Document:

EXHIBIT 10.4

 

 

TAX RECEIVABLE AGREEMENT

 

by and between

 

[US NEWCO]

 

and

 

LEHIGH HANSON, INC.

 

Dated as of [·], 201[·]

 

 

 

TAX RECEIVABLE AGREEMENT

 

THIS TAX RECEIVABLE AGREEMENT (as amended from time to time, this “Agreement”), dated as of [·], 201[·] is hereby entered into by and between [US NewCo] (“US NewCo”), a [·] corporation, and Lehigh Hanson, Inc. (“LHI”), a Delaware corporation and indirect subsidiary of HeidelbergCement AG.

 

R E C I T A L S

 

WHEREAS, pursuant to the IPO (defined below), (1) LHI will contribute all of the shares of Hanson Brick America, Inc. to US NewCo in exchange for all of the shares of such corporation, (2) through a series of transactions, all of the shares of US NewCo will be transferred to Hanson Building Products Limited, a Jersey public limited company and indirect Subsidiary of HeidelbergCement AG, and (3) shares of Hanson Building Products Limited will be sold to the public;

 

WHEREAS, after the IPO, US NewCo and its Subsidiaries (the “Taxable Entities” and each a “Taxable Entity”) will have U.S. federal, state and local net operating losses and alternative minimum tax (“AMT”) credit carryforwards (including AMT credits that arise after the IPO as a result of limitations on the use of NOLs under the AMT) (collectively, “NOLs”) that relate, at least in part, to periods (or portions thereof) during which the Taxable Entities were, directly or indirectly, controlled by HeidelbergCement AG (the “Pre-IPO NOLs”);

 

WHEREAS, the Pre-IPO NOLs will be available to reduce the Taxes (as defined below) that the Taxable Entities might otherwise be required to pay;

 

WHEREAS, the income, gain, loss expense and other Tax (as defined below) items of the Taxable Entities may be affected by Imputed Interest (as defined below), if any;

 

WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the benefits that the Taxable Entities realize as a result of the Pre-IPO NOLs and Imputed Interest (as defined below);

 

NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.01. Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).

 

 

“Acquired NOLs” means any NOL of any corporation or other entity acquired by US NewCo or any of its Subsidiaries by purchase, merger, or otherwise (in each case, from a Person or Persons other than US NewCo and its Subsidiaries and, in each case, whether or not such corporation or other entity survives) after the IPO that relate to periods (or portions thereof) ending on or prior to the date of such acquisition.

 

“Advisory Firm” means (i) Ernst & Young, LLP or (ii) any other law or accounting firm that is (A) nationally recognized as being expert in Tax matters and (B) that is agreed to by US NewCo and LHI.

 

“Advisory Firm Report” shall mean (a) an attestation report from the Advisory Firm expressing an opinion on management’s assertion as to whether the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared, in all material respects, in accordance with the Agreement, or (b) another type of report or letter from the Advisory Firm related to whether the information in the Tax Benefit Schedule and/or the Early Termination Schedule has been prepared in a manner consistent with the terms of the Agreement.

 

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.

 

“Agreed Rate” means LIBOR plus [·] basis points.

 

“Agreement” is defined in the preamble of this Agreement.

 

“Amended Schedule” is defined in Section 2.03(b) of this Agreement.

 

A “Beneficial Owner” of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms “Beneficially Own” and “Beneficial Ownership” shall have correlative meanings.

 

“Board” means the board of directors of US NewCo.

 

“Business Day” means Monday through Friday of each week, except that a legal holiday recognized as such by the government of the United States of America or the State of New York shall not be regarded as a Business Day.

 

“Change of Control” means:

 

(i)                                     a merger, reorganization, consolidation or similar form of business transaction directly involving US NewCo or indirectly involving US NewCo through one or more intermediaries unless, immediately following such transaction, more than 50% of the voting power of the then outstanding voting stock or other equities of US NewCo resulting from consummation of such transaction (including, without limitation, any parent or ultimate parent corporation of such Person that as a result of such transaction owns directly or indirectly US

 

 

NewCo and all or substantially all of US NewCo’s assets) is held by the existing US NewCo shareholders or their Affiliates (determined immediately prior to such transaction and related transactions); or

 

(ii)                                  a transaction in which US NewCo, directly or indirectly, sells, assigns, conveys, transfers, leases or otherwise disposes of all or substantially all of its assets to another Person other than an Affiliate; or

 

(iii)                               a transaction in which there is an acquisition of control of US NewCo by a Person or group of Persons (other than LHI and its Affiliates). For purposes of this definition, the term “control” shall mean the possession, directly or indirectly, of the power to either (i) vote more than 50% of the securities having ordinary voting power for the election of directors (or comparable positions in the case of partnerships and limited liability companies), or (ii) direct or cause the direction of the management and policies of such Person whether by contract or otherwise (for the avoidance of doubt, consent rights do not constitute control for the purpose of this definition); or

 

(iv)                              a transaction in which individuals who constitute the Board of US NewCo (the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board of US NewCo, provided that any person becoming a director subsequent to the effective date of this Agreement, whose election or nomination for election is either (A) contemplated by a written agreement among equityholders of US NewCo on the effective date of this Agreement or (B) was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board (either by a specific vote or by approval of the proxy statement of US NewCo in which such person is named as a nominee for director, without written objection to such nomination) shall be an Incumbent Director; provided, however, that no individual initially elected or nominated as a director of US NewCo as a result of an actual or threatened election contest with respect to directors or as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any Person other than the Board shall be deemed to be an Incumbent Director; or

 

(v)                                 the liquidation or dissolution of US NewCo.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Combined Taxation Group” means any consolidated, combined or unitary group or any profit and/or loss sharing, affiliated group relief, group payment or similar group or fiscal unity for Tax purposes (by election or otherwise).

 

“Control” means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

 

“Corporation” means an entity taxable as a corporation for U.S. federal income tax purposes.

 

“Default Rate” means LIBOR plus [·] basis points.

 

 

“Determination” shall have the meaning ascribed to such term in Section 1313(a) of the Code or similar provision of state or local Tax law, as applicable, or any other event (including the execution of a Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax.

 

“Divestiture” means the sale of any Taxable Entity, other than any such sale that is or is part of a Change of Control.

 

“Early Termination Event” means (i) a breach of this Agreement to which Section 4.01(b) applies and (ii) a Change of Control.

 

“Early Termination Date” means (i) in the event of a breach of this Agreement to which Section 4.01(b) applies, the date of such breach, (ii) in the event of a Change of Control, the effective date of such Change of Control and (iii) in the event of a Divestiture, the effective date of such Divestiture.

 

“Early Termination Payment” is defined in Section 4.03(b) of this Agreement.

 

“Early Termination Rate” means LIBOR plus [·] basis points.

 

“Early Termination Schedule” is defined in Section 4.02 of this Agreement.

 

“Expert” is defined in Section 7.09 of this Agreement.

 

“Imputed Interest” shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code or similar provision of state or local Tax Law, as applicable, with respect to US NewCo’s payment obligations under this Agreement.

 

“Interest Amount” is defined in Section 3.01(a) of this Agreement.

 

“IPO” shall mean the initial public offering of shares of Hanson Building Products Limited pursuant to the Registration Statement.

 

“ITR Payment” means any Annual Tax Payment, Early Termination Payment or Divestiture Acceleration Payment required to be made by US NewCo to LHI under this Agreement.

 

“LIBOR” means for each month (or portion thereof) during any period, an interest rate per annum equal to the London interbank offered rate administered by the British Bankers Association for the U.S. dollar deposits for such month (or portion thereof) displayed on pages LIBOR01 or LIBOR02 of Reuters Screen, on the date two days prior to the first day of such month (or if such screen shall cease to be publicly available, as reported on Reuters Screen page “LIBO” or by any other publicly available source of such market rate) for London interbank offered rates for U.S. dollar deposits for such month (or portion thereof).

 

“Material Objection Notice” has the meaning set forth in Section 4.02.

 

“Net Tax Benefit” is defined in Section 3.01(b) of this Agreement.

 

 

“NOLs” is defined in the preamble of this Agreement.

 

“Objection Notice” has the meaning set forth in Section 2.03(a).

 

“Other NOLs” means any Post-IPO NOLs and any Acquired NOLs.

 

“Payment Date” means any date on which a payment is required to be made pursuant to this Agreement.

 

“Person” means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.

 

“Post-IPO NOLs” means any NOL arising in a Taxable Year or portion thereof beginning after the date of the IPO.

 

“Pre-IPO NOLs” is defined in the preamble of this Agreement; provided, however, that in order to determine whether an NOL is a Pre-IPO NOL or a Post-IPO NOL, the Taxable Year of the relevant Taxable Entity that includes the effective date of the IPO (the “Straddle Year”) shall be deemed to end as of the close of such effective date, provided, further, however, that the Chief Executive Officer of US NewCo, the Board and LHI shall, acting reasonably, together determine the amount of any NOL arising in the Straddle Year, or any portion thereof, that is included in the amount of Pre-IPO NOLs; provided further, however, that any Transferred NOLs taken into account in calculating a Divestiture Acceleration Payment shall not be considered Pre-IPO NOLs.

 

“Realized Tax Benefit” means, for a Taxable Year, the reduction in the liability for Taxes of US NewCo and of each Taxable Entity, in each case, for such Taxable Year resulting from the Pre-IPO NOLs and the deduction attributable to Imputed Interest for the payment(s), if any, made in respect of such Taxable Year under the Agreement (giving effect to the principles of Section 3.02). For the avoidance of doubt, for purposes of the preceding sentence, state and local NOLs that are reflected in the Pre-IPO NOLs shall be disregarded such that the calculation of U.S. federal income Taxes before the reduction resulting from the Pre-IPO NOLs reflects any deduction (or other benefit) for state and local Taxes that would be available in the absence of such state and local NOLs.

 

“Reconciliation Dispute” has the meaning set forth in Section 7.09(a) of this Agreement.

 

“Reconciliation Procedures” shall mean those procedures set forth in Section 7.09 of this Agreement.

 

“Registration Statement” means the registration statement on Form S-1 (File No. 333-198736) of Hanson Building Products Limited.

 

“Rollover Taxable Year” is defined in Section 2.02 of this Agreement.

 

 

“Schedule” means any Tax Benefit Schedule and any Early Termination Schedule.

 

“Schedule Delivery Date” is defined in Section 2.02 of this Agreement.

 

“Specified Filing Date” is defined in Section 2.02 of this Agreement.

 

“Subject Taxable Year” is defined in Section 2.02 of this Agreement.

 

“Subsidiaries” means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.

 

“Tax Benefit” is defined in Section 3.01(b) of this Agreement.

 

“Tax Benefit Schedule” is defined in Section 2.02 of this Agreement.

 

“Tax Return” means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.

 

“Taxable Entity” is defined in the Preamble to this Agreement.

