-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ues/1UXNenk4mJ3ez2FNU1dzR1D/PWR6Q2jDEYhlITuXJlrGoFu9h4B/wTmI4qve yiwX8IlpP+UMiEdJE+cW5A== 0001047469-99-022070.txt : 19990624 0001047469-99-022070.hdr.sgml : 19990624 ACCESSION NUMBER: 0001047469-99-022070 CONFORMED SUBMISSION TYPE: S-1 PUBLIC DOCUMENT COUNT: 45 FILED AS OF DATE: 19990525 FILER: COMPANY DATA: COMPANY CONFORMED NAME: U S AGGREGATES INC CENTRAL INDEX KEY: 0001054422 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 570990958 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: S-1 SEC ACT: SEC FILE NUMBER: 333-79209 FILM NUMBER: 99633665 BUSINESS ADDRESS: STREET 1: 400 SOUTH EL CAMINO REAL, SUITE 500 STREET 2: ATTN: CHIEF FINANCIAL OFFICER CITY: SAN MATEO STATE: CA ZIP: 94402 BUSINESS PHONE: 6506854880 S-1 1 S-1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 24, 1999 REGISTRATION NO. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- U.S. AGGREGATES, INC. (Exact name of Registrant as specified in its charter) DELAWARE 1400 57-0990958 (State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer incorporation or organization) Classification Code Number) Identification No.)
400 SOUTH EL CAMINO REAL, SUITE 500, SAN MATEO, CALIFORNIA 94402 TELEPHONE: (650) 685-4880 (Address, including zip code, and telephone number, including area code, of Registrant's principal offices) MICHAEL J. STONE EXECUTIVE VICE PRESIDENT CHIEF FINANCIAL OFFICER, TREASURER AND SECRETARY U.S. AGGREGATES, INC. 400 SOUTH EL CAMINO REAL, SUITE 500 SAN MATEO, CALIFORNIA 94402 TELEPHONE: (650) 685-4880 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------------------- COPIES TO: WILLARD G. FRAUMANN, P.C. BRUCE A. TOTH Kirkland & Ellis Winston & Strawn 200 East Randolph Drive 35 West Wacker Drive Chicago, Illinois 60601 Chicago, Illinois 60601 (312) 861-2000 (312) 558-5600 -------------------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after this Registration Statement becomes effective. -------------------------- If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box: / / If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering. / / If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / / -------------------------- CALCULATION OF REGISTRATION FEE
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE Common Stock, par value $.01 per share.......................... $150,000,000 $41,700
(1) Estimated solely for the purposes of determining the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EXPLANATORY NOTE This registration statement contains two forms of prospectus: one to be used in connection with an underwritten public offering in the United States and Canada and one to be used in connection with a concurrent underwritten public offering outside the United States and Canada. The U.S. prospectus and the international prospectus are identical except for the front and back cover pages. The form of the U.S. prospectus is included herein and is followed by the alternate pages to be used in the international prospectus. The alternate pages for the international prospectus included herein are each labeled "International Prospectus Alternate Page." Final forms of each prospectus will be filed with the SEC under Rule 424(b) under the Securities Act. THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED , 1999 SHARES [LOGO] U.S. AGGREGATES, INC. COMMON STOCK --------- This is the initial public offering of our common stock. The U.S. underwriters are offering shares in the United States and Canada and the international managers are offering shares outside the United States and Canada. We have applied to have our common stock listed on the New York Stock Exchange under the symbol " ." INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10. -------------
PER SHARE TOTAL ----------- ----------- Public offering price.................................................................... $ $ Underwriting discounts................................................................... $ $ Proceeds, before expenses, to U.S. Aggregates, Inc....................................... $ $
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Certain of our stockholders have granted the U.S. underwriters and the international managers the right to purchase up to shares to cover any over-allotments. -------------- BT ALEX. BROWN THE ROBINSON-HUMPHREY COMPANY SCHRODER & CO. INC. , 1999 [Pictures to come] 2 TABLE OF CONTENTS
PAGE ----- Prospectus Summary.............................. 4 Risk Factors.................................... 10 Forward-Looking Statements...................... 16 Use of Proceeds................................. 16 Dividend Policy................................. 17 Capitalization.................................. 18 Dilution........................................ 19 Selected Unaudited Pro Forma Financial Data..... 20 Selected Historical Financial Data.............. 23 Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 25 Industry Overview............................... 31 Business........................................ 35 PAGE ----- Management...................................... 42 Principal and Selling Stockholders.............. 46 Certain Relationships and Related Transactions.................................. 48 Description of Certain Indebtedness............. 50 Description of Capital Stock.................... 53 Shares Eligible for Future Sale................. 56 Material United States Federal Tax Consequences to Non-United States Holders.................. 58 Underwriting.................................... 61 Experts......................................... 64 Legal Matters................................... 64 Where You Can Find More Information............. 64 Index to Financial Statements................... F-1
-------------- In this prospectus, "U.S. Aggregates," "USAI," the "company," "we," "us" and "our" each refers to U.S. Aggregates, Inc., "WAHC" refers to Western Aggregates Holding Corp., one of our subsidiary holding companies, and "SRMHC" refers to SRM Holdings Corp., the other of our subsidiary holding companies. "Tons," as used in this prospectus, means "short" or "U.S." tons, equalling a weight of 2,000 pounds. -------------- You may rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. This prospectus is not an offer to sell, nor a solicitation to buy shares of our common stock in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor sale of our common stock means that the information contained in this prospectus is correct after the date of this prospectus. -------------- Until , 1999 (25 days after the date of this prospectus), all dealers that buy, sell or trade our common stock, whether or not participating in the offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. 3 PROSPECTUS SUMMARY THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT YOU SHOULD CONSIDER BEFORE DECIDING TO INVEST IN OUR COMMON STOCK. WE URGE YOU TO READ THIS ENTIRE PROSPECTUS CAREFULLY, INCLUDING THE "RISK FACTORS" SECTION AND THE FINANCIAL STATEMENTS AND THE NOTES TO THOSE STATEMENTS. UNLESS OTHERWISE NOTED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES CONSUMMATION OF THE RECAPITALIZATION AND STOCK SPLIT DESCRIBED ON PAGE 7. U.S. AGGREGATES U.S. Aggregates, Inc. is a leading producer and marketer of aggregates and associated aggregate-based materials and services. Aggregates consist of crushed stone, sand and gravel. Our products are used primarily for the construction and maintenance of highways and other infrastructure projects and for commercial and residential construction. We serve local markets in nine states in two fast growing regions of the United States, the Mountain states and the Southeast. As a result of our geographic diversification, we believe that our results of operations are less subject to any single market's economic conditions. We believe that we are a market leader in most of the local markets that we serve. Our current estimated aggregate reserve position exceeds 1.3 billion tons, and in most of our markets we have a 20 to 40 year supply of aggregates. We were founded in 1994 with the goal of becoming a leading national producer of aggregates. From our inception in January 1994 through 1998, our net sales have increased to $228.7 million while operating profit has increased to $24.4 million. Our growth has been driven by a number of factors, including: - WE SERVE ATTRACTIVE, HIGH GROWTH MARKETS. According to the U.S. Geological Survey, from 1993 to 1998, compound annual growth in consumption of aggregates in the nine states we serve was 6.7%. During the same period, the United States compound annual increase was 5.1%. In the nine states that we serve, average annual federal highway spending through 2003 is projected to be 61% higher than under the predecessor six year federal program. - WE ARE A MARKET LEADER IN MOST OF THE LOCAL MARKETS WE SERVE. We have utilized our management and financial resources to strengthen our position in our markets and to expand into contiguous markets. - WE HAVE WELL LOCATED, LONG-TERM AGGREGATE RESERVES. Our long-term, high-quality aggregate reserves located near our customers are key to our success. Since 1996, we have started eight major greenfield aggregate production sites serving large metropolitan markets to complement our existing operations. - WE HAVE INVESTED SIGNIFICANT CAPITAL IN OUR BUSINESS. We believe that our plant and equipment are among the most modern and cost-competitive in our industry and should enable us to take advantage of increasing demand in our markets. - WE HAVE A STRONG TRACK RECORD OF COMPLETING, INTEGRATING AND DEVELOPING BUSINESS AND ASSET ACQUISITIONS. We have focused on the acquisition and development of aggregate production sites and companies that are well located to serve growing markets. Since our inception, we have completed 28 business and asset acquisitions in the aggregates industry and have generally seen a substantial increase in revenues and profits relative to their performance prior to our ownership. Approximately 70% of our production of aggregates is sold directly to customers. The balance is used to produce asphalt, which generally contains approximately 90% aggregates by volume, and ready-mix concrete, which generally contains approximately 80% aggregates by volume. Our integration into these aggregate-based products and related services generally occurs in markets where our competitors also produce and market these products. 4 INDUSTRY OVERVIEW Aggregates are a basic construction material, approximately 50% of which are used for highway and infrastructure construction and maintenance. Demand for aggregates has historically been only moderately cyclical due to the stability of federal and state spending on road maintenance and construction. Additionally, the national average per ton market price for aggregates has not experienced an annual decline between 1985 and 1998. The United States market for all aggregates was approximately 2.8 billion tons in 1998 with a value of $13.5 billion. This represents an increase of 7.5% in volume and 9.7% in dollar value above 1997 levels. In 1998, the six year, $218 billion Transportation Equity Act for the 21st Century, or TEA-21, was passed which designates a minimum of $158 billion nationally for federal highway construction and maintenance projects. This represents a 44% increase above average annual federal highway spending levels under the predecessor six year federal program. In the nine states we serve, average annual federal highway spending under the new program is projected to be 61% higher than under the predecessor program. Due to the high cost of transportation relative to the value of the product, competition within the aggregates industry favors producers with suitable aggregate reserves closest to the market. Difficulty in obtaining the necessary permits for new, economically viable aggregate production sites located near customers has constrained, and will continue to constrain, the number of competitors able to serve each market. Because of the local nature of the aggregates industry and its historical development, the ownership within the industry continues to be highly fragmented, with the top five producers combined holding an estimated 25% market share in 1997. GROWTH STRATEGY We plan to increase sales and profits through five main strategies: - SERVE GROWTH IN EXISTING MARKET AREAS. We will take advantage of our existing aggregate reserve capacity and the maturation of our developing aggregate production sites to serve additional demand in our markets. - EXPAND CAPACITY. We will expand production capacity and invest capital so that we can serve additional demand in our markets while remaining cost-competitive. - MAKE ACQUISITIONS AND DEVELOP NEW AGGREGATE RESERVES IN EXISTING MARKETS. We will continue to make add-on acquisitions and develop new aggregate reserves to increase our competitive position in our markets. - SERVE MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and additional reserves so that we can move into contiguous markets when opportunities arise. - EXPAND INTO NEW MARKETS THROUGH ACQUISITIONS. We may make acquisitions in new market areas or, where economically attractive, new regions. MANAGEMENT Our executive officers have an average of 26 years of experience in the aggregates industry and have a strong track record of building profitable aggregates businesses. Immediately after the offering, our management team will own approximately % of our common stock. -------------- Our corporate headquarters are located at 400 South El Camino Real, Suite 500, San Mateo, California 94402. Our telephone number is (650) 685-4880. 5 THE OFFERING Common stock offered by USAI: U.S. offering..................... shares International offering............ shares Total........................... shares -------------- -------------- Common stock to be outstanding immediately after the offering.... shares (1)
Use of proceeds..................... Our net proceeds from the offering will be used to repay outstanding indebtedness and to redeem our preferred stock. See "Use of Proceeds" for a further description of the application of the net proceeds of the offering. Proposed New York Stock Exchange symbol............................ " "
- ------------------------ (1) The number of shares of our common stock to be outstanding immediately after the offering does not include approximately shares of our common stock that will be issuable pursuant to stock options to be granted concurrently with the offering. For a discussion of these stock options, see "Management--Incentive Plan." 6 RECAPITALIZATION USAI currently owns 82.99% of the common stock of WAHC and 90.84% of the common stock of SRMHC with the remainder held primarily by certain officers and employees of WAHC and SRMHC. Immediately prior to the consummation of the offering, each outstanding share of common stock of WAHC not held by USAI will be converted into 0.62 shares of our common stock and each outstanding share of common stock of SRMHC not held by USAI will be converted into 8.07 shares of our common stock. Each share of our common stock will then be subject to an approximate 35.19 to 1 stock split. See "Certain Relationships and Related Transactions" for a further discussion of these events. 7 SUMMARY HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL INFORMATION (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The following table presents summary historical and unaudited pro forma financial information for USAI. You should read this along with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Selected Unaudited Pro Forma Financial Data," "Selected Historical Financial Data" and the financial statements and the accompanying notes included elsewhere in this prospectus. The summary unaudited pro forma financial data are derived from the application of unaudited pro forma adjustments related to the offering detailed below and in the notes to "Selected Unaudited Pro Forma Financial Data" on page 20.
THREE MONTHS ENDED MARCH FISCAL YEARS ENDED DECEMBER 31, 31, ---------------------------------------------- ------------------------ 1996 1997 1998 1998 1999 --------- --------- --------- ----------- ----------- 1998 PRO FORMA AS ADJUSTED(1) ------------- (UNAUDITED) (UNAUDITED) STATEMENTS OF OPERATIONS DATA: Net sales...................................... $ 131,710 $ 163,243 $ 228,739 $249,224 $ 28,513 $ 49,171 Gross profit................................... 38,889 44,111 60,519 65,771 7,179 11,461 Selling, general and administrative expenses... 16,571 18,275 25,001 26,448 5,190 7,213 Depreciation, depletion and amortization(2).... 6,301 7,830 11,098 12,333 2,056 3,285 Income (loss) from operations.................. 16,017 18,006 24,420 26,990 (67 ) 963 Interest, net.................................. (5,036) (8,344) (14,886) (8,469 ) (2,394 ) (4,360 ) Other income and expense, net.................. (150) (150) (1,104) (946 ) (1,195 ) (162 ) Income (loss) from continuing operations before provision for income taxes, minority interest, discontinued operations and extraordinary item........................... 10,831 9,512 8,430 17,575 (3,656 ) (3,559 ) Benefit (provision) for income taxes........... (3,660) (3,384) (3,547) (7,167 ) 1,346 1,296 Income (loss) before minority interest, discontinued operations and extraordinary item......................................... 7,171 6,128 4,883 10,408 (2,310 ) (2,263 ) Minority interest.............................. (727) (623) (624) -- 277 588 Income (loss) from continuing operations....... 6,444 5,505 4,259 10,408 (2,033 ) (1,675 ) Income (loss) from continuing operations per common share --basic...................................... $0.63 --diluted.................................... $0.63 Weighted average number of common shares(3) --basic....................................... 16,619,133 --diluted.................................... 16,619,133 SELECTED STATISTICAL AND OPERATING DATA: EBITDA(4)...................................... $22,318 $25,836 $35,518 $39,323 Capital expenditures (excluding acquisitions)................................ 19,594 15,251 22,372 28,538 Capital expenditures (including acquisitions)................................ 57,504 19,289 106,256 112,422 Tons of aggregates shipped (in millions)....... 7.2 9.5 15.8 21.6 Tons of asphalt sold (in millions)............. 0.9 1.3 1.6 1.6 Yards of ready-mix concrete sold (in millions).................................... 0.9 0.9 1.4 1.7 Estimated tons of aggregate reserves (in millions).................................... 757 935 1,360 1,360
MARCH 31, 1999 -------------------------- PRO FORMA AS HISTORICAL ADJUSTED(5) ----------- ------------- (UNAUDITED) BALANCE SHEET DATA: Total assets........................................................................... $ 344,992 $ 356,232 Total debt............................................................................. 207,654 113,654 Mandatory redeemable preferred stock................................................... 44,652 -- Stockholders' equity................................................................... 9,606 162,300
- ------------------------------ (1) Pro forma to give effect as if all 1998 acquisitions and dispositions had occurred on January 1, 1998 and certain other pro forma adjustments to the historical financial statements described in the notes to "Selected Unaudited Pro Forma Financial Data" on page 20; as adjusted to give effect to the sale of shares of our common stock in the offering at the public offering price of $ per share, and the application of the net proceeds therefrom, as well as certain other resulting pro 8 forma adjustments as described in the notes to "Selected Unaudited Pro Forma Financial Data" on page 20. See "Use of Proceeds" for a further description of the application of net proceeds from the offering. (2) In 1996, we began using a 20 percent salvage value in providing depreciation on certain of our assets. In 1997, we also extended the estimated lives of certain depreciable assets, resulting in an approximate $1,550 reduction of 1997 depreciation expense compared to what it would have been had the estimated lives not been changed. (3) Assumes exercise of all warrants outstanding and the conversion of minority stock into our common stock prior to the closing of the offering. (4) EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization. We have included EBITDA data (which are not measures of financial performance under generally accepted accounting principles) because such data are used by certain investors. (5) Gives effect to the sale of shares of our common stock in the offering at the public offering price of $ per share, and the application of the net proceeds therefrom, as well as certain other resulting pro forma adjustments as described in the notes to "Selected Unaudited Pro Forma Financial Data" on page 20. See "Use of Proceeds" for a further description of the application of net proceeds from the offering. 9 RISK FACTORS YOU SHOULD CAREFULLY CONSIDER EACH OF THE FOLLOWING RISKS AND ALL OF THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE DECIDING TO INVEST IN SHARES OF OUR COMMON STOCK. INVESTING IN OUR COMMON STOCK WILL PROVIDE YOU WITH AN EQUITY OWNERSHIP INTEREST IN USAI. AS A STOCKHOLDER OF USAI, YOU MAY BE EXPOSED TO RISKS INHERENT IN OUR BUSINESS. THE PERFORMANCE OF YOUR SHARES WILL REFLECT THE PERFORMANCE OF OUR BUSINESS RELATIVE TO, AMONG OTHER THINGS, COMPETITION, INDUSTRY CONDITIONS AND GENERAL ECONOMIC AND MARKET CONDITIONS. THE VALUE OF YOUR INVESTMENT MAY INCREASE OR DECREASE AND COULD RESULT IN A LOSS. IF ANY OF THE FOLLOWING RISKS AND UNCERTAINTIES DEVELOP INTO ACTUAL EVENTS, OUR BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY ADVERSELY AFFECTED. IN SUCH CASE, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MAY LOSE ALL OR PART OF YOUR INVESTMENT. RISK FACTORS RELATING TO OUR BUSINESS AND INDUSTRY OUR BUSINESS IS SUBJECT TO THE FOLLOWING RISKS, WHICH INCLUDE RISKS RELATING TO THE INDUSTRY IN WHICH WE OPERATE. SEASONALITY AND WEATHER CONDITIONS COULD ADVERSELY AFFECT OUR SALES AND PROFITS Our business is seasonal, with peak sales and profits occurring primarily in the months of April through November. Poor weather conditions during this period could adversely affect operating income and cash flow and could therefore have a disproportionate impact on our results for a quarter or a full year. GENERAL AND LOCAL ECONOMIC CONDITIONS MAY AFFECT OUR BUSINESS A majority of our sales are to customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. In addition, because we conduct our operations in a variety of geographic markets, our business is subject to the economic conditions in each such geographic market. Our business is located in the Mountain states and the Southeast and is dependent upon the economies of those regions. General economic downturns or localized downturns in those regions where we have operations, including any downturns in the construction industry, could have a material adverse effect on our business, financial condition and results of operations. A DECREASE IN GOVERNMENT FUNDING OF HIGHWAY CONSTRUCTION AND MAINTENANCE AND OTHER INFRASTRUCTURE PROJECTS MAY ADVERSELY AFFECT US Many of the customers we serve and intend to serve in the future depend substantially on government funding of highway construction and maintenance and other infrastructure projects. Thus, a decrease or delay in government funding of highway construction and maintenance and other infrastructure projects could have a material adverse effect on our business, financial condition and results of operations. AN INCREASE IN THE PRICE OR DECREASE IN THE AVAILABILITY OF OIL MAY ADVERSELY AFFECT US A material rise in the price or a material decrease in the availability of oil could adversely affect our operating results. Federal, state and municipal government spending on roads is subject to appropriations by the respective government entity. Asphalt prices are correlated to the price of oil. Therefore, if there is a material rise in the price or a material decrease in the availability of oil, there will be a resulting increase in the cost of producing asphalt, which we would likely attempt to pass along to our customers. As a result of any price increase, our customers may use less asphalt, thereby decreasing our asphalt sales volumes. A material increase in the price or decrease in the availability of oil could also lead to higher gasoline costs which would also increase our operating costs. An increase in our operating costs could adversely affect our operating results if we cannot pass these increased costs through to our customers. 10 OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT Certain of our executive officers are of significant importance to our business and operations, particularly James A. Harris, the Chairman and Chief Executive Officer, Morris L. Bishop, Jr., the President and Chief Operating Officer, and Michael J. Stone, the Executive Vice President--Development, Chief Financial Officer, Treasurer and Secretary. The loss of the services of these executives could have a material adverse effect on our business, financial condition and results of operations. It is possible that we would not be able to find replacements for such persons with comparable business experience. We do not maintain key man life insurance with respect to such executive officers. See "Management--Directors and Executive Officers" for a further description of our management personnel. OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR GROWTH AND OUR ABILITY TO RESPOND TO CHANGING CONDITIONS We have incurred substantial indebtedness. Our level of indebtedness could, among other things: - limit our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to pay interest; - limit our ability to obtain additional financing to fund our growth strategy, working capital, capital expenditures, debt service requirements or other purposes; and - limit our ability to react to changing market conditions, changes in our industry and economic downturns. After giving effect to the offering and the application of the net proceeds, at March 31, 1999 we would have had approximately $113.7 million of indebtedness outstanding. We may incur additional indebtedness in the future to finance acquisitions, capital expenditures, working capital and for other purposes. OUR SUCCESS MAY BE LIMITED BY OUR INABILITY TO SUCCESSFULLY INTEGRATE ACQUIRED BUSINESSES AND RAISE ADDITIONAL CAPITAL We intend to grow in part through the acquisition of additional aggregates businesses. This strategy will involve reviewing and potentially reorganizing acquired business operations, corporate infrastructure and systems and financial controls. Our success may be limited because of unforeseen expenses, difficulties, complications, delays and other risks, including the following: - We may not be able to compete successfully for available acquisition candidates, complete future acquisitions or accurately estimate the financial effect on our company of any businesses we acquire; - Future acquisitions may require us to spend significant cash amounts or may decrease our operating income; - We may have trouble integrating acquired businesses and retaining personnel; - Acquisitions may disrupt our business and distract our management from other responsibilities; - To the extent that any of the companies which we acquire fail, the growth of our business could be harmed; and - Future acquired companies may have undiscovered liabilities that could require us to spend significant amounts of additional capital. Future acquisitions may require substantial capital investment. We intend to pay for any future acquisitions using cash, capital stock, notes and/or assumption of indebtedness. To the extent available cash is not sufficient to provide the capital required for such acquisitions, we will require additional debt and/or equity financing in order to provide for such capital. There can be no assurance, however, that such financing will be available or, if available, will be available on terms we consider satisfactory. 11 Failure to obtain sufficient additional capital in the future could limit our ability to implement our business strategy. Future debt financings, if available, may result in increased interest and amortization expense, increased leverage and decreased income available to fund further acquisitions and expansion. This may limit our ability to withstand competitive pressures and render us more vulnerable to economic downturns. Future equity financings may dilute the equity interest of existing stockholders. WE MAY BE UNABLE TO COMPETE SUCCESSFULLY IN THE HIGHLY COMPETITIVE AGGREGATES INDUSTRY The construction aggregates industry is local by nature. Transporting aggregates over relatively short distances is costly in relation to the value of the delivered materials. As a result, strategically located aggregate production sites with substantial mineral reserves enjoy a significant competitive advantage, generally within a geographic area roughly half the distance to the nearest competitor's location. Although asphalt and ready-mix concrete represent higher value-added products, the nature of their use and dependence on aggregates as a raw material also result in localized competition. The importance of tight scheduling of asphalt pick-ups and deliveries to maximize productivity at both the production plant and paving site, as well as the significant cost per ton of transportation relative to the value per ton, limits the effective ranges of asphalt producers and contractors. Access to aggregate production sites in or near metropolitan areas represents a significant competitive advantage in relation to competitors seeking to enter that market. The difficulties associated with locating a suitable mineral source, obtaining proper permits and establishing operations, both with respect to cost and timing, represent an important barrier to entry. Although competitive dynamics vary across local markets, aggregates competitors within a market generally compete on the basis of price and, to a lesser extent, service and quality. Some of our competitors have greater financial resources and are more geographically diverse than us. We have significant investment in fixed locations in specific geographic areas. In the event one or more of our aggregate production sites is competitively disadvantaged in its market, it could have a material adverse effect on our business, financial condition and results of operations. It is possible that we will encounter increased competition from existing competitors or new market entrants that may be significantly larger and have greater financial and marketing resources. In addition, to the extent existing or future competitors seek to gain or retain market share by reducing prices, we may be required to lower our prices and rates, thereby adversely affecting operating results. WE MAY BE ADVERSELY AFFECTED BY GOVERNMENTAL REGULATIONS Our operations are subject to and affected by federal, state and local laws and regulations including such matters as land usage, street and highway usage, noise levels and health, safety and environmental matters. In many instances, we must have various permits. We cannot assure you that we have been or will at all times be in compliance with all regulatory requirements or that we will not incur material costs or liabilities in connection with regulatory requirements. Certain of our operations may from time to time involve the use of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Despite our compliance efforts, risk of environmental liability is inherent in the operation of our business. As a result, it is possible that environmental liabilities will have a material adverse effect on us in the future. In addition, future events, such as changes in existing laws or regulations or enforcement policies, or further investigation or evaluation of the potential health hazards of certain of our products or business activities, may give rise to additional compliance and other costs that could have a material adverse effect on our business, financial condition and results of operations. See "Business--Governmental and Environmental Regulation" for a further discussion of the effects of regulation on our business. GOLDER, THOMA, CRESSEY, RAUNER FUND IV, L.P. HAS SUBSTANTIAL CONTROL OF OUR COMMON STOCK AND HAS THE ABILITY TO MAKE DECISIONS THAT COULD ADVERSELY AFFECT STOCKHOLDERS After the completion of the offering and assuming no exercise of the underwriters' over-allotment option, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will own approximately % of the outstanding shares of our common stock. As long as Golder, Thoma, Cressey, Rauner Fund IV, L.P. has substantial 12 control of our outstanding common stock, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will continue to have the ability to influence the election of our board of directors and the outcome of all corporate actions requiring stockholder approval. As a result, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be in a position to continue to influence all matters affecting USAI, including: - the composition of our board of directors and, through it, any determination with respect to the direction and policies of USAI, including the appointment and removal of our officers; - any determinations with respect to mergers or other business combinations involving USAI; - the acquisition or disposition of assets by USAI; - future issuances of common stock or other securities of USAI; - the incurrence of debt by USAI; and - the payment of dividends on our common stock. OUR OPERATIONS ARE SUBJECT TO A VARIETY OF RISKS THAT MAY RESULT IN CLAIMS OF PERSONAL INJURY, PROPERTY DAMAGE OR OTHER LIABILITIES The drivers of our heavy delivery trucks are subject to traffic and other hazards associated with providing services on construction sites. Our plant personnel are subject to the hazards associated with moving and storing large quantities of heavy raw materials. Our operating hazards can cause personal injury and death, damage to or destruction of property and environmental damage. We maintain insurance coverage in amounts and against the risks we believe are in accord with industry practice. This insurance may not be adequate to cover all losses or liabilities we may incur in our operations, and we may not be able to maintain insurance of the types or at levels we deem necessary or adequate or at rates we consider reasonable. Our failure to maintain adequate insurance could have a material adverse effect on our business, financial condition and results of operations. WE MAY INCUR LIABILITIES IN CONNECTION WITH OUR AGGREGATE CERTIFICATION ACTIVITIES We operate independent material testing laboratories which determine and certify aggregates for compliance with material specifications for ourselves and for third parties. We may be subject to lawsuits alleging negligence or other legal claims that could involve claims for substantial damages. For example, we may become involved in litigation with a third party for whom we certified aggregates if such certification was in error or did not otherwise meet a particular project's specification. Damages assessed in connection with, and the costs of defending, any such lawsuit could have a material adverse effect on our business, financial condition and results of operations. WE SELL TO THE COMMERCIAL AND RESIDENTIAL CONSTRUCTION INDUSTRIES, WHICH ARE CYCLICAL Approximately one-half of our shipments are made to contractors in connection with commercial and residential construction projects. The level of activity in residential construction markets depends on many factors not within our control, including general economic conditions, mortgage and other interest rates, inflation, unemployment, demographic trends, gross domestic product growth and consumer confidence in each of the regions in which we operate. Historically, both new housing starts and residential remodeling decrease in slow economic periods. The level of activity in the commercial construction market depends largely on vacancy rates and general economic conditions. Because residential and commercial construction markets are sensitive to cyclical changes in the economy, downturns in the economy or lack of substantial improvement in the economy of any of our geographic markets could adversely affect our business, financial condition and results of operations. Because of these and other factors, there may be substantial fluctuations in our operating results and the results for any period may not be indicative of results for any future period. 13 OUR QUARTERLY OPERATING RESULTS ARE LIKELY TO FLUCTUATE, WHICH MAY IMPACT OUR STOCK PRICE Our quarterly revenues, expenses and operating results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future. As a result, our operating results may fall below market analysts' expectations in some future quarters, which could have a material adverse effect on the market price of our common stock. Delays in customer orders can cause our revenues and results of operations to significantly fluctuate from period to period. Quarterly fluctuations may also result from factors such as: - adverse weather conditions; - changes in our operating expenses; - the effect of integration of acquired businesses; - price changes in response to competitive factors; and - general economic factors. We believe that quarterly revenues, expenses and operating results are likely to vary significantly in the future. Therefore, period-to-period comparisons of such items are not necessarily meaningful and, as a result, should not be relied upon as indications of future performance. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" for a further discussion of the fluctuation in our quarterly operating results. THERE WILL BE IMMEDIATE AND SUBSTANTIAL DILUTION TO NEW STOCKHOLDERS IN THIS OFFERING The initial public offering price is substantially higher than the net tangible book value per share of our common stock that will be applicable immediately after the offering. The common stock you purchase in the offering will have a post-offering net tangible book value per share of $ less than the price paid for the share. THE YEAR 2000 ISSUE MAY MATERIALLY AFFECT US Our business, financial condition and results of operations may be adversely impacted by information technology issues related to the Year 2000. We use software and related computer technologies in our operations that use two digit rather than four to specify the year, which could result in a date recognition problem with the transition to the year 2000. We may not be successful in implementing Year 2000 solutions at a cost that does not materially adversely affect our business, financial condition and results of operations. Any failure on our part to have Year 2000 compliant programs and systems in place in a timely manner could have a material adverse effect on our business, financial condition or results of operations. There is uncertainty about the broader scope of the Year 2000 issue as it may affect third parties, including our suppliers and customers, which are critical to our operations. In the event our suppliers and customers do not have Year 2000 compliant programs and systems in place, there could be a material adverse effect on our business, financial condition and results of operations. RISK FACTORS RELATING TO SECURITIES MARKETS THERE ARE RISKS RELATING TO SECURITIES MARKETS THAT YOU SHOULD CONSIDER IN CONNECTION WITH YOUR INVESTMENT IN AND OWNERSHIP OF OUR COMMON STOCK. OUR STOCK PRICE MAY FLUCTUATE SIGNIFICANTLY AFTER THE OFFERING AND YOU COULD LOSE ALL OR PART OF YOUR INVESTMENT AS A RESULT Prior to the offering, there has been no public market for our common stock. We intend to list our common stock on the New York Stock Exchange. We do not know how our common stock will trade in 14 the future. The initial public offering price will be determined through negotiations between the underwriters and us. You may not be able to resell your shares at or above the initial public offering price due to a number of factors, including: - actual or anticipated fluctuations in our operating results; - changes in expectations as to our future financial performance or changes in financial estimates of securities analysts; and - the operating and stock price performance of other comparable companies. In addition, the stock market in general has experienced extreme volatility that often has been unrelated to the operating performance of particular companies. These broad market and industry fluctuations may adversely affect the trading price of our common stock, regardless of our actual operating performance. A SUBSTANTIAL NUMBER OF OUR SHARES WILL BE AVAILABLE FOR SALE IN THE PUBLIC MARKET AFTER THE OFFERING AND SALES OF THOSE SHARES COULD ADVERSELY AFFECT OUR STOCK PRICE The market price of our common stock could drop as a result of sales of a substantial number of shares of our common stock into the market after the offering, or the perception that such sales could occur. These factors also could impair our ability to raise funds through an offering of equity securities. After the offering, shares of our common stock will be outstanding. Except for certain exceptions, all of the shares sold in this offering will be freely transferable without restriction or further registration under the Securities Act. PROVISIONS IN OUR CORPORATE DOCUMENTS COULD DELAY OR PREVENT A CHANGE IN CONTROL OF USAI, WHICH COULD ADVERSELY AFFECT THE PRICE OF OUR COMMON STOCK Immediately following the offering, our restated certificate of incorporation and bylaws will contain several provisions which may discourage, delay or prevent a takeover attempt which could adversely affect the price of our common stock. These provisions include: - a classified board of directors; - the authority of our board of directors to issue preferred stock without stockholder approval with such terms as our board of directors may determine; and - with respect to annual stockholders' meetings, requirements that stockholders must comply with the timing and procedural requirements of the federal proxy rules in order for a stockholder proposal to be included in our proxy statement. - the ability of our board to adopt a rights plan, more commonly called a "poison pill," without shareholder approval. We will also be subject to Section 203 of Delaware corporate law, which imposes some restrictions on mergers and other business combinations between us and any holder of 15% or more of our common stock. For a description of these provisions, see "Description of Capital Stock." WE MAY ISSUE PREFERRED STOCK, THE TERMS OF WHICH COULD ADVERSELY AFFECT THE RIGHTS OF HOLDERS OF OUR COMMON STOCK Immediately following the offering, our restated certificate of incorporation will authorize us to issue one or more classes or series of preferred stock without the approval of our stockholders. Our preferred stock may have preferences, powers and relative, participating, optional and other rights and preferences over our common stock respecting dividends and distributions, as our board of directors may determine. The terms of one or more classes or series of our preferred stock could adversely impact the rights of holders of our common stock. See "Description of Capital Stock" for a further description of our preferred stock. 15 FORWARD-LOOKING STATEMENTS Certain statements made in this prospectus are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to the safe harbor provisions of the Securities Act and the Exchange Act. Such forward-looking statements include statements about: - our strategies; - effects of government funding; - cost of raw materials; and - other statements that are not historical facts. When used in this prospectus, the words "anticipate," "believe," "estimate," "should," "could" and similar expressions are generally intended to identify forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including the following: - changes in general economic and business conditions (including in the aggregates industry); - actions of competitors; - the implementation of our acquisition strategy; - changes in government funding; and - other factors discussed under "Risk Factors." We undertake no obligation to publicly update or revise any forward-looking statements. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this prospectus may not occur. USE OF PROCEEDS We estimate that the net proceeds we will receive from the sale of our common stock in the offering, after deducting estimated expenses of $ and underwriting discounts and commissions, will be approximately $ million. We intend to use approximately $ million of such net proceeds to repay indebtedness outstanding under our existing credit facility, $ million to repay the HTSB Note (as defined) and approximately $44.7 million to redeem our preferred stock, most of which is owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P. Our existing credit facility and our outstanding senior subordinated notes prohibit us from redeeming our preferred stock, and our outstanding senior subordinated notes prohibit us from repaying the HTSB Note. We plan on amending our credit facility and our senior subordinated note documents prior to or concurrently with the offering to allow us to redeem the preferred stock and repay the HTSB Note. There can be no assurance, however, that we will be able to amend those items to allow us to redeem the preferred stock and repay the HTSB Note. Our existing credit facility provides for a term loan in the aggregate amount of $115 million and a revolving loan of up to $60 million. The term loan consists of an "A" tranche and "B" tranche. The term loan A accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 0.875% to 2.125% and the term loan B accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 1.875% to 2.500%. The term loan A matures in March 2004 and the term loan B matures in March 2006. The revolving facility terminates in June 2004 and accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 0.875% to 2.125%. As of March 31, 1999, we had 16 borrowings of approximately $31.4 million outstanding under the revolving facility, $53.5 million of term loan A outstanding and $58.5 million of term loan B outstanding. As of March 31, 1999, our outstanding preferred stock totaled approximately $30.1 million, excluding accrued and unpaid dividends of approximately $14.6 million. Our preferred stock was sold to Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain members of our management for a purchase price of approximately $30.1 million. The yield on our preferred stock is 10% compounded quarterly. We have entered into a $17.5 million revolving line of credit pursuant to which the HTSB Note was issued. Interest on the note accrues quarterly at an announced prime rate which was 7.750% as of March 31, 1999. As of March 31, 1999, there was $8.2 million outstanding on this note. In April 1999, we borrowed an additional $7.5 million under the HTSB Note for working capital and other general corporate purposes. The HTSB Note is payable on demand. The HTSB Note is guaranteed by Golder, Thoma, Cressey, Rauner Fund IV, L.P. Upon repayment of the HTSB Note, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will be released from the guaranty. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources," "Certain Relationships and Related Transactions--The Preferred Stock Redemption" and "Description of Certain Indebtedness" for a further description of our credit facility, our preferred stock and the HTSB Note. DIVIDEND POLICY Beginning in the fourth quarter of 1999, with respect to earnings generated during the third quarter of 1999, we intend to pay quarterly cash dividends at an initial rate of $0.03 per share of our common stock. Any determination to pay dividends will be at the discretion of our board of directors. The determination of the board of directors to pay dividends will depend upon, among other factors, our results of operations, financial condition, capital requirements, future prospects, contractual restrictions and other factors deemed relevant by our board of directors. Under our existing credit facility, we are prohibited from paying dividends. We plan on amending our credit facility prior to or concurrently with the offering to allow us to pay dividends. There is no assurance, however, that we will be able to amend our credit facility to allow us to pay dividends. 17 CAPITALIZATION (DOLLARS IN THOUSANDS) The following table sets forth: (1) our unaudited actual capitalization as of March 31, 1999, and (2) our unaudited pro forma as adjusted capitalization as of such date, after giving effect to the sale of shares of our common stock in the offering at the offering price of $ per share, and the application of the net proceeds therefrom of $ . See "Use of Proceeds" for a further description of the application of the net proceeds of the offering. This table should be read in conjunction with our financial statements and notes thereto included elsewhere in this prospectus.
AT MARCH 31, 1999 ----------------------- PRO FORMA HISTORICAL AS ADJUSTED ---------- ----------- (UNAUDITED) Debt: Revolving loan...................................................................... $ 31,400 $ -- Term loan A......................................................................... 53,500 26,287 Term loan B......................................................................... 58,500 31,288 Notes payable to former stockholders................................................ 4,954 4,954 Other long-term debt................................................................ 6,856 6,856 10.34% senior subordinated notes.................................................... 30,000 30,000 10.09% senior subordinated notes.................................................... 15,000 15,000 Discount on the senior subordinated notes......................................... (731) (731) Demand note......................................................................... 8,175 -- ---------- ----------- Total debt(1)................................................................... 207,654 113,654 Minority interest..................................................................... 2,803 -- Mandatory redeemable preferred stock, $0.01 par value, 500,000 shares authorized; 300,842 shares initially issued and outstanding; none issued following the offering............................................................................ 44,652 -- Stockholders' equity: Common stock, $0.0003 par value, 8,796,975 shares initially authorized; 7,198,459 shares initially issued and outstanding, including 8,938 shares of Treasury stock; 16,619,133 shares issued and oustanding, as adjusted(2)........................... 2 5 Additional paid-in capital.......................................................... 2,946 155,637 Notes receivable from sale of stock................................................. (653) (653) Treasury stock, at cost............................................................. (2) (2) Retained earnings................................................................... 7,313 7,313 ---------- ----------- Total stockholders' equity........................................................ 9,606 162,300 ---------- ----------- Total capitalization.............................................................. $ 264,715 $ 275,954 ---------- ----------- ---------- -----------
- ------------------------ (1) Includes historical current maturities of $16,316 and pro forma as adjusted current maturities of $5,342. (2) Includes 7,198,459 shares outstanding less 8,938 shares of treasury stock, shares issued in the offering, the conversion of 335,517 warrants into shares and 760,762 shares issued to minority stockholders in connection with the recapitalization described on page 7. 18 DILUTION As of March 31, 1999, our unaudited pro forma net tangible book value was approximately $ million, or $ per share. After giving effect to the offering and the application of the net proceeds therefrom described in "Use of Proceeds," our unaudited pro forma net tangible book value as of March 31, 1999, would be $ million or $ per share. This represents an immediate increase in net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to new stockholders. The following table illustrates this per share dilution:
Assumed initial public offering price per share............................................. $ Pro forma net tangible book value per share before the offering (1)......................... $ Increase per share attributable to payments by new investors................................ $ Adjusted pro forma net tangible book value per share after the offering..................... $ $ --------- --------- Dilution per share to new stockholders (2).................................................. $ --------- ---------
- ------------------------ (1) Net tangible book value per share of our common stock is determined by dividing our net tangible book value at March 31, 1999 of $ million by the aggregate number of shares of our common stock outstanding. This calculation gives effect to the recapitalization and stock split described on page 7. (2) Dilution is determined by subtracting pro forma, as adjusted, net tangible book value per share after the offering from the initial public offering price per share. The following table summarizes, on a pro forma basis, as of March 31, 1999, the difference between our existing stockholders and the new stockholders with respect to the number of shares of our common stock purchased (or to be purchased) from USAI, the total consideration paid (or to be paid) and the average price per share paid (or to be paid) by our existing stockholders and new stockholders, before deducting the estimated offering expenses and underwriting discounts and commissions:
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE ---------------------- ---------------------- PRICE PER NUMBER PERCENT AMOUNT PERCENT SHARE --------- ----------- --------- ----------- --------- Existing stockholders (3)..................................... % $ % $ New stockholders.............................................. --------- --- --------- --- --------- Total....................................................... % $ % $ --------- --- --------- --- --------- --------- --- --------- --- ---------
- ------------------------ (3) Does not include shares of our common stock reserved for issuance under the incentive plan. See "Management--Incentive Plan" for a further description of these shares. 19 SELECTED UNAUDITED PRO FORMA FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) PRO FORMA In 1998, we acquired Falcon Ridge Quarry, Inc. on February 18th, Geodyne Transport, Inc. on February 20th and Monroc, Inc. on June 5th in separate transactions. These acquisitions constitute the 1998 Acquired Businesses. Subsequently, we disposed of the precast division assets of Monroc, Inc. and certain other non-business related land assets. These assets constitute the Disposed Assets. While these acquisitions and dispositions occurred at various dates during 1998, the unaudited pro forma data are presented as if such acquisitions and dispositions had occurred on January 1, 1998 and also include the effect of certain pro forma adjustments to the historical financial statements described below. The selected unaudited pro forma financial data for the year ended December 31, 1998 have been derived from our financial information, the financial statements and notes thereto of certain of the 1998 Acquired Businesses and Disposed Assets and the audited financial statements and notes thereto of Monroc, Inc., which are included elsewhere in this prospectus. Historical, pro forma and pro forma as adjusted balance sheet data are reflected as of March 31, 1999. The unaudited pro forma and unaudited pro forma as adjusted information presented below is not necessarily indicative of what results of operations actually would have been if the transactions had occurred on the date indicated. PRO FORMA AS ADJUSTED The selected unaudited pro forma as adjusted financial data gives effect to the consummation of the offering as if it occurred on January 1, 1998, and also includes the effects of certain adjustments to the unaudited pro forma statements as described below. The selected unaudited pro forma and unaudited pro forma as adjusted financial data should be read in conjunction with "Selected Historical Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and notes thereto of Monroc, Inc. included elsewhere in this prospectus.
YEAR ENDED DECEMBER 31, 1998 -------------------------------------- HISTORICAL ---------- PRO FORMA PRO FORMA ------------- AS ADJUSTED (UNAUDITED) ----------- (UNAUDITED) UNAUDITED PRO FORMA STATEMENT OF OPERATIONS: Net sales.......................................................... $ 228,739 $ 249,224(1) $ 249,224 Cost of products sold.............................................. 168,220 183,453(2) 183,453 ---------- ------------- ----------- Gross profit....................................................... 60,519 65,771 65,771 Selling, general and administrative expenses....................... 25,001 26,448(3) 26,448 Depreciation, depletion and amortization........................... 11,098 12,075(4) 12,333(8) ---------- ------------- ----------- Income from operations............................................. 24,420 27,248 26,990 Interest, net...................................................... (14,886) (16,611)(5) (8,469)(9) Other income and expense, net...................................... (1,104) (1,096) (946)(10) ---------- ------------- ----------- Income from continuing operations before provision for income taxes, minority interest, discontinued operations and extraordinary item............................................... 8,430 9,541 17,575 Provision for income taxes......................................... 3,547 3,975(6) 7,167(11) ---------- ------------- ----------- Income before minority interest, discontinued operations and extraordinary item............................................... 4,883 5,566 10,408 Minority interest.................................................. (624) (741)(7) --(12) ---------- ------------- ----------- Income from continuing operations.................................. $4,259 $4,825 $10,408 ---------- ------------- ----------- ---------- ------------- -----------
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YEAR ENDED DECEMBER 31, 1998 ----------------------------------------- HISTORICAL ------------ PRO FORMA PRO FORMA ------------ AS ADJUSTED (UNAUDITED) ------------- (UNAUDITED) UNAUDITED PRO FORMA STATEMENT OF OPERATIONS (CONTINUED): Income per common share--basic Income from continuing operations available for common stockholders................................................ $0.02 $0.10 $0.63(13) Weighted average common shares outstanding.................... 7,189,521 7,189,521 16,619,133(14) Income per common share--diluted Income from continuing operations available for common stockholders................................................ $0.02 $0.10 $0.63(13) Weighted average common shares outstanding.................... 7,525,038 7,525,038 16,619,133(14)
MARCH 31, 1999 ----------------------------------------- HISTORICAL ------------ PRO FORMA PRO FORMA ------------ AS ADJUSTED (UNAUDITED) ------------- (UNAUDITED) BALANCE SHEET DATA: Total assets.................................................. $344,992 $344,992 $356,232(15) Total debt.................................................... 207,654 207,654 113,654(15) Mandatory redeemable preferred stock.......................... 44,652 44,652 -- Stockholders' equity.......................................... 9,606 9,606 162,300(15)
Notes to Selected Unaudited Pro Forma Financial Data: (1) Net sales includes $20,485 from the 1998 Acquired Businesses (excluding sales related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition in 1998. (2) Cost of products sold includes $15,233 from the 1998 Acquired Businesses (excluding costs related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition in 1998. (3) Selling, general and administrative expenses include $2,051 from the 1998 Acquired Businesses (excluding expenses related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition in 1998, less $604 of expenses incurred by Monroc, Inc. relating to the sale of Monroc to USAI. (4) Depreciation, depletion and amortization include $977 from the 1998 Acquired Businesses (excluding amounts related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition to reflect depreciation, depletion and amortization of fixed assets, goodwill and other intangibles from their ongoing operations adjusted for USAI's depreciation, depletion and amortization policies and estimated lives of assets. It also includes amounts recorded as a result of purchase accounting. (5) Interest expense includes $1,725 from the 1998 Acquired Businesses for the period January 1, 1998 to their respective dates of acquisition in 1998. The $1,725 is comprised of: $228 of interest expense on the debt assumed by USAI from the 1998 Acquired Businesses; interest expense of $1,984 on the new debt incurred to acquire such businesses and interest savings of $487 resulting from debt reduction using the proceeds from the Disposed Assets. These adjustments reflect the acquisitions and dispositions as if they occurred on January 1, 1998. (6) Provision for income taxes includes $428 as if the 1998 Acquired Businesses (excluding Disposed Assets) had been combined with USAI for the period January 1, 1998 to their respective dates of acquisition, and those additional earnings were subject to a blended federal and state statutory tax rate of 38.5%. (7) Minority interest has been adjusted by $117 to reflect the minority interest's share in other pro forma adjustments. (8) Includes $257 of amortization of goodwill resulting from the acquisition of minority interest shares (concurrent with the offering) in exchange for shares of USAI assuming a per share value of $ . (9) Interest expense has been adjusted to reflect interest savings or interest income from the application of $94,000 of the proceeds of the offering to repay indebtedness or investment of excess cash assuming a return of 5% as if the offering and the appreciation of the proceeds occurred on January 1, 1998. (10) Other income and expense reflects the discontinuance of a $150 management fee paid to Golder, Thoma, Cressey, Rauner, Inc. 21 (11) Provision for income taxes includes $3,192 as if the offering had occurred on January 1, 1998, and the interest and other savings were subject to a blended federal and state statutory rate of 38.5%. (12) Minority interest has been adjusted to reflect the exchange of the minority stockholders' stock for USAI's common stock prior to the closing of the offering. (13) The impact on income per share available for common stockholders of the accretion of the 1998 mandatory redeemable preferred stock dividend has been eliminated. (14) Includes the conversion of 335,517 warrants into shares of our common stock and the conversion of minority shares into 760,762 shares of our common stock upon closing of the offering and the sale of shares of our common stock. (15) Reflects the impact of the following items as of March 31, 1999: the sale of shares of our common stock in the offering at the public offering price of $ per share, less estimated offering costs; the use of $94,000 in offering proceeds to pay down existing debt of USAI; the payment of a dividend of $14,567 to our preferred stockholders, the repurchase of all of our outstanding preferred stock for $30,084 and the exchange of the minority stockholders stock for USAI's common stock prior to the closing of the offering. 22 SELECTED HISTORICAL FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) The selected historical financial data for the year ended December 31, 1994 through the year ended December 31, 1998 have been derived from our audited financial statements and notes thereto, which financial statements for the years ended December 31, 1996, 1997 and 1998 appear elsewhere in this prospectus. The following data represent historical results and include the results of the business and asset acquisitions listed in footnote (1) below following their acquisition by USAI. The selected historical financial data should be read in conjunction with the information contained in the "Selected Unaudited Pro Forma Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements and notes thereto, and the individual financial statements and notes thereto of Monroc, Inc. included elsewhere herein.
FISCAL YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1994 1995 1996 1997 1998 ---------- ---------- ---------- ---------- ---------- STATEMENTS OF OPERATIONS DATA: Net sales............................................ $35,442 $97,527 $131,710 $163,243 $228,739 Cost of products sold................................ 24,653 70,006 92,821 119,132 168,220 ---------- ---------- ---------- ---------- ---------- Gross profit......................................... 10,789 27,521 38,889 44,111 60,519 Selling, general and administrative expenses......... 6,448 12,977 16,571 18,275 25,001 Depreciation, depletion and amortization(2).......... 1,227 4,139 6,301 7,830 11,098 ---------- ---------- ---------- ---------- ---------- Income from operations............................... 3,114 10,405 16,017 18,006 24,420 Interest, net........................................ (844) (2,828) (5,036) (8,344) (14,886) Other income and expense, net........................ (112) 391 (150) (150) (1,104) ---------- ---------- ---------- ---------- ---------- Income from continuing operations before provision for income taxes, minority interest, discontinued operations and extraordinary item.................. 2,158 7,968 10,831 9,512 8,430 Provision for income taxes........................... (756) (2,630) (3,660) (3,384) (3,547) ---------- ---------- ---------- ---------- ---------- Income before minority interest, discontinued operations and extraordinary item.................. 1,402 5,338 7,171 6,128 4,883 Minority interest.................................... (282) (759) (727) (623) (624) ---------- ---------- ---------- ---------- ---------- Income from continuing operations.................... 1,120 4,579 6,444 5,505 4,259 Operating income from discontinued operations, less applicable income tax expense(3)................... 372 (5) -- -- 844 Gain on disposal of discontinued operations and income during phase out period, less applicable income tax expense(3).............................. -- 247 -- -- 565 ---------- ---------- ---------- ---------- ---------- Income before extraordinary item..................... 1,492 4,821 6,444 5,505 5,668 Extraordinary item: loss on extinguishment of debt, less applicable income tax benefit................. -- -- -- -- (338) ---------- ---------- ---------- ---------- ---------- Net income........................................... $1,492 $4,821 $6,444 $5,505 $5,330 ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- Income per common share--basic....................... Income from continuing operations available for common stockholders.............................. $0.06 $0.38 $0.49 $0.25 $0.02 Net income available for common stockholders....... 0.13 0.41 0.49 0.25 0.17 Weighted average common shares outstanding......... 5,169,615 7,106,408 7,116,719 7,166,193 7,189,521 Income per common share--diluted..................... Income from continuing operations available for common stockholders.............................. $0.06 $0.38 $0.47 $0.24 $0.02 Net income available for common stockholders....... 0.13 0.41 0.47 0.24 0.16 Weighted average common shares outstanding......... 5,169,615 7,106,408 7,339,353 7,388,827 7,525,038
23
FISCAL YEARS ENDED DECEMBER 31, ---------------------------------------------------------- 1994 1995 1996 1997 1998 ---------- ---------- ---------- ---------- ---------- SELECTED STATISTICAL AND OPERATING DATA: EBITDA(4)............................................ $4,341 $14,544 $22,318 $25,836 $35,518 Capital expenditures (excluding acquisitions)........ 1,801 4,579 19,594 15,251 22,372 Capital expenditures (including acquisitions)........ 31,747 24,096 57,504 19,289 106,256 Tons of aggregates shipped (in millions)............. 2.1 4.8 7.2 9.5 15.8 Tons of asphalt sold (in millions)................... 0.1 0.6 0.9 1.3 1.6 Yards of ready-mix concrete sold (in millions)....... 0.4 0.8 0.9 0.9 1.4 Estimated tons of aggregate reserves (in millions)... 210 527 757 935 1,360 BALANCE SHEET DATA: Total assets......................................... $54,300 $83,560 $150,139 $172,266 $339,388 Total debt........................................... 22,269 37,992 78,475 92,788 200,591 Stockholders' equity(5).............................. 18,473 26,271 9,336 10,897 12,383
- ------------------------------ (1) In 1994, we acquired Southern Ready Mix, Inc., Western Rock Products Corp., DeKalb Stone, Inc. and G.M. Aldred & Sons, Inc. in separate transactions; in 1995, we acquired Cox Rock Products, Inc. and related businesses, Jensen Construction and Development, Inc., Verlie quarry (Alabaster), Mulberry Rock Corporation and certain assets of Ence Construction Company and related businesses in separate transactions; in 1996, we acquired or started-up the following: Southern Sand, Inc., Vance Materials, L.L.C., BHY Ready Mix, Inc., Jasper Sand, Inc., New Hope Farms, Inc., the O'Neal quarry operations, Mohave Concrete and Materials, Inc. and related businesses and Valley Asphalt, Inc. in separate transactions; in 1997, we acquired or started-up the following: Southwest Stone, Inc., A-T Asphalt, Inc., Ekins quarry and Lehi quarry in separate transactions; in 1998, we acquired or started-up the following: Pride quarry, Fort Pearce Aggregates, Geodyne Transport, Inc., Falcon Ridge Quarry, Inc., Beck Paving, Inc., Monroc, Inc. and Sandia Construction, Inc. in separate transactions. (2) In 1996, we began assuming a 20 percent salvage value in providing depreciation on certain of our assets. In 1997, we changed the estimated lives of certain depreciable assets, resulting in an approximate $1,550 reduction of 1997 depreciation expense compared to what it would have been had the estimated lives not been changed. (3) Effective February 7, 1995, we disposed of the concrete pipe plant of Southern Ready Mix, Inc. Effective December 31, 1998, we sold the Precast Division assets of Monroc, Inc. (4) EBITDA represents earnings before interest, taxes, depreciation, depletion and amortization. We have included EBITDA data (which are not measures of financial performance under generally accepted accounting principles) because such data are used by certain investors. (5) In 1996, USAI modified the terms of our preferred stock, making it mandatorily redeemable. The liquidation value, at that date, of the preferred stock of $32,792, including accreted dividends of $2,711, was removed from Stockholders' Equity and classified as Mandatory Redeemable Preferred Stock. 24 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS OF OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION AND LIQUIDITY SHOULD BE READ IN CONJUNCTION WITH "SELECTED HISTORICAL FINANCIAL DATA" AND THE FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. GENERAL We conduct our operations through the quarrying and distribution of aggregate products in nine states in two fast growing regions of the United States, the Mountain states and the Southeast. Our operations have the same general economic characteristics including the nature of the products, production processes, type and class of customers, methods of distribution and governmental regulations. Over the last three years, our net sales and profitability have increased as a result of internal growth, the maturation of our recently developed aggregate production sites and the completion of several business and asset acquisitions. In February 1998, we completed the acquisition of Falcon Ridge Quarry, Inc. and the acquisition of Geodyne Transport, Inc. In June 1998, we completed our largest acquisition to date, Monroc, Inc. Collectively, these acquisitions are referred to as the 1998 Acquired Businesses. The 1998 Acquired Businesses and the start-up of several other operations significantly expanded our business in the Mountain states and increased our presence in a number of local markets. Since 1996, we have started eight major greenfield aggregate production sites serving large metropolitan markets. The development of greenfield aggregate production sites includes securing all necessary permits and zoning to ensure that commercially economic quantities of aggregates can be produced. These new sites include both sites which have never been permitted or mined, as well as sites which may have been properly zoned, but were not operating at sufficient volumes to be economically viable. Based on our experience, a new aggregate production site's net sales, cash flow and profitability tend to increase over the first five years of operation as production increases and the site matures. Our business is seasonal, with peak sales and profits occurring primarily in the months of April through November. Accordingly, our results of operations for any individual quarter are not indicative of our results for the full year. RESULTS OF OPERATIONS The following table presents net sales, gross profit, selling, general and administrative expenses, income (loss) from operations and net interest expense for USAI:
THREE MONTHS ENDED FISCAL YEARS ENDED DECEMBER 31, MARCH 31, ---------------------------------------------------------------- --------- 1996 1997 1998 1998 -------------------- -------------------- -------------------- --------- (DOLLARS IN THOUSANDS) $ % $ % $ % $ --------- --------- --------- --------- --------- --------- --------- Net sales....................................... 131,710 100.0 163,243 100.0 228,739 100.0 28,513 Gross profit.................................... 38,889 29.5 44,111 27.0 60,519 26.5 7,179 Selling, general and administrative expenses.... 16,571 12.6 18,275 11.2 25,001 10.9 5,190 Income (loss) from operations................... 16,017 12.2 18,006 11.0 24,420 10.7 (67) Interest, net................................... (5,036) 3.8 (8,344) 5.1 (14,886) 6.5 (2,394) 1999 -------------------- % $ % --------- --------- --------- Net sales....................................... 100.0 49,171 100.0 Gross profit.................................... 25.2 11,461 23.3 Selling, general and administrative expenses.... 18.2 7,213 14.7 Income (loss) from operations................... (0.2) 963 2.0 Interest, net................................... 8.4 (4,360) 8.9
FIRST QUARTER 1999 COMPARED TO FIRST QUARTER 1998 NET SALES. Net sales for the three months ended March 31, 1999 increased 72.5% to $49.2 million from $28.5 million for the three months ended March 31, 1998. This increase consists of $10.8 million of net sales from the 1998 Acquired Businesses and an increase in net sales by our existing businesses 25 of $9.9 million, a 34.7% increase. The increase in sales from our existing businesses was due to strong demand for our aggregates and related products and increased shipments from new and developing aggregate production sites of 267,000 tons. Total shipments of aggregates increased from 2.1 million tons in the first quarter of 1998 to 4.2 million tons in the first quarter of 1999, a 100% increase. Although volumes increased, our mix of products sold in 1999 included more lower priced aggregates than in 1998. We also experienced an approximate 5% increase in selling prices per ton during the period. GROSS PROFIT. Gross profit for the three months ended March 31, 1999 increased 59.6% to $11.5 million from $7.2 million for the three months ended March 31, 1998. The 1998 Acquired Businesses contributed $1.5 million to gross profit for the three months ended March 31, 1999 and the existing businesses contributed $10.0 million, a 38.9% increase. The increase in gross profit at our existing businesses was primarily due to our increased sales. Gross margins fell from 25.2% in 1998 to 23.3% in 1999 due to the inclusion of the 1998 Acquired Businesses. Gross margins from existing businesses were 25.9%, compared to 25.2% in 1998. The gross margin at the 1998 Acquired Businesses of 13.9% was less than the existing businesses due to seasonal factors. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased to $7.2 million for the three months ended March 31, 1999 from $5.2 million for the three months ended March 31, 1998, primarily due to the inclusion of the 1998 Acquired Businesses. As a percentage of net sales, selling, general and administrative expenses decreased from 18.2% for the three months ended March 31, 1998 to 14.7% for the three months ended March 31, 1999, due to the leveraging of fixed costs over a larger sales base. INCOME FROM OPERATIONS. Income from operations for the three months ended March 31, 1999 increased to $963,000 from a loss of $67,000 for the three months ended March 31, 1998. INTEREST, NET. Net interest expense increased to $4.4 million for the three months ended March 31, 1999 from $2.4 million for the three months ended March 31, 1998 as a result of significantly increased borrowings used to fund the purchase of the 1998 Acquired Businesses and other expansion and capital needs. 1998 COMPARED TO 1997 NET SALES. Net sales for 1998 increased 40.1% to $228.7 million from $163.2 million in 1997. This increase reflects the inclusion of $37.8 million of net sales from the 1998 Acquired Businesses since their date of acquisition. The increase in 1998 net sales from our existing businesses of $27.7 million, a 17.0% increase, resulted from increased sales demand in our established businesses plus the start up of new aggregate production sites and related activity in both 1997 and 1998. Shipments of aggregates increased from 9.5 million tons in 1997 to 15.8 million tons in 1998, a 66% increase. Although volumes increased, our mix of products sold in 1998 included more lower priced aggregates than in 1997. Approximately one-half of this increase in volume came from the 1998 Acquired Businesses. Our selling prices per ton also increased approximately 5% during the period. GROSS PROFIT. Gross profit for 1998 increased 37.2% to $60.5 million in 1998 from $44.1 million in 1997. The 1998 Acquired Businesses contributed $10.4 million to gross profit in 1998. Gross profit at existing businesses increased 13.6% to $50.1 million from $44.1 million in 1997. Gross margins from existing businesses were 26.5% in 1998 compared to 27.0% in 1997, due to a change in the mix of products sold through the Utah operations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased from $18.3 million in 1997 to $25.0 million in 1998 primarily due to the 1998 Acquired Businesses. As a percentage of net sales, selling, general and administrative expenses decreased from 11.2% in 1997 to 10.9% in 1998, due to the leveraging of fixed costs over a larger sales base. 26 INCOME FROM OPERATIONS. Income from operations increased 35.6% to $24.4 million in 1998 from $18.0 million in 1997. INTEREST, NET. Net interest expense increased to $14.9 million in 1998 from $8.3 million in 1997 as a result of significantly increased borrowings used to fund the purchase of the 1998 Acquired Businesses and other expansion and capital needs. 1997 COMPARED TO 1996 NET SALES. Net sales for 1997 increased 23.9% to $163.2 million from $131.7 million in 1996. Shipments of aggregates increased from 7.2 million tons in 1996 to 9.5 million tons in 1997, a 32% increase. Although volumes increased, our mix of products sold in 1997 was different than 1996. Although volumes of both aggregates and associated products were up, the growth rate in associated products was less than the growth rate of aggregates in 1997. The associated products have a higher "per ton" sales price; accordingly the growth in total tons shipped exceed our growth in total sales. In 1997, we developed and expanded three new aggregate production sites acquired in 1995 and started operations at two new aggregate production sites acquired in late 1996. Our selling prices per ton also increased approximately 12% during the period. GROSS PROFIT. Gross profit for 1997 increased 13.4% to $44.1 million from $38.9 million in 1996 due to increased sales. Gross profit margins decreased from 29.5% to 27.0% due to our starting operations at five aggregate production sites in 1996 and 1997, and due to a change in the product mix in Utah, where we expanded our asphalt business. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased to $18.3 million in 1997 from $16.6 million in 1996. As a percentage of net sales, selling, general and administrative expenses decreased from 12.6% in 1996 to 11.2% in 1997, primarily due to the leveraging of fixed costs over a larger sales base. INCOME FROM OPERATIONS. Income from operations increased 12.4% to $18.0 million in 1997 from $16.0 million in 1996. INTEREST, NET. Net interest expense increased to $8.3 million in 1997 from $5.0 million in 1996. LIQUIDITY AND CAPITAL RESOURCES From our inception in 1994, we have financed our operations and growth from the issuance of preferred and common stock and debt. We have also used operating leases to finance the acquisition of equipment used in the business. Through December 31, 1998, $32.1 million of common and preferred stock was sold to Golder, Thoma, Cressey, Rauner Fund IV L.P. and certain members of management. Substantially all of this stock was issued before 1996. At December 31, 1998, we had $200.6 million of debt outstanding. This level of debt increased from $92.8 million in 1997 and $78.5 million in 1996. The terms of this debt are discussed further below and in Note 7 to the audited financial statements included herein and "Use of Proceeds." We lease aggregate production sites and equipment under operating leases with terms generally ranging from 5 to 40 years. Our minimum commitment under these leases was $42.9 million at December 31, 1998 versus $23.0 million in 1997 and $15.0 million in 1996. Our primary capital requirements are for working capital, acquisitions and equipment purchases. During 1997, our cash provided by operating activities provided net cash flow of $2.8 million compared to $5.2 million in 1996. The decrease was due to a reduction in net income of $0.9 million 27 and increased working capital requirements due to growth in the business. In 1998, we used $0.7 million in operating activities. Net income of $5.3 million in 1998 was $0.2 million less than in 1997, but we again had increased working capital requirements due to growth. As of December 31, 1996, 1997 and 1998, working capital was $8.5 million, $14.2 million and $29.7 million, respectively. Working capital needs will continue to increase with growth in our business. Net cash used in investing activities was $57.5 million in 1996. Of this amount, $37.9 million was used for acquisitions and $19.6 was used for property, plant and equipment purchases as we expanded our operations. Net cash used in investing activities was $18.0 million in 1997. Of this amount, $4.0 million was used for acquisitions and $14.0 million was used for the purchase of property, plant and equipment. Net cash used in investing activities was $97.0 million in 1998. Of this amount, $83.9 million was used for acquisitions $67.8 million of which was for the purchase of Monroc and related fees. Also of this amount, $22.4 million was for the purchase of property, plant and equipment offset by proceeds of $9.3 million from the sale of certain properties, including non-business land at Monroc. Cash provided by financing activities was $48.7 million in 1996, $14.3 million in 1997 and $100 million in 1998. Of the cash provided by financing activities in 1996, $12.4 million was from common and preferred stock sales and $36.3 million was provided by net borrowings. All of the cash provided by financing activities in 1997 and 1998 was from increased borrowings under existing or restructured debt agreements. In June 1998, we amended our existing credit facility with a syndicate of lenders. The term portion of the facility was increased to an aggregate principal amount of $115.0 million. The term loan consists of an "A" tranche and a "B" tranche. The term loan A accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 0.875% to 2.125% and the term loan B accrues interest at a rate per annum based on the Eurodollar rate plus a spread of 1.875% to 2.500%. The term loan A matures in March 2004 and the term loan B matures in March 2006. The revolving portion of the facility was increased to $60.0 million from $40 million in April 1999. The revolving facility terminates in June 2004 and accrues interest quarterly based on the Eurodollar rate plus a spread of 0.875% to 2.125%. As of March 31, 1999, we had borrowings of $31.4 million outstanding under the revolving facility, $53.5 million of term loan A outstanding and $58.5 million of term loan B outstanding. Borrowings under the revolver were increased to $32.4 million when the available line was modified in April, 1999. The credit facility is secured by all of our assets. In March 1998, we entered into a $9 million revolving line of credit facility with a bank. Interest accrues quarterly at an announced prime rate which was 7.75% as of March 31, 1999. The facility matures in June 1999 although the note is due on demand. We increased the facility to $17.5 million in April 1999. Borrowings under the credit facility are guaranteed by a stockholder. In November 1996 and June 1998, we issued $30.0 million and $15.0 million of senior subordinated notes to an institutional investor. Interest accrues quarterly at an annual rate of 10.34% and 10.09%, respectively. The notes mature in November 2006 and June 2008 and are subject to annual required principal payments beginning in 2003. In connection with this debt, we issued warrants to purchase 335,517 shares of common stock. We believe the proceeds of the offering, cash flow from operations, our existing credit facility as amended prior to the offering and existing cash balances will be sufficient to meet working capital requirements and fund future acquisitions during the next twelve months. To the extent we pursue additional acquisitions, or require additional working capital, we may need to obtain additional sources of financing. There can be no assurance that such financing will be commercially available through an increased commitment under our credit facility or otherwise be obtained pursuant to favorable terms, if at all. If we are unable to obtain additional financing to finance our future operations, we may not be able to implement our business strategy which could have a material adverse effect on our business, financial condition and results of operation. 28 Our credit facility provides us with a $115 million term loan and permits us to borrow up to an additional $60 million of revolving loans provided that certain conditions and financial tests are met. We also have a $17.5 million floating rate bank demand note. Borrowings under the credit facility bear interest, at our option, at either the Eurodollar rate or the ABR rate, plus a margin. At April 30, 1999, we had total borrowings under the credit facility and of $156.2 million, all of which is subject to interest rate risk. The floating rate bank demand note floats with the prime rate. The outstanding balance at April 30, 1999 was $15.7 million. Each 1.0% increase in interest rates on the total of the debt above would impact pretax earnings by approximately $1.7 million. We do not use interest rate swap contracts to hedge the impact of interest rate fluctuations on certain variable rate debt. YEAR 2000 ISSUE The past practice of computer programs being written using two digits rather than four to define the applicable year has resulted in the "Year 2000 Issue." Any of our computer programs or hardware that has date sensitive software or embedded chips may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations or a temporary inability to engage in normal business activities. In response to this issue, in 1998, we developed Year 2000 task forces whose project scopes included the assessment and ongoing monitoring of all information technology computer hardware and software and non-information technology equipment affected by the Year 2000 issue. The task forces are granted the authority and resources to address the Year 2000 issue and receive supervisory support, as needed, from our Chief Financial Officer. Our plan to resolve the Year 2000 issue involves the following four phases: systems and hardware assessment, resolution, testing and implementation. To date, the task forces have completed their assessment of all systems that could be significantly affected by the Year 2000 issue and are in the process of resolving hardware and software shortfalls. We have installed or are in the process of installing new hardware and system solutions. In 1998 we spent $499,400 on system improvements and have budgeted $500,000 to complete the process in 1999. We believe these improvements will resolve our Year 2000 issues. The results of ongoing system resolution and testing, however, could result in additional costs to us. Management believes it has an effective program in place to resolve the impact of the Year 2000 issue in a timely manner and does not expect the Year 2000 issue to have a material adverse effect on our business, financial condition and results of operations. However, we have not yet completed the conversion of all information technologies identified in our Year 2000 program. If we do not complete any additional Year 2000 work, we might be unable to effectively account for or report its financial position and results of operations using its current information technology. In addition, the ultimate effectiveness of the remediated information technology will be unknown until January 1, 2000, and there is no assurance that there will not be a material adverse effect on our business, financial condition and results of operations. Further, disruptions in the economy, generally resulting from Year 2000 issues, could have a material adverse effect on our business, financial condition and results of operations. The amount of the potential liability and lost revenue, if any, resulting from these risks cannot be reasonably estimated at this time. We currently have no formal contingency plans in place if we do not complete all phases of the Year 2000 program. However, the progress of the Year 2000 program is being closely monitored, and additional measures will be taken as risks are identified. We will continue to evaluate the status of completion throughout 1999 and determine whether such a plan is necessary. EFFECT OF INFLATION Management believes that inflation has not had a material effect on USAI. 29 RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS Effective June 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 131 ("FAS 131"), DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which superceded Statement of Financial Accounting Standard No. 14, FINANCIAL REPORTING FOR SEGMENTS OF A BUSINESS ENTERPRISE. FAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. FAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. We have determined that it operates in a single reportable segment. Accordingly, the adoption of FAS 131 did not affect net earnings or financial position, nor did it significantly change the disclosure of segment information. In April 1998, the American Institute of Certified Public Accountants (the "AICPA") issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all costs related to start-up activities, including organizational costs, be expensed as incurred. The cumulative effect of the adoption of SOP 98-5 impacted our net earnings by $84, which has been recorded as a nonoperating expense in the 1st quarter of 1999. In March 1998, the AICPA issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). We adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. We expensed such costs as incurred through December 31, 1998. We do not expect the impact of the adoption of SOP 98-1 to be material. In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, ("FAS 130"). FAS 130 requires all non-owner changes in equity that are excluded from net earnings under existing FASB standards be included as comprehensive income. We presently do not have any material transactions that directly affect equity other than those transactions with owners in their capacity as owners. Therefore, the provisions of FAS 130 did not materially affect net earnings or financial position. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), which is required to be adopted in years beginning after June 15, 1999. Because of our minimal use of derivatives, management does not anticipate that the adoption of FAS 133 will have a significant impact on net earnings or the financial position of USAI. 30 INDUSTRY OVERVIEW Aggregates are a basic construction material used extensively for highway and infrastructure construction and maintenance as well as for commercial and residential construction. For these purposes, aggregates have few, if any, substitutes. The United States market for all aggregates was approximately 2.8 billion tons in 1998 with a value of $13.5 billion. This represents an increase of 7.5% in volume and 9.7% in dollar value above 1997 levels. The following chart sets forth data on the total production of aggregates and value of annual shipments of aggregates in the United States for the periods shown. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
TOTAL AGGREGATES PRODUCTION IN THE UNITED STATES AND VALUE OF ANNUAL SHIPMENTS Million Tons Tons of Aggregates Production (left scale) 1985 1800.9 1986 1906.2 1987 2096.33 1988 2171.2 1989 2110.73 1990 2132.6 1991 1879.44 1992 2076.75 1993 2192.5 1994 2338 1995 2388.71 1996 2473.59 1997 2614.68 1998 2777.82 Source: U.S. Geological Survey $ Billion Value of Aggregates Production (right scale) 1985 6.49 1986 7 1987 8.25 1988 8.68 1989 8.75 1990 8.84 1991 7.99 1992 8.94 1993 9.46 1994 10.36 1995 10.64 1996 11.18 1997 12.33 1998 13.2
Historically, demand for aggregates has been only moderately cyclical, as the chart above illustrates, especially relative to other building materials such as cement and gypsum wallboard. In addition to moderate cycles, the national per ton average price for aggregates has not experienced an annual decline between 1985 and 1998 as indicated in the chart below. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
AGGREGATE PRICES - NATIONAL AVERAGE $/ ton DATE 1985 $3.60 1986 $3.67 1987 $3.94 1988 $4.00 1989 $4.15 1990 $4.15 1991 $4.25 1992 $4.30 1993 $4.31 1994 $4.43 1995 $4.45 1996 $4.52 1997 $4.70 1998 $4.81 Source: U.S. Geological Survey
31 Demand for aggregates is driven significantly by spending on highway and infrastructure construction and maintenance. Spending levels are influenced by public sector expenditures for construction and regional economic conditions. Residential and commercial construction spending is influenced by general economic conditions and prevailing interest rates and thus is generally more cyclical than public construction spending. Demand is also seasonal because of the impact of weather conditions on construction activity. The table below illustrates total United States public infrastructure spending over the periods shown. EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
UNITED STATES PUBLIC INFRASTRUCTURE SPENDING SEASONALLY ADJUSTED, ANNUAL RATE $ Billions Through 3/99 DATE 01/1988 56.272 02/1988 56.694 03/1988 60.868 04/1988 60.491 05/1988 60.04 06/1988 58.772 07/1988 62.037 08/1988 57.041 09/1988 58.18 10/1988 59.478 11/1988 59.705 12/1988 63.42 01/1989 62.16 02/1989 59.039 03/1989 54.71 04/1989 59.642 05/1989 62.478 06/1989 59.28 07/1989 58.711 08/1989 59.278 09/1989 60.616 10/1989 59.1 11/1989 61.798 12/1989 62.503 01/1990 64.264 02/1990 66.522 03/1990 62.885 04/1990 62.567 05/1990 63.487 06/1990 62.186 07/1990 66.132 08/1990 63.553 09/1990 60.396 10/1990 65.071 11/1990 66.677 12/1990 64.24 01/1991 56.825 02/1991 63.316 03/1991 63.192 04/1991 61.052 05/1991 62.802 06/1991 63.195 07/1991 60.603 08/1991 62.863 09/1991 62.656 10/1991 65.441 11/1991 64.066 12/1991 64.496 01/1992 66.924 02/1992 69.694 03/1992 71.539 04/1992 68.248 05/1992 69.833 06/1992 65.205 07/1992 63.723 08/1992 63.64 09/1992 63.014 10/1992 61.846 11/1992 64.39 12/1992 67.619 01/1993 60.479 02/1993 66.204 03/1993 64.409 04/1993 68.543 05/1993 65.768 06/1993 69.772 07/1993 67.531 08/1993 65.822 09/1993 68.248 10/1993 65.618 11/1993 68.594 12/1993 71.794 01/1994 69.296 02/1994 67.222 03/1994 67.565 04/1994 68.32 05/1994 68.445 06/1994 70.566 07/1994 75.616 08/1994 71.809 09/1994 72.287 10/1994 72.552 11/1994 69.11 12/1994 71.485 01/1995 72.016 02/1995 69.609 03/1995 73.554 04/1995 72.849 05/1995 73.362 06/1995 75.531 07/1995 73.088 08/1995 76.088 09/1995 75.726 10/1995 77.316 11/1995 77.177 12/1995 77.23 01/1996 80.071 02/1996 78.313 03/1996 76.575 04/1996 81.671 05/1996 80.933 06/1996 77.911 07/1996 77.83 08/1996 75.882 09/1996 79.779 10/1996 79.441 11/1996 79.251 12/1996 75.788 01/1997 79 02/1997 84.68 03/1997 86.685 04/1997 82.806 05/1997 83.648 06/1997 83.187 07/1997 83.403 08/1997 84.722 09/1997 83.404 10/1997 82.499 11/1997 84.142 12/1997 83.416 01/1998 82.624 02/1998 82.764 03/1998 82.65 04/1998 81.962 05/1998 76.804 06/1998 82.344 07/1998 81.827 08/1998 81.573 09/1998 84.511 10/1998 81.383 11/1998 82.269 12/1998 83.433 01/1999 90.146 02/1999 93.228 03/1999 94.779 Source: U.S. Census Bureau
TEA-21, the largest federal public works spending bill in the history of the United States, became law in June 1998. This legislation will be a key driver of federal highway and infrastructure spending and the resulting demand for aggregates over the next six years. This bill provides for total federal spending over the 1998 through 2003 period of $218 billion on highway and infrastructure projects. This spending level represents a 41% increase in funding above the prior federal highway and infrastructure program, the Intermodel Surface Transportation Efficiency Act, or ISTEA, which covered the 1992 to 1997 period. TEA-21 authorizes average annual federal spending on highways and roads of at least $26 billion, nearly 44% higher than the average annual spending of $18 billion that was spent under ISTEA. In the nine states that we serve, average annual federal highway spending through 2003 under TEA-21 is projected to be 61% higher than under ISTEA and should provide a strong underpinning for future aggregates demand. 32 The table below compares average annual federal highway spending under TEA-21 relative to spending under ISTEA in the nine states that we serve. FEDERAL HIGHWAY SPENDING IN STATES SERVED BY USAI
AVERAGE ANNUAL SPENDING ------------------------ ISTEA TEA-21 STATE 1992-1997 1998-2003 % INCREASE - --------------------------------------------------------------------------- ------------ ---------- ------------- (DOLLARS IN MILLIONS) Alabama.................................................................... $330.3 $530.5 61% Arizona.................................................................... 255.7 407.8 60 Florida.................................................................... 768.4 1,208.6 57 Georgia.................................................................... 541.4 918.8 69 Idaho...................................................................... 124.8 202.0 62 Mississippi................................................................ 202.3 319.0 58 Nevada..................................................................... 117.3 189.7 62 Tennessee.................................................................. 365.6 592.7 62 Utah....................................................................... 129.9 205.0 58 ------------ ---------- --- Total for states served by USAI.......................................... $2,835.7 $4,574.1 61% Total United States...................................................... $18,162.5 $26,173.8 44%
Source: United States Senate Environment and Public Works Committee The aggregates industry is currently undergoing significant consolidation, although generally the industry remains fragmented nationally as well as in many regional areas. The estimated market share of the top five producers was 25% in 1997. From 1980 to 1998, the number of independent producers of crushed stone in the United States declined by 22% from approximately 1,865 to approximately 1,450, although crushed stone consumption increased by 71%. From 1980 to 1998, the number of independent sand and gravel producers declined by 19% from 4,512 to 3,642, although sand and gravel consumption increased by 47%. Due to the high cost of transportation relative to the value of the product, competition within the aggregates industry tends to be localized. Generally, individual aggregate production sites compete for customers within a limited geographic area, which may be as small as 20-30 miles depending on local availability of suitable aggregates and the geographic density of demand. As a result, the proximity of aggregate production sites to customers is an important factor in competition for customers. In certain areas of the United States including markets encompassing our Gulf Coast operations, sources of aggegates may be located much further from customers due to factors including a lack of suitable aggregates, local permitting issues and zoning restrictions. In these areas, aggregates must be transported from more distant sites and thus transportation becomes a greater component of overall product cost. This has resulted in shipments into these markets over long distances by rail and water, which favor large operators like USAI that can invest in the infrastructure necessary to accommodate these modes of transportation. There are four primary factors which limit the availability of economically viable aggregates reserves in a particular market: - the geological existence of suitable aggregates within a particular market; - the physical characteristics of available aggregates and the difficulty in satisfying increasingly rigorous specifications required by customers; - the difficulty in and increasingly higher cost of obtaining the necessary permits for potential reserves; and - the feasibility of cost-effectively extracting, processing and delivering available reserves. 33 In addition to factors that limit the availability of suitable aggregates, increasing levels of operational, technical and financial sophistication in the aggregates industry have rewarded efficient producers with a competitive advantage in terms of their ability to meet the increasing demand for quality aggregates and to satisfy increasingly demanding and technically sophisticated customers. Other factors that operate as constraints on competition in the aggregates industry include: - High transportation costs relative to the value of the product, which generally result in very localized competition, with individual aggregate production sites competing for customers within a limited geographical area; - The increasingly capital intensive nature of aggregate mining and processing; - Increasing demand for certain types of aggregates that can meet rigorous material specifications and quality requirements, particularly the new federal "SuperPave" program. This gives a competive advantage to efficient and technically sophisticated producers such as USAI that have access to and are able to make efficient use of suitable aggregate reserves; - Increasingly difficult and expensive zoning and regulatory compliance requirements, such as obtaining the necessary permits for new aggregate production sites and the reclamation of depleted sites; and - Increasing levels of technical sophistication required to compete effectively, including expertise in geological engineering and planning, blasting technology, processing facility design, computer automation technology and reclamation planning. The difficulty and related expense of complying with environmental and other regulations also make it difficult for small producers to open new aggregate production sites, enter new markets and compete effectively. In ongoing aggregate mining and processing, aggregates producers must adhere to various mining regulations, such as rules and regulations regarding dust and water emissions, sediment and erosion control, noise limitations, wetlands protection, reclamation of depleted quarry sites and the safety of blasting and other mining techniques. Often new aggregate production sites require, among other things, zoning changes and local, state and federal permits and plans regarding mining, reclamation and air and water emissions. New site approval procedures may require the preparation of archaeological surveys, endangered species studies and other studies to assess the environmental impact of new sites. Compliance with these regulatory requirements necessitates a significant up-front investment and adds to the length of time to develop a new site. While governmental compliance issues can be challenging, aggregates producers often face opposition from the communities in which new aggregate production sites are to be located. Public concerns center on noise levels and blasting safety, the visual impact of an aggregate production site on neighboring properties and high volume of truck traffic. To respond to these issues, producers must operate in a more sophisticated manner such as developing blasting techniques to minimize surface vibrations and noise and developing an effective community communications program. Producers are often required to acquire larger tracts of property to allow for extended buffer zones between aggregate production sites and surrounding properties and to invest significant capital to improve road and highway access. Regulatory requirements and public concerns typically add from one to two years to the time required by us to develop a new site, and in extreme cases may require significantly longer time. In addition, at many locations regulatory and community obstacles may prevent the development of an attractive site. We anticipate that environmental compliance, operating considerations and community relations issues will become more difficult in the future, enhancing the competitive advantage of larger, more sophisticated producers such as USAI, further encouraging consolidation in the industry, and making entry into the construction aggregates business increasingly expensive. 34 BUSINESS THE COMPANY U.S. Aggregates is a leading producer and marketer of aggregates and associated aggregate-based materials and services. Aggregates consist of crushed stone, sand and gravel. Our products are used primarily for the construction and maintenance of highways and other infrastructure projects and for commercial and residential construction. We serve local markets in nine states in two fast growing regions of the United States, the Mountain states and the Southeast. We believe that we are a market leader in most of the local markets that we serve. Our current estimated aggregate reserve position exceeds 1.3 billion tons, which at most of our aggregate production sites represents in excess of a 20 year supply. USAI was founded in January 1994 with the goal of becoming a leading national producer of aggregates. From our inception in January 1994 through 1998, through internal growth and acquisitions, our net sales have increased to $228.7 million while operating profit has increased to $24.4 million. Our growth in sales and profitability has been driven by several factors. We hold strong positions in a number of fast growing local markets in the Mountain states and Southeast regions of the United States. A majority of our aggregate sales are in the highway and infrastructure construction and maintenance markets. During the 1990s, our markets benefitted from increased public sector spending on highway projects and should continue to see significant growth in the future as a result of a new, six year $218 billion federal commitment to highway and infrastructure projects. Through our management and technical expertise, we have positioned ourselves as an efficient, low-cost producer and supplier of high-quality aggregates. We have expanded into contiguous and new markets by acquiring, integrating, developing and further strengthening facilities, operations and aggregate sites. Additionally, we have enhanced the performance of our acquired facilities through increased capital investment and our management and technical expertise. In the Mountain states, we serve markets in Utah, Idaho, Nevada and Arizona. In the Southeast, we serve markets in Alabama, Tennessee, the Florida panhandle, Mississippi and Georgia. We are well positioned to benefit from continued strong economic activity in these states and in the local markets where we operate. According to the Bureau of Labor Statistics, from 1993 to 1998, compound annual growth in employment in these nine states was 3.7%. The United States compound annual growth in employment over this period was 2.5%. According to the U.S. Geological Survey, from 1993 to 1998, compound annual growth in consumption of aggregates in the nine states we serve was 6.7%. The United States compound annual growth in consumption of aggregates over this period was 5.1%. Nationally, approximately 50% of aggregate production is used in highway and infrastructure construction and maintenance. As a result, we will benefit from the 1998 passage of the six year, $218 billion Transportation Equity Act for the 21st Century, or TEA-21. TEA-21 designates a minimum of $158 billion nationally for federal highway construction and maintenance projects. This represents a 44% increase above average annual federal highway spending levels under the predecessor six year federal program. In the nine states we serve, average annual federal highway spending under TEA-21 is projected to be 61% higher than under the predecessor program. This federal spending, along with programs by state and local governments, should provide strong underpinnings for our future growth. GROWTH STRATEGY We believe that long-term, high-quality aggregate reserves located near customers are central to our success. Accordingly, we have focused on the acquisition and development of aggregate production sites and companies that are well positioned to serve growing markets. Since our inception in January 1994, we have completed and integrated 28 business and asset acquisitions, including both operating 35 companies and aggregate production facilities. Our strategy is to utilize our management and financial resources to strengthen our position in local markets by: SERVING GROWTH IN EXISTING MARKET AREAS. Demand for aggregates in the markets we serve has meaningfully outpaced overall United States demand for aggregates over the past five years. We will continue to take advantage of our established aggregate reserve capacity and the maturation of our newly developed aggregate production sites to meet our customers' demands. We have increased our annual production by 4.1 million tons to 21.6 million tons by opening eight new major aggregate sites during the 1996 to 1998 period. We believe that our financial performance does not yet fully reflect the benefit of these new operations. Based on our experience, a new aggregate production site's sales, cash flow and profitability usually increase over the first five years of operation as production is increased and the new aggregate site matures. EXPANDING CAPACITY AND MAINTAINING COST-COMPETITIVENESS. Where appropriate, we will expand our production capacity and invest capital in additional plant and equipment so that we can serve additional demand in our existing local and remote markets. As we continue to increase capacity we will focus on maintaining our cost-competitiveness. MAKING ADD-ON ACQUISITIONS AND DEVELOPING NEW AGGREGATE RESERVES IN EXISTING MARKETS. We will continue to make add-on acquisitions and to develop well positioned aggregate reserves. Our primary objective is to increase our competitive position within the local and remote markets we serve. SERVING MARKETS IN CONTIGUOUS AREAS. We will use our access to existing and additional reserves so that we can move into contiguous markets when opportunities arise. EXPANDING INTO NEW MARKETS PRIMARILY THROUGH ACQUISITIONS. We will evaluate and may make acquisitions in new market areas. These potential acquisitions may be made in the regions we currently serve or, where economically attractive, in new regions. These acquisitions may entail further add-on acquisitions and additional capital expenditures to expand our operations in these new areas. OPERATIONS We are a leading producer and marketer of aggregates and associated aggregate-based materials and services. Approximately 70% of our aggregates production is sold directly to customers. The balance is used to produce asphalt, which generally contains approximately 90% aggregates by volume and ready-mix concrete, which generally contains approximately 80% aggregates by volume. Our integration into these aggregates-based materials and related services generally occurs in markets where our main competitors are integrated into these products. Our entries into markets in the fast growing Mountain states and Southeast regions have provided the incremental market demand to justify the development of a number of new aggregate production sites as well as upgrades of existing facilities. Approximately 48% of our production in 1998 was produced at aggregate production sites which are less than three years old. We are currently developing these new aggregate production sites. Our production capacity has increased to approximately 30 million tons per year since 1994 while unit costs have been reduced substantially from the level of costs incurred in individual operations at the time they were acquired or started. This cost reduction is the result of comprehensive mining plans combined with the installation of state of the art equipment permitting the implementation of "best practices" throughout our operations. In addition, asphalt plants and transportation infrastructure for delivery of asphalt and concrete have been upgraded. 36 The following table shows, for the periods indicated, our total shipments of aggregates, asphalt and ready-mix concrete. U.S. AGGREGATES, INC. SHIPMENTS OF AGGREGATES, ASPHALT AND READY-MIX CONCRETE
FISCAL YEARS ENDED DECEMBER 31, ----------------------------------------------------- 1994 1995 1996 1997 1998 --------- --------- --------- --------- --------- (IN MILLIONS) Tons of aggregates produced: Sold directly to customers..................................... 1.5 3.1 5.1 6.6 11.9 Used internally................................................ 0.6 1.7 2.0 2.9 3.9 --- --- --- --- --- Total tons of aggregates produced............................ 2.1 4.8 7.2 9.5 15.8 PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 28.6% 35.4% 27.8% 30.5% 24.7% Tons of asphalt sold............................................. 0.1 0.6 0.9 1.3 1.6 Yards of ready-mix concrete sold................................. 0.4 0.8 0.9 0.9 1.4 PRO FORMA 1998(1) ------------- Tons of aggregates produced: Sold directly to customers..................................... 17.6 Used internally................................................ 4.0 --- Total tons of aggregates produced............................ 21.6 PERCENTAGE OF AGGREGATES PRODUCED USED INTERNALLY.......... 18.5% Tons of asphalt sold............................................. 1.6 Yards of ready-mix concrete sold................................. 1.7
- ------------------------ (1) Gives effect to the 1998 Acquired Businesses as if they were acquired on January 1, 1998. PRODUCT DESCRIPTION AND MANUFACTURING PROCESS We manufacture and distribute aggregates as well as construction materials with high aggregate content, including asphalt and ready-mix concrete. We have also developed state of the art material quality control and application design laboratories to ensure the highest levels of quality are maintained. These laboratories permit us to provide aggregates customers with the most cost effective and consistent materials for downstream applications, ensuring their compliance with increasingly stringent specifications. We also provide third party aggregates producers with these certification services. The laboratories have also contributed to our record of achieving bonuses on projects where control of variances in materials within a tight range can result in additional profits. AGGREGATES We have developed extensive mining plans at key sites to ensure the long term competitive position of our aggregate reserves. Typically, we mine raw aggregates from an open aggregate production site, crush the material and separate it by size for specific uses. Aggregates are then either shipped by truck or rail to customers, stockpiled for customer pick-up or used in producing asphalt, ready-mix concrete and related products. ASPHALT Asphalt generally has an aggregates content of approximately 90% by volume. We produce paving asphalt by heating and mixing aggregates with hot liquid asphalt in accordance with the specifications of each customer. Once produced, we transfer asphalt into mixer trucks and deliver it directly to job sites for immediate application. We produce asphalt in many of our markets in the Mountain states, including throughout Utah and in Las Vegas and northwestern Arizona, where our competitors are largely also integrated producers. Generally, we have expanded our asphalt operations in the Mountain states in order to benefit from government spending on highway construction and maintenance projects. 37 READY-MIX CONCRETE Ready-mix concrete generally has an aggregates content of approximately 80% by volume. We produce ready-mix concrete by mixing aggregates with cement, water and additives, which have the effect of controlling the concrete's strength, drying speed and other characteristics. We deliver the concrete by mixer trucks to construction sites for immediate use. We produce ready-mix concrete in a number of markets including Chattanooga, Tennessee and throughout Alabama, Utah and Idaho, among other areas. Generally, we have not expanded ready-mix operations other than as a result of acquiring an operating company that had an existing ready-mix business. RESERVES We estimate that our total recoverable aggregate reserves are in excess of 1.3 billion tons. The yield from the extraction of reserves is based on an estimate of the volume of materials which can be economically extracted to meet current market and product applications. Our mining plans are developed by experienced mining and operating personnel based on internal and outside drilling and geological studies and surveys. In some cases, zoned properties must be extracted in phases as reserves in a particular area of the reserve are exhausted. A portion of our aggregate reserves are owned and the remainder are leased. Leases usually provide for royalty payments based on revenues from aggregates sold at a specific location. Leases usually expire after a specific time period and may be renewable for additional terms. Most leases have extension options providing for at least 20 years of operation based on 1998 extraction rates. With minor exceptions, where lease options total less than 20 years, we have developed and zoned additional reserves that will allow us to serve our markets on a competive basis and ensure long term availability. Generally, reserves at our aggregate production sites are adequate for in excess of 20 years production at 1998 rates of extraction. In certain cases, leases may require us to extract a minimum amount of tonnage to maintain our right to mine reserves on the leased property. The following table presents our aggregate reserves by market area: USAI AGGREGATE RESERVES BY MARKET AREA
ZONED/ ZONED/ PERMITTED UNPERMITTED UNZONED TOTAL ----------- --------------- ----------- --------- (TONS IN MILLIONS) Alabama............................................................. 450 50 -- 500 Eastern Tennessee................................................... 70 -- -- 70 Northern Utah....................................................... 350 -- -- 350 Central Utah........................................................ 110 -- 50 160 So. Utah/SE Nevada/NW Arizona....................................... 125 -- 80 205 Idaho............................................................... 35 -- 40 75 ----------- --- ----- --------- TOTAL............................................................. 1,140 50 170 1,360 ----------- --- ----- --------- ----------- --- ----- ---------
We also have two aggregate production sites in Georgia, one of which is leased to a major building materials producer under a long term lease. The other aggregate production site is not anticipated to provide us with a base of operations in Georgia in 1999. Because transportation represents such a large component of overall cost of aggregates delivered to the customer, we operate a large number of small to medium size aggregate sites. In 1998, no single aggregate production site accounted for more than 4.0% of consolidated net sales. 38 TRANSPORTATION We have a modern transportation infrastructure that allows us to maintain our competitive position. We have expanded our infrastructure to accommodate rail shipments of aggregates to our remote markets and we will have the option of shipping by water from one site by the end of 1999. We own or lease approximately 500 trucks which we use primarily to deliver ready-mix concrete and asphalt, which represent approximately 30% of our total volume of aggregates sold of our net sales, on a timely basis to our customers. We also contract for additional trucks to transport aggregates and asphalt to meet short term peak demand. PROPERTIES In 1998, 26 of our aggregate production sites each had shipments of greater than 100,000 tons. We conducted mining operations in 1998 at all of these aggregate production sites, of which 12 are located on property we own, two are on land owned in part and leased in part, 11 are on leased property, and one is on facilities leased on a job basis. We own 61 pieces of real property and lease property at 62 locations. We have six pieces of property which are owned in part and leased in part. Leases typically provide for royalty payments based on revenues from material extracted from the facility, with specified minimum monthly royalties. Our leases generally expire after an established number of years and are renewable for a specified series of additional terms. Our aggregate production sites are generally small-to medium-sized by industry standards and we believe that no single aggregate production site is of major significance to our operations. Our policy has been to obtain surveys and title opinions on significant real estate purchases. In addition, we evaluate on a case by case basis whether to purchase title insurance in connection with real estate purchases and did in fact obtain title insurance on many of our owned parcels. RECLAMATION We are required by the laws of various states to reclaim aggregate sites after reserves have been depleted. Each site's mining plan includes a reclamation plan which has been developed for that site to maximize the value of the end use of the site. In some cases, depleted sites have been sold for commercial or residential properties generating additional profits. Historically, we have not incurred and do not anticipate incurring substantial costs in excess of residual land values in connection with the closing of aggregate operations due to depletion of reserves. MANAGEMENT INFORMATION SYSTEMS In general, we use networked management information systems for immediate access to production and sales data from our production facilities, tracking thousand of transactions each day. Automated sales and invoicing systems weigh trucks at the aggregate production site and related facilities and immediately generate customer invoicing and sales information. These streamlined procedures reduce both transportation costs and customer turnaround-time at the aggregate production site, increasing our productivity and providing us with a competitive advantage over producers who do not use similar systems. CUSTOMERS We market our aggregates products to customers in a variety of industries, including public infrastructure, commercial and residential construction contractors; producers of asphaltic concrete, ready-mixed concrete, concrete blocks, and concrete pipes; and railroads. A substantial amount of our aggregates is used in publicly funded projects. 39 COMPETITION Because of the impact of high transportation costs on the aggregates business, competition in each of our markets tends to be limited to producers in proximity to our production facilities. Although we experience competition in all of our markets, we believe that we are generally a leading producer in the market areas we serve. Competition is based primarily on aggregate production site location and price, but quality of aggregates and level of customer service are also important factors. We compete directly with a number of large and small producers in the markets we serve. Certain of our competitors have greater financial resources than we have. EMPLOYEES We employ approximately 2,000 employees, of which approximately 1,600 are hourly and approximately 400 are salaried. Approximately 600 of our employees are represented by labor unions. We consider our relations with our employees to be good. GOVERNMENTAL AND ENVIRONMENTAL REGULATION Our facilities are subject to various evolving federal, state and local laws and regulations relating to the environment, including those relating to discharges to air, water and land, the handling and disposal of solid and hazardous waste and the cleanup of properties affected by hazardous substances. Certain environmental laws impose substantial penalties for noncompliance, and others, such as the federal Comprehensive Environmental Response, Compensation, and Liability Act, as amended, impose strict, retroactive, joint and several liability upon persons responsible for releases of hazardous substances. In connection with our corporate acquisitions, we usually obtain environmental assessments from independent environmental consultants. These assessments generally consist of a site visit, historical record review, interviews with key personnel and preparation of a report. The purpose of the consultant's work is to identify potential environmental conditions or compliance issues associated with the subject property and operations. Some risk of environmental liability is inherent in the nature of our business, however, and we might incur future material costs to meet current or more stringent compliance, cleanup or other obligations pursuant to environmental laws. We continually evaluate whether we must take additional steps at our locations to ensure compliance with certain environmental laws. We believe that our operations are in substantial compliance with applicable laws and regulations and that any noncompliance is not likely to have a material adverse effect on our business, financial condition or results of operations. However, future events, such as changes in or modified interpretations of existing laws and regulations or enforcement policies, or further investigation or evaluation of the potential health hazards of certain products or business activities, may give rise to additional compliance and other costs that could have a material adverse effect on us. USAI, as well as other companies in the aggregates industry, produce certain products containing varying amounts of crystalline silica. Excessive and prolonged inhalation of very small particles of crystalline silica has been associated with non-malignant lung disease. The carcinogenic potential of excessive exposure to crystalline silica has been evaluated for over a decade by a number of research groups including the International Agency for Research on Cancer, the National Institute for Occupational Safety and Health and the National Toxicology Program, a part of the Department of Health and Human Services. Results of various studies have ranged from classifying crystalline silica as a probable to a known carcinogen. Other studies concluded higher incidences of lung cancer in some operations was due to cigarette smoking, not silica. Governmental agencies, including the Occupational Safety and Health Administration and Mine Safety Health Administration, coordinate to establish standards for controlling permissible limits on crystalline silica. In the early 1990s, they considered lowering silica exposure limits but decided to retain existing limits. 40 Recently, the Occupational Safety and Health Administration has announced a deadline of June 2000 for release of new rules to implement more stringent regulations. We believe we currently meet government guidelines for crystalline silica exposure and will continue to employ advanced technologies as they become available to ensure worker safety and comply with regulations. We believe that our compliance with environmental laws has not had a material adverse effect on our business, financial condition or results of operations. See "Risk Factors" for a further description for the effect of environmental regulation on our business. LEGAL PROCEEDINGS From time to time, we have been involved in various legal proceedings, all of which we believe are routine in nature and incidental to the conduct of our business. Our ultimate legal and financial liability with respect to such proceedings cannot be estimated with certainty, but we believe, based on its examination of such matters, that none of such proceedings, if determined adversely, would have a material adverse effect on our business, financial condition or results of operations. 41 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth certain information as of May 15, 1999, with respect to our directors and executive officers. Our executive officers serve at the discretion of our board of directors.
