This Agreement is made as of this 30th day of May, 2000 by and between Sun State Rock & Materials Corp., an Arizona corporation, hereinafter referred to as "Sun State," and Ready Mix, Inc., a Nevada corporation, hereinafter referred to as "Ready Mix."
WHEREAS, Sun State leases certain real property located in the general vicinity of 115th Avenue and Beardsley Road, Maricopa County, Arizona, and depicted and legally described on Exhibits A and B attached hereto and incorporated herein by this reference (the property described on Exhibit A is hereinafter referred to as the "Sun State Property"), pursuant to that certain Sand and Gravel Pit Lease, dated April 16, 1988 (hereinafter referred to as the "Lease"), between Sun State, as lessee, and Hope Enterprises, LLC and W.A.W.; LLC as lessors (hereinafter referred to as "Owner"); and
WHEREAS, pursuant to the terms of the Lease, Sun State has the right to extract sand and rock (hereinafter referred to collectively as "materials") from the Sun State Property and to permit the use of the Sun State Property by a third party in connection with the processing of such materials; and
WHEREAS, Ready Mix desires to utilize that portion of the Sun State Property depicted and legally described on Exhibit C attached hereto and incorporated herein by this reference (the "Ready Mix Site") and to purchase sand and rock from Sun State, all for the purpose of producing and selling Portland Cement Concrete and redi-mix products.
NOW, THEREFORE, in consideration of the mutual promises herein contained, and of other good and valuable consideration. Sun State and Ready Mix do hereby covenant and agree as follows:
1. Term: Unless sooner terminated as otherwise provided herein, the term of this Agreement shall be for a period of ten (10) years, commencing on June 1, 2000 and ending on May 31, 2010 (the "Initial Term"). Upon the expiration of the Initial Term, the parties may, if both parties desire, extend the term of this Agreement for such period of time and upon such terms and conditions as are mutually acceptable to the parties.
2. Use by Ready Mix:
A. During the term of this Agreement, Ready Mix shall have the exclusive right to use the Ready Mix Site for the purpose of operating a business for the production and sale of Portland Cement Concrete and the sale of redi-mix products and performing those acts which are ancillary to the operation of such a business, including, without limitation, the processing, manufacture, storage, and sale of such products and the disposal of any waste materials generated as a result thereof. Ready Mix mav locate such items of equipment and machinery and any structures and fixtures on the Ready Mix Site as it deems necessary for the operation of its business, and any such items, fixtures and structures shall remain the property of Ready Mix, subject to removal at Ready Mix's will during the term of this Agreement and for a period of one hundred twenty (120) days thereafter. Ready Mix shall not use the Ready Mix Site for any purpose not related or ancillary to the operation of its business, without the prior consent of Sun State.
B. In addition to the right to use the Ready Mix Site as set forth above, Ready Mix shall have the right to use other portions of the Sun State Property for purposes related to its business operations on the Ready Mix Site, as follows:
i. Ready Mix, its employees, agents, invitees and customers shall have the right to use a portion of the Sun State Property to be designated by mutual agreement of Sun State and Ready Mix for access to and from the Ready Mix Site necessary for Ready Mix's operations. If Sun State proposes to change the location of Ready Mix's access to the site, Sun State shall notify Ready Mix of the proposed change for Ready Mix's approval. Ready Mix shall not
unreasonably withhold approval of a proposed change in the location of Ready Mix's access as long as the proposed change in access does not significantly increase the length of travel or significantly reduce the convenience to Ready Mix of the access route originally designated by the parties. Ready Mix also shall have the right to use a portion of the Sun State property to be designated by mutual agreement of Sun State and Ready Mix for placement of utilities necessary for Ready Mix's operations.
ii. Ready Mix shall have the right to use a portion of the pit area located on the Sun State Property to dispose of any waste concrete and other materials reasonably resulting from the operation of its business on the Ready Mix Site; provided that Sun State shall from time to time designate and direct the method of disposal and the particular area or areas to be used for such purpose; and provided further that Ready Mix shall conduct any such disposal in accordance with all applicable laws and shall be responsible, at its sole cost, for obtaining any required licenses and permits.