 

“Taxable Entity Return” means the Tax Return, as applicable, of a Taxable Entity filed with respect to Taxes of any Taxable Year.

 

“Taxable Year” means a taxable year as defined in Section 441(b) of the Code or similar provision of state or local Tax law, as applicable, (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made) ending on or after the date hereof.

 

“Taxes” means U.S. federal, state and local income taxes, assessments or similar charges measured with respect to net income or profits and any interest related to such Tax.

 

“Taxing Authority” shall mean any domestic, foreign, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.

 

“Transferred NOLs” means, in the event of a Divestiture, the Pre-IPO NOLs attributable to the Taxable Entity that is sold in such Divestiture to the extent such Pre-IPO NOLs are transferred with such Taxable Entity under applicable Tax law following the Divestiture (disregarding any limitation on the use of such Pre-IPO NOLs as a result of the Divestiture) and do not remain under applicable Tax law with US NewCo or any of its Subsidiaries (other than the Taxable Entity that is sold in such Divestiture).

 

 

“Treasury Regulations” means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.

 

“Valuation Assumptions” shall mean, as of an Early Termination Date, the assumptions that (i) in each Taxable Year ending on or after such Early Termination Date, each Taxable Entity will generate an amount of taxable income in accordance with management’s preexisting projections (or, in the absence of such projections, as projected in good faith by management in a manner consistent with their projections for other purposes), (ii) the utilization of the Pre-IPO NOLs and the Imputed Interest for such Taxable Year or future Taxable Years, as applicable, will be determined based on the Tax laws in effect on the Early Termination Date and (iii) the U.S. federal income, state and local tax rates that will be in effect for each such Taxable Year will be that specified for each such Taxable Year by the Code or appropriate provision of state or local Tax law, as applicable, as in effect on the Early Termination Date (or, with respect to any Taxable Year for which such federal, state and local income tax rates are not specified by the Code or appropriate provision of state or local Tax law, as applicable, as in effect on the Early Termination Date, such federal, state and local income tax rates that are in effect on the Early Termination Date). For the purposes of clause (i) of this definition, the taxable income projections made by the management of US NewCo shall be subject to the Reconciliation Procedures. Such assumptions shall relate only to the projected income and loss of the Taxable Entities (extending the same beyond the years of projection, as applicable, at the same imputed growth rate), and shall include only the utilization of tax attributes subject to the Agreement and not any anticipated future attributes that might result from acquisitions, dispositions, recapitalizations or refinancings. For the avoidance of doubt, in the event of a Change of Control or Divestiture, such assumptions shall not take into account any changes in the relevant Taxable Entities’ stand-alone tax position that might result from the transaction giving rise to the Change of Control or Divestiture.

 

ARTICLE II

 

DETERMINATION OF REALIZED TAX BENEFIT

 

Section 2.01. Pre-IPO NOL Utilization. US NewCo, on the one hand, and LHI, on the other hand, acknowledge that the Taxable Entities may utilize the Pre-IPO NOLs to reduce the amount of Taxes that the Taxable Entities would otherwise be required to pay in the future.

 

Section 2.02. Tax Benefit Schedule. Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of US NewCo (or, in the case that US NewCo is a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to Sections 1501 et seq. of the Code, the Tax Return of such group) for any federal Taxable Year (each such Taxable Year a “Subject Taxable Year,” each such filing date a “Specified Filing Date,” and such ninetieth day the “Schedule Delivery Date”), US NewCo shall provide to LHI a schedule showing, for US NewCo and for each Taxable Entity, in the case of any relevant Tax Return that has been filed after the IPO and prior to the Schedule Delivery Date and has not previously been the subject of this Section 2.02, in reasonable detail, (i) the calculation of the Realized Tax Benefit for the Subject Taxable Year, (ii) the calculation of any payment to be made to LHI pursuant to Article III with respect to the Subject Taxable Year, (iii) the calculation of any Realized Tax Benefit for the Taxable Year immediately preceding the Subject Taxable Year (the “Rollover Taxable Year”), in the case of any relevant Tax Return that was filed

 

 

following the Specified Filing Date relating to the Rollover Taxable Year, and (iv) the calculation of any payment to be made to LHI pursuant to Article III with respect to the Rollover Taxable Year (collectively a “Tax Benefit Schedule”). Concurrently US NewCo shall also deliver to LHI all supporting information (including work papers and valuation reports) reasonably necessary to support the calculation of such payment. The Schedule will become final as provided in Section 2.03(a) and may be amended as provided in Section 2.03(b) (subject to the procedures set forth in Section 2.03(a)).

 

Section 2.03. Procedures, Amendments.

 

(a)                                 Procedure. Whenever US NewCo delivers to LHI an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.03(b), and including any Early Termination Schedule or amended Early Termination Schedule, US NewCo shall also (x) deliver to LHI schedules, valuation reports, if any, and work papers providing reasonable detail regarding the preparation of the Schedule and an Advisory Firm Report related to such Schedule (the cost and expense of which shall be paid by US NewCo) and (y) allow LHI reasonable access at no cost to the appropriate representatives at each of US NewCo and the Advisory Firm in connection with a review of such Schedule. The applicable Schedule shall become final and binding on all parties unless LHI, within thirty calendar days (or a shorter period agreed by US NewCo and LHI in writing after receiving any Schedule or amendment thereto, provides US NewCo with notice of a material objection to such Schedule or amendment, as applicable, made in good faith (“Objection Notice”). If the parties, for any reason, are unable to successfully resolve the issues raised in any Objection Notice within thirty calendar days of receipt by US NewCo of such Objection Notice, US NewCo and LHI shall employ the reconciliation procedures described in Section 7.09 of this Agreement (the “Reconciliation Procedures”).

 

(b)                                 Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by US NewCo (i) in connection with an audit of a Tax Return by an applicable Tax Authority for which a Determination has been made affecting such Schedule, (ii) to correct material inaccuracies in the Schedule identified as a result of the receipt of additional factual information relating to a Taxable Year after the date the Schedule was provided to LHI, (iii) to comply with the Expert’s determination under the Reconciliation Procedures, or (iv) to reflect a material change (relative to the amounts in the original Schedule) in the Realized Tax Benefit for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, in each case with respect to any Taxable Entity (such amended Schedule, an “Amended Schedule”) of a Tax Return by an applicable Taxing Authority shall not be taken into account on an Amended Schedule unless and until. US NewCo shall provide any Amended Schedule to LHI within thirty calendar days of the occurrence of an event referred to in clauses (i) through (iv) of the preceding sentence, and any such Amended Schedule shall be subject to the approval procedures described in Section 2.03(a).

 

 

ARTICLE III

 

TAX BENEFIT PAYMENTS

 

Section 3.01. Payments.

 

(a)                                 Except as provided in Section 5.02, within thirty days after the end of any Subject Taxable Year, US NewCo (on its own behalf and on behalf of any other Taxable Entity) shall pay to LHI the Interest Amount (as defined below) and the Annual Tax Payment for the Subject Taxable Year. The “Annual Tax Payment” for a Subject Taxable Year means an amount, not less than zero, equal to (i) the Estimated Tax Benefit determined pursuant to Section 3.01(c) for such Subject Taxable Year, plus (ii) the excess, if any, of the Tax Benefit for a Subject Taxable Year prior to the Subject Taxable Year over the Estimated Tax Benefit for such prior Subject Taxable Year, to the extent any such excess amount was not previously taken into account pursuant to this Section 3.01(a)(ii) to increase the Annual Tax Payment for a Subject Taxable Year prior to the Subject Taxable Year, minus (iii) the excess, if any, of the Estimated Tax Benefit for a Subject Taxable Year prior to the Subject Taxable Year over the Tax Benefit for such prior Subject Taxable Year, to the extent any such excess amount was not previously taken into account pursuant to this Section 3.01(a)(iii) to reduce the Annual Tax Payment for a Subject Taxable Year prior to the Subject Taxable Year, plus (iv) the excess of the Realized Tax Benefit required to be reflected on an Amended Schedule for a Subject Taxable Year prior to the Subject Taxable Year over the Realized Tax Benefit required to be reflected on the Tax Benefit Schedule for such prior Subject Taxable Year, to the extent any such excess amount was not previously taken into account pursuant to this Section 3.01(a)(iv) to increase the Annual Tax Payment for a Subject Taxable Year prior to the Subject Taxable Year, minus (v) the excess of the Realized Tax Benefit required to be reflected on a Tax Benefit Schedule for a Subject Taxable Year prior to the Subject Taxable Year over the Realized Tax Benefit required to be reflected on an Amended Schedule for such prior Subject Taxable Year, to the extent any such excess amount was not previously taken into account pursuant to this Section 3.01(a)(v) to reduce the Annual Tax Payment for a Subject Taxable Year prior to the Subject Taxable Year. For the avoidance of doubt, no Annual Tax Payment shall be made, nor Tax Benefit determined, in respect of estimated tax payments. For the further avoidance of doubt, LHI shall not be required to return any portion of any previously made Annual Tax Payment or other ITR Payment. The “Interest Amount” shall equal the interest on any excess amount described in Section 3.01(a)(ii) calculated at the Agreed Rate from the Payment Date for the Annual Tax Payment in which the relevant Estimated Tax Benefit is taken into account until the Payment Date for the Annual Tax Payment in which the relevant Tax Benefit is taken into account. Each payment pursuant to this Section 3.01(a) shall be made by wire transfer of immediately available funds to a bank account of LHI previously designated by LHI to US NewCo or as otherwise agreed by US NewCo and LHI.

 

(b)                                 A “Tax Benefit” for a Subject Taxable Year means an amount, not less than zero, equal to 85% of: (i) the Taxable Entities’ Realized Tax Benefit, if any, required to be reflected on the Tax Benefit Schedule for the Subject Taxable Year , plus (ii) the Taxable Entities’ Realized Tax Benefit, if any, for the Rollover Taxable Year, if any, to the extent required to be reflected on the Tax Benefit Schedule for the Subject Taxable Year (as set forth in Section 2.02(iii)).

 

 

(c)                                  The “Estimated Tax Benefit” for a Subject Taxable Year means an amount, not less than zero, equal to 85% of US NewCo’s reasonable good faith estimate of the Taxable Entities’ Realized Tax Benefit, if any, for the Subject Taxable Year.

