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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[☒] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2021
[☐] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________.
Commission File Number: 001-37921
FORTERRA, INC.
(Exact name of registrant as specified in its charter)
Delaware
37-1830464
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification Number)
511 East John Carpenter Freeway, 6th Floor, Irving, TX 75062
(Address of principal executive offices, including zip code)
(469) 458-7973
(Registrant’s telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.001 par value per share
FRTA
Nasdaq Stock Market LLC
Securities Registered Pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [x]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [x]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [x] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
Smaller reporting company
Emerging growth company
x
o
o
☐
☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided
pursuant to Section 13(a) of the Exchange Act. [ ]
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of
the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. [☒]
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [☐ ] No [☒]
As of February 25, 2022, 67,449,675 shares of the registrant’s common stock, $0.001 par value per share, were issued and outstanding. The aggregate market value of the registrant’s common stock,
$0.001 par value, held by non-affiliates of the registrant was approximately $712,062,000, based upon the closing market price of $23.51 per share of common stock on the Nasdaq Global Select Market as of June
30, 2021.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s Definitive Proxy Statement to be filed with the Securities and Exchange Commission no later than 120 days after the end of the Registrant’s fiscal year ended December 31, 2021, are
incorporated by reference in Part III of this Annual Report on Form 10-K.
Table of Contents
TABLE OF CONTENTS
Page
Part I
Item 1.
Business
1
Item 1A.
Risk Factors
11
Item 1B.
Unresolved Staff Comments
39
Item 2.
Properties
39
Item 3.
Legal Proceedings
41
Item 4.
Mine Safety Disclosures
43
Part II
Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
43
Item 6.
[Reserved]
44
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
45
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
67
Item 8.
Financial Statements and Supplementary Data
69
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
115
Item 9A.
Controls and Procedures
115
Item 9B.
Other Information
118
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
118
Part III
Item 10.
Directors, Executive Officers and Corporate Governance
119
Item 11.
Executive Compensation
119
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
119
Item 13.
Certain Relationships and Related Transactions, and Director Independence
119
Item 14.
Principal Accounting Fees and Services
119
Part IV
Item 15.
Exhibits, Financial Statement Schedules
120
Item 16.
Form 10-K Summary
124
Signatures
124
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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements and information in this Annual Report on Form 10-K may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended. These forward-looking statements relate to matters such as our industry, business strategy, goals and expectations concerning our market position, future
operations, margins, profitability, capital expenditures, liquidity, capital resources and other financial and operating information. We have used the words “approximately,” “anticipate,” “assume,” “believe,”
“contemplate,” “continue,” “could,” “estimate,” “expect,” “future,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will” and similar terms and phrases to identify forward-looking
statements. All of our forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those that we are expecting, including:
•
the impact of the COVID-19 pandemic on the economy, demand for our products and our business, financial condition and results of operations, including the measures taken by governmental authorities in
response;
•
government funding of infrastructure and related construction activities;
•
the level of construction activity, particularly in the residential construction and non-residential construction markets;
•
the highly competitive nature of our industry and our ability to effectively compete;
•
the availability and price of the raw materials and other inputs we use in our business;
•
our dependence on key customers and the absence of long-term agreements with these customers;
•
the level of construction activity in Texas;
•
disruption at one or more of our manufacturing facilities or in our supply chain;
•
construction project delays and our inventory management;
•
the seasonality of our business and its susceptibility to adverse weather;
•
our ability to successfully integrate acquisitions;
•
labor disruptions and other union activity;
•
compliance with applicable regulations;
•
a tightening of mortgage lending or mortgage financing requirements;
•
the ability to implement our growth strategy;
•
compliance with environmental laws and regulations;
•
energy costs;
•
changes in tax laws could adversely affect us;
•
compliance with health and safety laws and regulations;
•
our dependence on key executives and key management personnel;
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•
our ability and that of the customers with which we work to retain and attract additional skilled and non-skilled technical or sales personnel;
•
credit and non-payment risks of our customers;
•
warranty and related claims;
•
legal and regulatory claims;
•
our contract backlog;
•
climate change or climate change legislation or regulations may adversely impact our business;
•
our ability to maintain sufficient liquidity and ensure adequate financing or guarantees for large projects;
•
delays or outages in our information technology systems and computer networks;
•
security breaches in our information technology systems and other cybersecurity incidents;
•
risks associated with merger transactions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable anti-trust legislation and other regulatory and third party
consents and approvals;
•
the failure to consummate or delay in consummating the merger for other reasons;
•
the risk that a condition to closing of the merger may not be satisfied;
•
the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement;
•
the outcome of any legal proceedings that may be instituted following announcement of the merger;
•
failure of Quikrete Holdings, Inc. to obtain the financing required to consummate the merger;
•
failure to retain our key management and employees;
•
issues or delays in the successful integration of our operations with those of Quikrete Holdings, Inc., including incurring or experiencing unanticipated costs and/or delays or difficulties;
•
unfavorable reaction to the merger by customers, competitors, suppliers and employees; and
•
additional factors discussed in our filings with the Securities and Exchange Commission, or the SEC.
The forward-looking statements contained in this Annual Report on Form 10-K are based on historical performance and management’s current plans, estimates and expectations in light of information
currently available to us and are subject to uncertainty and changes in circumstances. There can be no assurance that future developments affecting us will be those that we have anticipated. Actual results may
differ materially from these expectations due to changes in global, regional or local political, economic, business, competitive, market, regulatory and other factors, many of which are beyond our control, as well as
the other factors described in Item 1A, “Risk Factors”. The COVID-19 pandemic may also precipitate or exacerbate these and other unknown risks and uncertainties. Additional factors or events that could cause
our actual results to differ may also emerge from time to time, and it is not possible for us to predict all of them. Should one or more of these risks or uncertainties materialize, or should any of our assumptions
prove to be incorrect, our actual results
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may vary in material respects from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. Any
forward-looking statement made by us speaks only as of the date on which we make it. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future
developments or otherwise, except as may be required by applicable securities laws.
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PART I
Item 1. Business
On March 13, 2015, through an indirect wholly owned subsidiary, Lone Star Fund IX (U.S.), L.P. (which is referred to, along with its affiliates and associates, but excluding us and other companies that it owns as
a result of its investment activity, as Lone Star) acquired the building products business of HeidelbergCement AG, or HC, in the United States and Eastern Canada, or the Acquisition. Unless otherwise specified or
where the context otherwise requires, references in this Annual Report on Form 10-K to “our,” “we,” “us,” the “Company” and “our business” refer to the operations of Forterra, Inc., together with its consolidated
subsidiaries. We are a holding company incorporated in Delaware in 2016. We are controlled by Lone Star and have been operating as a stand-alone company since 2015.
Recent Developments
On February 19, 2021, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Quikrete Holdings, Inc., a Delaware corporation, or Quikrete, and Jordan Merger Sub, Inc., a Delaware
corporation and a wholly-owned subsidiary of Quikrete, or Merger Sub. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into the
Company, or the Merger, with us surviving the Merger as a wholly-owned subsidiary of Quikrete. At the effective time of the Merger, each issued and outstanding share of common stock of the Company (other than
(i) any shares held in the treasury of the Company or owned, directly or indirectly, by Quikrete, Merger Sub or any wholly-owned subsidiary of the Company immediately prior to the Effective Time, (ii) shares that
are subject to any vesting restrictions, or Company Restricted Shares granted under the Company’s stock incentive plans, (iii) any shares owned by stockholders who have properly exercised and perfected
appraisal rights under Delaware law) will be automatically canceled and converted into the right to receive $24.00 in cash, without interest, or the Merger Consideration, subject to deduction for any required
withholding tax. We and Quikrete are currently working with the United States Department of Justice, or DOJ, to obtain approval to consummate the Merger under the Hart-Scot-Rodino Antitrust Improvements Act
of 1976, as amended, or the HSR Act, in the timeframe contemplated by the Merger Agreement.
In order to address some of the divestitures anticipated to be required by the DOJ, we have entered into two divestiture agreements. On November 24, 2021, we entered into an agreement with Eagle
Corporation and Parent pursuant to which Eagle will purchase our 50% equity interest in Concrete Pipe & Precast, LLC, or CP&P, a 50/50 joint venture with Eagle, for a purchase price of $105 million, subject to
certain adjustments as described in the purchase agreement. On December 13, 2021, we entered into an agreement with Hydro Conduit, LLC d/b/a Rinker Materials, an affiliate of Parent, and Foley Products
Company, Inc. pursuant to which we and Rinker will each sell to Foley certain assets and liabilities associated with reinforced concrete pipe and precast plants for an aggregate purchase price of $95 million,
subject to certain adjustments described in the asset purchase agreement. Consummation of these transactions is subject to customary closing conditions, including, among others, the consummation of the Merger
and approval by the DOJ.
See Item 1A, Risk Factors, and Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in "Overview" for a more fulsome description of the Merger, the Merger
Agreement, the risks related thereto and its terms and expected impact on our business.
General
We are a manufacturer of concrete pipe and precast products and ductile iron pipe in the United States and Eastern Canada for a variety of essential water-related infrastructure applications. Our products and
services are used in the construction, maintenance, repair and replacement of water drainage, distribution and transmission systems.
We operate 80 active manufacturing facilities, and our manufacturing and distribution network allows us to serve most major markets in the United States and Eastern Canada.
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We manufacture both water drainage pipe and precast structures (used primarily for storm water and drainage applications) and water transmission and distribution pipe (used primarily to transport potable water
and as a component of wastewater systems) and believe our complementary product portfolio is well positioned to serve both (i) the storm water and wastewater infrastructure market and (ii) the potable water
transmission and distribution market. We serve a diverse set of end markets, including infrastructure, residential, and non-residential construction, which allows us to benefit from both secular and cyclical growth
across each of these end-markets. The infrastructure, residential, and non-residential end markets in the United States and Eastern Canada have different growth drivers and operating dynamics, and the cyclical
performance of these markets has historically been staggered during different stages of the broader economic cycle serving to mitigate the cyclical impact of any one single market on our business. In addition,
given the nature of water as a basic necessity, municipalities generally repair and replace their existing water and wastewater infrastructure.
Our operational strategy is focused on our five improvement pillars:
•
Health and Safety — Prioritizing the health and safety of our employees above anything else; our most productive facilities should be our safest
•
Plant-level Operational Discipline — Making daily improvements using our manufacturing/process know-how to drive efficiencies with disciplined financial investment
•
Enhanced Commercial Capabilities—Investing in our sales force to expand capabilities and better inform our customers of our compelling value proposition
•
Working Capital Efficiency—Having the right levels of inventory in the right places at the right times and aligning our accounts receivable and accounts payable cycles
•
G&A Effectiveness—Delivering deeper information faster and at a lower cost so operators can make better business decisions
Our solid execution on these five pillars has produced, and we believe will continue to produce, the earnings and cash flows that have allowed us to reach our stated net leverage goal of 3.0x to 3.5x
earnings during 2021 and we believe will allow us to continue reducing our leverage over time. Our organic growth strategy is focused on leveraging our operations, customer service and product innovation
capabilities, as well as our product breadth and scale, to sell our products to existing customers, to increase penetration and project wins and to gain market share through new customers. Operationally, we
continue to focus on efficiency and productivity improvements to reduce costs and drive unit margin improvements. We periodically evaluate our existing business and acquisition opportunities to complement our
organic growth or enhance our scale, geographic footprint and product portfolio while simultaneously considering and making strategic divestitures or changes in our manufacturing footprint to optimize our portfolio.
See Note 3 to our consolidated financial statements for a more detailed discussion of our recent acquisitions and divestitures.
Our Segments
Drainage Pipe & Products. We are the largest producer of concrete drainage pipe and precast products by sales volume in the United States and Eastern Canada. In addition, we also produce concrete
pressure pipe in Eastern Canada. We operate 65 active manufacturing facilities across multiple states and two Canadian provinces. These facilities provide us with a local presence and the necessary proximity to
our customers to minimize delivery times and distribution costs to the markets we serve. We believe our product offering creates value for our customers as it eliminates the need to engage multiple suppliers of
storm water and wastewater-related products for a single project, enabling them to maximize efficiency and meet more aggressive timetables. We also have the ability to custom-build products to complex
specifications and regulations.
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Drainage pipe has residential, non-residential and infrastructure applications. It is primarily used for storm water applications, such as storm drains for roads and highways, and for residential and non-
residential site developments. In addition, drainage pipe is used for sanitary sewers, low-pressure sewer force mains, tunneled systems, treatment plant piping and utility tunnels.
Water Pipe & Products. We are the largest producer of ductile iron pipe, or DIP, by sales volume in the United States. Utilizing the U.S. Pipe brand, we manufacture a number of products used for the
transmission of potable water and wastewater in pipe diameters typically ranging from three to 64 inches. Our product breadth and depth and our technical service address a range of our customers' water
transmission and distribution needs. Our 15 manufacturing facilities are located across the United States, with swing capacity available to support increased production levels as appropriate to satisfy increased
demand.
Key Segments
Drainage Pipe & Products
Water Pipe & Products
Products
Product Applications
Storm water and wastewater infrastructure
Potable and wastewater transmission and distribution
Primary Market Channels
- Direct to Contractors - Distributors
- Distributors - Direct to Contractors, Municipalities and Utilities Waterworks
# of Active Manufacturing Facilities
65
15
Corporate and Other. Corporate, general and administrative expenses not allocated to our revenue-generating segments, such as certain shared services, executive and other administrative functions.
Our Industry and Core End Markets
We serve a range of infrastructure-related end markets. Based on the source of funding, we classify these construction markets into infrastructure/municipal, residential and non-residential.
Infrastructure
Infrastructure represents spending by federal, state, and local governments for the construction and repair of streets, highways, storm and sanitary sewers, as well as the construction and repair of water lines for
the delivery of potable water, which are often supported by multi-year federal and state legislation and programs. It also includes local municipalities water infrastructure spending associated with the construction,
repair and replacement of water transportation and distribution systems. Spending on these items is driven by federal, state and municipal funding for both new build and repair projects. In addition to availability of
funding at the federal, state and municipal levels, these programs are impacted by other factors, including demographic and population shifts and the ability of contractors to obtain skilled labor.
A large proportion of U.S. water infrastructure is approaching, or has already reached, the end of its useful life. According to The American Society of Civil Engineers, or ASCE, many drinking water pipes in the
U.S. were laid from 1900 to 1950. Today, aging pipelines contribute to the estimated 240,000 water main breaks per year in the U.S., wasting over two trillion gallons of treated drinking water. Additionally, lead
pipes and fixtures, which were commonly installed through the mid-20th century, are still in service in some cities. The American Water Works Association estimated that the need for buried drinking water
infrastructure in the U.S. through 2050 totals nearly $1.7 trillion, about 54% of which is needed for replacement of existing infrastructure and the balance being necessary to accommodate population growth and
migration over that period. ASCE gave the U.S.
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wastewater infrastructure a grade of D+ and, in 2017, estimated that 56 million new users would be connected to centralized treatment systems over the next 15 years requiring at least $271 billion to meet current
and future demands and to upgrade existing infrastructure. Likewise, the ASCE grades the U.S. surface transportation (roads, bridges, and transit) infrastructure D/C+/D- and has identified over $1 trillion in
additional spending needed to repair and upgrade existing structures as well as construction of new facilities to accommodate growth through 2025. As the leader in our respective markets serving the water related
infrastructure industry, we believe we are well positioned to benefit from this much needed spending to repair and upgrade U.S. infrastructure.
Residential Construction
Residential construction includes single family homes and multi-family units such as apartments and condominiums. In this end market, our products are primarily used during the new lot development phase of
construction. New residential housing starts provide a strong leading indicator of increased activity in the residential construction market for water transmission, wastewater and drainage systems. Demand for
residential construction is influenced by demographic and population shifts, mortgage interest rates, and the ability of builders to obtain skilled labor. U.S. residential new construction peaked in 2006 before
experiencing a downturn from 2007 to 2011. Since 2011, the recovery of residential new construction has translated into increased demand for our products and we believe we are well-positioned to capitalize as
and to the extent this trend continues. Since 1974, annual additions to the housing supply exceeded household growth by an average of 30% to accommodate replacement of older units, demand for second
homes, geographic shifts in the population, and a normal amount of vacancies. However, for most of the last decade, housing production has barely kept pace with household formation. We believe this indicates
there is significant pent up demand for housing and that the market will see continued growth.
Non-residential Construction
Non-residential construction includes all privately financed construction other than residential structures. Revenues in this end-market are driven largely by new United States non-residential construction, for
which demand is generally driven by job growth, vacancy rates, private infrastructure needs and demographic trends. Our products in this end market tend to be utilized primarily in shopping centers and similar
types of suburban development as opposed to development of large office buildings, and we believe that the demand for suburban development should be stable to growing over the short to medium term. The
supply of non-residential construction projects is also affected by the availability and cost of funding.
Our Products
Drainage Pipe & Products Segment
We manufacture drainage pipe and precast products in the United States and Eastern Canada and concrete pressure pipe products in Eastern Canada. Drainage pipe has residential, non-residential and
infrastructure applications. It is primarily used for storm water applications, such as storm drains for roads and highways, and for residential and non-residential site developments. In addition, drainage pipe is used
for sanitary sewers, low-pressure sewer force mains, tunneled systems, treatment plant piping and utility tunnels. Drainage pipe consists of concrete reinforced by a steel cage. It is manufactured by producing a
steel mesh cage, enclosing it in a form or mold and then pouring concrete around it to produce the pipe. Drainage pipe is manufactured in round, elliptical and arch shapes ranging from 12 inches to 144 inches in
diameter and in box sizes ranging from three feet to 20 feet in length and width.
We also manufacture a wide variety of precast concrete products, including box culverts, utility vaults, manholes, drainage inlets and pipe end sections. These precast concrete products are used for applications
such as roadway drainage, airport drainage, storm water management, utility construction and water treatment and filtration systems. Our range of precast concrete products also includes products that fall under
the general description of specialty precast, including products for which we hold patents that make us the exclusive manufacturer, or which are manufactured under license agreements with third parties. These
specialty products include architectural panels for buildings, modular railroad crossings, retaining wall systems, highway noise
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barriers, storm water treatment systems and concrete vaults, which are used to house either dry utilities (such as electrical, data or communications equipment) or wet utilities (such as valves, pumps or water
meters).
We also manufacture structural precast products in the United States and a range of precast concrete bridge girders for highway projects in both the United States and Eastern Canada. We manufacture a variety
of structural precast products primarily for infrastructure and non-residential applications, including hollow-core planks, prestressed bridge girders, beams, columns, wall panels, stairs, garage floors and
architectural cladding. These products are used as structural and architectural elements in building structures such as parking garages and arched and modular bridges.
Precast concrete products are reinforced with steel, similar to pipe, and manufactured using either a dry cast or wet cast concrete mix, depending on the size of the piece and the number of identical pieces to be
manufactured. In the dry cast method, a concrete mix with low water content, known as zero-slump concrete, is poured into a mold and then densely compacted around the steel reinforcement using a variety of
manufacturing methods. The concrete structure is immediately removed from the mold and allowed to cure in a high humidity environment to ensure proper hydration of the concrete. This method allows multiple
pieces to be produced from the same mold each day and is most suitable for high volume, repetitive manufacturing. In the wet cast method, a concrete mix with relatively high water content is poured into a mold
and allowed to cure in the mold, which can take from four to 16 hours. Precast concrete products typically range in diameter from four to 12 feet for round products or in length and width from one foot to 12 feet for
square or rectangular products.
We also regularly consider ways to innovate internally and expand our drainage pipe and precast product offerings by working to bring other products to market. Some of our product offerings include precast
Duct Bank, Kenner Chainwall, and a number of storm water innovative technologies for storm water management marketed through our Bio Clean subsidiary. Duct Bank is a precast product that consolidates and
protects underground electrical and communication cables and can be used in the construction of large buildings, including in data centers, as well as installing cabling underneath roads and areas with existing
structures. Kenner Chainwall is a precast concrete foundation that provides a structurally sound, on-grade or elevated foundation to support prefabricated shelters or equipment buildings. One use is to elevate
electrical equipment in flood zones such as those devastated by hurricanes. Each of these products is now commercially available.
In addition, for larger diameter applications, we manufacture concrete pressure pipe, prestressed concrete pipe and bar-wrapped concrete pipe in Eastern Canada. Our concrete pressure pipe is used for
water transmission and distribution, power plant cooling water lines, sewage force mains for wastewater and storm water and other diverse applications involving the movement of large volumes of water. Concrete-
lined pressure pipe ranges from fourteen to 144 inches in diameter. Prestressed concrete pipe consists of a concrete core, a steel cylinder and a high tensile strength wire that is wrapped, under measured tension
and at uniform spacing, around the steel cylinder. This wire wrap places the steel cylinder and concrete core in compression, developing the pipe’s ability to withstand specified hydrostatic pressures and external
loads. An outside coating of mortar protects the wires. Bar-wrapped concrete cylinder pipe combines the physical strength of steel with the structural and protective properties of high strength cement mortar. In this
type of pipe, a round steel bar is helically wound around a welded steel cylinder and all surfaces are encased in cement mortar. This composite pipe reacts as a unit when resisting internal pressure and external
loads. The inside of the cylinder is lined with centrifugally cast cement mortar. Our concrete pressure pipe is highly engineered and is built to order for technically demanding applications requiring various
thresholds of working pressure, surge pressure and loads. Our engineers work closely with customers to design components and systems to meet specific regulatory and industrial demands.
In addition to our operations, we have a 50% equity interest in Concrete Pipe & Precast LLC, or CP&P, a joint venture with Eagle Corporation. CP&P operates 12 plants that serve the Mid-Atlantic and
Southeastern United States. CP&P manufactures drainage pipe and precast concrete products and sells those products to similar types of customers as the ones to which we market. See Note 6 to our
consolidated financial statements for additional information regarding CP&P. In November 2021 we entered into an agreement to sell our 50% equity interest in CP&P to Eagle, with the closing of this transaction
subject to customary closing conditions, including, among others, the consummation of the Merger and approval by the DOJ.
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Water Pipe & Products Segment
Utilizing the U.S. Pipe brand, we manufacture a number of products used for the transmission of potable water and wastewater in pipe diameters ranging from three to 64 inches.
We manufacture DIP in pipe diameters ranging from three to 64 inches in the United States. For each diameter of pipe, we offer a wide range of thicknesses with both standard and specialized linings and
coatings. DIP is used for transmission and distribution of potable water and wastewater. DIP has residential and infrastructure repair replacement applications, including potable water distribution systems, small
water system grids, major water transmission mains, wastewater collection systems, sewer force mains and water treatment plants. In addition to DIP, we also manufacture a full line of complementary joint
restraints and fittings in Mexico, which are utilized for interlocking adjoining segments of pipe and are typically bundled with DIP. We also operate fabrication plants that modify our pipe to meet specific customer
design requirements for above-ground applications.
DIP is manufactured using a process that consists of introducing molten iron into a rapidly-rotating steel mold and relying on centrifugal force to distribute the molten iron evenly around the inner surface of the
mold to produce pipe of uniform size and dimensions. We also strive to innovate in our Water Pipe & Products segment, including by offering metallic zinc coating and TR-XTREME pipe. Metallic zinc coating is
active corrosion protection for DIP. TR-XTREME pipe is DIP designed for areas of seismic activity and has joints that provide flexible extension capabilities.
Customers and Markets
Drainage Pipe & Products Segment
We typically sell our drainage pipe and precast products to contractors that perform construction work for various levels of government, residential and non-residential building owners, and developers in markets
across the United States and Eastern Canada. Additionally, although they are not our direct customers, we view the owners and engineers who are customers of the contractors that purchase our products as our
customers as well, because these owners and engineers often specify the types of products that our customers are required to use. We also sell our drainage pipe and precast products to utility companies. Several
of our largest manufacturing facilities are located in close proximity to our markets. Our drainage pipe and precast products are typically shipped within a radius of 150 miles, but in some cases up to 350 miles, from
our manufacturing facilities. Our concrete pressure pipe is used in projects for regional water authorities and districts, cities, counties, municipalities, port authorities, private companies and industrial clients,
including power plants, and is typically shipped within a radius of 500 miles from our manufacturing facility.
Water Pipe & Products Segment
Our water transmission pipe products are sold to some of the largest waterworks distributors and contractors. Our Water Pipe & Products segment has significant sales through distributors, including Core &
Main, a key customer that accounted for 18% and 16% of our consolidated net sales in 2021 and 2020, respectively. We also sell to utility contractors that work on new or replacement pipeline projects, primarily in
the East, South and Midwest of the United States. DIP is typically shipped within a radius of 1,000 miles.
Competition
Drainage Pipe & Products Segment
Our competitors in our Drainage Pipe & Products Segment include Rinker Materials (a division of the QUIKRETE Companies) and Oldcastle Infrastructure (a unit of CRH plc), as well as numerous regional and
local manufacturers servicing various geographies. Additionally, our drainage pipe products compete with high density polyethylene, or HDPE, and polypropylene pipe products where such materials would serve as
an appropriate substitute for our product.
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Within Canada, our concrete pressure pipe products compete with DECAST (formerly Munro Concrete Products, Ltd.) and several other American and Canadian competitors. Our concrete-lined pressure
pipe also competes with pressure pipe made from other materials such as fiberglass, HDPE and PVC.
Water Pipe & Products Segment
Our two largest competitors in DIP manufacturing are McWane, Inc. and American Cast Iron Pipe Company. Our DIP products also compete with polyvinyl chloride, or PVC, and HDPE pipe and, when pricing
achieves certain levels, we may also compete with foreign manufacturers of DIP. Our national network of fabrication products competes with regional and local providers of those products and services.
Sales, Marketing and Distribution
Our products are generally made to order, but certain of our Drainage concrete pipe and DIP products are made to inventory. We have established target levels of inventory for certain products that we attempt to
keep available at our manufacturing facilities to meet customer demand. Inventories are held at manufacturing facilities and, to a lesser extent, at distribution yards.
Our structural precast products, most precast concrete products and concrete pressure pipe are customized products that are made to order. Our order backlog for precast concrete products is typically two to six
months. Our order backlog for concrete pressure pipe and other precast offerings (bridge products) is approximately three to eighteen months depending on the demand in the geographic area for specific products.
We seek to attract and retain customers through customer service and technical expertise, as well as product quality, our product and service offerings and competitive pricing. Our market strategy for products
with non-residential end users is centered on building and maintaining strong customer relationships rather than traditional advertising.
We maintain in-house technical sales, engineering and field service teams which provide customers technical expertise and support to assist them in finding the right product or solution for their specific need.
Each of our operating segments has its own sales force. Overall, we employ approximately 275 sales and related support professionals. Our sales force and customer service functions are staffed by experienced
professionals who have been trained in our product lines, processes and systems, and who maintain touch points with engineers, contractors, builders, and distributors. Additionally, we have a staff of more than
150 engineers that we employ to work in concert with our sales force to help develop effective product solutions for our customers.
We sell our DIP products and our fittings and fabricated products primarily through distributors. Our drainage pipe, concrete pressure pipe, and precast concrete products are mostly sold direct to customers who
are installing such products for or are the end users of such products. Drainage pipe, concrete pressure pipe, and certain precast products are sold through a bidding process in which we seek to place the most
competitive bid. We undertake marketing efforts through our participation in trade shows and through our website. We outsource many of our product deliveries by using a combination of dedicated carriers and
other third-party carriers.
Raw Materials and Inputs
The primary material for our drainage pipe and precast concrete products and our concrete pressure pipe is concrete, which consists of water, cement and aggregates. Another key input for our products is steel,
which is used to provide reinforcement within our drainage pipe and precast concrete products. Our DIP is largely made from iron melted from recycled scrap metals. Other key materials for our DIP include foundry
coke and certain additives, such as alloys.
Most of our raw materials are widely available commodities. While we have experienced challenges in obtaining certain materials during 2021 as a result of a globally challenged supply chain environment, we
have not experienced any significant shortages of raw materials. To the extent we do not produce any raw materials,
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when and where possible, we try to purchase raw materials from the source, and because of their low value-to-weight ratios, we generally try to source our raw materials in the vicinity of our facilities. We usually
purchase the raw materials we need in the spot market, except where we anticipate a significant need of materials for a specific project. Other than certain contracts for key materials, including cement and steel,
we typically do not enter into long-term supply contracts with our suppliers that require us to purchase particular quantities or to pay particular prices.
We purchase our steel from a number of different suppliers, but most suppliers are based in the United States in order to comply with “Buy America” government contract requirements placed on our customers.
We endeavor to purchase these steel supplies from the entity which is as close as possible to the manufacturer.
To manufacture DIP, fabricated products and fittings, we purchase scrap metal directly from qualified scrap sources near our foundry sites in the United States and Mexico. We utilize certain categories of scrap
metal, primarily shredded automobile bodies, plate & structural, and cast iron. We purchase foundry coke from two merchant coke producers in the United States, both located in Birmingham, Alabama. Major alloys
and additives are procured from both domestic and foreign sources based on a semiannual bid process.
Seasonality
The construction industry, and therefore demand for our products, is typically seasonal and dependent on weather conditions, with periods of snow or heavy rain negatively affecting construction activity. For a
more detailed discussion, see the sections titled Item 1A., Risk Factors, and Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for a discussion of the seasonality of
our business.
Team Members
As of December 31, 2021, we had 4,824 team members, 1,434 of which were salaried and 3,390 of which were hourly. Of the total number of team members, 4,272 were located in the United States, 277 were
located in Canada and 275 were located in Mexico. The number of hourly workers we employ varies to match our labor needs during periods of fluctuating demand and varies seasonally in certain regions. We also
contract to hire temporary workers as needed to meet production goals.
As of December 31, 2021, approximately 33% of our workforce is covered by collective bargaining agreements, and approximately 46% of these team members are included in collective bargaining agreements
that expire within one year of December 31, 2021. We have not had any recent union-organized work stoppages in the United States, Canada or Mexico. We believe that we have good relationships with our team
members and with the unions representing our team members.
Health and Safety
We believe there is nothing more important than the health, safety and wellness of our team members; we believe this commitment is both a moral imperative and is fundamental to driving success in our
business. We are committed to providing a safe and healthy working environment for our team members and are constantly looking for ways to improve our facilities and processes in order to better serve these
goals. We also provide team members and their families with access to programs that promote their health and wellness, including wellness and disease prevention programs, employee assistance programs, and
comprehensive health care benefits. In response to the COVID-19 pandemic, we implemented numerous policies and initiatives to assure that our team members, many of whom were essential infrastructure
workers, could operate in an environment that promoted each individual’s health and safety, to provide paid leave and other benefits to employees directly impacted by the pandemic, and to allow those team
members whose roles enabled them to work from home to do so. We have continued many of these policies and initiatives and are continuing to evaluate the need for such policies in the future.
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Compensation and Benefits
In order to attract, retain, and engage our team members to drive our success, we provide compelling compensation and benefit programs that are competitive in our markets. Our programs include a
combination of some or all of the following: competitive market-based pay, bonuses, stock awards, defined contribution retirement plans with Company matching contributions, healthcare and insurance benefits,
health savings and flexible spending accounts, wellness programs, company-paid life insurance, paid time off, family leave, employee assistance programs, tuition assistance, flexibility to allow work from home in
certain situations including in response to the COVID-19 pandemic, reimbursement for some health and fitness programs, and many others. These benefits can vary in our Canada and Mexico locations based on
local availability and regulations. We are committed to ensuring equal pay for equal work regardless of gender, race or ethnicity.
Talent Development
We know that our continued success depends on our ability to engage with our team members and grow them into the future leaders our business needs. To that end, we have implemented robust learning
management tools and training programs focused on developing our team members. Recent areas of focus have included implementation of a comprehensive program to develop skills for our sales professionals
as well as development of a front-line leader training system for our plant-level supervisors. In addition, we periodically conduct a survey of our team members to determine where they are engaged and where we
can improve.
Diversity and Inclusion
One of our core values is respect for people, and that includes providing a workplace that is committed to valuing diversity and inclusion of people of all backgrounds, regardless of race, ethnicity, gender, age,
religious belief, disability, sexual orientation, gender identity, or cultural background. As of December 31, 2021, underrepresented minorities (defined as those individuals who identify as Black/African American,
Hispanic/Latinx, Native American, Pacific Islander and/or two or more races) represented 49.43% of our team members, and women represented approximately 9.7% of our workforce.
Intellectual Property
We own various United States and foreign patents, registered trademarks, trade names and trade secrets and applications for, or licenses in respect of, the same, that relate to our various business lines
including a number of innovative technologies relating to storm water management. The U.S. Pipe name has been a recognized manufacturer of DIP for more than 115 years. We also license intellectual property
for use in certain of our products from unaffiliated third parties. We believe that our patents, trademarks, trade names and trade secrets are adequately protected and that any expiration or other loss of one or more
of our patents or other intellectual property rights would not have a material adverse effect upon our business, financial condition or results of operations.
Environmental, Health and Safety Matters
We are subject to a broad range of federal, state, provincial, local and foreign laws and regulations governing health and safety or the protection of the environment and natural resources, including, for example:
•
the federal Resource Conservation and Recovery Act, or RCRA, and comparable state laws that impose requirements for the generation, handling, transportation, treatment, storage, disposal and cleanup
of waste from our operations;
•
the federal Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, also known as “Superfund,” and comparable state laws that govern the cleanup of hazardous
substances that may have been released at properties currently or previously owned or operated by us or locations which we have sent waste for disposal;
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•
the federal Clean Water Act, or CWA, and analogous state laws and regulations that can impose detailed permit requirements and strict controls on discharges of waste water from our facilities; and
•
the federal Clean Air Act, or CAA, and comparable state laws and regulations that impose obligations related to air emissions, including federal and state laws and regulations to address greenhouse gas,
or GHG, emissions.
Environmental pre-construction and operating permits are, or may be, required for certain of the Company’s operations, and such permits are subject to modification, renewal, and revocation. It is likely that we
will be subject to increasingly stringent environmental standards in the future, particularly under air quality and water quality laws, as well as laws enacted to reduce climate change. It is also likely that we will be
required to make additional expenditures, which could be significant, relating to environmental matters such as pollution controls and carbon emissions, on an ongoing basis. As our operations involve, and have
involved, the handling, transport and distribution of materials that are, or could be classified as, toxic or hazardous or otherwise as pollutants, there is some risk of contamination and environmental damage inherent
in our operations and the materials and products we handle and transport. Consequently, we are subject to environmental laws that impose liability for historical releases of hazardous substances. We are also
subject to a variety of health and safety laws and regulations dealing with occupational health and safety. Manufacturing sites can be inherently dangerous workplaces. Our sites often put our employees and others
in close proximity with large pieces of mechanized equipment, moving vehicles, and manufacturing processes, and highly regulated materials and there is inherent risk of related liabilities in our operations. See
Item 1A. Risk Factors.
We regularly monitor and review our operations, procedures, and policies for compliance with existing laws and regulations, changes in interpretations of existing laws and enforcement policies, new laws that are
adopted, and new laws that we anticipate will be adopted that could affect our operations. For health and safety regulations, the Occupational Safety and Health Administration, or OSHA, sets minimum standards;
we have adopted programs internally that are intended to meet or exceed these requirements.
Despite our compliance efforts, risk of environmental, health and safety liability is inherent in the operation of our business, as it is with other companies engaged in similar businesses, and there can be no
assurance that environmental, health and safety liabilities will not have a material adverse effect on us in the future.
Our consolidated financial statements include estimated liabilities for future costs arising from environmental issues relating to our properties and operations. As of December 31, 2021, the Company had accrued
environmental liabilities of approximately $1.3 million. See Note 2 to the consolidated financial statements.
We have been named as a potentially responsible party, or PRP, at sites identified by the EPA or state regulatory agencies for investigation and remediation under CERCLA, or comparable state statutes,
generally referred to as Superfund sites, including Sylacauga, AL, North Birmingham, AL, Portland, OR and Chattanooga, TN. With respect to these Superfund sites for which we have received PRP notices, we are
entitled to contractual indemnity from a third party, subject to the terms of the indemnity provisions contained in the relevant agreement. Our estimates of current liabilities factor in these indemnification rights and
our assessment of the likelihood that the indemnitor will fulfill its obligations with respect to liabilities relating to such sites. To date, the indemnifying party has been fulfilling its indemnification obligation with respect
to those Superfund sites, and we have no reason to believe it will not continue to do so. However, in the future, we can provide no assurance that the indemnifying party will continue to honor its obligations, or that
the existing indemnities will be sufficient to cover the liabilities for such matters.
Available Information
Our web site address is www.forterrabp.com. Information contained on our website or connected thereto does not constitute a part of this Annual Report on Form 10-K or any other filing we make with the
Securities and Exchange Commission, or the SEC. We make available on this web site under the “Investor Relations” section, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-
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K, and amendments to those reports, as soon as reasonably practicable after we electronically file those materials with, or furnish them to, the SEC. The SEC also maintains a web site that contains reports, proxy
and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We also make available free of charge on our website our Corporate Governance
Guidelines, our Code of Ethics, and the Charters of our Audit Committee, Nominating and Corporate Governance Committee, and Compensation Committee of our Board of Directors.
Item 1A. RISK FACTORS
Our business, operations and financial condition are subject to various risks and uncertainties. We have described below significant factors that may adversely affect our business, operations, financial
performance and condition or industry. Additionally, the COVID-19 pandemic has amplified many of the other risks discussed below to which we are subject and, given the unpredictable, unprecedented, and fluid
nature of the pandemic, it may also materially and adversely affect our business, financial condition, and operating results in ways that are not currently anticipated by or known to us or that we do not currently
consider to present material risk.
Additionally, the COVID-19 pandemic has amplified many of the other risks discussed below to which we are subject and, given the unpredictable, unprecedented, and fluid nature of the pandemic, it may also
materially and adversely affect our business, financial condition, and operating results in ways that are not currently anticipated by or known to us or that we do not currently consider to present material risk. You
should carefully consider these factors, together with all of the other information in this Annual Report on Form 10-K and in other documents that we file with the SEC, before making any investment decision about
our securities. These risks and uncertainties are not the only ones we face. Additional risk and uncertainties presently unknown to us or currently deemed immaterial also may impair our business operations.
Adverse developments or changes related to any of the factors listed below or others could materially and adversely affect our business, financial condition, results of operations, future prospects and growth.
Risk Factor Summary
This risk factor summary contains a high-level overview of certain of the principal factors and uncertainties that make an investment in our securities risky, including risks related to our industry and end
markets; risks related to our business; production, supply chain and systems related risks; employee specific risks; miscellaneous business risk; indebtedness and liquidity related risks; risks related to the proposed
merger; risks related to ownership of our common stock; and risks related to our tax receivable agreement. The following summary is not complete and should be read together with the more detailed discussion of
these and the other factors and uncertainties that follows before making an investment decision regarding our securities. The principal factors and uncertainties that makes an investment in our securities risky
include:
Risks Related to Our Industry and End Markets
•
Our business is based in significant part on government-funded infrastructure projects and building activities, and any reductions or re-allocation of spending or related subsidies in these areas could have a
material adverse effect on us.
•
Residential and non-residential construction activity is cyclical and influenced by many factors, and any reduction in the activity in one or both of these markets could have a material adverse effect on us.
•
We engage in a highly competitive business and any failure to effectively compete could have a material adverse effect on us.
•
Changes in construction activity levels in Texas could have a material adverse effect on us.
Risks Related to Our Business
•
Our business, results of operations, financial condition, cash flows and stock price have been and in the future may be adversely affected by the COVID-19 pandemic.
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•
Our dependence on key customers with whom we do not have long-term contracts and consolidation within our customers’ industries could have a material adverse effect on us.
•
The seasonality of our business and its susceptibility to severe and prolonged periods of adverse weather and other conditions could have a material adverse effect on us.
Production, Supply Chain and Systems Related Risks
•
Decreased availability or increases in the cost of raw materials could have a material adverse effect on us.
•
A material disruption or capacity constraints at one or more of our manufacturing facilities or in our supply chain could have a material adverse effect on us.
•
Delays in construction projects and any failure to manage our inventory could have a material adverse effect on us.
Employee Specific Risks
•
Labor disruptions and other union activity could have a material adverse effect on us.
•
We depend on the services of key executives and any inability to attract and retain key management personnel could have a material adverse effect on us.
•
Any failure by us or the contractors with which we work to retain and attract necessary personnel or contract labor could have a material adverse effect on us.
Miscellaneous Business Risks
•
Cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our reputation and adversely impact our business and financial performance.
•
We are subject to increasingly stringent environmental laws and regulations, and any failure to comply with any current or future laws or regulations could have a material adverse effect on us.
•
Climate change and climate change legislation or regulations may adversely impact our business.
•
Legal and regulatory claims and proceedings could have a material adverse effect on us.
•
Any inability to successfully acquire businesses in the future could have a material adverse effect on us.
Indebtedness and Liquidity Related Risks
•
The terms of our debt could have a material adverse effect on us.
•
Our current indebtedness and any future indebtedness we may incur could have a material adverse effect on us.
•
Credit and non-payment risks of our customers could have a material adverse effect on us.
Risks Related to the Proposed Merger
•
We may not complete the proposed merger within the time frame we anticipate or at all, which could adversely affect our business.
•
Our business is subject to restrictions while the merger is pending.
•
The announcement and pendency of the merger may disrupt business relationships, lead to employee departures, or otherwise adversely affect our business.
Risks Related to Ownership of Our Common Stock
•
The trading price of our common stock has been and may in the future be volatile and could decline substantially.
•
The coverage of our business or our common stock by securities or industry analysts or the absence thereof could adversely affect our stock price and trading volume.
Risks Related to Our Tax Receivable Agreement
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•
We will be required to pay Lone Star for certain tax benefits, and these amounts are expected to be material.
•
We will not be reimbursed for any payments made to Lone Star under the tax receivable agreement in the event that the tax benefits are disallowed.
Risks Related to Our Industry and End Markets
Our business is based in significant part on government-funded infrastructure projects and building activities, and any reductions or re-allocation of spending or related subsidies in these areas
could have a material adverse effect on us.
Our business depends heavily on government spending for infrastructure and other similar building activities. As a result, demand for many of our products is heavily influenced by U.S. and Canadian federal
government fiscal policies and tax incentives and other subsidies, as well as state and municipal funding of projects. The infrastructure projects in which we participate are typically funded directly by governments
and/or privately-funded but are otherwise tied to or impacted by government policies and spending measures. Government infrastructure spending and governmental policies with respect thereto depend primarily
on the availability of public funds, which is influenced by many factors, including governmental budgets, public debt levels, interest rates, existing and anticipated and actual federal, state, provincial and municipal
tax revenues, government leadership and the general political climate, as well as other general macroeconomic and political factors. In addition, U.S. federal government funds may only be available based on
states’ willingness to provide matching funding, and state funding may not be available, particularly in light of the negative impact of the COVID-19 pandemic on state budgets. Government spending is often
approved only on a short-term basis and some of the projects in which our products are used require longer-term funding commitments. If government funding is not approved or funding is lowered, whether as a
result of poor economic conditions, lower than expected revenues, competing spending priorities or other factors, it could limit infrastructure projects available, increase competition for projects, result in excess
inventory and decrease sales, any of which could adversely affect the profitability of our business.
Additionally, certain regions or states may require or possess the means to finance only a limited number of large infrastructure projects and periods of high demand may be followed by years of little to no
activity. There can be no assurances that governments will sustain or increase current infrastructure spending and tax incentive and other subsidy levels, and any reductions thereto or delays therein could have a
material adverse effect on our business, financial condition and results of operations.
Residential and non-residential construction activity is cyclical and influenced by many factors, and any reduction in the activity in one or both of these markets could have a material adverse effect
on us.
Historically, demand for our products has been closely tied to residential construction and non-residential construction in the United States and Eastern Canada. Our success and future growth prospects
depend, to a significant extent, on conditions in these two markets and the degree to which these markets are strong in the future.
The construction industry and related markets are cyclical and have in the past been, and may in the future be, materially and adversely affected by general economic and global financial market conditions.
These factors impact not only our business, but those of our customers and suppliers as well. This influence is true with respect to macroeconomic factors within North America, particularly within our geographic
footprint in the United States and Eastern Canada. For example, in 2008, residential construction and non-residential construction activity dipped to historically low levels during the financial crisis. As a result,
demand for many of our products dropped significantly. More recently, the COVID-19 pandemic has impacted global supply chains, including pricing and availability of many of the materials used in residential
construction. Continued supply chain issues within the construction industry could adversely affect demand for our products.
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The markets in the construction industry in which we operate are also subject to other more specific factors. Residential construction activity levels are influenced by and sensitive to a number of factors,
including mortgage availability, the cost of financing a home (in particular, mortgage terms and interest rates), unemployment levels, household formation rates, gross domestic product, residential vacancy and
foreclosure rates, demand for second homes, existing housing prices, rental prices, housing inventory levels, building mix between single- and multi-family homes, consumer confidence, seasonal weather factors,
the available labor pool and government regulation, policy and incentives. Non-residential construction activity is primarily driven by levels of business investment, availability of credit and interest rates, as well as
many of the factors that impact residential construction activity levels.
We cannot control the foregoing factors, we cannot be certain that residential and non-residential construction activity will remain at current levels, and there can be no assurances regarding whether any
growth in these markets can be sustained. If construction activity in our markets, and more generally, does remain at current levels, or if there are future downturns, whether locally, regionally or nationally, it could
have a material adverse effect on our business, financial condition and results of operations.
We engage in a highly competitive business and any failure to effectively compete could have a material adverse effect on us.
The markets in which we sell our products are highly competitive. We face significant competition from, depending on the segment or product, domestic and imported products produced by local, regional,
national and international building product manufacturers, as well as privately owned single-site enterprises. Due in part to the costs associated with transporting our products to our customers, many of our sub-
markets are relatively fragmented and include a number of regional competitors. Our competitors include Rinker Materials (a division of QUIKRETE) and Oldcastle Infrastructure (a division of CRH plc), as well as
numerous regional and local competitors, in our Drainage Pipe & Products segment, and McWane, Inc. and American Cast Iron Pipe Company in our Water Pipe & Products segment.
Competition among manufacturers in our markets is based on many factors with significant emphasis on price. Our competitors may sell their products at lower prices because, among other things, they
possess the ability to manufacture or supply similar products and services more efficiently or at a lower cost or have built a superior sales or distribution network. Some of our competitors may have access to
greater financial or other resources than we do, which may afford them greater purchasing power, greater production efficiency, increased financial flexibility or more capital resources for expansion and
improvement. In addition, some of our competitors are vertically integrated with suppliers or distributors and can leverage this structure to their advantage to offer better pricing to customers. Furthermore, our
competitors’ actions, including restoring idled or expanding manufacturing capacity, or the entry of new competitors into one or more of our markets, particularly in the Drainage business where there are low
barriers to entry, could cause us to lower prices in an effort to maintain our customer base. Certain of our products, including gravity pipe, are volume manufacturing products that are widely available from other
manufacturers or distributors, with prices and volumes determined frequently based on participants’ perceptions of short-term supply and demand. Competitive factors, including industry overcapacity, could also
lead to pricing pressures. For example, competitors may choose to pursue a volume policy to continue utilizing their manufacturing facilities or in attempt to gain market share, each to the detriment of maintaining
prices. Excess product supply can result in significant declines in the market prices for these products, often within a short period of time. As a result, at times, to remain competitive, we may lower the price for any
one or more of our products to or below our production costs, requiring us to sacrifice margins or incur losses. Alternatively, we may choose to forgo product sales or cease production at one or more of our
manufacturing facilities. Conversely, at times when prices are maintained at higher levels, there is greater risk that foreign competitors may enter one or more of our markets, particularly with respect to DIP.
In addition to pricing, we also compete based on service, quality, range of products and product availability. Our competitors may be positioned to provide better service, including faster delivery time on
products, and thereby establish stronger relationships with customers and suppliers. Our competitors may also sell preferred products, improve the design and performance of their products, develop a more
comprehensive product portfolio, be better positioned to influence end-user product specifications or introduce new products with competitive
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prices and performance characteristics. While the majority of our products are not subject to frequent or rapid stylistic changes, trends do evolve over time, and our competitors may do a better job of predicting
market developments or adapt more quickly to new technologies or evolving customer requirements.
We also face competition from substitute and newly designed building products. For example, storm water pipe can be manufactured from concrete, steel, high-density polyethylene (HDPE), polypropylene
(PP) or polyvinyl chloride (PVC) and potable water transmission infrastructure can be manufactured using HDPE or PVC. The market share of HDPE and PP pipe, which compete with gravity pipe and concrete
pressure pipe for certain applications, and HDPE and PVC pipe, which compete with DIP for certain applications, have increased in recent years. Governments in the past have provided, and may continue in the
future, to provide incentives that support or encourage, or in certain instances pass regulations that require, the consideration or use of substitute products with which we compete. Lower costs and pricing of
substitute products may challenge our ability to achieve pricing for our products at a level that is consistent with our business plans. Some of the substitute products with which we compete may also offer longer
warranties than our typical product warranty, and we may face competitive pressures to offer longer warranties on our products, which could increase our exposure to claims in future years or cause us to lose
business. Additionally, new construction techniques and materials will likely be developed in the future. Increases in customer or market preferences for any of these products could lead to a reduction in demand
for our products, limit our ability to raise prices or otherwise adversely impact our competitive position.
Any failure by us to compete on price or service, to develop successful products and strategies or to generally maintain and improve our competitive position could have a material adverse effect on our
business, financial condition and results of operations.
Changes in construction activity levels in Texas could have a material adverse effect on us.
We currently conduct a significant portion of our business in Texas, which we estimate represented approximately 18% and 18% of our 2021 and 2020 net sales, respectively. Government-funded
infrastructure spending, as well as residential and non-residential construction activity in each of these areas has declined from time to time, particularly as a result of slow economic growth, whether in the energy
industry or otherwise. Local economic conditions depend on a variety of factors, including national economic conditions, local and state budgets, infrastructure spending and the impact of federal cutbacks. In
addition, Texas is susceptible to severe weather and flooding, which can interrupt, delay or otherwise impact the timing of projects. Any decrease in construction activity in Texas could have a material adverse
effect on our business, financial condition and results of operations.
A tightening of mortgage lending or mortgage financing requirements or other reductions in the availability of consumer credit or increases in its cost could have a material adverse effect on us.
We depend on net sales generated from residential construction activity. Most home sales in the U.S. and Eastern Canada are financed through mortgage loans, and a significant percentage of renovation
and other home repair activity is financed either through mortgage loans or other available credit. To the extent that the economy experiences a cyclical downturn, the financial position of many consumers may be
impacted and financial institutions may tighten their lending criteria, as occurred after the 2008 financial crisis, each of which can and did contribute to a significant reduction in the availability of consumer credit and
result in a significant reduction in total new housing starts in the U.S. and consequently, a reduction in demand for our products in the residential sector. Similarly, the rate of interest payable on any mortgage or
other form of credit will have an impact on the cost of borrowing. While base rates have remained relatively low in recent years, U.S. central bank authorities have indicated an intent to raise such rates in response
to inflationary pressures on the economy during 2022, which would increase the cost of borrowing, making the purchase of a home less attractive, which could reduce the number of new housing starts in the U.S.
and Eastern Canada. Any future tightening of mortgage lending or other reductions in the availability of consumer credit or increases in its cost, including as a result of rising interest rates and inflation, could have a
material adverse effect on our business, financial condition and results of operations.
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Risks Related to Our Business
Our business, results of operations, financial condition, cash flows and stock price have been and in the future may be adversely affected by the COVID-19 pandemic.
Our operations and business have been adversely affected and could in the future be materially and adversely affected, whether directly or indirectly, by the COVID-19 pandemic and the resulting weakening
of economic conditions in the United States and eastern Canada. Local, state, provincial and federal governmental authorities initially responded to the pandemic by implementing increasingly stringent measures in
geographies where we operate to help control the spread of the virus, including restrictions on movement such as quarantines, “shelter in place,” “stay at home” orders, and travel restrictions, as well as restricting
or prohibiting outright some or all forms of commercial and business activity, and other restrictions, including closures of school and childcare facilities. Certain states also enacted regulations that authorize local
officials to close businesses where there if a lack of safety precautions in place or signs that transmission of the virus at the workplace has occurred. Although we were and have continued to be categorized as
“essential” and therefore permitted to operate our facilities consistent with applicable local, state, provincial and federal orders, any changes in these governmental orders, including the imposition of new orders,
changes to the extent or the duration thereof, or any further, more severe, actions taken by governmental authorities or that we may choose to take whether required or not could have a material adverse effect on
our operations.
Our customers have been and could continue to be negatively impacted by the COVID-19 pandemic, including as a result of project delays and other adverse impacts on demand, which could result in
adverse impacts on our sales and have a material adverse effect on our business, results of operations and financial condition. Similarly, our suppliers and other parts of our supply chain have experienced and
could continue to experience disruptions and other adverse impacts as a result of the pandemic that could cause us to be unable to obtain key raw materials and supplies on a timely or cost-effective basis, or in
some cases, at all, any of which could result in our being unable to service our customers’ demands, and adversely affect our business and results of operations. For example, prices for certain of our raw material
costs, including costs for scrap metal, steel, cement, as well as other key materials needed in smaller amounts to produce and sell our products, such as coke, nitrogen gas, rubber gaskets, and magnesium
ferrosilicon, which have historically fluctuated depending on, among other things, overall market supply and demand and general business conditions, were negatively impacted by both global and industry-wide
supply chain disruptions, resulting in increases to our costs of goods sold and disruption in supply for some materials in certain of our areas. We have also encountered issues regarding timely receipt and in some
cases availability of certain of these raw materials.
The COVID-19 pandemic, including any actions we have taken in response, has disrupted our internal operations, including by heightening the risk that a significant portion of our workforce will suffer illness
or otherwise not be permitted or be unable to work, and required that certain of our employees work remotely, which has heightened certain risks, including those related to cybersecurity and internal controls. For
example, during the second quarter of 2020, a small number of employees tested positive for COVID-19, which required us to temporarily close a small number of our manufacturing facilities, and throughout 2021
we experienced increasing numbers of employees who tested positive for COVID-19 and were required to quarantine, which impacted our ability to operate our facilities efficiently. Additionally, we cannot predict
whether these conditions and concerns will continue or whether we will experience more significant or frequent disruptions in the future, including the complete closure of one or more of our facilities, which could
cause delays in our ability to produce and deliver products to our customers and cause us to suffer reputational harm and incur penalties and other types of damages if we are not able to meet contractual
obligations. In addition, in the event demand for our products is significantly reduced as a result of the COVID-19 pandemic and related economic impacts, we may need to assess different corporate actions and
cost-cutting measures, including reducing our workforce or closing one or more facilities, and these actions could cause us to incur costs and expose us to other risks and inefficiencies, including whether we would
be able to rehire our workforce or recommence operations at a given facility if our business experiences a subsequent recovery. A prolonged period of generating lower cash from operations or other pressures on
our liquidity could adversely affect our financial condition, the achievement of our strategic objectives or require us to seek additional capital, which may not be available on favorable terms or at all.
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The COVID-19 pandemic also adversely affected economies worldwide and significantly disrupted financial and other capital markets, causing a significant deceleration of economic activity. The continuing
impact of this outbreak on the U.S. and world economies is uncertain and, depending on the severity of future strains, the impact of responsive government measures and the efficacy of vaccines and vaccine roll-
outs, these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse. Although we initially took certain precautionary measures to preserve
liquidity, including borrowing under our ABL Facility and suspending non-essential capital expenditures, we have since ended these measures, repaid the amounts borrowed under the ABL Facility and caught up
on capital projects that were initially delayed early in the pandemic.
Considerable uncertainty still surrounds the COVID-19 virus and the pandemic's potential effects, and the extent and effectiveness of responses taken on local, national and global levels. While we expect
the pandemic and related events will continue to have a negative effect on us, the unpredictable and unprecedented nature and fluidity of current circumstances makes it impractical to identify all potential risks or
estimate the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies. However, our ability to conduct our business in the manner previously
or currently expected could be materially and adversely affected, and any of the foregoing risks and uncertainties as well as those that have not yet manifested themselves or been identified could have a material
adverse impact on our business, financial condition, results of operations and cash flows.
Our dependence on key customers with whom we do not have long-term contracts and consolidation within our customers’ industries could have a material adverse effect on us.
Our business is dependent on certain key customers. In 2021 and 2020, Core & Main, our largest customer accounted for 18% and 16% of our net sales, respectively. As is customary in our industry, we do
not enter into long-term contracts with many of our customers. As a result, our customers could stop purchasing our products, reduce their purchase levels or request reduced pricing structures at any time. We may
therefore need to adapt our manufacturing, pricing and marketing strategies in response to a customer who may seek concessions in return for its continued or increased business. In addition, a macroeconomic
downturn or any other cause of consolidation in the U.S. homebuilding industry or among our other customers, as occurred in the aftermath of the 2008 financial crisis when a number of smaller businesses went
out of business or were acquired, can significantly increase the market share and bargaining power of a limited number of customers and give them significant additional leverage to negotiate more favorable terms
and place greater demands on us. A loss of one or more customers or a meaningful reduction in their purchases from us or further consolidation within our end markets could have a material adverse effect on our
business, financial condition and results of operations.
The seasonality of our business and its susceptibility to severe and prolonged periods of adverse weather and other conditions could have a material adverse effect on us.
Demand for our products in some markets is typically seasonal, with periods of snow or heavy rain negatively affecting construction activity. For example, sales of our products in Canada and the Northeast
and Midwest regions of the United States are somewhat higher from spring through autumn when construction activity is greatest. Construction activity declines in these markets during the winter months in
particular due to inclement weather, frozen ground and fewer hours of daylight. Construction activity can also be affected in any period by adverse weather conditions such as hurricanes, severe storms, torrential
rains and floods, natural disasters such as fires and earthquakes and similar events, any of which could reduce demand for our products, push back existing orders to later dates or lead to cancellations.
Furthermore, our ability to deliver products on time or at all to our customers can be significantly impeded by such conditions and events, such as those described above. Public holidays and vacation periods
constitute an additional factor that may exacerbate certain seasonality effects, as building projects or industrial manufacturing processes may temporarily cease. These conditions, particularly when unanticipated,
can leave both equipment and personnel underutilized. Additionally, the seasonal nature of our business has led to variation in our quarterly results in the past and may continue to do so in the future. This general
seasonality of our business and any severe or prolonged adverse weather conditions or other similar events could have a material adverse effect on our business, financial condition and results of operations.
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The use of our products is often affected by various laws and regulations in the markets in which we operate, any of which may have a material adverse effect on us.
The use of many of our products is subject to approvals by municipalities, state departments of transportation, engineers and developers. These approvals and specifications, including building codes, may
affect the products our customers or their customers (the end users) are allowed or choose to use, and, consequently, failure to obtain or maintain such approvals or changes in building codes may affect the
saleability of our products. Changes in applicable regulations governing the sale of some of our products or the failure of any of our products to comply with such requirements could increase our costs of doing
business, reduce sales or otherwise have a material adverse effect on our business, financial condition and results of operations.
We are subject to increasingly stringent environmental laws and regulations, and any failure to comply with any current or future laws or regulations could have a material adverse effect on us.
We are subject to federal, state, provincial, local and foreign laws and regulations governing the protection of the environment and natural resources, including those governing air emissions, wastewater
discharges and the use, storage, discharge, handling, disposal, transport and cleanup of solid and hazardous materials and wastes. We are required to obtain permits from governmental authorities for certain
operations, and if we expand or modify our facilities or if environmental laws change, we could be required to obtain new or modified permits.
Environmental laws and regulations, including those related to energy use and climate change, tend to become more stringent over time, and any future laws and regulations could have a material impact on
our operations or require us to incur material additional expenses to comply with any such future laws and regulations. Future environmental laws and regulations may cause us to modify how we manufacture and
price our products or require that we make significant capital investments to comply. For example, our manufacturing processes use a significant amount of energy, and increased regulation of energy use to
address the possible emission of greenhouse gases could materially increase our manufacturing costs or require us to install emissions control or other equipment at some or all of our manufacturing facilities.
If we fail to comply with any existing or future environmental laws, regulations or permits, we could incur fines, penalties or other sanctions and suffer reputational harm. In addition, we could be held
responsible for costs and damages arising from claims or liabilities under environmental laws and regulations, including with respect to any exposure to or release of hazardous materials or contamination at our
facilities, whether presently or previously leased, operated, or owned, or at third-party waste disposal sites. We could also be subject to third-party claims from individuals for property damage, personal injury or
nuisance if any releases from our property were to cause contamination of the air, soil or groundwater of areas near our facilities. These laws and regulations may also require us to investigate and, in certain
instances, remediate contamination. Some of our sites have a history of industrial use, and while we apply strict environmental operating standards and undertake extensive environmental due diligence in relation
to our facilities and acquisitions, some soil and groundwater contamination has occurred in the past at a limited number of sites.
As of December 31, 2021, we had accrued approximately $1.3 million for environmental liabilities. Additionally, we cannot completely eliminate the risk of future contamination. Any costs or other damage
related to existing or future environmental laws, regulations or permits or any violations thereof could expose us to significant financial losses as well as civil and criminal liabilities, any of which could have a
material adverse effect on our business, financial condition and results of operations.
Climate change and climate change legislation or regulations may adversely impact our business.
Many of our products, particularly in our Drainage Pipe & Products segment, are made from or use concrete, which utilizes Portland cement as a raw material, a material whose manufacturing process
involves the emission of carbon dioxide, a greenhouse gas that scientists have attributed as a cause of climate change. Our products are also heavy and require transportation from our facilities to the site where
they are used, which consumes energy. A number of governmental bodies have finalized, proposed or are contemplating legislative
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and regulatory changes in response to the potential effects of climate change, which could lead to additional legislative and regulatory changes in those countries, including by means of required reporting of
greenhouse gas emissions, the use of alternative fuels, the use of carbon credits (including a "cap and trade" system) and/or a carbon tax. The U.S and Canada have agreed to the Paris Agreement, in connection
with the United Nations Framework Convention on Climate Change, in which the signatories aim to reduce greenhouse gas emissions, or GHGs, as soon as possible and achieve a position of net zero GHGs by
2050. In the U.S., President Biden has stated his commitment to taking action to address climate change, including by rejoining the Paris Agreement, announcing goals to achieve a 50-52% reduction in GHGs from
2005 levels by 2030, a whole-of-government initiative supported by his National Climate Task Force, and by issuing various executive orders addressing climate change policy, including an executive order in
December 2021 directing the federal government to achieve net-zero greenhouse gas emissions by 2050. Based on this focus, it is possible that environmental regulators and other agencies may use their rule-
making authority and procurement decisions to further address climate change Although it is uncertain at this time precisely what actions various governmental bodies will take early to address the effects of climate
change and to achieve the goals outlined in various agreements, including in what timeframe those actions would be implemented, it seems clear that changes to regulate carbon emissions are a key focus for the
Biden Administration and other governmental entities, including California, which has had a cap and trade system in place since 2012. In light of the uncertainty around what regulations will be implemented, we
cannot at this time reasonably predict what the costs of any future compliance requirements may be, but it is likely our costs will increase in relation to any climate change legislation and regulation concerning
greenhouse gases, which could have an adverse effect on our future financial position, results of operations or cash flows.
Climate change may also have adverse physical or financial impacts on our business to the extent that it causes more severe or more frequent major storm events, flooding, drought-induced wildfires, or
other shifts in weather patterns. Increases in the intensity and frequency of acute weather events have been linked to climate change, and this risk may increase to the extent global warming continues or is
unabated. These types of extreme weather events may include disruptions to operations or production, disruptions to supply chains or damage to our physical plants, which could lead to reduced financial
performance of our business.
In addition, regardless of whether governmental bodies enact legislation to address climate change and reduce GHGs, the public perception of carbon-intensive industries may change adversely over time
and additional focus on environmental, social and governance issues by the public and/or investors may harm our business as it could damage our reputation, require us to expend resources in reducing our net
carbon emissions, or reduce demand for our products, which could adversely impact our results of operations and cash flows.
We are subject to health and safety laws and regulations, and the costs to comply with, or any failure to comply with, any current or future laws or regulations could have a material adverse effect on
us.
Manufacturing sites are inherently dangerous workplaces. Our sites often put our employees and others in close proximity with large pieces of mechanized equipment, moving vehicles, chemical and
manufacturing processes, heavy products and items and highly regulated materials. As a result, we are subject to a variety of health and safety laws and regulations dealing with occupational health and safety.
Unsafe work sites have the potential to increase employee turnover and raise our operating costs. Our safety record can also impact our reputation. We maintain functional groups whose primary purpose is to
ensure we implement effective work procedures throughout our organization and take other steps to ensure the health and safety of our work force, but there can be no assurances these measures or other
measures we may take in the future will be successful in preventing injuries, including severe injuries and fatalities, or violations of health and safety laws and regulations. Any failure to maintain safe work sites or
violations of applicable law could expose us to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on our business, financial
condition and results of operations.
Warranty and related claims could have a material adverse effect on us.
We generally provide warranties on our products against defects in materials and workmanship, the costs of which could be significant. Many of our products such as gravity pipe are buried underground and
incorporated
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into a larger infrastructure system, such as a city’s or municipality’s water transmission system, or built into the fabric of a building or dwelling. In most cases, it is difficult to access, repair, recall or replace these
products. Additionally, some of our products, such as our pressure pipe, which is used in nuclear and coal-fired power generation factories, are used in applications where a product failure or construction defect
could result in significant project delay, property damage, personal injury or death or could require significant remediation expenses. Because our products, including discontinued products, are long lasting, claims
can also arise many years after their manufacture and sale. In certain cases, we may also offer warranties for longer periods now for certain products to compete with certain substitutes, which could increase the
number, size, and frequency of warranty claims in the future. Product failures may also arise due to the quality of the raw materials we purchase from third-party suppliers or the quality of the work performed by our
customers, including installation work, matters for which we have little to no control, but which may still subject us to a warranty claim. We may also assume product warranty or other similar obligations in
acquisition transactions regarding the products sold by the acquired businesses prior to the transaction date for which we are not indemnified pursuant to the terms of the relevant transaction documentation. Our
quality control systems and procedures and those of our suppliers and customers cannot test for all possible conditions of use or identify all defects in the design, engineering or specifications of one of our products
or the raw materials we use before they are put to their intended purpose. Therefore, there can be no assurances that we will not supply defective or inferior products that cause product or system failure, which
could give rise to potentially extensive warranty and other claims for damages, as well as negatively impact our reputation and the perception of our product quality and reliability. While we have established
reserves for warranty and related claims that we believe to be reasonable, these claims may exceed our reserves and any such excess and any negative publicity and other issues related to such claims could have
a material adverse effect on our business, financial condition and results of operations.
Sharing our brand name and logo could have a material adverse effect on us.
We share the “Forterra” brand with the operator of HeidelbergCement's former building products business in the United Kingdom, or Forterra UK, a public company listed on the London FTSE. Forterra UK is
no longer affiliated with us and, to our knowledge, operates solely in the United Kingdom. We have no control over Forterra UK’s use of the “Forterra” name and logo in Europe. Any actions or negative publicity
related to Forterra UK and its products could have a material adverse effect on our business, financial condition and results of operations.
Production, Supply Chain and Systems Related Risks
Decreased availability or increases in the cost of raw materials could have a material adverse effect on us.
Our ability to offer our products to our customers is dependent upon our ability to obtain adequate supplies of raw materials at reasonable costs, such as cement, aggregate, steel and scrap iron. Raw
material prices for certain raw materials that are key to our products, such as steel and scrap metal, have been volatile in recent years, and the cost of some of our most critical raw materials was significantly
increased in 2021 over prior years as the demand for such raw materials was significantly inflated. Increased demand for these materials could lead to the continued In addition, changes in trade policy can also
impact the price and availability of raw materials. In particular, changes in U.S. trade policy, including the imposition of any tariffs by the U.S. or foreign governments, may negatively impact the availability and price
of raw materials used in our production. In particular, in 2018 and 2019, the U.S. government imposed tariffs and quotas on certain imported steel articles, and other countries, such as Canada, have implemented
retaliatory tariffs on certain U.S. imports, including steel. These actions resulted in increased prices for both U.S. and non-U.S. steel, one of our main raw material inputs, and the continued imposition of these
tariffs, increases in tariff rates, additional tariffs on other goods, or further retaliatory actions from other governments may result in higher costs for us, and there can be no assurance we will be able to pass any of
the increases in raw material costs directly resulting from the tariff to our customers. Such actions may also result in more difficulty or the inability to obtain needed materials.
Suppliers are also subject to their own viability concerns from economic, market and other pressures. In particular, many suppliers may decrease capacity during financial downturns or due to other market
factors such as depressed prices. This decreased capacity, along with strong global demand for certain raw materials, has at
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times caused and may continue to cause tighter supply and significant price increases. Factors such as adverse weather conditions and other natural disasters, as well as political and other social instability, have
and will continue to disrupt raw material supplies and impact prices.
Although we have agreements with our raw material suppliers, these agreements are generally terminable by either party on limited notice or contain prices that are based upon the volume of our total
purchases. To the extent agreements with any of our raw material suppliers are terminated or we need to purchase additional raw materials in the open market, there can be no assurance that we could timely find
alternative sources in reasonable quantities or at reasonable prices. Furthermore, given the global issues with supply chains caused by the ongoing COVID-19 pandemic, certain raw materials may be difficult to
acquire at all or may be delayed in their delivery, which may cause delays in our ability to meet production schedule for our customers and timely deliver our products. In addition, sudden or unanticipated changes
in sources for certain raw materials, such as cement, may require us to engage in testing of our products for quality assurance, which also could cause delays in our ability to meet our production schedule and
timely deliver products. Changes in U.S. trade policy and reactions of other governments to those changes could also negatively impact the availability of certain raw materials, such as steel, as the demand for
U.S. steel could increase as a result of these changes. The inability to obtain any raw materials or unanticipated changes with respect to our suppliers could negatively impact our ability to manufacture or deliver
our products and to meet customer demands.
We are susceptible to raw material price fluctuations. In recent years, prices of the raw materials we use have at times fluctuated and may be susceptible to significant price fluctuations in the future. For
example, in 2021, according to industry average prices, the costs of our scrap steel, a major input in DIP, were on average at least 50% higher than in 2020 and much higher than the average price of each of the
prior five years. Because of the volatility of these prices, we cannot predict whether the trend of inflation will continue during 2022 and beyond. We have hedged our positions with respect to certain raw materials in
the past and may do so in the future, but we currently have no hedging in place regarding our raw material needs and are therefore more susceptible to any short-term price fluctuations. We generally attempt to
pass increased costs, including higher raw material prices and government imposed costs, on to our customers, but the timing between acceptance of a customer order and the purchase of raw materials needed to
fulfill such order, pricing pressure from our competitors, the market power of our customers or other pricing factors may limit our ability to pass on such price increases. If we cannot fully-offset increases in the cost
of raw materials through other cost reductions, or recover these costs through price increases or otherwise, we could experience lower margins and profitability, which could have a material adverse effect on our
business, financial condition and results of operations.
A material disruption or capacity constraints at one or more of our manufacturing facilities or in our supply chain could have a material adverse effect on us.
We own and operate manufacturing facilities of various ages and levels of automated control and rely on a number of third parties as part of our supply chain, including for the efficient distribution of products
to our customers. Any disruption at one of our manufacturing facilities or within our supply chain could prevent us from meeting demand or require us to incur unplanned capital expenditures. Older facilities and
equipment are generally less energy efficient and are at an increased risk of breakdown or equipment failure, resulting in unplanned downtime. Any unplanned downtime at our facilities may cause delays in
meeting customer timelines, result in damages claims, including liquidated damages, or cause us to lose or harm customer relationships. Additionally, we require specialized equipment to manufacture certain
products, and if any of our manufacturing equipment fails, the time required to repair or replace this equipment could be lengthy, which could result in extended downtime at the affected facility. Any unplanned
repair or replacement work can also be very expensive. Moreover, manufacturing facilities can unexpectedly stop operating because of events unrelated to us or beyond our control, including fires and other
industrial accidents, floods and other severe weather events, natural disasters, environmental incidents or other catastrophes, utility and transportation infrastructure disruptions, shortages of raw materials, and
acts of war or terrorism. Work stoppages, whether union-organized or not, can also disrupt operations at manufacturing facilities. Furthermore, we are generally responsible for delivering products to the customer
and, while we deliver a small percentage of our products directly to the customer using our own fleet, we outsource this function and depend on third parties to deliver the vast majority of our products, primarily by
truck with some reliance on rail where possible. Any shortages in trucking or rail capacity or any
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increase in the cost thereof, whether as a result of strikes, slowdowns, a shortage of drivers, other disruption to the highway or rail systems, or other unrelated transportation issues could limit our ability to deliver
our products in a timely and cost-effective manner or at all. Any material disruption at one or more of our facilities or those of our customers or suppliers or otherwise within our supply chain, whether as a result of
downtime, facility damage, an inability to deliver our products or otherwise, could prevent us from meeting demand, require us to incur unplanned capital expenditures or cause other material disruption to our
operations, any of which could have a material adverse effect on our business, financial condition and results of operations.
Delays in construction projects and any failure to manage our inventory could have a material adverse effect on us.
Many of our products are used in water transmission and distribution projects and other large-scale construction projects which generally require a significant amount of planning and preparation before
construction commences. However, construction projects can be delayed and rescheduled for a number of reasons, including unanticipated soil conditions, adverse weather or flooding, changes in project priorities,
financing issues, difficulties in complying with environmental and other government regulations or obtaining permits and additional time required to acquire rights-of-way or property rights. These delays or
reschedulings may occur with too little notice to allow us to replace those projects in our manufacturing schedules or to adjust production capacity accordingly, creating unplanned downtime, increased costs and
inefficiencies in our operations and increased levels of excess or obsolete inventory. Additionally, we maintain an inventory of certain products that meet standard specifications and are ultimately purchased by a
variety of end users. However, our demand forecasts are not always accurate and unexpected changes in demand for these products, whether project-driven, because of a change in preferences or otherwise, can
lead to increased levels of excess or obsolete inventory. Any delays in construction projects and our customers’ orders or any inability to manage our inventory, which can lead to impairment charges, could have a
material adverse effect on our business, financial condition and results of operations.
Increased costs of energy could have a material adverse effect on us.
We use significant amounts of energy, including electricity, natural gas and gasoline, in the manufacturing, transportation, distribution and sale of our products, and the related expense is significant. While
we have benefited from the relatively low cost of electricity and natural gas in recent years, energy prices have been and may continue to be volatile and these reduced prices may not continue. Prices for such
energy products may also increase due to global conflicts and actions taken in response to them. In addition, proposed or existing government policies, including those to address climate change by reducing
greenhouse gas emissions or the effects of hydraulic fracturing could result in increased energy costs. In addition, factors such as international political and military instability, adverse weather conditions and other
natural disasters may disrupt fuel supplies and increase prices in the future. Additionally, because we and other manufacturers in our industry are often responsible for delivering products to the customer, we are
further exposed to increased energy prices as a component of our transportation costs. While we generally attempt to pass increased costs, including higher energy costs, on to our customers, pricing pressure
from our competitors, the market power of our customers or other pricing factors may limit our ability to do so, and any increases in energy prices could have a material adverse effect on our business, financial
condition and results of operations.
Our business and financial performance could be adversely impacted based on disruptions, delays, outages of our information technology systems and computer networks.
Our manufacturing facilities as well as our sales and service activities depend on the efficient and uninterrupted operation of complex and sophisticated information technology systems and computer
networks, which are subject to failure and disruption. These and other problems may be caused by system updates, natural disasters, malicious attacks, human error, accidents, power disruptions,
telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins or other similar events. Additionally, because we have grown through various acquisitions, we have
integrated and are integrating a number of disparate information technology systems across our organization, certain of which may be outdated and due for replacement, further increasing the likelihood of
problems. We may in the future replace and integrate systems or
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implement new technology systems, but these updates may not be successful, they may create new issues we currently do not face, or significantly exceed our cost estimates.
We outsource certain portions of the operations of our information technology systems to a third party. Any failure of us or of our third party provider to effectively operate such systems could cause a
disruption in our information technology systems. Any disruption in our information technology systems could interrupt or damage our operations and our ability to meet customer needs as well as our ability to
maintain effective controls. These events could damage our reputation and cause us to incur unanticipated liabilities, including financial losses from remedial actions, business interruptions, loss of business and
other unanticipated costs which may not be covered by insurance. Despite the defensive measures we have taken to protect our data and information technology, our systems could be vulnerable to disruption and
any such disruption and the resulting fallout could have a material adverse effect on our business, financial condition and results of operations.
Employee Specific Risks
Labor disruptions and other union activity could have a material adverse effect on us.
As of December 31, 2021, approximately 33% of our workforce was covered by collective bargaining agreements, and approximately 46% of these employees were included in collective bargaining
agreements that are due to expire within one year. If negotiations to renew expiring collective bargaining agreements are not successful or become unproductive, the union could take actions such as strikes, work
slowdowns or work stoppages. Such actions at any one of our facilities could lead to a plant shut down or a substantial modification to employment terms, thereby causing us to lose net sales or incur increased
costs. We have not had any recent union-organized work stoppages in the United States, Canada or Mexico; however, we have experienced one union organizing effort directed at our non-union employees in the
past ten years. There can be no assurances there will not be additional union organizing efforts, strikes, work slowdowns or work stoppages in the future. Any such disruption, or other issue related to union activity,
could have a material adverse effect on our business, financial condition and results of operations.
We depend on the services of key executives and any inability to attract and retain key management personnel could have a material adverse effect on us.
Our key management personnel, including our Chief Executive Officer and Chief Financial Officer, are important to our success because they are instrumental in setting our strategic direction, operating our
business and identifying expansion opportunities. Additionally, as our business grows, we may need to attract and hire additional management personnel. We have employment agreements with some members of
senior management; however, we cannot prevent our executives from terminating their employment with us, and any replacements we hire may not be as effective. While we strive to mitigate the negative impact
associated with changes our senior management team, there may be uncertainty among investors, employees, customers and others concerning our future direction and performance. Our ability to retain our key
management personnel or to attract additional management personnel or suitable replacements when needed is dependent on a number of factors, including the competitive nature of the employment market. Any
failure to retain key management personnel or to attract additional or suitable replacement personnel could have a material adverse effect on our business, financial condition and results of operations.
Any failure by us or the contractors with which we work to retain and attract necessary personnel or contract labor could have a material adverse effect on us.
Competition for hiring new and retaining existing qualified personnel is intense and our success depends in part on our ability to retain, attract and train necessary personnel, including engineering and other
skilled technical personnel. Our experienced sales team has also developed a number of meaningful customer relationships that would be difficult to replace. We compete with other companies for many employees
in hourly positions, which have historically had high turnover rates. Without a sufficient number of qualified employees in each of these areas, the productivity and profitability of our operations and manufacturing
quality could suffer.
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Additionally, our business relies on the ability of the contractors who install our products to obtain qualified employees, including experienced supervisors and foreman, and a shortage in the supply of these skilled
personnel could cause delays in customer’s ability to take shipments of our products.
Labor shortages may impact our ability to hire skilled or unskilled workers with the necessary experience. For example, the reduction in demand for products in our industry during the financial crisis led to a
number of both skilled and unskilled workers leaving our industry permanently, reducing an already limited pool of available and qualified personnel. In addition, the COVID-19 pandemic led to a decreased labor
force size and participation rates, and we have observed an overall tightening and increasingly competitive labor market in many of our geographies, which causes increased costs to attract and retain qualified
workers. Furthermore, if new or more restrictive immigration legislation is enacted at the federal level or in states in which we do business, or if existing regulations are interpreted or enforced differently, these
changes could further tighten certain labor markets.
If we are unsuccessful in hiring and retaining the necessary workforce, we may incur additional costs to run our business. Many of these positions have historically had high turnover rates, which can lead to
increased training and retention costs. Our ability to control labor costs is also subject to numerous external factors, including prevailing wage rates, the impact of legislation or regulations governing wages,
regulations governing payment of workers.
There can be no assurances the labor pool from which we or the contractors with whom we work hire will increase or remain stable, nor that we will be able to control labor costs. Any failure by us or the
contractors with which we work to retain our existing personnel or attract and train additional qualified personnel at reasonable costs could have a material adverse effect on our business, financial condition and
results of operations.
Miscellaneous Business Risks
Cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our reputation and adversely impact our business and financial performance.
Cybersecurity attacks across industries, including ours, are increasing in sophistication and frequency and may range from uncoordinated individual attempts to measures targeted specifically at us. These
attacks include but are not limited to, malicious software or viruses, attempts to gain unauthorized access to, or otherwise disrupt, our information systems, attempts to gain unauthorized access to business,
proprietary or other confidential information, and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and
corruption of data. Cybersecurity failures may be caused by employee error, malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products. We have been
subject to cybersecurity attacks in the past, including breaches of our IT systems that exposed certain confidential business information as well as ransomware attacks on non-critical business systems. Based on
information known to date, past attacks have not had a material impact on our business, financial condition or results of operations. We may experience these and different types of attacks in the future, potentially
with more frequency or sophistication.
Failures of our IT systems as a result of cybersecurity attacks or other disruptions could result in a breach of critical operational or financial controls and lead to a disruption of our operations, commercial
activities or financial processes. Cybersecurity attacks or other disruptions impacting significant customers and/or suppliers could also lead to a disruption of our operations or commercial activities. Despite our
attempts to safeguard our systems and mitigate potential risks, there is no assurance that such actions will be sufficient to prevent cyberattacks or security breaches that manipulate or improperly use our systems
or networks, compromise confidential or otherwise protected information, destroy or corrupt data, or otherwise disrupt our operations. The occurrence of such events could have a material adverse effect on our
business, financial condition and results of operations.
Legal and regulatory claims and proceedings could have a material adverse effect on us.
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We are subject to claims, litigation and regulatory proceedings in the normal course of business and could become subject to additional claims in the future, some of which could be material. For example,
we have been, and may in the future be, subject to claims for product liability, construction defects, project delay, personal injury, property and other damages as well as allegations regarding compliance with
mandated product specifications. Claims and proceedings, whether or not they have merit and regardless of the outcome, are typically expensive and can divert the attention of management and other personnel
for significant periods of time. Additionally, claims and proceedings can impact customer confidence and the general public’s perception of our company and products, even if the underlying assertions are proven to
be false.
We are also currently a defendant, together with several of our current and former officers and directors, in a shareholder derivative suit, and in the past have been a defendant in other similar suits, each
filed by plaintiffs seeking damages against the Company for allegations of violations of United States laws regulating securities, as discussed in greater detail in Item 3, "Legal Proceedings," and Note 16 to our
consolidated financial statements. Lawsuits involving us, or our current or former officers and directors, could result in significant expense and divert attention and resources of our management and other key
employees. In addition to any damages we may be required to pay, we are generally obligated to indemnify our current and former directors and officers in connection with lawsuits and related settlement amounts.
Such amounts could exceed the coverage provided under our insurance policies.
While we have established reserves we believe to be reasonable under the facts known, the outcomes of litigation and similar disputes are often difficult to reliably predict and may result in decisions or
settlements that are contrary to, or in excess of, our expectations, and losses may exceed our reserves. In addition, various factors and developments could lead us to make changes in our current estimates of
liabilities and related insurance receivables or make new or modified estimates as a result of a judicial ruling or judgment, settlement, regulatory development or change in applicable law. Any claims or
proceedings, particularly those in which we are unsuccessful or for which we did not establish adequate reserves, could harm our reputation and could have a material adverse effect on our business, financial
condition and results of operations.
Any inability to successfully acquire businesses in the future could have a material adverse effect on us.
Historically we have grown in large part as a result of acquisitions and our business plan continues to provide for growth in part through acquisitions and joint ventures. Although we expect to regularly
consider additional strategic transactions in the future, there can be no assurances that we will identify suitable acquisition, joint venture or other investment opportunities or, if we do, that any transaction can be
consummated on acceptable terms. Antitrust or other competition laws may also limit our ability to acquire, or work collaboratively with, certain businesses or to fully realize the benefits of a prospective acquisition
or joint venture. Furthermore, changes in our business or the economy, an unexpected decrease in our cash flows or any restrictions imposed by our debt may limit our ability to obtain the necessary capital or
otherwise impede our ability to complete a transaction. Regularly considering strategic transactions can also divert management’s attention and lead to significant due diligence and other expenses regardless of
whether we pursue or consummate any transaction. Failure to identify suitable transaction partners and to consummate transactions on acceptable terms, as well as the commitment of time and resources in
connection with such transactions, could have a material adverse effect on our business, financial condition and results of operations.
The consummation of an acquisition also exposes us to significant risks and additional costs. We may not accurately assess the value, strengths, weaknesses or potential profitability of an acquisition target.
Furthermore, we may not be able to fully or successfully integrate an acquired business or realize the expected benefits and synergies following an acquisition. Business and operational overlaps may lead to
hidden costs. These costs can include unforeseen pre-acquisition liabilities or the impairment of customer relationships or certain acquired assets such as inventory and goodwill. We may also incur costs and
inefficiencies to the extent an acquisition expands the industries, markets or geographies in which we operate due to our limited exposure to and experience in a given industry, market or region. Significant
acquisitions may also require that we incur additional debt to finance the transaction, which could be substantial and limit our flexibility in using our cash flow from operations for other purposes. Acquisitions can
also involve post-transaction disputes with the counterparty regarding a number of matters, including a purchase price or other working capital adjustment or liabilities for
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which we believe we were indemnified under the relevant transaction agreements, such as environmental liabilities or pension or benefit obligations retained by the seller, including certain environmental and benefit
obligations in connection with our U.S. Pipe Acquisition and certain pension obligations we assumed pursuant to the Acquisition and our acquisition of Cretex. We are also engaged in other indemnification and
other post-closing disputes with certain of our transaction counterparties. Our inability to realize the anticipated benefits of an acquisition as well as other transaction-related issues could have a material adverse
effect on our business, financial condition and results of operations.
In July 2012, we entered into a joint venture agreement with Americast, Inc., now known as Eagle Corporation, to form Concrete Pipe & Precast LLC. From time to time, we may enter into additional joint
ventures as part of our growth strategy. The nature of a joint venture requires us to share control with unaffiliated third parties. If our joint venture partners do not fulfill their contractual and other obligations, the
affected joint venture may be unable to operate according to its business plan, and we may be required to increase our level of commitment. Differences in views among joint venture participants could also result in
delays in business decisions or otherwise, failures to agree on major issues, operational inefficiencies and impasses, litigation or other issues. Third parties may also seek to hold us liable for the joint ventures’
liabilities. These issues or any other difficulties that cause a joint venture to deviate from its original business plan could have a material adverse effect on our business, financial condition and results of operations.
Any inability to protect our intellectual property or claims that we infringe on the intellectual property rights of others could have a material adverse effect on us.
We rely on a combination of patents, trademarks, trade names, confidentiality and nondisclosure clauses and agreements, and other unregistered rights to define and protect our rights to our brand and the
intellectual property used in certain of our products, including the innovative technologies relating to storm water management acquired in the Bio Clean Acquisition. We also rely on product, industry, manufacturing
and market “know-how” that cannot be registered and may not be subject to any confidentiality or nondisclosure clauses or agreements. However, we cannot guarantee that any of our registered or unregistered
intellectual property rights or our know-how, or claims thereto, will now or in the future successfully protect our intellectual property , or that our rights will not be circumvented or successfully opposed or otherwise
challenged. We also cannot guarantee that applications filed will be approved. To the extent that our intellectual property rights are not sufficient, third parties, including competitors, may be able to commercialize
our innovations or products or use our know-how. Additionally, we have faced in the past and may in the future face claims that we are infringing the intellectual property rights of others, including with respect to
both existing and new technologies we use. If any of our products are found to infringe the patents or other intellectual property rights of others, our manufacture and sale of such products could be significantly
restricted or prohibited and we may be required to pay substantial damages or on-going licensing fees. Any inability to protect our intellectual property rights or any misappropriation of the intellectual property of
others could have a material adverse effect on our business, financial condition and results of operations.
Our foreign operations could have a material adverse effect on us.
We operate production facilities in Canada and Mexico and we are therefore subject to a number of risks specific to these countries. These risks include social, political and economic instability, unexpected
changes in regulatory requirements, tariffs and other trade barriers, currency exchange fluctuations, acts of war or terrorism and import/export requirements. In addition, we have a limited number of sales to other
foreign jurisdictions, primarily concentrated in the Dominican Republic and Bolivia. Our consolidated financial statements are reported in U.S. dollars with international transactions being translated into U.S. dollars.
If the U.S. dollar strengthens in relation to the Canadian dollar, our U.S. dollar reported net sales and income will decrease. Additionally, since we incur costs in foreign currencies, fluctuation in those currencies’
value can negatively impact manufacturing and selling costs. See Item 7A, “Quantitative and Qualitative Disclosures about Market Risk.” There can be no assurances that any of these factors will not materially
impact our production cost or otherwise have a material adverse effect on our business, financial condition and results of operations.
Changes in tax laws could adversely affect us.
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We regularly assess our future ability to utilize tax benefits, including those in the form of net operating loss, tax credit and other tax carryforwards, that are recorded as deferred income tax assets on our
balance sheets to determine whether a valuation allowance is necessary. A reduction in, or disallowance of, these tax benefits resulting from a legislative change or adverse determination by a taxing jurisdiction
could have an adverse impact on our financial results and liquidity.
Changes in corporate tax rates, the realizability of the net deferred tax assets relating to our U.S. operations, the taxation of foreign earnings and the deductibility of expenses contained in the Tax Cuts and
Jobs Act of 2017, or the TCJA, or other tax reform legislation, including the Coronavirus Aid, Relief, and Economic Security Act of 2020, (“CARES Act”), could have a material impact on the value of our deferred tax
assets, could result in significant one-time charges and could increase our future U.S. tax expense. See Note 20 to our consolidated financial statements.
Significant judgment is required in determining our domestic and international provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. While we
believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible these positions may be contested or overturned by jurisdictional tax authorities, which
may have a significant impact on our tax provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the laws are issued or applied.
Insufficient insurance coverage could have a material adverse effect on us.
We maintain property, business interruption, counterparty and liability insurance coverage that we believe is consistent with industry practice. However, our insurance program does not cover, or may not
adequately cover, every potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or against us could cause
our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable. In the future, we may not be able to obtain meaningful coverage at
reasonable rates for a variety of risks, including certain types of environmental hazards and ongoing regulatory compliance. In addition, we self-insure a portion of our exposure to certain matters, including
employee health care claims of up to $500,000 per covered individual per year and wage-payment obligations for short-term disability. If our insurance coverage is insufficient, if we are not able to obtain sufficient
coverage in the future, or if we are exposed to significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial
condition and results of operations.
Our internal control over financial reporting may not be effective, and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a
material adverse effect on our business and reputation.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our
quarterly and annual reports and provide an annual management report on the effectiveness of our control over financial reporting. Our independent registered public accounting firm is also required to formally
attest to the effectiveness of our internal control over financial reporting pursuant to Section 404.
Although we currently do not have any material weaknesses in our internal control over financial reporting, we have historically experienced such material weaknesses. To remediate our prior material weaknesses,
we have needed to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff, and we may need to do so in the future to
maintain the effectiveness of our internal control over financial reporting and other controls. Testing and maintaining internal control can divert our management’s attention from other matters that are important to
the operation of our business. If we identify material weaknesses in our internal control over financial reporting or are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act or assert that
our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the
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effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively
affected, and we could become subject to investigations by the SEC or other regulatory authorities, which could require additional financial and management resources.
We are a holding company and depend on the cash flow of our subsidiaries.
We are a holding company with no material assets other than the equity interests of our subsidiaries. Our subsidiaries conduct substantially all of our operations and own substantially all of our assets and
intellectual property. Consequently, our cash flow and our ability to meet our obligations and pay any future dividends to our stockholders depends upon the cash flow of our subsidiaries and their ability to make
payments, directly or indirectly, to us in the form of dividends, distributions and other payments. Any inability on the part of our subsidiaries to make payments to us could have a material adverse effect on our
business, financial condition and results of operations.
Risks Relating to our Indebtedness and Liquidity
The terms of our debt could have a material adverse effect on us.
We have substantial debt and may incur additional debt. As of December 31, 2021, we had approximately $902.4 million of total debt. Our credit facility contains a number of significant restrictions and
covenants that generally restrict our business and limit our ability to, among other things:
•
dispose of certain assets;
•
incur or guarantee additional indebtedness;
•
enter into new lines of business;
•
make investments, intercompany loans or certain payments in respect of indebtedness;
•
incur or maintain certain liens;
•
enter into transactions with affiliates;
•
engage in certain sale and leaseback transactions;
•
declare or pay dividends and make other restricted payments, including the repurchase or redemption of our stock; and
•
engage in mergers, consolidations, liquidations and certain asset sales.
In addition, our ability to borrow under the Revolver is limited by the amount of the borrowing base applicable to U.S. dollar and Canadian dollar borrowings. Any negative impact on the elements of our borrowing
base, such as eligible accounts receivable and inventory, will reduce our borrowing capacity under the Revolver. Moreover, the Revolver provides discretion to the agent bank acting on behalf of the lenders to
impose additional requirements on what accounts receivable and inventory may be counted toward the borrowing base availability, and to impose other reserves, which could materially impair the amount of
borrowings that would otherwise be available to us. The credit facility also requires us to maintain certain financial ratios. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” for more information regarding the terms of our credit facility and the indenture governing our senior secured notes dues due 2025. We are also party to a U.S. and a Canadian master lease under
which we currently pay an aggregate of $17.1 million and $1.2 million (CAD) per annum, respectively, to lease certain properties through June 30, 2043. Each of these master lease agreements contain certain
restrictions and covenants that limit, among other things, our use of and ability to sublease or discontinue use of the leased properties, our ability to consider strategic divestitures of properties that are leased and
our ability to consolidate operations as may be appropriate in order to minimize operating costs. See Note 15 in our consolidated financial statements.
These and other similar provisions in these and other documents could have adverse consequences on our business and to our investors because they limit our ability to take these actions even if we believe
that it would contribute to our future growth or improve our operating results. For example, these restrictions could limit our flexibility in planning for or reacting to changes in our business and our industry, thereby
inhibiting our ability to
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react to markets and potentially making us more vulnerable to downturns. These restrictions could also require that, based on our level of indebtedness, a significant portion of our cash flow from operations be
used to make interest payments, thereby reducing the cash flow available for working capital, to fund capital expenditures or other corporate purposes and to generally grow our business. Furthermore, these
restrictions could prevent us from pursuing a strategic transaction that we believe would benefit our company.
Our ability to comply with these provisions may be affected by events beyond our control. A breach of any of these provisions or any inability to comply with mandated financial ratios could result in a default,
in which case the counterparties may have the right to declare all borrowings or other amounts due thereunder to be immediately due and payable. If we are unable to pay any amounts when due, whether periodic
payments, at maturity or if declared due and payable following a default, the counterparties would have the right to proceed against the pledged collateral securing the indebtedness. Therefore, the restrictions
under these agreements and any breach of the covenants or failure to otherwise comply with the terms thereof could have a material adverse effect on our business, financial condition and results of operations.
Our current indebtedness and any future indebtedness we may incur could have a material adverse effect on us.
We expect that we will depend primarily on cash generated by our operations to pay our expenses and any amounts due under our credit facility and any other indebtedness we may incur. However, our
business may not generate sufficient cash flows from operations in the future and any anticipated growth in revenues and cash flows may not be realized, either or both of which could result in us being unable to
repay indebtedness or our inability to fund other liquidity or strategic needs. Our ability to make these payments depends on our future performance, which will be affected by financial, business, economic and
other factors, many of which are beyond our control. If we do not have sufficient liquidity, we may be required to refinance all or part of our then existing debt, sell assets or borrow more money.
If we incur additional indebtedness, the risks related to our indebtedness that we currently face could intensify. In addition to the risk of higher interest rates and fees, the non-economic terms of any additional
indebtedness may contain covenants and other terms restricting our financial, operating and strategic flexibility to an equal or greater extent as those imposed by our credit facility, the indenture governing our
senior secured notes dues due 2025 and the master leases. Additional indebtedness may also include cross-default provisions such that, if we breach a restrictive covenant with respect to any of our indebtedness,
or an event of default occurs, lenders may be entitled to accelerate all amounts owing under other outstanding indebtedness.
If we are required to refinance our indebtedness or otherwise incur additional indebtedness to fund strategic transactions or otherwise, any additional financing may not be available on terms favorable to us
or at all. If, at such time, market conditions are materially different or our credit profile has deteriorated, the cost of refinancing our debt may be significantly higher than our indebtedness existing at that time, or we
may not be able to refinance our debt at all. For example, our senior term loan matures in 2023 and, if interest rates continue to rise in the short- and longer-term, it could be more difficult and more expensive for us
to refinance that debt as compared to the options that we would currently have. Any failure to meet any future debt service obligations or any inability to obtain any additional financing on terms acceptable to us or
to comply therewith could have a material adverse effect on our business, financial condition and results of operations.
Credit and non-payment risks of our customers could have a material adverse effect on us.
As is customary in our industry, the majority of our sales are to customers on an open credit basis, with standard payment terms of 30 days. While we generally monitor the ability of our customers to pay
these open credit arrangements and limit the credit we extend to what we believe is reasonable based on an evaluation of each customer’s financial condition and payment history, we may still experience losses
because of a customer’s inability to pay. As a result, while we maintain what we believe to be a reasonable allowance for doubtful receivables for potential credit losses based upon our historical trends and other
available information, there is a risk that our estimates may not be accurate, particularly in times of economic uncertainty and tight credit markets.
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Any inability to collect customer receivables or inadequate provisions for doubtful receivables could have a material adverse effect on our business, financial condition and results of operations.
Our project-based business requires significant liquidity, and any inability to ensure adequate financing or guarantees for large projects in the future could have a material adverse effect on us.