NAME AGE POSITIONS - ------------------------------ --- ------------------------------------------------- James A. Harris............... 65 Chief Executive Officer and Chairman of the Board Morris L. Bishop, Jr.......... 54 President, Chief Operating Officer and Director Michael J. Stone.............. 55 Executive Vice President--Development, Chief Financial Officer, Treasurer, Secretary and Director Bruce V. Rauner............... 43 Director David A. Donnini.............. 34 Director Charles R. Pullin............. 75 Director Edward A. Dougherty........... 41 Director
JAMES A. HARRIS. Mr. Harris has been Chief Executive Officer and Chairman of the Board since he founded USAI with Michael J. Stone and Golder, Thoma, Cressey, Rauner Fund IV, L.P. in January 1994. Prior to 1994 Mr. Harris held a number of senior executive positions at Koppers Co., Inc. including a ten year period when he was responsible for acquisitions for Koppers Construction Materials and Services Group. This division of Koppers grew from $70 million in sales and $6 million in profit in 1970 to over $1.2 billion in sales and $140 million in profit in 1988. This growth includes 14 major acquisitions including several purchases of companies with revenues in the $100 million to $300 million range and numerous small add-on acquisitions. This growth positioned Koppers as the second largest producer of aggregates in the United States in 1988. MORRIS L. BISHOP, JR. Mr. Bishop has been President and Chief Operating Officer of USAI since May 1997. Mr. Bishop has been a Director since May 1999. Prior to joining USAI, Mr. Bishop was with Hoover, Inc., Koppers Company, Inc. and Vulcan Materials Company serving in senior management positions in their respective construction materials businesses. MICHAEL J. STONE. Mr. Stone has been Executive Vice President--Development, Chief Financial Officer, Treasurer, Secretary and Director since Mr. Harris and he founded USAI with Golder, Thoma, Cressey, Rauner Fund IV, L.P. in January 1994. Prior to joining USAI, Mr. Stone was Chief Financial Officer of Genstar Building Materials and Services Group, a $1.0 billion division of Genstar Corporation. This group included Genstar Stone Products, the tenth largest crushed stone producer in the United States. BRUCE V. RAUNER. Mr. Rauner has served as a director of USAI since its founding in January 1994. Mr. Rauner is the Managing Principal of GTCR Golder Rauner, LLC, a private equity investment company in Chicago, Illinois formed in January 1998 as a successor to Golder, Thoma, Cressey, Rauner, Inc., where he has been a Principal since 1981. Mr. Rauner is also a director of Coinmach Corporation, Lason, Inc., Province Healthcare Company and AnswerThink Consulting Group, Inc. DAVID A. DONNINI. Mr. Donnini has served as a director of USAI since its founding in January 1994. Mr. Donnini is a Principal of GTCR Golder Rauner, LLC, a private equity investment company in Chicago, Illinois formed in January 1998 as a successor to Golder, Thoma, Cressey, 42 Rauner, Inc., where he has been a Principal since 1993. Mr. Donnini is also a director of Coinmach Corporation and Polymer Group, Inc. CHARLES R. PULLIN. Mr. Pullin has been a director of USAI since August 1994. From 1967 until 1981, when he was appointed Vice Chairman of Koppers Company, Inc., he served in a number of executive positions at Koppers. Mr. Pullin was appointed Chief Executive Officer and Chairman of Koppers in 1982 and served in those positions until his retirement in June 1988. During Mr. Pullin's tenure, Koppers Construction Materials and Services Group grew from a small acquisition in 1966 to be the second largest producer of aggregates in the United States in 1988. EDWARD A. DOUGHERTY. Mr. Dougherty has served as a director of USAI since July 1997. Mr. Dougherty has provided consulting services to USAI since its founding in January 1994. Since 1991, Mr. Dougherty has been an independent financial advisor, having previously been employed by Bear, Stearns & Co. Inc., an investment banking firm. Mr. Dougherty is also a director of Cardinal Logistics Management, Inc. Our board of directors currently consists of seven directors, divided into three classes. At each annual meeting of our stockholders, successors to the class of directors whose term expires at such meeting will be elected to serve for three-year terms or until their successors are duly elected and qualified. Messrs. Dougherty and Stone are members of the class whose terms expire in 2000, Messrs. Bishop, Pullin and Rauner are members of the class whose terms expire in 2001, and Messrs. Donnini and Harris are members of the class whose terms expire in 2002. Our board of directors has the power to appoint our officers. Each officer will hold office for such term as may be prescribed by our board of directors and until such person's successor is chosen and qualified or until such person's death, resignation or removal. COMPENSATION OF DIRECTORS Directors currently do not receive a salary or an annual retainer for their services. Following the offering we expect however, that non-employee directors not otherwise affiliated with us or our stockholders will be paid an annual cash retainer. All directors are reimbursed for out-of-pocket expenses related to their service as directors including expenses incurred in connection with attending meetings. Directors may also be issued options pursuant to our incentive plan. See "--Incentive Plan" for a further discussion of director compensation. COMPENSATION OF EXECUTIVE OFFICERS The compensation of our executive officers will be determined by our board of directors. The following table sets forth information regarding the compensation paid or accrued by us to our chief executive officer and each of our other top executive officers for services rendered to USAI in all capacities during the years indicated. 43 SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION AWARDS ANNUAL COMPENSATION ------------------------ ------------------------------------------------ RESTRICTED OTHER ANNUAL STOCK STOCK ALL OTHER SALARY BONUS COMPENSATION AWARDS OPTIONS COMPENSATION NAME AND PRINCIPAL POSITION YEAR ($) ($)(1) ($) ($) (#) ($) - ------------------------------------- --------- ---------- ---------- ------------- ----------- ----------- ------------- James A. Harris...................... 1998 258,333 -- -- -- 2,500 Chief Executive Officer and 1997 200,000 75,000 -- -- -- 4,750 Chairman of the Board 1996 200,000 200,000 -- -- -- 2,375 Morris L. Bishop..................... 1998 220,833 -- -- -- 2,500 President, Chief Operating 1997 167,500 75,000 -- -- -- 2,375 Officer and Director 1996 150,000 100,000 -- -- -- 2,250 Michael J. Stone..................... 1998 208,333 -- -- -- 2,500 Executive Vice President-- 1997 150,000 75,000 -- -- -- 4,750 Development, Chief Financial 1996 150,000 150,000 -- -- -- 2,375 Officer, Treasurer, Secretary and Director
(1) In 1998, Messrs. Harris, Bishop and Stone did not receive bonuses. In May 1999, in recognition of USAI's successful completion of its recent Southeast expansion program, Mr. Harris was awarded a bonus of $200,000, Mr. Bishop was awarded a bonus of $125,000 and Mr. Stone was awarded a bonus of $200,000. MANAGEMENT EMPLOYMENT AGREEMENTS JAMES A. HARRIS. On January 24, 1994, we entered into an employment agreement with Mr. James A. Harris, our President and Chief Executive Officer. Currently, Mr. Harris is entitled to a base salary of $300,000 and a bonus, as determined from time to time by our board of directors, that is not to exceed one-half of Mr. Harris' annual base salary for the year. If Mr. Harris' employment is terminated without cause, or as a result of death or disability, Mr. Harris is entitled to payment of $16,667 per month for a period of twelve months following his termination. We plan to amend Mr. Harris' employment agreement prior to the offering to provide for a three-year term, create a discretionary bonus and revise the existing severance provisions. MORRIS L. BISHOP, JR. On August 5, 1995, we entered into an employment agreement with Mr. Morris Bishop, Jr., our President and Chief Operating Officer. Under the terms of this agreement, Mr. Bishop is entitled to a base salary of $250,000 and a bonus in such amount not exceeding one-half of Mr. Bishop's base salary and based on such criteria as may be established from time to time by our board of directors. If Mr. Bishop's employment is terminated without cause, he is entitled to payment of $12,500 per month for twelve months after termination. We plan to amend Mr. Bishop's employment agreement prior to the offering to provide for a three-year term, create a discretionary bonus and revise the existing severance provisions. MICHAEL J. STONE. On January 24, 1994, we entered into an employment agreement with Mr. Michael J. Stone, our Executive Vice President--Development, Chief Financial Officer, Treasurer and Secretary. Under this agreement, Mr. Stone is entitled to a base salary of $250,000 and a bonus, as determined from time to time by our board of directors, which is not to exceed one-half of Mr. Stone's base salary for the year. If Mr. Stone's employment is terminated without cause, or as a result of death or disability, he is entitled to payment of $12,500 per month for twelve months after his termination. We 44 plan to amend Mr. Stone's employment agreement prior to the offering to provide for a three-year term, create a discretionary bonus and revise the existing severance provisions. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION In 1998, the compensation committee of our board of directors held no meetings. Accordingly, decisions concerning compensation of our executive officers were made by the entire board. Other than Messrs. Harris and Stone, none of our officers or employees participated in deliberations concerning such compensation matters. 401(k) PLAN We maintain a savings plan qualified under Section 401(a) and 401(k) of the Internal Revenue Code. Generally, all full-time employees of USAI other than union employees are eligible to participate in the plan. Employees electing to participate in the plan are fully vested in their contributions. In addition, we may make discretionary contributions under the plan each year. Participating employees increase their vested interest in the discretionary contributions based upon years of employment in which a minimum of 1,000 hours are worked and they become fully vested after seven years. The maximum contribution for any participant for any year is the maximum amount permitted under the Internal Revenue Code. COMMITTEES OF THE BOARD OF DIRECTORS We have two standing committees of our board of directors: the compensation committee and the audit committee. The compensation committee, which currently consists of Messrs. Rauner, Donnini and Pullin, makes recommendations regarding the incentive plan and decisions concerning salaries and incentive compensation for our executive officers, key employees and consultants. The audit committee, which currently consists of Messrs. Rauner, Donnini and Pullin, is responsible for making recommendations to our board regarding the selection of independent auditors, reviewing the results and scope of the audit and other services provided by our independent accountants and reviewing and evaluating our audit and control functions. Our board may also create other committees. INCENTIVE PLAN Prior to the completion of the offering, we will establish the U.S. Aggregates, Inc. Long Term Incentive Plan. A maximum of shares of our common stock, subject to adjustment, have been initially authorized for the granting of stock options under the incentive plan. To date, no options have been granted pursuant to the incentive plan. Options granted under the incentive plan may be either "incentive stock options," which qualify for special tax treatment under the Internal Revenue Code, or nonqualified stock options. The purposes of the incentive plan are to advance the interests of USAI and stockholders by providing our employees with an additional incentive to continue their efforts on behalf of USAI, as well as to attract people of experience and ability to USAI. The incentive plan is intended to comply with Rule 16b-3 of the Exchange Act. It is expected that all of our and our subsidiaries' officers, directors and other employees and consultants will be eligible to participate under the incentive plan, as deemed appropriate by our compensation committee. Eligible employees will not pay any cash consideration to us to receive the options. The incentive plan will be administered by our compensation committee. The exercise price for incentive stock options must be no less than the fair market value of our common stock on the date of grant. The exercise price of nonqualified stock options is not subject to any limitation based upon the then current market value of our common stock. Options will expire no later than the tenth anniversary of the date of grant. An option holder will be able to exercise options from time to time, subject to vesting. Options will vest immediately upon death or disability of a participant and upon certain change of control events. Upon termination for cause or at will, the unvested portion of the options will be forfeited. Subject to the above conditions, the exercise price, duration of the options and vesting provisions will be set by our compensation committee in its discretion. 45 PRINCIPAL AND SELLING STOCKHOLDERS The table below sets forth certain information regarding the equity ownership of USAI: - each person or entity who beneficially owns five percent or more of our common stock; - each of our directors and executive officers; - each of the selling stockholders; and - all of our directors and executive officers as a group. Unless otherwise stated, each of the persons named in the table has sole voting and investment power with respect to the securities beneficially owned by it, him or her as set forth opposite its, his or her name. Beneficial ownership of our common stock listed in the table has been determined in accordance with the applicable rules and regulations under the Exchange Act.
SHARES BENEFICIALLY SHARES BENEFICIALLY OWNED PRIOR TO THE OWNED AFTER THE OFFERING OFFERING(1) ----------------------- ----------------------- NUMBER OF NUMBER OF NAME AND ADDRESS OF BENEFICIAL OWNER SHARES PERCENT SHARES PERCENT - --------------------------------------------------------------------- ---------- ----------- ---------- ----------- Golder, Thoma, Cressey, Rauner Fund IV, L.P.(2)(3)................... 5,982,300 72.2% 5,982,300 James A. Harris(2)(4)................................................ 582,887 7.0% 582,887 Morris L. Bishop, Jr................................................. 145,159 1.8% 145,159 Michael J. Stone(2)(5)............................................... 398,104 4.8% 398,104 Bruce V. Rauner(2)(3)................................................ 5,982,300 72.2% 5,982,300 David A. Donnini(2)(3)............................................... 5,982,300 72.2% 5,982,300 Charles R. Pullin.................................................... 17,384 * 17,384 Edward A. Dougherty.................................................. 23,929 * 23,929 The Prudential Insurance Company of America(6)....................... 335,537 4.1% 335,537 All directors and executive officers as a group (7 persons).......... 7,485,300 89.9% 7,485,300
- ------------------------ * Represents less than one percent. (1) Assumes no exercise of the U.S. underwriters' and international managers' over-allotment option and does not give effect to any purchases, if any, by such persons named in the table in the offering. (2) Certain of our stockholders have granted the U.S. underwriters and the international managers the right to purchase up to shares to cover any over-allotments. If the over-allotment option is exercised in full, Golder, Thoma, Cressey, Rauner Fund IV, L.P. will beneficially own shares, The Prudential Insurance Company of America will beneficially own shares, James A. Harris will beneficially own shares and Michael J. Stone will beneficially own shares. 46 (3) All of such shares are held of record by Golder, Thoma, Cressey, Rauner Fund IV, L.P. Golder, Thoma, Cressey, Rauner, Inc. is the general partner of GTCR IV, L.P., which is the general partner of Golder, Thoma, Cressey, Rauner Fund IV, L.P. Messrs. Rauner and Donnini are Principals of Golder, Thoma, Cressey, Rauner, Inc., and may be deemed to share the power to vote and dispose of such shares. The address of Golder, Thoma, Cressey, Rauner Fund IV, L.P. is 6100 Sears Tower, Chicago, Illinois 60606. Each of Messrs. Rauner and Donnini disclaims beneficial ownership of the shares of our common stock owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P. (4) Includes (A) 58,275 shares held by a charitable remainder trust and (B) 233,169 shares held by a grantor retained annuity trust for the benefit of Mr. Harris' sons. Mr. Harris disclaims beneficial ownership of the shares of our common stock owned by the trusts. (5) All of such shares are held by a trust for the benefit of Mr. Stone and his wife for which they also serve as trustees. Mr. Stone disclaims beneficial ownership of the shares of our common stock held by the trust. (6) The Prudential Insurance Company of America owns warrants to purchase up to 335,536 shares of our common stock and has indicated that it intends to convert all of its warrants into common stock upon the consummation of this offering. 47 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS THE RECAPITALIZATION In connection with and immediately prior to the consummation of the offering, each outstanding share of WAHC common stock not held by USAI will be converted into approximately 0.62 shares of our common stock, and each outstanding share of SRMHC common stock not held by USAI will be converted into approximately 8.07 shares of our common stock. Each share of our common stock will then be subject to an approximate 35.19 to 1 stock split. Concurrent with the consummation of the offering, we will use a portion of the proceeds of the offering to redeem shares of our preferred stock owned by Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain other stockholders at an aggregate price of approximately $ million or $ per share. Dividends have accrued daily at a rate of 10% per annum on the preferred stock since the date of issuance. See "Use of Proceeds" and "Description of Capital Stock--The Recapitalization" for a further description of these events. CERTAIN LOANS TO EXECUTIVES As of March 31, 1999, we have outstanding loans of approximately $146,000 to James A. Harris, our Chief Executive Officer and Chairman of the Board, $100,000 to Michael J. Stone, our Executive Vice President, Chief Financial Officer, Treasurer and Secretary and a Director, $247,000 to Morris L. Bishop, Jr., our President and Chief Operating Officer and a Director, pursuant to promissory notes to finance their purchase of our securities. Each of the notes is secured by a pledge of the securities purchased with the note pursuant to a pledge agreement between us and each of Messrs. Harris, Stone and Bishop. The notes bear interest at a rate per annum equal to 8%. The principal amount of the notes and all interest accrued thereon mature in part on various dates beginning in October 2001, with the remainder maturing in October 2005. The notes may be prepaid in full or in part at any time. PROFESSIONAL SERVICES AGREEMENT We have a professional services agreement with Golder, Thoma, Cressey, Rauner, Inc. pursuant to which it provides financial and management consulting services to us. Under the professional services agreement, Golder, Thoma, Cressey, Rauner, Inc. receives an annual management fee equal to 0.25% of the aggregate purchase price paid by Golder, Thoma, Cressey, Rauner Fund IV, L.P. to us for our common and preferred stock (plus reimbursement of out-of-pocket expenses) up to a maximum of $150,000 per year and an investment fee payable at the time of any purchase of our common or preferred stock by Golder, Thoma, Cressey, Rauner Fund IV, L.P. equal to 1.0% of the amount of the purchase price paid to USAI by Golder, Thoma, Cressey, Rauner Fund IV, L.P. for the common or preferred stock. For the year ended December 31, 1997 and for the year ended December 31, 1998, we paid or accrued $153,477 and $196,508, respectively, in fees under the professional services agreement. The professional services agreement will be terminated immediately prior to the consummation of the offering, and no fee will be payable to Golder, Thoma, Cressey, Rauner, Inc. with respect to the issuance of our common stock in the offering. Messrs. Rauner and Donnini will continue to serve as directors of USAI and they will be compensated as non-employee directors. See "Management--Compensation of Directors." STOCKHOLDERS AGREEMENT USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A. Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder Unitrust, Mrs. Jeanne T. Richey and Messrs. Harris, Stone, Richey, Bishop, Dougherty and Pullin are parties to a stockholders agreement. The stockholders agreement provides that the parties will nominate and vote for a total of seven persons to our board of directors, which will be comprised of: - two representatives designated by Golder, Thoma, Cressey, Rauner Fund IV, L.P.; - two members of our management designated by Messrs. Harris, Stone and Richey, determined by a majority vote of our common stock held by Messrs. Harris, Stone and Richey; and 48 - three representatives chosen jointly by Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Mr. Harris provided that such representatives are not members of our management or an employee or officer of us. Members of our board of directors may only be removed from the board, with or without cause, upon the written request of the party originally entitled to designate such director. If either Messrs. Harris or Stone ceases to be employed by us or our subsidiaries, they shall be removed from our board. The stockholders agreement generally restricts the transfer of any shares of our common stock held by James A. Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder Unitrust, Mrs. Jeanne T. Richey and Messrs. Harris, Stone, Richey, Bishop, Dougherty and Pullin by granting certain parties thereto rights of first offer and participation rights in connection with any proposed transfer by Messrs. Harris, Stone and Richey. The transfer restrictions of the stockholders agreement automatically terminate upon the sale by us of our common stock in an underwritten public offering. In addition, the stockholders agreement requires us to authorize and reserve for issuance to additional members of our management and our subsidiaries shares of our common stock in an amount equal to 3% of our common stock on a fully diluted basis. In addition, each party to the stockholders agreement has agreed to consent to our sale if such sale is approved by our board and the holders of a majority of our outstanding common stock. The parties to the stockholders agreement plan to amend the agreement prior to or concurrently with the offering. REGISTRATION AGREEMENT USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., James A. Harris Grantor Retained Annuity Trust, The James A. Harris Charitable Remainder Unitrust, Mrs. Jeanne T. Richey and Messrs. Harris, Stone, Richey, Bishop, Dougherty and Pullin are parties to a registration agreement. Pursuant to the registration agreement, the holders of a majority of our common stock issued pursuant to an equity purchase agreement, or issued or issuable in respect of such securities may request, after the offering of our common stock, up to three registrations of all or any part of their common stock on Form S-1 or any similar long-form registration statement, if available, an unlimited number of registrations on Form S-2 or S-3 or any similar short-form registration statement, each at our expense. In the event the holders of a majority of our common stock make such a request, all other parties to the registration agreement will be entitled to participate in such registration. The registration agreement also grants the parties piggyback registration rights with respect to registrations by us of our securities (other than the offering) and we will pay all expenses related to such piggyback registrations. FINANCIAL ADVISORY ARRANGEMENTS Pursuant to certain financial advisory agreements between USAI and Edward A. Dougherty, a Director of USAI, Mr. Dougherty has served as an advisor to us with respect to strategic financial planning from time to time in connection with our acquisition program and securing and completing specific financing arrangements. We paid Mr. Dougherty a total of $404,000 in 1998 for financial advisory services rendered to USAI. In 1999, to date, we have paid Mr. Dougherty $261,515 and will pay him $140,000 upon the consummation of the offering. CERTAIN FAMILY RELATIONSHIPS David Harris, the son of James A. Harris, our Chief Executive Officer and Chairman, is a full-time employee of Southern Ready Mix, Inc., one of our subsidiaries. David Harris receives a salary of approximately $90,000 for performing services as an employee. Christopher M. Bishop, the son of Morris L. Bishop, Jr., our President and Chief Operating Officer and a Director, and Timothy K. Bishop, the brother of Morris L. Bishop, Jr., are full-time employees of Southern Ready Mix, Inc., one of our subsidiaries. Each receives a salary of approximately $60,000 for services performed as an employee. Ashia H. Stone, the wife of Michael J. Stone, our Executive Vice President, Chief Financial Officer, Treasurer and Secretary and a Director, acts as one of our financial advisors. We paid Ms. Stone a total of $151,180 in 1998 for financial advisory services provided to us. 49 DESCRIPTION OF CERTAIN INDEBTEDNESS SENIOR CREDIT FACILITY GENERAL. On June 5, 1998, USAI, Bank of America National Trust and Savings Association, as agent, and certain other financial institutions entered into a third amended and restated bank credit facility and, on April 14, 1999, USAI, the agent and certain other financial institutions amended the credit facility. The borrowings under our credit facility were used to refinance indebtedness under our prior credit facility and to finance the acquisition of Monroc, Inc. As of April 14, 1999, we had unused borrowing capacity under our credit facility of $15.8 million. The credit facility provides for two tranches of term loans to USAI for $55.0 million and $60.0 million and revolving loans to USAI for up to $60.0 million. Subject to certain restrictions, our credit facility may be used for working capital and general corporate purposes of USAI and our subsidiaries, including permitted acquisitions. REPAYMENT. The revolving loans must be repaid on June 5, 2004. The principal repayment schedule for the $55.0 million term loan is $3.75 million in 1999, $8.75 million in 2000, $11.5 million in 2001, $12.75 million in 2002, $14.5 million in 2003, and $3.75 million in 2004. The principal repayment schedule for the $60.0 million term loan is $0.45 million in 1999, $0.60 million in 2000, $0.60 million in 2001, $0.60 million in 2002, $0.60 million in 2003, $0.60 million in 2004, $0.60 million in 2005, and $55.95 million in 2006. Loans made pursuant to our credit facility may be repaid and, in the case of the revolving loans, borrowed and reborrowed, without premium or penalty (other than prepayments of eurodollar loans which may be subject to customary breakage costs), from time to time until maturity, subject to the satisfaction of certain conditions on the date of any such borrowing. In addition, subject to certain exceptions, our credit facility provides for mandatory repayments of any outstanding borrowings out of any net cash proceeds received from a sale of assets. Net cash proceeds of permitted debt issuances; 50.0% of net cash proceeds of permitted equity issuances, reducing to 0.0% when our leverage ratio is less than 3.5:1.0; net cash proceeds from insurance recovery and condemnation events (subject to certain reinvestment rights) and 50.0% of annual excess cash flow, reducing to 0.0% when our leverage ratio is less than 3.5:1.0. SECURITY; GUARANTY. Our obligations under our credit facility are guaranteed by each of our existing subsidiaries and will be guaranteed by each or our future subsidiaries. Our obligations under our credit facility and each of our subsidiaries under its guarantee is or will be secured by (1) a first priority security interest in substantially all of the assets of such person, (2) a pledge of all of the capital stock of each of our direct and indirect domestic subsidiaries and (3) a pledge of 65.0% of the capital stock of each of our foreign subsidiaries. INTEREST. At our option, the interest rates per annum applicable to the loans under our credit facility are a fluctuating rate of interest measured by reference to one or a combination of the following: (1) the base rate, plus the applicable borrowing margin, or (2) the relevant eurodollar rate, plus the applicable borrowing margin. The applicable borrowing margins are subject to adjustment in based on our leverage ratio. FEES. We have agreed to pay certain fees in connection with our existing credit facility, including: (1) letter of credit fees; (2) agency fees; (3) arranger fees; and (4) commitment fees. Commitment fees are payable on the daily unused amount of the revolver. COVENANTS. Our existing credit facility requires us to meet certain financial tests, including, without limitation, a maximum leverage ratio, a minimum interest coverage ratio and a minimum fixed charge coverage ratio. Our credit facility also contains covenants which, among other things, restrict our ability and the ability of our subsidiaries to incur liens, transact with affiliates, incur indebtedness, 50 declare dividends or redeem or repurchase capital stock, make loans and investments, engage in mergers, acquisitions, consolidations and asset sales, acquire assets, stock or debt securities of any person, have additional subsidiaries, amend our or its certificate of incorporation and make capital expenditures. Our existing credit facility also requires us and our subsidiaries to satisfy certain customary affirmative covenants and to make certain customary indemnifications to the lenders and the administrative agent under our credit facility. EVENTS OF DEFAULT. Our existing credit facility contains customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, certain events of bankruptcy and insolvency, ERISA violations, judgment defaults, cross-defaults to certain other indebtedness and a change in control. THE SENIOR SUBORDINATED NOTES GENERAL. On November 21, 1996, The Prudential Insurance Company of America purchased $30.0 million principal amount of our 10.34% senior subordinated notes due November 22, 2006 and on June 8, 1998, it purchased $15.0 million principal amount of our 10.09% senior subordinated notes due November 22, 2008. The proceeds of the 1998 senior subordinated notes were used for working capital and other general corporate purposes and to finance the acquisition of Monroc, Inc. WARRANTS. In connection with the issuance of the senior subordinated notes in 1996, we issued warrants to purchase 6,327 shares of our common stock for $0.01 per share to Prudential. In connection with the issuance of the senior subordinated notes in 1998, we issued warrants to purchase 3,208 shares of shares of our common stock for $0.01 per share to Prudential. Prudential has certain registration rights with respect to the warrants. REPAYMENT. The principal repayment schedule for the senior subordinated notes issued in 1996 is $6.0 million in 2003, $6.0 million in 2004, $6.0 million in 2005 and $12.0 million in 2006. The principal repayment schedule for the senior subordinated notes issued in 1998 is $4.5 million in 2006, $4.5 million in 2007 and $6.0 million in 2008. Subject to certain exceptions, the senior subordinated notes may not be prepaid without premium or penalty. GUARANTY. Our obligations under the senior subordinated notes are guaranteed by each of our existing subsidiaries and will be guaranteed by each or our future subsidiaries. INTEREST. The senior subordinated notes issued in 1996 bear interest at a rate of 10.34% per year and the senior subordinated notes issued in 1998 bear interest at a rate of 10.09% per year. Interest on the senior subordinated notes is paid quarterly. COVENANTS. Our senior subordinated notes require us to meet certain financial tests, including, without limitation, a maximum leverage ratio, a minimum interest expense coverage ratio and a minimum fixed charge coverage ratio. Our senior subordinated notes also contain covenants which, among other things, restrict our ability and the ability of our subsidiaries to incur liens, transact with affiliates, incur indebtedness, declare dividends or redeem or repurchase capital stock, make loans and investments, engage in mergers, acquisitions, consolidations and asset sales, acquire assets, stock or debt securities of any person, have additional subsidiaries, amend our or its certificate of incorporation and make capital expenditures. Our senior subordinated notes also require us and our subsidiaries to satisfy certain customary affirmative covenants and to make certain customary indemnifications to Prudential. EVENTS OF DEFAULT. Our senior subordinated note documents contain customary events of default, including, without limitation, payment defaults, breaches of representations and warranties, covenant defaults, certain events of bankruptcy and insolvency, ERISA violations, judgment defaults and a change in control cross-defaults to certain other indebtedness. 51 THE HTSB UNSECURED DEMAND NOTE GENERAL. On April 15, 1999, we entered into a floating rate loan with Harris Trust and Savings Bank providing for a $17,500,000 revolving line of credit and evidenced by a note (the "HTSB NOTE"). We borrowed $7.5 million for working capital and other general corporate purposes and $8.2 million to repay borrowings under an existing facility with Harris Trust and Savings Bank. As of April 30, 1999, we had $15.7 million outstanding under the HTSB Note. The HTSB Note is a general unsecured obligation of USAI. REPAYMENT. The HTSB Note is due and payable on demand and may be repaid by USAI without premium or penalty, from time to time. INTEREST. The interest rate per annum applicable to the HTSB Note is the prime commercial rate announced by Harris Trust and Savings Bank. Interest is payable quarterly and upon demand. GUARANTY. Golder, Thoma, Cressey, Rauner Fund IV, L.P. has guaranteed the repayment of the HTSB Note. In addition, we entered into a letter agreement among Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America Trust and National Association, and The Prudential Insurance Company of America. Under the letter agreement, Golder, Thoma, Cressey, Rauner Fund IV, L.P. has agreed to contribute capital to fund the repayment of the HTSB Note upon the request of Harris Trust and Savings Bank. 52 DESCRIPTION OF CAPITAL STOCK GENERAL MATTERS Immediately prior to the offering, the total amount of our authorized capital stock will consist of shares of our common stock, par value $0.01 per share, and shares of preferred stock, par value $0.01 per share. Upon completion of the offering, shares of common stock will be issued and outstanding and no shares of our preferred stock will be issued and outstanding. The discussion below describes our capital stock, the restated certificate of incorporation and by-laws as anticipated to be in effect upon consummation of the offering. The following summary of certain provisions of our capital stock describes all material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, our restated certificate of incorporation and by-laws that are included as exhibits to the registration statement of which this prospectus forms a part and by the provisions of applicable law. Immediately following the offering, the restated certificate of incorporation and by-laws will contain certain provisions that are intended to enhance the likelihood of continuity and stability in the composition of our board of directors. These provisions may have the effect of delaying, deferring or preventing a future takeover or change in control of USAI unless such takeover or change in control is approved by the our board of directors. THE RECAPITALIZATION In connection with and immediately prior to the consummation of the offering, each outstanding share of WAHC common stock not held by us will be converted into approximately 0.62 shares of our common stock. Each outstanding share of SRMHC common stock not held by us will be converted into approximately 8.07 shares of our common stock. Each share of our common stock will then be subject to an approximate 35.19 to 1 stock split. See "Certain Relationships and Related Transactions" for a further description of these transactions. COMMON STOCK All outstanding shares of our common stock are fully paid and non-assessable. Subject to the prior rights of the holders of our preferred stock, the holders of our common stock are entitled to receive dividends at such time and in such amounts as our board of directors may determine. See "Dividend Policy" for a further description of your dividend rights. The shares of our common stock are not convertible and the holders thereof have no preemptive or subscription rights to purchase any of our securities. Upon our liquidation, dissolution or winding up, the holders of our common stock are entitled to receive pro rata all of our assets which are legally available for distribution, after payment of all debts and other liabilities and subject to the prior rights of any holders of our preferred stock which is then outstanding. Each outstanding share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders. There is no cumulative voting. We have applied to have our common stock listed on the New York Stock Exchange under the symbol " ." PREFERRED STOCK Our board of directors may, without further action by our stockholders, direct the issuance of up to shares of our preferred stock. At the time of issuance, they may determine the series and rights, preferences and limitations of each series. Satisfaction of any dividend preferences of our preferred stock would reduce the amount of funds available for the payment of dividends on shares of our common stock. Holders of our preferred stock may be entitled to receive a preference payment in the event of our liquidation, dissolution or winding-up before any payment is made to the holders of our common stock. Under certain circumstances, the issuance of our preferred stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a 53 holder of a large block of our securities or the removal of incumbent management. Upon the approval of a majority of the total number of our directors then in office, our board of directors, without stockholder approval, may issue shares of our preferred stock with voting and conversion rights which could adversely affect the holders of shares of our common stock. Upon consummation of the offering, there will be no shares of our preferred stock outstanding, and we have no present intention to issue any additional shares of our preferred stock. CERTAIN PROVISIONS OF THE RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS Our restated certificate of incorporation provides for our board of directors to be divided into three classes, as nearly equal in number as possible, serving staggered terms. Approximately one-third of our board will be elected each year. See "Management" for a further discussion of our directors. Under Delaware law, directors serving on a classified board can only be removed for cause. The provision for a classified board could prevent a party who acquires control of a majority of our outstanding voting stock from obtaining control of our board until the second annual stockholders meeting following the date the acquiror obtains the controlling stock interest. This provision could have the effect of discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control of us and could increase the likelihood that incumbent directors will retain their positions. Our restated certificate of incorporation provides that stockholder action can be taken only at an annual or special meeting of stockholders and cannot be taken by written consent in lieu of a meeting. Our restated certificate of incorporation and the by-laws provide that, except as otherwise required by law, special meetings of the stockholders can only be called pursuant to a resolution adopted by a majority of our board or by our chief executive officer. Stockholders will not be permitted to call a special meeting or to require our board to call a special meeting. The by-laws establish an advance notice procedure for stockholder proposals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board. Stockholders at an annual meeting may only consider proposals or nominations specified in the notice of meeting or brought before the meeting by or at the direction of our board or by a stockholder who was a stockholder of record on the record date for the meeting, who is entitled to vote at the meeting and who has given to our Secretary timely written notice, in proper form, of the stockholder's intention to bring that business before the meeting. Although the by-laws do not give our board the power to approve or disapprove stockholder nominations of candidates or proposals regarding other business to be conducted at a special or annual meeting, the by-laws may have the effect of precluding the conduct of certain business at a meeting if the proper procedures are not followed or may discourage or defer a potential acquiror from conducting a solicitation of proxies to elect its own slate of directors or otherwise attempting to obtain control of USAI. Our restated certificate of incorporation and by-laws provide that the approval of holders of at least 80% of the total votes eligible to be cast in the election of directors is required to amend, alter, change or repeal certain of their provisions. This requirement of a super-majority vote to approve amendments to our restated certificate of incorporation and by-laws could enable a minority of our stockholders to exercise veto power over any such amendments. SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW We are a Delaware corporation and subject to Section 203 of the Delaware corporate law. Generally, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the time such stockholder became an interested stockholder unless, as described below, certain conditions are satisfied. Thus, it 54 may make acquisition of control of our company more difficult. The prohibitions in Section 203 do not apply if: - prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; - upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced; or - at or subsequent to the time the stockholder became an interested stockholder, the business combination is approved by the board of directors and authorized by the affirmative vote of at least 66 2/3% of the outstanding voting stock that is not owned by the interested stockholder. Under Section 203, a "business combination" includes: - any merger or consolidation of the corporation with the interested stockholder; - any sale, lease, exchange or other disposition, except proportionately as a stockholder of such corporation, to or with the interested stockholder of assets of the corporation having an aggregate market value equal to 10% or more of either the aggregate market value of all the assets of the corporation or the aggregate market value of all the outstanding stock of the corporation; - certain transactions resulting in the issuance or transfer by the corporation of stock of the corporation to the interested stockholder; - certain transactions involving the corporation which have the effect of increasing the proportionate share of the stock of any class or series of the corporation which is owned by the interested stockholder; or - certain transactions in which the interested stockholder receives financial benefits provided by the corporation. Under Section 203, an "interested stockholder" generally is: - any person who owns 15% or more of the outstanding voting stock of the corporation; - any person who is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within the three-year period prior to the date on which it is sought to be determined whether such person is an interested stockholder; and - the affiliates or associates of any such person. Because Golder, Thoma, Cressey, Rauner Fund IV, L.P. owned more than 15% of our voting stock prior to the offering, Section 203 by its terms is currently not applicable to business combinations with Golder, Thoma, Cressey, Rauner Fund IV, L.P. If any other person acquires 15% or more of our outstanding voting stock, such person will be subject to the provisions of Section 203. LIMITATIONS ON LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS Our restated certificate of incorporation limits the liability of our directors to the fullest extent permitted by Delaware law. In addition, our restated certificate of incorporation will provide that we shall indemnify our directors and officers to the fullest extent permitted by Delaware law. We anticipate entering into indemnification agreements with our current directors and executive officers prior to the completion of the offering and any new directors or executive officers following such time. TRANSFER AGENT AND REGISTRAR The transfer agent and registrar for our common stock is Harris Trust and Savings Bank. 55 SHARES ELIGIBLE FOR FUTURE SALE Prior to the offering there has been no market for our common stock. We can make no predictions as to the effect, if any, that sales of shares or the availability of shares for sale will have on the market price of our common stock. Nevertheless, sales of significant amounts of our common stock in the public market, or the perception that such sales may occur, could adversely affect prevailing market prices. See "Risk Factors" for a further description of the effect of sales of our common stock. Upon completion of the offering, we expect to have shares of our common stock outstanding. In addition, shares of common stock will be issuable upon the exercise of outstanding stock options pursuant to our incentive plan. Of the shares outstanding after the offering, the shares of our common stock ( shares if the U.S. underwriters' and international managers' over-allotments are exercised in full) sold in the offering will be freely tradeable without restriction under the Securities Act, except for any such shares which may be acquired by an "affiliate" of USAI under Rule 144 of the Securities Act. Those shares will be subject to the volume limitations and other restrictions of Rule 144 described below. An aggregate of shares of our common stock held by existing stockholders will be "restricted securities" under Rule 144 and may not be resold in the absence of registration under the Securities Act or pursuant to an exemption from such registration, including among others, the exemption provided by Rule 144. In general, under Rule 144 as currently in effect, beginning ninety days after the date of this prospectus, if a period of at least one year has elapsed since the later of the date the "restricted securities" were acquired from us or the date they were acquired from an affiliate, then the holder of such restricted securities is entitled to sell in the public market a number of shares within any three-month period that does not exceed the greater of 1% of the then outstanding shares of our common stock (approximately shares immediately after the offering) or the average weekly reported volume of trading of our common stock on the New York Stock Exchange during the four calendar weeks preceding such sale. The holder may only sell such shares through "brokers' transactions" or in transactions directly with a "market maker". Sales under Rule 144 are also subject to certain requirements regarding providing notice of such sales and the availability of current public information concerning USAI. Affiliates may sell shares not constituting restricted shares in accordance with the foregoing volume limitations and other requirements but without regard to the one-year holding period. Under Rule 144(k), if a period of at least two years has elapsed between the later of the date restricted securities were acquired from us or the date they were acquired from an affiliate, a holder of such restricted securities who is not an affiliate at the time of the sale and has not been an affiliate for at least three months prior to the sale would be entitled to sell the shares in the public market without regard to the volume limitations and other restrictions described above. Beginning , 1999, approximately shares of our common stock will be eligible for sale in the public market pursuant to Rule 144, subject to the volume limitations and other restrictions described above. Notwithstanding the foregoing, our executive officers, directors and certain of the existing stockholders, who own in aggregate approximately shares of our common stock, have agreed that, without the prior consent of BT Alex. Brown Incorporated, they will not (1) directly or indirectly, sell, offer to sell, grant any option for the sale of or otherwise dispose of any shares of our common stock or securities or rights convertible into or exercisable or exchangeable for our common stock (except through gifts to persons who agree in writing to be bound by such restrictions) or (2) make any demand for or exercise any right with respect to the registration of any shares of our common stock or other such securities, for a period of 180 days after the date of this prospectus. Approximately shares of our common stock are reserved for issuance under the incentive plan. We currently intend to file a registration statement on Form S-8 under the Securities Act to register all shares of our common stock issuable pursuant to the incentive plan. We expect to file such registration statement within 90 days following the date of this prospectus and such registration statement will 56 become effective upon filing. Shares covered by the registration statement will thereafter be eligible for sale in the public markets, subject to Rule 144 under the Securities Act. USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., Messrs. Harris, Stone, Richey, Bishop, Dougherty and Pullin and certain related entities are parties to a registration agreement. Pursuant to this agreement, the holders of a majority of our common stock issued pursuant to an equity purchase agreement, or issued or issuable in respect of such securities, may request, after the offering, up to three registrations of all or any part of our common stock on Form S-1 or any similar long-form registration statement, if available, and an unlimited number of registrations on Form S-2 or S-3 or any similar short-form registration statement, each at our expense. In the event such holders make such request, all other parties to the registration agreement will be entitled to participate in such registration. The registration agreement also grants the parties piggyback registration rights with respect to registrations by us of our securities (other than in the offering) and we have agreed to pay all expenses related to such piggyback registrations. The parties to the registration agreement will own approximately % of our common stock immediately after the offering. USAI, Golder, Thoma, Cressey, Rauner Fund IV, L.P., Messrs. Harris and Stone and The Prudential Insurance Company of America have entered into a registration rights and stockholders' agreement pursuant to which Prudential has been granted registration rights with respect to shares of our common stock issuable upon warrants held by Prudential. If we propose at any time to register any of our common stock for sale to the public, we have agreed to use our best efforts to include in the registration shares requested to be registered by Prudential. We have agreed to pay all expenses related to any shares which are registered on behalf of Prudential. Upon exercise of the warrants in full, Prudential would own approximately % of our common stock immediately after the offering. 57 MATERIAL UNITED STATES FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS GENERAL The following is a general discussion of the principal United States federal income and estate tax consequences of the ownership and disposition of common stock by a non-U.S. holder. For this purpose, the term "non-U.S. holder" means any person or entity that is, for United States federal income tax purposes, a foreign corporation, a non-resident alien individual, a foreign partnership or a foreign estate or trust. This discussion is based on currently existing provisions of the Internal Revenue Code, final, temporary and proposed regulations promulgated thereunder, and administrative and judicial interpretations thereof. All of these provisions, regulations and interpretations are subject to change, possibly with retroactive effect, or different interpretations. This discussion is limited to non-U.S. holders who hold shares of our common stock as capital assets within the meaning of Section 1221 of the Code. Moreover, this discussion is for general information only and does not address all of the tax consequences that may be relevant to particular non-U.S. holders in light of their personal circumstances. It does not describe certain tax provisions which may apply to individuals who relinquish their United States citizenship or residence. An individual may, subject to certain exceptions, be deemed to be a resident alien, as opposed to a nonresident alien, by virtue of being present in the United States for at least 31 days in the calendar year and for an aggregate of at least 183 days during a three-year period ending in the current calendar year. For such purposes all of the days present in the current year, one-third of the days present in the immediately preceding year, and one-sixth of the days present in the second preceding year are counted. Resident aliens are subject to United States federal income tax as if they were United States citizens. EACH PROSPECTIVE PURCHASER OF OUR COMMON STOCK IS ADVISED TO CONSULT A TAX ADVISOR WITH RESPECT TO CURRENT AND POSSIBLE FUTURE TAX CONSEQUENCES OF PURCHASING, OWNING AND DISPOSING OF OUR COMMON STOCK AS WELL AS ANY TAX CONSEQUENCES THAT MAY ARISE UNDER THE LAWS OF ANY FEDERAL, STATE, MUNICIPALITY OR OTHER TAXING JURISDICTION. DIVIDENDS In the event that dividends are paid on shares of our common stock, dividends paid to a non-U.S. holder of our common stock will be subject to withholding of United States federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. To claim the benefit of a lower rate under an income tax treaty, a non-U.S. holder of common stock must properly file a form with the payor, claiming an exemption from or reduction in withholding under such tax treaty. Any dividends paid on shares of common stock to a non-U.S. holder will not be subject to withholding tax, but instead are subject to United States federal income tax on a net basis at applicable graduated individual or corporate rates if: - dividends are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States and, where a tax treaty applies, will be attributable to a United States permanent establishment of the non-U.S. holder; and - an IRS Form 4224, or successor form, is filed with the payor. Any such effectively connected dividends received by a foreign corporation may, under certain circumstances, be subject to an additional "branch profits tax" at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. 58 Unless the payor has knowledge to the contrary, dividends paid prior to January 1, 2001 to an address outside the United States are presumed to be paid to a resident of such country for purposes of the withholding discussed above and for purposes of determining the applicability of a tax treaty rate. However, recently finalized Treasury regulations pertaining to United States federal withholding tax provide that a non-U.S. holder must comply with new certification procedures with respect to dividends paid after December 31, 2000. In the case of payments made outside the United States with respect to an offshore account, a non-U.S. holder must comply with certain documentary evidence procedures, directly or under certain circumstances through an intermediary, to obtain the benefits of a reduced rate under an income tax treaty with respect to dividends paid after December 31, 2000. In addition, tax regulations will require a non-U.S. holder to provide its United States taxpayer identification number. A non-U.S. holder of our common stock eligible for a reduced rate of withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by filing an appropriate claim for refund with the IRS. GAIN ON DISPOSITION OF OUR COMMON STOCK A non-U.S. holder generally will not be subject to federal income tax with respect to gain recognized on a sale or other disposition of our common stock unless: (1) the gain is effectively connected with a trade or business of the non-U.S. holder in the United States and, where a tax treaty applies, is attributable to a United States permanent establishment of the non-U.S. holder; (2) in the case of a non-U.S. holder who is an individual and holds the common stock as a capital asset, such holder is present in the United States for 183 or more days in the taxable year of the sale or other disposition and certain other conditions are met; or (3) USAI is or has been a "U.S. real property holding corporation" for federal income tax purposes, as discussed below. An individual non-U.S. holder who falls under clause (1) above will, unless an applicable treaty provides otherwise, be taxed on his or her net gain derived from the sale or other disposition of our common stock under regular graduated individual United States federal income tax rates. An individual non-U.S. holder who falls under clause (2) above will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by certain United States capital losses. A non-U.S. holder that is a foreign corporation falling under clause (1) above will be taxed on its gain under regular graduated corporate United States federal income tax rates and may be subject to an additional branch profits tax equal to 30% of its effectively connected earnings and profits within the meaning of the Code for the taxable year, as adjusted for certain items, unless it qualifies for a lower rate under an applicable income tax treaty. A corporation is a U.S. real property holding corporation if the fair market value of the United States real property interests held by the corporation is 50% or more of the aggregate fair market value of its United States and foreign real property interests and any other assets used or held for use by the corporation in a trade or business. Based on our current and anticipated assets, we believe that we are likely a U.S. real property holding corporation. If we are a U.S. real property holding corporation, then gain on the sale or other disposition of our common stock by a non-U.S. holder generally would be subject to United States federal income tax unless both: - the common stock was "regularly traded" on an established securities market within the meaning of applicable regulations; and 59 - the non-U.S. holder actually or constructively owned 5% or less of the common stock during the shorter of the five-year period preceding such disposition or the non-U.S. holder's holding period. Non-U.S. holders should consult their tax advisors concerning any tax consequences that may arise if we are a U.S. real property holding company. FEDERAL ESTATE TAX Common stock owned or treated as owned by an individual non-U.S. holder at the time of death will be included in such holder's gross estate for federal estate tax purposes, and may be subject to federal estate tax unless an applicable estate tax treaty provides otherwise. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX We must report annually to the IRS and to each non-U.S. holder the amount of dividends paid to such holder and the tax withheld with respect to such dividends, regardless of whether withholding was required. Copies of the information returns reporting such dividends and withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty or certain other agreements. Backup withholding is imposed at the rate of 31% on certain payments to persons that fail to furnish certain identifying information to the payer. Backup withholding generally will not apply to dividends paid prior to January 1, 2001 to a non-U.S. holder at an address outside the United States, unless the payor has knowledge that the payee is a United States person. In the case of dividends paid after December 31, 2000, the regulations provide that a non-U.S. holder generally will be subject to withholding tax at a 31% rate unless certain certification procedures, or, in the case of payments made outside the United States with respect to an offshore account, certain documentary evidence procedures, are complied with, directly or under certain circumstances through an intermediary. Backup withholding and information reporting generally will also apply to dividends paid on common stock at addresses inside the United States to non-U.S. holders that fail to provide certain identifying information in the manner required. Regulations provide certain presumptions under which a non-U.S. holder would be subject to backup withholding and information reporting unless certification from the holder of the non-U.S. holder's non-United States status is provided. Payment of the proceeds of a sale of common stock effected by or through a United States office of a broker is subject to both backup withholding and information reporting unless the beneficial owner provides the payor with its name and address and certifies under penalties of perjury that it is a non-U.S. holder, or otherwise establishes an exemption. In general, backup withholding and information reporting will not apply to a payment of the proceeds of a sale of common stock by or through a foreign office of a broker. If, however, such broker is, for federal income tax purposes, a United States person, a controlled foreign corporation, or a foreign person that derives 50% or more of its gross income for certain periods from the conduct of a trade or business in the United States, or, in addition, for periods after December 31, 2000, a foreign partnership that at any time during its tax year either is engaged in the conduct of a trade or business in the United States or has as partners one or more United States persons that, in the aggregate, hold more than 50% of the income or capital interest in the partnership, such payments will be subject to information reporting, but not backup withholding, unless such broker has documentary evidence in its records that the beneficial owner is a non-U.S. holder and certain other conditions are met or the beneficial owner otherwise establishes an exemption. Any amounts withheld under the backup withholding rules generally will be allowed as a refund or a credit against the non-U.S. holder's federal income tax liability provided the required information is furnished in a timely manner to the IRS. 60 UNDERWRITING BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and Schroder & Co. Inc. are the U.S. representatives of the U.S. underwriters named below and are acting together as lead U.S. managers. BT Alex. Brown International, The Robinson-Humphrey Company, LLC, and J. Henry Schroder & Co. Limited are acting as the international representatives for the international managers named below and are acting together as lead international managers. Upon the terms and conditions of a U.S. underwriting agreement and an international underwriting agreement, the underwriters and managers named below have severally agreed through their representatives to purchase from us the number of shares of our common stock set forth opposite the name of the underwriter and manager below:
U.S. UNDERWRITERS NUMBER OF SHARES - --------------------------------------------------------------------------- ----------------- BT Alex. Brown Incorporated................................................ The Robinson-Humphrey Company, LLC......................................... Schroder & Co. Inc......................................................... Total.................................................................... -----------------
INTERNATIONAL MANAGERS NUMBER OF SHARES - --------------------------------------------------------------------------- ----------------- BT Alex. Brown International, division of Bankers Trust International PLC....................................................................... The Robinson-Humphrey Company, LLC......................................... J. Henry Schroder & Co. Limited............................................ Total.................................................................... -----------------
The U.S. underwriters and international managers will purchase all of the shares of common stock offered in the offering, other than those shares covered by the over-allotment option described below, if they purchase any shares. The U.S. offering and the international offering are each conditioned upon the closing of the other. The representatives have advised us that the U.S. underwriters and international managers propose initially to offer the shares of our common stock to the public at the offering price set forth on the cover page of this prospectus and to certain dealers at that price less a concession not in excess of $ per share. The U.S. underwriters, international managers and dealers may re-allow a concession not in excess of $ per share to certain other dealers. After the purchase from us of all of the shares of common stock offered in this offering, the representatives may change the public offering price and other selling terms. The following table summarizes the compensation and the estimated expenses payable by USAI and the selling stockholders:
TOTAL ---------------------------- WITHOUT WITH PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT ----------- ------------- ------------- Underwriting discounts and commissions.................................. Expenses payable by USAI................................................ Expenses payable by the selling stockholders............................