 

Section 3.02. No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. It is also intended that the provisions of this Agreement provide that 85% of the Taxable Entities’ Realized Tax Benefit for all Taxable Years be paid to LHI pursuant to this Agreement. Carryovers or carrybacks of any NOL or other tax item shall be considered to be subject to the rules of the Code and the Treasury Regulations or the appropriate provisions of state or local Tax law, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type; provided, however, that Pre-IPO NOLs treated as resulting in a Realized Tax Benefit for one Taxable Year shall not be treated as resulting in a Realized Tax Benefit for any other Taxable Year, and, for purposes of determining the Realized Tax Benefit for any Taxable Year, each Taxable Entity shall be assumed (a) to utilize any item of loss, deduction or credit arising in such Taxable Year (and permitted to be utilized in such Taxable Year) before carrying back or carrying forward to such Taxable Year any NOL that is permitted to be so carried back or carried forward, (b) to utilize any available Pre-IPO NOL that is permitted (or, for the absence of doubt, that would be so permitted but for such Other NOL) to be carried back or carried forward to such Taxable Year before utilizing any Other NOL, and (c) to utilize any Pre-IPO NOL in the first Taxable Year in which such Pre-IPO NOL is permitted to be utilized; provided, further, however, that, notwithstanding any other provision, the Chief Executive Officer of US NewCo, the Board and LHI shall, acting reasonably, together determine the extent to which a Pre-IPO NOL can be carried back or carried forward to a Straddle Year or any portion thereof. If a carryover or carryback of any Tax item includes a portion that is attributable to the Pre-IPO NOLs and another portion that is not, US NewCo shall be assumed to utilize the portion attributable to the Pre-IPO NOLs before utilizing such other portion. The provisions of this Agreement shall be construed in the appropriate manner so that such intentions are realized.

 

ARTICLE IV

 

TERMINATION

 

Section 4.01. Termination, Breach of Agreement, Change of Control.

 

(a)                                 This Agreement shall terminate at the time that all Annual Tax Payments have been made to LHI under this Agreement.

 

(b)                                 In the event that US NewCo breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment when due (as described below), failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and US NewCo shall pay to LHI (1) the Early Termination Payment, (2) any Annual Tax Payment agreed to by US NewCo and LHI as due and payable but unpaid as of the Early Termination Date and (3) any Annual Tax Payment due for the Taxable Year ending prior to, with or including the date of a breach.

 

 

Notwithstanding the foregoing, in the event that US NewCo breaches this Agreement, LHI shall be entitled to elect to receive the amounts set forth in (1), (2) and (3) above or to seek specific performance of the terms hereof. In the event of a breach of a material obligation under this Agreement, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions. The parties agree that the failure to make any payment due pursuant to this Agreement within six months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within six months of the date such payment is due, provided that in the event that payment is not made within six months of the date such payment is due, LHI shall be required to give written notice to US NewCo that US NewCo has breached its material obligations and so long as such payment is made within five Business Days of the delivery of such notice to US NewCo, US NewCo shall no longer be deemed to be in material breach of its obligations under this Agreement.

 

(c)                                  Change of Control. In the event of a Change of Control, then all obligations hereunder shall be accelerated and US NewCo shall pay to LHI (1) the Early Termination Payment, (2) any Annual Tax Payment agreed to by US NewCo and LHI as due and payable but unpaid as of the Early Termination Date and (3) any Annual Tax Payment due for any Taxable Year ending prior to, with or including the effective date of a Change of Control. In the event of a Change of Control, the Early Termination Payment shall be calculated utilizing the Valuation Assumptions.

 

(d)                                 Divestiture Acceleration Payment. In the event of a Divestiture, US NewCo shall pay to LHI the Divestiture Acceleration Payment in respect of such Divestiture, which shall be calculated utilizing the Valuation Assumptions.

 

Section 4.02. Early Termination Schedule. In the event of a Change of Control or a Divestiture, US NewCo shall deliver to LHI no later than sixty calendar days prior to such Change of Control or Divestiture, as applicable a schedule (the “Early Termination Schedule”) showing in reasonable detail the information required pursuant to the penultimate sentence of Section 2.02 and the calculation of the Early Termination Payment or the Divestiture Acceleration Payment, respectively (including the projections of the Taxable Entities’ taxable income under clause (i) of the Valuation Assumptions). The Early Termination Schedule shall become final and binding on all parties unless LHI, within fifteen calendar days after receiving the Early Termination Schedule provides US NewCo with notice of a material objection to such Schedule made in good faith (“Material Objection Notice”). If the parties for any reason are unable to successfully resolve the issues raised in such Material Objection Notice within fifteen calendar days after receipt by US NewCo of the Material Objection Notice, US NewCo and LHI shall employ the Reconciliation Procedures as described in Section 7.09 of this Agreement.

 

Section 4.03. Payment upon Early Termination. (a) Except as provided in Section 5.02, no later than the Early Termination Date, US NewCo shall pay to LHI an amount equal to the Early Termination Payment or Divestiture Acceleration Payment and any other payment required to be made pursuant to Sections 4.01(b) and (c). Such payment shall be made by wire transfer of immediately available funds to a bank account designated by LHI or as otherwise agreed by US NewCo and LHI.

 

 

(b)                                 The “Early Termination Payment” as of the Early Termination Date (other than an Early Termination Date arising under clause (iii) of the definition thereof) shall equal with respect to LHI the present value, discounted at the Early Termination Rate as of such date, of all Annual Tax Payments that would be required to be paid by US NewCo to LHI for Taxable years ending on or after the Early Termination Date assuming the Valuation Assumptions are applied, provided that in the event of a Change of Control, the Early Termination Payment shall be calculated without giving effect to any limitation on the use of the Pre-IPO NOLs resulting from the Change of Control. For purposes of calculating the present value pursuant to this Section 4.03(b) of all Annual Tax Payments that would be required to be paid, it shall be assumed that absent the Early Termination Event all Annual Tax Payments would be paid on the due date (without extensions) for filing the relevant Taxable Entity Return with respect to Taxes for each Taxable Year. The computation of the Early Termination Payment is subject to the Reconciliation Procedures as described in Section 7.09 of this Agreement.

 

(c)                                  The “Divestiture Acceleration Payment” as of the date of any Divestiture shall equal with respect to LHI the present value, discounted at the Early Termination Rate as of such date, of the Annual Tax Payments resulting solely from the Transferred NOLs that would be required to be paid by US NewCo to LHI beginning from the date of such Divestiture assuming the Valuation Assumptions are applied, provided that the Divestiture Acceleration Payment shall be calculated without giving effect to any limitation on the use of the Transferred NOLs resulting from the Divesture. For purposes of calculating the present value pursuant to this Section 4.03(c) of all Annual Tax Payments that would be required to be paid, it shall be assumed that absent the Divestiture all Annual Tax Payments would be paid on the due date (without extensions) for filing the relevant Taxable Entity Return with respect to Taxes for each Taxable Year. The computation of the Divestiture Acceleration Payment is subject to the Reconciliation Procedures as described in Section 7.09 of this Agreement.

 

ARTICLE V

 

LATE PAYMENTS, ETC.

 

Section 5.01. Late Payments by US NewCo. The amount of all or any portion of any ITR Payment not made to LHI when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such ITR Payment was due and payable.

 

Section 5.02. Compliance with Indebtedness. Notwithstanding anything to the contrary provided herein, if, at the time any amount becomes due and payable hereunder, (a) US NewCo is not permitted, pursuant to the terms of its outstanding indebtedness, to pay such amounts, or (b) (i) US NewCo does not have the cash on hand to pay such amounts, and (ii) the Subsidiaries of US NewCo that are permitted, pursuant to the terms of their outstanding indebtedness, to pay dividends to US NewCo to allow it to pay such amounts, in the aggregate do not have sufficient cash on hand, then, in each case, US NewCo shall, by notice to LHI, be permitted to defer the payment of such amounts until the condition described in clause (a) or (b) is no longer applicable, in which case such amounts (together with accrued and unpaid interest thereon as described in the immediately following sentence) shall become due and payable immediately. If US NewCo defers the payment of any such amounts pursuant to the foregoing sentence, such amounts shall accrue interest at the Agreed Rate per

 

 

annum, from the date that such amounts originally became due and owing pursuant to the terms hereof to the date that such amounts were paid.

 

ARTICLE VI

 

CONSISTENCY; COOPERATION

 

Section 6.01. LHI’s Participation in US NewCo Tax Matters. Except as otherwise provided herein, US NewCo shall have full responsibility for, and sole discretion over, all Tax matters concerning US NewCo and each Taxable Entity including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes, subject to a requirement that US NewCo act in good faith in connection with its control of any matter which is reasonably expected to affect LHI’s rights and obligations under this Agreement. Notwithstanding the foregoing, US NewCo shall notify LHI of, and keep LHI reasonably informed with respect to, the portion of any audit of US NewCo or any Taxable Entity by a Taxing Authority the outcome of which is reasonably expected to affect LHI’s rights and obligations under this Agreement, and shall give LHI reasonable opportunity to provide information and participate in the applicable portion of such audit.

 

Section 6.02. Consistency. Except upon the written advice of an Advisory Firm, US NewCo and LHI agree to report and cause to be reported for all purposes, including U.S. federal, state and local Tax purposes and financial reporting purposes, all Tax-related items (including without limitation the Annual Tax Payment) in a manner consistent with that specified by US NewCo in any Schedule required to be provided by or on behalf of US NewCo or any Taxable Entity under this Agreement and agreed by LHI. Any dispute concerning such advice shall be subject to the terms of Section 7.09. In the event that an Advisory Firm is replaced with another firm acceptable to US NewCo and LHI pursuant to the definition of Advisory Firm, such replacement Advisory Firm shall be required to perform its services under this Agreement using procedures and methodologies consistent with those used by the previous Advisory Firm, unless otherwise required by law or US NewCo and LHI agree to the use of other procedures and methodologies.

 

Section 6.03. Cooperation. Each of US NewCo and LHI shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making or approving any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the requesting party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the requesting party shall reimburse the other party for any reasonable third-party costs and expenses incurred pursuant to this Section.

 

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.01. Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile upon confirmation of transmission by the sender’s fax machine if sent on a Business Day (or otherwise on the next Business Day) or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:

 

If to US NewCo, to:

 

[·]

 

Attention:

 

with a copy to (which shall not constitute notice):

 

[·]

 

Attention:

 

If to LHI, to:

 

Lehigh Hanson, Inc.

300 East John Carpenter Freeway

Irving, Texas 75082

Attention: General Counsel

Facsimile: (972) 653-6185

 

with a copy to (which shall not constitute notice):

 

[·]

 

Attention:

 

Any party may change its address or fax number by giving the other party written notice of its new address or fax number in the manner set forth above.

 

Section 7.02. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.

 

 

Section 7.03. Entire Agreement; Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

 

Section 7.04. Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of New York, without regard to the conflict of laws principles thereof that would result in the application of any Law other than the Laws of the State of New York.

 

Section 7.05. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.

 

Section 7.06. Successors; Assignment; Amendments; Waivers. (a) LHI may not assign its rights and obligations under this Agreement to any person without the prior written consent of US NewCo; provided, however that LHI may assign its rights and obligations under this Agreement to any of its Affiliates, as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in form and substance reasonably satisfactory to US NewCo agreeing to be bound by all provisions of this Agreement and acknowledging specifically the last sentence of the next paragraph.

