Arcosa, Inc. (Form: 10-K, Received: 02/27/2020 10:34:09)

Construction Products

Energy Equipment

Transportation Products

Primary products

•
Natural aggregates

•
Lightweight aggregates

•
Specialty milled or processed materials

•
Trench shields and shoring products

•
Wind towers

•
Utility structures

•
Storage and distribution tanks

•
Inland barges

•
Fiberglass barge covers, winches, and other components

•
Axles and couplers for railcars and locomotives

Primary markets served

•
Residential, commercial, and industrial construction

•
Road and bridge construction

•
Agriculture

•
Specialty building products

•
Underground construction

•
Wind power generation

•
Electricity transmission and distribution

•
Gas and liquids storage and transportation for residential, commercial, agriculture, and industrial markets

•
Transportation products serving numerous markets, including:

•
Agriculture/food products

•
Refined products

•
Chemicals

•
Upstream oil

•
Railcar manufacturers and maintenance operations

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K



(Mark One)
☑	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2019



	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-38494

Arcosa, Inc.

(Exact name of registrant as specified in its charter)



Delaware		82-5339416
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

500 N. Akard Street, Suite 400
Dallas,	Texas	75201
(Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code: (972) 942-6500

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock ($0.01 par value)	ACA	New York Stock Exchange

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 þ No ¨

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 þ

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 þ 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 þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth 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 þ Accelerated filer ¨ Non-accelerated filer ¨

Smaller reporting company ☐ Emerging growth company ☐

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

The aggregate market value of voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold as of the last business day of the registrant's most recently completed second fiscal quarter (June 28, 2019) was $1,820.8 million.

At January 15, 2020 the number of shares of common stock outstanding was 48,279,180.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III of this report, to the extent not set forth herein, is incorporated by reference from the registrant's definitive 2020 Proxy Statement.

ARCOSA, INC.

FORM 10-K

TABLE OF CONTENTS



Caption	Page
PART I
Item 1. Business	3
Item 1A. Risk Factors	9
Item 1B. Unresolved Staff Comments	24
Item 2. Properties	25
Item 3. Legal Proceedings	26
Item 4. Mine Safety Disclosures	26

PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	27
Item 6. Selected Financial Data	28
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	30
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	44
Item 8. Financial Statements and Supplementary Data	45
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	75
Item 9A. Controls and Procedures	75
Item 9B. Other Information	77

PART III
Item 10. Directors, Executive Officers and Corporate Governance	78
Item 11. Executive Compensation	78
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	79
Item 13. Certain Relationships and Related Transactions, and Director Independence	79
Item 14. Principal Accountant Fees and Services	79

PART IV
Item 15. Exhibits and Financial Statement Schedules	80
Item 16. Form 10-K Summary	82

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PART I

Item 1. Business.

General Description of Business. Arcosa, Inc. and its consolidated subsidiaries, (“Arcosa,” “Company,” “we,” or “our”) headquartered in Dallas, Texas, is a provider of infrastructure-related products and solutions with leading brands serving construction, energy, and transportation markets in North America. Our individual businesses have built reputations for quality, service, and operational excellence over decades. Arcosa serves a broad spectrum of infrastructure-related markets and is strategically focused on driving organic and disciplined acquisition growth to capitalize on the fragmented nature of many of the industries in which we operate. With Arcosa’s current platform of businesses and additional growth opportunities, we are well- aligned with key market trends, such as the replacement and growth of aging transportation and energy infrastructure, the continued shift to renewable power generation, and the expansion of downstream energy infrastructure.

We are united in our shared purpose to fulfill the four pillars of our long-term vision, which include:


•	growing in attractive markets where we can achieve sustainable competitive advantages;


•	reducing the complexity and cyclicality of the overall business;


•	improving long-term returns on invested capital; and


•	integrating Environmental, Social, and Governance initiatives (ESG) into our long-term strategy.

We believe our long-term vision is aligned with value creation for all our stakeholders. In 2019, the Company made progress on advancing its long-term vision by successfully executing against our Stage One Priorities of growing the Construction Products Group in compelling markets; improving profitability margins in the Energy Equipment Group; capitalizing on a barge market recovery in the Transportation Products Group; and operating a lean corporate structure.

Arcosa is a Delaware corporation and was incorporated in 2018 in connection with the separation of Arcosa from Trinity Industries, Inc. (“Trinity” or “Former Parent”) on November 1, 2018 as an independent, publicly-traded company, listed on the New York Stock Exchange (the “Separation”). At the time of the Separation, Arcosa consisted of certain of Trinity’s former construction products, energy equipment, and transportation products businesses. The Separation was effectuated through a pro rata dividend distribution on November 1, 2018 of all of the then-outstanding shares of common stock of Arcosa to the holders of common stock of Trinity as of October 17, 2018, the record date for the distribution.

Our principal executive offices are located at 500 N. Akard Street, Suite 400, Dallas, Texas 75201. Our telephone number is 972-942-6500, and our Internet website address is www.arcosa.com. We make available on our website our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments thereto, as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission ("SEC"). Information on our Investor Relations page and on our website is not part of this Annual Report on Form 10-K or any of our other securities filings unless specifically incorporated herein by reference.

Overview. As a provider of infrastructure-related products and solutions, we manufacture or process and sell a variety of products, principally including:

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Recent Developments. On January 6, 2020, Arcosa completed the acquisition of Cherry Industries, Inc. and affiliated entities (“Cherry” or “Cherry Companies”), a leading producer of natural and recycled aggregates in the Houston, Texas market for approximately $298 million. The acquisition of Cherry broadens our geographic presence, adding 12 Houston locations to Arcosa’s existing 20 active aggregate and specialty materials locations in Texas, provides us a new complementary product line of recycled aggregates, a growing product category due to resource scarcity and ESG benefits, and offers a platform for additional growth in natural and recycled aggregates. The purchase was funded with a combination of cash on-hand and advances under a new $150 million five-year term loan. See Note 2 and Note 7 to the Consolidated and Combined Financial Statements.

Our Segments. The table below describes the percentages of revenues attributable to each of our three segments over each of the three years ended December 31, 2019. For additional information regarding revenues, operating profit and identifiable assets by segment, please refer to Note 4 to the Consolidated and Combined Financial Statements.

Construction Products Group.

Markets

Our Construction Products Group provides products that are used in multiple areas of construction infrastructure. Our products are used across the construction landscape including residential, commercial, industrial, road and bridge, and underground construction. As the United States ("U.S.") continues to experience population growth and replace its aging infrastructure, we believe our businesses are well-positioned to benefit from this activity. Additionally, our products are used in a variety of other markets, including certain agricultural and energy markets.

Products, Customers, and Competitors

Through wholly-owned subsidiaries, our Construction Products Group produces and sells construction aggregates including natural aggregates and specialty materials and construction site support equipment including trench shields and shoring products. See Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" for revenues attributable to construction aggregates products.

We are an established producer and distributor of natural aggregates and specialty materials serving both public infrastructure and private construction markets with active quarries in Texas (20), Oklahoma (4), Louisiana (4), California (1), Colorado (1) , Alabama (1), Indiana (1), Kentucky (1), Nevada (1), Washington (1), Florida (1), and British Columbia (1). Our natural aggregates products include sand, gravel, limestone, gypsum, shale, clay, and various other products used in the production of ready mixed concrete, cement, precast concrete products, roads, oil and gas well pads, wind farms, as well as various other building products. Our natural aggregates customers are concrete producers; commercial, residential, highway, and general contractors; manufacturers of masonry and building products; and state and local governments. Shipments of natural aggregates from an individual quarry are generally limited in geographic scope because the cost of transportation to customers is high relative to the value of the product itself. Where practical, we have operations located close to our local markets. Proximity of our active quarries and strategic reserves to demand centers serves as a barrier to entry. The U.S. aggregates industry is a highly fragmented industry with more than 5,200 producers nationwide. We compete, in most cases, with natural aggregates producers in the regions where we operate.

Our specialty materials, including lightweight aggregates and milled or processed specialty building products and agricultural products, are produced and distributed nationwide. We currently operate 14 production facilities in the U.S., several of which operate at the quarries that produce the raw material inputs. Our specialty materials products enjoy higher barriers to entry than our natural aggregates due to specific mineral properties, specialized manufacturing, or additional processing. Lightweight aggregates are select shales or clays that are expanded and hardened by high temperatures in a rotary kiln and possess a bulk density that can be less than half that of natural aggregates. Product applications include structural lightweight concrete, lightweight masonry block, and road surface treatments. Our specialty building products and agricultural products are processed at several production facilities across the U.S., mostly using our natural aggregates as a component of raw material supply. Product applications include plasters, prills, agricultural supplements and fertilizers, paints, flooring, glass, ingredients for food and feed, and other products. Due to the added value in processing, specialty materials have a much wider, multi-state distribution area due to their higher value relative to their distribution costs as compared to natural aggregates. Therefore, we compete with specialty materials producers nationwide.

We hold a strong market position in the manufacture of trench shields and shoring products for the U.S. construction industry. Trench shields and shoring products are used for water and sewer construction, utility installations, manhole work, oil and gas pipeline construction, and other underground applications. Our customers are equipment rental dealers and commercial, residential, and industrial contractors. Additionally, we participate in certain regional rental markets for trench shoring equipment. We compete with shoring products manufacturers nationwide.

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Raw Material and Suppliers

The primary raw material for our construction aggregates comes from quarries. Natural aggregates and specialty minerals can be found throughout the U.S. We have a proven and successful track record of securing long-term reserve positions for both current and future mine locations through our employment of exploration teams and the use of professional third parties. Our reserves are critical to our raw material supply and long-term success. We currently estimate that we have 933 million tons of proven and probable natural aggregates and specialty materials reserves strategically located in favorable markets that are expected to require large amounts of aggregates to meet future construction demand. For further discussion of our natural aggregates and specialty materials reserves, please refer to Item 2. “Properties.”

Energy Equipment Group.

Markets

Our Energy Equipment Group serves a broad spectrum of energy markets, including wind power generation, electricity transmission and distribution, and the storage and transportation of gas and liquid products for use in residential, commercial, agricultural, and industrial end markets. We believe we are well-positioned to benefit from the replacement and growth of North America energy infrastructure, policy changes encouraging more generation from renewable energy sources, and significant upgrades in the electrical grid to support enhanced reliability.

Products, Customers, and Competitors

Through wholly-owned subsidiaries, our Energy Equipment Group manufactures structural wind towers; steel utility structures for electricity transmission and distribution; and storage and distribution tanks. See Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for revenues attributable to wind towers and utility structures products.

We are one of the leading manufacturers of structural wind towers in the U.S. and Mexico with five plants strategically located in wind-rich regions of North America. Our primary customers are wind turbine producers and we compete with both domestic and foreign producers of towers. Revenues from General Electric Company (“GE”) included in our Energy Equipment Group constituted 18.2%, 19.4%, and 22.9% of consolidated or combined revenues for the years ended December 31, 2019, 2018, and 2017, respectively.

We are a well-established manufacturer in the U.S. and Mexico of engineered steel utility structures for electricity transmission and distribution. Through our recognized brands, we have developed strong relationships with our primary customers, public and private utilities. We compete with both domestic and foreign manufacturers on the basis of product quality, engineering expertise, customer service, and on-time delivery of the product. Sales to our customers, particularly certain large utility customers, are often made through alliance contracts that can extend several years. We also sell into the competitive-market, whereby the lowest bidder is awarded the contract, provided all other qualifying criteria are met.

Additionally, our storage tanks support oil, gas, and chemical markets and are used by industrial plants, utilities, residences, and small businesses in suburban and rural areas. We are one of the primary manufacturers in North America of pressurized and non-pressurized tanks that store and transport a wide variety of products, including propane, anhydrous ammonia, and natural gas liquids. We also manufacture fertilizer storage containers for agricultural markets, including bulk storage, farm storage, and the application and distribution of anhydrous ammonia.

Raw Materials and Suppliers

The principal material used in our Energy Equipment Group is steel. During 2019, the supply of steel was sufficient to support our manufacturing requirements. Market steel prices continue to exhibit periods of volatility and ended 2019 lower than 2018, a year in which prices reached 10-year average highs. Steel prices may be volatile in the future in part as a result of market conditions. We often use contract-specific purchasing practices, existing supplier commitments, contractual price escalation provisions, and other arrangements with our customers to mitigate the effect of steel price volatility on our operating profit for the year. Arcosa’s manufacturing operations also use component parts, such as flanges for wind towers. In general, we believe there is enough capacity in the supply industries to meet current production levels and that our existing contracts and other relationships with multiple suppliers will meet our current production forecasts.

Transportation Products Group.

Markets

Our Transportation Products Group consists of established companies that supply manufactured steel products to the transportation industry. These transportation products serve a wide variety of markets, including the transportation of commodities such as grain, coal, aggregates, chemicals, fertilizers, petrochemicals, and refined products. We believe we are well-positioned to capitalize on the emerging recovery in the inland barge market, as the industry continues to recover from the recent multi-year downturn. Our businesses providing steel components to the North American rail industry currently face challenging market conditions as the forecast for new railcar production is expected to decline in 2020.

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Products, Customers, and Competitors

Through wholly-owned subsidiaries, our Transportation Products Group manufactures and sells inland barges, fiberglass barge covers, winches, and marine hardware; and steel components for railcars and other transportation and industrial equipment. See Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” for revenues attributable to inland barges and steel components products.

We have a leading position in the U.S. market for the manufacture of inland barges and fiberglass barge covers. We manufacture a variety of hopper barges, tank barges, and fiberglass covers, and we provide a full line of deck hardware to the marine industry, including hatches, castings, and winches for towboats and dock facilities. Dry cargo barges transport various commodities, such as grain, coal, and aggregates. Tank barges transport liquids including refined products, chemicals, and a variety of petroleum products. Our fiberglass reinforced lift covers are used primarily for grain barges. Our barge manufacturing facilities are located along the U.S. inland river systems, allowing for rapid delivery to our customers. Our customers are primarily commercial marine transportation companies, lessors, and industrial shippers. We compete with a number of other manufacturers in the U.S.

We are a recognized manufacturer of steel components for railcars and other transportation equipment. We manufacture axles, circular forgings and coupling devices for freight, tank, locomotive and passenger rail transportation equipment, as well as other industrial uses, and also provide cast components for use in the industrial and mining sectors. Our customers are primarily freight and passenger railcar manufacturers, rail maintenance and repair facilities, railroads, steel mills, and mining equipment manufacturers. We compete with both domestic and foreign manufacturers.

Raw Materials and Suppliers

The principal material used in our Transportation Products Group is steel. During 2019, the supply of steel was sufficient to support our manufacturing requirements. Market steel prices continue to exhibit periods of volatility and ended 2019 lower than 2018, a year in which prices reached 10-year average highs. Steel prices may be volatile in the future in part as a result of market conditions. We often use contract-specific purchasing practices, existing supplier commitments, contractual price escalation provisions, and other arrangements with our customers to mitigate the effect of steel price volatility on our operating profit for the year. Arcosa’s manufacturing operations also use component parts, such as pumps, engines, and hardware for tank barges. In general, we believe there is enough capacity in the supply industries to meet current production levels and that our existing contracts and other relationships with multiple suppliers will meet our current production forecasts.

Unsatisfied Performance Obligations (Backlog). As of December 31, 2019 and 2018, our backlog of firm orders was as follows:



	December 31, 2019		December 31, 2018
	(in millions)
Energy Equipment Group:
Wind towers and utility structures	$	596.8	$	633.1
Other	$	36.2	$	55.1

Transportation Products Group:
Inland barges	$	346.9	$	230.5

Approximately 86% percent of unsatisfied performance obligations for our wind towers and utility structures in our Energy Equipment Group are expected to be delivered during the year ending 2020 with the remainder to be delivered in 2021. All of the unsatisfied performance obligations for our other business lines in our Energy Equipment Group are expected to be delivered during the year ending 2020. All of the unsatisfied performance obligations for inland barges in our Transportation Products Group are expected to be delivered during the year ending 2020.

Marketing. We sell substantially all of our products and services through our own sales personnel operating from offices in multiple locations in the U.S. and Mexico. We also use independent sales representatives and distributors.

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Employees. The following table presents the approximate headcount breakdown of employees by business group:



Business Group	December 31, 2019
Construction Products Group	1,185
Energy Equipment Group	3,450
Transportation Products Group	1,540
Corporate	100
	6,275

As of December 31, 2019, approximately 4,460 employees were employed in the U.S., 1,800 employees in Mexico, and 15 employees in Canada.

Seasonality. Results in our Construction Products Group are affected by seasonal fluctuations with the second and third quarters historically being the quarters with the highest revenues.

Intellectual Property. Arcosa owns a number of patents, trademarks, copyrights, trade secrets, and licenses to intellectual property owned by others. Although Arcosa’s intellectual property rights are important to Arcosa’s success, we do not regard our business as being dependent on any single patent, trademark, copyright, trade secret or license. For a discussion of risks related to our intellectual property, please refer to Item 1A. “Risk Factors—Risks Related to Our Business and Operations.”

Governmental Regulation.

Construction Products Group. Arcosa’s Construction Products Group is subject to regulation by the U.S. Mine Safety and Health Administration (“MSHA”), the Health-Safety and Reclamation Code of Ministry of Mines for British Columbia, and various state agencies, and certain specialty materials are regulated by the U.S. Food and Drug Administration (“FDA”).

Energy Equipment Group. Arcosa’s storage tanks are subject to the regulations by the U.S. Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and the U.S. Federal Motor Carrier Safety Administration (“FMCSA”), both of which are part of the U.S. Department of Transportation (“USDOT”), and various state agencies. These agencies promulgate and enforce rules and regulations pertaining, in part, to the manufacture of tanks that are used in the storage, transportation and transport arrangement, and distribution of regulated and non-regulated substances.

Transportation Products Group. The primary regulatory and industry authorities involved in the regulation of the inland barge industry are the U.S. Coast Guard, the U.S. National Transportation Safety Board, the U.S. Customs Service, the Maritime Administration of the USDOT, and private industry organizations such as the American Bureau of Shipping. These organizations establish safety criteria, investigate vessel accidents, and recommend improved safety standards.

Our steel components businesses that serve the railcar industry are regulated by governmental agencies such as the USDOT and the administrative agencies it oversees, including the Federal Railroad Administration, and industry authorities such as the Association of American Railroads. All such agencies and authorities promulgate rules, regulations, specifications, and operating standards affecting rail-related safety standards for railroad equipment.

Occupational Safety and Health Administration and Similar Regulations. In addition to the regulations described above, our operations are subject to regulation of health and safety matters by the U.S. Occupational Safety and Health Administration (“OSHA”) and, within our Construction Products Group, MSHA. We believe that we employ appropriate precautions to protect our employees and others from workplace injuries and harmful exposure to materials handled and managed at our facilities. However, claims that may be asserted against Arcosa for work-related illnesses or injury and the further adoption of occupational and mine safety and health regulations in the U.S. or in foreign jurisdictions in which we operate could increase our operating costs. While we do not anticipate having to make material expenditures in order to remain in substantial compliance with health and safety laws and regulations, we are unable to predict the ultimate cost of compliance.

International Regulations. We ship raw materials to Mexico and manufacture products in Mexico that are sold in the U.S. or elsewhere, which are subject to customs and other regulations. In addition, we are subject to other governmental regulations and authorities in Mexico and other countries where we conduct business that regulate products manufactured, sold, or used in those countries.

Environmental, Health, and Safety. We are subject to federal, state, and international environmental, health, and safety laws and regulations in the U.S., Mexico, and each country in which we operate, including the U.S. Environmental Protection Agency (“USEPA”). These include laws regulating air emissions, water discharge, hazardous materials, and waste management. We have an environmental management structure designed to facilitate and support our compliance with these requirements globally. Although it is our intent to comply with all such requirements and regulations, we cannot provide assurance that we are at all times in compliance. Environmental requirements are complex, change frequently, and have tended to become more stringent over time. Accordingly, we cannot assure that environmental requirements will not change or become more stringent over time or that our eventual environmental costs and liabilities will not be material.

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Certain environmental laws assess liability on current or previous owners or operators of real property for the cost of removal or remediation of hazardous substances. At this time, we are involved in various stages of investigation and cleanup related to environmental remediation matters at certain of our facilities. In addition, there may be soil or groundwater contamination at several of our properties resulting from historical, ongoing, or nearby activities.

We cannot ensure that our eventual environmental remediation costs and liabilities will not exceed the amount of our current reserves. In the event that such liabilities were to significantly exceed the amounts recorded, our results of operations could be materially adversely affected. See “Critical Accounting Policies and Estimates” in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 15 of the Notes to Consolidated and Combined Financial Statements for further information regarding reserves for environmental matters.

See Item 1A for further discussion of risk factors with regard to environmental, governmental, and other matters.