The selling stockholders have granted to the U.S. underwriters and international managers a 30-day option, exercisable by BT Alex. Brown Incorporated, to purchase up to additional shares of our common stock at the initial public offering price less the underwriting discounts and commissions set forth on the cover page of this prospectus. The option may only be exercised to cover orders 61 for more shares than are being offered in the offering. Each of the U.S. underwriters and international managers will have a firm commitment to purchase approximately the same percentage of additional shares of our common stock as the number of shares of our common stock to be purchased by it in the above table bears to the total offering size. The selling stockholders are obligated to sell the additional shares to the U.S. underwriters and international managers. We and the selling stockholders have agreed to indemnify the U.S. underwriters and international managers against certain liabilities, including liabilities under the Securities Act. In order to facilitate the offering of our common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the market price of our common stock. Specifically, the underwriters may accept orders for more shares of the common stock than are being offered in the offering, creating a short position in the underwriters' syndicate account. Additionally, to cover those orders or to stabilize the market price of the common stock, the underwriters may bid for and purchase shares of our common stock in the open market. Finally, the underwriters' representatives may reclaim selling concessions allowed to an underwriter or dealer if the underwriting syndicate repurchases shares distributed by that underwriter or dealer. Any of these activities may maintain the market price of our common stock at a level above that which might otherwise prevail in the open market. The underwriters are not required to engage in these activities and, if commenced, may end any of these activities at any time. Pursuant to an agreement between the U.S. underwriters and international managers relating to the offering, each of the U.S. underwriters named herein has agreed that, as a part of the distribution of the shares offered hereby and subject to certain exceptions, it will offer, sell or deliver the shares of our common stock, directly or indirectly, only in the United States, its territories, its possessions and other areas subject to its jurisdiction, in Canada and to U.S. persons. U.S. person means: (1) any individual who is a resident of the United States or (2) any corporation, partnership or other entity organized in or under the laws of the United States or any political subdivision thereof and whose office most directly involved with the purchase is located in the United States. Each of the international managers has agreed pursuant to the agreement that, as a part of the distribution of the shares offered as a part of the international offering, and subject to certain exceptions, it will (1) not, directly or indirectly, offer, sell or deliver shares of our common stock (a) in the United States or to any U.S. persons or (b) to any person who it believes intends to reoffer, resell or deliver the shares in the United States or to any U.S. persons, and (2) cause any dealer to whom it may sell such shares at any concession to agree to observe a similar restriction. Pursuant to the agreement, sales may be made between the U.S. underwriters and the international managers of such number of shares of our common stock as may be mutually agreed. The price of any shares so sold shall be the initial public offering price, less an amount not greater than the selling concession. To the extent that there are sales between the U.S. underwriters and the international managers pursuant to the agreement, the number of shares initially available for sale by the U.S. underwriters and the international managers may be more or less than the number of shares appearing on the cover page of this prospectus. USAI and our officers, directors and stockholders have each agreed to restrictions on the ability to dispose of any shares of our common stock for a period of 180 days after the date of this prospectus. These restrictions prohibit the offer, sale, contract to sell or other disposition of any shares of our common stock, or entering into any transaction designed to, or which could be expected to, result in the disposition of any portion of our common stock without the prior written consent of BT Alex. Brown Incorporated. BT Alex. Brown Incorporated may give its consent at any time without public notice. The restriction on disposition of our common stock includes shares of our common stock exchanged for shares of stock of our subsidiaries. 62 The representatives of the underwriters have advised us that the underwriters do not intend to confirm sales of more than 5% of the offering to any account over which they exercise discretionary authority. Prior to the closing of the offering, there has been no public market for our common stock. Consequently, the initial public offering price for our common stock will be determined by negotiation among us and the representatives of the underwriters. Among the factors to be considered in determining the public offering price will be: - prevailing market conditions; - our results of operations in recent periods; - the present stage of our development; - the market capitalizations and stages of development of other companies that we and the representatives believe to be comparable to us; - estimates of our business potential; and - other factors deemed relevant by us and the representatives. 63 EXPERTS The financial statements of USAI included in this registration statement have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. The consolidated financial statements of Monroc, Inc. and Subsidiary for the year ended December 31, 1997, included in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report appearing herein, and are included in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. The financial statements of Monroc, Inc. included in this registration statement have been audited by Grant Thornton LLP, independent public accountants, as indicated in their reports with respect thereto, and are included herein in reliance upon the authority of said firm as experts in accounting and auditing in giving said reports. LEGAL MATTERS Certain legal matters in connection with our common stock offered hereby will be passed upon for us by Kirkland & Ellis. Certain legal matters will be passed upon for the U.S. underwriters and the international managers by Winston & Strawn. WHERE YOU CAN FIND MORE INFORMATION We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock offered hereby. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. Certain items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to the company and its common stock, reference is made to the registration statement and the exhibits and any schedules filed therewith. Statements contained in this prospectus as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if such contract or document is filed as an exhibit, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, each statement being qualified in all respects by such reference. A copy of the registration statement, including the exhibits and schedules thereto, may be read and copied at the SEC's public reference room in Washington, D.C. and at the SEC's regional offices in New York, New York and Chicago, Illinois. Information on the operation of the public reference room may be obtained by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains an Internet site at http://www.sec.gov, from which interested persons can electronically access the registration statement, including the exhibits and any schedules thereto. As a result of the offering, we will become subject to the full informational requirements of the Exchange Act. We will fulfill our obligations with respect to such requirements by filing periodic reports and other information with the SEC. We intend to furnish our shareholders with annual reports containing consolidated financial statements certified by an independent public accounting firm. 64 INDEX TO FINANCIAL STATEMENTS U.S. Aggregates, Inc. and Subsidiaries Financial Statements--December 31, 1996, 1997 and 1998 and March 31, 1998 and 1999 Report of Independent Public Accountants......................................... F-2 Consolidated Balance Sheets...................................................... F-3 Consolidated Statements of Operations............................................ F-4 Consolidated Statements of Shareholders' Equity.................................. F-6 Consolidated Statements of Cash Flows............................................ F-7 Notes to Consolidated Financial Statements....................................... F-8 Monroc, Inc. and Subsidiary Financial Statements--December 31, 1997 Independent Auditors' Report..................................................... F-26 Consolidated Statements of Operations............................................ F-27 Consolidated Statements of Shareholders' Equity.................................. F-28 Consolidated Statements of Cash Flows............................................ F-29 Notes to Consolidated Financial Statements....................................... F-30 Financial Statements--December 31, 1996 Report of Independent Certified Public Accountants............................... F-42 Consolidated Statement of Operations............................................. F-43 Consolidated Statement of Shareholders' Equity................................... F-44 Consolidated Statement of Cash Flows............................................. F-45 Notes to Consolidated Financial Statements....................................... F-46
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Board of Directors of U.S. Aggregates, Inc.: We have audited the accompanying consolidated balance sheets of U.S. Aggregates, Inc. (a Delaware corporation) and Subsidiaries (the Company) as of December 31, 1997 and 1998, and the related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of U.S. Aggregates, Inc. and Subsidiaries as of December 31, 1997 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP San Francisco, California, January 29, 1999 F-2 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS) ASSETS
DECEMBER 31, DECEMBER 31, 1997 1998 ------------- ------------- MARCH 31, 1999 ----------- (UNAUDITED) CURRENT ASSETS: Cash and cash equivalents............................................. $ 479 $ 2,849 $ 1,794 Trade accounts receivable, net of allowance for doubtful accounts of $629, $1,163 and $1,241............................................. 19,113 43,853 37,633 Income tax receivable................................................. -- -- 591 Notes receivable...................................................... 77 1,954 705 Inventories........................................................... 11,280 25,480 28,963 Prepaid expenses and other assets..................................... 2,915 4,314 6,484 ------------- ------------- ----------- Total current assets............................................ 33,864 78,450 76,170 ------------- ------------- ----------- PROPERTY, PLANT AND EQUIPMENT, net...................................... 112,370 224,812 227,462 ------------- ------------- ----------- INTANGIBLE ASSETS, net: Goodwill.............................................................. 10,852 17,139 18,679 Covenants not to compete.............................................. 2,521 1,607 1,378 Deferred financing charges............................................ 4,511 7,427 7,763 ------------- ------------- ----------- Total intangible assets......................................... 17,884 26,173 27,820 ------------- ------------- ----------- OTHER ASSETS............................................................ 8,148 9,953 13,540 ------------- ------------- ----------- Total assets.................................................... $ 172,266 $ 339,388 $ 344,992 ------------- ------------- ----------- ------------- ------------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Trade accounts payable................................................ $ 9,428 $ 24,110 $ 24,190 Accrued payroll....................................................... 1,202 1,270 2,770 Other accrued liabilities............................................. 2,890 7,676 8,399 Income tax payable.................................................... -- 890 -- Current portion of long-term debt..................................... 6,139 14,801 16,316 ------------- ------------- ----------- Total current liabilities....................................... 19,659 48,747 51,675 LONG TERM DEBT, net of current portion.................................. 86,649 185,790 191,338 OTHER................................................................... 258 192 178 DEFERRED INCOME TAXES, net.............................................. 12,656 45,313 44,740 MINORITY INTEREST, net.................................................. 2,681 3,400 2,803 ------------- ------------- ----------- Total liabilities............................................... 121,903 283,442 290,734 ------------- ------------- ----------- COMMITMENTS AND CONTINGENCIES MANDATORY REDEEMABLE PREFERRED STOCK, $.01 par value, 500,000 shares authorized............................................................ 39,466 43,563 44,652 SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 8,796,975 shares authorized............. 2 2 2 Additional paid-in capital............................................ 2,646 2,946 2,946 Notes receivable from sale of stock................................... (593) (640) (653) Treasury stock, at cost............................................... (2) (2) (2) Retained earnings..................................................... 8,844 10,077 7,313 ------------- ------------- ----------- Total shareholders' equity...................................... 10,897 12,383 9,606 ------------- ------------- ----------- Total liabilities, mandatory redeemable preferred stock and shareholders' equity.......................................... $ 172,266 $ 339,388 $ 344,992 ------------- ------------- ----------- ------------- ------------- -----------
The accompanying notes are an integral part of these statements. F-3 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1996 1997 1998 1998 1999 --------- --------- --------- --------- --------- PRO FORMA YEAR ENDED DECEMBER 31, 1998 ------------ (UNAUDITED) (UNAUDITED) NET SALES............................... $ 131,710 $ 163,243 $ 228,739 $ 249,224 $ 28,513 $ 49,171 COST OF PRODUCTS SOLD................... 92,821 119,132 168,220 183,453 21,334 37,710 --------- --------- --------- ------------ --------- --------- Gross profit........................ 38,889 44,111 60,519 65,771 7,179 11,461 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.............................. 16,571 18,275 25,001 26,448 5,190 7,213 DEPRECIATION, DEPLETION AND AMORTIZATION.......................... 6,301 7,830 11,098 12,075 2,056 3,285 --------- --------- --------- ------------ --------- --------- Income (loss) from operations....... 16,017 18,006 24,420 27,248 (67) 963 --------- --------- --------- ------------ --------- --------- OTHER EXPENSE: Interest, net......................... (5,036) (8,344) (14,886) (16,611) (2,394) (4,360) Loss on sale of real estate........... -- -- (386) (386) -- -- Other, net............................ (150) (150) (718) (710) (1,195) (162) --------- --------- --------- ------------ --------- --------- Income (loss) from continuing operations before provision for income taxes, minority interest, discontinued operations and extraordinary item.......................... 10,831 9,512 8,430 9,541 (3,656) (3,559) BENEFIT (PROVISION) FOR INCOME TAXES.... (3,660) (3,384) (3,547) (3,975) 1,346 1,296 --------- --------- --------- ------------ --------- --------- Income (loss) before minority interest, discontinued operations and extraordinary item.......................... 7,171 6,128 4,883 5,566 (2,310) (2,263) MINORITY INTEREST....................... (727) (623) (624) (741) 277 588 --------- --------- --------- ------------ --------- --------- Income (loss) from continuing operations.................... 6,444 5,505 4,259 4,825 (2,033) (1,675) DISCONTINUED OPERATIONS: Operating income from discontinued Precast Division, less applicable income tax of $568.................. -- -- 844 -- -- -- Gain on disposal of Precast Division, including operating income of $829 income during phase-out period, less applicable income tax of $333....... -- -- 565 -- -- -- --------- --------- --------- ------------ --------- --------- Income (loss) before extraordinary item............ 6,444 5,505 5,668 4,825 (2,033) (1,675) EXTRAORDINARY ITEM: Loss on extinguishment of debt, less applicable income tax benefit of $212.................................. -- -- (338) -- -- -- --------- --------- --------- ------------ --------- --------- Net income (loss)............... $ 6,444 $ 5,505 $ 5,330 $ 4,825 $ (2,033) $ (1,675) --------- --------- --------- ------------ --------- --------- --------- --------- --------- ------------ --------- ---------
F-4 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1996 1997 1998 1998 1999 --------- --------- --------- --------- --------- PRO FORMA YEAR ENDED DECEMBER 31, 1998 ------------ (UNAUDITED) (UNAUDITED) Income per common share--basic Income (loss) from continuing operations available for common shareholders........................ $ 0.49 $ 0.25 $ 0.02 $ 0.10 $ (0.42) $ (0.38) Operating income from discontinued Precast Division, net of tax........ -- -- .12 -- -- -- Gain on disposal of Precast Division, including operating income during the phase out period, net of tax.... -- -- 0.08 -- -- -- Extraordinary item, net of tax........ -- -- (0.05) -- -- -- --------- --------- --------- ------------ --------- --------- Net income (loss) available for common shareholders........................ 0.49 0.25 0.17 0.10 (0.42) (0.38) --------- --------- --------- ------------ --------- --------- --------- --------- --------- ------------ --------- --------- Weighted average common shares outstanding......................... 7,116,719 7,166,193 7,189,521 7,189,521 7,189,521 7,189,521 Income per common share--diluted Income (loss) from continuing operations available for common shareholders........................ $ 0.47 $ 0.24 $ 0.02 $ 0.10 $ (0.42) $ (0.38) Operating income from discontinued Precast Division, net of tax........ -- -- .11 -- -- -- Gain on disposal of Precast Division, including operating income during the phase out period, net of tax.... -- -- .08 -- -- -- Extraordinary item, net of tax........ -- -- (.05) -- -- -- --------- --------- --------- ------------ --------- --------- Net income (loss) available for common shareholders........................ 0.47 0.24 0.16 0.10 (0.42) (0.38) --------- --------- --------- ------------ --------- --------- --------- --------- --------- ------------ --------- --------- Weighted average common shares outstanding......................... 7,339,353 7,388,827 7,525,038 7,525,038 7,412,155 7,525,038
The accompanying notes are an integral part of these statements. F-5 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
TREASURY NOTES STOCK PREFERRED STOCK COMMON STOCK ADDITIONAL RECEIVABLE ----------- ---------------------- ------------------------- PAID-IN FROM SALE SHARES HELD SHARES AMOUNT SHARES AMOUNT CAPITAL OF STOCK IN TREASURY --------- ----------- ---------- ------------- ----------- ----------- ----------- BALANCE AT DECEMBER 31, 1995.... 182,842 $ 2 7,106,408 $ 2 $ 23,012 $ (310) -- Issuance of stock............. 118,000 1 92,051 -- 11,824 -- -- Issuance of stock warrants.... -- -- -- -- 600 -- -- Notes receivable, net of payments.................... -- -- -- -- -- (51) -- Conversion to mandatory redeemable preferred stock....................... (300,842) (3) -- -- (32,792) -- -- Accretion of mandatory redeemable preferred stock dividend.................... -- -- -- -- -- -- -- Net income.................... -- -- -- -- -- -- -- -- --------- --- ---------- ----------- ----------- ----------- BALANCE AT DECEMBER 31, 1996.... -- -- 7,198,459 2 2,644 (361) -- Purchase of treasury stock, net......................... -- -- -- -- -- -- 50,600 Notes receivable, net of payments.................... -- -- -- -- 2 (232) (41,662) Accretion of mandatory redeemable preferred stock dividend.................... -- -- -- -- -- -- -- Net income.................... -- -- -- -- -- -- -- -- --------- --- ---------- ----------- ----------- ----------- BALANCE AT DECEMBER 31, 1997.... -- -- 7,198,459 2 2,646 (593) 8,938 Notes receivable, net of payments.................... -- -- -- -- -- (47) -- Issuance of stock warrants.... -- -- -- -- 300 -- -- Accretion of mandatory redeemable preferred stock dividend.................... -- -- -- -- -- -- -- Net income.................... -- -- -- -- -- -- -- -- --------- --- ---------- ----------- ----------- ----------- BALANCE AT DECEMBER 31, 1998.... -- -- 7,198,459 2 2,946 (640) 8,938 Notes receivable, net of payments (unaudited)........ -- -- -- -- -- (13) -- Accretion of mandatory redeemable preferred stock dividend.................... -- -- -- -- -- -- -- Net loss (unaudited).......... -- -- -- -- -- -- -- -- --------- --- ---------- ----------- ----------- ----------- BALANCE AT MARCH 31, 1999 (UNAUDITED)................... -- $ -- 7,198,459 $ 2 $ 2,946 $ (653) 8,938 -- -- --------- --- ---------- ----------- ----------- ----------- --------- --- ---------- ----------- ----------- ----------- TOTAL RETAINED SHAREHOLDERS' AMOUNT EARNINGS EQUITY --------- ----------- ------------- BALANCE AT DECEMBER 31, 1995.... $ -- $ 3,565 $ 26,271 Issuance of stock............. -- -- 11,825 Issuance of stock warrants.... -- -- 600 Notes receivable, net of payments.................... -- -- (51) Conversion to mandatory redeemable preferred stock....................... -- -- (32,795) Accretion of mandatory redeemable preferred stock dividend.................... -- (2,958) (2,958) Net income.................... -- 6,444 6,444 --------- ----------- ------------- BALANCE AT DECEMBER 31, 1996.... -- 7,051 9,336 Purchase of treasury stock, net......................... (220) -- (220) Notes receivable, net of payments.................... 218 -- (12) Accretion of mandatory redeemable preferred stock dividend.................... -- (3,712) (3,712) Net income.................... -- 5,505 5,505 --------- ----------- ------------- BALANCE AT DECEMBER 31, 1997.... (2) 8,844 10,897 Notes receivable, net of payments.................... -- -- (47) Issuance of stock warrants.... -- -- 300 Accretion of mandatory redeemable preferred stock dividend.................... -- (4,097) (4,097) Net income.................... -- 5,330 5,330 --------- ----------- ------------- BALANCE AT DECEMBER 31, 1998.... (2) 10,077 12,383 Notes receivable, net of payments (unaudited)........ -- -- (13) Accretion of mandatory redeemable preferred stock dividend.................... -- (1,089) (1,089) Net loss (unaudited).......... -- (1,675) (1,675) --------- ----------- ------------- BALANCE AT MARCH 31, 1999 (UNAUDITED)................... $ (2) $ 7,313 $ 9,606 --------- ----------- ------------- --------- ----------- -------------
The accompanying notes are an integral part of these statements. F-6 U.S. AGGREGATES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED -------------------- YEARS ENDED DECEMBER 31, MARCH 31, ------------------------------- -------------------- 1996 1997 1998 1998 1999 --------- --------- --------- --------- --------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Income (loss) before extraordinary item................. $ 6,444 $ 5,505 $ 5,668 $ (2,033) $ (1,675) Adjustments to reconcile income (loss) before extraordinary item to net cash provided by (used in) operating activities: Depreciation, depletion and amortization............ 6,301 7,830 11,098 2,056 3,285 Provision for doubtful accounts, net................ 15 (88) (49) (68) 77 Deferred income taxes............................... 2,626 3,129 3,225 (1,041) (1,455) Loss (gain) on disposal of fixed assets and real estate............................................ (13) (63) 330 -- 1 Minority interest................................... 727 981 1,015 (267) (588) Extraordinary item.................................. -- -- (338) -- -- Change in operating assets and liabilities: Trade accounts and notes receivable............... 2,900 (2,589) (13,018) 459 7,370 Inventories....................................... (2,797) (3,160) (8,280) (2,215) (3,483) Prepaid expenses and other assets................. (5,216) (6,717) (2,068) (855) (5,793) Trade accounts payable and accrued liabilities.... (5,678) (2,309) 347 3,130 2,301 Income taxes payable.............................. (39) 615 916 (341) (1,481) Other............................................. (35) (347) 454 (23) 141 --------- --------- --------- --------- --------- Net cash provided by (used in) operating activities.................................... 5,235 2,787 (700) (1,198) (1,300) --------- --------- --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment.............. (19,594) (15,251) (22,372) (6,998) (6,669) Acquisition of subsidiaries, net of cash acquired....... (37,910) (4,038) (83,884) (11,171) -- Proceeds from sale of fixed assets...................... -- 1,310 9,285 18 29 --------- --------- --------- --------- --------- Net cash used in investing activities............. (57,504) (17,979) (96,971) (18,151) (6,640) --------- --------- --------- --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on long-term debt.................... (41,773) (693) (85,990) (201) (350) New borrowings.......................................... 78,075 14,946 185,731 19,609 7,200 Sale of stock........................................... 12,426 -- -- -- -- Other................................................... (18) -- 300 31 35 --------- --------- --------- --------- --------- Net cash provided by financing activities......... 48,710 14,253 100,041 19,439 6,885 --------- --------- --------- --------- --------- NET INCREASE (DECREASE) IN CASH........................... (3,559) (939) 2,370 90 (1,055) CASH, beginning of period................................. 4,977 1,418 479 479 2,849 --------- --------- --------- --------- --------- CASH, end of period....................................... $ 1,418 $ 479 $ 2,849 $ 569 $ 1,794 --------- --------- --------- --------- --------- --------- --------- --------- --------- --------- DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest.............................................. $ 5,018 $ 8,311 $ 13,364 $ 2,286 $ 3,488 Taxes................................................. 937 (639) 131 36 728 NON CASH TRANSACTIONS: Value assigned to warrants.............................. 600 -- 300 -- -- Accretion of preferred stock dividend................... 2,958 3,712 4,097 987 1,089
The accompanying notes are an integral part of these statements. F-7 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 1. BUSINESS: U.S. Aggregates, Inc. (a Delaware corporation, hereinafter referred to as USAI or the Company) was incorporated in 1994. USAI is a leading producer of aggregates, primarily crushed stone, sand and gravel and associated aggregate-based materials and services. Its products are used primarily for the construction and maintenance of highways and other infrastructure projects and for commercial and residential construction, in nine states. The Company operates through two subsidiaries: SRM Holdings Corp. (SRMHC) and Western Aggregates Holding Corp. (WAHC). The capital structure of USAI includes common stock with voting rights and preferred stock without voting rights. The Company conducts its operations through one reportable segment: the quarrying and distribution of aggregate products. The Company operates in nine states which have been aggregated for segment reporting purposes. 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: INTERIM FINANCIAL STATEMENTS The interim consolidated financial statements as of March 31, 1999, and for the three months ended March 31, 1998 and 1999, are unaudited, and certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally accepted accounting principles, have been omitted. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the financial position, results of operations and cash flows with respect to the interim financial statements, have been included. The results of operations for the interim periods are not indicative of the results for the entire fiscal year. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of USAI and its subsidiaries. All significant intercompany balances and transactions have been eliminated. CASH AND CASH EQUIVALENTS Cash and cash equivalents represent funds on deposit in noninterest and interest-bearing operating and/or highly liquid investment accounts, with original maturities of three months or less. INVENTORIES Inventories are stated at the lower of average manufactured cost (which approximates the first-in, first-out method of accounting) or market. Average manufactured cost includes all direct labor and material costs and those indirect costs related to aggregate production, including indirect labor, repairs, depreciation and depletion. INCOME PER SHARE Basic income per share was calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share includes the impact of outstanding Warrants, using the treasury stock method. Net income per share for all periods F-8 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) presented and all share data reflect the Company's proposed 35.1879 for 1 stock split effective at the time of the Company's initial public offering of common stock. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. RISK FACTORS RELATING TO THE COMPANY'S BUSINESS AND INDUSTRY The Company's business is seasonal, with peak revenue and profits occurring primarily in the months of April through November. Bad weather conditions during this period could adversely affect operating income and cash flow and could therefore have a disproportionate impact on the Company's results for the full year. Quarterly results have varied significantly in the past and are likely to vary significantly from quarter to quarter in the future. A majority of the Company's revenues are from customers who are in industries and businesses that are cyclical in nature and subject to changes in general economic conditions. In addition, since operations occur in a variety of geographic markets, the Company's business is subject to the economic conditions in each such geographic market. General economic downturns or localized downturns in the regions where the Company has operations, including any downturns in the construction industry, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company's operations are subject to and affected by federal, state and local laws and regulations including such matters as land usage, street and highway usage, noise levels and health, safety and environmental matters. In many instances, various permits are required. Although management believes that the Company is in compliance with regulatory requirements, there can be no assurance that the Company will not incur material costs or liabilities in connection with regulatory requirements. Certain of the Company's operations may from time to time involve the use of substances that are classified as toxic or hazardous substances within the meaning of these laws and regulations. Risk of environmental liability is inherent in the operation of the Company's business. As a result, it is possible that environmental liabilities will have a material adverse effect on the Company in the future. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation is provided for using the straight-line method over the estimated useful lives of the assets, which are as follows:
10-40 Plant and equipment............................................. years Transportation and delivery equipment........................... 4-15 years Furniture and fixtures.......................................... 5-10 years
F-9 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) The Company uses a 20 percent salvage value in providing depreciation on certain of its assets. In 1997, USAI changed the estimated lives of certain depreciable assets, resulting in an approximate $1,550 reduction of 1997 depreciation expense compared to what it would have been had the estimated lives not been changed. Expenditures for development, renewals and betterments of developing quarries and gravel pits are capitalized. Depletion of acquired or leased mineral deposits is calculated on the units-of-production method over the estimated remaining recoverable reserves. Repairs and maintenance that do not improve or extend the lives of the assets are charged against operations in the year benefited. When properties are retired or otherwise disposed of, related costs and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in operations. INTANGIBLES Goodwill is amortized on a straight-line basis over 40 years. Covenants not to compete are amortized on a straight-line basis over the lesser of 5 years or the life of the agreement. Deferred finance charges are amortized on a straight-line basis over the life of the related loan. As of December 31, 1997 and 1998, the accumulated amortization applicable to the intangible assets was $4,067 and $6,208, respectively. ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS The Company evaluates its plant and other long-term assets for impairment and assesses their recoverability based upon anticipated future cash flows. If facts and circumstances lead the Company's management to believe that the cost of one of its assets may be impaired, the Company will (a) evaluate the extent to which that cost is recoverable by comparing the future undiscounted cash flows estimated to be associated with that asset to the asset's carrying amount and (b) write-down that carrying amount to market value or discounted cash flow value to the extent necessary. Using this approach, the Company's management determined that the cash flows would be sufficient to recover the carrying value of the Company's long lived assets as of December 31, 1997 and 1998. F-10 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) VALUATION ACCOUNTS Below is a summary of the changes in the Company's valuation accounts for 1996, 1997 and 1998:
ADDITIONS ------------------------ BEGINNING BALANCE ACQUIRED PROVIDED DEDUCTIONS FUNDING BALANCE ------------------- ----------- ----------- ----------- --------------- 1996 Allowance for doubtful accounts........ $ 297 $ 554 $ 275 $ (259) $ 867 Inventory valuation reserve............ 450 -- 350 (450) 350 1997 Allowance for doubtful accounts........ $ 867 $ -- $ 50 $ (288) $ 629 Inventory valuation reserve............ 350 -- 500 (559) 291 1998 Allowance for doubtful accounts........ $ 629 $ 583 $ 409 $ (458) $ 1,163 Inventory valuation reserve............ 291 -- 500 (291) 500
ENVIRONMENTAL MATTERS Remediation costs are accrued based on estimates of known environmental remediation exposure. Ongoing environmental compliance costs, including maintenance and monitoring costs, are expensed as incurred. Quarry and pit reclamation costs are treated as normal ongoing costs and are expensed, as incurred. INCOME TAXES USAI accounts for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement and tax bases, as well as the effect of operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period of change. REVENUE RECOGNITION Revenues are recognized at the time the related products are shipped. Contract revenues and costs are recognized under the percentage-of-completion method, measured by the percentage of costs incurred to date to estimated total costs for each contract. Revisions in cost estimates during the course of a contract are reflected in the accounting period in which the change of costs becomes known. Provision for estimated losses on incomplete contracts is made in the period in which such losses become evident. F-11 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) DEFERRED OFFERING COSTS As of December 31, 1998 and March 31, 1999 costs of $348 and $667 (unaudited), respectively, have been incurred in connection with the Company's initial public offering. Such costs will be treated as a reduction of the proceeds from the offering. FINANCIAL INSTRUMENTS USAI'S financial instruments, other than debt, consist of cash, short-term accounts receivable and accounts payable for which current carrying amounts are equal to or approximate fair market value. The estimated fair values of the Company's debt instruments at December 31, 1998, aggregated approximately $197,120 compared with a carrying amount of $200,591. The fair values were estimated based on the quoted market prices for similar issues, or on current rates anticipated by the Company for debt of the same remaining maturities. INTERNAL USE SOFTWARE In March 1998, the AICPA issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). The Company adopted SOP 98-1 on January 1, 1999. SOP 98-1 requires the capitalization of certain costs incurred after the date of adoption in connection with developing or obtaining software for internal use. The Company expensed such costs as incurred through December 31, 1998. The Company does not expect the impact of the adoption of SOP 98-1 to be material. COSTS OF START-UP ACTIVITIES In April 1998, the American Institute of Certified Public Accountants (the "AICPA") issued Statement of Position 98-5, REPORTING ON THE COSTS OF START-UP ACTIVITIES ("SOP 98-5"). Effective January 1, 1999, SOP 98-5 requires that all costs related to certain start-up activities, including organizational costs, be expensed as incurred. The cumulative effect of the adoption of SOP 98-5 reduced net earnings by $84, which has been recorded as an expense in the period ended March 31, 1999. NEW ACCOUNTING PRONOUNCEMENTS In June 1997, the FASB issued Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income, ("FAS 130"). FAS 130 requires all non-owner changes in equity that are excluded from net earnings under existing FASB standards be included as comprehensive income. The Company presently does not have any material transactions that directly affect equity other than those transactions with owners in their capacity as owners. Therefore, the provisions of FAS 130 did not materially affect net earnings or financial position. In June 1998, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities ("FAS 133"), which is required to be adopted in years beginning after June 15, 1999. Because of the Company's minimal use of derivatives, management does not anticipate that the adoption of FAS 133 will have a significant impact on net earnings or the financial position of the Corporation. F-12 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 2. BASES OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) COLLECTIVE BARGAINING AGREEMENTS The Company is a party to various collective bargaining agreements with labor unions. The agreements require the Company to pay specified wages and provide certain benefits to its union employees. These agreements will expire at various times through 2001. 3. ACQUISITIONS: On June 5, 1998, USAI, through WAHC, purchased all of the outstanding common stock of Monroc, Inc. (Monroc). Monroc's purchase price was approximately $67,800 in cash plus costs and certain assumed liabilities. The acquisition has been accounted for under the purchase method of accounting. The amount by which the total cost exceeded the fair value of the tangible net assets acquired of $3,850 as of December 31, 1998 was recognized as goodwill and is being amortized over 40 years. In addition, at various dates during 1996, 1997 and 1998, USAI, through its subsidiaries, acquired assets and businesses of several small companies. The operating results of the acquired businesses are included in the accompanying financial statements from their respective dates of acquisition. The following table reflects supplemental disclosure of noncash transactions related to these acquisitions for 1998:
Fair value of assets acquired, including goodwill of $6,808....... $ 138,683 Liabilities assumed............................................... (54,799) --------- Cash paid for assets.............................................. $ 83,884 --------- ---------
Subsequent to the acquisition of Monroc, acquired land, not related to the business, was sold for $6,945. No gain or loss was recognized on this disposition. The following unaudited selected pro forma financial data are presented as if the acquisitions (excluding Monroc's discontinued operations) had occured on January 1, 1997. The pro forma financial information is based upon certain estimates and assumptions that management of the Company believes are reasonable in the circumstances. The unaudited pro forma information presented below is not necessarily indicative of what results of operations actually would have been if the acquisition had occured on the date indicated. Moreover, they are not necessarily indicative of future results.
1997 1998 ---------- ---------- (UNAUDITED) Net sales............................................................. $ 212,910 $ 249,224 Income from continuing operations..................................... 3,622 4,825 Net income............................................................ 3,622 4,825 Net income per share.................................................. (.01) .10
F-13 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 3. ACQUISITIONS: (CONTINUED) DISCONTINUED OPERATIONS During 1998, the Company decided to discontinue the Precast Division operations of Monroc and on December 31, 1998 sold certain assets and inventory related to this division. Net sales from such operations were $15,639 in 1998. 4. UNAUDITED PRO FORMA INFORMATION In 1998, the Company acquired Monroc, Inc. on June 5th, Geodyne Transport, Inc. on Feb. 20th and Falcon Ridge Quarry, Inc. on Feb. 18th ("Acquired Businesses") in separate transactions. In addition, the Company disposed of the Precast Division assets of Monroc, Inc. and certain other non-business related land assets ("Disposed Assets"). While these acquisitions occurred at various dates during 1998, the Pro Forma data are presented as if such acquisitions and dispositions had occurred on the first day of the related period and also include the effect of certain pro forma adjustments to the historical financial statements described below. The selected pro forma financial data for the year ended December 31, 1998 has been derived from the Company (including the Acquired Businesses and Disposed Assets) prepared financial information, and the financial statements and notes thereto of certain of the Acquired Businesses and Disposed Assets for certain periods. (1) Net sales includes $20,485 from the Acquired Businesses (excluding sales related to Disposed Assets, for the period January 1, 1998 to their respective dates of acquisition in 1998. (2) Cost of products sold includes $15,233 from the Acquired Businesses (excluding costs related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition in 1998. (3) Selling, general and administrative expenses include $2,051 from the 1998 Acquired Businesses (excluding sales related to Disposed Assets, for the period January 1, 1998 to their respective dates of acquisition in 1998 less $604 of expenses incurred by Monroc, Inc. relating to the sale of Monroc to U.S. Aggregates. (4) Depreciation, depletion and amortization includes $977 from the 1998 Acquired Businesses (excluding amounts related to Disposed Assets) for the period January 1, 1998 to their respective dates of acquisition to reflect depreciation, depletion and amortization of fixed assets, goodwill and other intangibles from their ongoing operations as well as amounts recorded as a result of purchase accounting. (5) Interest expense includes $1,725 from the 1998 Acquired Businesses for the period January 1, 1998 to their respective dates of acquisition in 1998. The $1,725 is comprised of: $228 of interest expense on the debt assumed by USAI from the 1998 Acquired Businesses; interest expense of $1,984 on the new debt incurred to acquire such businesses and interest savings of $487 resulting from debt reduction using the proceeds from the Disposed Assets. These adjustments reflect the acquisitions and dispositions as if they occurred on January 1, 1998. (6) Provision for income tax expense includes $428 as if the 1998 Acquired Businesses (excluding Disposed Assets) had been combined with the USAI for the period January 1, 1998 to their F-14 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 4. UNAUDITED PRO FORMA INFORMATION (CONTINUED) respective dates of acquisition, and those additional earnings were subject to a blended federal and state statutory tax rate of 38.5%. (7) Minority Interest has been adjusted to reflect the Minority Interest's share in other pro forma adjustments. 5. INVENTORIES: Inventories consist of the following as of December 31:
1997 1998 --------- --------- Finished products....................................................... $ 6,300 $ 19,014 Raw materials........................................................... 4,831 5,730 Supplies and parts...................................................... 236 888 Fuel.................................................................... 204 348 Less: Allowances........................................................ (291) (500) --------- --------- $ 11,280 $ 25,480 --------- --------- --------- ---------
Inventories are pledged as security under various debt agreements (see Note 6). 6. PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment consist of the following as of December 31:
1997 1998 ---------- ---------- Land.................................................................. $ 7,889 $ 31,988 Mineral deposits...................................................... 19,083 89,554 Plant and equipment................................................... 96,107 119,675 Furniture and fixtures................................................ 1,669 4,148 Construction in progress.............................................. 2,018 1,038 ---------- ---------- 126,766 246,403 Less: Accumulated depreciation and depletion.......................... (14,396) (21,591) ---------- ---------- $ 112,370 $ 224,812 ---------- ---------- ---------- ----------
Property, plant and equipment are pledged as security for various debt agreements (see Note 6). F-15 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 7. LONG-TERM DEBT: Long-term debt consists of the following as of December 31:
1997 1998 ---------- ---------- Prudential Insurance subordinated notes, net of discount of $530 and $753, respectively.................................................. $ 29,470 $ 44,247 Bank of America term loan............................................. 25,875 -- Bank of America term loan A........................................... -- 53,500 Bank of America term loan B........................................... -- 58,500 Bank of America revolving loan........................................ 13,800 24,200 Bank of America acquisition loan...................................... 16,400 -- Demand note........................................................... -- 8,020 Notes payable to former stockholders.................................. 5,737 4,997 Other................................................................. 1,506 7,127 ---------- ---------- Total long-term debt.............................................. 92,788 200,591 Less: Current portion................................................. (6,139) (14,801) ---------- ---------- Long-term debt, net of current portion............................ $ 86,649 $ 185,790 ---------- ---------- ---------- ----------
The Bank of America credit facilities are secured by all of the assets of USAI. The Prudential Insurance notes are subordinated to the Bank of America credit facilities. Among other financial covenants, the debt agreements specify a minimum interest coverage ratio, a minimum fixed charge coverage ratio and a maximum leverage ratio. The agreements also prohibit the payment of dividends, or purchase or redemption of stock without the lenders' consent. The Company is in compliance with these covenants at December 31, 1997 and 1998. PRUDENTIAL INSURANCE COMPANY SUBORDINATED NOTES In November 1996 and June 1998, USAI issued $30,000 and $15,000, respectively, in subordinated notes to the Prudential Insurance Company of America (Prudential Insurance). Interest is due quarterly at a rate of 10.34 percent and 10.09 percent, respectively, per annum. Principal payments are scheduled as follows: 2003............................................................... $ 6,000 2004............................................................... 6,000 2005............................................................... 6,000 2006............................................................... 16,500 2007............................................................... 4,500 2008............................................................... 6,000
In connection with the issuance of the subordinated notes, USAI issued to Prudential Insurance warrants to purchase 335,517 shares of the common stock of USAI at a nominal cost. USAI has estimated the fair value of the warrants at $900 ($600 recorded in 1996 and $300 in 1998) and reflected this amount as a discount on the subordinated notes, with the offsetting credit to additional paid-in F-16 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 7. LONG-TERM DEBT: (CONTINUED) capital. The discount is being amortized on a straight-line basis (which approximates the interest method) over the life of the notes. BANK OF AMERICA TERM LOANS USAI has a syndicated term loan facility with Bank of America NT & SA, as agent, and certain other financial institutions (Bank of America). In June 1998, the term loan agreement was amended to increase the total principal amount of the Term Loan from $30,000 to $115,000 of Term Loan A and Term Loan B. In connection with the restructuring of the Company's debt, previously capitalized fees and costs of $338, net of a tax benefit of $212, were recorded as an Extraordinary Item--Loss on Extinguishment of Debt in 1998. TERM LOAN A has interest payments due quarterly and is currently payable at the Eurodollar rate plus 2.125 percent, or approximately 7.6875 percent as of December 31, 1998. Principal payments are scheduled as follows: TERM LOAN A June 1999 through March 2000....... $1,250 per quarter June 2000 through March 2001....... $2,500 per quarter June 2001 through March 2002....... $3,000 per quarter June 2002 through March 2003....... $3,250 per quarter June 2003 through March 2004....... $3,750 per quarter
TERM LOAN B has interest payments due quarterly and is currently payable at the Eurodollar rate plus 2.5 percent, or approximately 8.0625 percent as of December 31, 1998. Principal payments are scheduled as follows: TERM LOAN B June 1999 through December 2005.... $138 per quarter March 2006......................... $51,288
BANK OF AMERICA REVOLVING LOAN In June 1998, the Company's revolving loan facility was increased to $40,000. Subsequent to year end, this loan facility was increased to $60,000. The revolving loan is to be paid in full by the revolving termination date in December 2006; however, USAI may terminate revolving commitments at any time provided that USAI pays, in full, all obligations. Interest on the unpaid principal amount of each revolving loan is due quarterly. If the loan is a floating rate loan, interest is payable at a rate per annum equal to the sum of the alternate reference rate from time to time in effect plus 1 percent. If the loan is a Eurodollar loan, interest is payable at a rate per annum equal to the sum of the Eurodollar rate applicable to each interest period for such loan plus 1.125 percent. In addition, USAI F-17 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 7. LONG-TERM DEBT: (CONTINUED) pays fees of .5 percent per annum on the daily average of the unused amount of the revolver. The interest rate on this debt as of December 31, 1998 was 8.875%. The interest rate and commitment fee on unused amounts of the revolving loan vary based on certain performance criteria established by USAI's banks. However, the rates cannot exceed the Eurodollar rate plus 2.125%, the alternate reference rate plus 1.125%, or, in relation to committment fees, 0.5% of the unused portion of the revolver. HARRIS TRUST & SAVINGS BANK DEMAND NOTE In March 1998, Harris Trust & Savings Bank granted USAI a $9,000 revolving line of credit guaranteed by a shareholder. Interest is due quarterly at a rate per annum equal to the rate announced from time to time by Harris Trust & Savings Bank as prime commercial rate or approximately 7.75% as of December 31, 1998. The demand note is due in full on June 30, 1999. Subsequent to the end of year, the Company retired the above note and was granted a $17,500 revolving line of credit also guaranteed by a shareholder. The note is due on demand. NOTES PAYABLE TO FORMER SHAREHOLDERS In connection with the acquisition of certain companies, USAI subsidiaries have issued from time to time notes payable to the selling shareholders, several of whom remain employees and shareholders of subsidiaries. These notes payable bear interest at rates from 6% to 10.65% per annum and have varying maturity dates continuing to 2001. OTHER DEBT Other debt consists primarily of various borrowings from banks, generally secured by equipment. Interest rates range from 7.9% to 10.0% and have varying maturity dates through 2018. SCHEDULED PAYMENTS OF LONG-TERM DEBT Scheduled long-term debt maturities are as follows:
YEAR ENDING DECEMBER 31 - ------------------------------------------------------------------------------ 1999.......................................................................... $ 14,801 2000.......................................................................... 12,756 2001.......................................................................... 14,202 2002.......................................................................... 13,949 2003.......................................................................... 21,621 Thereafter.................................................................... 124,193 -------------- 201,522 Less: Unamortized discount.................................................... (931) -------------- $ 200,591 -------------- --------------
F-18 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 8. EMPLOYEE BENEFIT PLANS: U.S. AGGREGATES INC. 401(K) PLAN Prior to 1998, some of USAI's subsidiaries had 401(k) plans with various vesting and discretionary contribution formulas. For the year ended December 31, 1997, the subsidiaries provided contributions of $255. In 1998, USAI established a 401(k) plan that is funded by both employees and at the discretion of USAI. This plan is administered by a third party. Subsequently, the subsidiaries' 401(k) plans were merged into the USAI plan. All full-time employees other than union employees are eligible to participate in the U.S. Aggregates, Inc. 401(k) Plan. USAI may make discretionary contributions each year. Participants increase their vested interest in these discretionary contributions based upon years of employment in which at least 1,000 hours are worked, and they become fully vested after seven years. Participants are fully vested in their contributions. For the years ended December 31, 1997 and 1998, USAI provided contributions of $255 and $0, respectively. SRM SRM had a noncontributory defined benefit pension plan covering substantially all of its employees. SRM's funding policy was to contribute amounts that were actuarially determined to provide this plan with sufficient assets to meet future benefit payment requirements. In February 1997, a total distribution of plan assets to participants and termination of the plan occurred. The Company has no ongoing liability related to this plan. SRM also maintains a benefit plan partially funded by key-man life insurance for current and former key employees of SRM. Benefits under the plan are discretionary and are payable over a ten-year period upon retirement at age 65 or upon death. As of December 31, 1997 and 1998, the present value of long-term benefits payable are $79 and $76, respectively. MULTIEMPLOYER PLANS The Company participates in various multiemployer union pension plans through two of its subsidiaries. Contributions to these plans in 1996, 1997 and 1998 were approximately $253, $292 and $586, respectively. F-19 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 9. INCOME TAXES: USAI files a consolidated federal tax return. Its subsidiaries file tax returns in the states in which they conduct business. The provision for income taxes for 1996, 1997 and 1998 is as follows:
1996 1997 1998 ------------ ------------ ------------ Current: Federal........................................... $ 888 $ 255 $ 884 State............................................. 146 -- 127 ------------ ------------ ------------ 1,034 255 1,011 ------------ ------------ ------------ Deferred: Federal........................................... 2,276 2,718 2,806 State............................................. 350 411 419 ------------ ------------ ------------ 2,626 3,129 3,225 ------------ ------------ ------------ $ 3,660 $ 3,384 $ 4,236 ------------ ------------ ------------ ------------ ------------ ------------
The provision for income taxes is reflected in the accompanying statements of operations includes the following components:
1996 1997 1998 ------------ ------------ ------------ Provision for income taxes.......................... $ 3,660 $ 3,384 $ 3,547 Provision for income taxes on discontinued operations........................................ -- -- 901 Benefit for income taxes on extraordinary item...... -- -- (212) ------------ ------------ ------------ $ 3,660 $ 3,384 $ 4,236 ------------ ------------ ------------ ------------ ------------ ------------
F-20 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 9. INCOME TAXES: (CONTINUED) Significant components of the Company's deferred tax assets and liabilities as of December 31 are as follows:
1997 1998 -------------- -------------- Deferred tax assets; Accruals and reserves....................................... $ 559 $ 308 Alternative minimum tax credit.............................. 1,541 2,424 Net operating loss.......................................... 1,554 3,922 Other....................................................... 154 1,211 -------------- -------------- Total deferred tax assets................................. 3,808 7,865 -------------- -------------- Deferred tax liabilities: Depreciation and depletion.................................. (12,171) (24,147) Book basis in fixed assets over tax basis................... (3,845) (27,782) Other....................................................... (448) (1,249) -------------- -------------- Total deferred tax liabilities............................ (16,464) (53,178) -------------- -------------- Net deferred tax liability................................ $ (12,656) $ (45,313) -------------- -------------- -------------- --------------
The reconciliation of the statutory rate to the effective rate is as follows:
1996 1997 1998 ------------ ------------ ------------ Tax at federal statutory rate....................... $ 3,682 $ 3,234 $ 3,658 State taxes, net of federal benefit................. 357 358 366 Effect of tax rate increase to 35 percent........... -- -- 546 Depletion........................................... (432) (365) (491) Other............................................... 53 157 157 ------------ ------------ ------------ $ 3,660 $ 3,384 $ 4,236 ------------ ------------ ------------ ------------ ------------ ------------
At December 31, 1997 and 1998 the Company had net operating loss carryforwards of $4,487 and $10,437 available to offset future taxable income. These carryforwards expire through 2013. Alternative minimum tax credit carryforwards of $1,541 and $2,424 at December 31, 1997 and 1998 have no expiration date. Prior to 1998, the Company provided federal income taxes using a rate of 34%. In the year ended December 31, 1998 this rate was increased to 35% and deferred taxes were adjusted accordingly. 10. COMMON STOCK The Company has a stock purchase plan periodically made available to select members of management. Under this formula plan, individuals are allowed to purchase stock in the Company or its subsidiaries. The Company sold 50,600 shares of its common stock under this program in 1997. Also 50 shares of SRMHC and 2,500 shares of WAHC common stock were sold under this program in 1998. Shares issued under this program are generally sold for a combination of cash and notes and are subject to vesting over a 6 year period. The vested and unvested shares are subject to various call or F-21 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 10. COMMON STOCK (CONTINUED) put options upon termination. The repurchase price is at fair market value for vested shares or original cost for unvested shares. The total number of shares outstanding under this program are 50,600 (20,240 vested) for the Company, 3,857 (952 vested) for WAHC and 170 (67 vested) for SRM. Upon completion of the Initial Public Offering contemplated, the employees shares in subsidiary stock will be exchanged for stock of the Company, and the Company's and employees rights with regard to vested shares will cease. 11. PREFERRED STOCK There are 500,000 shares of non-voting preferred stock authorized with a .01 per share par value. At December 31, 1996, 1997 and 1998 there were 300,842 shares outstanding. The preferred stock has certain liquidation preferences and a liquidation value of $100 per share. It entitles the holders to receive cumulative dividends of 10% per annum of the sum of the liquidation value plus all accumulated and unpaid dividends when and as declared. The net proceeds from any public offering must be used to redeem these shares at their liquidation value plus all accrued and unpaid dividends. Effective November, 1996 the terms of the preferred stock agreement were modified, allowing the holders to redeem their shares at liquidation value plus all accrued and unpaid dividends at any date after January 2000, subject to the approval of the Company's lenders. As of December 31, 1998 the Company's debt agreements do not allow such a redemption. The preferred stock is reflected as Mandatorily Redeemable Preferred Stock on the balance sheet and is not considered a component of Shareholders' Equity. Dividends are accreted at a compound rate of 10% per quarter. Accumulated accreted dividends of $14,568 have been charged against retained earnings and reflected in mandatory redeemable preferred stock through December 31, 1998. Upon completion of the Initial Public Offering contemplated, this stock will be redeemed. 12. INCOME PER SHARE Basic income per share was calculated by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share include the impact of outstanding Warrants, using the treasury stock method. Net income per share for all periods presented and all share data reflect the Company's proposed 35.1879 for 1 stock split effective at the time of the Company's initial public offering of common stock. F-22 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 12. INCOME PER SHARE (CONTINUED) Income used in the per common share calculations are the same for basic and diluted calculations. The following table reconciles the weighted average shares outstanding used for basic and diluted income per share:
Year Ended December 31, ---------------------------------------------------------------------------------------------------- 1996 1997 1998 ------------------------------------- ------------------------------------- ---------------------- PER SHARE PER SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES ----------- --------- ------------- ----------- --------- ------------- ----------- --------- Income (loss) from continuing operations... $ 6,444 $ 5,505 $ 4,259 Less: Accretion of Preferred stock dividend.............. 2,959 3,712 4,097 Basic income available to common stockholders..... 3,485 7,116,719 $ 0.49 1,793 7,166,193 $ 0.25 162 7,189,521 ----- ----- ----- ----- Effect of warrants........ 222,634 222,634 335,517 --------- --------- Dilutive income available to common stockholders............ $ 3,485 7,339,353 $ 0.47 $ 1,793 7,388,827 $ 0.24 $ 162 7,525,038 ----------- --------- ----- ----------- --------- ----- ----------- --------- ----------- --------- ----- ----------- --------- ----- ----------- --------- Pro Forma 1998 ------------------------------------- (UNAUDITED) PER SHARE PER SHARE AMOUNT INCOME SHARES AMOUNT ------------- ----------- ----------- ----------- Income (loss) from continuing operations... $ 4,825 Less: Accretion of Preferred stock dividend.............. 4,097 Basic income available to common stockholders..... $ 0.02 728 7,189,521 $ 0.10 ----- ----------- ----- ----------- Effect of warrants........ 335,517 ----------- Dilutive income available to common stockholders............ $ 0.02 $ 728 7,525,038 $ 0.10 ----- ----------- ----------- ----------- ----- ----------- ----------- -----------
Three Months Ended March 31, -------------------------------------------------- 1998 1999 ------------------------------------- ----------- (UNAUDITED) (UNAUDITED) PER SHARE INCOME SHARES AMOUNT INCOME ----------- ----------- ----------- ----------- Income (loss) from continuing operations............................ $ (2,033) $ (1,675) Less: Accretion of preferred stock dividend....................... 987 1,089 Basic income available to common stockholders....................... (3,020) 7,189,521 $ (0.42) (2,764) Effect of warrants.................................................. 335,517 Dilutive income available to common stockholders.................... $ (3,020) 7,412,155 $ (0.42) $ (2,764) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- PER SHARE SHARES AMOUNT ----------- ----------- Income (loss) from continuing operations............................ Less: Accretion of preferred stock dividend....................... Basic income available to common stockholders....................... 7,189,521 $ (0.38) Effect of warrants.................................................. 335,517 Dilutive income available to common stockholders.................... 7,525,038 $ (0.38) ----------- ----------- ----------- -----------
13. CONCENTRATION OF CREDIT RISK: Financial instruments that potentially subject USAI to concentrations of credit risk consist primarily of cash and trade receivables. USAI places its cash on deposit with credit-worthy financial institutions, in accounts or instruments with maturities of three months or less. Concentration of credit risk with respect to trade receivables is limited due to the large number of customers who service a large base of clients dispersed across many different industries throughout the southeastern and southwestern sections of the United States. 14. COMMITMENTS AND CONTINGENCIES: USAI and its subsidiaries lease office facilities, trucks, equipment and certain quarry sites under operating lease arrangements. Lease expense (other than royalties) was $3,933 and $8,951 for the years F-23 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 14. COMMITMENTS AND CONTINGENCIES: (CONTINUED) ended December 31, 1997 and 1998, respectively. Total future minimum rentals under noncancelable operating leases as of December 31, 1998 are: 1999........................................................... $ 9,720 2000........................................................... 9,005 2001........................................................... 7,790 2002........................................................... 6,210 2003........................................................... 4,701 Thereafter..................................................... 5,488 ---------- $ 42,914 ---------- ----------
The Company operates several quarries on land owned entirely or in part by unrelated third parties. Pursuant to related agreements, the Company pays monthly royalties to the owner based on the quantity of aggregates sold. The initial terms of these agreements range from 5 to 40 years and generally include renewal options. The minimum royalty payments are included in the above table. Royalty expenses recorded pursuant to these arrangements in 1996, 1997 and 1998 totaled 2,490, $2,725 and $4,748, respectively. USAI and its subsidiaries are subject to various laws and regulations relating to the protection of the environment. It is not possible to quantify with certainty the potential impact of actions regarding environmental matters, particularly any future remediation and other compliance efforts. In the opinion of management, future compliance with existing environmental protection laws will not have a material adverse effect on the financial condition or results of operations of USAI. USAI acquired SRM from Lohja, Inc. (Lohja) in 1994. In connection with the purchase, USAI agreed to make semiannual payments to Lohja (the Lohja obligation) through December 31, 1999, under an initial $3,760 obligation, contingent upon the continuing operations and earnings of one of the Company's quarries. In September 1998, the Company chose to terminate the balance of the contract, and final payment of $1,149 was made in full satisfaction of the contract. The Company has a quarry under development in DeKalb County, Georgia which is inactive but currently permitted as a dimensional stone quarry site. The Company has filed a lawsuit against the county regarding a dispute over the issuance of a blasting permit to start a crushed stone operation. The DeKalb site development-stage activities to date have consisted primarily of site preparation work such as road construction, the placement of scales and legal fees. DeKalb has also made advance minimum royalty payments under a sublease agreement to be applied against payments due upon the commencement of operations at this site. Capitalized costs as of December 31, 1998 in connection with this site were $1,524. Management feels that they will eventually open the quarry; however, in the event that DeKalb is not permitted to conduct operations at this quarry, the quarry will likely be leased to a dimensional stone producer. USAI is subject to various legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. In the opinion of management, the ultimate resolution of these issues would not have a material adverse effect on USAI's financial condition or results of operations. F-24 U.S. AGGREGATES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS) 15. RELATED-PARTY TRANSACTIONS: During 1998, SRMHC issued 50 shares of SRMHC common stock to one management member of SRMHC and received a note receivable of $57 for the issuance of such shares. This note bears interest at 8 percent per annum and is due on December 31, 2003. In 1998, WAHC issued 2,500 shares of WAHC common stock to several members of WAHC management and received notes receivable of $250 for the issuance of these shares. Additionally, a member of Valley Asphalt, Inc.'s (Valley) management elected to purchase 625 shares of WAHC's outstanding common stock, in lieu of amounts owed to them. In October 1997, USAI issued 50,600 shares of stock for $220 to a member of USAI's management. Additionally, during the same period, members of Valley's management elected to purchase 1,875 shares of WAHC's outstanding common stock, in lieu of amounts owed to them. Included in long-term debt is $1,449 and $1,682 as of December 31, 1997 and 1998 that is due to employees or shareholders who were former owners of acquired companies. Shares of the Company or its subsidiaries owned by members of management are subject to repurchase agreements with the Company. USAI pays an advisory fee to one of its major shareholders. Such fee amounted to $150 for each of the years ended December 31, 1997 and 1998. Also, USAI paid advisory fees of approximately $308 and $404 to a common and preferred shareholder of USAI for each of the years ended December 31, 1997 and 1998, respectively. These fees were paid in connection with various financing transactions undertaken by USAI during these years. All related-party transactions are considered to be conducted at arm's length. 16. SUBSEQUENT EVENTS: OFFERING The Company is in the process of filing a Registration Statement with the Securities and Exchange Commission in connection with the offering by the Company of shares of common stock for sale to the public. F-25 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders of Monroc, Inc.: We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary (the Company) for the year ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the consolidated results of operations and cash flows of Monroc, Inc. and Subsidiary for the year ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP Salt Lake City, Utah March 31, 1998 F-26 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
THREE MONTHS ENDED YEAR ENDED MARCH 31, DECEMBER 31, ---------------------------- 1997 1997 1998 ------------ ------------- ------------- (UNAUDITED) Net Sales............................................................ $ 61,383 $ 14,913 $ 12,307 Cost and Expenses: Cost of sales...................................................... 52,584 12,868 10,156 General and administrative expenses................................ 6,925 1,611 1,699 Contribution to ESOP............................................... 800 200 200 ------------ ------------- ------------- TOTAL COSTS AND EXPENSES............................................. 60,309 14,679 12,055 ------------ ------------- ------------- OPERATING PROFIT (LOSS).............................................. 1,074 234 252 Other income (expense): Interest, net...................................................... (1,013) (231) (390) Gain (loss) on sale of real estate................................. (16) 4 -- ------------ ------------- ------------- Total other expense................................................ (1,029) (227) (390) ------------ ------------- ------------- EARNINGS (LOSS) BEFORE INCOME TAXES.................................. 45 7 (138) Income tax (benefit)................................................. (194) -- -- ------------ ------------- ------------- NET EARNINGS (LOSS).................................................. $ 239 $ 7 $ (138) ------------ ------------- ------------- ------------ ------------- ------------- Basic earnings (loss) per common share............................... $ 0.05 $ 0.00 $ (0.03) Diluted earnings (loss) per common share............................. $ 0.05 $ 0.00 $ (0.03)
The accompanying notes are an integral part of these statements. F-27 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
COMMON STOCK CAPITAL IN ---------------------- EXCESS SHARES AMOUNT OF PAR VALUE --------- ----------- ---------------- Balance at January 1, 1997.............................................................. 4,467,000 $ 45 $ 24,482 Common stock issued................................................................... 47,200 -- 236 Purchase of stock warrants............................................................ -- -- -- Net earnings for the year............................................................. -- -- -- Reduction of ESOP note receivable..................................................... -- -- -- --------- ----------- ---------------- Balance at December 31, 1997............................................................ 4,514,200 45 24,718 Net loss for the period (unaudited)................................................... -- -- -- Reduction of ESOP note receivable (unaudited)......................................... -- -- -- --------- ----------- ---------------- Balance at March 31, 1998 (unaudited)................................................... 4,514,200 $ 45 $ 24,718 --------- ----------- ---------------- --------- ----------- ---------------- ESOP ACCUMULATED NOTE DEFICIT RECEIVABLE ------------ ---------- Balance at January 1, 1997.............................................................. $ (3,332) $ (2,524) Common stock issued................................................................... -- -- Purchase of stock warrants............................................................ (208) -- Net earnings for the year............................................................. 239 -- Reduction of ESOP note receivable..................................................... -- 800 ------------ ---------- Balance at December 31, 1997............................................................ (3,301) (1,724) Net loss for the period (unaudited)................................................... (138) -- Reduction of ESOP note receivable (unaudited)......................................... -- 200 ------------ ---------- Balance at March 31, 1998 (unaudited)................................................... $ (3,439) $ (1,524) ------------ ---------- ------------ ----------
The accompanying notes are an integral part of these statements. F-28 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
THREE MONTHS YEAR ENDED ENDED MARCH 31, DECEMBER 31, -------------------- 1997 1997 1998 ------------ --------- --------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss)............................................................. $ 239 $ 7 $ (138) Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Depreciation and amortization of property, plant, and equipment............... 2,303 569 704 Deferred income tax expense................................................... (194) -- -- Provision for contribution to ESOP and repayment of ESOP note receivable...... 800 200 200 Amortization of other assets.................................................. 57 18 13 Provision for discounts and doubtful accounts................................. 396 (1) (72) Depletion of aggregate deposits............................................... 107 15 28 Loss on sale of property, plant and equipment, and land....................... 16 259 -- Changes in assets and liabilities: Accounts receivable......................................................... 3,624 1,130 (150) Note receivable from officer................................................ (140) Costs and estimated earnings in excess of billings on uncompleted contracts................................................................. (33) (151) 210 Inventories................................................................. (761) 128 (339) Prepaid expenses............................................................ 140 547 (214) Other assets................................................................ (25) -- Trade accounts payable...................................................... (1,747) (2,065) 847 Accrued liabilities......................................................... 870 267 415 Billings in excess of costs and estimated earnings on uncompleted contracts................................................................. (529) 142 (119) Deferred compensation....................................................... (31) (29) 14 ------------ --------- --------- Net cash provided by operating activities..................................... 5,117 1,011 1,399 ------------ --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant, and equipment................................... (4,357) (1,043) (4,774) Proceeds from sale of property, plant, equipment, and land.................... 306 -- -- Additions to aggregate deposits............................................... (2,917) -- -- Addition to land.............................................................. (638) -- -- ------------ --------- --------- Net cash used in investing activities....................................... (7,606) (1,043) (4,774) ------------ --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in line of credit..................................... $ 544 $ (1,237) $ (400) Principal payments on long-term obligations................................... (1,656) (125) (308) Issuance of long-term obligations............................................. 3,136 565 3,997 Purchase of stock warrants.................................................... (209) -- -- Issuance of common stock...................................................... 236 -- -- ------------ --------- --------- Net cash provided by (used in) financing activities......................... 2,051 (797) 3,289 ------------ --------- --------- Net decrease in cash and cash equivalents....................................... (438) (829) (86) Cash and cash equivalents at beginning of period................................ 1,190 1,190 752 ------------ --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD...................................... $ 752 $ 361 $ 666 ------------ --------- --------- ------------ --------- --------- SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest.................................................................... $ 981,672 $ 203 $ 401
NONCASH INVESTING AND FINANCING ACTIVITIES--The Company acquired equipment under capital lease obligations totaling $418 in 1997. Additionally, inventory valued at a cost of $55 was transferred to the cost of land due to land reclamation activities during 1997. See notes to consolidated financial statements. F-29 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BUSINESS ACTIVITY -- Monroc, Inc. and subsidiary (the Company) operate in one industry segment; the production and sale of sand and gravel products, ready-mix concrete, prestress/precast concrete products, and accessories for the building and construction industry, principally in Utah, Idaho, and Wyoming. PRINCIPLES OF CONSOLIDATION -- The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Big Horn Redi-Mix, Inc. (Big Horn). All significant intercompany accounts and transactions have been eliminated in consolidation. INTERIM FINANCIAL STATEMENTS -- The interim consolidated financial statements for the three months ended March 31, 1998 and 1997, are unaudited. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary to fairly present the financial position, results of operations and cash flows with respect to the interim financial statements, have been included. The results of operations for the interim periods are not indicative of the results for the entire fiscal year. PROPERTY, PLANT, AND EQUIPMENT AND AGGREGATE DEPOSITS -- Property, plant, and equipment are depreciated over their estimated useful lives. Leased property under capital leases is amortized over the lives of the respective leases or over the service lives of the assets for those leases which substantially transfer ownership. The straight-line method of depreciation is followed for financial reporting purposes; however, straight-line and accelerated methods are used for tax purposes. Depletion on aggregate deposits is calculated on a units-of-production basis. The estimated lives used in determining depreciation and amortization are:
YEARS ----- Mobile equipment................................................... 5-12 Plant equipment.................................................... 5-12 Administrative equipment and buildings............................. 5-50
OTHER ASSETS -- Other assets include miscellaneous amortizable assets including financing commitment fees, which fees are being amortized on the interest method over the term of the notes payable to banks. Other assets also includes goodwill which is being amortized on the straight-line method over 20 years. Impairment of long-lived assets is determined by evaluating long-lived assets on a periodic basis in accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and of Long-Lived Assets to be Disposed Of," which was adopted on January 1, 1996. Assets determined to be impaired are written down to their fair value. There were no significant impairments during 1997. REVENUE RECOGNITION -- Revenues on contracts which are primarily for prestress/precast concrete products are recognized on the percentage-of-completion method. The percentage-of-completion is determined on the units-of-production basis. Under this method, revenues, costs, and estimated profits are recognized as individual units are completed. F-30 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) During 1997, the Company recognized revenue of approximately $6,349 on a significant project which was completed during 1997. Contract costs are included in cost of sales and include all direct labor and benefits, materials unique to or installed in the project, and indirect cost allocations, including employee benefits and construction equipment expense. As long-term contracts extend over one or more years, revision in cost and earnings estimates during the course of the work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is recognized in the financial statements. Costs attributable to contract claims or disputes are recorded only when realization is probable. The amounts are recorded at the lesser of actual costs incurred or the amount expected to be realized. Revenues on other product sales are recognized when the product is shipped. INCOME TAXES -- The Company utilizes an asset and liability approach for financial accounting and reporting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized. ESOP ACCOUNTING -- The Company established an Employee Stock Ownership Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor company. In conjunction with the acquisition, the Company loaned the ESOP $10 million, which the ESOP used to finance the acquisition of its interest in the Company. Generally accepted accounting principles require that the note receivable from the ESOP be included in the balance sheet as a reduction of stockholders' equity. The ESOP allocates the shares issued to the ESOP in 1986 to the participants of the ESOP as described below. The Company makes contributions to the ESOP which allow the ESOP to make the debt payments back to the Company on the note receivable from the ESOP. Upon a commitment to release shares, ESOP contributions by the Company are expensed and charged against income for accounting purposes and are deductible for income tax purposes. Shares allocable to participants for a given year are determined based on the ratio of the current year's ESOP debt service payments (principal and interest) on the original note from the Company as compared to the total remaining required debt service on that loan. The contribution to the ESOP is a noncash expense of the Company because the contributions are paid back to the Company and reduce the note receivable from the ESOP. Consequently, no cash is consumed as a result of the contributions. Furthermore, since the note receivable from the ESOP is reduced by contributions, total stockholders' equity is not affected by the contributions to the ESOP. CASH EQUIVALENTS -- For financial statement purposes, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. CONCENTRATION OF CREDIT RISK -- A significant portion of the Company's sales are to customers whose activities are related to the building and construction industry. These customers are located F-31 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) primarily in the intermountain west. The Company generally extends credit to these customers and, therefore, collection of receivables is affected by the economy of the building and construction industry. However, the Company closely monitors extensions of credit. ESTIMATES AND ASSUMPTIONS -- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RELATED PARTIES -- The Company made consulting fee payments of $200 during the year ended December 31, 1997 to an entity with controlling ownership of the Company (see Note 8). This payment is included in general and administrative expenses in the consolidated statements of operations. 2. LONG-TERM OBLIGATIONS The following is a schedule of equipment capital lease obligations at December 31, 1997: Year ending December 31: 1998............................................ $ 552,748 1999............................................ 489,657 2000............................................ 448,589 2001............................................ 356,722 ---------- Total minimum lease payments...................... 1,847,716 Less amount representing interest................. 274,744 ---------- Present value of minimum lease payments........... $1,572,972 ---------- ----------
The Company has entered into several operating leases on certain equipment expiring through 2003. Lease expense for the year ended December 31, 1997, was $2,627. The following is a schedule of future minimum lease payments on the Company's operating leases at December 31, 1997: Year ending December 31: 1998.............................................................. $ 2,650 1999.............................................................. 2,146 2000.............................................................. 1,830 2001.............................................................. 1,360 2002.............................................................. 539 Thereafter........................................................ 97 --------- Total............................................................... $ 8,622 --------- ---------
Not included in the above schedule are production royalties which the Company has agreed to pay on aggregate deposits mined on lease property. The payments are based on a progressive scale ranging F-32 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 2. LONG-TERM OBLIGATIONS (CONTINUED) from $0.25 per ton in 1997 to $0.48 per ton in 2000. The annual expense for these royalties was $117 for 1997. 3. INCOME TAXES Income tax benefit for the year ended December 31, 1997 consists of the following: Current--Federal..................................................... $ -- Deferred--Federal.................................................... (194) --------- Total................................................................ $ (194) --------- ---------
At December 31, 1997, the Company had net operating loss carryforwards for tax reporting purposes of approximately $5,100, which expire through the year 2012. The net operating loss carryforwards are subject to limitation in any given year upon the occurrence of certain events, including significant changes in ownership. The net change in the Company's valuation allowance for the deferred tax assets was $(82) for 1997, principally due to changes in net operating loss carry forward, excess tax depreciation, and other items. F-33 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 3. INCOME TAXES (CONTINUED) Reconciliation of income taxes computed at the federal statutory rate and income tax expense (benefit) is as follows:
1997 --------- Income tax (benefit) computed at the Federal statutory rate of 35%....................................................... $ 16 Net operating loss (utilized)......................................................... (82) Percentage depletion.................................................................. (145) Nondeductible expenses................................................................ 17 --------- Income tax (benefit).................................................................. $ (194) --------- ---------
4. EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The Company has an ESOP covering substantially all full-time employees who have at least one year of service. Under the terms of the ESOP, the Company contributes amounts as determined by the Board of Directors. Shares of stock allocated for a given year are further allocated to individual participants based on the ratio of the participants' annual compensation to total compensation for all participants. Shares allocated to participants vest over six years. In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock representing a 68% interest, in exchange for a $10,000 promissory note. The balance on the note receivable from the ESOP was $1,724 at December 31, 1997. As of December 31, 1997, there were 1,164,075 shares of the Company's common stock remaining in the ESOP with 920,569 shares allocated to participants' accounts and 243,506 remaining to be allocated based on future contributions by the Company. All shares in the ESOP are considered issued and outstanding for purposes of calculating earnings per share. Participants vote the shares in their accounts on any stockholder vote while the unallocated shares are voted by the ESOP trustee under instructions from the Company's Board of Directors. As of December 31, 1997, the fair value of the 243,506 shares still to be allocated to participants' accounts was $2,465. The principal reductions on the ESOP note were $800 for the year ended December 31, 1997 was shown as contributions to the ESOP. The accumulated deficit at December 31, 1997 includes $8,276 of contributions since 1986 to the ESOP, which have been used to reduce principal on the ESOP note. 5. RETIREMENT PLANS The Company makes payments to a defined contribution pension plan (Plan) covering most full-time nonbargaining employees who have completed at least one full year of service with the Company based on a percentage of the employee's salary. Payments are made to the Plan as they accrue. The contribution for the year ended December 31, 1997 was $523. There were also certain bargaining employees who are covered under this Plan. The Company has no liability under the Plan beyond the amounts contributed. The Company also makes payments to various bargaining union trust funds, as negotiated under union contracts. The contribution for the year ended December 31, 1997 was $286. F-34 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 6. COMMITMENTS AND CONTINGENCIES DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS -- In May 1996, the Company amended the employment agreement with its former president and chief executive officer (president). The amended agreement stipulates that the Company will no longer accrue amounts towards the former president's deferred compensation effective May 22, 1996. In addition, the amount accrued in the former president's unfunded deferred compensation account will continue to earn interest at 1% below the prime interest rate (7.5% at December 31, 1997). The total accrued amount will be paid over a period equal to one and one-fourth times the length of Company service of the president as follows:
YEAR ENDING DECEMBER 31: - -------------------------------------------------------------------------------------- 1998.................................................................................. $ 112 1999.................................................................................. 30 2000.................................................................................. 32 2001.................................................................................. 35 2002.................................................................................. 38 Thereafter............................................................................ 599 --------- Total................................................................................. $ 846 --------- ---------
The Company has entered into employment agreements with certain officers. These agreements provide for annual compensation through July 1998 as determined by the Board of Directors. The Board of Directors has approved annual compensation of $255 for these officers as of December 31, 1997. ENVIRONMENTAL MATTERS -- The Company is currently the owner of 9.9 acres of land located in Murray, Utah that contains mining slag previously deposited by the former owner. The slag contains certain heavy metals including lead and arsenic that may have leached from the slag into the environment. This and adjoining properties have been proposed by the Environmental Protection Agency (EPA) for listing on the National Priorities List for cleanup of the lead slag and potential groundwater contamination. Although the Company did not generate the slag material, under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), the current owner of a property may be liable for cleanup costs. In such case, the Company would have a claim against the former owner for its respective share of these costs. All the landholders and the City of Murray entered, in May 1997, into an Agreement in Principle in which landholders agreed to donate land for a roadway through the properties which would be used as a depository for some of the hazardous wastes on the site. In addition, the parties agreed to cooperate in the remediation efforts to be conducted by the former owner. The parties are currently in negotiations regarding a proposed draft, Remedial Design/ Remedial Action Consent Decree ("CD"). As proposed, the CD requires the Company to (i) contribute a certain amount of its property for the roadway (approximately 1.8 acres with a book value of about $19) as its share of the cleanup costs, (ii) participate in a local improvement district for the installation of a curb, gutter, and sidewalks along the proposed roadway (approximately a $30 assessment over a ten-year period), and (iii) implement certain institutional controls. In return, the Company will receive protection from making further contributions and a covenant not to sue. Under the current F-35 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 6. COMMITMENTS AND CONTINGENCIES (CONTINUED) draft of the CD, the Company's obligations terminate upon sale of the property. The Company's estimated cost to satisfy these requirements of the CD as outlined above are immaterial. On May 5, 1997, the Company entered into an agreement to sell its total acreage in Murray, Utah to The Boyer Company, L.C. for a total purchase price of approximately $1.9 million. The agreement is subject to the purchaser obtaining necessary approvals. Pursuant to the agreement, the purchaser will assume the Company's liabilities under the agreement in principle and the proposed consent agreement described above including the dedication of the land for the roadway and the participation in the improvement district. If the sale to the Boyer Group does not occur, then the Company would be responsible for those costs. Subject to certain conditions, the Company expects the sale of the Murray property to close on or before January 1, 1999. Prior to learning of the potential presence of lead in the slag from the Murray site, the Company sold some of the slag for use in road base and railroad fill. The Company has not sold any slag material from this site since 1988. The Company may be liable for cleanup costs if it is determined that the lead from this slag poses an environmental hazard. The Company has not received any notice of government or private action on this matter. The potential cost to the Company, if any, is not ascertainable at the present time because no action currently is pending by any party and it is unknown whether any action will be taken in the future. The Company's management believes that there are economically reasonable methods of containing the slag should this become necessary. OTHER -- The Company is engaged in various lawsuits as plaintiff or defendant arising in the normal course of business. In the opinion of management, based upon advice of counsel, the ultimate outcome of these lawsuits will not have a material impact on the Company's financial statements. 7. CAPITAL STOCK EARNINGS (LOSS) PER SHARE -- Effective December 31, 1997, the Company adopted SFAS No. 128, "Earnings Per Share", and retroactively restated its earnings per share (EPS) for 1997 to conform with SFAS No. 128. F-36 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 7. CAPITAL STOCK (CONTINUED) Basic and diluted earnings per share are calculated as follows for the year ended December 31, 1997:
PER AVERAGE SHARE INCOME SHARES AMOUNT ----------- ---------- ----------- Income........................................................ $ 239 ----- EPS basic: Income available to common stockholders..................... 239 4,485,376 $ 0.05 ----- ----- ----- Effect of dilutive securities--options and warrants........... 546,524 ---------- EPS diluted: Income available to common stockholders with assumed conversions.................................. $ 239 5,031,900 $ 0.05 ----- ---------- ----- ----- ---------- -----
Earnings per common share diluted are computed using the treasury stock method. 8. STOCK OPTIONS AND WARRANTS In 1997, the Company amended its 1994 stock option plan and increased the shares available under the 1994 plan to 260,000. As of December 31, 1997, the Company had granted stock options under the 1994 stock option plan to various officers, directors, and employees of the Company covering the aggregate amount of 119,600 shares of common stock. In 1997, the Company amended its 1996 stock option plan and increased the shares available under the 1996 plan to 600,000. As of December 31, 1997, the Company had granted stock options under the 1996 stock option plan covering 296,000 shares of common stock. Of these, 136,000 options had vested as of December 31, 1997. The remaining 160,000 options vest annually through July 2000 with 60,000 to vest in 1998 and 1999 with the remaining 40,000 to vest in 2000. In conjunction with its initial public offering in 1994, the Company issued 60,000 warrants at $5.50 per share to various entities involved in helping the Company go public. During 1997, 58,750 of these warrants were repurchased at a cost of $209. As of December 31, 1997, none of the remaining 1,250 warrants had been exercised. On December 28, 1995, in connection with the issuance of 1,650,000 shares of common stock, the Company issued a warrant to a single purchaser to purchase 1,500,000 shares of common stock at an exercise price of $6.25 per share. The warrant was exercisable at the issuance date and expires in December 2000. As of December 31, 1997, the warrant has not been exercised. The Company accounts for stock-based compensation under APB Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations under which no compensation cost has been recognized because all options were issued at fair value. During 1996, the Company adopted the F-37 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 8. STOCK OPTIONS AND WARRANTS (CONTINUED) disclosure provision of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS 123). If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed by FAS 123, the Company's net earnings (loss) and earnings (loss) per share would be reduced to the pro forma amounts indicated below:
1997 --------- Net earnings (loss): As reported......................................................................... $ 239 Pro Forma........................................................................... 161 Earnings (loss) per common share: As reported--basic.................................................................. $ 0.05 Pro forma--basic.................................................................... 0.04 As reported--diluted................................................................ 0.05 Pro forma--diluted.................................................................. 0.03
These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation costs related to grants made before 1995. The fair value of the applicable options was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions for 1997: expected volatility of 57%, risk-free interest rate of 5.18%, and expected life of .25 years (See Note 11). The weighted average fair value of options granted during 1997 was $.70. F-38 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 8. STOCK OPTIONS AND WARRANTS (CONTINUED) Option pricing models require the input of highly subjective assumptions including the expected stock price volatility. Also, the Company's employee stock options have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimate. Management believes the best input assumptions available were used to value the options and the resulting option values are reasonable. Information with respect to the Company's stock option plans at December 31, 1997 and changes for the year then ended is as follows:
WEIGHTED AVERAGE STOCK EXERCISE EXERCISE OPTIONS PRICE PRICE --------- ----------- ----------- Outstanding at January 1, 1997............................. 367,600 $ 5.00-8.75 $ 5.95 Granted.................................................... 112,000 5.25-7.50 5.94 Canceled................................................... 16,800 5.00 5.00 Exercised.................................................. 47,200 5.00 5.00 --------- Outstanding at December 31, 1997........................... 415,600 $ 5.00-8.75 $ 6.11 --------- --------- Exercisable at December 31, 1997........................... 255,600 $ 5.00-7.50 $ 5.35 --------- ---------
Additional information about stock options outstanding and exercisable at December 31, 1997 is summarized as follows: OPTIONS OUTSTANDING
WEIGHTED- AVERAGE REMAINING WEIGHTED- CONTRACTUAL AVERAGE NUMBER LIFE (YEARS) EXERCISE RANGE OF EXERCISE PRICES OUTSTANDING (SEE NOTE 11) PRICE - ------------------------------------------------------ ----------- --------------- ----------- $5.00-$5.75........................................... 259,600 2.69 $ 5.25 6.60.................................................. 40,000 5.00 6.60 6.80.................................................. 20,000 5.00 6.80 7.50.................................................. 16,000 4.50 7.50 7.60.................................................. 40,000 5.00 7.60 8.75.................................................. 40,000 5.00 8.75 ----------- ----- 415,600 $ 6.11 ----------- ----- ----------- -----
F-39 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 8. STOCK OPTIONS AND WARRANTS (CONTINUED) OPTIONS EXERCISABLE
WEIGHTED- AVERAGE NUMBER EXERCISE RANGE OF EXERCISE PRICES EXERCISABLE PRICE - ---------------------------------------------------------------------- ----------- ----------- $5.00-$5.75........................................................... 239,600 $ 5.21 7.50.................................................................. 16,000 7.50 ----------- ----- 255,600 $ 5.35 ----------- ----- ----------- -----
9. QUARTERLY FINANCIAL RESULTS (UNAUDITED) Quarterly financial results for the year ended December 31, 1997 is as follows:
BASIC DILUTED OPERATING NET EARNINGS EARNINGS NET PROFIT EARNINGS (LOSS) (LOSS) SALES (LOSS) (LOSS) PER SHARE PER SHARE --------- ----------- ----------- ----------- ----------- 1997 First quarter.......................................... $ 14,913 $ 234 $ 7 N/A N/A Second quarter......................................... 16,352 804 764 $ 0.17 $ 0.15 Third quarter.......................................... 16,193 1,198 1,051 0.23 0.19 Fourth quarter......................................... 13,925 (1,162) (1,583) (0.35) (0.29) --------- ----------- ----------- ----------- ----------- Total.................................................... $ 61,383 $ 1,074 $ 239 $ 0.05 $ 0.05 --------- ----------- ----------- ----------- ----------- --------- ----------- ----------- ----------- -----------
Year end adjustments to accrued liabilities, accounts receivable, property, and contract estimates made in the fourth quarter of 1997 had the effect of decreasing net income by approximately $925 or $.25 per common share -- basic/$.18 per common share -- diluted. Additionally, the Company experienced operating losses during the fourth quarter of 1997. 10. SUBSEQUENT EVENTS On January 6, 1998, the Company acquired all the outstanding common stock of Treasure Valley Concrete, Inc., an Idaho corporation, for $3,350 in cash and the assumption of $1,141 of liabilities. Treasure Valley Concrete, Inc., with annual revenues of approximately $7 million, is a producer of ready mix concrete, serving the Boise, Idaho area. With the close of the transaction, Treasure Valley Concrete becomes a wholly owned subsidiary of Monroc, Inc. The Company has entered into an Amended and Restated Agreement and Plan of Merger dated as of January 29, 1998 and amended and restated as of March 4, 1998 (the Merger Agreement) with U.S. Aggregates, Inc., a Delaware corporation (USAI), and Western Acquisition, Inc., a Delaware corporation and a subsidiary of USAI (Sub), providing for the merger of Sub with and into the Company (the Merger), with the Company continuing as the surviving corporation and a subsidiary of USAI. Pursuant to the Merger Agreement, each outstanding share of common stock, par value $.01 per share, of the Company (the Common Stock) will be converted into the right to receive $10.771 per share in cash. In addition, the Merger Agreement provides that each option or warrant to purchase F-40 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1997 (DOLLARS IN THOUSANDS) 10. SUBSEQUENT EVENTS (CONTINUED) shares of Common Stock will be canceled in consideration for the right to receive in cash an amount equal to the number of shares subject to such option or warrant multiplied by the difference between $10.771 and the exercise price of such option or warrant, less any applicable tax withholdings. The Merger is conditioned upon, among other things, the approval of the stockholders of the Company, certain regulatory and governmental approvals and other customary conditions. In connection with the proposed Merger, the Board of Directors of the Company received a fairness opinion from SBC Warburg Dillion Read Inc. to the effect that, as of the date of the opinion, the merger consideration is fair to the stockholders of the Company from a financial point of view. 11. RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income". SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general purpose financial statements. This Statement requires that an enterprise (a) classify items of other comprehensive income by their nature in a financial statement and (b) display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Reclassification of financial statements for earlier periods provided for comparative purposes is required. The adoption of SFAS No. 130 may require the Company to add disclosure to the financial statements about comprehensive income. In June 1997, the FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information", which redefines how public business enterprises report information about operating segments in annual financial statements. It also establishes standards for related disclosures about products and services, geographical areas, and major customers. SFAS No. 131 is effective for financial statements for periods beginning after December 15, 1997. In the initial year of application, comparative information for earlier years is to be restated. The adoption of SFAS No. 131 may result in additional disclosures regarding the Company's segments. ****** F-41 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Monroc, Inc. We have audited the accompanying consolidated statements of operations, stockholders' equity, and cash flows of Monroc, Inc. and Subsidiary, for the year ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated results of operations, changes in stockholders' equity and cash flows of Monroc, Inc. and Subsidiary, for the year ended December 31, 1996 in conformity with generally accepted accounting principles. /s/ Grant Thornton LLP Salt Lake City, Utah February 11, 1997 F-42 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) Net Sales....................................................................... $ 70,401 Cost and Expenses: Cost of sales................................................................. 63,045 General and administrative expenses........................................... 5,941 Contribution to ESOP.......................................................... 800 Restructuring charges......................................................... 1,500 ----------- OPERATING PROFIT (LOSS)......................................................... (885) Other income (expense): Interest, net................................................................. (736) Gain (loss) on sale of real estate............................................ 36 ----------- EARNINGS (LOSS) BEFORE INCOME TAXES............................................. (1,585) Income taxes (benefit).......................................................... (217) ----------- NET LOSS........................................................................ $ (1,368) ----------- ----------- Loss per common share........................................................... $ (0.31) Weighted average common shares outstanding...................................... 4,467,000
The accompanying notes are an integral part of this statement. F-43 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS)
COMMON STOCK CAPITAL IN ---------------------- EXCESS OF ACCUMULATED ESOP NOTE SHARES AMOUNT PAR VALUE DEFICIT RECEIVABLE --------- ----------- ---------- --------------- ---------- Balance at January 1, 1996........................ 4,467,000 $ 45 $ 24,482 $ (1,964) $ (3,325) Reduction of ESOP note receivable............... -- -- -- -- 800 Net loss for the year........................... -- -- -- (1,368) -- --------- ----------- ---------- --------------- ---------- Balance at December 31, 1996...................... 4,467,000 45 24,482 (3,332) (2,525) --------- ----------- ---------- --------------- ---------- --------- ----------- ---------- --------------- ----------
The accompanying notes are an integral part of this statement. F-44 MONROC, INC. AND SUBSIDIARY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.......................................................................... $ (1,368) Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation, depletion and amortization of property, plant and equipment and other assets.................................................................... 2,377 Provision for contribution to ESOP and repayment of ESOP note receivable.......... 800 Amortization of other assets...................................................... 82 Provision for discounts and doubtful accounts, net................................ 537 Depletion of aggregate deposits................................................... 107 Gain on sale of property, plant and equipment..................................... (35) Deferred income taxes............................................................. (218) Restructuring charges............................................................. 1,500 Change in operating assets and liabilities: Accounts receivable............................................................. (7,099) Costs and estimated earnings in excess of bilings on uncompleted contracts...... (29) Inventories..................................................................... (1,161) Prepaid expenses................................................................ (216) Other assets.................................................................... 518 Trade accounts payable.......................................................... 1,022 Accrued liabilities............................................................. 27 Billings in excess of costs and estimated earnings on uncompleted contracts..... 448 Deferred compensation........................................................... 19 ------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES................................. (2,689) ------- Cash flow from investing activities: Additions to property, plant and equipment.......................................... (4,503) Additions to aggregate deposits..................................................... (22) Additions to land................................................................... (842) Proceeds from sale of property, plant, equipment and land........................... 329 ------- NET CASH USED IN INVESTING ACTIVITIES............................................... (5,038) ------- Cash flows from financing activities: Net increase (decrease) in line of credit........................................... 5,268 Principal payments on long-term obligations......................................... (3,627) Issuance of long-term obligations................................................... 769 ------- NET CASH PROVIDED BY FINANCING ACTIVITIES........................................... 2,410 ------- Net increase (decrease) in cash..................................................... (5,317) Cash, beginning of year............................................................. 6,507 ------- CASH, END OF YEAR................................................................... $ 1,190 ------- ------- DISCLOSURE OF SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the year for: Interest.......................................................................... $ 907 Taxes............................................................................. 32 NON CASH INVESTING AND FINANCING ACTIVITIES: The Company acquired equipment under capital lease obligations totalling $1,424 in 1996.