 

(b)                                 No provision of this Agreement may be amended unless such amendment is approved in writing by US NewCo and LHI. No provision of this Agreement may be waived unless such waiver is in writing and signed by the party against whom the waiver is to be effective.

 

(c)                                  All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors and assigns. US NewCo shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of US NewCo, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that US NewCo would be required to perform if no such succession had taken place.

 

Section 7.07. Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.

 

 

Section 7.08. Resolution of Disputes.

 

(a)                                 Any and all disputes which cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or non-performance of this Agreement (including the validity, scope and enforceability of this arbitration provision) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Institute for Conflict Prevention and Resolution. If the parties to the dispute fail to agree on the selection of an arbitrator within thirty calendar days of the receipt of the request for arbitration, the International Institute for Conflict Prevention and Resolution shall make the appointment. The arbitrator shall be a lawyer and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.

 

(b)                                 Notwithstanding the provisions of paragraph (a), US NewCo may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), LHI (i) expressly consents to the application of paragraph (c) of this Section 7.08 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints US NewCo as its agent for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise LHI of any such service of process, shall be deemed in every respect effective service of process upon LHI in any such action or proceeding.

 

(c)                      (i) LHI HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF PARAGRAPH (B) OF THIS SECTION 7.08, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the fora designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties’ relationship with one another.

 

(ii)                      The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in paragraph (c) (i) of this Section 7.08 and such parties agree not to plead or claim the same.

 

Section 7.09. Reconciliation.

 

(a)                                 In General. In the event that US NewCo and LHI are unable to resolve a disagreement with respect to the matters governed by Sections 2.03, 4.02 and 6.02 within the relevant period designated in this Agreement (or the amount of an Early Termination Payment in

 

 

the case of a breach to which Section 4.01(b) applies) (“Reconciliation Dispute”), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the “Expert”) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner in a nationally recognized accounting firm or a law firm (other than the Advisory Firm), and the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with US NewCo or LHI or other actual or potential conflict of interest. If the parties are unable to agree on an Expert within fifteen (15) days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Institute for Conflict Prevention and Resolution. The Expert shall resolve any matter relating to the Early Termination Schedule or an amendment thereto within thirty calendar days and shall resolve any matter relating to a Tax Benefit Schedule or an amendment thereto within fifteen calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement is due or any Tax Return reflecting the subject of a disagreement is due, such payment shall be made on the date prescribed by this Agreement and such Tax Return may be filed as prepared by US NewCo or the relevant Taxable Entity, subject to adjustment or amendment upon resolution. The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by US NewCo, except as provided in the next sentence. Each of US NewCo and LHI shall bear their own costs and expenses of such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.09 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.09 shall be binding on US NewCo and LHI and may be entered and enforced in any court having jurisdiction.

 

(b)                                 Income Projections for Early Termination Payments. Notwithstanding the provisions of Section 7.09(a), solely with respect to disagreements regarding the computation of an Early Termination Payment or Divestiture Acceleration Payment that relates to the taxable income projections described in clause (i) of the definition of “Valuation Assumptions,” US NewCo and LHI shall each submit the Reconciliation Dispute for determination to an Expert in the area of valuation services. Based on the income projections of such Experts, if the higher of the resulting Early Termination Payment or Divestiture Acceleration Payment computations does not exceed 110% of the lower, then the Early Termination Payment or Divestiture Acceleration Payment shall be the average of such two amounts. If the higher of the Early Termination Payment or Divestiture Acceleration Payment computations is more than 110% of the lower, then the two Experts shall, within 20 days from such determination, select a third Expert and shall notify US NewCo and LHI of such selection. If the Early Termination Payment or Divestiture Acceleration Payment computed by the third Expert is equal to the average of the first two Early Termination Payment or Divestiture Acceleration Payment computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be such average. If the third Early Termination Payment or Divestiture Acceleration Payment computation is higher than the average of the first two computations, then the Early Termination Payment or the Divestiture Acceleration Payment shall be the average of such third computation and the higher of the first two computations; provided that if such average exceeds 110% of the higher of the first two computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be 110% of the higher of the first two computations. If the third Early Termination Payment or Divestiture Acceleration Payment computation is lower than the average of the first two

 

 

computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be the average of such third computation and the lower of the first two computations; provided that if such average is less than 90% of the lower of the first two computations, then the Early Termination Payment or Divestiture Acceleration Payment shall be 90% of the lower of the first two computations.

 

Section 7.10. Withholding. US NewCo shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as US NewCo is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by US NewCo, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to LHI. US NewCo shall provide evidence of such payment to LHI to the extent that such evidence is available.

 

Section 7.11. Affiliated Corporations; Admission of US NewCo into a Consolidated Group; Transfers of Corporate Assets.

 

(a)                                 If US NewCo is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income tax return pursuant to Sections 1501 et seq. of the Code or any corresponding provision of state or local Tax law, as applicable, (other than if US NewCo becomes a member of such a group as a result of a Change of Control, in which case the provisions of Article IV shall control), then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Annual Tax Payments shall be computed with reference to the consolidated taxable income of the group as a whole.

 

(b)                                 If any Taxable Entity is or becomes a member of a Combined Taxation Group for purposes of state or foreign income Taxes (other than if a Taxable Entity becomes a member of such a group as a result of a Change of Control or Divestiture, in which cases the provisions of Article IV shall control), then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Annual Tax Payments shall be computed with reference to the combined taxable income of the group as a whole.

 

(c)                                  If any Person the income of which is included in the income of any Taxable Entity’s Combined Taxation Group transfers one or more assets to a corporation or any Person treated as such for Tax purposes the income of which is not included in such Combined Taxation Group, for purposes of calculating the amount of any Annual Tax Payment (e.g., calculating the gross income of a Taxable Entity’s Combined Taxation Group and determining the Realized Tax Benefit) due hereunder, such Person shall be treated as having disposed of such asset in a fully taxable transaction on the date of such transfer. The consideration deemed to be received by such entity shall be equal to the fair market value of the transferred asset, plus (i) the amount of debt to which such asset is subject, in the case of a transfer of an encumbered asset or (ii) the amount of debt allocated to such asset, in the case of a transfer of a partnership interest.

 

Section 7.12. Confidentiality. (a) LHI and each of its assignees acknowledges and agrees that the information of US NewCo is confidential and, except in the course of performing any duties as necessary for US NewCo and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, shall keep and retain in the strictest confidence and not

 

 

disclose to any Person all confidential matters of US NewCo or LHI acquired pursuant to this Agreement. This Section 7.12 shall not apply to (i) any information that has been made publicly available by US NewCo or any of its Affiliates, becomes public knowledge (except as a result of an act of LHI in violation of this Agreement) or is generally known to the business community; and (ii) the disclosure of information to the extent necessary for LHI to prepare and file its Tax returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any taxing authority with respect to such returns. Notwithstanding anything to the contrary herein, LHI (and each employee, representative or other agent of LHI) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of (x) US NewCo and (y) any of its transactions, and all materials of any kind (including opinions or other tax analyses) that are provided LHI relating to such tax treatment and tax structure.

 

(b)                                 If LHI or any of its assignees commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, US NewCo shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to US NewCo or any of its Subsidiaries and the accounts and funds managed by US NewCo and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.

 

Section 7.13. Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

 

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.

 

 

	
 
    	
[US NEWCO]
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
LEHIGH HANSON, INC.
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
Title:
    

 

[Signature Page to Tax Receivable Agreement]EXHIBIT 10.5

 

EMPLOYEE MATTERS AGREEMENT

 

This EMPLOYEE MATTERS AGREEMENT (this “Agreement”) dated as of [·], 201[·], is by and among HeidelbergCement AG, a German Aktiengesellschaft (“HC”), and Hanson Building Products Limited, a Jersey public limited company (the “Company”).  HC and the Company are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

 

RECITALS:

 

WHEREAS, the Board of Directors of HC has determined that it is in the best interests of HC and its shareholders to separate the Building Products Business (as such term is defined in the Separation Agreement, dated as of the date hereof (the “Separation Agreement”)) from the the other businesses conducted by HC and its Subsidiaries;

 

WHEREAS, pursuant to the Separation Agreement, HC presently intends to cause shares of the Company Ordinary Shares (as defined in the Separation Agreement) to be offered and sold in an initial public offering of the Company Ordinary Shares pursuant to a registration statement on Form S-1 (the “IPO”), as more fully described in the Separation Agreement;

 

WHEREAS, the Separation Agreement sets forth the terms and conditions applicable to the IPO; and

 

WHEREAS, in furtherance of the foregoing, the Parties have entered into this Agreement, which is an Ancillary Agreement (as defined in the Separation Agreement) to the Separation Agreement, to govern the rights and obligations of the Parties with respect to employment, compensation, employee benefits and related matters in connection with the Separation (as defined in the Separation Agreement).

 

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, the parties hereto agree as follows:

 

Article I

 

SCOPE OF AGREEMENT; DEFINITIONS

 

Capitalized terms used but not defined herein shall have the meaning ascribed to them in the Separation Agreement.  For purposes of this Agreement the terms set forth below shall have the following meanings:

 

1.1  “Business Retiree” means any former employee of the Building Products Business who is entitled to retirement or post-retirement benefits under any Plan.

 

1.2 “Canadian Pension Plans” means the Pension Plan for the Employees of Hanson Pipe & Precast, Ltd. (Ontario Registration No. 0961086), the Pension Plan for Non-Bargaining Employees of Hanson Brick Limited (Ontario Registration No. 0551655) and, subject to Section 5.1(c), the Canadian Union Pension Plan.

 

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1.3 “Canadian Union Pension Plan” means the Pension Plan for the Unionized Employees of Hanson Brick Limited (Ontario Registration No. 0976787).

 

1.4 “Company Employee” means any individual who is employed by the Company or a Subsidiary of the Company immediately prior to the IPO.

 

1.5 “Company Group” means the Company, each Subsidiary of the Company and each other Person that either (i) is controlled directly or indirectly by the Company immediately after the IPO or (ii) becomes controlled by the Company following the IPO.

 

1.6 “Company Multi-Employer Plans” means (i) the National Integrated Group Pension Fund as referenced in the Corunna USW 84 agreement between Hanson Brick America, Inc. and the United Steelworkers, expiring March 31, 2017 and (ii) the Central Laborers Pension Fund as referenced in the South Beloit ILU 32 agreement between Hanson Pressure Pipe, Inc. and the Laborers International Union of North America, expiring March 31, 2015.

 

1.7 “Company WC Claims” shall have the meaning set forth in Subsection 8.8(b)(i).

 

1.8 “COBRA” means the continuation coverage requirements for “group health plans” under Title X of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended from time to time, and as codified in Code Section 4980B and ERISA Sections 601 through 608.

 

1.9 “DOL” means the United States Department of Labor.

 

1.10 “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time.