3. Washed Sand and Rock; Water:
A. Sun State shall use its best efforts to supply to Ready Mix washed sand and rock, in quantities and quality required by Ready Mix for its production of Portland Cement Concrete and sale of redi-mix products at the Ready Mix Site. The sand supplied by Sun State shall meet the ASTM C-33 specification for fine aggregates, and Sun State shall use all good faith efforts to maintain the average values of daily tests performed within the FM range of 2.70 and 2.95 and within the SE range of 80 and 90. SE tests will be performed in accordance with ASTM D 2419-95 (utilizing sample prep procedure A). The pea gravel and rock supplied by Sun State shall meet the ASTM C-33 specification for #5 and #7 course aggregates.
B. Sun State shall use its best efforts to maintain a reasonable stockpile of washed sand and rock to supply Ready Mix's immediate requirements for production of Portland Cement Concrete and sale of redi-mix products, and Ready Mix shall keep Sun State generally informed of such requirements.
C. Nothing contained in this Agreement shall be interpreted to prevent, restrict or otherwise limit Sun State from making unlimited sales of the sand, pea gravel and rock aggregate it produces to third parties or to allow the use of the Sun State Property, other than the Ready Mix Site, for any purpose.
4. Imported Sand and Rock: If Sun State is unable, notwithstanding its best efforts, to supply Ready Mix with all its requirements for washed sand, pea gravel and rock meeting the specifications set forth in this Agreement in connection with Ready Mix's operation on the Ready Mix Site, Ready Mix may, at its option, import additional sand, pea gravel and rock from other locations for use in the production and sale of Portland Cement Concrete and the sale of redi-mix products in accordance with this Section. Ready Mix shall notify Sun State, in writing, at least three (3) business days before importing any sand, pea gravel, or rock for use at the Ready Mix Site. The written notice shall describe the type and amount of material that Ready Mix intends to import. If Sun State cannot supply the material specified in the notice within three (3) business days after receipt of the written notice, Ready Mix may obtain the materials described in the notice for use at the Ready Mix Site. Sun State shall pay Ready Mix an amount equal to fifty percent (50%) of the amount by which Ready Mix's cost for the material imported in accordance with this Section exceeded the amount that Ready Mix would have paid Sun State for the same type of material under this Agreement. Ready Mix shall submit an invoice and documentation showing the type, amount and cost of the imported material and the amount due under this Section to Sun State. Sun State shall pay Ready Mix the amount due under this Section within thirty (30) days after receipt of an invoice under this Section. Except as otherwise provided in this Section, Ready Mix shall obtain all sand, pea gravel and rock used for production of Portland Cement Concrete and redi-mix products on the Ready Mix Site from Sun State.
A. Ready Mix agrees to pay Sun State (i) an initial price of $5.60 per ton of concrete sand, (ii) an initial price of $5.55 per ton of pea gravel (ASTM 3 / 8 "), and (iii) an initial price of $5.00 per ton of concrete rock (1" and 1 / 2 " minus), payable in accordance with Subsection 5.C below. Said prices shall each be adjusted each year in accordance with Subsection 5.B below. These prices include loading of the material into Ready Mix's bins by Sun State.
B. Commencing on the first anniversary of the date of this Agreement and on each anniversary thereafter, the prices for sand, pea gravel and rock listed in Subsection 5.A hereof shall be adjusted for the next succeeding year based on the following formula:
provided, however, that in the event that the quotient of said ratio (PPIE/PPIB) in any given year is less than 1.00, then in such event, 1.00 shall be substituted for such ratio and utilized in the formula for calculating the adjusted prices to be paid by Ready Mix (i.e., the Adjusted Price shall never be less than the initial price set forth in Subsection 5.A hereof).
The Producer Price Index Table 6 Commodity Code is currently indexed to the base year 1982. In the event of a change in base years during this Agreement, the Producer Price Index numbers used in the calculation shall also be adjusted for relativity with one another with respect to the new base year, if necessary, to proportionately adjust the price for the relative percentage change in the index. In the event the Producer Price Index shall cease to be published, then Sun State and Ready Mix shall agree upon another index to be substituted therefor, and if they are unable to agree upon a substitute index within a reasonable time, such matter shall be determined by arbitration in accordance with this Agreement.