Information About Our Executive Officers and Other Corporate Officers. The following table sets forth the names and ages of all of our executive officers and other corporate officers, their positions and offices presently held by them, and the year each person first became an officer.



Name	Age	Office	Officer Since
Antonio Carrillo*	53	President and Chief Executive Officer	2018
Scott C. Beasley*	39	Chief Financial Officer	2018
Reid S. Essl*	38	President, Construction Products	2018
Kerry S. Cole*	51	President, Energy Equipment	2018
Jesse E. Collins, Jr.*	53	President, Transportation Products	2018
Bryan P. Stevenson*	46	Chief Legal Officer	2018
Mary E. Henderson*	61	Chief Accounting Officer	2018
Gail M. Peck	52	Senior Vice President, Finance and Treasurer	2018

^*Executive officer subject to reporting requirements under Section 16 of the Securities Exchange Act of 1934.

Antonio Carrillo serves as Arcosa’s President and Chief Executive Officer, as well as a member of its Board of Directors. From April 2018 until the Separation, Mr. Carrillo served as the Senior Vice President and Group President of Construction, Energy, Marine and Components of Trinity. From 2012 to February 2018, Mr. Carrillo served as the Chief Executive Officer of Orbia Advance Corporation (formerly known as Mexichem S.A.B. de C.V.), a publicly-traded global specialty chemical company. Prior to joining Orbia, Mr. Carrillo spent 16 years at Trinity where he served as Senior Vice President and Group President of Trinity’s Energy Equipment Group and was responsible for Trinity’s Mexico operations. Mr. Carrillo previously served as a director of Trinity from 2014 until the Separation in 2018 and served as a director of Dr. Pepper Snapple Group, Inc. from 2015 to 2018. Mr. Carrillo currently serves as a director of NRG Energy, Inc. where he was appointed in 2019.

Scott C. Beasley serves as Arcosa’s Chief Financial Officer. From 2017 until the Separation, Mr. Beasley previously served as Group Chief Financial Officer of Trinity’s Construction, Energy, Marine, and Components businesses. Mr. Beasley joined Trinity in 2014 and previously served as Vice President of Corporate Strategic Planning for Trinity. Prior to joining Trinity, Mr. Beasley was an Associate Principal with McKinsey & Company, a global management consulting firm.

Reid S. Essl serves as the President of Construction Products at Arcosa. From 2016 until the Separation, Mr. Essl served as the President of Trinity Construction Materials and from 2013 to 2016, Mr. Essl served as the Group Chief Financial Officer of the Construction, Energy, Marine, and Components businesses of Trinity. In his 14 years at Trinity, Mr. Essl held a variety of operational, financial, strategic planning, and business development positions.

Kerry S. Cole serves as the President of Energy Equipment at Arcosa. From 2016 until the Separation, Mr. Cole served as President of Trinity Electrical Products which included oversight for the Trinity Structural Towers and Trinity Meyer Utility Structures business units. Prior to this role, Mr. Cole served as President of Trinity Structural Towers business unit from 2007 to 2016. From 2000 to 2007, he served in a variety of operations and manufacturing leadership positions at Trinity spanning Mining and Construction Equipment, Heads, and Structural Bridge business units.

Jesse E. Collins, Jr. serves as the President of Transportation Products at Arcosa. From 2016 until the Separation, Mr. Collins served as the President of Trinity Parts and Components, which included McConway & Torley, Standard Forged Products, and the business of McKees Rocks Forgings. From 2014 to 2016, he served as President of Trinity Cryogenics. From 2008 to 2013, Mr. Collins served as Executive Vice President and Chief Operating Officer at Broadwind Energy serving wind energy, transportation, and infrastructure markets, prior to which he held various management and executive positions at Trinity from 1993 to 2006.

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Bryan P. Stevenson serves as the Chief Legal Officer at Arcosa. From 2015 until the Separation, Mr. Stevenson was the Vice President, Associate General Counsel and Corporate Secretary for Trinity. Prior to joining Trinity, Mr. Stevenson was Vice President, General Counsel and Secretary for U.S. Auto Parts Network, Inc., an online provider of automotive parts, from 2011 to 2015.

Mary E. Henderson serves as the Chief Accounting Officer at Arcosa. From 2010 until the Separation, Ms. Henderson served as Vice President and Chief Accounting Officer of Trinity. Ms. Henderson joined Trinity in 2003 and served in a variety of leadership positions including Corporate Controller, Assistant Corporate Controller, and Director of External Reporting.

Gail M. Peck serves as the Senior Vice President, Finance and Treasurer at Arcosa. From 2010 until the Separation, Ms. Peck served as Vice President, Finance and Treasurer of Trinity. From 2004 to 2009, she served as Vice President and Treasurer for Centex Corporation, a diversified building company.

Item 1A. Risk Factors.

Arcosa's business, financial condition, and results of operations may be impacted by a number of factors. In addition to the factors discussed elsewhere in this report, the following risks and uncertainties could materially harm its business, financial condition, or results of operations, including causing its actual results to differ materially from those projected in any forward-looking statements. The following list of significant risk factors is not all-inclusive or necessarily in order of importance. Additional risks and uncertainties not presently known to Arcosa or that it currently deems immaterial also may materially adversely affect it in future periods.

Risks Related to our Business and Operations.

Many of the industries in which Arcosa operates are subject to global market volatility and economic cyclicality.

Instability in the global economy, negative conditions in the global credit markets, volatility in the industries that Arcosa’s products serve, fluctuations in commodity prices, changes in legislative policy, adverse changes in the availability of raw materials and supplies, or adverse changes in the financial condition of Arcosa’s customers could lead to a reduction in orders for Arcosa’s products and customers’ requests for deferred deliveries of Arcosa’s backlog orders. Additionally, such events could result in Arcosa’s customers’ attempts to unilaterally cancel or terminate firm contracts or orders in whole or in part resulting in contract or purchase order breaches which could result in increased commercial litigation costs.

If volatile conditions in the global credit markets prevent our customers’ access to credit, product order volumes may decrease, or customers may default on payments owed to Arcosa. Likewise, if Arcosa’s suppliers face challenges obtaining credit, selling their products to customers that require purchasing credit, or otherwise operating their businesses, the supply of materials Arcosa purchases from them to manufacture its products may be interrupted.

Periodic downturns in economic conditions usually have a significant adverse effect on cyclical industries in which Arcosa participates due to decreased demand for new and replacement products. Decreased demand could result in lower sales volumes, lower prices, and/or a decline in or loss of profits. The barge and wind energy industries in particular have previously experienced sharp cyclical downturns and at such times operated with a minimal backlog. While the business cycles of Arcosa’s different operations may not typically coincide, an economic downturn could affect disparate cycles contemporaneously.

Any of the foregoing market or industry conditions or events could result in reductions in Arcosa’s revenues, increased price competition, or increased operating costs, which could adversely affect Arcosa’s business, cash flows, results of operations, and financial condition.

Arcosa operates in highly competitive industries. Arcosa may not be able to sustain its market positions, which may impact its financial results.

Arcosa faces aggressive competition in all geographic markets and each industry sector in which it operates. In addition to price, Arcosa faces competition in respect to product performance and technological innovation, quality, reliability of delivery, customer service, and other factors. The effects of this competition, which is often intense, could reduce Arcosa’s revenues and operating profits, limit Arcosa’s ability to grow, increase pricing pressure on Arcosa’s products, and otherwise affect Arcosa’s financial results.

Arcosa may be adversely affected by trade policies and practices, including trade practices of competitors that violate U.S. or other foreign laws, regulations, or practices.

Arcosa faces competition from manufacturers both in the U.S. and around the world, some of which may engage in competition and trade practices involving the importation of competing products into the U.S. in violation of U.S. or other foreign laws, regulations, or practices. For example, Arcosa’s competitors import competing products that are subsidized by foreign governments and sold in the U.S. at less than fair value. The results of trade negotiations, trade agreements, and tariffs could also negatively affect Arcosa’s supplies, cost of goods sold, and customers. These trade policies and practices could increase pricing pressure on

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Arcosa’s products, reduce Arcosa’s revenues and operating profits, limit Arcosa’s ability to grow, and otherwise adversely affect Arcosa’s financial results.

Equipment failures or extensive damage to Arcosa’s facilities, including as might occur as a result of natural disasters, could lead to production, delivery or service curtailments or shutdowns, loss of revenue or higher expenses.

Arcosa operates a substantial amount of equipment at Arcosa’s production facilities, several of which are situated in tornado and hurricane zones and on navigable waterways in the U.S. An interruption in production capabilities or maintenance and repair capabilities at Arcosa’s facilities, as a result of equipment failure or acts of nature, including non-navigation orders resulting from excessive or low-water conditions issued from time to time by the U.S. Army Corps of Engineers on one or more U.S. rivers that serve Arcosa’s facilities, could reduce or prevent Arcosa’s production, delivery, service, or repair of Arcosa’s products and increase Arcosa’s costs and expenses. A halt of production at any of Arcosa’s manufacturing facilities could severely affect delivery times to Arcosa’s customers. While Arcosa maintains emergency response and business recovery plans that are intended to allow Arcosa to recover from natural disasters that could disrupt Arcosa’s business, Arcosa cannot provide assurances that its plans would fully protect Arcosa from the effects of all such disasters. In addition, insurance may not adequately compensate Arcosa for any losses incurred as a result of natural or other disasters, which may adversely affect Arcosa’s financial condition. Any significant delay in deliveries not otherwise contractually mitigated by favorable force majeure or other provisions could result in cancellation of all or a portion of Arcosa’s orders, cause Arcosa to lose future sales, and negatively affect Arcosa’s reputation and Arcosa’s results of operations.

Arcosa depends on its key management employees, and Arcosa may not be able to retain their services in the future.

Arcosa’s success depends on the continued services of its executive team and key management employees, none of whom currently have an employment agreement with Arcosa. Arcosa may not be able to retain the services of its executives and key management in the future. The loss of the services of one or more executives or key members of Arcosa’s management team, or Arcosa’s inability to successfully develop talent for succession planning, could result in increased costs associated with attracting and retaining a replacement and could disrupt Arcosa’s operations and result in a loss of revenues.

A material disruption at one or more of Arcosa’s manufacturing facilities or in Arcosa’s supply chain could have a material adverse effect on us.

Arcosa owns and operates manufacturing facilities of various ages and levels of automated control and relies on a number of third parties as part of Arcosa’s supply chain, including for the efficient distribution of products to Arcosa’s customers. Any disruption at one of Arcosa’s manufacturing facilities or within Arcosa’s supply chain could prevent Arcosa from meeting demand or require Arcosa to incur unplanned capital expenditures. Older facilities are generally less energy-efficient and are at an increased risk of breakdown or equipment failure, resulting in unplanned downtime. Any unplanned downtime at Arcosa’s facilities may cause delays in meeting customer timelines, result in liquidated damages claims, or cause Arcosa to lose or harm customer relationships.

Additionally, Arcosa requires specialized equipment to manufacture certain of its products, and if any of its 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 Arcosa or beyond its 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, any shortages in trucking capacity, any increase in the cost thereof, or any other disruption to the highway systems could limit Arcosa’s ability to deliver its products in a timely manner or at all. Any material disruption at one or more of Arcosa’s facilities or those of Arcosa’s customers or suppliers or otherwise within Arcosa’s supply chain, whether as a result of downtime, facility damage, an inability to deliver Arcosa’s products or otherwise, could prevent Arcosa from meeting demand, require Arcosa to incur unplanned capital expenditures, or cause other material disruption to Arcosa’s operations, any of which could have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

Delays in construction projects and any failure to manage Arcosa’s inventory could have a material adverse effect on us.

Many of Arcosa’s products are used in 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 rescheduling may occur with too little notice to allow Arcosa to replace those projects in Arcosa’s manufacturing schedules or to adjust production capacity accordingly, creating unplanned downtime, increasing costs and inefficiencies in Arcosa’s operations, and increased levels of obsolete inventory.

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Additionally, Arcosa maintains an inventory of certain products that meet standard specifications and are ultimately purchased by a variety of end users. Arcosa forecasts demand for these products to ensure that it keeps sufficient inventory levels of certain products that Arcosa expects to be in high demand and limits its inventory for which Arcosa does not expect much interest. However, Arcosa’s forecasts are not always accurate and unexpected changes in demand for these products, whether because of a change in preferences or otherwise, can lead to increased levels of obsolete inventory. Any delays in construction projects and Arcosa’s customers’ orders or any inability to manage Arcosa’s inventory could have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

The seasonality of Arcosa’s 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 Arcosa’s products in some markets is typically seasonal, with periods of snow or heavy rain negatively affecting construction activity. For example, sales of Arcosa’s products in Canada and the Northeast and Midwest regions of the U.S. 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 Arcosa’s products, push back existing orders to later dates or lead to cancellations.

Furthermore, Arcosa’s ability to deliver products on time or at all to Arcosa’s customers can be significantly impeded by such conditions and events 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 Arcosa’s business has led to variation in Arcosa’s quarterly results in the past and is expected to continue to do so in the future. This general seasonality of Arcosa’s business and any severe or prolonged adverse weather conditions or other similar events could have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

Risks related to Arcosa’s operations outside of the U.S., particularly Mexico, could decrease Arcosa’s profitability.

Arcosa’s operations outside of the U.S. are subject to the risks associated with cross-border business transactions and activities. Political, legal, trade, economic change or instability, criminal activities or social unrest could limit or curtail Arcosa’s respective foreign business activities and operations, including the ability to hire and retain employees. Violence in Mexico associated with drug trafficking is continuing. Arcosa has not, to date, been materially affected by any of these risks, but Arcosa cannot predict the likelihood of future effects from such risks or any resulting adverse impact on Arcosa’s business, results of operations or financial condition. Arcosa ships raw materials to Mexico and manufactures products in Mexico that are sold in the U.S. or elsewhere, which are subject to customs and other regulations and the transportation and import of such products may be disrupted. Some foreign countries where Arcosa operates have regulatory authorities that regulate products sold or used in those countries. If Arcosa fails to comply with the applicable regulations related to the foreign countries where Arcosa operates, Arcosa may be unable to market and sell its products in those countries or could be subject to administrative fines or penalties.

In addition, with respect to operations in Mexico and other foreign countries, unexpected changes in the political environment, laws, rules, and regulatory requirements; tariffs and other trade barriers, including regulatory initiatives for buying goods produced in America; more stringent or restrictive laws, rules and regulations relating to labor or the environment; adverse tax consequences; price exchange controls and restrictions; regulations affecting cross-border rail and vehicular traffic; or availability of commodities, including gasoline and electricity, could limit operations affecting production throughput and making the manufacture and distribution of Arcosa’s products less timely or more difficult.

Furthermore, any material change in the quotas, regulations or duties on imports imposed by the U.S. government and agencies or on exports by the government of Mexico or its agencies, could affect Arcosa’s ability to export products that Arcosa manufactures in Mexico. Failure to comply with such import and export regulations could result in significant fines and penalties.

Because Arcosa has operations outside the U.S., Arcosa could be adversely affected by final judgments of non-compliance with the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”) or import/export rules and regulations and similar anti-corruption, anti-bribery, or import/export laws of other countries.

Potential expansion of our business may expose us to new business, regulatory, political, operational, financial, and economic risks associated with such expansion, both inside and outside of the U.S.

Previously, we have expanded and plan in the future to expand our business and operations, and this expansion may involve expansion into markets (either inside or outside the U.S.) in which we have limited operating experience, including with respect to seeking regulatory approvals, becoming subject to regulatory authorities, and marketing or selling products. Further, our operations in new foreign markets may be adversely affected by a number of factors, including: general economic conditions and monetary and fiscal policy; financial risks, such as longer payment cycles, difficulty in collecting from international customers,

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the effect of local and regional financial crises and exposure to foreign currency exchange rate fluctuations and controls; multiple, conflicting and changing laws and regulations such as export and import restrictions, employment laws, regulatory requirements and other governmental approvals, permits and licenses; interest rates and taxation laws and policies; increased government regulation; social stability; and political, economic, or diplomatic developments. Certain jurisdictions have, from time to time, experienced instances of civil unrest and hostilities, both internally and with neighboring countries. Rioting, military activity, terrorist attacks, or armed hostilities could cause our operations in such jurisdictions to be adversely affected or suspended. We generally do not have insurance for losses and interruptions caused by terrorist attacks, military conflicts, and wars.

In addition, anti-bribery and anti-corruption laws may conflict with some local customs and practices in foreign jurisdictions. Our operations in international jurisdictions may be adversely affected by regulatory and compliance risks that relate to maintaining accurate information and control over activities that may fall within the purview of the FCPA, including both its books and records provisions and its anti-bribery provisions. As a result of our policy to comply with the FCPA and similar anti-bribery laws, we may be at a competitive disadvantage to competitors that are not subject to, or do not comply with, such laws

Any of these factors could significantly harm our potential business or international expansion and our operations and, consequently, our revenues, costs, results of operations, and financial condition.

Arcosa may incur increased costs due to fluctuations in interest rates and foreign currency exchange rates.

Arcosa is exposed to risks associated with fluctuations in interest rates and changes in foreign currency exchange rates. Under varying circumstances, Arcosa may seek to minimize these risks through the use of hedges and similar financial instruments and other activities, although these measures, if and when implemented, may not be effective. Any material and untimely changes in interest rates or exchange rates could adversely impact our results of operations, financial condition, or cash flows.

The loss of revenues attributable to one of our customers could negatively impact our revenues and results of operations.

GE, a customer in our Energy Equipment Group, accounted for approximately 18.2% of our consolidated revenues in 2019. The loss of revenues attributable to this customer could have a material adverse effect on our revenues and results of operations.

Arcosa may not be able to successfully identify, consummate or integrate acquisitions, and acquisitions may bring additional known and unknown risks to Arcosa’s business.

Arcosa expects to routinely engage in the search for growth opportunities, including assessment of merger and acquisition prospects in new markets and/or products. However, Arcosa may not be able to identify and secure suitable opportunities. Arcosa’s ability to consummate any acquisitions on terms that are favorable to Arcosa may be limited by a number of factors, such as competition for attractive targets and, to the extent necessary, Arcosa’s ability to obtain financing on satisfactory terms, if at all.

In addition, any merger or acquisition into which Arcosa may enter (including the Cherry acquisition) is subject to known and unknown risks of such business, markets and/or products and integrating such business, markets, and/or products into Arcosa’s businesses and culture. The failure to successfully integrate such mergers or acquisitions could prevent Arcosa from achieving the anticipated operating and cost synergies or long-term strategic benefits from such transactions.

The Cherry acquisition brings known and unknown risks to Arcosa, and Arcosa may fail to realize all of the anticipated benefits of the acquisition of Cherry or those benefits may be delayed, including due to difficulties integrating Cherry and Arcosa.

Cherry is bringing new lines of businesses to Arcosa, including demolition and recycling services. These new lines of businesses involve known and unknown risks. If any of these risks occur, they could result in a material adverse effect on Arcosa’s business, operations, or financial condition. In addition, some or all of Arcosa’s anticipated benefits from the Cherry acquisition may not be realized. Some of these benefits may not be realized due to Cherry’s concentration in the Houston, Texas-area market. A downturn in this market could have a disproportionate adverse impact on Cherry's business, operations, or financial condition. If Arcosa is not able to successfully integrate Cherry to any material degree, such failure of a successful integration could result in unexpected claims or otherwise have a material adverse effect on Arcosa’s business, operations, or financial condition. Integration risks include the following: (i) the diversion of management’s time and resources to integration matters from other Arcosa matters; (ii) difficulties in achieving business opportunities and growth prospects of Cherry; (iii) difficulties in managing the expanded operations; and (iv) challenges in retaining key personnel.

Some of Arcosa’s customers place orders for Arcosa’s products (i) in reliance on their ability to utilize tax benefits or tax credits such as accelerated depreciation or the production tax credit for renewable energy or (ii) to utilize federal-aid programs that allow for purchase price reimbursement or other government funding or subsidies, any of which benefits, credits, or programs could be or are being discontinued or allowed to expire without extension thereby reducing demand for certain of Arcosa’s products.

There is no assurance that the U.S. government will reauthorize, modify, or otherwise not allow the expiration of tax benefits, tax credits, subsidies, or federal-aid programs that may include funding of the purchase or purchase price reimbursement of certain of Arcosa’s products. For example, the federal renewable electricity production tax credit (“the PTC”) for wind energy facilities was scheduled to expire at the end of calendar year 2019; however, just prior to expiration, it was extended for one year. Pricing

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of orders and individual order quantities reflect a market transitioning from the PTC incentives. In instances where any benefits, credits, subsidies, or programs are allowed to expire or are otherwise modified or discontinued, the demand for Arcosa’s products could decrease, thereby creating the potential for a material adverse effect on Arcosa’s financial condition or results of operations and could result in non-cash impairments on long-lived assets, including intangible assets, and/or goodwill.

Arcosa’s access to capital may be limited or unavailable due to deterioration of conditions in the global capital markets and/or weakening of macroeconomic conditions.