 

1.11 “Final Determination” means the final resolution of liability for any tax, which resolution may be for a specific issue or adjustment or for a taxable period, (i) by IRS Form 870 or 870-AD (or any successor forms thereto), on the date of acceptance by or on behalf of the taxpayer, or by a comparable form under the laws of a state, local, or foreign taxing jurisdiction, except that a Form 870 or 870-AD or comparable form shall not constitute a Final Determination to the extent that it reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund or the right of the tax authority to assert a further deficiency in respect of such issue or adjustment or for such taxable period (as the case may be); (ii) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable; (iii) by a closing agreement or accepted offer in compromise under Sections 7121 or 7122 of the Internal Revenue Code, or a comparable agreement under the laws of a state, local, or foreign taxing jurisdiction.

 

1.12 “FMLA” means the Family and Medical Leave Act of 1993, as amended from time to time.

 

1.13   “HC Group” means HC, each other Subsidiary of HC involved in the Separation and each other Person that either (x) is controlled directly or indirectly by HC immediately after the IPO or (y) becomes controlled by HC following the IPO; provided, however, that neither the Company nor any other member of the Company Group shall be members of the HC Group.

 

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1.14 “HC Leave of Absence Programs” means the personal, medical, military and FMLA leave and other leaves of absence required by applicable Law or offered from time to time under the personnel policies and practices of HC or other any member of the HC Group.

 

1.15 “HC Life Insurance Plans” means the Basic and Supplemental Life Insurance Plan and the Basic AD&D Insurance Plan maintained by HC or other any member of the HC Group.

 

1.16 “HC Long-Term Disability Plan” means the long-term disability plan maintained by HC or other any member of the HC Group as of the IPO.

 

1.17 “HC Nonqualified Plans” means the Lehigh Hanson Deferred Compensation Plan, the Lehigh Cement Company Excess Restoration Plan, Lehigh Cement Company Supplemental Executive Retirement Plan, the Lehigh Hanson US Legacy Nonqualified Plan, the Lehigh Hanson Materials Canadian Pension Excess Restoration Plan and the Lehigh Cement Limited Deferred Income Plan.

 

1.18 “HC Retirement Plans” means the Retirement Plan for Employees of Lehigh Hanson, Lehigh Cement Company non-union Pension Plan, Retirement Plan for Collectively Bargained Employees of Lehigh Hanson and the CBR Cement Corporation Union Retirement Plan.

 

1.19 “HC Short-Term Disability Plan” means the Short-Term Disability or any similar plan or policy (or, where an employee works in a state that offers a statutory state short-term disability plan, then “Short-Term Disability Plan” refers to the alternative voluntary state disability plan offered under the Short-Term Disability Plan) maintained by HC or other any member of the HC Group.

 

1.20 “HC Stock Plan” means the HeidelbergCement Long Term Incentive Plan.

 

1.21  “IRS” means the United States Internal Revenue Service.

 

1.22 “Labor Agreements” means the (i) Hattiesburg ILU 145 agreement between Hanson Pressure Pipe, Inc. and the Laborers International Union of North America, expiring October 31, 2017, (ii) South Beloit ILU 32 agreement between Hanson Pressure Pipe, Inc. and the Laborers International Union of North America, expiring March 31, 2015, (iii) Columbus IBT 284 agreement between Hanson Pipe & Precast LLC and the International Brotherhood of Teamsters, expiring December 15, 2015, (iv) Salt Lake City IBT 222 agreement between Hanson Structural Precast, Inc. and the International Brotherhood of Teamsters, expiring December 31, 2015, (v) Little Rock IBT 878 agreement between Hanson Pipe & Precast LLC and the International Brotherhood of Teamsters, expiring April 1, 2016, (vi) Corunna USW 84 agreement between Hanson Brick America, Inc. and the United Steelworkers, expiring March 31, 2017, (vii) West Memphis IBT 984 agreement between Hanson Pipe & Precast LLC and the International Brotherhood of Teamsters, expiring April 1, 2017, (viii) New Orleans IBT 270 agreement between Hanson Pipe & Precast LLC and the International Brotherhood of Teamsters, expiring September 4, 2017, (ix) Mascouche FITI agreement between Hanson Pipe & Precast Quebec Ltd. and the United Steelworkers, expiring May 31, 2014, (x) LA Prairie USW agreement between

 

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Hanson Brick Ltd. and the United Steelworkers, expiring November 18, 2014, (xi) St Eustache USW agreement between Hanson Pressure Pipe, Inc. and the United Steelworkers, expiring November 30, 2014, (xii) Ottawa IBT agreement between Hanson Pipe & Precast, Ltd. and the International Brotherhood of Teamsters, expiring December 31, 2015, (xiii) Stouffville USW agreement between Hanson Pressure Pipe, Inc. and the United Steelworkers, expiring December 31, 2016, (xiv) Uxbridge Association agreement between Hanson Pressure Pipe, Inc. and UNIFOR (Formerly Canadian Auto Workers), expiring April 1, 2017, and (xvi) St Jerome FITI, whose agreement was merged with the Mascouche FITI agreement listed above in (ix).

 

1.23 “Lehigh Hanson Deferred Compensation Plan” means the Lehigh Hanson Executive Supplemental Deferral Plan.

 

1.24 “Lehigh Hanson Defined Contribution Plan” means Lehigh Hanson Retirement Savings and Investment Plan, Lehigh Hanson Retirement Savings and Investment Plan for Collectively Bargained Employees and The Lehigh Hanson 401(k) Retirement Plan.

 

1.25 “Lehigh Hanson Flexible Benefits Plan” means the Health Care FSA or the Dependent Care FSA.

 

1.26 “Lehigh Hanson Fringe Benefits” means the fringe benefits, plans, programs and arrangements sponsored and maintained by Lehigh Hanson or other any member of the HC Group.

 

1.27 “Lehigh Hanson Health and Welfare Plans” means the group health plans and such other health plans or programs, including medical, prescription drug, dental and vision plans and programs established and maintained by HC or a Subsidiary, the Lehigh Hanson, Inc. Health and Welfare Plan for Active Employees, and the Lehigh Hanson Flexible Benefits Plan.

 

1.28 “Lehigh Hanson Severance Plan” means the Lehigh Hanson Severance Plan.

 

1.29 “Participating Company” means, with respect to any Plan:  (i) any Person (other than an individual) that HC has approved for participation in, has accepted participation in, and which is participating in, a Plan sponsored by HC; or (ii) any Person (other than an individual) which, by the terms of such Plan, participates in such Plan or any employees of which, by the terms of such Plan, participate in or are covered by such Plan.

 

1.30 “Plan” means (i) any written or unwritten plan, policy, program, payroll practice, arrangement, contract, trust, insurance policy, or any agreement or funding vehicle providing compensation or benefits to employees, former employees or directors of a member of the HC Group or the Company Group and (ii) the HC Stock Plan; when immediately preceded by “HC,” the HC Plans (including the HC Stock Plan and not including the UK Plans), when immediately preceded by “UK”, the Plans operating or operated for the benefit of Company Employees of the UK Company and when immediately preceded by “Company,” the plans to be established by the Company.

 

1.31 “Phantom Stock Unit” means an award of phantom stock units which will be settled in cash subject to corporate and individual performance criteria, issued pursuant to the HC Stock Plan.

 

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1.32 “QDRO” means a domestic relations order which qualifies under Section 414(p) of the Code and ERISA Section 206(d) and which creates or recognizes an alternate payee’s right to, or assigns to an alternate payee, all or a portion of the benefits payable to a participant under a plan qualified under Section 401(a) of the Code.

 

1.33 “QMCSO” means a medical child support order which qualifies under ERISA Section 609(a) and which creates or recognizes the existence of an alternate recipient’s right to, or assigns to an alternate recipient the right to, receive benefits for which a participant or beneficiary is eligible under any applicable health plan.

 

1.34 “Retiree Medical Program” means the Lehigh Hanson OPEB Plan, Beazer East Survivor Life Plan, Beazer West Survivor Life Plan, Beazer West GHA Survivor Life Plan, the Lehigh COLI Plan, the Hanson Brick Ltd. Other Post-Employment Benefit Plan and the Hanson Pipe and Precast, Ltd. Other Post-Employment Benefit Plan.

 

1.35 “Separation Agreement” has the meaning set forth in the recitals.

 

1.36 “Transition Services Agreements” has the meaning set forth in the Separation Agreement.

 

1.37 “UK Company” means Hanson Building Products, Ltd, a company incorporated in England & Wales with company registration number 8960430.

 

Article II

 

GLOBAL PROVISION; GENERAL ALLOCATION OF LIABILITIES

 

2.1 In General.  All provisions herein shall be subject to the requirements of all applicable Law and any collective bargaining, works council or similar agreement or arrangement with any labor union.  The provisions of this Agreement shall apply in respect of all jurisdictions wherever situated.

 

2.2 Employee Liabilities.  As of the IPO, the Company or another member of the Company Group shall assume and thereafter shall pay, perform, fulfill, and discharge, except as expressly provided in this Agreement, (i) all employment or service-related Liabilities with respect to all Company Employees (and their dependents and beneficiaries) accrued and arising on and after the IPO, and (ii) any Liabilities expressly transferred to the Company or a Company Group member under this Agreement.

 

2.3 Plan Liabilities.  Except as expressly set forth herein, HC and the Company intend that HC and/or the applicable HC Plan shall retain and be responsible for any Liabilities incurred by Company Employees under all HC Plans prior to the IPO.  An appropriate allocation of the Company costs incurred prior to the IPO shall be charged back to the Company.

 

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Article III

 

GENERAL PLAN MATTERS

 

3.1 HC Plans.

 

(a) Employee Participation.  Except as otherwise set forth herein, effective as of the IPO, all Company Employees shall cease participating in any HC Plans and shall cease accruing benefits in respect of such plans.

 

(b) Company Participation in HC Plans.  Except as otherwise set forth herein, or except as otherwise agreed upon by the Parties, as of the IPO the Company shall cease to be a Participating Company in the Lehigh Hanson Health and Welfare Plans, the Lehigh Hanson Defined Contribution Plan, the Canadian Pension Plans, the HC Nonqualified Plans, the Lehigh Hanson Fringe Benefits, the HC Life Insurance Plans, the HC Long-Term Disability Plan, the Lehigh Hanson Severance Plan and such other HC Plans as the Company Employees participated in immediately prior to the IPO.

 

(c) HC’s General Obligations as Plan Sponsor.  Except as otherwise set forth herein, HC shall retain and continue to administer, or cause to be administered, the HC Plans, and shall have the sole and absolute discretion and authority to interpret the HC Plans, as set forth therein, subject to the specific arrangements provided in this Agreement.  HC shall administer all claims incurred under the HC Plans before the IPO.  Any determination made or settlements entered into by HC with respect to such claims shall be final and binding.