C. Sun State shall be entitled to payment for sand, pea gravel and rock supplied to Ready Mix pursuant to the terms of this Agreement at such time as the materials are used by Ready Mix in the production of concrete including drum cleanout or, if not used to produce concrete, at such time as Ready Mix removes the materials from the Sun State Property. Payments from Ready Mix to Sun State shall be made monthly, on or before the fifteenth (15 th ) day of each month following the month in which the materials were used in production or removed from the Ready Mix Site.
D. i. Ready Mix agrees that, commencing in the month of January, 2001 and for each month thereafter as long as this Agreement remains in effect, the monthly payment Sun State receives shall not be less than an amount (the "Monthly Minimum Payment") calculated on the basis of minimum monthly sales volumes of sand and rock and the prices of sand and rock during the month pursuant to Subsection 5.B. For the months of January through May 2001. the Monthly Minimum Payment shall be $65,875, which is based on the monthly minimum volumes of 6,875 tons of rock and 5,625 tons of sand. Beginning in June 2001, the Monthly Minimum Payment shall be calculated based on the minimum monthly sales volume of 6,750 tons of sand and 8,250 tons of rock multiplied by the respective prices calculated pursuant to Subsection 5.B. Beginning in
June 2002 and thereafter as long as this Agreement remains in effect, the Monthly Minimum Payment shall be adjusted each year on the anniversary date of this Agreement based on the Adjusted Price for sand and rock determined in accordance with Section 5.B hereof, but never below the Monthly Minimum Payment for June 2001.
ii. The Monthly Minimum Payment shall be applied to adjust the monthly payment pursuant to Subsection 5.C as follows. If the monthly payment due under Subsection 5.C in a given month does not equal or exceed the Monthly Minimum Payment for that month, Ready Mix shall increase the monthly payment for that month to equal the Monthly Minimum Payment. If, in any month, the monthly payment due under Subsection 5.C is less than the Monthly Minimum Payment because inclement weather prevented Ready Mix from using sufficient materials to cover the Monthly Minimum Payment, Ready Mix shall be entitled to a credit equal to the difference between the Monthly Minimum Payment and the monthly payment that would have been due under Subsection 5.C. Ready Mix shall provide written notice to Sun State of the amount of the credit claimed along with the payment submitted for that month. Ready Mix may use the credit to reduce the amount of any future monthly payment that exceeds the Monthly Minimum Payment for that month, provided that the payment for any month shall not be less than the Monthly Minimum Payment. Any unused credit shall expire if not used within twelve months. All credits shall expire upon any termination of this Agreement, except that if Sun State terminates this Agreement pursuant to Section 16, Sun State shall compensate Ready Mix for the amount of any unused and unexpired credits.
iii. During any month in which Sun State is unable to furnish, within a reasonable time after receiving an order from Ready Mix, sufficient materials to meet Ready Mix's order, Ready Mix shall not be liable for the Monthly Minimum Payment, and the monthly payment due for that month shall be the amount due under Subsection 5.C for the materials supplied by Sun State and used by Ready Mix.
6. Measurement: Measurement of materials used by Ready Mix for payment purposes pursuant to Section 5 hereof shall be made by Ready Mix. For materials used in the production of Portland Cement Concrete, measurements shall be based upon the quantities of sand, pea gravel and rock as shown on Ready Mix's computer printouts for the plant located on the Ready Mix Site; provided, however, that if Ready Mix utilizes imported sand, pea gravel or rock pursuant to Sections 4 or 8 hereof, then the sand, pea gravel and rock quantities to be paid for by Ready Mix shall be the total sand, pea gravel and rock quantities shown on such printouts reduced by the total quantity of imported sand, pea gravel and rock documented by certified truck-scaled tickets and hatched by Ready Mix during the applicable monthly period. Sun State may implement reasonable monitoring procedures to insure proper measurement of the imported sand, pea gravel and rock, provided that any such procedures shall be at no cost or expense to Ready Mix. Upon request, Ready Mix shall supply Sun State with quantity usages each day for the previous day. For sand, pea gravel and rock not used in the production of concrete on the Ready Mix Site, measurements shall be based on the quantities of rock, pea gravel and sand removed from the Sun State Property as shown on Sun State's truck scales.
Upon written request, Sun State shall have the right to audit Ready Mix's books an