In general, Arcosa may rely upon banks and capital markets to fund its growth strategy. These markets can experience high levels of volatility and access to capital can be constrained for extended periods of time. In addition to conditions in the capital markets, a number of other factors could cause Arcosa to incur increased borrowing costs and have greater difficulty accessing public and private markets for both secured and unsecured debt, which factors include Arcosa’s financial performance. If Arcosa is unable to secure financing on acceptable terms, Arcosa’s other sources of funds, including available cash, its committed bank facility, and cash flow from operations may not be adequate to fund its operations and contractual commitments and refinance existing debt.

Arcosa's indebtedness restricts its current and future operations, which could adversely affect its ability to respond to changes in its business and manage its operations.

On January 2, 2020, Arcosa entered into an Amended and Restated Credit Agreement (the “Credit Agreement”), by and among Arcosa, as borrower, and the lenders party thereto. The Credit Agreement includes a number of restrictive covenants that impose significant operating and financial restrictions on Arcosa, including restrictions on its and its guarantors' ability to, among other things and subject to certain exceptions, incur or guarantee additional indebtedness, merge or dispose of all or substantially all of its assets, engage in transactions with affiliates and make certain restricted payments. In addition, the Credit Agreement requires Arcosa to comply with financial covenants. The Credit Agreement requires that we maintain a minimum interest coverage ratio of no less than 2.50 to 1.00 and maximum leverage ratio of no greater than 3.00 to 1.00, subject to certain exceptions, in each case, for any period of four consecutive fiscal quarters of Arcosa.

For more information on the restrictive covenants in the Credit Agreement, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources.” Arcosa's ability to comply with these agreements may be affected by events beyond its control, including prevailing economic, financial, and industry conditions. These covenants could have an adverse effect on Arcosa's business by limiting its ability to take advantage of financing, merger and acquisition, or other opportunities. The breach of any of these covenants or restrictions could result in a default under the Credit Agreement.

The phaseout of the London Interbank Offered Rate (LIBOR) and the replacement of LIBOR with a different reference rate may have an adverse effect on Arcosa’s business.

On July 27, 2017, the United Kingdom’s Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phase out LIBOR by the end of 2021. It is unclear whether new methods of calculating LIBOR will be established or if alternative benchmark reference rates will be adopted. Arcosa’s revolving credit facility, term loan, and other financial instruments utilize LIBOR or an alternative benchmark reference rate for calculating the applicable interest rate. After LIBOR is phased out, the interest rates for these obligations might be subject to change. The replacement of LIBOR with an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under Arcosa’s current or future credit agreements and financial instruments. This could materially and adversely affect Arcosa’s results of operations, cash flows, ability to acquire debt financing and liquidity. Arcosa cannot predict the effect of the elimination of LIBOR or the establishment and use of alternative benchmark reference rates and the corresponding effects on Arcosa’s cost of capital.

Fluctuations in the price and supply of raw materials and parts and components used in the production of Arcosa’s products and the availability of natural aggregates and specialty materials reserves could have a material adverse effect on its ability to cost-effectively manufacture and sell its products. In some instances, Arcosa relies on a limited number of suppliers for certain raw materials, parts and components needed in its production.

A significant portion of Arcosa’s business depends on the adequate supply of numerous specialty and other parts and components at competitive prices such as flanges for the structural wind towers business. Arcosa’s manufacturing operations partially depend on Arcosa’s ability to obtain timely deliveries of raw materials, parts, and components in acceptable quantities and quality from Arcosa’s suppliers. Certain raw materials, parts, and components for Arcosa’s products are currently available from a limited number of suppliers and, as a result, Arcosa may have limited control over pricing, availability, and delivery schedules. If Arcosa is unable to purchase a sufficient quantity of raw materials, parts, and components on a timely basis, Arcosa could face disruptions in its production and incur delays while Arcosa attempts to engage alternative suppliers. Fewer suppliers could result from unimproved or worsening economic or commercial conditions, potentially increasing Arcosa’s rejections for poor quality and requiring Arcosa to source unknown and distant supply alternatives. Any such disruption or conditions could harm Arcosa’s business and adversely impact Arcosa’s results of operations.

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The principal material used in Arcosa’s manufacturing segments is steel. Market steel prices may exhibit periods of volatility. Steel prices may experience further volatility as a result of scrap surcharges assessed by steel mills, tariffs, and other market factors. Arcosa often uses contract-specific purchasing practices, supplier commitments, contractual price escalation provisions, and other arrangements with Arcosa’s customers to mitigate the effect of this volatility on Arcosa’s operating profits for the year. To the extent that Arcosa does not have such arrangements in place, a change in steel prices could materially lower Arcosa’s profitability. In addition, meeting production demands is dependent on Arcosa’s ability to obtain a sufficient amount of steel. An unanticipated interruption in Arcosa’s supply chain could have an adverse impact on both Arcosa’s margins and production schedules.

A part of the operations in Arcosa’s Construction Products Group includes the mining of natural aggregates and specialty materials reserves. The success and viability of these operations depend on the accuracy of Arcosa’s reserve estimates, the costs of production and the ability to economically distribute the natural aggregates and specialty materials. Estimates for natural aggregate and specialty materials reserves and for the costs of production of such reserves depend upon a variety of factors and assumptions, many of which involve uncertainties beyond Arcosa’s control, such as geological and mining conditions that may not be identifiable. In addition, Arcosa's success in recovering natural aggregates and specialty materials depends on the ability to secure new reserve locations and permits to mine such reserves in areas that make distribution of materials economically viable. Inaccuracies in reserve estimates and production costs, and the inability to secure locations and permits for future operations could negatively affect our results of operations.

Reductions in the availability of energy supplies or an increase in energy costs may increase Arcosa’s operating costs.

Arcosa uses electricity and various gases, including natural gas, at Arcosa’s manufacturing facilities and uses diesel fuel in vehicles to transport Arcosa’s products to customers and to operate its plant equipment. An outbreak or escalation of hostilities between the U.S. and any foreign power and, in particular, prolonged conflicts could result in a real or perceived shortage of petroleum and/or natural gas, which could result in an increase in the cost of natural gas or energy in general. Extreme weather conditions and natural occurrences such as hurricanes, tornadoes, and floods could result in varying states of disaster and a real or perceived shortage of petroleum and/or natural gas, including rationing thereof, potentially resulting in unavailability or an increase in natural gas prices, electricity prices, or other general energy costs. Speculative trading in energy futures in the world markets could also result in an increase in natural gas and general energy cost. Future limitations on the availability (including limitations imposed by increased regulation or restrictions on rail, road, and pipeline transportation of energy supplies) or consumption of petroleum products and/or an increase in energy costs, particularly natural gas for plant operations and diesel fuel for vehicles and plant equipment, could have an adverse effect upon our ability to conduct Arcosa’s business cost effectively.

The inability to hire and retain skilled labor could adversely impact Arcosa’s operations.

Arcosa depends on skilled labor in the manufacture, maintenance, and repair of Arcosa’s products. Some of Arcosa’s facilities are located in areas where demand for skilled laborers may exceed supply. If Arcosa is unable to hire and retain these skilled laborers, including welders, Arcosa may be limited in its ability to maintain or increase production rates and could increase Arcosa’s labor costs.

Some of Arcosa’s employees belong to labor unions and strikes or work stoppages could adversely affect Arcosa’s operations.

Arcosa is a party to collective bargaining agreements with various labor unions at some of Arcosa’s operations in the U.S. and Canada and all of Arcosa’s operations in Mexico. Disputes with regard to the terms of these agreements or Arcosa’s potential inability to negotiate acceptable contracts with these unions in the future could result in, among other things, strikes, work stoppages, or other slowdowns by the affected workers. Arcosa cannot be assured that its relations with its workforce will remain positive or that union organizers will not be successful in future attempts to organize at some of Arcosa’s facilities. If Arcosa’s workers were to engage in a strike, work stoppage, or other slowdown or other employees were to become unionized or the terms and conditions in future labor agreements were renegotiated, Arcosa could experience a significant disruption of its operations and higher ongoing labor costs. In addition, Arcosa could face higher labor costs in the future as a result of severance or other charges associated with lay-offs, shutdowns, or reductions in the size and scope of its operations or difficulties of restarting Arcosa’s operations that have been temporarily shuttered.

Our business is subject to significant regulatory compliance burdens in the U.S., Mexico, and other countries where we do business.

We are subject to various governmental regulations in the U.S., Mexico, and other countries where we do business related to occupational safety and health, labor, and business practices. Failure to comply with current or future regulations could result in the imposition of substantial fines, suspension of production, alterations of our production processes, cessation of operations, or other actions which could harm our business.

Although we believe that we are in material compliance with all applicable regulations material to our business operations, amendments to existing statutes and regulations, adoption of new statutes and regulations or entering into new lines of business could require us to continually alter our methods of operation and/or discontinue the sale of certain of our products resulting in costs to us that could be substantial. We may not be able, for financial or other reasons, to comply with applicable laws, rules, regulations, and permit requirements. Our failure to comply with applicable laws, rules or regulations or permit requirements could

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subject us to civil remedies, including substantial fines, penalties, and injunctions, as well as possible criminal sanctions, which would, if of significant magnitude, materially adversely impact our operations and future financial condition.

Violations of or changes in the regulatory requirements applicable to the industries in which Arcosa operates or will operate may have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

Arcosa’s Transportation Products Group is subject to regulation by, among others, the U.S. Coast Guard; the U.S. National Transportation Safety Board; the U.S. Customs Service; the Maritime Administration of the USDOT and private industry organizations such as the American Bureau of Shipping. These organizations establish safety criteria, investigate vessel accidents, and recommend improved safety standards.

Arcosa’s Construction Products Group is subject to regulation by MSHA, USEPA, FDA, and various state agencies.

Arcosa’s Energy Equipment Group is subject to the regulations by the PHMSA and the FMCSA, both of which are part of the USDOT; and various state agencies. These agencies promulgate and enforce rules and regulations pertaining, in part, to the manufacture of tanks that are used in the storage, transportation and transport arrangement, and distribution of regulated and non-regulated substances.

Arcosa’s operations are also subject to regulation of health and safety matters by OSHA and MSHA. In addition, our business is subject to additional regulatory requirements in Mexico and other countries where we conduct business.

Future regulatory changes, new lines of business which are covered by regulatory agencies that Arcosa has not previously been subject to, or the determination that Arcosa’s current or future products or processes are not in compliance with applicable requirements, rules, regulations, specifications, standards or product testing criteria might result in additional operating expenses, administrative fines or penalties, product recalls, reputational harm, or loss of business that could have a material adverse effect on Arcosa’s financial condition and operations. For example, the U.S. barge industry relies, in part, on the Jones Act, and changes to or a repeal of the legislation could have a material adverse impact on Arcosa’s barge business and revenues. In addition, the impact of a government shutdown could have a material adverse effect on Arcosa's revenues, profits, and cash flows. Arcosa relies on government personnel to conduct certain routine business processes related to the inspection and delivery of certain products that, if disrupted, could have an immediate impact on Arcosa's revenues and business.

Arcosa is subject to health and safety laws and regulations and any failure to comply with any current or future laws or regulations could have a material adverse effect on us.

Manufacturing and construction sites are inherently dangerous workplaces. Arcosa’s manufacturing sites often put Arcosa’s employees and others in close proximity with large pieces of mechanized equipment, moving vehicles, chemical and manufacturing processes, heavy products and other items, and highly regulated materials. As a result, Arcosa is 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 Arcosa’s operating costs. Arcosa’s safety record can also impact Arcosa’s reputation. Arcosa maintains functional groups whose primary purpose is to ensure Arcosa implements effective work procedures throughout Arcosa’s organization and take other steps to ensure the health and safety of Arcosa’s work force, but there can be no assurances these measures will be successful in preventing injuries or violations of health and safety laws and regulations. Any failure to maintain safe work sites or violations of applicable health and safety laws could expose Arcosa to significant financial losses and reputational harm, as well as civil and criminal liabilities, any of which could have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

Employment related lawsuits could be brought against us, which could be expensive, time consuming, and result in substantial damages to us.

Arcosa may become subject to substantial and costly litigation by its former and current employees related to improper termination of employment, sexual harassment, hostile work environment, and other employment-related claims. Such claims could divert management’s attention from Arcosa’s core business, be expensive to defend, and result in sizable damage awards against Arcosa. Arcosa’s current insurance coverage is limited and may not apply or may not be sufficient to cover these claims. Any employment related claims brought against Arcosa, with or without merit, could harm Arcosa’s reputation in the industry and reduce product sales. Damages assessed against Arcosa could have a material adverse impact on Arcosa’s financial condition and operating results.

Arcosa has potential exposure to environmental liabilities that may increase costs and lower profitability.

Arcosa is subject to comprehensive federal, state, local, and foreign environmental laws and regulations relating to: (i) the release or discharge of regulated materials into the environment at Arcosa’s facilities or with respect to Arcosa’s products while in operation; (ii) the management, use, processing, handling, storage, transport and transport arrangement, and disposal of hazardous and non-hazardous waste, substances, and materials; and (iii) other activities relating to the protection of human health and the environment. Such laws and regulations expose Arcosa to liability for its own acts and in certain instances potentially expose Arcosa to liability for the acts of others. These laws and regulations also may impose liability on Arcosa currently under circumstances where at the time of the action taken, Arcosa’s acts or those of others complied with then applicable laws and

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regulations. In addition, such laws may require significant expenditures to achieve compliance, and are frequently modified or revised to impose new obligations. Civil and criminal fines and penalties may be imposed for non-compliance with these environmental laws and regulations. Arcosa’s operations involving hazardous materials also raise potential risks of liability under common law.

Environmental operating permits are, or may be, required for Arcosa’s operations under these laws and regulations. These operating permits are subject to modification, renewal, and revocation. Although Arcosa regularly monitors and reviews its operations, procedures, and policies for compliance with Arcosa’s operating permits and related laws and regulations, the risk of environmental liability is inherent in the operation of Arcosa’s businesses.

However, future events, such as changes in, or modified interpretations of, existing environmental laws and regulations or enforcement policies, or further investigation or evaluation of the potential health hazards associated with the manufacture of Arcosa’s products and related business activities and properties, may give rise to additional compliance and other costs that could have a material adverse effect on Arcosa’s financial condition and operations.

In addition to environmental laws, the transportation of commodities by rail, barge, or container raises potential risks in the event of an accident that results in the release of an environmentally sensitive substance. Generally, liability under existing laws for an accident depends upon causation analysis and the acts, errors, or omissions, if any, of a party involved in the transportation activity, including, but not limited to, the shipper, the buyer, and the seller of the substances being transported, or the manufacturer of the barge, container, or its components. Additionally, the severity of injury or property damage arising from an incident may influence the causation responsibility analysis, exposing Arcosa to potentially greater liability. Under certain circumstances, strict liability concepts may apply. If Arcosa is found liable in any such incidents, it could have a material adverse effect on Arcosa’s financial condition, business, and operations.

Responding to claims relating to improper handling, transport, storage, or disposal of hazardous materials could be time consuming and costly.

We use controlled hazardous materials in our business and generate wastes that are regulated as hazardous wastes under U.S. federal, state, and local environmental laws and under equivalent provisions of law in those and other jurisdictions in which our manufacturing facilities are located. Our use of these substances and materials is subject to stringent, and periodically changing, regulation that can impose costly compliance obligations on us and have the potential to adversely affect our manufacturing activities. We are also subject to potential liability for claims alleging property damage and personal and bodily injury or death arising from the use of or exposure to our products, especially in connection with products we manufacture that our customers use to transport or store hazardous, flammable, toxic, or explosive materials.

The risk of accidental contamination or injury from these materials cannot be completely eliminated. If an accident with these substances occurs, we could be held liable for any damages that result, as well as incurring clean-up costs and liabilities, which can be substantial. Additionally, an accident could damage our facilities, resulting in delays and increased costs.

Our manufacturing plants or other facilities may have unknown environmental conditions that could be expensive and time-consuming to correct.

There can be no assurance that we will not encounter hazardous environmental conditions at any of our manufacturing plants or other facilities that may require us to incur significant clean-up or correction costs. Upon encountering a hazardous environmental condition or receiving a notice of a hazardous environmental condition, we may be required to correct the condition. The presence of a hazardous environmental condition relating to any of our manufacturing plants or other facilities may require significant expenditures to correct the environmental condition.

Business, regulatory, and legal developments regarding climate change, and physical impacts from climate change, could have an adverse effect on our business, financial condition, and operations.

Legislation and new rules to regulate emission of greenhouse gases (“GHGs”) has been introduced in numerous state legislatures, the U.S. Congress, and by the USEPA. Some of these proposals would require industries to meet new standards that may require substantial reductions in carbon emissions. There is also a potential for climate change legislation and regulation that could adversely impact the cost of certain manufacturing inputs, including the cost of energy and electricity. While Arcosa cannot assess the direct impact of these or other potential regulations, new climate change protocols could affect demand for its products and/or affect the price of materials, input factors, energy costs, and manufactured components.

Potential impacts of climate change include physical impacts, such as disruption in production and product distribution due to impacts from major storm events, shifts in regional weather patterns and intensities, and sea level changes. Other adverse consequences of climate change could include an increased frequency of severe weather events, flooding, and rising sea levels that could affect operations at Arcosa’s manufacturing facilities as well as the price of insuring Company assets or other unforeseen disruptions of Arcosa’s operations, systems, property, or equipment.

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The impacts of climate change and related regulations on our operations and the Company overall are highly uncertain and difficult to estimate, but such effects could be materially adverse to our business, financial position, results of operations, or cash flows.

Arcosa may be required to reduce the value of Arcosa’s long-lived assets, including intangible assets, and/or goodwill, which would weaken Arcosa’s financial results.

Arcosa periodically evaluates for potential impairment the carrying values of Arcosa’s long-lived assets, including intangible assets, to be held and used. The carrying value of a long-lived asset to be held and used is considered impaired when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the asset is less than the carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced commensurate with the estimated cost to dispose of the assets. In addition, goodwill is required to be tested for impairment annually or on an interim basis whenever events or circumstances change indicating that the carrying amount of the goodwill might be impaired.

Certain non-cash impairments may result from a change in our strategic goals, business direction, changes in market interest rates, or other factors relating to the overall business environment. Any impairment of the value of goodwill or other intangible assets recorded in connection with previous acquisitions will result in a non-cash charge against earnings, which could have a material adverse effect on our financial condition, results of operations, shareholder’s equity, and/or share price.

Changes in accounting policies or inaccurate estimates or assumptions in the application of accounting policies could adversely affect the reported value of Arcosa’s assets or liabilities and financial results.

Arcosa’s financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The significant accounting policies, together with the other notes that follow, are an integral part of the financial statements. Some of these policies require the use of estimates and assumptions that may affect the reported value of Arcosa’s assets or liabilities and financial results and require management to make difficult, subjective, and complex judgments about matters that are inherently uncertain. Accounting standard setters and those who interpret the accounting standards (such as the Financial Accounting Standards Board, the SEC, and Arcosa’s independent registered public accounting firm) may amend or even reverse their previous interpretations or positions on how these standards should be applied. These changes can be difficult to predict and can materially impact how Arcosa records and reports its financial condition and results of operations. In some cases, Arcosa could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. For a further discussion of some of Arcosa’s critical accounting policies and standards and recent accounting changes, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” and Note 1 “Overview and Summary of Significant Accounting Policies” of the Notes to Consolidated and Combined Financial Statements.

From time to time Arcosa may take tax positions that the Internal Revenue Service (“IRS”), the Servicio de Administracion Tributaria (“SAT”) in Mexico, or other taxing jurisdictions may contest.

Our subsidiaries have in the past and may in the future take tax positions that the IRS, the SAT, or other taxing jurisdictions may challenge. Arcosa is required to disclose to the IRS as part of Arcosa’s tax returns particular tax positions in which Arcosa has a reasonable basis for the position but not a “more likely than not” chance of prevailing. If the IRS, SAT, or other taxing jurisdictions successfully contests a tax position that Arcosa takes, Arcosa may be required to pay additional taxes or fines which may not have been previously accrued that may adversely affect its results of operations and financial position.

The limited number of customers for certain of Arcosa’s products, the variable purchase patterns of Arcosa’s customers in all of its segments, and the timing of completion, delivery, and customer acceptance of orders may cause Arcosa’s revenues and income from operations to vary substantially each quarter, potentially resulting in significant fluctuations in its quarterly results.

Some of the markets Arcosa serves have a limited number of customers. The volumes purchased by customers in each of Arcosa’s business segments vary from year to year, and not all customers make purchases every year. As a result, the order levels for Arcosa’s products have varied significantly from quarterly period to quarterly period in the past and may continue to vary significantly in the future. Therefore, Arcosa’s results of operations in any particular quarterly period may also vary. As a result of these quarterly fluctuations, Arcosa believes that comparisons of its sales and operating results between quarterly periods may not be meaningful and should not be relied upon as indicators of future performance.