 

(d) Company’s General Obligations as Participating Company.  With respect to any HC Plan that provides benefits to a Company Employee, the Company will cooperate with HC on a timely basis with respect to such Plans, and the Company shall comply with the terms as set forth in such Plans or any procedures adopted pursuant thereto, including (without limitation):  (i) assisting in the administration of claims, to the extent requested by the claims administrator of said HC Plan; (ii) cooperating fully with HC Plan auditors; (iii) the provision of payroll processing support; (iv) the qualification and administration of QDROs; (v) preserving the confidentiality of all financial arrangements HC has or may have with any entity or individual with whom HC has entered into an agreement relating to said HC Plan; and (vi) preserving the confidentiality of participant information to the extent not specified otherwise in this Agreement.  In addition, the Company shall provide, or cause to be provided, all participant information that is necessary or appropriate for the efficient and accurate administration of each HC Plan or program that provides or has provided benefits to a Company Employee during the respective period applicable to such Plan.  HC and its respective authorized agents shall, subject to applicable laws of confidentiality and data protection, be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party or its agents, to the extent necessary or appropriate for the administration of said Plans or programs.

 

(e) Reporting and Disclosing Communications to Participants.  While the Company is a Participating Company in the HC Plans, HC shall take, or cause to be taken, all

 

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actions necessary or appropriate to facilitate the distribution of all HC Plan-related communications and materials to participating Company Employees and their beneficiaries, including (without limitation) notices and enrollment material for the HC Plans.  To the extent that HC fails to take such action which results in the failure of a distribution of required disclosure materials in connection with a HC Plan which results in any Liability to the Company, HC shall indemnify the Company for such Liability.  The Company shall provide all information needed by HC to facilitate such HC Plan-related communications.  The Company shall take, or cause to be taken, all actions necessary or appropriate to facilitate the distribution of all HC Plan-related communications and materials to participating Company Employees and their beneficiaries.  To the extent that the Company fails to take such action which results in the failure of a distribution of required disclosure materials in connection with a HC Plan which results in any Liability to HC, the Company shall indemnify HC for such Liability.

 

(f) HC Under No Obligation to Maintain Plans.  Nothing in this Agreement shall preclude HC, at any time, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any HC Plan, any benefit under any HC Plan or any trust, insurance policy or funding vehicle related to any HC Plan.  To the extent that any such amendment, modification, termination or elimination of a HC Plan results in any Liability to the Company, HC shall indemnify the Company for such Liability.

 

3.2 Company Plans.

 

(a) Establishment of Company Plans.  Except as otherwise set forth herein, effective as of the IPO, the Parties shall cause the Company to cease being a Participating Company in the HC Plans and the Company, or another member of the Company Group, shall adopt the Company Plans, which Plans shall generally correspond to the HC Plans, including, but not limited to, the Lehigh Hanson Health and Welfare Plans, the Lehigh Hanson Defined Contribution Plans, the Canadian Pension Plans, the HC Nonqualified Plans, the Lehigh Hanson Fringe Benefits, the HC Life Insurance Plans, the HC Long-Term Disability Plan, the Lehigh Hanson Severance Plan and such other HC Plans as the Company Employees participated in immediately prior to the IPO; provided, however, that the Company shall not be required to adopt any defined benefit pension plan or retirement medical plan except to the extent required by Law or any collective bargaining agreement, or as otherwise set forth herein.

 

(b) Cooperation in Establishment of Company Plans.  Prior to the IPO, HC and the Company shall cooperate to establish the Company Plans and the related insurance contracts, third party service provider agreements and other related agreements and arrangements.

 

(c) Company Under No Obligation to Maintain Plans.  Nothing in this Agreement shall preclude the Company, at any time after the IPO, from amending, merging, modifying, terminating, eliminating, reducing, or otherwise altering in any respect any Company Plan, any benefit under any Company Plan or any trust, insurance policy or funding vehicle related to any Company Plan.  To the extent that any such amendment, modification, termination or elimination of a Company Plan results in any Liability to any member of the HC Group, the Company shall indemnify such HC Group member for such Liability.

 

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(d) Transfers of Plan Assets.  Except as otherwise specified in this Agreement, nothing in this Agreement shall require HC to transfer any Assets of any member of the HC Group or any HC Plan.

 

3.3 Terms of Participation by Company Employees in Company Plans.

 

(a) Non-Duplication of Benefits.  The Company Plans shall be, with respect to Company Employees, in all respects the successors in interest to, and shall not provide benefits that duplicate benefits provided by, the corresponding HC Plans.  HC and the Company shall agree on methods and procedures, including amending the respective Plan documents, to prevent Company Employees from receiving duplicate benefits from the HC Plans and the Company Plans.

 

(b) Service Credit.  The Company shall credit service under the Company Plans accrued by Company Employees with, or otherwise recognized for purposes of benefit plans, programs, policies or arrangements by HC as of the IPO for all purposes (other than for benefit accrual purposes under any defined benefit pension plan of the Company).  The service crediting provisions shall be subject to any respectively applicable “service bridging,” “break in service,” “employment date,” or “eligibility date” rules under the Company Plans and the corresponding HC Plans.

 

Article IV

 

LABOR MATTERS AND MULTI-EMPLOYER PLANS

 

4.1 Labor Agreements.  On or prior to the IPO, HC shall transfer and assign the Labor Agreements to the Company or the Subsidiary of the Company that will employ the Company Employees covered by the Labor Agreements, and such entity shall accept such assignment.  From the IPO, the Company or the relevant Subsidiary shall be solely responsible for all duties, obligations and Liabilities related to the Labor Agreements arising on or after the IPO.  From the IPO, the Company or the relevant Subsidiary shall comply with and honor the Labor Agreements and any and all other labor agreements to which it was a party and shall be solely responsible for all duties, obligations and Liabilities thereunder.

 

4.2 Consultation with Unions; Collective Bargaining Agreements.  The Parties shall cooperate to inform and consult with any union representatives to the extent required by Law or an applicable collective bargaining, works council or similar agreement or arrangement with any labor union or works council or which covers the Company Employees as of the IPO.

 

4.3 Company Multi-Employer Plans.  As of the IPO, HC shall transfer and assign the Liabilities in respect of the Company Multi-Employer Plans to the Company or the Subsidiary of the Company that will employ the Company Employees, and such entity shall accept such assignment.  From the IPO, the Company or the relevant Subsidiary shall be solely responsible for all duties, obligations and Liabilities related to the Company Multi-Employer Plans arising on or after the IPO.  HC shall indemnify the Company and each Subsidiary of the Company against any loss actually suffered or incurred by the Company or any Subsidiary of the Company,

 

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respectively, in connection with (a) any withdrawal liability under Section 4063 or 4064 of ERISA that was triggered on or prior to the IPO as described on Section 4.3(a) of the attached Schedule; and (b) the withdrawal liability under Section 4063 or 4064 of ERISA that is expected to be triggered following the IPO as described on Section 4.3(b) of the attached Schedule, subject to the Company’s and each Subsidiary of the Company’s compliance with the applicable collective bargaining agreement and absence of any modifications to such agreement or any other action that would increase such withdrawal liability; provided, in each case, that HC shall, in its complete discretion, control the actual payment (including the amount and timing) of any such withdrawal liability, including any negotiations, claims or litigation with the applicable employee benefit plan over the required payments.

 

Article V

 

DEFINED BENEFIT PLANS

 

5.1 Defined Benefit Plans.

 

(a) No member of the Company Group shall assume any Liability with respect to the HC Retirement Plans.

 

(b) No Company Group member shall assume any Liability allocable to the Company Employees under the HC Retirement Plans; provided, however, that, to the extent that (i) any act or omission of the Company directly results in the inability of HC to administer a HC Retirement Plan in compliance with the respective plan terms with respect to any Company Employee who participated under a HC Retirement Plan and (ii) any related Liability is imposed on any member of the HC Group, the Company shall indemnify such HC Group member for such Liability.  To the extent that (x) any act or omission of HC directly results in the inability of HC to administer a HC Retirement Plan in compliance with the respective plan terms with respect to any Company Employee who participated under a HC Retirement Plan and (y) any related Liability is imposed on any member of the Company Group, HC shall indemnify such Company Group member for such Liability.

 

(c) Notwithstanding Section 5.1(a) and 5.1(b) directly above, the Company or a member of the Company Group shall be required to assume the sponsorship and administration of the Canadian Union Pension Plan if such assumption is required under applicable Canadian labor standards laws.

 

Article VI

 

DEFINED CONTRIBUTION PLAN

 

6.1 Company Defined Contribution Plan.  Prior to the IPO, the Parties shall cooperate to cause the Company to establish one or more qualified defined contribution plans (the “Company Defined Contribution Plan”).  Prior to the IPO, the Parties shall cooperate to cause the Company Employees to cease their participation in the Lehigh Hanson Defined Contribution Plan and, upon

 

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the establishment of the Company Defined Contribution Plan, each Company Employee shall be eligible to commence participation in the Company Defined Contribution Plan and each Company Employee’s account balance under the Lehigh Hanson Defined Contribution Plan shall be transferred to the Company Defined Contribution Plan.  Any minimum age or service requirements contained in the Company Defined Contribution Plan with respect to eligibility to participate generally or eligibility to share in any employer contributions under such plan shall be waived or deemed satisfied for Company Employees to the extent waived or satisfied under the most favorable of the Lehigh Hanson Defined Contribution Plan in which such Company Employee previously participated.  The Company shall be responsible for taking all necessary, reasonable and appropriate action to establish, maintain and administer the Company Defined Contribution Plan so that it is qualified under Section 401(a) of the Code and that the related trust thereunder is exempt under Section 501(a) of the Code, and as soon as reasonably practicable following the establishment of the Company Defined Contribution Plan, the Company shall take all steps reasonably necessary to obtain a favorable determination from the IRS or obtain an opinion as to such qualification.

 

Article VII

 

NON-QUALIFIED PLANS

 

7.1 HC Nonqualified Plans.

 

(a) In General.  Except as set forth in Section 7.1(b), no member of the Company Group shall assume any Liability with respect to any HC Nonqualified Plan.  The treatment of benefits under any Nonqualified Plan shall comply with Section 409A of the Code, to the extent subject thereto, and shall be paid in accordance with such plan.

 

(b) Vesting.  HC or another member of the HC Group shall, as applicable, amend the HC Nonqualified Plans to provide that Company Employees shall be 100% vested in their account balances under the such HC Nonqualified Plans as of the IPO.

