EXHIBIT 10.1
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LEASE AGREEMENT
This Lease
Agreement ("Agreement") is entered into as of August 3, 2005
(the "Effective Date") by and between
Arizona Pacific Materials, an Arizona
limited liability company ("APM") and
CalMat Co., a Delaware Corporation, dba
Vulcan Materials Company, Western Division
("Vulcan").
RECITALS
A. APM owns in
fee simple the real property more particularly described as
Parcel 1 on Attachment A, attached hereto
and incorporated herein by reference.
B. APM maintains
a special land use permit ("State Permit") from the
Arizona State Land Department for the
surface estate of certain real property
located adjacent to the Property more
particularly described as Parcel 2 on
Attachment A ("Parcel 2 or the Mineral
Estate"). APM owns all of the mineral
materials on Parcel 2, including basalt,
cinders, sand, gravel and other inert
materials and has the right to access and
mine these mineral materials from the
Mineral Estate pursuant to the State
Permit.
C. APM holds a
Contract for the Sale of Mineral Materials with the Phoenix
Field Office, Bureau of Land Management,
United States Department of the
Interior dated November 30, 2004 ("BLM
Contract"), pursuant to the Materials Act
of 1947 and that part of 43 C.F.R. ss.
3600, et seq., regarding non-competitive
contracts. The BLM Contract involves real
property belonging to the United
States of America and more particularly
described as Parcel 3 on Attachment A.
D. For purposes
of this Agreement, the area comprised of Parcels 1, 2 and
3, excluding the Leased Property, shall
sometimes be referred to herein as the
"APM Property."
E. Vulcan
desires to lease a portion of Parcel 1 more particularly
described on the "Site Plan" to be approved
by Vulcan and APM in accordance with
Section 4(b) below (the "Leased Property")
for the purpose of operating a hot
mix asphalt plant ("Asphalt Plant"). If
desired by Vulcan, a ready mix batch
plant ("Ready Mix Plant") may be operated
on an extension to the Leased Property
as described below.
F. Vulcan
desires to use the mineral materials, including basalt,
cinders,
sand, gravel and other inert materials (the
"Mineral Products") produced by APM
from the Mineral Estate and the BLM
Contract for use in the Asphalt Plant and
the Ready Mix Plant.
G. APM desires
to lease the Property to Vulcan for the above-described
purposes and to sell Mineral Products to
Vulcan.
AGREEMENT
NOW THEREFORE,
in consideration of the promises and the mutual agreements,
covenants, and provisions contained in this
Agreement, APM and Vulcan agree and
declare as follows:
1. GRANT. APM
hereby leases and grants to Vulcan the sole and exclusive
lease and use of the Leased Property. APM
shall lease and let the Leased
Property exclusively to Vulcan. During the
term of the Agreement, Vulcan shall
have the right to conduct all operations
necessary and incident to its
installation and operation of the Asphalt
Plant, to purchase Mineral Products
from APM pursuant to the terms of this
Agreement and to have such access to the
Leased Property as it reasonably requires
to carry out its permitted activities
hereunder, and to do all other things
within the Leased Property appropriate to
the foregoing and not in violation of the
terms hereof or of any other
applicable law. Vulcan shall also have the
right of ingress and egress over the
Leased Property and the adjacent lands of
APM in connection with
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the purposes stated herein. APM also grants
to Vulcan the right to extend and
modify the Leased Property to accommodate
the Ready Mix Plant at any time during
the term of this Agreement. Vulcan's
decision to install the Ready Mix Plant
will be accomplished by an amendment to
this Agreement by APM and Vulcan
modifying the Site Plan (in accordance with
Section 4(b)) to include additional
acreage and to correspondingly increase the
Property Rent (described in Section
3(c)(i)) on a pro-rata basis per the
additional acreage.
2. TERM, RENEWAL
AND EFFECTIVE DATE.
(a) TERM. This
Agreement shall be for a term of five years commencing on
the effective date hereof.
(b) RENEWAL
Vulcan may renew this Agreement for two (2) five year periods
by sending written notice of its election
to renew to APM not less than ninety
(90) days prior to the expiration of any
term of this Agreement.
3. RENT, PLANTS,
MINERAL PRODUCTS AND PAYMENTS.
(a) ASPHALT
PLANT AND READY MIX PLANT. Vulcan shall be solely responsible
for all aspects of the acquisition,
installation, operation and maintenance of
the Asphalt Plant. Vulcan shall have the
right, but not the obligation, to
install and operate the Ready Mix Plant on
the modified Leased Premises during
the term of this Agreement, and in such
event, Vulcan shall be solely
responsible for all aspects of the
acquisition, installation, operation and
maintenance of the Ready Mix Plant.