The accompanying notes are an integral part of this statement. F-45 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows. 1. BUSINESS ACTIVITY Monroc, Inc. and Subsidiary (the Company), operate in one industry segment; the production and sale of sand and gravel products, ready-mix concrete, prestress/precast concrete products and accessories for the building and construction industry, principally in Utah, Idaho, and Wyoming. 2. PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Big Horn Redi-Mix, Inc. (Big Horn). Effective December 1995, the Company merged Cody Concrete, Inc. (Cody Concrete), and Powell Ready Mix, Inc. (Powell Ready Mix) with and into Big Horn with Big Horn as the surviving corporation. All significant intercompany accounts and transactions have been eliminated in consolidation. 3. INVENTORIES Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method, except for sand and gravel which uses the lower of average cost or market. 4. PROPERTY, PLANT AND EQUIPMENT AND AGGREGATE DEPOSITS Property, plant and equipment are stated at cost. Depreciation and amortization are provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. Leased property under capital leases is amortized over the lives of the respective leases or over the service lives of the assets for those leases which substantially transfer ownership. The straight-line method of depreciation is followed for financial reporting purposes; however, straight-line and accelerated methods are used for tax purposes. Depletion on aggregate deposits is calculated on a units-of-production basis. The estimated lives used in determining depreciation and amortization are:
YEARS ----- Mobile equipment............................................................. 5-12 Plant equipment.............................................................. 5-12 Administrative equipment and buildings....................................... 5-50
5. OTHER ASSETS Other assets include miscellaneous amortizable assets including financing commitment fees, which fees are being amortized on the interest method over the term of the notes payable to banks. Other assets also includes goodwill which is being amortized on the straight-line method over 20 years. The Company evaluates its goodwill annually to determine potential impairment by comparing the carrying value to the undiscounted estimated expected future cash flows of the related asset. F-46 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 6. REVENUE RECOGNITION Revenues on contracts which are primarily for prestress/precast concrete products are recognized on the percentage-of-competion method. The percentage-of-completion is determined on the units-of-production basis. Under this method, revenues, costs, and estimated profits are recognized as individual units are completed. The amounts included in the accompanying balance sheets as "costs and estimated earnings in excess of billings on uncompleted contracts" represent revenues recognized in excess of amounts billed (underbillings) and "billings in excess of costs and estimated earnings on uncompleted contracts" represent billings in excess of revenues recognized (overbillings). During 1996, the Company recognized revenue of approximately $15,600 on a significant project which is scheduled to be completed during 1997. No single project with revenues recognized in excess of 10% of total consolidated revenues existed during 1995. Contract costs include all direct labor and benefits, materials unique to or installed in the project, and indirect cost allocations, including employee benefits and construction equipment expense. As long-term contracts extend over one or more years, revisions in cost and earnings estimates during the course of the work are reflected in the accounting period in which the facts which require the revision become known. At the time a loss on a contract becomes known, the entire amount of the estimated ultimate loss is recognized in the financial statements. Costs attributable to contract claims or disputes are carried in the accompanying balance sheets only when realization is probable. The amounts are recorded at the lesser of actual costs incurred or the amount expected to be realized. Revenues on all other products are recognized when the product is shipped. 7. INCOME TAXES The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities and are measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized. 8. ESOP ACCOUNTING As described in Note D, the Company established an Employee Stock Ownership Plan (ESOP) in 1986 to facilitate the acquisition of assets from a predecessor company. In conjunction with the acquisition, the Company loaned the ESOP $10 million, which the ESOP used to finance the acquisition of its interest in the Company. Generally accepted accounting principles require that the note receivable from the ESOP be included in the balance sheet as a reduction of stockholders' equity. The ESOP allocates the shares issued to the ESOP in 1986 to the participants of the ESOP as described below. The Company makes contributions to the ESOP which allow the ESOP to make the debt payments back to the Company on the note receivable from the ESOP. ESOP contributions by the F-47 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Company are expensed and charged against income for accounting purposes and are deductible for income tax purposes. Shares allocable to participants for a given year are determined based on the ratio of the current year's ESOP debt service payments (principal and interest) on the original note from the Company as compared to the total remaining required debt service on that loan. The contribution to the ESOP is a noncash expense of the Company because the contributions are paid back to the Company and reduce the note receivable from the ESOP. Consequently, no cash is consumed as a result of the contributions. Furthermore, since the note receivable from the ESOP is reduced by contributions, total stockholders' equity is not affected by the contributions to the ESOP. 9. CASH EQUIVALENTS For financial statement purposes, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. 10. CONCENTRATION OF CREDIT RISK A significant portion of the Company's sales are to customers whose activities are related to the building and construction industry. These customers reside primarily in the intermountain west. The Company generally extends credit to these customers and, therefore, collection of receivables is affected by the economy of the building and construction industry. However, the Company closely monitors extensions of credit. The Company maintains cash and money market balances at several financial institutions in the intermountain west. Accounts at each institution are insured up to $100 by the Federal Deposit Insurance Corporation. Uninsured balances aggregate to approximately $860 at December 31, 1996. 11. EARNINGS (LOSS) PER SHARE Earnings (loss) per common and common equivalent share are computed by dividing net earnings (loss) by the weighted average common shares outstanding during each year. Common stock equivalents are antidilutive in the loss year and are not included in the weighted average common shares outstanding. 12. ESTIMATES AND ASSUMPTIONS The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 13. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of the Company's cash, and short-term trade receivables and payables approximate their fair values. F-48 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE B--CONTRACTS IN PROCESS Costs incurred to date, estimated earnings, and the related progress billings are as follows:
1996 --------- Costs incurred to date............................................................. $ 20,418 Estimated earnings................................................................. 1,304 --------- Revenue recognized................................................................. 21,722 Less billings to date.............................................................. 22,230 --------- $ (508) --------- ---------
The above are included in the accompanying balance sheet under the following captions:
1996 --------- Costs and estimated earnings in excess of billings on uncompleted contracts $ 182 Billings in excess of costs and estimated earnings on uncompleted contracts (690) --------- $ (508) --------- ---------
Retainage on uncompleted contracts amounted to $870 at December 31, 1996. All accounts receivable, including retainage, under contracts in process are expected to be collected within one year. F-49 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE C--INCOME TAXES Income taxes (benefit) consist of the following:
1996 --------- Current-Federal....................................................................... $ -- Deferred-Federal...................................................................... (217) --------- $ (217) --------- ---------
The components of the Company's deferred tax assets and liabilities are as follows:
1996 --------- Deferred tax assets (liabilities) Net operating loss carryforward................................................... $ 1,915 Deferred compensation............................................................. 243 Allowance for doubtful accounts................................................... 103 Accrued expenses.................................................................. 258 Inventory cost capitalization..................................................... 74 Other............................................................................. 11 Excess of tax depreciation and amortization....................................... (1,096) Difference in assigned values and tax basis in purchase of subsidiaries........... (972) Valuation allowance............................................................... (1,508) --------- Net deferred tax liability.......................................................... $ (972) --------- ---------
There were no deferred tax assets or income tax benefits recorded in the financial statements for net deductible temporary differences or net operating loss carryforwards due to the fact that the likelihood of realization of the related tax benefits cannot be established. A deferred tax liability was recognized upon the purchase of three subsidiary corporations during 1994. The initial deferred liability was calculated on the differences between the assigned values and tax bases of the assets and liabilities acquired in the purchase. At December 31, 1996, the Company had net operating loss carryforwards for tax reporting purposes of approximately $5,850, which expire through the year 2011. The net operating loss carryforwards are subject to limitation in any given year upon the occurrence of certain events, including significant changes in ownership. F-50 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE C--INCOME TAXES (CONTINUED) Reconciliation of income taxes computed at the federal statutory rate and income tax expense (benefit) is as follows:
1996 --------- Income taxes (benefit) computed at the Federal statutory rate......................... $ (555) Net operating loss (utilized) generated............................................... 402 Percentage depletion.................................................................. (89) Alternative minimum tax............................................................... -- Nondeductible expenses................................................................ 33 All other, net........................................................................ (8) --------- Income taxes (benefit)................................................................ $ (217) --------- ---------
NOTE D--EMPLOYEE STOCK OWNERSHIP PLAN (ESOP) The Company has an ESOP covering substantially all full-time employees who have at least one year of service. Under the terms of the ESOP, the Company contributes amounts as determined by the Board of Directors, except as discussed below. Shares of stock allocated for a given year are further allocated to individual participants based on the ratio of the participants' annual compensation to total compensation for all participants. Shares allocated to participants vest over six years. In 1986, the ESOP purchased 1,606,796 shares of the Company's common stock representing a 68% interest, in exchange for a $10,000 promissory note. The interest rate and payment terms of the note receivable were identical to those of the Company's notes payable to banks, which were paid in full during 1993. The balance on the note receivable from ESOP was $2,525 and at December 31, 1996. The principal reduction on the ESOP note is $800 the year ended December 31, 1996 and is shown as contributions to the ESOP. The accumulated deficit at December 31, 1996, includes $7,476 of contributions since 1986 to the ESOP, which have been used to reduce principal on the ESOP note. NOTE E--RETIREMENT PLANS The Company makes payments to a defined contribution pension plan (Plan) covering most full-time nonbargaining employees who have completed at least one full year of service with the Company based on a percentage of the employee's salary. Payments are made to the Plan as they accrue. The contributions for the year ended December 31, 1996 was $481. There are also certain bargaining employees who are covered under this Plan. The Company has no liability under the Plan beyond the amounts contributed. The Company also makes payments to various bargaining union trust funds, as negotiated under union contracts. The contribution for the year ended December 31, 1996 was $334. F-51 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE F--COMMITMENTS AND CONTINGENCIES 1. DEFERRED COMPENSATION AND EMPLOYMENT AGREEMENTS In May 1996, the Company amended the employment agreement with its former president and chief executive officer (president). The amended agreement stipulates that the Company will no longer accrue amounts towards the former president's deferred compensation effective May 22, 1996. In addition, the amount accrued in the former president's deferred compensation account will continue to earn interest at 1% below the prime interest rate (7.25% at December 31, 1996). The total accrued amount plus interest will be paid over a period equal to one and one-fourth times the length of Company service of the president as follows:
YEAR ENDING DECEMBER 31, - ------------------------------------------------------------------------------------- 1997................................................................................. $ -- 1998................................................................................. 33 1999................................................................................. 78 2000................................................................................. 78 2001................................................................................. 78 Thereafter........................................................................... 1,106 --------- $ 1,373 --------- ---------
Deferred compensation of $779 was accrued in this account as of December 31, 1996. The Company has entered into employment agreements with certain officers. These agreements provide for annual compensation through July 1998 as determined by the Board of Directors. The Board of Directors has approved annual compensation of $312 for these officers as of December 31, 1996. 2. ENVIRONMENTAL MATTERS The Company is currently the owner of certain property located in Murray, Utah, which contains lead slag deposited by the former owner. The slag contains heavy metals including lead and arsenic which may have leached from the slag into the environment. This and adjoining properties have been proposed by the Environmental Protection Agency (EPA) for listing on the National Priorities List for cleanup of the lead slag, and potential groundwater contamination. Although the Company did not generate the slag material, under the Comprehensive Environmental Response, Compensation and Liability Act, the current owner of a property may be liable for clean-up costs. In such case, the Company would have a claim against the former owner for its respective share of these costs. The Company has not been designated a Potentially Responsible Party by the EPA with respect to cleanup of any waste at this site. The Company has been participating in a study group with the EPA, the former owner, Murray City and the other current landowners to develop a plan that would result in the remediation of the problems described above. An agreement in principal has been reached among all parties, and upon executing of a formal understanding, the EPA will begin the process of preparing a consent agreement F-52 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE F--COMMITMENTS AND CONTINGENCIES (CONTINUED) in 1997. Cleanup will take several years to accomplish and involves a combination of offsite disposal, redevelopment of the area including new road construction, and on site treatment. Development of the land for commercial purposes will be possible at the end of the process. The remediation plan calls for the dedication of a certain amount of the Company's property for the extension of a roadway in Murray City. Until approval of a consent agreement, it is difficult to estimate the possible financial impact to the Company, if any. Prior to learning of the potential presence of lead in the slag from this site, the Company sold some of the slag for use in road base and railroad fill. The Company may be liable for cleanup costs if it is determined that the lead from this slag poses an environmental hazard to drinking water. The Company has not received any notice of government or private action on this matter. The potential cost to the Company, if any, is not ascertainable at the present time. The Company's management believes that there are economically reasonable methods of containing the slag should this become necessary. 3. OPERATING LEASES The Company has entered into several operating leases on certain equipment expiring through 2002. Lease expense for the year ended December 31, 1996 was $1,493. The following is a schedule of future minimum lease payments on the Company's operating leases at December 31, 1996:
YEAR ENDING DECEMBER 31, - ----------------------------------------------------------------------------------- 1997............................................................................. $ 2,888 1998............................................................................. 2,805 1999............................................................................. 2,263 2000............................................................................. 1,892 2001............................................................................. 1,430 Thereafter....................................................................... 842 --------- $ 12,120 --------- ---------
Not included in the above schedule are production royalties which the Company has agreed to pay on aggregate deposits mined on leased property. The payments are based on a progressive scale ranging from $0.25 per ton in 1997 to $0.31 per ton in 2000. 4. OTHER The Company is engaged in various lawsuits as plaintiff or defendant arising in the normal course of business. In the opinion of management, based upon advice of counsel, the ultimate outcome of these lawsuits will not have a material impact on the Company's financial statements. F-53 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE G--STOCK OPTIONS AND WARRANTS Effective January 20, 1994, the Company adopted a stock option plan which provides for the granting of stock options to purchase up to 200,000 shares of common stock, subject to adjustment under certain circumstances. As of December 31, 1996, the Company had granted stock options under the Company's 1994 stock option plan to various officers, directors and employees of the Company covering the aggregate amount of 167,600 shares of common stock. On May 22, 1996, the stockholders approved the Company's 1996 stock option plan which provides for the granting of stock options to purchase up to 300,000 shares of common stock. As of December 31, 1996, the Company had granted stock options under the 1996 stock option plan covering 200,000 shares of common stock. Of these, 40,000 options vested immediately. The remaining 160,000 options vest at 40,000 annually through July 2000. On December 28, 1995, in connection with the issuance of 1,650,000 shares of common stock (Note L), the Company issued a warrant to a single purchaser to purchase 1,500,000 shares of common stock at an exercise price of $6.25 per share. The warrant vested immediately and expires in December 2000. As of December 31, 1996, none of the warrants have been exercised. During 1996 the Company adopted only the disclosure provisions of Financial Accounting Standard No. 123, "Accounting for Stock-Based Compensation" (FAS 123). Therefore, the Company accounts for stock based compensation under APB Opinion No. 25. "Accounting for Stock Issued to Employees," and related Interpretations under which no compensation cost has been recognized. If the Company had elected to recognize compensation expense based upon the fair value at the grant date for awards under these plans consistent with the methodology prescribed by FAS 123, the Company's net earnings (loss) and earnings (loss) per share would be reduced to the pro forma amounts indicated below:
1996 --------- Net earnings (loss) As reported....................................................................... $ (1,368) Pro forma......................................................................... (1,566) Earnings (loss) per common share As reported....................................................................... $ (0.31) Pro forma......................................................................... (0.35)
These pro forma amounts may not be representative of future disclosures because they do not take into effect pro forma compensation costs related to grants made before 1995. The fair value of these options was estimated at the date of grant using the modified Black-Scholes American option-pricing model with the following weighted-average assumptions for 1996: expected volatility of 61%, risk-free interest rate of 6%, and expected life of 3.6 years for the period. The weighted average fair value of options granted during 1996 was $3.07. Option pricing models require the input of highly subjective assumptions including the expected stock price volatility. Also, the Company's employee stock options have characteristics significantly different from those of traded options, and changes in the subjective input assumptions can materially F-54 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE G--STOCK OPTIONS AND WARRANTS (CONTINUED) affect the fair value estimate. Management believes the best input assumptions available were used to value the options and the resulting option values are reasonable. Information with respect to the Company's stock option plans at December 31, 1996, and changes for the three years then ended, is as follows:
WEIGHTED- STOCK EXERCISE AVERAGE OPTIONS PRICE EXERCISE PRICE ------------ ----------- --------------- Outstanding at January 1, 1994......................................... -- $ -- $ -- Granted.............................................................. 136,500 5.00 5.00 ------------ Outstanding at December 31, 1994....................................... 136,500 5.00 5.00 Granted.............................................................. 20,100 5.00 5.00 ------------ Outstanding at December 31, 1995....................................... 156,600 5.00 5.00 Granted.............................................................. 217,700 5.00-8.75 6.61 Canceled............................................................. 6,700 5.00-8.75 5.00 ------------ Outstanding at December 31, 1996....................................... 367,600 5.00-8.75 5.95 ------------ ----------- ----- ------------ ----------- ----- Exercisable at December 31, 1996....................................... 207,600 $ 5.00-5.38 $ 5.01 ------------ ----------- ----- ------------ ----------- -----
Additional information about stock options outstanding and exercisable at December 31, 1996, is summarized as follows: OPTIONS OUTSTANDING
WEIGHTED-AVERAGE WEIGHTED- REMAINING AVERAGE RANGE OF NUMBER CONTRACTUAL EXERCISE EXERCISE PRICES OUTSTANDING LIFE PRICE - ----------------------------------------------- ----------- ---------------- ------------ $5.00-5.75..................................... 247,600 3.1 years $ 5.13 6.60.......................................... 40,000 4.5 years 6.60 7.60.......................................... 40,000 4.5 years 7.60 8.75.......................................... 40,000 4.5 years 8.75 ----------- 367,600 ----------- -----------
OPTIONS EXERCISABLE
WEIGHTED- AVERAGE RANGE OF NUMBER EXERCISE EXERCISE PRICES EXERCISABLE PRICE - ----------------------------------------------- ----------- ---------------- $5.00-5.38..................................... 207,600 $ 5.01
F-55 MONROC, INC. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 (DOLLARS IN THOUSANDS) NOTE H--QUARTERLY FINANCIAL RESULTS (UNAUDITED) Quarterly financial results for the year ended December 31, 1996 is as follows:
EARNINGS OPERATING NET EARNINGS (LOSS) PER 1996 NET SALES PROFIT (LOSS) (LOSS) COMMON SHARE - ------------------------------------------------------------ --------- ------------- ------------ --------------- First quarter............................................... $ 9,204 $ (916) $ (1,041) $ (0.23) Second quarter.............................................. 19,416 888 771 0.17 Third quarter............................................... 22,246 (459) (657) (0.15) Fourth quarter.............................................. 19,535 (398) (441) (0.10) --------- ----- ------------ ------ $ 70,401 $ (885) $ (1,368) $ (0.31) --------- ----- ------------ ------ --------- ----- ------------ ------
NOTE I--RESTRUCTURING CHARGES AND PLANT CLOSING A change in control of the Company occurred in December 1995. The Company's management has restructured the operations so that the Company can be more responsive to the needs of the marketplace and improve operating efficiencies. Due to these changes, the Company incurred certain restructuring charges totaling $1,500 ($0.34 per share) during 1996. These one time restructuring charges included: (i) the write-off of certain facilities and equipment obsoleted by new operating strategies ($715); (ii) the closure of undersized and unprofitable operations in Utah and Wyoming ($351); (iii) the payout remaining on the Company's two-year employment agreement with its former president and chief executive officer ($333); and (iv) costs associated with restructuring management ($101). F-56 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHARES U.S. AGGREGATES, INC. COMMON STOCK [LOGO] -------------- PROSPECTUS , 1999 -------------- BT ALEX. BROWN THE ROBINSON-HUMPHREY COMPANY SCHRODER & CO. INC. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. SUBJECT TO COMPLETION, DATED , 1999 SHARES [LOGO] U.S. AGGREGATES, INC. COMMON STOCK --------- This is the initial public offering of our common stock. The international managers are offering shares outside the United States and Canada and the U.S. underwriters are offering shares in the United States and Canada. We have applied to have our common stock listed on the New York Stock Exchange under the symbol " ." INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON PAGE 10. -------------
PER SHARE TOTAL -------------- -------------- Public offering price............................................................ $ $ Underwriting discounts........................................................... $ $ Proceeds, before expenses, to U.S. Aggregates, Inc............................... $ $
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. Certain of our stockholders have granted the international managers and the U.S. underwriters the right to purchase up to shares to cover any over-allotments. -------------- BT ALEX. BROWN INTERNATIONAL THE ROBINSON-HUMPHREY COMPANY J. HENRY SCHRODER & CO. LIMITED , 1999 [International Prospectus Alternative Cover Page] - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SHARES U.S. AGGREGATES, INC. COMMON STOCK [LOGO] -------------- PROSPECTUS , 1999 -------------- BT ALEX. BROWN INTERNATIONAL THE ROBINSON-HUMPHREY COMPANY J. HENRY SCHRODER & CO. LIMITED - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- [International Prospectus Alternative Back Cover Page] PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. The following is a statement of estimated expenses, to be paid solely by the Company, of the issuance and distribution of the securities being registered: Securities and Exchange Commission registration fee............... $ 41,700 NASD filing fee................................................... 15,500 New York Stock Exchange original listing fee...................... * Blue Sky fees and expenses (including attorneys' fees and expenses)....................................................... * Printing expenses................................................. * Accounting fees and expenses...................................... * Transfer agent's fees and expenses................................ * Legal fees and expenses........................................... * Miscellaneous expenses............................................ * --------- Total......................................................... $ * --------- ---------
- ------------------------ * To be provided by Amendment. ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The Company is incorporated under the laws of the State of Delaware. Section 145 of the General Corporation Law of the State of Delaware ("Section 145") provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorney's fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses which such officer or director has actually and reasonably incurred. Section 145 further provides that the indemnification provisions of Section 145 shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person's official capacity and as to action in another capacity while holding such office. The certificate of incorporation of the Company provides that, to the fullest extent permitted by the General Corporation Law of the State of Delaware, no director of the Company shall be liable to the Company or its II-1 stockholders for monetary damages arising from a breach of fiduciary duty owed to the corporation of its stockholders. Article V of the by-laws of the Company provides that any person who was or is a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative by reason of the fact that he or she is or was a director or officer of the Company, or is or was serving at the request of the Company as a director, officer, employee, fiduciary or agent of another corporation or of a partnership, joint venture, trust or other enterprise including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, fiduciary or agent or in any other capacity while serving as a director, officer, employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the fullest extent to which it is empowered to do so unless prohibited from doing so by the General Corporation Law of the State of Delaware, as may be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall continue as to an indemnitee who has ceased to a be a director, officer, employee or agent and shall inure to the benefit of the indemnitee's heirs, executors and administrators, provided that, such person shall be indemnified only (subject to certain limited exceptions) in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification of such person shall be a contract right and shall include the right to be paid expenses incurred in defending any proceeding in advance of its final disposition. Section 145 further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation or enterprise, against any liability asserted against him or her and incurred by him or her in any such capacity, arising out of his or her status as such, whether or not the corporation would otherwise have the power to indemnify him or her under Section 145. Article V of the by-laws of the Company further provides that the Company may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the Company or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under Article V of its by-laws. All of the directors and officers of the Company are covered by insurance policies maintained and held in effect by the Company against certain liabilities for actions taken in such capacities, including liabilities under the Securities Act of 1933. ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES. Since May 15, 1996, the Company has sold and issued the following unregistered securities: (1) In June 1996, the Company sold 50,000 shares of Preferred Stock to Golder, Thoma, Cressey, Rauner Fund IV, L.P. for a cash purchase price of $5,000,000.00. (2) In November 1996, the Company sold 810.5 shares of Common Stock to James Harris for a purchase price of $8,105.00. Mr. Harris purchased the shares with $8.11 cash and a promissory note for $8,096.89 due November 20, 2001. (3) In November 1996, the Company sold 810.5 shares of Common Stock to Michael Stone for a purchase price of $8,105.00. Mr. Stone purchased the shares with $8.11 cash and a promissory note for $8,096.89 due November 20, 2001. II-2 (4) In November 1996, the Company sold 995 shares of Common Stock to Morris Bishop, Jr. for a purchase price of $9,950.00. Mr. Bishop purchased the shares with $9.95 cash and a promissory note for $9,940.05 due November 20, 2001. (5) In November 1996, the Company issued Warrants to purchase 6,327 shares of Common Stock (the "1996 Warrants") to The Prudential Insurance Company of America ("Prudential") in connection with Prudential's purchase of $30,000,000.00 principal amount of the Company's 10.34% Senior Subordinated Notes due November 22, 2006 (the "1996 Notes"). Prudential purchased the 1996 Warrants and the 1996 Notes for a purchase price of $30,000,000.00. (6) In October 1997, the Company sold 1,438 shares of Common Stock to Morris Bishop, Jr. for a purchase price of $220,000.00. Mr. Bishop purchased the shares with $14.38 cash and a demand note for $219,985.62. (7) In June 1998, the Company issued Warrants to purchase 3,208 shares of Common Stock (the "1998 Warrants") to Prudential in connection with Prudential's purchase of $15,000,000.00 principal amount of the Company's 10.09% Senior Subordianted Notes due November 22, 2008 (the "1998 Notes"). Prudential purchased the 1998 Warrants and the 1998 Notes for a purchase price of $15,000,000.00. The above-described transactions were exempt from registration under the Securities Act pursuant to Section 4(2) of the Securities Act as transactions not involving any public offering. ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits. 1.1 Form of U.S. Underwriting Agreement among the Company, the Selling Stockholders, BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co. Limited. 1.2 Form of International Underwriting Agreement among the Company, the Selling Stockholders, BT Alex. Brown International, division of Bankers Trust International PLC, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co. Limited.* 3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994. 3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of Capital of the Company dated as of January 14, 1994. 3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as of February 24, 1994. 3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as of November 21, 1996. 3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as of June 3, 1998. 3.1 (vi) Form of Restated Certificate of Incorporation of the Company.* 3.2 (i) Restated By-laws of the Company. 3.2 (ii) Form of Restated By-laws of the Company.* 4.1 (i) Third Amended and Restated Credit Agreement dated as of June 5, 1998 by and among the Company, various financial institutions and Bank of America National Trust and Savings Association, individually and as agent.* 4.1 (ii) First Amendment to Third Amended and Restated Credit Agreement dated as of April 14, 1999 by and among the Company, various financial institutions and Bank of America National Trust and Savings Association, individually and as agent.*
II-3 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) (a) Exhibits. 4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the Company, its subsidiaries and Bank of America National Trust and Savings Association.* 4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and between the Company and Bank of America National Trust and Savings Association.* 4.4 Amended and Restated Subsidiary Pledge Agreement dated as of June 5, 1998 by and among Western Aggregates Holding Corp., Western Rock Products Corp., SRM Holdings Corp., Southern Ready Mix, Inc., Monroc, Inc. and Bank of America National Trust and Savings Association.* 4.5 Amended and Restated Shareholder Pledge Agreement dated as of June 5, 1998 by and among Western Aggregates Holding Corp.'s stockholders, SRM Holdings Corp.'s stockholders and Bank of America National Trust and Savings Association.* 4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's subsidiaries, various financial institutions and Bank of America National Trust and Savings Association.* 4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998 by and between the Company and The Prudential Insurance Company of America.* 4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated as of April 14, 1999 by and between the Company and The Prudential Insurance Company of America.* 4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company and The Prudential Insurance Company of America.* 4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's subsidiaries and The Prudential Insurance Company of America.* 4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by and among the Company, the Company's stockholders and The Prudential Insurance Company of America.* 4.9 (ii) First Amendment to Registration Rights and Stockholders' Agreement dated as of June 5, 1998 by and among, the Company, the Company's stockholders and The Prudential Insurance Company of America.* 4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The Prudential Insurance Company of America.* 4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The Prudential Insurance Company of America.* 4.12 Letter Agreement dated as of April 15, 1999 by and among Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America National Trust and Savings Association, as Agent, The Prudential Insurance Company of America and the Company.* 4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between Harris Trust and Savings Bank and the Company.* 4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.* 5.1 Opinion and consent of Kirkland & Ellis.*
II-4 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) (a) Exhibits. 10.1 Professional Services Agreement dated as of January 24, 1994 by and between the Company and Golder, Thoma, Cressey, Rauner, Inc. 10.2 Equity Purchase Agreement dated as of January 24, 1994 between the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. 10.3 Stockholders Agreement dated as of January 24, 1994 by and among the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein. 10.4 Stockholders Joinder Agreement dated as of August 1, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty. 10.5 Stockholders Joinder Agreement dated as of August 5, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop. 10.6 Stockholders Joinder Agreement dated as of October 31, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin. 10.7 Stockholders Joinder Agreement dated as of July 31, 1998 by and among the Company, James A. Harris and James A. Harris Grantor Retained Annuity Trust. 10.8 Stockholders Joinder Agreement dated as of October 1, 1998 by and among the Company, James A. Harris and The James A. Harris Charitable Remainder Unitrust. 10.9 Registration Rights Agreement dated as of January 24, 1994 by and among the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein. 10.10 Registration Rights Joinder Agreement dated as of August 1, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty. 10.11 Registration Rights Joinder Agreement dated as of August 5, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop. 10.12 Registration Rights Joinder Agreement dated as of October 31, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin. 10.13 Senior Management Agreement dated as of January 24, 1994 by and between the Company and James A. Harris.** 10.14 Senior Management Agreement dated as of May 10, 1994 by and between the Company and James A. Harris.* ** 10.15 Senior Management Agreement dated as of November 20, 1996 by and between the Company and James A. Harris.** 10.16 Senior Management Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone.** 10.17 Senior Management Agreement dated as of May 10, 1994 by and between the Company and Michael J. Stone.* ** 10.18 Senior Management Agreement dated as of November 20, 1996 by and between the Company and Michael J. Stone.** 10.19 Senior Management Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr.* ** 10.20 Senior Management Agreement dated as of October 1, 1997 by and between the Company and Morris L. Bishop, Jr.**
II-5 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) (a) Exhibits. 10.21 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the Company and James A. Harris. 10.22 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the Company and James A. Harris. 10.23 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and James A. Harris. (Included as Exhibit B to exhibit 10.15) 10.24 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone. 10.25 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the Company and Michael J. Stone. 10.26 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and Michael J. Stone. (Included as Exhibit B to exhibit 10.18) 10.27 Executive Stock Pledge Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr. 10.28 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.43) 10.29 Executive Stock Pledge Agreement dated as of October 1, 1997 by and between the Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.20) 10.30 Promissory Note dated as of January 24, 1994 by James A. Harris in favor of the Company in the principal amount of $16,223.76. 10.31 Promissory Note dated as of May 10, 1994 by James A. Harris in favor of the Company in the principal amount of $121,638.24. 10.32 Promissory Note dated as of November 20, 1996 by James A. Harris in favor of the Company in the principal amount of $8,096.89. (Included as Exhibit A to exhibit 10.15) 10.33 Promissory Note dated as of January 24, 1994 by Michael J. Stone in favor of the Company in the principal amount of $10,809.18. 10.34 Promissory Note dated as of May 10, 1994 by Michael J. Stone in favor of the Company in the principal amount of $81,098.82. 10.35 Promissory Note dated as of November 20, 1996 by Michael J. Stone in favor of the Company in the principal amount of $8,096.89. (Included as Exhibit A to Exhibit 10.18) 10.36 Promissory Note dated August 5, 1994 by Morris L. Bishop in favor of the Company in the principal amount of $16,903.08. 10.37 Promissory Note dated November 20, 1996 by Morris L. Bishop in favor of the Company in the principal amount of $9,940.05. (Included as Exhibit A to exhibit 10.43) 10.38 Demand Note dated October 1, 1997 by Morris L. Bishop in favor of the Company in the principal amount of $219,985.62. (Included as an exhibit A to exhibit 20) 10.39 Employment Agreement dated as of January 24, 1994 by and between the Company and James A. Harris. 10.40 Employment Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone.
II-6 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) (a) Exhibits. 10.41 Employment Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr. 10.42(i) Agreement and Plan of Merger dated as of January 29, 1998 by and among the Company, Western Acquisition, Inc. and Monroc, Inc. 10.42(ii) Amended and Restated Agreement and Plan of Merger dated as of March 4, 1998 by and among the Company, Western Acquisition, Inc. and Monroc, Inc. 10.43 Senior Management Agreement dated as of November 20, 1996 by and between the Company and Morris L. Bishop, Jr. 10.44 Stockholders Joinder Agreement dated as of December 31, 1997 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Jeanne T. Richey.* 10.45 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward A. Dougherty.* 10.46 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward A. Dougherty.* 10.47 Letter Agreement dated as of December 30, 1998 by and between the Company and Edward A. Dougherty.* 11.1 Statement re computation of per share earnings.* 12.1 Statement re computation of ratios.* 21.1 Subsidiaries of the Company.* 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Deloitte & Touche LLP. 23.3 Consent of Grant Thornton LLP. 23.4 Consent of Kirkland & Ellis (Included in Exhibit 5.1)* 24.1 Powers of Attorney of Directors and Officers of the Company (Included on signature page). 27.1 Financial Data Schedule.
- ------------------------ * To be filed by amendment. ** Management contract or compensatory plan or arrangement. (b) Financial Statement Schedules. All schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions, are inapplicable or not material, or the information called for thereby is otherwise included in the financial statements and therefore has been omitted. ITEM 17. UNDERTAKINGS. The undersigned registrant hereby undertakes to provide to the underwriter at closing specified in the underwriting agreement certificates in such denominations and registered in such names as requested by the underwriter to permit prompt delivery to each purchaser. II-7 ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (CONTINUED) The undersigned registrant hereby undertakes that: (1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (2) For purposes of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial BONA FIDE offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Chicago, State of Illinois, on May 24, 1999. U.S. AGGREGATES, INC. By: /s/ JAMES A. HARRIS ----------------------------------------- James A. Harris CHIEF EXECUTIVE OFFICER POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints James A. Harris, Morris L. Bishop, Jr. and Michael J. Stone, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any or all amendments (including post-effective amendments) to this registration statement (and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, for the Offering which this Registration Statement relates), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. * * * * Pursuant to the requirements of the Securities Act of 1933, this Registration Statement and power of attorney have been signed by the following persons in the capacities and on the dates indicated: SIGNATURE CAPACITY DATE - ------------------------------ -------------------------- ------------------- Chief Executive Officer /s/ JAMES A. HARRIS and Chairman of the - ------------------------------ Board (principal May 24, 1999 James A. Harris executive officer) Executive Vice President, /s/ MICHAEL J. STONE Chief Financial Officer - ------------------------------ and Director (principal May 24, 1999 Michael J. Stone financial and accounting officer) /s/ MORRIS L. BISHOP, JR. - ------------------------------ President, Chief Operating May 24, 1999 Morris L. Bishop, Jr. Officer and Director /s/ BRUCE V. RAUNER - ------------------------------ Director May 24, 1999 Bruce V. Rauner /s/ DAVID A. DONNINI - ------------------------------ Director May 24, 1999 David A. Donnini /s/ CHARLES R. PULLIN - ------------------------------ Director May 24, 1999 Charles R. Pullin /s/ EDWARD A. DOUGHERTY - ------------------------------ Director May 24, 1999 Edward A. Dougherty II-9 EXHIBIT INDEX 1.1 Form of U.S. Underwriting Agreement among the Company, the Selling Stockholders, BT Alex. Brown Incorporated, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co. Limited. 1.2 Form of International Underwriting Agreement among the Company, the Selling Stockholders, BT Alex. Brown International, division of Bankers Trust International PLC, The Robinson-Humphrey Company, LLC and J. Henry Schroder & Co. Limited.* 3.1 (i) Certificate of Incorporation of the Company dated as of January 13, 1994. 3.1 (ii) Certificate of Correction of Certificate of Incorporation Before Payment of Capital of the Company dated as of January 14, 1994. 3.1 (iii) Certificate of Amendment to Certificate of Incorporation of the Company dated as of February 24, 1994. 3.1 (iv) Certificate of Amendment to Certificate of Incorporation of the Company dated as of November 21, 1996. 3.1 (v) Certificate of Amendment to Certificate of Incorporation of the Company dated as of June 3, 1998. 3.1 (vi) Form of Restated Certificate of Incorporation of the Company.* 3.2 (i) By-laws of the Company. 3.2 (ii) Form of Restated By-laws of the Company.* 4.1 (i) Third Amended and Restated Credit Agreement dated as of June 5, 1998 by and among the Company, various financial institutions and Bank of America National Trust and Savings Association, individually and as agent.* 4.1 (ii) First Amendment to Third Amended and Restated Credit Agreement dated as of April 14, 1999 by and among the Company, various financial institutions and Bank of America National Trust and Savings Association, individually and as agent.* 4.2 Amended and Restated Security Agreement dated as of June 5, 1998 by and among the Company, its subsidiaries and Bank of America National Trust and Savings Association.* 4.3 Amended and Restated Company Pledge Agreement dated as of June 5, 1998 by and between the Company and Bank of America National Trust and Savings Association.* 4.4 Amended and Restated Subsidiary Pledge Agreement dated as of June 5, 1998 by and among Western Aggregates Holding Corp., Western Rock Products Corp., SRM Holdings Corp., Southern Ready Mix, Inc., Monroc, Inc. and Bank of America National Trust and Savings Association.* 4.5 Amended and Restated Shareholder Pledge Agreement dated as of June 5, 1998 by and among Western Aggregates Holding Corp.'s stockholders, SRM Holdings Corp.'s stockholders and Bank of America National Trust and Savings Association.* 4.6 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's subsidiaries, various financial institutions and Bank of America National Trust and Savings Association.* 4.7 (i) Amended and Restated Note and Warrant Purchase Agreement dated as of June 5, 1998 by and between the Company and The Prudential Insurance Company of America.* 4.7 (ii) Amendment No. 1 to Amended and Restated Note and Warrant Purchase Agreement dated as of April 14, 1999 by and between the Company and The Prudential Insurance Company of America.* 4.7 (iii) Waiver under Note Agreement dated as of April 15, 1999 by and between the Company and The Prudential Insurance Company of America.*
4.8 Amended and Restated Guaranty dated as of June 5, 1998 by and among the Company's subsidiaries and The Prudential Insurance Company of America.* 4.9 (i) Registration Rights and Stockholders' Agreement dated as of November 21, 1996 by and among the Company, the Company's stockholders and The Prudential Insurance Company of America.* 4.9 (ii) First Amendment to Registration Rights and Stockholders' Agreement dated as of June 5, 1998 by and among, the Company, the Company's stockholders and The Prudential Insurance Company of America.* 4.10 Warrant Agreement dated as of November 21, 1996 by and between the Company and The Prudential Insurance Company of America.* 4.11 Warrant Agreement dated as of June 5, 1998 by and between the Company and The Prudential Insurance Company of America.* 4.12 Letter Agreement dated as of April 15, 1999 by and among Golder, Thoma, Cressey, Rauner Fund IV, L.P., Harris Trust and Savings Bank, Bank of America National Trust and Savings Association, as Agent, The Prudential Insurance Company of America and the Company.* 4.13 Floating Rate Loan - Procedures Letter dated as of April 15, 1999 by and between Harris Trust and Savings Bank and the Company.* 4.14 Guaranty, dated April 15, 1999, in favor of Harris Trust and Savings Bank executed by Golder, Thoma, Cressey, Rauner Fund, IV, L.P.* 5.1 Opinion and consent of Kirkland & Ellis.* 10.1 Professional Services Agreement dated as of January 24, 1994 by and between the Company and Golder, Thoma, Cressey, Rauner, Inc. 10.2 Equity Purchase Agreement dated as of January 24, 1994 between the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. 10.3 Stockholders Agreement dated as of January 24, 1994 by and among the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein. 10.4 Stockholders Joinder Agreement dated as of August 1, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty. 10.5 Stockholders Joinder Agreement dated as of August 5, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop. 10.6 Stockholders Joinder Agreement dated as of October 31, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin. 10.7 Stockholders Joinder Agreement dated as of July 31, 1998 by and among the Company, James A. Harris and James A. Harris Grantor Retained Annuity Trust. 10.8 Stockholders Joinder Agreement dated as of October 1, 1998 by and among the Company, James A. Harris and The James A. Harris Charitable Remainder Unitrust. 10.9 Registration Rights Agreement dated as of January 24, 1994 by and among the Company and Golder, Thoma, Cressey, Rauner Fund IV, L.P. and certain Executives named therein. 10.10 Registration Rights Joinder Agreement dated as of August 1, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Edward A. Dougherty. 10.11 Registration Rights Joinder Agreement dated as of August 5, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Morris L. Bishop. 10.12 Registration Rights Joinder Agreement dated as of October 31, 1994 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Charles R. Pullin. 10.13 Senior Management Agreement dated as of January 24, 1994 by and between the Company and James A. Harris.**
10.14 Senior Management Agreement dated as of May 10, 1994 by and between the Company and James A. Harris.* ** 10.15 Senior Management Agreement dated as of November 20, 1996 by and between the Company and James A. Harris.** 10.16 Senior Management Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone.** 10.17 Senior Management Agreement dated as of May 10, 1994 by and between the Company and Michael J. Stone.* ** 10.18 Senior Management Agreement dated as of November 20, 1996 by and between the Company and Michael J. Stone.** 10.19 Senior Management Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr.* ** 10.20 Senior Management Agreement dated as of October 1, 1997 by and between the Company and Morris L. Bishop, Jr.** 10.21 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the Company and James A. Harris. 10.22 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the Company and James A. Harris. 10.23 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and James A. Harris. (Included as Exhibit B to exhibit 10.15) 10.24 Executive Stock Pledge Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone. 10.25 Executive Stock Pledge Agreement dated as of May 10, 1994 by and between the Company and Michael J. Stone. 10.26 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and Michael J. Stone. (Included as Exhibit B to exhibit 10.18) 10.27 Executive Stock Pledge Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr. 10.28 Executive Stock Pledge Agreement dated as of November 20, 1996 by and between the Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.43) 10.29 Executive Stock Pledge Agreement dated as of October 1, 1997 by and between the Company and Morris L. Bishop, Jr. (Included as Exhibit B to exhibit 10.20) 10.30 Promissory Note dated as of January 24, 1994 by James A. Harris in favor of the Company in the principal amount of $16,223.76. 10.31 Promissory Note dated as of May 10, 1994 by James A. Harris in favor of the Company in the principal amount of $121,638.24. 10.32 Promissory Note dated as of November 20, 1996 by James A. Harris in favor of the Company in the principal amount of $8,096.89. (Included as Exhibit A to exhibit 10.15) 10.33 Promissory Note dated as of January 24, 1994 by Michael J. Stone in favor of the Company in the principal amount of $10,809.18. 10.34 Promissory Note dated as of May 10, 1994 by Michael J. Stone in favor of the Company in the principal amount of $81,098.82. 10.35 Promissory Note dated as of November 20, 1996 by Michael J. Stone in favor of the Company in the principal amount of $8,096.89. (Included as Exhibit A to Exhibit 10.18) 10.36 Promissory Note dated August 5, 1994 by Morris L. Bishop in favor of the Company in the principal amount of $16,903.08.
10.37 Promissory Note dated November 20, 1996 by Morris L. Bishop in favor of the Company in the principal amount of $9,940.05. (Included as Exhibit A to exhibit 10.43) 10.38 Demand Note dated October 1, 1997 by Morris L. Bishop in favor of the Company in the principal amount of $219,985.62. (Included as an exhibit A to exhibit 20) 10.39 Employment Agreement dated as of January 24, 1994 by and between the Company and James A. Harris. 10.40 Employment Agreement dated as of January 24, 1994 by and between the Company and Michael J. Stone. 10.41 Employment Agreement dated as of August 5, 1994 by and between the Company and Morris L. Bishop, Jr. 10.42(i) Agreement and Plan of Merger dated as of January 29, 1998 by and among the Company, Western Acquisition, Inc. and Monroc, Inc. 10.42(ii) Amended and Restated Agreement and Plan of Merger dated as of March 4, 1998 by and among the Company, Western Acquisition, Inc. and Monroc, Inc. 10.43 Senior Management Agreement dated as of November 20, 1996 by and between the Company and Morris L. Bishop, Jr. 10.44 Stockholders Joinder Agreement dated as of December 31, 1997 by and among the Company, Golder, Thoma, Cressey, Rauner Fund IV, L.P. and Jeanne T. Richey.* 10.45 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward A. Dougherty.* 10.46 Letter Agreement dated as of April 18, 1998 by and between the Company and Edward A. Dougherty.* 10.47 Letter Agreement dated as of December 30, 1998 by and between the Company and Edward A. Dougherty.* 11.1 Statement re computation of per share earnings.* 12.1 Statement re computation of ratios.* 21.1 Subsidiaries of the Company.* 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of Grant Thornton LLP. 23.3 Consent of Deloitte & Touche LLP. 23.4 Consent of Kirkland & Ellis (Included in Exhibit 5.1)* 24.1 Powers of Attorney of Directors and Officers of the Company (Included on signature page). 27.1 Financial Data Schedule.
- ------------------------ * To be filed by amendment. ** Management contract or compensatory plan or arrangement. EX-1.1 2 EXHIBIT 1.1 _______________ Shares U.S. AGGREGATES, INC. Common Stock ($0.01 Par Value) UNDERWRITING AGREEMENT ---------------------- July ___, 1999 BT Alex. Brown Incorporated The Robinson-Humphrey Company, LLC Schroder & Co. Inc. As Representatives of the Several Underwriters c/o BT Alex. Brown Incorporated One South Street Baltimore, Maryland 21202 Ladies and Gentlemen: U.S. Aggregates, Inc., a Delaware corporation (the "Company") proposes to sell to the several underwriters (the "Underwriters") named in Schedule I hereto for whom you are acting as representatives (the "Representatives") an aggregate of __________ shares of the Company's Common Stock, $.01 par value (the "Firm Shares"). The respective amounts of the Firm Shares to be so purchased by the several Underwriters are set forth opposite their names in Schedule I hereto. Certain shareholders of the Company (the "Selling Shareholders") also propose to sell at the Underwriters' option an aggregate of up to __________ additional shares of the Company's Common Stock (the "Option Shares") as set forth below. The Company and the Selling Shareholders are sometimes referred to herein collectively as the "Sellers." As the Representatives, you have advised the Company and the Selling Shareholders (a) that you are authorized to enter into this Agreement on behalf of the several Underwriters, and (b) that the several Underwriters are willing, acting severally and not jointly, to purchase the numbers of Firm Shares set forth opposite their respective names in Schedule I, plus their pro rata portion of the Option Shares if you elect to exercise the over-allotment option in whole or in part for the accounts of the several Underwriters. The Firm Shares and the Option Shares (to the extent the aforementioned option is exercised) are herein collectively called the "Shares." In consideration of the mutual agreements contained herein and of the interests of the parties in the transactions contemplated hereby, the parties hereto agree as follows: 1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLING SHAREHOLDERS. (a) The Company represents and warrants to each of the Underwriters as follows: (i) A registration statement on Form S-1 (File No. 333-______) with respect to the Shares has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the Rules and Regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder and has been filed with the Commission. Copies of such registration statement, including any amendments thereto, the preliminary prospectuses (meeting the requirements of the Rules and Regulations) contained therein and the exhibits, financial statements and schedules, as finally amended and revised, have heretofore been delivered by the Company to you. Such registration statement, together with any registration statement filed by the Company pursuant to Rule 462 (b) of the Act, herein referred to as the "Registration Statement," which shall be deemed to include all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, has become effective under the Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. "Prospectus" means the form of prospectus first filed with the Commission pursuant to Rule 424(b). Each preliminary prospectus included in the Registration Statement prior to the time it becomes effective is herein referred to as a "Preliminary Prospectus." (ii) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. Each of the subsidiaries of the Company (collectively, the "Subsidiaries") has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement. The Subsidiaries are the only subsidiaries, direct or indirect, of the Company. The Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification. The outstanding shares of capital stock of each of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned by the Company or another Subsidiary free and clear of all liens, encumbrances and -2- equities and claims; and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in the Subsidiaries are outstanding. (iii) The outstanding shares of Common Stock of the Company, including all shares to be sold by the Selling Shareholders, have been duly authorized and validly issued and are fully paid and non-assessable; the Shares to be issued and sold by the Company have been duly authorized and when issued and paid for as contemplated herein will be validly issued, fully paid and non-assessable; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue and sale thereof. Neither the filing of the Registration Statement nor the offering or sale of the Shares as contemplated by this Agreement gives rise to any rights, other than those which have been waived or satisfied, for or relating to the registration of any shares of Common Stock. (iv) The information set forth under the caption "Capitalization" in the Prospectus is true and correct. All of the Shares conform to the description thereof contained in the Registration Statement. The form of certificates for the Shares conforms to the corporate law of the jurisdiction of the Company's incorporation. (v) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor instituted proceedings for that purpose. The Registration Statement contains, and the Prospectus and any amendments or supplements thereto will contain, all statements which are required to be stated therein by, and will conform, to the requirements of the Act and the Rules and Regulations. The Registration Statement and any amendment thereto do not contain, and will not contain, any untrue statement of a material fact and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein not misleading. The Prospectus and any amendments and supplements thereto do not contain, and will not contain, any untrue statement of material fact; and do not omit, and will not omit, to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to information contained in or omitted from the Registration Statement or the Prospectus, or any such amendment or supplement, in reliance upon, and in conformity with, written information furnished to the Company by or on behalf of any Underwriter through the Representatives, specifically for use in the preparation thereof. (vi) The consolidated financial statements of the Company and the Subsidiaries, together with related notes and schedules as set forth in the Registration Statement, present fairly the financial position and the results of operations and cash flows of the Company and the consolidated Subsidiaries, at the indicated dates and for the indicated periods. Such financial statements and related schedules have been prepared in accordance with generally accepted principles of accounting, consistently applied -3- throughout the periods involved, except as disclosed therein, and all adjustments necessary for a fair presentation of results for such periods have been made. The summary financial and statistical data included in the Registration Statement presents fairly the information shown therein and such data has been compiled on a basis consistent with the financial statements presented therein and the books and records of the Company. The pro forma financial statements and other pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. (vii) Arthur Andersen LLP, who have certified certain of the financial statements filed with the Commission as part of the Registration Statement, are independent public accountants as required by the Act and the Rules and Regulations. (viii) There is no action, suit, claim or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of the Subsidiaries before any court or administrative agency or otherwise which if determined adversely to the Company or any of its Subsidiaries might result in any material adverse change in the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and of the Subsidiaries taken as a whole or to prevent the consummation of the transactions contemplated hereby, except as set forth in the Registration Statement. (ix) The Company and the Subsidiaries have good and marketable title to all of the properties and assets reflected in the financial statements (or as described in the Registration Statement) hereinabove described, subject to no lien, mortgage, pledge, charge or encumbrance of any kind except those reflected in such financial statements (or as described in the Registration Statement) or which are not material in amount. The Company and the Subsidiaries occupy their leased properties under valid and binding leases conforming in all material respects to the description thereof set forth in the Registration Statement. (x) The Company and the Subsidiaries have filed all Federal, State, local and foreign tax returns which have been required to be filed and have paid all taxes indicated by said returns and all assessments received by them or any of them to the extent that such taxes have become due. All tax liabilities have been adequately provided for in the financial statements of the Company, and the Company does not know of any actual or proposed additional material tax assessments. (xi) Since the respective dates as of which information is given in the Registration Statement, as it may be amended or supplemented, there has not been any -4- material adverse change or any development involving a prospective material adverse change in or affecting the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise), or prospects of the Company and its Subsidiaries taken as a whole, whether or not occurring in the ordinary course of business, and there has not been any material transaction entered into or any material transaction that is probable of being entered into by the Company or the Subsidiaries, other than transactions in the ordinary course of business and changes and transactions described in the Registration Statement, as it may be amended or supplemented. The Company and the Subsidiaries have no material contingent obligations which are not disclosed in the Company's financial statements which are included in the Registration Statement. (xii) Neither the Company nor any of the Subsidiaries is or with the giving of notice or lapse of time or both, will be, in violation of or in default under its Charter or By-Laws or under any agreement, lease, contract, indenture or other instrument or obligation to which it is a party or by which it, or any of its properties, is bound and which default is of material significance in respect of the condition, financial or otherwise of the Company and its Subsidiaries taken as a whole or the business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole. The execution and delivery of this Agreement and the consummation of the transactions herein contemplated and the fulfillment of the terms hereof will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, any indenture, mortgage, deed of trust or other agreement or instrument to which the Company or any Subsidiary is a party, or of the Charter or By-Laws of the Company or any order, rule or regulation applicable to the Company or any Subsidiary of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (xiii) Each approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body necessary in connection with the execution and delivery by the Company of this Agreement and the consummation of the transactions herein contemplated (except such additional steps as may be required by the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or such additional steps as may be necessary to qualify the Shares for public offering by the Underwriters under state securities or Blue Sky laws) has been obtained or made and is in full force and effect. (xiv) The Company and each of the Subsidiaries holds all material licenses, consents, orders, authorizations, approvals, certificates and permits (collectively, "Licenses") of and from, and have made all declarations and filings with and satisfied all eligibility and other similar requirements imposed by, all Federal, State, local and other governmental authorities which are necessary to the conduct of their businesses, and each such License is in full force and effect; and neither the Company nor any of the Subsidiaries has infringed any patents, patent rights, trade names, trademarks or copyrights, which infringement is material to the business of the Company and the -5- Subsidiaries taken as a whole. The Company knows of no material infringement by others of patents, patent rights, trade names, trademarks or copyrights owned by or licensed to the Company. (xv) Neither the Company, nor to the Company's knowledge, any of its affiliates, has taken or may take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares. (xvi) Neither the Company nor any Subsidiary is an "investment company" within the meaning of such term under the Investment Company Act of 1940, (as amended, the "1940 Act") and the rules and regulations of the Commission thereunder. (xvii) The Company maintains a system of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management's general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (xviii) The Company and each of its Subsidiaries carry, or are covered by, insurance in such amounts and covering such risks as is adequate for the conduct of their respective businesses and the value of their respective properties and as is customary for companies engaged in similar industries. (xix) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) has occurred with respect to any "pension plan" (as defined in ERISA) for which the Company would have any liability; the Company has not incurred and does not expect to incur liability under (i) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (ii) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification. (xx) To the Company's knowledge, there are no affiliations or associations between any member of the NASD and any of the Company's officers, directors or 5% or greater securityholders, except as set forth in the Registration Statement. -6- (xxi) The Company and its Subsidiaries are in compliance with all applicable Federal, State and local laws and regulations relating to (i) zoning, land use, protection of the environment, human health and safety or hazardous or toxic substances, wastes, pollutants or contaminants and (ii) employee or occupational safety, discrimination in hiring, promotion or pay of employees, employee hours and wages or employee benefits. (b) Each of the Selling Shareholders severally represents and warrants as follows: (i) Such Selling Shareholder now has and at the Option Closing Date (as hereinafter defined) will have good and marketable title to the Option Shares to be sold by such Selling Shareholder, free and clear of any liens, encumbrances, equities and claims, and full right, power and authority to effect the sale and delivery of such Option Shares; and upon the delivery of, against payment for, such Option Shares pursuant to this Agreement, the Underwriters will acquire good and marketable title thereto, free and clear of any liens, encumbrances, equities and claims. (ii) Such Selling Shareholder has full right, power and authority to execute and deliver this Agreement, the Power of Attorney, and the Custodian Agreement referred to below and to perform its obligations under such agreements. The execution and delivery of this Agreement and the consummation by such Selling Shareholder of the transactions herein contemplated and the fulfillment by such Selling Shareholder of the terms hereof will not require any consent, approval, authorization, or other order of any court, regulatory body, administrative agency or other governmental body (except as may be required under the Act, state securities laws or Blue Sky laws) and will not result in a breach of any of the terms and provisions of, or constitute a default under, organizational documents of such Selling Shareholder, if not an individual, or any indenture, mortgage, deed of trust or other agreement or instrument to which such Selling Shareholder is a party, or of any order, rule or regulation applicable to such Selling Shareholder of any court or of any regulatory body or administrative agency or other governmental body having jurisdiction. (iii) Such Selling Shareholder has not taken and will not take, directly or indirectly, any action designed to, or which has constituted, or which might reasonably be expected to cause or result in the stabilization or manipulation of the price of the Common Stock of the Company and, other than as permitted by the Act, the Selling Shareholder will not distribute any prospectus or other offering material in connection with the offering of the Shares. (iv) Without having undertaken to determine independently the accuracy or completeness of either the representations and warranties of the Company contained herein or the information contained in the Registration Statement, such Selling Shareholder has no reason to believe that the representations and warranties of the Company contained in this Section 1 are not true and correct, is familiar with the Registration Statement and has no knowledge of any material fact, condition or information not disclosed in the Registration Statement which has adversely affected or -7- may adversely affect the business of the Company or any of the Subsidiaries; and the sale of the Option Shares by such Selling Shareholder pursuant hereto is not prompted by any information concerning the Company or any of the Subsidiaries which is not set forth in the Registration Statement or the documents incorporated by reference therein. The information pertaining to such Selling Shareholder under the caption "Principal and Selling Stockholders" in the Prospectus is complete and accurate in all material respects. 2. PURCHASE, SALE AND DELIVERY OF THE FIRM SHARES. (a) On the basis of the representations, warranties and covenants herein contained, and subject to the conditions herein set forth, the Company agrees to sell to the Underwriters and each Underwriter agrees, severally and not jointly, to purchase, at a price of $_____ [NET PRICE] per share, the number of Firm Shares set forth opposite the name of each Underwriter in Schedule I hereof, subject to adjustments in accordance with Section 9 hereof. The number of Firm Shares to be purchased by each Underwriter from the Company shall be as nearly as practicable in the same proportion to the total number of Firm Shares being sold by the Company as the number of Firm Shares being purchased by each Underwriter bears to the total number of Firm Shares to be sold hereunder. (b) Certificates in negotiable form for the total number of Option Shares to be sold hereunder by the Selling Shareholders have been placed in custody with ____________________ as custodian (the "Custodian") pursuant to the Custodian Agreement executed by each Selling Shareholder for delivery of any Option Shares to be sold hereunder by the Selling Shareholders. Each of the Selling Shareholders specifically agrees that any Option Shares represented by the certificates held in custody for the Selling Shareholders under the Custodian Agreement are subject to the interests of the Underwriters hereunder, that the arrangements made by the Selling Shareholders for such custody are to that extent irrevocable, and that the obligations of the Selling Shareholders hereunder shall not be terminable by any act or deed of the Selling Shareholders (or by any other person, firm or corporation including the Company, the Custodian or the Underwriters) or by operation of law (including the dissolution of a corporate Selling Shareholder) or by the occurrence of any other event or events, except as set forth in the Custodian Agreement. If any such event should occur prior to the delivery to the Underwriters of the Option Shares hereunder, certificates for the Options Shares shall be delivered by the Custodian in accordance with the terms and conditions of this Agreement as if such event has not occurred. The Custodian is authorized to receive and acknowledge receipt of the proceeds of sale of the Option Shares held by it against delivery of such Option Shares. (c) Payment for the Firm Shares to be sold hereunder is to be made in Federal (same day) funds to an account designated by the Company against delivery of certificates therefor to the Representatives for the several accounts of the Underwriters. Such payment and delivery are to be made through the facilities of the Depository Trust Company at 10:00 a.m., New York time, on the third business day after the date of this Agreement or at such other time and date not later than five business days thereafter as you and the Company shall agree upon, such time and date being herein referred to as the "Closing Date." (As used herein, "business day" means a day on which the New York Stock Exchange is open for trading and on which banks in New York -8- are open for business and not permitted by law or executive order to be closed.) The certificates for the Firm Shares will be delivered in such denominations and in such registrations as the Representatives request in writing not later than the second full business day prior to the Closing Date, and will be made available for inspection by the Representatives at least one business day prior to the Closing Date. (d) In addition, on the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, the Selling Shareholders hereby grant an option to the several Underwriters to purchase the Option Shares at the price per share as set forth in the first paragraph of this Section 2. The maximum number of Option Shares to be sold by the Selling Shareholders is set forth opposite their respective names on Schedule II hereto. The option granted hereby may be exercised in whole or in part by giving written notice (i) at any time before the Closing Date and (ii) only once thereafter within 30 days after the date of this Agreement, by you, as Representatives of the several Underwriters, to the Company, setting forth the number of Option Shares as to which the several Underwriters are exercising the option, the names and denominations in which the Option Shares are to be registered and the time and date at which such certificates are to be delivered. If the option granted hereby is exercised in part, the respective number of Option Shares to be sold by each of the Selling Shareholders listed in Schedule II hereto shall be determined on a pro rata basis in accordance with the percentages set forth opposite their names on Schedule II hereto, adjusted by you in such manner as to avoid fractional shares. The time and date at which certificates for Option Shares are to be delivered shall be determined by the Representatives but shall not be earlier than three nor later than 10 full business days after the exercise of such option, nor in any event prior to the Closing Date (such time and date being herein referred to as the "Option Closing Date"). If the date of exercise of the option is three or more days before the Closing Date, the notice of exercise shall set the Closing Date as the Option Closing Date. The number of Option Shares to be purchased by each Underwriter shall be in the same proportion to the total number of Option Shares being purchased as the number of Firm Shares being purchased by such Underwriter bears to the total number of Firm Shares, adjusted by you in such manner as to avoid fractional shares. The option with respect to the Option Shares granted hereunder may be exercised only to cover over-allotments in the sale of the Firm Shares by the Underwriters. You, as Representatives of the several Underwriters, may cancel such option at any time prior to its expiration by giving written notice of such cancellation to the Company. To the extent, if any, that the option is exercised, payment for the Option Shares shall be made on the Option Closing Date in Federal (same day) funds drawn to the order of "_______________, as Custodian" for the Option Shares against delivery of certificates therefor through the facilities of the Depository Trust Company, New York, New York. (e) If on the Option Closing Date, any Selling Shareholder fails to sell the Option Shares which such Selling Shareholder has agreed to sell on such date as set forth in SCHEDULE II hereto, the Company agrees that it will sell or arrange for the sale of that number of shares of Common Stock to the Underwriters which represents the Option Shares which such Selling Shareholder has failed to so sell, as set forth in SCHEDULE II hereto, or such lesser number as may be requested by the Representatives. -9- 3. OFFERING BY THE UNDERWRITERS. It is understood that the several Underwriters are to make a public offering of the Firm Shares as soon as the Representatives deem it advisable to do so. The Firm Shares are to be initially offered to the public at the initial public offering price set forth in the Prospectus. The Representatives may from time to time thereafter change the public offering price and other selling terms. To the extent, if at all, that any Option Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer them to the public on the foregoing terms. It is further understood that you will act as the Representatives for the Underwriters in the offering and sale of the Shares in accordance with a Master Agreement Among Underwriters entered into by you and the several other Underwriters. 4. COVENANTS OF THE COMPANY AND THE SELLING SHAREHOLDERS. (a) The Company covenants and agrees with the several Underwriters that: (i) The Company will (A) use its best efforts to cause the Registration Statement to become effective or, if the procedure in Rule 430A of the Rules and Regulations is followed, to prepare and timely file with the Commission under Rule 424(b) of the Rules and Regulations a Prospectus in a form approved by the Representatives containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A of the Rules and Regulations, and (B) not file any amendment to the Registration Statement or supplement to the Prospectus of which the Representatives shall not previously have been advised and furnished with a copy or to which the Representatives shall have reasonably objected in writing or which is not in compliance with the Rules and Regulations and (C) file on a timely basis all reports and any definitive proxy or information statements required to be filed by the Company with the Commission subsequent to the date of the Prospectus and prior to the termination of the offering of the Shares by the Underwriters. (ii) The Company will advise the Representatives promptly (A) when the Registration Statement or any post-effective amendment thereto shall have become effective, (B) of receipt of any comments from the Commission, (C) of any request of the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, and (D) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the use of the Prospectus or of the institution of any proceedings for that purpose. The Company will use its best efforts to prevent the issuance of any such stop order preventing or suspending the use of the Prospectus and to obtain as soon as possible the lifting thereof, if issued. (iii) The Company will cooperate with the Representatives in endeavoring to qualify the Shares for sale under the securities laws of such jurisdictions as the Representatives may reasonably have designated in writing and will make such applications, file such documents, and furnish such information as may be reasonably -10- required for that purpose, provided the Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction where it is not now so qualified or required to file such a consent. The Company will, from time to time, prepare and file such statements, reports, and other documents, as are or may be required to continue such qualifications in effect for so long a period as the Representatives may reasonably request for distribution of the Shares. (iv) The Company will deliver to, or upon the order of, the Representatives, from time to time, as many copies of any Preliminary Prospectus as the Representatives may reasonably request. The Company will deliver to, or upon the order of, the Representatives during the period when delivery of a Prospectus is required under the Act, as many copies of the Prospectus in final form, or as thereafter amended or supplemented, as the Representatives may reasonably request. The Company will deliver to the Representatives at or before the Closing Date, four signed copies of the Registration Statement and all amendments thereto including all exhibits filed therewith, and will deliver to the Representatives such number of copies of the Registration Statement (including such number of copies of the exhibits filed therewith that may reasonably be requested), and of all amendments thereto, as the Representatives may reasonably request. (v) The Company will comply with the Act and the Rules and Regulations, and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder, so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the Prospectus. If during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, any event shall occur as a result of which, in the judgment of the Company or in the reasonable opinion of the Underwriters, it becomes necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances existing at the time the Prospectus is delivered to a purchaser, not misleading, or, if it is necessary at any time to amend or supplement the Prospectus to comply with any law, the Company promptly will prepare and file with the Commission an appropriate amendment to the Registration Statement or supplement to the Prospectus so that the Prospectus as so amended or supplemented will not, in the light of the circumstances when it is so delivered, be misleading, or so that the Prospectus will comply with the law. (vi) The Company will make generally available to its security holders, as soon as it is practicable to do so, but in any event not later than 15 months after the effective date of the Registration Statement, an earning statement (which need not be audited) in reasonable detail, covering a period of at least 12 consecutive months beginning after the effective date of the Registration Statement, which earning statement shall satisfy the requirements of Section 11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you in writing when such statement has been so made available. -11- (vii) Prior to the Closing Date, the Company will furnish to the Underwriters, as soon as they have been prepared by or are available to the Company, a copy of any unaudited interim financial statements of the Company for any period subsequent to the period covered by the most recent financial statements appearing in the Registration Statement and the Prospectus. (viii) No offering, sale, short sale or other disposition of any shares of Common Stock of the Company or other securities convertible into or exchangeable or exercisable for shares of Common Stock or derivative of Common Stock (or agreement for such) will be made for a period of 180 days after the date of this Agreement, directly or indirectly, by the Company otherwise than hereunder or with the prior written consent of BT Alex. Brown Incorporated. (ix) The Company will use its best efforts to list, subject to notice of issuance, the Shares on the New York Stock Exchange. (x) The Company has caused each officer and director and specific shareholders of the Company to furnish to you, on or prior to the date of this agreement, a letter or letters, in form and substance satisfactory to the Underwriters, pursuant to which each such person shall agree not to offer, sell, sell short or otherwise dispose of any shares of Common Stock of the Company or other capital stock of the Company, or any other securities convertible, exchangeable or exercisable for Common Stock or derivative of Common Stock owned by such person or request the registration for the offer or sale of any of the foregoing (or as to which such person has the right to direct the disposition of) for a period of 180 days after the date of this Agreement, directly or indirectly, except with the prior written consent of BT Alex. Brown Incorporated ("Lockup Agreements"). (xi) The Company shall apply the net proceeds of its sale of the Firm Shares as set forth in the Prospectus and shall file such reports with the Commission with respect to the sale of the Firm Shares and the application of the proceeds therefrom as may be required in accordance with Rule 463 under the Act. (xii) The Company shall not invest, or otherwise use the proceeds received by the Company from its sale of the Firm Shares in such a manner as would require the Company or any of the Subsidiaries to register as an investment company under the 1940 Act. (xiii) The Company will maintain a transfer agent and, if necessary under the jurisdiction of incorporation of the Company, a registrar for the Common Stock. (xiv) The Company will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company. (b) Each of the Selling Shareholders covenants and agrees with the several Underwriters that: -12- (i) No offering, sale, short sale or other disposition of any shares of Common Stock of the Company or other capital stock of the Company or other securities convertible, exchangeable or exercisable for Common Stock or derivative of Common Stock owned by the Selling Shareholder or request the registration for the offer or sale of any of the foregoing (or as to which the Selling Shareholder has the right to direct the disposition of) will be made for a period of one hundred eighty (180) days after the date of this Agreement, directly or indirectly, by such Selling Shareholder otherwise than hereunder or with the prior written consent of BT Alex. Brown Incorporated. (ii) In order to document the Underwriters' compliance with the reporting and withholding provisions of the Tax Equity and Fiscal Responsibility Act of 1982 and the Interest and Dividend Tax Compliance Act of 1983 with respect to the transactions herein contemplated, each of the Selling Shareholders agrees to deliver to you prior to or at the Closing Date a properly completed and executed United States Treasury Department Form W-8 or W-9 (or other applicable form or statement specified by Treasury Department regulations in lieu thereof). (iii) Such Selling Shareholder will not take, directly or indirectly, any action designed to cause or result in, or that has constituted or might reasonably be expected to constitute, the stabilization or manipulation of the price of any securities of the Company . 5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees incident to the performance of the obligations of the Sellers under this Agreement, including, without limiting the generality of the foregoing, the following: accounting fees of the Company; the fees and disbursements of counsel for the Company; the cost of printing and delivering to, or as requested by, the Underwriters copies of the Registration Statement, Preliminary Prospectuses, the Prospectus, this Agreement, the Underwriters' Invitation Letter, the Listing Application, the Blue Sky Survey and any supplements or amendments thereto; the filing fees of the Commission; the filing fees and expenses (including legal fees and disbursements) incident to securing any required review by the NASD of the terms of the sale of the Shares; the Listing Fee of the New York Stock Exchange; and the expenses, including the fees and disbursements of counsel for the Underwriters, incurred in connection with the qualification of the Shares under State securities or Blue Sky laws. The Company agrees to pay all costs and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, incident to the offer and sale of directed shares of the Common Stock by the Underwriters to employees and persons having business relationships with the Company and its Subsidiaries. The Sellers shall not, however, be required to pay for any of the Underwriters expenses (other than those related to qualification under NASD regulation and State securities or Blue Sky laws) except that, if this Agreement shall not be consummated because the conditions in Section 6 hereof are not satisfied, or because this Agreement is terminated by the Representatives pursuant to Section 11 hereof, or by reason of any failure, refusal or inability on the part of the Company or the Selling Shareholders to perform any undertaking or satisfy any condition of this Agreement or to comply with any of the terms hereof on their part to be performed, unless such -13- failure to satisfy said codition or to comply with said terms be due to the default or omission of any Underwriter, then the Company shall reimburse the several Underwriters for reasonable out-of-pocket expenses, including fees and disbursements of counsel, reasonably incurred in connection with investigating, marketing and proposing to market the Shares or in contemplation of performing their obligations hereunder; but the Company and the Selling Shareholders shall not in any event be liable to any of the several Underwriters for damages on account of loss of anticipated profits from the sale by them of the Shares. 6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several obligations of the Underwriters to purchase the Firm Shares on the Closing Date and the Option Shares, if any, on the Option Closing Date are subject to the accuracy, as of the Closing Date or the Option Closing Date, as the case may be, of the representations and warranties of the Company and the Selling Shareholders contained herein, and to the performance by the Company and the Selling Shareholders of their covenants and obligations hereunder and to the following additional conditions: (a) The Registration Statement and all post-effective amendments thereto shall have become effective and any and all filings required by Rule 424 and Rule 430A of the Rules and Regulations shall have been made, and any request of the Commission for additional information (to be included in the Registration Statement or otherwise) shall have been disclosed to the Representatives and complied with to their reasonable satisfaction. No stop order suspending the effectiveness of the Registration Statement, as amended from time to time, shall have been issued and no proceedings for that purpose shall have been taken or, to the knowledge of the Company or the Selling Shareholders, shall be contemplated by the Commission and no injunction, restraining order, or order of any nature by a Federal or state court of competent jurisdiction shall have been issued as of the Closing Date which would prevent the issuance of the Shares. (b) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, the opinion of Kirkland & Ellis, counsel for the Company and the Selling Shareholders, dated the Closing Date or the Option Closing Date, as the case may be, addressed to the Underwriters (and stating that it may be relied upon by counsel to the Underwriters) to the effect that: (i) The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; each of the Subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, with corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; the Company and each of the Subsidiaries are duly qualified to transact business in all jurisdictions in which the conduct of their business requires such qualification, or in which the failure to qualify would have a materially adverse effect upon the business of the Company and the Subsidiaries taken as a whole; and the outstanding shares of capital stock of each of the -14- Subsidiaries have been duly authorized and validly issued and are fully paid and non-assessable and are owned by the Company or a Subsidiary; and, to the best of such counsel's knowledge, the outstanding shares of capital stock of each of the Subsidiaries is owned free and clear of all liens, encumbrances and equities and claims, and no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into any shares of capital stock or of ownership interests in the Subsidiaries are outstanding. (ii) The Company has authorized and outstanding capital stock as set forth under the caption "Capitalization" in the Prospectus; the authorized shares of the Company's Common Stock have been duly authorized; the outstanding shares of the Company's Common Stock, including the Option Shares to be sold by the Selling Shareholders, have been duly authorized and validly issued and are fully paid and non-assessable; all of the Shares conform to the description thereof contained in the Prospectus; the certificates for the Shares, assuming they are in the form filed with the Commission, are in due and proper form; the Shares to be sold by the Company pursuant to this Agreement have been duly authorized and will be validly issued, fully paid and non-assessable when issued and paid for as contemplated by this Agreement; and no preemptive rights of stockholders exist with respect to any of the Shares or the issue or sale thereof. (iii) Except as described in or contemplated by the Prospectus, to the knowledge of such counsel, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, which has not been satisfied or effectively waived, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Stock or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Registration Statement has become effective under the Act and, to the best of the knowledge of such counsel, no stop order proceedings with respect thereto have been instituted or are pending or threatened under the Act. (v) The Registration Statement, the Prospectus and each amendment or supplement thereto comply as to form in all material respects with the requirements of the Act and the applicable rules and regulations thereunder (except that such counsel need express no opinion as to the financial statements and related schedules therein). -15- (vi) The statements under the captions "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources," "Certain Relationships and Related Transactions," "Description of Capital Stock," "Description of Indebtedness" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, fairly summarize in all material respects the information called for with respect to such documents and matters. (vii) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly summarized in all material respects. (viii) Such counsel knows of no material legal or governmental proceedings pending or threatened against the Company or any of the Subsidiaries except as set forth in the Prospectus. (ix) The execution and delivery of this Agreement and the consummation of the transactions herein contemplated do not and will not conflict with or result in a breach of any of the terms or provisions of, or constitute a default under, the Charter or By-Laws of the Company, or any agreement or instrument known to such counsel to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries may be bound. (x) This Agreement has been duly authorized, executed and delivered by the Company. (xi) No approval, consent, order, authorization, designation, declaration or filing by or with any regulatory, administrative or other governmental body is necessary in connection with the execution and delivery of this Agreement and the consummation of the transactions herein contemplated (other than as may be required by the NASD or as required by State securities and Blue Sky laws as to which such counsel need express no opinion) except such as have been obtained or made, specifying the same. (xii) The Company is not, and will not become, as a result of the consummation of the transactions contemplated by this Agreement, and application of the net proceeds therefrom as described in the Prospectus, required to register as an investment company under the 1940 Act. (xiii) This Agreement has been duly authorized, executed and delivered on behalf of the Selling Shareholders. (xiv) Each Selling Shareholder has full legal right, power and authority, and any approval required by law (other than as required by State securities and Blue Sky laws as -16- to which such counsel need express no opinion), to sell, assign, transfer and deliver the portion of the Option Shares to be sold by such Selling Shareholder. (xv) The Custodian Agreement and the Power of Attorney executed and delivered by each Selling Shareholder is valid and binding. (xvi) The Underwriters (assuming that they are bona fide purchasers within the meaning of the Uniform Commercial Code) have acquired good and marketable title to the Option Shares being sold by each Selling Shareholder on the Option Closing Date free and clear of all liens, encumbrances, equities and claims. In rendering such opinion Kirkland & Ellis may rely as to matters governed by the laws of states other than Delaware, New York and Illinois or Federal laws on local counsel in such jurisdictions, provided that in each case Kirkland & Ellis shall state that they believe that they and the Underwriters are justified in relying on such other counsel. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, at the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Kirkland & Ellis may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (c) The Representatives shall have received from Winston & Strawn, counsel for the Underwriters, an opinion dated the Closing Date or the Option Closing Date, as the case may be, substantially to the effect specified in subparagraphs (ii), (iv), (v) and (x) of Paragraph (b) of this Section 6, and that the Company is a duly organized and validly existing corporation under the laws of the State of Delaware. In rendering such opinion Winston & Strawn may rely as to all matters governed other than by the laws of the State of Delaware, New York and Illinois or Federal laws on the opinion of counsel referred to in Paragraph (b) of this Section 6. In addition to the matters set forth above, such opinion shall also include a statement to the effect that nothing has come to the attention of such counsel which leads them to believe that (i) the Registration Statement, or any amendment thereto, as of the time it became effective under the Act (but after giving effect to any modifications incorporated therein pursuant to Rule 430A under the Act) as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and (ii) the Prospectus, or any supplement thereto, on the date it was filed pursuant to the Rules and Regulations and as of the Closing Date or the Option Closing Date, as the case may be, contained an untrue statement -17- of a material fact or omitted to state a material fact, necessary in order to make the statements, in the light of the circumstances under which they are made, not misleading (except that such counsel need express no view as to financial statements, schedules and statistical information therein). With respect to such statement, Winston & Strawn may state that their belief is based upon the procedures set forth therein, but is without independent check and verification. (d) The Representatives shall have received at or prior to the Closing Date from Winston & Strawn a memorandum or summary, in form and substance satisfactory to the Representatives, with respect to the qualification for offering and sale by the Underwriters of the Shares under the State securities or Blue Sky laws of such jurisdictions as the Representatives may reasonably have designated to the Company. (e) You shall have received, on each of the dates hereof, the Closing Date and the Option Closing Date, as the case may be, a letter dated the date hereof, the Closing Date or the Option Closing Date, as the case may be, in form and substance satisfactory to you, of Arthur Andersen LLP, confirming that they are independent public accountants within the meaning of the Act and the applicable published Rules and Regulations thereunder and stating that in their opinion the financial statements and schedules examined by them and included in the Registration Statement comply in form in all material respects with the applicable accounting requirements of the Act and the related published Rules and Regulations; and containing such other statements and information as is ordinarily included in accountants' "comfort letters" to Underwriters with respect to the financial statements and certain financial and statistical information contained in the Registration Statement and Prospectus. (f) The Representatives shall have received on the Closing Date or the Option Closing Date, as the case may be, a certificate or certificates of the Chief Executive Officer and the Chief Financial Officer of the Company to the effect that, as of the Closing Date or the Option Closing Date, as the case may be, each of them severally represents as follows: (i) The Registration Statement has become effective under the Act and no stop order suspending the effectiveness of the Registrations Statement has been issued, and no proceedings for such purpose have been taken or are, to his or her knowledge, contemplated by the Commission; (ii) The representations and warranties of the Company contained in Section 1 hereof are true and correct as of the Closing Date or the Option Closing Date, as the case may be; (iii) All filings required to have been made pursuant to Rules 424 or 430A under the Act have been made; (iv) He or she has carefully examined the Registration Statement and the Prospectus and, in his or her opinion, as of the effective date of the Registration Statement, the statements contained in the Registration Statement were true and correct, and such Registration Statement and Prospectus did not omit to state a material fact required to be stated therein or necessary in order to make the statements therein not -18- misleading, and since the effective date of the Registration Statement, no event has occurred which should have been set forth in a supplement to or an amendment of the Prospectus which has not been so set forth in such supplement or amendment; and (v) Since the respective dates as of which information is given in the Registration Statement and Prospectus, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and the Subsidiaries taken as a whole, whether or not arising in the ordinary course of business. (g) The Company and the Selling Shareholders shall have furnished to the Representatives such further certificates and documents confirming the representations and warranties, covenants and conditions contained herein and related matters as the Representatives may reasonably have requested. (h) The Lockup Agreements described in Section 4 are in full force and effect. The opinions and certificates mentioned in this Agreement shall be deemed to be in compliance with the provisions hereof only if they are in all material respects satisfactory to the Representatives and to Winston & Strawn, counsel for the Underwriters. If any of the conditions hereinabove provided for in this Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, the obligations of the Underwriters hereunder may be terminated by the Representatives by notifying the Company and the Selling Shareholders of such termination in writing or by facsimile at or prior to the Closing Date or the Option Closing Date, as the case may be. In such event, the Selling Shareholders, the Company and the Underwriters shall not be under any obligation to each other (except to the extent provided in Sections 5 and 8 hereof). 7. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The obligations of the Sellers to sell and deliver the portion of the Shares required to be delivered as and when specified in this Agreement are subject to the conditions that at the Closing Date or the Option Closing Date, as the case may be, no stop order suspending the effectiveness of the Registration Statement shall have been issued and in effect or proceedings therefor initiated or threatened. 8. INDEMNIFICATION. (a) The Company agrees: (i) indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, -19- damages or liabilities to which such Underwriter or any such controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading any act or failure to act, or (iii) any alleged act or failure to act by any Underwriter in connection with, or relating in any manner to, the Shares or the offering contemplated hereby, and which is included as part of or referred to in any loss, claim, damage, liability or action arising out of or based upon matters covered by clause (i) or (ii) above (PROVIDED, that the Company shall not be liable under this clause (iii) to the extent that it is determined in a final judgment by a court of competent jurisdiction that such loss, claim, damage, liability or action resulted directly from any such acts or failures to act undertaken or omitted to be taken by such Underwriter through its gross negligence or willful misconduct); provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement, or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. (ii) to reimburse each Underwriter and each such controlling person upon demand for any legal or other out-of-pocket expenses reasonably incurred by such Underwriter or such controlling person in connection with investigating or defending any such loss, claim, damage or liability, action or proceeding or in responding to a subpoena or governmental inquiry related to the offering of the Shares, whether or not such Underwriter or controlling person is a party to any action or proceeding. In the event that it is finally judicially determined that the Underwriters were not entitled to receive payments for legal and other expenses pursuant to this subparagraph, the Underwriters will promptly return all sums that had been advanced pursuant hereto. (b) The Selling Shareholders agree to indemnify the Underwriters and each person, if any, who controls any Underwriter within the meaning of the Act, against any losses, claims, damages or liabilities to which such Underwriter or controlling person may become subject under the Act or otherwise to the same extent as indemnity is provided by the Company pursuant to Section 8(a) above. In no event, however, shall the liability of any Selling Shareholder for indemnification under this Section 8(a) exceed the proceeds received by such Selling Shareholder from the Underwriters in the offering. This indemnity obligation will be in addition to any liability which the Company or any Selling Stockholder may otherwise have. (c) Each Underwriter severally and not jointly will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed the Registration Statement, the Selling Shareholders, and each person, if any, who controls the Company or the Selling -20- Shareholders within the meaning of the Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, Selling Shareholder or controlling person may become subject under the Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto, or (ii) the omission or the alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made; and will reimburse any legal or other expenses reasonably incurred by the Company or any such director, officer, Selling Shareholder or controlling person in connection with investigating or defending any such loss, claim, damage, liability, action or proceeding; provided, however, that each Underwriter will be liable in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission has been made in the Registration Statement, any Preliminary Prospectus, the Prospectus or such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by or through the Representatives specifically for use in the preparation thereof. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (d) In case any proceeding (including any governmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to this Section 8, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemnifying party") in writing. No indemnification provided for in Section 8(a), (b) or (c) shall be available to any party who shall fail to give notice as provided in this Section 8(d) if the party to whom notice was not given was unaware of the proceeding to which such notice would have related and was materially prejudiced by the failure to give such notice, but the failure to give such notice shall not relieve the indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of the provisions of Section 8(a), (b) or (c). In case any such proceeding shall be brought against any indemnified party and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel satisfactory to such indemnified party and shall pay as incurred the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel at its own expense. Notwithstanding the foregoing, the indemnifying party shall pay as incurred (or within 30 days of presentation) the fees and expenses of the counsel retained by the indemnified party in the event (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel, (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappopriate due to actual or potential differing interests between them or (iii) the indemnifying party shall have failed to assume the defense and employ counsel acceptable to the indemnified party within a reasonable period of time after notice of commencement of the action. It is understood that the indemnifying party shall not, in connection with any proceeding or related proceedings in the -21- same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm for all such indemnified parties. Such firm shall be designated in writing by you in the case of parties indemnified pursuant to Section 8(a) or (b) and by the Company and the Selling Shareholders in the case of parties indemnified pursuant to Section 8(c). The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judgment. In addition, the indemnifying party will not, without the prior written consent of the indemnified party, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding of which indemnification may be sought hereunder (whether or not any indemnified party is an actual or potential party to such claim, action or proceeding) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action or proceeding. (e) If the indemnification provided for in this Section 8 is unavailable to or insufficient to hold harmless an indemnified party under Section 8(a), (b) or (c) above in respect of any losses, claims, damages or liabilities (or actions or proceedings in respect thereof) referred to therein, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (or actions or proceedings in respect thereof) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other from the offering of the Shares. If, however, the allocation provided by the immediately preceding sentence is not permitted by applicable law then each indemnifying party shall contribute to such amount paid or payable by such indemnified party in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company and the Selling Shareholders on the one hand and the Underwriters on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, (or actions or proceedings in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholders on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company and the Selling Shareholders bear to the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or th Selling Shareholders on the one hand or the Underwriters on the other and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Company, the Selling Shareholders and the Underwriters agree that it would not be just and equitable if contributions pursuant to this Section 8(e) were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to above in this Section 8(e). The amount paid or payable by an indemnified party as a result of the losses, -22- claims, damages or liabilities (or actions or proceedings in respect thereof) referred to above in this Section 8(e) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this subsection (e), (i) no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter, (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation, and (iii) no Selling Shareholder shall be required to contribute any amount in excess of the proceeds received by such Selling Shareholder from the Underwriters in the offering. The Underwriters' obligations in this Section 8(e) to contribute are several in proportion to their respective underwriting obligations and not joint. (f) In any proceeding relating to the Registration Statement, any Preliminary Prospectus, the Prospectus or any supplement or amendment thereto, each party against whom contribution may be sought under this Section 8 hereby consents to the jurisdiction of any court having jurisdiction over any other contributing party, agrees that process issuing from such court may be served upon him or it by any other contributing party and consents to the service of such process and agrees that any other contributing party may join him or it as an additional defendant in any such proceeding in which such other contributing party is a party. (g) Any losses, claims, damages, liabilities or expenses for which an indemnified party is entitled to indemnification or contribution under this Section 8 shall be paid by the indemnifying party to the indemnified party as such losses, claims, damages, liabilities or expenses are incurred. The indemnity and contribution agreements contained in this Section 8 and the representations and warranties of the Company set forth in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Company, its directors or officers or any persons controlling the Company, (ii) acceptance of any Shares and payment therefor hereunder, and (iii) any termination of this Agreement. A successor to any Underwriter, or to the Company, its directors or officers, or any person controlling the Company, shall be entitled to the benefits of the indemnity, contribution and reimbursement agreements contained in this Section 8. 9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing Date, as the case may be, any Underwriter shall fail to purchase and pay for the portion of the Shares which such Underwriter has agreed to purchase and pay for on such date (otherwise than by reason of any default on the part of the Company or a Selling Shareholder), you, as Representatives of the Underwriters, shall use your reasonable efforts to procure within 36 hours thereafter one or more of the other Underwriters, or any others, to purchase from the Company and the Selling Shareholders such amounts as may be agreed upon and upon the terms set forth herein, the Firm Shares or Option Shares, as the case may be, which the defaulting Underwriter or Underwriters failed to purchase. If during such 36 hours you, as such Representatives, shall not have procured such other Underwriters, or any others, to purchase the Firm Shares or Option Shares, as the case may be, agreed to be purchased by the -23- defaulting Underwriter or Underwriters, then (a) if the aggregate number of shares with respect to which such default shall occur does not exceed 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the other Underwriters shall be obligated, severally, in proportion to the respective numbers of Firm Shares or Option Shares, as the case may be, which they are obligated to purchase hereunder, to purchase the Firm Shares or Option Shares, as the case may be, which such defaulting Underwriter or Underwriters failed to purchase, or (b) if the aggregate number of shares of Firm Shares or Option Shares, as the case may be, with respect to which such default shall occur exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered hereby, the Company and the Selling Shareholders or you as the Representatives of the Underwriters will have the right, by written notice given within the next 36-hour period to the parties to this Agreement, to terminate this Agreement without liability on the part of the non-defaulting Underwriters or of the Company or of the Selling Shareholders except to the extent provided in Section 8 hereof. In the event of a default by any Underwriter or Underwriters, as set forth in this Section 9, the Closing Date or Option Closing Date, as the case may be, may be postponed for such period, not exceeding seven days, as you, as Representatives, may determine in order that the required changes in the Registration Statement or in the Prospectus or in any other documents or arrangements may be effected. The term "Underwriter" includes any person substituted for a defaulting Underwriter. Any action taken under this Section 9 shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 10. NOTICES. All communications hereunder shall be in writing and, except as otherwise provided herein, will be mailed, delivered, telecopied or telegraphed and confirmed as follows: if to the Underwriters, to BT Alex. Brown Incorporated, One South Street, Baltimore, Maryland 21202, Attention:_________ _________________; with a copy to BT Alex. Brown Incorporated, One Bankers Trust Plaza, 130 Liberty Street, New York, New York 10006, Attention: General Counsel; if to the Company, to: U.S. Aggregates, Inc. 400 South El Camino Real Suite 500 San Mateo, CA 94402 Attention: Michael J. Stone and if to the Selling Shareholders, to: Golder, Thoma, Cressey, Rauner, Inc. 6100 Sears Tower Chicago, IL 60606 Attention: David Donnini -24- 11. TERMINATION. (a) This Agreement may be terminated by you by notice to the Company at any time prior to the Closing Date if any of the following has occurred: (i) since the respective dates as of which information is given in the Registration Statement and the Prospectus, any material adverse change or any development involving a prospective material adverse change in or affecting the condition, financial or otherwise, of the Company and its Subsidiaries taken as a whole or the earnings, business, management, properties, assets, rights, operations, condition (financial or otherwise) or prospects of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (ii) any outbreak or escalation of hostilities or declaration of war or national emergency or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, escalation, declaration, emergency, calamity, crisis or change on the financial markets of the United States would, in your reasonable judgment, make it impracticable or inadvisable to market the Shares or to enforce contracts for the sale of the Shares, or (iii) suspension of trading in securities generally on the New York Stock Exchange or the American Stock Exchange or limitation on prices (other than limitations on hours or numbers of days of trading) for securities on either such Exchange, (iv) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which in your opinion materially and adversely affects or may materially and adversely affect the business or operations of the Company, (v) declaration of a banking moratorium by United States or New York State authorities, (vi) any downgrading, or placement on any watch list for possible downgrading, in the rating of the Company's debt securities by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Exchange Act);(vii) the suspension of trading of the Company's Common Stock by the New York Stock Exchange, the Commission, or any other governmental authority or, (viii) the taking of any action by any governmental body or agency in respect of its monetary or fiscal affairs which in your reasonable opinion has a material adverse effect on the securities markets in the United States; or (b) as provided in Sections 6 and 9 of this Agreement. 12. SUCCESSORS. This Agreement has been and is made solely for the benefit of the Underwriters, the Company and the Selling Shareholders and their respective successors, executors, administrators, heirs and assigns, and the officers, directors and controlling persons referred to herein, and no other person will have any right or obligation hereunder. No purchaser of any of the Shares from any Underwriter shall be deemed a successor or assign merely because of such purchase. 13. INFORMATION PROVIDED BY UNDERWRITERS. The Company, the Selling Shareholders and the Underwriters acknowledge and agree that the only information furnished or to be furnished by any Underwriter to the Company for inclusion in any Prospectus or the Registration Statement consists of the information set forth in the last paragraph on the front cover page (insofar as such information relates to the Underwriters), -25- legends required by Item 502(d) of Regulation S-K under the Act and the information under the caption "Underwriting" in the Prospectus. 14. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers and (c) delivery of and payment for the Shares under this Agreement. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland. If the foregoing letter is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicates hereof, whereupon it will become a binding agreement among the Selling Shareholders, the Company and the several Underwriters in accordance with its terms. -26- Any person executing and delivering this Agreement as Attorney-in-Fact for a Selling Shareholder represents by so doing that he has been duly appointed as Attorney-in-Fact by such Selling Shareholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-Fact to take such action. Very truly yours, U.S. AGGREGATES, INC. By: ------------------------------------ Its: President [Selling Shareholders listed on Schedule II By: ------------------------------------ Name: ---------------------------------- Attorney-in-Fact] The foregoing Underwriting Agreement is hereby confirmed and accepted as of the date first above written. BT ALEX. BROWN INCORPORATED - --------------------------------------- - --------------------------------------- As Representatives of the several Underwriters listed on Schedule I By: BT Alex. Brown Incorporated By:------------------------------------ Authorized Officer SCHEDULE I SCHEDULE OF UNDERWRITERS