 

(c) Deferred Compensation Plan.  No Company Group member shall assume any Liability allocable to the Company Employees under the Lehigh Hanson Deferred Compensation Plan; provided, however, that, to the extent that (i) any act or omission of the Company directly results in the inability of HC to administer the Lehigh Hanson Deferred Compensation Plan in compliance with Section 409A of the Code or any other Law or regulation and the terms of the respective Plan with respect to any Company Employee who participated under the Lehigh Hanson Deferred Compensation Plan and (ii) any related Liability is imposed on any member of the HC Group, the Company shall indemnify such HC Group member for such Liability.  To the extent that (i) any act or omission of HC directly results in the inability of HC to administer the Lehigh Hanson Deferred Compensation Plan in compliance with Section 409A of the Code or any other Law or regulation and the terms of the respective Plan with respect to any Company Employee who participated under the Lehigh Hanson Deferred Compensation Plan and (ii) any related Liability is imposed on any member of the Company Group, HC shall indemnify such Company Group member for such Liability.

 

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Article VIII

 

HEALTH AND WELFARE PLANS

 

8.1 Allocation of Life Insurance Liabilities.  Each HC Life Insurance Plan shall retain all Liabilities with respect to covered life insurance claims incurred prior to IPO by Company Employees and their dependents.  The applicable Company Life Insurance Plan shall be responsible for all Liabilities with respect to life insurance claims incurred after the IPO by Company Employees and their dependents, it being understood that the provisions of this Section 8.1 shall not require any member of the Company Group to maintain a plan providing life insurance benefits.  For these purposes, a claim shall be deemed to have occurred on the date of the death of the insured person.

 

8.2 Health and Welfare Plan Liabilities.    HC and the Company shall cooperate to establish the Company Health and Welfare Plans and any related insurance contracts, third party service provider agreements and other agreements and arrangements.  It is understood and agreed that the Company Employees may continue to participate in certain Lehigh Hanson Health and Welfare Plans for a transition period following the IPO as further agreed by the Parties under the separate Transition Services Agreements.

 

8.3 Post-Separation Transitional Arrangements.

 

(a) Coverage and Contribution Elections.  Upon the establishment of the Company Health and Welfare Plans (including the Company Flexible Benefits Plans), the Company shall cause the Company Health and Welfare Plans (including the Company Flexible Benefits Plans) to recognize and maintain all coverage and contribution elections made by Company Employees under the corresponding Lehigh Hanson Health and Welfare Plans (including the Lehigh Hanson Flexible Benefits Plans) and apply such elections under the Company Health and Welfare Plans for the remainder of the period or periods for which such elections are by their terms applicable.  All waiting periods and pre-existing condition exclusions and actively-at-work requirements shall be waived with respect to the Company Employees who were not subject to any such waiting periods, exclusions or requirements under a Lehigh Hanson Health and Welfare Plan in which such employees previously participated.  For the avoidance of doubt, nothing herein shall prevent the Company from conducting open enrollment and accepting elections under Company Health and Welfare Plans.

 

(b) Deductibles and Out-of-Pocket Maximums.  Upon the establishment of the Company Health and Welfare Plans, the Company shall use commercially reasonable efforts to cause the Company Health and Welfare Plans to recognize and give credit for or take into account all amounts applied to deductibles, out-of-pocket maximums and co-payments with respect to which such expenses have been incurred by Company Employees under the Lehigh Hanson Health and Welfare Plans for the remainder of the applicable calendar year=.

 

8.4 Flexible Benefits Plans Spin-Off.  The Parties shall take all steps necessary or appropriate so that the account balances (whether positive or negative) (the “Transferred Account Balances”) under the Lehigh Hanson Flexible Benefits Plans of each Company Employee who

 

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has elected to participate therein shall be transferred, as of, or as soon as practicable following the establishment of the Company Flexible Benefits Plans , from the Lehigh Hanson Flexible Benefits Plans to the corresponding Company Flexible Benefits Plans.  The Company Flexible Benefits Plans shall assume responsibility as of the later of the IPO or the establishment of the corresponding Company Flexible Benefits Plans for all outstanding dependent care and medical care claims under the Lehigh Hanson Flexible Benefits Plans of each Company Employee and shall assume and agree to perform the obligations of the analogous Lehigh Hanson Flexible Benefits Plans from such date.  As of, or as soon as practicable following the establishment of the Company Flexible Benefits Plans, and in any event within 30 days after the amount of the Transferred Account Balances is determined or such later date as mutually agreed upon by the Parties, the Company shall pay HC the net aggregate amount of the Transferred Account Balances, if such amount is positive, and HC shall pay the Company the net aggregate amount of the Transferred Account Balances, if such amount is negative.

 

8.5 COBRA.  The HC Group shall be responsible for compliance with the health care continuation coverage requirements of COBRA and the Lehigh Hanson Health and Welfare Plans with respect to Business Retirees and qualified beneficiaries (as such term is defined under COBRA) who become eligible and elect to receive continuation health care coverage prior to the IPO.  The Company or another member of the Company Group shall provide HC with all necessary employee change notices and related information for covered dependents, spouses, qualified beneficiaries, and alternate recipients pursuant to QMCSO, in accordance with applicable HC COBRA policies and procedures.  As of the IPO, the Company Group shall be solely responsible for compliance with the health care continuation coverage requirements of COBRA and the Company Health and Welfare Plans for Company Employees and their qualified beneficiaries who become eligible or elect to receive continuation health care coverage on or following the IPO.

 

8.6 Disability Plans.  HC shall retain all Liabilities with respect to Company Employees who become eligible for benefits under the HC Long-Term Disability Plan or the HC Short-Term Disability Plan before the IPO.

 

8.7 Leave of Absence Programs and FMLA.  On and after the IPO, (i) the Company Group shall honor all terms and conditions of leaves of absence that have been granted by HC to any Company Employee under a HC Leave of Absence Program or FMLA or other applicable Law regarding leave of absence before the IPO, including such leaves that are to commence after the IPO; (ii) the Company Group shall be solely responsible for administering any such leaves of absence and complying with FMLA and other applicable laws regarding leaves of absence with respect to Company Employees; and (iii) the Company Group shall recognize all periods of service of Company Employees with the members of the HC Group, as applicable, to the extent such service is recognized by the members of the HC Group for the purpose of eligibility for leave entitlement under the HC Leave of Absence Programs and FMLA and other applicable Laws; provided, however, that no duplication of benefits shall be required by the foregoing.

 

8.8 HC Workers’ Compensation Program.

 

(a) Assumption of Liabilities.  The Company shall procure workers’ compensation insurance policies on behalf of the Company Employees, to be effective as of the

 

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IPO.  The Company shall assume all Liabilities with respect to workers’ compensation claims made before, on or after the IPO by all Company Employees, except in relation to the Company Employees of the UK Company, for whom Liabilities shall remain with the UK Company.

 

(b) Administration of Claims.

 

(i). Through the IPO, the HC Group shall continue to be responsible for the administration of all workers’ compensation claims that are, or have been, made before the IPO by Company Employees (“Company WC Claims”) and have been historically administered by HC or its third party administrator.  The Company Group shall promptly reimburse the HC Group for any and all direct and indirect costs and expenses related to any such administration.

 

(ii).  Effective as of the IPO, the Company Group shall, to the extent legally permissible under the applicable state’s workers’ compensation Laws, be responsible for the administration of all Company WC Claims, and if not legally permissible, the HC Group shall be responsible for the administration of all Company WC Claims not administered by the Company pursuant to this Subsection 8.8(b)(ii).  Any determination made, or settlement entered into, by or on behalf of either party or its insurance company with respect to Company WC Claims for which it is administratively responsible shall be final and binding upon the other party.  The Company Group shall promptly reimburse the HC Group for any and all direct and indirect costs and expenses related to any such settlement.

 

8.9 Reimbursement.  The Company shall reimburse HC for any health and welfare-related costs actually incurred as of or following the IPO and relating to the Continuing Employees’ participation in certain Lehigh Hanson Health and Welfare Plans for a transition period following the IPO as further agreed by the Parties under the separate Transition Services Agreements.

 

Article IX

 

RETIREE MEDICAL PROGRAM

 

9.1 Retiree Medical Program.  No member of the Company Group shall assume any Liability with respect to the Retiree Medical Program.  Following the IPO, no Company Employee shall accrue any additional benefits under the Retiree Medical Program, except as contemplated in this Section 9.1.  HC shall provide or cause to be provided to each Company Employee (and his or her eligible dependents) who was eligible to retire on or immediately prior to the IPO and, upon such retirement, would have satisfied the eligibility requirements for retiree coverage set forth in the Retiree Medical Program, with retiree benefits and coverage following such Company Employee’s retirement from the Company Group, with such benefits to be provided under the Retiree Medical Program, as the Retiree Medical Program may be amended from time to time following the IPO, as if such Company Employee had remained employed with HC through the applicable retirement date. In addition, HC or another member of the HC Group shall amend the Retiree Medical Program to provide that until the Company Employee’s termination of employment, Company Employees shall be given credit for service with members

 

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of the Company Group for purposes of eligibility for participation in the Retiree Medical Program.  The provisions of this Section 9.1 shall not be construed to require any member of the HC Group to maintain the Retiree Medical Program or to prevent the amendment in any manner of the Retiree Medical Program.  The participation by any Company Employee in the Retiree Medical Program shall be subject to such right of amendment or termination.

 

Article X

 

CASH BONUS PLANS

 

10.1 Annual Incentive Plans.  HC shall retain and perform all Liabilities with respect to the participation of each Company Employee who is participating in any cash-based annual bonus or other annual incentive compensation plan of a HC Group member with respect to performance periods that are ongoing as of December 31, 2014 and completed performance periods as of December 31, 2014.  Effective as of January 1, 2015, the Company shall establish an annual bonus or other cash-based annual incentive compensation plan for the benefit of eligible Company Employees and the Company shall be responsible for the annual bonus payable to the Company Employees in respect of the full 2015 calendar year.

 

Article XI

 

EQUITY COMPENSATION

 

11.1 HC Equity.  As of or prior to the IPO, HC shall take such actions and/or modify any applicable terms of the Phantom Stock Units held by Company Employees as it deems appropriate to ensure that such awards are treated as though such Company Employees are deemed “good leavers” in connection with the IPO, subject, in each case, to the requirements of Section 409A of the Code and the terms of a HC Stock Plan and applicable award agreements.

 

Article XII

 

SEPARATION PAY; VACATION; UNEMPLOYMENT INSURANCE

 

12.1 Separation Pay.  On or before the IPO, the Company shall adopt a severance pay plan having materially the same terms and providing materially the same severance pay benefits as the Lehigh Hanson Severance Plan.  Except as specified otherwise in this Agreement, the Company shall assume and be solely responsible for all Liabilities with respect to severance benefits attributable to the termination of employment after the IPO of Company Employees, to the extent such individual is eligible for severance pursuant to the terms of the Company severance pay plan or policy as in effect as of the date of the employee’s termination of employment.

 

12.2 Paid Time Off Benefits.  The Company or another member of the Company Group shall assume and honor all paid time off accrued but not yet taken by Company Employees as of the IPO (including banked vacation).