(b) MINERAL
PRODUCT. Each 12 month period that this Agreement is in effect,
commencing on the Effective Date, APM
guarantees, warrants and represents that
it will produce not less than 250,000 tons
of Mineral Products which will meet
or exceed the written specifications set
forth by Vulcan and delivered to APM.
Consequently, Vulcan agrees to accept and
purchase at least 250,000 tons per
year of Mineral Products derived from the
Mineral Estate and the BLM Contract.
Subject to subsection 3(c)(ii) below, if
APM produces more than 250,000 tons of
Mineral Products, Vulcan shall have the
right, but not the obligation to
purchase such materials in accordance with
this Agreement. The Mineral Products
shall strictly conform to Vulcan's
standards and specifications for the Asphalt
Plant and, if applicable, the Ready Mix
Plant.
(c)
CONSIDERATION.
(i) PROPERTY RENT. Vulcan shall pay APM the sum of Two Thousand
Five
Hundred Dollars ($2,500.00) each month that
this Agreement is in effect. The
rental payment shall be delivered to APM on
the first day of each such month and
shall not be deemed overdue until ten (10)
days following written notice from
APM. Rent for partial months at the
inception or the termination of this
Agreement shall be prorated.
(ii) TONNAGE ROYALTY. Vulcan agrees to purchase from APM, at the
rate
of XXXXX ($XXX) per ton ("Purchase Price"),
all of the Mineral Products
necessary for Vulcan to operate its Asphalt
Plant and if applicable, the Ready
Mix Plant. The amount of Mineral Products
purchased by Vulcan shall not be less
than the 250,000 tons per year referenced
above. If Vulcan determines that APM
is unable to provide Vulcan with sufficient
quantities of materials, Vulcan may
obtain any additional minerals and
aggregates from outside sources. For the life
of the Agreement and all extensions, any
deliveries of Mineral Products ordered
by Vulcan and delivered and/or picked up by
a Vulcan client shall be counted
towards fulfillment of Vulcan's guaranteed
250,000 annual minimum requirement
and will be billed by APM to Vulcan at the
Purchase Price.
(iii) HOPPER LOADING FEE. APM shall provide sufficient and
suitable
front-end loaders and other necessary
machinery and operators to provide the
Mineral Product deliveries described herein
to the hoppers designated by Vulcan
at the Asphalt Plant and, if applicable,
the Ready Mix Plant.
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Vulcan shall pay APM Twenty Five Cents
($.25) for each ton of Mineral Product
delivered to the hoppers pursuant to this
Agreement (the "Hopper Loading Fee").
(iv) ADJUSTMENTS. Beginning with the first (1st) anniversary of
the
Effective Date, and on every anniversary
thereafter throughout the term of this
Agreement and any renewal term (the
"Adjustment Dates"), the Purchase Price and
Hopper Loading Fee may be reviewed and
adjusted by APM. The adjustment shall be
based upon the Producer Price Index for
Sand and Gravel, Western Region,
Mountain, (Product Code 1442-38) (Base year
1982-100), published by the United
States Department of Labor, Bureau of Labor
Statistics ("PPI"), which is
published for the month of December, 2005
("Base PPI"). The PPI published for
the month, which is three (3) months prior
to the month in which the Adjustment
Date in question occurs ("Adjustment PPI")
shall be used in determining the
amount of the adjustment. If adjusted, the
Purchase Price and Hopper Loading Fee
for each one (1) year period commencing
with an Adjustment Date shall be the
result of multiplying $XXXX (in the case of
the Purchase Price) and $0.25 (in
the case of the Hopper Loading Fee) by a
fraction, the numerator of which is the
Adjustment PPI and the denominator of which
is the Base PPI, provided that in no
event shall the Purchase Price or Hopper
Loading Fee be increased by more than
three percent (3%) above the amount payable
during, the period immediately
preceding the Adjustment Date or be less
than the amount payable during the
period immediately preceding the Adjustment
Date. Should the Bureau of Labor
Statistics discontinue the publication of
the PPI, or publish the PPI less
frequently, or alter the PPI in some other
manner, then APM and Vulcan shall
agree on a substitute index or substitute
procedure which reasonably reflects
and monitors sand and gravel producer
prices. Before any adjustment is
implemented, APM will review said
adjustments with Vulcan at least 60 days prior
to any price change.
(v) PREFERENTIAL PRICING. In the event APM sells Mineral Product
to
any third parties unrelated to Vulcan
during the term of this Agreement, the
price that APM charges such third parties
for the Mineral Product shall be no
less than five percent (5%) greater than
the then existing Purchase Price.
(d)
PAYMENTS.
(i) PAYMENT AND DELIVERY. At the end of each month that this
Agreement
is in effect, APM shall deliver to Vulcan
an invoice comprised of each Vulcan
Statement and the APM Statement for the
prior month less any Preferential
Pricing reductions pursuant to Section
3(c)(v). The invoice shall be due and
payable by Vulcan to APM within 30 days of
Vulcan's receipt thereof. Interest
will accrue at the rate of 1.5% per month
if the invoice is not timely paid.