The projects in which we participate, particularly in our pressure pipe business, can be capital-intensive and often require substantial liquidity levels. In line with industry practice, we receive prepayments
from our customers as well as milestone payments. However, a change in prepayment patterns or our inability to obtain third-party guarantees in respect of such prepayments could force us to seek alternative
financing sources, such as bank debt or in the capital markets, which we may not be able to do on terms acceptable to us or at all, any of which could have a material adverse effect on our business, financial
condition and results of operations.
Certain of the contracts in our backlog may be adjusted, canceled or suspended by our customers and, therefore, our backlog is not necessarily indicative of our future revenues or earnings or a
good indicator of our future margins, even if performed.
As of December 31, 2021, our backlog totaled approximately $882.9 million. In accordance with industry practice, many of our contracts are subject to cancellation, reduction, termination or suspension at the
discretion of the customer in respect of work that has not yet been performed. In the event of a project cancellation, we would generally have no contractual right to the total revenue reflected in our backlog, but
instead would collect revenues in respect of all work performed at the time of cancellation as well as all other costs and expenses incurred by us through such date. Projects can remain in backlog for extended
periods of time because of the nature of the project, delays in execution of the project and the timing of the particular services required by the project. Additionally, the risk of contracts in backlog being canceled,
terminated or suspended generally increases at times, including as a result of periods of widespread macroeconomic and industry slowdown, weather, seasonality and many of the other factors impacting our
business. Many of the contracts in our backlog are subject to changes in the scope of services to be provided as well as adjustments to the costs relating to the contracts. The revenue for certain contracts included
in backlog are based on estimates. Therefore, the timing of performance on our individual contracts can affect greatly our margins and hence, future profitability. There is no assurance that backlog will actually be
realized as revenues in the amounts reported or, if realized, will result in any estimated profits.
As is customary in some of our markets, we provide our customers with performance guarantees and other guarantee instruments, such as surety bonds, that guarantee the timely completion of a project
pursuant to defined contractual specifications. We also enter into contractual obligations to pay liquidated damages to our customers for project delays. We are required to make payments under these contracts,
guarantees and instruments if we fail to meet any of the specifications. Some customers require the performance guarantees to be issued by a reputable and credit worthy financial institution in the form of a letter
of credit, surety bond or other financial guarantee. Financial institutions consider our credit ratings and financial position in the guarantee approval process. Our credit ratings and financial position could make the
process of obtaining guarantees from financial institutions more difficult and expensive. If we cannot obtain such guarantees from reputable and credit-worthy financial institutions on reasonable terms or at all, we
could face higher financing costs or even be prevented from bidding on or obtaining new projects, and any of these or other related obstacles could have a material adverse effect on our business, financial
condition and results of operations.
Our ability to raise capital in the future may be limited.
Our business and operations may consume resources faster than we anticipate. In the future, we may need to raise additional funds through the issuance of new equity securities, debt or a combination of
both. However, any sale or perception of a possible sale by Lone Star, and any related decline in the market price of our common stock, could impair our ability to raise capital. Separately, additional financing may
not be available on favorable terms, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our capital requirements. If we issue new debt securities, the debt holders would
have rights senior to common stockholders to make claims on our assets, and the terms of any debt could restrict our operations, including our ability to pay
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dividends on our common stock. If we issue additional equity securities, existing stockholders will experience dilution, and the new equity securities could have rights senior to those of our common stock. Because
our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus,
our stockholders bear the risk of our future securities offerings reducing the market price of our common stock and diluting their interest.
The phase-out of LIBOR could increase our interest expense and have a material adverse effect on us.
LIBOR is the basic rate of interest used in lending between banks on the London interbank market.
Borrowings under our senior term loan and revolver use the London Interbank Offering Rate, or LIBOR, as a benchmark for establishing the applicable interest rate. The Financial Conduct Authority of the United
Kingdom has announced that it plans to phase out LIBOR by the end of 2021. It is unclear if LIBOR will cease to exist at that time or if new methods of calculating LIBOR will be established such that it continues to
exist after 2021. The U.S. Federal Reserve, in conjunction with the Alternative Reference Rates Committee, a steering committee comprised of large U.S. financial institutions, is considering replacing U.S. dollar
LIBOR with a new index, the Secured Overnight Financing Rate, or SOFR, calculated using short-term repurchase agreements backed by Treasury securities. Whether or not SOFR, or another alternative
reference rate, attains market traction as a LIBOR replacement tool remains in question. Although our borrowing arrangements provide for alternative base rates, , those alternative base rates historically would
often have led to increased interest rates, in some cases significantly higher, than those we paid based on LIBOR, and may similarly be higher in the future. Therefore, if LIBOR ceases to exist, we will likely need to
agree upon a replacement index with our lenders, which would require an amendment to our borrowing arrangements, and the interest rate thereunder will likely change.
The consequences of the phase out of LIBOR cannot be entirely predicted at this time. For example, we may not be successful in amending our borrowing arrangements to provide for a replacement rate. If
any new or alternative base rate for calculating interest with respect to our outstanding indebtedness may not be as favorable or perform in the same manner as LIBOR and could lead to an increase in our interest
expense or could impact our ability to refinance some or all of our existing indebtedness. In addition, the transition process may involve, among other things, increased volatility or illiquidity in financial markets,
which could also have an adverse effect on us whether or not any replacement rate applicable to our borrowings is affected. Any such effects of the transition away from LIBOR, as well as other unforeseen
impacts, may result in increased interest expense and other expenses, difficulties, complications or delays in connection with future financing efforts or otherwise have a material adverse impact on our business,
financial condition, and results of operations.
Risks Related to the Proposed Merger
We may not complete the proposed merger within the time frame we anticipate or at all, which could adversely affect our business.
Completion of the merger is subject to a number of closing conditions, including, among others, the expiration or termination of the waiting period under the Hart-Scot-Rodino Antitrust Improvements Act of
1976, as amended, or the HSR Act, including any agreement with the United States Department of Justice, or the DOJ, to delay the Merger, or the HSR Condition. The DOJ has indicated that it will require
conditions on the proposed transaction, including requiring the disposition of certain assets held by us and/or Quikrete. We and Quikrete have each entered into definitive agreements with various third parties to
dispose of certain assets in order to secure the DOJ's approval of the merger, or the Divestiture Agreements. There can be no assurances that the dispositions contemplated by the Divestiture Agreements will be
acceptable to the DOJ or sufficient to obtain the DOJ's approval of the merger prior to the outside date contained in the merger agreement or by the outside dates contemplated in each of the Divestiture
Agreements. Further, while the parties have agreed to use their respective reasonable best efforts to obtain the required regulatory approvals, Quikrete and its affiliates will not be required to take, or agree to take,
certain actions with respect to assets, businesses or product lines of Quikrete or any of its subsidiaries, or the Company or any of its subsidiaries, accounting for more than $80 million of EBITDA for the 12 months
ended December 31, 2020, as defined in and measured in accordance with the merger
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agreement. Therefore, Quikrete may not be required to agree to additional divestitures the extent that the DOJ requires divestitures beyond those currently contemplated by the Divestiture Agreements.
Each party’s obligation to consummate the merger is also subject to the absence of any order issued by any court of competent jurisdiction, other legal restraint or prohibition or any law enacted or deemed
applicable by a governmental entity that prohibits or makes illegal the consummation of the merger; subject to certain qualifications, the accuracy of representations and warranties of the other party set forth in the
merger agreement; and the performance by the other party in all material respects of its obligations under the merger agreement. Quikrete’s obligation to consummate the merger is also conditioned on, among
other things, the absence of any material adverse effect, as defined in the merger agreement. In addition, the merger agreement may be terminated under certain specified circumstances, including if the merger
has not been consummated on or before March 22, 2022, or the Outside Date. There is currently no assurance that the HSR Condition will be satisfied by the Outside Date. As a result, we cannot assure you that
the merger will be completed, or that, if completed, it will be exactly on the terms set forth in the merger agreement or within the expected time frame.
If the merger is not completed within the expected time frame or at all, we may be subject to a number of material risks and our business, financial condition and results of operations will be harmed. The
price of our common stock may decline to the extent that current market prices reflect a market assumption that the merger will be completed. We could be required to reimburse certain expenses of Quikrete or
pay Quikrete a termination fee of $50.0 million if the merger agreement is terminated under specific circumstances described in the merger agreement. The failure to complete the merger may result in negative
publicity and could negatively affect our relationship with our stockholders, employees, customers, suppliers and strategic partners. We may also be required to devote significant time and resources to litigation
related to any failure to complete the merger or related to any enforcement proceeding commenced against us to perform our obligations under the merger agreement.
The merger agreement provides us with limited remedies in the event of a breach by Quikrete that results in termination of the merger agreement, including the right to a reverse termination fee payable
under certain specified circumstances, as described in the merger agreement. We cannot assure you that a remedy will be available to us in the event of such a breach or that the damages we incur in connection
with such breach will not exceed the amount of the reverse termination fee.
Our business is subject to restrictions while the merger is pending.
The merger agreement restricts the conduct of our business prior to the completion of the merger or termination of the merger agreement, generally requiring us to conduct our business in the ordinary
course and subjecting us to a variety of specified limitations absent Quikrete’s prior written consent. The restrictions on our business activities include, among other things, restrictions on our ability to acquire other
businesses and assets, dispose of our assets, make investments, enter into certain contracts, repurchase or issue securities, pay dividends, make capital expenditures above specified levels, amend our
organizational documents and incur indebtedness above specified levels. These restrictions could prevent us from pursuing strategic business opportunities, taking actions with respect to our business that we may
consider advantageous and responding in a timely and effective manner to competitive pressures and industry developments, any of which could adversely affect our business, and financial condition and results of
operations.
The pendency of the merger may disrupt business relationships, lead to employee departures, or otherwise adversely affect our business.
The pendency of the merger and our efforts to complete the merger could create uncertainty surrounding and significantly disrupt our business. Uncertainty regarding our future could adversely affect our
relationship with existing and potential customers, suppliers, vendors, strategic partners or others that deal with us. For example, clients and other counterparties may delay or defer decisions concerning entering
into contracts or otherwise working with us, seek to change our existing business relationships or consider doing business with other companies rather than us. Competitors may also target our customers by
highlighting potential uncertainties and other risks related to the merger. The pendency of the merger may also divert management’s attention and
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resources towards completing the merger and preparing for integration actives and away from ongoing business and operations. Uncertainty as to whether the merger will be completed may also affect our ability to
recruit prospective employees or to retain and motivate existing employees. Employee retention may be particularly challenging while the merger is pending because employees may experience uncertainty about
their roles following the merger. These risks and the resulting adverse effects on business, financial condition and results of operations could be exacerbated by any delays in completion of the merger or
termination of the merger agreement.
We have incurred, and will continue to incur, significant costs as a result of the merger.
We have incurred, and will continue to incur, significant direct and indirect costs and expenses in connection with the merger. These costs and expenses include fees for financial, legal and accounting
advisors, facilities and systems costs in anticipation of consolidation, severance other potential employment-related costs and other transaction costs. We must pay substantially all of these amounts regardless of
whether the merger is completed. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses, including the length of time required to obtain the
required regulatory approvals and satisfy the other conditions to closing the merger. If the merger is not completed, we will have incurred significant costs for which we will have received little or no benefit, which
could adversely affect our business, financial condition and results of operations.
Merger-related legal proceedings could delay or prevent the completion of the merger or otherwise adversely affect us.
Litigation by purported stockholder plaintiffs and others is common in connection with public company acquisitions, regardless of the merits of these claims. While certain lawsuits with respect to the merger
were previously filed by stockholder plaintiffs and subsequently dismissed, any additional legal proceedings filed in connection with the merger could delay or prevent the merger from becoming effective. For
example, the conditions to closing the merger include the absence of any order, injunction or other judgment issued by any court of competent jurisdiction, other legal restraint or prohibition or any law enacted or
deemed applicable by a governmental entity that prohibits or makes illegal the consummation of the merger and, if a settlement or other resolution is not reached in any merger-related lawsuit in which a claimant
secures injunctive or other relief having the effect of making the merger illegal or otherwise prohibiting completion of the merger, then the merger may not be completed in a timely manner or at all. Moreover, any
litigation could be time consuming and expensive and could divert management’s attention away from our regular business, any of which could adversely affect our business, financial condition and results of
operations.
The merger agreement prohibits us from affirmatively seeking other acquisition proposals that may be superior to the merger.
The merger agreement prohibits us from engaging in any further discussions or solicitations regarding an alternative potential acquisition of the Company. This provision prevents us from affirmatively
seeking offers from other possible acquirers that may be superior to the pending merger. Further, under the terms of the merger agreement, we may be required to pay Quikrete a termination fee of $50.0 million
under specified conditions, including in the event Quikrete terminates the merger agreement for specified reasons and, within 12 months thereafter, we have consummated an acquisition proposal, as defined in the
merger agreement, or entered into a definitive agreement regarding an acquisition proposal that is ultimately consummated. If the merger agreement is terminated under circumstances where the termination fee is
potentially payable by the Company, this payment could affect the structure, pricing and terms proposed by a third party seeking to acquire or merge with us, and could discourage a third party from making a
competing acquisition proposal following the termination of the merger agreement.
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Risks Related to Ownership of Our Common Stock
The trading price of our common stock has been and may in the future be volatile and could decline substantially.
The market price of our common stock may be highly volatile and subject to wide fluctuations. Some of the factors that could negatively affect the market price of our common stock or result in significant
fluctuations in price, regardless of our actual operating performance, include:
•
actual or anticipated variations in our quarterly operating results;
•
changes in market valuations of similar companies;
•
changes in the markets in which we operate;
•
additions or departures of key personnel;
•
actions by stockholders, including the sale by Lone Star of any of its shares of our common stock;
•
speculation in the press or investment community;
•
general market, economic and political conditions, including an economic slowdown;
•
uncertainty regarding economic events, including in Europe in connection with the United Kingdom’s departure from the European Union;
•
changes in interest rates;
•
our operating performance and the performance of other similar companies;
•
our ability to accurately project future results and our ability to achieve those and other industry and analyst forecasts;
•
new legislation or other regulatory developments that adversely affect us, our markets or our industry; and
•
the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger agreement or delay in consummating the Merger.
Furthermore, at times, the stock market has experienced significant price and volume fluctuations. This volatility has had a significant impact on the market price of securities issued by many companies,
including companies in our industry, and often occurs without regard to the operating performance of the affected companies. Therefore, factors that have little or nothing to do with us could cause the price of our
common stock to fluctuate, and these fluctuations or any fluctuations related to our company could cause the market price of our common stock to decline materially.
The coverage of our business or our common stock by securities or industry analysts or the absence thereof could adversely affect our stock price and trading volume.
The trading market for our common stock is influenced in part by the research and other reports that industry or securities analysts may publish about us or our business. We currently have, but may not be
able to continue, research coverage by industry or financial analysts. If analysts do not continue coverage of us, the trading price and volume of our stock would likely be negatively impacted. Even if analyst
coverage continues, if we fail to meet analyst expectations or one or more of the analysts who cover us downgrade our stock, or if analysts issue other unfavorable commentary or inaccurate research, our stock
price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our
stock price or trading volume to decline.
Lone Star may have conflicts of interest with other stockholders and may limit your ability to influence corporate matters.
Lone Star beneficially owns approximately 51.9% of our outstanding common stock. As a result of this concentration of stock ownership, Lone Star acting on its own has sufficient voting power to effectively
control all matters submitted to our stockholders for approval, including director elections and proposed amendments to our bylaws or certificate of incorporation. Five of the nine members of our board of directors
are employees or affiliates of Lone Star.
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In addition, this concentration of ownership may delay or prevent a merger, consolidation or other business combination or change in control of our company and make some transactions that might
otherwise give investors the opportunity to realize a premium over the then-prevailing market price of our common stock more difficult or impossible without the support of Lone Star. Because we have opted out of
Section 203 of the Delaware General Corporation Law, or the DGCL, regulating certain business combinations with interested stockholders, Lone Star may transfer control of us to a third party by transferring its
common stock without the approval of our board of directors or other stockholders, which may limit the price that investors are willing to pay in the future for shares of our common stock. The interests of Lone Star
may not always coincide with our interests as a company or the interests of other stockholders. Accordingly, Lone Star could cause us to enter into transactions or agreements of which investors would not approve
or make decisions with which investors would disagree. This concentration of ownership may also adversely affect our share price.
Lone Star is in the business of making investments in companies and may from time to time acquire and hold interests in businesses that compete directly or indirectly with us, although it does not currently
hold any such interests. Lone Star may also pursue acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. In recognition
that principals, members, directors, managers, partners, stockholders, officers, employees and other representatives of Lone Star and its affiliates and investment funds may serve as our directors or officers, our
amended and restated certificate of incorporation provides, among other things, that none of Lone Star or any principal, member, director, manager, partner, stockholder, officer, employee or other representative of
Lone Star has any duty to refrain from engaging directly or indirectly in the same or similar business activities or lines of business that we do. In the event that any of these persons or entities acquires knowledge of
a potential transaction or matter which may be a corporate opportunity for itself and us, we will not have any expectancy in such corporate opportunity, and these persons and entities will not have any duty to
communicate or offer such corporate opportunity to us and may pursue or acquire such corporate opportunity for themselves or direct such opportunity to another person. These potential conflicts of interest could
have a material adverse effect on our business, financial condition and results of operations if, among other things, attractive corporate opportunities are allocated by Lone Star to themselves or their other affiliates.
Lone Star may also have conflicts of interest with the Company and other stockholders as a result of its status as a party to the tax receivable agreement. For example, the tax receivable agreement entered
into with Lone Star at the time of our initial public offering gives us the right to terminate the tax receivable agreement with approval of a majority of our independent directors and with Lone Star’s consent by
making a payment equal to the present value of future payments under the tax receivable agreement (based on certain assumptions and deemed events in the agreement, including those relating to our and our
subsidiaries’ future taxable income). Lone Star may determine to withhold its consent to terminate the tax receivable agreement at a time when such a termination would be favorable to us and the other
stockholders. Furthermore, the tax receivable agreement prohibits us from settling any tax audit without Lone Star’s consent (not to be unreasonably withheld, conditioned or delayed) if the outcome of the audit is
reasonably expected to affect Lone Star’s rights under the tax receivable agreement. Therefore, Lone Star may determine to withhold consent to a settlement that reduces the payments Lone Star will receive under
the tax receivable agreement, even though the settlement might be favorable to us and our stockholders.
We are a “controlled company” within the meaning of Nasdaq rules and, as a result, qualify for, and are relying on, exemptions from certain corporate governance requirements.
Lone Star controls a majority of the voting power of our outstanding common stock. As a result, we are a “controlled company” within the meaning of the Nasdaq corporate governance standards. Under the
relevant Nasdaq rules, a company of which more than 50% of the voting power is held by a person or group is a “controlled company” and need not comply with certain requirements, including the requirement that
a majority of the board of directors consist of independent directors and the requirements that the compensation and nominating and corporate governance committees be composed entirely of independent
directors. We are utilizing these exemptions and, for so long as Lone Star controls a majority of the voting power of our outstanding common stock, we intend to continue to utilize these exemptions. As a result,
among other things, we do not have a majority of independent directors and our compensation and nominating and corporate governance committees
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do not consist entirely of independent directors. Accordingly, investors will not have the same protections afforded to stockholders of companies that are subject to all of the applicable Nasdaq corporate governance
requirements.
Future sales of our common stock in the public market could cause our stock price to fall.
Lone Star beneficially owns approximately 51.9% of our outstanding shares of common stock. The shares held by Lone Star and all shares held by our affiliates are eligible for resale in the public market,
subject to applicable securities laws, including the Securities Act of 1933, as amended, or the Securities Act. In December 2019 we registered the shares of common stock beneficially owned by Lone Star pursuant
to the terms of a registration rights agreement and these shares are now generally freely tradeable in the public market, subject to applicable securities laws. Unless the shares owned by any of our other affiliates
are registered under the Securities Act, these shares may only be resold into the public markets in accordance with the requirements of an exemption from registration or safe harbor, including Rule 144 and the
volume limitations, manner of sale requirements and notice requirements thereof. Any sale by Lone Star or other affiliates or any perception in the public markets that such a transaction may occur could cause the
market price of our common stock to decline materially.
We have issued, and in the future we expect to issue, options, restricted stock and other forms of stock-based compensation, which have the potential to dilute stockholder value and cause the price
of our common stock to decline.
We have issued, and in the future expect to issue, stock-based awards, including stock options, restricted stock and other forms of stock-based compensation to our independent directors, officers and
employees. If any options that we have issued or may issue are exercised, or any restricted stock or other awards that we have issued or may issue vests, and the shares of common stock are sold into the public
market, the market price of our common stock may decline. In addition, the availability of shares of common stock for award under our equity incentive plan, or the grant of stock options, restricted stock or other
forms of stock-based compensation, may adversely affect the market price of our common stock.
We have no present intention to pay dividends on our common stock.
We have no present intention to pay dividends on our common stock. Any determination to pay dividends to holders of our common stock will be at the discretion of our board of directors and will depend
upon many factors, including our financial condition, results of operations, projections, liquidity, earnings, legal requirements, restrictions in our credit facility and agreements governing any other indebtedness we
may enter into and other factors that our board of directors deems relevant. Accordingly, holders of our common stock may need to sell their shares to realize a return on their investment and may not be able to sell
their shares at or above the price they paid.
Provisions of our amended and restated governing documents, Delaware law and other documents could discourage, delay or prevent a merger or acquisition at a premium price.
Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change of control or changes in our management. For
example, our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:
•
permit us to issue, without stockholder approval, preferred stock in one or more series and, with respect to each series, fix the number of shares constituting the series and the designation of the series, the
voting powers, if any, of the shares of the series and the preferences and other special rights, if any, and any qualifications, limitations or restrictions, of the shares of the series;
•
prevent stockholders from calling special meetings;
•
restrict the ability of stockholders to act by written consent after such time as Lone Star owns less than a majority of our common stock;
•
limit the ability of stockholders to amend our certificate of incorporation and bylaws;
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•
require advance notice for nominations for election to the board of directors and for stockholder proposals;
•
do not permit cumulative voting in the election of our directors, which means that the holders of a majority of our common stock may elect all of the directors standing for election; and
•
establish a classified board of directors with staggered three-year terms (which will be phased out over the next 3 annual meetings of stockholders).
These provisions may discourage, delay or prevent a merger or acquisition of our company, including a transaction in which the acquirer may offer a premium price for our common stock.
Our amended and restated certificate of incorporation includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, the sole and exclusive forum for any stockholder (including any
beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to
our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL, or our certificate of incorporation or bylaws, or (iv) any action asserting a claim governed by the internal affairs
doctrine, will be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for the District of Delaware); in all cases subject
to such court having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have
notice of and consented to the foregoing provisions. The exclusive forum clause may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us. It is also possible that, notwithstanding
such exclusive forum clause, a court could rule that such a provision is inapplicable or unenforceable.
Risks Related to Our Tax Receivable Agreement
We will be required to pay Lone Star for certain tax benefits, and these amounts are expected to be material.
We entered into a tax receivable agreement with Lone Star that provides for the payment by us to Lone Star of 85% of the amount of cash savings, if any, in U.S. federal, state, local and non-U.S. income tax
that we and our subsidiaries realize (or in some circumstances are deemed to realize) as a result of the utilization of certain tax benefits, together with interest accrued at a rate of LIBOR plus 100 basis points from
the date the applicable tax return is due (without extension) until paid. These tax benefits, which we collectively refer to as the Covered Tax Benefits, include: (i) all depreciation and amortization deductions, and
any offset to taxable income and gain or increase to taxable loss, resulting from the tax basis that we have in our assets as of the time of the consummation of our initial public offering, (ii) the utilization of our and
our subsidiaries’ net operating losses and tax credits, if any, attributable to periods prior to our initial public offering, (iii) deductions in respect of payments made, funded or reimbursed by an initial party to the tax
receivable agreement (other than us or one of our subsidiaries) or an affiliate thereof to participants under the LSF9 Concrete Holdings Ltd Long Term Incentive Plan, or the LTIP, (iv) deductions in respect of
transaction expenses attributable to the acquisition of U.S. Pipe and (v) certain other tax benefits attributable to payments made under the tax receivable agreement. The tax receivable agreement will remain in
effect until all Covered Tax Benefits have been used or expired, unless the agreement is terminated early, as described below.
We expect that the payments we make under the tax receivable agreement could be substantial. For the years ended December 31, 2021 and December 31, 2020, we paid $8.3 million and $13.1 million,
respectively, on our tax receivable agreement to Lone Star. Assuming no material changes in the relevant tax law, and that we and our subsidiaries earn sufficient income to realize the full tax benefits subject to the
tax receivable agreement, we currently estimate that future payments under the agreement will aggregate to approximately $55.9 million. This amount excludes any payments that may be made to Lone Star under
the tax receivable agreement as a
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result of tax benefits recognized in connection with payments under the LTIP and, thus, the actual payments we ultimately are required to make under the tax receivable agreement could be greater, potentially
materially greater, than these amounts. These payment obligations are our obligations and are not obligations of any of our subsidiaries. Furthermore, these payment obligations are not conditioned upon Lone Star
maintaining a continued direct or indirect ownership interest in us. The actual utilization of Covered Tax Benefits as well as the timing of any payments under the tax receivable agreement will vary depending upon
a number of factors, including the amount, character and timing of our and our subsidiaries’ taxable income in the future.
We will not be reimbursed for any payments made to Lone Star under the tax receivable agreement in the event that the tax benefits are disallowed.
Lone Star will not reimburse us for any payments previously made under the tax receivable agreement if such benefits are subsequently disallowed upon a successful challenge by the Internal Revenue
Service, although future payments under the agreement would be adjusted to the extent possible to reflect the result of such disallowance. As a result, in certain circumstances, payments could be made under the
tax receivable agreement in excess of our cash tax savings if any, from the Covered Tax Benefits, and we may not be able to recoup those payments, which could adversely affect our liquidity.
In certain cases, payments made by us under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits we realize in respect of the Covered Tax Benefits.
The term of the tax receivable agreement will continue until all Covered Tax Benefits have been utilized or expired, unless we exercise our right to terminate the agreement with Lone Star’s consent, we
breach any of our material obligations under the agreement or certain credit events occur with respect to us, in any of which cases we will be required to make an accelerated payment to Lone Star equal to the
present value of future payments under the tax receivable agreement. Such payment would be based on certain assumptions, including, among others, that we and our subsidiaries would generate sufficient
taxable income and tax liability to fully utilize all Covered Tax Benefits. The tax receivable agreement also provides that upon certain mergers, asset sales, other forms of business combinations or other changes of
control, our (or our successor’s) payments under the tax receivable agreement for each taxable year after any such event would be based on certain valuation assumptions, including the assumption that we and
our subsidiaries have sufficient taxable income to fully utilize the Covered Tax Benefits. Accordingly, payments under the tax receivable agreement may be made years in advance of the actual realization, if any, of
the anticipated future tax benefits and may be significantly greater than the benefits we realize in respect of the Covered Tax Benefits.
Even if the payments under the tax receivable agreement are not accelerated as described above, such payments may be significantly greater than the benefits we realize in respect of the Covered Tax
Benefits, due to the manner in which payments are calculated under the tax receivable agreement. For example, for purposes of calculating the payments to be made to Lone Star:
•
it is assumed that we will pay effective state and local taxes at a rate of 5%, even though our actual effective state and local tax rate may be materially lower;
•
tax benefits existing at the time of our initial public offering are deemed to be utilized before any post-closing/after-acquired tax benefits and, as a result, we could be required to make payments to Lone
Star for a particular tax year even if our tax liability for such year would have been materially reduced or eliminated by reason of our utilization of the post-initial public offering/after-acquired tax benefits;
•
a non-taxable transfer of assets by us to a non-consolidated entity is treated under the tax receivable agreement as a taxable sale at fair market value and, as a result, we could be required to make
payments to Lone Star even though such non-taxable transfer would not generate any actual tax benefits to us or our non-consolidated entity; and
•
a taxable sale or other taxable transfer of subsidiary stock by us (in cases where the subsidiary’s tax basis in its assets exceeds our tax basis in the subsidiary’s stock) is treated under the tax receivable
agreement as a taxable sale of the subsidiary’s assets and, as a result, we could be required to make payments to Lone Star that materially exceed the actual tax benefit we realize from such stock sale.
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Because of the foregoing, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain
mergers, asset sales, other forms of business combinations or other changes of control.
Certain provisions of the tax receivable agreement limit our ability to incur additional indebtedness, which could adversely affect our business and growth strategy.
For so long as the tax receivable agreement remains outstanding, without the prior written consent of Lone Star (not to be unreasonably withheld, conditioned or delayed), we will be prohibited from (a)
entering into any agreement that would be materially more restrictive with respect to our ability to make payments under the tax receivable agreement than the terms of our credit agreement and (b) incurring any
indebtedness for borrowed money if, immediately after giving effect to such incurrence and the application of proceeds therefrom, our consolidated net leverage ratio - the ratio of consolidated funded indebtedness
for borrowed money less unrestricted cash to consolidated EBITDA - would exceed a certain specified ratio, in each case as calculated pursuant to the tax receivable agreement, unless the incurrence of such
indebtedness is permitted by the terms of our credit agreement or any replacement credit agreements to the extent the terms thereof are no less restrictive in this regard than the applicable credit agreement it
replaced. These restrictions on the incurrence of debt could adversely affect our business, including by preventing us from pursuing an acquisition or other strategic transaction that we believe is in the best
interests of our company and our stockholders, thereby impeding our growth strategy. Lone Star has no fiduciary duties to us when deciding whether to enforce these covenants under the tax receivable agreement.
Furthermore, the provision in the tax receivable agreement that requires that we make an accelerated payment to Lone Star equal to the present value of all future payments due under the tax receivable
agreement if we breach any of our material obligations under the agreement or certain credit events occur with respect to us might make it harder for us to obtain financing from third party lenders on favorable
terms.
We would be required to make tax gross-up payments to Lone Star if we consummate a corporate inversion or similar transaction that causes payments under the tax receivable agreement to be
subject to withholding taxes.
If we were to consummate a change of control transaction that causes us (or our successor) to become a non-U.S. person (e.g., a corporate inversion transaction), and such transaction causes payments
under the tax receivable agreement to become subject to withholding taxes, we would be required under the tax receivable agreement to make tax gross-up payments to Lone Star in respect of such withholding
taxes in amounts that may exceed the tax savings realized by the Company from the Covered Tax Benefits. Any such tax gross-up payments could have a negative impact on our liquidity and our ability to finance
our growth.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We operate a broad network of 80 active manufacturing facilities in the United States, including 10 fabrication plants. We also have three manufacturing facilities in Canada and one in Mexico. Our headquarters
is located in Irving, Texas.
The following tables set forth certain information regarding our active manufacturing facilities:
Facility Name
City
State/Province
Ownership
Drainage Pipe & Products (65 plants)
Caldwell
Caldwell
Idaho
Owned
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Facility Name
City
State/Province
Ownership
Salt Lake City
Salt Lake City
Utah
Owned
Pelham (2 plants)
Pelham
Alabama
Owned
El Mirage
El Mirage
Arizona
Leased
West Memphis
West Memphis
Arkansas
Leased
Florin Road (2 plants)
Sacramento
California
Leased
Deland Precast
Deland
Florida
Leased
Green Cove Springs
Green Cove Springs
Florida
Owned
Gretna
Gretna
Florida
Leased
Marianna
Marianna
Florida
Leased
Winter Haven Pipe
Winter Haven
Florida
Leased
St. Martinville
St. Martinville
Louisiana
Leased
Como
Como
Mississippi
Owned
Prentiss (2 plants)
Prentiss
Mississippi
Owned
Columbus (2 plants)
Columbus
Ohio
Leased
Austin Pipe
Austin
Texas
Leased
Cedar Hill Pipe
Cedar Hill
Texas
Leased
Grand Prairie (2 plants)
Grand Prairie
Texas
Leased
Jersey Village (3 plants)
Houston
Texas
Leased
Waco
Hewitt
Texas
Leased
Waxahachie (2 plants)
Waxahachie
Texas
Owned
Ottawa
Gloucester
Ontario
Leased
Cambridge
Cambridge
Ontario
Leased
Lexington
Lexington
Kentucky
Leased
Louisville
Louisville
Kentucky
Leased
Billings
Billings
Montana
Leased
Bonner Springs
Bonner Springs
Kansas
Leased
Cedar Rapids
Cedar Rapids
Iowa
Owned
Des Moines
Des Moines
Iowa
Leased
Elk River (4 plants)
Elk River
Minnesota
Leased
Hawley
Hawley
Minnesota
Leased
Independence
Independence
Missouri
Owned
Helena
Helena
Montana
Leased
Humboldt
Humboldt
Iowa
Owned
Iowa Falls
Iowa Falls
Iowa
Leased
Lawrence
Lawrence
Kansas
Owned
Marshalltown
Marshalltown
Iowa
Leased
West Des Moines
West Des Moines
Iowa
Leased
Menoken
Menoken
North Dakota
Leased
Mitchell
Mitchell
South Dakota
Owned
Plattsmouth
Plattsmouth
Nebraska
Leased
Rapid City
Rapid City
South Dakota
Leased
Henderson (2 plants)
Henderson
Colorado
Leased
Grand Junction
Grand Junction
Colorado
Leased
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Facility Name
City
State/Province
Ownership
Lubbock
Lubbock
Texas
Owned
Mineral Wells
Mineral Wells
Texas
Owned
San Antonio
San Antonio
Texas
Owned
Stacy
Stacy
Minnesota
Owned
Riverside (2 plants)
Menifee
California
Leased
Bio Clean
Oceanside
California
Leased
St. Eustache Pressure Pipe
St. Eustache
Quebec
Owned
Bar Nunn
Bar Nunn
Wyoming
Owned
Water Pipe & Products (15 plants)
Bessemer (2 plants)
Bessemer
Alabama
Leased
Mini Mill
Bessemer
Alabama
Leased
Union City
Union City
California
Owned
Lynchburg
Lynchburg
Virginia
Owned
Monterrey, Mexico
Monterrey
Mexico
Owned
Rogers
Rogers
Minnesota
Leased
Ottawa
Ottawa
Kansas
Leased
Marysville
Marysville
California
Leased
Warren
Warren
Oregon
Leased
Ephrata
Ephrata
Pennsylvania
Leased
Phoenix
Phoenix
Arizona
Leased
Orlando
Orlando
Florida
Leased
Gainesville
Gainesville
Georgia
Leased
San Antonio
San Antonio
Texas
Leased
Item 3. Legal Proceedings
We have been from time to time, and may in the future become, party to litigation or other legal proceedings that we consider to be part of the ordinary course of our business. We are not currently involved in any
legal proceedings that we believe could reasonably be expected to have a material adverse effect on our business, financial condition or results of operations. We may become involved in material legal
proceedings in the future.
Derivative Action
On January 15, 2019, a putative shareholder derivative complaint captioned Lee v. Bradley, et al., was filed in the United States District Court for the District of Delaware, naming as defendants certain of
our current and former directors and officers, or the Lee Action. The complaint alleges the defendants violated Section 14A of the Securities and Exchange Act of 1934, as amended, and related rules by failing to
make certain disclosures in our proxy solicitation in advance of the 2017 Annual Meeting of Stockholders, and that defendants breached their fiduciary duties, wasted corporate assets, and committed constructive
fraud. The complaint also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of certain payments to
the defendants, certain injunctive relief, and reasonable costs and attorneys' fees. After initially staying the case until the court in a prior, unrelated shareholder class action that has now been settled ruled on the
motion to dismiss in that case, on December 11, 2019, the court in the Lee Action entered a Stipulation and Order consolidating the Lee Action and another derivative action filed in the same court into a single
case, or the Consolidated Lee Action, and providing a schedule for filing of an amended complaint and motions to dismiss, which has been further extended by
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agreement of the parties. Plaintiffs filed an amended complaint in August 2020 and Defendants filed a motion to dismiss the complaint in September 2020, which is now fully briefed and before the court. In light of
the pending merger of the Company with an affiliate of Quikrete Holdings, Inc., the parties have agreed to stay the action, and the Court has entered an order staying the action until the later of the date the merger
is completed or April 1, 2022, unless the merger agreement is terminated, in which case the parties must inform the court. and a decision is expected in the coming months.
We and other defendants are vigorously defending the Consolidated Lee Action. Given the stage of the proceedings, we cannot reasonably estimate at this time the possible loss or range of loss, if any, that may
arise from the Consolidated Lee Action. See Note 16 to our consolidated financial statements.
Merger-Related Litigation
On March 24, 2021, Anand Choudhuri, a purported owner of Forterra common stock brought a lawsuit against the Company and each of the members of its Board of Directors in the U.S. District Court for
the Southern District of New York, or the Choudhuri Action. The plaintiff alleges, among other things, that the directors breached their fiduciary duties by entering into the Merger Agreement through an unfair
process and for inadequate compensation, and that the Information Statement filed by the Company to explain the Merger to its stockholders, or the Merger Information Statement, omits material information related
to the sales process, our financial projections, and Citigroup Global Markets Inc.’s, or Citi's, analysis of the proposed transaction reflected in the Merger Agreement, in violation of the federal securities laws and
seeks to enjoin the Merger and/or damages in an unspecified amount.
On March 31, 2021, Christopher Jones, a purported owner of Forterra common stock brought a lawsuit against the Company and each of the members of its Board of Directors in the U.S. District Court for
the District of Colorado, or the Jones Action. The plaintiff alleges, among other things, that defendants violated federal securities laws by failing to disclose certain information in the Merger Information Statement,
the Company’s financial projections, and Citi's analysis of the proposed transaction reflected in the Merger Agreement and seeks to enjoin the Merger and/or damages in an unspecified amount.
On April 1, 2021, Adam Franchi, a purported owner of Forterra common stock brought a lawsuit against Forterra and individual members of the Board of Directors in the U.S. District Court for the District of
Delaware, or the Franchi Action, collectively, the Choudhuri Action, the Jones Action and the Franchi Action are the Merger-Related Litigation. The plaintiff in the Franchi Action alleges, among other things, that
defendants violated federal securities laws by failing to disclose certain information in the Merger Information Statement, the Company’s financial projections, and Citi's analysis of the proposed transaction reflected
in the Merger Agreement and seeks to enjoin the Merger and/or damages in an unspecified amount.
We filed supplemental disclosures relating to the Merger Information Statement which further explained the proposed transaction that is contemplated by the Merger Agreement. Following the supplemental
disclosure filings, in late April 2021 each of the three cases was voluntarily dismissed by the applicable plaintiff, and it is expected that the plaintiffs in these actions may seek compensation for their expenses and
attorneys' fees. Given the stage of the proceedings, we cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the Merger-Related Litigation.
In addition, certain stockholders have informed us that they will seek to exercise their appraisal rights under Delaware law with respect to their shares. No further action has been taken by these
stockholders to date.
North Birmingham EPA Matter
U.S. Pipe received a General Notice Letter and Invitation to Conduct Removal Action dated September 20, 2013 from the EPA with respect to the 35th Avenue Superfund site in Birmingham, Alabama. The letter
requests that U.S. Pipe participate in an environmental response action in an area proximate to a closed U.S. Pipe facility in North Birmingham, Alabama. The U.S. Pipe North Birmingham facility was closed and,
as part of the acquisition of U.S. Pipe by a private equity fund from Mueller Water Products, Inc. and Mueller Group, LLC, or
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the Sellers, in 2012, the facility was retained by and is currently owned by either the Sellers or one of their affiliates. The notice requested response activities including testing and removing surface soils at area
residences alleged to be contaminated by locally-sourced air pollutants. In connection with the disposition, the Sellers agreed to jointly and severally defend and indemnify U.S. Pipe against any losses or
environmental liabilities related to sites retained by the Sellers, including the North Birmingham facility. Accordingly, U.S. Pipe tendered the defense of this matter to the Sellers for defense and indemnification. The
Sellers accepted the tender and, on behalf of U.S. Pipe, have responded to the EPA’s request to participate in a time-critical removal action by declining, based on the EPA’s failure to establish any nexus between
the contamination and any operations at the U.S. Pipe North Birmingham facility. The EPA sent a renewed request addressed to the Sellers, U.S. Pipe and a number of other potentially responsible parties on
August 8, 2014 seeking participation in a broader cleanup of soil at approximately 80 homes in North Birmingham. The Sellers again responded on U.S. Pipe’s behalf declining to participate on the same grounds.
In September 2014, the EPA proposed that the site be listed on the National Priorities List. The Sellers continue to defend on this matter on behalf of U.S. Pipe. While we cannot provide assurance that such
defense will be successful, because of the indemnification described above, we do not believe the ultimate resolution of these matters will have a material adverse effect on our business, financial condition or
results of operations.
Item 4. Mine Safety Disclosures
Not applicable.
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Common Stock
Our common stock is traded on Nasdaq under the ticker symbol “FRTA.” As of February 25, 2022, there were 3 stockholders of record of our common stock. A substantially greater number of holders of
Forterra's common stock are “street name” or beneficial holders, whose shares of record are held by banks, brokers, and other financial institutions.
Dividend Policy
We have not declared or paid any dividends since our formation and currently do not intend to pay dividends for the foreseeable future. Additional information concerning restrictions on our payment of cash
dividends may be found in “Liquidity and Capital Resources” in Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Securities Authorized for Issuance Under Equity Compensation Plans
See Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information regarding common stock authorized for issuance under equity
compensation plans.
Stock Performance Graph
The following graph shows a comparison of cumulative total shareholder return, calculated on a dividend-reinvested basis, for the Company, the Russell 2000 Index and a market-weighted index of
Company-selected, publicly traded peer companies (the “Peer Group”) for the five years ended December 31, 2021. The graph assumes $100 was invested in each of the Company’s common stock, the Russell
2000 Index and the Peer Group as of the market close on December 31, 2016 and that all dividends were reinvested. The Peer Group consists of Summit Materials, Inc., Vulcan Materials Company, Martin Marietta
Materials, Inc., Advanced
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Drainage Systems Inc. and Mueller Water Products, Inc. The stock price performance shown in the graph is not necessarily indicative of future price performance.
Cumulative Total Return
As of December 31,
2016
2017
2018
2019
2020
2021
Forterra
$
100.00
$
51.25
$
17.36
$
53.37
$
79.36
$
109.79
Peer Group
$
100.00
$
104.15
$
79.03
$
121.99
$
131.36
$
194.88
Russell 2000 Index
$
100.00
$
113.14
$
99.37
$
122.94
$
145.52
$
165.70
The information under the heading “Stock Performance Graph” shall not be deemed to be soliciting material or to be filed with the SEC or incorporated by reference into any SEC filings except to the extent
the Company specifically incorporates it by reference into a filing under the Securities Act or the Exchange Act.
Item 6. [Reserved.]
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Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with our consolidated financial statements and the related notes included in Item 8. "Financial Statements and Supplementary Data".
This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of many factors, including those set forth under the heading Item 1A. "Risk Factors" and elsewhere in this Annual Report on Form 10-K. See the section entitled “Cautionary Statement
Concerning Forward-Looking Statements.”
Overview
Our Company
We are a manufacturer of ductile iron pipe and concrete pipe and precast products in the United States and Eastern Canada for a variety of essential water-related infrastructure applications, including water
transmission, distribution and drainage. Our manufacturing and distribution network allows us to serve most major U.S. and Eastern Canadian markets. We operate 80 active manufacturing facilities and currently
have additional manufacturing capacity available in both of our segments, providing room to increase production to meet short-cycle demand with minimal incremental investment. These facilities and our
distribution network provide us with a local presence and the necessary proximity to our customers to minimize delivery time and distribution costs to the markets we serve.
Quikrete Merger Agreement and the Related Divestitures
On February 19, 2021, we entered into an Agreement and Plan of Merger, or the Merger Agreement, with Quikrete Holdings, Inc., a Delaware corporation, or Quikrete, and Jordan Merger Sub, Inc., a
Delaware corporation and a wholly-owned subsidiary of Quikrete, or Merger Sub. Pursuant to the Merger Agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with and into
the Company, or the Merger, with us surviving the Merger as a wholly-owned subsidiary of Quikrete.
Pursuant to the Merger Agreement, at the effective time of the Merger, or the Effective Time, each issued and outstanding share of common stock of ours (other than (i) any shares held in the treasury of us
or owned, directly or indirectly, by Quikrete, Merger Sub or any wholly-owned subsidiary of us immediately prior to the Effective Time, (ii) shares that are subject to any vesting restrictions, or the Company
Restricted Shares, granted under our stock incentive plans, or the Company Stock Plans, and (iii) any shares owned by stockholders who have properly exercised and perfected appraisal rights under Delaware
law) will be automatically canceled and converted into the right to receive $24.00 in cash, without interest, or Merger Consideration, subject to deductions for any required withholding tax.
Each party’s obligation to consummate the Merger is subject to certain conditions, including, among others: (i) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (ii) the absence of any order issued by any court of competent jurisdiction, other legal restraint or prohibition or any law enacted or deemed applicable by a governmental
entity that prohibits or makes illegal the consummation of the Merger; (iii) the passing of twenty (20) days from the date on which we mail to our stockholders the Information Statement (as defined below) in
definitive form; (iv) subject to certain qualifications, the accuracy of representations and warranties of the other party set forth in the Merger Agreement; and (v) the performance by the other party in all material
respects of its obligations under the Merger Agreement. Quikrete’s obligation to consummate the Merger is also conditioned on, among other things, the absence of any Material Adverse Effect (as defined in the
Merger Agreement).
Entry into the Merger Agreement was unanimously approved by our board of directors.
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The Merger Agreement includes customary representations, warranties and covenants of us, Quikrete and Merger Sub. Among other things, we have agreed to use commercially reasonable efforts to
conduct its business in the ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve intact its businesses until the Merger is consummated. We and Quikrete
have also agreed to use their respective reasonable best efforts to obtain any approvals from governmental authorities for the Merger, including all required antitrust approvals, on the terms and subject to the
conditions set forth in the Merger Agreement, provided that Quikrete and its affiliates will not be required to take, or agree to take, certain actions with respect to assets, businesses or product lines of Quikrete or
any of its subsidiaries, or we or any of its subsidiaries, accounting for more than $80 million of EBITDA (as defined in the Merger Agreement) for the 12 months ended December 31, 2020, measured in accordance
with the Merger Agreement.
The Merger Agreement contains certain provisions giving each of Quikrete and us rights to terminate the Merger Agreement under certain circumstances, including the right for either Quikrete or us to
terminate the Merger Agreement if the Merger has not been consummated on or before November 19, 2021, which date will be automatically extended for up to two additional 60-day periods in specified
circumstances as described in the Merger Agreement, or the Outside Date. Upon termination of the Merger Agreement under specified circumstances, we will be required to pay Quikrete a termination fee of $50
million. The Merger Agreement further provides that Quikrete will be required to pay us a reverse termination fee of $85 million under certain circumstances if the Merger Agreement is terminated due to the failure
of the parties to obtain required approvals under Antitrust Laws (as defined in the Merger Agreement) prior to the Outside Date or as a result of a Restraint (as defined in the Merger Agreement) arising under
applicable Antitrust Laws.
If the Merger is consummated, the shares of Common Stock will be delisted from the Nasdaq Stock Market LLC and deregistered under the Securities Exchange Act of 1934, as amended or the Exchange
Act.
In order to address some of the divestitures anticipated to be required by the DOJ to satisfy the HSR Condition, on November 24, 2021, Forterra Pipe & Precast, LLC, a Delaware limited liability company
and wholly owned subsidiary of us, or FP&P, entered into a Membership Interest Purchase Agreement, or the Eagle Purchase Agreement, with Eagle Corporation, a Virginia corporation, or Eagle, and Quikrete.
Pursuant to the terms and subject to the conditions set forth in the Eagle Purchase Agreement, contemporaneously with the closing of the Merger and the other transactions contemplated by the Merger
Agreement, Eagle will purchase FP&P’s 50% equity interest in Concrete Pipe & Precast, LLC, or CP&P, a joint venture with Eagle, or the CP&P Sale, for a purchase price of $105,000,000 (subject to certain
adjustments as described in the Eagle Purchase Agreement). Consummation of the CP&P Sale is subject to customary closing conditions, including, among others, the consummation of the Merger and approval
by the DOJ.
The Eagle Purchase Agreement contains certain termination rights for FP&P and Eagle, including, among others, the right to terminate the Eagle Purchase Agreement (i) by either party if the CP&P Sale
has not occurred by March 22, 2022, which date may be extended under certain circumstances described in the Eagle Purchase Agreement, (ii) by either party in the event of the issuance of a final and non-
appealable governmental order that prohibits the CP&P Sale or if FP&P notifies Eagle that (x) the Merger is not occurring or (y) the Merger Agreement has been terminated and (iii) by FP&P if FP&P determines in
good faith in its reasonable discretion that the DOJ is not likely to approve the CP&P Sale and the Merger.
In addition, in order to address some of the divestitures anticipated to be required by the DOJ to satisfy the HSR Condition, on December 13, 2021, FP&P entered into an Asset Purchase Agreement, or the
Foley Asset Purchase Agreement, with Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability company and an affiliate of Quikrete, or Rinker, and Foley Products Company, Inc., a Georgia
corporation, or Foley.
Pursuant to the terms and subject to the conditions set forth in the Foley Asset Purchase Agreement, contemporaneously with the closing of the Merger and the other transactions contemplated by the
Merger Agreement, FP&P and Rinker will each sell to Foley certain assets and liabilities associated with reinforced concrete pipe and precast plants, or the Asset Sale, for an aggregate purchase price of
$95,000,000 (subject to certain adjustments described in the Asset Purchase Agreement). The assets being sold by FP&P include FP&P’s
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reinforced concrete pipe and precast plant located in St. Martinville, Louisiana. Consummation of the Asset Sale is subject to customary closing conditions, including, among others, the consummation of the Merger
and approval by the DOJ.
The Asset Purchase Agreement contains specified termination rights for the FP&P and Rinker, or the Asset Sellers, and Foley, including, among others, the right to terminate the Asset Purchase Agreement
(i) by either the Foley or the Asset Sellers if the Asset Sale has not occurred by March 22, 2022, which date may be extended under certain circumstances described in the Asset Purchase Agreement, (ii) by either
Foley or the Asset Sellers in the event of the issuance of a final and non-appealable governmental order that prohibits the Asset Sale or if the Asset Sellers notify Foley that (x) the Merger is not occurring or (y) the
Merger Agreement has been terminated and (iii) by the Asset Sellers if they determine in good faith in its reasonable discretion that the DOJ is not likely to approve the Asset Sale and the Merger.
Additionally, on February 16, 2022, the Company announced that Rinker had entered into an Asset Purchase Agreement, or the Oldcastle Asset Purchase Agreement, with Oldcastle Infrastructure, Inc., a
Washington corporation, or Oldcastle, in order to address some of the divestitures anticipated to be required by the DOJ to satisfy the HSR Condition for the consummation of the Merger and the other transactions
contemplated by the Merger Agreement. Pursuant to the terms and subject to the conditions set forth in the Oldcastle Asset Purchase Agreement, contemporaneously with or shortly after the closing of the Merger
and the other transactions contemplated by the Merger Agreement, Rinker will sell to Oldcastle certain assets and liabilities associated with three reinforced concrete pipe plants located in the Dallas/Fort Worth,
Houston, and San Antonio metropolitan areas, or the Oldcastle Asset Sale. Consummation of the Oldcastle Asset Sale is subject to customary closing conditions, including, among others, the consummation of the
Merger and approval by the DOJ.
The Company and Quikrete continue to work with the DOJ to obtain the necessary consent to allow the parties to complete the Merger by the outside date of March 22, 2022, but whether such consent is
obtained by the outside date is outside of the Company’s control. If such consent has not been obtained by the outside date, the parties will have the rights set forth in the Merger Agreement. For additional detail
regarding the risks associated with the failure to close the Merger prior to the outside date, please refer to the “Risks Related to the Proposed Merger” set forth in “Risk Factors” in Part I, Item 1A of this Form 10-K.
Our Segments
Our operations are organized into the following reportable segments:
•
Drainage Pipe & Products - We are a producer of concrete drainage pipe and precast products and concrete pressure pipe products.
•
Water Pipe & Products - We are a producer of ductile iron pipe, or DIP.
•
Corporate and Other - Corporate, general and administrative expenses not allocated to our revenue-generating segments such as certain shared services, executive and other administrative functions.
In the fourth quarter of 2020, we reclassified our pressure pipe business from Water segment to Drainage segment to better align with our organizational structure.
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COVID-19 Pandemic
Beginning in mid-March 2019, local, state, provincial and federal authorities began issuing stay at home orders in response to the spread of the coronavirus disease 2019, or COVID-19, which has quickly spread
throughout the United States and worldwide. These government-instituted restrictions, together with the economic volatility and uncertainty caused by the pandemic, have had a significant impact on the United
States economy in general and certain parts of our end-markets in particular. Despite these events and the related uncertainty, we have continued to operate as an essential business under the government orders,
and the COVID-19 pandemic has not materially affected our liquidity, financial results or business operations thus far. During the initial phase of the pandemic in the early part of the second quarter, we experienced
temporary delays in certain projects, primarily related to governmental stay-at-home orders in place at that time and the reactions of certain customers to those orders, specifically in our residential end-markets.
Late in the second quarter and continuing through 2020 and into 2021, as most states started gradually resuming their normal economic activities, there was some correction in these trends in the residential
housing market.
Since the onset of the COVID-19 pandemic, we have focused on protecting the health and safety of our team members while maintaining our operations, which have been deemed essential under relevant
pandemic-related government regulations, and continuing to meet our customers’ needs. Although some of our team members have tested positive for COVID-19, and we encountered temporary closures of a
small number of our manufacturing facilities in the second quarter of 2020 due to such cases or due to government mandate, these events have not had a significant impact on our operations or our ability to serve
our customers' needs. We did however utilize the option under the CARES Act to defer the employer portion of the social security taxes that would otherwise have been due in 2020, with 50% paid in the third
quarter of 2021 and the remaining 50% due by December 31, 2022.
During 2021, we saw improvements in our business conditions, however, we continued to see supply chain challenges as well as higher raw material, labor, and freight costs. The situation around the COVID-19
pandemic remains fluid because of the evolution of COVID-19 variants, and the extent of the ongoing impact on our business may be significant. However, due the fluidity and unprecedented and uncertain nature
of the pandemic, we cannot predict the future impact of the COVID-19 pandemic may have on our business, or that of our customers, and participants in our supply chain, or on economic conditions generally,
including the effects on infrastructure spending and other construction activity. The ultimate scope and extent of the effects of the COVID-19 pandemic are highly uncertain and will depend on future developments,
and such effects could exist for an extended period of time even after the pandemic may end.
For additional information on risk factors that could impact our results, please refer to “Risk Factors” in Part I, Item 1A of this Form 10-K.
Principal Factors Affecting Our Results of Operations
Our financial performance and results of operations are influenced by a variety of factors, including conditions in the residential, non-residential and infrastructure construction markets, general economic
conditions, changes in cost of goods sold, competitive behavior in the markets we serve, and seasonality and weather conditions. Some of the more important factors are discussed below, as well as in the section
Item 1A. “Risk Factors,” with the exception of the impacts of the COVID-19 pandemic, which are discussed above.
Infrastructure Spending and Residential and Non-Residential Construction Activities
A large proportion of our net sales in our Drainage Pipe & Products segment is generated through public infrastructure projects, which are driven by federal, state and provincial funding programs. In the U.S.,
federal funds are allocated to the states, which are required to match a portion of the federal funds they receive. According to the Federal Reserve Bank, public investment in the U.S. infrastructure as a share of
Gross Domestic Product has fallen by more than 40% since the 1960s. The World Economic Forum ranked the U.S. 13 when it comes to overall quality of infrastructure. In terms of the transportation
infrastructure, more than 45,000 U.S.
th
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bridges and 1 in 5 miles of roads are in poor condition, according to the American Society of Civil Engineers, or the ASCE.
A large proportion of our net sales in our Water Pipe & Products segment is generated through municipal infrastructure projects. The U.S. potable water infrastructure, especially the underground pipes that deliver
drinking water to homes and businesses, is aging and in need of significant reinvestment. Like many of the roads, bridges, and other public assets on which the U.S. relies, most of the underground drinking water
infrastructure was built 50 or more years ago, in the post-World War II era of rapid demographic change and economic growth. In some older urban areas, many water mains have been in the ground for a century
or longer. Given its age, a large proportion of the U.S. water infrastructure is approaching, or has already reached, the end of its useful life. In some locations, improvements to water infrastructure are needed to
comply with standards for drinking water quality. The ASCE estimates 240,000 water main breaks per year in the U.S. due to aging pipelines, wasting over two trillion gallons of treated drinking water. The
underlying demand for municipalities to repair or replace their water systems depends on the status of the water systems and the availability of funding. With people spending more time at their homes in order to
reduce the spread of the COVID-19 virus, it is even more critical to ensure the uninterrupted supply of clean water.
In November 2021, President Biden signed into law the Infrastructure Investment and Jobs Act, a $1.2 trillion investment in U.S. infrastructure, of which more than $100 billion is dedicated to upgrading aging
bridges, highways and roads. In addition, more than $50 billion of the contemplated spending is dedicated to upgrading water infrastructure in the U.S. The law's increased federal funding for highways, roads,
bridges, transit and water systems is expected to benefit the state and local governments, which undertake the bulk of public-sector investment in the U.S. The funding will allow these entities to maintain aging
assets and clear project backlogs especially for projects which were delayed during the initial outbreak of the COVID-19 pandemic, as well as supporting economic activity and revenue growth.
A relatively smaller proportion of our products has been closely tied to residential construction and non-residential construction activity in the United States and Eastern Canada. Activity levels in these markets can
be materially affected by general economic and global financial market conditions. In addition, residential construction activity levels are influenced by and sensitive to mortgage availability, the cost of financing a
home (in particular, mortgage and interest rates), unemployment levels, household formation rates, residential vacancy and foreclosure rates, existing housing prices, rental prices, housing inventory levels,
consumer confidence and government policy and incentives. During 2021, the residential construction activities continued recovering from the brief downturn during the initial outbreak of the pandemic in 2020,
driven by improvements in economic activities, increased demand for single-family housing as more people work remotely, as well as historically low mortgage interest rates. Non-residential construction activity is
primarily driven by levels of business investment, availability of credit and interest rates, as well as many of the factors that impact residential construction activity levels. See Item 1 “Business.”
Mix of Products
We derive our revenues from both the sale of products manufactured to inventory, such as concrete drainage pipe and DIP, and highly engineered products which are made to order, such as precast concrete
products and concrete pressure pipe. These two product categories differ in their dynamics. The mix of products our customers order is project driven and varies from period to period. We generally recognize
revenue at the time of shipment of our products; however, for some of our highly engineered structural precast products, we recognize revenue on a percentage of completion method, which accounted for 1.7% of
our total sales in 2021.
Most of our products are sold on a one-off basis, with volumes and prices determined frequently based on market participants’ perceptions of short-term supply and demand factors. A shortage of capacity or
excess capacity in the industry, or in the regions where we have operations, or the behavior of our competitors, can each result in significant increases or decreases in market prices for these products, often within
a short period of time. By contrast, our project-driven business involves highly engineered and customized products with a wide range of contract values. The products for these projects are engineered,
manufactured and delivered on the basis of contracts that tend to extend over periods of several months or, in some cases, several years. The timing of the
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commencement of a project and the progress and completion of work under a contract, therefore, can have a significant effect on our results of operations for a particular period.
Average Selling Prices
The average selling prices we are able to obtain for our products affect our results of operations and our margins. Our average selling price can vary by market location, particularly in our Drainage Pipe and
Products segment, product mix, factors relating to supply and demand, and the actions of our customers and competitors. The average selling prices for our products increased in 2021 over the average selling
prices we received in 2020 in both our Water and Drainage segments. For a discussion of changes to average selling price see the discussion by segment in “Results of Operations” below.
Cost of Goods Sold
Costs of raw material and other inputs, supplies, labor (including contract labor), freight and energy constitute a large portion of our cost of goods sold, and fluctuations in the prices of these materials and inputs
affect our results of operations and, in particular, our margins. Our primary raw materials in our Drainage Pipe and Products segment are cement, aggregates, and steel. We typically negotiate contracts with
suppliers of these materials for one to three years, with prices subject to annual revisions. The primary input in our Water business is scrap steel, which we purchase on the spot market, and its costs can vary
significantly from period to period. We do not generally hedge our raw material purchases but rather utilize our product pricing strategy to manage our exposure to fluctuations in our raw material costs. The costs of
our raw materials increased significantly during 2021 over 2020, in particular the costs of steel and scrap steel.
Seasonality and Weather Conditions
The construction industry, and therefore demand for our products, is typically seasonal and highly dependent on weather conditions, with periods of snow or heavy rain negatively affecting construction activity.
Because the majority of our products are buried underground, we experience lower demand for our products in periods of cold weather, particularly during winter, and periods of excessive rain or flooding. These
types of conditions or other unfavorable weather conditions generally lead to seasonal fluctuations in our quarterly financial results. Historically, our net sales in the second and third quarters have been higher than
in the other quarters of the year, particularly the first quarter.
In addition, unfavorable weather conditions, such as hurricanes or severe storms, or public holidays during peak construction periods can result in temporary cessation of projects and a material reduction in
demand for our products and consequently have an adverse effect on our net sales. Results of a fiscal quarter may therefore not be a reliable basis for the expectations of a full fiscal year and may not be
comparable with the results in the other fiscal quarters in the same year or prior years.
Our Business Strategy
Our strategy is focused on continued execution of our five improvement pillars: health and safety of our team members, plant-level operational discipline, enhanced commercial capabilities, working capital
efficiency, and general and administrative effectiveness. See Item 1 "Business" These pillars are designed to expand our product margin so that we can earn a full and fair return on the products we produce and
the capital we deploy. We are also committed to strengthening our capital structure through a combination of working capital improvement, debt repayment and prudent investment in the business. Prudent
investment in the business includes growth capital expenditures in projects and smaller acquisitions. Our near-term goal is to reduce our net leverage ratio to 3x-3.5x. After achieving that, we will cautiously evaluate
our capital allocation plans going forward to maximize values to our stakeholders.
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Principal Components of Results of Operations
Net Sales
Net sales consist of the consideration received or receivable for the sale of products in the ordinary course of business and include the billable costs of delivery of our products to customers, net of discounts
given to the customer. Net sales include any outbound freight charged to the customer. Revenue on certain long-term engineering and construction contracts for our structural precast and products that are
designed and engineered specifically for the customer is recognized under the percentage-of completion method. See Note 2 to our consolidated financial statements.
Cost of Goods Sold
Cost of goods sold includes raw materials and other inputs (cement, aggregates, scrap, and steel) and supplies, labor (including contract labor), freight (including outbound freight for delivery of products to end
users and other charges such as inbound freight), energy, depreciation and amortization, repairs and maintenance and other cost of goods sold.
Selling, General and Administrative Expenses
Selling, general and administrative expenses include expenses for sales, marketing, legal, accounting and finance services, human resources, customer support, treasury and other general corporate services.
Selling, general and administrative expenses also include transaction costs directly related to business combinations.
Earnings from Equity Method Investee
Earnings from equity method investee represents our share of the income of the CP&P joint venture we entered into with Americast, Inc. CP&P is engaged primarily in the manufacture, marketing, sale and
distribution of concrete pipe and precast products in Virginia, West Virginia, Maryland, North Carolina, Pennsylvania and South Carolina with sales to contiguous states. See Note 6 to the consolidated financial
statements for additional information on CP&P.
Other Operating Income
The remaining categories of operating income and expenses consist of scrap income (associated with scrap from the manufacturing process or remaining scrap after plants are closed), insurance gains, rental
income, as well as net gain or loss on the sale of assets including property, plant and equipment.
Interest Expense
Interest expense represents interest on the indebtedness.
Income Tax Expense
Income tax expense consists of federal, state, provincial, local and foreign taxes based on income in the jurisdictions in which we operate.
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Results of Operations
Year Ended December 31, 2021 as Compared to the Year Ended December 31, 2020
Total Company
The following table summarizes certain financial information relating to our operating results for the years ended December 31, 2021 and December 31, 2020 (in thousands).
Statements of Income Data:
Year ended
December 31, 2021
Year ended
December 31, 2020
% Change
Net sales
$
1,858,270
$
1,594,506
16.5%
Cost of goods sold
1,437,872
1,217,833
18.1%
Gross profit
420,398
376,673
11.6%
Selling, general and administrative expenses
(216,146)
(221,770)
(2.5)%
Impairment and exit charges
(645)
(2,511)
(74.3)%
Other operating income, net
13,763
1,409
876.8%
(203,028)
(222,872)
(8.9)%
Income from operations
217,370
153,801
41.3%
Other income (expenses)
Interest expense
(74,976)
(79,890)
(6.2)%
Gain (loss) on extinguishment of debt
—
(12,256)
*
Earnings from equity method investee
12,592
11,291
11.5%
Income before income taxes
154,986
72,946
*
Income tax expense
(38,669)
(8,460)
*
Net income
$
116,317
$
64,486
80.4%
* Represents positive or negative change in excess of 100%
Net Sales
Net sales for the year ended December 31, 2021 were $1,858.3 million, an increase of $263.8 million or 16.5% from $1,594.5 million for the year ended December 31, 2020. The increase was the combination of
a $157.7 million increase in our in our Water Pipe & Products segment due to both higher average selling prices and higher shipment volumes, and a $106.1 million increase in our Drainage Pipe & Products
segment mostly driven by higher shipment volumes.
Cost of Goods Sold
Cost of goods sold for the year ended December 31, 2021 were $1,437.9 million, an increase of $220.1 million or 18.1% from $1,217.8 million for the year ended December 31, 2020. The increase in cost of
goods sold was the combination of a $156.4 million increase in our Water Pipe & Products segment due to both higher raw material, labor, and freight costs and higher shipment volumes, and a $63.5 million
increase in our Drainage Pipe & Products segment primarily due to higher shipment volumes. Specifically, for our Water Pipe & Products segment, the industry average cost of scrap metal increased by more than
50% year-over-year. In addition, unit freight and labor costs increased by more than 25% and 5% year-over-year, respectively.
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Gross Profit
Gross profit in the year ended December 31, 2021 was $420.4 million, an increase of $43.7 million, or 11.6%, from $376.7 million in the year ended December 31, 2020. Most of the increase in gross profit came
from our Drainage Pipe and Products segment primarily driven by higher shipment volumes
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the year ended December 31, 2021 were $216.1 million, a slight decrease compared to $221.8 million in the year ended December 31, 2020.
Impairment and Exit Charges
Impairment and exit charges in the year ended December 31, 2021 were $0.6 million, compared to $2.5 million in the year ended December 31, 2020. These charges in both years primarily related to plant
closings undertaken for purposes of achieving operating efficiencies.
Other Operating Income, net
Other operating income, net increased to $13.8 million in the year ended December 31, 2021, compared to $1.4 million in the year ended December 31, 2020. The increase was primarily due to $10.3 million of
gains from disposal of properties, plant and equipment during the year as we continue optimizing our asset portfolio.
Interest Expense
Interest expense in the year ended December 31, 2021 was $75.0 million, a decrease of $4.9 million, or 6.2%, from $79.9 million in the year ended December 31, 2020. Lower LIBOR and lower average
outstanding term loan balances year-over-year contributed a $12.3 million decrease in interest expenses, which was partially offset by $6.3 million impact of a full year of interest expense on the $500 million senior
secured notes that were issued in July 2020.
Gain (loss) on extinguishment of debt
Loss on extinguishment of debt in the year ended December 31, 2020 was $12.3 million. There was no loss on extinguishment of debt in the year ended December 31, 2021. The loss in 2020 was primarily driven
by the write-off of the deferred debt issuance cost of $13.1 million associated with our $612.5 million term loan prepayment at par with the proceeds from the offering of our Senior Notes and cash on hand, slightly
offset by a gain from our $83.5 million open-market term loan repurchases at small discounts.
Income Tax Expense
Income tax expense in the year ended December 31, 2021 was $38.7 million, an increase of $30.2 million from an income tax expense of $8.5 million in the year ended December 31, 2020. The change is
primarily due to the improvement of our operating income in 2021 to $155.0 million, compared to $72.9 million in 2020. In addition, the prior year income tax expense was offset by an $11.5 million reversal of
valuation allowance.
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Segment Results of Operations
(in thousands)
For the year ended December 31,
2021
2020
% Change
Net sales:
Drainage Pipe & Products
$
993,464
$
887,420
11.9 %
Water Pipe & Products
864,806
707,086
22.3 %
Corporate and Other
—
—
Total
$
1,858,270
$
1,594,506
16.5 %
Gross profit (loss):
Drainage Pipe & Products
254,076
211,568
20.2 %
Water Pipe & Products
166,378
165,078
0.8 %
Corporate and Other
(56)
27
*
Total
$
420,398
$
376,673
11.6 %
Segment EBITDA :
Drainage Pipe & Products
239,860
187,547
27.9 %
Water Pipe & Products
150,412
145,451
3.4 %
Corporate and Other
(77,754)
(90,666)
(14.2)%
Key Operational Statistics
% Change
Drainage Pipe & Products
Shipment Volumes
+11%
Average Selling Prices
+2%
Water Pipe & Products
Shipment Volumes
+12%
Average Selling Prices
+10%
(1) For purposes of evaluating segment performance, the Company's chief operating decision maker reviews earnings before interest, taxes, depreciation and amortization, or EBITDA, as a basis for making the decisions to allocate resources and assess
performance. Our discussion below includes the primary drivers of EBITDA. See Note 21, Segment Reporting, to the condensed consolidated financial statements for segment EBITDA reconciliation to income (loss) before income taxes.
(2) Operational statistics only pertain to pipe and precast products and do not include other services, non-volume-based products, or non-core products. Pipe and precast products revenue accounted for more than 87% of Drainage segment revenue.
(3) Operational statistics only pertain to ductile iron pipe products and do not include other services, non-volume-based products, or non-core products. Ductile iron pipe products revenue accounted for more than 88% of Water segment revenue.
* Represents positive or negative change in excess of 100%.
(2)
(1)
(2)
(3)
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Drainage Pipe & Products
Net Sales
Net sales in the year ended December 31, 2021 were $993.5 million, an increase of $106.0 million, or 12.0%, from $887.4 million in the year ended December 31, 2020. The increase was primarily driven by
higher shipment volumes in our pipe and precast products as the economy continued to recover from the COVID-19 pandemic. Pipe and precast products revenues accounted for more than 85% of the net sales in
this segment.
Gross Profit
Gross profit in the year ended December 31, 2021 was $254.1 million, an increase of $42.5 million or 20.1% from $211.6 million in the year ended December 31, 2020. The increase was primarily due to higher
shipment volumes of our pipe and precast products.
Water Pipe & Products
Net Sales
Net sales in the year ended December 31, 2021 were $864.8 million, an increase of $157.7 million or 22.3% from $707.1 million in the year ended December 31, 2020. The increase was primarily the
combination of $68.0 million driven by higher shipment volumes and $63.3 million driven by higher average selling prices of our ductile iron pipe products. Ductile-iron pipe sales accounted for more than 85% of the
net sales in this segment.
Gross Profit
Gross profit in the year ended December 31, 2021 was $166.4 million, a slight increase of $1.3 million or 0.8% from $165.1 million in the year ended December 31, 2020. Higher average selling prices were offset
by higher raw material, labor and freight costs.
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Year Ended December 31, 2020 as Compared to the Year Ended December 31, 2019
Total Company
The following table summarizes certain financial information relating to our operating results for the years ended December 31, 2020 and December 31, 2019 (in thousands).
Statements of Income Data:
Year ended
December 31, 2020
Year ended
December 31, 2019
% Change
Net sales
$
1,594,506
$
1,529,752
4.2 %
Cost of goods sold
1,217,833
1,233,370
(1.3)%
Gross profit
376,673
296,382
27.1 %
Selling, general and administrative expenses
(221,770)
(221,770)
— %
Impairment and exit charges
(2,511)
(3,520)
(28.7)%
Other operating income, net
1,409
1,094
28.8 %
(222,872)
(224,196)
(0.6)%
Income from operations
153,801
72,186
*
Other income (expenses)
Interest expense
(79,890)
(94,970)
(15.9)%
Gain (loss) on extinguishment of debt
(12,256)
1,708
*
Earnings from equity method investee
11,291
10,466
7.9 %
Income (loss) before income taxes
72,946
(10,610)
*
Income tax (expense) benefit
(8,460)
3,279
*
Net income (loss)
$
64,486
$
(7,331)
*
* Represents positive or negative change in excess of 100%
Net Sales
Net sales for the year ended December 31, 2020 were $1,594.5 million, an increase of $64.7 million or 4.2% from $1,529.8 million for the year ended December 31, 2019. The increase was the net effect of a
$90.3 million increase in our in our Water Pipe & Products segment mostly due to higher average selling prices; partially offset by a decrease of $25.6 million in our Drainage Pipe & Products segment primarily
driven by lower shipment volumes, partially offset by higher average selling prices.
Cost of Goods Sold
Cost of goods sold for the year ended December 31, 2020 were $1,217.8 million, a decrease of $15.6 million or 1.3% from $1,233.4 million in the year ended December 31, 2019. The small decrease in cost of
goods sold was the net effect of a $36.2 million decrease in our Drainage Pipe & Products segment primarily driven by lower shipment volumes, partially offset by an increase of $20.8 million in our Water Pipe &
Products segment primarily due to a slight year-over-year increase in shipment volumes while unit cost of sales remained relatively flat.
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Gross Profit
Gross profit in the year ended December 31, 2020 was $376.7 million, an increase of $80.3 million, or 27.1%, from $296.4 million in the year ended December 31, 2019. Gross profit in both our Water Pipe &
Products segment and our Drainage Pipe & Products segment increased by $69.5 million and $10.6 million, respectively, primarily due to higher average selling prices in both businesses, partially offset by the
volume decline in our Drainage Pipe & Products segment.
Selling, General and Administrative Expenses
Selling, general and administrative expenses in the year ended December 31, 2020 were $221.8 million, the same as $221.8 million in the year ended December 31, 2019. Higher incentive compensation
expenses of $6.1 million driven by better results were partially offset by lower travel expenses of $3.1 million, and lower executive severance expenses of $2.5 million in 2020 compared to 2019.
Impairment and Exit Charges
Impairment and exit charges in the year ended December 31, 2020 were $2.5 million, compared to $3.5 million in the year ended December 31, 2019. The exit charges in both years primarily related to plant
closings undertaken for the purpose of achieving operating efficiencies.
Interest Expense
Interest expense in the year ended December 31, 2020 was $79.9 million, a decrease of $15.1 million, or 15.9%, from $95.0 million in the year ended December 31, 2019. The decrease in interest expense was
primarily driven by both the impact of lower LIBOR of $12.3 million and the impact of lower average outstanding debt balance of $4.0 million as we continued voluntarily prepaying our term loan, partially offset by
$6.3 million impact of higher interest rate on the $500 million senior secured notes that were issued in July 2020. In addition, $5.4 million of the change was related to the decrease of mark-to-market loss on the
interest rate swaps year over year.
Gain (loss) on extinguishment of debt
Loss on extinguishment of debt in the year ended December 31, 2020 was $12.3 million, compared to a gain of $1.7 million in the year ended December 31, 2019. The loss in 2020 was primarily driven by the write-
off of the deferred debt issuance cost of $13.1 million associated with our $612.5 million term loan prepayment at par with the proceeds from the offering of our Senior Notes and cash on hand, slightly offset by a
gain from our $83.5 million open-market term loan repurchases at small discounts. The gain in 2019 primarily related to our open-market purchases of term loan at discounts.
Income Tax (Expense) Benefit
Income tax expense in the year ended December 31, 2020 was $8.5 million, a change of $11.8 million from an income tax benefit of $3.3 million in the year ended December 31, 2019. The change is primarily
due to the improvement of our operating income in 2020 to $72.9 million, compared to an operating loss of $10.6 million in 2019. The increase in income tax expense was partially offset by an $11.8 million reversal
of valuation allowance in 2020 as our operating income improved over the prior year.
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Segment Results of Operations
(in thousands)
For the year ended December 31,
2020
2019
% Change
Net sales:
Drainage Pipe & Products
$
887,420
$
913,033
(2.8)%
Water Pipe & Products
707,086
616,719
14.7 %
Corporate and Other
—
—
Total
$
1,594,506
$
1,529,752
4.2 %
Gross profit (loss):
Drainage Pipe & Products
211,568
201,015
5.2 %
Water Pipe & Products
165,078
95,581
72.7 %
Corporate and Other
27
(214)
*
Total
$
376,673
$
296,382
27.1 %
Segment EBITDA :
Drainage Pipe & Products
187,547
173,006
8.4 %
Water Pipe & Products
145,451
82,831
75.6 %
Corporate and Other
(90,666)
(74,219)
22.2 %
Key Operational Statistics
% Change
Drainage Pipe & Products
Shipment Volumes
-11%
Average Selling Prices
+8%
Water Pipe & Products
Shipment Volumes
+3%
Average Selling Prices
+14%
(1) For purposes of evaluating segment performance, the Company's chief operating decision maker reviews earnings before interest, taxes, depreciation and amortization, or EBITDA, as a basis for making the decisions to allocate resources and assess
performance. Our discussion below includes the primary drivers of EBITDA. See Note 21, Segment Reporting, to the condensed consolidated financial statements for segment EBITDA reconciliation to income (loss) before income taxes.
(2) During the fourth quarter of 2020, we reclassified the pressure pipe business from Water segment to Drainage segment to better align with our organizational structure. The US and Canadian Pressure Pipe businesses were formerly managed by the Water
segment management team, however Forterra changed its internal management structure to include the remaining Canadian Pressure Pipe plant under the same management team that oversees the Canadian Pipe & Precast operations. As a result,
historical segment data reported in our 2019 Form 10-K was updated to reflect the current segment compositions.
(3) Operational statistics only pertain to pipe and precast products and do not include other services, non-volume-based products, or non-core products. Pipe and precast products revenue accounted for more than 85% of Drainage segment revenue.
(4) Operational statistics only pertain to ductile iron pipe products and do not include other services, non-volume-based products, or non-core products. Ductile iron pipe products revenue accounted for more than 85% of Water segment revenue.
* Represents positive or negative change in excess of 100%.
(2)
(1)
(2)
(3)
(4)
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Drainage Pipe & Products
Net Sales
Net sales in the year ended December 31, 2020 was $887.4 million, a decrease of $25.6 million, or 2.8%, from $913.0 million in the year ended December 31, 2019. The decrease was primarily the net effect of a
$91.3 million decrease due to lower shipment volumes in our pipe and precast products driven by less favorable weather in 2020 compared to 2019, temporary project delays related to the COVID-19 pandemic, as
well as our margin-enhancing "value before volume" commercial strategy; partially offset by a $53.7 million increase driven by higher average selling price in our pipe and precast products. Pipe and precast
products revenues accounted for more than 85% of the net sales in this segment. The remaining increase in net sales was primarily related to our structural precast business and was driven by higher shipment
volumes.
Gross Profit
Gross profit in the year ended December 31, 2020 was $211.6 million, an increase of $10.6 million or 5.3%, from $201.0 million in the year ended December 31, 2019. The increase was primarily due to higher
average selling prices, partially offset by lower shipment volumes of our pipe and precast products.
Water Pipe & Products
Net Sales
Net sales in the year ended December 31, 2020 were $707.1 million, an increase of $90.4 million or 14.7% from $616.7 million in the year ended December 31, 2019. The increase was primarily the combination
of $76.2 million driven by higher average selling prices and $13.9 million driven by higher shipment volumes of our ductile iron pipe products. Ductile-iron pipe sales accounted for more than 85% of the net sales in
this segment.
Gross Profit
Gross profit in the year ended December 31, 2020 was $165.1 million, an increase of $69.5 million or 72.7% from $95.6 million in the year ended December 31, 2019. The increase was primarily due to both
higher average selling prices and higher shipment volumes.
Liquidity and Capital Resources
Our available cash and cash equivalents, borrowing availability under our $350.0 million Revolver, and funds generated from operations are our most significant sources of liquidity. While we believe these
sources will be sufficient to finance our working capital requirements, planned capital expenditures that are essential, debt service obligations, lease payment obligations and other cash requirements for at least the
next 12 months, our long-term future liquidity requirements will depend in part upon our operating performance, which will be affected by prevailing economic conditions, including those related to the COVID-19
pandemic, and financial, business and other factors, some of which are beyond our control. See “Risk Factors” in Part I, Item 1A of this Form 10-K. Other long-term liquidity requirements may include strategic
transactions.
As of December 31, 2021 and 2020, we had approximately $56.8 million and $25.7 million of cash and cash equivalents, respectively, of which $19.0 million and $12.5 million, respectively, were held by foreign
subsidiaries. All of the cash and cash equivalents as of December 31, 2021 and 2020 were readily convertible as of such dates into currencies used in the Company’s operations, including the U.S. dollar. As a
result of recent tax reform legislation, we can repatriate the cumulative undistributed foreign earnings back to the U.S. when needed with minimal additional taxes other than state income and foreign withholding
tax.
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In connection with the IPO, we entered into a tax receivable agreement with Lone Star that provides for the payment by us to Lone Star of specified amounts in respect of any cash savings as a result of the
utilization of certain tax benefits. The actual utilization of the relevant tax benefits as well as the timing of any payments under the tax receivable agreement will vary depending upon a number of factors, including
the amount, character and timing of our and our subsidiaries’ taxable income in the future. However, we expect that the payments we make under the tax receivable agreement could be substantial. The tax
receivable agreement also includes provisions that restrict the incurrence of debt and require that we make an accelerated payment to Lone Star equal to the present value of all future payments due under the tax
receivable agreement, in each case under certain circumstances. Because of the foregoing, our obligations under the tax receivable agreement could have a substantial negative impact on our liquidity and could
have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. The passage of the TCJA significantly reduced the Company's
anticipated liability under the tax receivable agreement. Our liability recorded for the tax receivable agreement at December 31, 2021 and December 31, 2020 was $55.9 million and $64.2 million, respectively, with
$7.7 million and $8.3 million, respectively, being classified as short-term. For the years ended December 31, 2021 and December 31, 2020, we paid $8.3 million and $13.1 million, respectively, to Lone Star under
the tax receivable agreement.
Our forecast for payments under the tax receivable agreement in 2022 is expected to be in the range of $7 million to $9 million. We expect that future annual payments under the tax receivable agreement will
decline each year in accordance with our tax basis depreciation and amortization schedule unless future transactions result in an acceleration of our tax benefits under the agreement. See Item 1A, Risk Factors
and Note 16 to the consolidated financial statements.
Financing Arrangements
During the year ended December 31, 2020, we voluntarily prepaid $203.5 million of our Term Loan and prepaid $492.5 million of our Term Loan using the net proceeds from the offering of the senior secured
notes, as further described below. No voluntary debt prepayments were made during the year ended December 31, 2021. As of December 31, 2021, we had $402.4 million outstanding balance under our Term
Loan. At December 31, 2021, we had no borrowings under our Revolver and our available borrowing capacity under the Revolver was $317.9 million.
The Revolver provides for an aggregate principal amount of up to $350.0 million, with up to $330.0 million to be made available to the U.S. borrowers and up to $20.0 million to be made available to the Canadian
borrowers. Subject to the conditions set forth in the revolving credit agreement, the Revolver may be increased by up to the greater of (i) $100.0 million and (ii) such amount as would not cause the aggregate
borrowing base to be exceeded by more than $50.0 million. Borrowings under the Revolver may not exceed a borrowing base equal to the sum of (i) 100% of eligible cash, (ii) 85% of eligible accounts receivable
and (iii) the lesser of (a) 75% of eligible inventory and (b) 85% of the orderly liquidation value of eligible inventory, with the U.S. and Canadian borrowings being subject to separate borrowing base limitations. The
Revolver bears interest at a rate equal to LIBOR or CDOR plus a margin ranging from 1.75% to 2.25% per annum, or an alternate base rate, Canadian prime rate or Canadian base rate plus a margin ranging from
0.75% to 1.25% per annum, in each case, based upon the average excess availability under the Revolver for the most recently completed calendar quarter and our total leverage ratio as of the end of the most
recent fiscal quarter for which financial statements have been delivered. The Revolver matures on June 17, 2025, subject to earlier maturity if greater than $75.0 million of our Term Loan remains outstanding 91
days prior to the scheduled maturity of the term loan credit facility or any refinancing thereof.
The Term Loan, as amended, provides for a $1.25 billion senior secured term loan. Subject to the conditions set forth in the term loan agreement, the Term Loan may be increased by (i) up to the greater of
$285.0 million and 1.0x consolidated EBITDA of Forterra, Inc. and its restricted subsidiaries for the four quarters most recently ended prior to such incurrence plus (ii) the aggregate amount of any voluntary
prepayments, plus (iii) an additional amount, provided certain financial tests are met. See Note 11 to our consolidated financial statements. The Term Loan matures on October 25, 2023 and is subject to quarterly
amortization equal to 0.25% of the initial principal amount. Interest will accrue on outstanding borrowings thereunder at a rate equal to LIBOR
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(with a floor of 1.0%) or an alternate base rate, in each case plus a margin of 3.00% or 2.00%, respectively. Our credit agreement does not provide a mechanism to facilitate the adoption of an alternative
benchmark rate for use in place of LIBOR. We plan to monitor the expected phase-out of LIBOR and may seek to renegotiate the benchmark rate with our lenders in the future. See Item 1A. "Risk Factors."
The Revolver and the Term Loan contain customary representations and warranties, and affirmative and negative covenants, that, among other things, restrict our ability to incur additional debt, incur or permit
liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales and pay dividends and make distributions. The Revolver contains a financial covenant
restricting Forterra from allowing its fixed charge coverage ratio to drop below 1.00:1.00 during a compliance period, which is triggered when the availability under the Revolver falls below a threshold. The fixed
charge coverage ratio is the ratio of consolidated earnings before interest, depreciation, and amortization, less cash payments for capital expenditures and income taxes to consolidated fixed charges (interest
expense plus scheduled payments of principal on indebtedness). The Term Loan does not contain any financial covenants. Obligations under the Revolver and the Term Loan may be accelerated upon certain
customary events of default (subject to grace periods, as appropriate). As of December 31, 2021, we were in compliance with all applicable covenants under the Revolver and the Term Loan.
On July 16, 2020, two of our subsidiaries, Forterra Finance, LLC and FRTA Finance Corp., completed the issuance of $500 million senior secured notes, or the Notes, that are due July 15, 2025. The Notes
have a fixed annual interest rate of 6.50%. Obligations under the Notes are guaranteed by us and our existing and future subsidiaries (other than the issuers) that guarantee the Term Loan and the obligations of the
U.S. borrowers under the Revolver. The Notes and the related guarantees are secured by first-priority liens on the collateral that secures the Term Loan on a first-priority basis (which is generally all assets other
than those that secure the Revolver on a first-priority basis as set forth below) and second-priority liens on the collateral that secures the Revolver on a first-priority basis (which is generally inventory, accounts
receivable, deposit accounts, securities accounts, certain intercompany loans and related assets), which second-priority liens is ratable with the liens on such assets securing the obligations under the Term Loan
and junior to the liens on such assets securing the Revolver. Upon closing on July 16, 2020, we used the net proceeds from this offering to repay $492.5 million of the principal amount of the Term Loan at par, plus
accrued interest.
Parent Issuer and Subsidiary Guarantor Summarized Financial Information
The following information contains the summarized financial information for the parent (Forterra, Inc.) and subsidiary guarantors.
This consolidated summarized financial information has been prepared from the Company's financial information on the same basis of accounting as the Company's consolidated financial statements.
Transactions between the parent and subsidiary guarantors presented on a combined basis have been eliminated. The principal elimination entries relate to investments in subsidiaries and intercompany balances
and transactions. Certain costs have been partially allocated to all of the subsidiaries of the Company.
The subsidiary guarantors are 100% owned by the Company. All guarantees are full and unconditional and are joint and several. There are no significant restrictions on the ability of the Company to obtain
funds from its U.S. subsidiaries, including the guarantors.
Summarized financial information for the two most recent annual periods was as follows (in thousands):
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Parent - Forterra, Inc. and Subsidiary Guarantors
December 31, 2021
December 31, 2020
Current assets
$
566,907 $
443,839
Intercompany payable to non-guarantor subsidiaries
7,334
8,384
Non-current assets
1,085,017
1,115,191
Current liabilities
277,093
267,672
Non-current liabilities
1,153,624
1,176,492
Parent - Forterra, Inc. and Subsidiary Guarantors
Year ended December 31, 2021
Year ended December 31, 2020
Net sales
$
1,752,627 $
1,514,556
Gross profit
374,792
347,854
Income before taxes
123,513
58,880
Net income
91,277
52,273
Cash Flows
The following table sets forth a summary of the net cash provided by (used in) operating, investing and financing activities for the periods presented (in thousands).
Year ended December 31,
2021
Year ended December 31,
2020
Year ended December 31,
2019
Statement of Cash Flows data:
Net cash provided by operating activities
$
100,514
$
243,197
$
146,786
Net cash used in investing activities
(48,008)
(18,373)
(42,295)
Net cash used in financing activities
(21,236)
(234,272)
(106,181)
Net Cash Provided by Operating Activities
Changes in operating cash flows between the periods are primarily due to the change in income from operations, timing of collections and payments, as well as the change in our inventory as compared to the
prior year periods.
Operating cash flow decreased to $100.5 million in 2021 as compared to $243.2 million in 2020 primarily due to $159.2 million changes in net working capital items as compared to the prior year, partially offset
by a $35.9 million increase in cash income from operations. Operating cash flow increased to $243.2 million in 2020 as compared to $146.8 million in 2019 primarily due to higher income from operations and better
working capital management.
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Net Cash Used in Investing Activities
Net cash used in investing activities was $48.0 million for the year ended December 31, 2021 primarily due to capital expenditures of $65.6 million and acquisition of Barbour of $7.3 million, partially offset by
proceeds from the sale of fixed assets of $24.9 million. Net cash used in investing activities was $18.4 million for the year ended December 31, 2020 primarily due to capital expenditures of $34.0 million, partially
offset by proceeds from the sale of fixed assets of $15.6 million. Net cash used in investing activities was $42.3 million for the year ended December 31, 2019 primarily due to capital expenditures of $42.9 million
and the acquisition of Buckner assets of $10.8 million, partially offset by proceeds from the sale of fixed assets of $11.4 million.
Net Cash Used in Financing Activities
Net cash used in financing activities was $21.2 million for the year ended December 31, 2021 primarily due to $12.5 million repayments of principal on the Term Loan and $8.3 million payment pursuant to
the tax receivable agreement. Net cash used in financing activities was $234.3 million for the year ended December 31, 2020 due primarily to $707.6 million repayments of principal on the Term Loan, $13.1 million
payment pursuant to the tax receivable agreement, and $11.4 million payment of debt issuance costs, partially offset by proceeds from senior secured notes of $500.0 million. Net cash used in financing activities
was $106.2 million for the year ended December 31, 2019 due primarily to $95.7 million of repayments of principal on the Term Loan and a $11.4 million payment pursuant to the tax receivable agreement. The $8.3
million payment under the tax receivable agreement in 2021 was pertaining to the 2020 tax year. The $13.1 million payment under the tax receivable agreement in 2020 was pertaining to the 2019 tax year.
Capital Expenditures
Under normal circumstances, our annual sustaining capital expenditures would average $45.0 million to $55.0 million. Our capital expenditures were $65.6 million for the year ended December 31, 2021,
$34.0 million for the year ended December 31, 2020, and $42.9 million for the year ended December 31, 2019. Our capital expenditures in 2021 were higher than usual due to certain pandemic-delayed projects
originally planned for 2020 that were completed during 2021. The majority of our planned capital spending now is related to equipment, such as plant and mobile equipment, upgrade and expansion of existing
facilities, and environmental and permit compliance projects.
Off-Balance Sheet Arrangements
In the ordinary course of our business, we are required to provide surety bonds and standby letters of credit to secure performance commitments. As of December 31, 2021, outstanding stand-by letters of credit
amounted to $18.8 million.
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Contractual Obligations and Other Long-Term Liabilities
The following table summarizes our significant contractual obligations as of December 31, 2021. Non-cancelable operating leases are presented net of non-cancelable subleases. Some of the amounts included
in the table are based on management's estimate and assumptions about these obligations, including their duration, the possibility of renewal, anticipated actions by third parties and other factors. Because these
estimates and assumptions are necessarily subjective, our actual payments may vary from those reflected in the table.
Payment Due by Period
Total
2022
2023
2024
2025
2026
Thereafter
(In thousands)
Term loan
$
402,357
$
12,510
$
389,847
$
—
$
—
$
—
$
—
Notes
500,000
—
—
—
500,000
—
—
Interest on indebtedness
28,797
16,084
12,713
—
—
—
—
Operating leases
145,167
11,381
11,887
11,144
10,320
8,808
91,627
Finance leases
709,129
18,245
18,372
18,605
18,809
18,531
616,567
Total Commitments
$
1,785,450
$
58,220
$
432,819
$
29,749
$
529,129
$
27,339
$
708,194
(1) The interest rate on the Term loan is 4.0%; the interest rate on the Notes is 6.5%.
Additionally, we have accrued approximately $48.2 million associated with the tax receivable agreement in long-term liabilities and $27.3 million of other long-term liabilities as of December 31, 2021. The risks
and uncertainties associated with the tax receivable agreement are discussed above and in Note 16 to the consolidated financial statements.
Application of Critical Accounting Policies and Estimates
Business Combinations
Assets acquired and liabilities assumed in business combination transactions, as defined by ASC 805, Business Combination, are recorded at fair value using the acquisition method of accounting. We allocate
the purchase price of acquisitions based upon the fair value of each component which may be derived from various observable and unobservable inputs and assumptions. Initial purchase price allocations are
preliminary and subject to revision within the measurement period, not to exceed one year from the date of the transaction. The fair value of property, plant and equipment and intangible assets may be based upon
the discounted cash flow method that involves inputs that are not observable in the market (Level 3). Goodwill assigned represents the amount of consideration transferred in excess of the fair value assigned to
identifiable assets acquired and liabilities assumed.
Use of estimates
The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities as of the reporting date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These estimates are
based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made relate to fair value estimates for assets and liabilities
acquired in business combinations; accrued liabilities for environmental cleanup, bodily injury and insurance claims; estimates for commitments and contingencies; and estimates for the realizability of deferred tax
assets, the tax receivable agreement obligation, inventory reserves, allowance for doubtful accounts and impairment of goodwill and long-lived assets.
(1)
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Inventories
Inventories are valued at the lower of cost or net realizable value. Our inventories are valued using the average cost and first-in-first-out methods. Inventories include materials, labor and applicable factory
overhead costs. The value of inventory is adjusted for damaged, obsolete, excess and slow-moving inventory. Market value of inventory is estimated considering the impact of market trends, an evaluation of
economic conditions, and the value of current orders relating to the future sales of each respective component of inventory.
Goodwill and other intangible assets, net
Goodwill represents the excess of costs over the fair value of identifiable assets acquired and liabilities assumed. We evaluate goodwill and intangible assets in accordance with ASC 350, Goodwill and Other
Intangible Assets which requires goodwill to be either qualitatively or quantitatively assessed for impairment annually (or more frequently if impairment indicators arise) for each reporting unit. We perform our
annual impairment testing of goodwill as of October 1 of each year and in interim periods if events occur that would indicate that it is more likely than not the fair value of a reporting unit is less than carrying value.
We first assess qualitative factors to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis for determining whether it is necessary to perform a
quantitative goodwill impairment test. We may bypass the qualitative assessment for any reporting unit in any period and proceed directly with the quantitative analysis. The quantitative analysis compares the fair
value of the reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds the fair value, impairment is recognized in an amount equal to that excess, limited to the total amount of
goodwill allocated to that reporting unit.
We determine the fair value of our reporting units using a weighted combination of the discounted cash flow method (income approach) and the guideline company method (market approach). Determining the
fair value of a reporting unit requires judgment and the use of significant estimates and assumptions. Such estimates and assumptions include future revenue growth rates, gross profit margins, EBITDA margins,
future capital expenditures, weighted average costs of capital and future market conditions, among others. We believe the estimates and assumptions used in our impairment assessments are reasonable;
however, variations in any of the assumptions could result in materially different calculations of fair value and determinations of whether or not an impairment is indicated. Under the discounted cash flow method,
we determine fair value based on estimated future cash flows of each reporting unit including estimates for capital expenditures, discounted to present value using the risk-adjusted industry rate, which reflect the
overall level of inherent risk of the reporting unit. Cash flow projections are derived from one year budgeted amounts and five year operating forecasts plus an estimate of later period cash flows, all of which are
evaluated by management. Subsequent period cash flows are developed for each reporting unit using growth rates that management believes are reasonably likely to occur. Under the guideline company method,
we determine the estimated fair value of each of our reporting units by applying valuation multiples of comparable publicly-traded companies to each reporting unit’s projected EBITDA and then averaging that
estimate with similar historical calculations using a three-year average. In addition, we estimate a reasonable control premium representing the incremental value that accrues to the majority owner from the
opportunity to dictate the strategic and operational actions of the business.
Key assumptions for the measurement of an impairment include management’s estimate of future cash flows and EBITDA. The estimates of future cash flows and EBITDA are subjective in nature and are
subject to impacts from the business risks described in “Item 1A. Risk Factors.” Therefore, the actual results could differ significantly from the amounts used for goodwill impairment testing, and significant changes
in fair value estimates could occur, resulting in potential impairments in future periods.
For the years ended December 31, 2021, December 31, 2020 and December 31, 2019, no impairment charge was recorded for goodwill and intangible assets.
Leases Accounting Policy
We determine if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet. Operating leases are included in operating lease right-of-use, or
ROU,
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assets, accrued liabilities, and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in property, plant and equipment, accrued liabilities, and long-term finance lease
liabilities in the consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and
liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate
based on the information available at commencement date in determining the present value of lease payments. We use the implicit rate when readily determinable. The lease terms may include options to extend or
terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
We have lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, we account for the lease and non-lease
components as a single lease component.