Some of Arcosa’s products are sold to contractors, distributors, installers, and rental companies who may misuse, abuse, improperly install, or improperly or inadequately maintain or repair such products, thereby potentially exposing Arcosa to claims that could increase Arcosa’s costs and weaken Arcosa’s financial condition.

The products Arcosa manufactures are designed to work optimally when properly assembled, operated, installed, repaired, and maintained. When this does not occur, Arcosa may be subjected to claims or litigation associated with personal or bodily injuries or death and property damage.

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U.S. government actions relative to the federal budget, taxation policies, government expenditures, U.S. borrowing/debt ceiling limits, and trade policies could adversely affect Arcosa’s business and operating results.

Periods of impasse, deadlock, and last minute accords may continue to permeate many aspects of U.S. governance, including federal government budgeting and spending, taxation, U.S. deficit spending and debt ceiling adjustments, and international commerce. Such periods could negatively impact U.S. domestic and global financial markets, thereby reducing customer demand for Arcosa’s products and services and potentially result in reductions in Arcosa’s revenues, increased price competition, or increased operating costs, any of which could adversely affect Arcosa’s business, results of operations, and financial condition.

For example, Arcosa produces many of its products at its manufacturing facilities in Mexico. Arcosa’s business benefits from free trade agreements such as the North American Free Trade Agreement (“NAFTA”). The U.S., Mexico and Canada have reached a U.S.-Mexico-Canada Agreement (“USMCA”) which would replace NAFTA. The USMCA would maintain duty-free access for many products. The USMCA still requires approval from Canada’s Parliament before it takes effect. It is uncertain what the outcome of the approval process and any further negotiations will be, but it is possible that additional revisions to USMCA or failure to secure approvals could adversely affect Arcosa’s existing production operations in Mexico and have a material adverse effect on Arcosa’s business, financial condition, and results of operations.

Arcosa’s business is based in 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 an adverse effect on us.

Certain of Arcosa’s businesses depend on government spending for infrastructure and other similar building activities. As a result, demand for some of Arcosa’s products is influenced by U.S. federal government fiscal policies and tax incentives and other subsidies. Projects in which Arcosa participates may be funded directly by governments 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 local 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. Government spending is often approved only on a short-term basis and some of the projects in which Arcosa’s products are used require longer-term funding commitments. If government funding is not approved or funding is lowered 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, all of which could adversely affect the profitability of Arcosa’s 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 affect Arcosa’s business, financial condition, and results of operations.

Litigated disputes and other claims could increase Arcosa’s costs and weaken Arcosa’s financial condition.

Arcosa is currently, and may from time to time be, involved in various claims or legal proceedings arising out of Arcosa’s operations. Adverse judgments and outcomes in some or all of these matters could result in significant losses and costs that could weaken Arcosa’s financial condition. Although Arcosa maintains reserves for its probable and reasonably estimable liability, Arcosa’s reserves may be inadequate to cover its portion of claims or final judgments after taking into consideration rights in indemnity and recourse under insurance policies or to third parties as a result of which there could be a material adverse effect on Arcosa’s business, operations, or financial condition.

Arcosa’s manufacturer’s warranties expose Arcosa to product replacement and repair claims.

Depending on the product, Arcosa warrants its workmanship and certain materials (including surface coatings), parts, and components pursuant to express limited contractual warranties. Arcosa may be subject to significant warranty claims in the future, such as multiple claims based on one defect repeated throughout Arcosa’s production process or claims for which the cost of shipping, repairing, or replacing the defective part, component, or material is highly disproportionate to the original price. These types of warranty claims could result in significant costs associated with product recalls or product shipping, repair, or replacement, and damage to Arcosa’s reputation.

Defects in materials and workmanship could harm our reputation, expose us to product warranty or product liability claims, decrease demand for products, or materially harm existing or prospective customer relationships.

A defect in materials or in the manufacturing of our products could result in product warranty and product liability claims, decrease demand for products, or materially harm existing or prospective customer relationships. These claims may require costly repairs or replacement and may include cost related to disassembly of our products and transportation of the products from the field to our facilities and returning the products to the customer, a change in our manufacturing processes, recall of previously manufactured products, or personal injury claims, which could result in significant expense and materially harm our existing or

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prospective customer relationships. Any of the foregoing could materially harm our business, operating results, and financial condition.

Increasing insurance claims and expenses could lower profitability and increase business risk.

Arcosa is subject to potential liability for claims alleging property damage and personal and bodily injury or death arising from the use of or exposure to Arcosa’s products, especially in connection with products Arcosa manufactures that Arcosa’s customers use to transport hazardous, flammable, toxic, or explosive materials. As policies expire, premiums for renewed or new coverage may further increase and/or require that Arcosa increase its self-insured retention or deductibles. Arcosa maintains primary coverage and excess coverage policies. If the number of claims or the dollar amounts of any such claims rise in any policy year, Arcosa could suffer additional costs associated with accessing its excess coverage policies. Also, an increase in the loss amounts attributable to such claims could expose Arcosa to uninsured damages if Arcosa were unable or elected not to insure against certain claims because of high premiums or other reasons. While Arcosa’s liability insurance coverage is at or above levels based on commercial norms in Arcosa’s industries, an unusually large liability claim or a string of claims coupled with an unusually large damage award could exceed Arcosa’s available insurance coverage. In addition, the availability of, and Arcosa’s ability to collect on, insurance coverage is often subject to factors beyond Arcosa’s control, including positions on policy coverage taken by insurers. If any of Arcosa’s third-party insurers fail, cancel, or refuse coverage or otherwise are unable to provide Arcosa with adequate insurance coverage, then Arcosa’s risk exposure and Arcosa’s operational expenses may increase and the management of its business operations would be disrupted. Moreover, any accident or incident involving Arcosa’s industries in general or Arcosa or Arcosa’s products specifically, even if Arcosa is fully insured, contractually indemnified, or not held to be liable, could negatively affect Arcosa’s reputation among customers and the public, thereby making it more difficult for Arcosa to compete effectively, and could significantly affect the cost and availability of insurance in the future.

Arcosa’s inability to produce and disseminate relevant and/or reliable data and information pertaining to Arcosa’s business in an efficient, cost-effective, secure, and well-controlled fashion may have significant negative impacts on confidentiality requirements and obligations and trade secret or other proprietary needs and expectations and, therefore, Arcosa’s future operations, profitability, and competitive position.

Arcosa relies on information technology infrastructure and architecture, including hardware, network including the cloud, software, people, and processes to provide useful and confidential information to conduct Arcosa’s business in the ordinary course, including correspondence and commercial data and information interchange with customers, suppliers, legal counsel, governmental agencies, and consultants and to support assessments and conclusions about future plans and initiatives pertaining to market demands, operating performance, and competitive positioning. Any material failure, interruption of service, compromised data security, or cybersecurity threat could adversely affect Arcosa’s relations with suppliers and customers, place Arcosa in violation of confidentiality and data protection laws, rules, and regulations, and result in negative impacts to Arcosa’s market share, operations, and profitability. Arcosa will have to continually upgrade its infrastructure and applications, to reduce the risk of such material failures, interruptions, or security breaches. Security breaches in Arcosa’s information technology could result in theft, destruction, loss, misappropriation, or release of confidential data, trade secrets, or other proprietary or intellectual property that could adversely impact Arcosa’s future results.

Cybersecurity incidents could disrupt our business and result in the compromise of confidential information.

Our business is at risk from and may be impacted by information security incidents, including attempts to gain unauthorized access to our confidential data, ransomware, malware, phishing emails, and other electronic security events. Such incidents can range from individual attempts to gain unauthorized access to our information technology systems to more sophisticated security threats. They can also result from internal compromises, such as human error, or malicious acts. While we employ a number of measures to prevent, detect, and mitigate these threats, there is no guarantee such efforts will be successful in preventing a cyber event. Arcosa will have to continually upgrade its network infrastructure to reduce the risk of such cyber events. Cybersecurity incidents could disrupt our business and compromise confidential information belonging to us and third parties.

Repercussions from terrorist activities or armed conflict could harm Arcosa’s business.

Terrorist activities, anti-terrorist efforts, and other armed conflict involving the U.S. or its interests abroad may adversely affect the U.S. and global economies, potentially preventing Arcosa from meeting its financial and other obligations. In particular, the negative impacts of these events may affect the industries in which Arcosa operates. This could result in delays in or cancellations of the purchase of Arcosa’s products or shortages in raw materials, parts, or components. Any of these occurrences could have a material adverse impact on Arcosa’s operating results, revenues, costs, and financial condition.

Arcosa’s inability to sufficiently protect Arcosa’s intellectual property rights could adversely affect Arcosa’s business.

Arcosa’s patents, copyrights, trademarks, trade secrets, and other intellectual property rights are important to Arcosa’s success. Arcosa relies on patent, copyright, and trademark law, and trade secret protection and confidentiality and/or license agreements with others to protect Arcosa’s intellectual property rights. Arcosa’s trademarks, service marks, copyrights, patents, and trade secrets may be exposed to market confusion, commercial abuse, infringement, or misappropriation and possibly challenged, invalidated, circumvented, narrowed, or declared unenforceable by countries where Arcosa’s products and services are made

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available, including countries where the laws may not protect Arcosa’s intellectual property rights as fully as in the U.S. Such instances could negatively impact Arcosa’s competitive position and adversely affect Arcosa’s business. Additionally, Arcosa could be required to incur significant expenses to protect its intellectual property rights.

Risks Related to the Separation.

Arcosa may not achieve some or all of the expected benefits of the Separation, and the Separation may adversely affect Arcosa’s business.

Arcosa may not be able to achieve the full strategic and financial benefits expected to result from the Separation, or such benefits may be delayed or not occur at all. The Separation is expected to provide the following benefits, among others:


•	allow Arcosa to more effectively pursue its own distinct operating priorities and strategies, enable Arcosa's management to pursue its own separate opportunities for long-term growth and profitability and to recruit, retain, and motivate employees pursuant to compensation policies which are appropriate for Arcosa's lines of business;


•	permit Arcosa to concentrate its financial resources solely on its own operations, providing greater flexibility to invest capital in its business in a time and manner appropriate for its distinct strategy and business needs; and


•	enable investors to evaluate the merits, performance, and future prospects of Arcosa's businesses and to invest in Arcosa separately based on these distinct characteristics.

Arcosa may not achieve these and other anticipated benefits for a variety of reasons, including, among others: (a) the transition to being a stand-alone public company has required and will continue to require significant amounts of management’s time and effort, which may divert management’s attention from operating and growing Arcosa’s business; (b) Arcosa’s stock price may be more susceptible to market fluctuations and other events particular to one or more of Arcosa’s products than if it were still a part of Trinity; and (c) Arcosa’s operational and financial profile changed such that Arcosa’s diversification of revenue sources diminished, and Arcosa’s results of operations, cash flows, working capital, and financing requirements may be subject to increased volatility than prior to the Separation. Additionally, Arcosa may experience unanticipated competitive developments, including changes in the conditions of Arcosa’s infrastructure-related businesses’ markets that could negate the expected benefits from the Separation. If Arcosa does not realize some or all of the benefits expected to result from the Separation, or if such benefits are delayed, the business, financial condition, results of operations, and cash flows of Arcosa could be adversely affected.

Arcosa has only operated as an independent, publicly-traded company since November 1, 2018, and its historical financial information for the periods prior to the Separation is not necessarily representative of the results that it would have achieved as a separate, publicly-traded company and therefore may not be a reliable indicator of its future results.

The historical information about Arcosa in this report includes Arcosa’s business as operated by and integrated with Trinity prior to the Separation. Arcosa’s historical financial information included in this report for the periods prior to the Separation is derived from the combined financial statements and accounting records of Trinity. Accordingly, such historical financial information included in this report does not necessarily reflect the financial condition, results of operations, or cash flows that Arcosa would have achieved as a separate, publicly-traded company during the periods presented prior to the Separation or those that Arcosa will achieve in the future primarily as a result of the factors described below:

•

Arcosa will need to make investments to replicate or outsource certain systems, infrastructure, and functional expertise after its Separation from Trinity. These initiatives to develop Arcosa’s independent ability to operate without access to Trinity’s existing operational and administrative infrastructure will be costly to implement. Arcosa may not be able to operate its business efficiently or at comparable costs, and its profitability may decline; and

•

Prior to the Separation, Arcosa relied upon Trinity for working capital requirements and other cash requirements, including in connection with Arcosa’s previous acquisitions. Subsequent to the Separation, Trinity no longer provides Arcosa with funds to finance Arcosa’s working capital or other cash requirements. Arcosa’s access to and cost of debt financing may be different from the historical access to and cost of debt financing under Trinity. Differences in access to and cost of debt financing may result in differences in the interest rate charged to Arcosa on financings, as well as the amounts of indebtedness, types of financing structures, and debt markets that may be available to Arcosa, which could have an adverse effect on Arcosa’s business, financial condition, results of operations, and cash flows.

For additional information about the past financial performance of Arcosa’s business and the basis of presentation of the historical combined financial statements of Arcosa’s business, see “Item 6. Selected Financial Data,” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as the Consolidated and Combined Financial Statements and accompanying Notes included elsewhere in this report.

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Trinity may fail to perform under various transaction agreements that were executed as part of the Separation or Arcosa may fail to have necessary systems and services in place when Trinity is no longer obligated to provide services under the various agreements.

The separation and distribution agreement and other agreements entered into in connection with the Separation determined the allocation of assets and liabilities between the companies following the Separation for those respective areas and include any necessary indemnifications related to liabilities and obligations. The transition services agreement provides for the performance of certain services for a period of time after the Separation. Arcosa is relying on Trinity to satisfy its performance and payment obligations under these agreements. If Trinity is unable to satisfy its obligations under these agreements, including its indemnification obligations, Arcosa could incur operational difficulties or losses.

If Arcosa does not have in place its own systems and services, and does not have agreements with other providers of these services when the transitional or other agreements terminate, or if Arcosa does not implement the new systems or replace Trinity’s services successfully, Arcosa may not be able to operate its business effectively, which could disrupt its business and have a material adverse effect on its business, financial condition, and results of operations. These systems and services may also be more expensive to install, implement and operate, or less efficient than the systems and services Trinity is expected to provide during the transition period.

Potential indemnification liabilities to Trinity pursuant to the separation and distribution agreement could materially and adversely affect Arcosa’s business, financial condition, results of operations, and cash flows.

The separation and distribution agreement, among other things, provides for indemnification obligations designed to make Arcosa financially responsible for certain liabilities that may exist relating to its business activities. If Arcosa is required to indemnify Trinity under the circumstances set forth in the separation and distribution agreement, Arcosa may be subject to substantial liabilities.

Arcosa may be subject to certain contingent liabilities of Trinity following the Separation.

There is the possibility that certain liabilities of Trinity could become Arcosa’s obligations. For example, under the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and the related rules and regulations, each corporation that was a member of the Trinity U.S. consolidated group during a taxable period or portion of a taxable period ending on or before the effective time of the distribution is jointly and severally liable for the U.S. federal income tax liability of the entire Trinity U.S. consolidated group for that taxable period. Consequently, if Trinity is unable to pay the consolidated U.S. federal income tax liability for a prior period, Arcosa could be required to pay the entire amount of such tax which could be substantial and in excess of the amount allocated to it under the tax matters agreement between it and Trinity. Other provisions of federal law establish similar liability for other matters, including laws governing tax-qualified pension plans as well as other contingent liabilities.

In connection with Arcosa’s Separation from Trinity, Trinity has agreed to indemnify Arcosa for certain liabilities. However, there can be no assurance that the indemnity will be sufficient to insure Arcosa against the full amount of such liabilities, or that Trinity’s ability to satisfy its indemnification obligation will not be impaired in the future.

Pursuant to the separation and distribution agreement, Trinity has agreed to indemnify Arcosa for certain pre-Separation liabilities. However, third parties could also seek to hold Arcosa responsible for liabilities that Trinity has agreed to retain, and there can be no assurance that the indemnity from Trinity will be sufficient to protect Arcosa against the full amount of such liabilities, or that Trinity will be able to fully satisfy its indemnification obligations. In addition, Trinity’s insurers may attempt to deny coverage to Arcosa for liabilities associated with certain occurrences of indemnified liabilities prior to the Separation.

If the distribution of shares of Arcosa, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, Arcosa's stockholders in the distribution and Trinity could be subject to significant tax liability and, in certain circumstances, Arcosa could be required to indemnify Trinity for material taxes pursuant to indemnification obligations under the tax matters agreement.

In connection with the distribution of shares of Arcosa, Trinity received (i) a private letter ruling from the IRS and (ii) an opinion of each of Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel to Trinity, and KPMG, tax advisor to Trinity, substantially to the effect that, among other things, the distribution, together with certain related transactions, qualifies as tax-free for U.S. federal income tax purposes under Sections 368(a)(1)(D) and 355 of the Code. The IRS ruling and the tax opinions rely on certain facts, assumptions, representations, and undertakings from Trinity and Arcosa, including those regarding the past and future conduct of the companies’ respective businesses and other matters, and the tax opinions rely on the IRS ruling. Notwithstanding the IRS ruling and the tax opinions, the IRS could determine that the distribution or any such related transaction is taxable if it determines that any of these facts, assumptions, representations, or undertakings are not correct or have been violated, or that the distribution should be taxable for other reasons, including if the IRS were to disagree with the conclusions in the tax opinions that are not covered by the IRS ruling.

If the distribution is determined to be taxable for U.S. federal income tax purposes, a stockholder of Trinity that has received shares of Arcosa common stock in the distribution would be treated as having received a distribution of property in an amount equal to the fair value of such Arcosa shares on the distribution date and could incur significant income tax liabilities. Such

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distribution would be taxable to such stockholder as a dividend to the extent of Trinity’s current and accumulated earnings and profits, including Trinity’s taxable gain, if any, on the distribution. Any amount that exceeded Trinity’s earnings and profits would be treated first as a non-taxable return of capital to the extent of such stockholder’s tax basis in its shares of Trinity stock, with any remaining amount being taxed as capital gain. Trinity would recognize a taxable gain in an amount equal to the excess, if any, of the fair market value of the shares of Arcosa common stock held by Trinity on the distribution date over Trinity’s tax basis in such shares.

Under the tax matters agreement between Trinity and Arcosa, Arcosa may be required to indemnify Trinity against any taxes imposed on Trinity that arise from the failure of the distribution to qualify as tax-free for U.S. federal income tax purposes within the meaning of Section 355 of the Code or the failure of certain related transactions to qualify for tax-free treatment, to the extent such failure to qualify is attributable to actions, events or transactions relating to Arcosa’s stock, assets or business or any breach of Arcosa’s representations, covenants or obligations under the tax matters agreement (or any other agreement Arcosa enters into in connection with the separation and distribution), the materials submitted to the IRS in connection with the request for the IRS ruling or the representation letters provided by Arcosa in connection with the tax opinions. Events triggering an indemnification obligation under the tax matters agreement include events occurring after the distribution that cause Trinity to recognize a gain under Section 355(e) of the Code. Such tax amounts could be significant, and Arcosa’s obligations under the tax matters agreement will not be limited by amount or subject to any cap. If Arcosa is required to indemnify Trinity under the circumstances set forth above or otherwise under the tax matters agreement, Arcosa may be subject to substantial liabilities, which could materially adversely affect its financial position.

Arcosa may not be able to engage in certain corporate transactions after the Separation.

To preserve the tax-free treatment to Trinity and its stockholders of the distribution and certain related transactions, under the tax matters agreement between Arcosa and Trinity, Arcosa will be restricted from taking any action following the distribution that prevents the distribution and related transactions from being tax-free for U.S. federal income tax purposes. Under the tax matters agreement, for the two-year period following the distribution, Arcosa will be prohibited, except in certain circumstances, from:


•	entering into any transaction resulting in the acquisition of 40 percent or more of its stock or substantially all of its assets, whether by merger or otherwise;


•	merging, consolidating, or liquidating;


•	issuing equity securities beyond certain thresholds;


•	repurchasing its capital stock unless certain conditions are met; and


•	ceasing to actively conduct its business.

These restrictions may limit Arcosa’s ability to pursue certain strategic transactions or other transactions that it may believe to be in the best interests of its stockholders or that might increase the value of its business. In addition, under the tax matters agreement, Arcosa will be required to indemnify Trinity against any such tax liabilities as a result of the acquisition of Arcosa’s stock or assets, even if Arcosa did not participate in or otherwise facilitate the acquisition.

The Separation and related internal restructuring transactions may expose Arcosa to potential liabilities arising out of state and federal fraudulent conveyance laws and legal dividend requirements.