Number of Firm Shares Underwriter to be Purchased ----------- --------------------- BT Alex. Brown Incorporated The Robinson-Humphrey Company, LLC Schroder & Co. Inc. ---------- Total ----------
SCHEDULE II SCHEDULE OF OPTION SHARES
Maximum Number Percentage of Name of of Option Shares Total Number of Selling Shareholder to be Sold Option Shares ------------------- ---------------- --------------- Golder, Thoma, Cressey, Rauner Fund IV, L.P. The Prudential Insurance Company of America James A. Harris Michael J. Stone ------ --- Total 100% ------ ---
EX-3.1(I) 3 EXHIBIT 3.1(I) CERTIFICATE OF INCORPORATION OF USAI ACQUISITION CORP. ___________________________________________ ARTICLE ONE The name of the corporation is USAI Acquisition Corp. ARTICLE TWO The address of the corporation's registered office in the State of Delaware is 32 Loockerman Square, Suite L-100, in the City of Dover, county of Kent 19901. The name of its registered agent at such address is The Prentice-Hall Corporation System, Inc. ARTICLE THREE The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General corporation Law of the State of Delaware. ARTICLE FOUR The total number of shares of stock which the Corporation has authority to issue is one thousand (1,000) shares of Common Stock, with a par value of one cent ($.01) per share. ARTICLE FIVE The name and mailing address of the sole incorporator are as follows:
Name Mailing Address ---- --------------- Marci Shaffer 200 East Randolph Drive Suite 5700 Chicago, Illinois 60601
ARTICLE SIX The corporation is to have perpetual existence. ARTICLE SEVEN In furtherance and not in limitation of the powers conferred by statute, the board of directors of the corporation is expressly authorized to make, alter or repeal the by-laws of the corporation. ARTICLE EIGHT Meetings of stockholders may be held within or without the State of Delaware, as the by-laws of the corporation may provide. The books of the corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Election of directors need not be by written ballot unless the by-laws of the corporation so provide. ARTICLE NINE To the fullest extent permitted by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, a director of this corporation shall not be liable to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director. Any repeal or modification of this ARTICLE NINE shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. ARTICLE TEN The corporation expressly elects not to be governed by Section 203 of the General Corporation Law of the State of Delaware. ARTICLE ELEVEN The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders herein are granted subject to this reservation. I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the state of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts stated herein are true, and accordingly have hereunto set my hand on the 13th day of January, 1994. /s/ Marci Shaffer --------------------------------------- Marci Shaffer, Sole Incorporator -2- EX-3.1(II) 4 EXHIBIT 3.1(II) Exhibit 3.1(ii) CERTIFICATE OF CORRECTION OF CERTIFICATE OF INCORPORATION BEFORE PAYMENT OF CAPITAL OF USAI ACQUISITION CORP. * * * * * * * * * * * * Pursuant to Section 103(f) of the General Corporation Law of the State of Delaware * * * * * * * * * * * * I, Marci Shaffer, being the sole incorporator of USAI Acquisition Corp., a corporation organized and existing under and by virtue of the General Corporation Law of the state of Delaware (the "Corporation") do hereby certify as follows: FIRST: That the Certificate of Incorporation of the Corporation was filed in the office of the Secretary of State of Delaware on the 13th day of January, 1994 and that said Certificate of Incorporation requires correction. SECOND: The inaccuracy to be corrected in the Certificate of Incorporation is as follows: ARTICLE FOUR The total number of shares of stock which the Corporation has authority to issue is one thousand (1,000) shares of Common Stock, with a par value of one cent ($.01) per share. THIRD: The portion of the Certificate of Incorporation in corrected form is attached hereto as Exhibit A. FOURTH: That said correction to the certificate of Incorporation of the Corporation be effective as of the date the oriqinal instrument was filed. FIFTH: The Corporation has not received any payment for any of its stock. SIXTH: The foregoing Certificate of correction has been prepared pursuant to the provisions of Section 103(f) of the General Corporation Law of the State of Delaware, by the sole incorporator, no directors having been maned in the Certificate of Incorporation and no directors or officers having been elected. IN WITNESS WHEREOF, the undersigned, being the sole incorporator herainabove named, for the purpose of correcting the Certificate of Incorporation of the Corporation, pursuant to Section 103(f) of the General Corporation Law of the State of Delaware, does hereby make this Certificate of Correction, under penalties of perjury declaring and certifying that this is the act and deed of the Corporation and that the facts herein stated are true, and accordingly has hereunto set her hand this 14th day of January, 1994. /s/ Marci Shaffer ----------------------------------------- Marci Shaffer, Sole Incorporator -2- EXHIBIT A ARTICLE FOUR A. AUTHORIZED SHARES The total number of shares of capital stock which the Corporation has authority to issue is 750,000 shares, consisting of: (1) 500,000 shares of Preferred Stock, par value $.01 per share (the "Preferred Stock"); and (2) 250,000 shares of Common Stock, par value $-01 per share (the "Common Stock"); B. PREFERRED STOCK Section 1. DIVIDENDS. 1A. GENERAL OBLIGATION. When and as declared by the Corporation's board of directors (the "Board") or upon an initial public offering of the Corporation's equity securities, to the extent permitted under applicable law, the Corporation shall pay preferential dividends to the holders of the Preferred stock as provided in this Section 1. Except as otherwise provided herein, dividends an each share of the Preferred Stock (a "Share") shall accrue on a daily basis at the rate of 10% per annum of the sun of the Liquidation Value thereof plus all accumulated and unpaid dividends thereon, from and including the date of issuance of such Share to and including the date on which the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) is paid. such dividends shall accrue whether or not they have been declared and whether or not there are profits, surplus or other funds of the corporation legally available for the payment of dividends. The date on which the Corporation initially issues any Share shall be deemed to be its "date of issuance" regardless of the number of times transfer of such Share is made :in the stock records maintained by or for the Corporation and regardless of the number of certificates which may be issued to evidence such Share. 1B. DIVIDEND REFERENCE DATES. To the extent not paid on March 31, June 30, September 30 and December 31 of each year beginning March 31, 1994 (the "Dividend Reference Dates") . all dividends which have accrued on each Share outstanding during the three-month period (or other period in the case of the initial Dividend Reference Date) ending upon each such Dividend Reference Date shall be accumulated and shall remain accumulated dividends with respect to such Share until paid. 1C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as otherwise provided herein, if at any time the Corporation pays less than the total amount of dividends then accrued with respect to the Preferred stock, such payment shall be distributed ratably among the holders thereof based upon the number of Shares held by each such holder. Section 2. LIQUIDATION. Upon any liquidation, dissolution or winding up of the Corporation. each holder of Pref erred stock shall be entitled to be paid, before any distribution.or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value (plus all accrued and unpaid dividends) of all Shares held by such holderi, and the holders of Preferred Stock shall not be entitled to any further payment. If upon any such liquidation,. dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Preferred Stock are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid, then the entire assets to be distributed shall be distributed ratably among such holders based upon the aggregate Liquidation Value (plus all accrued and unpaid dividends) of the Preferred stock held by each such holder. Prior to the liquidation, dissolution or winding up of the Corporation,, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Pref erred Stock. The Corporation shall mail written notice of such liquidation, dissolution or winding up, not less than 60 days prior to the payment date stated therein, to each record holder of Preferred Stock. Neither the consolidation or merger of the Corporation into or with any other entity or entities, nor the sale or transfer by the Corporation of all or any part of its assets, nor the reduction of the capital stock of the Corporation, shall be deemed to be a liquidation, dissolution or winding up of the Corporation within the meaning of this Section 2. Section 3. PRIORITY OF PREFERRED STOCK ON DIVIDENDS AND REDEMPTIONS. Without the consent of the holders of a majority of the issued and outstanding Preferred Stock, so long as any Preferred Stock remains outstanding, neither the Corporation nor any Subsidiary shall redeem, purchase or otherwise acquire directly or indirectly any Junior Securities, nor shall the Corporation directly or indirectly pay or declare any dividend or make any distribution upon any aunior Securities, if at the time of or immediately after any such redemption, purchase, acquisition, dividend or distribution the Corporation has failed to pay the full amount of dividends accrued on the Preferred Stock or the Corporation has failed to make any redemption of the Preferred Stock required hereunder. Section 4. REDEMPTIONS. 4A. REDEMPTION AFTER PUBLIC The Corporation may at any time redeem all or any portion of Preferred Stock then outstanding. on any such redemption,, the Corporation shall pay a price per Share equal to the Liquidation Value thereof plus all accrued and unpaid dividends thereon. 4B. REDEMPTION AFTER PUBLIC OFFERING. The corporation shall, at the request (by written notice given to the Corporation) of the holders of a majority of the Preferred Stock, apply the net cash proceeds from any Public Offering remaining after deduction of all discounts, underwriters commissions and other reasonable expenses to redeem Shares of Preferred Stock at a -2- price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon). Such redemption shall take place on a date fixed by the Corporation, which date shall be not more than five days after the Corporation's receipt of such proceeds. 4C. REDEMPTION PAYMENT. For each Share which is to be redeemed, the corporation shall be obligated on the Redemption Date to pay to the holder thereof (upon surrender by such holder at the Corporation' s principal office of the certificate representing such Share) an amount in immediately available funds equal to the Liquidation Value of such Share (plus all accrued and unpaid dividends thereon) . If the funds of the Corporation legally available for redemption of Shares on any Redemption Date are insufficient to redeem the total number of Shares to be redeemed on such date, those funds which are legally available shall be used to redeem the maximum possible number of shares ratably among the holders of the Shares to be redeemed based upon the aggregate Liquidation Value of such Shares (plus all accrued and unpaid dividends thereon) held by each such holder. At any time thereafter when additional funds of the corporation are legally available for the redemption of Shares such funds shall immediately be used to redeem the balance of the Shares which the Corporation has become obligated to redeem on any Redemption Date but which it has not redeemed. Prior to any redemption of Preferred Stock, the Corporation shall declare for payment all accrued and unpaid dividends with respect to the Sharer. which are to be redeemed. 4D. NOTICE OF REDEMPTION. The Corporation shall mail written notice of each redemption of any Preferred Stock to each record holder thereof not more than 60 nor less than 30 days prior to the date on which such redemption is to be made. Upon mailing any notice of redemption which relates to a redemption at the Corporation's option, the Corporation shall become obligated to redeem the total number of Shares specified in such notice at the time of redemption specified therein. In case fever than the total number of Shares represented by any certificate are redeemed, a new certificate representing the number of unredeemed Shares shall be issued to the holder thereof without cost to such holder within ,throe business days after :surrender of the certificate representing the redeemed Shares. 4E. DETERMINATION OF THE NUMBER OF EACH HOLDER'S SHARES TO BE REDEEMED. The number of shares of Pref erred Stock to be redeemed from each holder thereof in redemptions hereunder shall be the number of Shares determined by multiplying the total number of Shares to be redeemed times a fraction, the numerator of which shall be the total number of shares then held by such holder and the denominator of which-shall be the total number of Shares then outstanding. 4F. DIVIDEND AFTER REDEMPTION DATE. No Share is entitled to any dividends accruing after the date on which the Liquidation value of such Share (plus all accrued and unpaid dividends thereon) is paid to the holder thereof. on such date all rights of the holder of such Share shall cease, and such Share shall not be deemed to be outstanding. 4G. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which are redeemed or otherwise acquired by the Corporation shall be canceled and shall not be reissued, sold or transferred. -3- 4H. OTHER REDEMPTION OR ACQUISITION. Neither the Corporation nor any Subsidiary shall redeem or otherwise acquire any Preferred Stock, except a& expressly authorized herein. 4I. ACCRUED DIVIDENDS MUST BE -PAID PRIOR TO ANY REDEMPTION. The Corporation may not redeem any Preferred Stock, unless all dividends accrued on the outstanding Preferred Stock through the immediately preceding Dividend Reference Date have been paid in full. 4J. SPECIAL REDEMPTIONS. (i) If a Change in Ownership has occurred or the Corporation obtains knowledge that a Change in Ownership is to occur, the Corporation shall give prompt written notice of such Change in ownership describing in reasonable detail the definitive terms and date of consummation thereof to each holder of Preferred Stock, but in any event such notice shall not be given later than five days after the occurrence of such Change in Ownership. The holder or holders of a majority of the Preferred Stock then outstanding may require the Corporation to redeem all or any portion of the Preferred Stock owned by such holder or holders at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by giving written notice to the Corporation of such election prior to the later of (a) 21 days after receipt of the Corporation's notice and (b) five days prior to the consummation of the Change in Ownership (the "Expiration Date"). The Corporation shall give prompt written notice of any such election to all other holders of Preferred Stock within five days after the receipt thereof, and each such holder shall have until the later of (a) the Expiration Date or (b) tan days after receipt of such second notice to request redemption (by giving written notice to the Corporation) of all or any portion of the Preferred Stock owned by such holder. Upon receipt of such election(s), the Corporation shall be obligated to redeem the aggregate number of Shares specified therein on the later of (a) the occurrence of the Change in Ownership or (b) five days after the Corporation's receipt of such election(s). If in any case a proposed change in ownership does not occur, all requests for redemption in connection therewith shall be automatically rescinded. The term "Change in Ownership" means any sale or issuance or series of sales and/or issuances of shares of the Corporation's capital stock by the Corporation or any holders thereof which results in any Person or group of affiliated Persons (other than the owners of Common Stock as of the date of the Purchase Agreement) owning capital stock of the Corporation possessing the voting power (under ordinary circumstances) to elect a majority of the Board. James A. Harris, Michael J. stone and all members of Corporation"s management who become holders of Common Stock Agreements shall be deemed to be one Person for purposes of determining a "Change in ownership" under this paragraph. (ii) If a Fundamental Change is proposed to occur, the Corporation shall give written notice of such Fundamental Change describing in reasonable detail the definitive terms and date of consummation thereof to each holder of Preferred Stock not more than 45 days nor less than 20 days prior to the consummation thereof. The holder or holders or a majority of the Preferred Stock then outstanding may require the Corporation to redeem all or any portion of the Preferred Stock owned by such holder or holders at a price per share equal to the Liquidation Value thereof -4- (plus all accrued and unpaid dividends thereon) by giving written notice to the Corporation of such election prior to the later of (a) ten days prior to the consummation of the Fundamental Change or (b) ten days after receipt of notice from the Corporation. The Corporation shall give prompt written notice of such election to all other holders of Preferred Stock (but in any avant within five days prior to the consummation of the Fundamental Change), and each such holder shall have until two days after the receipt of such notice to request redemption (by written notice given to the Corporation) of all or any portion of the Preferred stock owned by such holder. Upon receipt of such election(s), the Corporation shall be obligated to redeem the aggregate number of Shares specified therein upon the consummation of such Fundamental Change. If any proposed Fundamental Change does not occur, all requests for redemption in connection therewith shall be automatically rescinded. The term "Fundamental Change" means (a) a sale or transfer of more than 204; of the assets of the Corporation and its Subsidiaries on a consolidated basis (measured by either book value in accordance with generally accepted accounting principles consistently applied or f air market value determined in the reasonable good faith judgment of the Board) in any transaction or series of transactions (other than sales in the ordinary course of business) and (b) any merger or consolidation to which the Corporation is a party, except for a merger in which the Corporation is the surviving corporation and, after giving effect to such merger the holders of the Corporation"s outstanding capital stock possessing a majority of the voting power (under ordinary circumstances) to elect a majority of the Board immediately prior to the merger shall own the Corporation"s outstanding capital stock possessing the voting power (under ordinary circumstances) to elect a majority of the Board. 4K. REDEMPTIONS ON- REQUEST. At any time after January 1, 2000, the holders of a majority of the Preferred stock may request redemption of all of their Shares of Preferred stock by delivering written notice of such request to the Corporation. Within five days after receipt of such request, the Corporation shall give written notice of such request to all other holders of Pref erred Stock, and such other holders may request redemption of their Shares of Preferred Stock by delivering written notice to the Corporation within five days 'after receipt of the Corporation's notice. The Corporation shall be required to redeem all Shares with respect to which such redemption requests have been made at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon) within 20 days after receipt of the initial redemption request. Section 5. VOTING RIGHTS. Except as otherwise provided herein and as otherwise required by law, the Preferred Stock shall have no voting rights. Section 6. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office a register for the registration of the Preferred Stock. Upon the surrender of any certificate representing Preferred Stock at such place, the Corporation shall, at the request of the record holder of such certificate, execute and deliver (at the Corporation"s .expense) a now certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such now certificate -5- shall be registered in such name and shall represent such number of Shares as is requested by the holder of the surrendered certificate ana shall be substantially identical in form to the surrendered certificate, and dividends shall accrue on the Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such Preferred Stock represented by the surrendered certificate. Section 7. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing Shares of any class of Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation, or, in the case of any such mutilation upon surrender of such certificate, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen,, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends shall accrue on the Preferred Stock represented by such now certificate from the date to which dividends have been fully paid on such lost,, stolen, destroyed or mutilated certificate. Section 8. DEFINITIONS. "JUNIOR SECURITIES" means any of the Corporation's equity securities other than the Preferred Stock. "LIQUIDATION VALUE" of any Share as of any particular date shall be equal to $100. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "PUBLIC OFFERING" means any of faring by the Corporation of its equity securities to the public pursuant to am effective registration statement under the Securities Act of 1933, as amended, as then in affect, or any comparable statement under any similar federal statute then in force; provided that f or purposes of paragraph 4B hereof, a Public Offering shall not include an offering made in connection with a business acquisition or combination or an employee benefit plan. "PURCHASE AGREEMENT" means the Equity Purchase Agreement by and between the Corporation and Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership, as such agreement may f rom time to time be amended in accordance with its terms. "REDEMPTION DATE" as to any Share means the date specified in the notice of any redemption at the Corporation's option or at the holder's option or the applicable date specified herein in the case of any other redemption; provided that no such date shall be a Redemption Date -6- unless the Liquidation Value of such share (plus all accrued. and unpaid dividends thereon) is actually paid in full on such date, and if not so paid in full, the Redemption Date shall be the date on which such amount is fully paid. "SUBSIDIARY means any corporation of which the shares of outstanding capital stock possessing the voting power (under ordinary circumstances) in electing the board of directors are, at the time as of which any determination is being made, owned by the Corporation either directly or indirectly through Subsidiaries. Section 9. AMENDMENT AND WAIVER. No amendment, modification or waiver shall be binding or effective with respect to any provision of this Section B without the prior written consent of the holders of at least 50% of the Preferred Stock outstanding at the time such action is taken; provided that no such action shall change (a) the rate at which or the manner in which dividends on the Preferred Stock accrue or the times at which such dividends become payable or the amount payable on redemption of the Preferred Stock or the times at which redemption of Preferred Stock is to occur, without the prior written consent of the holders of at least 75% of the Preferred Stock then outstanding or (b) the percentage required to approve any change described in clause (a) above.. without the prior written consent of the holders of at least 75% of the Preferred stock then outstanding; and provided further that no change in the terms hereof may be accomplished by merger or consolidation of the Corporation with another corporation or entity unless the corporation has obtained the prior written consent of the holders of the applicable percentage of the Preferred Stock then outstanding. SECTION 10. NOTICES. Except as otherwise expressly provided hereunder,, all notices referred to herein shall be in writing and shall be delivered by registered or certified mail, return receipt requested and postage prepaid, or by reputable overnight courier service, charges prepaid, and shall be deemed to have been given when so mailed or sent (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). C. COMMON STOCK 1. VOTING RIGHT. Except as otherwise provided in this Section C or as otherwise required by applicable law, holders of Common Stock shall be entitled to one vote per share on all matters to be voted on by the stockholders of the Corporation -7- 2. DIVIDENDS. After dividends on the Preferred Stock, to the extent such stock may be entitled thereto, shall have been .paid or set apart for payment, the Board may declare a dividend upon the Common Stock out of the unrestricted and unreserved surplus of the Corporation. As and when dividends are declared or paid thereon, whether in cash, property or securities of the Corporation, the holders of Common Stock shall be entitled to participate in such dividends ratably on a per share basis. 3. LIQUIDATION. Subject to the provisions of the Preferred Stock, the holders of the Common Stock shall be entitled to participate ratably on a per share basis in all distributions to the holders of Common stock in any liquidation, dissolution or winding up of the Corporation. 4. REGISTRATION OF TRANSFER. The Corporation shall keep at its principal office (or such other place as the Corporation reasonably designates) a register for the registration of shares of the Common stock. Upon the surrender of any certificate representing shares of any class of Common stock at such place, the Corporation shall, at the request of the registered holder of such certificate, execute and deliver a new certificate or certificates in exchange therefor representing in the aggregate the number of shares of such class represented by the surrendered .certificate, and the Corporation forthwith shall cancel such surrendered certificate. Each such now certificate will be registered in such name and will represent such number of shares of such class as is requested by the holder of the surrendered cartificate and will be substantially identical in form to the surrendered certificate. The issuance of now certificates shall be made without charge to the holders of the surrendered certificates for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such issuance. 5. REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or mutilation of any certificate evidencing one or more shares of any class of Common Stock, and in the case of any such lossy theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that it the holder is a financial institution or other institutional investor its own agreement will be satisfactory) p or,, in the case of any such mutilation upon surrender of such certificate,, the Corporation shall (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate. 6. NOTICES. All notices referred to herein shall be in writing, shall be delivered personally or by first class mail, postage prepaid, and shall be deemed to have been given when so delivered or sailed to the corporation at its principal executive offices and to any stockholder at such holder,'s address as it appears in the stock records of the Corporation (unless otherwise specified in a written notice to the Corporation by such holder). -8- EX-3.1(III) 5 EXHIBIT 3.1(III) CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF USAI ACQUISITION CORPORATION * * * * * * * Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware * * * * * * * James A. Harris and Michael J. Stone, being the President and Treasurer, respectively, of USAI Acquisition Corp., a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DO HEREBY CERTIFY as follows: FIRST: The Board of Directors of the Corporation adopted the resolution set forth below proposing the amendment to the Certificate of Incorporation (the "Amendment") and directed that the Amendment be submitted to the holders of the issued and outstanding shares of Common Stock of the Corporation entitled to vote thereon for its consideration and approval: RESOLVED, that the board of directors of the Corporation deem it advisable and in its best interest to amend its Certificate of Incorporation of the Corporation by deleting ARTICLE ONE in its entirety and inserting in its place a new ARTICLE ONE to read as follows: ARTICLE ONE The name of the corporation is U.S. Aggregates, Inc. SECOND: The Amendment as duly adopted in accordance with Section228 and Section242 of the General Corporation Law of the State of Delaware by the holders of the issued and outstanding shares of the Common Stock of the Corporation entitled to vote thereon. * * * * * * * 2 IN WITNESS WHEREOF, the undersigned do hereby certify under penalties of perjury that this Certificate of Amendment is the act and deed of the undersigned and the facts stated herein are true and accordingly have hereunto set their hands this 24th day of February, 1994. USAI ACQUISITION CORP., a Delaware corporation By: /s/ James A. Harris -------------------------------- James A. Harris, President ATTEST: By: /s/ Michael J. Stone ------------------------------------------------ Michael J. Stone, Treasurer 3 EX-3.1(IV) 6 EXHIBIT 3.1(IV) CHARTER AMENDMENT CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF U.S. AGGREGATES, INC. ---------------------- Adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware Michael J. Stone, being Treasurer, of U.S. Aggregates, Inc., a corporation duly organized and existing under and by virtue or the General Corporation Law of the State of Delaware (the "Corporation"), DOES HERE-BY CERTIFY &s. follows: FIRST: The Board of Directors of the Corporation adapted the resolution set forth below proposing the amendment to the Certificate of Incorporation (the "Amendment") and directed that the Amendment be submitted to the holders of the issued and outstanding shares or Common Stock of the Corporation entitled to vote thereon for its consideration and approval: RESOLVED, that the Board of Directors of the Corporation deems it advisable and in the Corporation's best interest to amend its Certificate of Incorporation of the Corporation by deleting Article Four, Sections 4J and 4K to read as follows: 4J. SPECIAL REDEMPTIONS. (i) If a Change in Ownership bas occurred or the Corporation obtains knowledge that a Change in Ownership is to occur, the Corporation shall give prompt written notice of such Change in Ownership describing in reasonable detail the definitive terms and date of consummation thereof to each holder of Preferred Stock, but in any event such notice shall not be given later than five days after the occurrence of such Change in Ownership. The holder or holders of a majority of the Preferred Stock then outstanding may require the Corporation to redeem all or any portion of the Preferred Stock owned by such holder or holden at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon) by giving written notice to the Corporation of such election prior to the later of (a) 21 days aller receipt of the Corpvrativn'3i notice and (b) five days prior to the consummation of the Change in Ownership (the "Expiration Date"). The Corporation shall give prompt written notice of any such election to all other holders of Preferred Stock within five days after the receipt thereof. and each such holder shall have; until the later of (a) the Expiration Date or (b) ten days after receipt of such second notice to request redemption (by giving written notice to the Corporation) of all or any portion of the Preferred Stock owned by such bolder. Upon receipt of such election(s), the Corporation, subject to Section 4L, shall be obligated to redeem the aggregate number of Shares specified therein on the later of (a) the occurrence of the change in Ownership or (b) five days after the Corporation's receipt Of such election (3). If in any cast; a proposed Change in Ownership does not occur. all requests for redemption in connection therewith shall be automatically rescinded. The term "Change in Ownership" means any sale or issuance or series of sales and/or issuances of shares of the Corporation's capital stock by the Corporation or any holders thereof which results in any Person or group of affiliated Persons (other than the owners of Common Stock as of the date or the Purchase Agreement) owning capital stock of the Corporation possessing the voting power (under ordinary circumstances) to elect a majority of the Board. James A. Harris, Michael J. Stone and all members of Corporation's management who become holders of Common Stock Agreements shall be deemed to be one Person for purposes of determining a "Change in Ownership" under this paragraph. (ii) If a Fundamental Change is proposed to occur, the Corporation shall give written notice of such Fundamental Change describing in reasonable detail the definitive terms and date of consummation thereof to each holder of Preferred Stock not more than 45 days or less than 20 days prior to the consummation thereof. The holder or holders of it majority of the Preferred Stock then outstanding may require the Corporation to redeem all or any portion of the Preferred Stock owned by such holder or holders at a price per Share equal to the Liquidation Value thereof (plus all 2 accrued and unpaid dividends thereon) by giving written notice to the Corporation of such election prior to the later of (a) ten days prior to the consummation of the Fundamental Change or (b) ten days after receipt of notice from the Corporation. The Corporation shall give prompt written notice of such election to all other holders of Preferred Stock (but in any event within five days prior to the consummation of the Fundamental Change), and each such bolder shall have until two days after the receipt of such notice to request redemption (by written notice given to the Corporation ) of a or any portion of the Preferred Stock owned by such holder. Upon receipt of such election(s), the Corporation, subject to Section 4L, shall be obligated to redeem the aggregate number of Shares specified therein upon the consummation of 'such Fundamental Change. If any proposed Fundamental Change does not occur, all requests for redemption in connection therewith shall be automatically rescinded. The term "Fundamental Change" means (a) a sale of transfer of more than 20% of the assets or the Corporation and its Subsidiaries on a consolidated basis (measured by either book value in accordance with generally accepted accounting principles consistently applied or fair market value determined in the reasonably good faith judgment of the Board) in any transaction or series of transactions (other than sales in the ordinary course of business) and (b) any merger or consolidation to which the Corporation is a party, except for a merger in which the Corporation is the surviving corporation and, after giving effect to such merger, the holders or the Corporation's outstanding capital stock possessing a majority of the voting power (under ordinary circumstances) to elect a majority of the Board immediately prior in the merger shall own the Corporation's outstanding capital stock possessing the voting power (under ordinary circumstances) to elect a majority of the Board. 4K. REDEMPTIONS ON REQUEST. At any time after January 1, 2000, the holders of a majority of the Preferred Stock may request redemption of 4 of their Shares of Preferred Stock by delivering written notice of such request to the Corporation. Within five days after receipt of such request, the Corporation shall give written notice of such request to all other 3 holders of Preferred Stock, and such other holders may request redemption of their Shares of Preferred Stock by delivering written notice to the Corporation within five days after receipt of the Corporation's notice. The Corporation, subject to Section 4L, shall be required to redeem all Shares with respect to which such redemption requests have been made at a price per Share equal to the Liquidation Value thereof (plus all accrued and unpaid dividends thereon) within 20 days after receipt of the initial redemption request. RESOLVED, that the Board of Directors of the Corporation deems it advisable and in the Corporation's best interest to amend its Certificate of Incorporation of the Corporation by adding Article Four. Section 41. to read as follows: 4L. LIMITATION ON REDEMPTION OBLIGATIONS. In the event that any Default or Event of Default shall occur and be continuing, unless and until such Default or Event of Default shall have been cured or waived or shall have ceased to exist (the "Suspension Period"), the Corporation shall not redeem any Shut* of Preferred Stock requested to be redeemed by any holders thereof Within a reasonable time of the Corporation becoming aware of the existence of any condition or event that constitutes a Default or an Event of Default, a written notice specifying the nature and period of existence thereof and what action the Corporation is taking or proposes to take with respect 4 thereto shall be provided to the holders of Preferred Stock. In the event that the Default or Event of Default is duly cured or waived, the Suspension Period shall terminate and the Corporation shall provide prompt written notice specifying such event to the holders of Preferred Stock. RESOLVED, that the Board of Directors of the Corporation deems it advisable and in the Corporation's best interest to amend its Certificate of Incorporation of the Corporation by adding the following defined terms in the appropriate alphabetical order to Article Four, Section 8: "Default " has the meaning assigned to it in paragraph 11B or the Note and Warrant Purchase Agreement. "Event of Default" has the meaning assigned to it in paragraph 11B of the Note and Warrant Purchase Agreement. "Note and Warrant Purchase Agreement" means that certain Note and Warrant Purchase Agreement dated as of November 21. 1996. among the Corporation and each of the purchasers listed on Annex I thereto, as amended from time to time. SECOND,:The Amendment was duly adopted in accordance with Section 228 and Section 242 of the General Corporation Law of the State of Delaware by the holders of the issued and outstanding shares of the Common Stock and Preferred Stock of the Corporation entitled to vote thereon. 5 IN WITNESS WHEREOF, the undersigned does hereby certify under penalty of perjury that this Certificate of Amendment is the act and deed of the undersigned and the facts stated herein are true and accordingly have hereunto set his hand this 21st day of November, 1996 U.S. AGGREGATES, INC. a Delaware corporation By: /s/ Michael J. Stone ------------------------------------- Michael J. Stone, Treasurer 6 EX-3.1(V) 7 EXHIBIT 3.1(V) Exhibit 3.1(v) CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION OF U.S. AGGREGATES, INC. * * * * Adopted in accordance with the provisions of Section 242 of the General Corporation Low of the State of Delaware * * * * The undersigned being the Executive Vice President of U.S. Aggregates, Inc., a corporation duly organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: The Board of Directors of the Corporation adopted the resolution set forth below proposing an amendment to the Certificate of Incorporation of the Corporation (the "Amendment") and directed that the Amendment be submitted to the holders of a least a majority of the issued and outstanding shares of Common Stock of the Corporation entitled to vote thereon for their consideration and approval: "RESOLVED, that the Certificate of Incorporation of the Corporation be, and hereby is, amended in accordance with Section 242 of the General Corporation Law of the State of Delaware by deleting the definition of "Note and Warrant Purchase Agreement" in Section 8 of Article Four thereof in its entirety and substituting therefor the definition of Note and Warrant Purchase Agreement" in Section 8 of Article Four as follows: "NOTE AND WARRANT PURCHASE AGREEMENT" means that certain Amended and Restated Note and Warrant Purchase Agreement, dated June 5, 1998, as may be amended from time-to-time, by and among the Corporation and each of the purchasers listed on Annex I attached thereto." SECOND: The Amendment was duly adopted in accordance with Section 228 and Section 242 of the General Corporation Law of the State of Delaware by the holders of at least a majority of the issued and outstanding shares of the Common Stock of the Corporation entitled to vote thereon. Written notice has been given to the holders of the issued and outstanding shares of Common Stock of the Corporation who have not consented in writing to the Amendment. IN WITNESS WHEREOF, the undersigned does hereby certify under penalties of perjury that this Certificate of Amendment to the Certificate of Incorporation of the Corporation is the act and deed of the undersigned and the facts stated herein are true and accordingly has hereunto set his hand this 3rd day of June, 1998. U.S. Aggregates, Inc., a Delaware corporation By: /s/Michael J. Stone ----------------------------------- Name: Michael J. Stone Title: Executive Vice President -2- EX-3.2(I) 8 EXHIBIT 3.2(I) Exhibit 3.2(i) BY-LAWS OF U.S. AGGREGATES, INC. A Delaware Corporation ARTICLE I OFFICES SECTION 1. REGISTERED OFFICE. The registered office of the corporation in the State of Delaware shall be located at 32 Loockerman Square, Suite L-100, Dover, Delaware, County of Kent. The name of the corporation's registered agent at such address shall be The Prentice-Hall Corporation System, Inc. The registered office and/or registered agent of the corporation may be changed from time to time by action of the board of directors. SECTION 2. OTHER OFFICES. The corporation may also have offices at such other places, both within and without the State of Delaware, as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS SECTION 1. PLACE AND TIME OF MEETINGS. An annual meeting of the stockholders shall be held each year within one hundred twenty (120) days after the close of the immediately preceding fiscal year of the corporation for the purpose of electing directors and conducting such other proper business as may come before the meeting. The date, time and place of the annual meeting shall be determined by the chief executive officer of the corporation; provided, that if the chief executive officer does not act, the board of directors shall determine the date, time and place of such meeting. SECTION 2. SPECIAL MEETINGS. Special meetings of stockholders may be called for any purpose and may be held at such time and place, within or without the State of Delaware, as shall be stated in a notice of meeting or in a duly executed waiver of notice thereof. SECTION 3. PLACE OF MEETINGS. The board of directors may designate any place, either within or without the State of Delaware, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal executive office of the corporation. SECTION 4. NOTICE. Whenever stockholders are required or permitted to take action at a meeting, written or printed notice stating the place, date, time, and, in the case of special meetings, the purpose or purposes, of such meeting, shall be given to each stockholder entitled to vote at such meeting. SECTION 5. STOCKHOLDERS LIST. The officer having charge of the stock ledger of the corporation shall make, at least 10 days before every meeting of the stockholders, a complete list of the stockholders entitled to vote at such meeting arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. SECTION 6. OUORUM. The holders of a majority of the outstanding shares of capital stock, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by statute or by the certificate of incorporation. If a quorum is not present, the holders of a majority of the shares present in person or represented by proxy at the meeting, and entitled to vote at the meeting, may adjourn the meeting to another time and/or place. SECTION 7. ADJOURNED MEETINGS. When a meeting is adjourned to another time and place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. SECTION 8. VOTE REQUIRED. When a quorum is present, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders, unless the question is one upon which by express provisions of an applicable law or of the certificate of incorporation a different vote is required, in which case such express provision shall govern and control the decision of such question. SECTION 9. VOTING RIGHTS. Except as otherwise provided by the General Corporation Law of the State of Delaware or by the certificate of incorporation of the corporation or any amendments thereto and subject to Section 3 of Article VI hereof, every stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of common stock held by such stockholder. -2- SECTION 10. PROXIES. Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act f or him or her by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. SECTION 11. ACTION BY WRITTEN CONSENT. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken and bearing the dates of signature of the stockholders who signed the consent or consents, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the state of Delaware, or the corporation's principal place of business, or an officer or agent of the corporation having custody of the book or books in which proceedings of meetings of the stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. All consents properly delivered in accordance with this section shall be deemed to be recorded when so delivered. No written consent shall be effective to take the corporate action referred to therein unless, within sixty days of the earliest dated consent delivered to the corporation as required by this section, written consents signed by the holders of a sufficient number of shares to take such corporate action are so recorded. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. Any action taken pursuant to such written consent or consents of the stockholders shall have the same force and effect as if taken by the stockholders at a meeting thereof. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business and affairs of the corporation shall be managed by or under the direction of the board of directors. SECTION 2. NUMBER, ELECTION AND TERM OF OFFICE. The number of directors which shall constitute the first board shall be seven (7). Thereafter, the number of directors shall be established from time to time by resolution of the board. The directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote in the election of directors. The directors shall be elected in this manner at the annual meeting of the stockholders, except as provided in Section 4 of this Article III. Each director elected shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. SECTION 3. REMOVAL AND RESIGNATION. Any director or the entire board of -3- directors may be removed at any time, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors. Whenever the holders of any class or series are entitled to elect one or more directors by the provisions of the corporation's certificate of incorporation, the provisions of this section shall apply, in respect to the removal without cause of a director or directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole. Any director may resign at any time upon written notice to the corporation. SECTION 4. VACANCIES. Except as otherwise provided in the Voting Agreement, vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director. Each director so chosen shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as herein provided. SECTION 5. ANNUAL MEETINGS. The annual meeting of each newly elected board of directors shall be held without other notice than this by-law immediately after, and at the same place as, the annual meeting of stockholders. SECTION 6. OTHER MEETINGS AND NOTICE. Regular meetings, other than the annual meeting, of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by resolution of the board. Special meetings of the board of directors may be called by or at the request of the chief executive officer on at least 24 hours notice to each director, either personally, by telephone, by mail, or by telegraph. SECTION 7. OUORUM, REQUIRED VOTE AND ADJOURNMENT. A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of a majority of directors present at a meeting at which a quorum is present shall be the act of the board of directors. If a quorum shall not be present at any meeting of the board of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. SECTION 8. COMMITTEES. The board of directors may, by resolution passed by a majority of the whole board, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these by-laws shall have and may exercise the powers of the board of directors in the management and affairs of the corporation except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. SECTION 9. COMMITTEE RULES. Each committee of the board of directors may -4- fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. In the event that a member and that member's alternate, if alternates are designated by the board of directors as provided in Section 8 of this Article III, of such committee is or are absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. SECTION 10. COMMUNICATIONS EQUIPMENT. Members of the board of directors or any committee thereof may participate in and act at any meeting of such board or committee through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other, and participation in the meeting pursuant to this section shall constitute presence in person at the meeting. SECTION 11. WAIVER OF NOTICE AND PRESUMPTION OF ASSENT. Any member of the board of directors or any committee thereof who is present at a meeting shall be conclusively presumed to have waived notice of such meeting except when such member attends for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Such member shall be conclusively presumed to have assented to any action taken unless his or her dissent shall be entered in the minutes of the meeting or unless his or her written dissent to such action shall be filed with the person acting as the secretary of the meeting before the adjournment thereof or shall be forwarded by registered mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to any member who voted in favor of such action. SECTION 12. ACTION BY WRITTEN CONSENT. Unless otherwise restricted by the certificate of incorporation, any action required or permitted to be taken at any meeting of the board of directors, or of any committee thereof, may be taken without a meeting if all members of the board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the board or committee. ARTICLE IV OFFICERS SECTION 1. NUMBER. The officers of the corporation shall be elected by the board of directors and shall consist of a chief executive officer, a president, any number of vice presidents, a secretary, a chief financial officer, a treasurer and such other officers and assistant officers as may be deemed necessary or desirable by the board of directors. Any number of offices may be held by the same person. In its discretion, the board of directors may choose not to f ill any of f ice f or any period as it may deem advisable, except that the offices of chief executive officer and secretary shall be filled as expeditiously as possible. -5- SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at its first meeting held after each annual meeting of stockholders or as soon thereafter as conveniently may be. Vacancies may be filled or new of f ices created and filled at any meeting of the board of directors. Each officer shall hold office until a successor is duly elected and qualified or until his or her earlier death, resignation or removal as hereinafter provided. SECTION 3. REMOVAL. Any officer or agent elected by the board of directors may be removed by the board of directors whenever in its judgment the best interests of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. VACANCIES. Any vacancy occurring in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term by the board of directors then in office. SECTION 5. COMPENSATION. Compensation of all officers shall be fixed by the board of directors, and no officer shall be prevented from receiving such compensation by virtue of his or her also being a director of the corporation. SECTION 6. THE CHIEF EXECUTIVE OFFICER. The chief executive officer of the corporation shall be the senior-most officer of the corporation and shall preside at all meetings of the stockholders and board of directors at which he or she is present; subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The chief executive officer shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed or except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The chief executive officer shall have such other powers and perform such other duties as may be prescribed by the board of directors or as may be provided in these by-laws. SECTION 7. THE PRESIDENT. The president shall subject to the powers of the board of directors, shall have general charge of the business, affairs and property of the corporation, and control over its officers, agents and employees; and shall see that all orders and resolutions of the board of directors are carried into effect. The president shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. The president shall have such other powers and perform such other duties as may be prescribed by the board of directors, the chief executive officer or as may be provided in these by-laws. SECTION 8. VICE-PRESIDENTS. The vice-president, or if there shall be more than -6- one, the vice-presidents in the order determined by the board of directors shall, in the absence or disability of the president, act with all of the powers and be subject to all the restrictions of the chief executive officer. The vice-presidents shall also perform such other duties and have such other powers as the board of directors, the chief executive officer, the president or these by-laws may, from time to time, prescribe. SECTION 9. THE SECRETARY AND ASSISTANT SECRETARIES. The secretary shall attend all meetings of the board of directors, all meetings of the committees thereof and all meetings of the stockholders and record all the proceedings of the meetings in a book or books to be kept f or that purpose. Under the chief executive officer's supervision, the secretary shall give, or cause to be given, all notices required to be given by these by-laws or by law; shall have such powers and perform such duties as the board of directors, the chief executive officer or these by-laws may, from time to time, prescribe; and shall have custody of the corporate seal of the corporation. The secretary, or an assistant secretary, shall have authority to affix the corporate seal to any instrument requiring it and when so affixed, it may be attested by his or her signature or by the signature of such assistant secretary. The board of directors may give general authority to any other officer to aff ix the seal of the corporation and to attest the affixing by his or her signature. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary and shall perform such other duties and have such other powers as the board of directors, the chief executive officer, the president or secretary may, from time to time, prescribe. SECTION 10. THE CHIEF FINANCIAL OFFICER, TREASURER AND ASSISTANT TREASURER. The chief financial officer and the treasurer shall have the custody of the corporate funds and securities; shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation; shall deposit all monies and other valuable effects in the name and to the credit of the corporation as may be ordered by the board of directors; shall cause the funds of the corporation to be disbursed when such disbursements have been duly authorized, taking proper vouchers f or such disbursements; and shall render to the chief executive officer and the board of directors, at its regular meeting or when the board of directors so requires, an account of the corporation; shall have such powers and perform such duties as the board of directors, the chief executive officer or these by-laws may, from time to time, prescribe. If required by the board of directors, the chief financial officer and the treasurer shall give the corporation a bond (which shall be rendered every six years) in such sums and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of the office of treasurer and for the restoration to the corporation, in case of death, resignation, retirement, or removal from office, of all books, papers, vouchers, money, and other property of whatever kind in the possession or under the control of the chief financial officer and the treasurer belonging to the corporation. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors, shall in the absence or disability of the chief financial officer or the treasurer, perform the duties and exercise the powers of the treasurer. The assistant treasurers shall perform such other duties and have such other powers as the board of directors, the chief executive officer, the president or the treasurer may, from time to time, prescribe. -7- SECTION 11. OTHER OFFICERS, ASSISTANT OFFICERS AND AGENTS. Officers, assistant officers and agents, if any, other than those whose duties are provided for in these by-laws, shall have such authority and perform such duties as may from time to time be prescribed by resolution of the board of directors. SECTION 12. ABSENCE OR DISABILITY OF OFFICERS. In the case of the absence or disability of any officer of the corporation and of any person hereby authorized to act in such officer's place during such officer's absence or disability, the board of directors may by resolution delegate the powers and duties of such officer to any other officer or to any director, or to any other person whom it may select. -8- ARTICLE V INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS SECTION 1. NATURE OF INDEMNITY. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding") , by reason of the fact that he or she, is or was a director or officer, of the corporation or is or was serving at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee, fiduciary or agent or in any other capacity while serving as a director, officer, employee, fiduciary or agent, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 2 hereof, the corporation shall indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article V shall be a contract right and, subject to Sections 2 and 5 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation with the same scope and effect as the foregoing indemnification of directors and officers. SECTION 2. PROCEDURE FOR INDEMNIFICATION OF DIRECTORS AND OFFICERS. Any indemnification of a director, officer, employee, fiduciary or agent of the corporation under Section 1 of this Article V or advance of expenses under Section 5 of this Article V shall be made promptly, and in any event within 30 days, upon the written request of the director, officer, employee, fiduciary or agent. If a determination (as defined in the General Corporation Law of the State of Delaware) by the corporation that the director, officer, employee, fiduciary or agent is entitled to indemnification pursuant to this Article V is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of expenses, in whole or in part, or if payment in full pursuant to such request is not made within 30 days, the right to indemnification or advances as granted by this Article V shall be enforceable by the director, officer, employee, fiduciary or agent in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any, has been tendered to the corporation) that the claimant has not met the standards of conduct which -9- make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 3. ARTICLE NOT EXCLUSIVE. The rights to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article V shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. SECTION 4. INSURANCE. The corporation may purchase and maintain insurance on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article V. SECTION 5. EXPENSES. Expenses incurred by any person described in Section 1 of this Article V in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. SECTION 6. EMPLOYEES AND AGENTS. Persons who are not covered by the foregoing provisions of this Article V and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation as employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. SECTION 7. CONTRACT RIGHTS. The provisions of this Article V shall be deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article V and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article V or any such law shall not affect any rights or obligations then existing with respect to any -10- state of facts or proceeding then existing. SECTION 8. MERGER OR CONSOLIDATION. For purposes of this Article V, references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee, fiduciary or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article V with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. ARTICLE VI CERTIFICATES OF STOCK SECTION 1. FORM. Every holder of stock in the corporation shall be entitled to have a certificate, signed by, or in the name of the corporation by the chairman, chief executive officer, or a vice-president and the secretary or an assistant secretary of the corporation, certifying the number of shares owned by such holder in the corporation. If such a certificate is countersigned (1) by a transfer agent or an assistant transfer agent other than the corporation or its employee or (2) by a registrar, other than the corporation or its employee, the signature of any such chairman, chief executive officer, vice president, secretary, or assistant secretary may be facsimiles. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the corporation whether because of death, resignation or otherwise before such certificate or certificates have been delivered by the corporation, such certificate or certificates may nevertheless be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the corporation. All certificates for shares shall be consecutively numbered or otherwise identified. The name of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the books of the corporation. Shares of stock of the corporation shall only be transferred on the books of the corporation by the holder of record thereof or by such holder's attorney duly authorized in writing, upon surrender to the corporation of the certificate or certificates for such shares endorsed by the appropriate person or persons, with such evidence of the authenticity of such endorsement, transfer, authorization, and other matters as the corporation may reasonably require, and accompanied by all necessary stock transfer stamps. In that event, it shall be the duty of the corporation to issue a new certificate to the person entitled thereto, cancel the old certificate or certificates, and record the transaction on its books. The board of directors may appoint a bank or trust company organized under the laws of the United States or any state thereof to act as its transfer agent or registrar, or both in connection with the transfer of any class or series of securities of the corporation. -11- SECTION 2. LOST CERTIFICATES. The board of directors may direct a new certificate or certificates to be issued in place of any certificate or certificates previously issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. When authorizing such issue of a new certificate or certificates, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to give the corporation a bond sufficient to indemnify the corporation against any claim that may be made against the corporation on account of the loss, theft or destruction of any such certificate or the issuance of such new certificate. SECTION 3. FIXING A RECORD DATE FOR STOCKHOLDER MEETINGS. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which record date shall not be more than sixty nor less than ten days before the date of such meeting. If no record date is fixed by the board of directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be the close of business on the next day preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the board of directors may fix a new record date for the adjourned meeting. SECTION 4. FIXING A RECORD DATE FOR ACTION BY WRITTEN CONSENT. In order that the corporation may determine the stockholders entitled to consent to corporate action in writing without a meeting, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the board of directors, and which date shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors. If no record date has been fixed by the board of directors, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting, when no prior action by the board of directors is required by statute, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the corporation by delivery to its registered office in the State of Delaware, its principal place of business, or an officer or agent of the corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. If no record date has been fixed by the board of directors and prior action by the board of directors is required by statute, the record date for determining stockholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the board of directors adopts the resolution taking such prior action. SECTION 5. FIXING A RECORD DATE FOR OTHER PURPOSES. In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other -12- distribution or allotment or any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purposes of any other lawful action, the board of directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board of directors adopts the resolution relating thereto. SECTION 6. REGISTERED STOCKHOLDERS. Prior to the surrender to the corporation of the certificate or certificates for a share or shares of stock with a request to record the transfer of such share or shares, the corporation may treat the registered owner as the person entitled to receive dividends, to vote, to receive notifications, and otherwise to exercise all the rights and powers of an owner. SECTION 7. SUBSCRIPTIONS FOR STOCK. Unless otherwise provided for in the subscription agreement, subscriptions for shares shall be paid in full at such time, or in such installments and at such times, as shall be determined by the board of directors. Any call made by the board of directors f or payment on subscriptions shall be uniform as to all shares of the same class or as to all shares of the same series. In case of default in the payment of any installment or call when such payment is due, the corporation may proceed to collect the amount due in the same manner as any debt due the corporation. ARTICLE VII GENERAL PROVISIONS SECTION 1. DIVIDENDS. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or any other purpose and the directors may modify or abolish any such reserve in the manner in which it was created. SECTION 2. CHECKS, DRAFTS OR ORDERS. All checks, drafts, or other orders for the payment of money by or to the corporation and all notes and other evidences of indebtedness issued in the name of the corporation shall be signed by such officer or officers, agent or agents of the corporation, and in such manner, as shall be determined by resolution of the board of directors or a duly authorized committee thereof. SECTION 3. CONTRACTS. The board of directors may authorize any officer or -13- officers, or any agent or agents, of the corporation to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 4. LOANS. The corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiary, including any officer or employee who is a director of the corporation or its subsidiary, whenever, in the judgment of the directors, such loan, guaranty or assistance may reasonably be expected to benefit the corporation. The loan, guaranty or other assistance may be with or without interest, and may be unsecured, or secured in such manner as the board of directors shall approve, including, without limitation, a pledge of shares of stock of the corporation. Nothing in this section contained shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute. SECTION 5. FISCAL YEAR. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SECTION 6. CORPORATE SEAL. The board of directors shall provide a corporate seal which shall be in the form of a circle and shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. SECTION 7. VOTING SECURITIES OWNED BY CORPORATION. Voting securities in any other corporation held by the corporation shall be voted by the chief executive officer, unless the board of directors specifically confers authority to vote with respect thereto, which authority may be general or confined to specific instances, upon some other person or officer. Any person authorized to vote securities shall have the power to appoint proxies, with general power of substitution. SECTION 8. INSPECTION OF BOOKS AND RECORDS. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts therefrom. A proper purpose shall mean any purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in the State of Delaware or at its principal place of business. SECTION 9. SECTION HEADINGS. Section headings in these by-laws are for convenience of reference only and shall not be given any substantive effect in limiting or otherwise construing any provision herein. -14- SECTION 10. INCONSISTENT PROVISIONS. In the event that any provision of these 'by-laws is or becomes inconsistent with any provision of the certificate of incorporation, the General Corporation Law of the State of Delaware or any other applicable law, the provision of these by-laws shall not be given any effect to the extent of such inconsistency but shall otherwise be given full force and effect. ARTICLE VIII AMENDMENTS These by-laws may be amended, altered, or repealed and new by-laws adopted at any meeting of the board of directors by a majority vote. The fact that the power to adopt, amend, alter, or repeal the by-laws has been conferred upon the board of directors shall not divest the stockholders of the same powers. -15- EX-10.1 9 EXHIBIT 10.1 PROFESSIONAL SERVICES AGREEMENT PROFESSIONAL SERVICES AGREEMENT ("Agreement"), dated as of January 24, 1994, by and between Golder, Thoma, Cressey, Rauner, Inc., a Delaware Corporation ("GTCR"), and USAI Acquisition Corp., a Delaware corporation (the "Company"). WHEREAS, Golder, Thoma, Cressey, Rauner Fund IV Limited partnership, an Illinois limited partnership ("Purchaser"), of which GTCR is the general partner, will purchase (the "Investment") pursuant to that certain Equity Purchase Agreement (the "Purchase Agreement") of even date herewith between the Company and Purchaser a portion of the Company's Common Stock, par value $.01 per share (the "Common Stock"), and Preferred Stock, par value $. 01 per share (the "Preferred Stock"); WHEREAS, the Company desires to receive financial and management consulting services from GTCR, and obtain the benefit of the experience of GTCR in business and financial management generally and its knowledge of the Company and the Company's financial affairs in particular; and WHEREAS, in connection with the Investment, GTCR is willing to provide financial and management consulting services to the Company and the compensation arrangements set forth in this Agreement are designed to compensate GTCR for such services. NOW, THEREFORE, in consideration of the foregoing premises and the respective agreements hereinafter set forth and the mutual benefits to be derived here from, GTCR and the Company hereby agree as follows: 1. ENGAGEMENT. The Company hereby engages GTCR as a financial and management consultant, and GTCR hereby agrees to provide financial and management consulting services to the Company, all on the terms and subject to the conditions set forth below. 2. SERVICES OF GTCR. GTCR hereby agrees during the term of this engagement to consult with the Company's board of directors (the "Board") and management of the Company and its subsidiaries in such manner and on such business and financial matters as may be reasonably requested from time to time by the Board, including but not limited to: (i) corporate strategy; (ii) budgeting of future corporate investments; (iii) acquisition and divestiture strategies; and (iv) debt and equity financings. 3. PERSONNEL. GTCR shall provide and devote to the performance of this Agreement such partners, employees and agents of GTC as GTC shall deem appropriate for the furnishing of the services required thereby. 4. INVESTMENT FEE. At the time of any purchase of Common Stock or Preferred Stock by Purchaser pursuant to Sections 1B(i), 1B(ii) or 1B(iii) of the Purchase Agreement, the Company shall pay to GTCR an investment fee in immediately available funds equal to one percent (1%) of the purchase price paid to the Company in connection with such purchase. 5. MANAGEMENT FEE. The Company shall pay to GTCR on January 31, April 30, July 31 and October 31 of each year, commencing January 31, 1994, a management fee equal to one-quarter of one percent (0.25%) of the aggregate purchase price then paid pursuant to Sections 1B(i), 1B(ii) and 1B(iii) of the Purchase Agreement; provided, however, such management fee will not exceed $150,000 in any calendar year. 6. EXPENSES. The Company shall promptly reimburse GTC for such reasonable travel expenses and other out-of-pocket fees and expenses as may be incurred by GTCR, its directors, officers and employees in connection with the Closing (as defined in the Purchase Agreement) and in connection with the rendering of services hereunder. 7. TERM. This Agreement will continue from the date hereof until Purchaser ceases to own at least 50% of the Investor Stock (as defined in the Purchase Agreement). No termination of this Agreement, whether pursuant to this paragraph or otherwise, shall affect the Company's obligations with respect to the fees, costs and expenses incurred by GTCR in rendering services hereunder and not reimbursed by the Company as of the effective date of such termination. 8. LIABILITY. Neither GTCR nor any of its affiliates, partners, employees or agents shall be liable to the Company or its subsidiaries or affiliates for any loss, liability, damage or expense arising out of or in connection with the performance of services contemplated by this Agreement, unless such loss, liability, damage or expense shall be proven to result directly from the gross negligence or willful misconduct of GTCR. 9. INDEMNIFICATION. The Company agrees to indemnify and hold harmless GTCR, its partners, affiliates, officers, agents and employees against and from any and all loss, liability, suits, claims, costs, damages and expenses (including attorneys' fees) arising from their performance hereunder, except as a result of their gross negligence or intentional wrongdoing. 10. GTCR AN INDEPENDENT CONTRACTOR. GTCR and the Company agree that GTCR shall perform services hereunder as an independent contractor, retaining control over and responsibility for its own operations and personnel. Neither GTCR nor its directors, officers, or employees shall be considered employees or agents of the Company as a result of this Agreement nor shall any of them have authority to contract in the name of or bind the Company, except as expressly agreed to in writing by the Company. -2- 11. NOTICES. Any notice, report or payment required or permitted to be given or made under this Agreement by one party to the other shall be deemed to have been duly given or made if personally delivered or, if mailed, when mailed by registered or certified mail, postage prepaid, to the other party at the following addresses (or at such other address as shall be given in writing by one party to the other): If to GTCR: Golder, Thoma, Cressey, Rauner, Inc. 120 S. LaSalle St. Chicago, IL 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: Kevin R. Evanich John A. Schoenfeld If to the Company: USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 Attention: President 12. ENTIRE AGREEMENT: MODIFICATION. This Agreement (a) contains the complete and entire understanding and agreement of GTCR and the Company with respect to the subject matter hereof; and (b) supersedes all prior and contemporaneous understandings, conditions and agreements, oral or written, express or implied, respecting the engagement of GTCR in connection with the subject matter hereof. 13. WAIVER OF BREACH. The waiver by either party of a breach of any provision of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach of that provision or any other provision hereof. 14. ASSIGNMENT. Neither GTCR nor the Company may assign its rights or obligations under this Agreement without the express written consent of the other. -3- 15. SUCCESSORS. This Agreement and all the obligations and benefits hereunder shall inure to the successors and permitted assigns of the parties. 16. COUNTERPARTS. This Agreement may be executed and delivered by each party hereto in separate counterparts, each of which when so executed and delivered shall be deemed an original and both of which taken together shall constitute one and the same agreement. 17. CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. * * * * * -4- IN WITNESS WHEREOF, GTCR and the Company have caused this Agreement to be duly executed and delivered on the date and year first above written. GOLDER, THOMA, CRESSEY RAUNER, INC. By: -------------------------------- Its: ------------------------------- USAI ACQUISITION CORP. By: -------------------------------- Its: ------------------------------- -5- IN WITNESS WHEREOF, GTCR and the Company have caused this Agreement to be duly executed and delivered on the date and year first above written. GOLDER, THOMA, CRESSEY RAUNER, INC. By: /s/ Bruce Rauner -------------------------------- Its: ------------------------------- USAI ACQUISITION CORP. By: /s/ James A. Harris -------------------------------- Its: ------------------------------- -6- EX-10.2 10 EXHIBIT 10.2 EQUITY PURCHASE AGREEMENT THIS AGREEMENT is made as of January 24, 1994, between USAI Acquisition Corp., a Delaware corporation (the "Company") , and Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership, an Illinois limited partnership (the "Purchaser"). Except as otherwise indicated herein, capitalized terms used herein are defined in Section 6 hereof. The parties hereto agree as follows: Section 1. AUTHORIZATION AND CLOSING. 1A. AUTHORIZATION OF THE STOCK. The Company shall authorize the issuance and sale to the Purchaser of 170,000 shares of its Common Stock, par value $.01 per share (the "Common Stock") , and 233,000 shares of its Preferred Stock, par value $.01 per share (the "Preferred Stock"), each having the rights and preferences set forth in EXHIBIT A attached hereto. The Common Stock and the Preferred Stock are collectively referred to herein as the "Stock." 1B. PURCHASE AND SALE OF THE STOCK. (i) At the Closing (as defined in Section 1C below) , the Company shall sell to the Purchaser and, subject to the terms and conditions set forth herein, the Purchaser shall purchase from the Company 20,000 shares of the Common Stock at a price of $10 per share. (ii) The Purchaser may, at its sole election, purchase from time to time, upon written notice to the Board of Directors (the "Board"), up to 150,000 additional shares of Common Stock at a price of $10 per share (as adjusted from time to time as a result of stock dividends, splits, recapitalizations on similar events). (iii) The Purchaser may, at its sole election, purchase from time to time, upon written notice to the Board, up to 233,000 shares of the Preferred Stock at a price of $100 per share (as adjusted from time to time as a result of stock dividends, stock splits, recapitalizations and similar events). At the time of any such purchase, the Purchaser shall be entitled to receive, and the Company shall be obligated to deliver, satisfactory representations and warranties similar to (and in addition to) those contained in Section 5 herein and all other information and documentation as the Purchaser may reasonably request. 1C. THE CLOSING. The closing of the purchase and sale of the Stock (the "Closing") shall take place at the off ices of Kirkland & Ellis, 200 East Randolph Drive, Chicago, Illinois 60601 at 10:00 a.m. on January 24, 1994, or at such other place or on such other date as may be mutually agreeable to the Company and the Purchaser. At the Closing, the Company shall deliver to the Purchaser stock certificates evidencing the Common Stock to be purchased by the Purchaser, registered in the Purchaser's name, upon payment of the purchase price thereof by a cashier's or certified check, or by wire transfer of immediately available funds to such account as designated by the Company in the amount of $200,000.00. Section 2. CONDITIONS OF THE PURCHASER'S OBLIGATION AT THE CLOSING. The obligation of the Purchaser to purchase and pay for the Stock at the Closing is subject to the satisfaction as of the Closing of the following conditions: 2A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations and warranties contained in Section 5 hereof shall be true and correct at and as of the Closing as though then made, except to the extent of changes caused by the transactions expressly contemplated herein, and the Company shall have performed in all material respects all of the covenants required to be performed by it hereunder prior to the Closing. 2B. AMENDMENT OF CERTIFICATE OF INCORPORATION. The Company's certificate of incorporation (the "Certificate of Incorporation") shall have been amended to include the provisions set forth in EXHIBIT A hereto, shall be in full force and effect under the laws of Delaware as of the Closing as so amended and shall not have been further amended or modified. 2C. MANAGEMENT AGREEMENTS. The Company shall have entered into a senior management agreements, in form and substance substantially similar to EXHIBIT B-1 attached hereto (the "Management Agreements"), with each of James A. Harris ("Harris") and Michael J. Stone ("Stone") and a consultant stock agreement in form and substance substantially similar to EXHIBIT B-2 attached hereto (the "Consultant Agreement") with Hobart Richey ("Richey") , and the Management Agreements and Consultant Agreement shall not have been amended or modified and shall be in full force and effect as of the Closing. 2D. EMPLOYMENT AGREEMENT. Harris and Stone shall have each entered into an employment agreement, in form and substance substantially similar to Exhibit C-1 and EXHIBIT C-2, respectively, attached hereto (the "Employment Agreements"), and the Employment Agreements shall not have been amended or modified and shall be in full force and effect as of the Closing. 2E. STOCKHOLDERS AGREEMENT. The Company, the Purchaser, Harris, Richey and Stone shall have entered into a stockholders agreement, in form and substance substantially similar to EXHIBIT D attached hereto (the "Stockholders Agreement"), and the Stockholders Agreement shall be in full force and effect as of the Closing. 2F. PROFESSIONAL SERVICES AGREEMENT. The Company and Golder, Thomas, Cressey, Rauner, Inc., a Delaware corporation, shall have entered into a professional services agreement, in form and substance substantially similar to EXHIBIT -F attached hereto (the "Services Agreement"), and the Services Agreement shall be in full force and effect as of the Closing. 2G. BLUE SKY CLEARANCE. The Company shall have made all filings under applicable state securities laws necessary to consummate the issuance of the Stock pursuant to this Agreement in compliance with such laws. -2- 2H. CLOSING DOCUMENTS. The Company shall have delivered to the Purchaser all of the following documents: (i) an Officer's Certificate, dated the date of the Closing, stating that the conditions specified in section 1 and Sections 2A through 2G, inclusive, have been fully satisfied; (ii) certified copies of (a) the resolutions duly adopted by the Company"s board of directors authorizing the execution, delivery and performance of this Agreement, the Management Agreements, the Consultant Agreement, the Employment Agreements, the Stockholders Agreement, the Services Agreement and each of the other agreements contemplated hereby, the filing of the amendment to the Certificate of Incorporation referred to in Section 2B, the issuance and sale of the Common Stock and the CONSUMMATION of all other transactions contemplated by this Agreement, and (b) the resolutions duly adopted by the Company's stockholders adopting the amendment to the Certificate of Incorporation referred to in Section 2B; (iii) certified copies of the Certificate of Incorporation and the Company's bylaws, each as in effect at the Closing; and (iv) such other documents relating to the transactions contemplated by this Agreement as the Purchaser or its counsel may reasonably request. 21. FEES AND EXPENSES. The Company shall have reimbursed the Purchaser for the fees and expenses as provided in Section 7A hereof. 2J. COMPLIANCE WITH APPLICABLE LAWS. The purchase of Stock by the Purchaser hereunder shall not be prohibited by any applicable law or governmental regulation, shall not subject the Purchaser to any penalty, liability or, in the Purchaser's sole judgment, other onerous condition under or pursuant to any applicable law or governmental regulation, and shall be permitted by laws and regulations of the jurisdictions to which the Purchaser is subject. 2K. WAIVER. Any condition specified in this Section 2 may be waived only if such waiver is set f orth in a writing executed by the Purchaser. Section 3. COVENANTS. 3A. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall deliver to the Purchaser (so long as the Purchaser holds any Stock) and to each subsequent holder of at least 25% of the Investor Common Stock and each subsequent holder of at least 25% of the Investor Preferred Stock: (i) as soon as available but in any event within 30 days after the end of each quarterly accounting period in each fiscal year, unaudited consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such quarterly period and for the -3- period from the beginning of the fiscal year to the end of such quarterly period, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such quarterly period, setting forth in each case comparisons to the annual budget and to the corresponding period in the preceding fiscal year, and all such statements shall be prepared in accordance with generally accepted accounting principles, consistently applied, subject to the absence of footnote disclosures and to normal year-end adjustments; (ii) accompanying the financial statements referred to in Section (i) , an Officer's Certificate stating that neither the Company nor any of its Subsidiaries is in default under any of its other material agreements or, if any such default exists, specifying the nature and period of existence thereof and what actions the Company and its Subsidiaries have taken and propose to take with respect thereto; (iii) within 120 days after the end of each fiscal year, consolidating and consolidated statements of income and cash flows of the Company and its Subsidiaries for such fiscal year, and consolidating and consolidated balance sheets of the Company and its Subsidiaries as of the end of such fiscal year, all prepared in accordance with generally accepted accounting principles, consistently applied, and accompanied by (a) with respect to the consolidated portions of such statements (except with respect to budget data) , an opinion containing no exceptions or qualifications (except for qualifications regarding specified contingent liabilities) of an independent accounting firm of recognized national standing acceptable to the holders of a majority of each of the Investor Common Stock and the Investor Preferred Stock, and (b) a copy of such firm's annual management letter to the Board; (iv) promptly upon receipt thereof, any additional reports, management letters or other detailed information concerning significant aspects of the Company's operations or financial affairs given to the Company by its independent accountants (and not otherwise contained in other materials provided hereunder); (v) at least 30 days prior to the beginning of each fiscal year, an annual budget prepared on a monthly basis for the Company and its Subsidiaries for such fiscal year (displaying anticipated statements of income and cash flows and balance sheets) , and promptly upon preparation thereof any other significant budgets prepared by the Company and any revisions of such annual or other budgets, and within 30 days after any quarterly period in which there is a material adverse deviation from the annual budget, an Officer's Certificate explaining the deviation and what actions the Company has taken and proposes to take with respect thereto; (vi) promptly (but in any event within five business days) after the discovery or receipt of notice of any default under any material agreement to which it or any of its Subsidiaries is a party or any other material adverse event or circumstance affecting the Company or any Subsidiary (including the filing of any material litigation against the Company or any Subsidiary or the existence of any dispute with any Person which involves a reasonable likelihood of such litigation being commenced), an Officer's Certificate specifying the nature and period of existence -4- thereof and what actions the Company and its Subsidiaries have taken and propose to take with respect thereto; and (vii) with reasonable promptness, such other information and financial data concerning the Company and its Subsidiaries as any Person entitled to receive information under this Section 3A may reasonably request. Each of the financial statements referred to in Sections 3A(i) and 3A(iii) shall be true and correct in all material respects as of the dates and for the periods stated therein, subject in the case of the unaudited financial statements to changes resulting from normal year-end audit adjustments (none of which would, alone or in the aggregate, be materially adverse to the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole). 3B. INSPECTION OF PROPERTY. The Company shall permit any representatives designated by the Purchaser (so long as the Purchaser holds any Stock) or any subsequent holder of at least 25% of the outstanding Investor Common Stock or any subsequent holder of at least 25% of the outstanding Investor Preferred Stock, upon reasonable notice and during normal business hours and such other times as any such holder may reasonably request, to (i) visit and inspect any of the properties of the Company and its Subsidiaries, (ii) examine the corporate and financial records of the Company and its Subsidiaries and make copies thereof or extracts therefrom and (iii) discuss the affairs, finances and accounts of any such corporations with the directors, officers, key employees and independent accountants of the Company and its Subsidiaries. 3C. RESTRICTIONS. The Company shall not, without the prior written consent of largest holder of the Investor Preferred Stock: (i) directly or indirectly declare or pay any dividends or make any distributions upon any of its equity securities; (ii) except as contemplated in the Management Agreement and the Stockholders Agreement, directly or indirectly redeem, purchase or otherwise acquire, or permit any Subsidiary to redeem, purchase or otherwise acquire, any of the Company's equity securities (including, without limitation, warrants, options and other rights to acquire equity securities); (iii) except as expressly contemplated by this Agreement, the Management Agreement and the Stockholders Agreement, authorize, issue or enter into, or permit any Subsidiary to authorize, issue or enter into, any agreement providing for the issuance (contingent or otherwise) of, (a) any notes or debt securities containing equity features (including, without limitation, any notes or debt securities convertible into or exchangeable for equity securities, issued in connection with the issuance of equity securities or containing profit participation features) or (b) any equity securities (or any securities convertible into or exchangeable for any equity securities); -5- (iv) merge or consolidate with any Person or permit any Subsidiary to merge or consolidate with any Person (other than a wholly owned Subsidiary); (v) sell, lease or otherwise dispose of, or permit any Subsidiary to sell, lease or otherwise dispose of, more than 5% of the consolidated assets of the Company and its Subsidiaries (computed on the basis of book value, determined in accordance with generally accepted accounting principles consistently applied, or fair market value, determined by the Company's board of directors in its reasonable good faith judgment) in any transaction or series of related transactions (other than sales of inventory in the ordinary course of business); (vi) liquidate, dissolve or effect a recapitalization or reorganization in any form of transaction (including, without limitation, any reorganization into partnership form); (vii) acquire, or permit any Subsidiary to acquire, any interest in any business (whether by a purchase of assets, purchase of stock, merger or otherwise) , or enter into any joint venture; (viii) enter into, or permit any Subsidiary to enter into, the ownership, active management or operation of any business other than the acquisition and operation of a business within the construction aggregates industry; (ix) other than the Employment Agreements, enter into, or permit any Subsidiary to enter into, any transaction with any of its or any Subsidiary's officers, directors, employees or Affiliates or any individual related by blood, marriage or adoption to any such Person (a "Relative") or any entity in which any such Person or individual owns a beneficial interest (a "Related Entity"), except for normal employment arrangements and benefit programs on reasonable terms and except as otherwise expressly contemplated by this Agreement, the Management Agreement and the proposed acquisition by the Company of Western Rock, Inc. (the "Proposed Acquisition"); provided that in no event shall any Relative or Related Entity be employed by, render services to or receive compensation from the Company or any Subsidiary; (x) create, incur, assume or suffer to exist, or permit any Subsidiary to create, incur, assume or suffer to exist, Indebtedness exceeding the amounts approved therefor by the Board in the annual budget; 3D. AFFIRMATIVE COVENANTS. So long as any Investor Stock remains outstanding, the Company shall, and shall cause each Subsidiary to: (i) enter into and maintain appropriate nondisclosure and noncompete agreements with its key employees; (ii) comply with all applicable laws, rules and regulations of all governmental authorities, the violation of which would reasonably be expected to have a material adverse effect -6- upon the financial condition, operating results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole and pay and discharge when payable all taxes, assessments and governmental charges (to the extent that the same are being contested in good faith and adequate reserves therefor have been established); 3E. CURRENT PUBLIC INFORMATION. At all times after the Company has filed a registration statement with the Securities and Exchange Commission pursuant to the requirements of either the Securities Act or the Securities Exchange Act, the Company shall file all reports required to be filed by it under the Securities Act and the Securities Exchange Act and the rules and regulations adopted by the Securities and Exchange Commission thereunder and shall take such further action as any holder or holders of Restricted Securities may reasonably request, all to the extent required to enable such holders to sell Restricted Securities pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Securities and Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or any similar registration form hereafter adopted by the Securities and Exchange Commission. Upon request, the Company shall deliver to any holder of Restricted Securities a written statement as to whether it has complied with such requirements. 3F. AMENDMENT OF OTHER AGREEMENTS. The Company shall not amend, modify or waive any provision of the Management Agreement without the prior written consent of the holders of a majority of each of the Investor Common Stock and the Investor Preferred Stock, and the Company shall enforce the provisions of the Management Agreement and shall exercise all of its rights and remedies thereunder (including, without limitation, any repurchase options and first refusal rights) unless it is otherwise directed by the holders of a majority of each of the Investor Common Stock and the Investor Preferred Stock. 3G. LIMITED PREEMPTIVE RIGHTS. (i) Except for the issuance of Common Stock (a) pursuant to the Management Agreements, (b) to management of the' Company, (c) pursuant to the Proposed Acquisition, or (d) pursuant to a public offering registered under the Securities Act, if the Company at any time after the Closing authorizes the issuance or sale of any shares of Stock or any securities containing options or rights to acquire any shares of Stock (other than as a dividend on the outstanding Stock), the Company shall first offer to sell to each holder of Investor Stock a portion of such stock or securities equal to the quotient determined by dividing (1) the number of shares of Investor Stock held by such holder by (2)' the total number of shares of Stock outstanding on a fully diluted basis immediately prior to such issuance. Each holder of Investor Stock shall be entitled to purchase such stock or securities at the most favorable price and on the most favorable terms as such stock or securities are to be offered to any other Persons. (ii) In order to exercise its purchase rights hereunder, a holder of Investor Stock must within 15 days after receipt of written notice from the Company describing in reasonable detail -7- the stock or securities being offered, the purchase price thereof, the payment terms and such holder's percentage allotment deliver a written notice to the Company describing its election hereunder. If all of the stock and securities offered to the holders of Investor Stock is not fully subscribed by such holders, the remaining stock and securities shall be reoffered by the Company to the holders purchasing their full allotment upon the terms set forth in this Section, except that such holders must exercise their purchase rights within five days after receipt of such reoffer. (iii) Upon the expiration of the offering periods described above, the Company shall be entitled to sell such stock or securities which the holders of Investor Stock have not elected to purchase during the 90 days following such expiration on terms and conditions no more favorable to the purchasers thereof than those offered to such holders. Any stock or securities offered or sold by the Company after such 90-day period must be reoffered to the holders of Investor Stock pursuant to the terms of this Section. (iv) Nothing contained in this Section 3G shall be deemed to amend, modify or limit in any way the restrictions on the issuance of shares of Stock set forth in Section 3C hereof or elsewhere in this Agreement, in the Stockholders Agreement or in any other agreement to which the Company is presently bound. 3H. PUBLIC DISCLOSURES. The Company shall not, nor shall it permit any Subsidiary to, disclose the Purchaser's name or identity as an investor in the Company in any press release or other public announcement or in any document or material filed with any governmental entity, without the prior written consent of the Purchaser, unless such disclosure is required by applicable law or governmental regulations or by order of a court of competent jurisdiction, in which case prior to making such disclosure the Company shall give written notice to the Purchaser describing in reasonable detail the proposed content of such disclosure and shall permit the Purchaser to review and comment upon the form and substance of such disclosure. Section 4. TRANSFER OF RESTRICTED SECURITIES. (i) Restricted Securities are transferable only pursuant to (a) public offerings registered under the Securities Act, (b) Rule 144 or Rule 144A of the Securities and Exchange Commission (or any similar rule or rules then in force) if such rule or rules are available or (c) subject to the conditions specified in Section 4(ii) below, any other legally available means of transfer. (ii) In connection with the transfer of any Restricted Securities (other than a transfer described in Section 4 (i) (a) or (b) above), the holder thereof shall deliver written notice to the Company describing in reasonable detail the transfer or proposed transfer, together with an opinion of Kirkland & Ellis or other counsel which (to the Company's reasonable satisfaction) is knowledgeable in securities law matters to the effect that such transfer of Restricted Securities may be effected without registration of such Restricted Securities under the Securities Act. In addition, if the holder of the Restricted Securities delivers to the Company an opinion of Kirkland & Ellis or -8- such other counsel that no subsequent transfer of such Restricted Securities shall require registration under the Securities Act, the Company shall promptly upon such contemplated transfer deliver new certificates for such Restricted Securities which do not bear the Securities Act legend set forth in Section 7C. If the company is not required to deliver new certificates for such Restricted Securities not bearing such legend, the holder thereof shall not transfer the same until the prospective transferee has confirmed to the Company in writing its agreement to be bound by the conditions contained in this Section and Section 7C. (iii) Upon the request of the Purchaser, the Company shall promptly supply to the Purchaser or its prospective transferees all information regarding the Company required to be delivered in connection with a transfer pursuant to Rule 144A of the Securities and Exchange Commission. Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As a material inducement to the Purchaser to enter into this Agreement and purchase the Stock, the Company hereby represents and warrants to the Purchaser that: 5A. ORGANIZATION AND CORPORATE POWER. The Company is a corporation duly organized, validly existing and in good standing under the laws of Delaware and is qualified to do business in every jurisdiction in which the failure to so qualify might reasonably be expected to have a material adverse effect on the financial condition, operating results, assets, operations or business prospects of the Company taken as a whole. The Company has all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties, to carry on its businesses as now conducted and presently proposed to be conducted and to carry out the transactions contemplated by this Agreement. The copies of the Company's and each Subsidiary"s Certificate of Incorporation and bylaws which have been furnished to the Purchaser's counsel reflect all amendments made thereto at any time prior to the date of this Agreement and are correct and complete. 5B. CAPITAL STOCK AND RELATED MATTERS. As of the closing and immediately thereafter, the authorized capital stock of the Company shall consist of 250,000 shares of Common Stock (22,824 of which shall be issued and outstanding) and 500,000 shares of Preferred Stock (none of which shall be issued and outstanding and 233,000 of which shall be reserved for issuance to the Purchaser pursuant to Section 1B(iii) hereof) . As of the Closing, neither the Company nor any Subsidiary shall have outstanding any stock or securities convertible or exchangeable for any shares of its capital stock or containing any profit participation features, nor shall it have outstanding any rights or options to subscribe for or to purchase its capital stock or any stock or securities convertible into or exchangeable for its capital stock or any stock appreciation rights or phantom stock plans other than pursuant to and as contemplated by the Management Agreement. As of the Closing, neither the Company nor any Subsidiary shall be subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock or any warrants, options or other rights to acquire its capital stock, except pursuant to this Agreement, the Management -9- Agreement and the Stockholders Agreement. As of the Closing, all of the outstanding shares of the Company's capital stock shall be validly issued, fully paid and nonassessable. (ii) There are no statutory or contractual stockholders preemptive rights or rights of refusal with respect to the issuance of the Stock hereunder or the issuance of the Preferred Stock pursuant to Section 1B(iii) hereof, except as expressly provided herein. Based in part on the investment representations of the Purchaser in Section 7C, the Company has not violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its capital stock, and the offer, sale and issuance of the Stock hereunder and pursuant to Section 1B(iii) hereof do not and will not require registration under the Securities Act or any applicable state securities laws. There are no agreements among the Company's stockholders with respect to the voting or transfer of the Company's capital stock or with respect to any other aspect of the Company's affairs, except for the Stockholders Agreement and the Management Agreement. 