Income Taxes
The Company computes the provision for income taxes using the asset/liability method. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year in which the differences are expected to reverse. The Company uses the period cost method for
Global Intangible Low-taxed Income (“GILTI”) provisions, and therefore, has not recorded deferred taxes for basis differences expected to reverse in future periods.
The Company evaluates the recoverability of its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. In assessing the need for a valuation allowance, the
Company considers all available evidence for each jurisdiction, including past operating results, future reversal of taxable and deductible temporary differences, estimates of future taxable income, and the feasibility
of ongoing tax planning strategies. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if, based on all available evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
The Company recognizes a tax benefit for uncertain tax positions only if it believes it is more-likely-than-not that the position will be sustained upon examination based solely on the technical merits of the tax
position. The Company evaluates whether a tax position meets the more-likely-than-not recognition threshold using the assumption that the position will be examined by the appropriate taxing authority. The tax
benefits recognized in the financial statements from such positions are measured based upon the largest amount that is more than 50% likely to be realized upon ultimate settlement. Penalties and interest related
to income tax uncertainties, should they occur, are included in income tax expense in the period in which they are incurred.
Revenue recognition
Revenues are recognized when the risks and rewards associated with the transaction have been transferred to the purchaser, which is demonstrated when all the following conditions are met: evidence of a
binding arrangement exists, products have been delivered or services have been rendered, there is no future performance required, fees are fixed or determinable and amounts are collectible under normal
payment terms. Sales represent the net amounts charged or chargeable in respect of services rendered and goods supplied, excluding intercompany sales. Sales are recognized net of any discounts given to the
customer.
A portion of our sales revenue is derived from sales to distributors. Distributor revenue is recognized when all of the criteria for revenue recognition are met, which is generally the time of shipment to the
distributor. All returns and credits are estimable and recognized as contra-revenue.
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We incur shipping costs to third parties for the transportation of building products and bill such costs to customers. For the years ended December 31, 2021, 2020 and 2019, we recorded freight costs of
approximately $153.9 million, $122.7 million, and $131.8 million, respectively, on a gross basis within net sales and cost of goods sold in the accompanying consolidated statements of operations.
For certain engineering and construction contracts and building contracting arrangements, we recognize revenue using the percentage of completion method, based on total contract costs incurred to date
compared to total estimated cost at completion for each contract. Changes to total estimated contract cost or losses, if any, are recognized in the period in which they are determined. Pre-contract costs are
expensed as incurred. If estimated total costs on a contract indicate a loss, the entire loss is provided for in the financial statements immediately. To the extent we have invoiced and collected from customers more
revenue than has been recognized as revenue using the percentage of completion method, we record the excess amount invoiced as deferred revenue. Revenue recognized in excess of amounts billed, and
balances billed but not yet paid by customers under retainage provisions are classified as a current asset within receivables, net on the balance sheet. For the years ended December 31, 2021, December 31, 2020,
and December 31, 2019, revenue recognized in continuing operations using the percentage of completion method amounted to 2%, 3%, and 2% of total net sales, respectively.
We generally provide limited warranties related to our products which cover manufacturing in accordance with the specifications identified on the face of our quotation or order acknowledgment and to be free of
defects in workmanship or materials. The warranty periods typically extend for a limited duration of one year. We estimate and accrue for potential warranty exposure related to products which have been delivered.
Recent Accounting Guidance Adopted
The information set forth under Note 2 to the consolidated financial statements under the caption “Recent Accounting Guidance Adopted” is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
In the normal course of business, we are exposed to financial risks such as changes in interest rates, foreign currency exchange rates and commodity price risk associated with our input costs. We utilize
derivative instruments to manage selected foreign exchange and interest rate exposures. See Note 13 to the consolidated financial statements.
Interest Rate Risk
Our exposure to market risk for changes in interest rates relates primarily to our long-term debt. The interest expense associated with our long-term debt will vary with market rates. On March 30, 2020, Forterra
entered into an interest rate swap transaction with a notional value of $400 million to reduce exposure to interest rate fluctuations associated with a portion of the Term Loan. Under the terms of the swap
transaction, Forterra agreed to pay a fixed rate of interest of 1.08% and receive floating rate of interest indexed to one-month LIBOR, subject to a minimum of 1.00%, with monthly settlement terms with the swap
counterparty. The swap has a 30-month term and expires on September 30, 2022. At December 31, 2021, we estimate that 1% increase in the rates relating to the portion of our floating rate debt that is not hedged
would increase annual interest requirements by approximately $5.0 million.
Borrowings under our Term Loan and our Revolver may use LIBOR as a benchmark for establishing the applicable interest rate. LIBOR is the subject of recent regulatory guidance and proposals for reform,
which are expected to ultimately lead to the discontinuation of LIBOR or to cause LIBOR to become unavailable as a benchmark rate. The consequences of these developments with respect to LIBOR cannot be
entirely predicted but could result in a significant increase in the cost of our variable rate indebtedness causing a negative impact on our financial position, liquidity and results of operations. Our credit agreement
does not provide a mechanism to facilitate the adoption of an alternative benchmark rate for use in place of LIBOR. We plan to carefully monitor
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the situation and may seek to renegotiate the benchmark for establishing the applicable interest rate with our lenders in the future. See Item 1A. "Risk Factors."
Foreign Currency Risk
Approximately 5.7% of our net sales for the year ended December 31, 2021 were made in countries outside of the U.S. As a result, we are exposed to movements in foreign exchange rates between the U.S.
dollar and other currencies. Based upon our net sales for the year ended December 31, 2021, we estimate that a 1% change in the exchange rate between the U.S. dollar and foreign currencies would affect net
sales by approximately $1.1 million. This may differ from actual results depending on the levels of net sales outside of the U.S.
Commodity Price Risk
We are subject to commodity price risks with respect to price changes mainly in the electricity and natural gas markets and other raw material costs, such as cement, aggregates, scrap and steel. Price
fluctuations on our key inputs have a significant effect on our financial performance. The markets for most of these commodities are cyclical and are affected by factors such as global economic conditions, changes
in or disruptions to industry production capacity, changes in inventory levels and other factors beyond our control.
Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk consist principally of accounts receivable. We provide our products to customers based on an evaluation of the financial condition
of our customers, generally without requiring collateral. Exposure to losses on receivables is principally dependent on each customer's financial condition. We monitor the exposure for credit losses and maintain
allowances for anticipated losses. Concentrations of credit risk with respect to our accounts receivable are limited due to the large number of customers comprising our customer base and their dispersion among
many different geographies.
At December 31, 2021 and 2020, we had an individual customer within our Water Pipe & Products segment that accounted for more than 10% of total net sales for the years ended December 31, 2021 and 2020.
The customer represented approximately 18% and 16% of our total net sales for the years ended December 31, 2021 and 2020, respectively, and had total receivables at December 31, 2021 and 2020 totaling
17% and 16% of our total receivables, net, respectively.
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Item 8. Financial Statements and Supplementary Data
TABLE OF CONTENTS
Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
70
Consolidated Statements of Operations
72
Consolidated Statements of Comprehensive Income (Loss)
73
Consolidated Balance Sheets
74
Consolidated Statements of Shareholders' Equity
75
Consolidated Statements of Cash Flows
76
Consolidated Notes to Financial Statements
77
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Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Forterra, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Forterra, Inc. (the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income
(loss), shareholders’ equity and cash flows for the each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our
opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company at December 31, 2021 and 2020, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 1,
2022 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We are a public accounting firm
registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and
Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable
basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1)
relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of a critical audit matter does not
alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or
on the account or disclosure to which it relates.
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Realizability of deferred tax assets
Description of the Matter
As more fully described in Note 20 to the consolidated financial statements, at December 31, 2021, the Company had deferred tax assets related to deductible temporary
differences of $85.6 million, net of a $1.4 million valuation allowance. Deferred tax assets are reduced by a valuation allowance if, based on the weight of all available evidence, in
management’s judgment it is more likely than not that some portion, or all, of the deferred tax assets will not be realized.
Auditing management’s assessment of the realizability of its deferred tax assets involved complex auditor judgment because management’s estimate is highly judgmental and
based on significant assumptions that may be affected by future market or economic conditions.
How We Addressed the Matter in
Our Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls that address the risks of material misstatement relating to the realizability
of deferred tax assets. This included controls over management’s scheduling of the future reversal of existing taxable temporary differences and projections of future taxable
income.
Among other audit procedures performed, we tested the Company’s scheduling of the reversal of existing temporary taxable differences, including evaluation of the timing of the
reversal pattern. We evaluated the assumptions used by the Company to develop projections of future taxable income by jurisdiction and tested the completeness and accuracy of
the underlying data used in its projections. For example, we compared the projections of future taxable income with the actual results of prior periods, as well as management’s
consideration of current industry and economic trends. We also assessed the historical accuracy of management’s projections and compared the projections of future taxable
income with other forecasted financial information prepared by the Company.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2013.
Dallas, Texas
March 1, 2022
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FORTERRA, INC.
Consolidated Statements of Operations
(in thousands, except per share data)
Year ended December 31,
2021
2020
2019
Net sales
$
1,858,270
$
1,594,506
$
1,529,752
Cost of goods sold
1,437,872
1,217,833
1,233,370
Gross profit
420,398
376,673
296,382
Selling, general & administrative expenses
(216,146)
(221,770)
(221,770)
Impairment and exit charges
(645)
(2,511)
(3,520)
Other operating income, net
13,763
1,409
1,094
(203,028)
(222,872)
(224,196)
Income from operations
217,370
153,801
72,186
Other income (expenses)
Interest expense
(74,976)
(79,890)
(94,970)
Gain (loss) on extinguishment of debt
—
(12,256)
1,708
Earnings from equity method investee
12,592
11,291
10,466
Income (loss) before income taxes
154,986
72,946
(10,610)
Income tax (expense) benefit
(38,669)
(8,460)
3,279
Net income (loss)
$
116,317
$
64,486
$
(7,331)
Earnings (loss) per share:
Basic
$
1.74
$
0.99
$
(0.11)
Diluted
$
1.67
$
0.94
$
(0.11)
Weighted average shares of common stock outstanding:
Basic
66,719
65,260
64,232
Diluted
69,644
68,203
64,232
See accompanying notes to financial statements
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FORTERRA, INC.
Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
Year ended December 31,
2021
2020
2019
Net income (loss)
$
116,317
$
64,486
$
(7,331)
Change in other postretirement benefit plans, net of tax
—
(1,042)
373
Foreign currency translation adjustment
(252)
1,149
3,304
Comprehensive income (loss)
$
116,065
$
64,593
$
(3,654)
See accompanying notes to financial statements
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FORTERRA, INC.
Consolidated Balance Sheets
(in thousands, except per share data)
December 31,
2021
2020
ASSETS
Current assets
Cash and cash equivalents
$
56,832
$
25,678
Receivables, net
293,856
227,948
Inventories
263,684
222,928
Prepaid expenses
10,869
7,967
Other current assets
3,128
2,022
Total current assets
628,369
486,543
Non-current assets
Property, plant and equipment, net
458,681
451,082
Operating lease right-of-use assets
52,808
54,379
Goodwill
509,936
509,127
Intangible assets, net
69,105
101,409
Investment in equity method investee
49,292
48,285
Deferred tax assets
1,769
2,351
Other long-term assets
4,073
4,987
Total assets
$
1,774,033
$
1,658,163
LIABILITIES AND EQUITY
Current liabilities
Trade payables
$
144,510
$
134,144
Accrued liabilities
116,683
115,693
Deferred revenue
10,559
8,220
Current portion of long-term debt
12,510
12,510
Current portion of tax receivable agreement
7,709
8,333
Total current liabilities
291,971
278,900
Non-current liabilities
Long-term debt
879,272
887,511
Long-term finance lease liabilities
142,940
142,195
Long-term operating lease liabilities
49,814
50,943
Deferred tax liabilities
15,469
12,022
Other long-term liabilities
27,301
36,918
Long-term tax receivable agreement
48,199
55,907
Total liabilities
1,454,966
1,464,396
Commitments and Contingencies (Note 16)
Equity
Common stock, $0.001 par value. 190,000 shares authorized; 67,329 and 65,981 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively
19
19
Additional paid-in-capital
261,814
252,579
Accumulated other comprehensive loss
(7,208)
(6,956)
Retained earnings / (deficit)
64,442
(51,875)
Total shareholders' equity
319,067
193,767
Total liabilities and shareholders' equity
$
1,774,033
$
1,658,163
See accompanying notes to financial statements
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FORTERRA, INC.
Consolidated Statements of Shareholders' Equity
(in thousands, except share data)
Common Stock
Shares
Amount
Additional Paid-in-
Capital
Accumulated Other
Comprehensive Income (Loss)
Retained Earnings /
(Deficit)
Total Shareholders' Equity
Balance at December 31, 2018
64,205,604
$
18
$
234,931
$
(10,740)
$
(115,987)
$
108,222
Cumulative effect of accounting changes, net of tax
—
—
—
—
6,957
6,957
Share-based compensation expense
—
—
7,919
—
—
7,919
Stock-based plan activity
535,063
1
1,522
—
—
1,523
Net loss
—
—
—
—
(7,331)
(7,331)
Foreign currency translation adjustment
—
—
—
3,304
—
3,304
Other
—
—
—
373
—
373
Balance at December 31, 2019
64,740,667
$
19
$
244,372
$
(7,063)
$
(116,361)
$
120,967
Share-based compensation expense
—
—
9,489
—
—
9,489
Stock-based plan activity
1,240,120
—
(1,282)
—
—
(1,282)
Net income
—
—
—
—
64,486
64,486
Foreign currency translation adjustment
—
—
—
1,149
—
1,149
Other
—
—
—
(1,042)
—
(1,042)
Balance at December 31, 2020
65,980,787
$
19
$
252,579
$
(6,956)
$
(51,875)
$
193,767
Share-based compensation expense
—
—
8,740
—
—
8,740
Stock-based plan activity
1,348,253
—
495
—
—
495
Net income
—
—
—
—
116,317
116,317
Foreign currency translation adjustment
—
—
—
(252)
—
(252)
Balance at December 31, 2021
67,329,040
$
19
$
261,814
$
(7,208)
$
64,442
$
319,067
See accompanying notes to financial statements
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FORTERRA, INC.
Consolidated Statements of Cash Flows
(in thousands)
Year ended December 31,
2021
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)
$
116,317
$
64,486
$
(7,331)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation & amortization expense
82,556
89,496
97,258
(Gain) / loss on disposal of property, plant and equipment
(10,295)
638
2,045
(Gain) / loss on extinguishment of debt
—
12,256
(1,708)
Amortization of debt discount and issuance costs
4,940
6,599
7,962
Stock-based compensation expense
8,740
9,489
7,919
Impairment of property, plant, and equipment and goodwill
382
1,206
128
Earnings from equity method investee
(12,592)
(11,291)
(10,466)
Distributions from equity method investee
11,585
13,039
11,039
Unrealized (gain) / loss on derivative instruments, net
(378)
830
6,401
Unrealized foreign currency (gains) / losses, net
(89)
311
45
Provision (recoveries) for doubtful accounts
1,049
(271)
387
Deferred income taxes
4,029
(19,258)
(20,067)
Other non-cash items
2,418
5,188
1,320
Change in assets and liabilities:
Receivables, net
(64,668)
(21,421)
(7,394)
Inventories
(39,883)
15,683
47,491
Other current assets
(3,962)
9,662
514
Accounts payable and accrued liabilities
7,171
53,936
2,675
Other assets & liabilities
(6,806)
12,619
8,568
NET CASH PROVIDED BY OPERATING ACTIVITIES
100,514
243,197
146,786
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment, and intangible assets
(65,642)
(34,019)
(53,709)
Proceeds from sale of fixed assets
24,933
15,646
11,414
Assets and liabilities acquired, business combinations, net
(7,299)
—
—
NET CASH USED IN INVESTING ACTIVITIES
(48,008)
(18,373)
(42,295)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of debt issuance costs
—
(11,416)
—
Proceeds from issuance of common stock, net
5,052
2,424
1,703
Payments on Term Loan
(12,508)
(707,624)
(95,741)
Proceeds from Senior Secured Notes
—
500,000
—
Proceeds from revolver
40,000
180,000
54,000
Payments on revolver
(40,000)
(180,000)
(54,000)
Payments pursuant to tax receivable agreement
(8,333)
(13,145)
(11,390)
Other financing activities
(5,447)
(4,511)
(753)
NET CASH USED IN FINANCING ACTIVITIES
(21,236)
(234,272)
(106,181)
Effect of exchange rate changes on cash
(116)
326
697
Net change in cash and cash equivalents
31,154
(9,122)
(993)
Cash and cash equivalents, beginning of period
25,678
34,800
35,793
Cash and cash equivalents, end of period
$
56,832
$
25,678
$
34,800
SUPPLEMENTAL DISCLOSURES:
Cash interest paid
66,703
53,175
77,086
Income taxes paid
39,714
16,472
12,343
See accompanying notes to financial statements
76
FORTERRA, INC.
Consolidated Notes to Financial Statements
1. Organization and description of the business
General
Forterra, Inc. (‘‘Forterra’’ or the ‘‘Company’’) is involved in the manufacturing, sale and distribution of building products in the United States (‘‘U.S.’’) and Eastern Canada. Forterra’s primary products are concrete
drainage pipe, precast concrete structures, and water transmission pipe used in drinking and wastewater systems. These products are used in the residential, infrastructure and non-residential sectors of the
construction industry.
Forterra, a Delaware corporation, was formed on June 21, 2016 to hold the business of Forterra Building Products following an internal reorganization transaction in connection with its initial public offering in
2016 ("IPO").
The business of Forterra Building Products included indirect wholly-owned subsidiaries of LSF9 Concrete Holdings Ltd., ("LSF9"). Lone Star Fund IX (U.S.), L.P., which is referred to along with its affiliates and
associates, but excluding the Company and other companies that it owns as a result of its investment activity, as Lone Star, through its wholly-owned subsidiary LSF9, acquired the business of Forterra Building
Products on March 13, 2015, (‘‘Acquisition’’). LSF9, which was formed on February 6, 2015 for the purpose of acquiring the business of Forterra Building Products had no operations prior to the date of the
Acquisition.
Quikrete Merger Agreement and the Related Divestitures
On February 19, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Quikrete Holdings, Inc., a Delaware corporation (“Quikrete”), and Jordan Merger Sub,
Inc., a Delaware corporation and a wholly-owned subsidiary of Quikrete (“Merger Sub”). Pursuant to the Merger Agreement, subject to the satisfaction or waiver of specified conditions, Merger Sub will merge with
and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Quikrete.
Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of common stock (the “Common Stock”) of the Company (other than (i) any
shares held in the treasury of the Company or owned, directly or indirectly, by Quikrete, Merger Sub or any wholly-owned subsidiary of the Company immediately prior to the Effective Time, (ii) shares that are
subject to any vesting restrictions (“Company Restricted Shares”) granted under the Company’s stock incentive plans (the “Company Stock Plans”) and (iii) any shares owned by stockholders who have properly
exercised and perfected appraisal rights under Delaware law) will be automatically canceled and converted into the right to receive $24.00 in cash, without interest (the “Merger Consideration”), subject to deduction
for any required withholding tax.
At the Effective Time:
(1)
each restricted stock unit that is solely subject to time-based vesting requirements granted under the Company Stock Plans that is outstanding immediately prior to the Effective
Time shall fully vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholdings) equal to the product of (i) the Merger
Consideration multiplied by (ii) the number of shares of Common Stock subject to such vested restricted stock unit;
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FORTERRA, INC.
Consolidated Notes to Financial Statements
(2)
each restricted stock unit that is subject to performance-based vesting requirements granted under the Company Stock Plans that is outstanding immediately prior to the Effective
Time shall immediately vest and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholdings) equal to the product of (i) the
Merger Consideration multiplied by (ii) the number of shares subject to such vested restricted stock unit immediately prior to the Effective Time as determined in accordance with
the Merger Agreement;
(3)
each option to purchase shares of Common Stock granted under the Company Stock Plans that is outstanding immediately prior to the Effective Time shall fully vest, to the extent
not vested previously, and be converted into the right to receive an amount in cash (without interest and subject to applicable tax withholdings) equal to the product of (i) the
remainder, if positive, of (A) the Merger Consideration minus (B) the exercise price per share of Common Stock of such option multiplied by (ii) the number of shares of Common
Stock subject to such vested option; and
(4)
each Company Restricted Share that is outstanding immediately prior to the Effective Time shall immediately vest in full and be converted into the right to receive an amount in
cash (without interest and subject to applicable tax withholdings) equal to the Merger Consideration.
Each party’s obligation to consummate the Merger is subject to certain conditions, including, among others: (i) expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; (ii) the absence of any order issued by any court of competent jurisdiction, other legal restraint or prohibition or any law enacted or deemed applicable by a governmental
entity that prohibits or makes illegal the consummation of the Merger; (iii) the passing of twenty (20) days from the date on which the Company mails to the Company’s stockholders the Information Statement (as
defined below) in definitive form; (iv) subject to certain qualifications, the accuracy of representations and warranties of the other party set forth in the Merger Agreement; and (v) the performance by the other party
in all material respects of its obligations under the Merger Agreement. Quikrete’s obligation to consummate the Merger is also conditioned on, among other things, the absence of any Material Adverse Effect (as
defined in the Merger Agreement).
Entry into the Merger Agreement has been unanimously approved by the board of directors of the Company.
The Merger Agreement includes customary representations, warranties and covenants of the Company, Quikrete and Merger Sub. Among other things, the Company has agreed to use commercially
reasonable efforts to conduct its business in the ordinary course of business consistent with past practice and use commercially reasonable efforts to preserve intact its businesses until the Merger is consummated.
The Company and Quikrete have also agreed to use their respective reasonable best efforts to obtain any approvals from governmental authorities for the Merger, including all required antitrust approvals, on the
terms and subject to the conditions set forth in the Merger Agreement, provided that Quikrete and its affiliates will not be required to take, or agree to take, certain actions with respect to assets, businesses or
product lines of Quikrete or any of its subsidiaries, or the Company or any of its subsidiaries, accounting for more than $80 million of EBITDA (as defined in the Merger Agreement) for the 12 months ended
December 31, 2020, measured in accordance with the Merger Agreement.
The Merger Agreement contains certain provisions giving each of Quikrete and the Company rights to terminate the Merger Agreement under certain circumstances, including the right for either Quikrete or
the Company to terminate the Merger Agreement if the Merger has not been consummated on or before November 19, 2021, which date will be automatically extended for up to two additional 60-day periods in
specified circumstances as described in the Merger Agreement (such date, as may be so extended pursuant to the Merger Agreement, the “Outside Date”). Upon termination of the Merger Agreement under
specified circumstances, the Company will be required to pay Quikrete a termination fee of $50 million. The Merger Agreement further provides that Quikrete will be required to pay the Company a reverse
termination fee of $85 million under certain circumstances if the Merger Agreement is terminated due to the failure of the parties to obtain required approvals
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FORTERRA, INC.
Consolidated Notes to Financial Statements
under Antitrust Laws (as defined in the Merger Agreement) prior to the Outside Date or as a result of a Restraint (as defined in the Merger Agreement) arising under applicable Antitrust Laws.
If the Merger is consummated, the shares of Common Stock will be delisted from the Nasdaq Stock Market LLC and deregistered under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”).
In order to address some of the divestitures anticipated to be required by the U.S. Department of Justice (the “DOJ”) to obtain approval under the HSR Act for the consummation of the Merger and the other
transactions contemplated by the Merger Agreement, on November 24, 2021, Forterra Pipe & Precast, LLC, a Delaware limited liability company and wholly owned subsidiary of us (“FP&P”), entered into a
Membership Interest Purchase Agreement (the “Purchase Agreement”) with Eagle Corporation, a Virginia corporation (“Eagle”), and Quikrete.
Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, contemporaneously with the closing of the Merger and the other transactions contemplated by the Merger
Agreement, Eagle will purchase FP&P’s 50% equity interest in Concrete Pipe & Precast, LLC (“CP&P”), a joint venture with Eagle (the “CP&P Sale”) for a purchase price of $105,000,000 (subject to certain
adjustments as described in the Purchase Agreement). Consummation of the CP&P Sale is subject to customary closing conditions, including, among others, the consummation of the Merger and approval by the
DOJ.
The Purchase Agreement contains certain termination rights for FP&P and Eagle, including, among others, the right to terminate the Purchase Agreement (i) by either party if the CP&P Sale has not
occurred by March 22, 2022, which date may be extended under certain circumstances described in the Purchase Agreement, (ii) by either party in the event of the issuance of a final and non-appealable
governmental order that prohibits the CP&P Sale or if FP&P notifies Eagle that (x) the Merger is not occurring or (y) the Merger Agreement has been terminated and (iii) by FP&P if FP&P determines in good faith in
its reasonable discretion that the DOJ is not likely to approve the CP&P Sale and the Merger.
In addition, on December 13, 2021, FP&P entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability
company and an affiliate of Quikrete (“Rinker Materials” and, together with FP&P, the “Asset Sellers”), and Foley Products Company, Inc., a Georgia corporation (“Foley”).
Pursuant to the terms and subject to the conditions set forth in the Asset Purchase Agreement, contemporaneously with the closing of the Merger and the other transactions contemplated by the Merger
Agreement, FP&P and Rinker will each sell to Foley certain assets and liabilities associated with reinforced concrete pipe and precast plants (the “Asset Sale”) for an aggregate purchase price of $95,000,000
(subject to certain adjustments described in the Asset Purchase Agreement). The assets being sold by FP&P include FP&P’s reinforced concrete pipe and precast plant located in St. Martinville, Louisiana.
Consummation of the Asset Sale is subject to customary closing conditions, including, among others, the consummation of the Merger and approval by the DOJ.
The Asset Purchase Agreement contains specified termination rights for the Asset Sellers and Foley, including, among others, the right to terminate the Asset Purchase Agreement (i) by either the Foley or
the Asset Sellers if the Asset Sale has not occurred by March 22, 2022, which date may be extended under certain circumstances described in the Asset Purchase Agreement, (ii) by either Foley or the Asset
Sellers in the event of the issuance of a final and non-appealable governmental order that prohibits the Asset Sale or if the Asset Sellers notify Foley that (x) the Merger is not occurring or (y) the Merger Agreement
has been terminated and (iii) by the Asset Sellers if they determine in good faith in its reasonable discretion that the DOJ is not likely to approve the Asset Sale and the Merger.
79
FORTERRA, INC.
Consolidated Notes to Financial Statements
2. Summary of significant accounting policies
Principles of Consolidation
The consolidated financial statements include the accounts and results of operations of Forterra, Inc. and its consolidated subsidiaries. Intercompany transactions and balances have been eliminated in
consolidation.
Basis of Presentation
The consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (‘‘U.S. GAAP’’). Certain prior year numbers have been reclassified to
conform to current year presentations.
Business Combinations
Assets acquired and liabilities assumed in business combination transactions, as defined by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 805, Business
Combination, are recorded at fair value using the acquisition method of accounting. The Company allocates the purchase price of acquisitions based upon the fair value of each component which may be derived
from various observable and unobservable inputs and assumptions. Initial purchase price allocations are preliminary and subject to revision within the measurement period, not to exceed one year from the date of
the transaction. The fair value of property, plant and equipment and intangible assets may be based upon the discounted cash flow method that involves inputs that are not observable in the market (Level 3).
Goodwill assigned represents the amount of consideration transferred in excess of the fair value assigned to identifiable assets acquired and liabilities assumed.
Use of estimates
The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities as of the reporting date, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. These
estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. The more significant estimates made by management relate to fair value
estimates for assets and liabilities acquired in business combinations; estimates for accrued liabilities for environmental cleanup, bodily injury and insurance claims; estimates for commitments and contingencies;
and estimates for the realizability of deferred tax assets, the tax receivable agreement obligation, inventory reserves, allowance for doubtful accounts and impairment of goodwill and long-lived assets.
Certain accounting matters that generally require consideration of forecasted financial information were assessed in light of the impact from the coronavirus disease 2019 ("COVID-19") pandemic. The
accounting matters assessed included, but were not limited to, the Company’s allowance for doubtful accounts, inventory reserves, goodwill impairment, impairment of property and equipment and valuation
allowances for tax assets. While the assessments resulted in no material impacts to the Company’s consolidated financial statements as of and for the years ended December 31, 2021 and December 31, 2020, the
Company believes the full impact of the COVID-19 outbreak remains uncertain and will continue to assess if ongoing developments related to the outbreak may cause future material impacts to its consolidated
financial statements.
Cash and cash equivalents
Cash and cash equivalents include cash on hand and other highly liquid investments having an original maturity of less than three months.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
Receivables, net
Receivables are recorded at net realizable value, which includes allowances for doubtful accounts. The Company reviews the collectability of trade receivables on an ongoing basis. The Company reserves for
trade receivables determined to be uncollectible. This determination is based on the delinquency of the account, the financial condition of the customer and the Company’s collection experience.
Concentration of credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily receivables. The Company performs ongoing credit evaluations of its customers’ financial condition and
generally requires no collateral from its customers. The allowances for uncollectible receivables are based upon analysis of economic trends in the construction industry, detailed analysis of the expected
collectability of accounts receivable that are past due and the expected collectability of overall receivables.
The Company had an individual customer within its Water Pipe & Products segment that accounted for approximately 18% and 16% of the Company's total net sales for the years ended December 31, 2021 and
2020, respectively, and total receivables at December 31, 2021 and 2020 representing 17% and 16% of the Company's total receivables, net, respectively.
Credit Losses
Trade accounts receivable. The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering
factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay.
The Company's exposure to credit losses may increase if one or more of its customers are adversely affected by changes in laws or other government recommendations or mandates, economic pressures or
uncertainty associated with local or global economic recessions, disruption or other impacts associated with the COVID-19 pandemic, or other customer-specific factors. Although the Company has historically not
experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables as customers are impacted by the COVID-19
pandemic.
Concentration of Labor
Approximately 33% of the Company’s employees are represented by collective bargaining agreements, and 46% of these employees are included in collective bargaining agreements that expire within 12
months.
Inventories
Inventories are valued at the lower of cost or net realizable value. The Company’s inventories are valued using the average cost and first-in-first-out methods. Inventories include materials, labor and applicable
factory overhead costs. The value of inventory is adjusted for damaged, obsolete, excess and slow-moving inventory. Market value of inventory is estimated considering the impact of market trends, an evaluation
of economic conditions, and the value of current orders relating to the future sales of each respective component of inventory.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
Property, plant and equipment, net
Property, plant and equipment, which includes amounts recorded under capital lease arrangements, is stated at cost less accumulated depreciation. Depreciation of property, plant and equipment is computed
using the straight-line method over the estimated useful lives of the assets. These lives range from 20 to 40 years for buildings, 4 to 20 years for machinery and equipment, and 5 to 10 years for other equipment
and lower of lease term or useful life on leasehold improvements. Repair and maintenance costs are expensed as incurred. The Company’s depreciation expense is recorded in cost of goods sold and selling,
general and administrative expenses in the statements of operations. The Company capitalizes interest during the active construction of major projects. Capitalized interest is added to the cost of the underlying
assets and is depreciated over the useful lives of those assets. There was no interest capitalized for any of the periods presented in the financial statements.
Impairment or disposal of long-lived assets
The Company evaluates the recoverability of its long-lived assets in accordance with the provisions of ASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by
comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Such evaluations for impairment are significantly impacted by estimates of future prices for
the Company’s products, capital needs, economic trends in the construction sector and other factors. If such assets are considered to be impaired, the impairment to be recognized is measured at the amount by
which the carrying amount of the assets exceeds their fair value.
Leases
The Company has both capital and finance leases. The Company determines if an arrangement is a lease at inception. Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Operating leases are included in operating lease right-of-use (“ROU”) assets, accrued liabilities, and long-term operating lease liabilities in the consolidated balance sheets. Finance leases are included in property,
plant and equipment, accrued liabilities, and long-term finance lease liabilities in the consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease. Operating lease
ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company
uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable.
The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line
basis over the lease term.
The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. For machinery and equipment leases, such as forklifts, the Company accounts for the
lease and non-lease components as a single lease component.
Minimum rent payments under operating leases are recognized as an expense on a straight-line basis over the lease term, including any rent-free periods. Operating lease expenses for the years ended
December 31, 2021, 2020 and 2019 were approximately $14.0 million, $15.6 million and $16.5 million, respectively.
Goodwill and other intangible assets, net
Goodwill represents the excess of costs over the fair value of identifiable assets acquired and liabilities assumed. The Company evaluates goodwill and intangible assets in accordance with ASC 350, Goodwill
and Other Intangible Assets (“ASC 350”). ASC 350 requires goodwill to be either qualitatively or quantitatively
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FORTERRA, INC.
Consolidated Notes to Financial Statements
assessed for impairment annually (or more frequently if impairment indicators arise) for each reporting unit. The Company performs its annual impairment testing of goodwill as of October 1 of each year and in
interim periods if events occur that would indicate that it is more likely than not the fair value of a reporting unit is less than carrying value. The Company first assesses qualitative factors to evaluate whether it is
more likely than not that the fair value of a reporting unit is less than its carrying amount as the basis for determining whether it is necessary to perform a quantitative goodwill impairment test. The Company may
bypass the qualitative assessment for any reporting unit in any period and proceed directly with the quantitative analysis. The quantitative analysis compares the fair value of the reporting unit with its carrying
amount. If the carrying amount of a reporting unit exceeds the fair value, impairment is recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit.
The Company evaluates its intangible assets with finite lives for indications of impairment whenever events or changes in circumstances indicate that the net book value may not be recoverable. Intangible assets
with finite lives consist of customer relationships, customer backlogs, and brand names, and are amortized under the consumption method over the estimated useful lives. Factors that could trigger an impairment
review include significant under-performance relative to expected historical or projected future operating results, significant changes in the manner of the Company's use of the acquired assets or the strategy for
the Company's overall business or significant negative industry or economic trends.
If this evaluation indicates that the value of the intangible asset may be impaired, the Company makes an assessment of the recoverability of the net book value of the asset over its remaining useful life. If this
assessment indicates that the intangible asset is not recoverable, based on the estimated undiscounted future cash flows of the asset over the remaining amortization period, the Company reduces the net book
value of the related intangible asset to fair value and may adjust the remaining amortization period.
Investment in equity method investee
The Company has an investment in a joint venture accounted for using the equity method. Under the equity method, carrying value is adjusted for the Company's share of the investee's earnings and losses, as
well as capital contributions to and distributions from the investee. Distributions in excess of equity method earnings are recognized as a return of investment and recorded as investing cash inflows in the
accompanying consolidated statements of cash flows. The Company classifies its share of income and loss related to its investments in its investee as a component of operating income or loss, as the Company's
investments in the investee is an extension of the Company's core business operations.
The Company evaluates its investment in the equity method investee for impairment whenever events or changes in circumstances indicate that the carrying value of its investment may have experienced an
"other-than-temporary" decline in value. If such conditions exist, the Company compares the estimated fair value of the investment to its carrying value to determine if an impairment is indicated and determines
whether the impairment is "other-than-temporary" based on its assessment of all relevant factors, including consideration of the Company's intent and ability to retain its investment.
Derivatives and Hedge Accounting
The Company previously entered into derivative instruments to mitigate interest rate and foreign exchange rate risk. Certain derivative instruments are designated for hedge accounting under ASC 815-20,
Derivatives - Hedging. Instruments that meet hedge criteria are formally designated as hedges at the inception of the instrument.
The Company’s derivative assets and liabilities are measured at fair value. Fair value related to the cash flows occurring within one year are classified as current and the fair value related to the cash flows
occurring beyond one year are classified as non-current in the consolidated balance sheets. For those instruments designated as hedges, the Company recognizes the changes in fair value in other comprehensive
income (“OCI”), and recognizes any ineffectiveness immediately in earnings.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
Valuation of derivative assets and liabilities reflect the value of the instrument including counterparty credit risk. These values also take into account the Company’s own credit standing.
Deferred financing costs
In conjunction with its debt, the Company had a net balance of $10.6 million in debt discounts and debt issuance costs as of December 31, 2021. These costs are amortized over the life of the applicable debt
instrument to interest expense utilizing the effective interest method. The Company wrote-off deferred debt issuance cost of $13.1 million in the year ended December 31, 2020 in connection with the repayment of
a portion of the term loan at par with the proceeds from the offering of the senior secured notes. See Note 11, Debt and deferred financing costs.
Fair value measurement
The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Company determines fair value based on
assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the
following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs – Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs – Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs – Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market
activity for the asset or liability at measurement date.
The Company's other financial instruments consist primarily of cash and cash equivalents, trade and other receivables, accounts payable, accrued expenses, derivative financial instruments and long-term debt.
The carrying value of the Company’s trade and other receivables, trade payables and accrued expenses approximates fair value due to their highly liquid nature, short-term maturity, or competitive rates assigned to
these financial instruments.
The Company adjusts the carrying amount of certain non-financial assets to fair value on a non-recurring basis when they are impaired.
Foreign currency translation
The Company uses the U.S. dollar as its functional currency for operations in the U.S. and Mexico, and the Canadian dollar for operations in Canada. The assets, liabilities, revenues and expenses of the
Company’s Canadian operations are translated in accordance with ASC 830, Foreign Currency Matters.
Environmental remediation liabilities
The Company accrues for costs on an undiscounted basis associated with environmental remediation obligations when such costs are probable and reasonably estimable; if an estimated amount is likely to fall
within a range and no amount within that range can be determined to be the better estimate, the minimum amount of the range is recorded. Claims for recoveries from insurance carriers and other third parties are
not recorded until it is probable that the recoveries will be realized. Such accruals are adjusted as further information develops or circumstances change. Environmental expenditures that relate to current
operations or to conditions caused by past operations are expensed. Expenditures that create future benefits are capitalized. At December 31, 2021
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FORTERRA, INC.
Consolidated Notes to Financial Statements
and 2020, the Company had environmental obligations of $1.3 million and $1.6 million, respectively, which are recorded within accrued liabilities and other long-term liabilities in the consolidated balance sheets.
Stock-based plans
The Company applies the provisions of ASC 718, Compensation - Stock Compensation, in its accounting and reporting for stock-based compensation. ASC 718 requires all stock-based payments to employees,
including grants of employee stock options, to be recognized in the income statement based on their fair values. All unvested options outstanding under the Company's option plans have grant prices equal to the
market price of the Company's stock on the dates of grant. Compensation cost for restricted stock and restricted stock units is determined based on the fair market value of the Company's stock at the date of grant.
Stock-based compensation expense is generally recognized over the required service period, or over a shorter period when employee retirement eligibility is a factor. The Company recognizes forfeitures as they
occur. Awards that may be settled in cash or company stock are classified as liabilities and remeasured at fair value at the end of each reporting period until the awards are settled.
Income Taxes
The Company computes the provision for income taxes using the asset/liability method. Deferred tax assets and liabilities are recorded for temporary differences between the tax basis of assets and liabilities and
their reported amounts in the consolidated financial statements using the statutory tax rates in effect for the year in which the differences are expected to reverse. The Company uses the period cost method for
Global Intangible Low-taxed Income (“GILTI”) provisions, and therefore, has not recorded deferred taxes for basis differences expected to reverse in future periods.
The Company evaluates the recoverability of its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. In assessing the need for a valuation allowance, the
Company considers all available evidence for each jurisdiction, including past operating results, future reversal of taxable and deductible temporary differences, estimates of future taxable income, and the feasibility
of ongoing tax planning strategies. The measurement of a deferred tax asset is reduced, if necessary, by a valuation allowance if, based on all available evidence, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
The Company recognizes a tax benefit for uncertain tax positions only if it believes it is more-likely-than-not that the position will be sustained upon examination based solely on the technical merits of the tax
position. The Company evaluates whether a tax position meets the more-likely-than-not recognition threshold using the assumption that the position will be examined by the appropriate taxing authority. The tax
benefits recognized in the financial statements from such positions are measured based upon the largest amount that is more than 50% likely to be realized upon ultimate settlement. Penalties and interest related
to income tax uncertainties, should they occur, are included in income tax expense in the period in which they are incurred.
Revenue recognition
The Company's revenue contracts are primarily single performance obligations for the sale of product both to trade customers and distributors. A majority of revenue recognized by the Company is recognized at
the time control is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. The Company considers several indicators for the
transfer of control to its customers, including the significant risks and rewards of ownership of products, the Company's right to payment and the legal title of the products. Based upon the assessment of control
indicators, sales to trade customers and distributors are generally recognized when products are delivered to customers.
All variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns and credits, is included in net sales. Estimates for variable consideration are based on
historical experience, anticipated performance and management's judgment. Generally, the Company's contracts do not contain significant financing.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
For certain engineering and construction contracts and building contracting arrangements, the Company enters into long-term contracts with customers. Revenue is recognized as the identified performance
obligations are satisfied over time using an acceptable input method to measure the progress toward completion of the performance obligation if: the customer receives the benefits as work is performed, the
customer controls the asset as it is being produced, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment. The Company uses its cost
incurred to date relative to total estimated costs at completion to measure progress. The Company's contract liabilities consist of billings to customers in excess of revenue recognized which the Company records
as deferred revenue. Revenue recognized during the years ended December 31, 2021 and December 31, 2020, which was included in contract liabilities at the beginning of each period was not material. Contract
assets include revenue recognized in excess of amounts billed, and balances billed but not yet paid by customers under retainage provisions which are classified as a current asset within receivables, net on the
Company's consolidated balance sheet. The Company had no material contract assets on the consolidated balance sheets as of December 31, 2021 or December 31, 2020. For the years ended December 31,
2021, 2020 and 2019, revenue recognized in continuing operations using the percentage of completion method amounted to 2%, 3%, and 2% and of total net sales, respectively.
The Company records net sales including taxes collected on behalf of its customers. Shipping and handling costs are accounted for as contract fulfillments costs and classified as cost of goods sold. See Note
21, Segment reporting, for the Company's disaggregated revenue disclosures.
The Company incurs shipping costs to third parties for the transportation of building products and bills such costs to customers. For the years ended December 31, 2021, 2020 and 2019, the Company recorded
freight costs of approximately $153.9 million, $122.7 million and $131.8 million, respectively, on a gross basis within net sales and cost of goods sold in the accompanying consolidated statements of operations.
The Company generally provides limited warranties related to its products which cover manufacturing in accordance with the specifications identified on the face of its quotation or order acknowledgment and to
be free of defects in workmanship or materials. The warranty periods typically extend for a limited duration of one year. The Company estimates and accrues for potential warranty exposure related to products
which have been delivered.
Cost of goods sold and selling, general and administrative expenses
Cost of goods sold includes costs of production, inbound freight charges for raw materials, outbound freight to customers, purchasing and receiving costs, inspection costs and warehousing at plant distribution
facilities. Selling, general and administrative costs include expenses for sales, marketing, legal, accounting and finance services, human resources, customer support, treasury and other general corporate
services.
86
FORTERRA, INC.
Consolidated Notes to Financial Statements
Recent Accounting Guidance Adopted
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). The new guidance simplifies the accounting for income taxes by eliminating certain
exceptions related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, hybrid taxes, and the recognition of deferred tax liabilities for outside basis
differences. It also clarifies and simplifies other aspects of the accounting for income taxes. For public companies, the amendments in this ASU were effective for fiscal years beginning after December 15, 2020
and interim periods within those fiscal years. Amendments are to be applied prospectively, except for certain amendments that are to be applied either retrospectively or with a modified retrospective approach
through a cumulative effect adjustment recorded to retained earnings. The Company adopted this ASU on January 1, 2021 and it did not have a material impact on the Company's consolidated financial
statements.
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13, Financial Instruments–Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments. The standard replaces the incurred loss impairment methodology under current U.S. GAAP with a methodology that reflects expected credit losses and requires the use of a forward-looking
expected credit loss model for accounts receivables, loans, and other financial instruments. The Company adopted this ASU on January 1, 2020 using a modified retrospective approach, which did not have a
material impact on the Company's consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional
guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging
relationships and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate
("LIBOR") or another reference rate expected to be discontinued due to reference rate reform. The guidance was effective upon issuance and generally can be applied through December 31, 2022 and has not had
any material impact to the Company's consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which establishes the principles that lessees and lessors shall apply to report information about the amount, timing, and uncertainty of
cash flows arising from a lease. Under the new guidance, lessees are required to recognize a right-of-use asset and a lease liability, measured on a discounted basis, at the commencement date for all leases with
terms greater than twelve months. Additionally, this guidance required disclosures to help investors and other financial statement users better understand the amount, timing and uncertainty of cash flows arising
from leases, including qualitative and quantitative requirements. The Company adopted Topic 842 during the first quarter of 2019, using the transition approach that permits application of the new standard at the
adoption date instead of the earliest comparative period presented in the financial statements.
To adopt Topic 842, the Company elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward
its historical assessments of (1) whether the existing contracts contained a lease, (2) the lease classification for existing leases, and (3) initial direct cost for existing leases. In addition to the package of practical
expedients, the Company has elected the adoption expedients of (1) the exclusion of leases with terms less than 12 months, and (2) the election not to separate non-lease components from lease components for
certain classes of underlying leased assets.
87
FORTERRA, INC.
Consolidated Notes to Financial Statements
To adopt Topic 842, the Company recognized a cumulative catch-up adjustment to the opening balance sheet presented January 1, 2019. The adoption of the standard had a material impact on the Company’s
consolidated balance sheet but did not have an impact on its consolidated statements of operations, comprehensive income (loss) or cash flows. As a result of the adoption, the Company has recorded additional
lease assets and lease liabilities of approximately $63.9 million and $65.2 million, respectively, as of January 1, 2019. In addition, the Company recognized the carrying value of deferred gains related to certain sale
and operating leaseback of land of $9.3 million, net of tax impact of $2.3 million, to beginning retained deficit as of January 1, 2019, in accordance with ASC 842-10-65-1.
Recent Accounting Guidance Not Yet Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets
and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Prior to the
issuance of this guidance, contract assets and contract liabilities were recognized by the acquirer at fair value on the acquisition date. The amendments in ASU 2021-08 are effective for fiscal years, and interim
periods within those fiscal years, beginning after December 15, 2022, with early adoption permitted and should be applied prospectively to acquisitions occurring on or after the effective date. This ASU will be
effective for the Company in the first quarter of fiscal 2023. The effects of this standard on the Company's consolidated financial statements are not expected to be material.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance, which requires business entities to disclose
information about transactions with a government that are accounted for by applying a grant or contribution model by analogy to other accounting guidance due to the lack of specific authoritative guidance in
GAAP, (for example, a grant model within International Accounting Standard 20, Accounting for Government Grants and Disclosure of Government Assistance, or Subtopic 958-605, Not-For-Profit Entities -
Revenue Recognition). This guidance excludes transactions in the scope of specific GAAP, such as tax incentives accounted for under ASC 740, Income Taxes. This new ASU is effective for annual periods
beginning after December 15, 2021, with early adoption and retrospective or prospective application permitted. This ASU will be effective for the Company in its Form 10-K for fiscal 2022. The effects of this
standard on the Company's consolidated financial statements are not expected to be material.
88
FORTERRA, INC.
Consolidated Notes to Financial Statements
3. Acquisitions and divestitures
The acquisitions described below have been accounted for as business combinations (except as discussed below) as defined by ASC 805. The Company allocated the purchase price to the individually
identifiable assets acquired and liabilities assumed based on their estimated fair value on the date of acquisition. The excess purchase price over those fair values was recorded as goodwill. The determination of
fair values of the acquired assets and assumed liabilities required significant judgment, including estimates impacting the determination of estimated lives of tangible and intangible assets, calculation of the fair
value of property, plant and equipment, inventory, and various intangibles. The fair values of assets and liabilities were determined using level 3 inputs as defined by ASC 820.
2021 transactions
On July 1, 2021, the Company acquired the business of Barbour Concrete Company & Barbour Building Systems ("Barbour") for $7.3 million, inclusive of $0.3 million payment for additional net working
capital delivered with the business that was made in October 2021. Barbour is a manufacturer of precast concrete products used in drainage, stormwater, utility and other infrastructure applications based in
Independence, Missouri. Barbour primarily serves the greater Kansas City metropolitan area. The acquisition was accounted for as a business combination as defined by ASC 805, Business Combinations;
consequently, goodwill of $0.5 million was recorded.
2019 transactions
On March 1, 2019, the Company acquired certain assets of Texas limited liability companies Houston Buckner Precast, LLC, Buckner Precast, LLC, Montgomery 18905 E. Industrial, LLC, and 1763 Old Denton
Road, LLC (altogether "Buckner") for consideration of $11.8 million in cash, inclusive of a working capital adjustment. The acquired Buckner assets did not meet the definition of a business and, as such, the
transaction was accounted for as an asset acquisition pursuant to the guidance in subsection 805-50 of ASC 805, Business Combinations. The assets of the Buckner acquisition operate as part of the Company’s
Drainage Pipe & Products segment.
Transaction costs
For the years ended December 31, 2021, 2020 and 2019, the Company recognized aggregate transaction costs, including legal, accounting, valuation, and advisory fees, specific to the transactions identified
above of $0.1 million, $0.0 million and $0.2 million, respectively. In addition, for the year ended December 31, 2021 the Company incurred transaction costs related to the Merger of $9.2 million. These transaction
costs are recorded in the consolidated statements of operations within selling, general & administrative expenses.
89
FORTERRA, INC.
Consolidated Notes to Financial Statements
4. Receivables, net
Receivables consist of the following at December 31, 2021 and 2020 (in thousands):
December 31,
2021
2020
Trade receivables
$
274,602
$
195,997
Amounts billed, but not yet paid under retainage provisions
2,616
4,022
Other receivables
18,512
29,026
Total receivables
$
295,730
$
229,045
Less: Allowance for doubtful accounts
(1,874)
(1,097)
Receivables, net
$
293,856
$
227,948
The Company records provisions for doubtful accounts in selling, general and administrative expenses in the consolidated statements of operations. The table below summarizes the Company's allowance
for doubtful accounts for the periods presented (in thousands):
Allowance for doubtful accounts
Balance at December 31, 2019
$
(2,068)
Recovery on doubtful accounts
451
Write-offs and adjustments
520
Balance at December 31, 2020
$
(1,097)
Provision for doubtful accounts
(1,049)
Write-offs and adjustments
272
Balance at December 31, 2021
$
(1,874)
5. Inventories
Inventories consist of the following at December 31, 2021 and December 31, 2020 (in thousands):
December 31,
2021
2020
Finished goods
$
152,036
$
145,872
Raw materials
110,548
76,322
Work in process
1,100
734
Total inventories
$
263,684
$
222,928
6. Investment in equity method investee
The Company owns 50% of the Common Unit voting shares of Concrete Pipe & Precast LLC ("CP&P") and consequently, has recorded its investment in the Common Unit voting shares in accordance with ASC
323, Investments – Equity Method and Joint Ventures, under the equity method of accounting.
The Company's investment in the joint venture as of December 31, 2021 and 2020 was $49.3 million and $48.3 million, respectively, which is included within the Drainage Pipe & Products segment. At December
31, 2021, the difference between the amount at which the Company's investment is carried and the amount of the Company's share of the underlying equity in net assets of CP&P was approximately $12.9 million.
The basis difference is primarily attributable to the value of land and equity method goodwill associated with the investment.
90
FORTERRA, INC.
Consolidated Notes to Financial Statements
The following reflects the Company's distribution and earnings in the equity investment (in thousands):
Year ended December 31,
2021
2020
2019
Distribution received from CP&P
$
(11,585)
$
(13,039)
(11,039)
Share of earnings in CP&P
12,664
11,363
10,538
Amortization of excess fair value of investment
(72)
(72)
(72)
Selected financial data for CP&P on a 100% basis is as follows (in thousands):
Year ended December 31,
2021
2020
2019
Net sales
$
173,926
$
157,499
$
152,740
Gross profit
44,352
41,245
40,369
Income from operations
25,060
23,172
21,720
Net income
24,737
22,642
20,844
The Company has entered into an agreement to sell its 50% interest in CP&P to the joint venture partner with such transaction conditioned upon, among other things, the closing of the Merger. See Note 1.
7. Property, plant and equipment, net
Property, plant and equipment, net consist of the following at December 31, 2021 and 2020 (in thousands):
December 31,
2021
2020
Machinery and equipment
$
426,097
$
410,436
Land, buildings and improvements
237,613
234,251
Other equipment
16,209
12,633
Construction-in-progress
43,276
26,073
Total property, plant and equipment
723,195
683,393
Less: accumulated depreciation
(264,514)
(232,311)
Property, plant and equipment, net
$
458,681
$
451,082
Depreciation expense totaled $49.2 million, $48.2 million and $49.8 million for the years ended December 31, 2021, 2020 and 2019, respectively, which is included in cost of goods sold and selling, general and
administrative expenses in the consolidated statements of operations.
As of December 31, 2021 and 2020, gross assets recorded under finance leases, consisting primarily of land and buildings, were $54.5 million and $55.6 million, respectively, and accumulated depreciation was
$6.7 million and $5.9 million, respectively.
Impairments
For the year ended December 31, 2021, the Company recorded asset impairment charges of $0.4 million for its property, plant and equipment. For the year ended December 31, 2020, the Company recorded
asset impairment charges of $1.2 million for its property, plant and equipment. For the year ended December 31, 2019,
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FORTERRA, INC.
Consolidated Notes to Financial Statements
the Company recorded asset impairment charges of $0.1 million for its property, plant and equipment. Asset impairments are included in impairment and exit charges on the consolidated statements of operations.
8. Goodwill and other intangible assets, net
The Company has goodwill which has been recorded in connection with its acquisition of businesses. The following table summarizes the changes in goodwill by operating segment for the years ended
December 31, 2021 and December 31, 2020 (in thousands):
Drainage Pipe &
Products
Water Pipe & Products
Total
Balance at December 31, 2019
$
190,466
$
318,360
$
508,826
Foreign currency and other adjustments
301
—
301
Balance at December 31, 2020
190,767
318,360
509,127
Acquisitions
759
—
759
Foreign currency and other adjustments
50
—
50
Balance at December 31, 2021
$
191,576
$
318,360
$
509,936
Goodwill is required to be tested for impairment at the reporting unit level. The Company has three reporting units which have goodwill. We perform our annual impairment assessment of goodwill in the
fourth quarter of each year, or more frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. In accordance
with ASC 350, Intangibles – Goodwill & Other, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for
determining whether it is necessary to perform the quantitative goodwill impairment test. The more likely than not threshold is defined as having a likelihood of more than 50 percent. If, after assessing the totality
and events or circumstances, we determine that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, then performing the quantitative impairment test is unnecessary
and our goodwill is considered to be unimpaired. However, if based on our qualitative assessment we conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we
will proceed with performing the quantitative impairment test.
Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of the qualitative
assessment, we may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit's fair value.
For quantitative impairment test, the Company uses a combination of an income approach and a market approach to determine the fair value of the reporting unit. The income approach uses a reporting
unit's estimated future cash flows, discounted at the weighted average cost of capital of a hypothetical third-party buyer. The market approach estimates fair value by applying cash flow multiples to the reporting
unit's operating performance. The multiples are derived from comparable publicly traded companies with similar operating and investment characteristics to the reporting unit. The calculation of business enterprise
value is based on significant unobservable inputs, such as price trends, customer demand, material costs and discount rates, and are classified as Level 3 in the fair value hierarchy. The Company's impairment
determinations involve significant assumptions and judgments, as discussed above. Different assumptions regarding any of these inputs could have a significant effect on the various valuations.
The Company performed its annual goodwill impairment test as of October 1st of each year. In 2021 and 2020, the fair value for all of our reporting units substantially exceeded their carrying value, and our
annual qualitative assessment did not indicate that a more detailed quantitative test was necessary. In 2019, we performed the quantitative impairment test and concluded that the calculated fair value of the
reporting units exceeded book value in all circumstances; therefore, no annual impairment charge was recorded.
92
FORTERRA, INC.
Consolidated Notes to Financial Statements
Intangible assets other than goodwill at December 31, 2021 included the following (in thousands):
Weighted average amortization period
(in years)
Gross carrying amount as of December
31, 2021
Accumulated amortization
Net carrying value as of December 31,
2021
Customer relationships
10
$
236,669
$
(189,318)
$
47,351
Trade names
10
39,657
(28,885)
10,772
Patents
11
23,629
(20,639)
2,990
Customer backlog
0.8
13,211
(13,211)
—
Non-compete agreements
5
17,178
(14,711)
2,467
Developed technology
17
6,354
(1,121)
5,233
Other
10
867
(575)
292
Total intangible assets
$
337,565
$
(268,460)
$
69,105
Intangible assets other than goodwill at December 31, 2020 included the following (in thousands):
Weighted average amortization
period (in years)
Gross carrying amount as of December
31, 2020
Accumulated amortization
Net carrying value as of December 31,
2020
Customer relationships
10
$
235,907
$
(165,404)
$
70,503
Trade names
10
39,390
(24,455)
14,935
Patents
11
23,629
(18,600)
5,029
Customer backlog
0.8
13,211
(13,211)
—
Non-compete agreements
5
17,172
(12,210)
4,962
Developed technology
17
$
6,354
$
(748)
5,606
Other
10
867
(493)
374
Total intangible assets
$
336,530
$
(235,121)
$
101,409
Amortization expense totaled $33.3 million, $41.3 million and $47.4 million for the years ended December 31, 2021, December 31, 2020 and December 31, 2019, respectively, which is included in selling, general
and administrative expenses in the consolidated statements of operations.
The estimated amortization expense relating to amortizable intangible assets for the next five years is as follows (in thousands):
Year ended
Intangible assets subject to amortization
2022
$
24,203
2023
17,801
2024
12,818
2025
9,549
2026
670
Total
$
65,041
93
FORTERRA, INC.
Consolidated Notes to Financial Statements
9. Fair value measurement
The Company's financial instruments consist primarily of cash and cash equivalents, trade and other receivables, derivative instruments, accounts payable, long-term debt, operating and finance lease liabilities,
accrued liabilities and the tax receivable agreement obligation. The carrying value of the Company's trade receivables, other receivables, trade payables, the asset-based revolver and accrued liabilities
approximates fair value due to their short-term maturity or other terms related to these financial instruments. The Company may adjust the carrying amount of certain non-financial assets to fair value on a non-
recurring basis when they are impaired.
The estimated carrying amount and fair value of the Company’s financial instruments measured and recorded at fair value on a recurring basis are as follows for the dates indicated (in thousands):
Fair value measurements at December 31, 2021 using
Quoted Prices in Active Markets for
Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs (Level
3)
Total Fair Value December 31, 2021
Liabilities:
Derivative liability
$
— $
194 $
— $
194
Fair value measurements at December 31, 2020 using
Quoted Prices in Active Markets for
Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs (Level
3)
Total Fair Value December 31, 2020
Liabilities:
Derivative liability
$
— $
572 $
— $
572
Liabilities and assets classified as level 2 which are recorded at fair value are valued using observable market inputs. The fair values of derivative assets and liabilities are determined using quantitative models
that utilize multiple market inputs including interest rates and exchange rates to generate continuous yield or pricing curves and volatility factors to value the position. The majority of market inputs are actively
quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services. The fair values of derivative assets and liabilities include adjustments for market
liquidity, counter-party credit quality and other instrument-specific factors, where appropriate. In addition, the Company incorporates within its fair value measurements a valuation adjustment to reflect the credit risk
associated with the net position. Positions are netted by counter-parties, and fair value for net long exposures is adjusted for counter-party credit risk while the fair value for net short exposures is adjusted for the
Company’s own credit risk.
The estimated carrying amount and fair value of the Company’s financial instruments and liabilities for which fair value is only disclosed is as follows (in thousands):
Fair value measurements at December 31, 2021 using
Carrying Amount December 31, 2021
Quoted Prices in Active Markets for
Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs (Level
3)
Total Fair Value December 31, 2021
Non-current liabilities
Term Loan
$397,986
—
$402,357
—
$402,357
Senior Secured Notes
493,796
—
$530,690
—
530,690
Tax receivable agreement payable
55,908
—
—
34,697
34,697
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FORTERRA, INC.
Consolidated Notes to Financial Statements
Fair value measurements at December 31, 2020 using
Carrying Amount December 31, 2020
Quoted Prices in Active Markets for
Identical Assets (Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs (Level
3)
Total Fair Value December 31, 2020
Non-current liabilities
Term Loan
$407,978
—
$415,386
—
$415,386
Senior Secured Notes
492,043
539,760
539,760
Tax receivable agreement payable
64,240
—
—
40,586
40,586
The fair value of debt is valued using a market approach based on the indicative quoted prices for the Company's debt instruments traded in over-the-counter markets and, therefore, is classified as Level 2
within the fair value hierarchy. See Note 11, Debt and deferred financing costs, for a further discussion of Company debt.
The fair value of the tax receivable agreement payable was determined using a discounted cash flow methodology using level 3 inputs as defined by ASC 820, Fair Value Measurements and Disclosures. The
determination of fair value required significant judgment, including estimates of the timing and amounts of various tax attributes. These estimates are based on management’s best knowledge of current events and
actions that the Company may undertake in the future. Actual results could differ from these estimates. See Note 16, Commitments and contingencies, for a further discussion of the Company's tax receivable
agreement.
10. Accrued liabilities
Accrued liabilities consist of the following at December 31, 2021 and December 31, 2020 (in thousands):
December 31,
2021
2020
Accrued payroll and employee benefits
$
53,517
$
49,434
Short-term capital leases
17,767
17,009
Short-term operating leases
8,325
7,448
Accrued taxes
9,645
13,642
Accrued rebates
15,484
11,649
Warranty
3,987
7,069
Other miscellaneous accrued liabilities
7,958
9,442
Total accrued liabilities
$
116,683
$
115,693
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FORTERRA, INC.
Consolidated Notes to Financial Statements
11. Debt and deferred financing costs
The Company’s debt consisted of the following (in thousands):
December 31,
December 31,
2021
2020
Term Loan, net of debt issuance costs and original issuance discount of
$4,371 and $6,889, respectively
$
397,986
$
407,978
Senior Secured Notes, net of debt issuance costs and original issuance discount of $6,204 and $7,957, respectively
493,796
492,043
Total debt
$
891,782
$
900,021
Less: current portion debt
(12,510)
(12,510)
Total long-term debt
$
879,272
$
887,511
As of December 31, 2021, Forterra had no borrowings under its $350 million asset based revolving credit facility under its ABL Credit Agreement dated October 25, 2016 (the “ABL Credit Agreement”) for working
capital and general corporate purposes (“Revolver”), $402.4 million outstanding under its senior term loan facility (“Term Loan”) and $500 million senior secured notes due 2025 (the “Notes”).
Senior Secured Notes
On July 16, 2020, Forterra Finance, LLC and FRTA Finance Corp., both wholly-owned subsidiaries of the Company, completed the issuance of $500 million aggregate principal amount of senior secured
notes due in 2025. The Notes have a fixed annual interest rate of 6.50% which will be paid semi-annually on January 15 and July 15 of each year. The Notes will mature on July 15, 2025. The Company used the
net proceeds from the offering to repay $492.5 million of the principal amount of the Term Loan at par, plus accrued interest. The Company incurred debt issuance costs of $8.8 million and will amortize them over
the term of the Notes under the effective interest method.
Obligations under the Notes are guaranteed by the Company and the Company’s existing and future subsidiaries (other than the issuing companies) that guarantee the Term Loan and the obligations of the
U.S. borrowers under the Revolver. The Notes and the related guarantees are secured by first-priority liens on the collateral that secures the Term Loan on a first-priority basis (which is generally all assets other
than those that secure the Revolver on a first-priority basis as set forth below) and second-priority liens on the collateral that secures the Revolver on a first-priority basis (which is generally inventory, accounts
receivable, deposit accounts, securities accounts, certain intercompany loans and related assets), which second-priority liens will be ratable with the liens on such assets securing the obligations under the Term
Loan and junior to the liens on such assets securing the Revolver.
At any time prior to July 15, 2022, the Company may on any one or more occasions redeem all or part of the Notes at a redemption price equal to 100% of the principal amount of the Notes redeemed, plus
a “make whole premium” as of, and accrued and unpaid interest to the date of redemption, subject to the right of holders of Notes on the relevant record date to receive interest due on an interest payment date
occurring on or prior to the redemption date. In addition, at any time prior to July 15, 2022, the Company may on any one or more occasions redeem up to 40% of the aggregate principal amount of the Notes
(calculated after giving effect to the issuance of any additional notes) issued under the Indenture at a redemption price equal to 106.500% of the principal amount of Notes redeemed, plus accrued and unpaid
interest to the date of redemption (subject to the right of holders of Notes on the relevant record date to receive interest due on an interest payment date occurring on or prior to the redemption date), with the net
cash proceeds of an equity offering. Furthermore, at any time on or after July 15, 2022, the Company may on any one or more occasions redeem all or part of the Notes at the redemption prices (expressed as
percentages of principal amount) set forth below, plus accrued and unpaid interest on the Notes redeemed, to the applicable date of redemption, if redeemed during the 12-month period beginning on July 15 of the
years indicated below, subject to the rights of holders of Notes on a relevant record date to receive interest on an interest payment date occurring on or prior to the redemption date:
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FORTERRA, INC.
Consolidated Notes to Financial Statements
Percentage
2022
103.250
%
2023
101.625
%
2024 and thereafter
100.000
%
The Notes contain customary negative covenants, including, among other things, limitations or prohibitions on restricted payments, incurrence of additional indebtedness, liens, mergers, asset sales and
transactions with affiliates. In addition, the Indenture contains customary events of default.
Senior Term Loan
The Term Loan provides for a $1.25 billion senior secured term loan. Subject to the conditions set forth in the term loan agreement, the Term Loan may be increased by (i) up to the greater of $285.0 million
and 1.0x consolidated EBITDA (defined below) of Forterra and its restricted subsidiaries for the four quarters most recently ended prior to such incurrence plus (ii) the aggregate amount of any voluntary
prepayments, plus (iii) an additional unlimited amount, provided (x) in the case of any incremental debt that is secured by a lien that is pari passu with the liens securing the Term Loan, the first lien leverage ratio
does not exceed 4.10 to 1.00, (y) in the case of incremental debt that is secured by a lien that is junior to the liens securing the Term Loan, the total leverage ratio does not exceed 5.50 to 1.00 and (z) in the case of
incremental debt that is unsecured, the total leverage ratio does not exceed 5.75 to 1.00, in each case, determined on a pro forma basis.
The Term Loan matures on October 25, 2023 and is subject to quarterly amortization equal to 0.25% of the initial principal amount. Interest accrues on outstanding borrowings thereunder at a rate equal to
adjusted LIBOR (with a floor of 1.0%) or an alternate base rate (the base rate, which is the highest of the then current federal funds rate plus 0.50%, the prime rate most recently announced by the administrative
agent under the Term Loan, and the one-month adjusted LIBOR plus 1.00%), in each case plus a margin of 3.00% or 2.00%, respectively. The weighted average interest rates for the Term Loan were 4.0% and
4.1% for the years ended December 31, 2021 and December 31, 2020, respectively.
During the year ended December 31, 2020, the Company repurchased $696.0 million of the Term Loan before its maturity at a market value of $695.1 million. Consequently, the Company wrote off a
proportionate share of debt issuance costs of $13.1 million and recognized a net loss of $12.2 million which was included in the consolidated statements of operations. During the year ended December 31, 2021,
the Company didn't make any debt repurchases before its maturity.
Outstanding borrowings under the Term Loan are guaranteed by Forterra and each of its direct and indirect material wholly-owned domestic subsidiaries except certain excluded subsidiaries (the "Guarantors").
The Term Loan is secured by substantially all of the assets of Forterra, the borrower and the Guarantors; provided that the obligations under the Term Loan are not secured by any liens on more than 65% of the
voting stock of foreign subsidiaries or assets of foreign subsidiaries. The Term Loan contains customary representations and warranties, and affirmative and negative covenants, that, among other things, restrict
the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset sales
and pay dividends and make distributions. The Term Loan does not contain any financial covenants. Obligations under the Term Loan may be accelerated upon certain customary events of default (subject to grace
periods, as appropriate).
Asset Based Revolving Facility
On June 17, 2020, the Company entered into a First Amendment (the “Amendment”) to the ABL Credit Agreement. The Amendment, among other things, (i) increased the size of the Revolver from $300
million to $350 million of aggregate commitments, with up to $330 million to be made available to the U.S. Borrowers and up to
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FORTERRA, INC.
Consolidated Notes to Financial Statements
$20 million to be made available to the Canadian Borrowers (the allocation may be modified periodically at the Company's request), (ii) extended the maturity date of the Revolver to June 17, 2025, subject to
earlier maturity if greater than $75.0 million of the Company’s Term Loan remains outstanding 91 days prior to the scheduled maturity of the term loan credit facility or any refinancing thereof, and (iii) modified the
interest rates on outstanding borrowings under the Revolver to a rate equal to LIBOR or CDOR plus a margin ranging from 1.75% to 2.25% per annum, or an alternate base rate, Canadian prime rate or Canadian
base rate plus a margin ranging from 0.75% to 1.25% per annum, in each case, based upon the average excess availability under the Revolver for the most recently completed calendar quarter and the Company’s
total leverage ratio as of the end of the most recent fiscal quarter for which financial statements have been delivered. The Company incurred $2.6 million of fees and expenses in connection with this Amendment
and recorded it to “Other Long-term Assets” in its consolidated balance sheet. In addition, for the year ended December 31, 2020, the Company wrote off $0.4 million of previously deferred issuance cost related to
the banks that are no longer part of the ABL Credit Facility.
Subject to the conditions set forth in the ABL Credit Agreement, as amended, the Revolver may be increased by up to the greater of (i) $100.0 million and (ii) such amount as would not cause the aggregate
borrowing base to be exceeded by more than $50.0 million. Borrowings under the Revolver may not exceed a borrowing base equal to the sum of (i) 100% of eligible cash, (ii) 85% of eligible accounts receivable
and (iii) the lesser of (a) 75% of eligible inventory and (b) 85% of the orderly liquidation value of eligible inventory, with the U.S. and Canadian borrowings being subject to separate borrowing base limitations. The
advance rates for accounts receivable and inventory are subject to increase by 2.5% during certain periods. As of December 31, 2021 and December 31, 2020, the Revolver had no outstanding borrowings. The
weighted average interest rates for the borrowings under the Revolver were 2.75% and 2.00% for the years ended December 31, 2021 and December 31, 2020, respectively.
The Revolver also provides for the issuance of letters of credit of up to an agreed sublimit. The obligations of the borrowers under the Revolver are guaranteed by Forterra and its direct and indirect wholly-owned
restricted subsidiaries other than certain excluded subsidiaries; provided that the obligations of the U.S. borrowers are not guaranteed by the Canadian subsidiaries. The Revolver is secured by substantially all of
the assets of the borrowers; provided that the obligations of the U.S. borrowers are not secured by any liens on more than 65% of the voting stock of foreign subsidiaries or assets of foreign subsidiaries.
In addition, Forterra pays a facility fee of between 20.0 and 32.5 basis points per annum based upon the utilization of the total Revolver. Availability under the Revolver, based on draws, outstanding letters of
credit of $18.8 million, as well as allowable borrowing base as of December 31, 2021, was $317.9 million.
The Revolver and the Term Loan contain customary representations and warranties, and affirmative and negative covenants, including representations, warranties, and covenants that, among other things,
restrict the ability of Forterra and its restricted subsidiaries to incur additional debt, incur or permit liens on assets, make investments and acquisitions, consolidate or merge with any other company, engage in asset
sales and pay dividends and make distributions. The Revolver contains a financial covenant restricting Forterra from allowing its fixed charge coverage ratio to drop below 1.00:1.00 during a compliance period,
which is triggered when the availability under the Revolver falls below a threshold set forth in the ABL Credit Agreement, as amended. Obligations under the Revolver and the Term Loan may be accelerated upon
certain customary events of default (subject to grace periods, as appropriate). The fixed charge coverage ratio is the ratio of consolidated earnings before interest, depreciation, and amortization (“EBITDA’’) less
cash payments for capital expenditures and income taxes to consolidated fixed charges (interest expense plus scheduled payments of principal on indebtedness).
As of December 31, 2021, the Company was in compliance with all applicable covenants under the Revolver, the Term Loan, and the Notes.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
As of December 31, 2021, scheduled maturities of long-term debt were as follows (in thousands):
Total
Term Loan
Notes
2022
$
12,510
$
12,510
$
—
2023
389,847
389,847
—
2024
—
—
—
2025
500,000
—
500,000
2026
—
—
—
$
902,357
$
402,357
$
500,000
12. Other long-term liabilities
Other long-term liabilities consist of the following for the years ended December 31, 2021 and 2020 (in thousands):
December 31,
2021
2020
Workers' compensation
$
13,687
$
12,417
Legal
6,758
6,758
Social Security deferral
—
5,521
Long term bonus incentive plan
—
5,110
Employee benefits
3,322
3,322
Environmental remediation liability
1,223
1,535
Other miscellaneous long-term liabilities
2,311
2,255
$
27,301
$
36,918
13. Derivatives and hedging
The Company uses derivatives to manage selected foreign exchange and interest rate exposures. The Company does not use derivative instruments for speculative trading purposes, and, except as discussed
below, cash flows from derivative instruments are included in net cash provided by (used in) operating activities in the consolidated statements of cash flows.
On March 30, 2020, Forterra entered into an interest rate swap transaction with a notional value of $400 million to reduce exposure to interest rate fluctuations associated with a portion of the Term Loan.
Under the terms of the swap transaction, Forterra agreed to pay a fixed rate of interest of 1.08% and receive floating rate of interest indexed to one-month LIBOR, subject to a minimum of 1.00%, with monthly
settlement terms with the swap counterparty. The swap has a 30-month term and expires on September 30, 2022. The interest rate swap is not designated as a cash flow hedge, therefore all changes in the fair
value of the instrument are captured as a component of interest expense in the consolidated statements of operations. Accordingly, cash flows from the monthly interest rate swap settlements are included in net
cash provided by (used in) operating activities in the consolidated statements of cash flows.
On February 9, 2017, Forterra entered into interest rate swap transactions with a combined notional value of $525 million. Under the terms of the swap transactions, Forterra agreed to pay a fixed rate of interest
of 1.52% and receive floating rate interest indexed to one-month LIBOR with monthly settlement terms with the swap counterparties. The swaps had a three-year term and expired on March 31, 2020. The interest
rate swaps were not designated as cash flow hedges, therefore all changes in the fair value of these instruments were captured as a component of interest expense in the consolidated statements of operations.
Accordingly, cash flows from the
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FORTERRA, INC.
Consolidated Notes to Financial Statements
monthly interest rate swap settlements were included in net cash provided by (used in) operating activities in the consolidated statements of cash flows.
The Company elects to present all derivative assets and derivative liabilities on a net basis on its consolidated balance sheets when a legally enforceable International Swaps and Derivatives Association, Inc.
(“ISDA”) Master Agreement exists. An ISDA Master Agreement is an agreement between two counterparties, which may have multiple derivative transactions with each other governed by such agreement, and
such ISDA Master Agreement generally provides for the net settlement of all or a specified group of these derivative transactions, through a single payment, in a single currency, in the event of a default on, or
affecting any, one derivative transaction or a termination event affecting all, or a specified group of, derivative transactions. At December 31, 2021 and 2020, the Company’s derivative instruments fall under an
ISDA master netting agreement.
The following table presents the fair values of derivative assets and liabilities in the balance sheets (in thousands):
December 31, 2021
Derivative Assets
Derivative Liabilities
Notional Amount
Fair Value
Notional Amount
Fair Value
Interest rate swaps
$
—
$
—
$
400,000
$
194
Total derivatives, gross
—
194
Less: Legally enforceable master netting agreements
—
—
Total derivatives, net
$
—
$
194
December 31, 2020
Derivative Assets
Derivative Liabilities
Notional Amount
Fair Value
Notional Amount
Fair Value
Interest rate swaps
$
—
$
—
$
400,000
$
572
Total derivatives, gross
—
572
Less: Legally enforceable master netting agreements
—
—
Total derivatives, net
$
—
$
572
The following table presents the effect of derivative instruments on the consolidated statements of operations (in thousands):
Year ended December 31,
Year ended December 31,
2021
2020
Derivatives not designated as hedges
Interest rate swaps
Gain / (loss) on derivatives not designated as hedges included in interest expense
378
(830)
14. Leases
The Company leases land and buildings, office spaces, vehicles, machinery and equipment under various lease agreements. A large portion of the Company’s leases were the result of the sale and leaseback of
land and buildings related to certain production facilities. These leases have an initial term of 25 years, followed by one optional renewal term of approximately ten years that may be exercised at the Company’s
discretion. See Note 15, Sale-Leaseback transaction. These leases, with the exception of certain land leases, were classified as finance leases. The Company’s operating leases are mainly comprised of land and
buildings, office spaces, vehicles, machinery and equipment leases, and have remaining terms of one to 25 years, some of which include options to extend the leases for up to ten years.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
The components of lease expense were as follows (in thousands):
Lease cost
Classification
Year ended December 31, 2021
Year ended December 31, 2020
Year ended December 31,
2019
Operating lease cost
Lease expense
$
13,780
$
15,613
$
16,464
Finance lease cost
Amortization of leased assets
Depreciation, amortization, and accretion
2,266
2,259
2,276
Interest on lease liabilities
Interest expense
19,504
18,954
18,528
Lease term and discount rate
December 31, 2021
December 31, 2020
December 31, 2019
Weighted-average remaining lease term (years)
Operating leases
14.9 years
15.7 years
15.5 years
Finance leases
30.8 years
31.7 years
33.1 years
Weighted-average discount rate (%)
Operating leases
12.4 %
12.6 %
12.6 %
Finance leases
12.3 %
12.3 %
12.3 %
Supplemental cash flow information related to leases was as follows (in thousands):
Year ended December 31,
2021
Year ended December 31,
2020
Year ended December 31,
2019
Cash paid for amounts included in lease liabilities
Operating cash flows related to operating leases
$
12,783
$
14,515
$
14,945
Operating cash flows related to finance leases
17,149
16,621
16,090
Financing cash flows related to finance leases
852
805
583
Leased assets obtained in exchange for new finance lease liabilities
11
3,456
180
Leased assets obtained in exchange for new operating lease liabilities
5,450
2,032
4,925
Supplemental balance sheet information related to leases was as follows (in thousands):
Classification
December 31, 2021
December 31, 2020
Operating leases
Right of use assets
Operating lease right-of-use assets
$
52,808
$
54,379
Operating lease liabilities - current portion
Accrued liabilities
(8,325)
(7,448)
Operating lease liabilities - long term portion
Long-term operating lease liabilities
(49,814)
(50,943)
Finance leases
Finance lease assets
Property, plant and equipment, net
49,222
51,360
Finance lease liabilities - current portion
Accrued liabilities
(17,767)
(17,009)
Finance lease liabilities - long term portion
Long-term finance lease liabilities
(142,940)
(142,195)
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FORTERRA, INC.
Consolidated Notes to Financial Statements
As of December 31, 2021, maturities of lease liabilities were as follows (in thousands):
Operating leases
Finance leases
Total
2022
$
12,501
$
18,245
$
30,746
2023
12,007
18,372
30,379
2024
11,144
18,605
29,749
2025
10,320
18,809
29,129
2026
8,808
18,531
27,339
Thereafter
91,628
616,567
708,195
Total lease payments
146,408
709,129
855,537
Less: imputed interest
(88,269)
(548,422)
(636,691)
Present value of lease liabilities
$
58,139
$
160,707
$
218,846
15. Sale-leaseback transaction
During April 2016, the Company sold 49 US and Canadian properties to Pipe Portfolio Owner (Multi) LP, (the "U.S. Buyer") and FORT-BEN Holdings (ONQC) Ltd., (the "Canadian Buyer") and entered into master
land and building lease agreements under which the Company agreed to lease back each of the properties for an initial term of twenty years, followed by one optional renewal term of 9 years, 11 months. A
deferred gain of $81.5 million related to the sale-leaseback transaction was being amortized over the life of the master leases. In addition, the Company concluded that the leases for land and buildings were
operating leases, and the leases for the machinery equipment were capital leases. In October 2016, the Company entered into agreements to replace the original guarantor with Forterra, as the new guarantor,
effective immediately following completion of the internal reorganization effected prior to the IPO. Due to the change in guarantor, the sale leaseback qualified for sales recognition and was classified as an
operating lease beginning October 2016.
On June 5, 2018, the Company entered into exchange agreements and Amended and Restated Master Leases with each of the U.S Buyer and the Canadian Buyer (collectively, the “Exchange
Transaction”). Under the exchange agreement between the Company and the U.S. Buyer, the Company exchanged ownership of a ductile iron pipe facility located in Bessemer, Alabama used in its Water Pipe &
Products segment (the “Bessemer Facility”) for 21 facilities used in its Drainage Pipe & Products segment and the U.S. concrete and steel pressure pipe facilities previously part of the Water Pipe & Products
segment, including a portion of one property used in both segments, all of which were previously included in the sale-leaseback transaction. Under the exchange agreement between the Company and the
Canadian Buyer, the Company exchanged ownership of a smaller diameter ductile iron pipe facility located in Bessemer, Alabama used in its Water Pipe & Products segment (the “Mini Mill Facility”) for ownership
of three Canadian concrete pressure pipe facilities that were previously included in the sale-leaseback transaction. No cash changed hands in the Exchange Transaction.
Under the Amended and Restated Master Leases, the Company leases 26 properties from the U.S. Buyer and 2 properties from an affiliate of the Canadian Buyer, each for an initial term of 25 years,
through June 30, 2043, followed by one optional renewal term of nine years, eleven months that may be exercised at the Company’s option. The initial base rent under the U.S. Amended and Restated Master
Lease is $17.1 million per annum, payable monthly, and is subject to a 2% annual increase during the initial term. If the Company elects to extend the term of the U.S. Amended and Restated Master Lease, the
base rent for the first year of the extension will be the greater of 95% of the fair market rental value of the properties and an amount equal to 102% of the prior year’s base rent, subject to an annual increase based
on changes in the Consumer Price Index, but capped at 4%. The U.S. Amended and Restated Master Lease restricts the Company’s use of the U.S. properties to heavy manufacturing, industrial, and other related
uses. The Company cannot sublease or assign the properties covered by the U.S. Amended and Restated Master Lease without the prior written consent of the U.S. Landlord and subject to certain other
restrictions. The terms of the Canadian Amended and Restated Master Lease are
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FORTERRA, INC.
Consolidated Notes to Financial Statements
similar to those of the U.S. Amended and Restated Master Lease described above, except that the initial base rent is $1.2 million (CAD) per annum. The Company’s aggregate liability in connection with its
representations, warranties, covenants and indemnification and other obligations is $5.0 million under the U.S. Exchange Agreement and $6.4 million (CAD) under the Canadian Exchange Agreement, subject to
limited exceptions.
The Company accounted for the Exchange Transaction in accordance with the sale-leaseback accounting guidance under ASC 840, Leases. The fair value of the 24 facilities exchanged back was $86.1
million and was accounted for as the proceeds from the sale of the Bessemer and Mini Mill Facilities after adjusting for the transaction cost of $2.7 million. Consequently, a deferred gain of $67.3 million was
recorded at June 5, 2018. The carrying value of the deferred gains of $35.0 million, the deferred rent of $3.1 million, and the deferred transaction costs of $2.4 million from the original sale-leaseback transaction
were reclassified to reduce the carrying value of the 24 facilities exchanged back.
The Amended and Restated Master Leases extended the lease terms for all facilities, which caused the majority of the leases to be classified as capital leases instead of operating leases. Consequently,
the Company recognized capital lease obligations as well as the gross value of the capital lease assets of $149.0 million, calculated by discounting minimum future lease payments using its incremental borrowing
rate of 12.33%. The carrying value of the deferred gains of $100.0 million, the deferred rent of $3.8 million, and the deferred transaction cost of $5.7 million were reclassified to reduce the carrying value of capital
lease assets.
See Note 14 for lease expense relating to the years ended December 31, 2021, 2020 and 2019.
16. Commitments and contingencies
The Company is involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the
Company’s consolidated financial position, results of operations, or liquidity. Other than routine litigation incidental to the Company's business and those matters described below, there are no material legal
proceedings to which the Company is a party or to which any of the Company’s properties are subject.
Derivative Action
On January 15, 2019, a putative shareholder derivative complaint captioned Lee v. Bradley, et al., was filed in the United States District Court for the District of Delaware, naming as defendants certain of the
Company’s current and former directors and officers (the "Lee Action"). The complaint alleges the defendants violated Section 14A of the Securities and Exchange Act of 1934, as amended, and related rules by
failing to make certain disclosures in the Company's proxy solicitation in advance of the 2017 Annual Meeting of Stockholders, and that defendants breached their fiduciary duties, wasted corporate assets, and
committed constructive fraud. The complaint also asserts unjust enrichment claims against certain defendants. The complaint seeks, on behalf of the Company, unspecified damages, an order directing the return of
certain payments to the defendants, certain injunctive relief, and reasonable costs and attorneys' fees. After initially staying the case until the court in a prior, unrelated securities class action suit that has now been
settled ruled on the motion to dismiss in that case, on December 11, 2019, the court in the Lee Action entered a Stipulation and Order consolidating the Lee Action and another derivative action filed in the same
court into a single case (the "Consolidated Lee Action"), and providing a schedule for filing of an amended complaint and motions to dismiss, which has been further extended by agreement of the parties. A
mediation of the dispute was held on June 12, 2020 but was not successful in resolving the dispute. Plaintiffs filed an amended complaint in August 2020 and Defendants filed a motion to dismiss the complaint in
September 2020, which is now fully briefed and before the court. In light of the Company’s entry into the Merger Agreement, the parties agreed that the action should be stayed pending the completion of the
Merger, and the Court has entered an order staying the Lee Action until the later of the date the merger is completed or April 1, 2022, unless the merger agreement is terminated, in which case the parties must
inform the court.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
The Company and other defendants are vigorously defending the Consolidated Lee Action. Given the stage of the proceedings, the Company cannot reasonably estimate at this time the possible loss or range of
loss, if any, that may arise from the Consolidated Lee Action.
Merger-Related Litigation
On March 24, 2021, Anand Choudhuri, a purported owner of Forterra common stock brought a lawsuit against the Company and each of the members of its Board of Directors in the U.S. District Court for
the Southern District of New York (the "Choudhuri Action"). The plaintiff alleges, among other things, that the directors breached their fiduciary duties by entering into the Merger Agreement through an unfair
process and for inadequate compensation, and that the Information Statement filed by the Company to explain the Merger to its stockholders (the "Merger Information Statement") omits material information related
to the sales process, the Company’s financial projections, and Citigroup Global Markets Inc.’s (“Citi”) analysis of the proposed transaction reflected in the Merger Agreement, in violation of the federal securities laws
and seeks to enjoin the Merger and/or damages in an unspecified amount.
On March 31, 2021, Christopher Jones, a purported owner of Forterra common stock brought a lawsuit against the Company and each of the members of its Board of Directors in the U.S. District Court for
the District of Colorado (the "Jones Action"). The plaintiff alleges, among other things, that defendants violated federal securities laws by failing to disclose certain information in the Merger Information Statement,
the Company’s financial projections, and Citi's analysis of the proposed transaction reflected in the Merger Agreement and seeks to enjoin the Merger and/or damages in an unspecified amount.
On April 1, 2021, Adam Franchi, a purported owner of Forterra common stock brought a lawsuit against Forterra and individual members of the Board of Directors in the U.S. District Court for the District of
Delaware (the "Franchi Action") (collectively, the Choudhuri Action, the Jones Action and the Franchi Action are the “Merger-Related Litigation”). The plaintiff in the Franchi Action alleges, among other things, that
defendants violated federal securities laws by failing to disclose certain information in the Merger Information Statement, the Company’s financial projections, and Citi's analysis of the proposed transaction reflected
in the Merger Agreement and seeks to enjoin the Merger and/or damages in an unspecified amount.
The Company filed supplemental disclosures relating to the Merger Information Statement which further explained the proposed transaction that is contemplated by the Merger Agreement. Following the
supplemental disclosure filings, in late April 2021 each of the three cases was voluntarily dismissed by the applicable plaintiff, and it is expected that the plaintiffs in these actions may seek compensation for their
expenses and attorneys' fees. Given the stage of the proceedings, the Company cannot reasonably estimate at this time the possible loss or range of loss, if any, that may arise from the Merger-Related Litigation.
In addition, certain stockholders have informed the Company that they will seek to exercise their appraisal rights under Delaware law with respect to their shares. No further action has been taken by these
stockholders to date.
Long-term incentive plan
Following the Acquisition, Lone Star implemented a cash-based long term incentive plan (the “LTIP”), which entitles the participants in the LTIP a potential cash payout upon a monetization event as defined by
the LTIP. Potential monetization events include the sale, transfer or otherwise disposition of all or a portion of the Company or successor entities of LSF9, an initial public offering where Lone Star sells/reduces its
ownership in the Company or successor entities of LSF9, or through certain cash distribution as defined in the LTIP. Before the payout of any cash the LTIP requires Lone Star realize in cash the full return of their
investment plus a specified internal rate of return, which is calculated by comparing the return to Lone Star over the timeline of its investment in the Company and certain successor entities of LSF9. As of
December 31, 2021, no such monetization events that meet the required return for an LTIP payment have occurred, and therefore no amounts were accrued in the accompanying consolidated balance sheet. While
no payments have occurred thus far, payments under the LTIP could be significant depending upon future monetization events. The timing and
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FORTERRA, INC.
Consolidated Notes to Financial Statements
amount of such payments are unknown and is dependent upon future monetization events and market conditions that are outside of the control of the Company or the participants of the plan. Subsequent to the
IPO, Forterra became directly liable for any payment obligations triggered under the LTIP, but LSF9 or one of its affiliates will remain obligated to make payments to the Company in amounts equal to any payment
obligations triggered under the LTIP as and when such payment obligations are triggered. It is expected that if the Merger is completed under the terms of the Merger Agreement, the Merger will constitute a
Liquidity Event that will trigger certain payments under the terms of the LTIP.
Leases
The Company leases certain property and equipment for various periods under non-cancelable operating and finance leases. See Note 14 for future minimum lease payments under such agreements.
Tax receivable agreement
The Company has a tax receivable agreement (the "TRA") with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain covered tax benefits,
which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. The tax benefits subject to the TRA include: (i) all depreciation and amortization deductions, and any
offset to taxable income and gain or increase to taxable loss, resulting from the tax basis that the Company had in its assets as of the time of the consummation of the IPO, (ii) the utilization of the Company's and
its subsidiaries’ net operating losses and tax credits, if any, attributable to periods prior to the IPO, (iii) deductions in respect of payments made, funded or reimbursed by an initial party to the tax receivable
agreement (other than the Company or one of its subsidiaries) or an affiliate thereof to participants under the LTIP, (iv) deductions in respect of transaction expenses attributable to the acquisition of USP Holdings,
Inc., and (v) certain other tax benefits attributable to payments made under the tax receivable agreement.
For purposes of the TRA, the aggregate reduction in income tax payable by the Company will be computed by comparing the Company's actual income tax liability with its hypothetical liability had it not been
able to utilize the related tax benefits. The agreement will remain in effect for the period of time in which all such related tax benefits remain. The Company accounts for potential payments under the tax receivable
agreement as a contingent liability, with amounts accrued when considered probable and reasonably estimable. The liabilities recorded by the Company for the tax receivable agreement at December 31, 2021 and
December 31, 2020 were $55.9 million and $64.2 million, respectively. The timing and amount of future tax benefits associated with the TRA are subject to change, and additional payments may be required which
could be materially different from the current accrued liability. The Company anticipates that it will have sufficient taxable income in future periods to realize the full value of the obligation recorded. Future tax
receivable agreement payments related to the tax basis of assets at the time of the IPO will be recorded as a reduction to the liability and will be recorded as a financing activity in the consolidated statements of
cash flows. For the years ended December 31, 2021 and December 31, 2020, the Company paid $8.3 million and $13.1 million, respectively on the TRA to Lone Star. It is expected that if the Merger is completed
under the terms of the Merger Agreement, payments to Lone Star will continue to be made by the surviving entity under the Merger Agreement according to the terms of the TRA.
17. Earnings per share
Basic earnings per share (“EPS”) is calculated by dividing net earnings by the weighted average number of common shares outstanding during the period. Potentially dilutive securities include employee stock
options and shares of restricted stock. Diluted EPS reflects the assumed exercise or conversion of all dilutive securities. The restricted shares are considered participating securities for the purposes of the
Company's EPS calculation.
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FORTERRA, INC.
Consolidated Notes to Financial Statements
The calculations of the basic and diluted EPS for the years ended December 31, 2021, 2020 and 2019
are presented below (in thousands, except per share data):
Year ended December 31,
2021
2020
2019
Net income (loss)
$
116,317
$
64,486
$
(7,331)
Earnings allocated to unvested restricted stock
—
40
—
Earnings (loss) allocated to common shareholders
$
116,317
$
64,446
$
(7,331)
Common stock:
Weighted average basic shares outstanding
66,719
65,260
64,232
Effect of dilutive securities
2,925
2,943
—
Weighted average diluted shares outstanding
69,644
68,203
64,232
Basic earnings (loss) per share:
Net income
$
1.74
$
0.99
$
(0.11)
Diluted earnings per share:
Net income
$
1.67
$
0.94
$
(0.11)
Potential dilutive common shares were anti-dilutive as a result of the Company's net loss for the year ended December 31, 2019. As a result, basic weighted average shares were used in the calculations of basic
earnings per share and diluted earnings per share for those periods.
The number of stock options and restricted shares that were excluded from the computation of diluted earnings per share because their inclusion would result in an anti-dilutive effect on per share amounts for
the years ended December 31, 2021, 2020 and 2019 was none , 213,413 and 2,192,048, respectively.
18. Employee benefit plans
Defined Contribution Plans
The Company’s employees are able to participate in a 401K defined contribution plan. The Company contributes funds into this plan subject to certain limits. For the years ended December 31, 2021,
December 31, 2020, and December 31, 2019, the Company recorded an expense of $10.8 million, $13.0 million and $7.0 million, respectively.
19. Stock-based plans
Stock Incentive Plans
The Company's previous equity compensation plan under which it granted stock awards was the Forterra, Inc. 2016 Stock Incentive Plan, (the "2016 Incentive Plan"). The aggregate number of shares of
common stock that was initially available for issuance under the 2016 Incentive Plan was 5,000,000 shares. The Company's board of directors has granted employees and independent directors options to
purchase shares of common stock, shares of restricted common stock and restricted stock units. The options, restricted stock and restricted stock units awarded to employees are subject to either three-year or
four-year vesting periods and the options, restricted stock and restricted stock units awarded to independent directors are subject to a one-year vesting period. The awards of stock options granted under the 2016
Incentive Plan have a term of ten years. In May 2018, the Company's shareholders approved the Forterra, Inc. 2018 Stock Incentive Plan, (the "2018 Incentive Plan"). The 2018 Incentive Plan serves as the
umbrella plan for the Company’s stock-based and cash-based incentive compensation programs for its directors, officers and other eligible employees. The aggregate number of shares of common stock issuable
under the 2018 Incentive Plan is 5,000,000 shares plus any shares subject to
106
FORTERRA, INC.
Consolidated Notes to Financial Statements
outstanding awards under the 2016 Incentive Plan as of the date of the approval of the 2018 Incentive Plan that on or after such date cease for any reason to be subject to such awards (other than by reason of
exercise or settlement of the awards to the extent they are exercised for or settled in nonforfeitable shares).
In accordance with ASC 718, Compensation-Stock Compensation, the Company recognizes stock-based compensation expense over the requisite service period for the entire award, which is generally the
maximum vesting period of the award or over a shorter period when employee retirement eligibility is a factor, in an amount equal to the fair value of share-based payments, which include stock options granted and
restricted stock awards to employees and non-employees members of Forterra's Board of Directors. The Company records stock-based compensation expense in cost of goods sold and selling, general, and
administrative expenses. Stock-based compensation expense was approximately $8.7 million, $9.5 million and $7.9 million for the years ended December 31, 2021, 2020 and 2019, respectively.
Stock Option Grants
The value of the options is determined by using a Black-Scholes pricing model that includes the following variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of
grant, 3) expected life, 4) estimated volatility and 5) the risk-free interest rate. There were no stock option grants in the year ended December 31, 2021. The Company utilized the following weighted-average
assumptions in estimating the fair value of the option grants in the years ended December 31, 2020 and December 31, 2019:
2020
2019
Expected dividends
— %
— %
Expected volatility
67.00 %
32.08 %
Risk-free interest rate
1.63 %
2.43 %
Expected lives in years
6
6
Weighted-average fair value of options:
Granted at fair value
$
8.90
$
1.54
Weighted-average exercise price of options:
Granted at fair value
$
14.63
$
4.29
The Black-Scholes model requires the use of subjective assumptions including expectations of future dividends and stock price volatility. Expected volatility was calculated using a weighted average of Forterra
and a set of Forterra's peer companies based on an analysis of historical and implied volatility measures. The average expected life is based on the contractual term of the option and expected employee exercise
and post-vesting employment termination behavior. Such assumptions are only used for making the required fair value estimate and should not be considered as indicators of future dividend policy or stock price
appreciation. Because changes in the subjective assumptions can materially affect the fair value estimate, and because employee stock options have characteristics significantly different from those of traded
options, the use of the Black-Scholes option pricing model may not provide a reliable estimate of the fair value of employee stock options.
107
FORTERRA, INC.
Consolidated Notes to Financial Statements
A summary of the status of the Company's stock options is presented below:
Shares
Weighted Average Exercise Price
(in thousands)
Outstanding, December 31, 2019
3,673,096
$6.50
Granted
2,248
$14.63
Exercised
(366,814)
$6.61
Forfeited
(231,360)
$7.82
Outstanding, December 31, 2020
3,077,170
$6.39
Exercised
(653,624)
$7.73
Outstanding, December 31, 2021
2,423,546
$6.03
Options vested or expected to vest at year end
2,423,546
$6.03
Options exercisable at year end
1,992,254
$6.41
As of December 31, 2021, the Company has approximately $0.1 million of unrecognized stock option compensation cost related to unvested stock options, which is expected to be recognized over a
weighted average period of approximately 0.2 years.