The Separation could be challenged under various state and federal fraudulent conveyance laws. Fraudulent conveyances or transfers are generally defined to include transfers made or obligations incurred with the actual intent to hinder, delay, or defraud current or future creditors or transfers made or obligations incurred for less than reasonably equivalent value when the debtor was insolvent, or that rendered the debtor insolvent, inadequately capitalized or unable to pay its debts as they become due. An unpaid creditor or an entity acting on behalf of a creditor (including, without limitation, a trustee or debtor-in-possession in a bankruptcy by Trinity or Arcosa or any of their respective subsidiaries) may bring a lawsuit alleging that the Separation or any of the related transactions constituted a constructive fraudulent conveyance. If a court accepts these allegations, it could impose a number of remedies, including, without limitation, voiding the distribution and returning Arcosa’s assets or Arcosa’s shares and subject Trinity and/or Arcosa to liability.

The distribution of Arcosa common stock is also subject to state corporate distribution statutes. Under Delaware General Corporation Law (“DGCL”), a corporation may only pay dividends to its stockholders either (i) out of its surplus (net assets minus capital) or (ii) if there is no such surplus, out of its net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Although Trinity made the distribution of Arcosa common stock entirely out of surplus, Arcosa or Trinity cannot ensure that a court would reach the same conclusion in determining the availability of surplus for the separation and the distribution to Trinity’s stockholders.

Certain of Arcosa’s executive officers and directors may have actual or potential conflicts of interest because of their previous positions at Trinity.

Because of their former positions with Trinity, certain of Arcosa’s executive officers and directors own equity interests in Trinity. Although Arcosa’s Board of Directors consists of a majority of directors who are independent, and Arcosa’s executive officers who were former employees of Trinity ceased to be employees of Trinity upon the Separation, some of Arcosa’s executive officers

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and directors will continue to have a financial interest in shares of Trinity common stock. Continuing ownership of shares of Trinity common stock and equity awards could create, or appear to create, potential conflicts of interest if Arcosa and Trinity pursue the same corporate opportunities or face decisions that could have different implications for Trinity and Arcosa.

Arcosa may have received better terms from unaffiliated third parties than the terms it receives in its agreements with Trinity.

The agreements Arcosa entered into with Trinity in connection with the Separation, including the separation and distribution agreement, transition services agreement, tax matters agreement, intellectual property matters agreement, and employee matters agreement, were prepared in the context of Arcosa’s Separation from Trinity while Arcosa was still a wholly-owned subsidiary of Trinity. Accordingly, during the period in which the terms of those agreements were prepared, Arcosa did not have a board of directors or management team that was independent of Trinity. While the parties believe the terms reflect arm’s-length terms, there can be no assurance that Arcosa would not have received better terms from unaffiliated third parties than the terms it receives in its agreements with Trinity.

Risks Related to Arcosa Common Stock.

Arcosa’s stock price may fluctuate significantly.

We cannot predict the prices at which shares of Arcosa common stock may trade. The trading and market price of Arcosa common stock may fluctuate significantly due to a number of factors, some of which may be beyond Arcosa’s control, including:


•	Arcosa’s quarterly or annual earnings, or those of other companies in its industry;


•	actual or anticipated fluctuations in Arcosa’s operating results;


•	changes in earnings estimates by securities analysts or Arcosa’s ability to meet those estimates;


•	Arcosa’s ability to meet its forward looking guidance;


•	the operating and stock price performance of other comparable companies;


•	overall market fluctuations and domestic and worldwide economic conditions; and


•	other factors described in these “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. Broad market and industry factors may materially harm the market price of Arcosa’s common stock, regardless of Arcosa’s operating performance. In the past, following periods of volatility in the market price of a company’s securities, shareholder derivative lawsuits and/or securities class action litigation has often been instituted against that company. Such litigation, if instituted against us, could result in substantial costs and a diversion of management’s attention and resources.

In addition, investors may have difficulty accurately valuing Arcosa common stock. Investors often value companies based on the stock prices and results of operations of other comparable companies. Investors may find it difficult to find comparable companies and to accurately value Arcosa common stock, which may cause the trading price of Arcosa common stock to fluctuate.

Future sales by us or our existing stockholders may cause our stock price to decline.

Any transfer or sales of substantial amounts of our common stock in the public market or the perception that such transfer or sales might occur may cause the market price of our common stock to decline, particularly when our trading volumes are low. As of January 15, 2020, we had a total of 48.3 million shares of our common stock issued and outstanding. Shares are generally freely tradeable without restriction or further registration under the Securities Act, except for shares owned by one of our “affiliates,” as that term is defined in Rule 405 under the Securities Act. Shares held by “affiliates” may be sold in the public market if registered or if they qualify for an exemption from registration under Rule 144. The sales of significant amounts of shares of our common stock or the perception in the market that this could occur may result in the lowering of the market price of our common stock.

Arcosa cannot guarantee the timing, amount, or payment of dividends on its common stock.

The timing, declaration, amount, and payment of future dividends to Arcosa’s stockholders falls within the discretion of Arcosa’s Board of Directors. The Board of Directors’ decisions regarding the payment of future dividends will depend on many factors, such as Arcosa’s financial condition, earnings, capital requirements, debt service obligations, covenants related to our debt service obligations, industry practice, legal requirements, regulatory constraints, and other factors that the Board of Directors deems relevant. Arcosa’s ability to pay future dividends will depend on its ongoing ability to generate cash from operations and access to the capital markets. Arcosa cannot guarantee that it will continue to pay any dividend in the future.

Your percentage of ownership in Arcosa may be diluted in the future.

Your percentage ownership in Arcosa may be diluted because of equity issuances for acquisitions, capital market transactions, or otherwise, including, without limitation, equity awards that Arcosa grants to its directors, officers, and employees.

In addition, Arcosa’s restated certificate of incorporation authorizes Arcosa to issue, without the approval of Arcosa’s stockholders, one or more classes or series of preferred stock having such designation, powers, preferences, and relative, participating, optional, and other special rights, including preferences over Arcosa common stock respecting dividends and distributions, as Arcosa’s Board of Directors generally may determine. The terms of one or more classes or series of preferred

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stock could dilute the voting power or reduce the value of Arcosa common stock. For example, Arcosa could grant the holders of preferred stock the right to elect some number of Arcosa’s directors in all events or on the happening of specified events or to veto specified transactions. Similarly, the repurchase or redemption rights or liquidation preferences Arcosa could assign to holders of preferred stock could affect the residual value of Arcosa common stock.

Certain provisions in Arcosa’s restated certificate of incorporation and amended and restated bylaws, and of Delaware law, may prevent or delay an acquisition of Arcosa, which could decrease the trading price of the common stock.

Arcosa’s restated certificate of incorporation, amended and restated bylaws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the bidder and to encourage prospective acquirers to negotiate with Arcosa’s Board of Directors rather than to attempt a hostile takeover. These provisions include, among others:


•	rules regarding how stockholders may present proposals or nominate directors for election at stockholder meetings;


•	the right of Arcosa’s Board of Directors to issue preferred stock without stockholder approval;


•	the ability of Arcosa’s directors, and not stockholders, to fill vacancies (including those resulting from an enlargement of the Board of Directors) on Arcosa’s Board of Directors;


•	the initial division of Arcosa’s Board of Directors into three classes of directors, with each class serving a staggered term; and


•	a provision that directors serving on a classified board may be removed by stockholders only for cause.

In addition, Arcosa is subject to Section 203 of the DGCL. Section 203 provides that, subject to limited exceptions, persons that (without prior board approval) acquire, or are affiliated with a person that acquires, more than 15 percent of the outstanding voting stock of a Delaware corporation shall not engage in any business combination with that corporation, including by merger, consolidation or acquisitions of additional shares, for a three-year period following the date on which that person or its affiliate becomes the holder of more than 15 percent of the corporation’s outstanding voting stock.

Arcosa believes these provisions will protect its stockholders from coercive or otherwise unfair takeover tactics by requiring potential acquirers to negotiate with Arcosa’s Board of Directors and by providing Arcosa’s Board of Directors with more time to assess any acquisition proposal. These provisions are not intended to make Arcosa immune from takeovers. However, these provisions will apply even if the offer may be considered beneficial by some stockholders and could delay or prevent an acquisition that Arcosa’s Board of Directors determines is not in the best interests of Arcosa and its stockholders. These provisions may also prevent or discourage attempts to remove and replace incumbent directors.

In addition, an acquisition or further issuance of Arcosa’s stock could trigger the application of Section 355(e) of the Code. Under the tax matters agreement, Arcosa would be required to indemnify Trinity for the tax imposed under Section 355(e) of the Code resulting from an acquisition or issuance of Arcosa stock, even if Arcosa did not participate in or otherwise facilitate the acquisition, and this indemnity obligation might discourage, delay, or prevent a change of control that you may consider favorable.

Arcosa's restated certificate of incorporation and bylaws contain exclusive forum provisions that could limit an Arcosa stockholder’s ability to choose a judicial forum that it finds favorable for certain disputes with Arcosa or its directors, officers, stockholders, employees, or agents, and may discourage lawsuits with respect to such claims.

Arcosa’s restated certificate of incorporation and bylaws provide that unless the Board of Directors otherwise determines, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of Arcosa, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer, stockholder, employee, or agent of Arcosa to Arcosa or Arcosa’s stockholders, (iii) any action asserting a claim against Arcosa or any director, officer, stockholder, employee, or agent of Arcosa arising out of or relating to any provision of the DGCL or Arcosa’s restated certificate of incorporation or bylaws, or (iv) any action asserting a claim against Arcosa or any director, officer, stockholder, employee or agent of Arcosa governed by the internal affairs doctrine, in all cases subject to the court having subject matter jurisdiction and personal jurisdiction over an indispensable party named as a defendant. These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for such disputes and may discourage these types of lawsuits. Alternatively, if a court were to find the exclusive forum provisions inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, Arcosa may incur additional costs associated with resolving such matters in other jurisdictions.

Item 1B. Unresolved Staff Comments.

None.

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Item 2. Properties.

Arcosa’s corporate headquarters is located in Dallas, Texas. We principally operate in various locations throughout the U.S. and in Mexico. Our facilities are considered to be in good condition, well maintained, and adequate for our purposes. Information about the total square footage of our facilities as of December 31, 2019 is as follows:



	Approximate Square Feet⁽¹⁾		Approximate Square Feet Located In⁽¹⁾
	Owned	Leased	US	Mexico	Canada
Construction Products Group	580,100	119,500	648,500	—	51,100
Energy Equipment Group	2,270,000	472,800	1,710,300	1,032,500	—
Transportation Products Group	1,761,400	116,300	1,877,700	—	—
Corporate	—	24,600	24,600	—	—
	4,611,500	733,200	4,261,100	1,032,500	51,100

⁽¹⁾ Excludes non-operating facilities.

In our Construction Products Group, the Company, through its subsidiaries, operates 37 quarries in 11 states as of December 31, 2019, including 23 which produce and distribute natural aggregates and 14 which produce, process, and distribute specialty materials, all of which we believe have adequate road and/or railroad access. The Company estimates proven and probable aggregate reserves based on the results of drill sampling and geological analysis. For a description of quarry locations, products, and customers, please refer to Item 1. "Business - Our Segments - Construction Products Group."

Proven reserves are those for which the quantity, grade and quality are computed from dimensions revealed in outcrops, trenches, workings or drill holes. The grade and quality of proven reserves are computed from results of detailed sampling, and the sampling and measurement data are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well established. Probable reserves are those for which the quantity, grade and quality are computed from information similar to that used for proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation.

The Company's estimated reserves include recoverable material excluding reserves not available due to property boundaries, set-backs, and plant configurations. Estimated reserves include only quantities that are owned in fee or under lease, and for which all appropriate zoning and permitting have been obtained. The Company's reserve estimation processes are consistent across both its aggregates and specialty materials facilities. During the year ended December 31, 2019, no individual quarry or location accounted for more than 5% of Arcosa's consolidated revenues. Substantially all of our materials are internally sourced.

As of December 31, 2019, the Company estimates its proven and probable reserves as follows:



	Number of Facilities	Estimated Proven and Probable Reserves ⁽¹⁾ (thousand tons)	Percentage of Reserves		2019 Production (thousand tons)
	Number of Facilities	Estimated Proven and Probable Reserves ⁽¹⁾ (thousand tons)	Owned	Leased	2019 Production (thousand tons)
Natural aggregates	23	323,900	57%	43%	9,800
Specialty materials	14	608,800	67%	33%	6,300
Total	37	932,700	63%	37%	16,100

⁽¹⁾ Reserve estimates are based on various assumptions and any material inaccuracies in these assumptions could have a material impact on the accuracy of our reserve estimates.

Our estimated weighted average production capacity utilization for the twelve month period ended December 31, 2019 is reflected by the following percentages:



	Production Capacity Utilized⁽¹⁾
Construction Products Group⁽²⁾	70	%
Energy Equipment Group	75	%
Transportation Products Group⁽³⁾	55	%

⁽¹⁾ Excludes non-operating facilities.

⁽²⁾ Includes processing facilities and quarries.

⁽³⁾ Includes impact of re-opening of a previously idled barge manufacturing facility.

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Item 3. Legal Proceedings.

Arcosa is, from time to time, a party to various legal actions and claims incidental to its business, including those arising out of commercial disputes, alleged product defect and/or warranty claims, intellectual property matters, personal injury claims, environmental issues, employment and/or workplace-related matters, and various governmental regulations. It is the opinion of Arcosa that the outcome of such matters will not have a material adverse impact on the consolidated financial position, results of operations or cash flows of Arcosa.

On July 22, 2019, the Company was served with a breach of contract lawsuit filed by Thomas & Betts Corporation (“T&B”) against the Company and its wholly-owned subsidiary, Trinity Meyer Utility Structures, LLC, now known as Meyer Utility Structures, LLC (“Meyer”), in the Supreme Court of the State of New York, New York County. T&B’s claims relate to responsibility for alleged product warranty claims pursuant to the terms of the Asset Purchase Agreement, dated June 24, 2014, entered into by and between T&B and Meyer (the “APA”) with respect to Meyer’s purchase of certain assets of T&B’s utility structure business. The Company and Meyer subsequently removed the litigation to federal court. The case is currently pending under Case No. 1:19-cv-07829-PAE; Thomas & Betts Corporation, now known as, ABB Installation Products, Inc., Plaintiff, v. Trinity Meyer Utility Structures, LLC, formerly known as McKinley 2014 Acquisition, LLC, and Arcosa, Inc., Defendants; In the United States District Court for the Southern District of New York. The Company and Meyer have filed a motion to dismiss T&B’s claims, and an Answer and Counterclaims against T&B. We intend to vigorously defend ourselves in this matter.

See Note 15 of the Consolidated and Combined Financial Statements for further information regarding legal proceedings.

Item 4. Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this Form 10-K.

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PART II

Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Shares of our common stock are listed on the New York Stock Exchange under the ticker symbol “ACA,” which began “regular-way” trading on November 1, 2018 immediately following the Separation. Our transfer agent and registrar is American Stock Transfer & Trust Company.

Holders

At December 31, 2019, we had 1,542 record holders of common stock. Because many of our shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these recordholders.

Performance Graph

The following Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that the Company specifically incorporates it by reference into such filing.

The following graph compares the Company's cumulative total stockholder return from November 1, 2018 (beginning of “regular-way” trading) through December 31, 2019 with the S&P Small Cap 600 Index and the S&P Small Cap 600 Construction & Engineering Industry Index. The data in the graph assumes $100 was invested in each index at the closing price on November 1, 2018 and assumes the reinvestment of dividends.



	11/1/2018		12/31/2018		12/31/2019
Arcosa, Inc.	$	100	$	101	$	163
S&P Small Cap 600 Index	$	100	$	88	$	107
S&P Small Cap 600 Construction & Engineering Industry Index	$	100	$	87	$	115

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Issuer Purchases of Equity Securities N EED

This table provides information with respect to purchases by the Company of shares of its common stock during the quarter ended December 31, 2019:



Period	Number of Shares Purchased ⁽¹⁾	Average Price Paid per Share ⁽¹⁾		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs ⁽²⁾	Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs⁽²⁾
October 1, 2019 through October 31, 2019	2,159	$	34.34	—	$	36,025,126
November 1, 2019 through November 30, 2019	158	$	38.55	—	$	36,025,126
December 1, 2019 through December 31, 2019	2,841	$	45.07	—	$	36,025,126
Total	5,158	$	40.38	—	$	36,025,126


⁽¹⁾	These columns include the following transactions during the three months ended December 31, 2019: (i) the surrender to the Company of 5,158 shares of common stock to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees and (ii) the purchase of 0 shares of common stock on the open market as part of the stock repurchase program.


⁽²⁾	In December 2018, the Company’s Board of Directors authorized a $50 million share repurchase program that expires December 31, 2020.

Item 6. Selected Financial Data.

The following financial information for the five years ended December 31, 2019 has been derived from our Consolidated and Combined Financial Statements. This information should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated and Combined Financial Statements and notes thereto included elsewhere herein.

The selected historical consolidated and combined financial information as of December 31, 2019, 2018, 2017, and 2016 and for the years ended December 31, 2019, 2018, 2017, 2016, and 2015 has been derived from Arcosa’s audited Consolidated and Combined Financial Statements. The selected historical combined financial information as of December 31, 2015 has been derived from Trinity’s underlying financial records and, in the opinion of Arcosa’s management, has been prepared on the same basis as the information included in the table derived from Arcosa’s audited Consolidated and Combined Financial Statements.

The selected historical combined financial data includes expenses of Trinity that were allocated to Arcosa for certain corporate functions including information technology, finance, legal, insurance, compliance, and human resources activities. These costs may not be representative of the future costs we will incur as an independent, publicly-traded company.

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	Year Ended December 31,
	2019		2018		2017		2016		2015
	(in millions, except per share data)
Statement of Operations Data:
Revenues	$	1,736.9	$	1,460.4	$	1,462.4	$	1,704.0	$	2,140.4
Income before income taxes	146.8		95.0		130.1		197.2		219.2
Provision for income taxes	33.5		19.3		40.4		74.2		84.2
Net income	$	113.3	$	75.7	$	89.7	$	123.0	$	135.0

Net income per common share:
Basic	$	2.34	$	1.55	$	1.84	$	2.52	$	2.77
Diluted	$	2.32	$	1.54	$	1.84	$	2.52	$	2.77

Weighted average number of shares outstanding⁽¹⁾:
Basic	47.9		48.8		48.8		48.8		48.8
Diluted	48.4		48.9		48.8		48.8		48.8
Dividends declared per common share	$	0.20	$	0.05	$	—	$	—	$	—

Balance Sheet Data:
Total assets	$	2,302.5	$	2,172.2	$	1,602.5	$	1,526.3	$	1,603.7
Debt	$	107.3	$	185.5	$	0.5	$	—	$	0.5

⁽¹⁾ For periods prior to the Separation, the denominator for basic and diluted net income per common share was calculated using the 48.8 million shares of common stock outstanding immediately following the Separation.

The Tax Cuts and Jobs Act (the "Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. For the year ended 2017, we recognized a provisional benefit of $6.2 million. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Act and recorded an additional $1.5 million benefit, primarily as a result of the true-up of our deferred taxes.

On January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” (ASU 2014-09) which provides common revenue recognition guidance for U.S. generally accepted accounting principles. The primary impact of the adoption of ASU 2014-09 is a change in the timing of revenue recognition for our wind towers and certain utility structure product lines within our Energy Equipment Group. Previously, the Company recognized revenue when the product was delivered. Under ASU 2014-09, revenue is recognized over time as the products are manufactured. Revenue recognition policies in our other business segments remain substantially unchanged. See Note 1 “Overview and Summary of Significant Accounting Policies” of the Notes to Consolidated and Combined Financial Statements included in this report for further details.

Arcosa’s goodwill was tested for impairment at the reporting unit level for each of the five years in the period ended December 31, 2019. Accordingly, we determined that the goodwill associated with certain operations included in the Energy Equipment Group was impaired in its entirety and recorded a pre-tax impairment charge of $89.5 million for the year ended December 31, 2015. See Note 6 “Goodwill” of the Notes to Consolidated and Combined Financial Statements.

During the fourth quarter of 2018, the Company completed the divestiture of certain businesses whose revenues were included in the Other component of the Energy Equipment Group. The net proceeds from these divestitures were not significant. Prior to the sales, the Company recognized a pre-tax impairment charge of $23.2 million in 2018 on these businesses.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity, and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

•Separation from Trinity

•Basis of Historical Presentation

•Executive Overview

•Results of Operations

•Liquidity and Capital Resources

•Contractual Obligations and Commercial Commitments

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

•Forward-Looking Statements

Our MD&A should be read in conjunction with our Consolidated and Combined Financial Statements and related Notes in Item 8, "Financial Statements and Supplementary Data," of this Annual Report on Form 10-K.