 

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12.3 Unemployment Insurance Program.  On or before the IPO, the Company shall use its commercially reasonable best efforts to procure an agreement with an unemployment insurance vendor to provide unemployment insurance for Company Employees other than for Company Employees of the UK Company.

 

Article XIII

 

OTHER EMPLOYMENT-RELATED MATTERS

 

13.1 Confidentiality and Proprietary Information.  No provision of the Separation Agreement or any Ancillary Agreement shall be deemed to release any individual for any violation of the HC non-competition guidelines or any agreement or policy pertaining to confidential or proprietary information of any member of the HC Group, or otherwise relieve any individual of his or her obligations under such non-competition guidelines, agreement or policy.

 

Article XIV

 

CERTAIN PAYROLL AND TAX MATTERS

 

14.1 Payroll and Withholding.

 

(a) Accrued Payroll.  HC shall retain all Liabilities related to payroll with respect to the Company Employees other than the Company Employees of the UK Company, which shall remain the obligation of the UK Company, to the extent such Liabilities relate to service prior to the IPO, and shall pay such amounts on or after the IPO in accordance with its standard payroll practices.  Effective as of the IPO, the Company Group shall establish its own payroll system for Company Employees.

 

(b) Income Reporting, Withholding.  HC and the Company shall, to the extent practicable, (i) treat the Company (or a member of the Company Group designated by the Company) as a “successor employer” and HC (or the appropriate HC Group member) as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, with respect to Company Employees for purposes of taxes imposed under the United States Federal Unemployment Tax Act or the United States Federal Insurance Contributions Act, and (ii) cooperate with each other to avoid, to the extent possible, the filing of the more than one IRS Form W-2 with respect to each Company Employee for the year in which the IPO occurs. Without limiting in any manner the obligations and Liabilities of the parties under the Tax Matters Agreement, HC, each HC Group member, the Company and each Company Group member shall each bear its responsibility for payroll tax obligations and for the proper reporting to the appropriate governmental authorities of compensation earned by their respective employees after the IPO, including compensation related to the vesting of Phantom Stock Units, subject to Section 11.2 hereof.

 

(c) Delivery of, and Access to, Documents and Other Information.  On or before the IPO, HC shall cause to be delivered to the Company the employee information set forth on

 

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all withholding certificates executed by Company Employees as of the date of such delivery.  For such period as HC and the Company may mutually agree in writing, HC shall make reasonably available to the Company all forms, documents or information, no matter in what format stored, relating to compensation or payments made to any Company Employee.  Such information may include, but is not limited to, information concerning employee payroll deductions, payroll adjustments, records of time worked, tax records (e.g., Forms W-2, 1099, W-4, 940 and 941 and applicable counterparts in other jurisdictions), and information concerning garnishment of wages or other payments.

 

(d) Consistency of Tax Positions; Duplication.  HC and the Company shall individually and collectively make commercially reasonable best efforts to avoid unnecessarily duplicated federal, state or local payroll taxes, insurance or workers’ compensation contributions, or unemployment contributions arising on or after the IPO.  HC and the Company shall cooperate with a view toward taking consistent reporting and withholding positions with respect to any such taxes or contributions.

 

14.2 Personnel and Pay Records.  Notwithstanding anything to the contrary in the Separation Agreement, to the extent permitted by applicable Law, the original of all records created prior to the IPO (or such later date of transfer of employment, as applicable) set forth in the personnel files of the Company Employees (including, but not limited to, information regarding such employee’s ranking or promotions, the existence and nature of garnishment orders or other judicial or administrative actions or orders affecting the employee’s compensation, and performance evaluations) shall be transferred to the applicable member of the Company Group on or before the IPO.  The originals of all personnel records of all Business Retirees shall remain with the applicable member of the HC Group; provided that HC shall permit the Company or its Affiliates or successors or their authorized representatives to have full access to all such personnel records to the extent reasonably necessary in order for the members of the Company Group or its successors to respond to a subpoena, court order, audit, investigation or otherwise as required by applicable Law or in connection with any pending or threatened lawsuits, actions, arbitrations, claims, complaints, investigations or other proceedings.  The Company or its Affiliates (or their respective successors) shall retain the personnel records for a period of at least ten (10) years following the IPO.  The members of the Company Group shall permit HC and its authorized representatives to have full access upon reasonable notice during normal business hours to all the personnel records during the ten (10) year retention period in order for the members of the HC Group to respond to a subpoena, court order, audit or investigation, to obtain data for pension or other benefits, or otherwise as required by applicable Law, and the members of the Company Group shall provide HC, upon the reasonable request of HC and at the expense of HC, with copies of such personnel records.

 

Article XV

 

ADMINISTRATIVE PROVISIONS

 

15.1 Sharing of Participant Information.  In addition to the responsibilities and obligations of HC and the Company specified in the Separation Agreement and the schedules thereto, HC and the Company shall share, or cause to be shared, all participant information that is necessary or

 

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appropriate for the efficient and accurate administration of each of the HC Plans and the Company Plans during the respective periods applicable to such Plans as the Company and HC may mutually agree, subject to applicable Laws (including those with respect to privacy, confidentiality and data protection).  Subject to such Laws, HC and the Company and their respective authorized agents shall be given reasonable and timely access to, and may make copies of, all information relating to the subjects of this Agreement in the custody of the other party or its agents, to the extent necessary or appropriate for such administration.

 

15.2 Audits Regarding Vendor Contracts.  From the period beginning on the IPO and ending on such date as HC and the Company may mutually agree in writing, HC and the Company and their duly authorized representatives shall have the right to conduct joint audits with respect to any vendor contracts that relate to both the Lehigh Hanson Health and Welfare Plans and the Company Health and Welfare Plans.  The scope of such audits shall encompass the review of all correspondence, account records, claim forms, canceled drafts (unless retained by the bank), provider bills, medical records submitted with claims, billing corrections, vendor’s internal corrections of previous errors and any other documents or instruments relating to the services performed by the vendor under the applicable vendor contracts.  HC and the Company shall agree on the performance standards, audit methodology, auditing policy and quality measures, reporting requirements, and the manner in which costs incurred in connection with such audits will be shared.

 

15.3 Regulatory Matters.  HC and the Company shall make such filings and applications to regulatory agencies, including the IRS and DOL, as may be necessary or appropriate in connection with the transactions contemplated by this Agreement.  The Company and HC shall cooperate fully with one another on any issue relating to the transactions contemplated by this Agreement for which HC and/or the Company elects to seek a determination letter or private letter ruling from the IRS, an advisory opinion from the DOL or other ruling from a local regulatory agency.

 

15.4 Fiduciary Matters.  HC and the Company each acknowledge that actions contemplated to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no party shall be deemed to be in violation of this Agreement if such party fails to comply with any provisions hereof based upon such party’s good faith determination that to do so would violate such a fiduciary duty or standard.

 

15.5 Consent of Third Parties.  If any provision of this Agreement is dependent on the consent of any third party (such as a vendor) and such consent is withheld, HC and the Company shall use their commercially reasonable best efforts to implement the applicable provision.  If any provision of this Agreement cannot be implemented due to the failure of such third party to consent, HC and the Company shall negotiate in good faith to implement the provision in a mutually satisfactory manner.

 

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Article XVI

 

GENERAL PROVISIONS

 

16.1 Cooperation.

 

(a) Duties of Company.  Following the IPO, the Company shall cooperate, and shall cause the members of the Company Group to cooperate, fully with the members of the HC Group in the prosecution, defense and settlement of any claims for which any member of the HC Group retains Liability under this Agreement.  Such cooperation shall include (i) affording the applicable member of the HC Group, its counsel and its other representatives reasonable access, upon reasonable written notice during normal business hours, to all relevant personnel, properties, books, contracts, commitments and records, (ii) furnishing promptly to the applicable member of the HC Group, its counsel and its other representatives such information as they reasonably requested, and (iii) providing any other assistance to the applicable member of the HC Group, its counsel and its other representatives as they reasonably request.  HC shall reimburse the Company for reasonable costs and expenses incurred in assisting HC pursuant to this Subsection 16.1(a).

 

(b) Duties of HC.  Following the IPO, HC shall cooperate, and shall cause the members of the HC Group to cooperate, fully with the members of the Company Group in the prosecution, defense and settlement of any claims for which any member of the Company Group assumes Liability under this Agreement.  Such cooperation shall include (i) affording the applicable member of the Company Group, its counsel and its other representatives reasonable access, upon reasonable written notice during normal business hours, to all relevant personnel, properties, books, contracts, commitments and records, (ii) furnishing promptly to the applicable member of the Company Group, its counsel and its other representatives such information as they reasonably request, and (iii) providing any other assistance to the applicable member of the Company Group, its counsel and its other representatives as they reasonably request.  The Company shall reimburse HC for reasonable costs and expenses incurred in assisting the Company pursuant to this Subsection 16.1(b).

 

16.2 Relationship of Parties.  Nothing in this Agreement shall be deemed or construed by the Parties or any third party as creating the relationship of principal and agent, partnership or joint venture between the Parties, the understanding and agreement being that no provision contained herein, and no act of the Parties, shall be deemed to create any relationship between the Parties other than the relationship set forth herein.

 

16.3 Affiliates.  Each of HC and the Company shall cause to be performed, and hereby guarantee the performance of, any and all actions of the members of the HC Group or the Company Group, respectively.

 

16.4 No Third Party Remedies.  The provisions of this Agreement are solely for the benefit of the Parties and are not intended to confer upon any Person (including employees of the Parties hereto) except the Parties any rights or remedies hereunder, and there are no third party beneficiaries of this Agreement and this Agreement shall not provide any third person (including

 

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employees of the Parties) with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement.

 

16.5 Governing Law.  This Agreement shall be governed by and construed and interpreted in accordance with the Laws of the State of New York, without regard to the conflict of laws principles thereof that would result in the application of any Law other than the Laws of the State of New York.

 

16.6 Severability.  If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party.  Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to affect the original intent of the Parties.

 

16.7 Amendment and Termination.  This Agreement may be amended or terminated at any time prior to the IPO by and in the sole discretion of HC without the approval of the Company.  This Agreement may be amended at any time on after the IPO by mutual consent in writing of HC and the Company.

 

16.8 Conflict.  Except as otherwise set forth in Section 2.1 herein, in the event of any conflict between the provisions of this Agreement and the Separation Agreement, any Ancillary Agreement, or Plan, the provisions of this Agreement shall control.

 

16.9 Counterparts.  This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party.  Execution of this Agreement or any other documents pursuant to this Agreement by facsimile or other electronic copy of a signature shall be deemed to be, and shall have the same effect as, executed by an original signature.

 

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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed on its behalf by its officer thereunto duly authorized on the day and year first above written.

 

	
 
    	
HEIDELBERGCEMENT   AG
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    
	
 
    	
 
    
	
 
    	
HANSON   BUILDING PRODUCTS LIMITED
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By:
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Name:
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
Title:
    

 

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