Restricted Stock and Restricted Stock Unit Awards
Restricted stock are share awards that entitle the holder to receive shares of the Company's common stock which become freely transferable upon vesting. Restricted stock has the same dividend and voting
rights as common stock and is considered to be issued and outstanding upon grant. Restricted stock units are share awards denominated in units of the Company's common stock and are subject to a service
condition. The restricted stock units do not have the voting rights of common stock, and the shares underlying restricted stock units are not considered issued and outstanding upon grant. The restricted stock and
restricted stock unit awards generally vest one to four years from the date of grant and are generally subject to forfeiture if employment terminates prior to the vesting date. The estimated compensation cost of the
restricted stock and restricted stock unit awards, which is equal to the fair value of the awards on the date of grant, is recognized on a straight-line basis over the vesting period.
During 2021, the Company granted 0.5 million restricted stock units which were time-vested restricted stock units. During 2020, the Company granted 0.8 million restricted stock units consisting of 0.6 million
time-vested restricted stock units and 0.2 million performance-based restricted stock units. During the first quarter of 2022, in connection with the Merger Agreement, the Company certified actual performance
achieved of the performance-based restricted stock units granted in 2020. Such performance-based restricted stock units remain subject to time-based vesting requirements. During 2019, the Company granted 2.6
million restricted stock units consisting of 1.2 million time-vested restricted stock units and 1.4 million performance-based restricted stock units. The performance-based restricted stock units granted in 2019 vest in
tranches based on the 20-day volume weighted average price of FRTA common stock based on a grant date market condition. If the performance condition is achieved, one-fourth of the tranche will vest
immediately and the remainder of the tranche will be time-vested over one year from the date the performance condition was met. The Company accounts for the time-vested and performance-based restricted
stock units as equity awards.
108
FORTERRA, INC.
Consolidated Notes to Financial Statements
The following table summarizes the activity for restricted stock and restricted stock units:
Shares
Weighted Average Grant Date Fair Value
(in thousands)
Unvested balance at December 31, 2019
2,157,642
$5.11
Grants
792,090
$8.87
Vested shares
(1,201,617)
$8.91
Forfeitures
(156,237)
$7.06
Unvested balance at December 31, 2020
1,591,878
$6.60
Grants
498,239
$23.45
Vested shares
(887,579)
$5.63
Forfeitures
(4,650)
$15.74
Unvested balance at December 31, 2021
1,197,888
$14.28
At December 31, 2021, there was $9.7 million of total unrecognized compensation cost related to unvested restricted stock and restricted stock units and that cost is expected to be recognized over a weighted
average period of 1.4 years.
20. Income taxes
The Company’s income (loss) from continuing operations before income taxes was as follows (in thousands):
Year ended December 31,
Year ended December 31,
Year ended December 31,
2021
2020
2019
U.S. companies
$
129,276 $
61,146 $
(21,557)
Foreign companies
25,710
11,800
10,947
Income (loss) from continuing operations before income taxes
$
154,986 $
72,946 $
(10,610)
109
FORTERRA, INC.
Consolidated Notes to Financial Statements
The income tax (expense) benefit was as follows (in thousands):
Year ended December 31,
2021
2020
2019
Current income tax
U.S. companies
$
(21,495) $
(16,203) $
(9,510)
State
(7,389)
(6,802)
(4,260)
Foreign companies
(5,716)
(4,694)
(3,018)
Total current tax expense
(34,600)
(27,699)
(16,788)
Deferred income tax
U.S. companies
(3,616)
922
16,180
State
376
15,506
4,232
Foreign companies
(829)
2,811
(345)
Total deferred tax (expense) benefit
(4,069)
19,239
20,067
Income tax (expense) benefit
$
(38,669) $
(8,460) $
3,279
The rate reconciliation for continuing operations presented below is based on the U.S. federal statutory tax rate of 21% for the years ended December 31, 2021, December 31, 2020 and December 31, 2019
because the predominant business activity is in the U.S. (in thousands):
Year ended December 31,
2021
2020
2019
Income (loss) from continuing operations
$
154,986 $
72,946 $
(10,610)
Income tax (expense) benefit at statutory rate of 21%
$
(32,547) $
(15,319) $
2,228
State income taxes, net of federal (expense) benefit
(6,026)
(3,449)
113
Tax effect of equity and non-deductible executive compensation
721
(1,682)
(1,507)
Meals and entertainment and other non-deductible expenses
(370)
(516)
(763)
Change in valuation allowance
316
11,839
1,927
Other prior year adjustments
(310)
968
1,311
Other
(453)
(301)
(30)
Total income tax (expense) benefit
$
(38,669) $
(8,460) $
3,279
The income tax expense for the year ended December 31, 2021 is primarily attributable to statutory federal, state and international income tax expense on continuing operations.
The income tax expense for the year ended December 31, 2020 is primarily attributable to statutory federal, state and international income tax expense on the continuing operations, the unfavorable impact
of non-deductible executive compensation and other non-deductible expenses, partially offset with the release of the valuation allowance on assets now expected to be realized prior to expiration and the favorable
effect of the retroactive tax law changes included in the prior year federal and state tax return filings.
The income tax benefit for the year ended December 31, 2019 is primarily attributable to the unfavorable impact of the non-deductible expenses, partially offset with the favorable effect of the partial
reversal of the federal and state valuation allowances and the effect of the return to provision adjustments.
110
FORTERRA, INC.
Consolidated Notes to Financial Statements
The Company evaluates the recoverability of its deferred tax assets quarterly to determine if valuation allowances are required or should be adjusted. The Company assesses whether valuation allowances
should be established against deferred tax assets based on consideration of all available evidence, both positive and negative, using a “more likely than not” criteria. The analysis used in determining the valuation
allowance involves considerable judgment and assumptions.
Deferred income taxes are provided for the effects of temporary differences between the tax basis of an asset or liability and its reported amount in the accompanying consolidated balance sheets. These
temporary differences result in taxable or deductible amounts in future years. The net deferred tax asset (liability) balances were comprised of the following components as of December 31, 2021 and 2020 (in
thousands):
December 31, 2021
December 31, 2020
Deferred tax assets:
Inventory
$
6,874 $
6,670
Reserves
6,018
7,419
Accrued liabilities
5,966
8,034
Net operating losses
2,868
3,909
Capitalized transaction costs
5,580
3,513
Finance leases
54,564
53,794
Tax receivable agreement
1,616
1,618
Other assets
3,496
3,769
Total deferred tax assets
86,982
88,726
Valuation allowance
(1,359)
(1,675)
Total deferred tax assets, net
$
85,623 $
87,051
Deferred tax liabilities:
Fixed assets
$
(60,616) $
(53,386)
Lease assets
(23,053)
(23,742)
Intangible assets
(10,116)
(13,931)
Other liabilities
(5,538)
(5,663)
Total deferred tax liabilities
$
(99,323) $
(96,722)
Net deferred tax asset (liability)
$
(13,700) $
(9,671)
As of December 31, 2021, the Company had tax loss carryforwards as follows (in thousands):
Amount
Expiration Date
Federal net operating losses
$
—
—
State net operating losses
$
29,784
2022-2040
Foreign net operating losses
$
4,873
2031-2040
111
FORTERRA, INC.
Consolidated Notes to Financial Statements
Uncertain tax positions
The Company is subject to audit examinations at federal, state, local, and foreign levels by tax authorities in those jurisdictions who may challenge the treatment or reporting of any tax return item. The tax
matters challenged by the tax authorities are typically complex; therefore, the ultimate outcomes of these challenges are subject to uncertainty. The Company’s U.S. federal income tax audit for the years ended
December 31, 2016 and 2017 was finalized in 2020 with no changes identified for either period, respectively. State income tax returns are generally subject to examination for a period of three to five years after
filing of the respective return.
Each period the Company assesses uncertain tax positions for recognition, measurement and effective settlement. Based on the Company's assessment, it determined that no liabilities for uncertain tax positions
should be recorded as of December 31, 2021 and 2020.
21. Segment reporting
Segment information is presented in accordance with ASC 280, Segment Reporting, which establishes standards for reporting information about operating segments. It also establishes standards for related
disclosures about products and geographic areas. Operating segments are defined as components of an enterprise that engage in business activities that earn revenues, incur expenses and prepare separate
financial information that is evaluated regularly by the Company’s chief operating decision maker (“CODM”) in order to allocate resources and assess performance. The Company's Chief Executive Officer is its
CODM. The Corporate and Other segment includes expenses related to certain executive salaries, interest costs related to the Company's credit agreements, acquisition related costs, and other corporate costs
that are not directly attributable to the Company's operating segments. The Company's segments follow the same accounting policies as the Company. During the year ended December 31, 2020, the Company
moved its concrete and steel pressure pipe business from the Water Pipe & Products segment to the Drainage Pipe & Products segment to better align with how the CODM manages the businesses. Information
regarding the prior year ended December 31, 2019 has been restated as compared to how it was originally presented in the Company's 2019 Form 10-K to conform with the re-segmentation, which resulted in an
immaterial impact to the year ended December 31, 2019 segment information. There were no changes to the information as reported in the Company's 2020 Form 10-K.
Net sales from the major products sold to external customers include drainage pipe and precast products, and concrete and steel water transmission pipe.
The Company’s three geographic areas consist of the United States, Canada and Mexico for which it reports net sales, fixed assets and total assets. For purposes of evaluating segment profit, the CODM
reviews
earnings before interest, taxes, depreciation and amortization (“EBITDA”) as a basis for making the decisions to allocate resources and assess performance.
The following tables set forth the disaggregation of revenue earned from contracts with customers based on the Company's reportable segments as well as other financial information attributable to the
Company's reportable segments for the periods presented (in thousands):
112
FORTERRA, INC.
Consolidated Notes to Financial Statements
Year ended
December 31,
Year ended
December 31,
Year ended
December 31,
2021
2020
2019
Net sales:
Drainage Pipe & Products
$
993,464
$
887,420
$
913,033
Water Pipe & Products
864,806
707,086
616,719
Corporate and Other
—
—
—
Total
$
1,858,270
$
1,594,506
$
1,529,752
Depreciation and amortization:
Drainage Pipe & Products
$
31,136
$
33,420
$
38,260
Water Pipe & Products
48,575
53,885
57,547
Corporate and Other
2,845
2,191
1,451
Total
$
82,556
$
89,496
$
97,258
Segment EBITDA and reconciliation to income (loss) before income taxes:
Drainage Pipe & Products
$
239,860
$
187,547
$
173,006
Water Pipe & Products
150,412
145,451
82,831
Corporate and Other
(77,754)
(90,666)
(74,219)
Less: Interest expense
(74,976)
(79,890)
(94,970)
Depreciation and amortization
(82,556)
(89,496)
(97,258)
Income (loss) before income taxes
$
154,986
$
72,946
$
(10,610)
Capital expenditures:
Drainage Pipe & Products
$
38,287
$
17,066
Water Pipe & Products
25,886
19,500
Corporate and Other
3,138
1,039
Total
$
67,311
$
37,605
Total assets:
Drainage Pipe & Products
$
875,298
$
821,547
Water Pipe & Products
836,165
795,292
Corporate and Other
62,570
41,324
Total
$
1,774,033
$
1,658,163
In addition, the Company also has an investment in an equity method investee included in the Drainage Pipe & Products segment for which earnings from equity method investee were $12.6 million, $11.3
million and $10.5 million for the years ended December 31, 2021, 2020 and 2019, respectively, and with the following balances (in thousands):
December 31,
2021
2020
Investment in equity method investee
$
49,292
$
48,285
Disaggregated revenue by geographic location is provided in the tables below. The Company has operations in the United States, Canada and Mexico. The economic characteristics of the Company's
customers does not significantly vary across geographic locations or product lines. The Company has both revenues and long-lived assets in each country and those assets and revenues are recorded within
geographic location as follows (in thousands):
113
FORTERRA, INC.
Consolidated Notes to Financial Statements
Property, plant, and equipment, net:
December 31,
2021
2020
United States
$
411,915
$
409,338
Canada
38,824
33,250
Mexico
7,942
8,494
$
458,681
$
451,082
Net Sales:
Year ended December 31,
Year ended December 31,
Year ended December 31,
2021
2020
2019
United States
$
1,752,627
$
1,513,925
$
1,448,492
Canada
91,936
71,906
73,270
Mexico
13,707
8,675
7,990
$
1,858,270
$
1,594,506
$
1,529,752
22. Related party transactions
CP&P
The Company sold certain goods and services to its joint venture, CP&P, including spare parts for repairs, and property rentals. For the year ended December 31, 2021, Forterra sold $1.2 million of product to
CP&P and purchased goods and services from CP&P for an amount of $0.4 million. For the year ended December 31, 2020, the Company sold $1.4 million of product to CP&P and received $1.0 million in
exchange for purchased goods and services from CP&P. For the year ended December 31, 2019, Forterra sold $0.4 million of product to CP&P and purchased $0.5 million of goods and services from CP&P.
Master Builders Solutions US, LLC
During the year ended December 31, 2021, Forterra purchased goods from Master Builders Solutions US, LLC, an affiliate of Lone Star, for an amount of $0.9 million. During the year ended December 31, 2020,
Forterra sold $0.1 million of product to Master Builders Solutions US, LLC, and purchased goods from Master Builders Solutions US, LLC for an amount of $0.9 million.
Tax receivable agreement
In connection with the IPO, the Company entered into a tax receivable agreement with Lone Star that provides for, among other things, the payment by the Company to Lone Star of 85% of the amount of certain
covered tax benefits, which may reduce the actual liability for certain taxes that the Company might otherwise be required to pay. See further discussion in Note 16, Commitments and contingencies.
114
FORTERRA, INC.
Consolidated Notes to Financial Statements
23. Quarterly financial data (unaudited)
The following is a summary of the quarterly results of operations:
Year ended December 31, 2021:
(in thousands, except per share amounts)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Net sales
$
368,114
$
492,800
$
526,640
$
470,716
Cost of goods sold
285,850
373,228
410,072
368,722
Gross profit
82,264
119,572
116,568
101,994
Income from continuing operations before taxes
23,175
48,130
49,469
34,212
Net income
18,676
36,065
35,768
25,808
Basic earnings per share:
Net income
$
0.28
$
0.54
$
0.53
$
0.39
Diluted earnings per share:
Net income
$
0.27
$
0.52
$
0.51
$
0.37
Year ended December 31, 2020:
(in thousands, except per share amounts)
First Quarter
Second Quarter
Third Quarter
Fourth Quarter
Net sales
$
330,876
$
426,186
$
457,557
$
379,887
Cost of goods sold
272,134
320,607
331,284
293,808
Gross profit
58,742
105,579
126,273
86,079
Income (loss) from continuing operations before taxes
(13,988)
34,570
38,751
13,613
Net income (loss)
(14,066)
27,115
28,827
22,610
Basic earnings (loss) per share:
Net income (loss)
$
(0.22)
$
0.42
$
0.44
$
0.34
Diluted earnings (loss) per share:
Net income (loss)
$
(0.22)
$
0.40
$
0.42
$
0.33
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the
effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act) as of December 31, 2021.
Based on the evaluation referenced above, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as
of December 31, 2021.
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Table of Contents
Management’s Report on Internal Control over Financial Reporting
Our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with U.S. GAAP. Internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.
GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.
Management assessed the Company's internal control over financial reporting as of December 31, 2021 using the criteria for effective internal control over financial reporting established in “Internal Control
- Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on this assessment, management concluded that as of December 31, 2021,
our internal control over financial reporting was effective.
Ernst & Young LLP, our independent registered public accounting firm that audited the consolidated financial statements included in this Annual Report on Form 10-K, also audited the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2021, as stated in their report included below.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the quarter ended December 31, 2021 that have a materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
Inherent Limitations on Effectiveness of Controls
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our system of internal control over financial reporting will
prevent or detect all errors and all fraud. A control system, no matter how well designed or operated, can provide only reasonable, but not absolute, assurance that the objectives of the system of internal control are
met. The design of our control system reflects the fact that there are resource constraints, and that the benefits of such control system must be considered relative to their costs. Further, because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that all control failures and instances of fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the intentional acts of
individuals, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part on certain assumptions about the likelihood of future events,
and there can be no assurance that the design of any particular control will always succeed in achieving its objective under all potential future conditions.
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Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Forterra, Inc.
Opinion on Internal Control over Financial Reporting
We have audited Forterra, Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission 2013 framework (the COSO criteria). In our opinion, Forterra, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as
of December 31, 2021, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021
and 2020, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the
related notes, and our report dated March 1, 2022 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over
financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records
that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
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Dallas, Texas
March 1, 2022
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required by this Item is herein incorporated by reference to the Company's definitive proxy statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the SEC
not later than 120 days after December 31, 2021.
Item 11. Executive Compensation
The information required by this Item is herein incorporated by reference to the Company's definitive proxy statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the SEC
not later than 120 days after December 31, 2021.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information with Respect to Securities Authorized for Issuance Under Equity Compensation Plans
The following table summarizes, as of December 31, 2021, information with respect to (a) the number of securities to be issued upon exercise of outstanding options, warrants and rights, (b) the weighted
average exercise price of outstanding options, warrants and rights and (c) the number of securities remaining available for future issuance, in each case under our 2016 Stock Incentive Plan or 2018 Stock Incentive
Plan. We do not have any equity compensation plans not approved by security holders.
Plan Category
(a) Number of Securities
to Be Issued Upon
Exercise of
Outstanding Options, Warrants and
Rights
(b) Weighted Average
Exercise Price of
Outstanding Options, Warrants and Rights
(c) Number of Securities
Remaining Available
for Future Issuance
Under Equity
Compensation Plans
(Excluding Securities
Reflected in Column(a))
Equity compensation plans approved by security holders
2,423,546
$
6.03
2,839,000
All other information required by this Item is herein incorporated by reference to the Company's definitive proxy statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the
SEC not later than 120 days after December 31, 2021.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this Item is herein incorporated by reference to the Company's definitive proxy statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the SEC
not later than 120 days after December 31, 2021.
Item 14. Principal Accounting Fees and Services
The information required by this Item is herein incorporated by reference to the Company's definitive proxy statement relating to the 2022 Annual Meeting of Stockholders, which will be filed with the SEC
not later than 120 days after December 31, 2021.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
The following documents are filed as part of this Annual Report on Form 10-K, or incorporated herein by reference:
1. Financial Statements. The Company's financial statements are included in Part II, Item 8, Financial Statements and Supplementary Data.
2. Financial Statement Schedules. All schedules are omitted since they are not applicable, not required, or the information required to be set forth herein is included in the Consolidated Financial Statements.
3. Exhibits. The exhibits listed in the Exhibit Index immediately below are filed as part of this Annual Report on Form 10-K or are incorporated by reference herein.
Exhibit No.
Description of Exhibit
2.1
Agreement and Plan of Merger, dated February 19, 2021, by and among Quikrete Holdings, Inc., Jordan Merger Sub, Inc. and Forterra, Inc.
(r)
2.2
Membership Interest Purchase Agreement dated November 24, 2021 by and among Forterra Pipe & Precast, LLC, Eagle Corporation and
Quikrete Holdings, Inc.
*
2.3
Asset Purchase Agreement dated December 13, 2021, by and among Forterra Pipe & Precast, LLC, Hydro Conduit, LLC d/b/a Rinker Materials
and Foley Products Company
*
3.1
Amended and Restated Certificate of Incorporation of the Registrant.
(d)
3.2
Amended and Restated Bylaws of the Registrant.
(b)
4.1
Registration Rights Agreement dated as of October 19, 2016 between Forterra, Inc. and LSF9 Concrete Mid-Holdings Ltd.
(b)
4.2
Form of Certificate of Common Stock of the Registrant.
(e)
4.3
Indenture, dated as of July 16, 2020 among Forterra Finance, LLC, FRTA Finance Corp., the guarantors party thereto and Deutsche Bank Trust
Company Americas, as trustee.
(p)
4.4
Form of Global Note for 6.50% Senior Secured Notes due 2025 (included as Exhibit A to Exhibit 4.3 hereto).
(p)
4.5
Description of Registrant's Securities
*
10.1
Amended and Restated Master Land and Building Lease dated June 5, 2018 between Pipe Portfolio Owner (Multi) LP and Forterra Pipe &
Precast LLC and certain affiliates.
(l)
10.2
Amended and Restated Master Land and Building Lease dated June 5, 2018 between FORT-NOM HOLDINGS (ONQC) INC. and Forterra Pipe
& Precast, Ltd.
(l)
10.3
Amended and Restated Limited Liability Company Agreement of Concrete Pipe & Precast, LLC, dated as of August 3, 2012, by and among
Concrete Pipe & Precast, LLC, Americast, Inc. and Hanson Pipe & Precast LLC.
(a)
10.4
Form of Tax Receivable Agreement.
(e)
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10.5
Form of Indemnification Agreement for executive officers and directors.
(b)
10.6#
Employment Agreement between HBP Pipe and Precast LLC and Jeff Bradley dated as of July 8, 2015.
(a)
10.7#
LSF9 Concrete Holdings Ltd. Long Term Incentive Plan (with form of award agreement).
(a)
10.8#
Notice regarding LSF9 Concrete Holdings Ltd. Long Term Incentive Plan dated December 14, 2016.
(h)
10.9#
Forterra, Inc. 2016 Stock Incentive Plan.
(g)
10.10#
Form of Grant Notice for 2016 Stock Incentive Plan Nonqualified Stock Options Award.
(c)
10.11#
Form of Grant Notice for 2016 Stock Incentive Plan Incentive Stock Options Award.
(c)
10.12#
Form of Grant Notice for 2016 Stock Incentive Plan Restricted Stock Award.
(c)
10.13#
Form of Grant Notice for 2016 Stock Incentive Plan Restricted Stock Unit Award.
(c)
10.14#
Form of Grant Notice for 2016 Stock Incentive Plan Performance Restricted Stock Unit Award.
(c)
10.15#
Forterra, Inc. 2018 Stock Incentive Plan.
(m)
10.16
Senior Lien Term Loan Credit Agreement dated October 25, 2016 by and among Forterra, Inc., Forterra Finance, LLC, as borrower, the lenders
party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent.
(f)
10.17
ABL Credit Agreement dated October 25, 2016 by and among Forterra, Inc. and certain of its subsidiaries, as borrowers, the lenders party
thereto and Bank of America, N.A., as agent.
(f)
10.18
First Amendment to Senior Lien Term Loan Credit Agreement dated May 1, 2017 by and among Forterra, Inc., Forterra Finance, LLC, as
borrower, the lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as administrative agent.
(i)
10.19#
Employment Agreement, dated as of September 6, 2017 by and between the Company and Charlie Brown.
(j)
10.20#
Employment Agreement, dated as of December 18, 2017 by and between the Company and Lori Browne.
(k)
10.21#
Employment Agreement, dated as of May 22, 2019 by and between the Company and Richard Hunter.
(n)
10.22#
Employment Agreement, dated as of May 22, 2019 by and between the Company and Vikrant Bhatia.
(n)
10.23#
Employment Agreement, dated as of June 21, 2019 by and between the Company and Karl Watson, Jr.
(o)
10.24#
Separation and General Release Agreement between Jeff Bradley and Forterra, Inc. and USP Holdings, Inc. dated as of June 30, 2019.
(q)
10.25#
Form of Grant Notice for 2018 Stock Incentive Plan Nonqualified Stock Options Award.
(q)
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10.26#
Form of Grant Notice for 2018 Stock Incentive Plan Restricted Stock Unit Award.
(q)
10.27#
Form of Grant Notice for 2018 Stock Incentive Plan Performance Restricted Stock Unit Award.
(q)
10.28
First Amendment, dated as of June 17, 2020 to the ABL Credit Agreement dated as of October 25, 2016 by and among Forterra, Inc. and certain
of its subsidiaries, as borrowers, the lenders party thereto and Bank of America, N.A., as agent.
(s)
21.1
Subsidiaries of the Registrant.
*
23.1
Consent of Ernst & Young LLP.
*
23.2
Consent of Moss Adams LLP.
*
31.1
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*
31.2
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*
32.1
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
^
99.1
Financial Statements of Concrete Pipe & Precast, LLC as of December 31, 2021 and 2020 and for the years ended December 31, 2021, 2020
and 2019.
*
101.INS
XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL document.
*
101.SCH
Inline XBRL Taxonomy Extension Schema Document.
*
101.CAL
Inline XBRL Taxonomy Calculation Linkbase Document.
*
101.DEF
Inline XBRL Taxonomy Definition Linkbase Document.
*
101.LAB
Inline XBRL Taxonomy Label Linkbase Document.
*
101.PRE
Inline XBRL Taxonomy Presentation Linkbase Document.
*
104
Cover Page Interactive Data File – The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 is
formatted in Inline XBRL (included as Exhibit 101).
*
122
Table of Contents
*
Filed herewith
#
Denotes management compensatory plan or arrangement
^
Exhibit 32.1 shall not be deemed filed with the SEC, nor shall it be deemed incorporated by reference in any filing with the SEC under the Exchange Act or the Securities Act of 1933, as amended, whether made before or
after the date hereof and irrespective of any general incorporation language in any filings.
(a)
Previously filed on July 8, 2016 as an exhibit to the Company’s Registration Statement on Form S-1 (File No. 333-212449) and incorporated herein by reference.
(b)
Previously filed on August 15, 2016 as an exhibit to Amendment No. 1 to the Company’s Registration Statement on Form S-1 (File No. 333-212449) and incorporated herein by reference.
(c)
Previously filed on September 8, 2016 as an exhibit to Amendment No. 2 to the Company’s Registration Statement on Form S-1 (File No. 333-212449) and incorporated herein by reference.
(d)
Previously filed on October 7, 2016 as an exhibit to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-212449) and incorporated herein by reference.
(e)
Previously filed on October 17, 2016 as an exhibit to Amendment No. 5 to the Company’s Registration Statement on Form S-1 (File No. 333-212449) and incorporated herein by reference.
(f)
Previously filed on November 11, 2016 as an exhibit to the Company’s Current Report on Form 8-K/A and incorporated herein by reference.
(g)
Previously filed on January 10, 2017 as an exhibit to the Company’s Registration Statement on Form S-8 (File No. 333-215504) and incorporated herein by reference.
(h)
Previously filed on March 31, 2017 as an exhibit to the Company Annual Report on Form 10-K for the fiscal year ended December 31, 2017 and incorporated herein by reference.
(i)
Previously filed on May 15, 2017 as an exhibit to the Company Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2017 and incorporated herein by reference.
(j)
Previously filed on September 7, 2017 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(k)
Previously filed on December 20, 2017 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(l)
Previously filed on June 11, 2018 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(m)
Previously filed on April 20, 2018 as an exhibit to the Company's Definitive Proxy Statement and incorporated herein by reference.
(n)
Previously filed on May 23, 2019 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(o)
Previously filed on Jun 24, 2019 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(p)
Previously filed on July 17, 2020 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(q)
Previously filed on February 27, 2020 as an exhibit to the Company Annual Report on Form 10-K for the fiscal year ended December 31, 2019 and incorporated herein by reference.
(r)
Previously filed on February 22, 2021 as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.
(s)
Previously filed on July 28, 2020 as an exhibit to the Company Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2020 and incorporated herein by reference.
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Table of Contents
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
FORTERRA, INC.
(Registrant)
/s/ Karl Watson, Jr.
March 1, 2022
By:
Karl Watson, Jr.
Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
/s/ Karl Watson, Jr.
Chief Executive Officer and Director
March 1, 2022
Karl Watson, Jr.
(Principal Executive Officer)
/s/ Charles R. Brown, II
Executive Vice President and Chief Financial Officer
March 1, 2022
Charles R. Brown, II
(Principal Financial Officer, Principal Accounting Officer)
/s/ Chris Meyer
Chairman of the Board, Director
March 1, 2022
Chris Meyer
/s/ Richard Cammerer, Jr.
Director
March 1, 2022
Richard Cammerer, Jr.
/s/ Rafael Colorado
Director
March 1, 2022
Rafael Colorado
/s/ Maureen Harrell
Director
March 1, 2022
Maureen Harrell
/s/ Chad Lewis
Director
March 1, 2022
Chad Lewis
/s/ Clint McDonnough
Director
March 1, 2022
Clint McDonnough
/s/ John McPherson
Director
March 1, 2022
John McPherson
/s/ Jacques Sarrazin
Director
March 1, 2022
Jacques Sarrazin
124
Execution Version 120761002 MEMBERSHIP INTEREST PURCHASE AGREEMENT BETWEEN FORTERRA PIPE & PRECAST, LLC AS SELLER, AND EAGLE CORPORATION AS PURCHASER, AND SOLELY FOR PURPOSES OF SECTION 8.2(b), QUIKRETE HOLDINGS, INC. Dated as of November 24, 2021
TABLE OF CONTENTS Page 120761002 -i- ARTICLE I PURCHASE AND SALE .......................................................................................... 1 Section 1.1 Purchase and Sale .............................................................................. 1 Section 1.2 Defined Terms and Disclosure Schedules ........................................ 1 Section 1.3 Purchase Price .................................................................................... 2 Section 1.4 Transfer Taxes ................................................................................... 2 ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER .................................. 2 Section 2.1 Existence and Qualification .............................................................. 2 Section 2.2 Power ................................................................................................... 2 Section 2.3 Authorization and Enforceability ..................................................... 2 Section 2.4 No Conflicts ........................................................................................ 2 Section 2.5 Title...................................................................................................... 2 Section 2.6 Consents, Approvals or Waivers ...................................................... 3 Section 2.7 Litigation ............................................................................................. 3 Section 2.8 Limitations .......................................................................................... 3 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER ........................ 3 Section 3.1 Existence and Qualification .............................................................. 3 Section 3.2 Power ................................................................................................... 3 Section 3.3 Authorization and Enforceability ..................................................... 3 Section 3.4 No Conflicts ........................................................................................ 4 Section 3.5 Consents, Approvals or Waivers ...................................................... 4 Section 3.6 Litigation ............................................................................................. 4 Section 3.7 Financing ............................................................................................ 4 Section 3.8 Investment Intent ............................................................................... 4
Section 3.9 Limitations .......................................................................................... 4 ARTICLE IV COVENANTS OF THE PARTIES ........................................................................ 5 Section 4.1 Public Announcements ...................................................................... 5 Section 4.2 Cooperation ........................................................................................ 5 Section 4.3 Further Assurances ............................................................................ 6 Section 4.4 Member Distributions ....................................................................... 6 Section 4.5 Director and Officer Liability; Indemnification ............................. 6 Section 4.6 Tax Matters. ....................................................................................... 7 Section 4.7 Post-Closing Access ............................................................................ 7 ARTICLE V CLOSING ................................................................................................................ 8 Section 5.1 Time and Place of Closing ................................................................. 8 Section 5.2 Obligations of Seller at Closing ........................................................ 8 Section 5.3 Obligations of Purchaser at Closing ................................................. 9 ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER ....................................... 9 Section 6.1 Conditions to Obligations of Purchaser ........................................... 9 Section 6.2 Waiver ............................................................................................... 10
TABLE OF CONTENTS (continued) Page 120761002 -ii- Section 6.3 Frustration of Closing Conditions .................................................. 10 ARTICLE VII CONDITIONS TO OBLIGATION OF SELLER ............................................... 11 Section 7.1 Conditions to Obligations of Seller ................................................. 11 Section 7.2 Waiver ............................................................................................... 11 Section 7.3 Frustration of Closing Conditions .................................................. 11 ARTICLE VIII TERMINATION ................................................................................................ 12 Section 8.1 Termination of Agreement .............................................................. 12 Section 8.2 Effect of Termination ...................................................................... 13 ARTICLE IX MISCELLANEOUS ............................................................................................. 14 Section 9.1 SURVIVAL ....................................................................................... 14 Section 9.2 Specific Performance ....................................................................... 14 Section 9.3 Counterparts .................................................................................... 15 Section 9.4 Notices ............................................................................................... 15 Section 9.5 Expenses ............................................................................................ 16 Section 9.6 Governing Law ................................................................................. 16 Section 9.7 Jurisdiction; Service of Process; and Venue ................................. 16 Section 9.8 Captions ............................................................................................ 17 Section 9.9 Waivers ............................................................................................. 17 Section 9.10 Assignment........................................................................................ 17 Section 9.11 Entire Agreement ............................................................................. 17 Section 9.12 Amendment ...................................................................................... 17 Section 9.13 No Third-Person Beneficiaries........................................................ 17 Section 9.14 References
......................................................................................... 17 Section 9.15 LIMITATION ON DAMAGES ...................................................... 18 SCHEDULES Schedule 1.2 Defined Terms EXHIBITS Exhibit A Form of Non-Competition Agreement Exhibit B Form of Forms Sharing Agreement
120761002 MEMBERSHIP INTEREST PURCHASE AGREEMENT This Membership Interest Purchase Agreement (this “Agreement”), is dated as of November 24, 2021, by and between Forterra Pipe & Precast, LLC, a Delaware limited liability company (“Seller”), and Eagle Corporation, a Virginia corporation (“Purchaser”) and solely for purposes of Section 8.2(b), Quikrete Holdings, Inc. (“Quikrete”). Seller and Purchaser are sometimes referred to collectively as the “Parties” and individually as a “Party.” RECITALS WHEREAS, Seller owns 500 Common Units (the “Interests”) in Concrete Pipe & Precast, LLC, a Delaware limited liability company (the “Company”), which Common Units represent fifty percent (50%) of the issued and outstanding Common Units of the Company; WHEREAS, Purchaser owns the remaining fifty percent (50%) of the issued and outstanding Common Units of the Company, represented by 500 Common Units held by Purchaser (“Purchaser’s Original Interests”); WHEREAS, pursuant to that certain Agreement and Plan of Merger among Quikrete, Jordan Merger Sub, Inc. (“Merger Sub”) and Forterra, Inc. (“Forterra”) dated as of February 19, 2021, as the same may be amended (the “Merger Agreement”), Merger Sub will merge with and into Forterra (the “Merger”), with Forterra surviving the Merger as a wholly-owned subsidiary of Quikrete; WHEREAS, the United States Department of Justice (“DOJ”) is expected to issue a DOJ Consent in connection with its review of the Merger and the transactions contemplated by this Agreement; and WHEREAS, in furtherance of the foregoing, upon the terms and subject to the conditions set forth herein, Seller desires to sell and Purchaser desires to purchase the Interests, on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and of the mutual promises, representations, warranties, covenants, conditions and agreements
contained herein, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: ARTICLE I PURCHASE AND SALE Section 1.1 Purchase and Sale. On the terms and conditions contained in this Agreement, Seller agrees to sell to Purchaser and Purchaser agrees to purchase, accept and pay Seller for the Interests. Section 1.2 Defined Terms and Disclosure Schedules. Capitalized terms used herein shall have the meanings ascribed to them in Schedule 1.2. The term “Disclosure Schedules” means the disclosure schedules, attached hereto and made a part hereof, delivered by Seller concurrently with the execution and delivery of this Agreement.
2 120761002 Section 1.3 Purchase Price. The purchase price for the Interests shall be One Hundred Five Million Dollars ($105,000,000) (the “Purchase Price”); provided that in the event of a Restricted Period Modification (as defined below), the Purchase Price shall be reduced by One Hundred Eighty-Five Thousand Dollars ($185,000) for each month that the Restricted Period (as defined in the Non-Competition Agreement) is reduced. Section 1.4 Transfer Taxes. Purchaser shall pay, and shall reimburse Seller for, any sales, use or transfer taxes, documentary charges, recording fees or similar taxes, charges, fees, or expenses, if any, that become due and payable as a result of the transactions contemplated by this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER Except as set forth in the Disclosure Schedules, Seller represents and warrants to Purchaser the following: Section 2.1 Existence and Qualification. Seller is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware. Section 2.2 Power. Seller has the limited liability company power to enter into and perform this Agreement (and all documents required to be executed and delivered by Seller at Closing) and to consummate the transactions contemplated by this Agreement (and such documents). Section 2.3 Authorization and Enforceability. The execution, delivery and performance of this Agreement (and all documents required to be executed and delivered by Seller at Closing), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary limited liability company action on the part of Seller. This Agreement has been duly executed and delivered by Seller (and all documents required to be executed and delivered by Seller at Closing shall be duly executed and delivered by Seller) and this Agreement constitutes, and at the Closing such
documents shall constitute, the valid and binding obligations of Seller, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 2.4 No Conflicts. The execution, delivery and performance of this Agreement by Seller, and the consummation of the transactions contemplated by this Agreement shall not (i) violate any provision of the limited liability company agreement of Seller, (ii) violate any judgment, order, ruling, or decree applicable to Seller as a party in interest or (iii) violate any Laws applicable to Seller or which are applicable to the Interests. Section 2.5 Title. Seller is the legal and beneficial owner of the Interests. Seller holds the Interests free and clear of all Encumbrances, other than any Encumbrance that will be discharged at or prior to the Closing.
3 120761002 Section 2.6 Consents, Approvals or Waivers. Except for the DOJ Consent, the execution, delivery and performance of this Agreement by Seller will not be subject to any consent, approval or waiver applicable to Seller from any Governmental Authority or other Third Party. Section 2.7 Litigation. There are no actions, suits or proceedings pending, or to Seller’s knowledge, threatened in writing before any Governmental Authority or arbitrator against Seller or any Affiliate of Seller which are reasonably likely to impair or delay materially Seller’s ability to perform its obligations under this Agreement. Section 2.8 Limitations. (a) Notwithstanding anything contained in this Article II or any other provision of this Agreement, it is the explicit intent of each Party that Seller is not making any representation or warranty whatsoever, express or implied, except those representations and warranties set forth in this Article II, and in entering into this Agreement and acquiring the Interests from Seller, Purchaser expressly acknowledges and agrees that it is not relying on any statement, representation or warranty, other than those representations and warranties set forth in this Article II. (b) SUCH REPRESENTATIONS AND WARRANTIES BY SELLER IN THIS ARTICLE II CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF SELLER TO PURCHASER IN CONNECTION WITH THE TRANSACTIONS, AND PURCHASER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARE SPECIFICALLY DISCLAIMED BY SELLER. (c) Seller expressly acknowledges and agrees that except as expressly provided in Article III, Purchaser does not make any express or implied representations or warranties to Seller and that in entering into this Agreement Seller is not relying on any statement,
representation or warranty made by Purchaser other than those representations and warranties expressly set forth in Article III. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Seller the following: Section 3.1 Existence and Qualification. Purchaser is a corporation organized, validly existing and in good standing under the Laws of the State of Virginia. Section 3.2 Power. Purchaser has the corporate power to enter into and perform its obligations under this Agreement (and all documents required to be executed and delivered by Purchaser at Closing) and to consummate the transactions contemplated by this Agreement (and such documents). Section 3.3 Authorization and Enforceability. The execution, delivery and performance of this Agreement (and all documents required to be executed and delivered by Purchaser at Closing), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary corporate action on the part of Purchaser.
4 120761002 This Agreement has been duly executed and delivered by Purchaser (and all documents required to be executed and delivered by Purchaser at Closing will be duly executed and delivered by Purchaser) and this Agreement constitutes, and at the Closing such documents will constitute, the valid and binding obligations of Purchaser, enforceable in accordance with their terms except as such enforceability may be limited by applicable bankruptcy or other similar Laws affecting the rights and remedies of creditors generally as well as to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). Section 3.4 No Conflicts. The execution, delivery and performance of this Agreement by Purchaser, and the consummation of the transactions contemplated by this Agreement, will not (i) violate any provision of the certificate of incorporation or bylaws (or other governing instruments) of Purchaser, (ii) violate any judgment, order, ruling, or regulation applicable to Purchaser as a party in interest or (iii) violate any Laws applicable to Purchaser. Section 3.5 Consents, Approvals or Waivers. Except for the DOJ Consent, the execution, delivery and performance of this Agreement by Purchaser will not be subject to any consent, approval or waiver applicable to Purchaser from any Governmental Authority or other Third Party. Section 3.6 Litigation. There are no actions, suits or proceedings pending, or to Purchaser’s knowledge, threatened in writing before any Governmental Authority or arbitrator against Purchaser or any Affiliate of Purchaser which are reasonably likely to impair or delay materially Purchaser’s ability to perform its obligations under this Agreement. Section 3.7 Financing. Purchaser has a commitment for debt financing to enable it to pay the Purchase Price to Seller at the Closing, pursuant to a Commitment Letter, dated as of November 24, 2021 (“Commitment Letter”), a true and
correct copy of which has been provided to Seller. Section 3.8 Investment Intent. Purchaser is acquiring the Interests for its own account and not with a view to their sale or distribution in violation of the Securities Act of 1933, as amended, the rules and regulations thereunder, any applicable state blue sky Laws, or any other applicable securities Laws. Purchaser acknowledges that it can bear the economic risk of an investment in the Interests, and has such knowledge and experience that it is capable of evaluating its investment in the Interests. Purchaser understands that neither the offer nor sale of the Interests has or will have been registered pursuant to the Securities Act of 1933, as amended, the rules and regulations thereunder, or any applicable state securities Laws. Purchaser is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended, and the rules and regulation thereunder, any applicable state blue sky Laws, or any other applicable securities Laws. Section 3.9 Limitations (a) Notwithstanding anything contained in this Article III or any other provision of this Agreement, it is the explicit intent of each Party that Purchaser is not making any representation or warranty whatsoever, express or implied, except those representations and warranties set forth in this Article III, and in entering into this Agreement and selling the Interests
5 120761002 to Purchaser, Seller expressly acknowledges and agrees that it is not relying on any statement, representation or warranty, other than those representations and warranties set forth in this Article III. (b) SUCH REPRESENTATIONS AND WARRANTIES BY PURCHASER IN THIS ARTICLE III CONSTITUTE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF PURCHASER TO SELLER IN CONNECTION WITH THE TRANSACTIONS, AND SELLER UNDERSTANDS, ACKNOWLEDGES AND AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, ARE SPECIFICALLY DISCLAIMED BY PURCHASER. (c) Purchaser expressly acknowledges and agrees that except as expressly provided in Article II, Seller does not make any express or implied representations or warranties to Purchaser and that in entering into this Agreement Purchaser is not relying on any statement, representation or warranty made by Seller other than those representations and warranties expressly set forth in Article II. ARTICLE IV COVENANTS OF THE PARTIES Section 4.1 Public Announcements. The Parties acknowledge and agree that no press release or other public announcement, or public statement or comment in response to any inquiry, or other disclosure that is reasonably expected to result in a press release or public announcement, relating to the subject matter of this Agreement shall be issued or made by Seller or Purchaser, or their respective Affiliates, without the joint written approval of Seller and Purchaser, each of which may withhold its approval in its sole discretion; provided that, a press release or other public announcement, or public statement or comment in response to any inquiry, made without such joint approval shall not be in violation of this Section if it is made in order for the disclosing Party or any of its Affiliates to comply with
applicable Laws or stock exchange rules or regulations and provided (a) it is limited to those disclosures that are required to so comply and (b) the disclosing Party provides the other Party with prior written notice of the disclosure and a reasonable opportunity to provide comments thereon. The Parties may, and may direct the Company to, disclose the existence of the transactions contemplated by this Agreement to key employees of the Company that have been advised of the confidential nature of this Agreement and have agreed to be bound by the terms of the Confidentiality Agreement. Following a public announcement of this Agreement by the Parties in accordance with this Section 4.1, the Parties may, and may direct the Company to, disclose the existence of the transactions contemplated by this Agreement to all employees of the Company and solely in response to inquiry, disclose the existence of the transactions contemplated by this Agreement to the Company’s customers and vendors. Section 4.2 Cooperation. Seller and Purchaser shall each cooperate with and use commercially reasonable efforts to obtain the approval of DOJ and any other Governmental Authority of Purchaser as an acceptable purchaser of the Interests, and each Party shall produce all documents requested by, and provide responses to any questions from, such Governmental Authorities. Purchaser shall, as promptly as practicable after the date hereof (to the extent Purchaser has not already completed the following activities), (i) prepare and furnish all necessary information and documents reasonably requested by the DOJ and any other Governmental Entity;
6 120761002 (ii) use commercially reasonable efforts to demonstrate to the DOJ and any other Governmental Entity that Purchaser is an acceptable purchaser of the Interests; and (iii) subject to the Purchase Price adjustment set out in Section 1.3, accept modifications to the term of the Restricted Period requested by the DOJ and any other Governmental Entity in connection therewith (a “Restricted Period Modification”), provided that the Restricted Period shall in no event be less than two (2) years without consent of Purchaser, which may be withheld in Purchaser’s sole discretion. Nothing in this Agreement shall prevent Seller from complying with the DOJ Consent and Seller shall not be considered in breach of this Agreement for taking any actions to comply with the DOJ Consent; provided, however, that in the event that DOJ or any other Governmental Authority requests or requires changes to the terms of this agreement that impose materially adverse obligations, conditions or terms on Buyer or its Affiliates prior to approval, then Purchaser shall have the sole right to determine whether to and the manner in which to implement the requirement of such Governmental Authority. Purchaser and Seller shall consult and agree on strategy and communications with the DOJ and any other Governmental Entity, and, to the extent not prohibited by Law, the DOJ, or any other Governmental Entity, Purchaser shall not independently communicate with or make submissions to the DOJ or any other Governmental Entity related to the approval of Purchaser as a suitable buyer of the assets without giving Seller (i) prior notice of such communications and (ii) the opportunity to attend or participate in the communication (provided that Seller shall not be entitled to receive confidential information, including financial, about Purchaser, its Affiliates, or the Company in connection with such participation). Purchaser shall promptly notify Seller of any communications
Purchaser or its Affiliates receive from any Governmental Entity relating to the transactions contemplated by this Agreement and permit Seller to review in advance any proposed communications by or on behalf of Purchaser or any of its Affiliates to any Governmental Entity, unless the staff of such Governmental Entity requires otherwise; provided, however, that Seller shall not be entitled to review or have access to Purchaser’s business plan or Purchaser’s other competitively sensitive information. Section 4.3 Further Assurances. After Closing, Seller and Purchaser each agree to take such further actions and to execute, acknowledge and deliver all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement. Section 4.4 Member Distributions. From the date of this Agreement until the Closing Date, Purchaser shall cause the Company to continue to make distributions to its members in the ordinary course of business and consistent with past practice, subject to compliance with the LLC Agreement; provided that any distributions relating to any period on or prior to the Closing Date may be paid after the last day of such period (i.e., the Closing Date). For the avoidance of doubt, the proceeds of the conveyance of real property under Section 4.8 shall be retained by the Company, and no portion of such proceeds shall be distributed to Seller. Section 4.5 Director and Officer Liability; Indemnification. (a) Survival of Indemnification. If the Closing occurs, Purchaser shall cause all rights to indemnification and all limitations on liability existing in favor of any existing or prior employee, agent, officer, director or manager of Seller or any of its Affiliates (collectively, the “Seller Indemnitees”), as provided in the organizational documents of the Company or otherwise in effect on the date of this Agreement, and to the extent arising out of or related to the
period prior
7 120761002 to Closing, to survive the consummation of the transactions contemplated hereby and continue in full force and effect and be honored by the Company after the Closing until the sixth (6th) anniversary of the Closing Date. (b) Tail Insurance. In connection with, and without limiting the foregoing, Purchaser shall, or shall cause the Company to maintain, without lapse, directors’ and officers’ liability insurance covering the Seller Indemnitees for claims or liabilities arising from facts or events occurring prior to and including the Closing Date and providing coverage not less favorable than that provided by such insurance maintained by or on behalf of the Company as of the date of this Agreement. Section 4.6 Tax Matters.Tax Returns. Purchaser shall prepare, or cause to be prepared, and timely file, or cause to be timely filed (in a manner consistent with practices followed in prior taxable periods except as required by applicable Law), all Tax Returns related to the Company, and its assets and business operations. Purchaser shall deliver to Seller, for its review and approval (which shall not be unreasonably withheld, conditioned or delayed), a draft of any such Tax Return (together with all supporting documentation and workpapers) at least twenty (20) days before the date on which such Tax Return is required to be filed, or as soon as reasonably possible if such Tax Return is required to be filed within ninety (90) days following the Closing Date. (b) No Amendments of Tax Returns; No Election Changes. Purchaser shall not amend, refile or otherwise modify, or cause or permit to be amended, refiled or otherwise modified, any Tax Return filed by the Company for any period prior to the Closing Date without the prior written consent of Seller, which shall not be unreasonably withheld, conditioned, or delayed. Except as required by applicable Law, Purchaser shall not, and shall cause the Company not to (i) make, change or revoke any Tax election
that has retroactive effect to any period prior to the Closing Date or that would otherwise adversely affect Seller, or (ii) enter into a voluntary disclosure or similar agreement, or otherwise voluntarily disclose information to, a Taxing Authority with respect to any period prior to the Closing Date, in each case without Seller’s prior written consent. (c) Gains and Losses on Real Property Sale. Gains and losses for book and Tax purposes allocable to the sale of real property under Section 4.8 shall be allocated between Purchaser and Seller, as members of the Company, in accordance with the operating agreement of the Company and consistent with past practice; provided, however, that Purchaser agrees to indemnify Seller for any additional Taxes payable by Seller or other adverse tax consequences to Seller resulting from the sale of such real property, in each case as compared to the tax consequences to Seller from the sale of the Interests without the sale of such real property. Section 4.7 Post-Closing Access. Purchaser, for a period of seven (7) years following the Closing, shall, or shall cause the Company to provide Seller, its Affiliates, and their respective officers, employees and representatives with access, during normal business hours, to all books and records to the extent relating to Taxes of Seller for review and copying at Seller’s expense and to the Company’s, and their Affiliates’ personnel for the purpose of discussing any such matter or claim. Section 4.8. Real Property Sale. As soon as reasonably practicable after the date of
8 120761002 this Agreement, Purchaser shall cause to be drafted special warranty deeds (or the equivalent under local law) (“Deeds”), pursuant to which the Company will convey to Purchaser or its permitted assigns all of the Company’s right, title, and interest in and to each parcel of real property owned by the Company described on Schedule 4.8. Seller and Purchaser shall cause the Company to execute and deliver the Deeds to Purchaser’s counsel, Williams Mullen, at the address set out in Section 9.4, to be held in escrow, prior to Closing. At Closing, Purchaser shall remit to the Company the sum of Thirty Million Dollars ($30,000,000), which will be allocated among the properties in Purchaser’s sole discretion, as consideration for the conveyance under the Deeds. The payment of such sum shall be separate from and shall not reduce the Purchase Price. Upon confirmation from the Company that such sum has been received, and from each of Seller and Purchaser that all conditions to Closing for the benefit of such party under this Agreement have been satisfied or waived (other than conditions that are to be satisfied at Closing) and that such Party is prepared to proceed to Closing hereunder, Purchaser’s counsel shall release the Deeds from Escrow to Purchaser immediately prior to Closing hereunder. In the event that the Deeds have been delivered in escrow, but Closing does not occur within five (5) Business Days of the then scheduled Closing, Purchaser’s counsel shall return the Deeds to Company, unless otherwise jointly instructed by the Parties. If a new Closing date is scheduled, Purchaser and Seller shall cause the Company to re-deliver the Deeds to Purchaser’s counsel, to be held in escrow pursuant to this Section 4.8. Purchaser’s counsel has acknowledged this Agreement solely to consent to the provisions of this Section 4.8. ARTICLE V CLOSING Section 5.1 Time and Place of Closing. The consummation of the purchase and sale of the
Interests contemplated by this Agreement (the “Closing”) shall take place remotely through the delivery of the documentation to be delivered at Closing pursuant to this Agreement and the signatures thereto by electronic mail or other means of electronic submission (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) at 10:00 a.m. (Eastern Time), or at such other place, date or time as the Parties shall mutually agree in writing, on the date on which the last of the applicable conditions set forth in Article VI and Article VII are satisfied or waived by the applicable Parties (other than those conditions that by their nature are intended to be satisfied only at the Closing, but subject to the satisfaction or waiver thereof at the Closing) (the “Closing Date”). The Parties intend that the Closing shall take place contemporaneously (or as contemporaneously as possible) with the Merger. The Parties acknowledge and agree that all proceedings at the Closing shall be deemed to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken and executed simultaneously on the Closing Date, and no proceedings shall be deemed taken nor any document executed or delivered until all have been taken, executed and delivered. Section 5.2 Obligations of Seller at Closing. At the Closing, Seller shall deliver or cause to be delivered to Purchaser, among other things, the following: (a) Resignations of the managers of the Company that were appointed by Seller under the LLC Agreement from their position as manager of the Company, effective on or before the Closing;
9 120761002 (b) An executed certificate described in Treasury Regulation § 1.1445-2(b)(2) certifying that Seller is not a foreign person within the meaning of the Code; (c) A certificate duly executed by an officer of Seller, dated as of the Closing, (i) attaching and certifying on behalf of Seller complete and correct copies of the written consents or resolutions of the board of managers and/or managing member of Seller authorizing the execution, delivery, and performance of this Agreement and the transactions contemplated hereby, and (ii) certifying on behalf of Seller the incumbency of each officer of Seller executing this Agreement or any document delivered in connection with the Closing; (d) A counterpart of the Non-Competition Agreement, duly executed by Quikrete; (e) A counterpart of the Forms Sharing Agreement, duly executed by Seller; and (f) All other documents and instruments reasonably required from Seller to transfer the Interests to Purchaser. Section 5.3 Obligations of Purchaser at Closing. At the Closing, Purchaser shall deliver or cause to be delivered to Seller, among other things, the following: (a) A wire transfer of the Purchase Price in same-day funds; (b) A counterpart of the Non-Competition Agreement, duly executed by the Company; (c) A counterpart of the Forms Sharing Agreement, duly executed by the Company; and (d) A certificate duly executed by an officer of Purchaser, dated as of the Closing, (i) attaching and certifying on behalf of Purchaser complete and correct copies of the written consents or resolutions of the board of directors of Purchaser authorizing the execution, delivery, and performance by Purchaser of this Agreement and the transactions contemplated hereby, and (ii) certifying on behalf of Purchaser the incumbency of each officer of Purchaser executing this Agreement or any document delivered in connection with the Closing. ARTICLE VI CONDITIONS TO OBLIGATIONS OF PURCHASER Section
6.1 Conditions to Obligations of Purchaser. The obligation of Purchaser to consummate the Closing is subject to the fulfillment, at or before the Closing, of each of the following conditions: (a) Orders. At the Closing Date, there being in effect no preliminary or permanent injunction or other order issued by any Governmental Authority of competent
10 120761002 jurisdiction which restrains, prohibits or otherwise makes illegal the consummation of the applicable Transactions. (b) DOJ Consent. The DOJ shall have no unresolved objection to the terms of this Agreement or the transactions contemplated hereby, and the DOJ Consent shall have been obtained. (c) Representations and Warranties. Each of the representations and warranties of Seller contained in Article II shall be true and accurate in all respects, on and as of the Closing Date as though made on and as of the Closing Date, except for representations and warranties which are as of a specific date, in each case, which shall be true and accurate as of such date, and except for failures to be true and accurate which would not, individually or in the aggregate, have a Seller Impairment Effect. (d) Performance. Seller shall have performed in all material respects the covenants and obligations then required to have been performed by it on or prior to the Closing pursuant to Article IV. (e) Document Deliveries. Purchaser shall have received all of the items to be delivered by Seller pursuant to Section 5.2. (f) Merger. Quikrete and Forterra shall have consummated the Merger. (g) Officer’s Certificate. Purchaser shall have received a certificate of an officer of Seller, certifying that the conditions set forth in Section 6.1(c) and Section 6.1(d) have been satisfied. Section 6.2 Waiver. Any condition set forth in this Article VI may be waived in whole or in part solely by a waiver in writing by Purchaser; provided that if Purchaser elects to proceed to consummate the Transactions to be effected at the Closing despite a failure of one or more conditions precedent to be met, such condition or conditions precedent shall be deemed to have been waived by Purchaser whether or not such condition or conditions precedent shall have been so waived in writing. Section 6.3 Frustration of Closing Conditions. Purchaser may not rely, either as a basis for not consummating the
transactions contemplated by this Agreement or terminating this Agreement and abandoning the Transactions, on the failure of any condition set forth in Section 6.1 to be satisfied if such failure was caused by Purchaser’s breach of any provision of this Agreement or failure to use its reasonable best efforts to consummate the transactions contemplated by this Agreement.
11 120761002 ARTICLE VII CONDITIONS TO OBLIGATION OF SELLER Section 7.1 Conditions to Obligations of Seller. The obligation of Seller to consummate the Closing is subject to the fulfillment, at or before the Closing, of each of the following conditions: (a) DOJ Consent. The DOJ shall have no unresolved objection to the terms of this Agreement or the transactions contemplated hereby, and the DOJ Consent shall have been obtained. (b) Orders. At the Closing Date, there being in effect no preliminary or permanent injunction or other order issued by any Governmental Authority of competent jurisdiction which restrains, prohibits or otherwise makes illegal the consummation of the applicable Transactions. (c) Representations and Warranties. Each of the representations and warranties of Purchaser in Article III shall be true and accurate in all respects, on and as of the Closing Date as though made on and as of the Closing Date, except for representations and warranties which are as of a specific date, in each case, which shall be true and accurate as of such date, and except for failures to be true and accurate which would not, individually or in the aggregate, have a Purchaser Impairment Effect. (d) Performance. Purchaser shall have performed in all material respects the covenants and obligations then required to have been performed by it on or prior to the Closing pursuant to Article V. (e) Document Deliveries. Seller shall have received all of the items to be delivered by Purchaser pursuant to Section 5.3. (f) Acquisition of Forterra. Quikrete shall have consummated the Merger. (g) Officer’s Certificate. Seller shall have received a certificate of an executive officer of Purchaser, certifying that the conditions set forth in Section 7.1(c) and Section 7.1(d) have been satisfied. Section 7.2 Waiver. Any condition set forth in this Article VII may be waived in whole or in part solely by a waiver in writing by Seller; provided that if Seller elects to proceed to
consummate the Transactions to be effected at the Closing despite a failure of one or more conditions precedent to be met, such condition or conditions precedent shall be deemed to have been waived by Seller whether or not such condition or conditions precedent shall have been so waived in writing. Section 7.3 Frustration of Closing Conditions. Seller may not rely, either as a basis for not consummating the Transactions or terminating this Agreement and abandoning the
12 120761002 Transactions, on the failure of any condition set forth in Section 7.1 to be satisfied if such failure was caused by Seller’s breach of any provision of this Agreement or failure to use its reasonable best efforts to consummate the transactions contemplated by this Agreement. ARTICLE VIII TERMINATION Section 8.1 Termination of Agreement. This Agreement may be terminated: (a) by mutual written consent of Seller and Purchaser; (b) by Seller or Purchaser if the Closing has not occurred by the Outside Date; provided, that the right to terminate this Agreement under this Section 8.1(b) will not be available to a Party whose failure to fulfill any obligation under this Agreement has been the cause of, or has resulted in, the failure of the Closing to occur by the Outside Date; (c) by either Seller or Purchaser in the event that (i) any Governmental Authority has enacted, issued, enforced or entered into any statute, rule, regulation, injunction or other order, restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement that has become final and non-appealable; provided that the right to terminate this Agreement under this Section 8.1(c)(i) will not be available to any Party whose actions resulted in an injunction or other order that had the effect of restraining, enjoining or otherwise prohibiting such transactions, or (ii) Seller shall have notified Purchaser that the acquisition of Forterra by Quikrete is not occurring, or the Merger Agreement has been terminated, and such notification is confirmed in a Form 8-K filing or other public disclosure by Forterra; (d) by Purchaser if Seller shall have breached any of its representations and warranties, covenants or agreements contained in this Agreement, which breach (i) cannot be cured by the earlier to occur of (A) the date that is thirty (30) days following Seller’s receipt of written notice of such breach and (B) the Outside Date, and (ii) would result in any of conditions in
Section 6.1 not being satisfied; (e) by Seller if Purchaser shall have breached any of its representations and warranties, covenants or agreements contained in this Agreement, which breach (i) cannot be cured by the earlier to occur of (A) the date that is thirty (30) days following Purchaser’s receipt of written notice of such breach and (B) the Outside Date, and (ii) would result in any of the applicable conditions set forth in Section 7.1 not being satisfied; (f) by Seller, if (i) all of the conditions set forth in Section 6.1 have been satisfied or waived (other than those conditions that are to be satisfied at the Closing, each of which is capable of being satisfied at the Closing); (ii) Seller has given written notice to Purchaser that it is prepared and able to consummate the transactions contemplated by this Agreement (or could be if Purchaser had satisfied any unsatisfied conditions set forth in Section 7.1); and
13 120761002 (iii) Purchaser fails to consummate the Transactions contemplated by this Agreement on the later of the date the Closing should have occurred pursuant to Section 5.1 and one Business Day following delivery of the notice in clause (ii) above; (g) by Purchaser, if (i) all of the conditions set forth in Section 7.1 have been satisfied or waived (other than those conditions that are to be satisfied at the Closing, each of which is capable of being satisfied at the Closing); (ii) Purchaser has given written notice to Seller that it is prepared and able to consummate the transactions contemplated by this Agreement (or could be if Seller had satisfied any unsatisfied conditions set forth in Section 6.1); and (iii) Seller fails to consummate the Transactions contemplated by this Agreement on the later of the date the Closing should have occurred pursuant to Section 5.1 and one Business Day following delivery of the notice in clause (ii) above; (h) by Seller, if Seller determines in good faith, in its reasonable discretion, that the DOJ is not likely to grant the DOJ Consent. Section 8.2 Effect of Termination. (a) Subject to Section 8.2(a) and (b), in the event of a termination of this Agreement, this Agreement shall become void and there shall be no liability on the part of any Party under this Agreement, except that Article IX, the agreements of Seller and Purchaser contained in this Section 8.2 and the Confidentiality Agreement shall survive termination of the Agreement. (b) In the event that this Agreement is validly terminated by either Seller or Purchaser pursuant to Section 8.1(b), Section 8.1(c), by Seller pursuant to Section 8.1(h), or by Purchaser pursuant to Section 8.1(g), or Section 8.1(d) and, in the case of a valid termination by Purchaser pursuant to Section 8.1(d), Seller shall have breached its representations and warranties set forth in Section 2.5, Quikrete shall pay to Purchaser the Termination Fee by wire transfer of immediately available funds to an account
specified by Purchaser, such payment to be made within two Business Days of the applicable termination. (c) The Parties acknowledge that the Termination Fee if, as and when required to be paid in accordance with this Section 8.2, shall not constitute a penalty but will be liquidated damages, in a reasonable amount that will compensate Purchaser in the circumstances in which it is payable for the efforts and resources expended and opportunities foregone while negotiating this Agreement and in reliance on this Agreement and on the expectation of the consummation of the transactions contemplated by this Agreement, which amount would otherwise be impossible to calculate with precision. (d) Each of the Parties acknowledges that the agreements contained in this Section 8.2 are an integral part of the transactions contemplated by this Agreement and that, without these agreements, the Parties would not enter into this Agreement. Notwithstanding
14 120761002 anything to the contrary, the Termination Fee shall constitute the sole and exclusive remedy of Purchaser for any loss or damages suffered as a result of the failure of the transactions contemplated by this Agreement to be consummated. ARTICLE IX MISCELLANEOUS Section 9.1 SURVIVAL. EXCEPT FOR SELLER’S REPRESENTATIONS AND WARRANTIES CONTAINED IN SECTION 2.5, WHICH SHALL SURVIVE FOR A PERIOD OF EIGHTEEN (18) MONTHS FOLLOWING THE CLOSING DATE, NONE OF THE REPRESENTATIONS, WARRANTIES, COVENANTS OR AGREEMENTS IN THIS AGREEMENT OR IN ANY INSTRUMENT DELIVERED PURSUANT TO THIS AGREEMENT SHALL SURVIVE THE CLOSING, ALL SUCH RIGHTS, CLAIMS AND CAUSES OF ACTION (WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, OR WHETHER AT LAW OR IN EQUITY) WITH RESPECT THERETO SHALL TERMINATE AT SUCH CLOSING. NOTWITHSTANDING THE FOREGOING, NEITHER THIS SECTION 9.1 NOR ANYTHING ELSE IN THIS AGREEMENT TO THE CONTRARY SHALL LIMIT THE SURVIVAL OF ANY COVENANT OR AGREEMENT OF AND PARTY TO THE EXTENT THAT BY ITS TERMS IT IS REQUIRED TO BE PERFORMED OR COMPLIED WITH IN AFTER THE CLOSING, WHICH COVENANTS AND AGREEMENTS SHALL SURVIVE SUCH CLOSING IN ACCORDANCE WITH THEIR RESPECTIVE TERMS. Section 9.2 Specific Performance. Each Party acknowledges and agrees that the other Party will be irreparably damaged if this Agreement is not performed in accordance with its terms and that any breach of this Agreement by such Party and the non-consummation of the transactions contemplated by this Agreement would not be adequately compensated in all cases by monetary damages alone. Accordingly, in
addition to any other right or remedy to which a Party may be entitled, at applicable Law or in equity, each Party shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to compel specific performance of this Agreement, without the need for proof of actual damages, in accordance with its terms and to require the other Party to consummate the Closing as contemplated hereby. Each Party agrees that it will not oppose the granting of an injunction, specific performance and other equitable relief on the basis that (x) the other Party has an adequate remedy at law or (y) an award of specific performance is not an appropriate remedy for any reason at law or equity. For the avoidance of doubt, each Party further agrees that (i) by seeking the equitable remedies provided for in this Section 9.2, such Party shall not in any respect be deemed to waive its right to seek at any time any other form of relief that may be available to such Party in accordance with this Agreement in the event that this Agreement has been terminated or in the event that the equitable remedies provided for in this Section 9.2 are not available or otherwise are not granted, and (ii) nothing set forth in this Section 9.2 shall require a Party to institute any proceeding for (or limit such Party’s right to institute any proceeding for) specific performance under this Section 9.2 prior to or as a condition to exercising any termination right under Article VIII, nor shall the commencement of any legal proceeding pursuant to this Section 9.2 or anything set forth in this Section 9.2 restrict or limit a Party’s right to terminate this Agreement in accordance with the terms of Article VIII or pursue any other remedies otherwise available under this Agreement.
15 120761002 Section 9.3 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original instrument, but all such counterparts together shall constitute but one agreement. Section 9.4 Notices. All notices that are required or may be given pursuant to this Agreement shall be sufficient in all respects if given in writing, in English and delivered personally, by telecopy, facsimile, or by recognized courier service, as follows: (a) If to Seller: Forterra Pipe & Precast, LLC (prior to the Closing only) 511 E. John Carpenter Freeway, Suite 600 Irving, Texas 75062 Attn: Lori Browne Email: Lori.Browne@forterrabp.com Facsimile: (469) 284-8678 and Quikrete Holdings, Inc. Five Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attn: Nick Ivezaj Email: nick.ivezaj@quikrete.com With a copy to (which shall not constitute notice): Troutman Pepper Hamilton Sanders LLP 600 Peachtree Street, N.E., Suite 3000 Atlanta, Georgia 30308 Attn: David W. Ghegan Email: David.ghegan@troutman.com (b) If to Purchaser: Eagle Corporation 1020 Harris Street Charlottesville, Virginia 22903 Attn: David T. Paulson, President Facsimile: 434-977-3573 E-mail: dpaulson@eagle-corp.com With a copy to (which shall not constitute notice): Williams Mullen 321 East Main Street, Suite 400 Charlottesville, Virginia 22903
16 120761002 Attn: Kenneth C. Shevlin Facsimile: 434-817-0977 E-mail: kshevlin@williamsmullen.com Either Party may change its address for notice by notice to the other in the manner set forth above. All notices shall be deemed to have been duly given at the time of receipt by the Party to which such notice is addressed. Section 9.5 Expenses. Except as otherwise provided in this Agreement, Seller, on the one hand, and Purchaser, on the other hand, shall each be responsible for its own costs, charges and other expenses incurred in connection with the transactions contemplated by this Agreement. In addition, at Closing (but only to the extent Closing shall have occurred), Seller shall reimburse Purchaser for the reasonable and documented fees of Purchaser’s antitrust counsel in connection with the DOJ Consent in an amount not to exceed $150,000. Section 9.6 Governing Law. This Agreement and all disputes or controversies arising out of or relating to this Agreement or the transactions contemplated hereby shall be governed by, and construed in accordance with, the internal laws of the State of Delaware, without regard to the laws of any other jurisdiction that might be applied because of the conflicts of laws principles of the State of Delaware. Section 9.7 Jurisdiction; Service of Process; and Venue. Each Party irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement brought by any Party against any other Party shall be brought and determined in the Court of Chancery of the State of Delaware; provided, that if jurisdiction is not then available in the Court of Chancery of the State of Delaware, then any such legal action or proceeding may be brought in any federal court located in the State of Delaware or any other Delaware state court. Each Party hereby irrevocably submits to the jurisdiction of the aforesaid courts for itself and with respect to its property, generally and unconditionally, with regard to any such
action or proceeding arising out of or relating to this Agreement and the transactions contemplated hereby. Each of the parties agrees not to commence any action, suit or proceeding relating thereto except in the courts described above in Delaware, other than actions in any court of competent jurisdiction to enforce any judgment, decree or award rendered by any such court in Delaware as described herein. Each of the parties further agrees that notice as provided herein shall constitute sufficient service of process and the parties further waive any argument that such service is insufficient. Each of the parties hereby irrevocably and unconditionally waives, and agrees not to assert, by way of motion or as a defense, counterclaim or otherwise, in any action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby, (a) any claim that it is not personally subject to the jurisdiction of the courts in Delaware as described herein for any reason, (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) that (i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts.
17 120761002 Section 9.8 Captions. The captions in this Agreement are for convenience only and shall not be considered a part of or affect the construction or interpretation of any provision of this Agreement. Section 9.9 Waivers. Any failure by any Party to comply with any of its obligations, agreements or conditions herein contained may be waived by the Party to whom such compliance is owed by an instrument signed by the Party to whom compliance is owed and expressly identified as a waiver, but not in any other manner. No waiver of, or consent to a change in, any of the provisions of this Agreement shall be deemed or shall constitute a waiver of, or consent to a change in, other provisions hereof (whether or not similar), nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. Section 9.10 Assignment. No Party shall assign or otherwise transfer all or any part of this Agreement, nor shall any Party delegate any of its rights or duties hereunder, without the prior written consent of the other Party and any transfer or delegation made without such consent shall be void; provided that Purchaser may assign all of its rights under this Agreement to an Affiliate; provided, further that no such assignment will relieve Purchaser of its obligations under this Agreement. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and assigns. Section 9.11 Entire Agreement. This Agreement and the documents to be executed hereunder and the Schedules and Exhibits attached hereto constitute the entire agreement among the Parties pertaining to the subject matter hereof, and supersede all prior agreements, understandings, negotiations and discussions, whether oral or written, of the Parties pertaining to the subject matter hereof. Section 9.12 Amendment. This Agreement may be amended or modified only by an agreement in writing signed by Seller and
Purchaser and expressly identified as an amendment or modification. Section 9.13 No Third-Person Beneficiaries. Nothing in this Agreement shall entitle any Person other than Purchaser and Seller to any claim, cause of action, remedy or right of any kind. Section 9.14 References. In this Agreement: (a) References to any gender includes a reference to all other genders; (b) References to the singular includes the plural, and vice versa; (c) Reference to any Article, Section or Clause means an Article, Section or Clause of this Agreement; (d) Reference to any Exhibit or Schedule means an Exhibit or Schedule to this Agreement, all of which are incorporated into and made a part of this Agreement;
18 120761002 (e) Unless expressly provided to the contrary, “hereunder”, “hereof”, “herein” and words of similar import are references to this Agreement as a whole and not any particular Section or other provision of this Agreement; (f) References to “$” or “Dollars” means United States dollars; and (g) “Include” and “including” shall mean include or including without limiting the generality of the description preceding such term. Section 9.15 LIMITATION ON DAMAGES. NEITHER PURCHASER OR SELLER SHALL BE ENTITLED TO RECOVER ANY INDIRECT, CONSEQUENTIAL, PUNITIVE, SPECIAL, OR EXEMPLARY DAMAGES OR DAMAGES FOR LOST PROFITS OF ANY KIND ARISING UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. [Remainder of Page Left Intentionally Blank; Signature Page Follows.]
Lori M. Browne EVP & General Counsel
SIGNATURE PAGE TO MEMBERSHIP INTEREST PURCHASE AGREEMENT 120761002 IN WITNESS WHEREOF, this Agreement has been signed by each of the Parties and Quikrete as of the date first above written. SELLER: FORTERRA PIPE & PRECAST, LLC By: Name: Title: PURCHASER: EAGLE CORPORATION By: Name: Title: QUIKRETE HOLDINGS, INC. Solely for purposes of Section 8.2(b) By: Name: Title: WILLIAMS MULLEN Solely for purposes of Section 4.8 By: Name: Kenneth C. Shevlin Title: Shareholder
Schedule 1.2 - 1 120761002 Schedule 1.2 Defined Terms “Affiliate” means, with respect to any Person, a Person that directly or indirectly controls, is controlled by or is under common control with such Person, with control in such context meaning the ability to direct the management or policies of a Person through ownership of voting interests or other securities, pursuant to a written agreement, or otherwise. “Agreement” shall have the meaning set forth in the Preamble. “Business Day” means any day other than a Saturday, a Sunday, or a day on which banks are closed for business in New York, New York. “Closing” shall have the meaning set forth in Section 5.1. “Closing Date” shall have the meaning set forth in Section 5.1. “Code” means the United States Internal Revenue Code of 1986, as amended. “Common Units” shall have the meaning set forth for such term in the LLC Agreement. “Company” shall have the meaning set forth in the Recitals. “Confidentiality Agreement” shall mean that certain non-disclosure letter agreement entered into by and among Purchaser, Seller, Quikrete and Forterra dated as of March 19, 2021. “Disclosure Schedules” shall have the meaning set forth in Section 1.2. “DOJ” shall have the meaning set forth in the Recitals. “DOJ Consent” means that each of the following conditions has been met: (i) the consent, agreement and approval of the DOJ with respect to Purchaser, this Agreement and the transactions contemplated hereby; (ii) the filing of any proposed final judgment by the DOJ in any court in connection with the Merger, in form and substance acceptable to Seller in its sole discretion; (iii) if required by the DOJ, the entry by such court of either an Asset Preservation Stipulation and Order or Hold Separate Stipulation and Order between the DOJ, on the one hand, and Forterra and Seller, on the other hand. “DOJ Consent” shall not in any event mean the entry of a final judgment by such court or completion with
respect to the Merger of the process set forth in the Tunney Act, 15 U.S.C. § 16. “Effect” means any event, change, effect, occurrence, circumstance or development. “Encumbrance” means any mortgage, lien, pledge, charge, or other encumbrance or any other security interest. “Forms Sharing Agreement” means the forms sharing agreement to be entered into by any between Seller and the Company on the Closing Date substantially in the form of Exhibit B hereto.
Schedule 1.2 - 2 120761002 “Forterra” shall have the meaning set forth in the Recitals. “Governmental Authority” means any national government and/or government of any political subdivision, and departments, courts, commissions, boards, bureaus, ministries, agencies or other instrumentalities of any of them. “Hart-Scott-Rodino Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. “Interests” shall have the meaning set forth in the Recitals. “Laws” means any and all applicable laws, statutes, rules, regulations, ordinances, orders, codes, decrees, writs, injunctions, judgments, or principles of common law that are promulgated, issued, or enacted by Governmental Authorities. “LLC Agreement” means the Amended and Restated Limited Liability Company Agreement of the Company dated as of August 3, 2012, as may have been amended from time to time. “Loan” means the incurrence or assumption of indebtedness for borrowed money. “Merger” shall have the meaning set forth in the Recitals. “Merger Agreement” shall have the meaning set forth in the Recitals. “Non-Competition Agreement” means the non-competition agreement to be entered into by any between Quikrete and the Company on the Closing Date substantially in the form of Exhibit A hereto, in addition to any modifications made pursuant to Section 4.2. “Outside Date” shall mean (i) with respect to Purchaser’s right to terminate this Agreement pursuant to Section 8.1(b), March 22, 2022 or such later date as the parties to the Merger may agree as the outside date or later closing date of the Merger Agreement (but in no event later than May 22, 2022); and (ii) with respect to Seller’s right to terminate this Agreement pursuant to Section 8.1(b), March 22, 2022 or such later date as the parties to the Merger may agree as the outside date or later closing date of the Merger Agreement. “Party” and “Parties” shall have the meaning set forth in the Preamble.
“Person” means any individual, corporation, partnership, limited liability company, trust, estate, Governmental Authority or any other entity. “Purchase Price” shall have the meaning set forth in Section 2.1. “Purchaser” shall have the meaning set forth in the Preamble. “Purchaser Impairment Effect” means any Effect that would, individually or in the aggregate, reasonably be expected to prevent or materially impair the ability of Purchaser to consummate the transactions contemplated by this Agreement.
Schedule 1.2 - 3 120761002 “Purchaser’s Original Interests” shall have the meaning set forth in the Recitals. “Quikrete” shall have the meaning set forth in the Preamble. “Seller” shall have the meanings set forth in the Preamble. “Seller Impairment Effect” means any Effect that would, individually or in the aggregate, reasonably be expected to prevent or materially impair the ability of Seller to consummate the transactions contemplated by this Agreement. “Seller Indemnitees” shall have the meaning set forth in Section 4.5(a). “Tail Policy” shall have the meaning set forth in Section 4.5(b). “Tax” or “Taxes” shall mean (i) all taxes, assessments, customs, duties, imposts, unclaimed property, fees and other governmental charges imposed by any Governmental Body, including any federal, state, local, and foreign income, profits, franchise, sales, use, ad valorem, property, severance, production, excise, stamp, documentary, real property transfer or gain, gross receipts, goods and services, registration, capital, transfer, or withholding taxes or other governmental fees or charges imposed by any taxing authority, (ii) any interest, fine, penalties or additional amounts which may be imposed with respect of any item described in clause (i), and (iii) any liability in respect of any item described in clauses (i) and (ii) that arises by reason of a contract, assumption, transferee or successor liability, operation of law or otherwise. “Taxing Authority” means the agency or department of the Governmental Authority responsible for the administration and collection of any Taxes, including the Internal Revenue Service and Treasury. “Tax Return” means any report, return, statement (including an estimated report, return or statement), and other similar filing to declare or report Taxes. “Termination Fee” shall mean an amount equal to (i) $250,000 if payable prior to November 30, 2021, (ii) $350,000 if payable between December 1, 2021 and December 31, 2021 and (iii) $500,000 if
payable thereafter. “Third Party” means any Person other than a Party to this Agreement or an Affiliate of a Party to this Agreement. “Treasury” means the United States Department of the Treasury or any successor department.
Schedule 4.8 - 1 120761002 Schedule 4.8 Company Real Property Facility Name Street Address City/State/Zip Parcel ID Chesapeake Pipe 3801 Cook Boulevard Chesapeake, VA 23323 240000000810 Jessup Pipe 7955 Dorsey Run Road Jessup, MD 20794 06 48 6 Oakboro Pipe 20047 Silver Road Oakboro, NC 28129 29737 Rincon Precast 500 Ebenezer Road Rincon, GA 31326 0429A-016-000 Salem 1 Precast 2000 Salem Industrial Dr. Salem, VA 24153 177-2-3, 177-2-4 Salem 2 Precast 2176 Salem Industrial Dr. Salem, VA 24153 176-3-9 Dunn Precast 452 Webb Road Dunn, NC 28334 0125370147- 01&05 Summerville Precast 1094 Old Dairy Road Summerville, SC 29483 26381050047
120761002 Exhibit A Form of Non-Competition Agreement [attached]
120768324 NON-COMPETITION AGREEMENT This Non-Competition Agreement (this “Agreement”) is entered into as of ______, 2021 (the “Effective Date”), by and among QUIKRETE HOLDINGS, INC., a Delaware corporation (“Quikrete”), FORTERRA PIPE & PRECAST, LLC, a Delaware limited liability company (“Forterra” and together with Quikrete, hereinafter sometimes referred to individually as a “Restricted Party” or collectively referred to as the “Restricted Parties”), and CONCRETE PIPE & PRECAST, LLC, a Delaware limited liability company (the “Company” and together with the Restricted Parties hereinafter sometimes referred to individually as a “Party” or collectively referred to as the “Parties”). WHEREAS, pursuant to the terms of that certain Membership Interest Purchase Agreement (the “Purchase Agreement”) dated as of November 24, 2021, by and between Forterra and Eagle Corporation, a Virginia corporation (together with its permitted assigns, “Purchaser”), Forterra is selling its membership interests in the Company to Purchaser pursuant to which Purchaser will own all of the outstanding membership interests in the Company; WHEREAS, Purchaser’s willingness to consummate the transactions contemplated by the Purchase Agreement is explicitly conditioned on the Restricted Parties entering into this Agreement; and WHEREAS, the Restricted Parties understand and agree that the consummation of the transactions contemplated by the Purchase Agreement is good and sufficient consideration for the restrictive covenants below. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is mutually agreed as follows: 1. DEFINITIONS. 1.1 All terms used in the Purchase Agreement shall have the same meaning when used herein as therein unless such terms are otherwise defined in this Agreement or the context hereof otherwise requires. 1.2 The
following capitalized terms used in this Agreement shall have the respective meanings as follows: (i) “Competing Business” means the manufacture, production, distribution or sale of precast concrete products and structures, including storm water and sanitary manholes (including bases, risers and cones), curb and drop inlets, septic tanks, pump stations, boxes and vaults within the Non-compete Territory, or the sale, directly or indirectly, of precast concrete products and structures from outside of the Non-compete Territory into the Non-compete Territory; provided, however, that for purposes of this Agreement “precast concrete products and structures” shall not include: (a) reinforced concrete pipe (including PVC-lined RCP), reinforced concrete box (used as/for storm drains, storm sewers, culverts, bridge replacement and stormwater retention), concrete pressure pipe or any associated pipe or box end sections or fittings (but, for the sake of clarity, not
2 120768324 including manholes and inlets), (b) concrete masonry products (such as concrete block and concrete wall block), (c) hardscape products (such as concrete pavers and retaining wall block), or (d) any precast concrete products and structures that are not produced by the Company as of the Effective Date. (ii) “Non-compete Territory” means the geographic territories delineated on the maps attached hereto as Appendix 1, with respect to precast concrete products and structures. 2. COVENANT NOT TO COMPETE. 2.1 From and after the Effective Date and until the fifth (5th) anniversary of the Effective Date (the “Restricted Period”), each Restricted Party agrees to not directly, or indirectly through any Affiliate, without the prior written consent of the Company: (i) engage in a Competing Business; or (ii) purchase or lease any land intended for the conduct of a Competing Business; or (iii) have any ownership interest (whether as proprietor, partner, member, stockholder or otherwise) in any Competing Business; or (iv) be a general or managing partner of, or hold a similar position in any Competing Business; or (v) act as agent, broker or distributor for, or adviser or consultant to any Competing Business; or (vi) either (A) solicit, divert, take away or accept, or attempt to solicit, divert, take away or accept, from the Company, the business of any customer for precast concrete products and structures in the Non-compete Territory; or (B) attempt or seek to cause any customer to refrain, in any respect, from acquiring from or through the Company, any precast concrete products and structures to be acquired in the Non-compete Territory. 2.2 Notwithstanding the foregoing, the above restrictions in § 2.1. do not apply to and shall not preclude: (i) Contech Engineered Solutions LLC and its affiliates (“Contech”) from the distribution or sale of precast concrete products and structures (a) manufactured by third parties for use in Contech’s stormwater
management products or (b) manufactured by Contech or any other Restricted Party outside the Non-compete Territory for use in Contech’s stormwater management products; provided, that during the Restricted Period (x) Contech shall not own, acquire or construct any manufacturing facilities in the Non-compete Territory that produce products that are produced by the Company as of the Effective Date and (y) none of the Restricted Parties shall acquire or construct a new manufacturing facility
3 120768324 located outside the Non-compete Territory in order to engage in a Competing Business through Contech in the Non-compete Territory (notwithstanding anything to the contrary contained in this Agreement, this Agreement shall not in any way preclude Contech from operating its business within the Non-compete Territory as it is being operated as of the date of this Agreement, including with respect to the manufacture, distribution or sale of precast concrete products and structures); (ii) either Restricted Party (or its Affiliates), as a result of a larger transaction, acquiring a Competing Business, subject to such Party’s compliance with § 2.3; or (iii) either Restricted Party (or its Affiliates) from owning capital stock or other securities of any entity which are publicly owned or regularly traded in the over-the-counter market or on any securities exchange; provided, however, such investment does not exceed, directly or indirectly, five percent (5%) of the issuer’s outstanding securities of that class. 2.3 Acquisition or Sale of a Competing Business. (i) In the event that, as a result of a larger transaction, either Restricted Party or any Affiliate of a Restricted Party acquires, directly or indirectly, a Competing Business, such Restricted Party or its Affiliate, within forty-five (45) days following such acquisition, will offer the Competing Business to the Company for a cash price equivalent to its reasonable value (as determined using the valuation model employed to determine the value of such Competing Business in such larger transaction). The Company will have forty-five (45) days from its receipt of written notice of such offer to elect to purchase such Competing Business. If the Company declines or fails to timely make an election to purchase such Competing Business, or if the Parties are unable to consummate such purchase after good faith efforts within ninety (90) days following the Company’s election to purchase, the Restricted Party or its Affiliate
may continue to operate the Competing Business notwithstanding the restrictions in § 2.1 above. (ii) If the Company declines or otherwise does not consummate the purchase of a Competing Business in accordance with § 2.3(i) above, and at a later date, the Restricted Party or its Affiliate decides to sell such a Competing Business, it shall first offer the Competing Business to the Company at a cash price at which it is willing to sell, and the Company will have thirty (30) days from its receipt of written notice of such offer to elect to purchase such Competing Business at such price. If the Company declines or fails to timely make an election to purchase such Competing Business, or the Parties are unable to consummate such purchase after good faith efforts within ninety (90) days following the Company’s election to purchase, the Restricted Party or its Affiliate shall have eighteen (18) months to sell the Competing Business on the open market for at least ninety percent (90%) of the price at which the Competing Business was offered to the Company.
4 120768324 2.4 The Restricted Parties and the Company have examined in detail this Agreement and agree that the restraints imposed upon the Restricted Parties are reasonable in light of the legitimate interests of the Company, and are not unduly harsh upon either Restricted Party’s function as a company with respect to its remaining areas of business., 3. INJUNCTIVE RELIEF. The Restricted Parties acknowledge that the remedies at law for any breach or threatened breach of any restrictive covenant contained in this Agreement will be inadequate and that the Company is entitled to seek injunctive relief to prevent breaches of this Agreement and to enforce specifically the terms and conditions of § 2 in addition to any other remedy to which the Company may be entitled at law or equity. 4. REVIEW BY COUNSEL. The Restricted Parties understand the nature of the burdens imposed by the restrictive covenants contained in this Agreement. The Restricted Parties acknowledge that they are entering into the Agreement on their own volition as a condition to the consummation of the transactions contemplated by the Purchase Agreement, and that they have been given the opportunity to have this Agreement reviewed by legal counsel. 5. RESTRICTIVE COVENANTS OF THE ESSENCE/VIOLATIONS. The restrictive covenants set forth herein are of the essence of this Agreement and the Purchase Agreement; they shall be construed as independent of any other provision in this Agreement or the Purchase Agreement; and the existence of any claim or cause of action of a Restricted Party against the Company or the Purchaser, whether predicated on this Agreement or not, shall not constitute a defense to the enforcement by the Company of the restrictive covenants contained herein. 6. ASSIGNABILITY. This Agreement shall not be terminated by the merger or consolidation of a Restricted Party or any of its Affiliates with any corporate or other entity or by
the transfer of all or substantially all of the assets of the Restricted Party or any of its Affiliates to any other person, corporation, firm or entity. The provisions of this Agreement shall be binding on and shall inure to the benefit of any successor in interest to or assign of each Restricted Party and/or any of its Affiliates. 7. SEVERABILITY. The provisions of this Agreement are severable and the invalidity of any one or more provisions shall not affect the validity of any other provision. In the event that a court of competent jurisdiction shall determine that any provision of this Agreement or the application thereof is unenforceable in whole or in part because of the duration or scope thereof, the Parties agree that said court in making such determination shall have the power to reduce the duration and scope of such provision to the extent necessary to make it enforceable, and that the Agreement in its reduced form shall be valid and enforceable to the full extent permitted by law.
5 120768324 8. AMENDMENT; WAIVER. No amendment of any provision of this Agreement shall be valid unless the same shall be in writing and signed by all of the Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether intentional or not, shall be effective unless explicitly set forth in writing and signed by the party so waiving, nor shall it be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence. 9. ATTORNEYS’ FEES. In any action to enforce the restrictive covenant in § 2.1, above, the non-prevailing Party shall pay, indemnify, and save the prevailing Party harmless against all costs and expenses (including reasonable attorneys’ fees and expenses) incurred by the prevailing Party with respect to enforcement of its rights under this Agreement. 10. GOVERNING LAW AND JURISDICTION. 10.1 This Agreement shall be governed by and construed in accordance with the domestic laws of the State of Delaware without giving effect to any choice or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. 10.2 Each of the Parties submits to the jurisdiction of any state or federal court sitting in Wilmington, Delaware, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Each Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or in equity. 11. NOTICES. All notices, requests, demands, claims, and other communications hereunder will be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed duly given if (and then two business days after) it is sent by registered or certified mail, return receipt requested, postage prepaid, and addressed to the intended recipient as set forth below: If to the Company: Eagle Corporation 1020 Harris Street Charlottesville, Virginia 22903 Attn: David T. Paulson, President Facsimile: 434-977-3573 E-mail: dpaulson@eagle-corp.com
6 120768324 With a copy to: Williams Mullen 321 East Main Street, Suite 400 Charlottesville, Virginia 22903 Attn: Kenneth C. Shevlin Facsimile: 434-817-0977 E-mail: kshevlin@williamsmullen.com If to Quikrete: Quikrete Holdings, Inc. Five Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attention: Nick Ivezaj, General Counsel E-mail: nick.ivezaj@quikrete.com If to Forterra: Forterra Pipe & Precast, LLC c/o Quikrete Holdings, Inc. Five Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attention: Nick Ivezaj, General Counsel Email: nick.ivezaj@quikrete.com Any Party may send any notice, request, demand, claim, or other communication hereunder to the intended recipient at the address set forth above using any other means (including personal delivery, expedited courier, messenger service, ordinary mail, or electronic mail), but no such notice, request, demand, claim, or other form of communication of notice shall be deemed to have been duly given unless and until it actually is received by the intended recipient. Any Party may change the address to which notices, requests, demands, claims, and other communications hereunder are to be delivered by giving the other Parties notice in the manner herein set forth. 12. INTERPRETATION. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the interpretation of this Agreement. All words used in this Agreement will be construed to be of such gender or number as circumstances require. The Parties understand and agree that the restrictive covenants herein are to be construed as being in connection with the sale and/or creation of a business rather than as in connection with individual employment. 13. ENTIRE AGREEMENT. This Agreement and the documents to be executed hereunder (including the exhibits and documents attached hereto) constitute the entire agreement among the Parties pertaining to the subject matter hereof, and
supersede all prior agreements, understandings, negotiations and
7 120768324 discussions, whether oral or written, of the Parties pertaining to the subject matter hereof, including the terms of that certain Non-competition Agreement, dated as of August 3, 2012, by and among the Purchaser (as successor to Americast, Inc.), Forterra (as successor to Hanson Pipe and Precast, LLC) and the Company, which agreement is hereby terminated by the Parties as of the Effective Date and shall have no further force and effect. This Agreement (including the exhibits and documents referred to herein) is delivered pursuant to the Purchase Agreement, is subject in all respects to the provisions thereof and is not meant to alter, enlarge or otherwise modify the provisions of the Purchase Agreement. In the event of any conflict or inconsistency between the terms of the Purchase Agreement and the terms of this Agreement, the terms of this Agreement shall control. 14. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when so executed shall be an original, and all of which taken together shall constitute one and the same instrument. Any signature on the signature page hereto transmitted by facsimile or electronic mail transmission shall have the full force and effect of an original signature. [Remainder of Page Intentionally Left Blank]
8 120768324 IN WITNESS WHEREOF, the Parties have had this Agreement executed by their duly authorized representatives as of the Effective Date. QUIKRETE HOLDINGS, INC. By: Name: Title: FORTERRA PIPE & PRECAST, LLC By: Name: Title: CONCRETE PIPE & PRECAST, LLC By: Name: Title:
120768324 APPENDIX 1 PRECAST NON-COMPETE TERRITORY (See attached.)
120768324
120768324
WM Draft – November 23, 2021 120768324
120761002 Exhibit B Form of Forms Sharing Agreement [attached]
120764201v6 FORMS RENTAL AGREEMENT THIS FORMS RENTAL AGREEMENT (the “Agreement”), made and entered into this ____ day of __________, 2021, (“Effective Date”) by and between Concrete Pipe & Precast, LLC, a Delaware limited liability company (the “CP&P”) and Forterra Pipe & Precast, LLC, a Delaware limited liability company (the “FP&P”, and collectively with CP&P, the “Parties”, and each, a “Party”). WHEREAS, CP&P is the owner of certain reinforced concrete elliptical pipe forms and the necessary ancillary parts (including, without limitation, headers, pallets and vibrators) for the proper production of reinforced concrete elliptical pipe (the “Forms”) that are used in operations at CP&P’s Chesapeake, Virginia and Jessup, Maryland plants (collectively, “CP&P Plant”); and WHEREAS, FP&P is the owner of certain Forms that are used in operations at FP&P’s Columbus, Ohio plant (the “FP&P Plant”, and collectively with the CP&P Plant, each, a “Plant”); WHEREAS, in connection with that certain Membership Interest Purchase Agreement, by and between FP&P and Eagle Corporation, a Virginia corporation, dated November 24, 2021 with respect to the sale of membership interests in CP&P (the “Purchase Agreement”), each Party desires to lease to the other Party, and each Party desires to lease from the other Party, the Forms from time to time, pursuant to the terms set forth herein. NOW, THEREFORE, in consideration of the terms and provisions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. As used herein, the “Lessor” shall mean the Party leasing a Form to the other Party, and the “Lessee” shall mean the Party leasing a Form from the Lessor. Capitalized terms used but not defined herein will have the respective meanings given them in the Purchase Agreement. 2. Rental of Forms.
Subject to the terms, conditions and provisions herein, each Party hereby agrees to make available to and lease to the other Party the Forms used in such Party’s Plant for use by the other Party in the other Party’s Plant during the Term (as defined below), each in accordance with an individual written request (each, a “Rental Request”). Each Party hereby agrees to take and rent from the other Party, the Forms, upon such Party’s demand from time to time and in accordance with the terms and conditions set forth herein (each a “Rental”). 2. Rental Requests; Duration of Rental. Each Rental Request shall set forth (a) the requested rental term for the particular Forms (the “Rental Period”), which shall (i) commence on the date the Form or Forms are received by Lessee and (ii) shall be no shorter than the time necessary to complete the project or projects indicated in the Rental Request (as determined in the Lessee’s sole discretion); and (b) the type and quantity of Forms to be leased and a general description of the projects for which the Forms will be used. The Lessor shall, within five (5) Business Days of receipt of any Rental Request, either confirm availability of the Forms for the Rental Period or identify the first date as soon as practicable thereafter on which the Forms
120764201v6 requested in the Rental Request will be available for the Rental Period; provided, however, that the Lessor shall deliver the Form or Forms indicated in the Rental Request within twenty (20) Business Days of the date of the Rental Request for Forms; provided, however, the Lessor shall not be responsible for delays caused by the delivery service. 3. Forms Available to Lessee. Notwithstanding anything to the contrary set forth herein, Lessee shall not be entitled to: (i) lease any forms or ancillary parts of the Lessor other than the Forms in existence and in working and transportable condition on the date of the applicable Rental Request, and not being used or reasonably anticipated to be used by the Lessor during the applicable Rental Period; (ii) rent any Forms to the extent such Lessee has Forms in its possession or control that are functionally equivalent to those set out in any Rental Request; or (iii) use any Form rented hereunder at a location other than the Lessee’s Plant. For the avoidance of doubt, nothing in this Agreement shall obligate the Lessor to purchase or otherwise acquire any forms or ancillary parts from any third party or from any plant of Lessor or any of its affiliates, other than the Lessor’s Plant. 4. Rental Fee; Freight Costs. The Lessee shall pay to the Lessor a rental fee equal to $1.00 per Rental (“Rent”). In addition, the Lessee shall be responsible for fifty percent (50%) of any (a) applicable sales, use or other taxes, custom charges or duties on the lease and use of such Forms, and (b) all transportation costs, loading or unloading charges or related fees associated with the shipment and transfer (delivery and return) of Forms between the Parties (collectively, the “Additional Charges”). A Form will be considered in possession of the Lessee from the date such Form is received by the Lessee until the date that the Form is delivered to the shipping or transportation company for delivery back to the Lessor (freight collect). Rent will be
due and payable on the last day of each month for all Forms in the possession of the Lessee during such month. In addition, Additional Charges will be invoiced monthly and shall be due and payable no later than thirty (30) days after the date of invoice. 5. Condition of Leased Forms. The Lessee shall accept the Forms in their “as-is” condition, without warranty or representation of any kind and Lessor shall have no obligation to replace or repair any Forms. THERE ARE NO IMPLIED WARRANTIES OF ANY KIND IN CONNECTION WITH THE LEASE OF THE FORMS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 6. Use and Maintenance of Leased Forms. During the Term, the Lessee may use the Forms for the projects described in the applicable Rental Request and covenants and agrees to maintain the Forms in good working order and condition, ordinary wear and tear and casualty excepted. 7. Default. If either Party defaults in any material respect in the performance of, or compliance with, any term or condition hereof, the non-defaulting Party may terminate the Agreement, and Lessor may reclaim the Forms. Notwithstanding the foregoing, the defaulting Party shall be given twenty (20) Business Days prior written notice of any default or breach, and the non-defaulting Party may not terminate the Agreement if, within twenty (20) Business Days of receipt of such notice, the defaulting Party has corrected the default or breach or taken action reasonably likely to effect such correction within a reasonable time.