5C. SUBSIDIARIES: INVESTMENTS. The Company does not own or hold any shares of stock or any other security or interest in any other Person or any rights to acquire any such security or interest, and the Company has never had any Subsidiary. 5D. AUTHORIZATION: NO BREACH. The execution, delivery and performance of this Agreement, the Management Agreements, the Stockholders Agreement, the Acquisition Agreement and all other agreements contemplated hereby to which the Company is a party and the filing of the amendment of the Certificate of Incorporation have been duly authorized by the Company. This Agreement, the Management Agreements, the Stockholders Agreement, the Certificate of Incorporation, the Acquisition Agreement and all other agreements contemplated hereby each constitutes a valid and binding obligation of the Company, enforceable in accordance with its terms. The execution and delivery by the Company of this Agreement, the Management Agreements, the Stockholders Agreement and all other agreements contemplated hereby to which the Company is a party, the offering, sale and issuance of the Stock hereunder and pursuant to Section 1B (ii) , the amendment of the Certificate of Incorporation and the fulfillment of and compliance with the respective terms hereof and thereof by the Company, do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a default under, (iii) result in the creation of any lien, security interest, charge or encumbrance upon the Company's capital stock or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in a violation of, or (vi) require any authorization, consent, approval, exemption or other action by or notice to any court or administrative or governmental body pursuant to, the Certificate of Incorporation or bylaws of the Company, or any law, statute, rule or regulation to which the Company is subject, or any agreement, instrument, order, judgment or decree to which the Company is a party or by which it is bound. 5E. CONDUCT OF BUSINESS; LIABILITIES. Other than the negotiation, execution and delivery of this Agreement, the Management Agreements, the Stockholders Agreement and the other agreements contemplated hereby and thereby, prior to the Closing, the Company has not (i) conducted any business, (ii) incurred any expenses, obligations or liabilities (whether accrued, -10- absolute, contingent, unliquidated or otherwise, whether or not known to the Company and whether due or to become due and regardless of when asserted) , (iii) owned any assets, (iv) entered into any contracts or agreements, or (v) violated any laws or governmental rules or regulations. 5F. TAX MATTERS. The Company and each Subsidiary have filed all tax returns (if any) which they are required to file under applicable laws and regulations; all such returns are complete and correct in all material respects; the Company and each Subsidiary have paid all taxes due and owing by them and have withheld and paid over all taxes which they are obligated to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party; neither the Company nor any Subsidiary has waived any statute of limitations with respect to taxes or agreed to any extension of time with respect to a tax assessment or deficiency; the assessment of any additional taxes for periods for which returns have been filed is not expected; no foreign, federal, state or local tax audits are pending or being conducted with respect to the Company or any Subsidiary, no information related to tax matters has been requested by any foreign, federal, state or local taxing authority and no notice indicating an intent to open an audit or other review has been received by the Company or any Subsidiary from any foreign, federal, state or local taxing authority; and there are no unresolved questions or claims concerning the Company's or any Subsidiary's tax liability. Neither the Company nor any Subsidiary has made an election under S341(f) of the IRC. 5G. LITIGATION, ETC. There are no actions, suits, proceedings, orders, investigations or claims pending or, to the best of the Company's knowledge, threatened against or affecting the Company or any Subsidiary (or to the best of the Company's knowledge, pending or threatened against or affecting any of the officers, directors or employees of the Company and its Subsidiaries with respect to its business or proposed business activities) at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any action, suit, proceeding or investigation with respect to the transactions contemplated by this Agreement); neither the Company nor any Subsidiary is subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the best of the Company's knowledge, any governmental investigations or inquiries; and, to the best of the Company's knowledge, there is no basis for any of the foregoing. Neither the Company nor any Subsidiary is subject to any judgment, order or decree of any court or other governmental agency. Neither the Company nor any Subsidiary has received any opinion or memorandum or legal advice from legal counsel to the effect that it is exposed, from a legal standpoint, to any liability or disadvantage which may be material to its business. 5H. BROKERAGE. There are no claims for brokerage commissions, finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Company or any Subsidiary except pursuant to that certain agreement between Michael J. Stone and Edward A. Dougherty dated October 7, 1993. The Company shall pay, and hold the Purchaser harmless against, any liability, loss or expense (including, without limitation, attorneys' fees and out-of-pocket expenses) arising in connection with any such claim. -11- 51. GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or authorization of, or declaration to or filing with, any governmental authority is required in connection with the execution, delivery and performance by the Company of this Agreement or the other agreements contemplated hereby, or the CONSUMMATION by the Company of any other transactions contemplated hereby or thereby. 5J. ERISA. The Company does not maintain or have any obligation to contribute to or any other liability with respect to or under (including but not limited to current or potential withdrawal liability), nor has it ever maintained or had any obligation to contribute to or any other liability with respect to or under, (i) any plan or arrangement whether or not terminated, which provides medical, health or life insurance or other welfare type benefits for current or future retired or terminated employees (except for limited continued medical benefit coverage required to be provided under Section 4980B of the IRC or as required under applicable state law), (ii) any "multiemployer plan" (as defined in Section 3(37) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") , (iii) any employee plan which is a tax qualified "defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not terminated, (iv) any employee plan which is a tax-qualified "defined contribution plan" (as defined in Section 3(34) of ERISA), whether or not terminated, or (v) any other plan or arrangement providing benefits to current or former employees, including any bonus plan, plan for deferred compensation, employee health or other welfare benefit plan or other arrangement, whether or not terminated. For purposes of this Section 5J, the term "Company" includes all organizations under common control with the Company pursuant to Section 414(b) or (c) of the IRC. 5K. COMPLIANCE WITH LAWS. Except as set forth on the attached "Compliance Schedule," neither the Company nor any Subsidiary has violated any law or any governmental regulation or requirement which violation would reasonably be expected to have a material adverse effect upon the financial condition, operation results, assets, operations or business prospects of the Company and its Subsidiaries taken as a whole, and neither the Company nor any Subsidiary has received notice of any such violation. Neither the Company nor any Subsidiary is subject to any clean up liability, or has reason to believe it may become subject to any clean up liability, under any federal, state or local environmental law, rule or regulation. 5L. DISCLOSURE. Neither this Agreement nor any of the schedules, attachments, written statements, documents, certificates or other items prepared or supplied to the Purchaser by or on behalf of the Company with respect to the transactions contemplated hereby contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. There is no f act which the Company has not disclosed to the Purchaser in writing and of which any of its officers, directors or executive employees is aware and which has had or might reasonably be anticipated to have a material adverse effect upon the existing or expected financial condition, operating results, assets, customer or supplier relations, employee relations or business prospects of the Company and its Subsidiaries taken as a whole. -12- 5M. CLOSING DATE. The representations and warranties of the Company contained in this Section 5 and elsewhere in this Agreement and all information contained in any exhibit, schedule or attachment hereto or in any writing delivered by, or on behalf of, the Company to the Purchaser shall be true and correct in all material respects on the date of the Closing as though then made, except as affected by the transactions expressly contemplated by this Agreement. Section 6. DEFINITIONS. For the purposes of this Agreement, the following terms have the meanings set forth below: "AFFILIATE" of any particular person or entity means any other person or entity controlling, controlled by or under common control with such particular person or entity. "INDEBTEDNESS" means all indebtedness for borrowed money (including purchase money obligations) maturing one year or more from the date of creation or incurrence thereof or renewable or extendible at the option of the debtor to a date one year or more from the date of creation or incurrence thereof, all indebtedness under revolving credit arrangements extending over a year or more, all capitalized lease obligations and all guarantees of any of the foregoing. "INVESTOR COMMON STOCK" means (i) the Common Stock issued hereunder or pursuant to Section 1B(ii) hereof and (ii) any common Stock issued or issuable with respect to the Common Stock referred to in clause (i) above by way of stock dividends or stock splits or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares of Investor Common Stock, such shares shall cease to be Investor Common Stock when they have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (b) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar rule then in force). "INVESTOR PREFERRED STOCK" means (i) the Preferred Stock issued hereunder or pursuant to Section 1B(iii) hereof and (ii) any Preferred Stock issued or issuable with respect to the Preferred Stock referred to in clause (i) above by way of stock dividends or stock splits or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares of Investor Preferred Stock, such shares shall cease to be Investor Preferred Stock when they have been (a) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (b) distributed to the public through a broker, dealer or market maker pursuant to Rule 144 under the Securities Act (or any similar rule then in force). "INVESTOR STOCK" means the Investor Common Stock and the Investor Preferred Stock. "IRC" means the Internal Revenue Code of 1986, as amended, and any reference to any particular IRC section shall be interpreted to include any revision of or successor to that section regardless of how numbered or classified. -13- "OFFICER'S CERTIFICATE" means a certificate signed by the Company's president or its chief financial officer, stating that (i) the officer signing such certificate has made or has caused to be made such investigations as are necessary in order to permit him to verify the accuracy of the information set forth in such certificate and (ii) to the best of such officer's knowledge, such certificate does not misstate any material fact and does not omit to state any fact necessary to make the certificate not misleading. "PERSON" means an individual, a partnership, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "RESTRICTED SECURITIES" means (i) the Stock issued hereunder and pursuant to Sections 1B(i), 1B(ii) and 1B(iii) hereof and (ii) any securities issued with respect to the securities referred to in clause (i) or (ii) above by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Restricted Securities, such securities shall cease to be Restricted Securities when they have (a) been effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them, (b) become eligible for sale pursuant to Rule 144(k) (or any similar provision then in force) under the Securities Act or (c) been otherwise transferred and new certificates for them not bearing the Securities Act legend set f orth in Section 7C have been delivered by the Company in accordance with Section 4 (ii) . Whenever any particular securities cease to be Restricted Securities, the holder thereof shall be entitled to receive from the Company, without expense, new securities of like tenor not bearing a Securities Act legend of the character set forth in Section 7C. "SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar federal law then in force. "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar federal law then in force. "SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or agency succeeding to the FUNCTIONS THEREOF. "SUBSIDIARY" means any corporation of which the securities having a majority of the ordinary voting power in electing the board of directors are, at the time as of which any determination is being made, owned by the Company either directly or through one or more Subsidiaries. 7. MISCELLANEOUS. 7A. EXPENSES. The Company agrees to pay, and hold the Purchaser and all holders of Investor Stock harmless against liability for the payment of, (i) the fees and expenses of their -14- counsel arising in connection with the negotiation and execution of this Agreement and the CONSUMMATION of the transactions contemplated by this Agreement (INCLUDING BUT not limited to fees and expenses arising with respect to any subsequent purchase of Stock pursuant to Sections 1B(ii) and 1B(iii) hereof), (ii) the fees and expenses incurred with respect to any amendments or waivers (whether or not the same become effective) under or in respect of this Agreement, the Management Agreement, the Stockholders Agreement, the Proposed Acquisition, the other agreements contemplated hereby and the Certificate of INCORPORATION, (III) stamp and other taxes which may be payable in respect of the execution and delivery of this Agreement or the issuance, delivery or acquisition of any shares of Stock purchased hereunder or in accordance with Section 1B(ii) hereof, and (iv) the fees and expenses incurred with respect to the interpretation or enforcement of the rights granted under this Agreement, the Management Agreements, the Stockholders Agreement, the other agreements contemplated hereby (INCLUDING THOSE related to the Proposed Acquisition) and the Certificate of INCORPORATION AND the Company's bylaws. 7B. REMEDIES. Each holder of Stock shall have all rights and remedies set forth in this Agreement and the Certificate of INCORPORATION AND all rights and remedies which such holders have been granted at any time under any other agreement or contract and all of the rights which such holders have under any law. Any Person having any rights under any provision of this Agreement shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. 7C. PURCHASER'S INVESTMENT REPRESENTATIONS. The Purchaser hereby represents that it is acquiring the Restricted securities purchased hereunder or acquired pursuant hereto for its own account with the present intention of holding such securities for purposes of investment, and that it has no intention of selling such securities in a public distribution in violation of the federal securities laws or any applicable state securities laws; provided that nothing contained herein shall prevent the Purchaser and subsequent holders of Restricted Securities from transferring such securities in compliance with the provisions of section 4 hereof. Each certificate for Restricted Securities shall be imprinted with a legend in substantially the following form: "The securities represented by this certificate were originally issued on January 24, 1994, and have not been registered under the Securities Act of 1933, as amended. The transfer of the securities represented by this certificate is subject to the conditions specified in the Equity Purchase Agreement, dated as of January 24, 1994, between the issuer and a certain investor, and the Company reserves the right to refuse the transfer of such securities until such conditions have been fulfilled with respect to such transfer. A copy of such conditions shall be furnished by the issuer to the holder hereof upon written request and without charge." -15- 7D. CONSENT TO AMENDMENTS. Except as otherwise expressly provided herein, the provisions of 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, only if the Company has obtained the written consent of the holders of a majority of each of the Investor Common Stock and the Investor Preferred Stock. No other course of dealing between the Company and the holder of any Stock or any delay in exercising any rights hereunder or under the Certificate of Incorporation shall operate as a waiver of any rights of any such holders. For purposes of this Agreement, shares of Stock held by the Company or any Subsidiaries shall not be deemed to be outstanding. 7E. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and warranties contained herein or made in writing by any party in connection herewith shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, regardless of any investigation made by the Purchaser or on its behalf. 7F. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, all covenants and agreements contained in this Agreement 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 whether so expressed or not. In addition, and whether or not any express assignment has been made, the provisions of this Agreement which are for the Purchaser's benefit as a purchaser or holder of Stock are also for the benefit of, and enforceable by, any subsequent holder of such Stock. 7G. GENERAL LY ACCEPTED ACCOUNTING PRINCIPLES. Where any accounting determination or calculation is required to be made under this Agreement or the exhibits hereto, such determination or calculation (unless otherwise provided) shall be made in accordance with generally accepted accounting principles, consistently applied, except that if because of a change in generally accepted accounting principles the Company would have to alter a previously utilized accounting method or policy in order to remain in compliance with generally accepted accounting principles, such determination or calculation shall continue to be made in accordance with the Company's previous accounting methods and policies. 7H. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 71. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together shall constitute one and the same Agreement. 7J. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a Section of this Agreement. The use of the word "including" in this Agreement shall be by way of example rather than by limitation. -16- 7K. GOVERNING LAW. The corporate law of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits and schedules hereto shall be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. 7L. NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications shall be sent to the Purchaser and to the Company at the address indicated below: IF TO THE COMPANY: USAI Acquisition Corp. 400-3 College Avenue Clemson, South Carolina 29631 Attention: President IF TO THE PURCHASER: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. * * * * * -17- -18- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By: --------------------------- Its: --------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: --------------------------- Its: --------------------------- -19- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By: /s/ James A. Harris --------------------------- Its: --------------------------- GOLDER,, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner --------------------------- Its: --------------------------- -20- LIST OF EXHIBITS Exhibit A - Certificate of Amendment Exhibit B-1 - Management Agreement Exhibit B-2 - Consultant Agreement Exhibit C-1 - Employment Agreement Exhibit C-2 - Employment Agreement Exhibit D - Stockholders Agreement Exhibit E - Services Agreement 21 EX-10.3 11 EXHIBIT 10.3 STOCKHOLDERS AGREEMENT THIS AGREEMENT is made as of January 24, 1994 by and between USAI Acquisition Corp., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership, an Illinois limited partnership (the "Investor"), James A. Harris ("Harris"), Hobart Richey ("Richey") and Michael J. Stone ("Stone"). Harris, Richey and Stone are collectively referred to herein as the "Executives" and individually as an "Executive." The Investor and the Executives are collectively referred to herein as the "Stockholders" and individually as a "Stockholder." Capitalized terms used but not otherwise defined herein are defined in Section 8 hereof. The Investor will purchase shares of the Company's Common Stock, par value $.01 per share (the "Common Stock"), and the Company's Preferred Stock, par value $.01 per share (the "Preferred Stock"), pursuant to an Equity Purchase Agreement dated as of the date hereof (the "Equity Purchase Agreement") between the Investor and the Company. In a related transaction to be completed subsequent to the date hereof under an acquisition agreement (the "Acquisition Agreement") among the Company, the Executives and certain other parties thereto, the Executives will exchange certain shares of common stock of Western Rock, Inc. for shares of Common Stock and shares of the Company's Preferred Stock. Pursuant to senior management agreements dated as of the date hereof (the "Management Agreements") between the Company and each of Harris and Stone, such Executives will purchase shares of Common Stock. Pursuant to a consultant stock agreement dated as of the date hereof (the "Consultant Agreement") between the Company and Richey, Richey will purchase shares of Common Stock. The Preferred Stock and the Common Stock are collectively referred to herein as the "Stock." The Common Stock and the Preferred Stock currently held, or hereafter acquired, by each Executive are referred to herein as "Executive Stock." The execution and delivery of this Agreement is a condition to the Investor's purchase of the Stock pursuant to the Equity Purchase Agreement. In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows: 1. BOARD OF DIRECTORS. (a) From and after the Closing (as defined in the Equity Purchase Agreement) and until the provisions of this Section 1 cease to be effective, each Stockholder shall vote all of its, his or her Stockholder Shares and any other voting securities of the Company over which such Stockholder has voting control and shall take all other necessary or desirable actions within its, his or her control (whether in its, his or her capacity as a stockholder, director, member of a board committee or officer of the Company or otherwise, and including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum and execution of written consents in lieu of meetings), and the Company shall take all necessary and desirable actions within its control (including, without limitation, calling special board and stockholder meetings), so that: (i) the authorized number of directors on the Company's board of directors (the "Board") shall be established at seven directors; (ii) the following persons shall be elected to the Board (A) two representatives designated by the Investor (the "Investor Directors"), who shall initially be Bruce V. Rauner and David A. Donnini; (B) Two members of the Company's management designated by the Executives, determined by a vote of the Executives owning a majority of Stockholder Shares held by all Executives (the "Executive Directors"), who shall initially be Harris and Stone; and (C) three representatives chosen jointly by the Investor and Harris (the "Outside Directors"); provided that such representative shall not be a member of the Company's management or an employee or officer of the Company or its subsidiaries; provided further that if the Investor and Harris are unable to agree on the Outside Directors within 30 days after the date hereof and, in the future, within 30 days after the date for electing the Outside Directors, the Investor, in its sole discretion, shall designate the Outside Directors; (iii) the removal from the Board (with or without cause) of the Investor Directors, the Executive Directors or the Outside Directors shall be only upon the written request of the person or persons originally entitled to designate such director pursuant to Section 1(a)(ii) above (including removal of the Outside Director at any time by the Investor); provided that if either Harris or Stone ceases to be an employee of the Company and its subsidiaries, such Executive shall be removed as a director promptly after his employment ceases; and -2- (iv) in the event that any representative designated hereunder for any reason ceases to serve as a member of the Board during his term of office, the resulting vacancy on the Board shall be filled by a representative designated by the person or persons originally entitled to designate such director pursuant to Section 1(a)(ii) above. (b) The Company shall pay acceptable directors fees and all reasonable out-of-pocket expenses incurred by each director in connection with attending regular and special meetings of the Board and any committee thereof. (c) The rights of each Executive under this Section 1 shall terminate at such time as the such Executive is, in the case of Harris and Stone, no longer employed by the Company or its subsidiaries and, in the case of Richey, no longer a consultant to the Company or its subsidiaries. (d) The provisions of this Section 1 shall terminate automatically and be of no further force and effect upon the tenth anniversary of the date hereof (unless extended by the parties hereto in accordance with the Delaware General Corporation Law). (e) If any party fails to designate a representative to fill a directorship pursuant to the terms of this Section 1, the election of a person to such directorship shall be accomplished in accordance with the Company's bylaws and applicable law. 2. CONFLICTING AGREEMENTS. Each Stockholder represents that he has not granted and is not a party to any proxy, voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement, and no holder of Stockholder Shares shall grant any proxy or become party to any voting trust or other agreement which is inconsistent with or conflicts with the provisions of this Agreement. 3. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK. (a) RETENTION OF EXECUTIVE STOCK. Until the seventh anniversary of the date of this Agreement, no Executive shall sell, transfer, assign, pledge or otherwise dispose of any interest in any shares of Executive Stock, except pursuant to an Exempt Transfers (as defined in Section 3(b) below) other than sales to the public pursuant to Rule 144 promulgated under the Securities Act or any similar rule then in force. (b) TRANSFER OF EXECUTIVE STOCK. No Executive shall sell, transfer, assign, pledge or otherwise dispose of (whether with or without consideration and whether voluntarily or involuntarily or by operation of law) any interest in any shares of Executive Stock (a "Transfer"), except pursuant to (i) the provisions of Section 3 of the Management Agreements or of the Consultant Agreement, a Public Sale or a Sale of the Company -3- ("Exempt Transfers") or (ii) the provisions of this Section 3; provided that in no event shall any Transfer of Executive Stock pursuant to this Section 3 be made for any consideration other than cash payable upon consummation of such Transfer or in installments over time. Prior to making any Transfer other than an Exempt Transfer, Executive will give written notice (the "Sale Notice") to the Company and the Investor. The Sale Notice will disclose in reasonable detail the identity of the prospective transferee(s), the number of shares to be transferred and the terms and conditions of the proposed transfer. Executive will not consummate any Transfer until 110 days after the Sale Notice has been given to the Company and to the Investor, unless the parties to the Transfer have been finally determined pursuant to this Section 3 prior to the expiration of such 110-day period. The date of the first to occur of such events is referred to herein as the "Authorization Date." (c) FIRST REFUSAL RIGHTS. Subject to Section 3(a) above, the Company may elect to purchase all (but not less than all) of the shares of Executive Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by delivering a written notice of such election to Executive and the Investor within 60 days after the Sale Notice has been given to the Company. If the Company has not elected to purchase all of the Executive Stock to be transferred, the Investor may elect to purchase all (but not less than all) of the Executive Stock to be transferred upon the same terms and conditions as those set forth in the Sale Notice by giving written notice of such election to Executive within 90 days after the Sale Notice has been given to the Investor. If neither the Company nor the Investor elects to purchase all of the shares of Executive Stock specified in the Sale Notice, Executive may transfer the shares of Executive Stock specified in the Sale Notice, at a price and on terms no more favorable to the transferee(s) thereof than specified in the Sale Notice during the 60-day period immediately following the Authorization Date. Any shares of Executive Stock not transferred within such 60-day period will be subject to the provisions of this Section 3(c) upon subsequent transfer. The Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company. (d) CERTAIN PERMITTED TRANSFERS. The restrictions contained in this Section 3 will not apply with respect to transfers of shares of Executive Stock (a) pursuant to applicable laws of descent and distribution or (b) among Executive's Family Group, provided that such restrictions will continue to be applicable to the Executive Stock after any such transfer and the transferees of such Executive Stock have agreed in writing to be bound by the provisions of this Agreement. (e) TERMINATION OF RESTRICTIONS. The restrictions on the Transfer of shares of Executive Stock set forth in this Section 3 will continue with respect to each share of Executive Stock until -4- the date on which such Executive Stock has been transferred in a transaction permitted by this Section 3 (except in a transaction contemplated by Section 3(d)); provided that in any event such restrictions will terminate on the first to occur of a Change of Control, Sale of the Company or a Qualified Public Offering. 4. LEGEND. Each certificate evidencing Stockholder Shares and each certificate issued in exchange for or upon the transfer of any Stockholder Shares (if such shares remain Stockholder Shares as defined herein after such transfer) shall be stamped or otherwise imprinted with a legend in substantially the following form: "The securities represented by this certificate are subject to restrictions of transfer and other agreements set forth in a Stockholders Agreement dated as of January 24, 1994, among the issuer of such securities (the "Company") and certain of the Company's stockholders. A copy of such Stockholders Agreement will be furnished without charge by the Company to the holder hereof upon written request." The Company shall imprint such legend on certificates evidencing Stockholder Shares outstanding prior to the date hereof. The legend set forth above shall be removed from the certificates evidencing any shares which cease to be Stockholder Shares in accordance with Section 8 hereof. 5. PUBLIC OFFERING. In the event that the Board and the Investor approve an initial public offering and sale of Stock (a "Public Offering") pursuant to an effective registration statement under the Securities Act, the holders of Stock shall take all necessary or desirable actions in connection with the consummation of the Public Offering. In the event that such Public Offering is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the capital stock structure shall adversely affect the marketability of the offering, each holder of Stock shall consent to and vote for a recapitalization, reorganization and/or exchange of the Stock into securities that the managing underwriters, the Board and the Investor find acceptable and shall take all necessary or desirable actions in connection with the consummation of the recapitalization, reorganization and/or exchange; provided that the resulting securities reflect and are consistent with the rights and preferences set forth in the Company's Certificate of Incorporation as in effect immediately prior to such Public Offering. -5- 6. SALE OF THE COMPANY. (a) If the Board and the holders of a majority of the shares of Common Stock then outstanding approve a Sale of the Company (an "Approved Sale"), each holder of Stock shall vote for, consent to and raise no objections against such Approved Sale. If the Approved Sale is structured as (i) a merger or consolidation, each holder of Stock shall waive any dissenters' rights, appraisal rights or similar rights in connection with such merger or consolidation or (ii) a sale of stock, each holder of Stock shall agree to sell all of his Stock and rights to acquire Stock on the terms and conditions approved by the Board and the holders of a majority of the Common Stock then outstanding. Each holder of Stock shall take all necessary or desirable actions in connection with the consummation of the Approved Sale as requested by the Company. (b) The obligations of the holders of Stock with respect to the Approved Sale of the Company are subject to the satisfaction of the following conditions: (i) upon the consummation of the Approved Sale, each holder of a class of Stock shall receive the same form of consideration and the same amount of consideration per share as any other holders of such class of stock; (ii) if any holders of a class of Stock are given an option as to the form and amount of consideration to be received, each holder of such class of Stock shall be given the same option; and (iii) each holder of then currently exercisable rights to acquire shares of a class of Stock shall be given an opportunity to either (A) exercise such rights prior to the consummation of the Approved Sale and participate in such sale as holders of such class of Stock or (B) upon the consummation of the Approved Sale, receive in exchange for such rights consideration equal to the amount determined by multiplying (1) the same amount of consideration per share of a class of Stock received by holders of such class of Stock in connection with the Approved Sale less the exercise price per share of such class of Stock of such rights to acquire such class of Stock by (2) the number of shares of such class of Stock represented by such rights. 7. ADDITIONAL ISSUANCES OF COMMON STOCK. The Company will authorize and reserve for issuance to additional members of management of the Company and its subsidiaries (as agreed upon by the Stockholders) shares of Common Stock in an amount equal to 3% of the Company's fully diluted Common Stock (as adjusted from time to time for stock splits, stock dividends, recapitalizations and similar events) (the "Additional Shares"). Prior to issuing any such Additional Shares, the Company shall require such additional members of management to be bound by the restrictions provided in this Agreement. In the event that all of the Additional Shares are not issued to such additional members of management within two years after the date hereof the Company shall offer any such remaining Additional Shares to the Executives for purchase on terms substantially the same as set forth in the Management Agreements -6- and the Consultant Agreement, pro rata based on their ownership of Common Stock at such time. 8. DEFINITIONS. "EXECUTIVE'S FAMILY GROUP" means Executive's spouse and descendants (whether natural or adopted) and any trust solely for the benefit of Executive and/or Executive's spouse and/or descendants. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Sale of the Company or Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock. "SALE OF THE COMPANY" means any transaction or series of transactions pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power under normal circumstances to elect a majority of the Board (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "STOCKHOLDER SHARES" means (i) any Stock purchased or otherwise acquired by any Stockholder, (ii) any equity securities issued or issuable directly or indirectly with respect to the Stock referred to in clause (i) above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular shares constituting Stockholder Shares, such shares will cease to be Stockholder Shares when they have been (x) effectively registered under the Securities Act and disposed of in accordance with the registration statement covering them or (y) sold to the public through a broker, dealer or market maker pursuant to -7- Rule 144 (or any similar provision then in force) under the Securities Act. 9. TRANSFERS; TRANSFERS IN VIOLATION OF AGREEMENT. Prior to transferring any Stockholder Shares to any person or entity, the transferring Stockholder shall cause the prospective transferee to execute and deliver to the Company and the other Stockholders a counterpart of this Agreement. Any transfer or attempted transfer of any Stockholder Shares in violation of any provision of this Agreement shall be void, and the Company shall not record such transfer on its books or treat any purported transferee of such Stockholder Shares as the owner of such shares for any purpose. 10. AMENDMENT AND WAIVER. Except as otherwise provided herein, no modification, amendment or waiver of any provision of this Agreement shall be effective against the Company or the Stockholders unless such modification, amendment or waiver is approved in writing by the Company, the Investor and the holders of a majority of the shares of stock held by the Executives. The failure of any party to enforce any of the provisions of this Agreement shall in no way be construed as a waiver of such provisions and shall not affect the right of such party thereafter to enforce each and every provision of this Agreement in accordance with its terms. 11. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 12. ENTIRE AGREEMENT. Except as otherwise expressly set forth herein, this document embodies the complete agreement and understanding among the parties hereto with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. 13. SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by the Company and its successors and assigns and the Stockholders and any subsequent holders of Stockholder Shares and the respective successors and assigns of each of them, so long as they hold Stockholder Shares. -8- 14. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 15. REMEDIES. The Company, the Investor and the Executives shall be entitled to enforce their rights under this Agreement specifically to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights existing in their favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any of the Company, the Investor and the Executives may in its or their sole discretion apply to any court of law or equity of competent jurisdiction for specific performance and/or injunctive relief (without posting a bond or other security) in order to enforce or prevent any violation of the provisions of this Agreement. 16. NOTICES. Any notice provided for in this Agreement shall be in writing and shall be personally delivered, mailed first class mail (postage prepaid) or sent by reputable overnight courier service (charges prepaid) to the Company at the address set forth below and to any other recipient at the address indicated on the schedules hereto and to any subsequent holder of Stock subject to this Agreement at such address as indicated by the Company's records, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. Notices will be deemed to have been given hereunder when delivered personally, three days after deposit in the U.S. mail and one day after deposit with a reputable overnight courier service. Such notices, demands and other communications shall be sent to the Stockholders and the Company at the addresses indicated below: IF TO THE COMPANY: USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 Attention: Board of Directors IF TO THE EXECUTIVES: USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 Attention: James A. Harris -9- IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld 17. GOVERNING LAW. The corporate law of Delaware shall govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or other conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. 18. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * -10- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written. USAI ACQUISITION CORP. By /s/ James A. Harris ---------------------------- Its --------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey Rauner, Inc. Its: General Partner By /s/ Bruce Rauner ---------------------------- Its --------------------------- /s/ James A. Harris ------------------------------ James A. Harris /s/ Michael J. Stone ------------------------------ Michael J. Stone /s/ Hobart Richey ------------------------------ Hobart Richey EX-10.4 12 EXHIBIT 10.4 STOCKHOLDERS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of August 1, 1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR II), and Edward A. Dougherty ("Dougherty"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Stockholders Agreement, dated as of January 24, 1994, as amended (the "Stockholders Agreement"). WHEREAS, the Company and Dougherty have entered into a Stock Purchase Agreement, dated as of the date hereof, pursuant to which Dougherty has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and GTCR desire to provide Dougherty rights under the Stockholders Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, Dougherty shall be a party to the Stockholders Agreement, shall be an Executive (as defined in the Stockholders Agreement), a Stockholder (as defined in the Stockholders Agreement) and a holder of Executive Stock (as defined in the Stockholders Agreement and Stockholder Shares (as defined in the Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive, a Stockholder and a holder of Executive Stock and Stockholder Shares thereunder, as fully as if Dougherty had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Registration Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: /s/ Michael Stone --------------------------- Its: Chief Financial Officer GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thomas, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner --------------------------- Its: Principal /s/ Edward A. Dougherty ---------------------------------------- Edward A. Dougherty EX-10.5 13 EXHIBIT 10.5 STOCKHOLDERS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of August 5, 1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Morris Bishop, Jr. (the "Executive"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Stockholders Agreement, dated as of January 24, 1994, as amended (the "Stockholders Agreement"). WHEREAS, the Company and the Executive have entered into an Agreement, dated as of the date hereof, pursuant to which the Executive has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and the GTCR desire to provide the Executive rights under the Stockholders Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, the Executive shall be a party to the Stockholders Agreement, shall be an Executive (as defined in the Stockholders Agreement), a Stockholder (as defined in the Stockholders Agreement) and a holder of Executive Stock (as defined in the Stockholders Agreement) and Stockholder Shares (as defined in the Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive, a Stockholder, and a holder of Executive Stock and Stockholder Shares thereunder, as fully as if the Executive had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Stockholders Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * * * * IN WITNESS WHEREOF, this Amendment has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: /s/ James A. Harris --------------------------- Its: President GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce V. Rauner --------------------------- Its: Principal /s/ Morris Bishop, Jr. ------------------------------ Morris Bishop, Jr. -2- EX-10.6 14 EXHIBIT 10.6 STOCKHOLDERS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of October 31, 1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Charles R. Pullin ("Pullin"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Stockholders Agreement, dated as of January 24, 1994, as amended (the "Stockholders Agreement"). WHEREAS, the Company and Pullin have entered into a Stock Purchase Agreement, dated as of the date hereof, pursuant to which Pullin has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and GTCR desire to provide Pullin rights, and Pullin agrees to be obligated, under the terms of the Stockholders Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, Pullin shall be a party to the Stockholders Agreement, shall be an Executive (as defined in the Stockholders Agreement), a Stockholder (as defined in the Stockholders Agreement) and a holder of Executive Stock (as defined in the Stockholders Agreement and Stockholder Shares (as defined in the Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive, a Stockholder and a holder of Executive Stock and Stockholder Shares thereunder, as fully as if Pullin had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any other provision of the Registration Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC By: /s/ Michael Stone -------------------------------- Its: Chief Financial Officer GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner -------------------------------- Its: ------------------------------- /s/ Charles R. Pullin ----------------------------------- Charles R. Pullin IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC By: -------------------------------- Its: ------------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: -------------------------------- Its: ------------------------------- ----------------------------------- Charles R. Pullin IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC By: -------------------------------- Its: ------------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: -------------------------------- Its: ------------------------------- ----------------------------------- Charles R. Pullin EX-10.7 15 EXHIBIT 10.7 STOCKHOLDERS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of July 31, 1998, by and among U.S. Aggregates, Inc. ("USAI"), James A. Harris (the "Executive") and James A. Harris Grantor Retained Annuity Trust (the "Trust"). WHEREAS, the Executive, USAI and certain other stockholders of the Company are parties to a Stockholders Agreement, dated as of January 24, 1994, as amended (the "Stockholders Agreement"), and an Amended and Restated Registration Rights and Stockholders' Agreement, dated as June 5, 1998, as amended (the "Prudential Stockholders Agreement"). WHEREAS, the Executive and USAI are parties to a Senior Management Agreement, dated as of January 24, 1994 (the "Management Agreement"), pursuant to which Executive acquired shares of USAI's common stock, par value $0.01 per share (the "Executive Stock"), and an Executive Stock Pledge Agreement, dated as of May 10, 1994 (the "Pledge Agreement"). WHEREAS, the Executive desires to transfer 6,626 shares of his Executive Stock to the Trust. WHEREAS, the Executive and USAI desire to provide the Trust rights, and the Trust desires to be subject to the duties, under the Stockholders Agreement, the Prudential Stockholders Agreement, the Management Agreement and the Pledge Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION TO STOCKHOLDERS AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Stockholders Agreement, shall be an "Executive" (as defined in the Stockholders Agreement), a "Stockholder" (as defined in the Stockholders Agreement) and a holder of "Executive Stock" (as defined in the Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive, a Stockholder, and a holder of Executive Stock thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 2. ADDITION TO PRUDENTIAL STOCKHOLDERS AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Prudential Stockholders Agreement, shall be a member of "Senior Management" (as defined in the Prudential Stockholders Agreement) and a holder of "Registrable Securities" (as defined in the Prudential Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a member of Senior Management and a holder of Registrable Securities thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 3. ADDITION TO MANAGEMENT AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Management Agreement, shall be an "Executive" (as defined in the Management Agreement) and a holder of "Executive Stock" (as defined in the Management Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive and a holder of Executive Stock thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 4. ADDITION TO PLEDGE AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Pledge Agreement, shall be a "Pledgor" (as defined in the Pledge Agreement) and a holder of "Pledged Shares" (as defined in the Pledge Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a Pledgor and a holder of Pledged Shares thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 5. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Stockholders Agreement, the Prudential Stockholders Agreement, the Management Agreement and the Pledge Agreement, which shall continue and remain in full force and effect in accordance with its terms. 6. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 7. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 8. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * * * * IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U. S. AGGREGATES, INC. By: /s/ Michael Stone --------------------------- Its: --------------------------- JAMES A. HARRIS GRANTOR RETAINED ANNUITY TRUST By: /s/ Brett Harris --------------------------- Its: Trustee By: /s/ David Harris --------------------------- Its: Trustee /s/ James A. Harris ------------------------------ JAMES A. HARRIS EX-10.8 16 EXHIBIT 10.8 STOCKHOLDERS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of October 1, 1998, by and among U.S. Aggregates, Inc. ("USAI"), James A. Harris (the "Executive") and The James A. Harris Charitable Remainder Unitrust (the "Trust"). WHEREAS, the Executive, USAI and certain other stockholders of the Company are parties to a Stockholders Agreement, dated as of January 24, 1994, as amended (the "Stockholders Agreement"), and an Amended and Restated Registration Rights and Stockholders' Agreement, dated as June 5, 1998, as amended (the "Prudential Stockholders Agreement"). WHEREAS, the Executive and USAI are parties to a Senior Management Agreement, dated as of January 24, 1994 (the "Management Agreement"), pursuant to which Executive acquired shares of USAI's common stock, par value $0.01 per share (the "Executive Stock"), and an Executive Stock Pledge Agreement, dated as of May 10, 1994 (the "Pledge Agreement"). WHEREAS, the Executive desires to transfer 1,656 shares of his Executive Stock to the Trust. WHEREAS, the Executive and USAI desire to provide the Trust rights, and the Trust desires to be subject to the duties, under the Stockholders Agreement, the Prudential Stockholders Agreement, the Management Agreement and the Pledge Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION TO STOCKHOLDERS AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Stockholders Agreement, shall be an "Executive" (as defined in the Stockholders Agreement), a "Stockholder" (as defined in the Stockholders Agreement) and a holder of "Executive Stock" (as defined in the Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive, a Stockholder, and a holder of Executive Stock thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 2. ADDITION TO PRUDENTIAL STOCKHOLDERS AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Prudential Stockholders Agreement, shall be a member of "Senior Management" (as defined in the Prudential Stockholders Agreement) and a holder of "Registrable Securities" (as defined in the Prudential Stockholders Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a member of Senior Management and a holder of Registrable Securities thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 3. ADDITION TO MANAGEMENT AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Management Agreement, shall be an "Executive" (as defined in the Management Agreement) and a holder of "Executive Stock" (as defined in the Management Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of an Executive and a holder of Executive Stock thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 4. ADDITION TO PLEDGE AGREEMENT. The parties hereto agree that, by and upon execution of this Agreement, the Trust shall be a party to the Pledge Agreement, shall be a "Pledgor" (as defined in the Pledge Agreement) and a holder of "Pledged Shares" (as defined in the Pledge Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a Pledgor and a holder of Pledged Shares thereunder, as fully as if the Trust had been an original signatory thereto in such capacity. 5. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Stockholders Agreement, the Prudential Stockholders Agreement, the Management Agreement and the Pledge Agreement, which shall continue and remain in full force and effect in accordance with its terms. 6. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 7. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 8. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * * * * IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U. S. AGGREGATES, INC. By: /s/ Michael Stone --------------------------- Its: --------------------------- THE JAMES A. HARRIS CHARITABLE REMAINDER UNITRUST By: /s/ Brett Harris --------------------------- Its: Trustee By: /s/ David Harris --------------------------- Its: Trustee /s/ James A. Harris ------------------------------ JAMES A. HARRIS EX-10.9 17 EXHIBIT 10.9 REGISTRATION AGREEMENT THIS AGREEMENT is made as of January 24, 1994, between USAI Acquisition Corp., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership, an Illinois limited partnership (the "Investor"), James A. Harris, Michael J. Stone, and Hobart Richey (collectively, the "Executives"). The Company and the Investors are parties to an Equity Purchase Agreement of even date herewith (the "Purchase Agreement"). The Company and each Executive is a party to either a Senior Management Agreement or a Consultant Stock Agreement of even date herewith (collectively, the "Management Agreements"). In order to induce the Investors to enter into the Purchase Agreement and the Executives to enter into the Management Agreements, the Company has agreed to provide the registration rights set forth in this Agreement. Unless otherwise provided in this Agreement, capitalized terms used herein shall have the meanings set forth in paragraph 8 hereof. The parties hereto agree as follows: 1. DEMAND REGISTRATIONS. (a) REQUESTS FOR REGISTRATION. At any time after the Company has completed a public offering of its Common Stock under the Securities Act, the holders of a majority of the Investor Registrable Securities may request registration under the Securities Act of all or part of their Registrable Securities on Form S-1 or any similar long-form registration ("Long-Form Registrations"), and the holders of a majority of the Investor Registrable Securities may request registration under the Securities Act of all or part of their Registrable Securities on Form S-2 or S-3 or any similar short-form registration ("Short-Form Registrations") if available. Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered and the anticipated per share price range for such offering. Within ten days after receipt of any such request, the Company will give written notice of such requested registration to all other holders of Registrable Securities and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. All registrations requested pursuant to this paragraph 1(a) are referred to herein as "Demand Registrations." (b) LONG-FORM REGISTRATIONS. The holders of Investor Registrable Securities will be entitled to request three Long-Form Registrations in which the Company will pay all Registration Expenses. A registration will not count as one of the permitted Long-Form Registrations until it has become effective (unless such Long-Form Registration has not become effective due solely to the fault of the holders requesting such registration), and neither the LAST nor any subsequent Long-Form Registration above will count as one of the permitted Long-Form Registrations unless the holders of Registrable Securities are able to register and sell at least 90% of the Registrable Securities requested to be included in such registration; provided that in any event the Company will pay all Registration Expenses in connection with any registration initiated as a Long-Form Registration whether or not it has become effective. All Long-Form Registrations shall be underwritten registrations. (c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form Registrations provided pursuant to paragraph 1(b), the holders of Investor Registrable Securities will be entitled to request an unlimited number of Short-Form Registrations in which the Company will pay all Registration Expenses. Demand Registrations will be Short-Form Registrations whenever the Company is permitted to use any applicable short form. After the Company has become subject to the reporting requirements of the Securities Exchange Act, the Company will use its best efforts to make Short-Form Registrations on Form S-3 available for the sale of Registrable Securities. (d) PRIORITY ON DEMAND REGISTRATIONS. The Company will not include in any Demand Investor Registration any securities which are not Registrable Securities without the prior written consent of the holders of a majority of the Investor Registrable Securities included in such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities and other securities, if any, which can be sold therein without adversely affecting the marketability of the offering, the Company will include in such registration prior to the inclusion of any securities which are not Registrable Securities the number of Registrable Securities requested to be included which in the opinion of such underwriters can be sold without adversely affecting the marketability of the offering, pro rata among the respective holders thereof on the basis of the amount of Registrable Securities owned by each such holder. Any Persons other than holders of Registrable Securities who participate in Demand Registrations must pay their share of the Registration Expenses as provided in paragraph 5 hereof. (e) RESTRICTIONS ON DEMAND REGISTRATIONS. The Company will not be obligated to effect any Demand Registration within six months after the effective date of a previous Demand Registration The Company may postpone for up to six months the filing or the effectiveness of a registration statement for a Demand Registration if the Company determines that such Demand Registration would reasonably be expected to have an adverse effect on any proposal or plan by the Company or any of its Subsidiaries to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer or similar transaction; provided that in such event, the holders of Registrable Securities initially requesting such Demand Regis- -2- tration will be entitled to withdraw such request and, if such request is withdrawn, such Demand Registration will not count as one of the permitted Demand Registrations hereunder and the Company will pay all Registration Expenses in connection with such registration. (f) SELECTION OF UNDERWRITERS. The holders of a majority of the Investor Registrable Securities initially requesting registration will have the right to select the investment banker(s) and manager(s) to administer the offering, subject to the Company's approval which will not be unreasonably withheld. 2. PIGGYBACK REGISTRATIONS. (a) RIGHT TO PIGGYBACK. Whenever the Company proposes to register any of its securities under the Securities Act (other than pursuant to an initial public offering of its securities or to a Demand Registration) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), the Company will give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and will include in such registration all Registrable Securities with respect to which the Company has received written requests for inclusion therein within 15 days after the receipt of the Company's notice. (b) PIGGYBACK EXPENSES. The Registration Expenses of the holders of Registrable Securities will be paid by the Company in all Piggyback Registrations. (c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration (i) first, the securities the Company proposes to sell, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an underwritten secondary registration on behalf of holders of the Company's securities, and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in such registration exceeds the number which can be sold in such offering without adversely affecting the marketability of the offering, the Company will include in such registration (i) first, the securities requested to -3- be included therein by the holders requesting such registration, (ii) second, the Registrable Securities requested to be included in such registration, pro rata among the holders of such Registrable Securities on the basis of the number of shares owned by each such holder, and (iii) third, other securities requested to be included in such registration. (e) OTHER REGISTRATIONS. If the Company has previously filed a registration statement with respect to Registrable Securities pursuant to paragraph 1 or pursuant to this paragraph 2, and if such previous registration has not been withdrawn or abandoned, the Company will not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-8 or any successor form), whether on its own behalf or at the request of any holder or holders of such securities, until a period of at least six months has elapsed from the effective date of such previous registration. 3. HOLDBACK AGREEMENTS. (a) Each holder of Registrable Securities agrees not to effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included (except as part of such underwritten registration), unless the underwriters managing the registered public offering otherwise agree. (b) The Company agrees not to effect any public sale or distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during the seven days prior to and during the 180-day period beginning on the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration (except as part of such underwritten registration or pursuant to registrations on Form S-8 or any successor form), unless the underwriters managing the registered public offering otherwise agree. 4. REGISTRATION PROCEDURES. Whenever the holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company will use its best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition thereof and pursuant thereto the Company will as expeditiously as possible: (a) prepare and file with the Securities and Exchange Commission a registration statement with respect to such Registra- -4- ble Securities and use its best efforts to cause such registration statement to become effective; (b) prepare and file with the Securities and Exchange Commission such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; (c) furnish to each seller of Registrable Securities such number of copies of such registration statement, each amendment and supplement thereto, the prospectus included in such registration statement (including each preliminary prospectus) and such other documents as such seller may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such seller; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable such seller to consummate the disposition in such jurisdictions of the Registrable Securities owned by such seller (provided that the Company will not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of such Registrable Securities, at any time when a prospectus relating thereto is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in such registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements therein not misleading, and, at the request of any such seller, the Company will prepare a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus will not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements therein not misleading; (f) cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by the Company are then listed and, if not so listed, to be listed on the NASD automated quotation system; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of such registration statement; -5- (h) enter into such customary agreements (including underwriting agreements in customary form) and take all such other actions as the holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of such Registrable Securities (including, without limitation, effecting a stock split or a combination of shares); (i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to such registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, directors, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with such registration statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the Securities and Exchange Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder; and (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any common stock included in such registration statement for sale in any jurisdiction, the Company will use its reasonable best efforts promptly to obtain the withdrawal of such order; and (l) use its best efforts to obtain a cold comfort letter from the Company's independent public accountants in customary form and covering such matters of the type customarily covered by cold comfort letters. 5. REGISTRATION EXPENSES. (a) All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts and commissions) and other Persons retained by the Company (all such expenses being herein called "Registration Expenses"), will be borne as provided in this Agree- -6- ment, except that the Company will, in any event, pay its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review, the expense of any liability insurance and the expenses and fees for listing the securities to be registered on each securities exchange on which similar securities issued by the Company are then listed or on the NASD automated quotation system. (b) To the extent Registration Expenses are not required to be paid by the Company, each holder of securities included in any registration hereunder will pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable will be borne by all sellers of securities included in such registration in proportion to the aggregate selling price of the securities to be so registered. 6. INDEMNIFICATION. (a) The Company agrees to indemnify, to the extent permitted by law, each holder of Registrable Securities, its officers and directors and each Person who controls such holder (within the meaning of the Securities Act) against all losses, claims, damages, liabilities and expenses caused by any untrue or alleged untrue statement of material fact contained in any registration statement, prospectus or preliminary prospectus or any amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same are caused by or contained in any information furnished in writing to the Company by such holder expressly for use therein or by such holder's failure to deliver a copy of the registration statement or prospectus or any amendments or supplements thereto after the Company has furnished such holder with a sufficient number of copies of the same. In connection with an underwritten offering, the Company will indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. (b) In connection with any registration statement in which a holder of Registrable Securities is participating, each such holder will furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with any such registration statement or prospectus and, to the extent permitted by law, will indemnify the Company, its directors and officers and each Person who controls the Company (within the meaning of the Securities Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue or alleged untrue statement of material fact contained in the registration statement, prospectus or preliminary prospectus or any -7- amendment thereof or supplement thereto or any omission or alleged omission of a material fact required to be stated therein or necessary to make the statements therein not misleading, but only to the extent that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder; provided that the obligation to indemnify will be individual to each holder and will be limited to the net amount of proceeds received by such holder from the sale of Registrable Securities pursuant to such registration statement. (c) Any Person entitled to indemnification hereunder will (i) give prompt written notice to the indemnifying party of any claim with respect to which it seeks indemnification and (ii) unless in such indemnified party's reasonable judgment a conflict of interest between such indemnified and indemnifying parties may exist with respect to such claim, permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party. If such defense is assumed, the indemnifying party will not be subject to any liability for any settlement made by the indemnified party without its consent (but such consent will not be unreasonably withheld). An indemnifying party who is not entitled to, or elects not to, assume the defense of a claim will not be obligated to pay the fees and expenses of more than one counsel for all parties indemnified by such indemnifying party with respect to such claim, unless in the reasonable judgment of any indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such claim. (d) The indemnification provided for under this Agreement will remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of such indemnified party and will survive the transfer of securities. The Company also agrees to make such provisions, as are reasonably requested by any indemnified party, for contribution to such party in the event the Company's indemnification is unavailable for any reason. 7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may participate in any registration hereunder which is underwritten unless such Person (a) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Person or Persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. 8. DEFINITIONS. "Common Stock" means any share of the Company's Common Stock, par value $.01 per share. -8- "Executive Registrable Securities" means any shares of Common Stock held as of the date hereof, or acquired hereafter, by the Executives and any executive employee of the Company or its Subsidiaries who becomes a party to this Agreement. As to any particular Executive Registrable Securities, such securities will cease to be Executive Registrable Securities when they have been distributed to the public pursuant to a offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force). For purposes of this Agreement, a Person will be deemed to be a holder of Executive Registrable Securities whenever such Person has the right to acquire such Executive Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Investor Registrable Securities" means (i) any Common Stock issued pursuant to the Purchase Agreement, (ii) any Common Stock issued or issuable with respect to the securities referred to in clause (i) by way of a stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization. As to any particular Investor Registrable Securities, such securities will cease to be Investor Registrable Securities when they have been distributed to the public pursuant to a offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force). For purposes of this Agreement, a Person will be deemed to be a holder of Investor Registrable Securities whenever such Person has the right to acquire such Investor Registrable Securities (upon conversion or exercise in connection with a transfer of securities or otherwise, but disregarding any restrictions or limitations upon the exercise of such right), whether or not such acquisition has actually been effected. "Person" means an individual, a partnership, a joint venture, a corporation, a trust, an unincorporated organization or a government or any department or agency thereof. "Registrable Securities" means Investor Registrable Securities and Executive Registrable Securities. "Securities Act" means the Securities Act of 1933, as amended. "Subsidiary" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. -9- 9. MISCELLANEOUS. (a) NO INCONSISTENT AGREEMENTS. The Company will not hereafter enter into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement. (b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company will not take any action, or permit any change to occur, with respect to its securities which would materially and adversely affect the ability of the holders of Registrable Securities to include such Registrable Securities in a registration undertaken pursuant to this Agreement or which would materially and adversely affect the marketability of such Registrable Securities in any such registration (including, without limitation, effecting a stock split or a combination of shares). (c) REMEDIES. Any Person having rights under any provision of this Agreement will be entitled to enforce such rights specifically to recover damages caused by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and for other injunctive relief in order to enforce or prevent violation of the provisions of this Agreement. (d) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may be amended or waived only upon the prior written consent of the Company and holders of a majority of the Registrable Securities; provided, however, that in the event that such amendment or waiver would treat a holder or group of holders of Registrable Securities in a manner materially different from any other holders of Registrable Securities, then such amendment or waiver will require the consent of such holder or the holders of a majority of the Registrable Securities of such group treated materially different. (d) SUCCESSORS AND ASSIGNS. All covenants and agreements in this Agreement by or on behalf of any of the parties hereto will bind and inure to the benefit of the respective successors and assigns of the parties hereto whether so expressed or not. In addition, whether or not any express assignment has been made, the provisions of this Agreement which are for the benefit of purchasers or holders of Registrable Securities are also for the benefit of, and enforceable by, any subsequent holder of Registrable Securities. (e) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of -10- this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. (f) COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. (g) DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. (h) GOVERNING LAW. The corporate law of Delaware will govern all issues concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits and schedules hereto will be governed by the internal law, and not the law of conflicts, of Delaware. (i) NOTICES. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when delivered personally to the recipient, sent to the recipient by reputable express courier service (charges prepaid) or mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid. Such notices, demands and other communications will be sent to each Investor at the address indicated on the Company records and to the Company at the address indicated below: USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party. * * * * * -11- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. USAI ACQUISITION CORP. By: /s/ James A. Harris --------------------------- Its: -------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its General Partner By /s/ Bruce Rauner --------------------------- Its -------------------------- /s/ James A. Harris ------------------------------ James A. Harris /s/ Michael J. Stone ------------------------------ Michael J. Stone /s/ Hobart Richey ------------------------------ Hobart Richey -12- EX-10.10 18 EXHIBIT 10.10 REGISTRATION RIGHTS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of August 1, 1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Edward A. Dougherty ("Dougherty"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Registration Agreement, dated as of January 24, 1994, as amended (the "Registration Agreement"). WHEREAS, the Company and Dougherty have entered into a Stock Purchase Agreement, dated as of the date hereof, pursuant to which the Executive has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and GTCR desire to provide Dougherty rights under the Registration Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, Dougherty shall be a party to the Registration Agreement, shall be a holder of Executive Registrable Securities (as defined in the Registration Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a holder of Registrable Securities thereunder, as fully as if Dougherty had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Registration Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: /s/ Michael Stone ------------------------------------- Its: Chief Financial Officer GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Raumer, Inc. ------------------------------------- Its: General Partner ------------------------------------- By: /s/ Bruce Rauner ------------------------------------- Its: ------------------------------------ /s/ Edward A. Dougherty --------------------------------------- Edward A. Dougherty EX-10.11 19 EXHIBIT 10.11 REGISTRATION RIGHTS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of August 5, 1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Morris Bishop, Jr. (the "Executive"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Registration Agreement, dated as of January 24, 1994, as amended (the "Registration Agreement"). WHEREAS, the Company and the Executive have entered into an Agreement, dated as of the date hereof, pursuant to which the Executive has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and the GTCR desire to provide the Executive rights under the Registration Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, the Executive shall be a party to the Registration Agreement, shall be a holder of Executive Registrable Securities (as defined in the Registration Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a holder of Registrable Securities thereunder, as fully as if the Executive had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any provision of the Registration Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADING. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * * * * IN WITNESS WHEREOF, this Amendment has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: /s/ James A. Harris ------------------------------ Its: President GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce V. Rauner ------------------------------ Its: Principal /s/ Morris Bishop, Jr. --------------------------------- Morris Bishop, Jr. EX-10.12 20 EXHIBIT 10.12 REGISTRATION RIGHTS JOINDER AGREEMENT THIS AGREEMENT (this "Agreement") is made as of October 31,1994, by and among U.S. Aggregates, Inc., a Delaware corporation (the "Company"), Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership ("GTCR"), and Charles R. Pullin ("Pullin"). WHEREAS, the Company, GTCR and certain other stockholders of the Company are parties to a Registration Agreement, dated as of January 24, 1994, as amended (the "Registration Agreement"). WHEREAS, the Company and Pullin have entered into a Stock Purchase Agreement, dated as of the date hereof, pursuant to which the Executive has purchased shares of the Company's Common Stock, par value $.01 per share ("Common Stock"). WHEREAS, the Company and GTCR desire to provide Pullin rights, and Pullin agrees to be obligated, under the terms of the Registration Agreement as set forth herein. NOW, THEREFORE, the parties hereto agree as follows: 1. ADDITION OF THE EXECUTIVE. The parties hereto agree that, by and upon execution of this Agreement, Pullin shall be a party to the Registration Agreement, shall be a holder of Executive Registrable Securities (as defined in the Registration Agreement) and shall be entitled to the rights and benefits and subject to the duties and obligations of a holder of Registrable Securities thereunder, as fully as if Pullin had been an original signatory thereto in such capacity. 2. CONTINUING EFFECT. This Agreement shall not constitute an amendment or waiver of any other provision of the Registration Agreement, which shall continue and remain in full force and effect in accordance with its terms. 3. COUNTERPARTS. This Agreement may be executed in separate counterparts each of which shall be an original and all of which taken together shall constitute one and the same agreement. 4. GOVERNING LAW. All questions concerning the construction, validity and interpretation of this Agreement shall be governed by and construed in accordance with the internal law, and not the law of conflicts, of Delaware. 5. DESCRIPTIVE HEADINGS. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. * * * * * IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: /s/ Michael Stone --------------------------- Its: Chief Financial Officer GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: /s/ Bruce Rauner --------------------------- Its: --------------------------- /s/ Charles R. Pullin ------------------------------ Charles R. Pullin IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: --------------------------- Its: --------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: --------------------------- Its: --------------------------- ------------------------------ Charles R. Pullin IN WITNESS WHEREOF, this Agreement has been entered into as of the date first written above. U.S. AGGREGATES, INC. By: --------------------------- Its: --------------------------- GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By: Golder, Thoma, Cressey, Rauner, Inc. Its: General Partner By: --------------------------- Its: --------------------------- ----------------------------- Charles R. Pullin EX-10.13 21 EXHIBIT 10.13 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of January 24, 1994 between USAI Acquisition Corp., a Delaware corporation (the "Company"), and James A. Harris ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 13,800 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Common Stock." The Common Stock and the Company's Preferred Stock, par value $.01 per share (the "Preferred Stock"), currently held, or hereafter acquired, by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The execution and delivery of this Agreement by the Company and Executive is a condition to the purchase of shares of Common Stock and Preferred Stock by Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership (the "Investor") pursuant to an Equity Purchase Agreement between the Company and the Investor dated as of the date hereof (the "Equity Purchase Agreement"). Certain provisions of this Agreement are intended for the benefit of, and will be enforceable by, the Investor. The Common Stock and the Preferred Stock are collectively referred to herein as the "Stock." The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 1,624 shares of Common Stock at a price of $10 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company a check or wire transfer of funds in an amount of $16.24 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of $16,223.76 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto (the "Pledge Agreement"). (b) Upon the election of the Investor to purchase additional Common Stock pursuant to Section 1B(ii) of the Equity Purchase Agreement, Executive may elect to purchase a number of shares of Common Stock equal to the amount necessary to maintain the Executive's pro rata ownership of Common Stock existing immediately prior to such purchase by Investor at a price of $10 per share; provided that the number of shares of Common Stock which Executive may acquire pursuant to this paragraph (b) shall not exceed 12,176 shares. The Company will deliver to Executive the certificate representing such Common Sock, and Executive will deliver to the Company a check or wire transfer of funds in an amount equal to $.01 per share and a promissory note substantially in the form of the Executive Note in an aggregate principal amount equal to the remaining purchase price amount. Executive's obligations will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith shall enter into a pledge agreement substantially similar to the Pledge Agreement. (c) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock. (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (d) As an inducement to the Company to issue the Executive Stock to Executive, as a condition thereto, Executive acknowledges and agrees that: -2- (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in that certain Employment Agreement of even date herewith between the Company and the Executive (the "Employment Agreement"); and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. VESTING OF EXECUTIVE COMMON STOCK. (a) The Executive Common Stock acquired hereunder will become vested in accordance with the following schedule, if as of each such date Executive is still employed by the Company or any of its Subsidiaries:
Cumulative Percentage of Executive Common Date Stock Vested ---- --------------- At Closing 25% 1st Anniversary of Closing 50% 2nd Anniversary of Closing 75% 3rd Anniversary of Closing 100%
(b) If Executive ceases to be employed by the Company and its Subsidiaries on any date other than any anniversary date prior to the third anniversary of the Closing, the cumulative percentage of Executive Common Stock to become vested will be determined on a pro rata basis according to the number of days elapsed since the prior anniversary date. Upon the occurrence of a Sale of the Company or the death or Disability of the Executive, all shares of Executive Common Stock which have not yet become vested shall become vested at the time of such event. Shares of Executive Common Stock which have become vested and shares of Executive Common Stock acquired hereafter by the Executive pursuant to that certain acquisition agreement expected to be entered into among the Company, Executive and other security holders of Western Rock, Inc., (the "Acquisition Agreement") are referred to herein as "Vested Shares," and all other shares of Executive Common Stock are referred to herein as "Unvested Shares." (c) Within 30 days after the date of this Agreement, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of EXHIBIT C attached hereto for the shares of Executive Common Stock. -3- 3. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), all Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 3 (the "Repurchase Option"). (b) The purchase price for each Unvested Share of Executive Common Stock and each share of Preferred Stock constituting Executive Stock will be Executive's Original Cost for such share (plus all accrued but unpaid dividends thereon), and the purchase price for each Vested Share of Executive Common Stock will be the Fair Market Value for such share. (c) The Board of Directors of the Company (the "Board") may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the Termination (it being understood that an election to purchase Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (d) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase all, but not less than all, of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (e) In the event that (i) the Executive's employment is terminated by the Company without Cause, (ii) neither the Company -4- nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (f) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The Company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the Company may elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (g) The right of the Company and the Investor to repurchase Vested Shares pursuant to this Section 3 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (h) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company will make such repurchases as soon as it is permitted to do so under such restrictions. 4. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: -5- "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF JANUARY 24, 1994, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN USAI ACQUISITION CORP. (THE "COMPANY") AND JAMES A. HARRIS DATED AS OF JANUARY 24, 1994. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 5. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated by the Employment Agreement for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by -6- way of a stock split, stock dividend or other recapitalization. Notwithstanding the foregoing, all Unvested Shares shall remain Executive Stock after any Transfer thereof. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined jointly in good faith by the Company and Executive; provided that if such parties are unable to reach agreement within 15 days following the Termination, such Fair Market Value shall be determined by an independent appraiser jointly selected by the Company and Executive. In the event that such parties are unable to reach agreement with respect to such independent appraiser within 5 days following the conclusion of the 15-day period described above, each of the Company and Executive shall promptly (and in any event within 5 days therefrom) select an independent appraiser, and the two independent appraisers so selected shall, as promptly as possible (and in any event within 10 days therefrom), jointly select a third independent appraiser. The independent appraiser hereunder shall determine the Fair Market Value of such Executive Stock within 60 days following the Termination. Any independent appraiser determining Fair Market Value of the Executive Stock hereunder shall use one or more valuation methods that such independent appraiser, in its best professional judgment, determines to be most appropriate under the circumstances, provided that no premium or discount shall be applied regarding any presence or absence of control of the Company. The determination of such third appraiser shall be final and binding on the Company and Executive. The fees and expenses of all appraiser(s) shall be borne by the Company and Executive in relation to the amount by which the fair market value determined by the Company and Executive, respectively, pursuant to the first clause of the second sentence of this definition differs from the fair market value determined by the final appraiser. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $10, each share of Common Stock issued pursuant to the Acquisition Agreement will be equal to $10 and for -7- each share of Preferred Stock issued pursuant to the Acquisition Agreement will be equal to $100 (each as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 6. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: USAI Acquisition Corp. c/o Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini -8- WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: James A. Harris 5 Marina Village Way Salem, SC 29676 IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 7. GENERAL PROVISIONS. (a) EXPENSES. The Company agrees to pay, and hold the Executive harmless against liability for the payment of the fees and expenses of its counsel arising in connection with the negotiation and execution of this Agreement and other related senior management agreements and consultant stock agreements and the consummation of the transactions contemplated by this and those agreements; provided that the aggregate of such amount attributable to all such transactions shall not exceed $10,000. (b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported -9- transferee of such Executive Stock as the owner of such stock for any purpose. (c) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (d) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (e) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (g) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (h) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of -10- this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (i) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (j) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (k) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By /s/ Michael Stone --------------------------- Its --------------------------- /s/ James A. Harris ------------------------------ James A. Harris Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By Golder, Thoma, Cressey, Rauner, Inc. Its General Partner By /s/ Bruce Rauner --------------------------- Its -------------------------- [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. ------------------------------ [SPOUSE] ------------------------------ Witness 12 EX-10.15 22 EXHIBIT 10.15 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of November 20, 1996 between U. S. Aggregates, Inc., a Delaware corporation (the "Company"), and James A. Harris ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 810.50 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 810.50 shares of Common Stock at a price of $10 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company a check or wire transfer of funds in an amount of $8.11 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of $8,096.89 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto (the "Pledge Agreement"). (b) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws; (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock; (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available; (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested; and (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (c) As an inducement to the Company to issue the Executive Stock to Executive, as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in the Employment Agreement dated as of January 24, 1994 between the Executive and the Company (the "Employment Agreement"); and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), all Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 2 (the "Repurchase Option"). The purchase price for each share of the Executive Stock will be the higher of the Executive's Original Cost and the Fair Market Value for such share. (b) The Board of Directors of the Company (the "Board") may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the Termination (it being understood that an election to purchase -2- Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (c) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase all, but not less than all, of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (d) In the event that (i) the Executive's employment is terminated by the Company without Cause, (ii) neither the Company nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (e) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The Company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the Company may -3- elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (f) The right of the Company and the Investor to repurchase Executive Stock pursuant to this Section 2 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (g) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company will make such repurchases as soon as it is permitted to do so under such restrictions. 3. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF NOVEMBER 20, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN U. S. AGGREGATES, INC.(THE "COMPANY") AND JAMES A. HARRIS DATED AS OF NOVEMBER 20, 1996 AND THE STOCKHOLDER AGREEMENT DATED AS OF JANUARY 24, 1994 AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF SUCH AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion -4- of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 4. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated by the Employment Agreement for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. Notwithstanding the foregoing, all Unvested Shares shall remain Executive Stock after any Transfer thereof. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 -5- consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined jointly in good faith by the Company and Executive; provided that if such parties are unable to reach agreement within 15 days following the Termination, such Fair Market Value shall be determined by an independent appraiser jointly selected by the Company and Executive. In the event that such parties are unable to reach agreement with respect to such independent appraiser within 5 days following the conclusion of the 15-day period described above, each of the Company and Executive shall promptly (and in any event within 5 days therefrom) select an independent appraiser, and the two independent appraisers so selected shall, as promptly as possible (and in any event within 10 days therefrom), jointly select a third independent appraiser. The independent appraiser hereunder shall determine the Fair Market Value of such Executive Stock within 60 days following the Termination. Any independent appraiser determining Fair Market Value of the Executive Stock hereunder shall use one or more valuation methods that such independent appraiser, in its best professional judgment, determines to be most appropriate under the circumstances, provided that no premium or discount shall be applied regarding any presence or absence of control of the Company. The determination of such third appraiser shall be final and binding on the Company and Executive. The fees and expenses of all appraiser(s) shall be borne by the Company and Executive in relation to the amount by which the fair market value determined by the Company and Executive, respectively, pursuant to the first clause of the second sentence of this definition differs from the fair market value determined by the final appraiser. "INVESTOR" means Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $10, each share of Common Stock issued pursuant to the Acquisition Agreement will be equal to $10 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to -6- elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 5. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: U. S. Aggregates, Inc. 1900 South Norfolk Street Suite 211 San Mateo, California 94403 Attention: Michael Stone WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: James A. Harris 5 Marina Village Way Salem, SC 29676 IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini -7- WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 6. GENERAL PROVISIONS. (a) EXPENSES. The Company agrees to pay, and hold the Executive harmless against liability for the payment of the fees and expenses of its counsel arising in connection with the negotiation and execution of this Agreement and other related senior management agreements and consultant stock agreements and the consummation of the transactions contemplated by this and those agreements; provided that the aggregate of such amount attributable to all such transactions shall not exceed $10,000. (b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (c) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (d) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (e) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original -8- and all of which taken together constitute one and the same agreement. (f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (g) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (h) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (i) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (j) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (k) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * -9- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. U. S. Aggregates, Inc. By /s/ Michael Stone ----------------------------- Its ---------------------------- /s/ James A. Harris ------------------------------- James A. Harris Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By Golder, Thoma, Cressey, Rauner, Inc. Its General Partner By /s/ David A. Donnini ------------------------- Its Principal [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. /s/ Frances E. Harris ------------------------------ [SPOUSE] /s/ Lauri J. Burns ------------------------------ Witness EXHIBIT A PROMISSORY NOTE $8,096.89 November 20, 1996 For value received, James A. Harris ("Executive") promises to pay on November 20, 2001 to the order of U. S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in San Mateo, California, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $8,096.89. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as of November 20, 1996 between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 2(c) of the Agreement. The amounts due under this Note are secured by a pledge of 810.50 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ James A. Harris ------------------------------ James A. Harris EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of November 20, 1996, between James A. Harris ("Pledgor"), and U. S. Aggregates, Inc., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated November 20, 1996 pursuant to which Pledgor purchased 810.50 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $8,105.00. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $8,096.89. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. ********** IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ James A. Harris ------------------------------------- James A. Harris U. S. Aggregates, Inc. By /s/ Michael Stone ---------------------------------- Its --------------------------------- EX-10.16 23 EXHIBIT 10.16 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of January 24, 1994 between USAI Acquisition Corp., a Delaware corporation (the "Company"), and Michael J. Stone ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 9,200 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Common Stock." The Common Stock and the Company's Preferred Stock, par value $.01 per share (the "Preferred Stock"), currently held, or hereafter acquired, by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The execution and delivery of this Agreement by the Company and Executive is a condition to the purchase of shares of Common Stock and Preferred Stock by Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership (the "Investor") pursuant to an Equity Purchase Agreement between the Company and the Investor dated as of the date hereof (the "Equity Purchase Agreement"). Certain provisions of this Agreement are intended for the benefit of, and will be enforceable by, the Investor. The Common Stock and the Preferred Stock are collectively referred to herein as the "Stock." The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 1,082 shares of Common Stock at a price of $10 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company a check or wire transfer of funds in an amount of $10.82 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of $10,809.18 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto (the "Pledge Agreement"). (b) Upon the election of the Investor to purchase additional Common Stock pursuant to Section 1B(ii) of the Equity Purchase Agreement, Executive may elect to purchase a number of shares of Common Stock equal to the amount necessary to maintain the Executive's pro rata ownership of Common Stock existing immediately prior to such purchase by Investor at a price of $10 per share; provided that the number of shares of Common Stock which Executive may acquire pursuant to this paragraph (b) shall not exceed 8,118 shares. The Company will deliver to Executive the certificate representing such Common Sock, and Executive will deliver to the Company a check or wire transfer of funds in an amount equal to $.01 per share and a promissory note substantially in the form of the Executive Note in an aggregate principal amount equal to the remaining purchase price amount. Executive's obligations will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith shall enter into a pledge agreement substantially similar to the Pledge Agreement. (c) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock. (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (d) As an inducement to the Company to issue the Executive Stock to Executive, as a condition thereto, Executive acknowledges and agrees that: -2- (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in that certain Employment Agreement of even date herewith between the Company and the Executive (the "Employment Agreement"); and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. VESTING OF EXECUTIVE COMMON STOCK. (a) The Executive Common Stock acquired hereunder will become vested in accordance with the following schedule, if as of each such date Executive is still employed by the Company or any of its Subsidiaries:
Cumulative Percentage of Executive Common Date Stock Vested ---- ------------ At Closing 25% 1st Anniversary of Closing 50% 2nd Anniversary of Closing 75% 3rd Anniversary of Closing 100%
(b) If Executive ceases to be employed by the Company and its Subsidiaries on any date other than any anniversary date prior to the third anniversary of the Closing, the cumulative percentage of Executive Common Stock to become vested will be determined on a pro rata basis according to the number of days elapsed since the prior anniversary date. Upon the occurrence of a Sale of the Company or the death or Disability of the Executive, all shares of Executive Common Stock which have not yet become vested shall become vested at the time of such event. Shares of Executive Common Stock which have become vested and shares of Executive Common Stock acquired hereafter by the Executive pursuant to that certain acquisition agreement expected to be entered into among the Company, Executive and other security holders of Western Rock, Inc., (the "Acquisition Agreement") are referred to herein as "Vested Shares," and all other shares of Executive Common Stock are referred to herein as "Unvested Shares." (c) Within 30 days after the date of this Agreement, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of EXHIBIT C attached hereto for the shares of Executive Common Stock. -3- 3. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), all Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 3 (the "Repurchase Option"). (b) The purchase price for each Unvested Share of Executive Common Stock and each share of Preferred Stock constituting Executive Stock will be Executive's Original Cost for such share (plus all accrued but unpaid dividends thereon), and the purchase price for each Vested Share of Executive Common Stock will be the Fair Market Value for such share. (c) The Board of Directors of the Company (the "Board") may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the Termination (it being understood that an election to purchase Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (d) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase all, but not less than all, of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (e) In the event that (i) the Executive's employment is terminated by the Company without Cause, (ii) neither the Company -4- nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (f) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The Company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the Company may elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (g) The right of the Company and the Investor to repurchase Vested Shares pursuant to this Section 3 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (h) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company will make such repurchases as soon as it is permitted to do so under such restrictions. 4. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: -5- "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF JANUARY 24, 1994, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN USAI ACQUISITION CORP. (THE "COMPANY") AND MICHAEL J. STONE DATED AS OF JANUARY 24, 1994. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 5. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated by the Employment Agreement for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by -6- way of a stock split, stock dividend or other recapitalization. Notwithstanding the foregoing, all Unvested Shares shall remain Executive Stock after any Transfer thereof. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined jointly in good faith by the Company and Executive; provided that if such parties are unable to reach agreement within 15 days following the Termination, such Fair Market Value shall be determined by an independent appraiser jointly selected by the Company and Executive. In the event that such parties are unable to reach agreement with respect to such independent appraiser within 5 days following the conclusion of the 15-day period described above, each of the Company and Executive shall promptly (and in any event within 5 days therefrom) select an independent appraiser, and the two independent appraisers so selected shall, as promptly as possible (and in any event within 10 days therefrom), jointly select a third independent appraiser. The independent appraiser hereunder shall determine the Fair Market Value of such Executive Stock within 60 days following the Termination. Any independent appraiser determining Fair Market Value of the Executive Stock hereunder shall use one or more valuation methods that such independent appraiser, in its best professional judgment, determines to be most appropriate under the circumstances, provided that no premium or discount shall be applied regarding any presence or absence of control of the Company. The determination of such third appraiser shall be final and binding on the Company and Executive. The fees and expenses of all appraiser(s) shall be borne by the Company and Executive in relation to the amount by which the fair market value determined by the Company and Executive, respectively, pursuant to the first clause of the second sentence of this definition differs from the fair market value determined by the final appraiser. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $10.00, each share of Common Stock issued pursuant to the Acquisition Agreement will be equal to $10 -7- and for each share of Preferred Stock issued pursuant to the Acquisition Agreement will be equal to $100 (each as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 6. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: USAI Acquisition Corp. c/o Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini -8- WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Michael J. Stone 457 Fairfax Avenue San Mateo, CA 94402 IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 7. GENERAL PROVISIONS. (a) EXPENSES. The Company agrees to pay, and hold the Executive harmless against liability for the payment of the fees and expenses of its counsel arising in connection with the negotiation and execution of this Agreement and other related senior management agreements and consultant stock agreements and the consummation of the transactions contemplated by this and those agreements; provided that the aggregate of such amount attributable to all such transactions shall not exceed $10,000. (b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported -9- transferee of such Executive Stock as the owner of such stock for any purpose. (c) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (d) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (e) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (g) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (h) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of -10- this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (i) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (j) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (k) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * -11- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By /s/ James A. Harris ---------------------------- Its --------------------------- /s/ Michael J. Stone ------------------------------- Michael J. Stone Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By Golder, Thoma, Cressey, Rauner, Inc. Its General Partner By /s/ Bruce Rauner ---------------------------- Its --------------------------- [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. /s/ BeBe Ashia H. Shah-Stone ------------------------------- [SPOUSE] /s/ Sylvia N. Stone ------------------------------- Witness -12- EX-10.18 24 EXHIBIT 10.18 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of November 20, 1996 between U. S. Aggregates, Inc., a Delaware corporation (the "Company"), and Michael J. Stone ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 810.50 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 810.50 shares of Common Stock at a price of $10 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company a check or wire transfer of funds in an amount of $8.11 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of$8,096.89 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto (the "Pledge Agreement"). (b) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws; (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock; (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available; (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested; and (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (c) As an inducement to the Company to issue the Executive Stock to Executive, as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in the Employment Agreement dated as of January 24, 1994 between the Executive and the Company (the "Employment Agreement"); and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), all Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 2 (the "Repurchase Option"). The purchase price for each share of the Executive Stock will be the higher of the Executive's Original Cost and the Fair Market Value for such share. (b) The Board of Directors of the Company (the "Board") may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the Termination (it being understood that an election to purchase Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with -2- other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (c) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase all, but not less than all, of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (d) In the event that (i) the Executive's employment is terminated by the Company without Cause, (ii) neither the Company nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (e) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The Company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the Company may elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company -3- having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (f) The right of the Company and the Investor to repurchase Executive Stock pursuant to this Section 2 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (g) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company will make such repurchases as soon as it is permitted to do so under such restrictions. 3. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF NOVEMBER 20, 1996, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN U. S. AGGREGATES, INC.(THE "COMPANY") AND MICHAEL J. STONE DATED AS OF NOVEMBER 20, 1996 AND THE STOCKHOLDER AGREEMENT DATED AS OF JANUARY 24, 1994 AMONG THE COMPANY AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF SUCH AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the -4- Securities Act and applicable state securities laws is required in connection with such transfer. 4. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated by the Employment Agreement for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. Notwithstanding the foregoing, all Unvested Shares shall remain Executive Stock after any Transfer thereof. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in -5- the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined jointly in good faith by the Company and Executive; provided that if such parties are unable to reach agreement within 15 days following the Termination, such Fair Market Value shall be determined by an independent appraiser jointly selected by the Company and Executive. In the event that such parties are unable to reach agreement with respect to such independent appraiser within 5 days following the conclusion of the 15-day period described above, each of the Company and Executive shall promptly (and in any event within 5 days therefrom) select an independent appraiser, and the two independent appraisers so selected shall, as promptly as possible (and in any event within 10 days therefrom), jointly select a third independent appraiser. The independent appraiser hereunder shall determine the Fair Market Value of such Executive Stock within 60 days following the Termination. Any independent appraiser determining Fair Market Value of the Executive Stock hereunder shall use one or more valuation methods that such independent appraiser, in its best professional judgment, determines to be most appropriate under the circumstances, provided that no premium or discount shall be applied regarding any presence or absence of control of the Company. The determination of such third appraiser shall be final and binding on the Company and Executive. The fees and expenses of all appraiser(s) shall be borne by the Company and Executive in relation to the amount by which the fair market value determined by the Company and Executive, respectively, pursuant to the first clause of the second sentence of this definition differs from the fair market value determined by the final appraiser. "INVESTOR" means Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $10, each share of Common Stock issued pursuant to the Acquisition Agreement will be equal to $10 (as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or -6- transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 5. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: U. S. Aggregates, Inc. 1900 South Norfolk Street Suite 211 San Mateo, California 94403 Attention: President WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Michael J. Stone 457 Fairfax Avenue San Mateo, CA 94402 IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini -7- WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 6. GENERAL PROVISIONS. (a) EXPENSES. The Company agrees to pay, and hold the Executive harmless against liability for the payment of the fees and expenses of its counsel arising in connection with the negotiation and execution of this Agreement and other related senior management agreements and consultant stock agreements and the consummation of the transactions contemplated by this and those agreements; provided that the aggregate of such amount attributable to all such transactions shall not exceed $10,000. (b) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (c) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (d) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (e) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original -8- and all of which taken together constitute one and the same agreement. (f) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (g) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (h) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (i) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (j) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (k) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * -9- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. U. S. Aggregates, Inc. By /s/ Michael Stone --------------------------- Its -------------------------- /s/ Michael J. Stone ----------------------------- Michael J. Stone Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By Golder, Thoma, Cressey, Rauner, Inc. Its General Partner By /s/ David A. Donnini -------------------------- Its Principal ------------------------- [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. /s/ Ashia H. Stone ------------------------------ [SPOUSE] /s/ Mailan Do Boris ------------------------------ Witness EXHIBIT A PROMISSORY NOTE $8,096.89 November 20, 1996 For value received, Michael J. Stone ("Executive") promises to pay on November 20, 2001 to the order of U. S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in San Mateo, California, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $8,096.89. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as of November 20, 1996 between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 2(c) of the Agreement. The amounts due under this Note are secured by a pledge of 810.50 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ Michael J. Stone ----------------------------- Michael J. Stone EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of November 20, 1996, between Michael J. Stone ("Pledgor"), and U. S. Aggregates, Inc., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated November 20, 1996 pursuant to which Pledgor purchased 810.50 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $8,105.00. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $8,096.89. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. ************** IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Michael Stone ----------------------------- Michael J. Stone U. S. Aggregates, Inc. By /s/ Michael Stone ------------------------- Its ------------------------- EX-10.20 25 EXHIBIT 10.20 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of October 1, 1997, between U.S. Aggregates, Inc., a Delaware corporation (the "Company"), and Morris L. Bishop, Jr. ("Executive"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 1,438 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 1,438 shares of Common Stock at a price of $152.990264 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company cash or a check in an amount of $14.38 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of $219,985.62 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto. (b) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws. (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock. (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act oran exemption from such registration is available. (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested. (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (c) As an inducement to the Company to issue the Executive Stock to Executive and as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in the Employment Agreement; and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. VESTING OF EXECUTIVE STOCK. (a) The Executive Stock acquired hereunder will become vested in accordance with the following schedule, if as of each such date Executive is still employed by the Company or any of its Subsidiaries:
Cumulative Percentage of Executive Stock Date Vested ---- --------------- October 1, 1997 20% October 1, 1998 40% October 1, 1999 60% -2- October 1, 2000 80% October 1, 2001 100%
(b) If Executive ceases to be employed by the Company or any of its Subsidiaries on any date other than any Vesting Date prior to October 1, 2001, the cumulative percentage of Executive Stock to become vested will be determined on a pro rata basis according to the number of days elapsed since the prior Vesting Date. Upon the occurrence of a Sale of the Company, all shares of Executive Stock which have not yet become vested shall become vested at the time of such event. Shares of Executive Stock which have become vested are referred to herein as "Vested Shares," and all other shares of Executive Stock are referred to herein as "Unvested Shares." (c) Within 30 days after the date of this Agreement, Executive will make an effective election with the Internal Revenue Service under Section 83(b) of the Internal Revenue Code and the regulations promulgated thereunder in the form of EXHIBIT C attached hereto for the shares of Executive Stock. 3. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), the Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 3 (the "Repurchase Option"). (b) The purchase price for each Unvested Share of Executive Stock will be the lower of the Executive's Original Cost and the Fair Market Value for such shares, and the purchase price for each Vested Share of Executive Common Stock will be the higher of the Executive's Original Cost and the Fair Market Value for such share. (c) The Board may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the Termination (it being understood that an election to purchase Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (d) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase any or all of the Available Shares by giving written notice to the Company within one month after the Option Notice -3- has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (e) In the event that (i) the Executive's employment is terminated by the Company without Cause (as defined in the Employment Agreement), (ii) neither the Company nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (f) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the company may elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (g) The right of the Company and the Investor to repurchase Vested Shares pursuant to this Section 3 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (h) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases as soon as it is permitted to do so under such restrictions. -4- 4. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF OCTOBER 1, 1997, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN U.S. AGGREGATES, INC. (THE "COMPANY") AND MORRIS L. BISHOP, JR. DATED AS OF OCTOBER 1, 1997. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 5. DEFINITIONS. "EMPLOYMENT AGREEMENT" means that certain employment agreement between the Executive and the Company dated as of August 5, 1994. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. Notwithstanding the foregoing, all Unvested Shares shall remain Executive Stock after any Transfer thereof. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative -5- bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined in good faith by the Board. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $152.990264 each as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "VESTING DATE" means any of October 1, 1997, October 1, 1998, October 1, 1999, October 1, 2000 and October 1, 2001. 6. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: -6- IF TO THE COMPANY: U.S. Aggregates, Inc. 400 South El Camino Real, Suite 500 San Mateo, California 94402 Attn: Executive Vice President WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Morris L. Bishop, Jr. 8109 Brenthaven Drive Brentwood, Tennessee 37027 IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. -7- 7. GENERAL PROVISIONS. (a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (b) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (c) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (f) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (g) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without -8- posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (h) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (i) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (j) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * -9- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. U.S. AGGREGATES, INC. /s/ Michael J. Stone ---------------------------- By Michael J. Stone Its Executive Vice President /s/ Morris L. Bishop, Jr. ---------------------------- Morris L. Bishop, Jr. Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By /s/ David A. Donnini --------------------------- Its -------------------------- [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. ------------------------------- Name: -------------------------- ------------------------------- Witness -10- DEMAND NOTE $219,985.62 October 1, 1997 ON DEMAND, or if no Demand shall have been made, on October 1, 2005 or such later date as the parties may mutually agree, for value received, Morris L. Bishop, Jr. ("Executive") promises to pay to the order of U.S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in San Mateo, California, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $219,985.62. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as of October 1, 1997, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 1,438 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ Morris L. Bishop, Jr. ------------------------------- Morris L. Bishop, Jr. EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of October 1, 1997, between Morris L. Bishop, Jr. ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated October 1, 1997, pursuant to which Pledgor purchased 1,438 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $220,000. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $219,985.62. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. -2- 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. * * * * * * * * * * -3- IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Morris L. Bishop, Jr. ------------------------------- Morris L. Bishop, Jr. U.S. AGGREGATES, INC. /s/ Michael J. Stone ------------------------------- By Michael J. Stone Its Executive Vice President -4- October 1, 1997 ELECTION TO INCLUDE STOCK IN GROSS INCOME PURSUANT TO SECTION 83(b) OF THE INTERNAL REVENUE CODE The undersigned purchased shares of Common Stock, par value $.01 per share (the "Shares"), of U.S. Aggregates, Inc. on October 1, 1997. Under certain circumstances, the Company has the right to repurchase the Shares at cost from the undersigned (or from the holder of the Shares, if different from the undersigned) should the undersigned cease to be employed by the Company and its subsidiaries. Hence, the Shares are subject to a substantial risk of forfeiture and are non-transferable. The undersigned desires to make an election to have the Shares taxed under the provision of Code Section 83(b) at the time he purchased the Shares. Therefore, pursuant to Code Section 83(b) and Treasury Regulation Section 1.83-2 promulgated thereunder, the undersigned hereby makes an election, with respect to the Shares (described below), to report as taxable income for calendar year 1997 the excess (if any) of the Shares' fair market value on October 1, 1997 over purchase price thereof. The following information is supplied in accordance with Treasury Regulation Section 1.83-2(e): 1. The name, address and social security number of the undersigned: Morris L. Bishop, Jr. 8109 Brenthaven Drive Brentwood, TN 37027 SSN: ###-##-#### 2. A description of the property with respect to which the election is being made: 1,438 shares of US Aggregates, Inc. Common Stock, par value $.01 per share. 3. The date on which the property was transferred: October 1, 1997. The taxable year for which such election is made: calendar 1997. 4. The restrictions to which the property is subject: If prior to October 1, 2001 the undersigned ceases to be employed by the Company or any of its subsidiaries, the unvested portion of the Shares will be subject to repurchase by the Company at the lower of fair market value and cost, and at any time prior to a public offering by the Company or a sale of the Company the undersigned ceases to be employed by the Company or any of its subsidiaries, the vested portion of the Shares will be subject to repurchase by the Company at the higher of cost and fair market value. One-fifth of the Shares will become vested shares on each of October 1, 1997, October 1, 1998, October 1, 1999, October 1, 2000 and October 1, 2001. 5. The fair market value on October 1, 1997, of the property with respect to which the election is being made, determined without regard to any lapse restrictions: $152.990264 per share of Common Stock. 6. The amount paid for such property: $152.990264 per share of Common Stock. A copy of this election has been furnished to the Secretary of the Company pursuant to Treasury Regulations Section 1.83-2(e)(7). Dated: October 1, 1997 /s/ Morris L. Bishop, Jr. ------------------------------- Morris L. Bishop, Jr. -2- EX-10.21 26 EXHIBIT 10.21 EXHIBIT B EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of January 24, 1994, between James A. Harris ("Pledgor"), and USAI Acquisition Corp., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated January 24, 1994, pursuant to which Pledgor purchased 1,624 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $16,240. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $16,223.76. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ James A. Harris ------------------------------- James A. Harris USAI ACQUISITION CORP. By /s/ Michael Stone ---------------------------- Its --------------------------- EX-10.22 27 EXHIBIT 10.22 EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of May 10, 1994, between James A. Harris ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (f/k/a USAI Acquisition Corp.) (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated January 24, 1994, pursuant to which Pledgor purchased 12,176 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $121,760.00. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $121,638.24. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ James A. Harris ------------------------------------- James A. Harris U.S. AGGREGATES, INC. By /s/ Michael Stone ----------------------------------- Its Treasurer ---------------------------------- EX-10.24 28 EXHIBIT 10.24 EXHIBIT B EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of January 24, 1994, between Michael J. Stone ("Pledgor"), and USAI Acquisition Corp., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated January 24, 1994, pursuant to which Pledgor purchased 1,082 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $10,820.00. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $10,809.18. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Michael J. Stone ------------------------------------- Michael J. Stone USAI ACQUISITION CORP. By /s/ James A. Harris ------------------------------------- Its ------------------------------------ EX-10.25 29 EXHIBIT 10.25 EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of May 10, 1994, between Michael J. Stone ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (f/k/a USAI Acquisition Corp.) (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated January 24, 1994, pursuant to which Pledgor purchased 8,118 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $81,180. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the company of a promissory note (the "Note") in the aggregate principal amount of $81,098.82. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or private or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Michael J. Stone ------------------------------------- Michael J. Stone U.S. AGGREGATES, INC. By /s/ James A. Harris ----------------------------------- Its President ---------------------------------- EX-10.27 30 EXHIBIT 10.27 EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of August 5, 1994, between Morris Bishop, Jr. ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated August 5, 1994, pursuant to which Pledgor purchased 1,692 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $16,920. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $16,903.08. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or private or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. -2- 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms of provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Morris Bishop, Jr. ------------------------------------- Morris Bishop, Jr. U.S. AGGREGATES, INC. By /s/ James A. Harris ----------------------------------- Its President ---------------------------------- -3- EX-10.30 31 EXHIBIT 10.30 EXHIBIT A PROMISSORY NOTE $16,223.76 January 24, 1994 For value received, James A. Harris ("Executive") promises to pay on January 24, 1999 to the order of USAI Acquisition Corp., a Delaware corporation (the "Company"), at its offices in Clemson, South Carolina, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $16,223.76. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as January 24, 1994, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 1,624 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ James A. Harris ------------------------------------- James A. Harris EX-10.31 32 EXHIBIT 10.31 PROMISSORY NOTE $121,638.24 May 10, 1994 For value received, James A. Harris ("Executive") promises to pay on May 10, 1994 to the other of U.S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in Clemson, South Carolina, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $121,638.24. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as January 24, 1994, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 12,176 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ James A. Harris ------------------------------------- James A. Harris EX-10.33 33 EXHIBIT 10.33 EXHIBIT A PROMISSORY NOTE $10,809.18 January 24, 1994 For value received, Michael J. Stone ("Executive") promises to pay on January 24, 1999 to the order of USAI Acquisition Corp., a Delaware corporation (the "Company"), at its offices in Clemson, South Carolina, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $10,809.18. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as January 24, 1994, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 1,082 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ Michael J. Stone - ------------------------------------ Michael J. Stone EX-10.34 34 EXHIBIT 10.34 PROMISSORY NOTE $81,098.82 May 10, 1994 For value received, Michael J. Stone ("Executive") promises to pay on May 10, 1999 to the other of U.S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in Clemson, South Carolina, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $81,098.82. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as January 24, 1994, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 8,118 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ Michael J. Stone -------------------------------- Michael J. Stone EX-10.36 35 EXHIBIT 10.36 PROMISSORY NOTE $16,903.08 August 5, 1994 For value received, Morris Bishop, Jr. ("Executive") promises to pay on August 5, 1994 to the order of U.S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in Clemson, South Carolina, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $16,903.08. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as August 5, 1994, between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 3(c) of the Agreement. The amounts due under this Note are secured by a pledge of 1,692 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Senior Management Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successor and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. /s/ Morris Bishop, Jr. ---------------------- Morris Bishop, Jr. EX-10.39 36 EXHIBIT 10.39 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of January 24, 1994, between USAI Acquisition Corp., a Delaware corporation (the "COMPANY"), and James A. Harris ("EXECUTIVE"). The parties hereto desire to enter into an agreement pursuant to which Executive shall be employed by the Company as the Company's President and Chief Executive Officer. Certain defined terms used herein are set forth in Section 9 below. The parties hereto agree as follows: 1. EMPLOYMENT. The Company agrees to employ Executive and Executive accepts such employment for the period beginning as of the date hereof and ending upon termination pursuant to Section 3(a) hereof (the "EMPLOYMENT PERIOD"). During the Employment Period, Executive shall serve as the President and Chief Executive Officer of the Company and shall have the normal duties, responsibilities and authority of the President and Chief Executive Officer, including, without limitation, responsibility for all aspects of the daily operations of the Company and the identification, negotiation and integration of acquisitions, subject to customary oversight by the Company's board of directors (the "BOARD"). 2. COMPENSATION. During the Employment Period, the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") as the Board may designate from time to time, at a rate initially equal to $200,000 per annum, which amount shall be reviewed annually and shall be subject to adjustment as determined by the Board in its discretion, based upon, among other things, the Company's achievement of certain performance objectives; provided Annual Base Salary shall not be less than $200,000 per annum. Following the end of each fiscal year, the Board may, in its sole discretion, award a bonus to Executive in an amount not expected to exceed 50% of Executive's Annual Base Salary for such year, as determined by the Board in its discretion, based upon, among other things, the Company's achievement of budgetary and other objectives. The Board will consult with Executive at the beginning of each budgetary period to set reasonable budgetary and other objectives against which the Company's performance will be measured. Executive's Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year. 3. TERMINATION. (a) EMPLOYMENT PERIOD. The Employment Period will continue until Executive's resignation, Disability (as defined in Section 9 below) or death or until the Board determines in its good faith judgment that termination of Executive's employment is in the best interests of the Company. -1- (b) SEVERANCE PAYMENTS. In the event Executive's employment is terminated by the Company without Cause (as defined in Section 9 below) or as a result of Executive's death or Disability, the Company shall pay to Executive severance pay ("SEVERANCE PAY") equal to $16,667 per month for a period of 12 months following the date of such termination. Each such payment shall be reduced by the amount of salary, commissions, fees, bonuses and other compensation paid to Executive on account of any other employment or services rendered during the period between such payment and the immediately prior payment. Executive shall cooperate with the Company in providing information so as to calculate the net amount due pursuant to the preceding sentence. 4. CONFIDENTIAL INFORMATION. Executive acknowledges that the information, observations and data obtained by him during the course of his performance under this Agreement concerning the business and affairs of the Company and its affiliates (the "CONFIDENTIAL INFORMATION") are the property of the Company. Therefore, Executive agrees that he will not disclose to any unauthorized person or use for his own account any of such information, observations or data without the Board's written consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public, other than as a result of Executive's acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the Confidential Information (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control. -2- 5. NONCOMPETITION AND NONSOLICITATION. (a) NONCOMPETITION. Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company's trade secrets and with other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that during the Noncompete Period (as defined in Section 9 below) he shall not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist on the date of the termination of Executive's employment, within 100 miles any site of operations in which the Company or its Subsidiaries engage in such businesses or are then in negotiations to acquire such businesses. (b) NONSOLICITATION. During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way knowingly interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any Subsidiary at any time during the last 12 months of the Employment Period or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary. (c) ENFORCEMENT. If, at the time of enforcement of Section 4 or 5 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Executive's services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). -3- 6. EXECUTIVE REPRESENTATIONS. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement, confidentiality agreement or other similar agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. 7. SURVIVAL. Paragraphs 4 and 5 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 8. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: USAI Acquisition Corp. c/o Golder, Thoma, Cressey & Rauner 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: James A. Harris c/o USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. -4- 9. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated hereby for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "NONCOMPETE PERIOD" means the Employment Period plus the two year period immediately subsequent the Employment Period. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. -5- 10. GENERAL PROVISIONS. (a) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (b) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (c) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (d) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive and the Company under this Agreement shall not be assignable without the prior written consent of the other party. (e) CHOICE OF LAW. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (f) REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (g) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive. * * * * * -6- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By /s/ Michael Stone --------------------- Its -------------------- /s/ James A. Harris --------------------- James A. Harris -7- EX-10.40 37 EXHIBIT 10.40 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of January 24, 1994, between USAI Acquisition Corp., a Delaware corporation (the "COMPANY"), and Michael J. Stone ("EXECUTIVE"). The parties hereto desire to enter into an agreement pursuant to which Executive shall be employed by the Company as the Company's Executive Vice President-Development, Chief Financial Officer and Treasurer. Certain defined terms used herein are set forth in Section 9 below. The parties hereto agree as follows: 1. EMPLOYMENT. The Company agrees to employ Executive and Executive accepts such employment for the period beginning as of the date hereof and ending upon termination pursuant to Section 3(a) hereof (the "EMPLOYMENT PERIOD"). During the Employment Period, Executive shall serve as the Executive Vice President-Development, Chief Financial Officer and Treasurer of the Company and shall have the normal duties, responsibilities and authority of the Executive Vice President-Development, Chief Financial Officer and Treasurer, including, without limitation, responsibility for the identification, negotiation and integration support of acquisitions, and the financial strategy, budget controls and the cash management of the Company, subject to customary oversight by the Company's board of directors (the "BOARD"). 2. COMPENSATION. During the Employment Period, the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") as the Board may designate from time to time, at a rate initially equal to $150,000 per annum, which amount shall be reviewed annually and shall be subject to adjustment as determined by the Board in its discretion, based upon, among other things, the Company's achievement of certain performance objectives; provided Annual Base Salary shall not be less than $150,000 per annum. Following the end of each fiscal year, the Board may, in its sole discretion, award a bonus to Executive in an amount not expected to exceed 50% of Executive's Annual Base Salary for such year, as determined by the Board in its discretion, based upon, among other things, the Company's achievement of budgetary and other objectives. The Board will consult with Executive at the beginning of each budgetary period to set reasonable budgetary and other objectives against which the Company's performance will be measured. Executive's Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year. 3. TERMINATION. (a) EMPLOYMENT PERIOD. The Employment Period will continue until Executive's resignation, Disability (as defined in Section 9 below) or death or until the Board determines in its good faith judgment that termination of Executive's employment is in the best interests of the Company. (b) SEVERANCE PAYMENTS. In the event Executive's employment is terminated by the Company without Cause (as defined in Section 9 below) or as a result of Executive's death or Disability, the Company shall pay to Executive severance pay ("SEVERANCE PAY") equal to $12,500 per month for a period of 12 months following the date of such termination. Each such payment shall be reduced by the amount of salary, commissions, fees, bonuses and other compensation paid to Executive on account of any other employment or services rendered during the period between such payment and the immediately prior payment. Executive shall cooperate with the Company in providing information so as to calculate the net amount due pursuant to the preceding sentence. 4. CONFIDENTIAL INFORMATION. Executive acknowledges that the information, observations and data obtained by him during the course of his performance under this Agreement concerning the business and affairs of the Company and its affiliates (the "CONFIDENTIAL INFORMATION") are the property of the Company. Therefore, Executive agrees that he will not disclose to any unauthorized person or use for his own account any of such information, observations or data without the Board's written consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public, other than as a result of Executive's acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the Confidential Information (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control. 5. NONCOMPETITION AND NONSOLICITATION. (a) NONCOMPETITION. Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company's trade secrets and with other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that during the Noncompete Period (as defined in Section 9 below) he shall not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist on the date of the termination of Executive's employment, within 100 miles any site of operations in which the Company or its Subsidiaries engage in such businesses or are then in negotiations to acquire such businesses. -2- (b) NONSOLICITATION. During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way knowingly interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any Subsidiary at any time during the last 12 months of the Employment Period or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary. (c) ENFORCEMENT. If, at the time of enforcement of Section 4 or 5 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Executive's services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). 6. EXECUTIVE REPRESENTATIONS. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement, confidentiality agreement or other similar agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. 7. SURVIVAL. Paragraphs 4 and 5 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 8. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed -3- by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: USAI Acquisition Corp. c/o Golder, Thoma, Cressey & Rauner 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Michael J. Stone c/o USAI Acquisition Corp. 400-3 College Avenue Clemson, SC 29631 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 9. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated hereby for a continuous period of 90 days or -4- for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "NONCOMPETE PERIOD" means the Employment Period plus the two year period immediately subsequent the Employment Period. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 10. GENERAL PROVISIONS. (a) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (b) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (c) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (d) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive and the Company under this Agreement shall not be assignable without the prior written consent of the other party. (e) CHOICE OF LAW. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of -5- the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (f) REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (g) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive. * * * * * -6- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. USAI ACQUISITION CORP. By /s/ James A. Harris ----------------------------- Its ---------------------------- /s/ Michael J. Stone ------------------------------- Michael J. Stone -7- EX-10.41 38 EXHIBIT 10.41 EMPLOYMENT AGREEMENT THIS AGREEMENT is made as of August 5, 1994, between U.S. Aggregates, Inc., a Delaware corporation (the "COMPANY"), and Morris Bishop, Jr. ("EXECUTIVE"). The parties hereto desire to enter into an agreement pursuant to which Executive shall be employed by the Company as the Company's Vice President - Southeast Operations. Certain defined terms used herein are set forth in Section 9 below. The parties hereto agree as follows: 1. EMPLOYMENT. The Company agrees to employ Executive and Executive accepts such employment for the period beginning as of the date hereof and ending upon termination pursuant to Section 3(a) hereof (the "EMPLOYMENT PERIOD"). During the Employment Period, Executive shall serve as the Vice President - Southeast Operations of the Company and shall have the normal duties, responsibilities and authority as assigned by the Chief Executive Officer of the Company, subject to customary oversight by the Company's board of directors (the "BOARD"). 2. COMPENSATION. During the Employment Period, the Company will pay Executive a base salary (the "ANNUAL BASE SALARY") as the Board may designate from time to time, at a rate initially equal to $150,000 per annum, which amount shall be reviewed annually and shall be subject to adjustment as determined by the Board in its discretion, based upon, among other things, the Company's achievement of certain performance objectives; provided Annual Base Salary shall not be less than $150,000 per annum. Following the end of each fiscal year, the Board may, in its sole discretion, award a bonus to Executive in an amount not to exceed 50% of Executive's Annual Base Salary for such year, as determined by the Board in its discretion, based upon, among other things, the Company's achievement of budgetary and other objectives. The Board will consult with Executive at the beginning of each budgetary period to set reasonable budgetary and other objectives against which the Company's performance will be measured. Executive's Annual Base Salary for any partial year will be prorated based upon the number of days elapsed in such year. 3. TERMINATION. (a) EMPLOYMENT PERIOD. The Employment Period will continue until Executive's resignation, Disability (as defined in Section 9 below) or death or until the Board determines in its good faith judgment that termination of Executive's employment is in the best interests of the Company. -1- (b) SEVERANCE PAYMENTS. In the event Executive's employment is terminated by the Company without Cause (as defined in Section 9 below), the Company shall pay to Executive severance pay ("SEVERANCE PAY") equal to $12,500 per month for a period of 12 months following the date of such termination. Each such payment shall be reduced by the amount of salary, commissions, fees, bonuses and other compensation paid to Executive on account of any other employment or services rendered during the period between such payment and the immediately prior payment. Executive shall cooperate with the Company in providing information so as to calculate the net amount due pursuant to the preceding sentence. 4. CONFIDENTIAL INFORMATION. Executive acknowledges that the information, observations and data obtained by him during the course of his performance under this Agreement concerning the business and affairs of the Company and its affiliates (the "CONFIDENTIAL INFORMATION") are the property of the Company. Therefore, Executive agrees that he will not disclose to any unauthorized person or use for his own account any of such information, observations or data without the Board's written consent, unless and to the extent that the aforementioned matters become generally known to and available for use by the public, other than as a result of Executive's acts or omissions to act. Executive agrees to deliver to the Company at the termination of his employment, or at any other time the Company may request in writing, all memoranda, notes, plans, records, reports and other documents (and copies thereof) relating to the Confidential Information (including, without limitation, all acquisition prospects, lists and contact information) which he may then possess or have under his control. 5. NONCOMPETITION AND NONSOLICITATION. (a) NONCOMPETITION. Executive acknowledges that in the course of his employment with the Company he will become familiar with the Company's trade secrets and with other confidential information concerning the Company and that his services will be of special, unique and extraordinary value to the Company. Therefore, Executive agrees that during the Noncompete Period (as defined in Section 9 below) he shall not directly or indirectly own, manage, control, participate in, consult with, render services for or in any manner engage in any business competing with the businesses of the Company or its Subsidiaries as such businesses exist or are in process on the date of the termination of Executive's employment, within the geographical area in which the Company or its Subsidiaries engage or plan to engage in such businesses. -2- (b) NONSOLICITATION. During the Noncompete Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of the Company or any Subsidiary to leave the employ of the Company or such Subsidiary, or in any way knowingly interfere with the relationship between the Company or any Subsidiary and any employee thereof, (ii) hire any person who was an employee of the Company or any Subsidiary at any time during the last 12 months of the Employment Period or (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of the Company or any Subsidiary to cease doing business with the Company or such Subsidiary, or in any way knowingly interfere with the relationship between any such customer, supplier, licensee or business relation and the Company or any Subsidiary. (c) ENFORCEMENT. If, at the time of enforcement of Section 4 or 5 of this Agreement, a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Executive's services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event of a breach or threatened breach of this Agreement, the Company or its successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). 6. EXECUTIVE REPRESENTATIONS. Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive is not a party to or bound by any employment agreement, noncompete agreement, confidentiality agreement or other similar agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of Executive, enforceable in accordance with its terms. -3- 7. SURVIVAL. Paragraphs 4 and 5 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period. 8. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: U.S. Aggregates, Inc. 400-4 College Avenue Clemson, S.C. 29631 Attention: James A. Harris WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Morris Bishop, Jr. 8109 Brenthaven Drive Brentwood, TN 37027 or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. -4- 9. DEFINITIONS. "CAUSE" means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act involving dishonesty, disloyalty or fraud with respect to the Company or any of its Subsidiaries, (ii) conduct tending to bring the Company or any of its Subsidiaries into public disgrace or disrepute, (iii) failure to perform duties as reasonably directed by the Board, (iv) gross negligence or willful misconduct with respect to the Company or any of its Subsidiaries or (v) any other material breach of this Agreement or any other agreement to which the Executive and the Company are parties which is not cured within 10 days after written notice thereof to Executive. "DISABILITY" means Executive's inability, because of injury, illness or other incapacity to perform the services to the Company contemplated hereby for a continuous period of 90 days or for 120 days out of a continuous period of 360 days. Such Disability shall be deemed to have occurred on the 90th consecutive day or the 120th day within the specified period, as applicable. "NONCOMPETE PERIOD" means the Employment Period plus two years. "SUBSIDIARY" means any corporation of which the Company owns securities having a majority of the ordinary voting power in electing the board of directors directly or through one or more subsidiaries. 10. GENERAL PROVISIONS. (a) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (b) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. -5- (c) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same agreement. (d) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company and their respective successors and assigns; provided that the rights and obligations of Executive and the Company under this Agreement shall not be assignable without the prior written consent of the other party. (e) CHOICE OF LAW. The corporate law of the State of Delaware will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (f) REMEDIES. Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or other security) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (g) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company and Executive. * * * * * -6- IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. U.S. AGGREGATES, INC. By /s/ James A. Harris -------------------- Its President -------------------- /s/ Morris Bishop, Jr. ----------------------- Morris Bishop, Jr. -7- EX-10.42(I) 39 EXHIBIT 10.42(I) AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (this "Agreement") is entered into as of January 29, 1998, by and among U.S. Aggregates, Inc., a Delaware corporation ("Purchaser"), Western Acquisition, Inc., a Delaware corporation and a wholly-owned indirect subsidiary of Purchaser ("Sub"), and Monroc, Inc., a Delaware corporation (the "Company"). RECITALS A. The Boards of Directors of Purchaser, Sub and the Company each have determined that the merger of Sub with and into the Company, upon the terms and subject to the conditions set forth herein, is fair to, and in the best interests of, their respective corporations and stockholders. B. Concurrently with the execution of this Agreement, certain stockholders of the Company have entered into the Voting Agreement attached hereto as Exhibit A (the "Voting Agreement") which provides that such stockholders will vote their shares of common stock of the Company in favor of this Agreement. C. Purchaser, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with, and to establish various conditions precedent to, the merger provided for herein. ARTICLE I THE MERGER 1.1. MERGER. At the Effective Time, upon the terms and subject to the conditions hereof, and in accordance with the provisions of the Delaware General Corporation Law (the "DGCL") and the Certificate of Incorporation and Bylaws of the Company, Sub shall be merged with and into the Company (the "Merger"). Following the Merger, the Company shall continue as the surviving corporation (the "Surviving Corporation") under the name Monroc, Inc. and shall continue its existence under the laws of the State of Delaware, and the separate corporate existence of Sub shall cease. 1.2. CONSUMMATION OF THE MERGER. As soon as practicable after the satisfaction or waiver of the conditions set forth in Article 6, the parties hereto will cause a duly executed and acknowledged certificate of merger, or certificate of ownership and merger if permitted by the DGCL of the State of (the "Merger Certificate"), to be filed with the Secretary of State of Delaware, and the parties hereto shall take all such other and further actions as may be required by law to make the Merger effective. The Merger shall become effective on the date on which the Merger Certificate has been duly filed with the Secretary of State of the State of Delaware (such time is hereinafter referred to as the "Effective Time"). The closing of the Merger will take place at 10:00 a.m. on a date to be specified by the Purchaser or Sub, but shall be no later than the third business day after satisfaction or waiver of the conditions to closing set forth in Article 6 (the "Closing Date"), at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 1000 Kearns Building, 136 South Main Street, Salt Lake City, Utah 84101, unless another date or place is agreed to in writing by the parties hereto. 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Sub shall vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation. As of the Effective Time, the Company shall be a wholly owned subsidiary of Purchaser. 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to Section 5. 11 (indemnification), the Certificate of Incorporation and the Bylaws of Sub in effect at the Effective Time shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until amended in accordance with applicable law; provided that Article I of the Certificate of Incorporation of Sub shall be Amended as of the Effective Time to read "The name of the corporation is Monroc, Inc." 1.5 DIRECTORS AND OFFICERS. The directors of Sub at the Effective Time shall be the directors of the Surviving Corporation and the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation, in each case until their respective successors are duly elected (or appointed in the case of officers) and qualified. ARTICLE 2 CONVERSION OF SECURITIES 2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, Sub, the Company or the holders of any of the following securities: 2.1.1 Each share of common stock, par value $.01 per share, of the Company issued and outstanding immediately prior to the Effective Time (the "Shares"), other than Shares to be canceled pursuant to Section 2.1.2 and Dissenting Shares (as hereinafter defined), shall by virtue of the Merger and without any action on the part of the holder thereof be canceled and extinguished and be converted into the right to receive $10.771 without interest thereon (the "Merger Consideration"). 2.1.2 Each Share which is issued and outstanding immediately prior and held by Purchaser or Sub or any direct or indirect subsidiary of Purchaser or Sub, or which is held in the treasury of the Company or any of its subsidiaries, shall be canceled and retired and no payment shall be made with respect thereto. 2.1.3 Each share of common stock, par value $.01 per share, of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share (or such other value as may be determined by Sub), of the Surviving Corporation. 2.2 EMPLOYEE STOCK OPTIONS; OUTSTANDING WARRANTS. Immediately prior to the Effective Time, each stock option (an "Option") granted under the Monroc, Inc. 1996 Stock Option Plan and -2- the Monroc, Inc. 1994 Stock Option Plan (collectively, the "Stock Option Plans") and each outstanding warrant of the Company (a "Warrant"), whether or not such Option or Warrant is then exercisable, shall be canceled and each holder of a canceled Option or Warrant shall be entitled to receive from the Company, in consideration for cancellation and settlement of such Option or Warrant, a cash payment equal to the product of (i) the aggregate number of Shares subject to the Option or Warrant and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share of such Option or Warrant as set forth in Schedule 3.2 (the "Option Consideration"). Prior to the Closing, the Company will make any amendments to the Stock Option Plans, the Warrants and any agreements related thereto, and will obtain any consents or releases, necessary to effect the transactions contemplated by this Section 2.2. Any amounts payable pursuant to this Section 2.2 shall be subject to any required withholding of taxes and shall be paid without interest. 2.3 DISSENTING SHARES; PAYMENT FOR SHARES. Notwithstanding anything in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by holders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration, and the holders of such Dissenting Shares shall be entitled to receive payment of the appraised value of such Shares in accordance with the provisions of Section 262 unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal. If, after the Effective Time, any such holder fails to perfect or shall have effectively withdrawn or otherwise lost such right, each of such holder's Shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration without any interest thereon. The Company shall give Sub prompt notice of any demands received by the Company for appraisal of Shares, and, prior to the Effective Time, Sub shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Sub, make any payment with respect to, or settle or offer to settle, any such demands. 2.4 PAYMENT FOR SHARES. Prior to the Effective Time, Purchaser shall designate a United States bank or trust company reasonably satisfactory to the Company to act as Payment Agent in the Merger (the "Payment Agent"). At or prior to the Effective Time, Purchaser or Sub shall deposit, or cause to be deposited, in trust with the Payment Agent immediately available funds in an amount sufficient to make the payments contemplated by Section 2. 1.1 on a timely basis (the "Exchange Fund"). The Payment Agent shall, pursuant to irrevocable instructions and subject to Section 2.4.3, make payments out of the Exchange Fund to holders of record who hold Shares immediately prior to the Effective Time and the Exchange Fund shall not be used for any other purpose. The Exchange Fund may, as directed by the Surviving Corporation (so long as such directions do not impair the rights of holders of Shares to receive the Merger Consideration promptly upon the surrender of their shares in accordance with this agreement), be invested by the Payment Agent in direct obligations of the United States of America, obligations for which -the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, commercial paper rated of the highest quality by Moody's Investors Services, Inc. or Standard & Poor's Corporation, or certificates of deposit issued by a commercial bank having at least $1,000,000,000 in assets. Deposit -3- of funds pursuant hereto shall not relieve Purchaser or the Surviving Corporation of their obligations to make payments in respect of Shares and Purchaser hereby guarantees the Surviving Corporation's obligations in respect thereof. 2.4.1 Promptly after the Effective Time, Purchaser and the Surviving Corporation shall cause the Payment Agent to mail and/or make available to each record holder, as of the Effective Time, of a certificate or certificates (the "Certificates") which immediately prior to the Effective Time represented Shares (other than those cancelled pursuant to Section 2.1.2), a notice and letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Payment Agent) and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. As promptly as practicable after surrender to the Payment Agent of a Certificate, together with such letter of transmittal duly executed and completed in accordance with the instructions thereon, the holder of such Certificate shall be paid in exchange therefor cash in an amount equal to the product of the number of Shares represented by such Certificate multiplied by the Merger Consideration, and such Certificate shall be canceled. No interest shall be paid or accrued in respect of the Merger Consideration. If payment is to be made to a person other than the person in whose name the certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 2.4, each Certificate (other than Certificates cancelled pursuant to Section 2.1.2 and Dissenting Shares) shall represent for all purposes solely the right to receive the Merger Consideration, without any interest thereon. 2.4.2 After the Effective Time, there shall be no transfers of Shares on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates are presented to the Payment Agent or the Surviving Corporation, they shall be canceled and exchanged for cash as provided in this Section 2.4, subject to applicable law in the case of Dissenting Shares. 2.4.3 Any portion of the Exchange Fund which remains unclaimed by the stockholders of the Company on the date six months after the Effective Time shall be repaid to the Surviving Corporation, upon demand, and any stockholder of the Company who has not theretofore complied with Section 2.4 shall thereafter look only to the Surviving Corporation for payment of such stockholder's claim for the Merger Consideration, without any interest thereon. ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchaser and Sub as follows: -4- 3.1 ORGANIZATION AND QUALIFICATION. The Company and each subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the character of its properties or the nature of its business makes such qualification necessary, except where the failure to be so organized, existing, qualified or in good standing or have such power and authority would not have a Material Adverse Effect (as defined in Section 8.12). The Company has delivered or made available to Purchaser complete and correct copies of its and its subsidiaries' respective certificates of incorporation and bylaws. All subsidiaries of the Company and their respective jurisdictions of incorporation or organization are identified on Schedule 3.1. 3.2 CAPITALIZATION. The authorized capital stock of the Company consists of 20,000,000 Shares and 1,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred Shares"). No Preferred Shares are outstanding. All of the outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. As of the date hereof, (i) 4,514,200 Shares were issued and outstanding, (ii) 52 Shares were held in the Company's treasury, (iii) 415,600 Shares were reserved for issuance pursuant to outstanding Options and (iv) 1,501,250 Shares were reserved for issuance upon the exercise of outstanding Warrants. Except for the rights as set forth in this Section 3.2, there are not as of the date hereof any outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or any other agreements of any character obligating the Company or any of its subsidiaries to issue any additional Shares or any other shares of capital stock of the Company or any other securities convertible into or evidencing the right to subscribe for any Shares. The exercise prices of the outstanding Options and Warrants are set forth on Schedule 3.2. Except as provided in Section 2.2 or as set forth on Schedule 3.2, there are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any of their respective equity securities. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable, and is owned, directly or indirectly, by the Company. The Shares which are the subject of the Voting Agreement represent approximately 36.6% of the total Shares outstanding as of the date hereof. 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all requisite corporate power and authority to execute and deliver this Agreement and subject to the terms and conditions hereof, to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company in accordance with the applicable provisions of the DGCL). The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than, with respect to the Merger, the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company in accordance with the applicable provisions of the DGCL). This Agreement has been -5- duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of each of Purchaser and Sub, this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 3.4 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company Filings (as defined in Section 3.5) or as set forth on Schedule 3.4, since November 30, 1997 (a) the Company and its subsidiaries have not suffered any Material Adverse Effect, (b) the Company has not issued any shares of its capital stock or granted any rights to purchase its capital stock or securities convertible into or exchangeable for its capital stock or (c) the Company has not declared, set aside or made any payments of a dividend or other distribution in respect of any of its capital stock and has not, directly or indirectly, redeemed, purchased or otherwise acquired any of its capital stock. 3.5 REPORTS; FINANCIAL STATEMENTS. Since December 31, 1994, the Company has filed all required forms, reports and documents with the Securities and Exchange Commission (the "SEC") required to be filed by it pursuant to the federal securities laws and the SEC rules and regulations thereunder (the "Company Filings"), all of which have been delivered or made available to Purchaser and all of which have complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder. None of the Company Filings, including without limitation any financial statements or schedules included therein, at the time filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited and unaudited consolidated financial statements of the Company included in such reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as stated in such financial statements) and fairly present the financial position of the Company and its consolidated subsidiaries as of the dates thereof and the results of their operations and changes in financial position for the periods then ended, subject, in the case of the unaudited financial statements, to normal year-end audit adjustments. Except as reflected, reserved against or otherwise disclosed in the financial statements of the Company included in the Company Filings, as otherwise disclosed in the Company Filings or as disclosed on Schedule 3.5, neither the Company nor any of its subsidiaries has any material liabilities or obligations (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on, or reserved against in, the financial statements of the Company or in the notes thereto, prepared in accordance with generally accepted accounting principles consistently applied, except liabilities arising in the ordinary course of business since November 30, 1997. -6- 3.6 Consents AND APPROVALS; NO VIOLATION. Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (except as disclosed by the Company on Schedule 3.6): 3.6.1 subject to the obtaining of any requisite approval of the Company's stockholders, conflict with any provision of the Certificate of Incorporation or Bylaws of the Company or the charter documents of the Company's subsidiaries; 3.6.2 require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency or commission or other governmental authority domestic or foreign (a "Governmental Entity"), except (i) in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the Exchange Act and the rules and regulations thereunder, (iii) pursuant to state laws relating to takeovers and state securities laws, (iv) the filing of the Merger Certificate pursuant to the DGCL, or (v) where the failures to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not in the aggregate have a Material Adverse Effect; 3.6.3 violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or its subsidiaries, except for violations which, in the aggregate, would not have a Material Adverse Effect; or 3.6.4 result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, lease, mortgage, license, agreement, permit or other instrument or obligations to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect. 3.7 LITIGATION. Except as set forth on Schedule 3.7 or as disclosed in the Company Filings filed prior to the date of this Agreement, there are no actions, suits or proceedings pending or, to the knowledge of the Executive Officers of the Company, threatened against the Company or any of its subsidiaries which would have a Material Adverse Effect. 3.8 COMPLIANCE WITH LAWS. To the best knowledge of the Executive Officers of the Company, except as disclosed in the Company Filings or as set forth on Schedule 3.8, the Company and its subsidiaries have conducted their businesses in accordance with applicable federal, state and local laws, rules and regulations, except where the failure to so conduct their businesses would not in the aggregate have a Material Adverse Effect. The Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all Governmental Entities necessary for the conduct of their respective businesses as presently conducted, except where the failure to so hold would not have a Material Adverse Effect (the "Company Permits"). The -7- Company and its subsidiaries are in compliance with the terms of the Company Permits, except where the failure to so comply would not have a Material Adverse Effect. 3.9 EMPLOYEE MATTERS. Except as set forth on Schedule 3.9, none of the Company or any of its subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the knowledge of the Executive Officers of the Company, threatened against the Company or any of its subsidiaries, except for any such proceedings which would not in the aggregate have a Material Adverse Effect. 3.10 MATERIAL CONTRACTS. The Company has delivered or made available to Purchaser true and complete copies of all written, and written descriptions of all oral, contracts, agreements, commitments, leases (including with respect to personal property) and other arrangements to which it or any of its subsidiaries is a party or by which it or any of its subsidiaries are bound which require payments to be made in excess of $250,000 per year, other than agreements listed in any of the other schedules attached hereto (the "Material Contracts"). Each of the Material Contracts is listed on Schedule 3.10. Each of the Material Contracts is valid and in full force and effect except to the extent it has previously expired in accordance with its terms. Neither the Company nor any of its subsidiaries is in violation of or in default under (nor does any circumstance exist which, with notice of the lapse of time or both, would result in such a violation of or default under) any Material Contract, other than such violations or defaults which would not have a Material Adverse Effect. To the knowledge of the Executive Officers of the Company, none of the other parties to the Material Contracts are in violation of or in default under (nor does any circumstance exist which, with notice of the lapse of time or both, would result in such a violation of or default under) any Material Contract, other than such violations or defaults which would not have a Material Adverse Effect. 3.11 TAXES 3.11.1 Each of the Company and its Subsidiaries (as defined below for purposes of this Section 3.11) has timely filed all material federal, state, local and foreign Tax Returns (as defined below) required to be filed by it for tax years prior to the date of this Agreement or has timely requested extensions and any such request has been granted and has not expired. Except as set forth on Schedule 3.11, no agreement or arrangement extending the period for assessment or collection of Taxes of the Company or any of its Subsidiaries is in effect as of the date hereof. Each of such Tax Returns is complete and accurate in all material respects. All Taxes (as defined below) owed by the Company or any of its Subsidiaries on any such Tax Return have been paid or accrued, except for Taxes being contested in good faith and for which adequate reserves have been taken. The Company and each of its Subsidiaries have properly accrued for all Taxes for such periods subsequent to the periods covered by such Tax Returns. For purposes of this Section 3.11, the term "Subsidiary" of an entity shall mean any corporation, 80 % of the voting power and 80 % of the total value of all of the outstanding capital stock of which are owned directly by such entity. -8- 3.11.2 Except as set forth on Schedule 3.11, there are no pending or, to the knowledge of the Executive Officers of the Company, threatened audits or other proceedings by any court, governmental or regulatory authority or similar person in respect of Taxes or Tax Returns relating to the Company or any of its Subsidiaries which, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to have a Material Adverse Effect. 3.11.3 No election under Section 338 of the Internal Revenue Code of 1986, as amended (the "Code"), has been made or filed by or with respect to the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries has agreed to make any adjustment pursuant to Section 481(a) of the Code by reason of any change in any accounting method, and there is no application pending with any Taxing Authority (as defined below) requesting permission for any changes in any accounting method of the Company or any of its Subsidiaries. None of the assets of the Company or any of its Subsidiaries is or will be required to be treated as being owned by any person (other than the Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately before the enactment of the Tax Reform Act of 1986. 3.11.4 Except as set forth on Schedule 3.11, none of the Company or any of its Subsidiaries is party to, is bound by, or has any obligation under, any Tax sharing or allocation agreement or similar contract. 3.11.5 Except as set forth on Schedule 3.11, none of the Company or any of its Subsidiaries is a party to any contract, agreement, plan or arrangement that could reasonably be expected to result in the payment of any amount that would not be deductible by the Company or any of its Subsidiaries by reason of Section 280G of the Code. 3.11.6 Schedule 3.11 accurately set forth (i) the amount of all deferred intercompany gains for purposes of Treasury Regulation section 1.1502-13 (including any predecessor regulation) with respect to the Company and its Subsidiaries and (ii) the amount of any excess loss account with respect to the stock of each of the Subsidiaries for purposes of Treasury Regulation section 1.1502-19 (including any predecessor regulation). 3.11.7 For purposes of this Agreement, the term "Taxes" shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including (i) income, gross receipts, ad valorem, premium, excise, real property, personal property, sales, use, transfer, withholding, employment, payroll and franchise taxes imposed by the United States or by any state, local or foreign government or any subdivision, agency or similar organization thereof, and (ii) any interest, fines, penalties, assessments and additions in connection therewith. For purposes of this Agreement, the term "Tax Returns" shall mean any report, return or statement required to be supplied to a Taxing Authority in connection with Taxes. For purposes of this Agreement, the term "Taxing Authority" means the Internal Revenue Service (the "IRS") or any domestic or foreign Governmental Entity responsible for the administration of Taxes. -9- 3.12 BROKERAGE FEES AND COMMISSIONS. Except for those fees and expenses payable to SBC Warburg Dillon Read Inc. (the "Company Financial Advisor") (a true and complete copy of whose engagement agreement has been provided to Purchaser), no person or entity is entitled to receive from the Company any investment banking, brokerage or finder's fee in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 3.13 Proxy STATEMENT. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement (as defined herein) will, on the date it is first mailed to the Company's stockholders or at the time of the Stockholders Meeting (as defined herein), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary, in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied in writing by Purchaser or Sub specifically for inclusion therein. The Proxy Statement, insofar as it relates to the Company or its subsidiaries, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. 3.14 EMPLOYEE BENEFIT PLANS; ERISA. 3.14.1 Schedule 3.14.1 sets forth a complete and accurate list of (i) all "employee benefit plans," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, "Benefit Plans"), and (ii) all employment and consulting agreements and all bonus, incentive compensation, deferred compensation, disability, severance, stock bonus, stock option, stock purchase or vacation pay agreements, policies or arrangements which the Company or any of its subsidiaries maintains or has any liability in respect of and each of which has a cost to the Company or any of its subsidiaries in excess of $25,000 for any year (collectively, the "Employee Arrangements"). 3.14.2 With respect to each Benefit Plan and Employee Arrangement, a complete and correct copy of each of the following documents (if applicable) has been delivered or made available to Purchaser or its representatives (i) the most recent plan and related trust documents, (ii) the most recent summary plan description, (iii) the most recent form 5500, (iv) the most recent determination letter issued by the IRS and (v) the most recent actuarial report. 3.14.3 Except as set forth on Schedule 3.14, the Company and its subsidiaries have not during the preceding six years had any obligation or liability with respect to a multi-employer plan within the meaning of Section 3(37) of ERISA. 3.14.4 Each of the Benefit Plans intended to be qualified under Section 40 1 (a) of the Code is so qualified. -10- 3.14.5 All contributions or other payments required to have been made or accrued by the Company or any of its subsidiaries under the terms of any of Benefit Plan or Employee Arrangement have been made or accrued, except for those contributions or payments the failure of which to make or accrue would not have a Material Adverse Effect. 3.14.6 The Benefit Plans and Employee Arrangements have been maintained and administered in all material respects in accordance with their terms and applicable laws. 3.14.7 Except as disclosed in the Company Filings or in Schedule 3.14, there are no pending or, to the knowledge of the Executive Officers of the Company, threatened actions, claims or proceedings (other than routine claims for benefits) against or involving any Benefit Plan or Employee Arrangement, except for any of the foregoing which would not have a Material Adverse Effect. 3.14.8 Except as disclosed in the Company Filings or in Schedule 3.14, the Company or any subsidiary does not maintain or have an obligation to contribute to retiree life or retiree health plans which provide for continuing benefits or coverage for current or former officers, directors and employees of the Company or any of its subsidiaries, except (i) as may be required under Part 6 of Title I of ERISA or (ii) a medical expenses reimbursement account plan pursuant to Section 125 of the Code. 3.14.9 Except as disclosed in Schedule 3.14 or in connection with equity compensation or except as discussed in this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee of the Company or any of its subsidiaries, (ii) increase in any benefits under any Benefit Plan or Employee Arrangement or (iii) result in the acceleration of the time of payment of, vesting or other rights with respect to any benefits under any Benefit Plan or Employee Arrangement. 3.14.10 The Company and its subsidiaries have no liability under Section 4069 of ERISA by reason of a transfer of an under funded pension plan. 3.14.11 The Company's liability under any multi-employer plan, if the Company withdrew in part or in whole on the date hereof, would not exceed $150,000. 3.15 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of the Company Financial Advisor to the effect that, as of the date hereof, the Merger Consideration is fair to the holders of Shares from a financial point of view, a copy of which has been provided to Purchaser. 3.16 VOTE REQUIRED. The affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement and the transactions contemplated hereby. -11- 3.17 INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.17, the Company and its subsidiaries possess or have adequate rights to use all material trademark, trade name, patent, service mark, brand mark, brand names, industrial designs and copyrights necessary for the operation of their businesses as currently being conducted, except where the failure to so possess or have adequate rights would not result in a Material Adverse Effect (collectively, the "Company Intellectual Property"). To the knowledge of the Executive Officers of the Company, the use of Company Intellectual Property by the Company or its subsidiaries does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including any trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design or copyright of any other person, except for any such conflict, infringement, violation, interference, claim, invalidity, abandonment, cancellation or unenforceability that would not have a Material Adverse Effect. 3.18 ENVIRONMENTAL MATTERS. 3.18.1 For purposes of this Agreement: (i) "Environmental Law" means any applicable law regulating or prohibiting releases of Hazardous Materials into any part of the natural environment, or pertaining to the protection of natural resources, the environment and public and employee health and safety from Hazardous Materials including the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 ET SEQ.), the Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (33 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 7401 ET SEQ.), the Federal Insecticide Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.) and the regulations promulgated pursuant thereto, and any such applicable state or local statutes and the regulations promulgated pursuant thereto, as such laws have been and may be amended or supplemented through the Closing Date; (ii) "HAZARDOUS MATERIAL" means any substance, material or waste which is regulated by any public or governmental authority in the jurisdictions in which the applicable party or its subsidiaries conducts business, or the United States, including any material or substance which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste" or "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law and shall also include petroleum, petroleum products, asbestos, polychlorinated biphenyls and radioactive materials; (iii) "RELEASE" means any release spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the environment, or into or out of any property; and -12- (iv) "REMEDIAL ACTION" means all actions, including any expenditures, required by a governmental entity or defined under any Environmental Law, or voluntarily undertaken to (a) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Materials or other substance in the environment; (b) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public health or welfare or the environment; (c) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (d) bring the applicable party into compliance with any Environmental Law. 3.18.2 Except as set forth on Schedule 3.18, the operations of the Company and its subsidiaries are in compliance with all Environmental Laws, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. 3.18.3 Except as set forth on Schedule 3.18, the Company and its subsidiaries have obtained and maintained all permits required under applicable Environmental Laws for the continued operations of their respective business, except such permits the lack of which would not reasonably be expected to have a Material Adverse Effect. 3.18.4 Except as set forth on Schedule 3.18, the Company and its subsidiaries (i) are not subject to any material written consent decree, compliance order or administrative order from any Governmental Entity or other person respecting any Environmental Law, Remedial Action or any Release of a Hazardous Material, (ii) have not received written notice under the citizen suit provision of any Environmental Law or (iii) have not received any written request for information, notice, demand letter, administrative inquiry or complaint with respect to any Environmental Law, remedial Action or Release of a Hazardous Material, except for with respect to (ii) and (iii) those written notices, requests or other documents the subject matter of which would reasonably be expected to have a Material Adverse Effect. 3.18.5 Except as set forth on Schedule 3.18, the Company and its subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability under any Environmental Law, which violation or liability is outstanding and would reasonably be expected to have a Material Adverse Effect. 3.18.6 Except as set forth on Schedule 3.18, neither the Company nor any of its subsidiaries has any contingent liability in connection with the Release of any Hazardous Material which would reasonably be expected to have a Material Adverse Effect. 3.18.7 Except as set forth on Schedule 3.18, the operations of the Company or its subsidiaries involving the transportation, treatment, storage or disposal of hazardous waste, as defined and regulated under 40 C.F.R. Parts 260-270 (in effect as of the date of this Agreement) or any state equivalent are in compliance with all Environmental Laws, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. -13- 3.18.8 Except as set forth on Schedule 3.18, to the knowledge of the Company, there is not now nor has there been in the past, on or in any owned property of the Company or its subsidiaries any of the following: (i) any underground storage tanks or surface impoundments, (i) any asbestos-containing materials in friable form or (iii) any polychlorinated biphenyls, any of which ((i), (ii) or (iii) preceding) could reasonably be expected to have a Material Adverse Effect. 3.18.9 Except as set forth on Schedule 3.18, no judicial or administrative proceedings or governmental investigations are pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries alleging the violation of or seeking to impose liability pursuant to any Environmental Law. 3.19 TITLE TO REAL PROPERTY; LEASES. Schedule 3.19 sets forth a list of (a) all real property currently owned by the Company and its subsidiaries and (b) all leases with respect to real property to which the Company or any of its subsidiaries is a party (collectively, the "Real Property Leases"). Except as set forth on Schedule 3.19, each of the Company and its subsidiaries has good and marketable tide, or valid leasehold rights in the case of leased property, to the real property owned or leased by it, including, without limitation, all sand, gravel, rock and similar mineral rights (and rights of access thereto) with respect to mineral producing properties, free and clear of any mortgages, pledges, liens, encumbrances and security interests (collectively, "Encumbrances"), except for (i) those Encumbrances reflected or reserved against in the Company's Quarterly Report on Form IO-Q for the Quarter Ended September 30, 1997, (ii) Encumbrances for taxes, levies, imposts, assessments or governmental charges of any kind which are not yet delinquent or which are being contested in good faith by appropriate proceedings, (iii) liens for mechanics, materialmen, laborers, employees, suppliers or other liens arising by operation of law for which amounts which are not yet delinquent or which are being contested in good faith by appropriate proceedings, (iv) as to leased property, interests of lessors and Encumbrances affecting the interests of lessors, (v) deposits made in the ordinary course of business to secure contractual or other obligations of the Company or any of its subsidiaries, if the underlying obligation is not yet delinquent, and (vi) liens or defects in title or leasehold rights that, individually or in the aggregate, would riot have a Material Adverse Effect. Each of the Real Property Leases is valid and in full force and effect, except to the extent it has previously expired in accordance with its terms. Neither the Company nor any of its subsidiaries is in violation of or in default under any Real Property Lease, other than such violations or defaults which would not have a Material Adverse Effect. Notwithstanding anything in Schedule 3.19 to the contrary, the Company represents and warrants that there are no exceptions to the Company's title to its aggregate properties (as such properties are identified as aggregate properties on Schedule 3.19) either noted on Schedule B to any of the title policies attached to Schedule 3.19 with respect to such aggregate properties or otherwise, that would, in any material way, interfere with the Company's title to its aggregate properties, its right to access such aggregate properties, or the Company's right to extract and remove aggregates from such properties in the ordinary course of the Company's business. 3.20 BOARD RECOMMENDATION. The Board of Directors of the Company, at a meeting duly called and held, has by the vote of those directors participating (a) determined that this Agreement -14- and the transaction contemplated hereby are fair to and in the best interests of the stockholders of the Company and approved the same by at least a majority vote and (b) resolved to recommend that the holders of the Shares approve this Agreement and the transactions contemplated hereby. 3.21 INDEBTEDNESS. Except as set forth on Schedule 3.21 or as otherwise disclosed in the financial statements and notes thereto set forth in the Company Filings, the Company has no outstanding indebtedness for borrowed money and is not a party to any agreement providing for the creation, incurrence or assumption thereof. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB Purchaser and Sub represent and warrant to the Company as follows: 4.1 ORGANIZATION. Each of Purchaser and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to carry on its business as it is now being conducted except where the failure to be so organized, existing and in good standing or to have such power and authority would not in the aggregate have a material adverse effect on the results of operations, properties or financial condition of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder. Each of Purchaser and Sub has heretofore made available to the Company an accurate and complete copy of its respective certificate of incorporation and Bylaws, as currently in effect. 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Purchaser and Sub has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the respective Boards of Directors of Purchaser and Sub, and the stockholder of Sub, and no other corporate proceedings on the part of Purchaser or Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Purchaser and Sub and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of each of Purchaser and Sub, enforceable against each of Purchaser and Sub in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 4.3 CONSENT AND APPROVALS, NO VIOLATION. Neither the execution and delivery of this Agreement by Purchaser and Sub nor the consummation by Purchaser and Sub of the transactions contemplated hereby will: -15- 4.3.1 conflict with any provision of the respective Certificates of Incorporation or Bylaws (or other similar governing documents) of Purchaser or Sub; 4.3.2 require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) in connection with the HSR Act, (ii) pursuant to the Exchange Act and the rules and regulations thereunder, (iii) pursuant to state laws relating to takeovers and state securities laws, if any are applicable, (iv) the filing of the Merger Certificate pursuant to the applicable law or (v) where the failures to obtain such consents' approvals, authorizations or permits, or to make such filings or notifications, would riot in the aggregate have any material adverse effect on the results of operations, properties or financial condition of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder; 4.3.3 result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, lease, mortgage, license, agreement or other instrument or obligations to which Purchaser or any of its subsidiaries is a party or by which Purchaser or any of its subsidiaries or any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have any material adverse effect on the financial condition, business or results of operations of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations thereunder; or 4.3.4 violate any order, writ, injunction, decree, statute, rule or regulation applicable to Purchaser or any of its subsidiaries, except for violations which would not have in the aggregate any material adverse effect on the financial condition, business or results of operations of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder. 4.4 FINANCING. Purchaser has received binding written commitments from financially responsible financial institutions to obtain, funds necessary to consummate this Agreement and the transactions contemplated thereby, and to pay related fees and expenses, and will make such funds available to Sub. Purchaser has provided the Company with true and complete copies of all commitments and agreements from third parties to provide such financing to Purchaser or to Sub. 4.5 BROKERAGE FEES AND COMMISSIONS. No person or entity is entitled to receive from Purchaser or Sub any investment banking, brokerage or finder's fee in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser or Sub. ARTICLE 5 COVENANTS -16- 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this Agreement or as set forth on Schedule 5.1, during the period from the date of this Agreement to the Effective Time, the Company and its subsidiaries shall in all material respects conduct its operations according to its ordinary and usual course of business and consistent with past practice and the Company shall use commercially reasonable efforts to preserve intact in all material respects the business organization of the Company, keep available the services of its current officers and key employees, and preserve in all material respects the good will of those having advantageous business relationships with it and its subsidiaries. Without limiting the generality of the foregoing, and except as contemplated by this Agreement, as set forth on Schedule 5.1 or as disclosed in writing to Purchaser on or prior to the date hereof, prior to the Effective Time, neither the Company nor any of its subsidiaries, as the case may be, will, without the prior written consent of Purchaser: 5.1.1 issue, sell or pledge, or authorize or propose the issuance, sale or pledge of, additional shares of its capital stock or securities convertible into any such shares, or any rights, warrants or options to acquire any such shares or other convertible securities, other than Shares, preferred stock, treasury shares, rights, warrants or options, each as issuable pursuant to the Options and Warrants; 5.1.2 split, combine, subdivide, reclassify or redeem, or purchase or otherwise acquire, or propose to do any of the foregoing with respect to, any of its outstanding securities; 5.1.3 declare or pay any dividend or distribution on the Shares; 5.1.4 subject to the fiduciary duties of the Board of Directors of the Company (after consultation with and advice from outside legal counsel) and except pursuant to agreements or arrangements in effect on the date hereof, purchase or otherwise acquire, sell or otherwise dispose of or encumber (or enter into any agreement to so purchase or otherwise acquire, sell or otherwise dispose of or encumber) material properties or material assets except in the ordinary course of business; 5.1.5 subject to the rights of the stockholders of the Company under applicable law, adopt any amendments to the Certificate of Incorporation or Bylaws of the Company; 5.1.6 except as provided in Section 5.12 (i) increase the compensation of any of its directors, officers or key employees, except pursuant to the terms of agreements or plans currently in effect in amounts material to the Company and its subsidiaries taken as a whole; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or permitted by any existing plan, agreement or arrangement to any director, officers or key employee in amounts material to the Company and its subsidiaries taken as a whole; (iii) commit itself (other than pursuant to any collective bargaining agreement) to any additional pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchaser, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or to any employment or consulting agreement with or for the benefit of any director, -17- officer or key employee, whether past or present in amounts material to the Company and its subsidiaries taken as a whole; or (iv) except as required by applicable law, amend in any material respect any such plan, agreement or arrangement; or 5.1.7 except in the ordinary course of business and consistent with past practice, (i) incur any material amount of long-term indebtedness for borrowed money or issue any material amount of debt securities or assume, guarantee or endorse the obligations of any other person except for obligations of wholly owned subsidiaries of the Company; (ii) make any material loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company or customary loans or advances to employees in amounts not material to the maker of such loan or advance); (iii) pledge or otherwise encumber shares of capital stock of the Company or a material portion of the capital stock of any if its subsidiaries, or (iv) mortgage or pledge any of its material assets, tangible or intangible, or create or suffer to exist any material lien thereupon; 5.2 ACQUISITION PROPOSALS. The Company shall not, directly or indirectly, solicit, carry on discussions with or enter into any agreement with any corporation, partnership, person or other entity or group (other than Purchaser or an affiliate or an associate of Purchaser) concerning any merger, acquisition or similar transaction involving, or the sale of all or substantially all of the assets or equity securities of, the Company or any of its subsidiaries or divisions (other than with respect to the Company's Wyoming operations) (an "Acquisition Proposal"). Notwithstanding the foregoing, the Company may (i) directly or indirectly, furnish information to or enter into discussions and negotiations with any person, entity or group that makes an unsolicited Acquisition Proposal if the Board of Directors of the Company determines in good faith (after consultation with and advice from outside legal counsel) that such action is required for the Board of Directors to comply with its fiduciary duties under applicable law, and (ii) to the extent applicable, comply with Rule l4e-2 and l4d-9 promulgated under the Exchange Act with regard to an Acquisition Proposal. The Company will promptly communicate to Purchaser the terms of any proposal or inquiry which it may receive in respect of any Acquisition Proposal by any person (other than Purchaser or any affiliate of Purchaser or their respective directors, officers, employees, representatives and agents). 5.3. ACCESS TO INFORMATION. 5.3.1 Subject to applicable law and the agreements set forth in Section 5.3.2, between the date of this Agreement and the Effective time, the Company will (i) give Purchaser and its authorized representatives reasonable access, during regular business hours upon reasonable notice, to all of its facilities, books and records and key employees, (ii) permit Purchaser to make such reasonable inspections as it may be required, and (iii) cause its officers and those of its subsidiaries to furnish Purchaser with such financial and operating data and other information with respect to the business and assets of the Company and its subsidiaries as Purchaser may from time to time reasonably request. -18- 5.3.2 Information obtained by Purchaser pursuant to this Section 5.3 shall be subject to the provisions of the confidentiality agreement between Purchaser and the Company dated September 26, 1997 (the "Confidentiality Agreement"), which agreement remains in full force and effect; except insofar as such provisions would expressly prohibit Purchaser or Sub from taking any of the actions contemplated by this Agreement. 5.4 BEST EFFORTS. Subject to the fiduciary duties of the Board of Directors of the Company under applicable law as advised by legal counsel. each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all necessary or appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations or otherwise to consummate and make effective the transactions contemplated by this Agreement including, without limitation, the execution of any additional instruments necessary to consummate the transactions contemplated hereby and seeking to lift or reverse any legal restraint imposed on the consummation of the transactions contemplated by this Agreement. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party hereto shall take all such necessary action. 5.5 STOCKHOLDERS' MEETING. The Company, acting through its Board of Directors, shall in accordance with applicable law, its Certificate of Incorporation and Bylaws duly call, give notice of, convene and hold an annual or special meeting (the "Stockholders Meeting") of its stockholders as soon as practicable to consider and vote upon approval of this Agreement and the transactions contemplated hereby. Subject to its fiduciary duties under applicable laws as advised by legal counsel, the Company will include in the proxy statement (such proxy statement as amended or supplemented from time to time being referred to herein as the "Proxy Statement") to be sent to the Company's stockholders with respect to the Stockholders Meeting the recommendation of its Board of Directors that its stockholders vote in favor of the approval and adoption of this Agreement and the transactions contemplated hereby. At the Stockholders Meeting, all of the Shares beneficially owned by Purchaser or its affiliates, if any, shall be voted in favor of approval and adoption of this Agreement and the transactions contemplated hereby. 5.6 PROXY STATEMENT. The Company will use its commercially reasonable efforts (i) to obtain and furnish the information required to be included by it in the Proxy Statement, (ii) to file the Proxy Statement with the SEC, (iii) after consultation with the other parties hereto, respond as promptly as is reasonably practicable to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof, and (iv) cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the date of this Agreement. The information provided and to be provided by the Company, Purchaser and Sub for use in the Proxy Statement shall, as of the date of mailing of the Proxy Statement and as of the date of the Stockholders Meeting, not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. -19- 5.7 VOTING AGREEMENT. Concurrently with the execution of this Agreement, Building and Construction Capital Partners 1, L.P. and Purchaser shall enter into the Voting Agreement set forth as Exhibit A hereto. 5.8 FEES AND EXPENSES. Each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby; provided, however, that if the Merger is consummated, the Surviving Corporation shall assume responsibility for the payment of all Company expenses in connection with this Agreement and the transactions contemplated hereby. 5.9 STANDSTILL. In the event of the termination of this Agreement, neither Purchaser nor its subsidiaries, employees, officers or affiliates shall, for a period of three years from the date of this Agreement, directly or indirectly (unless and until Purchaser shall have received the prior written invitation or approval of a majority of the Board of Directors of the Company): 5.9.1 solicit, seek or offer to effect, or effect; 5.9.2 negotiate with or provide any information to the Board of Directors of the Company, any director or officer of the Company, any stockholder of the Company, any employee or union or other labor organization representing employees of the Company or any other person with respect to; 5.9.3 make any statement or proposal, whether written or oral, either alone or in concert with others, to the Board of Directors of the Company, any director or officer of the Company or any stockholder of the Company, any union or other labor organization representing employees of the Company or any other person with respect to; or 5.9.4 make any public announcement (except as required by law) or proposal or offer whatsoever (including, but not limited to, any "solicitation" of "proxies" as such terms are defined or used in Regulation 14A of the Exchange Act) with respect to: (a) any form of business combination or transaction involving the Company or any affiliate thereof, including, without limitation, a merger, tender or exchange offer or liquidation of the Company's assets; (b) any form of restructuring, recapitalization or similar transaction with respect to the Company or any affiliate thereof, (c) any purchase of any securities or assets, or rights or options to acquire any securities or assets (through purchase, exchange, conversion or otherwise), of the Company or any affiliate thereof; -20- (d) any proposal to seek representation on the Board of Directors of the Company or otherwise to seek to control or influence the management, Board of Directors or policies of the Company or any affiliate thereof; (e) any request or proposal to waive, terminate or amend the provisions of this Section 5.9; or (f) any proposal or other statement inconsistent with the terms of this Section 5.9. or instigate, encourage, joint, act in concert with or assist (including, but not limited to, providing or assisting in any way in the obtaining of financing for or acting as a joint bidder or co-bidder for the Company with) any third party to do any of the foregoing. 5.10 PUBLIC ANNOUNCEMENTS. Purchaser and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. 5.11 INDEMNIFICATION AND INSURANCE. 5.11.1 The Company shall indemnify and hold harmless, and after the Effective Time the Surviving Corporation shall indemnify and hold harness, each present and former employee, agent, director or officer of the Company and its subsidiaries (the "Indemnified Parties") from and against any and all claims arising out of or in connection with activities, including without limitation, the transactions contemplated by this Agreement, in such capacity, or on behalf of, or at the request of the Company, its subsidiaries or affiliates, to the fullest extent permitted under Delaware law (subject to applicable limitations thereunder) and in addition, to the fullest extent provided in their respective charters or Bylaws (subject to applicable limitations thereunder) or any contract or other arrangement in effect at the date hereof which obligations shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time; provided, however, that if any claim or claims (a "Claim or Claims") are asserted or made within such six year period, all rights to indemnification in respect of any such Claim or Claims shall continue until disposition of any and all such Claims. Without limiting the foregoing, the Company, and after the Effective Time the Surviving Corporation, shall advance expenses incurred with respect to the foregoing, as they are incurred, to the fullest extent permitted under applicable law, provided that the person on whose behalf the expenses are advanced provides and undertakes (which need not be secured) to repay such advances if it is ultimately determined that such person is not entitled to indemnification. 5.11.2 The Surviving Corporation shall use its best efforts to cause to be maintained in effect for not less than six years from the Effective Time the current policies of directors, and officers, liability insurance maintained by the Company and its subsidiaries (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are no less advantageous so long as no lapse in coverage occurs as a result of -21- such substitution) with respect to all matters, including the transactions contemplated hereby, occurring prior to and including the Effective Time; provided that, in the event that any Claim or Claims are asserted or made within such six-year period, such insurance shall be continued in respect of any such Claim or Claims until final disposition of any and all such Claims; provided further that the Surviving Corporation shall not be required to pay annual premiums in excess of 200% of the Company's total current annual premiums for such insurance and if the Surviving Corporation is unable to obtain the insurance required by this Section 5.11 it shall obtain as much comparable insurance as can be obtained for an annual premium equal to such maximum amount. 5.12 EMPLOYEE BENEFIT PLANS. 5.12.1 The Purchaser and the Surviving Corporation agree that all employees of the Company and its subsidiaries which are offered employment after the Effective Date shall be entitled to the same employee benefits, plans, programs, arrangements and policies as are available to the employees of Purchaser and its subsidiaries. 5.12.2 From and after the Effective Time, the Purchaser and the Surviving Corporation shall assume and honor in accordance with their terms all existing employment and severance agreements and arrangements set forth on Schedule 5.12. 5.12.3 If any employee of the Company or any of its subsidiaries becomes a participant in any employee benefit plan, program or policy of the Purchaser or the Surviving Corporation, such employee shall be given credit for purposes of eligibility and vesting under such plan for all service prior to the Effective Time with the Company and its subsidiaries, or any predecessor employer (to the extent such credit was given by the Company). 5.12.4 The Surviving Corporation shall provide professional out placement services for all officers and salaried employees of the Company or any subsidiaries employed at the Effective Time and who are terminated within one year after the Effective Time. 5.12.5 The Purchaser shall reimburse (or cause the Surviving Corporation to reimburse) any director, officer or employee (or former director, officer or director) of the Company or any of its subsidiaries for all costs and expenses, including attorneys' fees, incurred by such person in successfully enforcing the provisions of this Section 5. 5.13 REAL ESTATE GAINS TAX AND NEW REAL PROPERTY TRANSFER TAX. The Purchaser shall pay any State Tax on Gains Derived from Certain Real Property Transfers and Real Property Transfer Tax and any similar tax in any other jurisdiction (and any penalties or interest with respect to such taxes) payable in connection with the Merger or the acquisition of a controlling interest in the Company by Purchaser or Sub, and the Purchaser shall indemnify and hold harmless the stockholders of the Company from and against any liability with respect to such taxes (including any penalties, interest and professional fees). The Purchaser shall file any returns with respect to such taxes. -22- 5.14 EMPLOYEE STOCK OWNERSHIP PLAN. The Company agrees that, in accordance with its rights under the Monroc, Inc. Employee Stock Ownership Plan (the "ESOP"), the Company will direct the voting in favor of approval and adoption of the Merger Agreement of any Shares held in the ESOP with respect to which any ESOP participant has failed to give the ESOP trustee timely instructions as to how to vote such Shares. ARTICLE 6 CONDITIONS TO CLOSING 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each party to effect the Merger are subject to the satisfaction or waiver, at or prior to the Effective Time, of the following conditions: 6.1.1 This Agreement shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by applicable law and the Certificate of Incorporation of the Company. 6.1.2 No statute, rule, regulation, decree, order or in unction shall have been promulgated, enacted, entered or enforced by any United States federal or state government, governmental agency or authority or court which remains in effect and prohibits, restrains, enjoins or restricts the consummation of the Merger. 6.1.3 Any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB TO EFFECT THE MERGER. Unless waived by Purchaser in writing, the obligations of Purchaser and Sub to effect the Merger provided for hereby shall be subject to the satisfaction, at or prior to the Effective Time, of each of the following conditions: 6.2.1 The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except as to the extent such representations and warranties are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (other than representations and warranties which address matters only as of a certain date which shall be true and correct as of such certain date), except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms thereof. 6.2.2 The Company shall have performed in all material respects all agreements and covenants required hereby to be performed by it prior to or at the Effective Time; provided, -23- however, that neither Purchaser nor Sub shall be entitled to refuse to consummate the transaction in reliance upon its own breach or failure to perform. 6.2.3 From the date of this Agreement through the Effective Time, there shall not have occurred any change in or effect on the business of the Company or any of its subsidiaries, individually or in the aggregate, that is materially adverse to the results of operations, properties, financial condition or prospects of the Company and its subsidiaries taken as a whole, except for such changes or effects resulting from, or in connection with general economic, industry-wide or financial market conditions. 6.2.4 Purchaser shall have received a certificate executed on behalf of the Company by an executive officer of the Company to the effect set forth in clauses 6.2. 1 through 6.2.3. 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. Unless waived by the Company in writing, the obligations of the Company to effect the Merger provided for hereby shall be subject to the satisfaction, at or prior to the Effective Time, of each of the following conditions: 6.3.1 The representations and warranties of Purchaser and Sub contained in this Agreement shall be true and correct in all material respects (except as to the extent such representations and warranties are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (other than representations and warranties which address matters only as of a certain date which shall be true and correct as of such certain date), except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms thereof. 6.3.2 Purchaser and Sub shall have performed in all material respects all agreements and covenants required hereby to be performed by them prior to or at the Effective Time; provided, however, that the Company shall not be entitled to refuse to consummate the transaction in reliance upon its own breach or failure to perform. 6.3.3 The Company shall have received a certificate executed on behalf of Purchaser and Sub by an executive officer of Purchaser to the effect set forth in clauses 6.3.1 and 6.3.2. ARTICLE 7 TERMINATION 7.1 TERMINATION. This Agreement may be terminated and the Merger may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company (except as otherwise set forth in this Section 7. 1), but prior to the Effective Time: -24- 7.1.1 by mutual written consent duly authorized by the Boards of Directors of the Company, Purchaser and Sub; 7.1.2 by Purchaser or the Company if (i) the Effective Time shall not have occurred on or before August 31, 1998 (provided that the right to terminate this Agreement under this Section 7.1.2 shall not be available to any party whose failure to fulfill any obligations under this Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date), (ii) the approval of the Company's stockholders required by Section 6.1.1 shall not have been obtained by August 31, 1998 at a meeting duly convened therefor or at any adjournment thereof or (iii) any United States federal or state government, governmental agency or authority or court shall have issued an order, decree or ruling, or taken any other action, permanently restraining, enjoining or otherwise prohibiting the Merger (which the party seeking to terminate this Agreement shall have used its best efforts to have lifted or reversed) and such order, decree, ruling or other action shall have become final and non-appealable; 7.1.3 by the Company if an Acquisition Proposal has been made and the Board of Directors of the Company determines, in the exercise of its good faith judgment (after consultation with and advice from outside legal counsel) that such termination is required for the Board of Directors to comply with its fiduciary duties under applicable law; or 7.1.4 by Purchaser if the Board of Directors of the Company withdraws or modifies in a manner adverse to Purchaser or Sub its determination to recommend that the stockholders of the Company approve this Agreement and the transactions contemplated hereby. 7.2 EFFECT OF TERMINATION. 7.2.1 In the event of the termination of this Agreement pursuant to Section 7 hereof, this Agreement, except for the provisions of Section 5.3.2 (confidentiality), Section 5.11 (indemnity), Section 5.8 (fees and expenses), Section 5.9 (standstill) and this Section 7.2, shall forthwith become void and have no effect, without any liability on the part of any party or its affiliates, directors, officers or stockholders. Nothing in this Section 7.2 or in Section 8.3 shall relieve any party to this Agreement of liability for breach of this Agreement on or prior to the date of termination. 7.2.2 If (i) the Company terminates this Agreement pursuant to Section 7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following receipt by the Company of an Acquisition Proposal or either the Company or Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and immediately prior to any such meeting of the Company's stockholders an Acquisition Proposal was pending, and (ii) the Acquisition Proposal which gave rise to such termination (or any revised transaction based upon such Acquisition Proposal) is consummated within nine months of such termination, then the Company (or any successor thereto) shall pay to Purchaser a fee of $2.0 million (the "Termination Fee") in immediately available funds within five business days following such termination. Only one Termination Fee shall be payable -25- pursuant to this Section 7.2.2. If the Company has paid any amounts to Purchaser pursuant to Section 7.2.3, such amounts shall be deducted from any Termination Fee owed to Purchaser so that in no event shall the aggregate payments made by the Company to Purchaser pursuant to Sections 7.2.2 and 7.2.3 exceed $2.0 million. 7.2.3 If (i) the Company terminates this Agreement pursuant to Section 7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following receipt by the Company of an Acquisition Proposal or either the Company or Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and immediately prior to any such meeting of the Company's stockholders an Acquisition Proposal was pending, then the Company (or any successor thereto) shall pay to Purchaser the out-of-pocket fees and expenses incurred or paid by or on behalf of Purchaser or Sub in connection with the transactions contemplated by this Agreement, including all fees and expenses of counsel, commercial banks, accountants, experts and consultants to Parent and Sub. Payment of Purchaser's expenses pursuant to this Section 7.2.3 shall be made no later than five business days after delivery to the Company of notice of demand for payment and a written itemization setting forth in reasonable detail all of Purchaser's expenses. Notwithstanding the foregoing, if the Company pays to Purchaser the Termination Fee pursuant to Section 7.2.2, no amounts shall be owed to Purchaser by the Company pursuant to this Section 7.2.3. ARTICLE 8 MISCELLANEOUS 8.1 AMENDMENT. To the extent permitted by applicable law, this Agreement may be amended by action taken by or on behalf of the respective Boards of Directors of the Company, Purchaser and Sub at any time before or after adoption of this Agreement by the stockholders of the Company (if required by applicable law) but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or changes the form thereof or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. 