Separation from Trinity

Arcosa, Inc. (“Arcosa,” the “Company,” “we,” or “our”) is a Delaware corporation and was incorporated in 2018 in connection with the separation of Arcosa from Trinity Industries, Inc. (“Trinity” or “Former Parent”) on November 1, 2018 as an independent, publicly-traded company, listed on the New York Stock Exchange (the “Separation”). At the time of the Separation, Arcosa consisted of certain of Trinity’s former construction products, energy equipment, and transportation products businesses. The Separation was effectuated through a pro rata dividend distribution on November 1, 2018 of all of the then-outstanding shares of common stock of Arcosa to the holders of common stock of Trinity as of October 17, 2018, the record date for the distribution. Trinity stockholders received one share of Arcosa common stock for every three shares of Trinity common stock held as of the record date. The transaction was structured to be tax-free to both Trinity and Arcosa stockholders for U.S. federal income tax purposes.

Basis of Historical Presentation

The accompanying Consolidated and Combined Financial Statements present our historical financial position, results of operations, comprehensive income/loss, and cash flows in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The combined financial statements for periods prior to the Separation were derived from Trinity’s consolidated financial statements and accounting records and prepared in accordance with GAAP for the preparation of carved-out combined financial statements. Through the date of the Separation, all revenues and costs as well as assets and liabilities directly associated with Arcosa have been included in the combined financial statements. Prior to the Separation, the combined financial statements also included allocations of certain selling, general, and administrative expenses provided by Trinity to Arcosa and allocations of related assets, liabilities, and the Former Parent’s net investment, as applicable. The allocations were determined on a reasonable basis; however, the amounts are not necessarily representative of the amounts that would have been reflected in the financial statements had the Company been an entity that operated independently of Trinity during the applicable periods. Related party allocations prior to the Separation, including the method for such allocation, are described further in Note 1, “Overview and Summary of Significant Accounting Policies” to the Consolidated and Combined Financial Statements.

Following the Separation, the consolidated financial statements include the accounts of Arcosa and those of our wholly-owned subsidiaries and no longer include any allocations from Trinity. Trinity continues to provide some general and administrative functions on a transitional basis for a fee following the Separation. Such functions were minimal as of December 31, 2019.

Executive Overview

Financial Operations and Highlights


•	Revenues for the year ended December 31, 2019 grew 18.9% to $1.7 billion compared to the year ended December 31, 2018 primarily due to the impact of the ACG acquisition in our Construction Products Group, higher unit volumes and prices in our Energy Equipment Group, and higher tank barge volumes in our Transportation Products Group.


•	Operating profit for year ended December 31, 2019 totaled $152.9 million, representing an increase of 61.1% compared to the year ended December 31, 2018 primarily driven by increased revenues in all segments, operating improvements in our Energy Equipment Group, and certain other charges recognized in the prior period including an impairment charge of $23.2 million related to divested businesses.

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•	Selling, general, and administrative expenses increased by 16.6% for the year ended December 31, 2019, when compared to the prior year largely due to additional costs from the acquired ACG business, incremental standalone costs related to the replacement of services and fees previously provided or incurred by Trinity, as well as other standalone public company costs.


•	The effective tax rate for the year ended December 31, 2019 was 22.8% compared to 20.3% for the year ended December 31, 2018. See Note 10, “Income Taxes” to the Consolidated and Combined Financial Statements.


•	Net income for the year ended December 31, 2019 was $113.3 million compared with $75.7 million for the year ended December 31, 2018.

Recent Developments

On January 6, 2020, Arcosa completed the acquisition of Cherry, a leading producer of natural and recycled aggregates in the Houston, Texas market for approximately $298 million. The acquisition of Cherry broadens our geographic presence, adding 12 Houston locations to Arcosa’s existing 20 active aggregate and specialty materials locations in Texas, provides us a new complementary product line of recycled aggregates, a growing product category due to resource scarcity and ESG benefits, and offers a platform for additional growth in natural and recycled aggregates. The purchase was funded with a combination of cash on-hand and advances under a new $150 million five-year term loan. See Note 2 and Note 7 to the Consolidated and Combined Financial Statements.

Unsatisfied Performance Obligations (Backlog)

As of December 31, 2019 and 2018 our backlog of firm orders was as follows:



	December 31, 2019		December 31, 2018
	(in millions)
Energy Equipment Group:
Wind towers and utility structures	$	596.8	$	633.1
Other	$	36.2	$	55.1

Transportation Products Group:
Inland barges	$	346.9	$	230.5

Approximately 86% percent of unsatisfied performance obligations for our wind towers and utility structures in our Energy Equipment Group are expected to be delivered during the year ending 2020 with the remainder to be delivered in 2021. All of the unsatisfied performance obligations for our other business lines in our Energy Equipment Group are expected to be delivered during the year ending 2020. All of the unsatisfied performance obligations for barges in our Transportation Products Group are expected to be delivered during the year ending 2020.

Results of Operations

The following discussion of Arcosa’s results of operations should be read in connection with “Forward-Looking Statements” and “Risk Factors”. These items provide additional relevant information regarding the business of Arcosa, its strategy and various industry conditions which have a direct and significant impact on Arcosa’s results of operations, as well as the risks associated with Arcosa’s business.

Overall Summary

Revenues



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	($ in millions)
Construction Products Group	$	439.7		$	292.3		$	258.9		50.4	%	12.9	%
Energy Equipment Group	836.6			780.1			844.1			7.2		(7.6	)
Transportation Products Group	465.7			391.4			363.3			19.0		7.7
Segment Totals before Eliminations	1,742.0			1,463.8			1,466.3			19.0		(0.2	)
Eliminations	(5.1		)	(3.4		)	(3.9		)	50.0		(12.8	)
Consolidated and Combined Total	$	1,736.9		$	1,460.4		$	1,462.4		18.9		(0.1	)%

2019 versus 2018


•	Revenues grew by 18.9% with all segments contributing to the increase.


•	Revenues from our Construction Products Group increased primarily due to the impact of the ACG acquisition.

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•	In our Energy Equipment Group, revenues increased primarily driven by higher volumes in wind towers and higher pricing levels in utility structures.


•	Revenues from our Transportation Products Group increased primarily due to higher tank barge volumes partially offset by lower contractual pricing and decreased volumes in steel components.

2018 versus 2017


•	Revenues were essentially flat in 2018 as lower volumes in our Energy Equipment Group were largely offset by increased volumes in both the Construction Products and Transportation Products Groups.


•	Revenues from our Construction Products Group increased primarily due to the impact of acquisitions completed in 2018 and 2017 in both our construction aggregates and other product lines.


•	In our Energy Equipment Group, revenues decreased primarily due to a planned reduction of volumes in our wind towers product line partially offset by an increase in revenues from our other product lines.


•	Revenues from our Transportation Products Group increased primarily due to increased volumes in both our inland barge and steel components product lines.

Operating Costs

Operating costs are comprised of cost of revenues; selling, general, and administrative expenses; impairment charges; and gains or losses on property disposals.



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	(in millions)
Construction Products Group	$	387.0		$	241.9		$	205.2		60.0	%	17.9	%
Energy Equipment Group	735.9			751.5			765.7			(2.1	)	(1.9	)
Transportation Products Group	418.9			343.0			324.3			22.1		5.8
All Other	—			0.1			0.1
Segment Totals before Eliminations and Corporate Expenses	1,541.8			1,336.5			1,295.3			15.4		3.2
Corporate	47.3			32.1			39.3			47.4		(18.3	)
Eliminations	(5.1		)	(3.1		)	(3.9		)	64.5		(20.5	)
Consolidated and Combined Total	$	1,584.0		$	1,365.5		$	1,330.7		16.0		2.6

2019 versus 2018


•	Operating costs increased 16.0%.


•	The increase in our Construction Products Group was primarily due to the acquired ACG business as well as increased volumes in our legacy businesses.


•	Operating costs for the Energy Equipment Group decreased primarily due to an impairment charge and the elimination of operating losses from divested businesses in 2018, partially offset by higher volumes in 2019.


•	Operating costs for the Transportation Products Group increased due to higher tank barge volumes and start-up costs incurred related to the re-opening of a previously idled barge facility, partially offset by lower steel component volumes.

•

Total selling, general, and administrative expenses increased 16.6% largely due to additional costs from the acquired ACG business, incremental standalone costs related to the replacement of services and fees previously provided or incurred by Trinity, and other standalone public company costs. As a percentage of revenue, selling, general, and administrative expenses for the year ended December 31, 2019 was 10.3% compared to 10.5% for the year ended December 31, 2018.

2018 versus 2017


•	Operating costs increased 2.6%.


•	The increase in operating costs in our Construction Products Group was primarily due to the impact of businesses acquired in 2018 and 2017 in both our construction aggregates and other product lines.


•	Operating costs for the Energy Equipment Group were lower primarily due to a planned reduction in volumes in our wind tower product line, partially offset by an impairment charge of $23.2 million recorded in 2018 on businesses that were subsequently divested.


•	Operating costs for the Transportation Products Group were higher due to increased volumes in our inland barge and steel components product lines.


•	Total selling, general, and administrative expenses decreased 5.6%, primarily due to lower compensation-related expenses.

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Operating Profit (Loss)



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	(in millions)
Construction Products Group	$	52.7		$	50.4		$	53.7		4.6	%	(6.1	)%
Energy Equipment Group	100.7			28.6			78.4			252.1		(63.5	)
Transportation Products Group	46.8			48.4			39.0			(3.3	)	24.1
All Other	—			(0.1		)	(0.1		)
Segment Totals before Eliminations and Corporate Expenses	200.2			127.3			171.0			57.3		(25.6	)
Corporate	(47.3		)	(32.1		)	(39.3		)	47.4		(18.3	)
Eliminations	—			(0.3		)	—
Consolidated and Combined Total	$	152.9		$	94.9		$	131.7		61.1		(27.9	)

2019 versus 2018


•	Operating profit increased 61.1%.


•	Operating profit in the Construction Products Group increased 4.6% primarily due to higher volumes from the acquired ACG business.


•	Operating profit in our Energy Equipment Group increased significantly due to higher unit volumes in wind towers and higher pricing levels in utility structures as well as the elimination of operating losses from, and the incurrence of an impairment charge related to, businesses divested in 2018.


•	Operating profit in our Transportation Products Group decreased 3.3% primarily due to reduced volumes and lower contractual pricing for steel components as well as start-up costs incurred toward the re-opening of a previously idled barge facility, partially offset by higher tank barge volumes.

2018 versus 2017


•	Our operating profit decreased 27.9%.


•	Operating profit in the Construction Products Group decreased primarily due to lower volumes in our legacy construction aggregates businesses and increased costs related to the fair value markup of acquired inventory.


•	Operating profit in our Energy Equipment Group decreased as a result of a planned reduction in volumes in our wind towers product line and the impact of a $23.2 million impairment charge on businesses that were subsequently divested.


•	Operating profit in our Transportation Products Group increased due to increased volumes in our inland barge and steel components product lines.

For a further discussion of revenues, costs, and the operating results of individual segments, see Segment Discussion below.

Other Income and Expense

Other, net (income) expense consists of the following items:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Interest income	$	(1.4	)	$	(0.4	)	$	(0.1	)
Foreign currency exchange transactions	1.5			(0.2		)	2.2
Other	(0.8		)	(0.4		)	(0.5		)
Other, net (income) expense	$	(0.7	)	$	(1.0	)	$	1.6

Income Taxes

The income tax provision for the years ended December 31, 2019, 2018, and 2017 was $33.5 million, $19.3 million, and $40.4 million, respectively. The effective tax rate for the years ended December 31, 2019, 2018, and 2017 was 22.8%, 20.3%, and 31.1%, respectively. The effective tax rates differ from the federal tax rates of 21.0%, 21.0%, and 35.0%, respectively, due to the impact of the Act, state income taxes, excess tax deficiencies (benefits) related to equity compensation, and the impact of foreign tax benefits.

See Note 10 of the Notes to Consolidated and Combined Financial Statements for a further discussion of income taxes.

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Segment Discussion

Construction Products Group



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	($ in millions)
Revenues:
Construction aggregates	$	364.7		$	217.9		$	204.9		67.4	%	6.3	%
Other	75.0			74.4			54.0			0.8		37.8
Total revenues	439.7			292.3			258.9			50.4		12.9

Operating costs:
Cost of revenues	342.2			212.6			178.6			61.0		19.0
Selling, general, and administrative expenses	44.8			29.3			26.6			52.9		10.2
Operating profit	$	52.7		$	50.4		$	53.7		4.6		(6.1	)
Operating profit margin	12.0		%	17.2		%	20.7		%

Depreciation, depletion, and amortization	$	38.0		$	21.9		$	18.4		73.5		19.0

2019 versus 2018


•	Revenues increased 50.4%, driven by the acquisition of ACG, which increased revenues by approximately 50%. In our legacy construction aggregates businesses, increased volumes were substantially offset by lower average selling prices, largely in our natural aggregates business in the Dallas-Fort Worth, Texas market area.


•	Cost of revenues increased 61.0%, primarily due to the acquired ACG business as well as increased volumes in our legacy construction aggregates businesses.


•	Selling, general, and administrative expenses increased 52.9% primarily due to additional costs from the acquired ACG business.


•	Operating profit increased primarily due to the acquired ACG business. Operating margin decreased reflecting the change in product mix as a result of the addition of the ACG business, which has lower margins than the legacy businesses, as well as lower average selling prices in the legacy natural aggregates business.


•	Depreciation, depletion, and amortization expense increased primarily due to the acquired ACG business.

2018 versus 2017


•	Revenues and cost of revenues increased 12.9% and 19.0%, respectively, primarily due to revenues attributable to acquisitions completed in 2017 in both the lightweight aggregates and the trench shoring businesses and the December 2018 acquisition of ACG.


•	Selling, general, and administrative expenses increased 10.2% primarily due to the acquired businesses.


•	Operating profit and margin decreased primarily due to lower volumes in our legacy construction aggregates businesses and increased costs related to the fair value markup of acquired inventory.

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Energy Equipment Group



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	($ in millions)
Revenues:
Wind towers and utility structures	$	625.4		$	582.9		$	652.1		7.3	%	(10.6	)%
Other	211.2			197.2			192.0			7.1		2.7
Total revenues	836.6			780.1			844.1			7.2		(7.6	)

Operating costs:
Cost of revenues	670.6			658.3			691.7			1.9		(4.8	)
Selling, general, and administrative expenses	65.3			70.0			74.0			(6.7	)	(5.4	)
Impairment charge	—			23.2			—
Operating profit	$	100.7		$	28.6		$	78.4		252.1		(63.5	)
Operating profit margin	12.0		%	3.7		%	9.3		%

Depreciation and amortization	$	27.9		$	29.7		$	30.2		(6.1	)	(1.7	)

2019 versus 2018


•	Revenues increased 7.2%, driven primarily by higher unit volumes in wind towers and higher pricing levels in utility structures. Revenues from other product lines, which include results primarily from our storage and distribution tanks, also increased due to higher volumes and pricing levels, partially offset by the elimination of revenues from businesses divested in 2018.


•	Cost of revenues increased 1.9%, due primarily to higher overall volumes. The increase was partially offset by the elimination of costs from divested businesses, as well as a $6.1 million finished goods inventory write-off recognized in 2018 related to an order for a single customer in our utility structures business.


•	Selling, general, and administrative expenses decreased 6.7% primarily due to the elimination of costs from divested businesses and a $2.9 million recovery of bad debt related to a single customer in our utility structures business.

2018 versus 2017


•	Revenues decreased 7.6% primarily due to a planned reduction of volumes in our wind towers product line, partially offset by an increase in revenues from other product lines as a result of higher volumes in our storage tanks business.


•	Cost of revenues decreased 4.8% due to lower volumes in our wind tower product line, partially offset by a $6.1 million finished goods inventory write-off related to an order for a single customer in our utility structures business.


•	Decreases in revenues and cost of revenues were also partially offset by the required adoption of ASU 2014-09, which impacts the timing of revenue recognition in our wind towers and certain utility structures product lines. See Note 1 of the Notes to Consolidated and Combined Financial Statements for further discussion of the impact of this required change in accounting policy.


•	Selling, general, and administrative expenses decreased 5.4% primarily due to bad debt expense related to a single customer recognized in 2017.


•	Operating profit in 2018 was also negatively impacted by a $23.2 million impairment charge on businesses that were subsequently divested.

Unsatisfied Performance Obligations (Backlog)

As of December 31, 2019, the backlog for wind towers and utility structures was $596.8 million compared to $633.1 million as of December 31, 2018. Approximately 86% of our structural wind towers and utility structures backlog is expected to be delivered during the year ending December 31, 2020 with the remainder to be delivered in 2021. Future wind tower orders are subject to uncertainty as PTC eligibility for new wind farm projects is scheduled to expire at the end of 2020 and the level of credit phases out after 2024. Pricing of orders and individual order quantities reflect a market transitioning from PTC incentives. As of December 31, 2019, the backlog for our other business lines in our Energy Equipment Group was $36.2 million, all of which is expected to be delivered during the year ending December 31, 2020.

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Transportation Products Group



	Year Ended December 31,									Percent Change
	2019			2018			2017			2019 versus 2018		2018 versus 2017
	($ in millions)
Revenues:
Inland barges	$	293.9		$	170.2		$	157.9		72.7	%	7.8	%
Steel components	171.8			221.2			205.4			(22.3	)	7.7
Total revenues	465.7			391.4			363.3			19.0		7.7

Operating costs:
Cost of revenues	396.8			320.5			301.2			23.8		6.4
Selling, general, and administrative expenses	22.1			22.5			23.1			(1.8	)	(2.6	)
Operating profit	$	46.8		$	48.4		$	39.0		(3.3	)	24.1
Operating profit margin	10.0		%	12.4		%	10.7		%

Depreciation and amortization	$	16.3		$	15.5		$	17.1		5.2		(9.4	)

2019 versus 2018


•	Revenues increased 19.0%, primarily driven by higher tank barge volumes but partially offset by lower contractual pricing and decreased volumes in steel components. Railcar component demand has declined as the North American industry outlook for new railcar builds has softened. The Company expects the decline to continue into 2020 unless the industry backlog for new railcars recovers.


•	Cost of revenues increased 23.8%, driven by higher tank barge volumes, partially offset by lower steel component volumes. Cost of revenues also increased $2.6 million due to start-up costs related to the re-opening of a previously idled barge manufacturing facility, which began delivering barges in the third quarter of 2019.


•	Selling, general, and administrative expenses were substantially unchanged.

2018 versus 2017


•	Revenues and cost of revenues increased 7.7% and 6.4%, respectively, primarily from higher volumes in both the inland barge and steel components product lines.


•	Selling, general, and administrative expenses decreased 2.6%.

Unsatisfied Performance Obligations (Backlog)

As of December 31, 2019, the backlog for inland barges was $346.9 million compared to $230.5 million as of December 31, 2018. All of the backlog for inland barges is expected to be delivered during the year ending December 31, 2020.

Corporate



	Year Ended December 31,						Percent Change
	2019		2018		2017		2019 versus 2018		2018 versus 2017
	($ in millions)
Corporate overhead costs	$	47.3	$	32.1	$	39.3	47.4	%	(18.3	)%

The increase in corporate overhead costs of 47.4% for the year ended December 31, 2019 compared to 2018 is primarily due to incremental standalone costs related to the replacement of services and fees previously provided or incurred by Trinity as well as other standalone public company costs.

The 18.3% decrease in corporate overhead costs for the year ended December 31, 2018 compared to 2017 is primarily due to lower compensation related expenses.

Corporate overhead costs prior to the Separation consist of costs not previously allocated to Trinity’s business units and have been allocated to Arcosa based on an analysis of each cost function and the relative benefits received by Arcosa for each of the periods using methods management believes are consistent and reasonable. See Note 1 of the Notes to Consolidated and Combined Financial Statements for further information.

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Liquidity and Capital Resources

Arcosa’s primary liquidity requirement consists of funding our business operations, including capital expenditures, working capital investment, and disciplined acquisitions. Our primary sources of liquidity include cash flow from operations, our existing cash balance, availability under the revolving credit facility, and, as necessary, the issuance of additional long-term debt or equity. To the extent we have available liquidity, we may also consider undertaking new capital investment projects, executing additional strategic acquisitions, returning capital to stockholders, or funding other general corporate purposes.

Revolving Credit Facility

On November 1, 2018, the Company entered into a $400.0 million unsecured revolving credit facility that matures in November 2023. The interest rates under the facility are variable based on LIBOR or an alternate base rate plus a margin. A commitment fee accrues on the average daily unused portion of the revolving facility. The margin for borrowing and commitment fee rate are determined based on Arcosa’s leverage as measured by a consolidated total indebtedness to consolidated EBITDA ratio. The margin for borrowing ranges from 1.25% to 2.00% and was set at LIBOR plus 1.25% as of December 31, 2019. The commitment fee rate ranges from 0.20% to 0.35% and was set at 0.20% at December 31, 2019. Borrowings under the credit facility are guaranteed by certain wholly-owned subsidiaries of the Company.