120764201v6 8. Indemnification. The Lessee shall indemnify, defend and hold harmless the Lessor and its affiliates against any and all losses, costs, expenses and other damages incurred by the Lessor or its affiliates relating to or arising from the Lessee’s use, maintenance or repair of the Forms or breach or non-fulfilment of this Agreement. Lessee’s obligations to indemnify the Lessor and its affiliates does not extend to any losses, costs, expenses or other damages that arise out of the gross negligence or misconduct of the Lessor. The Lessor shall indemnify, defend and hold harmless the Lessee and its affiliates against any and all losses, costs, expenses and other damages incurred by the Lessee or its affiliates relating to or arising from the Lessor’s breach or non- fulfilment of this Agreement. Lessor’s obligations to indemnify the Lessee and its affiliates does not extend to any losses, costs, expenses or other damages that arise out of the gross negligence or misconduct of the Lessee. 9. Term. The term of the Agreement shall commence on the Effective Date and continue for a period of eighteen (18) months. 10. Assignment. Neither Party may assign its rights under this Agreement without the prior written consent of the other Party. Any purported assignment of this Agreement to which consent has not been obtained shall be voidable at the option of the non-consenting Party. 11. Subordination. Each Party agrees to subordinate this Agreement to any security interest that the other Party has placed or may hereafter place upon the Forms owned by such Party. 12. Notices. Any notice or demand under the terms of this Agreement or under any statute which must or may be given or made by a party hereto shall be in writing and shall be given or made by certified mail addressed to the respective parties as follows: If to Lessor: Concrete Pipe & Precast, LLC Attn: John Blankenship 10364 Design Road, Bldg. A Ashland VA 23005 Phone: 804-752-1412 Email:
jblankenship@concretepandp.com If to Lessee: Forterra Pipe & Precast, LLC c/o Quikrete Holdings, Inc. Five Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attn: Nick Ivezaj Phone: 404-9263114 Email: nick.ivezaj@quikrete.com Such notice or demand shall be deemed to have been given or made when deposited, postage prepaid, in the United States mail. The above addresses may be changed at any time by giving written notice in compliance with this section. 13. Rights of Successors and Assigns. The covenants and conditions contained in the Agreement shall bind and inure to the benefit of the Parties and their respective heirs, executors, administrators, successors and assigns.
120764201v6 14. Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such terms or provisions to persons or circumstances other than those as to when it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 15. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof, and no oral statement or representations or prior written matter not contained in this Agreement shall have any force or effect. This Agreement shall not be modified or amended in any way except by a writing executed by both parties. 16. Choice of Law. This Agreement shall be governed by the laws of the State of Delaware. The exclusive venue for any action arising out this Agreement shall be a court of appropriate jurisdiction in Wilmington, Delaware. [Signature Page Follows]
[Signature Page to Forms Rental Agreement] 120764201v6 IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. LESSOR: CONCRETE PIPE & PRECAST, LLC, a Delaware limited liability company By: Name: Title: LESSEE: FORTERRA PIPE & PRECAST, LLC a Delaware limited liability company By: Name: Title:
120675626v12 Execution Version ASSET PURCHASE AGREEMENT, dated as of December 13, 2021, among FORTERRA PIPE & PRECAST, LLC and HYDRO CONDUIT, LLC D/B/A RINKER MATERIALS as the Sellers, and FOLEY PRODUCTS COMPANY as the Purchaser
TABLE OF CONTENTS Page -i- ARTICLE 1 PURCHASE AND SALE .................................................................................................... 1 SECTION 1.1 Seller Assets.................................................................................................... 1 SECTION 1.2 Assumed Seller Liabilities............................................................................... 4 SECTION 1.3 Assumed Contracts and Transfer of Permits .................................................. 5 SECTION 1.4 Purchase Price ............................................................................................... 6 SECTION 1.5 Allocation and Proration ............................................................................... 6 ARTICLE 2 CLOSING ............................................................................................................................. 6 SECTION 2.1 Closing ........................................................................................................... 6 SECTION 2.2 Deliveries by the Seller .................................................................................. 6 SECTION 2.3 Deliveries by the Purchaser ........................................................................... 8 SECTION 2.4 St. Martinville Sublease Agreement ............................................................... 9 SECTION 2.5 Intentionally Omitted ...................................................................................... 9 SECTION 2.6 Proceedings at Closing .................................................................................. 9 ARTICLE 3 POST-CLOSING ADJUSTMENT ..................................................................................... 9 SECTION 3.1 Inventory Adjustment. ..................................................................................... 9 SECTION 3.2 Dispute Resolution. ...................................................................................... 10 SECTION 3.3 Post-Closing Adjustment. ............................................................................. 11 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS ............................ 11 SECTION 4.1 Organization; Power and Authority. ............................................................ 11 SECTION 4.2 Authorization; Execution and Validity ......................................................... 12 SECTION 4.3 Absence of Conflicts ..................................................................................... 12 SECTION 4.4 Governmental Approvals .............................................................................. 12 SECTION 4.5 Financial Data ............................................................................................. 12 SECTION 4.6 Liabilities ...................................................................................................... 13 SECTION 4.7 Absence of Cer
.................................................... 15 SECTION 4.10 Material Contracts ....................................................................................... 16 SECTION 4.11 Intellectual Property .................................................................................... 17 SECTION 4.12 Litigation ...................................................................................................... 17 SECTION 4.13 Employee Benefit Plans. ............................................................................... 17 SECTION 4.14 Labor and Employment Matters. .................................................................. 18 SECTION 4.15 Taxes. ........................................................................................................... 18 SECTION 4.16 Permits; Compliance with Laws................................................................... 19 SECTION 4.17 Proceedings; Orders .................................................................................... 19 SECTION 4.18 Environmental Laws. .................................................................................... 20 SECTION 4.19 Customers and Suppliers. ............................................................................. 21 SECTION 4.20 Insurance ...................................................................................................... 21 SECTION 4.21 Affiliated Transactions ................................................................................. 21 SECTION 4.22 Fees .............................................................................................................. 22 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ..................... 22 SECTION 5.1 Organization; Power and Authority ............................................................. 22 SECTION 5.2 Authorizations; Execution and Validity ....................................................... 22 SECTION 5.3 Absence of Conflicts ..................................................................................... 22 SECTION 5.4 Governmental Approvals .............................................................................. 22 SECTION 5.5 Fees .............................................................................................................. 23 SECTION 5.6 Sophisticated Purchaser. .............................................................................. 23 SECTION 5.7 No Financing Contingency ........................................................................... 23 ARTICLE 6 COVENANTS .................................................................................................................... 23
TABLE OF CONTENTS Page -ii- SECTION 6.1 Cooperation. ................................................................................................. 23 SECTION 6.2 Conduct of Business ..................................................................................... 24 SECTION 6.3 Access to Information ................................................................................... 25 SECTION 6.4 Certain Confidential Information. ................................................................ 26 SECTION 6.5 Access to Documents Following the Closing; Preservation of Books and Records. ................................................................................................. 26 SECTION 6.6 Limited Representations. .............................................................................. 27 SECTION 6.7 Cash and Cash Equivalents. ......................................................................... 28 SECTION 6.8 Mail .............................................................................................................. 28 SECTION 6.9 Bulk Sales Laws ............................................................................................ 29 SECTION 6.10 Seller Employee Benefit Arrangements. ....................................................... 29 SECTION 6.11 Carve-Out Transaction; Termination of Certain Services and Arrangements ............................................................................................... 30 SECTION 6.12 Fleet Leases. ................................................................................................. 30 SECTION 6.13 Title and Survey Review ............................................................................... 31 SECTION 6.14 St. Martinville Leased Real Property ........................................................... 31 SECTION 6.15 Sellers Names; Marks. .................................................................................. 32 SECTION 6.16 R&W Insurance Policy ................................................................................. 32 SECTION 6.17 Purchase Orders .......................................................................................... 32 SECTION 6.18 Raw Materials .............................................................................................. 32 ARTICLE 7 TAX MATTERS ................................................................................................................ 32 SECTION 7.1 Allocation of Liability for Transfer Taxes .................................................... 32 SECTION 7.2 Allocation of Liability for Other Taxes. ....................................................... 33 SECTION 7.3 No Changes in Elections, etc. ....................................................................... 33 SECTION 7.4 Allocation of Purchase Price ....................................................................... 33 SECT
.................................................................................................. 35 SECTION 7.8 Conflicts ....................................................................................................... 35 ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER .......................................................................................................... 35 SECTION 8.1 Accuracy of Representations and Warranties .............................................. 35 SECTION 8.2 Performance of Covenants ........................................................................... 35 SECTION 8.3 No Order ...................................................................................................... 35 SECTION 8.4 Closing Deliveries ........................................................................................ 36 SECTION 8.5 Required Consents ........................................................................................ 36 SECTION 8.6 Absence of Material Adverse Effect ............................................................. 36 SECTION 8.7 DOJ Consent ................................................................................................ 36 SECTION 8.8 Intentionally Omitted .................................................................................... 36 SECTION 8.9 Real Estate.................................................................................................... 36 SECTION 8.10 Acquisition of Forterra ................................................................................. 36 ARTICLE 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS .......... 36 SECTION 9.1 Accuracy of Representations and Warranties .............................................. 36 SECTION 9.2 Performance of Covenants ........................................................................... 37 SECTION 9.3 No Order ...................................................................................................... 37 SECTION 9.4 Closing Deliveries ........................................................................................ 37 SECTION 9.5 Required Consents ........................................................................................ 37 SECTION 9.6 Intentionally Omitted. ................................................................................... 37 SECTION 9.7 DOJ Consent ................................................................................................ 37 SECTION 9.8 Acquisition of Forterra ................................................................................. 37
TABLE OF CONTENTS Page -iii- ARTICLE 10 TERMINATION .............................................................................................................. 37 SECTION 10.1 Termination of Agreement ............................................................................ 37 SECTION 10.2 Effect of Termination .................................................................................... 38 ARTICLE 11 INDEMNIFICATION ..................................................................................................... 39 SECTION 11.1 Survival of Covenants. .................................................................................. 39 SECTION 11.2 Intentionally Omitted. ................................................................................... 39 ARTICLE 12 DEFINITIONS ................................................................................................................. 39 SECTION 12.1 Certain Definitions ....................................................................................... 39 SECTION 12.2 Other Defined Terms .................................................................................... 48 ARTICLE 13 GENERAL ........................................................................................................................ 49 SECTION 13.1 SURVIVAL ................................................................................................. 49 SECTION 13.2 Amendments ................................................................................................. 50 SECTION 13.3 Waivers ......................................................................................................... 50 SECTION 13.4 Notices .......................................................................................................... 50 SECTION 13.5 Successors and Assigns; Parties in Interest; Assignment ............................ 51 SECTION 13.6 Severability ................................................................................................... 51 SECTION 13.7 Entire Agreement .......................................................................................... 52 SECTION 13.8 Choice of Law; Arbitration. ......................................................................... 52 SECTION 13.9 Specific Performance ................................................................................... 53 SECTION 13.10 Expenses ....................................................................................................... 54 SECTION 13.11 Release of Information ................................................................................. 54 SECTION 13.12 Disclosure Schedules .................................................................................... 54 SECTION 13.13 Certain Rules of Construction ...................................................................... 54 SECTION 13.14 Facsimiles; Counterparts ............................................................................. 55 Ex
Plant) Exhibit A-5 – Form of Warranty Deed (St. Martinville Plant) Exhibit B – Form of Forms Rental Agreement Exhibit C – Reserved Exhibit D – Form of St. Martinville Sublease Agreement Exhibit E – Form of Aggregate Supply Agreement Exhibit F – Form of Bill of Sale and Assignment and Assumption Agreement Exhibit G – Inventory Methodology Exhibit H – Substituted Indemnification Provisions Exhibit I – Transition Services Agreement
-1- ASSET PURCHASE AGREEMENT This ASSET PURCHASE AGREEMENT, dated as of December 13, 2021 (this “Agreement”), is entered into by and among Forterra Pipe & Precast, LLC, a Delaware limited liability company (“FPP”), Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability company (“Rinker Materials” and, together with FPP, the “Sellers”), and Foley Products Company, Inc., a Georgia corporation (the “Purchaser”). The Sellers and Purchaser are sometimes referred to collectively as the “parties” and individually as a “party.” WHEREAS, with respect to such transaction, the Sellers desire to sell, transfer and assign to the Purchaser, and the Purchaser desires to acquire and assume from the Sellers, certain assets and liabilities associated with the Rinker Material’s reinforced concrete pipe and precast plants and the associated real property located in Phoenix, Arizona; American Canyon, California; Littleton, Colorado; and Ft. Myers, Florida (such properties constituting the “Rinker Plants”); and certain assets and liabilities associated with FPP’s reinforced concrete pipe and precast plant and associated real property located in St. Martinville, Louisiana (the “Forterra Plant”); WHEREAS, pursuant to that certain Agreement and Plan of Merger among Quikrete Holdings, Inc. (“Quikrete”), Jordan Merger Sub, Inc. (“Merger Sub”) and Forterra, Inc. (“Forterra”) dated as of February 19, 2021, as the same may be amended (the “Merger Agreement”), Merger Sub will merge with and into Forterra (the “Merger”), with Forterra surviving the Merger as a wholly-owned subsidiary of Quikrete; WHEREAS, the United States Department of Justice (“DOJ”) is expected to issue a DOJ Consent in connection with its review of the Merger and the transactions contemplated by this Agreement; and WHEREAS, capitalized terms used herein without definition have the respective meanings set forth in Article 11. NOW, THEREFORE, in consideration of the premises, the terms and provisions set forth herein, the mutual benefits to be gained by the performance thereof and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 PURCHASE AND SALE SECTION 1.1 Seller Assets. (a) At the Closing
of the Sellers’ right, title, and interest in and to the following properties and assets (the “Seller Assets”): (i) indefeasible fee simple title to the Real Property identified and described on Schedule 1.1(a)(i), together with all buildings, structures, and improvements located thereon and the Sellers’ right, title, and interest in and to all property rights therein
-2- (including all easements, rights of way, access rights, parking, covenants, and other rights appurtenant to such Real Property) (collectively, the “Seller Owned Real Property”); (ii) all Equipment owned or leased by the Sellers that is located at any Designated Plant on the Closing Date or primarily used in the operation of any Designated Plant, including, without limitation: (i) any Equipment shared between any Designated Plant and any other plant owned or operated by any Seller and primarily used in the operation of any Designated Plant; (ii) the Equipment set forth on Schedules 1.1(a)(ii)(A) (Ft Myers Equipment), 1.1(a)(ii)(B) (Littleton Equipment), 1.1(a)(ii)(C) (St. Martinville Equipment), 1.1(a)(ii)(D) (Napa Equipment) and 1.1(a)(ii)(E) (Phoenix Equipment); (iii) the forms set forth on Schedule 1.1(a)(ii)(F); and (iv) the rolling stock set forth on Schedule 1.1(a)(ii)(G); (iii) all inventory of the Sellers produced or held for sale by the Sellers (including raw materials and work in progress) located on, or in transit to, any of the Designated Plants on the Closing Date; (iv) the following Contracts relating to the Designated Plants, subject to the terms of Section 1.3, to which either Seller is a party in effect on the Closing Date (collectively, the “Assumed Seller Contracts”): (A) all Contracts set forth on Schedule 1.1(a)(iv); provided that no more than fifteen (15) days after the date hereof, Sellers shall deliver copies, to the extent available, of all such Contracts to the Purchaser (or if any such Contract is not available or is not reduced to writing, a description of all terms of such Contract), and within ten (10) days of the delivery of copies or descriptions, as applicable, of all such Contracts, the Purchaser shall have the unilateral right to elect not to assume any Contract listed on Schedule 1.1(a)(iv) (other than any such Contract which is denoted with an asterisk on such Schedule) upon written notice to Sellers, in which case such Contract shall be deemed stricken from Schedule 1.1(a)(iv), and such Contract shall be deemed an Excluded Asset, and the obligations thereunder shall be deemed Seller Retained Liabilities; (B) all open purchase orders or other Contracts for reinforced concrete pipe and precast products entered into in the Ordinary Course of Business to be fulfilled after the Closing Date by the Sellers from an
Closing Date by the Sellers from the Designated Plants; (v) the Seller Permits, subject to the terms of Section 1.3 and to the extent they are transferable to the Purchaser;
-3- (vi) all historical financial operations data and records related exclusively to the operation of the Designated Plants that are maintained by and in the possession of the Sellers at the Designated Plants as of the Closing Date, including customer, distributor, and supplier lists, customer credit files, maintenance records, environmental and engineering reports, transportation and warranty data, OSHA logs, and personnel files, driver qualification files, audiogram results, medical files for the Transferred Seller Employees (the “Seller Books and Records”), but not including any Retained Seller Books and Records; and (vii) all customer prepayments, advances, and deposits. (b) For the avoidance of doubt, the Seller Assets shall exclude all of the properties, assets and rights of the Sellers other than as expressly set forth in Section 1.1(a) (the “Excluded Seller Assets”), including, without limitation, the following properties, assets, and rights of the Sellers: (i) all of the Sellers’ cash and cash equivalents, on hand or in bank or savings and loan accounts, certificates of deposit and U.S. government securities of any kind or nature; (ii) all bank accounts of the Sellers; (iii) all right, title and interest in and to any Real Property owned or leased by the Sellers, other than the Seller Owned Real Property and Seller Leased Real Property; (iv) all right, title and interest in and to any inventory of the Sellers sold or disposed of prior to Closing; (v) the Shared Seller Assets; (vi) all computer servers of the Sellers, wherever located; (vii) all Seller Plans; (viii) all rights in and to the names “Forterra,” “Rinker Materials,” or “Quikrete,” or any related or similar Trademarks or any part or derivative thereof; (ix) any Tax refunds or credits, but in each case solely for Taxes paid or otherwise borne by either of the Sellers (or any of their Affiliates) and only to the extent that such refunds or credits are attributable to the ownership or operation of the Seller Assets or the Designated Plants during Pre-Closing Tax Periods; (x) all Intellectual Property owned or licensed by any Seller; (xi) all Retained Seller Books and Records;
-4- (xii) all of the Sellers’ accounts receivable (including all associated lien rights), prepayments, advances, and deposits arising out of the operation of the business conducted at the Designated Plants as of the Closing Date; and (xiii) all rights and claims of the Sellers relating to the Retained Seller Liabilities. SECTION 1.2 Assumed Seller Liabilities. (a) The Purchaser shall assume, pay, perform and discharge when due the following liabilities (the “Assumed Seller Liabilities”): (i) all liabilities arising on or after the Closing Date under or with respect to the Assumed Seller Contracts; provided, however, that Purchaser shall not assume any liabilities (i) arising under the Assumed Seller Contracts prior to the Closing Date or (ii) arising out of any assignment of the Assumed Seller Contracts in violation of the terms thereof; (ii) all liabilities arising on or after the Closing Date related to the Seller Permits except to the extent that such liabilities arise out of conditions existing at Closing; (iii) liabilities with respect to the Transferred Seller Employees allocated to the Purchaser pursuant to Section 6.10; (iv) any liabilities for Taxes for which the Purchaser is responsible pursuant to Section 7.2(b) (which, notwithstanding anything else in this Section 1.2(a) to the contrary, shall be the only liabilities for Taxes that are treated as Assumed Seller Liabilities); and (v) all liabilities arising on or after the Closing Date out of the operation by the Purchaser of the Designated Plants or the ownership of the Seller Assets. (b) Notwithstanding the provisions of Section 1.2(a) to the contrary, the Purchaser shall not, and shall have no obligation to, assume, pay, perform, or discharge any debts, liabilities, or obligations of any kind, character, or description whatsoever (whether known or unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, due or to become due) arising from or in connection with the business conducted at the Designated Plants, other than the Assumed Seller Liabilities. For the avoidance of doubt, the Purchaser is not assuming any of the following liabilities of Sellers (the “Retained Seller Liabilities”): (i) all liabilities for any Indebtedness of the Sellers; (ii) any liabilities for Taxes for which the Sellers
-5- (iv) all liabilities arising under that certain agreement between Rinker Materials and Construction & General Laborer’s Union Local No. 324 dated November 19, 2019 through the Closing, including all obligations under Article 16 to the Laborers’ International Union of North America, National (Industrial) Pension Fund and the Laborer’s International Union of North America, National Pension Trust Agreement; (v) all accounts payable, accrued expenses, unearned revenue, customer advances and all other current liabilities arising out of the operation of the business conducted at the Designated Plants as of the Closing Date; (vi) all liabilities arising out of the operation by the Sellers of the business conducted at the Designated Plants or the ownership of the Seller Assets prior to the Closing that are not assumed by the Purchaser, including (A) product liability claims resulting from products manufactured or sold by the Sellers prior to Closing, (B) warranty claims resulting from products manufactured or sold by the Sellers prior to Closing and (C)Proceedings pending or threatened against the Sellers; (vii) all run-off liability relating to insurance claims incurred prior to the Closing Date; and (viii) any Pre-Closing Environmental Liabilities. SECTION 1.3 Assumed Contracts and Transfer of Permits. Nothing in this Agreement shall be construed as an attempt by the Sellers to assign any Assumed Seller Contract or transfer any Seller Permit to the extent that such Assumed Seller Contract is not assignable without the necessary notice to or consent of the other party or parties thereto (each, a “Nontransferable Seller Contract”) or such Permit is not transferable without the necessary notice to or consent of the issuer thereof (each, a “Nontransferable Seller Permit” and, collectively with all Nontransferable Seller Contracts, the “Nontransferable Seller Rights”), and such notice to or consent of such other party has not been given or received, as applicable, as of the Closing Date. The Purchaser acknowledges that no adjustment to the Purchase Price shall be made for any Nontransferable Seller Rights and that the Purchaser shall have no Claim against the Sellers or any other Person in respect of such Nontransferable Seller Rights. Prior to and following the Closing, each of the Sellers and the Purchaser shall use its com
Purchaser in all cases in which such consent is required for such assignment or transfer. Notwithstanding the absence at Closing of one or more Nontransferable Seller Rights that is intended to be included within the Seller Assets pursuant to Section 1.1, following the Closing at such time as consent has been obtained, the related Nontransferable Seller Right shall be assigned or transferred to the Purchaser automatically without any other conveyance or other action by the Purchaser. For a period of six months after the Closing, pending receipt or in the absence of any such consent, the Sellers will provide the Purchaser with such rights and benefits under such Nontransferable Seller Rights as will not result in a violation nor breach of, or constitute a default under, the terms thereof, including enforcement for the benefit of the Purchaser of the rights of the Sellers thereunder. As between the Sellers and the Purchaser, the Purchaser will be deemed to have fully assumed the Sellers’ performance obligations for any
-6- such Nontransferable Seller Contract that is intended to be an Assumed Seller Contract or Nontransferable Seller Permit that is intended to be included in the Seller Assets at Closing and the benefit of which is provided to the Purchaser pursuant to the foregoing sentence in accordance with this Agreement. SECTION 1.4 Purchase Price. In consideration of the sale, assignment, conveyance, and transfer by the Sellers of the Seller Assets to the Purchaser, at the Closing, the Purchaser shall (i) assume the Assumed Seller Liabilities and (ii) pay to the Sellers an amount in cash equal to $95,000,000 less any Indebtedness assumed by the Purchaser (the “Closing Cash”). SECTION 1.5 Allocation and Proration. The Sellers shall pro-rate rents, operating expenses, water and sewer charges, and other utilities and all prepaid assets and liabilities and assessments relating to the Designated Plants based upon the number of days on or prior to, and the number of days after, the Closing Date in the relevant period. The Sellers shall be responsible for all such amounts with respect to the Designated Plants for the portion of such periods that ends on the Closing Date, and the Purchaser shall be responsible for all such amounts in respect of the Designated Plants for the portion of such periods beginning after the Closing Date. To the extent any amounts to be pro-rated hereunder are not definitively known as of the Closing, the parties shall use their best estimate for purposes of calculating the amounts payable at the Closing, subject to true-up as appropriate and as soon as reasonably practicable when the final amounts are known. For the avoidance of doubt, notwithstanding the foregoing, Article 7, rather than this Section 1.5, shall exclusively apply for purposes of allocating the parties’ liability for Taxes. ARTICLE 2 CLOSING SECTION 2.1 Closing. Upon the terms and subject to the conditions contained herein, the closing of the transactions contemplated by this Agreement (the “Closing”) and exchange of documents shall take place by email, facsimile or by other electronic transmission on the date on which the last of the applicable conditions set forth in Article 8 and Article 9 are satisfied or waived by the applicable Parties (other than those conditions that by their nature are intended to be satisfied only at the Closing, but subje
anything to the contrary in this Agreement, the Purchaser shall have the right to extend the Closing through February 10, 2022. The Parties acknowledge and agree that all proceedings at the Closing shall be deemed to be taken and all documents to be executed and delivered by all parties at the Closing shall be deemed to have been taken and executed simultaneously on the Closing Date, and no proceedings shall be deemed taken nor any document executed or delivered until all have been taken, executed and delivered. SECTION 2.2 Deliveries by the Seller. At the Closing, the Sellers shall deliver, or shall cause to be delivered, to the Purchaser each of the following:
-7- (a) special warranty deeds, substantially in the applicable forms of Exhibits A- 1, A-2, A-3, and A-4 hereto (the “Deeds”), with respect to each tract of Seller Owned Real Property, in each case duly executed by the applicable Seller; (b) the Bill of Sale and Assignment and Assumption Agreement duly executed by the Seller; (c) the St. Martinville Sublease Agreement, duly executed by the applicable Seller; (d) the Aggregate Supply Agreement, substantially in the form of Exhibit E hereto (the “Aggregate Supply Agreement”), duly executed by Western Aggregates LLC, a California limited liability company; (e) the Forms Rental Agreement, substantially in the form of Exhibit B hereto (the “Forms Rental Agreement”), duly executed by the Sellers; (f) the Transition Services Agreement, substantially in the form of Exhibit I hereto (the “Transition Services Agreement”), duly executed by the Sellers. Not later than seven (7) business days prior to Closing, the Sellers and the Purchaser, acting reasonably and in good faith, shall revisit the services described in Exhibit A and adjust Exhibit A given the Purchaser’s then plans for integration implementation as of the Closing, it being understood that, during the period after the date of this Agreement and through Closing, the Purchaser shall use commercially reasonable efforts to plan for, and implement on the Closing, as fulsome of a transition to the Purchaser of such Exhibit A services for the Designated Plants as may be reasonably practical; (g) a release and lien discharge issued by the various lenders evidencing the release of all Liens on the Seller Assets under the Credit Agreements; (h) intentionally omitted; (i) a list of all employees of the Sellers or their applicable Affiliate performing services at any Designated Plant whose employment with the Sellers or their applicable Affiliate has been terminated by the Sellers or their applicable Affiliate within the six-month period ending on the Closing Date but prior to the Closing; (j) with respect to the Seller Owned Real Property, title affidavits and gap indemnities customarily required by the Purchaser Title Company in order to allow the Purchaser Title Company to limit any exceptions for parties in possession, and not to take any exceptions for mechanics’ liens, and evidence of authority and any additional documents a
if such Seller is a disregarded entity for U.S. federal income Tax purposes) complying with Treas. Reg. § 1.1445-2(b)(2) which evidences the non-foreign status of each of the Sellers (or such Sellers’ regarded parent if such Seller is a disregarded entity for U.S. federal income Tax purposes);
-8- (l) a certificate of the Sellers certifying that the conditions set forth in Sections 8.1, 8.2 and 8.6 have been satisfied, dated the Closing Date and signed on behalf of the Sellers by a duly authorized officer of the Sellers; (m) a certificate of the Secretary or other duly authorized officer of the Sellers, dated the Closing Date, (i) setting forth a copy of the resolutions of the board of directors of Sellers authorizing the execution, delivery and performance of this Agreement, (ii)certifying that such resolutions were duly adopted and have not been amended or rescinded as of the Closing Date and (iii)certifying that the authorized representatives of the Sellers executing this Agreement, the Transaction Agreements and the other documents, agreements and instruments to be executed and delivered by the Sellers pursuant to this Agreement are duly authorized to execute the same; (n) a certificate from the Secretary of State of Delaware with respect to the existence and good standing of FPP; (o) a certificate from the Secretary of State of Delaware with respect to the existence and good standing of Rinker Materials; and SECTION 2.3 Deliveries by the Purchaser. At the Closing, the Purchaser shall deliver, or shall cause to be delivered to the Sellers each of the following: (a) the Closing Cash, by wire transfer of immediately available funds to such accounts as the Sellers shall have specified to the Purchaser at least 24 hours prior to the Closing; (b) the Bill of Sale and Assignment and Assumption Agreement duly executed by the Purchaser; (c) the St. Martinville Sublease Agreement, duly executed by the Purchaser; (d) Intentionally Omitted (e) the Forms Rental Agreement, duly executed by the Purchaser; (f) a certificate of the Purchaser certifying that the conditions set forth in Sections 9.1, 9.2 and 9.6 have been satisfied, dated the Closing Date and signed on behalf of the Purchaser by a duly authorized officer of the Purchaser; (g) a certificate of the Secretary or other duly authorized officer of the Purchaser, dated the Closing Date, (i) setting forth a copy of the resolutions of the board of directors of the Purchaser authorizing the execution, delivery and performance by the Purchaser of this Agreement and each of the Transaction Agreements, (ii) certifying that such resolutions were duly adopted and have not been amended or
executed and delivered by the Purchaser pursuant to this Agreement are duly authorized to execute the same; and
-9- (h) a certificate from the Secretary of State of the State of Georgia with respect to the existence and good standing of the Purchaser. SECTION 2.4 St. Martinville Sublease Agreement. In connection with the transactions contemplated hereby, FPP and the Purchaser agree to enter into, or cause to be entered into, as the case may be, at the Closing a sublease in the form attached hereto as Exhibit D (the “St. Martinville Sublease Agreement”), whereby the FPP shall sublease to the Purchaser, subject to the terms and conditions set forth in the Master Lease, the St. Martinville Leased Real Property. SECTION 2.5 Intentionally Omitted SECTION 2.6 Proceedings at Closing. All proceedings to be taken and all documents to be executed and delivered by the parties at the Closing shall be deemed to have been taken and executed and delivered simultaneously, and no proceedings shall be deemed taken nor any documents executed or delivered until all have been taken, executed and delivered. ARTICLE 3 POST-CLOSING ADJUSTMENT SECTION 3.1 Inventory Adjustment. (a) No more than three (3) days prior to Closing, a physical count of all saleable inventory, raw materials, castings, grates and other ancillary products included in the Seller Assets (the “Closing Inventory”) shall be carried out at the Designated Plants by representatives of each of the Seller and the Purchaser, which physical count shall be carried out in a manner mutually agreed upon by the parties. For the purposes of this Section 3.1(a), “saleable” inventory shall mean (i) finished goods, which are of first quality and saleable in the ordinary course without discount, and (ii) all raw materials, castings, grates and other ancillary products that are useable in the production of pipe and precast products or otherwise suitable for resale, unless obsolete, damaged or cosmetically impaired. The representatives of each of the Purchaser and the Seller shall attempt, in good faith, to resolve any disputes which may arise during the physical count of the inventory. Upon completion of the physical count of the inventory, the representatives of each of the Seller and the Purchaser shall agree upon and execute a statement setting forth either (i) the final physical count of the inventory in the event that the representatives agree on such final physical count or (ii) the final p
(the “Disputed Seller Inventory Items”) therein. The value of Closing Inventory shall be determined in accordance with the Inventory Methodology. In the event that there are any Disputed Seller Inventory Items, such Disputed Seller Inventory Items shall be resolved following the Closing pursuant to the dispute resolution procedures set forth in Section 3.2 and the final physical count agreed to by the parties or resolved pursuant to Section 3.2 shall be final and binding on the parties, including for purposes of determining the Closing Inventory. (b) No later than 90 days after the Closing Date (or if such day is not a Business Day, the next Business Day), the Purchaser shall deliver to the Seller a certificate executed by the
-10- chief financial officer of the Purchaser (the “Purchaser CFO Certificate”) setting forth the Purchaser’s proposed calculations of Closing Inventory. From the delivery of the Purchaser CFO Certificate until the earlier to occur of (i) the appointment of a Final Arbiter pursuant to Section 3.2(c) or (ii) the finalization of the Closing Inventory pursuant to Section 3.2, the Purchaser shall give the Sellers reasonable access during normal business hours to the relevant books and records, the accounting and other appropriate personnel and the independent accountants of the Purchaser in order to enable the Seller to obtain information relating to the calculation of Closing Inventory; provided, that such access does not unreasonably interfere with the normal business operations of the Purchaser. Sellers shall give the Purchaser reasonable access during normal business hours to the relevant books and records, the accounting and other appropriate personnel and the independent accountants of the Sellers in order to enable the Purchaser to obtain information relating to the calculation of Closing Inventory; provided, that such access does not unreasonably interfere with the normal business operations of the Seller. SECTION 3.2 Dispute Resolution. (a) The Sellers shall be entitled to dispute the proposed calculation of Closing Inventory set forth in the relevant Purchaser CFO Certificate delivered by the Purchaser if the Seller delivers a written notice (an “Objection Notice”) to the Purchaser within 30 days (or if such day is not a Business Day, the next Business Day) after receipt of the Purchaser CFO Certificate in which the Sellers object to the proposed calculation of Closing Inventory by the Purchaser (the date upon which the Sellers deliver an Objection Notice to the Purchaser being hereinafter referred to as the “Objection Date”). Any amounts or calculations set forth in a Purchaser CFO Certificate that are not included in an Objection Notice shall be binding and conclusive upon the parties. (b) If the Sellers deliver an Objection Notice to the Purchaser within the time period specified in Section 3.2(a), the parties shall attempt in good faith to agree upon the disputed calculation of Closing Inventory described in the Objection Notice and the resulting Final Adjustment Amount, during the period commencing on the Objectio
Objection Notice (whether such amount is the same as or different from the amount calculated based upon the Purchaser CFO Certificate), the calculation of the Final Adjustment Amount provided for in Section 3.3 shall be made using the agreed upon amount. (d) If the parties are unable to resolve any such disagreements within the Negotiation Period, the items that remain in dispute from the Objection Notice (but no other matters) (the “Disputed Items”) shall be submitted to BDO USA, LLP or, if such firm declines or is unable to accept such appointment, then such other reputable national firm of independent public accountants mutually agreed upon by the Purchaser and the Seller (in either case, the “Final Arbiter”). Within five days after the engagement of the Final Arbiter, each of the Seller and the Purchaser shall submit to each other and the Final Arbiter a statement (the “Adjustment Statement”) containing its calculation of the items in dispute, which shall include only the Disputed Items. The Final Arbiter shall consider and have authority to resolve only the Disputed Items specifically set forth in the Objection Notice. The Final Arbiter shall apply only GAAP in a
-11- manner consistent with the Inventory Methodology and the provisions of this Article 3 in resolving any Disputed Items and may not increase the amount of any Disputed Item above the highest amount proposed in an Adjustment Statement and may not decrease any Disputed Item below the lowest amount proposed in an Adjustment Statement. The parties shall use commercially reasonable efforts to cause the Final Arbiter to resolve any such disputed accounting matters within 30 days after its engagement. The decision of the Final Arbiter as to the calculation of Closing Inventory and the resulting Final Adjustment Amount, shall be in writing and shall be final and binding upon all parties hereto for all purposes, absent fraud or manifest error. All fees and expenses relating to the work, if any, to be performed by the Final Arbiter (including any retainer) shall be borne by the Purchaser, on the one hand, and the Seller, on the other hand, in inverse proportion to the dollar amount of the Disputed Items as to which such party prevails as finally determined by the Final Arbiter, which proportionate allocations shall also be determined by the Final Arbiter at the time it renders its determination on the merits of the matters in dispute. SECTION 3.3 Post-Closing Adjustment. (a) No later than five days (or if such fifth day is not a Business Day, the next Business Day after such fifth day) after a binding determination of the Closing Inventory has been made in accordance with Section 3.2: (i) if the final calculation of Closing Inventory is less than the Target Inventory, then an amount equal to such difference shall be paid by the Seller to the Purchaser in accordance with Section 3.3(b); and (ii) if the final calculation of Closing Inventory is greater than the Target Inventory, then an amount equal to such difference shall be paid by the Purchaser to the Seller in accordance with Section 3.3(b). (b) The amounts due and owing pursuant to Section 3.3(a) (if any) shall be referred to herein as the “Final Adjustment Amounts.” The Final Adjustment Amounts shall be paid by the Sellers or the Purchaser, as applicable, by wire transfer of immediately available funds to such account as the Sellers or the Purchaser, as applicable, shall have specified to the other party in writing at least 24 hours in advance. For the avoidance of doubt, t
payment of the Final Adjustment Amounts, the final determination of the Closing Inventory in accordance with Section 3.2(c) or (d) shall be binding and conclusive upon the Sellers and the Purchaser. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE SELLERS Each Seller severally (as to such Seller only and not jointly) hereby represents and warrants to the Purchaser that, on and as of the date of this Agreement (or, to the extent a representation or warranty is made as of a specified date, as of such date), except as set forth in schedules delivered by the Sellers to the Purchaser (the “Seller Schedules”): SECTION 4.1 Organization; Power and Authority.
-12- (a) Forterra Pipe & Precast, LLC is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and assets and conduct its business and operations as presently being conducted. (b) Hydro Conduit, LLC is a limited liability company duly organized, validly existing and in good standing under the Laws of the State of Delaware and has all requisite limited liability company power and authority to own, lease and operate its properties and assets and conduct its business and operations as presently being conducted. SECTION 4.2 Authorization; Execution and Validity. Each of the Sellers has all requisite limited liability company power and authority to execute and deliver this Agreement and each Transaction Agreement and perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and each Transaction Agreement by the Sellers executing the same and the performance by the Sellers of their obligations hereunder and thereunder have been duly and validly authorized by all necessary action on the part of the Sellers. This Agreement has been, and at the Closing each of the Transaction Agreements will be, duly and validly executed and delivered by the Sellers and this Agreement and each Transaction Agreement constitutes or will constitute a valid and binding obligation of the Sellers executing the same, enforceable against the Sellers in accordance with its terms, subject to the Enforceability Exceptions. SECTION 4.3 Absence of Conflicts. The execution and delivery by the Sellers of this Agreement and each Transaction Agreement, the performance by the Sellers of their obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby will not (a) result in any violation or breach of any provision of the Organizational Documents of the Sellers, (b) assuming that the filings and Consents referred to in Schedule 4.3, including the DOJ Consent, are made or obtained, result in any violation in any material respect of any Law or any Order applicable to the Sellers and their respective properties or assets (c) result in the creation of, or impose on the Sellers any obligati
Contract is required for the valid execution or delivery by the Sellers of this Agreement or in order to consummate the transactions contemplated by this Agreement or any Transaction Agreement. SECTION 4.4 Governmental Approvals. Except for the DOJ Consent, there is no requirement applicable to the Sellers to obtain any Consent of, or to make or effect any declaration, filing or registration with, any Governmental Authority for the valid execution and delivery by the Sellers of this Agreement or any Transaction Agreement, the due performance by the Sellers of its obligations hereunder or thereunder or the lawful consummation of the transactions contemplated hereby and thereby, except for any filing, consent or requirement which, if not made, obtained or satisfied, would not reasonably be expected to prevent, impede or otherwise affect in any material respect the transactions contemplated by this Agreement or any Transaction Agreement. SECTION 4.5 Financial Data. The financial data for the Designated Plants provided in Schedule 4.5 is true and correct in all material respects and accurately derived from the books
-13- and records of the Sellers as of the dates and for the periods indicated therein (the “Seller Financial Data”). SECTION 4.6 Liabilities. The Assumed Seller Liabilities do not include any material liabilities or obligations of a type required to be reflected on a balance sheet prepared in accordance with GAAP, except for liabilities or obligations (a)reflected or reserved against in the Seller Financial Data, (b) incurred by the Sellers in the Ordinary Course of Business after the date of the Seller Financial Data or (c) described in the Disclosure Schedules; provided, however, that no representation or warranty is made in this Section 4.6 with respect to any liability or obligation relating to Taxes, which are addressed exclusively in Section 4.15, compliance with Laws or Environmental Laws, which are addressed exclusively in Section 4.17 and 4.18, respectively. SECTION 4.7 Absence of Certain Changes. From the date of the Seller Financial Data until the date hereof, there has not been: (a) any event or occurrence that has had a Material Adverse Effect; (b) any damage, destruction, loss or casualty to any of the Seller Assets, which (after taking into account any available insurance coverage or reserves reflected in the Seller Financial Data) is material to the operation of the Designated Plants; (c) any material increase in any compensation payable to any Transferable Seller Employee other than (i) normal merit increases, (ii) increases in the Ordinary Course of Business, (iii) any increase in the compensation payable or to become payable to any employees whose total compensation after such increase would not exceed $100,000 per annum or (iv) any bonus, service, pension, award, percentage compensation or other benefit to be paid by the Sellers in connection with the consummation of the transactions contemplated hereby; (d) subject to Section 6.15, the transfer, assignment, lease, sale or other disposition of any material Seller Assets, except in the Ordinary Course of Business; (e) any extraordinary destruction or casualty loss to any material Seller Assets or the Seller Leased Real Property; (f) any change by the Sellers in accounting or Tax reporting principles with respect to the business conducted at the Designated Plants; (g) any transfer of Equipment from any of the Designated Plants to any other plant owned or op
(i) any liquidation or dissolution or filing of a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition against the Seller under any similar Law; or
-14- (j) any commitment or agreement to do any of the foregoing. SECTION 4.8 Real Property. (a) Schedule 4.8(a) lists the address and legal description of each parcel of Seller Owned Real Property. With respect to each parcel of Seller Owned Real Property: (i) Rinker Materials has good and marketable fee simple title to each parcel of Seller Owned Real Property, free and clear of all Liens other than Permitted Liens; and following the Closing Date, Purchaser will have sufficient title in and to the Seller Owned Real Property necessary to operate and conduct the business conducted thereon in the same manner as Rinker Materials conducted business prior to the Closing Date; (ii) Rinker Materials has not conveyed, assigned, or encumbered its interest in the Seller Owned Real Property or any portion thereof, except with respect to Permitted Liens; (iii) Rinker Materials has not leased or otherwise granted to any Person the right to occupy the Seller Owned Real Property or any portion thereof that remain in effect; (iv) There are no options, rights of first offer, or rights of first refusal to purchase the Seller Owned Real Property or any portion thereof; and (v) Rinker Materials has been in open, notorious, adverse and peaceful possession of the Seller Owned Real Property, and, other than Permitted Liens, there are no adverse claims to title to the Seller Owned Real Property. (b) Schedule 4.8(b) lists the address of the Seller Leased Real Property. The Master Lease constitute all leases, subleases and licenses, including all amendments, extensions and renewals with respect thereto, pursuant to which FPP holds any Seller Leased Real Property. FPP has heretofore made available to the Purchaser a true and complete copy of the Master Lease. With respect to the Master Lease, except as otherwise set forth on Schedule 4.8(b): (i) Such lease is valid, binding and enforceable against FPP, and FPP enjoys peaceful and undisturbed possession of the Seller Leased Real Property; and following the Closing Date, Purchaser will have sufficient interest in and to the Seller Leased Real Property necessary to operate and conduct the business conducted thereon in the same manner as FPP conducted business prior to the Closing Date; (ii) FPP is not in breach or default under such lease, and to Sellers’ Knowledge, no event has occurred or
given any written notice of any default or event that with notice or lapse of time, or both, would constitute a default by FPP under such lease which remains uncured, and, to Sellers’ Knowledge, no other party is in default thereof;
-15- (iv) FPP has not, and to Sellers’ Knowledge, no other party to such lease has exercised any termination rights with respect thereto; (v) FPP has not subleased, assigned or otherwise granted to any Person the right to use or occupy such Seller Leased Real Property or any portion thereof that remains in effect; and (vi) FPP has not pledged, mortgaged or otherwise granted a Lien on its leasehold interest in any such Seller Leased Real Property that remains in effect, other than Permitted Liens. (c) Since January 1, 2020, the Sellers have not received any written notice of, nor is either Seller aware of any, (i) violations of building codes or zoning ordinances or other governmental or regulatory Laws affecting the Seller Owned Real Property or Seller Leased Real Property, (ii) existing, pending or threatened condemnation proceedings affecting the Seller Owned Real Property or Seller Leased Real Property, or (iii) existing, pending or threatened zoning, building code or other moratorium proceedings, or similar matters which could reasonably be expected to adversely affect the ability to operate the Seller Owned Real Property or Seller Leased Real Property as currently operated. Since January 1, 2020, neither the whole nor any material portion of any Seller Owned Real Property or Seller Leased Real Property has been damaged or destroyed by fire or other casualty. The use of the Seller Owned Real Property and the Seller Leased Real Property for the purposes for which it is presently being used is permitted as of right under all applicable zoning requirements and is not subject to any “permitted nonconforming” use or structure classifications, except for any such classifications that would not be material to the Seller Owned Real Property and the Seller Leased Real Property. To the Sellers’ Knowledge, all improvements are in compliance with all applicable Laws, including those pertaining to zoning, building and the disabled, are in good repair and condition, ordinary wear and tear excepted, and are free from latent and patent defects. No part of any improvement encroaches on any setback restriction or any real property not included in the Seller Owned Real Property or the Seller Leased Real Property, to the extent that any such encroachment would not reasonably be expected to have a Material Adverse Effect. Th
Knowledge, is not located within any flood plain or area subject to wetlands regulation. SECTION 4.9 Title to and Condition of Tangible Assets. The Sellers own and have good and valid title to, or have valid rights to use, all of the tangible assets included in the Seller Assets, free and clear of all Liens other than (a) Liens under the Seller Indebtedness, which Liens will be released at the Closing, and (b) Permitted Liens. Except for the Excluded Seller Assets, the Shared Seller Assets and any assets described in Schedule 4.9, and after taking into account the rights granted to the Purchaser under the St. Martinville Sublease Agreement pursuant to Section 1.5, the Seller Assets include all assets necessary and sufficient in all material respects to operate the Designated Plants substantially as currently conducted. Except as described in Schedule 4.9, each item of Equipment is in good repair and good operating condition, normal wear and tear, routine maintenance, and minor repairs required to be performed in the Ordinary Course of Business excepted, is suitable for immediate use in the Ordinary Course of Business (except to the extent any such item of Equipment requires any such routine maintenance or minor
-16- repairs required to be performed in the Ordinary Course of Business) and, to the Sellers’ Knowledge, is free from latent and patent defects. For the avoidance of doubt, no asset described on Schedule 4.9 shall be an Excluded Seller Asset unless expressly stated therein. SECTION 4.10 Material Contracts. Schedule 4.10 lists all of the following Contracts that are included in the Assumed Seller Contracts and in effect as of the date hereof to which the Sellers are a party or by which its assets are bound, in each case that relate exclusively to the business conducted at the Designated Plants (collectively, the “Material Seller Contracts”): (a) each Contract (or series of related Contracts with the same counterparty) that resulted in aggregate monetary payments by the Sellers to a third party during the twelve months ended September 30, 2021 in an amount exceeding $200,000; (b) each Contract (or series of related Contracts with the same counterparty) that resulted in aggregate monetary receipts by the Sellers during the twelve months ended September 30, 2021 in an amount exceeding $200,000; (c) each Contract that provides for the incurrence of Indebtedness or the guaranty of Indebtedness of any Person by the Sellers and that is secured by a Lien on any of the Seller Assets; (d) each Contract with any Governmental Authority; (e) each Contract expressly limiting, in any material respect, the freedom of the Sellers to compete in any line of business or with any Person in any geographic area; (f) each Contract under which the Sellers or any of their Affiliates agrees to supply all or substantially all of the requirements of a Person for any products or services, or which gives any other Person the exclusive right to be a provider of specific products or services to the Sellers with respect to the business conducted at the Designated Plants; (g) each lease or similar agreement under which either of the Sellers is the lessor of, or makes available for use by any Person, any of the Seller Assets; (h) each Contract that grants to any Person any “most favored nation” right or any right of first refusal or other preferential right to purchase or acquire any material assets or property; (i) each Contract providing for any “take or pay” or similar unconditional purchaser or payment obligations; and each joint venture, partnership or similar Co
Exceptions, and the applicable Seller party is not in breach or default in any material respect in the performance of its duties and obligations under any Material Seller Contract, and to the Sellers’ Knowledge, no event has occurred that, with notice or lapse of time or both, would constitute such a material breach or default.
-17- SECTION 4.11 Intellectual Property; Privacy and Security. (a) The Sellers or their Affiliates own or have a valid right to use all Intellectual Property that is currently used in and material to the business conducted at the Designated Plants. To the Sellers’ Knowledge, the business presently conducted at the Designated Plants does not infringe upon or otherwise violate the Intellectual Property rights of any Person. (b) The computers, computer networks, software, computer hardware, and communication and storage systems owned, operated, or licensed by the Sellers or their Affiliates for business conducted at the Designated Plants (collectively, the “Systems”) are in good repair and operating condition and are sufficient for the needs of the business as currently conducted at the Designated Plants. The Sellers or their Affiliates have (i) implemented and maintained reasonable business continuity, backup, security, and disaster recovery plans and procedures with respect to the Systems and Business Data at the Designated Plants, (ii) taken reasonable steps to assess and test such plans and procedures at the Designated Plants; and (iii) remediated all material vulnerabilities identified by such assessments and testing at the Designated Plants. To the Sellers’ Knowledge, there has been no actual or reasonably suspected (i) unlawful or unauthorized access, use, loss, destruction, modification, or disclosure of Seller Books and Records; (ii) breach of security of any System; or (iii) disruption, interruption or outage to any System that that has caused or would reasonably be expected to cause a material disruption to the conduct of the business at the Designated Plants. (c) The Sellers or their Affiliates are in compliance with all applicable Privacy and Security Laws in all material respects, as such laws may apply to Business Data at the Designated Plants. The Sellers or their Affiliates have at all times implemented and maintained security measures, plans, procedures, controls, and programs to protect and maintain the security of Business Data at the Designated Plants. The Sellers or their Affiliates have not received any written, oral, or other notice from any Person or Governmental Authority, and there are no Proceedings alleging that the Sellers or their Affiliates are in violation of a Privacy and Security Law with respect to th
the Designated Plants or relating to the Seller Assets. There are no Proceedings pending or, to the Sellers’ Knowledge, threatened against the Sellers (a) that question the validity of this Agreement or any Transaction Agreement or any action taken or to be taken by the Sellers in connection with, or which seek to enjoin or obtain monetary damages in respect of, this Agreement or any Transaction Agreement or (b) that would reasonably be expected to adversely affect in any material respect the ability of the Sellers to perform its obligations under and consummate the transactions contemplated by this Agreement or any Transaction Agreement. SECTION 4.13 Employee Benefit Plans. (a) Schedule 4.13(a) sets forth each material written “employee benefit plan,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”); stock purchase, severance, retention, employment, change-in-control, deferred compensation, supplemental retirement, bonus, incentive, vacation or other employee benefit plan,
-18- agreement or program that is maintained, sponsored or contributed to by the Sellers or their ERISA Affiliates for the benefit of the Transferable Seller Employees (the “Seller Plans”). (b) None of the Sellers nor any of their ERISA Affiliates within the six-year period preceding the date of this Agreement has sponsored, maintained or contributed to (or has been obligated to contribute to) any “employee pension plan,” as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA or Section 412, 430 or 436 of the Code or any “multiemployer plan,” as defined in Section 3(37) of ERISA, in each case that is applicable to any Transferable Seller Employees. (c) Each Seller Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination, advisory or opinion letter from the IRS regarding its qualification thereunder and, to the Sellers’ Knowledge, nothing has occurred since the date of the most recent such determination, advisory or opinion letter that would adversely affect the qualified status of any of such Seller Plans. (d) There is no Proceeding pending or, to the Sellers’ Knowledge, threatened in writing against the Sellers related to the Seller Plans (other than routine claims for benefits) that would reasonably be expected to result in any liability to the Purchaser. (e) The representations and warranties set forth in this Section 4.13 constitute the only representations and warranties of the Sellers regarding the Seller Plans or any other ERISA matter. SECTION 4.14 Labor and Employment Matters. (a) The Sellers are, as of the date hereof, in compliance in all material respects with all applicable Laws respecting employment of its employees. There has been no “mass layoff’ or “plant closing” within the meaning of the Worker Adjustment and Retraining Notification Act of 1988, as amended (“WARN”), or any similar state or local “mass layoff’ or “plant closing” Law with respect to the Sellers within the six months prior to the date hereof. (b) The Sellers are not a party to or otherwise bound by any collective bargaining agreement, Contract or other agreement or understanding with a labor union or labor organization in respect of the business conducted at the Designated Plants. The Sellers are not subject to any written charge, demand, petition, or other Proceeding see
or, to the Sellers’ Knowledge, threatened, any material labor strike, walkout, work stoppage, slow-down, or lockout involving the business conducted at the Designated Plants. SECTION 4.15 Taxes. (a) All Tax Returns that are or were required to have been filed by the Sellers (or any of their Affiliates) pursuant to applicable Law with respect to the ownership or operation of the Seller Assets or the Designated Plants have been timely filed (taking into account any applicable extensions), and all Taxes due (whether or not shown on such Tax Returns) with respect to the ownership or operation of the Seller Assets or the Designated Plants have been paid in full.
-19- (b) All deficiencies asserted or assessments made as a result of any examinations by any Governmental Authority with respect to any Taxes due from the Sellers have been paid in full. No audit or other Proceeding by any Governmental Authority is pending or threatened in writing with respect to any Taxes due from the Sellers. (c) There are no Liens with respect to Taxes upon any of the Seller Assets, except for Permitted Liens. (d) None of the Seller Assets is subject to or owned by any Tax partnership, as defined in Code Section 761 and the related Treasury Regulations, or any analogous provision of applicable Tax Law. (e) For the avoidance of doubt, the representations and warranties made in this Section 4.15 and in Section 4.7(f), Section 4.13(c) and Section 4.23(a) are the only representations and warranties made by the Sellers with respect to matters related to Taxes. Furthermore, nothing in this Section 4.15 shall be construed as a representation or warranty with respect to, or a guarantee of, whether any particular position taken by the Sellers with respect to the Taxes attributable to the ownership or operation of the Designated Plants or the Seller Assets for a Pre- Closing Tax Period is permitted to be taken by the Purchaser after the Closing with respect to a Tax period (or portion thereof) beginning after the Closing Date. SECTION 4.16 Permits; Compliance with Laws. Schedule 4.16 lists all current Permits issued to the Sellers which are necessary and material to the conduct of the business as currently conducted at the Designated Plants or to the ownership, lease, operation or use of the Seller Assets (“Seller Permits”), including the names of the Permits and their respective dates of expiration. No event has occurred that, with or without notice or lapse of time or both, would reasonably be expected to result in the revocation, suspension, lapse or limitation of any Seller Permit. The Seller Permits constitute all material Permits that are required for the operation of the Designated Plants and the business conducted thereat as currently conducted and all Seller Permits are valid and in full force and effect. All fees and charges with respect to Seller Permits that are required to have been paid as of the date hereof have been paid in full. Since January 1, 2020, Sellers have complied in all material respects with
representations and warranties do not address Taxes which are the subject of Section 4.15 or Environmental Laws which are the subject of Section 4.18. SECTION 4.17 Proceedings; Orders. To the Sellers’ Knowledge, except as set forth on Schedule 4.17, there is no pending Proceeding, and no Person has threatened to commence any Proceeding: (i) that involves the Designated Plants or that relates to or might affect the Seller Assets (whether or not either of the Sellers is named as a party thereto) other than with respect to lapsed Environmental Permits of the Sellers for which re-applications are currently pending before the appropriate Governmental Authority; or (ii)that challenges, or that may have the effect of preventing, delaying, making illegal or otherwise interfering with, any of the transactions contemplated hereby. To the Sellers’ Knowledge and except as set forth Schedule 4.17, no event has occurred, and no Claim, dispute or other condition or circumstance exists, that would reasonably be expected to give rise to or serve as a basis for the commencement of any such
-20- Proceeding. There is no Order to which the Sellers, or any of the Seller Assets, is subject, and neither of the Sellers’ is subject to any Order that relates to the Designated Plants or to any of the Seller Assets. SECTION 4.18 Environmental Laws. (a) The operations of Sellers with respect to the Designated Plants and the business conducted at such Designated Plants are currently in compliance in all material respects with all applicable Environmental Laws, except for such matters as have been fully resolved. (b) Sellers have obtained and are in material compliance with all Environmental Permits which, to Sellers’ Knowledge, are necessary and material to the conduct of the business as currently conducted at the Designated Plants or to the ownership, lease, operation or use of the Designated Plants. Each of these Environmental Permits are disclosed on Schedule 4.18(b) with their respective dates of expiration. All such Environmental Permits are in full force and effect and shall be maintained in full force and effect, except as set forth in Schedule 4.18(b), by Sellers through the Closing Date in accordance with Environmental Laws. To the Sellers’ Knowledge, no environmental condition, environmental event or environmental circumstance exists at the Designated Plants that would reasonably be expected to prevent or impede in any material respect, after the Closing Date, the conduct of the business at the Designated Plants as currently conducted or the ownership, lease, operation or use of the Designated Plants. (c) Since January 1, 2020, neither of the Sellers have received from any Governmental Authority, with respect to the Designated Plants and the businesses conducted thereon, any: (i) Environmental Notice or Environmental Claim; or (ii) written request for information pursuant to Environmental Law, which, in each case, either remains pending or unresolved, or is the source of ongoing obligations or requirements as of the Closing Date. (d) To Sellers’ Knowledge, and except as described in Schedule 4.18(d) since January 1, 2020, there has been no Release of Hazardous Substances in concentrations that require reporting, investigation, or remediation or that give rise to liability under any Environmental Law with respect to the Designated Plants and the business conducted thereon, and Sellers have not r
thereon) has been contaminated with any Hazardous Substance which could reasonably be expected to result in an Environmental Claim against, or a violation of Environmental Law or term of any Environmental Permit by, Sellers. (e) The Assumed Seller Contracts do not include any Contracts pursuant to which the Purchaser will retain or assume any liabilities or obligations of third parties under Environmental Law with respect to the Designated Plants. (f) The Sellers have furnished to the Purchaser the (i) environmental audits, reports, studies, records, sampling data, site assessments, risk assessments and other environmental documents relating to the Designated Plants and the businesses conducted thereon listed on Schedule 4.18(f), which constitute all of the material written audits, reports, studies, records, sampling data, site assessments, risk assessments and other environmental documents relating to
-21- the Designated Plants that are in the Sellers’ possession or control related to compliance with Environmental Laws, Environmental Claims or an Environmental Notice or the Release of Hazardous Substances; and (ii) any and all material documents concerning planned or anticipated capital expenditures required to reduce, offset, limit or otherwise control pollution or emissions, manage waste or otherwise ensure compliance with current Environmental Laws (including, without limitation, costs of remediation, pollution control equipment and operational changes). (g) Sellers are not aware of and do not reasonably anticipate, as of the Closing Date, any condition, event or circumstance concerning the Release or regulation of Hazardous Substances that might, after the Closing Date, prevent, impede or materially increase the costs associated with the ownership, lease, operation, performance or use of the with the Designated Plants and the business conducted thereon. (h) The representations and warranties set forth in this Section 4.18 are the sole and exclusive representations and warranties of the Sellers with respect to matters relating to Environmental Laws or Hazardous Substances. SECTION 4.19 Customers and Suppliers. (a) Schedule 4.19(a) sets forth: (i) the ten largest customers of the business conducted at each of the Designated Plants (in the aggregate, measured by revenue generated), excluding any Affiliates of the Sellers, for the nine months ended September 30, 2021, and calendar year 2020 and (ii) the revenue generated from such customers (in the aggregate) during such periods. Except as set forth on Schedule 4.19(a), no customer identified in clause (i) above has advised either of the Sellers in writing that such customer is terminating or considering terminating any Material Seller Contract relating to the business conducted at the Designated Plants or is planning to discontinue or reduce its future spending with either of the Sellers. (b) Schedule 4.19(b) sets forth: (i) the ten largest suppliers of the business conducted at the Designated Plants (in the aggregate, measured by the dollar amounts paid by the Sellers to such suppliers), excluding any Affiliates of the Sellers, for the nine months ended September 30, 2021, and the calendar year 2020 and (ii) the dollar amounts paid by the Purchaser to su
terminating or considering terminating any Material Seller Contract relating to the business conducted at the Designated Plants or is planning to discontinue supplying the Designated Plants with goods or services or reduce the quantity of goods or services supplied. SECTION 4.20 Insurance. Schedule 4.20 sets forth a list of the insurance policies maintained by the Sellers that provide coverage for the Designated Plants and the business conducted at the Designated Plants. All such policies are, and will be through the Closing, in full force and effect and the Sellers are not in material default of any provision thereof or has received notice of cancellation or termination thereof. SECTION 4.21 Affiliated Transactions. There is no Contract, arrangement, liability or obligation between either of the Sellers and any of its Affiliates that will continue in effect or give rise to any obligation on the part of the Purchaser after the Closing Date.
-22- SECTION 4.22 Fees. The Sellers have not paid or become obligated to pay any fee or commission to any broker, finder or other intermediary in connection with the transactions contemplated by this Agreement for which the Purchaser will have any liability or responsibility whatsoever. ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PURCHASER The Purchaser hereby represents and warrant to the Sellers that, on and as of the date of this Agreement (or, to the extent a representation or warranty is made as of a specified date, as of such date): SECTION 5.1 Organization; Power and Authority. The Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Georgia and has all requisite corporate power and authority to own, lease and operate its properties and assets and conduct its business and operations as presently being conducted. SECTION 5.2 Authorizations; Execution and Validity. The Purchaser has all requisite corporate power and authority to execute and deliver this Agreement and each Transaction Agreement and perform its obligations hereunder and thereunder. The execution and delivery of this Agreement and each Transaction Agreement by the Purchaser, the performance by the Purchaser of its obligations hereunder and thereunder have been duly and validly authorized by all necessary corporate action on the part of the Purchaser. This Agreement has been, and at the Closing each of the Transaction Agreements will be, duly and validly executed and delivered by the Purchaser and this Agreement and each Transaction Agreement constitutes or will constitute a valid and binding obligation of the Purchaser, enforceable against the Purchaser in accordance with its terms, subject to the Enforceability Exceptions. SECTION 5.3 Absence of Conflicts. The execution and delivery by the Purchaser of this Agreement and each Transaction Agreement, the performance by the Purchaser of its obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby will not (i) result in any violation or breach of any provision of the Organizational Documents of the Purchaser, or (ii) result in any violation in any material respect of any Law or any Order applicable to the Purchaser and its respect
registration with, any Governmental Authority for the valid execution and delivery by the Purchaser of this Agreement or any Transaction Agreement, the due performance by the Purchaser of its obligations hereunder or thereunder or the lawful consummation by the Purchaser of the transactions contemplated hereby and thereby, except for any filing, consent or requirement which, if not made, obtained or satisfied, would not reasonably be expected to prevent, impede or otherwise affect in any material respect the transactions contemplated by this Agreement or any Transaction Agreement.
-23- SECTION 5.5 Fees. The Purchaser has not paid or become obligated to pay any fee or commission to any broker, finder or other intermediary in connection with the transactions contemplated by this Agreement for which the Sellers will have any liability or responsibility whatsoever. SECTION 5.6 Sophisticated Purchaser. (a) The Purchaser has read and understands the provisions of this Agreement, which it acknowledges have been negotiated at arm’s length, and has obtained appropriate professional assistance with respect to all legal, Tax and accounting consequences relating to the transactions contemplated hereby. In entering into this Agreement, the Purchaser is relying solely upon the representations, warranties and other terms and provisions of this Agreement and on the conclusions drawn from its own due diligence review. (b) The Purchaser acknowledges and agrees that neither the Sellers nor any of their Affiliates, Subsidiaries, officers or agents, or any other Person, has at any time expressly or implicitly represented, guaranteed, or warranted to the Purchaser that (i) any profit or other economic benefit will be realized by it as a result or in connection with its acquisition of the Seller Assets, (ii) any financial projections with respect to the Seller Assets or Designated Plants will prove to be true and correct or (iii) past performance or experience on the part of the Sellers in any way indicates the predictable results of the Purchaser with respect to the Seller Assets. SECTION 5.7 No Financing Contingency. The Purchaser has and will have as of the Closing Date sufficient cash on hand or in bank accounts or available under its line of credit with which to pay the Closing Cash, together with all fees and expenses incurred by or on its behalf, at Closing to perform its obligations under this Agreement and the other documents to which it is a party and to consummate the transactions contemplated herein and therein. ARTICLE 6 COVENANTS SECTION 6.1 Cooperation. (a) From the date hereof until the Closing Date, upon the terms and subject to the conditions of this Agreement, each of the parties shall use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done and cooperate with each other in order to do, all things necessary, proper or advisable (subject
extent the Sellers or the Purchaser or any of their respective Affiliates receives a request for information or documentary material from any Governmental Authority with respect to this Agreement or any of the transactions contemplated hereby, such party shall endeavor in good faith to make, or cause to be made, as soon as reasonably practicable and, to the extent permitted by applicable Law, after consultation with the other parties, an appropriate response in compliance with such request. The Sellers and the Purchaser shall each cooperate with and use all reasonable efforts to assist the other with respect to any negotiations with each Governmental Authority as to which such negotiations are necessary or appropriate in the
-24- consummation of the transactions contemplated hereby and shall produce all documents requested by, and provide responses to any questions from, such Governmental Authorities. The Purchaser shall, as promptly as practicable after the date hereof (to the extent the Purchaser has not already completed the following activities), (i) prepare and furnish all necessary information and documents reasonably requested by the DOJ and any other Governmental Authority; and (ii) use reasonable best efforts to demonstrate to the DOJ and any other Governmental Authority that the Purchaser is an acceptable purchaser of the Seller Assets. Nothing in this Agreement shall prevent the Sellers from complying with the DOJ Consent and the Sellers shall not be considered in breach of this Agreement for taking any actions to comply with the DOJ Consent. The Sellers shall control strategy and communications with the DOJ and any other Governmental Authority, and, to the extent not prohibited by Law, the DOJ, or any other Governmental Authority, the Purchaser shall not communicate with or make submissions to the DOJ or any other Governmental Authority without the simultaneous attendance or prior written consent of the Sellers. The Purchaser shall promptly notify the Sellers of any communications the Purchaser or its Affiliates receive from any Governmental Authority relating to the transactions contemplated by this Agreement and permit Sellers to review in advance any proposed communications by or on behalf of the Purchaser or any of its Affiliates to any Governmental Authority, unless the staff of such Governmental Authority requires otherwise; provided, however, that the Sellers shall not be entitled to review or have access to the Purchaser’s business plan or the Purchaser’s other competitively sensitive information. SECTION 6.2 Conduct of Business. From the date hereof until the Closing Date, each of the Sellers shall, unless the other parties shall otherwise consent in writing (which consent shall not be unreasonably withheld, conditioned or delayed) or except as described in Schedule 6.2 of the Seller Schedules or as otherwise specifically contemplated by this Agreement: (a) operate the Designated Plants only in the Ordinary Course of Business; (b) maintain its books, accounts and records that relate t
GAAP; (c) maintain the properties, Equipment and other assets included in the Seller Assets in the same condition as they were on the date of this Agreement, subject to reasonable wear and tear; (d) pay its debts, Taxes and other obligations with respect to the Assumed Seller Liabilities in the Ordinary Course of Business; (e) not transfer, assign, lease, sell, or otherwise dispose of any material Seller Assets except in the Ordinary Course of Business; (f) return to the Designated Plants any Equipment shared by the Designated Plants with any other plant owned or operated by either of the Sellers of their Affiliates and primarily used in the operations at the Designated Plants or which is necessary to produce products
-25- sold by the Designated Plants and not transfer any such shared Equipment from the Designated Plants; (g) clean up all junk, debris, waste and concrete culls from each of the Designated Plants prior to Closing; (h) remove the burned down building at the Littleton plant and provide, transport, replace, scrap, remove and/or repair the items of Equipment to the extent set forth in Schedule 4.9. In the event the Sellers cannot remove the burned down building at the Littleton plant before the Closing, the Sellers’ shall pay, at the Sellers’ sole expense, all cost associated with such removal; (i) not transfer or re-assign any management or supervisory personnel from the Designated Plants to any other plant owned or operated by either Seller or any of their Affiliates; (j) not liquidate or dissolve, or file a petition in bankruptcy under any provisions of federal or state bankruptcy Law or consent to the filing of any bankruptcy petition applicable to the Sellers under any similar Law; and (k) not agree to take any action or actions prohibited by any of the foregoing clauses (a) through (f); provided, however, that this Section 6.2 shall not be construed to prohibit (i) any payments to Affiliates or third parties in the Ordinary Course of Business, (ii) the performance of or actions taken in respect of the Retained Seller Liabilities or (iii) adjustments in inventory production that impact the calculation of Closing Inventory. SECTION 6.3 Access to Information. From and after the date hereof until the Closing Date, the Sellers shall, (a) subject to and in compliance with any obligations of confidentiality, access or non-disclosure provided by applicable Law or contained in any Contracts to which the Sellers or their Affiliates are a party or by which the Sellers or their Affiliates are bound, provide the Purchaser and its accountants, employees, attorneys and other representatives reasonable access to, and permit such Persons to review, during normal business hours and upon reasonable prior written request, the books, Contracts, accounts, records and files of the Sellers, and (b) provide such other information to the Purchaser and its representatives as they may reasonably request, in each case, which (i) is reasonably necessary to assist the Purchaser with integration and transition planning in connection with the transactions contemplated hereb
their Affiliates shall be obligated to provide to the Purchaser (x) any information relating to any offers or indications of interest received by the Sellers, their Affiliates or representatives from any Person other than the Purchaser to acquire the Seller Assets or other properties of the Sellers or assets or any communications between the Sellers and their Affiliates or representatives on the one hand and any such other Person on the other hand relating to such offers or indications of interest or the transactions contemplated thereby (it being understood that the Sellers may retain all such documents, information and communications, which shall be the sole property of the Sellers at all times prior to and after the Closing), (y) any work papers or
-26- similar materials prepared by the independent public accountants of the Sellers or their Affiliates, except to the extent that such accountants agree to provide access to such work papers or similar materials upon such terms and conditions as shall be determined by such accountants in their sole discretion, and (z) any documents or information that are protected by the attorney-client privilege or work product doctrines as determined in the Sellers’ sole discretion. SECTION 6.4 Certain Confidential Information. (a) The Purchaser hereby acknowledges that it and its Affiliates have received and will continue to receive certain documents and information from the other parties in connection with the transactions contemplated by this Agreement. All such materials reviewed or received, including, without limitation, materials reviewed in connection with Section 6.3, shall be deemed to be Confidential Information for the purposes of the Confidentiality Agreement. The Purchaser hereby acknowledges that it and its Affiliates are bound by the Confidentiality Agreement and agrees that it will not, and it will not permit any of its Affiliates, directors, officers, independent accountants, agents or other representatives to, use or disclose any Confidential Information of the Sellers, except as permitted by such agreement. The provisions of this Section 6.4, insofar as they relate to Confidential Information with respect to the Designated Plants, the Seller Assets and the Assumed Seller Liabilities (but not to any Excluded Seller Assets or Retained Seller Liabilities) shall terminate as to the Purchaser upon the Closing. Except as provided in the immediately preceding sentence, the provisions of this Section 6.4 shall survive the Closing or any termination of this Agreement indefinitely. Nothing in this Section 6.4 or the Confidentiality Agreement shall be construed to limit or supersede the common law of torts or statutory or other protection of Trade Secrets where such law provides the Sellers with greater or longer protection than provided in this Section 6.4. (b) Each party acknowledges that an Affiliate of the Sellers is a public company whose shares are traded on a national securities exchange. In connection therewith, the parties (i) are aware that the United States securities laws prohibit any Person who has material, nonpublic
Person is likely to purchase or sell those securities, (ii) are familiar with the Securities Act and the Exchange Act and (iii) shall not use, nor cause any third party to use, any Confidential Information in contravention of the Securities Act or the Exchange Act. SECTION 6.5 Access to Documents Following the Closing; Preservation of Books and Records. (a) For a period of seven (7) years from and after the Closing Date, (i) the Purchaser shall not dispose of or destroy any Seller Books and Records in such party’s possession at such time without first offering to turn over possession thereof to the Sellers, by written notice to the Sellers at least 90 days prior to the proposed date of such disposition or destruction; (ii) the Purchaser shall afford the Sellers and their Affiliates, representatives and agents access to its Books and Records for the purpose of making any required filing with any Governmental Authority or complying with any Tax or regulatory requirement applicable to such party or its Affiliates but not for the purpose of making or asserting any Claim or commencing or participating in any Proceeding against the Purchaser or its Affiliates, upon reasonable notice, during normal business hours, consistent with applicable Law and in accordance with and subject to such
-27- reasonable procedures and limitations as may be established by the Purchaser. Any information provided by the Purchaser to either of the Sellers or their representatives, in either case in accordance with this Section 6.5 or otherwise pursuant to this Agreement, shall be held by such requesting party and its representatives in accordance with Section 6.4 and shall be considered Confidential Information. Nothing contained in this Section 6.5 shall prohibit or restrict the Purchaser from destroying or disposing of any Books and Records in accordance with their regular document retention policies, as in effect from time to time. (b) Notwithstanding anything to the contrary herein, nothing herein shall require the Purchaser to disclose any information to either of the Sellers, their Affiliates, representatives or agents, in either case if such disclosure would jeopardize any attorney-client or other legal privilege or contravene any applicable Law, fiduciary duty or agreement. (c) Notwithstanding anything to the contrary herein, the seven-year period referred to in Section 6.5(a) with respect to any party shall be extended if either of the Sellers (or their successors) advises the Purchaser in writing, that any Proceeding or investigation is pending or threatened at the termination of such seven-year period, in which case such extension shall continue until any such Proceeding or investigation has been dismissed or settled through judgment or otherwise resolved. (d) Following the Closing Date, the Purchaser shall furnish the Quikrete Auditor with such information that it reasonably deems relevant in connection with its review, assessment audit, as applicable, of the historical financial statements for periods up to and including the Closing Date and/or the internal controls of Quikrete, the direct parent of Rinker Materials and/or Forterra, the direct parent of FPP. SECTION 6.6 Limited Representations. (a) Each of the parties expressly acknowledge and agree that neither such party nor any of its Affiliates has made and shall not be deemed to have made to (1) in the case of either of the Sellers, the Purchaser, and (2) in the case of the Purchaser, either of the Sellers, any representation or warranty other than those expressly made by the Sellers in Article 4 and the Purchaser in Article 5. Without limiting the generality of the foregoing, th
equity, with respect to the business conducted at the Designated Plants or the Seller Assets other than as set forth in Article 4, including, but not limited to, any (i) express or implied warranties as to any financial projections or other forward- looking information with respect to the business conducted at the Designated Plants, (ii) implied warranties of merchantability and fitness for a particular purpose with respect to the Seller Assets or (iii) express or implied warranties as to any other matter which, under applicable Law, would be deemed to give rise to any express or implied warranty unless such warranties are expressly disclaimed by the Sellers, and the Sellers hereby disclaim any other representations or warranties that would otherwise be deemed to be made by either of the Sellers, their Affiliates or any of their respective officers, directors, employees, agents, financial and legal advisors or other representatives in connection with this Agreement or any Transaction Agreement or the transactions contemplated hereby and thereby.
-28- (b) The Purchaser acknowledges and agrees that (i) it has not relied and is not relying upon any representations or warranties of the Sellers other than those contained in Article 4, (ii) the representations and warranties in Article 4 refer to past activities of the Sellers with respect to the Designated Plants up to the Closing and are not intended to serve as representations to, or a guarantee of, nor can they be relied upon with respect to, the operation of the Designated Plants by the Purchaser or its Affiliates after the Closing; and (iii) the Purchaser will not, and will cause its Affiliates not to, assert any claims or take any position in any Proceeding that is inconsistent with the provisions of this Section 6.6. (c) The Sellers acknowledges and agree that (i) the Sellers have not relied and are not relying upon any representations or warranties of the Purchaser other than those contained in Article 5, and (ii) the Sellers will not, and will cause their Affiliates not to, assert any claims or take any position in any Proceeding that is inconsistent with the provisions of this Section 6.6. SECTION 6.7 Cash and Cash Equivalents. (a) If, on or after the Closing Date, either of the Sellers receives any checks or any other amounts in cash in respect of any Seller Assets (other than in respect of any Retained Seller Liabilities), such Seller shall notify the Purchaser and such checks or cash (i) shall be held in trust for the benefit of the Purchaser, (ii) shall be segregated from the other property or funds of such Seller, (iii) in the case of checks, shall be (x) duly and properly endorsed to the Purchaser in accordance with such instructions as the Purchaser shall from time to time furnish to the Sellers and (y) forwarded, no later than five Business Days after the date of receipt thereof by such Seller, using a nationally recognized overnight delivery service for next-day delivery to the Purchaser, and (iv) in the case of cash in a form other than a check, shall be forwarded promptly to the Purchaser, but no later than five Business Days after the date of receipt thereof by such Seller, in such manner as the Purchaser shall from time to time direct. (b) If, on or after the Closing Date, the Purchaser receives any checks or any other amounts in cash in respect of any Excluded Seller Assets, Purchaser shall notify the Sellers and such checks or cash (i) shall be h
instructions as the Sellers shall from time to time furnish to the Purchaser and (y) forwarded, no later than five Business Days after the date of receipt thereof by the Purchaser, using a nationally recognized overnight delivery service for next-day delivery to the Seller, and (iv) in the case of cash in a form other than a check, shall be forwarded promptly to the Seller, but no later than five Business Days after the date of receipt thereof by the Purchaser, in such manner as the Sellers shall from time to time direct. SECTION 6.8 Mail. Each of the Sellers agrees to promptly deliver to the Purchaser and the Purchaser agrees to promptly deliver to the applicable Seller the original of any mail or other communication received by such party after the Closing Date which should properly be the property of such other party.
-29- SECTION 6.9 Bulk Sales Laws. The parties hereby waive compliance with any applicable Bulk Sales Laws in connection with the transactions contemplated by this Agreement or any Transaction Agreement. SECTION 6.10 Seller Employee Benefit Arrangements. (a) At least five (5) Business Days prior to the Closing Date, the Purchaser shall make an offer of employment to those (A) Transferable Seller Employees and (B) new employees of the Sellers hired at the Designated Plants after the date hereof and designated in writing to the Purchaser at least three Business Days prior to Closing, in each case whom the Purchaser elects, in its sole discretion, to make an offer of employment; provided however, that all offers of employment shall be subject to the Purchaser’s customary employee screening policies (including drug testing). (b) On and after the Closing Date, the Purchaser shall be responsible with respect to all Transferred Seller Employees for compliance with WARN and any similar state or local Laws. Neither the Purchaser nor any of its Affiliates shall, at any time during the six-month period after the Closing Date, take or otherwise permit to be taken any action that would result in a “plant closing” or a “mass layoff” (as each such term is defined in WARN) or any similar action under any applicable state or local Law requiring notice to employees in connection with a plant closing or layoff, in each case affecting in whole or in part any Transferred Seller Employees, any Designated Plant, or any other facility, site of employment, operating unit or employee of the Sellers, without complying fully with the notice and other requirements of WARN or such applicable state or local Law. (c) To the extent that any Transferred Seller Employee is covered by any collective bargaining agreement, the Purchaser, to the extent required under such agreement or applicable Law, shall (or shall cause an Affiliate to) assume and comply with, effective for periods after the Closing, such agreement. The Purchaser shall (or shall cause an Affiliate to) give any required notices relating to the assumption of such agreement. (d) Notwithstanding anything herein to the contrary, the Purchaser shall (or shall cause an Affiliate thereof to) treat, and cause the applicable benefit plans to treat, the service of Transferred Seller Empl
accrual of benefits under any defined benefit pension plan or under any severance plan), including, but not limited to, applicability of minimum waiting periods for participation, to the extent that Purchaser is not precluded from doing so pursuant to the terms of Purchaser’s employee benefit plan or insurance policy documents related to the Purchaser’s employee benefit plans. (e) From and after the Closing and subject to the Transition Services Agreement, the Purchaser shall be solely responsible for providing to Transferred Seller Employees and their qualified beneficiaries any continuation coverage that is required under COBRA or any other applicable state statute mandating health insurance continuation coverage in respect of any qualifying event occurring on or after the Closing Date.
-30- (f) In the event that a Transferred Seller Employee makes a voluntary election pursuant to Section 401(a)(31) of the Code to roll over his or her account balance in a tax-qualified defined contribution plan sponsored by the Sellers to a tax-qualified defined contribution plan sponsored by the Purchaser or an Affiliate thereof in which such Transferred Seller Employee is eligible to participate, the Purchaser shall cause such tax-qualified defined contribution plan to accept such rollover to the extent permitted by applicable Law. (g) The parties hereto acknowledge and agree that nothing herein shall be construed to (i) create any right in any other Person, including, without limitation, any employees, former employees, any participants in any Seller Plan (or other employee benefit plan within the meaning of Section 3(3) of ERISA) or any beneficiaries thereof, (ii) create any right to continued employment with the Seller, the Purchaser or any of their respective Affiliates, (iii) amend, or may be construed as amending, any Seller Plan or employee benefit plan, program or policy of the Purchaser or any of its Affiliates or (iv) confer upon any individual (including employees, retirees, or dependents or beneficiaries of employees or retirees) any right as a third-party beneficiary of this Agreement. (h) For the period commencing on the Closing Date through the end of the fifth calendar year commencing with first calendar year beginning after the Closing Date, the Sellers agree to fully indemnify Purchaser and its Affiliates for (i) the amount of any withdrawal liability or partial withdrawal liability incurred by Purchaser or its Affiliates in connection with the Construction & General Laborers’ Union Local No. 324 and the Laborers’ International Union of North America, National (Industrial) Pension Fund and the Laborers’ International Union of North America, National Pension Trust, and (ii) the amount of any bond issued by a corporate surety company or any amount held in escrow by a bank or similar financial institution, in either case, as furnished by Purchaser or its Affiliate to the Laborers’ International Union of North America, National (Industrial) Pension Fund and the Laborers’ Internal Union of North America, National Pension Trust, with respect to the Construction & General Laborers’ Union Local No. 324
SECTION 6.11 Carve-Out Transaction; Termination of Certain Services and Arrangements. The parties acknowledge that following the consummation of the transactions contemplated hereby, each of the parties will continue to be in the concrete pipe and precast manufacturing business and that the Seller Assets and the Designated Plants do not constitute all or substantially all of the concrete pipe and precast manufacturing operations of the Sellers. The parties further acknowledge that the Purchaser is not acquiring any right to any Excluded Seller Assets. Effective as of the Closing Date, and subject to the Transition Services Agreement, all Seller Corporate Services being provided by the Sellers or their Affiliates in respect of the business conducted at the Designated Plants shall cease and the Sellers and their Affiliates shall have no further obligation to provide any such services in respect of the Seller Assets or the Designated Plants. SECTION 6.12 Fleet Leases.
-31- (a) Schedule 6.12 lists each vehicle that is used exclusively in the business conducted at the Designated Plants but leased by the Sellers pursuant to a fleet lease (collectively, the “Fleet Leases”). At or prior to the Closing, the parties shall (i) establish, in the Purchaser’s name, a new lease (on terms reasonably satisfactory to the Purchaser) between the Purchaser and the lessor under the Fleet Lease with respect to the vehicles listed on Schedule 6.12, (ii) remove such vehicles and associated obligations from the Fleet Lease, and (iii) transfer and deliver such vehicles to the Purchaser; provided, however, that if any vehicle listed on Schedule 6.12 is assigned exclusively to a Transferable Seller Employee that is not a Transferred Seller Employee as of the Closing Date, Purchaser shall not be required to include such vehicle in the new lease entered into pursuant to Section 6.12(a)(i). (b) If the Sellers receive any invoice for payment of maintenance, taxes, insurance or loss related to the vehicles set forth on Schedule 6.12 and subject to the new lease entered into pursuant to Section 6.12(a)(i) that are for periods after the Closing, the Sellers shall promptly inform the Purchaser of such invoice and the Purchaser shall pay such invoice or, if paid by the Sellers, reimburse the Sellers for any payments made or costs incurred by the Sellers in connection with such invoice, including without limitation any reasonable and documented expenses incurred in connection with any dispute of such invoice at the Purchaser’s request. SECTION 6.13 Title and Survey Review. The Purchaser shall, at the Purchaser’s expense, be entitled to obtain title commitments or surveys that the Purchaser may desire. The Purchaser shall have until the date that is 45 days after the date hereof to review all exceptions to title and survey matters. With respect to each Designated Plant, the Purchaser shall deliver written notice of any Encumbrances or other title defects, in each case, which would reasonably be expected to materially restrict the Purchaser’s use and quiet enjoyment of such Designated Plant to the Sellers within five (5) days after receipt of a title commitment and survey for such Designated Plant, and in any event, prior to the expiration of such 45-day period. Sellers shall use commercially reasonable efforts to cure any such Encumbrances o
only, including, without limitation, judgment liens, mortgages, mechanics’ liens and delinquent taxes or taxes which are otherwise due and payable on or before Closing (the “Monetary Liens”), must be removed by the Sellers with respect to Designated Plants, at or prior to Closing. For the avoidance of doubt it is the intent of the parties that Monetary Liens, regardless of materiality, must be removed on or before Closing. This Section 6.13 and the covenants made herein shall survive the Closing. SECTION 6.14 St. Martinville Leased Real Property. FPP hereby covenants and agrees to obtain indefeasible fee simple title to the St. Martinville Leased Real Property as soon as practicable following the Closing. In the event that FPP obtains indefeasible fee simple title to the St. Martinville Leased Real Property following the Closing and prior the expiration of the Master Lease, the Purchaser shall purchase, and FPP shall convey to Purchaser by special warranty deed (on substantially the form set forth on Exhibit A-5), an indefeasible fee simple interest in the St. Martinville Leased Real Property from FPP or an Affiliate of FPP as soon as reasonably practicable, but in any event within 90 days, following the receipt of written notification from FPP that FPP has obtained indefeasible fee simple title to the St. Martinville
-32- Leased Real Property. The purchase price for the St. Martinville Leased Real Property shall be $100.00. SECTION 6.15 Sellers Names; Marks. Purchaser shall cease using the logos, trademarks, service marks, trade names, and trade dress of the Sellers and its Affiliates (whether on vehicles, signage or otherwise) immediately after the Closing and shall remove and discard any and all such logos, trademarks, service marks, trade names, and trade dress from the Designated Plants and the Sellers Assets as soon as reasonably practical, but in any event within six (6) months of the Closing. SECTION 6.16 R&W Insurance Policy. The Purchaser may elect to purchase a representation and warranty insurance policy in connection with this Agreement (the “R&W Insurance Policy”). In such event, the Purchaser agrees that the R&W Policy shall expressly provide that, other than with respect to fraud by the Person against whom recourse is sought, the insurers thereunder shall have no indemnification, contribution, assignment, subrogation or other rights to pursue any claim against the Sellers or any of its Affiliates or representatives (or representatives of its Affiliates) and the Sellers and such Affiliates and representatives shall be express third-party beneficiaries of such provisions. Following the Closing, the Purchaser shall not amend or waive, nor permit the amendment or waiver of, the foregoing provisions contained in the R&W Policy or otherwise amend or modify any R&W Policy in a manner adverse to the Sellers or any of such Affiliates or representatives without the prior written consent of the Sellers. The Purchaser shall bear all of the costs associated with obtaining any R&W Policy, including the premium, broker fee, underwriting fee, due diligence fee, carrier commissions, legal fees for counsel engaged by the underwriter and surplus lines taxes and fees. The Purchaser and Sellers acknowledge that, in order to facilitate a signing and closing as soon as possible, the Purchaser may elect to forego the purchase of a R&W policy. In such event, the indemnification provisions in Exhibit H shall be deemed to replace Article 11 of this Agreement in its entirety. SECTION 6.17 Purchase Orders. As of (a) the date that is ten (10) business days following the date of this Agreement, and (b) the Closing Date, the Sellers
SECTION 6.18 Raw Materials. As of the Closing Date, the Sellers shall have caused each Designated Plant to have a quantity of steel wire on site sufficient for the operation of the acquired business during the 45 days immediately following the Closing. ARTICLE 7 TAX MATTERS SECTION 7.1 Allocation of Liability for Transfer Taxes. Any and all sales, use, value added, transfer, recordation, documentary, stamp, registration and other similar Taxes and fees (including any penalties, interest, additions to tax and costs and expenses relating to such Taxes and fees) incurred in connection with the sale, transfer and assignment of the Seller Assets (collectively, “Purchaser Transfer Taxes”) shall be borne by the Seller. The Purchaser shall file all necessary Tax Returns and other documentation required to be filed by it under applicable Law with respect to all Purchaser Transfer Taxes, and, if required by applicable Law, the Sellers
-33- shall join in the execution of any such Tax Returns and other documentation. In the event that the Sellers are required under applicable Law to pay over any such Purchaser Transfer Taxes and/or file any Tax Returns with respect to such Purchaser Transfer Taxes, the Sellers shall timely do so, and shall promptly following the filing thereof furnish a copy of such Tax Return and a copy of a receipt showing payment of any such Purchaser Transfer Tax to the Purchaser, and the Purchaser shall reimburse the Sellers promptly for such Purchaser Transfer Taxes. The Sellers shall cooperate in providing the Purchaser with any appropriate exemption certifications and other similar documentation required to obtain any applicable exemption from (or reduction of) Purchaser Transfer Taxes. SECTION 7.2 Allocation of Liability for Other Taxes. (a) The Sellers shall be responsible for all Taxes attributable to the ownership or operation of the Seller Assets or the Designated Plants during any Pre-Closing Tax Period. (b) The Purchaser shall be responsible for all Taxes attributable to the ownership or operation of the Designated Plants or the Seller Assets during taxable periods (and the portion of any Straddle Periods) beginning after the Closing Date. (c) In the case of any Taxes attributable to the ownership or operation of the Designated Plants or the Seller Assets for a Straddle Period (for purposes of Sections 7.2(a) and 7.2(b)), the portion of such Tax attributable to the Pre-Closing Tax Period shall (i) in the case of any Tax based upon or related to income, sales, gross receipts or wages, be deemed to equal the amount of such Tax that would be payable if the Pre-Closing Tax Period ended (and the books of the Sellers or the Purchaser, as applicable, were closed) on the Closing Date and (ii) in the case of any Taxes other than those described in clause (i), be deemed to be the amount of such Tax for the Straddle Period multiplied by a fraction (x) the numerator of which is the days in the Pre-Closing Tax Period and (y) the denominator of which is the number of days in the entire Straddle Period. (d) For the avoidance of doubt, notwithstanding anything to the contrary in this Section 7.2, nothing in this Section 7.2 shall make (i) the Sellers responsible for any income, franchise, or similar Taxes of the Purchaser (or any of its Affili
and shall not permit its Affiliates to, make or change any Tax election, file or amend any Tax Return, take any Tax position on any Tax Return, take any action, omit to take any action or enter into any transaction, in each case, that results in any increased Tax liability in respect of the ownership or operation of the Designated Plants or the Seller Assets during any Pre-Closing Tax Period. SECTION 7.4 Allocation of Purchase Price. Within 90 days after the Closing, the Purchaser shall deliver to the Sellers a draft schedule (the “Allocation Schedule”), which shall allocate the fair market value of the aggregate consideration received by Sellers under this Agreement (including any liabilities of the Sellers that, for Tax purposes, are treated as assumed by the Purchaser) among the Seller Assets and the Sellers’ obligation pursuant to this Agreement to enter into the St. Martinville Sublease Agreement. The Sellers shall, within 30 days following
-34- its receipt of the Allocation Schedule, accept or reject the Allocation Schedule as submitted by the Purchaser. During this 30 day period, the Sellers may request, and the Purchaser shall endeavor to provide, documents and information reasonably necessary for the Sellers to understand the Allocation Schedule. If the Sellers disagree with the Allocation Schedule, the Sellers shall give written notice to the Purchaser of such disagreement and the specific basis for such disagreement within such 30 day period. In the event that the Sellers fails to notify the Purchaser in writing of a disagreement within such 30-day period, the Sellers shall be deemed to have agreed with the Purchasers Allocation Schedule. If the Sellers give written notice to the Purchaser, the Sellers and the Purchaser shall negotiate in good faith to resolve any disputed items. If, after a period of 20 days following the date on which the Sellers gives the Purchaser timely notice of such disagreement, any proposed change remains disputed, then Purchaser and the Sellers shall each be entitled to adopt their own positions regarding the Allocation Schedule to the extent of any differences arising from such disputed items, and the Purchaser shall be deemed to have otherwise agreed with the Sellers’ Allocation Schedule. To the extent the parties agree (or the Purchaser is deemed to agree) on the Allocation Schedule, such Allocation Schedule, as agreed to (or deemed to be agreed to) is referred to herein as the “Final Allocation Schedule.” The Sellers and the Purchaser shall file all Tax Returns (such as IRS Form 8594, if required, or any other forms or reports required to be filed pursuant to Section 1060 of the Code or any comparable provisions of applicable Law (“Section 1060 Forms”)) in a manner that is consistent with the Final Allocation Schedule and refrain from taking any action inconsistent therewith, unless otherwise required to do so by applicable Law or a “determination” within the meaning of Section 1313(a)(1) of the Code; provided, however, that (i) each party’s cost for the assets acquired hereunder by such party may differ from the total amount allocated hereunder to reflect the inclusion in the total cost of items (for example, capitalized acquisition costs) not included in the amount so allocated, (ii) the amount realized by the parties on the
Affiliates nor the Purchaser or any of its Affiliates will be obligated to litigate any challenge to the Final Allocation Schedule by a Governmental Authority. The Sellers and the Purchaser shall file such required Section 1060 Forms, if any, timely and in the manner required by applicable Law. The Sellers and the Purchaser also shall allocate and report any adjustments to the consideration paid pursuant to this Agreement in accordance with Section 1060 of the Code and the Treasury Regulations thereunder, if applicable, and any allocations made as a result of such adjustments (to the extent agreed to or deemed to be agreed to, applying the same procedures discussed above in this Section 7.4) shall become part of the Final Allocation Schedule. SECTION 7.5 Tax Returns. The Purchaser shall be responsible for the preparation and filing of all non-income Tax Returns that are due after the Closing Date (other than Tax Returns that are Tax Returns of the Sellers) and that relate to the ownership or operation of the Seller Assets or the Designated Plants (i) for any Tax period ending on or prior to the Closing Date and (ii) for any Straddle Period, and shall timely and properly pay the full amount reflected as due on such Tax Returns (to the extent such Taxes have not already been paid by the Sellers). The Purchaser shall (1) prepare such Tax Return in a manner consistent with prior practice, (2) deliver a draft of such Tax Return to the Sellers at least 15 days prior to the due date for filing such Tax Return, and (3) incorporate such revisions to such Tax Return as may reasonably be requested by the Sellers. In the event that the Purchaser, pursuant to its obligation to pay the amount reflected as due on a Tax Return that such party is required to file pursuant to this Section 7.5,
-35- pays any amount that is the responsibility (pursuant to Section 7.2) of the Sellers, the Sellers shall reimburse the Purchaser for the Sellers’ share of such Taxes within five (5) days of receipt from the Purchaser of evidence that the Purchaser has paid the full amount of such Taxes to the appropriate Governmental Authority. SECTION 7.6 Refunds. The Purchaser shall promptly forward to or reimburse the Sellers for any refunds of Taxes (including any interest paid by a Governmental Authority thereon and any credits in lieu thereof) that constitute Excluded Seller Assets. SECTION 7.7 Cooperation. The Sellers agree to furnish or cause to be furnished to each other, upon request, as promptly as practicable, such information and assistance relating to the Seller Assets, the Designated Plants, and the Assumed Seller Liabilities as is reasonably necessary for the filing of all Tax Returns, the preparation for any audit by any taxing authority, and the prosecution or defense of any action, suit or Proceeding, Claim, arbitration, litigation or investigation relating to any Tax. Any expenses incurred in furnishing such information or assistance shall be borne by the party requesting it. The parties shall preserve all Tax information, records, and documents relating to Taxes for periods beginning prior to the Closing Date until the expiration of any applicable statutes of limitation or extensions thereof and as otherwise required by Law. SECTION 7.8 Conflicts. In the event of any conflict between this Article 7 and the other provisions of this Agreement, the provisions of this Article 7 shall be controlling. ARTICLE 8 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE PURCHASER The obligation of the Purchaser to consummate the transactions contemplated hereby on the Closing Date is subject to the satisfaction (or waiver by the Purchaser) of the following conditions at or prior to the Closing: SECTION 8.1 Accuracy of Representations and Warranties. Each of the representations and warranties of the Sellers contained in Article 4 shall be true and correct on and as of the Closing Date, in each case as if made on and as of the Closing Date (except for any representations and warranties that address matters only as of a particular date or only with respect to a specific period of time, which need only be true and corr
SECTION 8.2 Performance of Covenants. Each Seller shall have performed and complied in all material respects with the covenants and obligations contained in this Agreement required to be performed or complied with by it at or prior to the Closing. SECTION 8.3 No Order. There shall not be in effect on the Closing Date any Law or Order that has not been vacated, withdrawn or overturned that restrains, enjoins or otherwise prohibits or makes illegal the consummation of the transactions contemplated in this Agreement.