8.2 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company, Purchaser or Sub, may, 8.2.1 extend the time for the performance of any of the obligations or other acts of the other parties hereto; 8.2.2 waive any inaccuracies in the representations and warranties of any other party contained herein or in any document, certificate or writing delivered pursuant hereto by any other party; or -26- 8.2.3 waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to assert any of its rights hereunder shall not constituent a waiver of such rights. 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made in Articles 3 and 4 shall not survive beyond the Effective Time or the termination of this Agreement. This Section 8.3 shall not limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Effective Time. 8.4 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, together with the Schedules hereto, (i) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, other than the Confidentiality Agreement, among the parties or any of them with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Purchaser or Sub may assign any of their rights and obligations to any wholly owned, direct or indirect subsidiary of Purchaser, but no such assignment shall relieve Purchaser or Sub of its obligations hereunder. 8.5 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties and other persons entitled to enforce this Agreement pursuant to this Section 8.5 shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any federal or state court located in Delaware (as to which the parties agree to submit to jurisdiction for the purposes of such action), this being in addition to any other remedy to which they are entitled at law or in equity. 8.6 VALIDITY. If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable. 8.7 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have teen duly given upon receipt) by delivery in person, by cable, telegram, telex or telecopies, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: If to Purchaser or Sub: U.S. Aggregates, Inc. 400 South El Camino Real Suite 500 San Mateo, California 94402 Attn: Michael J. Stone with a copy to: Kirkland & Ellis -27- 200 East Randolph Drive Chicago, Illinois 60601 Attn: John A. Schoenfeld, Esq. If to the Company: Monroc, Inc. 1730 Beck Street P.O. Box 537 Salt Lake City, Utah 84110 Attn: Ronald D. Davis with copies to: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 136 South Main Street 1000 Kearns Building Salt Lake City, Utah 84101 Attn: Nolan S. Taylor, Esq. or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). 8.8 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of Delaware regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. 8.9 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.10 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reasons of this Agreement except for the holders of Employee Options with respect to Section 2.2, the holders of Shares with respect to Articles I and 2 and Sections 5.9 and 8.4 (which are intended to be for the benefit of the persons provided for therein, and may be enforced by such persons). 8.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 8.12 Certain Definitions. As used in this Agreement: "AFFILIATE" or "Associate" of a person shall have the meaning ascribed thereto in Rule 1 2b-2 under the Exchange Act. -28- "BENEFICIAL OWNERSHIP" shall have the meaning as used in Rule 13d under the Exchange Act. EXECUTIVE Officers"means Ronald D. Davis and L. William Rands. "GROUP" shall have the meaning as used in Rule 13d-5(b) under the Exchange Act. "PERSON" means any individual, corporation, company, group, partnership. association, governmental body or other entity. "SUBSIDIARY" of an entity shall means any corporation, a majority of the outstanding voting securities of which are owned directly or indirectly by such entity. "MATERIAL ADVERSE EFFECT" shall mean any change in or effect on the business of the Company or any of its subsidiaries that is materially adverse to the results of operations, properties or financial condition of the Company and its subsidiaries taken as a whole, except for such changes or effects resulting from, or in connection with general economic, industry-wide or financial market conditions. 8.13 PERFORMANCE BY SUB. Purchaser hereby agrees to cause Sub to comply with its obligations hereunder and to cause Sub to consummate the Merger as contemplated herein. -29- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. PURCHASER U.S. AGGREGATES, INC. /s/ Michael J. Stone ------------------------------- Michael J. Stone Its: Executive Vice President --------------------------- SUB WESTERN ACQUISITION, INC. /s/ Michael J. Stone ------------------------------- Michael J. Stone Its: Vice President --------------------------- COMPANY MONROC, INC. /s/ Ronald D. Davis ------------------------------- Ronald D. Davis Its: President and Chief Financial Officer --------------------------- -30- EXHIBIT A VOTING AGREEMENT -31- EX-10.42(II) 40 EXHIBIT 10.42(II) AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER This Amended and Restated Agreement and Plan of Merger (this "Agreement") is dated as of January 29, 1998 and amended and restated as of March 4, 1998, by and among U.S. Aggregates, Inc. a Delaware corporation ("Purchaser"), Western Acquisition, Inc., a Delaware corporation and a wholly-owned indirect subsidiary of Purchaser ("Sub"), and Monroc, Inc., a Delaware corporation (the "Company"). RECITALS A. The Boards of Directors of Purchaser, Sub and the Company each have determined that the merger of Sub with and into the Company, upon the terms and subject to the conditions set forth herein, is fair to, and in the best interests of, their respective corporations and stockholders. B. Concurrently with the execution of the amendment and restatement of this Agreement, a significant stockholder of the Company has reconfirmed the Voting Agreement attached hereto as Exhibit A (the "Voting Agreements") which provides that such stockholders will vote their shares of common stock of the Company in favor of this Agreement. C. Purchaser, Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with, and to establish various conditions precedent to, the merger provided for herein. ARTICLE I THE MERGER 1.1 MERGER. At the Effective Time, upon the terms and subject to the conditions hereof, and in accordance with the provisions of the Delaware General Corporation Law (the "DGCL") and the Certificate of Incorporation and Bylaws of the Company, Sub shall be merged with and into the Company (the "Merger"). Following the Merger, the Company shall continue as the surviving corporation (the "Surviving Corporation") under the name Monroc, Inc. and shall continue its existence under the laws of the State of Delaware, and the separate corporate existence of Sub shall cease. 1.2 CONSUMMATION OF THE MERGER. As soon as practicable after the satisfaction or waiver of the conditions set forth in Article 6, the parties hereto will cause a duly executed and acknowledged certificate of merger, or certificate of ownership and merger if permitted by the DGCL of the State of (the "Merger Certificate"), to be filed with the Secretary of State of Delaware, and the parties hereto shall take all such other and further actions as may be required by law to make the Merger effective. The Merger shall become effective on the date on which the Merger Certificate has been duly filed with the Secretary of State of the State of Delaware (such time is hereinafter referred to as the "Effective Time"). The closing of the Merger will take place at 10:00 a.m. on a date to be specified by the Purchaser or Sub, but shall be no later than the third business day after satisfaction or waiver of the conditions to closing set forth in Article 6 (the "Closing Date"), at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 1000 Kearns Building, 136 South Main Street, Salt Lake City, Utah 84101, unless another date or place is agreed to in writing by the parties hereto. 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Sub shall vest in the Surviving Corporation. and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation. As of the Effective Time, the Company shall be a wholly owned subsidiary of Purchaser. 1.4 CERTIFICATE OF INCORPORATION AND BYLAWS. Subject to Section 5.11 (indemnification), the Certificate of Incorporation and the Bylaws of Sub in effect at the Effective Time shall be the Certificate of Incorporation and Bylaws of the Surviving Corporation until amended in accordance with applicable law-, provided that Article I of the Certificate of Incorporation of Sub shall be Amended as of the Effective Time to read "The name of the corporation is Monroc, Inc." 1.5 DIRECTORS AND OFFICERS. The directors of Sub at the Effective Time shall be the directors of the Surviving Corporation and the officers of the Company at the Effective Time shall be the officers of the Surviving Corporation, in each case until their respective successors are duly elected (or appointed in the case of officers) and qualified. ARTICLE 2 CONVERSION OF SECURITIES 2.1 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, Sub, the Company or the holders of any of the following securities: 2.1.1 Each share of common stock, par value $.01 per share, of the Company issued and outstanding immediately prior to the Effective Time (the "Shares"), other than Shares to be canceled pursuant to Section 2.1.2 and Dissenting Shares (as hereinafter defined), shall by virtue of the Merger and without any action on the part of the holder thereof be canceled and extinguished and be converted into the right to receive $10.771 without interest thereon (the "Merger Consideration"). 2.1.2 Each Share which is issued and outstanding immediately prior to the Effective Time and held by Purchaser or Sub or any direct or indirect subsidiary of Purchaser or Sub, or which is held in the treasury of the Company or any of its subsidiaries, shall be canceled and retired and no payment shall be made with respect thereto. 2.1.3 Each share of common stock, par value $.01 per share, of Sub issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly -2- issued, fully paid and nonassessable share of common stock, par value $.01 per share (or such other value as may be determined by Sub), of the Surviving Corporation. 2.2 EMPLOYEE STOCK OPTIONS; OUTSTANDING WARRANTS. Immediately prior to the Effective Time, each stock option (an "Option") granted under the Monroc, Inc. 1996 Stock Option Plan and the Monroc, Inc. 1994 Stock Option Plan (collectively, the "Stock Option Plans") and each outstanding warrant of the Company (a "Warrant"), whether or not such Option or Warrant is then exercisable, shall be canceled and each holder of a canceled Option or Warrant shall be entitled to receive from the Company, in consideration for cancellation and settlement of such Option or Warrant, a cash payment equal to the product of (i) the aggregate number of Shares subject to the Option or Warrant and (ii) the excess, if any, of the Merger Consideration over the exercise price per Share of such Option or Warrant as set forth in Schedule 3.2 (the "Option Consideration"). Prior to the Closing, the Company will make any amendments to the Stock Option Plans, the Warrants and any agreements related thereto, and will obtain any consents or releases, necessary to effect the transactions contemplated by this Section 2.2. Any amounts payable pursuant to this Section 2.2 shall be subject to any required withholding of taxes and shall be paid without interest. 2.3 DISSENTING SHARES; PAYMENT FOR SHARES. Notwithstanding in this Agreement to the contrary, Shares outstanding immediately prior to the Effective Time and held by holders who did not vote in favor of the Merger and who comply with all of the relevant provisions of Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration, and the holders of such Dissenting Shares shall be entitled to receive payment of the appraised value of such Shares in accordance with the provisions of Section 262 unless and until such holders shall have failed to perfect or shall have effectively withdrawn or lost their rights to appraisal. If, after the Effective Time, any such holder fails to perfect or shall have effectively withdrawn or otherwise lost such right, each of such holder's Shares shall thereupon be deemed to have been converted into the right to receive, as of the Effective Time, the Merger Consideration without any interest thereon. The Company shall give Sub prompt notice of any demands received by the Company for appraisal of Shares, and, prior to the Effective Time, Sub shall have the right to participate in all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, except with the prior written consent of Sub, make any payment with respect to, or settle or offer to settle, any such demands. 2.4 PAYMENT FOR SHARES. Prior to the Effective Time, Purchaser shall designate a United States bank or trust company reasonably satisfactory to the Company to act as Payment Agent in the Merger (the "Payment Agent"). At or prior to the Effective Time, Purchaser or Sub shall deposit, or cause to be deposited, in trust with the Payment Agent immediately available funds in an amount sufficient to make the payments contemplated by Section 2.1.1 on a timely basis (the "Exchange Fund"). The Payment Agent shall, pursuant to irrevocable instructions and subject to Section 2.4.3, make payments out of the Exchange Fund to holders of record who hold Shares immediately prior to the Effective Time and the Exchange Fund shall not be used for any other purpose. The Exchange Fund may, as directed by the Surviving Corporation (so long as such directions do not impair the rights of holders of Shares to receive the Merger Consideration promptly upon the surrender of their -3- shares in accordance with this agreement), be invested by the Payment Agent in direct obligations of the United States of America, obligations for which - -the full faith and credit of the United States of America is pledged to provide for the payment of principal and interest, commercial paper rated of the highest quality by Moody's Investors Services, Inc. or Standard & Poor's Corporation, or certificates of deposit issued by a commercial bank having at least $1,000,000,000 in assets. Deposit of funds pursuant hereto shall not relieve Purchaser or the Surviving Corporation of their obligations to make payments in respect of Shares and Purchaser hereby guarantees the Surviving Corporation's obligations in respect thereof. 2.4.1 Promptly after the Effective Time, Purchaser and the Surviving Corporation shall cause the Payment Agent to mail and/or make available to each record holder, as of the Effective Time, of a certificate or certificates (the "Certificates") which immediately prior to the Effective Time represented Shares (other than those cancelled pursuant to Section 2.1.2), a notice and letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificate shall pass, only upon proper delivery of the Certificates to the Payment Agent) and instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. As promptly as practicable after surrender to the Payment Agent of a Certificate, together with such letter of transmittal duly executed and completed in accordance with the instructions thereon, the holder of such Certificate shall be paid in exchange therefor cash in an amount equal to the product of the number of Shares represented by such Certificate multiplied by the Merger Consideration, and such Certificate shall be canceled. No interest shall be paid or accrued in respect of the Merger Consideration. If payment is to be made to a person other than the person in whose name the certificate surrendered is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of the surrendered Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. Until surrendered in accordance with the provisions of this Section 2.4, each Certificate (other than Certificates cancelled pursuant to Section 2.1.2 and Dissenting Shares) shall represent for all purposes solely the right to receive the Merger Consideration, without any interest thereon. 2.4.2 After the Effective Time, there shall be no transfers of Shares on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates are presented to the Payment Agent or the Surviving Corporation, they shall be canceled and exchanged for cash as provided in this Section 2.4, subject to applicable law in the case of Dissenting Shares. 2.4.3 Any portion of the Exchange Fund which remains unclaimed by the stockholders of the Company on the date six months after the Effective Time shall be repaid to the Surviving Corporation, upon demand, and any stockholder of the Company who has not theretofore complied with Section 2.4 shall thereafter look only to the Surviving Corporation for payment of such stockholder's claim for the Merger Consideration, without any interest thereon. ARTICLE 3 -4- REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company represents and warrants to Purchaser and Sub as follows: 3.1 ORGANIZATION AND QUALIFICATION. The Company and each subsidiary of the Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now ben conducted and is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the character of its properties or the nature of its business makes such qualification necessary, except where the failure to be so organized, existing, qualified or in good standing or have such power and authority would not have a Material Adverse Effect (as defined in Section 8.12). The Company has delivered or made available to Purchaser complete and correct copies of its and its subsidiaries' respective certificates of incorporation and bylaws. All subsidiaries of the Company and their respective jurisdictions of incorporation or organization are identified on Schedule 3. 1. 3.2 CAPITALIZATION. The authorized capital stock of the Company consists of 20,000,000 Shares and 1,000,000 shares of Preferred Stock, par value $.01 per share ("Preferred Shares"). No Preferred Shares are outstanding. All of the outstanding Shares have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights. As of the date hereof, (i) 4,514,200 Shares were issued and outstanding, (ii) 52 Shares were held in the Company's treasury, (iii) 415,600 Shares were reserved for issuance pursuant to outstanding Options and (iv) 1,501,250 Shares were reserved for issuance upon the exercise of outstanding Warrants. Except for the rights as set forth in this Section 3.2, there are not as of the date hereof any outstanding or authorized subscriptions, options, warrants, calls, rights, commitments or any other agreements of any character obligating the Company or any of its subsidiaries to issue any additional Shares or any other shares of capital stock of the Company or any other securities convertible into or evidencing the right to subscribe for any Shares. The exercise prices of the outstanding Options and Warrants are set forth on Schedule 3.2. Except as provided in Section 2.2 or as set forth on Schedule 3.2, there are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any of their respective equity securities. Each of the outstanding shares of capital stock of each of the Company's subsidiaries is duly authorized, validly issued, fully paid and nonassessable. and is owned, directly or indirectly, by the Company. The Shares which are the subject of the Voting Agreement represent approximately 36.6% of the total Shares outstanding as of the date hereof. 3.3 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has all requisite corporate power and authority to execute and deliver this Agreement and subject to the terms and conditions hereof, to consummate the transactions contemplated hereby (other than, with respect to the Merger, the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company in accordance with the applicable provisions of the DGCL). The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company and no other -5- corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than, with respect to the Merger, the approval and adoption of this Agreement and the transactions contemplated hereby by the stockholders of the Company in accordance with the applicable provisions of the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes a valid and binding obligation of each of Purchaser and Sub, this Agreement constitutes a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 3.4 ABSENCE OF CERTAIN CHANGES. Except as disclosed in the Company Filings (as defined in Section 3.5) or as set forth on Schedule 3.4, since November 30, 1997 (a) the Company and its subsidiaries have riot suffered any Material Adverse Effect, (b) the Company has not issued any shares of its capital stock or granted any rights to purchase its capital stock or securities convertible into or exchangeable for its capital stock or (c) the Company has not declared, set aside or made any payments of a dividend or other distribution in respect of any of its capital stock and has not, directly or indirectly, redeemed, purchased or otherwise acquired any of its capital stock. 3.5 REPORTS; FINANCIAL STATEMENTS. Since December 31, 1994, the Company has filed all required forms, reports and documents with the Securities and Exchange Commission (the "SEC") required to be filed by it pursuant to the federal securities laws and the SEC rules and regulations thereunder (the "Company Filings"), all of which have been delivered or made available to Purchaser and all of which have complied in all material respects with all applicable requirements of the Securities Act of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations promulgated thereunder. None of the Company Filings, including without limitation any financial statements or schedules included therein, at the time filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited and unaudited consolidated financial statements of the Company included in such reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as stated in such financial statements) and fairly present the financial position of the Company and its consolidated subsidiaries as of the dates thereof and the remits of their operations and changes in financial position for the periods then ended, subject, in the case of the unaudited financial statements, to normal year-end audit adjustments. Except as reflected, reserved against or otherwise disclosed in the financial statements of the Company included in the Company Filings, as otherwise disclosed in the Company Filings or as disclosed on Schedule 3.5, neither the Company nor any of its subsidiaries has any material liabilities or obligations (whether accrued, absolute, contingent or otherwise) that would be required to be reflected on, or reserved against in, the financial statements of the Company or in the notes thereto, prepared in accordance with generally -6- accepted accounting principles consistently applied, except liabilities arising in the ordinary course of business since November 30, 1997. 3.6 CONSENTS AND APPROVALS, NO VIOLATION. Neither the execution and delivery of this Agreement by the Company nor the consummation by the Company of the transactions contemplated hereby will (except as disclosed by the Company on Schedule 3.6): 3.6.1 subject to the obtaining of any requisite approval of the Company's stockholders, conflict with any provision of the Certificate of Incorporation or Bylaws of the Company or the charter documents of the Company's subsidiaries; 3.6.2 require any consent, approval, authorization or permit of, or filing with or notification to, any court, administrative agency or commission or other governmental authority domestic or foreign (a "Governmental Entity"), except (i) in connection with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) pursuant to the Exchange Act and the rules and regulations thereunder, (iii) pursuant to state laws relating to takeovers and state securities laws, -(iv) the filing of the Merger Certificate pursuant to the DGCL, or (v) where the failures to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not in the aggregate have a Material Adverse Effect; 3.6.3 violate any order, writ, injunction, decree, statute, rule or regulation applicable to the Company or its subsidiaries, except for violations which, in the aggregate, would not have a Material Adverse Effect; or 3.6.4 result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, lease, mortgage, license, agreement, permit or other instrument or obligations to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have a Material Adverse Effect. 3.7 LITIGATION. Except as set forth on Schedule 3.7 or as disclosed in the Company Filings filed prior to the date of this Agreement, there are no actions, suits or proceedings pending or, to the knowledge of the Executive Officers of the Company, threatened against the Company or any of its subsidiaries which would have a Material Adverse Effect. 3.8 COMPLIANCE WITH LAWS. To the best knowledge of the Executive Officers of the Company, except as disclosed in the Company Filings or as set forth on Schedule 3.8, the Company and its subsidiaries have conducted their businesses in accordance with applicable federal, state and local laws, rules and regulations, except where the failure to so conduct their businesses would not in the aggregate have a Material Adverse Effect. The Company and its subsidiaries hold all permits, licenses, variances, exemptions, orders, franchises and approvals of all Governmental Entities -7- necessary for the conduct of their respective businesses as presently conducted, except where the failure to so hold would riot have a Material Adverse Effect (the "Company Permits"). The Company and its subsidiaries are in compliance with the terms of the Company Permits, except where the failure to so comply would not have a Material Adverse Effect. 3.9 EMPLOYEE MATTERS. Except as set forth on Schedule 3.9, none of the Company or any of its subsidiaries is a party to, or bound by, any collective bargaining agreement, contract or other agreement or understanding with a labor union or labor organization. There is no unfair labor practice or labor arbitration proceeding pending or, to the knowledge of the Executive Officers of the Company, threatened against the Company or any of its subsidiaries, except for any such proceedings which would not in the aggregate have a Material Adverse Effect. 3.10 MATERIAL CONTRACTS. The Company has delivered or made available to Purchaser true and complete copies of all written, and written descriptions of all oral, contracts, agreements, commitments, leases (including with respect to personal property) and other arrangements to which it or any of its subsidiaries is a party or by which it or any of its subsidiaries are bound which require payments to be made in excess of $250,000 per year, other than agreements listed in any of the other schedules attached hereto (the "Material Contracts"). Each of the Material Contracts is listed on Schedule 3.10. Each of the Material Contracts is valid and in full force and effect except to the extent it has previously expired in accordance with its terms. Neither the Company nor any of its subsidiaries is in violation of or in default under (nor does any circumstance exist which, with notice of the lapse of time or both, would result in such a violation of or default under) any Material Contract, other than such violations or defaults which would not have a Material Adverse Effect. To the knowledge of the Executive Officers of the Company, none of the other parties to the Material Contracts are in violation of or in default under (nor does any circumstance exist which, with notice of the lapse of time or both, would result in such a violation of or default under) any Material Contract, other than such violations or defaults which would not have a Material Adverse Effect. 3.11 TAXES. 3.11.1 Each of the Company and its Subsidiaries (as defined below for purposes of this Section 3.11) has timely filed all material federal, state, local and foreign Tax Returns (as defined below) required to be filed by it for tax years prior to the date of this Agreement or has timely requested extensions and any such request has been granted and has not expired. Except as set forth on Schedule 3.11, no agreement or arrangement extending the period for assessment or collection of Taxes of the Company or any of its Subsidiaries is in effect as of the date hereof. Each of such Tax Returns is complete and accurate in all material respects. AD Taxes (as defined below) owed by the Company or any of its Subsidiaries on any such Tax Return have been paid or accrued, except for Taxes being contested in good faith and for which adequate reserves have been taken. The Company and each of its Subsidiaries have properly accrued for all Taxes for such periods subsequent to the periods covered by such Tax Returns. For purposes of this Section 3.11, the term "Subsidiary" of an entity shall mean any corporation, 80 % of the voting power and 80 % of the total value of all of the outstanding capital stock of which are owned directly by such entity. -8- 3.11.2 Except as set forth on Schedule 3.11, there are no pending or, to the knowledge of the Executive Officers of the Company, threatened audits or other proceedings by any court, governmental or regulatory authority or similar person in respect of Taxes or Tax Returns relating to the Company or any of its Subsidiaries which, if determined adversely to the Company or any of its Subsidiaries, could reasonably be expected to have a Material Adverse Effect. 3.11.3 No election under Section 338 of the Internal Revenue Code of 1986, as amended (the "Code"), has been made or filed by or with respect to the Company or any of its Subsidiaries. None of the Company or any of its Subsidiaries has agreed to make any adjustment pursuant to Section 481 (a) of the Code by reason of any change in any accounting method, and there is no application pending with any Taxing Authority (as defined below) requesting permission for any changes in any accounting method of the Company or any of its Subsidiaries. None of the assets of the Company or any of its Subsidiaries is or will be required to be treated as being owned by any person (other than the Company or its Subsidiaries) pursuant to the provisions of Section 168(f)(8) of the Internal Revenue Code of 1954, as amended and in effect immediately before the enactment of the Tax Reform Act of 1986. 3.11.4 Except as set forth on Schedule 3.11, none of the Company or any of its Subsidiaries is party to, is bound by, or has any obligation under, any Tax sharing or allocation agreement or similar contract. 3.11.5 Except as set forth on Schedule 3.11, none of the Company or any of its Subsidiaries is a party to any contract, agreement, plan or arrangement that could reasonably be expected to result in the payment of any amount that would not be deductible by the Company or any of its Subsidiaries by reason of Section 280G of the Code. 3.11.6 Schedule 3.11 accurately set forth (i) the amount of all deferred intercompany gains for purposes of Treasury Regulation section 1.1502-13 (including any predecessor regulation) with respect to the Company and its Subsidiaries and (ii) the amount of any excess loss account with respect to the stock of each of the Subsidiaries for purposes of Treasury Regulation section 1.1502-19 (including any predecessor regulation). 3.11.7 For purposes of this Agreement, the term "Taxes" shall mean all taxes, charges, fees, levies or other similar assessments or liabilities, including (i) income, gross receipts , ad valorem, premium, excise, real property, personal property, sales, use, transfer, withholding, employment, payroll and franchise taxes imposed by the United States or by any state, local or foreign government or any subdivision, agency or similar organization thereof, and (ii) any interest, fines, penalties, assessments and additions in connection therewith. For purposes of this Agreement, the term "Tax Returns" shall mean any report, return or statement required to be supplied to a Taxing Authority in connection with Taxes. For purposes of this Agreement, the term "Taxing Authority" means the Internal Revenue Service (the "IRS") or any domestic or foreign Governmental Entity responsible for the administration of Taxes. -9- 3.12 BROKERAGE FEES AND COMMISSIONS. Except for those fees and expenses payable to SBC Warburg Dillon Read Inc. (the "Company Financial Advisor") (a true and complete copy of whose engagement agreement has been provided to Purchaser), no person or entity is entitled to receive from the Company any investment banking, brokerage or finder's fee in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of the Company. 3.13 PROXY STATEMENT. None of the information supplied or to be supplied by the Company for inclusion or incorporation by reference in the Proxy Statement (as defined herein) will, on the date it is first mailed to the Company's stockholders or at the time of the Stockholders Meeting (as defined herein), contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary, in order to make the statements therein, in light of the circumstances under which they were made, not misleading, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied in writing by Purchaser or Sub specifically for inclusion therein. The Proxy Statement, insofar as it relates to the Company or its subsidiaries, will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations promulgated thereunder. 3.14 EMPLOYEE BENEFIT PLANS; ERISA. 3.14.1 Schedule 3.14.1 sets forth a complete and accurate list of (i) all "employee benefit plans," as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA") (collectively, "Benefit Plans"), and (ii) all employment and consulting agreements and all bonus, incentive compensation, deferred compensation, disability, severance, stock bonus, stock option, stock purchase or vacation pay agreements, policies or arrangements which the Company or any of its subsidiaries maintains or has any liability in respect of and each of which has a cost to the Company or any of its subsidiaries in excess of $25,000 for any year (collectively, the "Employee Arrangements"). 3.14.2 With respect to each Benefit Plan and Employee Arrangement, a complete and correct copy of each of the following documents (if applicable) has been delivered or made available to Purchaser or its representatives (i) the most recent plan and related trust documents, (ii) the most recent summary plan description, (iii) the most recent form 5500, (IV) the most recent determination letter issued by the IRS and (v) the most recent actuarial report. 3.14.3 Except as set forth on Schedule 3.14, the Company and its subsidiaries have not during the preceding six years had any obligation or liability with respect to a multi-employer plan within the meaning of Section 3(37) of ERISA. 3.14.4 Each of the Benefit Plans intended to be qualified under Section 401 (a) of the Code is so qualified. -10- 3.14.5 All contributions or other payments required to have been made or accrued by the Company or any of its subsidiaries under the terms of any of Benefit Plan or Employee Arrangement have been made or accrued, except for those contributions or payments the failure of which to make or accrue would not have a Material Adverse Effect. 3.14.6 The Benefit Plans and Employee Arrangements have been maintained and administered in all material respects in accordance with their terms and applicable laws. 3.14.7 Except as disclosed in the Company Filings or in Schedule 3.14, there are no pending or, to the knowledge of the Executive Officers of the Company, threatened actions, claims or proceedings (other than, routine claims for benefits) against or involving any Benefit Plan or Employee Arrangement, except for any of the foregoing which would not have a Material Adverse Effect. 3.14.8 Except as disclosed in the Company Filings or in Schedule 3.14, the Company or any subsidiary does riot maintain or have an obligation to contribute to retiree life or retiree health plans which provide for continuing benefits or coverage for current or former officers, directors and employees of the Company or any of its subsidiaries, except (i) as may be required under Part 6 of Title I of ERISA or (ii) a medical expenses reimbursement account plan pursuant to Section 125 of the Code. 3.14.9 Except as disclosed in Schedule 3.14 or in connection with equity compensation or except as discussed in this Agreement, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any payment becoming due to any employee of the Company or any of its subsidiaries, (ii) increase in any benefits under any Benefit Plan or Employee Arrangement or (iii) result in the acceleration of the time of payment of, vesting or other rights with respect to any benefits under any Benefit Plan or Employee Arrangement. 3.14.10 The Company and its subsidiaries have no liability under Section 4069 of ERISA by reason of a transfer of an under funded pension plan. 3.14.11 The Company's liability under any multi-employer plan, if the Company withdrew in part or in whole on the date hereof, would not exceed $150,000. 3.15 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion of the Company Financial Advisor to the effect that, as of the date hereof, the Merger Consideration is fair to the holders of Shares from a financial point of view, a copy of which has been provided to Purchaser. 3.16 VOTE REQUIRED. The affirmative vote of the holders of a majority of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve this Agreement and the transactions contemplated hereby. -11- 3.17 INTELLECTUAL PROPERTY. Except as set forth on Schedule 3.17, the Company and its subsidiaries possess or have adequate rights to use all material trademark, trade name, patent, service mark, brand mark, brand names, industrial designs and copyrights necessary for the operation of their businesses as currently being conducted, except where the failure to so possess or have adequate rights would not result in a Material Adverse Effect (collectively, the "Company Intellectual Property"). To the knowledge of the Executive Officers of the Company, the use of Company Intellectual Property by the Company or its subsidiaries does not conflict with, infringe upon, violate or interfere with or constitute an appropriation of any right, title, interest or goodwill, including any trademark, trade name, patent, service mark, brand mark, brand name, computer program, database, industrial design or copyright of any other person, except for any such conflict, infringement, violation, interference, claim, invalidity, abandonment, cancellation or unenforceability that would not have a Material Adverse Effect. 3.18 ENVIRONMENTAL MATTERS. 3.18.1 For purposes of this Agreement: (i) "ENVIRONMENTAL LAW" means any applicable law regulating or prohibiting releases of Hazardous Materials into any part of the natural environment, or pertaining to the protection of natural resources, the environment and public and employee health and safety from Hazardous Materials including the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 ET SEQ.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 ET SEQ.), the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 the Clean Water Act (33 U.S.C. Section 1251 ET SEQ.), the Clean Air Act (33 U.S.C. Section 7401 ET SEQ.), the Toxic Substances Control Act (15 U.S.C. Section 7401 ET SEQ.), the Federal Insecticide Fungicide, and Rodenticide Act (7 U.S.C. Section 136 ET SEQ.), and the Occupational Safety and Health Act (29 U.S.C. Section 651 ET SEQ.) ("OSHA") and the regulations promulgated pursuant thereto, and any such applicable state or local statutes and the regulations promulgated pursuant thereto, as such laws have been and may be amended or supplemented through the Closing Date; (ii) "HAZARDOUS MATERIAL" means any substance, material or waste which is regulated by any public or governmental authority in the jurisdictions in which the applicable party or its subsidiaries conducts business, or the United States, including any material or substance which is defined as a "hazardous waste," "hazardous material," "hazardous substance," "extremely hazardous waste" or "restricted hazardous waste," "contaminant," "toxic waste" or "toxic substance" under any provision of Environmental Law and shall also include petroleum, petroleum products, asbestos, polychlorinated biphenyls and radioactive materials; -12- (iii) "RELEASE" means any release spill, effluent, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching, or migration into the environment, or into or out of any property; and (iv) "REMEDIAL ACTION" means all actions, including any expenditures, required by a governmental entity or defined under any Environmental Law, or voluntarily undertaken to (a) clean up, remove, treat, or in any other way ameliorate or address any Hazardous Materials or other substance in the environment; (b) prevent the Release or threat of Release, or minimize the further Release of any Hazardous Material so it does not endanger or threaten to endanger the public health or welfare or the environment; (c) perform pre-remedial studies and investigations or post-remedial monitoring and care pertaining or relating to a Release; or (d) bring the applicable party into compliance with any Environmental Law. 3.18.2 Except as set forth on Schedule 3.18, the operations of the Company and its subsidiaries are in compliance with all Environmental Laws, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. 3.18.3 Except as set forth on Schedule 3.18, the Company and its subsidiaries have obtained and maintained all permits required under applicable Environmental Laws for the continued operations of their respective business, except such permits the lack of which would not reasonably be expected to have a Material Adverse Effect. 3.18.4 Except as set forth on Schedule 3.18, the Company and its subsidiaries (i) are not subject to any material written consent decree, compliance order or administrative order from any Governmental Entity or other person respecting any Environmental Law, Remedial Action or any Release of a Hazardous Material, (ii) have not received written notice under the citizen suit provision of any Environmental Law or (iii) have not received any written request for information, notice, demand letter, administrative inquiry or complaint with respect to any Environmental Law, remedial Action or Release of a Hazardous Material, except for with respect to (ii) and (iii) those written notices, requests or other documents the subject matter of which would reasonably be expected to have a Material Adverse Effect. 3.18.5 Except as set forth on Schedule 3.18, the Company and its subsidiaries have not received any written communication alleging, with respect to any such party, the violation of or liability under any Environmental Law, which violation or liability is outstanding and would reasonably be expected to have a Material Adverse Effect. 3.18.6 Except as set forth on Schedule 3.18, neither the Company nor any of its subsidiaries has any contingent liability in connection with the Release of any Hazardous Material which would reasonably be expected to have a Material Adverse Effect. -13- 3.18.7 Except as set forth on Schedule 3.18, the operations of the Company or its subsidiaries involving the transportation, treatment, storage or disposal of hazardous waste, as defined and regulated under 40 C.F.R. Paris 260-270 (in effect as of the date of this Agreement) or any state equivalent are in compliance with all Environmental Laws, except where the failure to so comply would not reasonably be expected to have a Material Adverse Effect. 3.18.8 Except as set forth on Schedule 3.18, to the knowledge of the Company, there is not now nor has there been in the past, on or in any owned property of the Company or its subsidiaries any of the following: (i) any underground storage tanks or surface impoundments, (i) any asbestos-containing materials in friable form or (iii) any polychlorinated biphenyls, any of which ((i), (ii) or (iii) preceding) could reasonably be expected to have a Material Adverse Effect. 3.18.9 Except as set forth on Schedule 3.18, no judicial or administrative proceedings or governmental investigations are pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries alleging the violation of or seeking to impose liability pursuant to any Environmental Law. 3.19 TITLE TO REAL PROPERTY; LEASES. Schedule 3.19 sets forth a list of (a) all real property currently owned by the Company and its subsidiaries and (b) all leases with respect to real property to which the Company or any of its subsidiaries is a party (collectively, the "Real Property Leases"). Except as set forth on Schedule 3.19, each of the Company and its subsidiaries has good and marketable title, or valid leasehold rights in the case of leased property, to the real property owned or leased by it, including, without limitation, all sand, gravel, rock and similar mineral rights (and rights of access thereto) with respect to mineral producing properties, free and clear of any mortgages, pledges, liens, encumbrances and security interests (collectively, "Encumbrances"), except for (i) those Encumbrances reflected or reserved against in the Company's Quarterly Report on Form I O-Q for the Quarter Ended September 30, 1997, (ii) Encumbrances for taxes, levies, imposts, assessments or governmental charges of any kind which are not yet delinquent or which are being contested in good faith by appropriate proceedings, (iii) liens for mechanics, materialmen, laborers, employees, suppliers or other liens arising by operation of law for which amounts which are not yet delinquent or which are being contested in good faith by appropriate proceedings, (iv) as to leased property, interests of lessors and Encumbrances affecting the interests of lessors, (v) deposits made in the ordinary course of business to secure contractual or other obligations of the Company or any of its subsidiaries, if the underlying obligation is not yet delinquent, and (vi) liens or defects in title or leasehold rights that, individually or in the aggregate, would not have a Material Adverse Effect. Each of the Real Property Leases is valid and in full force and effect, except to the extent it has previously expired in accordance with its terms. Neither the Company nor any of its subsidiaries is in violation of or in default under any Real Property Lease, other than such violations or defaults which would not have a Material Adverse Effect. Notwithstanding anything in Schedule 3.19 to the contrary, the Company represents and warrants that there are no exceptions to the Company's title to its aggregate properties (as such properties are identified as aggregate properties on Schedule 3.19) either noted on Schedule B to any of the title policies attached to Schedule 3.19 with respect to such aggregate properties or otherwise, that would, in any material way, interfere with -14- the Company's title to its aggregate properties, its right to access such aggregate properties, or the Company's right to extract and remove aggregates from such properties in the ordinary course of the Company's business. 3.20 BOARD RECOMMENDATION. The Board of Directors of the Company, at a meeting duly called and held, has by the vote of those directors participating (a) determined that this Agreement and the transaction contemplated hereby are fair to and in the best interests of the stockholders of the Company and approved the same by at least a majority vote and (b) resolved to recommend that the holders of the Shares approve this Agreement and the transactions contemplated hereby. 3.21 INDEBTEDNESS. Except as set forth on Schedule 3.21 or as otherwise disclosed in the financial statements and notes thereto set forth in the Company Filings, the Company has no outstanding indebtedness for borrowed money and is not a party to any agreement providing for the creation, incurrence or assumption thereof. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PURCHASER AND SUB Purchaser and Sub represent and warrant to the Company as follows: 4.1 ORGANIZATION. Each of Purchaser and Sub is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power to carry on its business as it is now being conducted except where the failure to be so organized, existing and in good standing or to have such power and authority would not in the aggregate have a material adverse effect on the results of operations, properties or financial condition of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder. Each of Purchaser and Sub has heretofore made available to the Company an accurate and complete copy of its respective certificate of incorporation and Bylaws, as currently in effect. 4.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Purchaser and Sub has all requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly and validly authorized by the respective Boards of Directors of Purchaser and Sub, and the stockholder of Sub, and no other corporate proceedings on the part of Purchaser or Sub are necessary to authorize this Agreement or to consummate the transactions contemplated hereby. This Agreement has been duly and validly executed and delivered by each of Purchaser and Sub and, assuming this Agreement constitutes a valid and binding obligation of the Company, this Agreement constitutes a valid and binding agreement of each of Purchaser and Sub, enforceable against each of Purchaser and Sub in accordance with its terms, except that such enforcement may be subject to bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights and the remedy of specific performance and injunctive and other forms of equitable relief may -15- be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought. 4.3 CONSENT AND APPROVALS, NO VIOLATION. Neither the execution and delivery of this Agreement by Purchaser and Sub nor the consummation by Purchaser and Sub of the transactions contemplated hereby will: 4.3.1 conflict with any provision of the respective Certificates of Incorporation or Bylaws (or other similar governing documents) of Purchaser or Sub; 4.3.2 require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity, except (i) in connection with the HSR Act, (ii) pursuant to the Exchange Act and the rules and regulations thereunder, (iii) pursuant to state laws relating to takeovers and state securities laws, if any are applicable, (iv) the filing of the Merger Certificate pursuant to the applicable law or (v) where the failures to obtain such consents' approvals, authorizations or permits, or to make such filings or notifications, would not in the aggregate have any material adverse effect on the results of operations, properties or financial condition of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder; 4.3.3 result in a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, lease, mortgage, license, agreement or other instrument or obligations to which Purchaser or any of its subsidiaries is a party or by which Purchaser or any of its subsidiaries or any of their respective assets may be bound, except for such defaults (or rights of termination, cancellation or acceleration) as to which requisite waivers or consents have been obtained or which, in the aggregate, would not have any material adverse effect on the financial condition, business or results of operations of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations thereunder; or 4.3.4 violate any order, writ, injunction, decree, statute, rule or regulation applicable to Purchaser or any of its subsidiaries, except for violations which would not have in the aggregate any material adverse effect on the financial condition, business or results of operations of Purchaser and its subsidiaries taken as a whole or on the ability of Purchaser or Sub to fully perform their obligations hereunder. 4.4 FINANCING. Purchaser has received binding written commitments from financially responsible financial institutions to obtain, funds necessary to consummate this Agreement and the transactions contemplated thereby, and to pay related fees and expenses, and will make such funds available to Sub. Purchaser has provided the Company with true and complete copies of all commitments and agreements from third parties to provide such financing to Purchaser or to Sub. -16- 4.5 BROKERAGE FEES AND COMMISSIONS. No person or entity is entitled to receive from Purchaser or Sub any investment banking, brokerage or finder's fee in connection with this Agreement or the transactions contemplated hereby based upon arrangements made by or on behalf of Purchaser or Sub. ARTICLE 5 COVENANTS 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as contemplated by this Agreement or as set forth on Schedule 5.1, during the period from the date of this Agreement to the Effective Time, the Company and its subsidiaries shall in all material respects conduct its operations according to its ordinary and usual course of business and consistent with past practice and the Company shall use commercially reasonable efforts to preserve impact in all material respects the business organization of the Company, keep available the services of its current officers and key employees, and preserve in all material respects the good will of those having advantageous business relationships with it and its subsidiaries. Without limiting the generality of the foregoing, and except as contemplated by this Agreement, as set forth on Schedule 5.1 or as disclosed in writing to Purchaser on or prior to the date hereof, prior to the Effective Time, neither the Company nor any of its subsidiaries, as the case may be, will, without the prior written consent of Purchaser: 5.1.1 issue, sell or pledge, or authorize or propose the issuance, sale or pledge of. additional shares of its capital stock or securities convertible into any such shares, or any rights, warrants or options to acquire any such shares or other convertible securities, other than Shares, preferred stock, treasury shares, rights, warrants or options, each as issuable pursuant to the Options and Warrants; 5.1.2 split, combine, subdivide, reclassify or redeem, or purchase or otherwise acquire, or propose to do any of the foregoing with respect to, any of its outstanding securities; 5.1.3 declare or pay any dividend or distribution on the Shares; 5.1.4 subject to the fiduciary duties of the Board of Directors of the Company (after consultation with and advice from outside legal counsel) and except pursuant to agreements or arrangements in effect on the date hereof, purchase or otherwise acquire, sell or otherwise dispose of or encumber (or enter into any agreement to so purchase or otherwise acquire, sell or otherwise dispose of or encumber) material properties or material assets except in the ordinary course of business; 5.1.5 subject to the rots of the stockholders of the Company under applicable law, adopt any amendments to the Certificate of Incorporation or Bylaws of the Company; 5.1.6 except as provided in Section 5.12, (i) increase the compensation of any of its directors, officers or key employees, except pursuant to the terms of agreements or plans currently -17- in effect in amounts material to the Company and its subsidiaries taken as a whole; (ii) pay or agree to pay any pension, retirement allowance or other employee benefit not required or permitted by any existing plan, agreement or arrangement to any director, officers or key employee in amounts material to the Company and its subsidiaries taken as a whole; (iii) commit itself (other than pursuant to any collective bargaining agreement) to any additional pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchaser, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or to any employment or consulting agreement with or for the benefit of any director, officer or key employee, whether past or present in amounts material to the Company and its subsidiaries taken as a whole; or (iv) except as required by applicable law, amend in any material respect any such plan, agreement or arrangement; or 5.1.7 except in the ordinary course of business and consistent with past practice, (i) incur any material amount of long-term indebtedness for borrowed money or issue any material amount of debt securities or assume, guarantee or endorse the obligations of any other person except for obligations of wholly owned subsidiaries of the Company; (ii) make any material loans, advances or capital contributions to, or investments in, any other person (other than to wholly owned subsidiaries of the Company or customary loans or advances to employees in amounts not material to the maker of such loan or advance); (iii) pledge or otherwise encumber shares of capital stock of the Company or a material portion of the capital stock of any 5.2 ACQUISITION PROPOSALS. The Company shall not, directly or indirectly, solicit, carry on discussions with or enter into any agreement with any corporation, partnership, person or other entity or group (other than Purchaser or an affiliate or an associate of Purchaser) concerning any merger. acquisition or similar transaction involving, or the sale of all or substantially all of the assets or equity securities of. the Company or any of its subsidiaries or divisions (other than with respect to the Company's ready-mix operations, precast/prestressed concrete operations or Wyoming operations) (an "Acquisition Proposal"). Notwithstanding the foregoing, the Company may (i) directly or indirectly, furnish information to or enter into discussions and negotiations with any person, entity or group that makes an unsolicited Acquisition Proposal if the Board of Directors of the Company determines in good faith (after consultation with and advice from outside legal counsel) that such action is required for the Board of Directors to comply with its fiduciary duties under applicable law, and (ii) to the extent applicable, comply with Rule 14e-2 and l4d-9 promulgated under the Exchange Act with regard to an Acquisition Proposal. The Company will promptly communicate to Purchaser the terms of any proposal or inquiry which it may receive in respect of any Acquisition Proposal by any person (other than Purchaser or any affiliate of Purchaser or their respective directors, officers, employees, representatives and agents). 5.3 ACCESS TO INFORMATION. 5.3.1 Subject to applicable law and the agreements set forth in Section 5.3.2, between the date of this Agreement and the Effective time, the Company will (i) give Purchaser and its authorized representatives reasonable access, during regular business hours upon reasonable -18- notice, to all of its facilities, books and records and key employees, (ii) permit Purchaser to make such reasonable inspections as it may be required, and (iii) cause its officers and those of its subsidiaries to furnish Purchaser with such financial and operating data and other information with respect to the business and assets of the Company and its subsidiaries as Purchaser may from time to time reasonably request. 5.3.2 Information obtained by Purchaser pursuant to this Section 5.3 shall be subject to the provisions of the confidentiality agreement between Purchaser and the Company dated September 26, 1997 (the "Confidentiality Agreement"), which agreement remains in full force and effect; except insofar as such provisions would expressly prohibit Purchaser or Sub from taking any of the actions contemplated by this Agreement. 5.4 BEST EFFORTS. Subject to the fiduciary duties of the Board of Directors of the Company under applicable law as advised by legal counsel, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all necessary or appropriate action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations or otherwise to consummate and make effective the transactions contemplated by this Agreement including, without limitation, the execution of any additional instruments necessary to consummate the transactions contemplated hereby and seeking to lift or reverse any legal restraint imposed on the consummation of the transactions contemplated by this Agreement. In case at any time after the Effective Time any further action is necessary or desirable to carry out the purposes of this Agreement, the proper officers and directors of each party hereto shall take all such necessary action. 5.5 STOCKHOLDERS' MEETING. The Company, acting through its Board of Directors, shall in accordance with applicable law, its Certificate of Incorporation and Bylaws duly call, give notice of, convene and hold an annual or special meeting (the "Stockholders Meeting") of its stockholders as soon as practicable to consider and vote upon approval of this Agreement and the transactions contemplated hereby. Subject to its fiduciary duties under applicable laws as advised by legal counsel, the Company will include in the proxy statement (such proxy statement as amended or supplemented from time to time being referred to herein as the "Proxy Statement") to be sent to the Company's stockholders with respect to the Stockholders Meeting the recommendation of its Board of Directors that its stockholders vote in favor of the approval and adoption of this Agreement and the transactions contemplated hereby. At the Stockholders Meeting. all of the Shares beneficially owned by Purchaser or its affiliates, if any, shall be voted in favor of approval and adoption of this Agreement and the transactions contemplated hereby. 5.6 PROXY STATEMENT. The Company will use its commercially reasonable efforts (i) to obtain and furnish the information required to be included by it in the Proxy Statement, (ii) to file the Proxy Statement with the SEC, (iii) after consultation with the other parties hereto, respond as promptly as is reasonably practicable to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof, and (iv) cause the Proxy Statement to be mailed to its stockholders at the earliest practicable time following the date of this Agreement. The information provided and to be provided by the Company, Purchaser and Sub for use in the Proxy -19- Statement shall, as of the date of mailing of the Proxy Statement and as of the date of the Stockholders Meeting, not include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 5.7 VOTING AGREEMENT. Concurrently with the execution of this Agreement, Building and Construction Capital Partners 1, L.P. and Purchaser shall enter into the Voting Agreement set forth as Exhibit A hereto. 5.8 FEES AND EXPENSES. Each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby; provided, however, that if the Merger is consummated, the Surviving Corporation shall assume responsibility for the payment of all Company expenses in connection with this Agreement and the transactions contemplated hereby. 5.9 STANDSTILL. In the event of the termination of this Agreement, neither Purchaser nor its subsidiaries, employees, officers or affiliates shall, for a period of three years from the date of this Agreement, directly or indirectly (unless and until Purchaser shall have received the prior written invitation or approval of a majority of the Board of Directors of the Company): 5.9.1 solicit, seek or offer to effect, or effect; 5.9.2 negotiate with or provide any information to the Board of Directors of the Company, any director or officer of the Company, any stockholder of the Company, any employee or union or other labor organization representing employees of the Company or any other person with respect to; 5.9.3 make airy statement or proposal, whether written or oral, either alone or in concert with others, to the Board of Directors of the Company, any director or officer of the Company or any stockholder of the Company, any union or other labor organization representing employees of the Company or any other person with respect to; or 5.9.4 make any public announcement (except as required by law) or proposal or offer whatsoever (including, but not limited to, any "solicitation" of "proxies" as such terms are defined or used in Regulation 14A of the Exchange Act) with respect to: (a) any form of business combination or transaction involving the Company or any affiliate thereof, including, without limitation, a merger, tender or exchange offer or liquidation of the Company's assets; (b) any form of restructuring, recapitalization or similar transaction with respect to the Company or any affiliate thereof; -20- (c) any purchase of any securities or assets, or rights or options to acquire any securities or assets (through purchase, exchange, conversion or otherwise), of the Company or any affiliate thereof; (d) any proposal to seek representation on the Board of Directors of the Company or otherwise to seek to control or influence the management, Board of Directors or policies of the Company or any affiliate thereof; (e) any request or proposal to waive, terminate or amend the provisions of this Section 5.9; or (f) any proposal or other statement inconsistent with the terms of this Section 5.9. or instigate, encourage, joint, act in concert with or assist (including, but not limited to, providing or assisting in any way in the obtaining of financing for or acting as a joint bidder or co-bidder for the Company with) any third party to do any of the foregoing. 5.10 PUBLIC ANNOUNCEMENTS. Purchaser and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the transactions contemplated by this Agreement and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by law. 5.11 INDEMNIFICATION AND INSURANCE. 5.11.1 The Company shall indemnify and hold harmless, and after the Effective Time the Surviving Corporation shall indemnify and hold harmless, each present and former employee, agent, director or officer of the Company and its subsidiaries (the "Indemnified Parties") from and against any and all claims arising out of or in connection with activities, including without limitation, the transactions contemplated by this Agreement, in such capacity, or on behalf of, or at the request of the Company, its subsidiaries or affiliates, to the fullest extent permitted under Delaware law (subject to applicable limitations thereunder) and in addition, to the fullest extent provided in their respective charters or Bylaws (subject to applicable limitations thereunder) or any contract or other arrangement in effect at the date hereof which obligations shall survive the Merger and shall continue in full force and effect for a period of not less than six years from the Effective Time; provided, however, that if any claim or claims (a "Claim or Claims") are asserted or made within such six year period, all rights to indemnification in respect of any such Claim or Claims shall continue until disposition of any and all such Claims. Without limiting the foregoing, the Company, and after the Effective Time the Surviving Corporation, shall advance expenses incurred with respect to the foregoing, as they are incurred, to the fullest extent permitted under applicable law, provided that the person on whose behalf the expenses are advanced provides and undertakes (which need not be secured) to repay such advances if it is ultimately determined that such person is not entitled to indemnification. -21- 5.11.2 The Surviving Corporation shall use its best efforts to cause to be maintained in effect for not less than six years from the Effective Time the current policies of directors, and officers, liability insurance maintained by the Company and its subsidiaries (provided that the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are no less advantageous so long as no lapse in coverage occurs as a result of such substitution) with respect to all matters, including the transactions contemplated hereby, occurring prior to and including the Effective Time; provided that, in the event that any Claim or Claims are asserted or made within such six-year period, such insurance shall be continued in respect of any such Claim or Claims until final disposition of any and all such Claims. provided further that the Surviving Corporation shall not be required to pay annual premiums in excess of 200% of the Company's total current annual premiums for such insurance and if the Surviving Corporation is unable to obtain the insurance required by this Section 5.11 it shall obtain as much comparable insurance as can be obtained for an annual premium equal to such maximum amount. 5.12 EMPLOYEE BENEFIT PLANS. 5.12.1 The Purchaser and the Surviving Corporation agree that all employees of the Company and its subsidiaries which are offered employment after the Effective Date shall be entitled to the same employee benefits, plans, programs, arrangements and policies as are available to the employees of Purchaser and its subsidiaries. 5.12.2 From and after the Effective Time, the Purchaser and the Surviving Corporation shall assume and honor in accordance with their terms all existing employment and severance agreements and arrangements set forth on Schedule 5.12. 5.12.3 If any employee of the Company or any of its subsidiaries becomes a participant in any employee benefit plan, program or policy of the Purchaser or the Surviving Corporation, such employee shall be given credit for purposes of eligibility and vesting under such plan for all service prior to the Effective Time with the Company and its subsidiaries, or any predecessor employer (to the extent such credit was given by the Company). 5.12.4 The Surviving Corporation shall provide professional out placement services for all officers and salaried employees of the Company or any subsidiaries employed at the Effective Time and who are terminated within one year after the Effective Time. 5.12.5 The Purchaser shall reimburse (or cause the Surviving Corporation to reimburse) any director, officer or employee (or former director, officer or director) of the Company or any of its subsidiaries for all costs and expenses, including attorneys' fees, incurred by such person in successfully enforcing the provisions of this Section 5. 5.13 REAL ESTATE GAINS TAX AND NEW REAL PROPERTY TRANSFER TAX. The Purchaser shall pay any State Tax on Gains Derived from Certain Real Property Transfers and Real Property Transfer Tax and any similar tax in any other jurisdiction (and any penalties or interest with respect -22- to such taxes) payable in connection with the Merger or the acquisition of a controlling interest in the Company by Purchaser or Sub, and the Purchaser shall indemnify and hold harmless the stockholders of the Company from and against any liability with respect to such taxes (including any penalties, interest and professional fees). The Purchaser shall file any returns with respect to such taxes. 5.14 EMPLOYEE STOCK OWNERSHIP PLAN. The Company agrees that, in accordance with its rights under the Monroc, Inc. Employee Stock Ownership Plan (the "ESOP"), the Company will direct the voting in favor of approval and adoption of the Merger Agreement of any Shares held in the ESOP with respect to which any ESOP participant has failed to give the ESOP trustee timely instructions as to how to vote such Shares. ARTICLE 6 CONDITIONS TO CLOSING 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The respective obligations of each parry to effect the Merger are subject to the satisfaction or waiver, at or prior to the Effective Time, of the following conditions: 6.1.1 This Agreement shall have been approved and adopted by the affirmative vote of the stockholders of the Company to the extent required by applicable law and the Certificate of Incorporation of the Company. 6.1.2 No statute, rule, regulation, decree, order or injunction shall have been promulgated, enacted, entered or enforced by any United States federal or state government, governmental agency or authority or court which remains in effect and prohibits, restrains, enjoins or restricts the consummation of the Merger. 6.1.3 Any waiting period applicable to the consummation of the Merger under the HSR Act shall have expired or been terminated. 6.2 CONDITIONS TO OBLIGATIONS OF PURCHASER AND SUB TO EFFECT THE MERGER. Unless waived by Purchaser in writing, the obligations of Purchaser and Sub to effect the Merger provided for hereby shall be subject to the satisfaction, at or prior to the Effective Time, of each of the following conditions: 6.2.1 The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects (except as to the extent such representations and warranties are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (other than representations and warranties which address matters only as of a certain date which shall be true and correct as of such certain date), except as and to the extent that the facts and conditions upon which such -23- representations and warranties are based are expressly required or permitted to be changed by the terms thereof. 6.2.2 The Company shall have performed in all material respects all agreements and covenants required hereby to be performed by it prior to or at the Effective Time; provided, however, that neither Purchaser nor Sub shall be entitled to refuse to consummate the transaction in reliance upon its own breach or failure to perform. 6.2.3 From the date of this Agreement through the Effective Time. there shall not have occurred any change in or effect on the business of the Company or any of its subsidiaries, individually or in the aggregate, that is materially adverse to the results of operations, properties, financial condition or prospects of the Company and its subsidiaries taken as a whole, except for such changes or effects resulting from, or in connection with general economic, industry-wide or financial market conditions; provided, however. that notwithstanding the occurrence of any change in or effect on the business of the Company or any of its subsidiaries, individually or in the aggregate, that is materially adverse to the results of operations, properties, financial condition or prospects of the Company and its subsidiaries taken as a whole, Purchaser and Sub shall still be obligated to effect the Merger if such change in or effect on the business of the Company or any of its subsidiaries, individually or in the aggregate, results from discussions or efforts of the Company, Purchaser or Purchaser's affiliates to divest any of the ready-mix operations, precast/prestressed concrete operations or Wyoming operations of the Company or its subsidiaries. 6.2.4 Purchaser shall have received a certificate executed on behalf of the Company by an executive officer of the Company to the effect set forth in clauses 6.2.1 through 6.2.3. 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. Unless waived by the Company in writing, the obligations of the Company to effect the Merger provided for hereby shall be subject to the satisfaction, at or prior to the Effective Time, of each of the following conditions: 6.3.1 The representations and warranties of Purchaser and Sub contained in this Agreement shall be true and correct in all material respects (except as to the extent such representations and warranties are qualified as to materiality, in which case such representations and warranties shall be true and correct in all respects) at and as of the Closing Date as if such representations and warranties were made at and as of the Closing Date (other than representations and warranties which address matters only as of a remain date which shall be true and correct as of such certain date), except as and to the extent that the facts and conditions upon which such representations and warranties are based are expressly required or permitted to be changed by the terms thereof. 6.3.2 Purchaser and Sub shall have performed in all material respects all agreements and covenants required hereby to be performed by them prior to or at the Effective Time; provided, -24- however, that the Company shall not be entitled to refuse to consummate the transaction in reliance upon its own breach or failure to perform. 6.3.3 The Company shall have received a certificate executed on behalf of Purchaser and Sub by an executive officer of Purchaser to the effect set forth in clauses 6.3.1 and 6.3.2. ARTICLE 7 TERMINATION 7.1 TERMINATION. This Agreement may be terminated and the Merger may be abandoned at any time notwithstanding approval thereof by the stockholders of the Company (except as otherwise set forth in this Section 7.1), but prior to the Effective Time: 7.1.1 by mutual written consent duly authorized by the Boards of Directors of the Company, Purchaser and Sub; 7.1.2 by Purchaser or the Company if (i) the Effective Time shall not have occurred on or before August 31, 1998 (provided that the right to terminate this Agreement under this Section 7.1.2 shall not be available to any party whose failure to fulfill any obligations under this Agreement has been the cause of or resulted in the failure of the Effective Time to occur on or before such date), (ii) the approval of the Company's stockholders required by Section 6.1.1 shall not have been obtained by August 31, 1998 at a meeting duly convened therefor or at any adjournment thereof or (iii) any United States federal or state government, governmental agency or authority or court shall have issued an order, decree or ruling, or taken any other action, permanently restraining, enjoining or otherwise prohibiting the Merger (which the party seeking to terminate this Agreement shall have used its best efforts to have lifted or reversed) and such order, decree, ruling or other action shall have become final and non-appealable; 7.1.3 by the Company if an Acquisition Proposal has been made and the Board of Directors of the Company determines, in the exercise of its good faith judgment (after consultation with and advice from outside legal counsel) do such termination is required for the Board of Directors to comply with its fiduciary duties under applicable law; or 7.1.4 by Purchaser if the Board of Directors of the Company withdraws or modifies in a manner adverse to Purchaser or Sub its determination to recommend that the stockholders of the Company approve this Agreement and the transactions contemplated hereby. 7.2 EFFECT OF TERMINATION. 7.2.1 In the event of the termination of this Agreement pursuant to Section 7 hereof, this Agreement, except for the provisions of Section 5.3.2 (confidentiality), Section 5. 11 (indemnity), Section 5.8 (fees and expenses), Section 5.9 (standstill) and this Section 7.2, shall forthwith become void and have no effect, without any liability on the part of any party or its -25- affiliates, directors, officers or stockholders. Nothing in this Section 7.2 or in Section 8.3 shall relieve any party to this Agreement of liability for breach of this Agreement on or prior to the date of termination. 7.2.2 If (i) the Company terminates this Agreement pursuant to Section 7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following receipt by the Company of an Acquisition Proposal or either the Company or Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and immediately prior to any such meeting of the Company's stockholders an Acquisition Proposal was pending, and (H) the Acquisition Proposal which gave rise to such termination (or any revised transaction based upon such Acquisition Proposal) is consummated within nine months of such termination, then the Company (or any successor thereto) shall pay to Purchaser a fee of $2.0 million (the "Termination Fee") in immediately available funds within five business days following such termination. Only one Termination Fee shall be payable pursuant to this Section 7.2.2. If the Company has paid any amounts to Purchaser pursuant to Section 7.2.3, such amounts shall be deducted from any Termination Fee owed to Purchaser so that in no event shall the aggregate payments made by the Company to Purchaser pursuant to Sections 7.2.2 and 7.2.3 exceed $2.0 million. 7.2.3 If (i) the Company terminates this Agreement pursuant to Section 7.1.3, Purchaser terminates this Agreement pursuant to Section 7.1.4 following receipt by the Company of an Acquisition Proposal or either the Company or Purchaser terminates this Agreement pursuant to clause (ii) of Section 7.1.2 and immediately prior to any such meeting of the Company's stockholders an Acquisition Proposal was pending, then the Company (or any successor thereto) shall pay to Purchaser the out-of-pocket fees and expenses incurred or paid by or on behalf of Purchaser or Sub in connection with the transactions contemplated by this Agreement, including all fees and expenses of counsel, commercial banks, accountants, experts and consultants to Parent and Sub. Payment of Purchaser's expenses pursuant to this Section 7.2.3 shall be made no later than five business days after delivery to the Company of notice of demand for payment and a written itemization setting forth in reasonable detail all of Purchaser's expenses. Notwithstanding the foregoing, if the Company pays to Purchaser the Termination Fee pursuant to Section 7.2.2, no amounts shall be owed to Purchaser by the Company pursuant to this Section 7.2.3. ARTICLE 8 MISCELLANEOUS 8.1 AMENDMENT. TO the extent permitted by applicable law, this Agreement may be amended by action taken by or on behalf of the respective Boards of Directors of the Company, Purchaser and Sub at any time before or after adoption of this Agreement by the stockholders of the Company (if required by applicable law) but, after any such stockholder approval, no amendment shall be made which decreases the Merger Consideration or changes the form thereof or which adversely affects the rights of the Company's stockholders hereunder without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. -26- 8.2 EXTENSION; WAIVER. At any time prior to the Effective Time, the parties hereto, by action taken by or on behalf of the respective Boards of Directors of the Company, Purchaser or Sub, may, 8.2.1 extend the time for the performance of any of the obligations or other acts of the other parties hereto; 8.2.2 waive any inaccuracies in the representations and warranties of any other party contained herein or in any document, certificate or writing delivered pursuant hereto by any other party; or 8.2.3 waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to assert any of its rights hereunder shall not constituent a waiver of such rights. 8.3 NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and warranties made in Articles 3 and 4 shall not survive beyond the Effective Time or the termination of this Agreement. This Section 8.3 shall not limit any covenant or agreement of the parties hereto which by its terms contemplates performance after the Effective Time. 8.4 ENTIRE AGREEMENT, ASSIGNMENT. This Agreement, together with the Schedules hereto, (i) constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all other prior agreements and understandings, both written and oral, other than. the Confidentiality Agreement, among the parties or any of them with respect to the subject matter hereof and (ii) shall not be assigned by operation of law or otherwise, provided that Purchaser or Sub may assign any of their rights and obligations to any wholly owned, direct or indirect subsidiary of Purchaser, but no such assignment shall relieve Purchaser or Sub of its obligations hereunder. 8.5 ENFORCEMENT OF THE AGREEMENT. The parties hereto agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties and other persons entitled to enforce this Agreement pursuant to this Section 8.5 shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions hereof in any federal or state court located in Delaware (as to which the parties agree to submit to jurisdiction for the purposes of such action), this being in addition to any other remedy to which they are entitled at law or in equity. 8.6 VALIDITY. If any provision of this Agreement, or the application thereof to any person or circumstance, is held invalid or unenforceable, the remainder of this Agreement, and the application of such provision to other persons or circumstances, shall not be affected thereby, and to such end, the provisions of this Agreement are agreed to be severable. -27- 8.7 NOTICES. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have teen duly given upon receipt) by delivery in person, by cable, telegram, telex or telecopies, or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties as follows: If to Purchaser or Sub: U.S. Aggregates, Inc. 400 South El Camino Real Suite 500 San Mateo, California 94402 Attn: Michael J. Stone with a copy to: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attn: John A. Schoenfeld, Esq. If to the Company: Monroc, Inc. 1730 Beck Street P.O. Box 537 Salt Lake City, Utah 84110 Attn: Ronald D. Davis with copies to: LeBoeuf, Lamb, Greene & MacRae, L.L.P. 136 South Main Street 1000 Kearns Building Salt Lake City, Utah 84101 Attn: Nolan S. Taylor, Esq. or to such other address as the person to whom notice is given may have previously furnished to the others in writing in the manner set forth above (provided that notice of any change of address shall be effective only upon receipt thereof). 8.8 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of Delaware regardless of the laws that might otherwise govern under principles of conflicts of laws applicable thereto. 8.9 DESCRIPTIVE HEADINGS. The descriptive headings herein are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. 8.10 PARTIES IN INTEREST. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to confer upon any other person any rights or remedies of any nature whatsoever under or by reasons of this -28- Agreement except for the holders of Employee Options with respect to Section 2.2, the holders of Shares with respect to Articles I and 2 and Sections 5.9 and 8.4 (which are intended to be for the benefit of the persons provided for therein, and may be enforced by such persons). 8.11 COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 8.12 CERTAIN DEFINITIONS. As used in this Agreement: "AFFILIATE" or "Associate" of a person shall have the meaning ascribed thereto in Rule I 2b-2 under the Exchange Act. "BENEFICIAL OWNERSHIP" shall have the meaning as used in Rule 13d under the Exchange Act. "EXECUTIVE OFFICERS" means Ronald D. Davis and L. William Rands. "GROUP" shall have the meaning as used in Rule 13d-5(b) under the Exchange Act. "PERSON" means any individual, corporation, company, group, partnership. association, governmental body or other entity. "SUBSIDIARY" of an entity shall means any corporation, a majority of the outstanding voting securities of which are owned directly or indirectly by such entity. "MATERIAL ADVERSE EFFECT" shall mean any change in or effect on the business of the Company or any of its subsidiaries that is materially adverse to the results of operations, properties or financial condition of the Company and its subsidiaries taken as a whole, except for such changes or effects resulting from, or in connection with general economic, industry-wide or financial market conditions. 8.13 PERFORMANCE BY SUB. BY SUB. Purchaser hereby agrees to cause Sub to comply with its obligations hereunder and to cause Sub to consummate the Merger as contemplated herein. -29- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. PURCHASER --------- U.S. AGGREGATES, INC. /s/ Michael J. Stone ------------------------------- Michael J. Stone Executive Vice President SUB --- WESTERN ACQUISITION, INC. /s/ Michael J. Stone ------------------------------- Michael J. Stone Vice President COMPANY ------- MONROC, INC. /s/ Ronald D. Davis ------------------------------- Ronald D. Davis President and Chief Executive Officer -30- IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed on its behalf by its officers thereunto duly authorized on the day and year first above written. PURCHASER --------- U.S. AGGREGATES, INC. ------------------------------- Michael J. Stone Executive Vice President SUB --- WESTERN ACQUISITION, INC. ------------------------------- Michael J. Stone Vice President COMPANY ------- MONROC, INC. ------------------------------- Ronald D. Davis President and Chief Executive Officer -31- EX-10.43 41 EXHIBIT 10.43 SENIOR MANAGEMENT AGREEMENT THIS AGREEMENT is made as of November 20, 1996 between U.S. Aggregates, Inc., a Delaware corporation (the "Company"), and Morris Bishop, Jr. ("Executive"). Executive and the Company have entered into an Employment Agreement dated as of August 5, 1994 (the "Employment Agreement"). The Company and Executive desire to enter into an agreement pursuant to which Executive shall purchase 995 shares of the Company's common stock, par value $.01 per share (the "Common Stock"). All shares of Common Stock received hereunder by Executive and all shares of Common Stock hereafter acquired by Executive are referred to herein as "Executive Stock." Certain definitions are set forth in Section 5 of this Agreement. The parties hereto agree as follows: 1. PURCHASE AND SALE OF EXECUTIVE STOCK. (a) Upon execution of this Agreement (the "Closing"), the Company will sell to Executive and Executive will purchase 995 shares of Common Stock at a price of$10 per share. The Company will deliver to Executive the certificate representing such Common Stock, and Executive will deliver to the Company a check or wire transfer of funds in an amount of $9.95 and a promissory note in the form of EXHIBIT A attached hereto in an aggregate principal amount of $9,940.05 (the "Executive Note"). Executive's obligations under the Executive Note will be secured by a pledge of all of the shares of Executive Stock to the Company and in connection therewith Executive shall enter into a pledge agreement in the form of EXHIBIT B attached hereto. (b) In connection with the purchase and sale of the Executive Stock hereunder, Executive represents and warrants to the Company that: (i) The Executive Stock to be acquired by Executive pursuant to this Agreement will be acquired for Executive's own account and not with a view to, or intention of, distribution thereof in violation of the Securities Act, or any applicable state securities laws, and the Executive Stock will not be disposed of in contravention of the Securities Act or any applicable state securities laws; (ii) Executive is an executive officer of the Company, is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Executive Stock; (iii) Executive is able to bear the economic risk of his investment in the Executive Stock for an indefinite period of time because the Executive Stock has not been registered under the Securities Act and, therefore, cannot be sold unless subsequently registered under the Securities Act or an exemption from such registration is available; (iv) Executive has had an opportunity to ask questions and receive answers concerning the terms and conditions of the offering of Executive Stock and has had full access to such other information concerning the Company as he has requested; and (v) This Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject. (c) As an inducement to the Company to issue the Executive Stock to Executive, as a condition thereto, Executive acknowledges and agrees that: (i) neither the issuance of the Executive Stock to Executive nor any provision contained herein shall affect any of the rights of the Company set forth in the Employment Agreement; and (ii) the Company shall have no duty or obligation to disclose to Executive, and Executive shall have no right to be advised of, any material information regarding the Company and its Subsidiaries at any time prior to, upon or in connection with the repurchase of Executive Stock upon the termination of Executive's employment with the Company and its Subsidiaries or as otherwise provided hereunder. 2. REPURCHASE OPTION. (a) In the event Executive ceases to be employed by the Company and its Subsidiaries for any reason (the "Termination"), the Executive Stock (whether held by Executive or one or more of Executive's transferees) will be subject to repurchase by the Company and the Investor pursuant to the terms and conditions set forth in this Section 2 (the "Repurchase Option"). The purchase price for each share of Executive Stock will be the higher of the Executive's Original Cost and the Fair Market Value for such share. (b) The Board of Directors of the Company (the "Board") may elect to purchase all, but not less than all, of the Executive Stock by delivering written notice (the "Repurchase Notice") to the holder or holders of such Executive Stock within one year after the - 2 - Termination (it being understood that an election to purchase Executive Stock hereunder shall not be an election to purchase the stock acquired pursuant to the senior management agreements with other executives of the Company). The Repurchase Notice will set forth the number of shares to be acquired from each holder, the aggregate consideration to be paid for such shares and the time and place for the closing of the transaction. (c) If for any reason the Company does not elect to purchase all of the Executive Stock pursuant to the Repurchase Option, the Investor shall be entitled to exercise the Repurchase Option for the shares of Executive Stock the Company has not elected to purchase (the "Available Shares"). As soon as practicable after the Company has determined that there will be Available Shares, but in any event within ten months after the Termination, the Company shall give written notice (the "Option Notice") to the Investor setting forth the number of Available Shares and the purchase price for the Available Shares. The Investor may elect to purchase any or all of the Available Shares by giving written notice to the Company within one month after the Option Notice has been given by the Company. As soon as practicable, and in any event within ten days after the expiration of the one-month period set forth above, the Company shall notify each holder of Executive Stock as to the number of shares being purchased from such holder by the Investor (the "Supplemental Repurchase Notice"). At the time the Company delivers the Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company shall also deliver written notice to the Investor setting forth the number of shares the Investor is entitled to purchase, the aggregate purchase price and the time and place of the closing of the transaction. (d) In the event that (i) the Executive's employment is terminated by the Company without Cause (as defined in the Employment Agreement), (ii) neither the Company nor the Investor has elected to purchase all of the Executive Stock hereunder and (iii) at the time of such Termination, the Company is meeting all budget projections set forth by the Board for that fiscal year, the Executive may require the Company to purchase all but not less than all, of the Executive Stock by delivering written notice (the "Put Notice") to the Company within one year after such Termination. The Put Notice will set forth the number of shares to be acquired from each holder and the time and place for the closing of the transaction. (e) The closing of the purchase of the Executive Stock pursuant to the Repurchase Option or the Put Notice shall take place on the date designated by the Company in the case of either the Repurchase Notice or the Supplemental Repurchase Notice or by the Executive in the case of the Put Notice, which date shall not be more than one month nor less than five days after the delivery of the later of any such notice to be delivered. The Company and/or the Investor will pay for the Executive Stock to be purchased pursuant to the Repurchase Option by delivery of a check - 3 - or wire transfer of funds in the aggregate amount of the purchase price for such shares; provided, however, that the Company may elect to pay for the Executive Stock to be purchased pursuant to the Put Notice by delivery of a promissory note from the Company having a term no longer than five years, payable in sixty equal installments, a market rate of interest and other typical market terms. In addition, the Company may pay the purchase price for such shares by offsetting amounts outstanding under any bona fide debts owed by Executive to the Company including, without limitation, debts owed under the Executive Note. The Company and the Investor will be entitled to receive customary representations and warranties from the sellers regarding such sale and to require all sellers' signatures be guaranteed. (f) The right of the Company and the Investor to repurchase Executive Stock pursuant to this Section 2 and the obligation of the Company to repurchase the Executive Stock pursuant to paragraph (e) above shall terminate upon the first to occur of the Sale of the Company or a Qualified Public Offering. (g) Notwithstanding anything to the contrary contained in this Agreement, all repurchases of Executive Stock by the Company shall be subject to applicable restrictions contained in the Delaware General Corporation Law and in the Company's and its Subsidiaries' debt and equity financing agreements. If any such restrictions prohibit the repurchase of Executive Stock hereunder which the Company is otherwise entitled or required to make, the Company may make such repurchases as soon as it is permitted to do so under such restrictions. 3. TERMINATION OF EXECUTIVE'S OPTION. The parties hereto agree that all rights and obligations under Section 1(b) of that certain Senior Management Agreement dated as of August 5, 1994 between the Company and the Executive are hereby terminated and that such Section 1(b) shall be of no further force and effect. 4. RESTRICTIONS ON TRANSFER. (a) LEGEND. The certificates representing the Executive Stock will bear the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS OF NOVEMBER 20, 1996 HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SENIOR MANAGEMENT AGREEMENT BETWEEN U.S. AGGREGATES, INC. (THE "COMPANY") AND MORRIS BISHOP, JR. DATED AS OF NOVEMBER 20, 1996 AND THE STOCKHOLDERS AGREEMENT DATED AS OF JANUARY 24, 1994 AMONG THE COMPANY AND CERTAIN OF ITS - 4 - STOCKHOLDERS. A COPY OF SUCH AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." (b) OPINION OF COUNSEL. No holder of Executive Stock may sell, transfer or dispose of any Executive Stock (except pursuant to an effective registration statement under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 5. DEFINITIONS. "EXECUTIVE STOCK" will continue to be Executive Stock in the hands of any holder other than Executive (except for the Company and the Investor and except for transferees in a Public Sale), and except as otherwise provided herein, each such other holder of Executive Stock will succeed to all rights and obligations attributable to Executive as a holder of Executive Stock hereunder. Executive Stock will also include shares of the Company's capital stock issued with respect to Executive Stock by way of a stock split, stock dividend or other recapitalization. "FAIR MARKET VALUE" of each share of Executive Stock means the average of the closing prices of the sales of the Company's Common Stock on all securities exchanges on which the Common Stock may at the time be listed, or, if there have been no sales on any such exchange on any day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day the Common Stock is not so listed, the average of the representative bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any day the Common Stock is not quoted in the NASDAQ System, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau Incorporated, or any similar successor organization, in each such case averaged over a period of 21 days consisting of the day as of which the Fair Market Value is being determined and the 20 consecutive business days prior to such day. If at any time the Common Stock is not listed on any securities exchange or quoted in the NASDAQ System or the over-the-counter market, the Fair Market Value will be the fair value of the Common Stock determined in good faith by the Board. "INVESTOR" means Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership. "ORIGINAL COST" of each share of Common Stock issued hereunder will be equal to $10 each as proportionately adjusted for all subsequent stock splits, stock dividends and other recapitalizations). - 5 - "PUBLIC SALE" means any sale pursuant to a registered public offering under the Securities Act or any sale to the public pursuant to Rule 144 promulgated under the Securities Act effected through a broker, dealer or market maker. "QUALIFIED PUBLIC OFFERING" means the sale in an underwritten public offering registered under the Securities Act of shares of the Company's Common Stock having an aggregate offering value of at least $30 million. "SALE OF THE COMPANY" means any transaction or series of related transaction pursuant to which any person or entity acquires (i) capital stock of the Company possessing the voting power to elect a majority of the Company's board of directors (whether by merger, consolidation, reorganization, combination, sale or transfer of the Company's capital stock or otherwise) or (ii) all or substantially all of the Company's assets determined on a consolidated basis. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. 6. NOTICES. Any notice provided for in this Agreement must be in writing and must be either personally delivered, mailed by first class mail (postage prepaid and return receipt requested) or sent by reputable overnight courier service (charges prepaid) to the recipient at the address below indicated: IF TO THE COMPANY: U.S. Aggregates, Inc. 1900 South Norfolk Street Suite 211 San Mateo, California 94403 Attn: President WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld IF TO THE EXECUTIVE: Morris Bishop, Jr. 8109 Brenthaven Drive Brentwood, Tennessee 37027 - 6 - IF TO THE INVESTOR: Golder, Thoma, Cressey, Rauner Fund IV Limited Partnership 120 South LaSalle Street Chicago, Illinois 60603 Attention: Bruce V. Rauner David A. Donnini WITH A COPY TO: Kirkland & Ellis 200 East Randolph Drive Chicago, Illinois 60601 Attention: Kevin R. Evanich John A. Schoenfeld or such other address or to the attention of such other person as the recipient party shall have specified by prior written notice to the sending party. Any notice under this Agreement will be deemed to have been given when so delivered or sent or, if mailed, five days after deposit in the U.S. mail. 7. GENERAL PROVISIONS. (a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or attempted Transfer of any Executive Stock in violation of any provision of this Agreement shall be void, and the Company shall not record such Transfer on its books or treat any purported transferee of such Executive Stock as the owner of such stock for any purpose. (b) SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. (c) COMPLETE AGREEMENT. This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. (d) COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original - 7 - and all of which taken together constitute one and the same agreement. (e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, the Company, the Investor and their respective successors and assigns (including subsequent holders of Executive Stock); provided that the rights and obligations of Executive under this Agreement shall not be assignable except in connection with a permitted transfer of Executive Stock hereunder. (f) CHOICE OF LAW. The corporate law of the State of Illinois will govern all questions concerning the relative rights of the Company and its stockholders. All other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto will be governed by and construed in accordance with the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Illinois. (g) REMEDIES. Each of the parties to this Agreement (including the Investor) will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorneys' fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. (h) AMENDMENT AND WAIVER. The provisions of this Agreement may be amended and waived only with the prior written consent of the Company, Executive and the Investor. (i) BUSINESS DAYS. If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which the Company's chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday. (j) TERMINATION. This Agreement shall survive the termination of Executive's employment with the Company and shall remain in full force and effect after such termination. * * * * * - 8 - IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above. U.S. AGGREGATES, INC. By _________________________________ Its ________________________________ ____________________________________ Morris Bishop, Jr. Agreed and Accepted: GOLDER, THOMA, CRESSEY, RAUNER FUND IV LIMITED PARTNERSHIP By ______________________________ Its _____________________________ [PROVISION FOR COMMUNITY PROPERTY JURISDICTIONS] CONSENT The undersigned spouse of Executive hereby acknowledges that I have read the foregoing Senior Management Agreement and that I understand its contents. I am aware that the Agreement provides for the repurchase of my spouse's shares of Common Stock under certain circumstances and imposes other restrictions on the transfer of such Common Stock. I agree that my spouse's interest in the Common Stock is subject to this Agreement and any interest I may have in such Common Stock shall be irrevocably bound by this Agreement and further that my community property interest, if any, shall be similarly bound by this Agreement. ______________________________ [SPOUSE] ______________________________ Witness - 9 - PROMISSORY NOTE $9,940.05 November 20, 1996 For value received, Morris Bishop, Jr. ("Executive") promises to pay on November 20, 2001 to the order of U.S. Aggregates, Inc., a Delaware corporation (the "Company"), at its offices in San Mateo, California, or such other place as designated in writing by the holder hereof, the aggregate principal sum of $9,940.05. This Note was issued pursuant to and is subject to the terms of the Senior Management Agreement (the "Agreement"), dated as of November 20, 1996 between the Company and Executive. Interest will accrue on the outstanding principal amount of this Note at a rate equal to the lesser of (i) 8% per annum or (ii) the highest rate permitted by applicable law, and shall be payable at such time as the principal of this Note becomes due and payable; provided, however, interest shall cease to accrue upon the date on which a Repurchase Notice is delivered to Executive pursuant to Section 2(c) of the Agreement. The amounts due under this Note are secured by a pledge of 995 shares of the Company's Common Stock. The payment of the principal amount of this Note is subject to certain offset rights under the Agreement. In the event Executive fails to pay any amounts due hereunder when due, Executive shall pay to the holder hereof, in addition to such amounts due, all costs of collection, including reasonable attorneys fees. Executive, or his successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and nonpayment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time and that the holder hereof may accept security for this Note or release security for this Note, all without in any way affecting the liability of Executive hereunder. This Note shall be governed by the internal laws, not the laws of conflicts, of the State of Illinois. ____________________________________ Morris Bishop, Jr. EXECUTIVE STOCK PLEDGE AGREEMENT THIS PLEDGE AGREEMENT is made as of November 20, 1996, between Morris Bishop, Jr. ("Pledgor"), and U.S. Aggregates, Inc., a Delaware corporation (the "Company"). The Company and Pledgor are parties to an Senior Management Agreement, dated November 20, 1996, pursuant to which Pledgor purchased 995 shares of the Company's Common Stock, $.01 par value (the "Pledged Shares"), for an aggregate purchase price of $9,950. The Company has allowed Pledgor to purchase the Pledged Shares by delivery to the Company of a promissory note (the "Note") in the aggregate principal amount of $9,940.05. This Pledge Agreement provides the terms and conditions upon which the Note is secured by a pledge to the Company of the Pledged Shares. NOW, THEREFORE, in consideration of the premises contained herein and other good and valuable consideration the receipt and sufficiency of which are hereby acknowledged, and in order to induce the Company to accept the Note as payment for the Pledged Shares, Pledgor and the Company hereby agree as follows: 1. PLEDGE. Pledgor hereby pledges to the Company, and grants to the Company a security interest in, the Pledged Shares as security for the prompt and complete payment when due of the unpaid principal of and interest on the Note. 2. DELIVERY OF PLEDGED SHARES. Upon the execution of this Pledge Agreement, Pledgor shall deliver to the Company the certificate(s) representing the Pledged Shares, together with duly executed forms of assignment sufficient to transfer title thereto to the Company. 3. VOTING RIGHTS; CASH DIVIDENDS. Notwithstanding anything to the contrary contained herein, during the term of this Pledge Agreement until such time as there exists a default in the payment of principal or interest on the Note or any other default under the Note, Pledgor shall be entitled to all voting rights with respect to the Pledged Shares and shall be entitled to receive all cash dividends paid in respect of the Pledged Shares. Upon the occurrence of and during the continuance of any such default, the Company shall retain all such cash dividends payable on the Pledged Shares as additional security hereunder. 4. STOCK DIVIDENDS; DISTRIBUTIONS, ETC. If, while this Pledge Agreement is in effect, Pledgor becomes entitled to receive or receives any securities or other property in addition to, in substitution of, or in exchange for any of the Pledged Shares (whether as a distribution in connection with any recapitalization, reorganization or reclassification, a stock dividend or otherwise), Pledgor shall accept such securities or other property on behalf of and for the benefit of the Company as additional security for Pledgor's obligations under the Note and shall promptly deliver such additional security to the Company together with duly executed forms of assignment, and such additional security shall be deemed to be part of the Pledged Shares hereunder. 5. DEFAULT. If Pledgor defaults in the payment of the principal or interest under the Note as it becomes due (whether upon demand, acceleration or otherwise) or any other event of default under the Note occurs (including the bankruptcy or insolvency of Pledgor), the Company may exercise any and all the rights, powers and remedies of any owner of the Pledged Shares (including the right to vote the shares and receive dividends and distributions with respect to such shares) and shall have and may exercise without demand any and all the rights and remedies granted to a secured party upon default under the Uniform Commercial Code of Delaware or otherwise available to the Company under applicable law. Without limiting the foregoing, the Company is authorized to sell, assign and deliver at its discretion, from time to time, all or any part of the Pledged Shares at any private sale or public auction, on not less than ten days written notice to Pledgor, at such price or prices and upon such terms as the Company may deem advisable. Pledgor shall have no right to redeem the Pledged Shares after any such sale or assignment. At any such sale or auction, the Company may bid for, and become the purchaser of, the whole or any part of the Pledged Shares offered for sale. In case of any such sale, after deducting the costs, attorneys' fees and other expenses of sale and delivery, the remaining proceeds of such sale shall be applied to the principal of and accrued interest on the Note; provided, however, that after payment in full of the indebtedness evidenced by the Note, the balance of the proceeds of sale then remaining shall be paid to Pledgor and Pledgor shall be entitled to the return of any of the Pledged Shares remaining in the hands of the Company. Pledgor shall be liable for any deficiency if the remaining proceeds are insufficient to pay the indebtedness under the Note in full, including the fees of any attorneys employed by the Company to collect such deficiency. 6. COSTS AND ATTORNEYS' FEES. All costs and expenses, including reasonable attorneys' fees, incurred in exercising any right, power or remedy conferred by this Pledge Agreement or in the enforcement thereof, shall become part of the indebtedness secured hereunder and shall be paid by Pledgor or repaid from the proceeds of the sale of the Pledged Shares hereunder. 7. PAYMENT OF INDEBTEDNESS AND RELEASE OF PLEDGED SHARES. Upon payment in full of the indebtedness evidenced by the Note, the Company shall surrender the Pledged Shares to Pledgor together with all forms of assignment. 8. FURTHER ASSURANCES. Pledgor agrees that at any time and from time to time upon the written request of the Company, Pledgor will execute and deliver such further documents and do such further acts and things as the Company may reasonably request in order to effect the purposes of this Pledge Agreement. 9. SEVERABILITY. Any provision of this Pledge 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. 10. NO WAIVER; CUMULATIVE REMEDIES. The Company shall not by any act, delay, omission or otherwise be deemed to have waived any of its rights or remedies hereunder, and no waiver shall be valid unless in writing, signed by the Company, and then only to the extent therein set forth. A waiver by the Company of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which the Company would otherwise have on any future occasion. No failure to exercise nor any delay in exercising on the part of the Company, any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided are cumulative and may be exercised singly or concurrently, and are not exclusive of any rights or remedies provided by law. 11. WAIVERS, AMENDMENTS; APPLICABLE LAW. None of the terms or provisions of this Pledge Agreement may be waived, altered, modified or amended except by an instrument in writing, duly executed by the parties hereto. This Agreement and all obligations of the Pledgor hereunder shall together with the rights and remedies of the Company hereunder, inure to the benefit of the Company and its successors and assigns. This Pledge Agreement shall be governed by, and be construed and interpreted in accordance with, the laws of the State of Illinois. * * * * * * * * * * IN WITNESS WHEREOF, this Pledge Agreement has been executed as of the date first above written. /s/ Morris Bishop, Jr. --------------------------------- Morris Bishop, Jr. U.S. AGGREGATES, INC. By /s/ Michael Stone ----------------------------- Its ----------------------------- -14- EX-23.1 42 EXHIBIT 23.1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our report dated January 29, 1999 (and to all references to our firm) included in or made a part of this registration statement. /s/ ARTHUR ANDERSEN LLP Arthur Andersen LLP San Francisco, California May 20, 1999 EX-23.2 43 EXHIBIT 23.2 EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS We have issued our report dated February 11, 1997 accompanying the consolidated financial statements of Monroc, Inc. and Subsidiary as of and for the year ended December 31, 1996 contained in the Form S-1 Registration Statement and Prospectus of U.S. Aggregates, Inc. We consent to the use of the aforementioned report in the Registration Statement and Prospectus and to the use of our name as it appears under the caption "Experts". /s/ Grant Thornton LLP GRANT THORNTON LLP Salt Lake City, Utah May 18, 1999 EX-23.3 44 EXHIBIT 23.3 EXHIBIT 23.3 INDEPENDENT AUDITORS' CONSENT We consent to the use in this Registration Statement of U.S. Aggregates, Inc., on Form S-1 of our report dated March 31, 1998, appearing in the Prospectus, which is part of this Registration Statement. We also consent to the reference to us under the heading "Experts" in such Prospectus. /s/ Deloitte & Touche LLP Salt Lake City, Utah May 18, 1999 EX-27.1 45 EXHIBIT 27.1
5 1,000 YEAR 3-MOS DEC-31-1998 MAR-31-1999 DEC-31-1998 MAR-31-1999 2,849 1,794 0 0 45,807 38,338 (1,163) (1,241) 25,480 28,963 78,450 76,170 246,403 251,397 (21,591) (23,935) 339,388 344,992 48,747 51,675 0 0 43,563 44,652 0 0 2 2 12,381 9,604 339,388 344,992 228,739 49,171 228,739 49,171 (168,220) (37,710) 0 0 (12,194) (3,447) 0 0 (16,611) (4,360) 8,430 (3,559) (3,547) 1,296 4,259 (1,675) 1,409 0 (338) 0 0 0 5,330 (1,675) $0.17 $(0.38) $0.16 $(0.38)
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