On January 2, 2020, the Company entered into an Amended and Restated Credit Agreement to increase the revolving credit facility from $400.0 million to $500.0 million and add a term loan facility of $150.0 million, in each case with a maturity date of January 2, 2025. The leverage-based mechanism for determining and the applicable ranges for both the interest rate margin and commitment fee rate are unchanged. The interest rate on the revolving credit facility was initially set at one-month LIBOR plus 1.50% and the interest rate on the term loan facility was initially set at three-month LIBOR plus 1.50%. The commitment fee rate on both facilities was initially set at 0.25%. The entire term loan was advanced on January 2, 2020 in connection with the closing of the acquisition of Cherry, leaving $357.5 million available for borrowing under the facility.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for each of the last three years:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Total cash provided by (required by):
Operating activities	$	358.8		$	118.5		$	162.0
Investing activities	(109.4		)	(364.5		)	(126.4		)
Financing activities	(108.4		)	338.6			(42.8		)
Net increase (decrease) in cash and cash equivalents	$	141.0		$	92.6		$	(7.2	)

2019 versus 2018

Operating Activities. Net cash provided by operating activities for the year ended December 31, 2019 was $358.8 million compared to $118.5 million for the year ended December 31, 2018.


•	The increase in cash flow provided by operating activities was primarily driven by increased earnings for the year ended December 31, 2019 and changes in current assets and liabilities.


•	The changes in current assets and liabilities resulted in a net source of cash of $132.6 million for the year ended December 31, 2019 compared to a net use of cash of $80.8 million for the year ended December 31, 2018. The increase was primarily driven by a reduction in receivables and increase in advance billings for our Energy Equipment and Transportation Products Groups.

Investing Activities. Net cash required by investing activities for the year ended December 31, 2019 was $109.4 million compared to $364.5 million for the year ended December 31, 2018.


•	Capital expenditures for the year ended December 31, 2019 were $85.4 million compared to $44.8 million for the year ended December 31, 2018.


•	Proceeds from the sale of property, plant, and equipment and other assets totaled $8.9 million for the year ended December 31, 2019 compared to $10.2 million for the year ended December 31, 2018.

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•	Cash paid for acquisitions, net of cash acquired, was $32.9 million for the year ended December 31, 2019 compared to $333.2 million for the year ended December 31, 2018.

Financing Activities. Net cash required by financing activities for the year ended December 31, 2019 was $108.4 million compared to $338.6 million of net cash provided by financing activities for the same period in 2018.


•	During the year ended December 31, 2019, the Company had repayments of advances under the Company's revolving credit facility of $80 million. During the year ended December 31, 2018, the Company had borrowings under the revolving credit facility of $180 million.


•	Dividends paid during the year ended December 31, 2019 were $9.9 million.


•	The Company paid $11.0 million during the year ended December 31, 2019 to repurchase common stock under the current share repurchase program compared to $3.0 million repurchased during the year ended December 31, 2018.

2018 versus 2017

Operating Activities. Net cash provided by operating activities for the year ended December 31, 2018 was $118.5 million compared to $162.0 million for the year ended December 31, 2017.


•	The decrease in cash flow provided by operating activities was primarily driven by lower operating profit.

•

The changes in current assets and liabilities resulted in a net use of cash of $80.8 million for the year ended December 31, 2018 compared to a net use of cash of $0.5 million for the year ended December 31, 2017. The change was primarily driven by the increase in receivables. While most of this increase relates to the timing of payments from trade receivables, approximately 10% of the increase is due to the recognition of receivables from the Former Parent which had previously been deemed settled in the period incurred in the historical combined financial statements.

Investing Activities. Net cash required by investing activities for the year ended December 31, 2018 was $364.5 million compared to $126.4 million for the year ended December 31, 2017.


•	Capital expenditures for the year ended December 31, 2018 were $44.8 million compared to $82.4 million for the year ended December 31, 2017.


•	Proceeds from the sale of property, plant, and equipment and other assets totaled $10.2 million for the year ended December 31, 2018 compared to $3.5 million for the year ended December 31, 2017.


•	Cash paid for acquisitions, net of cash acquired, was $333.2 million for the year ended December 31, 2018 compared to $47.5 million during for the year ended December 31, 2017. There was $3.3 million of divestiture activity for the year ended December 31, 2018. There was no divestiture activity for the year ended December 31, 2017.

Financing Activities. Net cash provided by financing activities during the year ended December 31, 2018 was $338.6 million compared to $42.8 million of net cash required by financing activities for the same period in 2017.


•	During the year ended December 31, 2018, we borrowed $180.0 million and retired $0.3 million in debt. During the year ended December 31, 2017, we retired $0.1 million in debt as scheduled.


•	We received a capital contribution of $200.0 million from Trinity during the year ended December 31, 2018.


•	Net transfers to Trinity totaled $34.5 million for the year ended December 31, 2018 compared with $43.0 million for the year ended December 31, 2017.

Other Investing and Financing Activities

Repurchase Program

In December 2018, the Company’s Board of Directors authorized a $50.0 million share repurchase program effective December 5, 2018 through December 31, 2020. For the year ended December 31, 2019, the Company repurchased 361,442 shares at a cost of $11.0 million. As of December 31, 2019, the Company had a remaining authorization of $36.0 million under the program. See Note 1 of the Notes to Consolidated and Combined Financial Statements.

Off-Balance Sheet Arrangements

As of December 31, 2019, we had letters of credit issued under our revolving credit facility in an aggregate principal amount of $42.5 million, all of which are expected to expire in 2020. The majority of our letters of credit obligations support the Company’s various insurance programs and warranty claims and generally renew by their terms each year. See Note 7 of the Notes to Consolidated and Combined Financial Statements.

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Derivative Instruments

In December 2018, the Company entered into an interest rate swap instrument, effective as of January 2, 2019 and expiring in 2023, to reduce the effect of changes in the variable interest rates associated with borrowings under the revolving credit facility. The instrument carried an initial notional amount of $100 million, thereby hedging the first $100 million of borrowings under the credit facility. The instrument effectively fixes the LIBOR component of the credit facility borrowings at a monthly rate of 2.71%. As of December 31, 2019, the Company has recorded a liability of $4.3 million for the fair value of the instrument, all of which is recorded in accumulated other comprehensive loss. See Note 3 and Note 7 of the Notes to Consolidated and Combined Financial Statements.

Stock-Based Compensation

We have a stock-based compensation plan for our directors, officers, and employees. See Note 13 of the Notes to Consolidated and Combined Financial Statements.

Employee Retirement Plans

In 2019, we sponsored an employee savings plan under the 401(k) plan that covered substantially all employees and included both a company matching contribution and an annual retirement contribution of up to 3% each of eligible compensation based on our performance, as well as a Supplemental Profit Sharing Plan. Both the annual retirement contribution and the company matching contribution are discretionary, requiring board approval, and made annually with the investment of the funds directed by the participants. The Company also contributed to a multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covered certain union-represented employees at one of our facilities. See Note 11 of the Notes to Consolidated and Combined Financial Statements.

Contractual Obligations and Commercial Commitments

As of December 31, 2019, we had the following contractual obligations and commercial commitments:



			Payments Due by Period
Contractual Obligations and Commercial Commitments	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
	(in millions)
Debt	$	100.0	$	—	$	—	$	100.0	$	—
Operating leases	22.7		6.4		6.6		3.7		6.0
Obligations for purchase of goods and services	168.9		138.8		25.0		5.1		—
Total	$	291.6	$	145.2	$	31.6	$	108.8	$	6.0

As of December 31, 2019 and 2018, we had $0.0 million and $0.5 million, respectively, of tax liabilities, including interest and penalties, related to uncertain tax positions. Because of the high degree of uncertainty regarding the timing of future cash outflows associated with these liabilities, we are unable to estimate the years in which settlement will occur with the respective taxing authorities. See Note 15 of the Notes to Consolidated and Combined Financial Statements.

Critical Accounting Policies and Estimates

MD&A discusses our Consolidated and Combined Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the 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.

On an on-going basis, management evaluates its estimates and judgments, including those related to bad debts, inventories, property, plant, and equipment, goodwill, income taxes, warranty obligations, insurance, contingencies, and litigation. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our Consolidated and Combined Financial Statements.

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Revenue Recognition

Revenue is measured based on the allocation of the transaction price in a contract to satisfied performance obligations. The transaction price does not include any amounts collected on behalf of third parties. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. The following is a description of principal activities from which the Company generates its revenue, separated by reportable segments. Payments for our products and services are generally due within normal commercial terms.

Construction Products Group

The Construction Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.

Energy Equipment Group

Within the Energy Equipment Group, revenue is recognized for our wind tower, certain utility structure, and certain storage tank product lines over time as the products are manufactured using an input approach based on the costs incurred relative to the total estimated costs of production. We recognize revenue over time for these products as they are highly customized to the needs of an individual customer resulting in no alternative use to the Company if not purchased by the customer after the contract is executed, and we have the right to bill the customer for our work performed to date plus at least a reasonable profit margin for work performed. For all other products, revenue is recognized when the customer has accepted the product and legal title of the product has passed to the customer.

Transportation Products Group

The Transportation Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.

Inventory

Inventories are valued at the lower of cost or net realizable value. Our policy related to excess and obsolete inventory requires an analysis of inventory at the business unit level on a quarterly basis and the recording of any required adjustments. In assessing the ultimate realization of inventories, we are required to make judgments as to future demand requirements and compare that with the current or committed inventory levels. It is possible that changes in required inventory reserves may occur in the future due to then current market conditions.

Long-lived Assets

We periodically evaluate the carrying value of long-lived assets to be held and used for potential impairment. The carrying value of long-lived assets to be held and used is considered impaired only when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the assets is less than their carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced by the estimated cost to dispose of the assets.

Goodwill

Goodwill is required to be tested for impairment annually, or on an interim basis whenever events or circumstances change indicating that the carrying amount of the goodwill might be impaired. The quantitative goodwill impairment test is a two-step process with step one requiring the comparison of the reporting unit’s estimated fair value with the carrying amount of its net assets. If necessary, step two of the impairment test determines the amount of goodwill impairment to be recorded when the reporting unit’s recorded net assets exceed its fair value. Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each unit with recorded goodwill. The estimates and judgments that most significantly affect the fair value calculations are assumptions, consisting of level three inputs, related to revenue and operating profit growth, discount rates, and exit multiples. Based on the Company's annual goodwill impairment test, performed at the reporting unit level as of December 31, 2019, the Company concluded that no impairment charges were determined to be necessary and that none of the reporting units evaluated were at risk of failing the first step of the goodwill impairment test. A reporting unit is considered to be at risk if its estimated fair value does not exceed the carrying value of its net assets by 10% or more. See Note 1 and Note 6 of the Notes to Consolidated and Combined Financial Statements.

Given the uncertainties of the economy and its potential impact on our businesses, there can be no assurance that our estimates and assumptions regarding the fair value of our reporting units, made for the purposes of the long-lived asset and goodwill impairment tests, will prove to be accurate predictions of the future. If our assumptions regarding forecasted cash flows are not achieved, it is possible that impairments of goodwill and long-lived assets may be required.

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Warranties

The Company provides various express, limited product warranties that generally range from one to five years depending on the product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been asserted by customers. Second, based on historical, accepted claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. The Company provides for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a quarterly basis.

Workers' Compensation

We are effectively self-insured for workers’ compensation claims. A third-party administrator processes all such claims. We accrue our workers’ compensation liability based upon independent actuarial studies. To the extent actuarial assumptions change and claims experience rates differ from historical rates, our liability may change.

Contingencies and Litigation

The Company is involved in claims and lawsuits incidental to our business. Based on information currently available with respect to such claims and lawsuits, including information on claims and lawsuits as to which the Company is aware but for which the Company has not been served with legal process, it is management’s opinion that the ultimate outcome of all such claims and litigation, including settlements, in the aggregate will not have a material adverse effect on the Company’s financial condition for purposes of financial reporting. However, resolution of certain claims or lawsuits by settlement or otherwise, could impact the operating results of the reporting period in which such resolution occurs.

Environmental

We are involved in various proceedings related to environmental matters. We have provided reserves to cover probable and estimable liabilities with respect to such proceedings, taking into account currently available information and our contractual recourse. However, estimates of future response costs are inherently imprecise. Accordingly, there can be no assurance that we will not become involved in future environmental litigation or other proceedings or, if we were found to be responsible or liable in any litigation or proceeding, that such costs would not be material to us.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases and other tax attributes using currently enacted tax rates. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in the provision for income taxes in the period that includes the enactment date. Management is required to estimate the timing of the recognition of deferred tax assets and liabilities, make assumptions about the future deductibility of deferred tax assets, and assess deferred tax liabilities based on enacted law and tax rates for the appropriate tax jurisdictions to determine the amount of such deferred tax assets and liabilities. Changes in the calculated deferred tax assets and liabilities may occur in certain circumstances including statutory income tax rate changes, statutory tax law changes, or changes in the structure or tax status of the Company. The Company assesses whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, the nature, frequency, and severity of recent losses; a forecast of future profitability; the duration of statutory carryback and carryforward periods; the Company’s experience with tax attributes expiring unused; and tax planning alternatives.

At December 31, 2019, the Company had $22.0 million federal consolidated net operating loss carryforwards, primarily from businesses acquired, and $0.6 million of tax-effected state loss carryforwards remaining. In addition, the Company had $36.9 million of foreign net operating loss carryforwards that will begin to expire in the year 2022. We have established a valuation allowance for state and foreign tax operating losses and credits that we have estimated may not be realizable.

At times, we may claim tax benefits that may be challenged by a tax authority. We recognize tax benefits only for tax positions more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

The Act was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, and created new taxes on certain foreign-sourced earnings. For the year ended December 31, 2017, we recognized a provisional benefit of $6.2 million. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Act and recorded an additional $1.5 million benefit, primarily as a result of the true-up of our deferred taxes.

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For periods prior to and including the Separation, income taxes as presented herein attribute current and deferred income taxes of the Company's standalone financial statements in a manner that is systematic, rational, and consistent with the asset and liability method prescribed by the Accounting Standards Codification Topic 740 — Income Taxes (“ASC 740”). Accordingly, Arcosa’s income tax provision has been prepared following the separate return method. The separate return method applies ASC 740 to the standalone financial statements of each member of the consolidated group as if the group member were a separate taxpayer and a standalone enterprise. As a result, actual tax transactions included in the consolidated financial statements of Trinity may not be included in the separate financial statements of Arcosa. Similarly, the tax treatment of certain items reflected in the separate financial statements of Arcosa may not be reflected in the consolidated financial statements and tax returns of Trinity; therefore, such items as net operating losses, credit carryforwards, and valuation allowances may exist in the standalone financial statements that may or may not exist in Trinity’s consolidated financial statements.

Recent Accounting Pronouncements

See Note 1 of the Notes to Consolidated and Combined Financial Statements for information about recent accounting pronouncements.

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Forward-Looking Statements

This annual report on Form 10-K (or statements otherwise made by the Company or on the Company’s behalf from time to time in other reports, filings with the Securities and Exchange Commission (“SEC”), news releases, conferences, internet postings or otherwise) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any statements contained herein that are not historical facts are forward-looking statements and involve risks and uncertainties. These forward-looking statements include expectations, beliefs, plans, objectives, future financial performances, estimates, projections, goals, and forecasts. Arcosa uses the words “anticipates,” “assumes,” “believes,” “estimates,” “expects,” “intends,” “forecasts,” “may,” “will,” “should,” and similar expressions to identify these forward-looking statements. Potential factors, which could cause our actual results of operations to differ materially from those in the forward-looking statements include, among others:


•	market conditions and customer demand for our business products and services;


•	the cyclical nature of the industries in which we compete;


•	variations in weather in areas where our construction products are sold, used, or installed;


•	naturally-occurring events and other events and disasters causing disruption to our manufacturing, product deliveries, and production capacity, thereby giving rise to an increase in expenses, loss of revenue, and property losses;


•	competition and other competitive factors;


•	our ability to identify, consummate, or integrate acquisitions of new businesses or products, including the Cherry acquisition;


•	the timing of introduction of new products;


•	the timing and delivery of customer orders or a breach of customer contracts;


•	the credit worthiness of customers and their access to capital;


•	product price changes;


•	changes in mix of products sold;


•	the costs incurred to align manufacturing capacity with demand and the extent of its utilization;


•	the operating leverage and efficiencies that can be achieved by our manufacturing businesses;


•	availability and costs of steel, component parts, supplies, and other raw materials;


•	changing technologies;


•	surcharges and other fees added to fixed pricing agreements for steel, component parts, supplies and other raw materials;


•	interest rates and capital costs;


•	counter-party risks for financial instruments;


•	long-term funding of our operations;


•	taxes;


•	the stability of the governments and political and business conditions in certain foreign countries, particularly Mexico;


•	changes in import and export quotas and regulations;


•	business conditions in emerging economies;


•	costs and results of litigation;


•	changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies;


•	legal, regulatory, and environmental issues, including compliance of our products with mandated specifications, standards, or testing criteria and obligations to remove and replace our products following installation or to recall our products and install different products manufactured by us or our competitors;


•	actions by the executive and legislative branches of the U.S. government relative to federal government budgeting, taxation policies, government expenditures, U.S. borrowing/debt ceiling limits, and trade policies, including tariffs and border closures;


•	the inability to sufficiently protect our intellectual property rights;


•	if the Company does not realize some or all of the benefits expected to result from the Separation, or if such benefits are delayed;


•	the Company's ongoing businesses may be adversely affected and subject to certain risks and consequences as a result of the Separation;


•	if the distribution of shares of Arcosa resulting from the Separation, together with certain related transactions, does not qualify as a transaction that is generally tax-free for U.S. federal income tax purposes, the Company's stockholders at the time of the distribution and the Company could be subject to significant tax liability; and


•	if the Separation does not comply with state and federal fraudulent conveyance laws and legal dividend requirements.

Any forward-looking statement speaks only as of the date on which such statement is made. Arcosa undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made. For a discussion of risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Item 1A, "Risk Factors" included elsewhere herein.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Our earnings could be affected by changes in interest rates due to the impact those changes have on our variable rate revolving credit facility. As of December 31, 2019, we had $100.0 million of outstanding loans borrowed under the facility. As our interest rate swap hedges the first $100 million of borrowings under the facility, these borrowings are fully hedged against any increases in interest rates as of the end of the year. In comparison, at December 31, 2018, we estimated that a 1% increase in interest rates would cause an increase in interest expense of approximately $0.8 million annually, after considering the effects of interest rate hedges.

In addition, we are subject to market risk related to our net investments in our foreign subsidiaries. The net investment in foreign subsidiaries as of December 31, 2019 was $162.0 million. The impact of such market risk exposures as a result of foreign exchange rate fluctuations has not been significant to Arcosa. See Note 9 of the Consolidated and Combined Financial Statements.

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Item 8. Financial Statements and Supplementary Data.

Arcosa, Inc.

Index to Financial Statements



	Page
Report of Independent Registered Public Accounting Firm	46
Consolidated and Combined Statements of Operations for the years ended December 31, 2019, 2018, and 2017	48
Consolidated and Combined Statements of Comprehensive Income for the years ended December 31, 2019, 2018, and 2017	49
Consolidated Balance Sheets as of December 31, 2019 and 2018	50
Consolidated and Combined Statements of Cash Flows for the years ended December 31, 2019, 2018, and 2017	51
Consolidated and Combined Statements of Stockholders' Equity for the years ended December 31, 2019, 2018, and 2017	52
Notes to Consolidated and Combined Financial Statements	53

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Arcosa, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arcosa, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated and combined statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “consolidated and combined financial statements”). In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2019, 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, 2019, 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 February 27, 2020 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 the Company’s 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 the critical audit matter does not alter in any way our opinion on the consolidated and combined 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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Valuation of Goodwill



Description of the Matter	At December 31, 2019, the Company’s goodwill was $621.9 million and represented 27% of total assets. As discussed in Note 1 of the financial statements, goodwill is required to be tested for impairment annually, or on an interim basis whenever events or circumstances change, indicating that the carrying amount of the goodwill might be impaired. Auditing management’s annual goodwill impairment test is complex due to the significant measurement uncertainty in determining the fair value of each reporting unit. In particular, the fair value estimates are sensitive to significant assumptions such as weighted average cost of capital, revenue growth rates, and projected operating margins, which are affected by expected future market or economic conditions. Our risk assessment for goodwill impairment considers the amount by which the estimated fair value of a reporting unit exceeds the carrying value of its net assets since the level of precision required for estimated fair value increases as the difference between the estimated fair value and the carrying value narrows.
How We Addressed the Matter in Our Audit	We tested controls over the Company’s goodwill impairment process for estimating the fair value of the Company’s reporting units. For example, we tested controls over management’s review of the valuation model and of the significant assumptions used to develop the prospective financial information, including management’s controls to validate that the data used in the valuation was complete and accurate. To test the fair value of the Company’s reporting units, our audit procedures included: (i) assessing the appropriateness of the methodology utilized by management to estimate fair value; (ii) assessing the significant assumptions used by management by comparing them to current industry and economic trends, considering changes in the Company’s business model, customer base or product mix and other relevant factors; (iii) performing sensitivity analyses of the significant assumptions; and (iv) reviewing the reconciliation of the fair value of the reporting units to the market capitalization of the Company and assessing the resulting control premium. In addition, we involved valuation specialists to assist us in evaluating the components and assumptions that are most significant to the fair value estimate.