-36- SECTION 8.4 Closing Deliveries. The Purchaser shall have received the items to be delivered by the Sellers pursuant to Section 2.2. SECTION 8.5 Required Consents. The Purchaser shall have received each of the Consents set forth on Schedule 8.5, in each case, in form and substance reasonably satisfactory to the Purchaser, and no such Consent shall have been revoked. SECTION 8.6 Absence of Material Adverse Effect. Since the date of this Agreement, there shall not have occurred any Material Adverse Effect. SECTION 8.7 DOJ Consent. The DOJ shall have no unresolved objection to the terms of this Agreement or the transactions contemplated hereby, and the DOJ Consent shall have been obtained. SECTION 8.8 Intentionally Omitted SECTION 8.9 Real Estate. The Purchaser shall have received an ALTA Owner’s Policy of Title Insurance dated as of the Closing Date, insuring title to the Seller Owned Real Property in the Purchaser, subject only to the Permitted Liens, or an unconditional commitment from the Purchaser Title Company binding itself to issue such title insurance. Notwithstanding the foregoing, this closing condition shall be deemed waived by the Purchaser if the abovementioned ALTA Owner’s Policy of Title Insurance, is not received by December 28, 2021. SECTION 8.10 Acquisition of Forterra. Quikrete shall have consummated the Merger. Notwithstanding the foregoing, the Purchaser may not rely on the failure of any condition set forth in this Article 8 to be satisfied if such failure (i) resulted from an action or inaction on the part of the Sellers or their Affiliates requested or consented to by the Purchaser or (ii) was caused by the failure of the Purchaser to act in good faith or comply with its obligations under this Agreement. ARTICLE 9 CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE SELLERS The obligation of the Sellers to consummate the transactions contemplated hereby on the Closing Date is subject to the satisfaction (or waiver by the Sellers) of the following conditions at or prior to the Closing: SECTION 9.1 Accuracy of Representations and Warranties. Each of the representations and warranties of the Purchaser contained in Article 5 shall be true and correct on and as of the Closing Date, in each case as if made on and as of the Closing Date (except
except to the extent that the failure of any such representations and warranties to be true and correct would not have a material adverse effect on Purchaser’s ability to consummate the transactions contemplated hereby.
-37- SECTION 9.2 Performance of Covenants. The Purchaser shall have performed and complied in all material respects with the covenants and obligations contained in this Agreement required to be performed or complied with by it at or prior to the Closing. SECTION 9.3 No Order. There shall not be in effect on the Closing Date any Law or Order that has not been vacated, withdrawn or overturned that restrains, enjoins or otherwise prohibits or makes illegal the consummation of the transactions contemplated in this Agreement. SECTION 9.4 Closing Deliveries. The Sellers shall have received all of the items to be delivered by the Purchaser pursuant to Section 2.3. SECTION 9.5 Required Consents. The Sellers shall have received each of the Consents set forth on Schedule 9.5, in each case, in form and substance reasonably satisfactory to the Sellers, and no such Consent shall have been revoked. SECTION 9.6 Intentionally Omitted. SECTION 9.7 DOJ Consent. The DOJ shall have no unresolved objection to the terms of this Agreement or the transactions contemplated hereby, and the DOJ Consent shall have been obtained. SECTION 9.8 Acquisition of Forterra. Quikrete shall have consummated the Merger. Notwithstanding the foregoing, the Sellers may not rely on the failure of any condition set forth in this Article 9 to be satisfied if such failure (i) resulted from an action or inaction on the part of the Purchaser or its Affiliates requested or consented to by the Sellers or (ii) was caused by the failure of the Sellers to act in good faith or comply with its obligations under this Agreement. ARTICLE 10 TERMINATION SECTION 10.1 Termination of Agreement. This Agreement may be terminated: (a) by mutual written consent of the Sellers and the Purchaser; (b) by the Sellers or the Purchaser if the Closing has not occurred by March 22, 2022 or such later date as agreed to by the parties to the Merger (the “Outside Date”); provided that the right to terminate this Agreement under this Section 10.1(b) will not be available to a party whose failure to fulfill any obligation under this Agreement has been the cause of, or has resulted in, the failure of the Closing to occur by the Outside Date; provided further, that (i) if the condition to Closing set forth in Section 9.8 of this Agreement has not been satisfied as of the Ou
to time; (c) by either Sellers or the Purchaser in the event that (i) any Governmental Authority has enacted, issued, enforced or entered into any statute, rule, regulation, injunction or other order, restraining, enjoining or otherwise prohibiting the transactions contemplated by this
-38- Agreement that has become final and non-appealable; provided that the right to terminate this Agreement under this Section 10.1(c)(i) will not be available to any Party whose actions resulted in an injunction or other order that had the effect of restraining, enjoining or otherwise prohibiting such transactions, or (ii) the Sellers shall have notified the Purchaser that the acquisition of Forterra by Quikrete is not occurring or the Merger Agreement has been terminated; (d) by the Purchaser if the Sellers shall have breached any of their representations and warranties, covenants or agreements contained in this Agreement, which breach (i) cannot be cured by the earlier to occur of (A) the date that is thirty (30) days following Sellers’ receipt of written notice of such breach and (B) the Outside Date, and (ii) would result in any of conditions in Article 8 not being satisfied; (e) by the Sellers if the Purchaser shall have breached any of its representations and warranties, covenants or agreements contained in this Agreement, which breach (i) cannot be cured by the earlier to occur of (A) the date that is thirty (30) days following the Purchaser’s receipt of written notice of such breach and (B) the Outside Date, and (ii) would result in any of the applicable conditions set forth in Article 9 not being satisfied; (f) by Sellers, if (i) all of the conditions set forth in Article 8 have been satisfied or waived (other than those conditions that are to be satisfied at the Closing, each of which is capable of being satisfied at the Closing); (ii) Sellers have given written notice to the Purchaser that it is prepared and able to consummate the transactions contemplated by this Agreement (or could be if the Purchaser had satisfied any unsatisfied conditions set forth in Article 9); and (iii) the Purchaser fails to consummate the transactions contemplated by this Agreement on the later of the date the Closing should have occurred pursuant to Section 2.1 and one Business Day following delivery of the notice in clause (ii) above (g) by Sellers, if Sellers determine in good faith, in its sole discretion, that the DOJ is not likely to grant the DOJ Consent. SECTION 10.2 Effect of Termination. (a) In the event of a termination of this Agreement, this Agreement shall become void and there shall be no liability on the part of any Party under this Agreement, except
Confidential Information and all other documents, materials and records (including records in electronic form) obtained from such other party or such other party’s Affiliates or any other Person acting on such other party’s behalf in connection with the transactions contemplated hereby and will continue to keep confidential and not use or disclose any information not returned because it is not included or reflected in any documents, materials or records.
-39- ARTICLE 11 INDEMNIFICATION SECTION 11.1 Survival of Covenants. (a) All of the covenants or other agreements contained in this Agreement shall survive the Closing Date until the first to occur of (i) the date on which such covenants and agreements have been fully performed or fulfilled in accordance with their terms and no further performance is required on the part of the applicable parties thereunder, unless compliance with any such covenant or agreement is expressly waived in writing, with respect to any future performance of obligations arising thereunder, by the party entitled to such performance (in which case such covenant or agreement will survive until such waiver becomes effective) and (ii) the expiration of any applicable statute of limitations period. (b) Sellers’ Indemnification Obligations. Subject to the limitations set forth in this Article 11, from and after the Closing Date, the Sellers shall (a) indemnify, defend, and hold the Purchaser and each of its Affiliates, officers and directors (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all Losses arising out of (i) any breach of any covenant on the part of the Sellers contained in this Agreement or (ii) any assertion against, imposition upon or incurrence by any Purchaser Indemnified Party of any Retained Seller Liabilities arising out of the ownership or operation of the Seller Assets or the Designated Plants prior to the Closing. (c) Purchasers’ Indemnification Obligations. Subject to the limitations set forth in this Article 11, from and after the Closing Date, the Purchasers shall (a) indemnify, defend, and hold the Sellers and each of their Affiliates, officers and directors (collectively, the “Seller Indemnified Parties”) harmless from and against any and Losses arising out of (i) any breach of any covenant on the part of the Purchasers contained in this Agreement or (ii) any assertion against, imposition upon or incurrence by any Seller Indemnified Party of any Assumed Seller Liabilities arising out of the ownership or operation of the Seller Assets or the Designated Plants following the Closing. SECTION 11.2 Intentionally Omitted. ARTICLE 12 DEFINITIONS SECTION 12.1 Certain Definitions. As used in this Agreement, the terms set forth below shall have the following respective meanings: “Affiliate”
Person. For the purposes of this definition, “control” means the possession of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise.
-40- “Bill of Sale and Assignment and Assumption Agreement” means the Bill of Sale and Assignment and Assumption Agreement, to be entered into as of the Closing Date, in the form of Exhibit F hereto. “Books and Records” means, with respect to any Person at any given time, the Seller Books and Records and/or Retained Seller Books and Records in such Person’s possession at such time. “Bulk Sales Law” means any version of Article 6 of the Uniform Commercial Code adopted by any state or any similar Law relating to the sale of inventory, equipment or other assets in bulk. “Business Data” means all data, information and works of authorship (including content, text, photos, documentation, customer information and sales and marketing materials), in any format, and all other data, information (including Personal Information) and works of authorship contained in or on any Equipment, Systems, and any databases of the Seller or their Affiliates, or otherwise possessed or controlled by the Seller or their Affiliates, that are disclosed, transferred, licensed, or otherwise made available by the Seller or their Affiliates to the Purchaser in connection with this Agreement. “Business Day” means any day except a Saturday, Sunday or any other day on which banks in Atlanta, Georgia are authorized or required by Law or executive order to remain closed. “Claim” means any demand, claim, investigation or action that is asserted or arises in a Proceeding or otherwise. “COBRA” means the continuation coverage requirements under Code Section 4980B and Part 6 of Title I of ERISA. “Code” means the Internal Revenue Code of 1986, as amended. “Confidential Information” shall have the meaning set forth in the Confidentiality Agreement. “Confidentiality Agreement” means that certain Confidentiality Agreement, dated October 15, 2021, by and among Quikrete, Forterra, and the Purchaser. “Consent” means any consent, approval or authorization required to be obtained from any Governmental Authority. “Contract” means any written contract, agreement, indenture, note, bond, loan, instrument, lease, conditional sale contract, mortgage or insurance policy. “Copyrights” means United States and foreign copyrights and maskwork rights, whether registered or unregistered, and registrations and applications
-41- Association, as Administrative Agent and the Lenders that are parties thereto, as amended, modified and supplemented from time to time; (ii) Amended and Restated Credit Agreement, dated as of November 15, 2016, by and among Quikrete, Quikrete Canada Holdings, Limited, Wells Fargo Bank, National Association, as Administrative Agent, and the Lenders that are parties thereto, as amended, modified and supplemented from time to time; (iii) ABL Credit Agreement dated as of October 25, 2016 by and among Forterra, the other U.S. Borrowers party thereto, the Canadian Borrowers party thereto, the Lenders party thereto and Bank of America, N.A., as Agent, as amended, modified and supplemented from time to time; (iv) Senior Lien Term Loan Credit Agreement dated as of October 25, 2016 by and among Forterra, Forterra Finance, LLC, the Lenders party thereto and Credit Suisse AG, Cayman Islands Branch, as Administrative Agent, as amended, modified and supplemented from time to time; and (v) Indenture dated as of July 16, 2020 by and among Forterra Finance, LLC, FRTA Finance Corp., the Guarantors party thereto and Deutsche Bank Trust Company Americas, as Trustee, as amended, modified and supplemented from time to time. “Designated Plants” means the Seller Owned Real Property and the Seller Leased Real Property, including the Rinker Plants and the Forterra Plant. “Disclosure Schedules” means the Seller Schedules any other disclosure schedule delivered by one party to another party in connection with this Agreement. “DOJ Consent” means that each of the following conditions has been met: (a) the consent, agreement and approval of the DOJ with respect to the Purchaser, this Agreement and the transactions contemplated hereby; (b) the filing of any proposed final judgment by the DOJ in any court in connection with the Merger, in form and substance acceptable to Quikrete in its sole discretion; (c) if required by the DOJ, the entry by such court of either an Asset Preservation Stipulation and Order or Hold Separate Stipulation and Order between the DOJ, on the one hand, and Forterra and Quikrete, on the other hand. “DOJ Consent” shall not in any event mean the entry of a final judgment by such court or completion with respect to the Merger of the process set forth in
license, or restriction, affecting the Seller Owned Real Property or Seller Leased Real Property. “Enforceability Exceptions” means, with reference to the enforcement of the terms and provisions of this Agreement or any other Contract, that the enforcement thereof is or may be subject to the effect of (a) applicable bankruptcy, receivership, insolvency, reorganization, moratorium, fraudulent conveyance, fraudulent transfer and other similar Laws relating to or affecting the enforcement of the rights and remedies of creditors or parties to executory contracts generally; (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding at law or in equity) and the exercise of equitable powers by a court of competent jurisdiction; and (c) applicable Law or public policy limiting the enforcement of provisions providing for the indemnification of any Person. “Environmental Claim” means any Claim, Order, fine, penalty or, as to each, any settlement or judgment arising therefrom, alleging liability (including liability or responsibility for
-42- the costs of enforcement proceedings, investigations, cleanup, governmental response, removal or remediation, natural resources damages and injunctive relief) resulting from: (a) the presence, Release of or exposure to any Hazardous Substances; or (b) any actual or alleged non-compliance with any Environmental Law. “Environmental Laws” means Laws in effect as of the date hereof applicable to the Designated Plants or the business conducted thereon relating to protection of the environment or health and human safety from actual or potential exposure (or the effects of exposure) to any actual or potential release, discharge, spill or emission of, or regarding the use, handling, transportation, treatment, storage or disposal of, any Hazardous Substances. “Environmental Notice” means any written notice of violation or infraction, or notice respecting any Environmental Claim relating to actual or alleged non-compliance with any Environmental Law or any term or condition of any Environmental Permit. “Environmental Permit” means any Permit issued, granted, given, authorized by or made pursuant to Environmental Law. “Equipment” means all machinery, vehicles, equipment, fixtures, appliances, furniture, computers, parts, supplies, forms, molds, tools and other tangible personal property of any kind. “Equity Interests” means (a) with respect to any corporation, all shares, interests, participations or other equivalents of capital stock of such corporation, however designated, and (b) with respect to any partnership or limited liability company, all partnership or limited liability company interests, units, participations or equivalents of partnership or limited liability company interests of such partnership or limited liability company, however designated. “ERISA Affiliate” means a corporation which is or was at any time a member of a controlled group of corporations with the Sellers within the meaning of Section 414(b) of the Code, or a trade or business which is under common control with the Sellers within the meaning of Section 414(c) of the Code. “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. “GAAP” means, with respect to any Person, United States generally accepted accounting principles, consistently applied in accord
competent jurisdiction, administrative or regulatory body, agency, bureau, commission, governing body of any national securities exchange, or other governmental authority or instrumentality in any domestic or foreign jurisdiction and any appropriate division or subdivision of any of the foregoing. “Hazardous Substances” means any material, chemical, waste, product, derivative, compound, mixture, solid, liquid, mineral or gas, in each case, whether naturally occurring or
-43- manmade, that is hazardous, acutely hazardous, toxic, or words of similar import or regulatory effect under Environmental Laws, and any petroleum or petroleum-derived products. “Indebtedness” of any Person means, without duplication, (a) indebtedness of such Person for borrowed money, (b) indebtedness evidenced by notes, debentures or bonds, the payment of which such Person is responsible, (c) indebtedness secured by a Lien on any property or asset owned or held by such Person, and (d) any accrued and unpaid interest on the indebtedness described in clauses (a) and (b). “Intellectual Property” means Copyrights, Patents, Trademarks and Trade Secrets. “Inventory Methodology” are set forth in Exhibit G hereto. “IRS” means the United States Internal Revenue Service. “Law” means any federal, state, local, municipal, foreign, tribal or other law (including common law), statute, legislation, constitution, principle of common law, resolution, ordinance, code, proclamation, treaty, convention, rule, regulation, proposed regulation, listing standard, directive, requirement, specification, executive decree or judgment or interpretation that is issued, enacted, promulgated, or otherwise put into effect, by or under the authority of any Governmental Authority. “Lien” means any lien, pledge, mortgage, deed of trust, security interest, attachment, levy or other similar encumbrance affecting title to the Seller Owned Real Property or Seller Leased Real Property. “Losses” means any and all Claims, judgments, causes of action, liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest, and expenses. “Master Lease” means the Amended and Restated Master Land and Building Lease dated June 5, 2018 by and among Pipe Portfolio Owner (Multi) LP, Forterra Pipe & Precast, LLC, Forterra Concrete Products, Inc., United States Pipe and Foundry Company, LLC and Forterra Concrete Industries, Inc. “Material Adverse Effect” means (a) a material adverse effect on the financial condition of the business conducted at the Designated Plants (to the extent affecting the Seller Assets or the Assumed Seller Liabilities), or (b) an event or circumstance affecting the Seller Assets or the Designated Plants that makes impossible the consummation of the transactions contemplated by this Agreement, but, in each ca
or other Governmental Authorities, (iii) any change in general economic conditions or in interest rates, (iv) any disruption in the capital markets, (v) any change in conditions affecting the concrete pipe and precast industry generally or any sector thereof or (vi) any facts or developments described in the Seller Schedules. Any determination as to whether any condition or other matter has a Material Adverse Effect shall be reasonable and shall be made only after taking into account all proceeds or amounts that are expected to be received by the Purchaser or the Sellers with respect to such condition or matter from insurance policies.
-44- “Order” means any order, injunction, judgment, decree or ruling of a Governmental Authority. “Ordinary Course of Business” means, with respect to a Person, the ordinary course of business contemplated by the current operating plans of such Person or consistent with the past custom and practice of such Person, including (a) variations in operations and production in light of seasonal and cyclical fluctuations in demand, (b) making expenditures contemplated by the projected budgets of such Person’s business, (c) incurring expenses in connection with the negotiation and execution of this Agreement or any Transaction Agreement and the consummation of the transactions contemplated hereby and thereby or (d) taking any actions contemplated by this Agreement or any Transaction Agreement. “Organizational Documents” means (a) in the case of any Person organized as a corporation, the certificate or articles of incorporation of such corporation (or, if applicable, the memorandum and articles of association of such corporation) and the bylaws of such corporation, (b) in the case of any Person organized as a limited liability company, the certificate of formation or organization and the limited liability company agreement, operating agreement or regulations of such limited liability company, (c) in the case of any Person organized as a limited partnership, the certificate of limited partnership and partnership agreement of such limited partnership and (d) in the case of any other Person, all constitutive or organizational documents of such Person which address matters relating to the business and affairs of such Person similar to the matters addressed by the documents referred to in clauses (a) through (c) above in the case of Persons organized as corporations, limited liability companies or limited partnerships. “Patents” means issued United States and foreign patents and pending patent applications, including, without limitation, provisional patent applications, continuations, continuations-in-part, divisions, revisions, reissues, reexaminations and extensions. “Permit” means any permit, license, authorization or approval issued by a Governmental Authority. “Permitted Lien” means any (a) mechanic’s, materialman’s, warehouseman’s, carrier’s and similar liens for labor, materials or supplies incurred under applicable
due and payable, (d) conditions in any Permit granted or issued by any Governmental Authority, (e) Liens, claims, easements, covenants, conditions, restrictions and other charges and encumbrances the existence of which would not reasonably be expected to have a Material Adverse Effect on the use or operation of any Real Property, (f) Liens arising under Equipment leases with third parties entered into in the Ordinary Course of Business or (g) Liens under the Credit Agreement that will be discharged at Closing, or (h) Liens, if any, identified Schedule 11.1(ii). “Person” means any natural person, corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity. “Personal Information” means information, in any form, that identifies, relates to, describes, is capable of being associated with, or could be linked, directly or indirectly, to identify,
-45- contact, or locate an individual, device or household, including an individual’s combined first and last names, home address, telephone number, email address, social security number, driver’s license number, payment information, IP address, unique identifiers, educational background, financial information, passport number and credit card number and/or any information considered “personally identifiable information,” “personal information,” “personal data” “protected health information,” or similar term by one or more applicable Law. “Pre-Closing Environmental Liabilities” means any liabilities relating to, or arising out of (a) the existence of, or any Release of, any Hazardous Material at, in, on or from any parcel of real property owned or leased by any Seller (including the Seller Owned Real Property and the Seller Leased Real Property) prior to the Closing, and (b) any violation of any Environmental Law or Environmental Permit at or in relation to (i) any parcel of real property owned or leased by any Seller (including the Seller Owned Real Property and the Seller Leased Real Property) or (ii) the business conducted by the Designated Plants, in each case, to the extent such violation exists or existed prior to the Closing. “Pre-Closing Tax Period” means any taxable period (and the portion of any Straddle Period) ending on or prior to the Closing Date. “Privacy and Security Laws” means all Laws concerning the protection, privacy or security of personal information, each as amended from time to time, including, Section 5 of the Federal Trade Commission Act, Federal Trade Commission regulations and guidelines, the Fair Credit Reporting Act, the Fair and Accurate Credit Transactions Act, the Privacy Act of 1974, the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, the Telephone Consumer Protection Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, Children’s Online Privacy Protection Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, the Nevada Revised Statues Chapter 603A.300 through 603A.360, state social security number protection Laws, state Laws regarding privacy, data security, data breach notification, or consumer protection, Laws relating to the transfer of personal information (including across bord
outbound calling and text messaging, telemarketing, and e-mail marketing). “Proceeding” means any action, arbitration, prosecution, hearing, litigation, or suit (whether civil, criminal, administrative, judicial, or investigative, whether formal or informal, whether public or private) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator. “Quikrete Auditor” means any audit firm representing either of the Sellers. “Real Property” means any lot, parcel or tract of land in which any Person has a property interest. “Release” means the term as defined at 42 U.S.C. § 9601(22). “Retained Seller Books and Records” means all books and records of the Sellers, other than the Seller Books and Records, including (a) any personnel records, books, files or other
-46- documentation relating to any employee that is not a Transferred Seller Employee as of the Closing Date or relating to any Transferred Seller Employee that under applicable Law must be retained by the Sellers, (b) any Tax records of the Sellers relating to any Pre-Closing Tax Period, (c) all records and reports prepared or received by or for the Sellers and their Affiliates in connection with the sale of the Seller Assets or the transactions contemplated hereby, including all analyses relating to the Purchaser or its Affiliates so prepared or received, (d) corporate minutes and governing documents of the Sellers and their Affiliates, (e) all confidentiality agreements with prospective purchasers of the Seller Assets or any portion thereof and all bids and expressions of interest received from third parties with respect thereto, (f) all records related to the Retained Seller Liabilities and any other business or operations of the Sellers not related to the Seller Assets or the Designated Plants and (g) all historical records, files and other documentation not maintained in the databases maintained by the Sellers’ Affiliates or otherwise not readily accessible or severable from Excluded Seller Assets without expense. “Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. “Seller Corporate Services” means all corporate overhead or administrative services provided by or at the direction of the Sellers or their Affiliates to the Designated Plants and the business conducted thereon, including, without limitation, human resources and employee relations management services, employee benefits services, travel, entertainment and credit card services, public relations, legal, compliance and risk management services (including workers’ compensation), purchasing, sales and marketing support, information technology and telecommunications services, computer hardware and software services (including access to shared databases, software and operating systems), financial, accounting and tax services, including payroll, collections and accounts payable, and internal audit services. “Seller Indebtedness” means any Indebtedness of the Seller. “Seller Leased Real Property” means the St. Martinville Leased Real Property. “Sellers’ Knowledge” means the actual (and not construct
investigation on the part of any such persons. “Shared Seller Assets” means: (a) all Seller Corporate Services; and (b) all hardware and software or other Intellectual Property necessary for or used to provide the Seller Corporate Services or used in the operation of the business of the Sellers’ Affiliates. “St. Martinville Leased Real Property” means the manufacturing facilities (and real property on which it is situated) leased by Sellers that is located in St. Martinville, Louisiana.
-47- “Straddle Period” means any taxable period that both begins on or before and ends after the Closing Date. “Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, trust, unincorporated organization, association or other entity of which such Person, directly or indirectly, owns Equity Interests that (a) represent more than 50% of the total number of outstanding common or other residual Equity Interests (however denominated) of such Person, (b) represent more than 50% of the total voting power of all outstanding Equity Interests of such Person which are entitled to vote in the election of directors, managers or other persons performing similar functions for and on behalf of such Person, (c) are entitled to more than 50% of the dividends paid and other distributions made by such Person prior to liquidation or (d) are entitled to more than 50% of the assets of such Person or proceeds from the sale thereof upon liquidation. “Target Inventory” means: (a) with respect to the Rinker Plant located in Phoenix, Arizona: $1,196,577; (b) with respect to the Rinker Plant located in Littleton, Colorado: $2,393,328; (c) with respect to the Rinker Plant located in Fort Myers, Florida: $832,742; (d) with respect to the Rinker Plant located in Napa, California: $715,894; and (e) with respect to the Forterra Plant located in St. Martinville, Louisiana: $1,272,170. Details of Target Inventory by plant is included in Exhibit G, along with unit cost per item of finished goods, raw materials, castings, grates and other ancillary products. “Tax” means all taxes, levies, imposts and similar assessments in the nature of a tax paid or payable to a Governmental Authority, including, but not limited to, all net income, gross income, gross receipts, sales, use, value added, property, ad valorem, services, occupation, transfer, franchise, capital stock, profits, license, withholding, payroll, employment, unemployment, excise, estimated, severance, stamp or occupancy taxes, together with any interest, penalty or addition to any such tax. “Tax Return” means any return, report, declaration, estimate, information return or other document (including any related or supporting information) filed or required to be filed with any Governmental Authority with respect to Taxes. “Trade Secrets” means trade secret rights
monetary or otherwise, from being maintained in confidence and not known to the Sellers’ competitors. “Trademarks” means United States, state and foreign trademarks and service marks, logos, designs, slogans, product and service names, product descriptions, trade dress, trade names,
-48- corporate names and other trade designations, whether the foregoing are registered or unregistered, and all United States, state and foreign registrations and applications to register the foregoing. “Transaction Agreements” means the Bill of Sale and Assignment and Assumption Agreement, the Deeds, the St. Martinville Sublease Agreements, the Forms Rental Agreement, and the Aggregate Supply Agreement, and the Transition Services Agreement. “Transferable Seller Employee” means (a) each employee of the Sellers at the Designated Plants as of the date hereof set forth on Schedule 11.1(iii) and (b) certain other employees of the Sellers, all of which are set forth on Schedule 11.1(iv). “Transferred Seller Employee” means each Transferable Seller Employee who receives and accepts an offer of employment from the Purchaser pursuant to Section 6.10(a) (and any similarly situated individual), including, but not limited to, those on vacation, leave of absence or disability. “Treasury Regulations” means the regulations promulgated under the Code. SECTION 12.2 Other Defined Terms. Each of the terms set forth below has the meaning set forth in the provision set forth opposite such term in the following table: Term Provision Adjustment Statement ..................................................................... Section 3.2(d) Aggregate Supply Agreement ......................................................... Section 2.2(d) Agreement ....................................................................................... Preamble Allocation Schedule ........................................................................ Section 7.4 Analysis........................................................................................... Section 6.18(a) Assumed Seller Contracts ............................................................... Section 1.1(a)(iv) Assumed Seller Liabilities ............................................................. Section 1.2(a) Closing ............................................................................................ Section 2.1 Closing Cash ................................................................................... Section 1.4 Closing Date.................................................................................... Section 2.1 Closing Inventory............................................................................ Section 3.1(a) Deeds .............................................................................................. Section 2.2(a) Disputed Items ................................................................................ Section 3.2(d) Disputed Seller Inventory Items ..............
............................................................................................. Section 4.13(a) Excluded Seller Assets .................................................................... Section 1.1(b) Final Adjustment Amounts ............................................................. Section 3.3(b) Final Allocation Schedule ............................................................... Section 7.4 Final Arbiter .................................................................................... Section 3.2(d) Fleet Lease ..................................................................................... Section 6.12(a) Forms Rental Agreement ................................................................ Section 2.2(e) FPP .................................................................................................. Preamble JAMS .............................................................................................. Section 13.8(b)
-49- JAMS Rules .................................................................................... Section 13.8(b) Material Seller Contracts ................................................................ Section 4.10 Merger Agreement .......................................................................... Preamble Monetary Liens ............................................................................... Section 6.13 Negotiation Period .......................................................................... Section 3.2(b) Nontransferable Seller Contract ...................................................... Section 1.3 Nontransferable Seller Permit ......................................................... Section 1.3 Nontransferable Seller Rights ......................................................... Section 1.3 Objection Date ................................................................................ Section 3.2(a) Objection Notice ............................................................................. Section 3.2(a) Purchaser ......................................................................................... Preamble Purchaser CFO Certificate .............................................................. Section 3.1(b) Purchaser Transfer Taxes ................................................................ Section 7.1 Quikrete........................................................................................... Preamble R&W Insurance Policy ................................................................... Section 6.16 Retained Seller Liabilities ............................................................... Section 1.2(b) Rinker Materials.............................................................................. Preamble Section 1060 Forms ........................................................................ Section 7.4 Seller Assets .................................................................................... Section 1.1(a) Seller Books and Records ............................................................... Section 1.1(a)(vi) Seller Financial Data ....................................................................... Section 4.5 Seller Permits .................................................................................. Section 4.16 Seller Plans...................................................................................... Section 4.13(a) Seller Owned Real Property............................................................ Section 1.1(a)(i) Seller Schedules .............................................................................. Article 4 Sellers .............................................................................................. Preamble St. Martinville Sublease Agreement ............................................... Section 2.4 Systems ........................................................................................... Section 4.11(b) Transition Services Agreement ...................................................... Section 2.2(f) WARN ..............................
COVENANTS OR AGREEMENTS IN THIS AGREEMENT OR IN ANY INSTRUMENT DELIVERED PURSUANT TO THIS AGREEMENT SHALL SURVIVE THE CLOSING AND ALL RIGHTS, CLAIMS AND CAUSES OF ACTION (WHETHER IN CONTRACT OR IN TORT OR OTHERWISE, OR WHETHER AT LAW OR EQUITY) WITH RESPECT THERETO SHALL TERMINATE AT SUCH CLOSING. NOTWITHSTANDING THE FOREGOING, NEITHER THIS SECTION 13.1 NOR ANYTHING ELSE IN THIS AGREEMENT TO THE CONTRARY SHALL LIMIT THE SURVIVAL OF ANY COVENANT OR AGREEMENT OF ANY PARTY TO THE EXTENT THAT BY ITS TERMS IT IS REQUIRED TO BE PERFORMED OR COMPLIED WITH AFTER THE CLOSING, WHICH COVENANTS AND AGREEMENTS SHALL SURVIVE SUCH CLOSING IN ACCORDANCE WITH THEIR RESPECTIVE TERMS.
-50- SECTION 13.2 Amendments. This Agreement may be amended, modified or supplemented only by an instrument in writing executed by each of the parties hereto. SECTION 13.3 Waivers. The observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively) by the party entitled to the benefits of such term, but such waiver shall be effective only if it is in a writing signed by the party entitled to the benefits of such term and against which such waiver is to be asserted. Unless otherwise expressly provided in this Agreement, no delay or omission on the part of any party in exercising any right or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of any party of any right or privilege under this Agreement operate as a waiver of any other right or privilege under this Agreement nor shall any single or partial exercise of any right or privilege preclude any other or further exercise thereof or the exercise of any other right or privilege under this Agreement. SECTION 13.4 Notices. Any notices, requests, consents, claims, demands, waivers or other communications required or permitted hereunder shall be in writing and shall be sufficiently given if delivered personally or sent by facsimile or electronic mail transmission (with confirmation of receipt) or recognized international overnight courier to the parties at the following addresses (or at such other address for any party as shall be specified by like notice); provided, that notices of a change of address shall be effective only upon receipt thereof. Notices sent by facsimile transmission shall be effective when receipt is acknowledged, notices sent by electronic mail transmission shall be effective on the date sent if sent before 5:00 p.m. Eastern time or the next Business Day if sent after such time; provided, that such Person making such electronic mail transmission shall send a copy of such transmission by facsimile or personal delivery by the next Business Day and notices sent by courier guaranteeing next day delivery shall be effective on the next Business Day after delivery to the courier. If to the Sellers, to: Rinker Materials c/o Quikrete Holdings, Inc. 5 Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attn: Legal Department Email: nick
8678
-51- With a copy (which shall not constitute effective notice) to: Troutman Pepper Hamilton Sanders LLP 600 Peachtree Street, N.E., Suite 3000 Atlanta, Georgia 30308 Attn: David W. Ghegan Email: David.ghegan@troutman.com If to the Purchaser, to: Foley Products Company 1031 Columbus Avenue Columbus, Georgia 31901 Attn: Frank D. Foley III Email: ffoley@foleyproducts.com Facsimile: 706-569-4436 With a copy (which shall not constitute effective notice) to: Nelson Mullins Riley & Scarborough LLP 50 North Laura Street 41st Floor Jacksonville, Florida 32202 Attn: Daniel B. Nunn, Jr. Email: Daniel.Nunn@nelsonmullins.com Facsimile: 904-665-3621 SECTION 13.5 Successors and Assigns; Parties in Interest; Assignment. This Agreement shall be binding upon and shall inure solely to the benefit of the parties hereto and their respective successors, legal representatives and permitted assigns. Nothing in this Agreement, express or implied, is intended to or shall confer upon any Person, other than the parties hereto, any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement, and no other Person shall be deemed a third-party beneficiary under or by reason of this Agreement. No party may assign this Agreement or its rights, interests or obligations hereunder to any Person without the prior written consent of each of the other parties hereto; provided, however, that Purchaser may (a) assign its rights, interests or obligations hereunder in respect of and relating to the Seller Assets at the Closing to an Affiliate of the Sellers and (b) collaterally assign its rights, interests, and obligations hereunder in respect of and relating to the Seller Assets hereunder to any lender or other financing source of the Purchaser, as applicable (and such rights and interests may be assigned or further assigned in connection with any foreclosure or transfer in lieu of foreclosure to any Person). SECTION 13.6 Severability. If any provision of this Agreement or the application of any such provision to any Person or circumstance, shall be declared judicially to be invalid, unenforceable or void, such decision shall not hav
-52- remainder of this Agreement, it being the intent and agreement of the parties that this Agreement shall be deemed amended by modifying such provision to the extent necessary to render it valid, legal and enforceable while preserving its intent or, if such modification is not possible, by substituting therefor another provision that is valid, legal and enforceable and that achieves the same objective. SECTION 13.7 Entire Agreement. This Agreement (including the Disclosure Schedules and the Exhibits hereto, and the documents and instruments executed and delivered in connection herewith) and the Confidentiality Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and supersede all prior and contemporaneous agreements and understandings, whether written or oral, among the parties or any of them with respect to the subject matter hereof, and there are no representations, understandings or agreements relating to the subject matter hereof that are not fully expressed in this Agreement and the documents and instruments executed and delivered in connection herewith. All Exhibits and Disclosure Schedules attached to this Agreement are expressly made a part of, and incorporated by reference into, this Agreement. SECTION 13.8 Choice of Law; Arbitration. (a) This Agreement and any Claim, dispute, remedy or Proceeding arising from or relating to this Agreement or any Transaction Agreement, the transactions contemplated hereby and thereby, any relief or remedies sought by any parties hereto and thereto, and the rights and obligations of the parties hereunder and thereunder shall be governed by and construed and enforced in accordance with the substantive Laws of the State of Delaware, without regard to the conflicts of law provisions thereof that would cause the Laws of any other jurisdiction to apply. (b) All disputes arising directly or indirectly out of or relating to this Agreement or the transactions contemplated hereby (whether in contract, tort, equity or otherwise), including the performance or non-performance of a party or the meaning or construction of any provisions, including the arbitrability of such matters (collectively, the “Disputes”), shall be finally settled by binding confidential arbitration proceedings in accordance with the Expedited A
shall be conducted before a single neutral arbitrator in Atlanta, Georgia; provided, however, that if the dispute involves claims of greater than Three Million Dollars ($3,000,000), the JAMS arbitration shall be conducted before a panel of three neutral arbitrators in Atlanta, Georgia. With respect to Disputes before a single arbitrator, the arbitrator shall be appointed by agreement of the parties hereto or, if no agreement can be reached, by JAMS. The arbitrator or arbitrators shall be appointed by JAMS pursuant to Rule 15 of the JAMS Comprehensive Arbitration Rules & Procedures (the “JAMS Rules”). The arbitrator(s) may enter a default decision against any party that fails to participate in the arbitration proceedings. (c) The decision of the arbitrator(s) on the points in dispute will be final, unappealable and binding, and judgment on the award may be entered in any court having jurisdiction thereof. The arbitrator(s) shall only be authorized to interpret the provisions of this Agreement only and shall not amend, change or add to any such provisions. The parties agree that this provision has been adopted by the parties to rapidly and inexpensively resolve any Disputes
-53- between them and that this provision will be grounds for dismissal of any court action commenced by either party with respect to this Agreement, other than post-arbitration actions seeking to enforce an arbitration award or proceedings seeking equitable relief as set forth herein. In the event that any court determines that this arbitration procedure is not binding, or otherwise allows any litigation regarding a dispute, claim, or controversy covered by this Agreement to proceed, the parties hereto hereby waive any and all right to a trial by jury in or with respect to such litigation. (d) Except as otherwise provided in this Agreement or by applicable Law, the arbitrator(s) will be authorized to apportion its (or their) fees and expenses as the arbitrator(s) deems appropriate and the arbitrator(s) will be authorized to award the prevailing party its fees and expenses (including attorneys’ fees). In the absence of any such apportionment or award, each party will bear its own expenses and the fees of its own attorney. (e) The parties and the arbitrator(s) will keep confidential, and will not disclose to any Person, except the parties’ advisors and legal representatives, or as may be required by applicable Law, the existence of any controversy under this Section 13.8 the referral of any such controversy to arbitration or the status or resolution thereof. (f) The parties may seek any interim or conservatory relief, including an injunction or injunctions to prevent breaches of this Agreement pursuant to Rule 2(c) of the JAMS Rules. SECTION 13.9 Specific Performance. The Purchaser acknowledges and agrees that the Sellers will be irreparably damaged if this Agreement is not performed in accordance with its terms and that any breach of this Agreement by the Purchaser and the non-consummation of the transactions contemplated by this Agreement would not be adequately compensated in all cases by monetary damages alone. Accordingly, in addition to any other right or remedy to which the Sellers may be entitled, at applicable Law or in equity, the Sellers shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to compel specific performance of this Agreement, without the need for proof of actual damages, in accordance with its terms and to require the Purchaser to consummate the Closing as co
of specific performance is not an appropriate remedy for any reason at law or equity. For the avoidance of doubt, the Purchaser further agrees that (i) by seeking the equitable remedies provided for in this Section 13.9, the Sellers shall not in any respect be deemed to waive its right to seek at any time any other form of relief that may be available to the Sellers in accordance with this Agreement in the event that this Agreement has been terminated or in the event that the equitable remedies provided for in this Section 13.9 are not available or otherwise are not granted, and (ii) nothing set forth in this Section 13.9 shall require the Sellers to institute any proceeding for (or limit Sellers’ right to institute any proceeding for) specific performance under this Section 13.9 prior to or as a condition to exercising any termination right under Article 10, nor shall the commencement of any legal proceeding pursuant to this Section 13.9 or anything set forth in this Section 13.9 restrict or limit the Sellers’ right to terminate this Agreement in accordance with the terms of Article 10 or pursue any other remedies otherwise available under this Agreement.
-54- SECTION 13.10 Expenses. Except as otherwise expressly provided herein, each of the parties hereto shall bear its own expenses (including, without limitation, fees and disbursements of its counsel, accountants, financial advisors and other experts) incurred by it in connection with the preparation, negotiation, execution, delivery and performance of this Agreement and each of the other documents and instruments executed in connection with or contemplated by this Agreement and the consummation of the transactions contemplated hereby, whether or not the Closing shall have occurred. SECTION 13.11 Release of Information. The parties shall cooperate with each other in releasing information concerning this Agreement and the transactions contemplated hereby. No press releases or other public announcements concerning the transactions contemplated by this Agreement shall be made by any party without prior consultation with, and agreement of, the other parties, except for any legally required communication by any party and then only with prior consultation with the other party; provided, that nothing herein shall limit any disclosure by the Sellers’ Affiliates in compliance with federal securities Laws or NASDAQ requirements applicable to such Affiliates of the Sellers. SECTION 13.12 Disclosure Schedules. For purposes of the representations and warranties of each party contained herein, disclosure in any portion of a Disclosure Schedule delivered by such party of any facts or circumstances shall be deemed to be adequate disclosure of such facts or circumstances with respect to all other representations or warranties made by such party, whether or not such disclosure specifically identifies or purports to respond to one or more of such other representations and warranties, if it is reasonably apparent that such disclosure pertains to the subject matter of such other representations and warranties. Any information provided in a Disclosure Schedule is solely for informational purposes, and the inclusion of such information shall not be deemed to enlarge or enhance any of the representations or warranties of the party providing the Disclosure Schedule pursuant to this Agreement. The inclusion of any information in any section of the Disclosure Schedule or other document delivered by the parties pursu
Construction. The article and section headings and the table of contents contained in this Agreement are for convenience of reference only and shall in no way define, limit, extend or describe the scope or intent of any provisions of this Agreement. Whenever the context may require, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. In addition, as used in this Agreement, unless otherwise provided to the contrary, (a) all references to days, months or years shall be deemed references to calendar days, months or years or (b) any reference to a “Section,” “Article” or “Exhibit” shall be deemed to refer to a section or article of this Agreement, a Disclosure Schedule or an Exhibit attached to this Agreement. Unless the context otherwise requires, the words “hereof,” “herein,” and “hereunder” and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. The words “include,” “includes,” or “including” shall be deemed to be followed by the words “without limitation.” Unless otherwise specifically provided for herein, the term “or” shall not be deemed to be exclusive. Whenever this Agreement refers to an event, occurrence or development that “Would reasonably be expected to have” or “would not reasonably be expected
-55- to have” a specified effect on the business, Seller Assets or any Person (including a Material Adverse Effect) a determination as to whether such effect would reasonably be expected to occur shall be made from the viewpoint of a reasonable and objective third party that is experienced in the concrete drainage products or concrete precast industry, as applicable, and not from the viewpoint of, or taking into account any special circumstances applicable to, any particular Person (including the Purchaser or Seller). SECTION 13.14 Facsimiles; Counterparts. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic submission (e.g., .pdf) shall be deemed binding for all purposes hereof, without delivery of an original signature page being thereafter required. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall constitute one instrument binding on all the parties, notwithstanding that all the parties are not signatories to the original or the same counterpart. [Remainder of Page Intentionally Blank]
ᐾ ! " # $ $ % $ & ' ( $ $ & ) * + , $ - $ . * $ ) ' / 0 $ ) ' $ 0 # ' ( / 1 $ 2 # $ & 3 ! 4 4 5 4 6 ! 7 7 6 ' 8 $ + ' 2 ' # $ + % $ ) + ' ( + , . / % 9 ' & ,: , ; ' % $ ; + $ ; < 8 6 8 = 7 7 6 8 > : > ! ? @ ! ! 7 ' 8 $ + ' 2 ' # $ + % $ ) + ' ( + , . / % 9 ' & ,: , ; ' % $ ; + $ ; Lori M. Browne EVP & General Counsel
A-1 EXHIBIT A-1 Form of Warranty Deed (Phoenix Plant) Attached.
4891-3033-0116 v.1 After recording return to: SPECIAL WARRANTY DEED FOR AND IN CONSIDERATION of the sum of Ten ($10.00) Dollars cash in hand paid by the hereinafter named Grantee, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, ____________________, a __________ ______________ ("Grantor"), does hereby convey to ______________, a ____________ ______________ _______________ ("Grantee"), and Grantee's successors and assigns, that certain real property situated in Maricopa County, Arizona, more particularly described on Exhibit A attached hereto and incorporated herein by this reference, together with all rights and privileges appurtenant thereto (the "Property"). The Property is conveyed to Grantee subject to those encumbrances and exceptions (the “Permitted Exceptions”) set forth on Exhibit B. Grantor hereby binds him/her/itself and his/her/its successors and assigns to warrant and defend the title to the Property against all acts of Grantor herein and no other, subject to the matters set forth above. This Special Warranty Deed may be executed in counterparts, all of which taken together shall be considered one and the same document. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE(S) ON FOLLOWING PAGE(S).
4891-3033-0116 v.1 DATED this ___ day of ______________ 20__. GRANTOR: By: Name: Title: [INSERT APPLICABLE NOTARY BLOCK]
4891-3033-0116 v.1 EXHIBIT A Description of the Property The Southwest quarter of the Southwest quarter of Section 10, Township 1 North, Range 2 East of the Gila and Salt river Base and Meridian, Maricopa County, Arizona; Except the North 75 feet; and Except that portion of said land conveyed to Southern Pacific Company in Deed recorded in Docket 3610, page 529, Maricopa County records, described as follows: Beginning at the Southeast corner of the Southwest quarter of the Southwest quarter of said Section 10; thence North 89˚45’04” West, along the South line of said Section 10, a distance of 20 feet; thence North 00˚36’56” East, parallel with the East line of said Southwest quarter of the Southwest quarter of Section 10, a distance of 1,066.59 feet; thence North 74˚11’32” West, 133.09 feet; thence Northerly, along a curve to the left, having a radius of 284.16 feet, through a central angle of 07˚01’52” (the tangent to said curve at the last mentioned point bears North 15˚48’28” East and the chord of said curve bears North 12˚17’32” East, 34.85 feet), and arc distance of 32.87 feet; thence North 05˚17’12” East, 68.23 feet to a point which is 20 feet Westerly of, as measured at right angles to, said East line; thence North 00 ˚36’56” East, parallel with the East line, 64.59 feet to a point on the South line of the North 75 feet of said Southwest quarter of Section 10; thence South 89˚54’41” East, along last said South line, being also the East line of that property described in Corporation Quit Claim Deed dated November 30,1959, between Concrete Conduit Company and American Marietta Company, recorded December 1, 1959 in Docket 3074, page 325, Maricopa County Records, 1,236.83 feet to the Point of Beginning; and Except that portion conveyed to the State of Arizona, by and through its Department of Transportation in Warranty Deed recorded in Docket 11650, page 225, described as follows: Commencing at the Southwest corner of said Section 10, which point is the intersection of the existing centerlines of 43rd Avenue and Buckeye Road (U.S. Highway 80); thence South 89˚57’26” East, along said existing centerline of Buckeye Road, being also the South line of said Section 10, a distance of 625.82 feet; thence North 00˚02’34” East, 33 feet to a point on the existing Northerly right-of-way li
344.69 feet; thence North 89˚33’09” West, 12 feet to a point on the existing Easterly right-of-way line of 43rd Avenue; thence South 00˚25’51” West, along said right-of-way line, 396.77 feet to its juncture with the aforesaid Northerly right-of-way line of Buckeye Road; thence South 89˚57’26” East, along said Northerly right-of-way line, 692.59 feet to the Point of Beginning; and
4891-3033-0116 v.1 Except that portion of the West 40 feet of said Southwest quarter of the Southwest quarter of Section 10 which was conveyed to the City of Phoenix, an Arizona municipal corporation, in Quit Claim Deed recorded in Recording No.83-193790, Maricopa County Records; and Except that portion which was conveyed to the State of Arizona, by and through its Department of Transportation in Warranty Deed recorded in Recording No. 88-301607, Maricopa County Records, and which lies Southerly of that certain line described as follows: Commencing at the Southwest corner of Section 10; thence North 89˚57’37.5” East, along the South line of said Section 10, a distance of 625.82 feet; thence North 00˚02’22.5” West, 50 feet to the Point of Beginning of said line being described, herein, said point being the Northeast corner of the existing North right-of-way of Buckeye Road; thence North 89˚57’37.5” East, parallel with, and 50 feet North of, said South line of Section 10, a distance of 656.03 feet; thence North 71˚56’09” East, 16.159 feet to the East property line of the above described property; thence South 00˚20’30.5” West, along said East property line, 15 feet to the terminus point of said line being described, herein, on the existing North right-of-way line of State Route 85 (Buckeye road); and Except any underlying fee interest in State Route 85 (Buckeye Road) as conveyed to the State of Arizona, by and through its Department of Transportation in Warranty Deed recorded in recording No. 88-301607, Maricopa County Records; and Except that portion conveyed to Pavestone Company, L.P., a Texas limited partnership in Special Warranty Deed and Restrictive Covenant recorded in Recording No. 00-0234820, Maricopa County Records, described as follows: Commencing at the Southwest corner of said Section 10 (using as a basis of bearings for this description, the South line of said Section 10, which bear South 89˚45’04” East); thence North 00˚42’33” East, 430.09 feet; thence South 89˚16’27” East, 40 feet to the Point of Beginning; thence North 00˚42’33” East, 104.55 feet; thence South 89˚45’04” East 250.01 feet; thence South 00˚42’33” West, 84 feet; thence South 89˚45’04” East, 306.52 feet; thence South 00˚40’05” West, 30 feet; thence South 89˚45’04” East, 700.02 feet; thence Sou
North 00˚42’33” East, 344.84 feet; thence North 89˚45’04” West, 5 feet to the Point of Beginning; and Except that portion conveyed to El Paso Natural Gas Company, a Delaware corporation in Warranty Deed recorded in Recording No. 2000-0613842, Maricopa County Records, as corrected in Recording No. 2000-0748506, Maricopa County Records, and as further corrected in Recording No. 2004-1460307, Maricopa County Records, described as follows: Beginning at a point on the East right-of-way line of 43rd Avenue in the Southwest quarter of the Southwest quarter of said Section 10, which lies North 01˚07’ East, along the West line of said Section 10, a distance of 1085.5 feet, and South 88˚53’ East, 46 feet, from the Southwest corner
4891-3033-0116 v.1 of said Section 10; thence North 01˚07’ East along the East right-of-way line of 43rd Avenue, 150 feet; thence South 88˚53’ East, 79.5 feet; thence South 01˚17’ West, 150 feet; thence North 88˚53’ West, 79.5 feet to the Point of Beginning; and Except that portion which was conveyed to the City of Phoenix, an Arizona municipal corporation, in Warranty Deed recorded in Recording No. 2004-0266183, Maricopa County Records, described as follows: The East 6 feet of the West 46 feet of that part of the Southwest quarter of the Southwest quarter of Section 10, Township 1 North, Range 2 East, lying between the South line of the North 75 feet of said Southwest quarter of the Southwest quarter and Line “B” described herein below; Together with that part of the following described parcel that lies within the East 7 feet of the West 40 feet of said Southwest quarter of the Southwest quarter: Beginning at a point which bears North 01˚12’ East a distance of 1146.2 feet from the Southwest corner of said Section 10; thence North 88˚48’ East a distance of 85.5 feet; thence North 01˚12’ West a distance of 90 feet; thence South 88˚48 West a distance of 85.5 feet; thence South 01˚12’ East a distance of 90 feet to the Point of Beginning; Except that part thereof that lies within that part of the Northwest quarter of said Southwest quarter of the Southwest quarter described as follows: Beginning at the point which bears North 01˚12’ East a distance of 1146.2 feet from the Southwest corner of said Section 10; thence North 88˚48’ East a distance of 86.5 feet; thence South 01˚12’ East, a distance of 60 feet; thence South 88˚48’ West a distance of 85.5 feet; thence North 01˚12’ West a distance of 60 feet to the Point of Beginning; and Except that part thereof that lies within the parcel described as follows: Commencing at the Southwest corner of said Section 10 (using as the basis of bearings for this particular description, the South line of said Section 10 which bears South 89˚45’04”); thence North 00˚42’33” East a distance of 430.09 feet; thence South 89˚17’27” East a distance of 40 feet to the Point of Beginning; thence North 00˚42’33” East a distance of 104.55 feet; thence South 89˚45’04” East a distance of 250.01; thence South 00˚42’33” West a distance of 84 feet; thence South 89˚45’04” East a distance of
16.22 feet; thence North 89˚45’04” West, along the Northerly right-of-way line of Buckeye Road, a distance of 1196.54 feet; thence North 48˚21’56” West a distance of 52.82 feet; thence North 00˚42’33” East a distance of 344.84; thence North 89˚45’04” West a distance of 5 feet to the Point of Beginning. Line “B”
4891-3033-0116 v.1 Commencing at the Southwest corner of said Section 10, being the intersection of the monument line of 43rd Avenue and Buckeye Road; thence South 89˚57’26” East, along said monument line of Buckeye Road and the South line of said Section 10, a distance of 625.82 feet; thence North 00˚02’34” East a distance of 50 feet to the Northly right-of-way line of said Buckeye Road; thence North 89˚57’26” West, along said Northerly right-of-way line, a distance of 540.51 feet; thence North 48˚34’18” West a distance of 52.93 feet; thence North 00˚26’51” East a distance of 344.69 feet to the Point of Beginning; thence South 89˚33’09” East a distance of 2 feet; thence North 89˚33’09” West a distance of 14 feet to the terminus of the line described herein.
4891-3033-0116 v.1 EXHIBIT B Permitted Encumbrances
A-1 EXHIBIT A-2 Form of Warranty Deed (Littleton Plant) Attached.
4879-4202-8036 v.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: [___________________________] [___________________________] [___________________________] MAIL TAX STATEMENTS TO: [___________________________] [___________________________] [___________________________] --------------------------------Space Above This Line For Recorder’s Use ------------------------ SPECIAL WARRANTY DEED THE STATE OF __________ § § COUNTY OF ____________ § [_________________________________], a [__________________], whose address is [______________________________] (“Grantor”), for and in consideration of the sum of Ten and No/100 Dollars ($10.00) and other good and valuable consideration to it in hand paid by [____________________________], a [________________________], whose address is [_____________________________] (“Grantee”), the receipt and sufficiency of which are hereby acknowledged, has GRANTED, SOLD AND CONVEYED, and by these presents does GRANT, SELL AND CONVEY unto Grantee, the real property situated in [____________] County, Colorado, described on Exhibit “A” attached hereto and made a part hereof for all purposes, together with all improvements and fixtures situated thereon, together with all singular the rights, benefits, privileges, easements, tenements, hereditaments, and appurtenances thereon, and any right, title and interest of Grantor in and to the adjacent streets, alleys and rights of way
2 4879-4202-8036 v.1 (said land, rights, benefits, privileges, easements, tenements, hereditaments, appurtenances, improvements, fixtures and interests being hereinafter referred to collectively as the “Property”). This conveyance is made and accepted subject to those encumbrances and exceptions (the “Permitted Exceptions”) set forth on the attached Exhibit “B.” TO HAVE AND TO HOLD the Property, unto Grantee, its successors and assigns forever, and Grantor does hereby bind itself to WARRANT AND FOREVER DEFEND all and singular the Property unto Grantee and its successors and assigns against every person whomsoever lawfully claiming or to claim the same, or any part thereof, by, through or under Grantor, but not otherwise, subject to the Permitted Exceptions. [NO FURTHER TEXT ON THIS PAGE] [SIGNATURE APPEARS ON THE FOLLOWING PAGE]
3 4879-4202-8036 v.1 [SIGNATURE PAGE TO SPECIAL WARRANTY DEED] IN WITNESS WHEREOF, the Grantor has executed this deed to be effective as of the date first above written. GRANTOR: _____________________________, a _________________________________ By: ______________________________ Name: ________________________ Title: _________________________ (SEAL) ACKNOWLEDGMENT [Insert applicable form of notary block.]
4 4879-4202-8036 v.1 EXHIBIT “A” LEGAL DESCRIPTION OF REAL PROPERTY PARCEL A: All of the Southwest quarter of Section 6, Township 6 South, Range 68 West of the 6th P.M. lying South and East of right-of-way of Atchinson, Topeka and Santa De Railroad and lying North and West of the West line of Highline Canal as the railroad right of way and the West line of the canal existed as of November 13, 1957, County Douglas, State of Colorado. PARCEL B: Part of the Northwest quarter of the Northeast quarter of Section 7, Township 6 South, Range 68 West of the 6th P.M., described as follows: Beginning at a point on the Easterly right-of-way line of the Atchinson, Topeka and Santa Fe Railroad and the South line of Highline Drive, said point being 321 feet East and 39 feet South of the Northwest corner of said Northwest quarter of the Northeast quarter; thence East 726 feet along Highline Drive to a point on the West right-of-way line of the Highline Canal; thence Southerly along the Westerly right-of-way line of the Highline Canal 1273 feet; thence West 630 feet; thence Northerly 384 feet to a point 50 feet East of the East right-of-way line of the Atchinson, Topeka and Santa Fe Railroad; thence West 50 feet to a point of the Easterly right-of-way line of the Atchinson, Topeka and Santa Fe Railroad; thence Northerly along the Atchinson, Topeka and Santa Fe railroad right-of-way 778 feet to the Point of Beginning; as to the right-of-way of railroad and lines of the canal as they existed on August 1, 1963. EXCEPT any portion of said Parcel B lying within a tract of land described in Book 203 at Page 383 in the Douglas County records, County of Douglas, State of Colorado; and EXCEPT that portion conveyed to the United States of America in Deed recorded September 2, 2003 at Reception No. 200331126, County of Douglas, State of Colorado PARCEL C: Part of the Northwest quarter of the Northeast quarter of Section 7, Township 6 South, Range 68 West of the 6th P.M., being vacated West Carder Court lying Easterly of the Easterly right-of-way of the Atchinson, Topeka and Santa Fe Railroad, and lying Westerly of the Westerly right-of
~#4813-9132-9470~ 4879-4202-8036 v.1 EXHIBIT “B” PERMITTED EXCEPTIONS 1.
A-1 EXHIBIT A-3 Form of Warranty Deed (Fort Myers Plant) Attached.
4876-8964-8900 v.1 This document was prepared by: _________________________ _________________________ _________________________ _________________________ After recording return to _________________________ _________________________ _________________________ _________________________ THE ABOVE SPACE FOR RECORDER’S USE ONLY SPECIAL WARRANTY DEED For the consideration of the sum of Ten Dollars ($10.00) and other valuable considerations received, ______________________, a _________________ _____________ (“Grantor”), having an office at __________________________. ________________________, _______________, Attn: _____________________, does hereby sell and convey to ______________________, a _________________ _____________ (“Grantee”), having an office at __________________________. ________________________, _______________, Attn: _____________________,, all of the Grantor’s rights, title and interest in and to the following described real property (the “Property”) situated in ________________, Lee County, Florida, together with all improvements thereon and all of the Grantor’s interest in any rights and privileges solely appurtenant thereto: SEE EXHIBIT A ATTACHED HERETO AND BY THIS REFERENCE MADE A PART HEREOF, SUBJECT, HOWEVER, TO THOSE MATTERS DESCRIBED IN EXHIBIT B ATTACHED HERETO AND MADE A PART HEREOF FOR ALL PURPOSES (“PERMITTED EXCEPTIONS”), PROVIDED THAT THIS REFERENCE SHALL NOT SERVE TO REIMPOSE SAME. Together with all and singular the hereditaments and appurtenances thereunto belonging, or in anywise appertaining: TO HAVE AND TO HOLD the Property in fee simple, with the appurtenances thereto, unto Grantee and its successors and assigns. Grantor, for itself, and its successors, does covenant, promise and agree, to WARRANT AND FOREVER DEFEND the Property unto Grantee, its successors and assigns, against every person lawfully claiming the same, or any part thereof, by through, or under Grantor but not other
4876-8964-8900 v.1 IN WITNESS WHEREOF, the undersigned has made, executed and delivered this Special Warranty Deed as of this ____ day of ________________, 2021 GRANTOR: WITNESSES: _________________________________, a ____________ ________________________ By: __________________________________ Print Name: Name: ______________________ Title: ______________________ Print Name: ****************************************************************************** [Insert applicable notary block] ****************************************************************************** [SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
4876-8964-8900 v.1 EXHIBIT A LEGAL DESCRIPTION PARCEL 1: The East 60 feet of Lot 5 and the West 190 feet of Lot 6, Pine Crest Subdivision, according to the plat recorded in Plat Book 5, Page 3, Public Records of Lee County, Florida. PARCEL 2: Lot 5, less the Easterly 60 feet and less the Westerly 130 feet, Pine Crest Subdivision, recorded in Plat Book 5, Page 3, Public Records of Lee County, Florida. PARCEL 3: The North half of the East half of Lot 11, of that certain subdivision known as Pine Crest Subdivision, Section 21, Township 44 South, Range 25 East, according to the map or plat thereof, on file and recorded in the office of the Clerk of the Circuit Court of Lee County, Florida in Plat Book 5, page 3. PARCEL 4: The North half of the West half of Lot 11, Pine Crest Subdivision, Plat Book 5, Page 3, Lot 6, Pine Crest Subdivision, Plat Book 5, Page 3, less the Westerly 190 feet and less the following parcel: Commence at the Southeast corner of said Lot 6; thence run Westerly along the South line of said Lot 6, for 20 feet to a point on the Westerly right-of-way line of SR 80-B, “Ortiz Avenue”, said point is the Point of Beginning of the parcel herein described: From said Point of Beginning continue Westerly along said South line of Lot 6, for 224.01 feet; thence deflect 105˚12’41” right and run Northeasterly 129.27 feet, more or less, to a point on the Southerly right-of-way line of the Old Immokalee Road; thence deflect 90˚28’10” right and run Southeasterly along said right-of-way line for 208.9 feet, more or less, to a point on aforementioned right-of-way line of SR 80-B; thence deflect 67˚14’11” right, run Southerly along said right-of-way line SR 80-B for 41.10 feet to the Point of Beginning. Commonly known as: [Address]
4876-8964-8900 v.1 EXHIBIT B PERMITTED EXCEPTIONS 1. Taxes and assessments for the year 202_ and subsequent years, which are not yet due and payable.
A-1 EXHIBIT A-4 Form of Warranty Deed (Napa Plant) Attached.
1 4863-8076-3908 v.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: Owner’s Name Address Address Attention: MAIL TAX STATEMENTS TO: Owner’s Name Address Address Attention: (Above Space for Recorder’s Use Only) APN: XXX-XX-XXXX GRANT DEED The Undersigned Grantor(s) Declare(s): DOCUMENTARY TRANSFER TAX $ ; CITY TRANSFER TAX $ ; SURVEY MONUMENT FEE $ . [ ] computed on the consideration or full value of property conveyed, OR [ ] computed on the consideration or full value less value of liens and/or encumbrances remaining at time of sale, [ ] unincorporated area; or [ ] City of XXXXXXXXXXXXXXX, and [ X ] __________________________________ Signature of Declarant FOR VALUE RECEIVED, , a ("Grantor"), grants to , a ("Grantee"), all that certain property in Sacramento County, State of California, as more particularly described on Exhibit "A" attached hereto, subject to all matters of record. [signatures to follow on the next page]
2 4863-8076-3908 v.1 IN WITNESS WHEREOF, the Grantor has executed this Grant Deed as of . GRANTOR: [___________________], a ____________________ ___________________ By: Name: Title: [Insert applicable notary form, or if executing in California, the Certificate on following page is required.]
3 4863-8076-3908 v.1 CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document. STATE )SS COUNTY ) On before me, , Notary Public, personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature Affix appropriate seal above
4 4863-8076-3908 v.1 EXHIBIT A – LEGAL DESCRIPTION PARCEL 1: Lot 21 of Florin Addition according to the official plat thereof filed in the Office of the Recorder of Sacramento County, California on March 28, 1912 in Book 13 of Maps, Map No. 12. Excepting therefrom all that portion conveyed by deed to John C. Gist, dated March 8, 1962 in Book 4406, Page 516, Official Records. Excepting therefrom all that portion thereof lying within the right-of-way of the Southern Pacific Railroad, successor in interest to Central Pacific Railroad Company under the Congressional Act approved July 1, 1862 and amendments thereto. PARCEL 2: All that portion of Section 35, Township 8 North, Range 5 East, Mount Diablo Base and Meridian, according to the official plat thereof, described as follows: Beginning at the Northwest corner of Lot 21, according to the official plat thereof Florin Addition recorded March 28, 1912 in Book 13 of Maps, Map No. 12, Sacramento County Records, and running thence North 00˚39’ West 992.21 feet to the Southeast corner of Lot 13, as shown on the official plat of Florin Acres, recorded May 14, 1907 in Book 8 of Maps, Map No. 29, Sacramento County Records; thence North 89˚27’30” East 38.35 feet to the Westerly right-of-way fence of the Central Pacific Railway Company; thence along said fence South 17˚02’ East 1017.74 feet to the Northerly line of Lot 21 of said Florin Addition; thence along said line South 86˚35’ West 325.80 feet to the Point of Beginning. Excepting therefrom all that portion thereof lying within the right-of-way of the Southern Pacific Railroad, successor in interest to Central pacific Railroad Company under the congressional act approved July 1, 1862 and amendments thereto. PARCEL 3: Lot 20 of Florin Addition according to the official plat thereof, filed in the Office of the Recorder of Sacramento County, California on March 28, 1912 in Book 13 of Maps, Map No. 12. PARCEL 4: All that portion of Lot 19 of Florin Addition, according to the official plat thereof, filed in the Office of the Recorder of Sacramento County, California on March 28, 1912 in Book 13 of Maps, Map No. 12, particularly described as follows: Beginning at the Northwest corner of said Lot 19, and running thence along the North line thereof North 89˚29’ East 236.20 fe
PARCEL 5: All that portion of the South half of Section 35, Township 8 North, Range 5 East, Mount Diablo Base and Meridian, described as follows:
5 4863-8076-3908 v.1 Commencing at the section corner common to Section 2 and 3 in Township 7 North, Range 5 East and Section 34 and 35 in Township 8 North, Range 5 East, Mount Diablo Base and Meridian; thence North 89˚39’ East 2,637 feet to the quarter section corner of the intersection of the South line of said Section 35, from said quarter section corner of the intersection of the center line of a 66 foot road and the center line of the railroad tract of the Central Pacific Railway Company bears North 88˚ East 855.70 feet; thence North 00˚39’ West 786.20 feet to a one inch iron pipe in fence line marking the Point of Beginning of the description of the realty herein described; thence from Said Point of Beginning North 00˚39’ West 883 feet to a fence corner; thence North 86˚35’ East 268.81 feet to a point located 100 feet measure at right angle from the center line of the 100 foot right-of-way the Central Pacific Railway Company, formerly Western Pacific Railroad Company; thence along the line parallel to the 100 foot Westerly, measured at a right angle, from the center line of said railroad tract, North 16˚45’ West 1019.31 feet to a point in fence line, which point is located approximately upon the quarter section line running East and West through the center of said Section 25; thence along said fence line, South 89˚27.5’ West 1278.66 feet to a one inch iron pipe at a fence corner; thence along fence line South 01˚02’ East 1332.60 feet to a one inch iron pipe at fence corner; thence along fence line North 89˚48’ East 761.65 feet to a one inch iron pipe at a fence corner; thence South 00˚38’ East 536.45 feet to a fence corner; thence 89˚39’ East 522.40 feet to said Point of Beginning. Excepting therefrom the following two parcels: Exception (1) beginning at the Northwest corner of Lot 21, as shown on the plat of Florin Addition according to the official plat thereof, filed in the Office of the Recorder of Sacramento County, California on March 28, 1912 in Book 133 of Maps, Map No. 12, running thence North 00˚39’ West 992.21 feet to the Southeast corner of Lot 13 as shown on the plat of Florin Acres, recorded in the Office of the Recorder of Sacramento County, California on May 14, 1907 in Book 8 of Maps, Map No. 29; thence North 89˚27’30” East 38.35 to the Westerly right-of-way fence of the Centra
Exception (2) all that portion of the South half of Section 35, Township 8 North, Range 5 East, Mount Diablo Base and Meridian, described as follows: Beginning at a one inch iron pipe at the Easterly terminus of the course designated North 89˚48’ East 761.65 feet to a one inch iron pipe at fence corner in that certain deed dated October 22, 1952 in Book 2311 of Official Records, page 482, executed by Charles A. Pearson and Nellie B. Pearson, his wife, to Oren J. McCurdy and Dorothy J. McCurdy, his wife, as joint tenants said Point of Beginning being located the following four courses and distances from the Southwest corner on the South line of said Section 35; (1) North 89˚39’ East 2637 feet to the quarter section corner on the South line of said Section 35 (2) North 00˚39’ West 786.20 feet to one inch iron pipe in fence line (3) South 89˚39’ West 522.40 feet and (4) North 00˚38’ West 536.45 feet; thence from said Point of Beginning parallel with the East line of the aforementioned McCurdy parcel North 01˚02’ West 1332 feet, more or less to a point on the North line of said McCurdy parcel; thence along the boundaries of said McCurdy parcel the following three courses and distances: (1) South 89˚27’30” West 761.65 feet, more or less, to the Northwest corner thereof (2) South 01˚02’ East 1332.6 feet to a one inch iron pipe and (3) along a fence line North 89˚48’ East 761.65 feet to the Point of Beginning. Further excepting therefrom all that portion therefrom lying within the right-of-way of the Southern Pacific Railroad, successor in interest to Central Pacific Railroad Company under the Congressional Act approved July 1, 1862 and amendment thereto. PARCEL 6:
6 4863-8076-3908 v.1 All that portion of the South half of Section 35, Township 8 North, Range 5 East, Mount Diablo Base and Meridian, described as follows: Beginning at a one inch iron pipe at the Easterly terminus of the course designated North 89˚48’ East 761.65 feet to a one inch iron pipe at fence corner in that certain deed dated October 22, 1952 in Book 2311 of Official Records, page 482, executed by Charles A. Pearson and Nellie B. Pearson, his wife, to Oren J. McCurdy and Dorothy J. McCurdy, his wife, as joint tenants said Point of Beginning being located the following four courses and distances from the Southwest corner on the South line of said Section 35; (1) North 89˚39’ East 2637 feet to the quarter section corner on the South line of said Section 35 (2) North 00˚39’ West 786.20 feet to one inch iron pipe in fence line (3) South 89˚39’ West 522.40 feet and (4) North 00˚38’ West 536.45 feet; thence from said Point of Beginning parallel with the East line of the aforementioned McCurdy parcel North 01˚02’ West 1332 feet, more or less to a point on the North line of said McCurdy parcel; thence along the boundaries of said McCurdy parcel the following three courses and distances: (1) South 89˚27’30” West 761.65 feet, more or less, to the Northwest corner thereof (2) South 01˚02’ East 1332.6 feet to a one inch iron pipe and (3) along a fence line North 89˚48’ East 761.65 feet to the Point of Beginning.
A-1 EXHIBIT A-5 Form of Warranty Deed (St. Martinville Plant) Attached.
4894-1809-5364 v.1 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: [__________________________] [__________________________] [__________________________] SPECIAL WARRANTY DEED CASH SALE BE IT KNOWN that on the dates and at the places designated below, before the respective undersigned witnesses and notaries public, duly commissioned and qualified as such, personally came and appeared: __________________________________, a ___________________________, represented herein by _____________________, pursuant to the ___________________ attached hereto, whose permanent mailing address is ______________________________________________ (“Seller”); who did declare that for the consideration hereinafter mentioned Seller does, by these presents, sell, transfer and deliver with no warranty of title (except for acts arising by, through or under Seller) but with full subrogation to all of Seller’s rights and actions of warranty of title which Seller has or may have against previous owners and with all rights of prescription, both liberative and acquisitive, free and clear of all mortgages, liens or encumbrances unto: _________________________________, a _______________________________, represented herein by ____________________, pursuant to the _______________ attached hereto, whose permanent mailing address is ________________________________________ (“Purchaser”); for the benefit of Purchaser, and Purchaser’s successors and assigns, the property described on Exhibit “A” attached hereto (along with all of Seller’s right, title and interest in and to all minerals (to the extent owned by Seller), buildings, improvements, easements, servitudes, appurtenances, rights, privileges belonging or appertaining to the property, including, but not limited to, all of Seller’s right, title and interest in and to any land lying in the bed of any street, road or avenue, opened or proposed, adjoining the property hereinafter collectively referred to as the “Property”). The Property is sold subject to the permitted exceptions listed on Exhibit “
4894-1809-5364 v.1 This sale is made and accepted for and in consideration of the sum of _______________________ AND _________/100 DOLLARS ($______________) cash in hand paid, the receipt and adequacy of which are acknowledged by Seller. Property taxes have been prorated as of the date of sale. In accordance with La. R.S. 9:2721(B), from and after the date of this Act, (a) the name of the person responsible for all property taxes and assessments is_________, and (b) all property tax and assessment notices should be mailed to the following address: ______________________________. All parties signing this instrument have declared themselves to be of full legal capacity. All agreements and stipulations herein and all the obligations herein assumed shall inure to the benefit of and be binding upon the heirs, successors and assigns of the respective parties, and Purchaser, its heirs, successors and assigns, shall have and hold the Property in full ownership forever. [NO FURTHER TEXT ON THIS PAGE]
4894-1809-5364 v.1 [SIGNATURE PAGE TO SPECIAL WARRANTY DEED] This act has been passed in the Parish/County of _______________, State of _________ on the day of ___________ , 2021, in the presence of the undersigned competent witnesses and me, Notary Public, after due reading of the whole. WITNESSES: _______________________________ Print Name: _____________________ _______________________________ Print Name: _____________________ SELLER: ________________________, a Delaware limited liability company By: _____________________________ Name: _______________________ Title: ________________________ [applicable Seller state notary form] _______________________________ Notary Public Bar Roll/Notary #:__________________ [SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
4894-1809-5364 v.1 [SIGNATURE PAGE TO SPECIAL WARRANTY DEED] This act has been passed in the Parish/County of __________ , State of ____________ on the day of ___________ , 2020, in the presence of the undersigned competent witnesses and me, Notary Public, after due reading of the whole. WITNESSES: _______________________________ Print Name: _____________________ _______________________________ Print Name: _____________________ PURCHASER: ________________________, a ________________ By: _____________________________ Name: _______________________ Title: ________________________ [applicable Purchaser state notary form] _______________________________ Notary Public Bar Roll/Notary #:________________ [END OF SIGNATURES] Exhibits to Special Warranty Deed: Exhibit “A”—Legal Description Exhibit “B”—Permitted Exceptions
4894-1809-5364 v.1 EXHIBIT “A” Legal Description A certain piece or portion of ground, together with all the buildings and improvements thereon, and all of the rights, ways, means, and privileges, servitudes, appurtenances and advantages thereunto belonging or in anywise appertaining, situated in the Parish of St. Martin, State of Louisiana, situated in Section 84, Township 10 South, Range 6 East, containing 9.84 acres, more or less, bounded Northerly by West Bridge Street, Southerly by West Port Street (Louisiana State Highway 96), Easterly by Estate of J.B. Talley, and Westerly by South Pacific Railroad right-of-way and being more particularly described as follows: Beginning at the intersection of the East right-of-way line of the South Pacific Railroad right- of-way and the North line of West Port Street (Louisiana State Highway 96), said point is also on a point of curvature to the right having a radius of 1776.8 feet, with a central angle of 25˚50’47” (Chord bearing: North 43˚21’41” East. Chord distance of 794.74 feet) thence run along said curve a distance of 801.52 feet to a point on the South right-of-way line of West Bridge Street; thence run South 67˚19’10” East along the South right-of-way line for a distance of 427 feet; thence run South 21˚19’09” West for a distance of 680.29 feet a point on the North right-of-way line West Port Street (Louisiana State Highway 96) ; thence run North 72˚19’39” West along the North right-of-way line for a distance of 726.61 feet back to the Point of Beginning. Said parcel contains 429,301 square feet, more or less, or 9.855 acres of land, more or less.
4894-1809-5364 v.1 EXHIBIT “B” Permitted Exceptions
B-1 EXHIBIT B Form of Forms Rental Agreement Attached.
FORMS RENTAL AGREEMENT THIS FORMS RENTAL AGREEMENT (the “Agreement”), made and entered into this ____ day of __________, 2022, (“Effective Date”) by and between Foley Products Company, Inc., a Georgia corporation (the “Foley”), Forterra Pipe & Precast, LLC, a Delaware limited liability company (“Forterra”) and Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability company (the “Rinker Materials”, and collectively with Foley and Forterra, the “Parties”, and each, a “Party”). WHEREAS, Foley is the owner of certain forms for reinforced concrete pipe, elliptical pipe, and arch pipe and the necessary ancillary parts for all the forms (including, without limitation, headers, pallets and vibrators) for the proper production of reinforced concrete pipe, elliptical pipe, and arch pipe (as more particularly described in Exhibit A-1, the “Foley Forms”) that are used in operations at Foley’s plants described in Exhibit A-1 (collectively, the “Foley Plants”); WHEREAS, Forterra is the owner of certain forms for reinforced concrete pipe, elliptical pipe, and arch pipe and the necessary ancillary parts for all the forms (including, without limitation, headers, pallets and vibrators) for the proper production of reinforced concrete pipe, elliptical pipe, and arch pipe (as more particularly described in Exhibit A-2, the “Forterra Forms”) that are used in operations at Forterra’s plants described in Exhibit A-2 (collectively, the “Forterra Plants”); WHEREAS, Rinker Materials is the owner of certain forms for reinforced concrete, elliptical pipe, and arch pipe and the necessary ancillary parts for all the forms (including, without limitation, headers, pallets and vibrators) for the proper production of reinforced concrete pipe, elliptical pipe, and arch pipe (as more particularly described in Exhibit A-2, the “Rinker Materials Forms” and collectively with the Foley Forms and Forterra Forms, the “Forms” and each, a “Form”) that are used in operations at Rinker Materials’ plants described in Exhibit A-2 (collectively, the “Rinker Materials Plants”, and collectively with the Foley Plants and the Forterra Plants, the “Plants” and each, a “Plant”)); and WHEREAS, in connection with that certain Asset Purchase Agreement, by and between Foley, Forterra and Rinker Materials, dated December 13, 2021 with
time to time, pursuant to the terms set forth herein. NOW, THEREFORE, in consideration of the terms and provisions set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Defined Terms. As used herein, the “Lessor” shall mean the Party leasing a Form to the other Party, and the “Lessee” shall mean the Party leasing a Form from the Lessor. Capitalized terms used but not defined herein will have the respective meanings given them in the Purchase Agreement.
2. Rental of Forms. Subject to the terms, conditions and provisions herein, each Party hereby agrees to make available to and lease to the other Party the Forms used in such Party’s Plant for use by the other Party in the other Party’s Leasing Plant (as defined in Exhibit A-1 or A- 2, as the case may be) during the Term (as defined below), each in accordance with an individual written request (each, a “Rental Request”). Each Party hereby agrees to take and rent from the other Party, the Forms, upon such Party’s demand from time to time and in accordance with the terms and conditions set forth herein (each a “Rental”). 3. Rental Requests; Duration of Rental. Each Rental Request shall set forth (a) the requested rental term (including number of days) for the particular Forms (the “Requested Rental Period”), and (b) the type and quantity of Forms to be leased and a general description of the projects for which the Forms will be used. Lessor shall, within five (5) business days of receipt of any Rental Request, either confirm availability of the Forms for the Rental Period (subject to Section 4) or identify the first date as soon as practicable thereafter on which the Forms requested in the Rental Request will be available; provided, however, that, if the Forms are available during the Requested Rental Period (subject to Section 4), the Lessor shall deliver the Form or Forms indicated in the Rental Request within twenty (20) business days of the date of the Rental Request for Forms; provided further, that Lessor shall not be responsible for delays caused by the delivery service. The “Rental Period” shall commence on the date the Form or Forms are received by Lessee, and shall continue for the number of days specified in the Rental Request; provided that, upon delivery of a written notice to Lessor, Lessee shall have a one-time right to extend such Rental Period by up to twenty (20) business days if the Lessee reasonably requires the use of the rented Forms to complete ongoing production. Any extension of the Rental Period beyond such 20-business day extension shall be granted or denied in the sole discretion of the Lessor. 4. Forms Available to Lessee. Notwithstanding anything to the contrary set forth herein, Lessee shall not be entitled to: (i) lease any forms or ancillary parts of the Lessor other than the Forms in existenc
extent such Lessee has Forms in its possession or control at the applicable Leasing Plant that are functionally equivalent to those set out in any Rental Request; or (iii) use any Form rented hereunder at a location other than the Lessee’s Leasing Plant. For the avoidance of doubt, nothing in this Agreement shall obligate Lessor to purchase or otherwise acquire any forms or ancillary parts from any third party or from any plant of the Lessor or any of its affiliates, other than the Lessor’s Plants. Notwithstanding the foregoing, Rinker and Forterra shall make available and lease to Foley from the nearest available Rinker or Forterra Plant to the Designated Plant making such Rental Request, within twenty (20) business days of receipt of a Rental Request, any Forms and ancillary parts necessary for Foley to manufacture any product that Rinker or Forterra shipped to any customer from a Designated Plant (as defined in the Purchase Agreement) during the period beginning January 1, 2019 and ending on the Closing Date (such products, “Designated Products”); provided, that neither Rinker nor Forterra shall be obligated to purchase or otherwise acquire any forms or ancillary parts from any third party and that if the Rental of such Forms during the Requested Rental Period would cause a material undue burden to Rinker or Forterra, then Rinker and Forterra agree to provide to Foley, at the Designated Plant making the Rental Request, from the nearest Rinker or Forterra Plant that produces the Designated Product being requested, the quantities of such Designated Products as requested by Foley at
$100.00 per ton within 45 business days, and Foley shall be responsible for all freight charges for delivery of such Designated Products. 5. Rental Fee; Freight Costs. Lessee shall pay to Lessor a rental fee equal to $1.00 per Rental (“Rent”). In addition, Lessee shall be responsible for (a) applicable sales, use or other taxes, custom charges or duties on the lease and use of such Forms, and (b) all transportation costs, loading or unloading charges or related fees associated with the shipment and transfer (delivery and return) of Forms between the Parties (collectively, the “Additional Charges”). A Form will be considered in possession of Lessee from the date such Form is received by Lessee until the Form is delivered to the shipping or transportation company for delivery back to Lessor (freight collect) . Rent will be due and payable on the last day of each month for all Forms in the possession of Lessee during such month. In addition, Additional Charges will be invoiced monthly and shall be due and payable no later than thirty (30) days after the date of invoice. 6. Condition of Leased Forms. Lessee shall accept the Forms in their “as-is” condition, without warranty or representation of any kind and Lessor shall have no obligation to replace or repair any Forms. THERE ARE NO IMPLIED WARRANTIES OF ANY KIND IN CONNECTION WITH THE LEASE OF THE FORMS, INCLUDING, WITHOUT LIMITATION, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. 7. Use and Maintenance of Leased Forms. During the applicable Rental Period, Lessee may use the Forms for the projects described in the applicable Rental Request and covenants and agrees to maintain the Forms in good working order and condition, ordinary wear and tear and casualty excepted. 8. Default. If either Party defaults in any material respect in the performance of, or compliance with, any term or condition hereof, the non-defaulting Party may terminate the Agreement, and Lessor may reclaim the Forms. Notwithstanding the foregoing, the defaulting Party shall be given twenty (20) business days prior written notice of any default or breach, and the non-defaulting Party may not terminate the Agreement if, within twenty (20) business days of receipt of such notice, the defaulting Party
any and all losses, costs, expenses and other damages incurred by Lessor or its affiliates relating to or arising from Lessee’s use, maintenance or repair of the Forms or breach or non-fulfilment of this Agreement. Lessee’s obligations to indemnify Lessor and its affiliates does not extend to any losses, costs, expenses or other damages that arise out of the gross negligence or misconduct of Lessor. Lessor shall indemnify, defend and hold harmless Lessee and its affiliates against any and all losses, costs, expenses and other damages incurred by Lessee or its affiliates relating to or arising from Lessor’s breach or non-fulfilment of this Agreement. Lessor’s obligations to indemnify Lessee and its affiliates does not extend to any losses, costs, expenses or other damages that arise out of the gross negligence or misconduct of Lessee.
10. Term. The term of the Agreement shall commence on the Effective Date and continue for a period of twenty-four (24) months. 11. Assignment. Neither Party may assign its rights under this Agreement without the prior written consent of the other Party. Any purported assignment of this Agreement to which consent has not been obtained shall be voidable at the option of the non-consenting Party. 12. Subordination. Each Party agrees to subordinate this Agreement to any security interest that the other Party has placed or may hereafter place upon the Forms owned by such Party. 13. Notices. Any notice or demand under the terms of this Agreement or under any statute which must or may be given or made by a party hereto shall be in writing and shall be given or made by certified mail addressed to the respective parties as follows: If to Foley: Foley Products Company, Inc. 1031 Columbus Avenue Columbus, Georgia 31901 Attn: Frank D. Foley III If to Forterra or Rinker Materials: Five Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attn: Legal Department Such notice or demand shall be deemed to have been given or made when deposited, postage prepaid, in the United States mail. The above addresses may be changed at any time by giving written notice in compliance with this section. 14. Rights of Successors and Assigns. The covenants and conditions contained in the Agreement shall bind and inure to the benefit of the Parties and their respective heirs, executors, administrators, successors and assigns. 15. Severability. If any term or provision of this Agreement or the application thereof to any person or circumstance shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such terms or provisions to persons or circumstances other than those as to when it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. 16. Entire Agreement. This Agreement contains the entire agreement between the parties with respect to the subject matter hereof, and no oral statement or representations or prior written matter not contained in this Agreement shall have any force or effect. This Agreement shall not be modified or amended in any way ex
appropriate jurisdiction in Wilmington, Delaware.
[Signature Page to Forms Rental Agreement] IN WITNESS WHEREOF, the parties have executed this Agreement the day and year first above written. FOLEY PRODUCTS COMPANY, INC. a Georgia corporation By:________________________________ Name: Title: FORTERRA PIPE & PRECAST, LLC a Delaware limited liability company By:________________________________ Name: Title: HYDRO CONDUIT, LLC D/B/A RINKER MATERIALS a Delaware limited liability company By:________________________________ Name: Title:
EXHIBIT A-1 FOLEY FORMS AND PLANTS Foley Plants Forterra and Rinker Leasing Plants Forms Littleton, Colorado Las Vegas, Nevada Albuquerque, New Mexico 18" elliptical form 24" elliptical form 30" elliptical form 36" elliptical form 42" elliptical form 48" elliptical form 54" elliptical form 60" elliptical form St. Martinville, Louisiana Prentiss, Mississippi 58X36 Arch form 54X40 Arch form 60X45 Arch form 72X54 Arch form 60inch RD form 72inch RD form
EXHIBIT A-2 FORTERRA AND RINKER FORMS AND PLANTS Forterra and Rinker Plants Foley Leasing Plants Forterra and Rinker Forms All Forterra and Rinker Plants All Foley Plants Forms necessary for the production of the Designated Products
C-1 120675626v12 EXHIBIT C Reserved
D-1 EXHIBIT D Form of St. Martinville Sublease Agreement Attached.
SUBLEASE THIS SUBLEASE (this “Sublease”) is entered into this ___ day of ____________, 2022 by and between Forterra Pipe & Precast, LLC, a Delaware limited liability company, (“Sublandlord”) and Foley Products Company, a Georgia corporation (“Subtenant”). Background A. Pursuant to that certain Amended and Restated Master Land and Building Lease dated June 5, 2018 (the “Master Lease”), Pipe Portfolio Owner (Multi) LP, a Delaware limited partnership (“Master Landlord”) leased to Sublandlord, as Tenant, the land and improvements as more fully described in the Master Lease (for purposes of this Sublease, the “Premises”). A copy of the Master Lease is attached hereto as Exhibit A. B. Pursuant to that certain Asset Purchase Agreement, by and among by and among Forterra Pipe & Precast, LLC, a Delaware limited liability company, Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability company, and Foley Products Company, Inc., dated as of December 13, 2021 (the “Asset Purchase Agreement”), Subtenant desires to sublease from Sublandlord, and Sublandlord desires to sublease to Subtenant a portion of the Premises being all of the property located at 520 W. Port Street, St. Martinville, Louisiana 70582 including all buildings and improvements located thereon (the “Subleased Premises”) as more particularly described on Exhibit B. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: Terms 1. Sublease. Sublandlord hereby subleases the Subleased Premises to Subtenant, and Subtenant hereby subleases the Subleased Premises from Sublandlord, for the term, at the rental, and upon all of the conditions set forth herein. 2. Term. This Sublease shall be for a term (the “Term”) commencing on the Closing Date (as defined in the Asset Purchase Agreement, the “Commencement Date”), and ending upon the earlier of (i) the date Sublandlord conveys to Subtenant fee simple title to the Subleased Premises in accordance with the terms of the Asset Purchase Agreement or (ii) the date the Master Lease expires with respect to the Subleased Premises (the “Expiration Date”), unless sooner te
Subleased Premises (“Sublease Base Rent”) each year (or partial year) of the Term, which Sublease Base Rent shall be equal to $100.00, payment of which is first due on the Commencement Date and then due on each anniversary thereof.
-2- 3.2 Payment of Rent. Subtenant shall pay the annual Sublease Base Rent on or before the anniversary of the Commencement Date through the Expiration Date. Sublease Base Rent and the payment of any other sums due under this Sublease shall be collectively referred to herein as “Rent”. Rent shall be paid to Sublandlord at 5 Concourse Parkway, Suite 1900, Atlanta, GA 30328 or to such other persons or at such other places as Sublandlord may designate in writing. All Rent shall be paid without set off, abatement or deduction. 4. Master Lease. 4.1 Subordinate to Master Lease. This Sublease is and shall be at all times subject and subordinate to the Master Lease. 4.2 Conflicts with Master Lease. (a) The terms, conditions and respective obligations of Sublandlord and Subtenant to each other under this Sublease shall be the terms and conditions of the Master Lease (including, without limitation, the indemnity provisions of the Master Lease) except for those provisions of the Master Lease which are directly contradicted by this Sublease, in which event the terms of this Sublease shall control over the Master Lease. Further, the terms and conditions of this Sublease shall not include the terms and conditions of the following provisions of the Master Lease: (1) Section 2.02(b); (2) Section 3.02(b) & (c); (3) Section 3.02(d) & (e); (4) Section 3.03(c) (5) Section 4.04; (6) Section 4.05; (7) Section 8.03; (8) Section 9.02 (9) Article 14; (10) Sections 15.01(g), (h) and (k) (11) Article 22; (12) Article 31; (13) Article 32; (14) Article 34 (15) Article 35; (16) Article 39; (b) Subject to the foregoing, for the purposes of this Sublease, wherever in the Master Lease the word “Landlord” is used, it shall be deemed to mean Sublandlord, and wherever in the Master Lease the word “Tenant” is used, it shall be deemed to mean Subtenant; the references to “Lease” will be deemed to refer to this Sublease; the references to “Demised Property” will be deemed to refer to the Subleased Premises; and the reference to “Lease Term” shall mean the Term. Subtenant acknowledges and agrees that Subtenant’s rights under this Sublease are as a subtenant only and that, notwithstanding anything contained in this Sublease to t
-3- are afforded to Sublandlord as the “Tenant” under the Master Lease: (a) any right which is contradicted or limited by this Sublease; (b) any right of extension; (c) any right of first refusal; (d) and right of self-help or setoff; (e) any right to receive condemnation proceeds; and (f) any right to terminate this Sublease by virtue of any provision of the Master Lease that may give Sublandlord the right to terminate the Master Lease. Any condition resulting from such default or delay by Sublandlord and Master Landlord shall not constitute an eviction, actual or constructive, of Subtenant by Sublandlord. No such default or delay shall excuse Subtenant from the performance or observance of any of its obligations to be performed or observed under this Sublease or shall entitle Subtenant to terminate this Sublease or to any reduction in or abatement of the rent or other charges provided for in this Sublease. In furtherance of the foregoing, Subtenant does, to the extent permitted by law, and except for the willful misconduct or gross negligence of Sublandlord or breach of its obligations hereunder, hereby waive any cause of action and any right to bring an action against Sublandlord by reason of any act or omission of Master Landlord under the Master Lease. Whenever the approval or consent of Sublandlord is required under any provision of the Master Lease or this Sublease, Subtenant shall also be required to obtain and furnish to Sublandlord the written approval or consent of Master Landlord (to the extent required under the Master Lease). Notwithstanding the foregoing, Subtenant shall not be entitled to exercise any renewal, extension, termination, first offer, first refusal or expansion rights of Sublandlord, if any under the Master Lease. 4.3 Assumption of Obligations. During the term of this Sublease, Subtenant does hereby expressly assume and agree to perform and comply with, for the benefit of Sublandlord and Master Landlord, the obligations of Sublandlord as “Tenant” under the Master Lease. Notwithstanding the foregoing, the obligation to pay rent to the Master Landlord shall be considered performed by Subtenant to the extent and in the amount rent is paid to Sublandlord in accordance with Section 3 of this Sublease. In no event shall Subtenant be deemed to have assumed any liability or obligation of Subland
Subtenant including, without limitation, as a result of a breach of this Sublease. 4.4 Termination of Master Lease. (a) If the Master Lease terminates through any event that is not caused by a default of Subtenant or Sublandlord under this Sublease, this Sublease shall terminate and the parties hereto shall be relieved of any further liability or obligation under this Sublease, except that any prepaid portion of Sublease Base Rent not yet earned by Sublandlord shall be promptly returned to Subtenant. If the Master Lease terminates, in no event shall Sublandlord be required to act beyond its obligations as tenant in the Master Lease or as provided in this Sublease. (b) Sublandlord agrees to observe and perform its obligations as tenant under the Master Lease to the extent such obligations are not the responsibility of Subtenant hereunder. 4.5 No Liability by Sublandlord. Notwithstanding anything contained in this Sublease to the contrary, Subtenant acknowledges and agrees that: (a) Sublandlord shall not be responsible for or deemed a guarantor with respect to any representations, warranties, covenants
-4- or other obligations or liabilities of the Master Landlord under the Master Lease, and Subtenant agrees to look solely to the Master Landlord for the performance of the Master Landlord’s obligations, (b) Sublandlord’s sole obligation to Subtenant under the Master Lease shall be, at Subtenant’s request and on Subtenant’s behalf, to use commercially reasonable efforts to require the Master Landlord to perform specific obligations of the Master Landlord under the Master Lease if necessary which shall not, in any event, require Sublandlord to commence or threaten litigation against the Master Landlord, and (c) Sublandlord shall have no liability to Subtenant for any misrepresentation, warranty, default or other act or omission of the Master Landlord under the Master Lease and Sublandlord shall not be obligated to provide any services to Subtenant or otherwise to perform any obligations in connection with this Sublease except as expressly set forth herein as the separate obligations of Sublandlord. 4.6 Modification of Master Lease. Sublandlord may amend or modify the Master Lease, in its sole discretion, provided that Subtenant shall not be bound by any amendment or modification which adversely affects Subtenant and results in any increase of Subtenant’s obligations under the Sublease and/or reduction of Subtenant’s rights under the Sublease, unless Subtenant has given its prior written consent to such modification, such consent not to be unreasonably withheld or delayed. 5. Condition of Subleased Premises. 5.1 “AS IS” Condition. Subtenant shall accept possession of the Subleased Premises on the Commencement Date, subject to restrictions of all applicable covenants of record, the Master Lease and the applicable zoning laws and other laws regulating the use of the Subleased Premises. Subtenant acknowledges and agrees that it shall take possession of the Subleased Premises and the personal property, equipment and fixtures contained therein and owned by the Master Landlord (the “Master Lease Equipment”) on the Commencement Date in an “AS IS” condition. Subtenant agrees and acknowledges that neither Sublandlord nor any agent, attorney, employee or representative of Sublandlord has made any representation respecting or has made any warranty whatsoever, express or implied, regarding the Su
Lease Equipment is hereby excluded, except to the extent expressly set forth in the Asset Purchase Agreement, and Sublandlord shall not be liable to Subtenant for any defect thereof. Subtenant agrees and acknowledges that neither Sublandlord nor any agent, attorney, employee or representative of Sublandlord has made any representation or has made any warranty whatsoever, express or implied, regarding the Subleased Premises or property except as may be expressly set forth herein and in the Asset Purchase Agreement. Subtenant shall be required to surrender the Master Lease Equipment upon the expiration or earlier termination of this Sublease in accordance with the terms of the Master Lease. 5.3 Alterations. Subtenant shall not at any time during the term make any alterations or improvements to the Subleased Premises without obtaining Sublandlord’s prior written consent, which consent shall not be unreasonably withheld. Subtenant acknowledges that any such consent shall also be contingent upon receiving Master Landlord’s consent pursuant to the Master Lease (to the extent such consent is required). Subtenant or its affiliates may not
-5- perform any drilling, sampling, testing or analysis (any such action, “Analysis”) of the Subleased Premises for hazardous substances unless (a) in response to a contemporaneous written claim or order by a governmental authority pursuant to an environmental law or (b) Sublandlord and Subtenant reasonably agree such Analysis is required pursuant to an environmental law to protect the health and safety of individuals at such Subleased Premises; provided, however, that Sublandlord shall have the right, but not the obligation, to conduct or control such Analysis. 5.4 Use of Subleased Premises. Subtenant may use the Subleased Premises only for its use as of the Commencement Date and for no other purpose. Subtenant shall not occupy or use the Subleased Premises (or permit the use or occupancy of the Subleased Premises) for any purpose or in any manner which: (a) is unlawful or in violation of any applicable legal, governmental or quasi-governmental requirement, ordinance or rule; (b) may invalidate or increase the amount of premiums for any policy of insurance affecting the Subleased Premises, provided that if Subtenant violates the terms of this clause (b) it shall not be a default under this Sublease if Subtenant reimburses any additional expense (including the increased premium or deductible amounts) incurred as a result of such use by Subtenant; (c) creates a nuisance; or (d) is in violation of the Master Lease. Subtenant shall be solely responsible for procuring and maintaining in effect any licenses or permits required for the operation of the Subtenant’s business activities in the Subleased Premises during the Term. Subtenant covenants not to Abandon the Subleased Premises prior to termination of this Sublease. 5.5 Surrender. Except in the event that Sublandlord conveys to Subtenant fee simple title to the Subleased Premises in accordance with the terms of the Asset Purchase Agreement, Subtenant shall surrender the Subleased Premises on the expiration or earlier termination of this Sublease in the condition required under the Master Lease, but in any event in broom clean condition free of debris and all personal property removed. 5.6 Resolution of Claims. Notwithstanding anything to the contrary set forth herein, or incorporated by reference, all claims arising under or in any way related to (i) any re
the limitations set forth in, the Asset Purchase Agreement. 6. Compliance with Laws. 6.1 Generally. Subtenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the Subleased Premises and its occupancy thereof, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of any violations or nuisances in or upon, or connected with, the Subleased Premises, all at Subtenant’s sole expense. 6.2 Americans with Disabilities Act. Sublandlord and Subtenant hereby agree and acknowledge that the Subleased Premises may be subject to, among other laws, the requirements of the Americans with Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq., including, but not limited to Title III thereof, and all regulations and guidelines related thereto, as may be hereafter modified, amended or supplemented (collectively, the “ADA”). Subtenant acknowledges that the Subleased Premises may not currently be in compliance with the ADA.