All payments required hereunder may be
mailed to APM's mailing address of c/o
Western Power & Equipment, 6407-B
Northeast 117th Avenue, Vancouver, WA 98662 or
to any single depository as the parties may
instruct. The delivery or the
deposit in the mail of any payment
hereunder on or before the due date thereof
shall be deemed timely payment
hereunder.
(ii) CALCULATION. Payments for Mineral Products delivered to
the
Asphalt Plant shall be calculated in the
following manner: The Purchase Price
shall be determined by the actual weight of
Mineral Products ordered by Vulcan
and delivered to the Asphalt Plant and, if
applicable, the Ready Mix Plant. Each
delivery shall be weighed in Vulcan's
production scales located on the Leased
Property and shall be recorded in Vulcan's
records. Vulcan shall deliver APM a
statement detailing the weight of Mineral
Products used in production at the
Asphalt Plant for each day of operation
during the term of this Agreement (each
a "Vulcan Statement"),
Payments for Mineral Products delivered to
Vulcan's off-Property facilities or
customers shall be calculated in the
following manner: Vulcan's or its agents'
trucks picking up Mineral Product shall be
weighed on APM's truck scales located
adjacent to the Property. APM shall keep
daily summary sheets detailing the
total weight of Mineral Products ordered by
Vulcan and delivered to Vulcan's off
Property facilities or customers each day.
At the end of each month, APM shall
submit an invoice to Vulcan based on APM's
summary sheets for that month (each
an "APM Statement").
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4. USE OF
PROPERTY AND SITE.
(a) USE OF
PROPERTY. Vulcan agrees that the Leased Property shall be used
only for the purposes contemplated in the
Agreement.
(b) SITE PLAN.
Prior to Vulcan commencing construction of the Asphalt
Plant, Vulcan shall prepare a site plan
delineating the exterior boundaries of
the Leased Property and the location and
specifications of the Asphalt Plant and
related improvements and equipment ("Site
Plan") and shall submit the Site Plan
to APM for approval, which approval shall
not be unreasonably withheld. Within
ten (10) days after receipt of the Site
Plan, APM shall deliver written notice
to Vulcan specifying that it agrees to the
Site Plan or that it has suggested
changes to the Site Plan, in which case
such notice shall specifically detail
any requested changes. If APM requests
changes, the parties shall promptly meet
and work together in good faith to agree on
the Site Plan, Vulcan shall then
resubmit the Site Plan to APM and the
parties shall follow the same procedure
set forth above until the Site Plan is
approved by both parties. If after four
(4) months following the initial submission
of the Site Plan to APM, the Site
Plan has not been approved in a manner
adequate to Vulcan, in Vulcan's sole and
absolute discretion, Vulcan may terminate
this Agreement upon written notice to
APM. Both APM and Vulcan shall retain
copies of the Site Plan. The Site Plan may
not be amended or changed without the
approval of both APM and Vulcan. Upon
approval of the Site Plan by Vulcan and
APM, the Site Plan shall be deemed the
correct delineation of the Leased Property
and shall be substituted in Exhibit
A.
5.
INSPECTION.
(a) GENERAL.
Following execution of this Agreement, Vulcan shall have full
access to the Property for the purposes set
forth in this Agreement and may,
along with its representatives,
contractors, and agents examine the Leased
Property, conduct soil tests, environmental
studies, engineering feasibility
studies, and other tests and studies, and
to plan the proposed development and
operation of the Leased Property. Vulcan
shall comply with all applicable laws.
Within three (3) days following execution
of this Agreement, APM shall provide
Vulcan with copies of all agreements,
leases, engineering plans and reports,
site plans, architectural plans, drawings,
test and inspection reports,
environmental assessments, surveys,
studies, and all other information in APM's
possession relating to the Leased Property.
APM and APM's agents shall have the
right to enter the Leased Property upon
reasonable notice and at reasonable
times for the purposes set forth in this
Agreement and for inspecting the same,
showing the same to prospective purchasers
or lenders and conducting any
environmental investigations or
environmental remedial work as APM may deem
necessary, as long as such activities by
APM or its agents do not interfere with
Vulcan's use of the Leased Property;
provided, however, that in order to ensure
the safety of all persons at the site, APM,
its representatives, contractors,
and agents, shall at all times comply with
Vulcan's safety, health and
environmental policies and procedures while
on the Leased Property.
(b) WEIGHT
SCALES AUDIT/CERTIFICATION. APM shall have the right, at APM's
expense, to require Vulcan's weigh scales
to be periodically certified/audited
for accuracy. Any state or federal
governmental certification or audit showing
Vulcan's weigh scales to be accurate shall
be accepted by APM for the period of
time such certification/a