-6- Subtenant agrees to hold Sublandlord harmless and indemnify Sublandlord for any losses, costs, claims or expenses arising out of failure of the Subleased Premises to comply with the ADA as a result of Subtenant’s use of the Subleased Premises, or as a result of any work or alteration or leasehold improvements made to the Subleased Premises by or on behalf of Subtenant. If any barrier removal work or other work is required to the Subleased Premises, then such work shall be performed by Subtenant, subject to the provisions of the Master Lease and this Sublease. 7. Insurance. Subtenant, at its sole expense, shall obtain and keep in force the insurance required to be obtained by Sublandlord as “Tenant” under the Master Lease. 8. Waiver of Subrogation. Without limiting any release or waiver of liability or recovery in any other Section of this Sublease, but rather in confirmation and furtherance thereof, Sublandlord and Subtenant agree that, in the event the Subleased Premises, or the fixtures or property therein, are damaged or destroyed by fire or other casualty, regardless of the cause thereof, the rights, if any, of any party against the other, or against the employees, agents or licensees of any party with respect to such damage or destruction and with respect to any loss resulting therefrom, including the interruption of the business of any of the parties, are hereby waived to the extent provided in Section 9 hereof. Sublandlord and Subtenant agree, further, that all policies of fire, extended coverage, business interruption or other insurance covering and insuring the Subleased Premises, or the contents, fixtures, and improvements therein shall contain a clause or endorsement providing in substance that the insurance shall not be prejudiced if the insureds have waived right of recovery from any person or persons prior to the date and time of loss or damage, if any. 9. Waiver of Claims. To the extent not prohibited by Law or caused by the gross negligence or willful misconduct of Sublandlord or Sublandlord’s Indemnitees (as defined herein), and except as provided below, Subtenant hereby expressly releases Sublandlord, its property manager and their respective officers, agents, directors, representatives, shareholders, members, subsidiaries, affiliates, related entities, partners, employees and lenders (collectively, “Subla
part thereof or any equipment therein or appurtenances thereto being or becoming in disrepair, or resulting from any willful, intentional or negligent act or omission of any person (except for the gross negligence or willful misconduct of Sublandlord and Sublandlord’s Indemnitees). Without limiting the generality of the foregoing, this paragraph shall apply particularly, but not exclusively, to flooding, damage caused by equipment and apparatus, water, snow, frost, steam, excessive heat or cold, broken glass, sewage, gas, odors, excessive noise or vibration, death, loss, conversion, theft, robbery, assault, battery, murder, or the bursting or leaking of pipes, plumbing fixtures or sprinkler devices. In addition, Subtenant waives all claims and rights of recovery against Sublandlord and Sublandlord’s Indemnitees for any loss or damage to any property of Subtenant, which loss or damage is insured against, or required to be insured against, by Subtenant pursuant to Section 7 of this Sublease, whether or not such loss or damage is due to the fault or negligence of Sublandlord, or Sublandlord’s Indemnitees, and regardless of the amount of insurance proceeds collected or collectible under any insurance policies in effect, and Subtenant further agrees that all such property of Subtenant shall be at the risk of Subtenant only and Sublandlord and Sublandlord’s Indemnitees shall not be liable for any loss or damage thereto and
-7- Subtenant completely releases and exculpates Sublandlord and Sublandlord’s Indemnitees therefrom. 10. Holdover. In the event that Subtenant retains possession of the Subleased Premises or any part thereof after the termination of the term of this Sublease by lapse of time or otherwise, Subtenant shall pay Sublandlord $1,000 per day (the “Base Holdover Rent”), computed on a per- month basis, for each month or part thereof (without reduction for any such partial month) that the Subtenant thus remains in possession, and in addition thereto, Subtenant shall pay Sublandlord all damages sustained by reason of Subtenant’s retention of possession, including, but not limited to, any amount that Sublandlord is responsible to pay for the Subleased Premises to Master Landlord under Article 21 of the Master Lease and any other liability of Sublandlord to Master Landlord sustained as a result thereof. 11. Assignment and Subletting. Subtenant shall not, under any circumstances, assign this Sublease, sublease the Subleased Premises or permit the use of the Subleased Premises by any person other than Subtenant and its employees without obtaining Sublandlord’s prior written consent, which consent shall not be unreasonably withheld. Subtenant acknowledges and agrees that it shall not be unreasonable for Sublandlord to withhold such consent in the event that the proposed assignee, sublessor or user of the Subleased Premises does not have financial resources equal to or exceeding those of Subtenant as of the date hereof and as necessary to perform all obligations arising under this Sublease. Subtenant acknowledges that any such consent shall also be contingent upon receiving Master Landlord’s consent pursuant to the Master Lease. Subtenant shall reimburse Sublandlord for any and all reasonable expenses (including reasonable attorneys’ fees) incurred by Sublandlord in connection with any proposed assignment or sublease, whether or not Sublandlord consents to such assignment or subletting. 12. Subtenant Default. 12.1 Any act or omission by Subtenant that would constitute a default under the Master Lease shall, subject to the same notice and cure provisions provided therein, less three (3) days (if more than a seven day cure period is provided), be deemed a default by Subtenant under this Sublease. In addition, an
Landlord under the provisions of the Master Lease. It is also agreed that if Subtenant is in default of the provisions of the Master Lease, Sublandlord may, but need not, cure said default specifically on behalf of and for the account of Subtenant, in which case all costs, damages and expenses incurred by Sublandlord in connection therewith shall be paid to Sublandlord immediately upon its demand as additional rent hereunder. In so curing Subtenant’s default, Sublandlord shall not be deemed to have waived any of its rights, nor to have released Subtenant from any of its obligations under this Sublease. 12.3 It is further agreed that Sublandlord may cure Subtenant’s default under the Master Lease or this Sublease on and for Sublandlord’s own account to preserve its interest in the Master Lease, and may terminate this Sublease by reason of said default pursuant to the terms hereof, if Subtenant does not pay as additional rent to Sublandlord all costs, damages and expenses
-8- incurred by it in connection with such cure within the applicable grace period provided for in the Master Lease. 12.4 In the event of a default hereunder beyond any applicable notice and cure periods, Sublandlord shall be entitled to all remedies and damages provided for Master Landlord in the Master Lease, or as otherwise provided by law or equity. 13. Covenant of Sublandlord. Sublandlord shall use reasonable efforts to obtain for Subtenant the benefit of all rights granted to Sublandlord, as tenant under the Master Lease, with respect to the Subleased Premises in order to effectuate the intent of the parties and the purpose of this Sublease; provided that nothing contained in this Sublease shall be construed as requiring Sublandlord to perform any obligation or discharge any duty which Master Landlord is required to perform or discharge under the Master Lease. Subtenant shall not receive any abatement of rent under this Sublease because of the Master Landlord’s failure to perform any of their obligations under the Master Lease, except that if Sublandlord receives an abatement of rent from the Master Landlord, to the extent relating to the Subleased Premises, Subtenant shall receive a corresponding abatement of rent hereunder. 14. Notice of Default. Sublandlord and Subtenant shall, respectively and promptly, give written notice to the other of any notice of default they may receive from Master Landlord under the Master Lease. 15. Damage or Destruction. If the Subleased Premises (in such a manner that materially interferes with Subtenant’s use of the Subleased Premises or reasonable access thereto) shall be damaged, in whole or in part, by fire or other casualty or condemned or taken in any manner for any public or quasi-public use, the Rent paid under this Sublease shall be reduced, in the same proportion, if any, and for the same period, in which the Rent payable for the Premises shall be reduced under the Master Lease, provided that Subtenant or Subtenant’s subtenants, assignees, servants, guests, suppliers, invitees, employees, contractors, subcontractors or agents shall not have caused such fire or other casualty. This Sublease shall terminate if and when the Master Lease is terminated as a result of any fire or other casualty. Sublandlord shall not be responsible for restoration nor for any inconvenience o
foregoing provisions and subject to Sublandlord’s rights and the rights of Master Landlord to terminate the Master Lease as a result of such an event. Subtenant agrees that it shall be the obligation of Subtenant, and not of Sublandlord to repair, restore or rebuild the Subleased Premises as provided in the Master Lease. 16. Additional Covenants of Subtenant. 16.1 Subtenant hereby assumes and agrees to perform and comply with all of the terms, covenants and conditions of the Master Lease on the part of the tenant thereunder to be performed and observed with respect to the Subleased Premises, other than as expressly set forth in this Sublease.
-9- 16.2 Sublandlord will not do or cause to be done or suffer or permit any act or thing to be done or suffered which would or might constitute a default under the Master Lease or cause the Master Lease or the rights of Sublandlord, as tenant thereunder, to be terminated or which would or might cause Sublandlord to become liable for any damages, costs, claims or penalties or would or might increase the Sublease Base Rent or other charges or obligations of Sublandlord, as tenant under the Master Lease, or would or might adversely affect or reduce any of Sublandlord’s rights or benefits under the Master Lease. 16.3 Subtenant shall defend, indemnify and hold Sublandlord harmless from and against any and all claims, actions, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising from the use or occupancy by Subtenant of the Subleased Premises or from any work or thing done or any condition created by or any other act or omission of Subtenant or its employees, agents, contractors, visitors or licensees, in or about the Subleased Premises, or from any breach of its obligations under this Sublease. Sublandlord shall defend, indemnify and hold Subtenant harmless from and against any and all claims, actions, liabilities, losses, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and disbursements) arising from the willful or negligent act or omission or breach of this Sublease or the Master Lease by Sublandlord or its employees, agents, contractors, visitors or licensees. The provisions of this Section 16.3 shall survive the expiration or earlier termination of this Sublease. 17. Notices. Whenever a provision is made under this Lease for any demand, notice or declaration of any kind, or where it is deemed desirable or necessary by either party to give or serve any such notice, demand or declaration to the other party, it shall be in writing and served either personally or sent by United States mail, certified, postage prepaid, or by pre-paid nationally recognized overnight courier service, addressed at the addresses set forth below or at such address as either party may advise the other from time to time. If to Sublandlord: Forterra Pipe & Precast, LLC 5 Concourse Parkway, Suite 1900 Atlanta, GA 30328 Attn: Lori B
at such other address as Sublandlord or Subtenant may theretofore by written notice to the other have designated for the service of such notice. Notices given hereunder shall be deemed to have been given on the date of personal delivery (or the first business day thereafter if delivered on a non-business day) or three (3) days after the date of certified mailing or the next business day after being sent by overnight courier, provided that the sender can evidence proof of receipt of such
-10- notice. If the sender is unable to provide such proof, notices given hereunder shall be effective upon actual receipt only. 18. Asset Purchase Agreement. Nothing herein is intended to modify, limit or otherwise affect the covenants, obligations and agreements of the parties contained in the Asset Purchase Agreement, including Section 6.14 thereof. 19. Governing Law. This Sublease shall be governed and construed in accordance with the laws of the State in which the Subleased Premises is located, notwithstanding any conflicts-of-laws doctrines of such state or other jurisdiction to the contrary. 20. Brokers. Each party represents that it has dealt with no brokers in connection with this Sublease. 21. Sublandlord’s Right to Perform Subtenant’s Duties. If Subtenant fails timely to perform any of its duties under this Sublease, Sublandlord shall have the right (but not the obligation), after the expiration of any grace or notice and cure period elsewhere under this Sublease expressly granted to Subtenant for the performance of such duty or upon ten (10) days’ notice, whichever is less, to perform such duty on behalf and at the expense of Subtenant without further prior notice to Subtenant, and all sums expended or expenses incurred by Sublandlord in performing such duty shall be deemed to be additional Rent under this Sublease and shall be due and payable upon demand by Sublandlord. 22. Due Authority. The individuals executing this Sublease for each party represent and warrant to the other that they have full right, power and authority to execute this Sublease on behalf of the applicable party. 23. Binding Effect. The covenants and agreements herein contained shall bind and inure to the benefit of Sublandlord and Subtenant and their respective successors and assigns. 24. Counterparts. This Sublease may be executed in any number of counterparts, each of which shall be deemed an original and all of which, taken together, constitute one and the same instrument. 25. Specific Performance and Injunctive Relief. Each party hereto recognizes that, if it fails to perform, observe, or discharge any of its obligations under this Sublease, no remedy at law will provide adequate relief to the other party hereto. Therefore, each party to this Sublease is hereby authorized to demand specific performance of this Sublease, and is entitl
by law, each party hereto irrevocably waives any defense that it might have based
-11- on the adequacy of a remedy at law which might be asserted as a bar to such remedy of specific performance or injunctive relief. 26. Terms. All capitalized terms used in this Sublease, but not defined herein, shall have the same meaning as ascribed to such terms in the Master Lease. 27. Execution and Delivery. The submission to Subtenant of this Sublease shall not constitute an option or offer for the subleasing of the Subleased Premises, and the execution and/or delivery of this Sublease by Subtenant shall have no binding force or effect on Sublandlord unless and until Sublandlord and Subtenant shall have (a) executed this Sublease and (b) delivered a fully- executed counterpart to each other. [balance of page intentionally blank]
[Signature Page to Sublease Agreement] IN WITNESS WHEREOF, the parties have executed this Sublease as of the day and year first above written. SUBLANDLORD: FORTERRA PIPE & PRECAST, LLC, a Delaware limited liability company By: ________________________________ Name: ______________________________ Title: _______________________________
[Signature Page to Sublease Agreement] IN WITNESS WHEREOF, the parties have executed this Sublease as of the day and year first above written. SUBTENANT: FOLEY PRODUCTS COMPANY, a Georgia corporation By: ________________________________ Name: Harold H. Sorrell Title: Vice President
EXHIBIT A COPY OF THE MASTER LEASE Attached hereto.
E-1 EXHIBIT E Form of Aggregate Supply Agreement Attached.
AGGREGATE SUPPLY AGREEMENT This AGGREGATE SUPPLY AGREEMENT (this “Agreement”) dated as of [ ], 2022 is made by and between WESTERN AGGREGATES, LLC, an Arizona limited liability company (“Supplier”) and FOLEY PRODUCTS COMPANY, a Georgia corporation (“Buyer”) (each of Supplier, on the one hand, and Buyer, on the other hand, a “Party”, and collectively, the “Parties”). RECITALS WHEREAS, Buyer uses Materials (defined below) at the Plant (defined below) in the manufacture of reinforced concrete pipe and related products; WHEREAS, Buyer has agreed to purchase, and Supplier has agreed to sell and supply, from the Facility (defined below) Materials for the Plant; and WHEREAS, the Parties desire to enter into this Agreement to set forth the terms and conditions of their arrangement pursuant to which the Plant is to be supplied with Materials. NOW THEREFORE, in consideration of the foregoing and the respective covenants and agreements hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which the Parties hereby acknowledge, the Parties, intending to be legally bound hereby, agree as follows: 1. Definitions. In this Agreement, the following terms shall have the following meanings: “Adjustment Date” has the meaning set forth in Section 4(c). “Affiliate” means, with respect to any Person, at the time in question, any other Person controlling, controlled by or under common control with such Person. For purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. “Agreement” has the meaning set forth in the preamble hereof. “Buyer” has the meaning set forth in the preamble hereof. “Defaulting Party” has the meaning set forth in Section 9(a). “Default Notice” has the meaning set forth in Section 9(a). “Effective Date” means January
2 “Facility” means Supplier’s quarry located at 31805 West Southern Avenue, Buckeye, Arizona 85326. “Force Majeure Event” means any of (i) acts of god, war, riots, civil disturbances, terrorism, fire, storm, hurricane, windstorm, flood, earthquake, sinkhole or other natural disaster, (ii) actions of governmental authority, changes in law or regulations including restrictions or restraints imposed by law and and/or rules or regulations of a public authority, (iii) total or partial destruction of the Facility or the Plant, or (iv) any other cause which is beyond the reasonable control of the Party affected and not occasioned by such Party’s fault or negligence, whether of a similar or dissimilar nature to the foregoing. “Materials” means those certain aggregates and sand specified in and meeting the specifications set forth on Exhibit A. “Non-Defaulting Party” has the meaning set forth in Section 9(a). “Party” and “Parties” have the meanings set forth in the preamble hereof. “Percentage Adjustment” has the meaning set forth in Section 4(c). “Person” means any natural person, governmental entity, any for-profit corporation, not-for-profit corporation, general partnership, limited partnership, limited liability company, trust, business trust, business association or other legally recognized association of persons. “Plant” means Buyer’s manufacturing facility located at 1011 S 43rd Avenue Phoenix, Arizona 85009. “Price” has the meaning set forth in Section 4(a). “Pricing Index” has the meaning set forth in Section 4(c). “Specifications” means the applicable specifications set forth in Exhibit A. “Supplier” has the meaning set forth in the preamble hereof. “Term” has the meaning set forth in Section 2(a). “Tons” means U.S. tons or “short” tons (i.e., 2,000 pounds). 2. Term. This Agreement shall commence on the Effective Date and end on December 31, 2026 (the “Term”) unless otherwise terminated pursuant to the terms hereof; provided, that the Buyer shall have the option to extend the Term for one additional five-year periods upon delivery of written notice to Supplier no less than thirty (30) days prior to the expiration of the then-current Term; provided, that at any time during the Term, Supplier may upon
3 shall have exhausted the mineable reserve of all or any of the Materials at the Facility prior to expiration of the Term; provided further that in such event, or in the event of a shortage of Materials, Buyer shall have first priority (even with Supplier’s Affiliates) among Supplier’s customers with respect to the purchase of Materials. 3. Purchase and Sale. (a) During the Term, Buyer may purchase, and Supplier agrees to sell, up to an aggregated 3,000 (increasing by 7% on each anniversary of the date of this Agreement, but not to exceed 3,500) Tons of Materials per calendar month. Buyer shall utilize the Materials for internal Plant-use only and not for resale. (b) Buyer shall submit orders for Materials to Supplier by purchase order via mail, facsimile, email or other means mutually acceptable to the Parties. Each purchase of Materials by Buyer pursuant to this Agreement shall be subject to the terms and conditions of this Agreement. Any additional, contrary, or different terms contained in any purchase order or other request or communication by Buyer or Supplier pertaining to the purchase and/or sale of Materials, and any attempt to modify, supersede, supplement or otherwise alter this Agreement, will not modify this Agreement or be binding on the Parties unless such terms have been fully approved in a signed writing by authorized representatives of both Parties. (c) With respect to Materials ordered "Delivered", Supplier shall (i) be responsible for delivering Materials to the Buyer Plant at the time specified in the Purchase Order, (ii) notify Buyer promptly of any actual or anticipated delays in supplying Materials and (iii) ensure that late delivery of Materials will not disrupt Buyer's ongoing operations. Buyer will notify Supplier in writing of any delays in receiving Materials on a timely basis. Supplier and Buyer will then attempt to resolve any delays in delivery in 10 days. The parties agree that time is of the essence. 4. Price. (a) The purchase price per Ton of Materials is set forth in Exhibit A and is subject to adjustment pursuant to Section 4(c) (the “Prices”). The Supplier hereby represents that the Prices listed on Exhibit A are equal to Supplier’s internal transfer prices actually charged to the Plant during calendar year 2021. The Prices listed on Exhibit A reflect prices for Materials delivered to the Plant (FOB Pl
regulation or order. Buyer shall pay any and all applicable sales taxes and similar charges now or hereafter imposed by federal, state, provincial or local law, regulations or order solely upon the sale or purchase of Materials (exclusive of, among others, any tax on income, employment, doing business, corporate franchise or other taxes whether or not imposed upon or measured by the income of Supplier). If Buyer is entitled under any federal, state or local law or regulation to purchase Materials free of any taxes, Buyer shall upon written request by Supplier furnish Supplier copies of proper exemption certificates to cover such purchase or purchases in advance
4 of deliveries hereunder. (c) Commencing January 1, 2023 and each January 1 thereafter (each an “Adjustment Date”) during the Term of this Agreement, the Prices shall be adjusted by Supplier based upon the percentage increase or decrease (the “Percentage Adjustment”) in the Bureau of Labor Statistics Producer Price Index Industry Data, Series ID PCU 21232121232104 for Construction Sand and Gravel for West Census Region (the “Pricing Index”), computed by dividing the change in Pricing Index as of (i) January 1 of the preceding year compared to (ii) January 1 of the year prior thereto; by the Pricing Index as of the date set forth in the preceding clause (ii). Once the Prices are adjusted based on the Percentage Adjustment, the Prices shall be fixed for the remainder of the calendar year and will be adjusted on January 1 of the succeeding year for the succeeding year (and every year thereafter) in accordance with the procedure set forth herein. If for any reason the Pricing Index is not available, the Parties shall mutually agree on a substitute index for the purpose of adjusting Prices and, failing any such agreement, Buyer shall designate an independent and impartial Person to select such a substitute index and such Person shall be subject to the approval by Supplier, no such approval to be unreasonably withheld, delayed or conditioned. 5. Payment. Supplier shall issue periodic invoices to Buyer for all Materials delivered to Buyer. Except for any amounts disputed by Buyer in good faith, Supplier’s accurate and correctly submitted invoices will be payable within thirty (30) days of Buyer’s receipt thereof. In the event that Buyer fails to pay in full any undisputed invoice when due, interest shall accrue daily on the unpaid and undisputed amount, as well as any disputed amounts that subsequently are determined to have been properly invoiced and due to Supplier, until such amounts are paid. The applicable interest rate shall be the lesser of (i) the prime rate as published in The Wall Street Journal on the tenth (10th) business day after the date of receipt by Buyer of Supplier’s invoice plus two percent (2%) and (ii) the maximum rate of interest allowed by applicable law. 6. Warranties; Inspection; Remedies. (a) Supplier represents and warrants with respect to each purchase of Materials that: (i) at the time of its
claims, or encumbrances of any kind whatsoever against same. (b) EXCEPT FOR THE EXPRESS WARRANTIES SET OUT IN THIS AGREEMENT, SUPPLIER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AND SUPPLIER SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR WARRANTY OF CUSTOM OR USAGE. (c) Buyer’s sole remedy for breach of the express warranty of conformity to the Specifications is limited to, at the option of Buyer, either: (i) replacement of the non- conforming Materials at the point of delivery or (ii) a refund of the price Buyer paid for such Materials (together with associated freight charges incurred). If Buyer directs Supplier to replace
5 non-conforming Materials as permitted in clause (i) of the immediately preceding sentence, then Supplier shall pay any costs and expenses associated with the delivery of the replacement Materials. The limited remedies set out in this Section 6(c) are exclusive and in lieu of all other remedies for any claim by Buyer arising from the breach of the express warranty of conformity to the Specifications. 7. Force Majeure. No loss or damage resulting from any delay in performing or failure to perform any provisions of this Agreement will give rise to a claim by either Party so long as, and solely to the extent as, such failure or delay results from a Force Majeure Event. When any such Force Majeure Event occurs, the affected Party may cease performance under this Agreement, but only during the period and to the extent that performance is prohibited by such Force Majeure Event. If this right is invoked by either Party, the affected obligations of Supplier and Buyer will be suspended and proportionately abated. The Party invoking this right shall notify the other Party promptly of such Force Majeure Event and, to the extent possible, inform the other Party of the expected duration of suspended or curtailed performance and the volume of Materials otherwise deliverable under this Agreement to be affected thereby. The Party declaring a force majeure shall use its best efforts to eliminate or otherwise reduce, as promptly as practicable, the effect of such condition on such Party’s performance of its obligations pursuant to this Agreement. Notwithstanding anything contained in this Agreement to the contrary, lack of funds shall not constitute a Force Majeure Event, and in no case will a Force Majeure Event described above relieve either Party from or in any way abate a Party’s obligation to pay monies owing to the other Party under this Agreement when due. 8. Confidentiality. Neither Supplier nor Buyer shall advertise or publish the fact that Supplier has contracted with Buyer, nor shall any information relating to this Agreement or its terms be further disclosed by Buyer or Supplier, as the case may be, without the other Party’s express written consent or as otherwise provided herein. Neither Party shall, without first obtaining the other Party’s written consent, publish or disclose the same to any third Party except the followi
terms of this Agreement, are obligated to comply with the obligations hereunder; (ii) the attorneys, accountants, consultants and other professional advisors of Buyer and Supplier and the parties described in subpart (i) above; or (iii) government authorities when disclosure to such authorities is required by law. Nothing in this Section 8 shall limit the right of either Party to disclose the terms of this Agreement in any court, mediation or arbitration proceeding relating to or involving the interpretation or enforcement of this Agreement. 9. Default, Remedies Etc. (a) If a Party (the “Defaulting Party”) fails to comply with any material term or condition of this Agreement, the other Party (the “Non-Defaulting Party”) may provide written notice to the Defaulting Party stating the nature of such failure (the “Default Notice”). If the Default Notice relates to (i) a failure by the Defaulting Party to pay any amount due and payable to the Non-Defaulting Party and the Defaulting Party fails to pay such sum within ten (10) days after receipt of the Default Notice; or (ii) a failure by Defaulting Party to comply with any material term or condition of this Agreement, other than the payment of money hereunder,
6 and such failure is not cured within thirty (30) days after the Defaulting Party’s receipt of the Default Notice, or in the event of a cure which requires in excess of thirty (30) days to complete, if the Defaulting Party has not commenced such cure within such thirty (30) day period and thereafter does not diligently prosecute the cure to completion within an additional thirty (30) days, the Non-Defaulting Party shall be entitled to terminate this Agreement and/or to seek any and all remedies available at law or equity. (b) No waiver by a Party of any breach by the other Party or any of such other Party’s obligations, agreements or covenants herein shall be a waiver of any subsequent breach or of any obligation, agreement or covenant, nor shall any forbearance by a Party to seek a remedy for any breach by the breaching Party be a waiver by the non-breaching Party of any rights and remedies with respect to such or any subsequent breach. (c) No right or remedy herein conferred upon or reserved to a Party is intended to be exclusive of any other right or remedy provided herein or by law, but each shall be cumulative and in addition to every other right or remedy given herein or now or hereafter existing at law or in equity or by statute. (d) In no event shall either Party be liable for consequential damages (i.e., damages to the extent not reasonably foreseeable at time of supply), special, punitive or exemplary damages arising from any breach of this Agreement or from the production, delivery, sale, handling, or use of the Materials sold and purchased pursuant to this Agreement, whether arising out of contract, negligence, strict tort, warranty, or otherwise. 10. Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by e-mail (with a confirmatory copy sent by an internationally recognized overnight courier service), or by facsimile (with a confirmatory copy sent by an internationally recognized overnight courier service) to the Parties at the following addresses (or at such other address of a Party as shall be specified in a notice given in accordance with this Section 10): If to Buyer: Foley Prod
1900 Atlanta, GA 30328
7 Attn: Legal Department Email: nick.ivezaj@quikrete.com or to such other address or addresses as any such Party may from time to time designate as to itself by like notice. 11. Miscellaneous. (a) If any term or other provision of this Agreement is or becomes 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 for so long as the economic or legal substance of the transactions contemplated by this Agreement 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 shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible. (b) This Agreement (including Exhibit A) together set out the entire agreement between the Parties in respect of the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, among the Parties with respect to the subject matter hereof and thereof. (c) Neither Party shall assign this Agreement by operation of law or otherwise without the prior written consent of the other Party. (d) This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on behalf of, each Party that expressly references the Section of this Agreement to be amended or (ii) by a waiver in accordance with Section 11(e) of this Agreement. (e) Either Party may (i) extend the time for the performance of any of the obligations or other acts of the other Party, or (ii) waive compliance with any of the agreements of the other Party or conditions to such Party’s obligations contained in this Agreement. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. Notwithstanding the foregoing, no failure or delay by any Party in exercising any right or remedy under this Agreement shall operate as a waiver or variation thereof nor shall any single or partial exercise thereof preclude any other or future exercise of
the benefit of, and be enforceable by, only the Parties and their respective successors and permitted assigns and 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. (g) This Agreement shall be governed by, and construed in accordance with,
8 the internal Laws of the State of Delaware without giving effect to the conflicts of law principles thereof. (h) This Agreement may be executed and delivered (including by facsimile or other means of electronic transmission, such as by electronic mail in “pdf” form) in any number of counterparts, and by each Party on separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement. (i) During the Term of this Agreement, Supplier shall maintain customary levels of insurance relating to its activities under this Agreement, including general liability, automotive liability and worker’s compensation. [Remainder of Page Intentionally Left Blank.]
9 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed and delivered for and in their names by their duly authorized officers as of the Effective Date. FOLEY PRODUCTS COMPANY By: __________________________ Name: Title: WESTERN AGGREGATES, LLC By: __________________________ Name: Title:
10 EXHIBIT A MATERIALS; SPECIFICATIONS; PRICE Materials Specifications Price (per Ton) FOB Facility FOB Plant 3/8” Gravel ASTM C33 (#8 gradation) $6.00 $13.00 Concrete Sand ASTM C33 $6.00 $13.00
F-1 EXHIBIT F Bill of Sale and Assignment and Assumption Agreement Attached.
BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT This BILL OF SALE AND ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”) is made effective as of [●], 2022 by Forterra Pipe & Precast, LLC, a Delaware limited liability company (“FPP”) and Hydro Conduit, LLC d/b/a Rinker Materials, a Delaware limited liability company (“Rinker Materials” and, together with FPP, the “Sellers”) in favor of Foley Products Company, Inc., a Georgia corporation (the “Purchaser”). WHEREAS, pursuant to the Asset Purchase Agreement, dated as of December 13, 2021 (the “Purchase Agreement”), by and between the Purchaser and the Sellers, the Sellers have agreed to sell, transfer and assign to Purchaser all of the Sellers’ right, title and interest in and to the Seller Assets, and the Purchaser has agreed to assume, pay, perform and discharge when due the Assumed Seller Liabilities; WHEREAS, pursuant to the Purchase Agreement, the Purchaser and the Sellers have agreed to deliver this Agreement for the Sellers to sell, assign, convey and transfer to the Purchaser all of the Sellers’ right, title and interest in and to the Seller Assets and for the Purchaser to assume, pay, perform and discharge when due the Assumed Seller Liabilities; WHEREAS, the Purchaser and the Sellers have agreed that the Sellers shall not sell, assign, convey or transfer any of the Excluded Seller Assets to the Purchaser, and that the Purchaser shall not assume, pay, perform or discharge any of the Retained Seller Liabilities, pursuant to the Purchase Agreement; WHEREAS, this Agreement is being executed and delivered pursuant to Sections 2.2(b) and 2.3(b) of the Purchase Agreement; and WHEREAS, each capitalized term used but not defined in this Agreement shall have the meaning ascribed to it in the Purchase Agreement; NOW, THEREFORE, pursuant to the Purchase Agreement and in consideration of mutual promises it contains, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: 1. The Sellers hereby sell, assign, convey and transfer to the Purchaser all of the Sellers’ right, title and interest in and to the Seller Assets, to have and to hold all such right, title and interest i
Assumed Seller Liabilities. 3. Nothing contained in this Agreement shall be deemed to supersede, modify, limit, extend, add to, amend or in any way affect any of the rights or obligations (including, for the avoidance of doubt, any representation or warranty) of any party under the Purchase Agreement. In the event of any conflict or inconsistency between the Purchase Agreement and the terms hereof, the terms of the Purchase Agreement shall govern and remain in full force and effect.
2 4. The Sellers make no representation or warranty of any nature with respect to any Sellers’ title to, or the condition of, the Seller Assets, except as set forth in the Purchase Agreement. Without limiting the foregoing, the Sellers hereby expressly disclaims any warranties of merchantability or fitness for a particular purpose. 5. The terms and conditions of this Agreement shall be binding upon and inure to the benefit of the Sellers and the Purchaser and their respective successors and permitted assigns. 6. Each of the Purchaser and the Sellers hereby agrees that, upon the written request of the other party hereto, it will take such additional actions and execute, acknowledge and deliver such additional documents as may be reasonably necessary in order to carry out the provisions and purposes of this Agreement, including any action reasonably necessary to assign and transfer title of any of the Seller Assets to the Purchaser, in each case subject to the conditions and limitations set forth in the Purchase Agreement. 7. This Agreement shall be governed by and construed and enforced in accordance with the laws of the state of Delaware, without regard to the conflicts of law provisions thereof that would cause the laws of any other jurisdiction to apply. 8. Any notice, request or other document to be given hereunder to any party hereto shall be given in the manner specified in Section 13.4 of the Purchase Agreement. 9. Delivery of an executed signature page of this Agreement by facsimile or other customary means of electronic submission (e.g., .pdf) shall be deemed binding for all purposes hereof, without delivery of an original signature page being thereafter required. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original and all of which taken together shall constitute one instrument binding on all the parties, notwithstanding that all the parties are not signatories to the original or the same counterpart. [Signature pages follow]
[Signature Page to Bill of Sale and Assignment and Assumption Agreement] IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written. PURCHASER: FOLEY PRODUCTS COMPANY, INC., a Georgia corporation By: _________________________________ Name. Frank D. Foley, III Title: President
[Signature Page to Bill of Sale and Assignment and Assumption Agreement] IN WITNESS WHEREOF, this Agreement has been duly executed as of the date first above written. SELLERS: FORTERRA PIPE & PRECAST, LLC, a Delaware limited liability company By: ____________________________________ Name: Title: HYDRO CONDUIT, LLC d/b/a/ RINKER MATERIALS a Delaware limited liability company By: ____________________________________ Name: [ ] Title: [ ]
G-1 EXHIBIT G Inventory Methodology Inventories means: 1. Stock Precast and Pipe Inventory: Finished goods, which must be of first quality and saleable in the ordinary course without discount. Must be based on current industry or DOT specifications. The Finished Goods Closing Inventory count at each of the Rinker Plants and Forterra Plant shall be valued at the October 2021 Unit Cost per Ton for each plant and product as detailed in the attachment to this Exhibit G. This Unit Cost per Ton excludes the plant overhead cost allocation for the Rinker Plants, and includes the plant overhead allocation for the Forterra Plant. Any differences in the product mix at closing compared to the product detail in this Exhibit shall be valued at the same calculated basis as the October 2021 Unit Cost per Ton detailed in this Exhibit. 2. Raw Materials, Castings, Grates and other Ancillary Products: Unless obsolete, damaged or cosmetically impaired; all Raw Materials, Castings, Grates and other Ancillary Products that are useable in the production of pipe and precast products. The Raw Materials, Castings, Grates and other Ancillary Products Closing Inventory count at each of the Rinker Plants and Forterra Plant shall be valued at the October 2021 Unit Cost for each item as detailed in this Exhibit. Any additional items counted at closing shall be valued on the same basis (lesser of cost and market value (GAAP)) of Unit Cost as detailed in the attachment to this Exhibit G. See attachment to Exhibit G.
Summary LTM 10-31-21 Values Inventory Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 TTM 10/2021 Average 5565 FMY-CP (Fort Myers, FL) 626,918$ 736,897$ 781,298$ 754,761$ 732,647$ 761,347$ 765,107$ 823,027$ 808,686$ 1,056,654$ 1,080,410$ 1,065,152$ 832,742.00$ 012100 - RELATED 19,032$ 23,935$ 29,500$ 27,472$ 22,834$ 34,636$ 30,439$ 26,170$ 37,244$ 29,187$ 30,712$ 22,587$ 27,812.33 012125 - STEEL/PIPE 433,267$ 496,638$ 532,322$ 452,587$ 405,089$ 415,794$ 420,091$ 443,511$ 367,010$ 431,876$ 483,252$ 555,027$ 453,038.67 012300 - RAW MATERIALS 174,619$ 216,324$ 219,476$ 274,702$ 304,724$ 310,917$ 314,577$ 353,346$ 404,432$ 595,591$ 566,446$ 487,538$ 351,891.00 5585 DEN-CP (Littleton, CO) 2,664,856$ 2,595,675$ 3,119,257$ 3,153,277$ 2,821,208$ 2,371,716$ 1,979,124$ 2,099,580$ 2,090,472$ 1,927,486$ 1,978,398$ 1,918,881$ 2,393,327.50$ 012100 - RELATED 157,333$ 146,149$ 138,170$ 135,888$ 140,968$ 124,038$ 131,805$ 148,408$ 189,640$ 147,399$ 141,821$ 150,892$ 146,042.58 012125 - STEEL/PIPE 2,234,053$ 2,187,382$ 2,635,695$ 2,737,588$ 2,415,300$ 1,872,444$ 1,485,542$ 1,365,647$ 1,376,389$ 1,196,742$ 1,339,631$ 1,212,245$ 1,838,221.50 012300 - RAW MATERIALS 273,470$ 262,144$ 345,392$ 279,801$ 264,940$ 375,234$ 361,777$ 585,525$ 524,443$ 583,345$ 496,946$ 555,744$ 409,063.42 5610 PHX-CP (Phoenix, AZ) 1,014,210$ 1,045,121$ 1,043,765$ 1,062,636$ 1,124,880$ 1,094,199$ 1,074,813$ 1,187,556$ 1,238,595$ 1,355,586$ 1,579,948$ 1,537,613$ 1,196,576.83$ 012100 - RELATED 18,538$ 32,421$ 27,414$ 19,617$ 30,097$ 27,317$ 25,292$ 25,121$ 40,882$ 35,262$ 34,267$ 47,649$ 30,323.08 012125 - STEEL/PIPE 833,362$ 783,591$ 818,140$ 828,420$ 890,953$ 870,253$ 825,831$ 871,213$ 975,267$ 1,023,330$ 1,174,803$ 1,104,313$ 916,623.00 012300 - RAW MATERIALS 162,310$ 229,109$ 198,211$ 214,599$ 203,830$ 196,629$ 223,690$ 291,222$ 222,446$ 296,994$ 370,878$ 385,651$ 249,630.75 5600 SFO-CP (Napa, CA) 872,886$ 874,618$ 933,373$ 676,869$ 765,858$ 852,084$ 645,081$ 584,109$ 581,824$ 579,724$ 517,351$ 706,945$ 715,893.50$ 012100 - RELATED 35,759$ 37,823$ 31,920$ 26,727$ 33,793$
575,501.33 012300 - RAW MATERIALS 70,810$ 65,900$ 51,955$ 67,076$ 84,409$ 128,227$ 135,934$ 92,012$ 121,784$ 144,246$ 139,544$ 156,181$ 104,839.83 0558 SMV-CP (St Martinville, LA) 1,209,868$ 924,717$ 934,995$ 998,773$ 1,231,757$ 1,178,193$ 1,446,713$ 1,391,051$ 1,389,903$ 1,478,225$ 1,491,290$ 1,590,556$ 1,272,170.09$ 012100 - RELATED 45,551$ 51,204$ 52,131$ 37,712$ 62,101$ 49,273$ 49,857$ 51,242$ 33,188$ 86,350$ 73,408$ 52,764$ 53,731.72 012125 - STEEL/PIPE 931,151$ 675,519$ 709,387$ 807,246$ 975,509$ 880,292$ 1,003,270$ 987,372$ 1,006,215$ 1,005,869$ 975,249$ 1,053,998$ 917,589.79 012300 - RAW MATERIALS 233,166$ 197,994$ 173,477$ 153,815$ 194,147$ 248,628$ 393,586$ 352,437$ 350,500$ 386,006$ 442,633$ 483,794$ 300,848.58 Grand Total 6,388,738$ 6,177,028$ 6,812,688$ 6,646,316$ 6,676,350$ 6,257,539$ 5,910,838$ 6,085,323$ 6,109,480$ 6,397,675$ 6,647,397$ 6,819,147$ 6,410,709.92$
Rinker Unit Cost 10-31-21 Rinker Sites - October 2021 Inventory Valuation Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year Littleton, CO 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1181375 CP,GKT,CB,PFL,14X3,1-1/8,ISO 14x3 BOX GASKET ISO EA 5 51.99$ 260.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1181376 CP,GKT,CB,PFL,14X4,1-1/8,ISO 14x4 BOX GASKET ISO EA 3 54.16$ 162.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1181891 JNT LUBE,GP,DELTA,#711,8LB #711 LUBRICANT 8LB EA 429 7.97$ 3,418.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1185428 JNT LUBE,#711,30LB #711 LUBRICANT 30LB EA 374 26.13$ 9,772.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1211090 CP,GKT,D,PF,66,13/16,ISO 66" GASKET PF ISO EA 440 12.91$ 5,681.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212042 CP,GKT,D,PF,30,13/16,ISO 30" GASKET PF ISO EA 740 5.64$ 4,175.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212044 CP,GKT,D,PF,48,13/16,ISO 48" GASKET PF ISO EA 623 9.51$ 5,924.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212045 CP,GKT,D,PF,12,3/4,ISO 12" GASKET PF ISO EA 460 2.40$ 1,104.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212179 CP,GKT,D,PF,42,13/16,ISO 42" GASKET PF ISO EA 700 8.75$ 6,123.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212184 CP,GKT,D,PF,54,1,ISO 54" GASKET PF ISO EA 32 13.15$ 421.00$ Rinker Rinker So
54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212197 CP,GKT,D,PF,18,3/4,ISO 18" GASKET 18 3/4 PF ISO EA 250 3.52$ 880.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212198 CP,GKT,D,PF,24,13/16,ISO 24" GASKET PF ISO EA 740 4.60$ 3,405.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1212200 CP,GKT,D,PF,36,13/16,ISO 36" GASKET PF ISO EA 940 6.82$ 6,413.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1236013 CP,GKT,D,PF,72,13/16,ISO 72" GASKET PF ISO EA 414 13.87$ 5,743.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1244101 CP,GKT,D,PF,54,13/16,ISO 54" GASKET PF ISO EA 404 10.75$ 4,343.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1244102 CP,GKT,D,PF,60,13/16,ISO 60" GASKET PF ISO EA 301 11.77$ 3,543.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1302749 CP,GKT,D,PF,24,3/4,ISO 24" GASKET PF ISO EA 20 3.87$ 77.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1304599 CP,GKT,EL,PF,30(24X38),11/16IS 24x38 GASKET PF ISO EA 496 5.44$ 2,697.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1304600 CP,GKT,EL,PF,36,(29X45)11/16IS 29x45 GASKET PF ISO EA 370 5.66$ 2,094.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1315831 CP,GKT,EL,PF,42(34X53),7/8,ISO 34x53 GASKET PF ISO EA 285 9.67$ 2,755.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1315832 CP,GKT,EL,PF,48(38X60),7/8,ISO 38x60 GASKET PF ISO EA 242 14.42$ 3,491.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Lit
CO) 012100 - RELATED 1315834 CP,GKT,EL,PF,60(48X76),1,ISO 48x76 GASKET PF ISO EA 524 15.08$ 7,903.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1346416 CP,GKT,EL,PF,18(14X23)11/16,IS 14x23 GASKET PF ISO EA 282 2.96$ 834.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1347494 CP,GKT,EL,PF,24(19X30)11/16,IS 19x30 GASKET PF ISO EA 405 3.91$ 1,584.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1351812 CP,GKT,D,PF,84,1,ISO 84" GASKET PF ISO EA 109 22.43$ 2,445.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1357992 JNT SLNT CONSEAL,3/4" CONSEAL 3/4" EA 50 5.65$ 283.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1357994 JNT SLNT CONSEAL,1 1/4" CONSEAL 1 1/4" EA 370 9.83$ 3,637.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1357997 JNT FASTENER,11 JOINT FASTENER,11 EA 175 100.00$ 17,500.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1357998 TRASHGUARD,30 TRASHGUARD,30 EA 8 272.00$ 2,176.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1357999 TRASHGUARD,36 TRASHGUARD,36 EA 5 309.00$ 1,545.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358219 TRASHGUARD,12 TRASHGUARD,12 EA 10 242.93$ 2,429.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358220 TRASHGUARD,15 TRASHGUARD,15 EA 8 210.00$ 1,680.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358221 TRASHGUARD,18 TRASHGUARD,18 EA 16 210.00$ 3,360.00$ Rinker Rink
54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358223 TRASHGUARD,42 TRASHGUARD,42 EA 6 453.65$ 2,722.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358224 TRASHGUARD,48 TRASHGUARD,48 EA 8 564.50$ 4,516.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358225 TRASHGUARD,54 TRASHGUARD,54 EA 7 590.00$ 4,130.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358226 TRASHGUARD,60 TRASHGUARD,60 EA 6 0.01$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1358228 TRASHGUARD,72 TRASHGUARD,72 EA 2 0.02$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1360939 TRASHGUARD,GALV,42 TRASHGUARD,GALVANIZED,42 EA 2 0.01$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1360940 TRASHGUARD,GALV,48 TRASHGUARD,GALVANIZED,48 EA 3 0.01$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1360941 TRASHGUARD,GALV,54 TRASHGUARD,GALVANIZED,54 EA 1 0.01$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1360942 TRASHGUARD,GALV,60 TRASHGUARD,GALVANIZED,60 EA 1 0.01$ -$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1373650 CP,GKT,D,PF,78,1,ISO 78" GASKET PF ISO EA 372 17.67$ 6,573.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1374237 CP,GKT,CB,PFL,7X4,1-1/4,ISO 7x4 BOX GASKET ISO EA 3 39.12$ 117.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1518830 CP,GKT,CB,PFL,12X4,1-1/4,ISO 12x4' BOX GASK
26 56.29$ 1,464.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 1552415 CP,GKT,CB,PFL,10X10,1-1/4,ISO 10X10 BOX GASKET ISO EA 3 72.09$ 216.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 6000886 CP,GKT,CB,PFL,6X4,1-1/8,ISO 6x4 BOX GASKET ISO EA 1 47.14$ 47.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012100 - RELATED 6000887 CP,GKT,CB,PFL,8X4,1-1/8,ISO 8x4 BOX GASKET ISO EA 7 65.14$ 456.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1023848 CP,P,15,8,C5,B,1,PF 15x8' CL5 PF RCP EA 15 165.79$ 2,487.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1024527 CP,P,24,8,C3,B,1,PF 24x8' CL3 PF RCP EA 34 178.14$ 6,057.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1182588 PC,W,FE,60,8,B,OUT,PF 60x8' FES OUTLET PF EA 3 1,729.60$ 5,189.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183381 PC,W,CONCRETE PLUG,15,S 15" CONCRETE SPIG PLUG EA 1 73.69$ 74.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183383 PC,W,CONCRETE PLUG,18,S 18" CONCRETE SPIG PLUG EA 5 180.29$ 901.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183384 PC,W,CONCRETE PLUG,24,B 24" CONCRETE BELL PLUG EA 3 229.57$ 689.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183385 PC,W,CONCRETE PLUG,24,S 24" CONCRETE SPIG PLUG EA 10 229.57$ 2,296.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183396 PC,W,CONCRETE PLUG,30,B 30" CONCRETE BELL PLUG EA 1 309.12$ 309.0
Rinker Rinker Southwest 10 - 2021 2
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1183403 PC,W,CONCRETE PLUG,48,S 48" CONCRETE SPIG PLUG EA 1 1,346.04$ 1,346.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184263 CP,D,42,8,C3,B,2,PF 42x8' CL3 PF RCP EA 170 343.20$ 58,344.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184265 CP,D,42,8,C4,B,2,PF 42x8' CL4 PF RCP EA 30 367.41$ 11,022.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184266 CP,D,48,8,C3,B,2,PF 48x8' CL3 PF RCP EA 216 411.49$ 88,881.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184267 CP,D,48,8,C4,B,2,PF 48x8' CL4 PF RCP EA 1 420.14$ 420.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184268 CP,D,54,8,C3,B,2,PF 54x8' CL3 PF RCP EA 38 508.93$ 19,339.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184269 CP,D,54,8,C4,B,2,PF 54x8' CL4 PF RCP EA 36 798.91$ 28,761.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184270 CP,D,60,8,C3,B,2,PF 60x8' CL3 PF RCP EA 158 582.77$ 92,077.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1184271 CP,D,60,8,C4,B,2,PF 60x8' CL4 PF RCP EA 4 736.97$ 2,948.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1185986 CB,D,12X10,12,6',789,2,12 12x10x6' 789-1 2' RCB EA 4 2,665.10$ 10,660.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - ST
STEEL/PIPE 1211932 CP,D,15,8,C3,B,1,PF 15x8' CL3 PF RCP EA 29 101.98$ 2,957.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211942 CP,D,15,8,C5,B,1,PF 15x8' CL5 PF RCP EA 45 57.74$ 2,598.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211946 CP,D,18,8,C3,B,1,PF 18x8' CL3 PF RCP EA 794 66.61$ 52,888.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211954 CP,D,18,8,C4,B,1,PF 18x8' CL4 PF RCP EA 131 69.70$ 9,130.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211956 CP,D,18,8,C5,B,1,PF 18x8' CL5 PF RCP EA 6 79.90$ 479.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211959 CP,D,24,8,C3,B,1,PF 24x8' CL3 PF RCP EA 415 98.93$ 41,056.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211966 CP,D,24,8,C4,B,1,PF 24x8' CL4 PF RCP EA 73 139.09$ 10,153.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211967 CP,D,24,8,C5,B,1,PF 24x8' CL5 PF RCP EA 34 148.87$ 5,062.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211973 CP,D,30,8,C3,B,1,PF 30x8' CL3 PF RCP EA 333 151.49$ 50,445.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211980 CP,D,30,8,C4,B,1,PF 30X8' CL4 PF RCP EA 64 179.84$ 11,510.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211981 CP,D,30,8,C5,B,2,PF 30x8' CL5 PF RCP EA 9 233.95$ 2,106.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1211985 CP,D,36,8,C3,B,1,PF 36x8' CL3 PF RCP EA 750 214.54$ 160,907.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 D
(Littleton, CO) 012125 - STEEL/PIPE 1211994 CP,D,36,8,C5,B,2,PF 36x8' CL5 PF RCP EA 4 299.97$ 1,200.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1212002 CP,D,42,8,C5,B,2,PF 42x8' CL5 PF RCP EA 8 480.55$ 3,844.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1212023 CP,D,48,8,C5,B,2,PF 48x8' CL5 PF RCP EA 21 638.34$ 13,405.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1212040 CP,D,60,8,C5,B,2,PF 60x8' CL5 PF RCP EA 1 1,123.61$ 1,124.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1231581 CP,D,36,8,C5,C,2,PF 36x8' CL5 PF RCP EA 20 360.02$ 7,200.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1231588 CP,D,66,8,C3,B,2,PF 66x8' CL3 PF RCP EA 107 868.59$ 92,939.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1231589 CP,D,66,8,C4,B,2,PF 66x8' CL4 PF RCP EA 1 1,185.17$ 1,185.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1231674 CP,D,72,8,C3,B,2,PF 72x8' CL3 PF RCP EA 122 835.35$ 101,913.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1260891 CP,D,72,8,C5,B,2,PF 72x8' CL5 C76 PF RCP EA 5 1,493.89$ 7,469.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1277034 PC,W,FE,15,6,S,IN,PF 15x6' FES INLET PF EA 9 250.40$ 2,254.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1290631 CP,D,EL,18(14X23),8,C3,PF 14x23x8' CL3 PF HERCP EA 3 121.22$ 364.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1290632 CP,D,EL,18(14X23),8,C4,PF 14x23x8' CL4 PF HERCP EA 32 134.88$ 4,316.0
Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1290884 CP,D,EL,24(19X30),8,C4,PF 19x30x8' CL4 PF HERCP EA 12 195.92$ 2,351.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1310245 PC,W,FE,24,6,S,IN,PF 24x6' FES INLET PF EA 10 463.98$ 4,640.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1317685 CP,D,84,8,C3,C,2,PF 84x8' CL3 PF RCP EA 3 1,409.43$ 4,228.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1334277 PC,W,FE,15,6,B,OUT,PF 15x6' FES OUTLET PF EA 6 256.15$ 1,537.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342541 PC,W,FE,18,6,B,OUT,PF 18x6' FES OUTLET PF EA 19 328.40$ 6,240.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342542 PC,W,FE,24,6,B,OUT,PF 24x6' FES OUTLET PF EA 13 450.23$ 5,853.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342543 PC,W,FE,30,6,B,OUT,PF 30x6' FES OUTLET PF EA 43 582.94$ 25,066.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342544 PC,W,FE,30,6,S,IN,PF 30x6' FES INLET PF EA 25 594.06$ 14,851.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342545 PC,W,FE,36,8,B,OUT,PF 36X8' FES OUTLET PF EA 12 837.20$ 10,046.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342565 PC,W,FE,42,8,S,IN,PF 42x8' FES INLET PF EA 5 836.18$ 4,181.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1342576 PC,W,FE,36,8,S,IN,PF 36X8' FES INLET PF EA 12 890.63$ 10,688.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585
(Littleton, CO) 012125 - STEEL/PIPE 1343031 PC,W,FE,54,8,S,IN,PF 54x8' FES INLET PF EA 5 1,533.40$ 7,667.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1343032 PC,W,FE,54,8,B,OUT,PF 54x8' FES OUTLET PF EA 6 1,567.57$ 9,405.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1343033 PC,W,FE,48,8,S,IN,PF 48x8' FES INLET PF EA 6 1,408.75$ 8,453.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1343044 PC,W,FE,60,8,S,IN,PF 60x8' FES INLET PF EA 4 1,931.74$ 7,727.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1343045 PC,W,FE,48,8,B,OUT,PF 48x8' FES OUTLET PF EA 2 1,418.18$ 2,836.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1357942 CP,D,12,7.5,C5,B,1,PF 12x7.5' CL5 PF RCP EA 15 44.73$ 671.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1357967 CP,D,30,8,C3,B,1,PF,ELB,S 30x8' CL3 PF ELBOW RCP EA 1 826.69$ 827.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1359124 CP,D,18,8,C3,B,1,PF,ELB,SP 18x8' CL3 PF ELBOW RCP EA 7 561.45$ 3,930.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1362120 CP,D,36,8,C3,C,2,PF 36x8' CL3 PF RCP EA 40 248.36$ 9,934.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1367966 PC,W,FE,12,6,S,IN,PF 12x6' FES INLET PF EA 15 194.37$ 2,916.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1367967 PC,W,FE,12,6,B,OUT,PF 12x6' FES OUTLET PF EA 2 206.04$ 412.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1373648 CP,D,EL,42(34X53),8,C3,PF 34x
PF HERCP EA 2 633.53$ 1,267.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1373651 CP,D,EL,48(38X60),8,C3,PF 38x60x8' CL3 PF HERCP EA 5 673.80$ 3,369.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1373652 CP,D,EL,48(38X60),8,C4,PF 38x60x8' CL4 PF HERCP EA 3 619.96$ 1,860.00$ Rinker Rinker Southwest 10 - 2021 3
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1375998 CP,D,EL,60(48X76),8,C3,PF 48x76x8' CL3 HERCP EA 50 786.89$ 39,345.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1397533 CP,D,EL,36(29X45),8,C3,PF 29x45x8' CL3 PF HERCP EA 4 372.40$ 1,490.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1397534 CP,D,EL,36(29X45),8,C4,PF 29x45x8' CL4 PF HERCP EA 38 442.49$ 16,815.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1397535 CP,D,EL,60(48X76),8,C4,PF 48x76x8' CL4 PF HERCP EA 2 1,456.96$ 2,914.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1397536 CP,D,EL,30(24X38),8,C3,PF 24x38x8' CL3 PF HERCP EA 129 258.84$ 33,390.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422415 PC,W,FE,24,6,IN,PF,H-ELLIP 19x30x6' FES INLET PF H ELLIP EA 1 187.63$ 188.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422586 PC,W,FE,18,6,IN,PF,H-ELLIP 14x23x6' FES INLET PF H ELLIP EA 1 218.32$ 218.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422587 PC,W,FE,18,6,OUT,PF,H-ELLIP 14x23x6' FES OUTLET PF H ELLIP EA 3 205.41$ 616.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422590 PC,W,FE,30,6,IN,PF,H-ELLIP 24x38x6' FES INLET PF H ELLIP EA 4 443.34$ 1,773.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422596 PC,W,FE,30,6,OUT,PF,H-ELLIP 24x38x6' FES O
FES INLET PF H ELLIP EA 4 470.93$ 1,884.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422600 PC,W,FE,36,8,OUT,PF,H-ELLIP 29x45x8' FES OUTLET PF H ELLIP EA 2 820.33$ 1,641.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422602 PC,W,FE,42,6,IN,PF,H-ELLIP 34x53x6' FES INLET PF H ELLIP EA 1 1,106.23$ 1,106.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422603 PC,W,FE,48,8,OUT,PF,H-ELLIP 38x60x8' FES OUTLET PF H ELLIP EA 3 756.07$ 2,268.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1422604 PC,W,FE,42,6,OUT,PF,H-ELLIP 34x53x6' FES OUTLET PF H ELLIP EA 8 624.82$ 4,999.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1516885 CB,D,6X2,7,8',1433,5-10',8H 6x2x8' 1433 5-10' RCB EA 2 824.33$ 1,649.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1588013 PC,W,FE,72,8,S,IN,PF 72x8' FES INLET PF RCP EA 3 1,761.35$ 5,284.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 1588015 PC,W,FE,72,8,B,OUT,PF 72x8' FES OUTLET PF RCP EA 1 1,882.44$ 1,882.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012125 - STEEL/PIPE 6000967 CP,D,30,8,C3,C,1,PF,JP 30x8' CL3 PF RCP JP EA 5 340.89$ 1,704.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1000041 AGG,SAND,#4:#8X#100,CONC LB 1,681,321 0.01$ 16,813.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1001618 CEM,POR,I/II,GRAY,BULK LB 138,000 0.08$ 10,460.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1014199 REBAR
1,314.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1029597 STL,GREENROD,5/16,1008 LB 157,984 0.60$ 94,790.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1029598 STL,GREENROD,3/8,1008 LB 89,635 0.60$ 53,781.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1083297 FLYASH,C618,F,BULK LB 114,000 0.05$ 5,723.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1162578 ADM,POZZ_NC_534,MB,C494,C OZ 115,200 0.04$ 4,481.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184601 WWF,.18,3X6,4.5/2.5,.5,94 LB 19,895 0.80$ 15,986.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184633 WWF,.30,2X8,5.0/3.0,.5,94 LB 28,511 0.80$ 22,909.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184641 WWF,.36,2X8,6.0/2.5,.5,94 LB 39,432 0.80$ 31,684.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184646 WWF,.39,2X8,6.5/3.0,.5,94 LB 23,052 0.80$ 18,522.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184649 WWF,.42,2X8,7.0/3.0,.5,94 LB 1,422 0.80$ 1,143.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1184657 WWF,.54,2X8,9.0/3.75,.5,94 LB 20,172 0.80$ 16,208.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1190441 WWF,MESH SHEET LB 26,971 0.74$ 20,053.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1192619 STL,GREENROD,1/4,1008 LB 213,619 0.60
Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1251964 WWF,.12,3X6,3.0/2.5,.5,94 LB 5,648 0.80$ 4,538.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1251972 WWF,.33,2X8,5.5/2.5,.5,94 LB 42,798 0.80$ 34,388.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1265299 AGG,1/2":3/8X#8,CR_GVL LB 1,443,146 0.01$ 17,462.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1338530 AGG,SCRN,3/8:#4X#16,CPS LB 1,516,651 0.01$ 16,077.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1376563 WWF,.63,2X8,10.5/4.5,1X0,94 LB 1,000 0.80$ 804.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1520799 ADM,RHEOFIT,900 OZ 76,800 0.06$ 4,247.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1587751 STL,BRITEBASIC,0.425 / W14.2 LB 18,216 0.64$ 11,658.00$ Rinker Rinker Southwest 10 - 2021 54748 2021 10 5585 DEN-CP 5585 DEN-CP (Littleton, CO) 012300 - RAW MATERIALS 1590560 ADM,MASTER GLEN 7920 OZ 63,360 0.09$ 5,962.00$ Rinker Rinker Southwest 10 - 2021 Total Littleton CO 1,918,881.00$ Fort Myers, FL 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1155659 JNT SLNT,STR,1,BUTL,RNEK,PC 1",BUTYL,RAMNK,PC EA 551 1.30$ 719.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1185430 JNT LUBE,SA-2,8LB #SA-2 SUB-AQUEOUS LUBE 8LB EA 1,143 8.44$ 9,647.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212042 CP,GKT,D,PF,30,13/16,ISO 30" GASKET PF ISO EA 56 5.27$ 295.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 0121
1212179 CP,GKT,D,PF,42,13/16,ISO 42" GASKET PF ISO EA 116 7.79$ 904.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212184 CP,GKT,D,PF,54,1,ISO 54" GASKET PF ISO EA 2 16.52$ 33.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212185 CP,GKT,D,PF,60,1,ISO 60" GASKET PF ISO EA 20 16.97$ 339.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212196 CP,GKT,D,PF,15,3/4,ISO 15" GASKET PF ISO EA 551 3.10$ 1,707.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212197 CP,GKT,D,PF,18,3/4,ISO 18" GASKET 18 3/4 PF ISO EA 60 3.46$ 208.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212198 CP,GKT,D,PF,24,13/16,ISO 24" GASKET PF ISO EA 41 5.22$ 214.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1212200 CP,GKT,D,PF,36,13/16,ISO 36" GASKET PF ISO EA 40 6.79$ 272.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1287037 CP,GKT,EL,PF,19X30,11/16,ISO 19x30 GASKET PF ISO EA 135 3.29$ 444.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1295608 CP,GKT,EL,PF,18(14X23)11/16,IS 18" GASKET EL(14x23)11/16 PF I EA 775 2.48$ 1,923.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1304599 CP,GKT,EL,PF,30(24X38),11/16IS 24x38 GASKET PF ISO EA 265 3.77$ 998.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1304600 CP,GKT,EL,PF,36,(29X45)11/16IS 29x45 GASKET PF ISO EA 192 5.17$ 993.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012100 - RELATED 1306453 CP,GKT,EL,PF,15(12X18)11/16,IS 12X18 GASKET PF ISO EA 1,18
5,332.00$ Rinker Rinker Florida 10 - 2021 4
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1025803 CP,D,EL,15(12X18)8,C3,MESXB4:1 12x18x8' CL3 MES BELL 4:1 HRCP EA 16 67.37$ 1,078.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1025804 CP,D,EL,15(12x18)8,C3,MSxS,4:1 12x18x8' CL3 MES SPIG 4:1 HRCP EA 17 67.37$ 1,145.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1025983 CP,D,EL,18(14X23)8,C3,TG,SLTD 14x23x8' CL3 PF SLOTTED HERCP EA 2 118.20$ 236.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026041 CP,D,EL,24(19X30)8,C3,TG,SLTD 19x30x8' CL3 PF SLOTTED HERCP EA 4 162.73$ 651.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026076 CP,D,EL,30(24X38),8,C3,TG 24x38x8' CL3 HERCP EA 83 191.35$ 15,882.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026077 CP,D,EL,30(24X38)8,C3,MESXB4:1 24x38x8'CL3 MES BELL 4:1 HERCP EA 4 205.24$ 821.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026078 CP,D,EL,30(24X38)8,C3,MESXS4:1 24x38x8'CL3 MES SPIG 4:1 HERCP EA 14 205.24$ 2,873.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026084 CP,D,EL,36(29X45),8,C3,TG 29x45x8' CL3 HERCP EA 44 365.93$ 16,101.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026206 CP,D,EL,42(34X53),8,C4,TG 34x53x8' CL4 HERCP EA 1 763.74$ 764.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1026
CP,D,EL,42(34X53)16,C3,MESB4:1 34x53x16'CL3 MES BELL 4:1HERCP EA 2 1,259.77$ 2,520.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1181468 CP,D,72,8,C3,C,2,OR 72x8' CL3 OR RCP EA 3 0.01$ -$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1184263 CP,D,42,8,C3,B,2,PF 42x8' CL3 PF RCP EA 88 350.74$ 30,865.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1184266 CP,D,48,8,C3,B,2,PF 48x8' CL3 PF RCP EA 81 390.98$ 31,669.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1184268 CP,D,54,8,C3,B,2,PF 54x8' CL3 PF RCP EA 11 493.52$ 5,429.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1184270 CP,D,60,8,C3,B,2,PF 60x8' CL3 PF RCP EA 5 657.20$ 3,286.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211932 CP,D,15,8,C3,B,1,PF 15x8' CL3 PF RCP EA 30 53.38$ 1,601.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211934 CP,D,15,8,C3,B,1,PF,MESxB 4:1 15x8' CL3 PF MES 4:1 GB RCP EA 8 65.23$ 522.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211935 CP,D,15,8,C3,B,1,PF,MESxS 4:1 15x8' CL3 PF MES 4:1 GS RCP EA 8 65.23$ 522.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211938 CP,D,15,8,C3,B,1,PF,SLTD 15x8' CL3 PF SLOTTED RCP EA 2 64.96$ 130.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211940 CP,D,15,8,C4,B,1,PF 15x8' CL4 PF RCP EA 15 72.34$ 1,085.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211942 CP,D,15,8,C5,B,1,PF 15x8' CL5 PF RCP EA 5 71.55$ 358.00$ Rinker Rinker Florida 10
5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211948 CP,D,18,8,C3,B,1,PF,MESxB 4:1 18x8' CL3 PF MES 4:1 GB RCP EA 1 263.10$ 263.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211959 CP,D,24,8,C3,B,1,PF 24x8' CL3 PF RCP EA 44 113.16$ 4,979.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211960 CP,D,24,8,C3,B,1,PF,MESxB 4:1 24x8' CL3 PF MES 4:1 GB RCP EA 1 135.49$ 135.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211967 CP,D,24,8,C5,B,1,PF 24x8' CL5 PF RCP EA 14 130.06$ 1,821.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211969 CP,D,30,16,C3,MESxB 4:1 30x16' CL3 PF MES 4:1 GB RCP EA 3 197.14$ 591.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211973 CP,D,30,8,C3,B,1,PF 30x8' CL3 PF RCP EA 112 178.62$ 20,005.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1211985 CP,D,36,8,C3,B,1,PF 36x8' CL3 PF RCP EA 131 253.39$ 33,194.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1212978 CP,D,42,16,C3,B,2,PF,MESXB,4:1 42x16' CL3 PF MES 4:1 GB RCP EA 3 884.80$ 2,654.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1290631 CP,D,EL,18(14X23),8,C3,PF 14x23x8' CL3 PF HERCP EA 301 106.62$ 32,091.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1290632 CP,D,EL,18(14X23),8,C4,PF 14x23x8' CL4 PF HERCP EA 437 133.94$ 58,533.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1290883 CP,D,EL,24(19X30),8,C3,PF 19x30x8' CL3 PF HERCP EA 994 151.15$ 150,244.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565
CP (Fort Myers, FL) 012125 - STEEL/PIPE 1290956 CP,D,EL,24(19X30),8,C5,PF 19x30x8' CL5 PF HERCP EA 1 195.82$ 196.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310084 CP,D,EL,15(12X18)8,C3PFMESCB4: 12x18x8'CL3 PF MES 4:1 GBHERCP EA 9 90.70$ 816.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310102 CP,D,EL,15(12X18),8,C3,PF 12x18x8' CL3 PF HERCP EA 1,301 78.87$ 102,607.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310105 CP,D,EL,15(12X18)8,C3PFMESCS4: 12x18x8'CL3 PF MES 4:1 GSHERCP EA 48 90.70$ 4,353.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310107 CP,D,EL,18(14X23)8,C3,PFMES4:1 14x23x8'CL3 PF MES 4:1 GBHERCP EA 15 118.45$ 1,777.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310108 CP,D,EL,18(14X23)8,C3,PFMES4:1 14x23x8'CL3 PF MES 4:1 GSHERCP EA 5 118.45$ 592.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310110 CP,D,EL,24(19X30)8,C3,PF,BL4:1 19x30x8'CL3 PF MES 4:1 GBHERCP EA 19 163.00$ 3,097.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1310111 CP,D,EL,24(19X30)8,C3,PF,SP4:1 19x30x8'CL3 PF MES 4:1 GSHERCP EA 16 163.00$ 2,608.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012125 - STEEL/PIPE 1349302 PC,W,FE,15,6,BELL,MIA 15x6' FES OUTLET TG MIA EA 2 100.53$ 201.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012300 - RAW MATERIALS 1001711 WWF,ROLL,MISC.OWN WIRE LB LB 582,887 0.79$ 460,481.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012300 - RAW MATERIALS 1037110 AGG,1/2":3/8X#16,DOT,CPS LB 676,518 0.01$ 8,25
Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012300 - RAW MATERIALS 1083297 FLYASH,C618,F,BULK LB 23,200 0.04$ 882.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012300 - RAW MATERIALS 1148965 CEM,POR,I/II,AASHM85,BULK LB 57,000 0.07$ 3,819.00$ Rinker Rinker Florida 10 - 2021 54837 2021 10 5565 FMY-CP 5565 FMY-CP (Fort Myers, FL) 012300 - RAW MATERIALS 1240560 ADM,CHRYSO OPTIMA 249 EMX OZ 111,232 0.09$ 10,333.00$ Rinker Rinker Florida 10 - 2021 Total Fort Myers, FL 1,065,152.00$ Napa, CA 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1001790 CP,GKT,D,OR,42,13/16,ISO 42" GASKET OR ISO EA 125 11.64$ 1,455.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1001791 CP,GKT,D,OR,48,13/16,ISO 48" GASKET OR ISO EA 151 11.51$ 1,739.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1001792 CP,GKT,D,OR,54,13/16,ISO 54" GASKET OR ISO EA 11 14.67$ 161.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1001793 CP,GKT,D,OR,60,13/16,ISO 60" GASKET OR ISO EA 19 16.06$ 305.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1001795 CP,GKT,D,OR,72,13/16,ISO 72" GASKET OR ISO EA 49 18.80$ 921.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1030834 CP,GKT,P,OR,18,21/32,ISO 18" GASKET OR ISO EA 1,186 3.97$ 4,710.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1030847 CP,GKT,P,OR,21,21/32,ISO 21" GASKET OR ISO EA 173 4.80$ 830.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1153214 CP,GKT,P,OR,24,21/32,ISO 24" GASKET OR ISO EA 641 5.11$ 3,273.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1153215 CP,GKT,P,O
GASKET OR ISO EA 988 2.48$ 2,450.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1181891 JNT LUBE,GP,DELTA,#711,8LB #711 LUBRICANT 8LB EA 34 8.49$ 289.00$ Rinker Rinker Pacific 10 - 2021 5
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1183975 CP,GKT,P,OR,42,13/16,ISO 42" GASKET OR ISO EA 47 12.14$ 571.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1184408 CP,GKT,P,OR,15,21/32,ISO 15" GASKET OR ISO EA 1,227 3.38$ 4,145.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1185210 CP,GKT,P,OR,30,3/4,ISO 30" GASKET OR ISO EA 423 7.40$ 3,130.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1185218 CP,GKT,P,OR,36,3/4,ISO 36" GASKET OR ISO EA 500 8.76$ 4,382.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1185229 CP,GKT,P,OR,48,13/16,ISO 48" GASKET OR ISO EA 85 12.62$ 1,073.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1185428 JNT LUBE,#711,30LB #711 LUBRICANT 30LB EA 196 26.13$ 5,121.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1186761 CP,GKT,D,OR,48,13/16,NEO 48" GASKET OR NEO EA 150 26.49$ 3,973.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012100 - RELATED 1260594 CP,GKT,P,OR,12,5/8,NEO 12" GASKET OR NEO EA 299 5.54$ 1,655.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001000 CP,P,15,8,C4,B,1,OR 15x8' CL4 R/G RCP C76/C443 EA 94 60.79$ 5,714.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001001 CP,P,15,8,C5,B,1,OR 15"x8' CL-V R/G RCP C76/C443 EA 78 66.42$ 5,181.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001002 CP,P,18,8,C3,B,1,OR 18"X8'
RCP C76/C443 EA 5 84.39$ 422.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001004 CP,P,18,8,C5,B,1,OR 18"x8' CL-V R/G RCP C76/C443 EA 50 90.03$ 4,501.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001006 CP,P,21,8,C3,B,1,OR 21"X8' CL-III R/G RCP C76/C443 EA 2 87.12$ 174.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001007 CP,P,24,8,C3,B,1,OR 24x8' CL3 R/G RCP C76/C443 EA 1,030 106.21$ 109,400.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001009 CP,P,24,8,C5,B,1,OR 24x8' CL5 R/G RCP C76/C443 EA 81 146.46$ 11,864.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001011 CP,P,30,8,C3,B,1,OR 30x8' CL3 R/G RCP C76/C443 EA 191 169.08$ 32,294.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001012 CP,P,30,8,C4,B,1,OR 30x8' CL4 R/G RCP C76/C443 EA 19 202.89$ 3,855.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1001105 PC,W,FE,42,8,S,IN,TG 42x8' FES INLET TG EA 3 947.79$ 2,843.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1024263 CP,P,21,8,C4,B,1,OR 21x8' CL4 R/G RCP C76/C443 EA 32 103.89$ 3,325.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1024878 CP,P,36,8,C4,B,2,OR 36x8' CL4 R/G RCP C76/C443 EA 5 310.10$ 1,550.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1024983 CP,P,42,8,C3,B,2,OR 42x8' CL3 R/G RCP C76/C443 EA 3 341.90$ 1,026.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1025053 CP,P,48,8,C3,B,2,OR 48X8' CL3 R/G RCP C76/C443 EA 71 534.22$ 37,929.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600
CA) 012125 - STEEL/PIPE 1182411 CP,P,12,6,C5,B,1,OR 12"x6' CL-V R/G RCP C76/C443 EA 51 35.64$ 1,818.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182731 PC,W,FE,15,6,S,IN,TG 15x6' FES INLET TG EA 1 243.17$ 243.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182732 PC,W,FE,15,6,B,OUT,TG 15x6' FES OUTLET TG EA 6 233.82$ 1,403.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182735 PC,W,FE,24,6,S,IN,TG 24x6' FES INLET TG EA 4 361.89$ 1,448.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182806 PC,W,FE,24,6,B,OUT,TG 24x6' FES OUTLET TG EA 3 273.19$ 820.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182807 PC,W,FE,30,6,S,IN,TG 30x6' FES INLET TG EA 7 508.64$ 3,560.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182808 PC,W,FE,30,6,B,OUT,TG 30x6' FES OUTLET TG EA 3 508.64$ 1,526.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1182809 PC,W,FE,36,8,S,IN,TG 36x8' FES INLET TG EA 2 730.62$ 1,461.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1183907 CP,P,36,8,C3,B,2,OR 36x8' CL3 R/G RCP C76/C443 EA 279 260.19$ 72,592.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1184385 CP,D,EL,18(14X23),6,C3,TG 14x23x6' CL3 HERCP EA 20 128.08$ 2,562.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187046 CP,D,EL,18(14X23),6,C4,B,1,TG 14x23x6' CL4 HERCP EA 40 132.11$ 5,284.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187049 CP,D,EL,24(19X30),6,C4,B,1,TG 19x30x6' CL4 HERCP EA 16 208.33$ 3,333.00$ Rinker Rinker Pacific 10 -
2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187052 CP,D,EL,30(24X38),6,C4,B,2,TG 24x38x6' CL4 HERCP EA 4 346.66$ 1,387.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187053 CP,D,EL,36(29X45),6,C3,B,2,TG 29x45x6' CL3 HERCP EA 2 430.56$ 861.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187054 CP,D,EL,36(29X45),6,C4,B,2,TG 29x45x6' CL4 HERCP EA 2 400.75$ 801.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1187121 CP,P,33,8,C3,B,1,OR 33x8' CL3 OR RCP EA 5 196.18$ 981.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1189249 PC,W,FE,12,4,B,OUT,TG 12"x4' FES OUTLET T/G EA 2 69.62$ 139.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1189250 PC,W,FE,12,4,S,IN,TG 12"x4' FES INLET T/G EA 1 73.12$ 73.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1189251 PC,W,FE,18,4,B,OUT,TG 18x4' FES OUTLET TG EA 1 121.15$ 121.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1189252 PC,W,FE,18,4,S,IN,TG 18x4' FES INLET TG EA 5 141.56$ 708.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1514496 CP,D,54,7.9,C3,C,2,OR 54"x7.9'CL-3 R/G RCP C76/C443 EA 3 676.53$ 2,030.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1516712 CP,D,48,7.75,C3,B,2,OR 48"x7.75'CL-3 R/G RCP C76/C443 EA 22 512.53$ 11,276.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1522062 CP,D,60,7.9,C3,C,2,OR 60x7.9'CL-3 R/G RCP C76/C443 EA 5 816.41$ 4,082.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1522087 CP,D,72,7.75,C3,C,2,OR 72x7.75' CL3 OR RCP
827.98$ 828.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 1559391 CP,D,42,7.75,C3,B,2,OR 42x7.75' CL3 RCP EA 136 411.14$ 55,915.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 6000314 CP,D,42,7.75,A25,B,OR 42x7.75 A25 OR RCP EA 1 403.67$ 404.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 6000771 CP,D,72,7.9,B25,C,2,OR,1CELB 72x7.75' B25 OR ELB RCP EA 1 1,905.19$ 1,905.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 6001033 CP,D,42,7.75,C5,B,2,OR 42x7.75' C5 OR RCP EA 1 602.73$ 603.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012125 - STEEL/PIPE 6001203 CP,D,72.7.75,C3,OR,SKW 72x7.75 C3 OR SKEW RCP EA 3 1,370.05$ 4,110.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1000041 AGG,SAND,#4:#8X#100,CONC LB 212,800 0.01$ 2,490.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1001688 WWF,.10,3X6,2.5/2.5,1x.5,70.5 LB 9,645 0.81$ 7,764.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1001699 WWF,.10,3X6,2.5/3.0,.5,94 LB 14,992 0.81$ 12,069.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1182791 CEM,POR,II/V,GRAY,BULK LB 35,000 0.07$ 2,328.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1184614 WWF,.24,2X6,4.0/2.5,1x.5,95 LB 1,180 0.81$ 950.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1184631 WWF,.30,2X6,5.0/3.0,1x.5,95 LB 16,110 0.81$ 12,969.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1254180 WWF,.312,2X6,5.2/3.0,93.5 LB 6,037 0.81$ 4,860.00$ R
2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1307893 AGG,1/2":3/8X1/4",CR_GVL LB 153,200 0.01$ 1,792.00$ Rinker Rinker Pacific 10 - 2021 6
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1336874 WWF,.39,2X6,6.5/3.0,94,1.0X0 LB 28,816 0.81$ 23,197.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1361824 WWF,.27,2X6,4.5/2.5,.5X.5,95 LB 24,213 0.81$ 19,491.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1361825 WWF,.18,3X6,4.5/2.5,.5X.5,95 LB 22,159 0.81$ 17,838.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1361836 WWF,.14,3X6,3.5/2.5,.5X.5,95 LB 40,233 0.81$ 32,388.00$ Rinker Rinker Pacific 10 - 2021 54982 2021 10 5600 SFO-CP 5600 SFO-CP (Napa, CA) 012300 - RAW MATERIALS 1595459 ADM,MASTER AIR AE 90 OZ 42,240 0.03$ 1,309.00$ Rinker Rinker Pacific 10 - 2021 Total Napa, CA 706,945.00$ Phoenix, AZ 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1001791 CP,GKT,D,OR,48,13/16,ISO 48" GASKET OR ISO EA 106 13.01$ 1,379.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1030908 CP,GKT,P,PF,15,3/4,ISO 15" GASKET PF ISO EA 1,307 2.81$ 3,669.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1030910 CP,GKT,P,PF,18,3/4,ISO 18" GASKET PF ISO EA 889 3.22$ 2,860.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1030914 CP,GKT,P,PF,24,13/16,ISO 24" GASKET PF ISO EA 1,733 4.87$ 8,444.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1185668 JNT LUBE,POLYLUBE,40LB GASKET LUBE 40# PAIL EA 43 25.38$ 1,091.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 11856
CP,GKT,D,OR,30,13/16,NEO 30" GASKET OR NEO EA 20 14.29$ 286.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1186758 CP,GKT,D,OR,36,13/16,NEO 36" GASKET OR NEO EA 3 18.34$ 55.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1211090 CP,GKT,D,PF,66,13/16,ISO 66" GASKET PF ISO EA 134 11.48$ 1,538.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1212045 CP,GKT,D,PF,12,3/4,ISO 12" GASKET PF ISO EA 180 2.42$ 435.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1226257 CP,GKT,P,PF,30,13/16,ISO 30" GASKET PF ISO EA 840 5.91$ 4,967.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1236013 CP,GKT,D,PF,72,13/16,ISO 72" GASKET PF ISO EA 26 15.02$ 391.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1244101 CP,GKT,D,PF,54,13/16,ISO 54" GASKET PF ISO EA 112 11.18$ 1,253.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1295608 CP,GKT,EL,PF,18(14X23)11/16,IS 18" GASKET EL(14x23)11/16 PF I EA 65 3.04$ 197.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1304599 CP,GKT,EL,PF,30(24X38),11/16IS 24x38 GASKET PF ISO EA 275 4.65$ 1,278.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1304600 CP,GKT,EL,PF,36,(29X45)11/16IS 29x45 GASKET PF ISO EA 11 9.24$ 102.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1315831 CP,GKT,EL,PF,42(34X53),7/8,ISO 34x53 GASKET PF ISO EA 70 11.41$ 799.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1347494 CP,GKT,EL,PF,24(19X30)11/16,IS 19x30 GASKET PF ISO EA 124 3.52$ 437.00$ Rinker Rinke
55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1356683 CP,GKT,P,PF,42,7/8,ISO 42" GASKET PF ISO EA 514 9.19$ 4,722.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1356685 CP,GKT,P,PF,48,7/8,ISO 48" GASKET PF ISO EA 438 10.27$ 4,497.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012100 - RELATED 1359603 CP,GKT,D,PF,96,1,ISO 96" GASKET PF ISO EA 3 23.76$ 71.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1001096 PC,W,FE,15,6,B,OUT,OR 15x6' FES OUTLET OR EA 10 524.84$ 5,248.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1001099 PC,W,FE,24,6,S,IN,OR 24x6' FES INLET OR EA 15 615.00$ 9,225.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1001101 PC,W,FE,30,6,S,IN,OR 30x6' FES INLET OR EA 2 690.00$ 1,380.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1001103 PC,W,FE,36,8,S,IN,OR 36x8' FES INLET OR EA 4 915.00$ 3,660.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1023848 CP,P,15,8,C5,B,1,PF 15x8' CL5 PF RCP EA 277 65.88$ 18,249.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024258 CP,P,18,8,C5,B,1,PF 18x8' CL5 PF RCP EA 576 90.83$ 52,319.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024527 CP,P,24,8,C3,B,1,PF 24x8' CL3 PF RCP EA 519 117.89$ 61,184.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024566 CP,P,24,8,C4,B,1,PF 24x8' CL4 PF RCP EA 277 147.72$ 40,918.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024568 CP,P,24,8,C5,B,1,PF 24x8' CL5 PF RCP EA 20 157.07$ 3,141.00$ Rinker R
55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024675 CP,P,30,8,C4,B,1,PF 30X8' CL4 PF RCP EA 34 172.71$ 5,872.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1024830 CP,P,36,8,C3,B,1,PF 36x8' CL3 PF RCP EA 217 208.65$ 45,277.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1181717 CP,D,72,8,C4,C+,2,FB 72x8' CL4 C76 OR RCP EA 22 1,043.42$ 22,955.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1182441 CP,P,42,8,C3,B,2,PF 42x8' CL3 PF RCP EA 293 287.95$ 84,370.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1182443 CP,P,42,8,C4,B,2,PF 42x8' CL4 PF RCP EA 66 372.73$ 24,600.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1182452 CP,P,48,8,C3,B,2,PF 48x8' CL3 PF RCP EA 45 374.24$ 16,841.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1182453 CP,P,48,8,C4,B,2,PF 48x8' CL4 PF RCP EA 74 457.45$ 33,851.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1184268 CP,D,54,8,C3,B,2,PF 54x8' CL3 PF RCP EA 55 497.96$ 27,388.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1184271 CP,D,60,8,C4,B,2,PF 60x8' CL4 PF RCP EA 1 767.68$ 768.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1272727 CP,D,54,8,C5,C,2,PF 54x8' CL5 C76 PF RCP EA 4 694.72$ 2,779.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1277009 CP,P,36,8,C4,B,1,PF 36x8' CL4 PF RCP EA 443 268.31$ 118,861.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1290632 CP,D,EL,18(14X23),8,C4,PF 14x23x8' CL4 PF HERCP EA 26 135.55$ 3,524.00$ Rinke
Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1290884 CP,D,EL,24(19X30),8,C4,PF 19x30x8' CL4 PF HERCP EA 2 510.54$ 1,021.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1334277 PC,W,FE,15,6,B,OUT,PF 15x6' FES OUTLET PF EA 5 247.89$ 1,239.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1342541 PC,W,FE,18,6,B,OUT,PF 18x6' FES OUTLET PF EA 22 328.33$ 7,223.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1342542 PC,W,FE,24,6,B,OUT,PF 24x6' FES OUTLET PF EA 13 457.26$ 5,944.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1342543 PC,W,FE,30,6,B,OUT,PF 30x6' FES OUTLET PF EA 9 627.42$ 5,647.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1342545 PC,W,FE,36,8,B,OUT,PF 36X8' FES OUTLET PF EA 6 905.06$ 5,430.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1343045 PC,W,FE,48,8,B,OUT,PF 48x8' FES OUTLET PF EA 2 1,357.04$ 2,714.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1355589 CP,P,36,8,C5,C,1,PF 36x8' CL5 PF RCP EA 230 303.34$ 69,768.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1355615 CP,P,30,8,C5,C,2,PF 30x8' CL5 PF RCP EA 124 215.52$ 26,724.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1357942 CP,D,12,7.5,C5,B,1,PF 12x7.5' CL5 PF RCP EA 79 51.00$ 4,029.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1363915 CP,P,36X18,8,C5,C,1,PF,TEE 36x18x8' CL5 PF TEE R
Rinker Unit Cost 10-31-21 Cycle Count # Year Mo. BU # BU BU Description Balance Sheet Account Item Number Item Description Description 2 UM Physical Count Unit Cost Selected Month Inventory Division Region Month- Year 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1367966 PC,W,FE,12,6,S,IN,PF 12x6' FES INLET PF EA 2 209.36$ 419.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1367967 PC,W,FE,12,6,B,OUT,PF 12x6' FES OUTLET PF EA 4 201.29$ 805.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1369952 CP,P,48,8,C5,C,2,PF 48x8' CL5 PF RCP EA 196 519.34$ 101,790.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1373648 CP,D,EL,42(34X53),8,C3,PF 34x53x8' CL3 PF HERCP EA 15 464.15$ 6,962.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1373649 CP,D,EL,42(34X53),8,C4,PF 34x53x8' CL4 PF HERCP EA 3 592.10$ 1,776.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1374503 CP,P,42,8,C5,C,2,PF 42x8' CL5 PF RCP EA 75 400.89$ 30,066.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1377074 CP,P,18X18,8,C5,B,1,PF,TEE 18x18x8' CL5 PF TEE RCP EA 1 899.07$ 899.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1385614 CP,D,EL,30(24X38),8,C4,PF 24x38x8' CL4 PF HERCP EA 12 310.17$ 3,722.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1397412 CP,D,54X18,8,1350,B,2,OR,TEE 54X18,8,1350D,B,2,DB,TEE EA 3 768.54$ 2,306.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1397536 CP,D,EL,30(24X38),8,C3,PF 24x38x8' CL3 PF HERCP EA 15 287.40$ 4,311.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, A
AZ) 012125 - STEEL/PIPE 1593255 CP,D,48,10,D50,8,2,FB,JP 48x10' FB JP RCP EA 94 1,718.89$ 161,576.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1596835 CP,D,42,8,D50,8",2,FB,JP 42x8' D50, FB JP RCP EA 10 1,133.98$ 11,340.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 1596862 CP,D,36,12,D50,7-1/8,FB,JP 36x12' D50, FB JP RCP EA 2 1,295.39$ 2,591.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012125 - STEEL/PIPE 6000916 CP,D,EL,42(34X53),8,C3,PF,TEE 34x53x8' CL4 PF TEE HERCP EA 1 1,122.81$ 1,123.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1001618 CEM,POR,I/II,GRAY,BULK LB 137,000 0.06$ 7,741.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1001694 WWF,.10,3X6,2.5/2.5,.5,94 LB 40,688 0.79$ 31,940.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1184653 WWF,.48,2X8,8.0/3.5,.5,94 LB 904 0.79$ 710.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1185502 STL,BRITEBASIC,0.437 / W15 LB 1,914 0.64$ 1,225.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1187178 STL,BRITEBASIC,0.311 / W7.6 LB 37,060 0.50$ 18,530.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1187180 STL,BRITEBASIC,0.375 / W11 LB 9,198 0.64$ 5,887.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1187181 STL,BRITEBASIC,0.25 / W4.9 LB 18,110 0.64$ 11,590.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1395231 WWF,.18,3X6,4.5/2.0,.5,94 LB 19,255 0.79$ 15,115.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610
(Phoenix, AZ) 012300 - RAW MATERIALS 1397531 WWF,.30,2X8,5.0/2.5,.5,93.25 LB 85,320 0.79$ 66,976.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1414706 WWF,.21,2X8,3.5/2.5,.5,91 LB 148,022 0.79$ 116,197.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1418180 WWF,.42,2X8,7.0/3.0,.5,91 LB 31,044 0.79$ 24,370.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1425318 WWF,.33,2X8,5.5/2.5,.5,93.25 LB 61,360 0.79$ 48,168.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1505962 ADM,V-MAR,F100,WRG OZ 12,800 0.06$ 777.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS 1530834 ADM,BLK:GRCIRALON_3000 OZ 12,800 0.03$ 422.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS S200005 CONCRETE SAND-WET (A) LB 398,000 0.01$ 2,428.00$ Rinker Rinker Pacific 10 - 2021 55014 2021 10 5610 PHX-CP 5610 PHX-CP (Phoenix, AZ) 012300 - RAW MATERIALS S300005 GRAVEL-WET (A) LB 425,000 0.01$ 2,593.00$ Rinker Rinker Pacific 10 - 2021 Total Phoenix, AZ 1,537,613.00$ 8
FRTA Unit Cost Oct-21 Sum 1,590,556.30 FRTA St. Martinville - October 2021 Inventory Valuation Subtotal 1,590,556.30 Period Name Subinventory Family Subgroup Item Inventory Item ID Item Description Weight UOM Unit Weight Hist Unit Cost Ending Quantity Tons Onhand Ending Balance OCT-21 FIN-GOODS FG END SAFETY ETSI02406R141000 1792228 SI~024''~~6:1~RCP~141'' LBS 5,079.80 488.20 2 5.08 976.39 OCT-21 FIN-GOODS FG FT FITTINGS FTPR018B030 1975953 PR~018''~BEND~~CL-3 LBS 1,445.00 122.60 1 0.72 122.60 OCT-21 FIN-GOODS FG FT WYE FTPAR30Y1230L 28976803 PA RD EQUAL~30" (22X36)~WYE~12" BRANCH~CL3~~LEFT LBS 3,957.28 308.83 1 1.98 308.83 OCT-21 FIN-GOODS FG FT WYE FTPR015Y123P 28821004 PR~015"~WYE~12" BRANCH~CL3~PFL EA 1,602.48 175.29 3 0.00 525.86 OCT-21 FIN-GOODS FG FT WYE FTPR015Y153P 28821005 PR~015"~WYE~15" BRANCH~CL3~PFL EA 1,687.20 190.58 7 0.00 1,334.08 OCT-21 FIN-GOODS FG FT WYE FTPR018Y123P 28821008 PR~018"~WYE~12" BRANCH~CL3~PFL EA 2,129.76 190.51 6 0.00 1,143.08 OCT-21 FIN-GOODS FG FT WYE FTPR024Y123P 28821018 PR~024"~WYE~12" BRANCH~CL3~PFL EA 2,913.12 240.38 4 0.00 961.52 OCT-21 FIN-GOODS FG FT WYE FTPR030Y123P 28821031 PR~030"~WYE~12" BRANCH~CL3~PFL EA 3,892.32 299.83 3 0.00 899.50 OCT-21 FIN-GOODS FG FT WYE FTPR030Y153P 28821032 PR~030"~WYE~15" BRANCH~CL3~PFL EA 3,892.32 314.19 2 0.00 628.38 OCT-21 FIN-GOODS FG FT WYE FTPR036Y153P 28821045 PR~036"~WYE~15" BRANCH~CL3~PFL EA 5,119.44 435.33 3 0.00 1,306.00 OCT-21 FIN-GOODS FG FT WYE FTPR042Y153P 28840053 PR~042"~WYE~15" BRANCH~CL3~PFL LBS 6,441.36 494.44 2 6.44 988.87 OCT-21 FIN-GOODS FG FT WYE FTPR048Y153P 28821061 PR~048"~WYE~15" BRANCH~CL3~PFL EA 7,918.32 578.71 1 0.00 578.71 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR15M4B096000 28728917 PA~15" RD EQ (11X18)~MTR~CL-4~B WALL~8' NO HOLE LBS 1,460.00 92.51 1 0.73 92.51 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR18M3B096900 28940075 PA~18" RD EQ (13.5X22)~MTR~CL
HOLE LBS 2,511.00 166.96 112 140.62 18,699.59 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR24M3B096800 28923048 P~A~24" RD EQUAL (18X28.5)~MTR~CL-3~B WALL~096"~W/LIFT CABLE LBS 2,511.00 163.65 4 5.02 654.60 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR24M3B096900 28950101 PA~24" RD EQ (18X28.5)~MTR~CL-3~B WALL~8'~W/LIFT HOLE LBS 2,511.00 163.36 261 327.69 42,636.93 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR24M4B096900 28950102 P~A~24" RD EQUAL (18X28.5)~MTR~CL-4~B WALL~096"~W/LIFT HOLE LBS 2,511.00 149.39 40 50.22 5,975.78 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR30M3B096000 28666936 PA~30" RD EQ (22.5X36.25)~MTR~CL-3~B WALL~8' NO HOLE LBS 3,198.40 199.08 -2 -3.20 -398.15 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR30M3B096900 28950103 PA~30" RD EQ (22.5X36.25)~MTR~CL-3~B WALL~8' ~W/ LIFT HOLE LBS 3,198.40 199.08 57 91.15 11,347.36 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR30M4B096900 28950104 P~A~30" RD EQ (22.5X36.25)~MTR~CL-4~B WALL~096"~W/LIFT HOLE LBS 3,010.69 242.06 2 3.01 484.13 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR36M3B096000 28666937 PA~36" RD EQ (26.625X43.75)~MTR~CL-3~B WALL 8' NO HOLE LBS 4,200.00 311.61 4 8.40 1,246.43 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR36M3B096900 28950105 PA~36" RD EQ (26.625X43.75)~MTR~CL-3~B WALL~8'~W/LIFT HOLE LBS 4,200.00 311.61 173 363.30 53,908.23 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR42M3B096900 28950106 PA~42" RD EQ (31X51)~MTR~CL-3~B WALL~8'~W/LIFT HOLE LBS 5,681.60 432.30 68 193.17 29,396.09 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR42M4B096000 28915173 P~A~42" RD EQ (31X51)~MTR~CL-4~B WALL~096" LBS 5,540.00 397.14 2 5.54 794.29 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR48M3B096000 28703482 PA~48" RD EQ (36X58.5)~MTR~CL-3~B WALL~8'~NO HOLE LBS 7,400.00 613.96 24 88.80 14,734.98 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR48M3B096900 28950107 PA~48" RD EQ (36X
B-WALL 96" NO HOLE LBS 7,024.00 644.04 1 3.51 644.04 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR54M3B096900 28950109 PA~54" RD EQ (40X65)~MTR~T&G CL-3 B-WALL 8' W/LIFT HOLE LBS 8,560.00 658.99 66 282.48 43,493.27 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR60M3B096900 28951155 PA~60" RD EQ (45X73)~MTR~CL-3~B-WALL~8''~W/LIFT HOLE LBS 10,876.80 847.37 35 190.34 29,657.95 OCT-21 FIN-GOODS FG PA TONGUE & GROOVE PAR72M3B096900 28951157 PA~72" RD EQ (54X88)~MTR~CL-3~B WALL~8'~W/LIFT HOLE LBS 15,147.20 1,147.29 1 7.57 1,147.29 OCT-21 FIN-GOODS FG PR PROFILE PR012P5B096000 124769 P~R~012"~PFL~CL-5~B WALL~096" LBS 758.88 52.28 113 42.88 5,907.20 OCT-21 FIN-GOODS FG PR PROFILE PR015P3B096000 107 P~R~015"~PFL~CL-3~B-WALL~096" LBS 1,036.32 65.53 664 344.06 43,512.82 OCT-21 FIN-GOODS FG PR PROFILE PR015P3B096800 28918021 P~R~015"~PFL~CL-3~B WALL~096"~W/LIFT CABLE LBS 1,036.32 61.84 3 1.55 185.52 OCT-21 FIN-GOODS FG PR PROFILE PR015P3B096NLH 28975462 P~R~015"~PFL~CL-3~B WALL~096"~NO LIFT HOLE LBS 1,103.35 65.53 40 22.07 2,621.25 OCT-21 FIN-GOODS FG PR PROFILE PR015P4B096000 108 P~R~015"~PFL~CL-4~B WALL~096" LBS 1,036.32 81.83 92 47.67 7,528.42 OCT-21 FIN-GOODS FG PR PROFILE PR015P5B096000 17925 P~R~015"~PFL~CL-5~B WALL~096" LBS 1,036.32 75.15 3 1.55 225.44 OCT-21 FIN-GOODS FG PR PROFILE PR018P3B096000 17927 P~R~018"~PFL~CL-3~B WALL~096" LBS 1,370.88 80.76 409 280.34 33,029.80 OCT-21 FIN-GOODS FG PR PROFILE PR018P4B096000 2432 P~R~018"~PFL~CL-4~B WALL~096" LBS 1,370.88 86.73 16 10.97 1,387.64 OCT-21 FIN-GOODS FG PR PROFILE PR018P5B096000 17941 P~R~018"~PFL~CL-5~B WALL~096" LBS 1,370.88 89.37 1 0.69 89.37 OCT-21 FIN-GOODS FG PR PROFILE PR024P3B096000 307 P~R~024"~PFL~CL-3~B WALL~096" LBS 2,154.24 130.62 455 490.09 59,433.98 OCT-21 FIN-GOODS FG PR PROFILE PR024P3B096NLH 28975467 P~R~024"~PFL~CL-3~B WALL~096"~NO LIFT HOLE LBS 2,154.24 130.62 54 58.16 7,053.70
P~R~030"~PFL~CL-3~B WALL~096" LBS 3,133.44 190.08 61 95.57 11,594.67 OCT-21 FIN-GOODS FG PR PROFILE PR030P3B096NLH 28975470 P~R~030"~PFL~CL-3~B WALL~096"~NO LIFT HOLE LBS 3,133.44 190.08 6 9.40 1,140.46 OCT-21 FIN-GOODS FG PR PROFILE PR030P4B096000 309 P~R~030"~PFL~CL-4~B WALL~096" LBS 3,133.44 203.70 4 6.27 814.81 OCT-21 FIN-GOODS FG PR PROFILE PR030P5B096000 17907 P~R~030"~PFL~CL-5~B WALL~096" LBS 3,133.44 267.86 4 6.27 1,071.42 OCT-21 FIN-GOODS FG PR PROFILE PR036P3B096000 312 P~R~036"~PFL~CL-3~B WALL~096" LBS 4,275.84 311.22 167 357.03 51,973.27 OCT-21 FIN-GOODS FG PR PROFILE PR036P4B096000 313 P~R~036"~PFL~CL-4~B WALL~096" LBS 4,275.84 389.93 3 6.41 1,169.80 OCT-21 FIN-GOODS FG PR PROFILE PR036P5B096000 314 P~R~036"~PFL~CL-5~B WALL~096" LBS 4,275.84 413.42 99 211.65 40,928.39 OCT-21 FIN-GOODS FG PR PROFILE PR042P3B096000 317 P~R~042"~PFL~CL-3~B-WALL~096" LBS 5,597.76 370.32 326 912.43 120,724.16 OCT-21 FIN-GOODS FG PR PROFILE PR042P5B096000 63752 P~R~042"~PFL~CL5~B WALL~096" LBS 5,597.76 412.08 11 30.79 4,532.86 OCT-21 FIN-GOODS FG PR PROFILE PR048P3B096000 319 P~R~048"~PFL~CL-3~B-WALL~096" LBS 7,074.72 454.60 228 806.52 103,647.99 OCT-21 FIN-GOODS FG PR PROFILE PR054P3B096000 321 P~R~054"~PFL~CL-3~B WALL~096" LBS 8,714.88 584.66 99 431.39 57,881.68 OCT-21 FIN-GOODS FG PR PROFILE PR054P5C096000 123842 P~R~054"~PFL~CL-5~C WALL~096" LBS 10,584.00 610.99 5 26.46 3,054.93 OCT-21 FIN-GOODS FG PR PROFILE PR060P3C096000 123859 P~R~060"~PFL~CL-3~C WALL~096" LBS 12,019.68 654.80 60 360.59 39,287.87 OCT-21 FIN-GOODS FG PR PROFILE PR072P3C096000 525523 P~R~072"~PFL~CL-3~C WALL~096" LBS 16,442.40 1,008.84 103 846.78 103,911.01 OCT-21 FIN-GOODS RAW RESALE GASKETS RGAS0015002 907950 15" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 3.58 7 0.00 25.06 OCT-21 FIN-GOODS RAW RESALE GASKETS RGAS0024007 125178 24" ISOPRENE PROFILE GASKET NO N-LUBED LBS 2.40 5.37 20 0.0
68801 1.5" X 3.5' PREFORMED PLASTIC GASKET LBS 2.90 4.17 80 0.12 333.28 OCT-21 FIN-GOODS RAW RESALE LUBE RPL1GP00000 385 PIPE LUBE-1 GAL PAIL LBS 7.00 6.01 3 0.01 18.03 OCT-21 FIN-GOODS RAW RESALE SEALANTS RJTS3403000 28755600 3/4" X 2.5' RAM NEK~PER PIECE LBS 1.00 0.97 50 0.03 48.26 OCT-21 RAW-MTL RAW MIX AGGREGATE RRCK0000000 389 GRAVEL LBS 2,000.00 33.75 255 254.52 8,589.97 OCT-21 RAW-MTL RAW MIX CEMENT RCEM0000000 393 CEMENT LBS 2,000.00 146.85 26 26.38 3,873.90
FRTA Unit Cost Oct-21 Period Name Subinventory Family Subgroup Item Inventory Item ID Item Description Weight UOM Unit Weight Hist Unit Cost Ending Quantity Tons Onhand Ending Balance OCT-21 RAW-MTL RAW MIX SAND RSND0000000 390 SAND LBS 2,000.00 11.70 330 330.36 3,865.18 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0012004 125277 12" ISOPRENE PROFILE GASKET NON-LUBED LBS 1.00 1.82 465 0.23 846.30 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0015002 907950 15" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 3.58 902 0.45 3,229.16 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0018021 1790198 18" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.80 4.11 1,102 0.99 4,529.22 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0024007 125178 24" ISOPRENE PROFILE GASKET NO N-LUBED LBS 2.40 5.37 603 0.72 3,238.11 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0030006 908147 30" ISOPRENE PROFILE GASKET LBS 1.25 6.61 402 0.25 2,657.22 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0036004 125412 36" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 7.74 705 0.35 5,456.70 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0042005 125267 42" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 8.77 353 0.18 3,095.81 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0048034 1790202 48" ISOPRENE PROFILE GASKET NO N-LUBED LBS 4.80 10.06 163 0.39 1,639.78 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0054004 125318 54" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 11.51 105 0.05 1,208.55 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0060004 125351 60" ISOPRENE PROFILE GASKET LBS 6.00 12.43 385 1.16 4,785.47 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0072015 914760 72" ISOPRENE PROFILE GASKET NO N-LUBED LBS 1.00 15.08 128 0.06 1,930.24 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0103002 68801 1.5" X 3.5' PREFORMED PLASTIC GASKET LBS 2.90 4.17 1,280 1.85 5,332.48 OCT-21 RAW-MTL RAW RESALE GASKETS RGAS0203001 68802 2.00" X 3.5' PREFORMED PLASTIC GASKET LBS 3.8
28755600 3/4" X 2.5' RAM NEK~PER PIECE LBS 1.00 0.97 1,350 0.68 1,303.02 OCT-21 RAW-MTL RAW RESALE SEALANTS RJTW0036000 28972113 MIRAFI 140NL 36"X360' JOINT WRAP LBS 24.00 118.00 19 0.23 2,242.00 OCT-21 RAW-MTL RAW STEEL MESH RMSH0923900 28970292 D6.5/W3.0X2/8X92"X600' (6942.73) LBS 1.00 0.64 6,943 3.47 4,443.42 OCT-21 RAW-MTL RAW STEEL MESH RMSH0940081 2235571 D6.5/W3.0X2/8X94X600' LBS 1.00 0.56 6,943 3.47 3,888.08 OCT-21 RAW-MTL RAW STEEL MESH RMSH0940290 907977 D4.0/W2.5X2/8X94X600'(4,519#).5"&0" LBS 1.00 0.70 171,866 85.93 121,163.81 OCT-21 RAW-MTL RAW STEEL MESH RMSH0940317 915522 D5.0/W2.5X2/6X94X600'(5,704#) LBS 1.00 0.83 29,005 14.50 24,219.12 OCT-21 RAW-MTL RAW STEEL MESH RMSH0940365 915793 D7.0/W3.0X2/8X94X600'(7,581#) LBS 1.00 0.79 37,900 18.95 29,793.30 OCT-21 RAW-MTL RAW STEEL MESH RMSH0940406 1631289 D8.5/W3.5X2/8X94X500'(7,635.58#) LBS 1.00 0.80 7,642 3.82 6,075.39 OCT-21 RAW-MTL RAW STEEL MESH RMSH0941004 18659241 D4.5/W2.5X3/8X94X600' (3,632#) LBS 1.00 0.70 43,620 21.81 30,315.91 OCT-21 RAW-MTL RAW STEEL MESH RMSH0941021 28827582 W1.75/W2.5X2/8X94X600'(2319) LBS 1.00 0.52 2,383 1.19 1,239.16 OCT-21 RAW-MTL RAW STEEL MESH RMSH0941291 28959280 D3.0/W2.5X3/6X94X600'(2,824.52#) LBS 1.00 0.58 2,825 1.41 1,647.26 OCT-21 RAW-MTL RAW STEEL MESH RMSH0941404 28870360 D3.5/W2.5X3/8X94X600'(2,962#) LBS 1.00 0.77 32,582 16.29 24,989.91 OCT-21 RAW-MTL RAW STEEL MESH RMSH0942132 28799681 D3.5/W2.5X2/8X94X600' (4029#) LBS 1.00 0.76 8,064 4.03 6,088.32 OCT-21 RAW-MTL RAW STEEL MESH RMSH0943609 28741601 D6.0/W2.5X2/8X94X600'(6,481# ) LBS 1.00 0.83 38,880 19.44 32,464.03 OCT-21 RAW-MTL RAW STEEL MESH RMSH0946005 28965779 D10.0/W4.0X2/8X94X500' LBS 1.00 0.70 8,966 4.48 6,231.37 OCT-21 RAW-MTL RAW STEEL WIRE RWIR0000008 68747 BRIGHT BASIC WIRE W4.0 A-82 .2 27 LBS 1.00 0.61 68,343 34.17 42,010.44 OCT-21 RAW-MTL RAW STEEL WIRE RWIR0000012 68748 .252 DIA. W5.0 WIRE LBS 1.00 0.64 77
.178 DIAMETER BRIGHT BASIC LBS 1.00 0.62 47,260 23.63 29,190.14 OCT-21 RAW-MTL RAW STEEL WIRE RWIR2300000 28138084 .230 DIA. COIL WIRE~BRIGHT BASIC~W4.25 LBS 1.00 0.61 14,724 7.36 9,047.90 1,590,556.30$
H-1 EXHIBIT H Alternate Article 11 Indemnification Provisions Definitions: “Claimed Amount” shall have the meaning set forth in Section 11.6(a). “Fundamental Representations” means the representations and warranties set forth in Sections 4.1 (Organization; Power and Authority), 4.2 (Authorization; Execution and Validity), and 4.22 (Fees). “Indemnified Party” means either a Seller Indemnified Party or a Purchaser Indemnified Party, as the case may be. “Indemnification Claim” shall have the meaning set forth in Section 11.9. “Notice of Claim” shall have the meaning set forth in Section 11.6(a). “Response Notice” shall have the meaning set forth in Section 11.6(b). “Seller Covered Claims” shall have the meaning set forth in Section 11.4(a). “Seller Deductible” shall have the meaning set forth in Section 11.4(a). “Survival Period” shall have the meaning set forth in Section 11.1(a). “Tax Benefit” shall have the meaning set forth in Section 11.9. “Third-Party Claim” shall have the meaning set forth in Section 11.5. SECTION 11.1 Survival of Representations and Warranties and Covenants. (a) The representations and warranties of the Sellers contained in this Agreement shall survive the Closing until the earlier of (i) the date which any R&W Insurance Policy is bound and (ii) each of the following, as applicable: (A) the expiration of the applicable statute of limitations with respect to the Fundamental Representations; (B) with respect to the representations and warranties contained in Section 4.15 (Taxes), until 60 days following the expiration of the statute of limitations applicable to the subject matter of such representations and warranties; (C) with respect to the representations and warranties contained in Section 4.13 (Employee Benefit Plans), and Section 4.18 (Environmental Laws), until the 24-month anniversary of the Closing Date; and (D) until the 12-month anniversary of the Closing Date in the case of all other representations and warranties (each, the “Survival Period”). (b) All of the covenants or other agreements contained in this Agreement shall survive the Closing Date until the first to occur of (i) the date on which such covenants and agreements have
H-2 further performance is required on the part of the applicable parties thereunder, unless compliance with any such covenant or agreement is expressly waived in writing, with respect to any future performance of obligations arising thereunder, by the party entitled to such performance (in which case such covenant or agreement will survive until such waiver becomes effective) and (ii) the expiration of any applicable statute of limitations period. (c) The parties acknowledge that the time periods set forth in this Section 11.1 for the assertion of certain Claims under this Agreement are the result of arm’s-length negotiation among the parties and that the parties intend for the time periods to be enforced as agreed by the parties. Any Claim or potential Claim for indemnification under this Agreement with respect to any of such matters that (i) is asserted by written notice given in accordance with Section 13.4 prior to the expiration of the applicable Survival Period may be pursued, either prior to or after such expiration, for so long as is necessary to resolve the same, or (ii) is not so asserted prior to the expiration of the applicable Survival Period may not be pursued after the applicable Survival Period. SECTION 11.2 Sellers’ Indemnification Obligations. Subject to the limitations set forth in this Article 11, from and after the Closing Date, the Sellers shall indemnify, defend, and hold the Purchaser and each of its Affiliates, officers and directors (collectively, the “Purchaser Indemnified Parties”) harmless from and against any and all Claims, judgments, causes of action, liabilities, obligations, damages, losses, deficiencies, costs, penalties, interest, and expenses (collectively, “Losses”) arising out of (a) any breach of any representation or warranty of the Sellers contained in Article 4, (b) any breach of any covenant on the part of the Sellers contained in this Agreement, (c)(i) the recognized environmental conditions identified in the Phase I Environmental Site Assessments prepared by TRC Environmental Corporation with respect to the Designated Plants (“Phase I Reports”), and (ii) the environmental conditions described on Schedule 11.2(c)(ii), (d) any withdrawal liability incurred by Purchaser on account of withdrawing from the Pension Plan on or before the fifth anniversary of the Closing, or any other liability descri
Seller Assets or the Designated Plants prior to the Closing. For purposes of this Section 11.2, the determination of whether there has occurred any inaccuracy in or breach of any representation or warranty, and the calculation of Losses with respect to any breach of any representation or warranty, in each case, shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty. SECTION 11.3 Purchaser’s Indemnification Obligations. Subject to the limitations set forth in this Article 11, from and after the Closing Date, the Purchaser shall indemnify, defend, and hold the Sellers and each of its Affiliates, officers and directors (collectively, the “Seller Indemnified Parties”) harmless from and against any and all Losses arising out of (a) any breach of any covenant on the part of the Purchaser contained in this Agreement, or (b) any Assumed Seller Liabilities. For purposes of this Section 11.3, the determination of whether there has occurred any inaccuracy in or breach of any representation or warranty, and the calculation of Losses with respect to any breach of any representation or warranty, in each case, shall be determined without regard to any materiality, Material Adverse Effect or other similar qualification contained in or otherwise applicable to such representation or warranty.
H-3 SECTION 11.4 Limitations on Seller Indemnification. (a) In no event shall the indemnification obligations of the Sellers include any obligation to provide indemnification for Losses of the type identified in Section 11.2(a) (other than with respect to any Fundamental Representations, and the representations and warranties contained in Section 4.15 (Taxes) and Sections 4.8(a)(i) (Seller Owned Real Property) and 4.8(b)(i) (Seller Leased Real Property)) (the “Seller Covered Claims”), unless and until the aggregate amount of all Losses arising out of such Seller Covered Claims for which indemnification is sought exceeds on a cumulative basis an amount equal to $550,000 (the “Seller Deductible”); in which case indemnification under this Article 11 shall be available (subject to the other limitations herein) only for Losses in excess of the Seller Deductible. (b) The maximum obligation of the Sellers to provide indemnification to any Purchaser Indemnified Parties (i) under Section 11.2(a) shall not exceed an amount equal to ten percent (10%) of the Purchase Price, (ii) under Section 11.2(c)(ii) shall not exceed an amount equal to ten percent (10%) of the Purchase Price, and (iii) with respect to Fundamental Representations and the representations and warranties contained in Section 4.15 (Taxes) and Sections 4.8(a)(i) (Seller Owned Real Property) and 4.8(b)(i) (Seller Leased Real Property), shall not exceed the Purchase Price. (c) Notwithstanding anything to the contrary contained in this Article 11, Losses subject to indemnification pursuant to Section 11.2 shall be determined without duplication of recovery by reason of the state of facts giving rise to such Losses constituting a breach of more than one representation, warranty, covenant or agreement or being addressed by more than one clause under Section 11.2. (d) Notwithstanding anything herein to the contrary and except as set forth in Article 3, the Sellers shall have no obligation to indemnify any Purchaser Indemnified Parties with respect to any Losses relating to the amount or conditions of any inventory of the Sellers delivered to the Purchaser at the Closing, absent fraud. (e) For the avoidance of doubt, the limitations set forth in this Section 11.4 shall not apply to any Losses arising out of actual common law fraud (with intent to deceive) by the Sellers
Agreement if the Purchaser had knowledge of such inaccuracy or breach prior to the date of this Agreement. (g) Notwithstanding any other provision of this Agreement, if Purchaser has received a title commitment and survey for a Designated Plant and Sellers have cured any Encumbrances or other title defects which would reasonably be expected to restrict Purchaser’s use and quiet enjoyment of such Designated Plant pursuant to Section 6.13 of this Agreement, then following any such cure by Sellers, any Losses arising out of a breach
H-4 of the representations and warranties contained in Sections 4.8(a)(i) (Seller Owned Real Property) and 4.8(b)(i) shall be subject to the Seller Deductible, and Sellers’ maximum indemnification obligation under this Article 11 shall be the amount set forth in Section 11.4(b)(i). SECTION 11.5 Third-Party Claims. If any third party asserts a Claim (a “Third-Party Claim”) against any Indemnified Party that could reasonably be expected to give rise to a right on the part of the Indemnified Party to indemnification under this Article 11, the Indemnified Party shall give notice of such Third-Party Claim to the Sellers (in the case of a Third-Party Claim asserted against a Purchaser Indemnified Party) or the Purchaser (in the case of a Third-Party Claim asserted against a Seller Indemnified Party) as soon as practicable (but in no event later than ten Business Days after receiving notice of such Third-Party Claim or otherwise acquiring actual knowledge of the assertion thereof), and the Indemnifying Party shall have the right to assume the defense of such Third-Party Claim; provided, however, that the failure to so notify the Indemnifying Party will not relieve the Indemnifying Party from any liability that the Indemnifying Party may have hereunder with respect to such Third-Party Claim, except to the extent that the Indemnifying Party is prejudiced as a result of such failure, including where the failure to so notify the Indemnifying Party results in Losses to the Indemnifying Party or the forfeiture of substantive rights or defenses that would otherwise be available in the defense of such Third-Party Claim, and the Indemnifying Party shall have the right to assume the defense of such Third-Party Claim; provided, that in the case of Claim arising under Sections 11.2(a), the Indemnifying Party consults with the Indemnified Party with respect to the handling of such Third-Party Claim. Notwithstanding the foregoing, if (i) criminal penalties are asserted against the Indemnified Party in the Proceeding giving rise to such Third-Party Claim, or (ii) the Indemnifying Party and any Indemnified Party are both parties to the Proceeding giving rise to the Third-Party Claim and a conflict of interest exists between the Indemnifying Party and the Indemnified Party that has the potential of materially and adversely affecting the interests
satisfactory to the Indemnifying Party to represent or defend it against any such Third-Party Claim on the terms and subject to the conditions and limitations in the immediately following sentence. If the Indemnifying Party elects not to assume the defense or fails to assume the defense within 30 days after the Indemnified Party provides notice to the Indemnifying Party of such Third-Party Claim, then the Indemnified Party may employ counsel reasonably satisfactory to the Indemnifying Party to represent or defend it against any such Third-Party Claim, and, subject to Section 11.4, the reasonable out of pocket attorney’s fees incurred by the Indemnified Party for such counsel will be included in the Indemnified Party’s Losses; provided, however, that the Indemnified Party’s Losses shall not, in connection with any Proceeding or separate but substantially similar Proceedings arising out of the same general allegations, include the fees and expenses of more than one separate firm of attorneys at any time for all Indemnified Parties, except to the extent that local counsel, in addition to its regular counsel, is required in order to effectively defend against the Third-Party Claim. If the Indemnifying Party does assume the defense of a Third-Party Claim, the Indemnified Party shall have the right to participate in the defense of such Third-Party Claim at such Indemnified Party’s sole expense. If the Indemnified Party retains its own counsel, the Indemnifying Party shall reasonably cooperate in providing information to and consulting with the Indemnified Party about the Third-Party Claim. The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld,
H-5 conditioned or delayed, enter into any settlement with respect to any Third-Party Claim it has assumed the defense of unless such settlement involves only monetary relief and includes an unconditional release of the Indemnified Party for liability arising out of such Third-Party Claim. Notwithstanding anything to the contrary contained herein, in no event shall the Indemnified Party consent to the entry of judgment or enter into any settlement with respect to a Third-Party Claim for which it is seeking indemnification without the prior written consent of the Indemnifying Party, which shall not be unreasonably withheld, conditioned or delayed. SECTION 11.6 Procedures. (a) Notwithstanding anything to the contrary herein, no Indemnified Party shall be entitled to indemnification under this Article 11 unless it has duly delivered a written notice (a “Notice of Claim”) to the applicable Indemnifying Party prior to the expiration of the applicable Survival Period, setting forth: (i) (A) a statement that such Indemnified Party believes in good faith that there is or has been a breach of a representation, warranty, covenant or obligation contained in this Agreement, with reference to the specific representation, warranty, covenant or obligation, and that such Indemnified Party is entitled to be held harmless and indemnified under this Article 11 and (B) a brief description of the circumstances supporting such Indemnified Party’s belief that there is or has been such a breach, (ii)a good faith estimate of the aggregate dollar amount of actual and potential Losses for which it is entitled to be indemnified hereunder and that have arisen and may arise as a result of the claims described therein (the “Claimed Amount”) and (iii) in the event of a Third-Party Claim, a copy of such Third-Party Claim (if available) and a description of the basis for such Third-Party Claim. (b) If during the 30-day period commencing upon the receipt by the Indemnifying Party of a Notice of Claim, the Indemnifying Party delivers to the Indemnified Party a written response (the “Response Notice”) in which the Indemnifying Party objects to the payment of some or all of the Claimed Amount to such Indemnified Party, then the Indemnifying Party and such Indemnified Party shall attempt in good faith to resolve the dispute. (c) If the Indemnifying Party and
Claimed Amount or the related Indemnification Claim) shall be resolved pursuant to Section 13.8. (d) Upon the final determination of any amount owed by an Indemnifying Party to an Indemnified Party (whether by agreement or through dispute resolution), the Indemnifying Party shall immediately (but in any event within three Business Days after such determination) pay such amount to the Indemnified Party in cash by wire transfer of immediately available funds to the account designated by such Indemnified Party at least 24-hours in advance. SECTION 11.7 Exclusive Remedy. Unless otherwise prohibited by applicable Law (pursuant to statutory or other provisions that cannot be waived by the parties) and except for the
H-6 equitable remedies set forth in Section 13.8, from and after the Closing, the remedies of the parties specifically provided for in this Article 11 shall be the sole and exclusive remedies of the parties for all matters covered or contemplated by this Agreement or any Transaction Agreement (other than the St. Martinville Sublease Agreement) (including any breach of a representation, warranty or covenant) and the parties irrevocably waive any and all rights they may have to make claims other than pursuant to this Article 11, including under statute, common law, tort or equity, as a result of any Losses and all other damages incurred by the Seller Indemnified Parties or Purchaser Indemnified Parties, as the case may be; provided, however, that nothing herein shall limit the right of any party to seek specific performance or injunctive relief in connection with a breach by another party of its obligations under this Agreement or any Transaction Agreement that occurs after the Closing Date. Without limiting the generality of the foregoing, the parties agree not to seek any indemnification, contribution repayment or other remedy or recourse directly or indirectly (through any director or officer of the other party or otherwise) from the other party or its Affiliates with respect to any matter relating to the Seller Assets or the Designated Plants (including, but not limited to, any matters relating to the merchantability, value or use of any such assets), financial condition or results of operations, or the subject matter of this Agreement or any Transaction Agreement (whether on the basis of a claim sounding in tort, contract, statute or otherwise) outside of the provisions of this Article 11. Except for Losses incurred by a Purchaser Indemnified Party resulting from a Third-Party Claim, in no event shall any party be liable to any other party for any (a) punitive or exemplary damages or (b) for any consequential or indirect damages, damage to reputation or damage to goodwill or lost profits (unless, in the case of clause (b), such damages are (i) the natural, probable and reasonably foreseeable consequence of the applicable breach of this Agreement and (ii) not occasioned by any special circumstances relating to the applicable Indemnified Parties), in each case, whether based in contract, tort, strict liability or otherwise. The parties agree t
waive any and all rights they may have to make Claims, including under statute, common law, tort or equity, as a result of any Losses and all other damages incurred by the Seller Indemnified Parties or Purchaser Indemnified Parties, as the case may be. SECTION 11.8 Mitigation; Insurance. In the case of any Indemnification Claims for which it is reasonably likely that the Indemnified Party may have a direct or indirect right of recovery (a) against one or more third parties (including, but not limited to, rights of recovery under insurance policies or indemnification arrangements with third parties), the Indemnified Party shall seek recovery of such Indemnification Claims from such third party for so long as the pursuit of such recovery is commercially reasonable, and (b) the Indemnifying Party shall be entitled to exercise, and shall be subrogated to the Indemnified Party in respect of such right of recovery of the Indemnified Party (other than under the Insurance Policy). To the extent that a party actually obtains recovery in respect of any such Indemnification Claims from any third parties, such party shall use the funds provided by such recovery (in lieu of funds provided by any other party pursuant to the indemnification provisions of this Article 11) to pay or otherwise satisfy such Indemnification Claims and the amount of any Losses with respect to any Indemnification Claim for which indemnification is available under this Article 11 shall be reduced by the amount of such insurance proceeds (other than under the Insurance Policy) or other such funds actually paid to the Indemnified Party. If, after the making of any payment in respect of an Indemnification Claim under this Article 11, the amount of the Losses to which such payment relates is reduced by
H-7 recovery, settlement or otherwise under any insurance coverage (other than the Insurance Policy), or pursuant to any claim, recovery, settlement or payment by or against any other Person, the amount of such reduction will promptly be repaid by the Indemnified Party to the Indemnifying Party. Each party hereto shall take commercially reasonable steps within its control to mitigate its Losses upon and after becoming aware of any event which could reasonably be expected to give rise to any Losses. SECTION 11.9 Indemnification Net of Tax Benefit. The amount of any Losses with respect to any Claim for which indemnification is available under this Article 11 (an “Indemnification Claim”), shall be reduced by the Tax Benefit realized by the applicable Indemnified Parties and their Affiliates as a result of such Losses in or prior to the taxable year in which the indemnification payment is made. For these purposes, “Tax Benefit” means the positive excess, if any, of the Tax liability of the Indemnified Parties and their Affiliates without regard to such Losses, over the Tax liability of the Indemnified Parties and their Affiliates taking into account such Losses and the Tax consequences associated with receipt of the indemnification payment, with all other circumstances remaining unchanged, with such excess being calculated based on the actual reduction in cash payments for Taxes in such years, if any, attributable to such Losses. SECTION 11.10 Cooperation; Access to Documents and Information. The parties shall reasonably cooperate with each other in connection with resolving any Indemnification Claims. Without limiting the generality of the foregoing, any Indemnified Party who desires to assert an Indemnification Claim pursuant to this Agreement shall (i) provide to the Indemnifying Party all documents, books, records and other information relating to such Indemnification Claim which are in the possession of the Indemnified Party or its Affiliates or can be obtained by the Indemnified Party without undue cost or expense as promptly as practicable and (ii) give the Indemnifying Party reasonable access from time to time to the accounting and other appropriate personnel and the independent accountants of the Indemnified Party and its Affiliates in order to permit the Indemnifying Party to obtain informat
Claim for so long as the Indemnified Party is in breach in any material respect of its obligations in respect of such Indemnification Claim provided for in this Section 11.10. In addition, in no event shall an Indemnifying Party be liable to an Indemnified Party for any Losses arising from an Indemnification Claim to the extent that such Losses could reasonably be expected to have been avoided or reduced if the Indemnified Party had complied in a timely manner with its obligations under this Section 11.10.
I-1 EXHIBIT I Transition Services Agreement Attached.
TRANSITION SERVICES AGREEMENT This TRANSITION SERVICES AGREEMENT, dated as of [ ], 2022 (this “Agreement”), is made by and between QUIKRETE INTERNATIONAL, INC., a Delaware corporation (“Quikrete”), and FOLEY PRODUCTS COMPANY, a Georgia corporation (“Purchaser”). WITNESSETH: WHEREAS, Hydro Conduit, LLC d/b/a Rinker Materials (“Rinker Materials”) has entered into that certain Asset Purchase Agreement, dated as of December 13, 2021 (the “Asset Purchase Agreement”) with Purchaser and Forterra Pipe and Precast, LLC (“Forterra”), pursuant to which Rinker Materials and Forterra has sold to Purchaser, and Purchaser has purchased from Rinker Materials and Forterra, the Seller Assets, as defined therein; WHEREAS, Quikrete, Rinker Materials, Forterra and/or certain of their respective Affiliates (together, the “Service Provider”) have historically provided certain services in connection with the concrete pipe and precast manufacturing business conducted at the Designated Plants (the “Concrete Pipe Business”); and WHEREAS, in order to assist in the transition of the Concrete Pipe Business to Purchaser after the Closing, upon the terms and subject to the conditions set forth in this Agreement, Purchaser desires to receive from Service Provider, and Service Provider shall provide to Purchaser, certain transition services as set forth herein. NOW THEREFORE, in consideration of the Asset Purchase Agreement and the covenants, agreements and conditions set forth herein and therein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto, intending to be legally bound, agree as follows: ARTICLE I DEFINITIONS Section 1.1 Definitions. Capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to such terms in the Asset Purchase Agreement. ARTICLE II SERVICES Section 2.1 Scope of Services. During the Term (as defined below), Service Provider will provide to Purchaser, or cause to be provided to Purchaser, the services listed in Exhibit A for all of the Designated Plants (the “Services”). The Parties acknowledge and agree the “Services” shall include, in addition to the services set forth on Exhibit A, such other service
2 to effect a transition of the payroll, employee benefits and insurance coverage-related Services at the Designated Plants at the Closing. Section 2.2 Service Standards; Level of Service. Service Provider shall perform the Services in good faith in accordance with all applicable law, in a manner generally consistent with the historical provision of the Services and with substantially the same degree of quality and efficiency as provided in connection with similar services performed by Service Provider for itself and its Affiliates. Service Provider agrees to assign sufficient resources and qualified personnel as are reasonably required to perform the Services in accordance with the standards set forth in the preceding sentence. The standards described in this Section 2.2 are referred to as the “Service Standards”. Section 2.3 Means of Providing Services. (a) Service Provider may elect to modify or replace at any time (i) its policies and procedures; (ii) any Affiliates and/or third parties that provide any Services; (iii) the location from which any Service is provided; or (iv) the intellectual property rights, information technology, products and services used to provide the Services. (b) Service Provider may in its reasonable discretion suspend the provision of the Services (or any part thereof), from time to time, to enable it to perform routine or emergency maintenance to those parts or components of buildings, plant, machinery, information technology systems, or other assets of Service Provider required to provide the Services; provided, that Service Provider shall use commercially reasonable efforts to perform such routine maintenance outside of the normal business hours of Purchaser; (ii) Service Provider shall provide Purchaser with reasonable prior notice of such suspension and the anticipated duration of the suspension (and in the case of an emergency, to the extent practicable); and (iii) Service Provider shall use its commercially reasonable efforts to carry out the applicable maintenance and resume provision of the relevant Services efficiently as reasonably practicable. Section 2.4 Certain Limitations. The Services shall be subject to the following limitations: (a) Service Provider shall only be required to provide the Services to or for the benefit of the Concrete Pipe Business as conducted in the ordinary course of busine
Services to the extent prohibited by Applicable Law. (d) Notwithstanding anything herein to the contrary, except as expressly agreed by Service Provider, Service Provider shall not be obligated to (i) maintain the employment of any specific employee; (ii) hire any additional employees; (iii) modify or replace any existing systems,
3 equipment or software in order to provide the Services; or (iv) acquire additional systems, equipment or software in order to provide the Services. (e) Purchaser acknowledges and agrees that the Services provided by a third party on Service Provider’s behalf, and the assets, including any intellectual property and intellectual property licenses, licensed from a third party and used in connection with providing the Services, remain subject to the terms and conditions of any applicable contracts with the providers of such Services and the licensors of any such licensed assets and Purchaser shall adhere to such terms and conditions and Service Provider shall use commercially reasonable efforts to obtain any necessary consent from such third parties in order to provide such Services. In the event that any such consent is not obtained despite such efforts, or in the event that a third party informs Service Provider of a change to such terms and conditions that would reasonably be expected to degrade the quality and level of Services below the Service Standards, Service Provider shall so inform Purchaser, and the parties shall negotiate in good faith, as applicable, alternative arrangements or modifications to the Services in order to meet an alternative standard reasonably acceptable to Purchaser. All additional costs associated with such consents, alternative arrangements and modifications shall be borne by Purchaser. (f) Notwithstanding any provision of this Agreement to the contrary, Service Provider’s obligation to provide to Purchaser any Services that are provided to Service Provider by a third party are limited to such Services as they are actually provided by any such third party and Service Provider shall have no liability to Purchaser or any of its Affiliates arising from a failure by any such third party to perform Services that it provides to Purchaser or any of its Affiliates in accordance with terms and conditions of this Agreement or any agreement between or among Service Provider and any such third party. (g) It shall not be deemed to be a breach of this Agreement if Service Provider fails to meet the Service Standards because of changes in technology used to provide a Service, which technology is also used by Service Provider in connection with its provision of a service to itself or to one or more of its Affiliates; pro
of such change and the parties shall discuss in good faith modifications to the Services in order to meet a mutually agreed alternative standard. Section 2.5 Cooperation. Each party will perform all obligations under this Agreement in good faith and use commercially reasonable efforts to cooperate with the other in order to facilitate the provision and receipt of the Services. Without limiting the foregoing, Purchaser shall follow the policies, procedures and practices of Service Provider applicable to the Services, provided, that Purchaser shall not be obligated to follow any policies, procedures and practices to the extent in doing so Purchaser would be in violation of Applicable Law. Service Provider, when on the property of Purchaser or when given physical or electronic access to any equipment, computer, network or files owned, leased or controlled by Purchaser in connection with the provision of the Services, shall follow policies, procedures and practices concerning health, safety and security, including, without limitation, those of Purchaser, which are made known in advance to Service Provider.
4 Section 2.6 Divestiture, Sale or Transfer of Assets. Nothing in this Agreement shall be deemed to limit Service Provider’s ability to divest, sell or otherwise transfer any of its assets, including contracts and intellectual property licenses, necessary to provide the Services; provided, that Service Provider’s obligation to provide or cause to be provided the Services to Purchaser in accordance with this Agreement for the duration of the Term shall not be abrogated or affected thereby. Section 2.7 Compliance with Applicable Law. Each party shall perform all of its obligations hereunder in accordance with Applicable Law. ARTICLE III PRICING Section 3.1 Payment for Services. As compensation for the Services, Purchaser will pay Service Provider the amount(s) of the monthly fees specified in Exhibit B, and in addition, Purchaser will pay to (or reimburse) Service Provider for such costs, expenses and amounts described in Exhibit B (such amounts, monthly fees, costs and expenses, the “Fees”). Notwithstanding anything in this Agreement to the contrary, Service Provider may increase the Fees in the event that any Service is provided pursuant to any contract between Service Provider (or any of its Affiliates) and a third party, and the third party increases its fees under such contract, provided, that any such increase in Fees shall be in proportion to the increase in such fees and relate only to the Service provided by such third party. Section 3.2 Taxes. In addition to the other amounts payable under this Agreement, for any Services for which Service Provider charges Fees hereunder, Purchaser shall be obligated to pay, or reimburse Service Provider for, the amount of any present or future sales or use Taxes if any imposed upon payment for the Services. Invoices issued pursuant to Section 3.3 shall separately state any sales or use taxes due and payable by Purchaser in respect of the Services. Section 3.3 Billing and Cash Settlement. Any amounts due under this Agreement shall be billed and paid for in the following manner: (i) Service Provider shall invoice Purchaser on a monthly basis for all Services delivered during the preceding month incurred in the preceding month; (ii) each such invoice shall be payable within fifteen (15) days of Purchaser’s receipt thereof; and (iii) payment of all invoices in respect of the Servi
Purchaser fails to pay in full any undisputed invoice when due, interest shall accrue daily on the unpaid and undisputed amount, as well as any disputed amounts that subsequently are determined to have been properly invoiced and due to Service Provider, until such amounts are paid. The applicable interest rate shall be the lesser of (i) the prime rate as published in The Wall Street Journal on the tenth (10th) business day after the date of receipt by Purchaser of Service Provider’s invoice plus two percent (2%) and (ii) the maximum rate of interest allowed by Applicable Law.
5 ARTICLE IV TERM; TERMINATION Section 4.1 Term. The term of this Agreement (the “Term”) shall commence on the date hereof and end on the date that is three months following the date hereof. The “Term” may be extended upon the mutual agreement of the Parties. Section 4.2 Termination. This Agreement may be terminated by either Quikrete or Purchaser upon written notice to the other party if the other party is in material breach of this Agreement or the Asset Purchase Agreement; provided, however, that the breaching party shall have 10 days from receipt of written notice thereof to cure such breach, at which time this Agreement shall terminate if the breach has not been cured to the reasonable satisfaction of the non-breaching party. Section 4.3 Effect of Termination. Upon any termination of this Agreement, neither party will have any further obligation to the other, except (i) no termination of this Agreement will prejudice any claim either party may have under this Agreement that arises prior to the effective date of such termination and (ii) such termination will not terminate or otherwise affect any unpaid obligation of Purchaser to Service Provider set forth in Article III or the provisions of this Article IV, Article V, Article VI, Article VII, Article VIII and Article IX (which will survive termination as independent rights and obligations). ARTICLE V INDEMNIFICATION Section 5.1 Indemnification. (a) Purchaser will be solely responsible for, and will indemnify, defend, reimburse and hold harmless Service Provider and its Affiliates (including the successors, officers, directors, shareholders, employees, agents, representatives and members of each of them) (the “Service Provider Indemnified Parties”) from, for and against any and all claims, losses, liabilities, damages, judgments, settlements, costs and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Damages”) to the extent arising out of or relating to (i) any breach or other violation by Purchaser with any covenant or agreement in this Agreement or (ii) the gross negligence or willful misconduct of Purchaser in connection with the Services provided by Service Provider to Purchaser under this Agreement. (b) Service Provider will be solely responsible for, and will indemnify, defend, reimburse and hold harmless Purc
Damages to the extent arising out of (i) any breach or other violation by Service Provider with any covenant or agreement in this Agreement or (ii) the gross negligence or willful misconduct of the Service Provider or its
6 Affiliates or any third party that provides a Service to Purchaser pursuant to this Agreement in connection with the provision of, or failure to provide, any Services to Purchaser. Section 5.2 Indemnification Procedures. (a) Each Service Provider Indemnified Party or Purchaser Indemnified Party, as the case may be (such Party, the “Indemnified Party”) shall provide the Service Provider or the Purchaser, as the case may be (the “Indemnifying Party”) with timely notice of any claim or liability subject to indemnification pursuant to Section 5.1; provided, that any failure by any Indemnified Party to so notify Indemnifying Party shall relieve Indemnifying Party of its obligations under Section 5.1 only if and to the extent that Indemnifying Party is materially prejudiced thereby. (b) An Indemnified Party shall (i) give Indemnifying Party the opportunity to defend or negotiate a settlement of any indemnifiable claim hereunder against such Indemnified Party at Indemnifying Party’s expense; provided, that Indemnifying Party shall not settle any such claim without Indemnified Party’s prior written consent, not to be unreasonably withheld or delayed, and (ii) reasonably cooperate with Indemnifying Party, at that Indemnifying Party’s expense, in defending or settling such claim. ARTICLE VI DISCLAIMER OF WARRANTIES Section 6.1 Disclaimer of Warranties. Except as expressly set forth in this Agreement, neither Quikrete nor Service Provider makes, and expressly disclaims any and all, representations or warranties whatsoever to the extent permissible by Applicable Law, whether express, implied or statutory, with respect to the Services, software or hardware provided hereunder, including warranties with respect to merchantability, or suitability or fitness for a particular purpose, title and non-infringement, and any warranties arising from course of dealing, course of performance or trade usage. Section 6.2 Consequential Damages. In no event shall Service Provider on the one hand, and Purchaser on the other hand, be liable to each other for any consequential, incidental, special, exemplary or punitive damages or lost profits, lost revenues or diminution in value in connection with, or related to the performance of, this Agreement or arising out of the Services rendered hereunder, whether such liability is asserted on the
or damage in advance. ARTICLE VII CONFIDENTIALITY; SECURITY Section 7.1 Confidentiality. The parties hereto acknowledge that in connection with the provision by Service Provider of the Services as contemplated hereunder, they will have access to confidential and proprietary information concerning the other party, its customers, Affiliates and
7 its business, which information is not readily available to the public. Service Provider and Purchaser acknowledge that each has taken and will continue to take commercially reasonable efforts to ensure such confidential and proprietary information is not made available to the public. The parties hereto further agree that they will not at any time (during the Term or thereafter) disclose to any Person (except to its Affiliates and the officers, directors, designees, employees, agents, and representatives of such party and its Affiliates who require such information in order to perform their duties hereunder or, in the case of Purchaser, to receive the full benefit of the Services, but provided, that such disclosure is pursuant to reasonable confidentiality obligations that are at least equivalent to those contained herein), directly or indirectly, or make any use of, distribute or make copies of, for any purpose other than those contemplated by the Asset Purchase Agreement, this Agreement, or any other agreement contemplated hereby or thereby, any such confidential or proprietary information of the other party. Notwithstanding the foregoing, information of a party disclosed to the other party shall not be deemed confidential or proprietary if such information (i) becomes known to the public without breach of this Section 7.1 by the other party; (ii) was known to the other party prior to disclosure; (iii) is disclosed to the other party by a third party not subject to a confidentiality obligation to the disclosing party; or (iv) is independently developed by the other party without reference to the disclosing party’s information. Section 7.2 Disclosure. Notwithstanding Section 7.1, either party may disclose confidential information in the following circumstances (or as otherwise provided by the provisions of this Agreement), provided, that such party shall, to the extent reasonably possible and permitted by Applicable Law, first promptly notify the other party of such intended disclosure and shall cooperate in seeking any limitations on such disclosure and/or protective measures for disclosed information: (a) in response to a court order or formal discovery request; (b) if a request is made by any Governmental Authority; and (c) as otherwise required by Applicable Law. Section 7.3 Security. If either party is given access to the other party’s com
requirements (“Security Regulations”). No party shall tamper with, compromise or circumvent any security or audit measures employed by the other party, it being understood and agreed that if, notwithstanding the foregoing, a party fails to comply with the Security Regulations, then the other party may suspend access to the affected Systems to the extent necessary to preserve the security of the Systems until such time as the non-compliance is cured. Each party shall access and use only those Systems of the other party for which they have been granted the right to access and use, and to access and use such Systems only to the extent reasonably necessary to receive the Services. Section 7.4 Remedies. The parties acknowledge, understand and agree that a breach of this Article VII will cause irreparable injury to the non-breaching party and that no adequate or complete remedy at law is available for such breach. Accordingly, the parties (i) agree that the
8 non-breaching party will be entitled to enforcement of this Article VII by injunction and (ii) irrevocably waive any defense based on the adequacy of the remedy at law which might be asserted as a bar to such injunctive relief. ARTICLE VIII INTELLECTUAL PROPERTY Section 8.1 Ownership of Intellectual Property. (a) Except as otherwise expressly provided herein, each of Service Provider and Purchaser shall retain all right, title and interest in and to their respective intellectual property rights, and no other license (other than to the extent necessary for the provision of the Services) or other right, express or implied, is granted hereunder by either party to its intellectual property rights. (b) Each party shall from time to time execute any documents and take any other actions reasonably requested by the other party to effectuate the purposes of this Section 8.1. Section 8.2 Reservation of Rights. Except as expressly provided in this Agreement, no party shall have any rights or licenses with respect to any hardware or facility of the other party. All rights and licenses not expressly granted in this Agreement are expressly reserved by the relevant party. ARTICLE IX MISCELLANEOUS Section 9.1 Force Majeure. In the event that Service Provider is prevented from, or delayed in, providing one or more Services, or one or more Services are interrupted or suspended, by reason of events beyond its reasonable control and not from its fault, misconduct or negligence (including without limitation acts of God, fire, explosion, accident, floods, embargoes, epidemics, war, acts of terrorism, nuclear disaster or riot) (each, a “Force Majeure Event”), Service Provider shall not be obligated to deliver (or timely deliver, as applicable) the affected Services during the period Service Provider is so delayed or prevented. The duties and obligations of Service Provider with regard to the Services hereunder that are directly affected by such Force Majeure Event shall be tolled for the duration of the Force Majeure Event, but only to the extent that the Force Majeure Event prevents Service Provider from performing its duties and obligations hereunder and in no event shall such duties and obligations be tolled beyond expiration of the Term. During the duration of the Force Majeure Event, Service Provider shall use its commercially reas
Force Majeure Event, the Service Provider shall promptly notify the Purchaser. In addition, from and during the occurrence of a Force Majeure Event, Purchaser may replace the affected Services by providing such Services for itself or engaging a third party to provide such Services at Purchaser’s sole cost and expense. Section 9.2 Interpretation.
9 (a) Whenever the words “include,” “includes” or “including” are used in this Agreement they shall be deemed to be followed by the words “without limitation.” (b) Words denoting any gender shall include all genders. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. (c) A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns. (d) All references to “$” and Dollar shall be deemed to refer to United States currency unless otherwise specifically provided. (e) All references to “person” shall be deemed to refer to any individual, sole proprietorship, partnership, joint venture, corporation, estate, trust, unincorporated organization, association, limited liability company, institution or other entity, including any that is a Governmental Authority. Section 9.3 Preparation of this Agreement. Purchaser and Quikrete hereby acknowledge that (i) Purchaser and Quikrete jointly and equally participated in the drafting of this Agreement; (ii) Purchaser and Quikrete have been adequately represented and advised by legal counsel with respect to this Agreement and the transactions contemplated hereby; and (iii) no presumption shall be made that any provision of this Agreement shall be construed against either party by reason of such role in the drafting of this Agreement and any other agreement contemplated hereby. Section 9.4 Relationships of the Parties. The parties hereto are and shall remain independent contractors and not employees or agents of each other. Except as expressly granted by the other party in writing, neither Purchaser nor Service Provider shall have any authority, express or implied, to act as an agent of the other parties or their subsidiaries or Affiliates under this Agreement. It is not the intent of the parties hereto to create, nor should this Agreement be construed to create, a partnership, joint venture or employment relationship among or between the parties (including their respective officers, employees, agents or representatives). Section 9.5 Entire Agreement. This Agreement and the Asset Purchase Agreement set forth the entire understanding and agreement between the parties as to the matters covered in this Agreement and the Asset Purchase Agreement and
Beneficiaries. This Agreement is intended to be solely for the benefit of the parties to this Agreement and is not intended to confer any benefits upon, or create any rights in favor of, any Person other than the Purchaser and Service Provider, except those rights conferred on Indemnified Parties pursuant to Section 5.1.
10 Section 9.7 Governing Law. This Agreement shall be governed by, and will be construed and enforced in accordance with, the laws of the State of Delaware pursuant to the parties’ agreement in accordance with the substantive laws of the State of Delaware applicable to agreements executed and performed entirely within such State, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Delaware. Section 9.8 Judicial Proceeding. Each of the parties irrevocably agrees that all actions or proceedings relating to this Agreement (whether to enforce a right or obligation or obtain a remedy or otherwise) will be brought solely in the federal district court for the Northern District of Georgia, or if its subject matter jurisdiction requirements are not met, any Georgia state court sitting in Fulton County or any court of the United States located in the state of Georgia. Each party hereby unconditionally and irrevocably (a) consents to such exclusive jurisdiction and venue, (b) waives its rights to bring any action or proceeding against the other party except in such court, and (c) waives, and agrees not to use as a defense, any claim that any such forum is an inconvenient forum. Service of process in any judicial proceeding, legal or equitable, brought against any party and involving this Agreement may be made either by (i) providing a copy of such process in accordance with Section 9.10 or (ii) by providing a copy of such process in accordance with Applicable Law. Section 9.9 Waiver of Trial by Jury. Each party hereby waives, to the fullest extent permitted by Applicable Law, any right it may have to a trial by jury in respect of any litigation, directly or indirectly, arising out of or relating to this Agreement or any transaction contemplated by this Agreement. Each party (a) certifies that no Representative of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (b) acknowledges that it and the other parties have been induced to enter into this Agreement by, among other things, the mutual waivers and certifications in this Section 9.9. Section 9.10 Notices. A
confirmation of receipt when transmitted by facsimile transmission or on receipt after dispatch by internationally recognized courier service or by registered or certified mail, postage prepaid, addressed, as follows: (a) If to Purchaser: Foley Products Company 1031 Columbus Avenue Columbus, Georgia 31901 Attn: Frank D. Foley III Facsimile: 706-569-4436 (b) If to Service Provider:
11 Quikrete International, Inc. 5 Concourse Parkway, Suite 1900 Atlanta, Georgia 30328 Attn: Legal Department or such other address as the person to whom notice is to be given has furnished in writing to the other parties. A notice of change in address shall not be deemed to have been given until received by the addressee. Section 9.11 Descriptive Headings. The descriptive headings of the several Articles and Sections of this Agreement are inserted for convenience only and do not constitute a part of this Agreement. Section 9.12 Extension, Waiver. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party to this Agreement or (b) waive compliance with any of the agreements, or satisfaction of any of the conditions, contained herein by the other party to this Agreement. Any agreement on the part of a party to this Agreement to any such extension or waiver shall be valid only if set forth in an instrument in writing signed by such party and will not restrict subsequent enforcement of any of the obligations of this Agreement. Section 9.13 Amendment and Modification. This Agreement may not be amended except by an instrument in writing signed by Purchaser and Quikrete. Section 9.14 Assignment. Purchaser may not assign, transfer or delegate, whether by merger or other operation of Applicable Law or otherwise, any rights or obligations under this Agreement without Quikrete’s prior written consent. Quikrete may assign its rights and obligations under this Agreement to any of its Affiliates. No such assignment by any party shall relieve such party of its obligations hereunder except to the extent such party’s assignee fully performs such obligations. This Agreement is binding upon the parties and their respective successors and assigns and inures to the benefit of the parties and their respective permitted successors and assigns. Section 9.15 Severability. If any provision of this Agreement shall be held invalid, illegal or unenforceable, the validity, legality or enforceability of the other provisions of this Agreement shall not be affected thereby, and there shall be deemed substituted for the provision at issue a valid, legal and enforceable provision as similar as possible to the provision at issue. Section 9.16 Counterparts; Effect. This Agreem
delivery of this Agreement. Section 9.17 Costs and Expenses. Except as expressly set forth in this Agreement, each party shall pay all costs and expenses incurred by or on behalf of it in connection with this Agreement and the transactions contemplated by this Agreement. Notwithstanding the foregoing, in any action or proceeding brought to enforce any provisions of this Agreement, or where any
12 provision hereof is validly asserted as a defense, the successful party shall be entitled to recover reasonable attorneys’ fees and disbursements. [Remainder of Page Intentionally Left Blank.]
[Signature Page to Transition Services Agreement] IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on their behalf by their respective officers hereunto duly authorized, all on the date first above written. QUIKRETE INTERNATIONAL, INC. By: ____________________________ Name: Title: FOLEY PRODUCTS COMPANY By: ____________________________ Name: Title:
EXHIBIT A SERVICES Connectivity and Information Systems: Data Communications • Maintain and keep operational the current bandwidth of internet access at the Designated Plants. • Maintain and keep operational all data connectivity to all devices currently on the Service Provider’s network at the Designated Plants. • Maintain and keep operational the current WiFi availability at the Designated Plants. Voice Communications • Maintain and keep operational all landlines and phones at the Designated Plants • Maintain and keep operational all cell phones owned by the Service Provider, currently provided to the Transferred Seller Employees at the Designated Plants. Equipment • Maintain and keep operational all laptops, desktops, printers, copiers, and timeclocks at the Designated Plants. • Maintain and keep operational all routers, firewalls, switches and access points attached to the Service Provider’s network at the Designated Plants. • Maintain and keep operational all devices in use and attached to the Service Provider’s network not listed above at the Designated Plants. • Maintain, replace (if necessary) and keep operational all IT equipment currently used in the manufacturing process at the Designated Plants. • At end of TSA, provide Purchaser all local admin users and passwords for all IT equipment at the Designated Plants. Database/ERP • Maintain and keep operational all current logins and access to the Service Provider’s network and programs currently available to the current users at the Designated Plants. • Maintain a help desk to aid and assist any of the Transferred Seller Employees at the Designated Plants with any problems they have interacting with the Service Provider’s network and programs currently used at the Designated Plants. • Provide exports of any information associated with the Designated Plants and its business operations required to aid in the transition to the Purchaser’s ERP, such as but not limited to customers, products, vendors, unpaid accounts receivable and unpaid accounts payable.
Office 365 • Maintain and keep all email accounts of Transferred Seller Employees and provide Purchaser with .pst file containing the email accounts of the Transferred Seller Employees. • Service Provider to establish new email addresses and accounts for the Transferred Seller Employees, and Service Provider will redirect emails sent to current email addresses to new email addresses. • Maintain and keep available all Office 365 products currently used by Transferred Seller Employees. JD Edwards & Oracle • Service Provider will maintain systems for Quote to Cash (including customer database, customer quotes, invoicing, accounts receivable tracking and cash application), Purchase Order to Payment (including vendor database, purchase orders, receiving, invoice processing and vendor payments), Accounting and Financial Services (including general ledger accounting inventory and cost accounting and financial reporting). Finance & Accounting Accounts Payable, Accounting and Financial Reporting • Assist Designated Plants with their processing of accounts payable invoices as they currently are from PO to actual disbursement of the invoice. • Assist Designated Plants with their entry of accounts payable invoices into the system and ensure such invoices are paid within credit terms. • Ensure that all discounts are taken on vendor invoices related to the Designated Plants for which a discount is offered. • Ensure all cash disbursements related to the manufacturing operations of the Designated Plants are made from the Purchaser’s designated bank account. All checks will be overnighted for next day delivery to Purchaser for signature and mailing by Purchaser. • Ensure that all cash disbursements related to the manufacturing operations of the Designated Plants are recorded to the proper general ledger accounts, consistent with the past practices of the Service Provider. • Provide Purchaser with a detail listing of all cash disbursement made from the Purchaser’s designated bank account. This should be provided weekly. • Provide Purchaser with a detailed accounts payable aging for the Designated Plants at the end of each month and ensure that the detail aging agrees with the general ledger. • Upon request, provide Purchaser with all supporting documentation and invoices for all cash disbursements (documenta
detail agrees to the general ledger.
• Ensure all payroll processed for the Transferred Seller Employees or any new employees at the Designated Plants by Service Provider is posted to the proper general ledger accounts. • Provide Purchaser with a detailed calculation of any allocations from Service Provider to the Designated Plants and to ensure that these allocations are properly recorded in the general ledger. For the avoidance of doubt, such allocations are limited to expenses directly related to the Designated Plants and shall not include any costs related to Quikrete, Rinker or Forterra Corporate or Shared Services overhead. • Continue to account for inventory at the Designated Plants as it is currently being accounted for and provide Purchaser with a detailed costed inventory listing at the end of each month that agrees to the general ledger. • Provide Purchaser with a trial balance for the Designated Plants at the end of each month (in excel format) of the month's general ledger activity. • Provide Purchaser with all of the monthly financial statements reports that are currently being provided for each of the Designated Plants. • Provide Purchaser with exports of the trial balance, inventories, accounts payable, and accounts receivable for the Designated Plants upon request. Accounts Receivable • Maintain customer file for the Designated Plants to include tax exemptions and, credit applications. • Setup new accounts for the Designated Plants in Service Provider’s accounting software after approval from Purchaser’s Accounts Receivable Manager. • Maintain digital copies of any signed delivery tickets provided by the Designated Plants. • Prepare and mail/email invoices and monthly statements to customers on Service Provider’s current template (modified to include Purchaser’s logo). • Provide Purchaser’s Credit References upon request. • Prepare lien waivers and maintain digital file for the Designated Plants. • Prepare notice letters for new jobs upon first delivery and maintain digital file or database for the Designated Plants. • For the Designated Plants, track for upcoming liens and file as necessary. • Contact customers on past due accounts related to the Designated Plants. • Post all cash collected for the Designated Plants to appropriate customer accounts and the general ledger. • For any cash collected by Service Provider related to the Designated P
accounts for the Designated Plants on a weekly basis. • Provide weekly Aged Trial Balances detailing Current, 30 Days, 60 days, 90 Days and 120 Days balances.
Human Resources Assist (consistent with past practice) the relevant persons at the Designated Plants with their onboarding new hires, including enrollment/completion of appropriate orientations, their offboarding terminated employees and their completing, conducting and/or maintaining the following: • new hire paperwork include I-9, e-verify, etc. • personnel files, medical files and I-9 files • pre-employment drug testing (5 panel), post injury/incident drug testing and reasonable suspicion drug testing. • drug test/results records • Provide bi-weekly or monthly reports of all new hires, terminations, DOH/DOT, reason by Designated Plant • Benefits Administration o Administer health & welfare benefits o maintain required records o provide monthly claims experience Payroll • Maintain system for providing payroll. • Process new hires and terminations for payroll purposes. • Time keeping. • Payroll processing, using Purchaser’s designated bank account(s). • Processing tax, using Purchaser’s designated bank account(s). • Processing garnishment and child-support payments, other deductions as required by law, using Purchaser’s designated bank account(s). • Maintain required payroll records. • Provide weekly labor distribution payroll report – by location, by employee. • Prepare, audit and mail W2s in timely manner; answer any questions re: W2s. Time Off and Leave Administration • Maintain required records based on time-off/leave reason reported by the Designated Plants to Service Provider • Provide report of any employee on leave/leave reason reported by the Designated Plants to Service Provider Safety Assist (consistent with past practice) the relevant persons at the Designated Plants with their completing, conducting or maintaining of the following:
• Administering required safety training per company policy, regulatory (OSHA, environmental agencies, etc.). • Maintaining required training documentation. • Conducting required refresher training as needed. • Reporting incidents (close call, first aid, medical, property damage, spill, etc). • Conducting root cause analysis of all incidents. • Maintaining OSHA 300, 300A and 301 documentation. • Conducting quarterly safety inspection and submit report of findings. • Maintaining SDS records. • Reporting of any injuries requiring medical treatment outside first aid, serious, or catastrophic injuries. • Reporting of all injuries, to include location, name, DOH, DOI, detail of injury, etc. • Completing any required regulatory agency reporting as required by State, maintain detailed files of reporting. • Responding to OSHA, other regulatory agency visits per current policy/procedures, reporting with detailed summary of visit, follow up items, etc. Environmental Assist (consistent with past practice) the relevant persons at the Designated Plants with their completing, conducting or maintaining of the following: • Maintaining licenses and permits current. • Conducting all maintenance, testing, inspections, etc. as required by each license/permit • Maintaining detailed records (i.e., maintenance abatements, testing results, inspection results, smoke tests etc.). • Maintaining information for regulatory reporting (i.e. Tier II, Cercla, etc.). • Responding to, abate and report (as required) all environmental events (i.e. spills) and maintain detailed records. • Reporting any reportable events or issues requiring immediate response. Insurance • Continue to maintain insurance coverage for Designated Plants until coverage assumed by Purchaser. • Report, file, and manage all claims (workers compensation, auto, GL, EEO, etc.) keeping Purchaser notified immediately of all claims filed and updated throughout life of the claim. • Manage litigated claims, keeping Purchaser notified immediately of all claims filed and updated throughout the life of litigation. • Maintain detailed claims files.
EXHIBIT B MONTHLY FEES AND COSTS Monthly Fees for Services A. For Rinker Plants: Month Monthly Fee 1 $0 2 $0 3 $0 B. For Forterra Plant: Month Monthly Fee 1 $0 2 $0 3 $0 Reimbursement of Paid Assumed Seller Liabilities Purchaser will reimburse Service Provider in full for any and all expenditures, costs and expenses paid on Purchaser’s behalf (including Assumed Seller Liabilities (such as payroll, payroll taxes, trade payables, uninsured claims, deductibles, self-insured retentions, etc.) and including shared costs (such as ATT, UPS, Office Depot account, TMS software, insurance allocation, etc.)) paid by Service Provider. Shared costs will be treated on a consistent basis as pre-Closing.
Exhibit 4.5
DESCRIPTION OF THE REGISTRANT'S SECURITIES REGISTERED PURSUANT TO SECTION 12 OF THE SECURITIES EXCHANGE ACT OF 1934
Forterra, Inc. has one class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: our common stock.
The following is a summary of some of the general terms and provisions of our common stock. Because this is a summary description, it does not contain all of the information that may be important to you. For a more detailed
description of our common stock, you should refer to the provisions of our amended and restated certificate of incorporation and our amended and restated bylaws which are exhibits to our Annual Report on Form 10-K to which this
description is an exhibit. References to the “Company,” “we,” “us” and “our” refer to Forterra, Inc. and not to any of our subsidiaries.
Authorized Capitalization
Our authorized capital stock consists of 190,000,000 shares of common stock, par value $0.001 per share (“Common Stock”), and 10,000,000 shares of undesignated preferred stock, par value $0.001 per share.
Common Stock
Voting Rights
Each share of Common Stock entitles the holder to one vote with respect to each matter on which the holders of Common Stock are entitled to vote. Holders of our Common Stock do not have cumulative voting rights. Except in
respect of matters relating to the election of directors and as otherwise provided in our amended and restated certificate of incorporation or required by law, all matters to be voted on by our stockholders must be approved by a majority
of the shares present in person or by proxy at the meeting and entitled to vote on the subject matter. In the case of the election of directors, nominees must be approved by a plurality of the votes cast. Our Common Stock votes as a
single class on all matters.
Dividend Rights
The holders of our outstanding shares of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of legally available funds.
Liquidation Rights
In the event of any voluntary or involuntary liquidation, dissolution or winding up of our affairs, holders of our Common Stock would be entitled to share ratably in our assets that are legally available for distribution to
stockholders after payment of our debts and other liabilities. If we have any preferred stock outstanding at such time, holders of the preferred stock may be entitled to distribution and/or liquidation preferences, in which case we must
pay the holders of our preferred stock before we may pay distributions to the holders of our Common Stock.
Other Rights
Our stockholders have no preemptive, conversion or other rights to subscribe for additional shares. All outstanding shares are validly issued, fully paid and nonassessable. The rights, preferences and privileges of the holders of
our Common Stock are subject to and may be adversely affected by the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Anti-takeover Effects of Delaware Law and our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws
Provisions of the Delaware General Corporation Law, or the DGCL, and our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult to acquire our company by means of a
tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are intended to discourage coercive takeover practices and inadequate takeover bids and to encourage
persons seeking to acquire control of us to first negotiate with our board of directors. We believe that the benefits of these provisions outweigh the
disadvantages of discouraging certain takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms and enhance the ability of our board of directors to
maximize stockholder value. However, these provisions may delay, deter or prevent a merger or acquisition of us that a stockholder might consider is in its best interest, including those attempts that might result in a premium over the
prevailing market price of our common stock.
Undesignated Preferred Stock
Our amended and restated certificate of incorporation provides that our board of directors has the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock. Our board of directors
may issue preferred stock in one or more series and determine the rights, preferences, privileges, qualifications and restrictions granted to or imposed upon our preferred stock, including dividend rights, conversion rights, voting rights,
rights and terms of redemption, liquidation preferences and sinking fund terms, any or all of which may be greater than the rights of our common stock. Issuances of preferred stock could adversely affect the voting power of holders of
our common stock and reduce the likelihood that holders of our common stock will receive dividend payments and payments upon liquidation. Any issuance of preferred stock could also have the effect of decreasing the market price of
our common stock and could delay, deter or prevent a change in control of our company.
Requirements for Advance Notification of Stockholder Meetings, Nominations and Proposals
Our amended and restated bylaws provide that special meetings of the stockholders may be called only by or at the direction of the board of directors, the chairman of our board or the chief executive officer with the concurrence
of a majority of the board of directors. Our amended and restated bylaws prohibit the conduct of any business at a special meeting other than as specified in the notice for such meeting. These provisions may have the effect of deferring,
delaying or discouraging hostile takeovers, or changes in control or management of our company.
Our amended and restated bylaws establish advance notice procedures with respect to stockholder proposals and the nomination of candidates for election as directors. In order for any matter to be “properly brought” before a
meeting, a stockholder must comply with advance notice procedures and provide us with certain information. Our amended and restated bylaws allow the presiding officer at a meeting of the stockholders to adopt rules and regulations
for the conduct of meetings which may have the effect of precluding the conduct of certain business at a meeting if such rules and regulations are not followed. These provisions may also defer, delay or discourage a potential acquirer
from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to influence or obtain control of our company.
Supermajority Voting for Amendments to Our Governing Documents
Any amendment to our amended and restated certificate of incorporation requires the affirmative vote of at least 66⅔% of the voting power of all shares of our common stock then outstanding. Our amended and restated
certificate of incorporation provides that the board of directors is expressly authorized to adopt, amend or repeal our bylaws and that our stockholders may amend our bylaws only with the approval of at least 66⅔% of the voting power
of all shares of our common stock then outstanding.
No Cumulative Voting
The DGCL provides that a stockholder’s right to vote cumulatively in the election of directors does not exist unless the certificate of incorporation specifically provides otherwise. Our amended and restated certificate of
incorporation does not provide for cumulative voting.
Classified Board of Directors
Our amended and restated certificate of incorporation provides that our board of directors is divided into three classes of directors, with the classes to be as nearly equal in number as possible. The members of each class serve for
a three-year term. Beginning with the 2020 annual meeting of stockholders, directors of each class the term of which shall then expire shall be elected to hold office for a one-year term. Following the 2022 annual meeting of
stockholders, the board of directors will be fully de-classified. The classification of directors has the effect of making it more difficult for stockholders to change the composition of our board of directors. Our amended and restated
certificate of incorporation provides that the number of directors will be fixed from time to time pursuant to a resolution adopted by the board of directors, but must consist of not less than two or more than 15 directors.
Removal of Directors; Vacancies
Our amended and restated certificate of incorporation and amended and restated bylaws provide that (i) prior to the date on which Lone Star and its affiliates cease to beneficially own, in the aggregate, at least a majority of the
voting power of all outstanding shares entitled to vote generally in the election of directors, directors may be removed with or without cause upon the affirmative vote of holders of at least a majority of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class and (ii) on and after the date Lone Star and its affiliates cease to beneficially own, in the aggregate, at least a majority of
the voting power of all outstanding shares entitled to vote generally in the election of directors, directors may be removed only for cause and only upon the affirmative vote of holders of at least 66⅔% of the voting power of all the then
outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. In addition, our amended and restated certificate of incorporation and amended and restated bylaws also provide that any
newly created directorships and any vacancies on our board of directors will be filled only by the affirmative vote of the majority of remaining directors.
Stockholder Action by Written Consent
The DGCL permits any action required to be taken at any annual or special meeting of the stockholders to be taken without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock entitled to vote thereon
were present and voted, unless the certificate of incorporation provides otherwise. Our amended and restated certificate of incorporation and amended and restated bylaws preclude stockholder action by written consent after the date on
which Lone Star and its affiliates cease to beneficially own, in the aggregate, at least a majority of the voting power of all outstanding shares of our stock entitled to vote generally in the election of directors.
Limitations on Liability and Indemnification of Officers and Directors
The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of fiduciary duties. Our amended and restated certificate of
incorporation and amended and restated bylaws include provisions that eliminate, to the extent allowable under the DGCL, the personal liability of directors for monetary damages for actions taken as a director. Our organizational
documents also provide that we must indemnify and advance reasonable expenses to our officers and directors to the fullest extent authorized by the DGCL. We are also expressly authorized to carry directors’ and officers’ insurance for
our officers and directors as well as certain employees for certain liabilities.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against officers and
directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against officers and directors, even though such an action, if successful, might otherwise benefit our
company and our stockholders. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against officers and directors pursuant to these
indemnification provisions.
Authorized but Unissued Shares
Our authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder approval. The DGCL does not require stockholder approval for any issuance of authorized shares.
However, Nasdaq listing rules require stockholder approval of certain issuances equal to or exceeding 20% of the then-outstanding voting power or the then-outstanding number of shares of common stock. No assurances can be given
that our shares will remain so listed. We may use additional shares for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. As discussed above,
our board of directors has the ability to issue preferred stock with voting rights or other preferences, without stockholder approval. The existence of authorized but unissued shares of common stock and preferred stock could render
more difficult or discourage an attempt to obtain control of our company by means of a proxy contest, tender offer, merger or otherwise.
Exclusive Forum Clause
Our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for any stockholder
(including any beneficial owner) to bring (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of
breach of a fiduciary duty owed by any of our directors, officers, or employees to us or to our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, or
(iv) any action asserting a claim governed by the internal affairs doctrine, will be a state court located within the State of Delaware (or, if no state court located within the State of Delaware has jurisdiction, the federal district court for
the District of Delaware); in all cases subject to such court having personal jurisdiction over the indispensable parties named as defendants. Any person or entity purchasing or otherwise acquiring any interest in shares of our capital
stock is deemed to have notice of and consented to the foregoing provisions. See “Risk Factors—Our amended and restated certificate of incorporation includes an exclusive forum clause, which could limit our stockholders’ ability to
obtain a favorable judicial forum for disputes with us” in our Annual Report on Form 10-K.
EXHIBIT 21.1
SUBSIDIARIES OF FORTERRA, INC.
Name of Subsidiary
Jurisdiction of Organization
Bio Clean Environmental Services, Inc.
California
Concrete Pipe & Precast, LLC
Delaware
Constructure Fabrication, LLC
Delaware
Custom Fab, Inc.
Florida
DIP Acquisition LLC
Delaware
Fab Pipe LLC
Delaware
Forterra Brick America, Inc.
Michigan
Forterra Concrete Industries, Inc.
Tennessee
Forterra Concrete Operations, LLC
Texas
Forterra Concrete Products, Inc.
Iowa
Forterra Finance, LLC
Delaware
Forterra Pipe & Precast, LLC
Delaware
Forterra Pipe & Precast, Ltd.
Canada (British Columbia)
Forterra Pipe & Precast BC, ULC
Canada (British Columbia)
Forterra Precast Concepts, LLC
Delaware
Forterra Pressure Pipe, Inc.
Ohio
Forterra Pressure Pipe, ULC
Canada (British Columbia)
Forterra Properties Idaho, LLC
Idaho
Forterra Properties Utah, LLC
Utah
Forterra Structural Precast, LLC
Delaware
Forterra Transportation, LLC
Delaware
FRTA Finance Corp.
Delaware
Griffin Pipe Products Co., LLC
Delaware
Mill Handling LLC
Delaware
Modular Wetland Systems, Inc.
California
Stardust Holdings (USA), LLC
Delaware
United States Pipe and Foundry Company, LLC
Alabama
US Pipe Fabrication, LLC
Delaware
U.S. Pipe Mexico S. de R.L. de C.V.
Mexico
USP Holdings Inc.
Delaware
USP Land Holdings FCP, LLC
Delaware
USP Land Holdings FP&P, LLC
Delaware
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the following Registration Statements: (1) Registration Statement (Form S-3 No. 333-235501) of Forterra, Inc., (2) Registration Statement (Form
S-8 No. 333-215504) pertaining to the 2016 Stock Incentive Plan of Forterra, Inc., and (3) Registration Statement (Form S-8 No. 333-229964) pertaining to the 2018 Stock Incentive Plan of
Forterra, Inc.; of our reports dated March 1, 2022, with respect to the consolidated financial statements of Forterra, Inc. and the effectiveness of internal control over financial reporting of
Forterra, Inc. included in this Annual Report (Form 10-K) of Forterra, Inc. for the year ended December 31, 2021.
/s/ Ernst & Young LLP
Dallas, Texas
March 1, 2022
Exhibit 23.2
Consent of Independent Auditor
We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 333-235501, Form S-8 Nos. 333-215504 and 333-229964) of Forterra, Inc. of our report dated March
1, 2022, relating to the financial statements of Concrete Pipe & Precast, LLC, which report appears in the Form 10-K of Forterra, Inc. for the year ended December 31, 2021.
/s/ Moss Adams LLP
Houston, Texas
March 1, 2022
EXHIBIT 31.1
SECTION 302 CERTIFICATION
I, Karl Watson, Jr., certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Forterra, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case
of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
March 1, 2022
/s/ Karl Watson, Jr.
Karl Watson, Jr.
Chief Executive Officer
EXHIBIT 31.2
SECTION 302 CERTIFICATION
I, Charles R. Brown II, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Forterra, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of
an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
March 1, 2022
/s/ Charles R. Brown, II
Charles R. Brown, II
Executive Vice President and Chief
Financial Officer
Exhibit 32.1
CERTIFICATION
Pursuant to 18 U.S.C. Section 1350
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Annual Report on Form 10-K for the fiscal year ended December 31, 2021 of Forterra, Inc. (the “Company”) as filed with the U.S. Securities and Exchange Commission on the date
hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of the Company certifies to his knowledge
that:
•
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
•
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
March 1, 2022
/s/ Karl Watson, Jr.
Karl Watson, Jr.
President and Chief Executive Officer
Date:
March 1, 2022
/s/ Charles R. Brown, II
Charles R. Brown, II
Executive Vice President and Chief
Financial Officer
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.
EXHIBIT 99.1
CONCRETE PIPE & PRECAST, LLC
FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
Report of Independent Auditors
The Board of Managers and Members
Concrete Pipe & Precast, LLC
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of Concrete Pipe & Precast, LLC, which comprise the balance sheets as of December 31, 2021 and 2020, and the related statements of
income, changes in members’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes to the financial statements.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Concrete Pipe & Precast, LLC as of December 31, 2021 and 2020, and the
results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in accordance with accounting principles generally accepted in the United States of
America.
Basis for Opinion
We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Concrete Pipe & Precast, LLC and to meet our other ethical
responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for
the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Concrete Pipe &
Precast, LLC’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s
report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS
will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve
collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the
aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with GAAS, we:
•
Exercise professional judgment and maintain professional skepticism throughout the audit.
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such
procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
•
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of Concrete Pipe & Precast, LLC’s internal control. Accordingly, no such opinion is expressed.
•
Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the
financial statements.
•
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Concrete Pipe & Precast, LLC’s ability to continue as a
going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal
control–related matters that we identified during the audit.
/s/ Moss Adams LLP
Houston, TX
March 1, 2022
CONCRETE PIPE & PRECAST, LLC
BALANCE SHEETS
DECEMBER 31, 2021 and 2020
ASSETS
2021
2020
CURRENT ASSETS
Cash and cash equivalents
$
16,186
$
33,468
Trade accounts receivable, net
22,099,959
17,333,169
Inventories
22,305,722
19,001,648
Prepaid insurance and other assets
1,548,012
1,020,374
Due from affiliates
—
24,831
Total current assets
45,969,879
37,413,490
PROPERTY, PLANT, AND EQUIPMENT - NET
50,410,543
54,003,847
OTHER ASSETS
Deposits and other assets
40,265
58,895
Total other assets
40,265
58,895
Total Assets
$
96,420,687
$
91,476,232
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Cash overdraft
$
2,318,349
$
3,184,566
Accounts payable
9,533,157
6,878,707
Due to affiliates
348,904
195,009
Notes payable
24,708,662
—
Other current liabilities
3,073,616
2,956,639
Total current liabilities
39,982,688
13,214,921
LONG-TERM LIABILITIES
Other long-term liabilities
—
535,409
Notes payable
—
22,855,218
Total liabilities
39,982,688
36,605,548
Commitments and contingencies (see Note 6 and Note 8)
MEMBERS’ EQUITY
56,437,999
54,870,684
Total Liabilities and Members' Equity
$
96,420,687
$
91,476,232
The accompanying notes are an integral part of these financial statements
CONCRETE PIPE & PRECAST, LLC
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020, and 2019
2021
2020
2019
Net sales
$
173,926,048
$
157,499,099
$
152,739,737
Cost of sales
129,574,463
116,254,084
112,370,896
Gross profit
44,351,585
41,245,015
40,368,841
Operating Expenses
Selling expenses
4,969,511
4,581,005
4,721,079
General and administrative expenses
14,667,111
13,802,338
14,198,208
Other operating income
(345,492)
(310,422)
(270,635)
Income from Operations
25,060,455
23,172,094
21,720,189
Other expense
Interest expense, net
(323,366)
(529,922)
(875,902)
Net income
$
24,737,089
$
22,642,172
$
20,844,287
The accompanying notes are an integral part of these financial statements
CONCRETE PIPE & PRECAST, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020, and 2019
2021
2020
2019
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
24,737,089
$
22,642,172
$
20,844,287
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation
7,414,467
7,385,108
7,146,957
Amortization of debt issuance costs
21,993
21,993
21,993
Bad debt expense (recovery)
(15,355)
40,623
50,803
Net loss (gain) on disposal of assets
25,156
—
(12,758)
Changes in working capital:
Trade accounts receivable
(4,751,435)
(1,173,300)
(3,543,718)
Inventories
(3,304,074)
(161,934)
744,576
Prepaids and other assets
(531,001)
(435,784)
304,746
Due from / to affiliates
178,726
106,830
(23,593)
Accounts payable and other current liabilities
2,771,426
(1,237,898)
1,067,218
Cash overdraft
(866,217)
1,902,466
580,068
Other long-term liabilities
(535,409)
535,409
—
Net cash provided by operating activities
25,145,366
29,625,685
27,180,579
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures
(3,912,465)
(2,457,913)
(4,444,156)
Proceeds from disposal of assets
66,147
—
13,000
Net cash used in investing activities
(3,846,318)
(2,457,913)
(4,431,156)
CASH FLOWS FROM FINANCING ACTIVITIES
Distributions paid
(23,169,774)
(26,078,844)
(22,077,086)
Net (repayments) proceeds on revolving line of credit
1,853,444
(1,138,383)
(759,679)
Net cash used in financing activities
(21,316,330)
(27,217,227)
(22,836,765)
NET CHANGE IN CASH AND CASH EQUIVALENTS
(17,282)
(49,455)
(87,342)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
33,468
82,923
170,265
CASH AND CASH EQUIVALENTS, END OF YEAR
$
16,186
$
33,468
$
82,923
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest
$
302,852
$
535,357
$
861,888
The accompanying notes are an integral part of these financial statements
CONCRETE PIPE & PRECAST, LLC
STATEMENTS OF CHANGES IN MEMBERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2021, 2020, and 2019
BALANCE AT JANUARY 1, 2019
$
59,540,155
Distributions
(22,077,086)
Net income
20,844,287
BALANCE AT DECEMBER 31, 2019
58,307,356
Distributions
(26,078,844)
Net income
22,642,172
BALANCE AT DECEMBER 31, 2020
54,870,684
Distributions
(23,169,774)
Net income
24,737,089
BALANCE AT DECEMBER 31, 2021
$
56,437,999
The accompanying notes are an integral part of these financial statements
CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
1.
NATURE OF BUSINESS
Concrete Pipe & Precast, LLC (“CP&P” or the “Company”) commenced operations on August 3, 2012, through a joint venture formation agreement by and between two pipe and precast companies; Americast,
Inc., a Virginia corporation (“Americast”), and Hanson Pipe & Precast, LLC, a Delaware limited liability company (“Hanson”) (collectively, the “Members”). The Members formed CP&P, a limited liability
company under the laws of the State of Delaware. Both Members made initial contributions of tangible and intangible assets such as human resources, inventory, and property, plant, and equipment at the formation
of CP&P. On March 13, 2015, Forterra Pipe and Precast, LLC (“FP&P”) acquired Hanson’s interest in CP&P. As such, FP&P became a member of CP&P. On September 30, 2019, Americast assigned its units in
CP&P to Eagle Corporation (Americast’s parent company, or “Eagle”) and was subsequently dissolved.
CP&P is engaged primarily in the manufacture, marketing, sale, and distribution of concrete pipe and precast products. Operations are primarily in Virginia, West Virginia, Maryland, North Carolina, Pennsylvania,
South Carolina, and Georgia, with sales to contiguous states.
CP&P’s operating agreement stipulates how capital contributions, distributions, and income or losses of CP&P are to be allocated to each Member, which is not always in accordance with each Member’s respective
ownership percentage. Each of the Member’s loss is limited to the amount of capital contributed. CP&P shall continue in existence until dissolved in accordance with the provisions of the agreement.
2.
SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying financial statements and footnotes have been prepared in accordance with United States generally accepted accounting principles ("U.S. GAAP").
Accounting Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The more significant
estimates made by management relate to useful lives of property, plant, and equipment, allowance for uncollectible accounts, and impairment of long-lived assets.
Cash and Cash Equivalents
For purposes of the statement of cash flows, CP&P considers all highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash accounts in excess of federally-
insured limits are subject to risk of loss.
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
Accounts Receivable
Accounts receivable, net consists of amounts billed to customers less an allowance for doubtful accounts. CP&P accounts for estimated uncollectible amounts by reducing earnings through a valuation allowance.
This allowance is based on the judgment of management as to the estimated collectability of the receivables balance at year-end and is adjusted as experience, economic conditions, and other factors dictate. CP&P
established an allowance for uncollectible accounts receivable of $400,000 and $440,000 as of December 31, 2021 and 2020, respectively, to report receivables at their estimated net realizable value. Generally,
accounts receivable balances are unsecured and subject to certain credit risks. However, certain accounts receivable balances are secured through liens or bonding agents.
Accounts receivable balances are considered delinquent once they are 90 days past due. Finance charges begin to accrue once an account is 30 days past due and continue to accrue regardless of status. Trade
receivable balances that remain outstanding after CP&P has used reasonable collection efforts are written off by reducing accounts receivable and the valuation allowance.
Concentration of credit and supplier risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily receivables. The Company performs ongoing credit evaluations of its customers’ financial conditions and
generally requires no collateral other than partial advance payments or deposits from its customers on major projects. At December 31, 2021 and 2020, an individual supplier accounted for 14% and 12% of annual
purchases, respectively. At December 31, 2021 and 2020, no individual customer accounted for more than 10% of annual sales.
Inventories
Inventories are valued at the lower of cost or net realizable value using several cost flow assumptions including FIFO (first-in, first-out method) and average cost.
Property, Plant, and Equipment
All initial capital contributions of property, plant, and equipment by each Member were contributed at that Member’s respective book values. Property, plant, and equipment is recorded at cost and depreciated using
the straight-line method over the following estimated useful lives:
Estimated Useful
Lives in Years
Buildings and improvements
15 - 39
Machinery and equipment
5 - 20
Vehicles and delivery equipment
5 - 12
Office equipment
3 - 7
Depreciation expense, included in cost of sales and general and administrative expenses on the statements of income, were $7,414,467 in 2021, $7,385,108 in 2020, and $7,146,957 in 2019.
- 9 -
CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
The Company evaluates the recoverability of its long-lived assets in accordance with the provisions in Accounting Standards Codification (“ASC”) 360, Property, Plant, and Equipment (ASC 360). ASC 360
requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by
comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. No indication of impairment existed during any of the years presented. Such evaluations for
impairment are significantly impacted by estimates of future prices for the Company’s products, capital needs, economic trends in the construction sector, and other factors. If such assets are considered to be
impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the assets exceeds their fair value. Assets to be disposed of by sale are reflected at the lower of their carrying
amount or fair value less cost to sell.
Shipping and Handling Costs
Shipping and handling costs are included in cost of sales on the statements of income. Delivery revenue is included in net sales on the statements of income.
Income Taxes
CP&P is a limited liability company. Accordingly, under the Internal Revenue Code, all federal and state taxable income or loss flows through to its Members. Therefore, no income tax expense or liability is
recorded in the accompanying financial statements.
CP&P has reviewed and evaluated the relevant technical merits of each of its tax positions in accordance with guidance established by the Financial Accounting Standards Board (FASB) and determined that there
are no uncertain tax positions that would have a material impact on the financial statements of CP&P. The open tax years related to state tax filings are 2017 – 2021 and will expire in 2021 – 2025. When and if
applicable, potential interest and penalty costs are accrued as incurred with expenses recognized in general and administrative expenses on the statements of income.
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
Revenue Recognition
Substantially all of CP&P’s revenue contracts are single performance obligations for the sale of products. All revenue recognized by the Company is recognized at the point in time when control is transferred to
customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for the products. Revenues are recognized when the risks and rewards associated with the transaction have
been transferred to the purchaser, which is demonstrated when all the following conditions are met: evidence of a binding arrangement exists, products have been delivered, there is no future performance required,
fees are fixed or determinable, and amounts are collectible under normal payment terms. The Company considers several indicators for the transfer of control to its customers, including the significant risks and
rewards of ownership of products, the Company's right to payment, and the legal title of the products. Based upon the assessment of control indicators, sales to trade customers and distributors are recognized at the
point in time when products are delivered to customers. In most cases, the final delivery to the customers is within the same day that the shipment is picked up by a third-party hauler. For certain jobs, the Company
enters into contracts with customers. The Company's contract liabilities consist of billings to customers in excess of revenue recognized which the Company records as deferred revenue. Contract assets include
revenue recognized in excess of amounts billed, and balances billed but not yet paid by customers under retainage provisions which are classified as a current asset within receivables, net on the Company's balance
sheet. The Company had no contract assets or contract liabilities on the balance sheets as of December 31, 2021, December 31, 2020 or December 31, 2019. Receivables were $22,099,959 as of December 31, 2021,
$17,333,169 as of December 31, 2020 and $16,200,492 as of December 31, 2019.
Effective January 1, 2019, the Company adopted ASC Topic 606 Revenue from Contracts with Customers using the modified retrospective method applied to those contracts which were not completed as of
December 31, 2018. As a result of electing the modified retrospective adoption approach, results for reporting periods beginning after December 31, 2018, are presented under ASC 606. There was no material
impact upon the adoption of ASC 606.
All variable consideration that may affect the total transaction price, including contractual discounts, rebates, returns, and credits are included in net sales. Estimates for variable consideration are based on historical
experience, anticipated performance, and management's judgment.
Sales Taxes
CP&P collects sales tax from customers and remits the entire amount to the taxing jurisdictions. CP&P’s accounting policy is to exclude the tax collected and remitted to the taxing jurisdictions from revenues and
cost of sales.
Fair Value
CP&P follows current accounting standards relating to fair value measurements and disclosures, which define fair value, establish a framework and guidelines for measuring fair value, and expand disclosures
regarding fair value measurement. The Company’s financial instruments consist primarily of cash, trade receivables, accounts payable, other current liabilities, and debt. The carrying value of the Company’s
financial instruments approximates the fair value due to their highly liquid nature, short-term maturity, or competitive rates assigned to these financial instruments.
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
Members’ Equity
At the formation of CP&P, each Member received 500 common voting units. As of December 31, 2021, each Member has 500 common units. Income and losses are allocated to the Members based upon their
relative share of common units, with the exception that depreciation, gains, and losses related to property, plant, and equipment as part of the initial contribution to CP&P are allocated back to the Members who
originally contributed the assets. Depreciation, gains, and losses related to property, plant, and equipment acquired subsequent to the formation of CP&P are allocated based on common units.
CP&P distributes cash to the Members in an amount equal to the estimated tax amount on its taxable income. All distributions are divided equally among the Members.
Recent Accounting Pronouncements
In June 2020, the FASB issued ASU 2020-05, Leases (Topic 842), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and
making targeted changes to lessor accounting. The amendments in this update are effective for annual reporting periods beginning after December 15, 2021, and interim periods within fiscal years beginning after
December 15, 2022, and early adoption is permitted as of the standard’s issuance date. ASU 2016-02 requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of
initial application, with an option to use certain transition relief. The Company believes this ASU will have a material impact on the financial statements, as it will result in most of the Company’s operating leases
and associated right of use assets being presented on the balance sheet.
Risks and Uncertainties
The COVID 19 pandemic has caused an economic decline affecting many industries in the United States and globally, including certain of the Company’s customers which are primarily in construction industries.
The ultimate impact on the Company’s financial results, cash flows, and liquidity will depend on the extent and duration of these conditions as well as the United States’ government policies, and thus cannot be
reasonably estimated.
Subsequent Events
Management has evaluated subsequent events through March 1, 2022, which is the date the financial statements were available to be issued. On November 24, 2021, FP&P entered into a Membership Interest
Purchase Agreement (the “Purchase Agreement”) with Eagle and Quikrete Holdings, Inc., a Delaware corporation (“Parent”). This transaction has not closed as of the date the financial statements were issued.
On February 19, 2021, Forterra, Inc. a Delaware corporation (“Forterra”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Quikrete Holdings, Inc., a Delaware corporation, and
Jordan Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Parent (“Merger Sub”), pursuant to which Merger Sub will merge with and into Forterra (the “Merger”), with Forterra surviving
the Merger as a wholly-owned subsidiary of Parent. The consummation of the Merger is subject to the satisfaction or waiver of certain conditions, including, among others, the expiration or termination of the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”).
In order to address some of the divestitures anticipated to be required by the U.S. Department of Justice (the “DOJ”) to obtain approval under the HSR Act for the consummation of the Merger and the other
transactions contemplated
- 12 -
CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
by the Merger Agreement, on November 24, 2021, FP&P entered into a Membership Interest Purchase Agreement with Eagle and Parent.
Pursuant to the terms and subject to the conditions set forth in the Purchase Agreement, contemporaneously with the closing of the Merger and the other transactions contemplated by the Merger Agreement, Eagle
will purchase FP&P’s 50% equity interest in CP&P, (the “CP&P Sale”) for a purchase price of $105,000,000 (subject to certain adjustments as described in the Purchase Agreement). Consummation of the CP&P
Sale is subject to customary closing conditions, including, among others, the consummation of the Merger and approval by the DOJ.
The Purchase Agreement contains certain termination rights for FP&P and Eagle, including, among others, the right to terminate the Purchase Agreement (i) by either party if the CP&P Sale has not occurred by
March 22, 2022, which date may be extended under certain circumstances described in the Purchase Agreement, (ii) by either party in the event of the issuance of a final and non-appealable governmental order that
prohibits the CP&P Sale or if FP&P notifies Eagle that (x) the Merger is not occurring or (y) the Merger Agreement has been terminated and (iii) by FP&P if FP&P determines in good faith in its reasonable
discretion that the DOJ is not likely to approve the CP&P Sale and the Merger.
3.
INVENTORIES
Inventories consisted of the following at December 31:
2021
2020
Finished goods
$
15,473,989 $
15,454,289
Raw materials
6,781,508
3,481,943
Supplies
50,225
65,416
Total inventories
$
22,305,722 $
19,001,648
4.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consisted of the following at December 31:
2021
2020
Land, buildings, and improvements
$
47,527,359 $
47,300,782
Machinery and equipment
120,680,694
118,726,820
Vehicles and delivery equipment
778,451
778,851
Office equipment
1,725,556
1,725,555
Assets under development
1,731,024
308,992
Total
172,443,084
168,841,000
Less: Accumulated depreciation
(122,032,541)
(114,837,153)
Property, plant, and equipment, net
$
50,410,543 $
54,003,847
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
5.
NOTES PAYABLE
Effective June 1, 2017, the Company amended its Wells Fargo Bank revolving line of credit (WF Revolver) in its Second Amended and Restated Credit Agreement with Wells Fargo Bank (Amended WF Revolver).
Per the terms of the Amended WF Revolver, interest is payable monthly at a rate equal to LIBOR plus an applicable margin based upon performance, which approximated 1.4% as of December 31, 2021. The
Amended WF Revolver also includes an unused commitment fee. The credit limit is the lower of $40,000,000 or the Company's borrowing base, as defined in the amended credit agreement. Availability on the
Amended WF Revolver as of December 31, 2021 and 2020, was $15,259,538 and $17,112,982 respectively, based on draws, outstanding letters of credit, and the allowable borrowing base. The Amended WF
Revolver becomes due on May 31, 2022. Management has not renewed the Amended WF Revolver as of the date these financials were issued. Management expects the transaction disclosed in the Subsequent
Event footnote above will close prior to the Amended WF Revolver becoming due, at which time management intends to pay off the Amended WF Revolver. Should the transaction disclosed in the Subsequent
Event footnote not close prior to May 31, 2022, management believes it has sufficient cash flows and asset base to support a renewal or obtain borrowings from another financial institution.
Effective December 19, 2018, the Company entered into the First Amendment to the Amended WF Revolver to, among other things, replace one of the loan covenants of basic Fixed Charge Coverage Ratio with
Tangible Net worth (as defined in the First amendment).
The WF Revolver is secured by certain real property and all machinery and equipment, vehicles and delivery equipment, office equipment, other personal property, accounts receivable, general intangibles, and
inventory that had an approximate carrying value of $78,000,000 in total as of December 31, 2021.
The outstanding balance of the WF Revolver consisted of the following at December 31:
2021
2020
Current portion
$
24,708,662 $
—
Long-term portion
—
22,855,218
Notes payable
$
24,708,662 $
22,855,218
CP&P is subject to three loan covenants: a Funded Debt to EBITDA (earnings before interest, taxes, depreciation, and amortization) Ratio, a Fixed Charge Coverage Ratio considering only tax distributions, and a
Tangible Net Worth (as defined in the First Amendment). CP&P was in compliance with all financial loan covenants as of December 31, 2021 and 2020.
6.
PROFIT SHARING PLANS AND COLLECTIVE BARGAINING AGREEMENT
CP&P has adopted a plan allowing all qualified employees to invest a portion of their current earnings in an employees’ 401(k) retirement fund. CP&P matches a portion of the elective contributions made by the
employees based on the terms of the plan. CP&P may also, at its sole discretion, make additional contributions for all eligible employees. Employer contributions to the plan amounted to approximately $1,012,000
in 2021, $922,000 in 2020, and $941,000 in 2019.
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
CP&P entered into a collective bargaining agreement on August 28, 2012, with the union workforce at one production facility. The collective bargaining agreement was renewed for three more years beginning
August 27, 2021 through August 28, 2024. Approximately 9% of the total production workforce is covered under this agreement as of December 2021.
7.
RELATED PARTY TRANSACTIONS
CP&P, in its ordinary course of business, sells products to Americast, Eagle, subsidiaries of Eagle, and subsidiaries of Forterra. CP&P also purchases products and services from subsidiaries of Eagle and
subsidiaries of Forterra.
On August 3, 2012, CP&P entered into a Management Services Agreement with Eagle. For a monthly fee, Eagle is providing general and administrative services including information technology, payroll
processing, 401(k) profit sharing plan management, and insurance coverage allocations. The agreement is subject to a Consumer Price Index (CPI) adjustment beginning in 2015. The agreement will automatically
renew annually until terminated as described in the agreement.
Following table summarizes the related party transactions between CP&P and its affiliates during the years ended December 31, 2021, 2020, and 2019:
2021
2020
2019
Sale of products to affiliates
$
516,726
$
852,855
$
499,212
Purchase of products and services from affiliates
1,469,538
1,524,751
681,176
Management fees paid to affiliates
800,000
556,092
544,571
8.
COMMITMENTS AND CONTINGENT LIABILITIES
The Company is involved in legal proceedings and litigation in the ordinary course of business. In the opinion of management, the outcome of such matters will not have a material adverse effect on the Company’s
financial position, results of operations, or liquidity. Other than routine litigation incidental to the Company’s business, there are no other material legal proceedings to which the Company is a party or to which any
of the Company’s properties are subject.
Self-Insurance
CP&P participates in self-funding programs for workers’ compensation and liability insurance. The plans are administered by insurance companies who determine current funding requirements. CP&P has
individual and aggregate stop-loss arrangements with the insurance companies to cover substantial claims. CP&P had approximately $343,000 at December 31, 2021, and $117,000 at December 31, 2020, as an
estimated self-insurance liability recorded as part of other current liabilities.
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CONCRETE PIPE & PRECAST, LLC
Notes to Financial Statements
AS OF DECEMBER 31, 2021 AND 2020 AND FOR THE THREE YEARS ENDED DECEMBER 31, 2021
Operating Leases
CP&P is obligated under various non-cancellable operating leases for property, equipment, vehicles, and computers, which have varying terms. Lease expense under these agreements approximated $1,011,000 in
2021, $954,000 in 2020, and $1,069,000 in 2019.
Approximate minimum future operating lease rental payments required for the five-year period subsequent to December 31, 2021, are as follows:
2022
$
560,000
2023
262,000
2024
156,000
2025
54,000
2026
2,000
Total
$
1,034,000
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