/s/ ERNST & YOUNG LLP

We have served as the Company's auditor since 2015.

Dallas, Texas

February 27, 2020

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Operations



	Year Ended December 31,
	2019			2018			2017
	(in millions, except per share amounts)
Revenues	$	1,736.9		$	1,460.4		$	1,462.4
Operating costs:
Cost of revenues	1,404.5			1,188.4			1,167.7
Selling, general, and administrative expenses	179.5			153.9			163.0
Impairment charge	—			23.2			—
	1,584.0			1,365.5			1,330.7
Total operating profit	152.9			94.9			131.7

Interest expense	6.8			0.9			—
Other, net (income) expense	(0.7		)	(1.0		)	1.6
	6.1			(0.1		)	1.6
Income before income taxes	146.8			95.0			130.1
Provision (benefit) for income taxes:
Current	16.2			(3.1		)	30.1
Deferred	17.3			22.4			10.3
	33.5			19.3			40.4
Net income	$	113.3		$	75.7		$	89.7

Net income per common share:
Basic	$	2.34		$	1.55		$	1.84
Diluted	$	2.32		$	1.54		$	1.84
Weighted average number of shares outstanding⁽¹⁾:
Basic	47.9			48.8			48.8
Diluted	48.4			48.9			48.8
Dividends declared per common share	$	0.20		$	0.05		$	—

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Comprehensive Income



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Net income	$	113.3		$	75.7		$	89.7
Other comprehensive income (loss):
Derivative financial instruments:
Unrealized losses arising during the period, net of tax expense (benefit) of ($0.7), ($0.3), and $0.0	(2.8		)	(0.9		)	—
Reclassification adjustments for losses included in net income, net of tax expense (benefit) of ($0.1), $0.0, and $0.0	0.3			—			—
Currency translation adjustment:
Unrealized gains (losses) arising during the period, net of tax expense (benefit) of $0.0, ($0.3), and $0.0	0.5			—			(1.4		)
Reclassification adjustments for losses included in net income, net of tax expense (benefit) of $0.0, $0.0, and $0.0	—			3.0			—
	(2.0		)	2.1			(1.4		)
Comprehensive income	$	111.3		$	77.8		$	88.3

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated Balance Sheets



	December 31, 2019			December 31, 2018
	(in millions, except per share amounts)
ASSETS
Current assets:
Cash and cash equivalents	$	240.4		$	99.4
Receivables, net of allowance for doubtful accounts of $2.3 and $8.7	200.0			291.4
Inventories:
Raw materials and supplies	134.8			128.4
Work in process	41.7			33.3
Finished goods	106.8			90.8
	283.3			252.5
Other	33.5			24.1
Total current assets	757.2			667.4

Property, plant, and equipment, net	816.2			803.0
Goodwill	621.9			615.2
Deferred income taxes	14.3			6.9
Other assets	92.9			79.7
	$	2,302.5		$	2,172.2
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	90.0		$	86.2
Accrued liabilities	119.4			99.9
Advance billings	70.9			21.6
Current portion of long-term debt	3.7			1.8
Total current liabilities	284.0			209.5

Debt	103.6			183.7
Deferred income taxes	66.4			58.3
Other liabilities	58.1			36.2
	512.1			487.7
Stockholders’ equity:
Common stock, $0.01 par value – 200.0 shares authorized at December 31, 2019; 200.0 at December 31, 2018; 48.3 shares issued and outstanding at December 31, 2019; 48.8 at December 31, 2018	0.5			0.5
Capital in excess of par value	1,686.7			1,685.7
Retained earnings	122.9			19.5
Accumulated other comprehensive loss	(19.7		)	(17.7		)
Treasury stock – 0.0 shares at December 31, 2019; 0.1 at December 31, 2018	—			(3.5		)
	1,790.4			1,684.5
	$	2,302.5		$	2,172.2

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Cash Flows



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Operating activities:
Net income	$	113.3		$	75.7		$	89.7
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	85.8			67.6			65.7
Impairment charge	—			23.2			—
Stock-based compensation expense	14.6			9.9			9.0
Provision for deferred income taxes	17.3			22.4			10.3
Gains on disposition of property and other assets	(4.0		)	(1.1		)	(1.4		)
(Increase) decrease in other assets	(0.9		)	6.4			(3.3		)
Increase (decrease) in other liabilities	4.2			(1.7		)	(7.6		)
Other	(4.1		)	(3.1		)	0.1
Changes in current assets and liabilities:
(Increase) decrease in receivables	99.0			(80.9		)	(26.4		)
(Increase) decrease in inventories	(22.7		)	(29.9		)	24.3
(Increase) decrease in other current assets	(11.6		)	(10.8		)	(0.6		)
Increase (decrease) in accounts payable	3.5			20.6			7.1
Increase (decrease) in advance billings	49.3			7.7			(9.1		)
Increase (decrease) in accrued liabilities	15.1			12.5			4.2
Net cash provided by operating activities	358.8			118.5			162.0
Investing activities:
Proceeds from disposition of property and other assets	8.9			10.2			3.5
Capital expenditures	(85.4		)	(44.8		)	(82.4		)
Acquisitions, net of cash acquired	(32.9		)	(333.2		)	(47.5		)
Proceeds from divestitures	—			3.3			—
Net cash required by investing activities	(109.4		)	(364.5		)	(126.4		)
Financing activities:
Payments to retire debt	(81.2		)	(0.3		)	(0.1		)
Proceeds from issuance of debt	—			180.0			0.6
Shares repurchased	(11.0		)	(3.0		)	—
Dividends paid to common shareholders	(9.9		)	—			—
Purchase of shares to satisfy employee tax on vested stock	(4.4		)	(0.5		)	—
Capital contribution from Former Parent	—			200.0			—
Net transfers to Former Parent and affiliates	—			(34.5		)	(43.0		)
Other	(1.9		)	(3.1		)	(0.3		)
Net cash provided by (required by) financing activities	(108.4		)	338.6			(42.8		)
Net increase (decrease) in cash and cash equivalents	141.0			92.6			(7.2		)
Cash and cash equivalents at beginning of period	99.4			6.8			14.0
Cash and cash equivalents at end of period	$	240.4		$	99.4		$	6.8

Income tax payments (refunds) for the years ended 2019, 2018, and 2017 were $18.8 million, $0.6 million, and $0.0 million, respectively.

Non-cash investing activity: The Company's Former Parent issued shares of its common stock valued at $14.7 million in connection with a 2017 acquisition. See Note 2 Acquisitions and Divestitures.

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Consolidated and Combined Statements of Stockholders’ Equity



				Common Stock													Treasury Stock
	Former Parent's Net Investment			Shares		$0.01 Par Value		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Loss			Shares		Amount			Total Stockholders’ Equity
				(in millions, except par value)
Balances at December 31, 2016	$	1,360.2		—		$	—	$	—		$	—		$	(18.4	)	—		$	—		$	1,341.8
Net income	89.7			—		—		—			—			—			—		—			89.7
Other comprehensive loss	—			—		—		—			—			(1.4		)	—		—			(1.4		)
Net transfers from Former Parent and affiliates	(31.2		)	—		—		—			—			—			—		—			(31.2		)
Restricted shares, net	9.0			—		—		—			—			—			—		—			9.0
Balances at December 31, 2017	$	1,427.7		—		$	—	$	—		$	—		$	(19.8	)	—		$	—		$	1,407.9
Cumulative effect of adopting new accounting standards	(4.0		)	—		—		—			—			—			—		—			(4.0		)
Net income	53.8			—		—		—			21.9			—			—		—			75.7
Other comprehensive income	—			—		—		—			—			2.1			—		—			2.1
Capital contribution from Former Parent	200.0			—		—		—			—			—			—		—			200.0
Net transfers from Former Parent and affiliates	(1.2		)	—		—		—			—			—			—		—			(1.2		)
Distribution by Former Parent	(1,684.6		)	48.8		0.5		1,684.1			—			—			—		—			—
Cash dividends on common stock	—			—		—		—			(2.4		)	—			—		—			(2.4		)
Restricted shares, net	8.3			—		—		1.6			—			—			—		(0.5		)	9.4
Shares repurchased	—			—		—		—			—			—			(0.1	)	(3.0		)	(3.0		)
Balances at December 31, 2018	$	—		48.8		$	0.5	$	1,685.7		$	19.5		$	(17.7	)	(0.1	)	$	(3.5	)	$	1,684.5
Net income	—			—		—		—			113.3			—			—		—			113.3
Other comprehensive loss	—			—		—		—			—			(2.0		)	—		—			(2.0		)
Cash dividends on common stock	—			—		—		—			(9.9		)	—			—		—			(9.9		)
Restricted shares, net	—			0.2		—		16.0			—			—			(0.2	)	(5.7		)	10.3
Shares repurchased	—			—		—		—			—			—			(0.4	)	(11.0		)	(11.0		)
Retirement of treasury stock	—			(0.7	)	—		(20.2		)	—			—			0.7		20.2			—
Other	—			—		—		5.2			—			—			—		—			5.2
Balances at December 31, 2019	$	—		48.3		$	0.5	$	1,686.7		$	122.9		$	(19.7	)	—		$	—		$	1,790.4

See accompanying Notes to Consolidated and Combined Financial Statements.

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Arcosa, Inc. and Subsidiaries

Notes to Consolidated and Combined Financial Statements

Note 1. Overview and Summary of Significant Accounting Policies

Basis of Presentation

On November 1, 2018, Arcosa, Inc. and its consolidated subsidiaries (“Arcosa,” the “Company,” “we,” or “our”) became an independent publicly-traded company as a result of the distribution by Trinity Industries, Inc. (“Trinity” or "Former Parent") of 100% of the outstanding shares of Arcosa, Inc. to Trinity’s stockholders (the “Separation”). Trinity stockholders received one share of Arcosa, Inc. common stock for every three shares of Trinity common stock held as of 5:00 p.m. local New York City time on October 17, 2018, the record date for the distribution. The transaction was structured to be tax-free to both Trinity and Arcosa stockholders for U.S. federal income tax purposes.

Following the Separation, the consolidated financial statements include the accounts of the Company and its subsidiaries and no longer include any allocations from Trinity.

All normal and recurring adjustments necessary for a fair presentation of the financial position of the Company and the results of operations and cash flows have been made in conformity with GAAP. All significant intercompany accounts and transactions have been eliminated.

Relationship with Former Parent and Related Entities

Prior to the Separation, Arcosa was managed and operated in the normal course of business with other business units of Trinity. The accompanying combined financial results for periods prior to the Separation include sales and purchase transactions with Trinity and its subsidiaries in addition to certain shared costs which have been allocated to Arcosa and reflected as expenses in the Combined Statements of Operations. Transactions and allocations between Trinity and Arcosa are reflected in equity in the Combined Balance Sheets as Former Parent's net investment and in the Combined Statements of Cash Flows as a financing activity in Net transfers from/(to) Former Parent and affiliates. All transactions and allocations between Trinity and Arcosa prior to the Separation have been deemed paid between the parties, in cash, in the period in which the transaction or allocation was recorded in the Combined Financial Statements. Disbursements and cash receipts were made through centralized accounts payable and cash collection systems, respectively, which were operated by Trinity. As cash was disbursed and received by Trinity, it was accounted for by Arcosa through the Former Parent's net investment account. Allocations of current income taxes receivable or payable prior to the Separation were deemed to have been remitted to Arcosa or Trinity, respectively, in cash, in the period to which the receivable or payable applies.

Corporate Costs/Allocations

The combined financial results include an allocation of costs related to certain corporate functions incurred by Trinity for services that are provided to or on behalf of Arcosa. Corporate costs have been allocated to Arcosa using methods management believes are consistent and reasonable. Such cost allocations to Arcosa consist of (1) shared service charges and (2) corporate overhead costs. Shared service charges consist of monthly charges to each Trinity business unit for certain corporate functions such as information technology, human resources, and legal based on usage rates and activity units. Corporate overhead costs consist of costs not previously allocated to Trinity's business units and were allocated to Arcosa based on an analysis of each cost function and the relative benefits received by Arcosa for each of the periods. Corporate overhead costs allocated to Arcosa prior to the Separation totaled $26.0 million and $39.3 million for the ten months ended October 31, 2018 and the year ended December 31, 2017, respectively. Corporate overhead costs are included in selling, general, and administrative expenses in the accompanying Consolidated and Combined Statements of Operations. Also see Note 4 Segment Information.

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The Consolidated and Combined Financial Statements of Arcosa for the years ended December 31, 2018 and 2017 may not include all of the actual expenses that would have been incurred had we operated as a standalone company during the periods presented and may not reflect our combined results of operations, financial position, and cash flows had we operated as a standalone company during the periods presented. Actual costs that would have been incurred if we had operated as a standalone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas, including information technology and infrastructure. We also may incur additional costs associated with being a standalone, independent, publicly-traded company that were not included in the expense allocations and, therefore, would result in additional costs that are not reflected in our historical results of operations, financial position, and cash flows.

Other Transactions with Trinity Businesses

For the years ended December 31, 2018 and 2017, the Company had sales to Trinity businesses of $160.3 million and $148.3 million, respectively, and purchases from Trinity businesses of $44.5 million and $53.2 million, respectively. Subsequent to the Separation, Trinity is no longer considered a related entity.

Stockholders' Equity

In December 2018, the Company’s Board of Directors (the "Board") authorized a $50 million share repurchase program effective December 5, 2018 through December 31, 2020. For the year ended December 31, 2019, Company repurchased 361,442 shares at a cost of $11.0 million. As of December 31, 2019, the Company had a remaining authorization of $36.0 million under the program.

Prior to the Separation, the Company filed its Restated Certificate of Incorporation which authorizes the issuance of 200 million shares of common stock at a par value of $0.01 per share.

Revenue Recognition

Construction Products Group

The Construction Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.

Energy Equipment Group

Within the Energy Equipment Group, revenue is recognized for our wind tower, certain utility structure, and certain storage tank product lines over time as the products are manufactured using an input approach based on the costs incurred relative to the total estimated costs of production. We recognize revenue over time for these products as they are highly customized to the needs of an individual customer resulting in no alternative use to the Company if not purchased by the customer after the contract is executed, and we have the right to bill the customer for our work performed to date plus at least a reasonable profit margin for work performed. As of December 31, 2019 and 2018, we had a contract asset of $50.8 million and $44.0 million, respectively, which is included in receivables, net of allowance, within the Consolidated Balance Sheets. For all other products, revenue is recognized when the customer has accepted the product and legal title of the product has passed to the customer.

Transportation Products Group

The Transportation Products Group recognizes revenue when the customer has accepted the product and legal title of the product has passed to the customer.

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Unsatisfied Performance Obligations

The following table includes estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied or partially satisfied as of December 31, 2019 and the percentage of the outstanding performance obligations as of December 31, 2019 expected to be delivered during 2020:



	Unsatisfied performance obligations at
	December 31, 2019
	Total Amount		Percent expected to be delivered in 2020
	(in millions)
Energy Equipment Group:
Wind towers and utility structures	$	596.8	86.0	%
Other	$	36.2	100.0	%

Transportation Products Group:
Inland barges	$	346.9	100.0	%

The remainder of the unsatisfied performance obligations for wind towers and utility structures are expected to be delivered during 2021.

Income Taxes

The liability method is used to account for income taxes. Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Valuation allowances reduce deferred tax assets to an amount that will more likely than not be realized.

The Company regularly evaluates the likelihood of realization of tax benefits derived from positions it has taken in various federal and state filings after consideration of all relevant facts, circumstances, and available information. For those tax positions that are deemed more likely than not to be sustained, the Company recognizes the benefit it believes is cumulatively greater than 50% likely to be realized. To the extent the Company were to prevail in matters for which accruals have been established or be required to pay amounts in excess of recorded reserves, the effective tax rate in a given financial statement period could be materially impacted.

Prior to the Separation, the Company’s operating results were included in the Former Parent’s various consolidated U.S. federal and state income tax returns, as well as non-U.S. tax filings. In the Company’s Combined Financial Statements for the periods prior to the Separation, income tax expense and deferred tax balances have been recorded as if the Company filed tax returns on a standalone basis separate from the Former Parent. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise for the periods presented.

Financial Instruments

The Company considers all highly liquid debt instruments to be cash and cash equivalents if purchased with a maturity of three months or less. Financial instruments that potentially subject the Company to a concentration of credit risk are primarily cash investments and receivables. The Company places its cash investments in bank deposits and highly-rated money market funds, and its investment policy limits the amount of credit exposure to any one commercial issuer. We seek to limit concentrations of credit risk with respect to receivables with control procedures that monitor the credit worthiness of customers, together with the large number of customers in the Company's customer base and their dispersion across different industries and geographic areas. As receivables are generally unsecured, the Company maintains an allowance for doubtful accounts based upon the expected collectibility of all receivables. Receivable balances determined to be uncollectible are charged against the allowance. To accelerate the conversion to cash, the Company may sell a portion of its trade receivables to a third party. The Company has no continuing involvement or recourse related to these receivables once they are sold, and the impact of these transactions in the Company's Consolidated Statements of Operations for the year ended December 31, 2019 was not significant. The carrying values of cash, receivables, and accounts payable are considered to be representative of their respective fair values.

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined principally on the first in first out method. The value of inventory is adjusted for damaged, obsolete, excess, or slow-moving inventory. Work in process and finished goods include material, labor, and overhead. During the year ended December 31, 2018, the Company recorded a $6.1 million write-off on finished goods inventory related to an order for a single customer in our utility structures business.

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Property, Plant, and Equipment

Property, plant, and equipment are stated at cost and depreciated or depleted over their estimated useful lives, primarily using the straight-line method. The estimated useful lives are: buildings and improvements - 3 to 30 years; leasehold improvements - the lesser of the term of the lease or 11 years; machinery and equipment - 2 to 10 years; and information systems hardware and software - 2 to 5 years. Depletion of mineral reserves is calculated based on estimated proven and probable reserves using the units-of-production method on a quarry-by-quarry basis. The costs of ordinary maintenance and repair are charged to operating costs as incurred.

Long-lived Assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used for potential impairment. The carrying value of long-lived assets to be held and used is considered impaired only when the carrying value is not recoverable through undiscounted future cash flows and the fair value of the assets is less than their carrying value. Fair value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risks involved or market quotes as available. Impairment losses on long-lived assets held for sale are determined in a similar manner, except that fair values are reduced by the estimated cost to dispose of the assets. See Note 2 Acquisitions and Divestitures for discussion of the impairment charge recorded during the year ended December 31, 2018 on businesses that were subsequently divested. Based on the Company's evaluations, no additional impairment charges were determined to be necessary as of December 31, 2019 and December 31, 2017.

Goodwill and Intangible Assets

Goodwill is required to be tested for impairment annually, or on an interim basis whenever events or circumstances change indicating that the carrying amount of the goodwill might be impaired. The quantitative goodwill impairment test is a two-step process with step one requiring the comparison of the reporting unit's estimated fair value with the carrying amount of its net assets. If necessary, step two of the impairment test determines the amount of goodwill impairment to be recorded when the reporting unit's recorded net assets exceed its fair value. Impairment is assessed at the “reporting unit” level by applying a fair value-based test for each unit with recorded goodwill. The estimates and judgments that most significantly affect the fair value calculations are assumptions, consisting of level three inputs, related to revenue and operating profit growth, discount rates, and exit multiples. As of December 31, 2019 and 2018, the Company's annual impairment test of goodwill was completed at the reporting unit level and no impairment charges were determined to be necessary.

The net book value of intangible assets totaled $51.7 million and $55.2 million as of December 31, 2019 and 2018, respectively, and included $34.1 million not subject to amortization related to an acquired trademark. The remaining intangible assets with a gross cost of $44.6 million as of December 31, 2019 and 2018, are amortized over their estimated useful lives ranging from 1 to 12 years, and primarily relate to acquired customer relationships. Total amortization expense from intangible assets was $3.4 million, $4.7 million, and $5.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. Intangible assets were evaluated for potential impairment as of December 31, 2019 and 2018.

Workers’ Compensation

The Company is effectively self-insured for workers’ compensation claims. A third party administrator is used to process claims. We accrue our workers' compensation liability based upon independent actuarial studies.

Warranties

The Company provides various express, limited product warranties that generally range from 1 to 5 years depending on the product. The warranty costs are estimated using a two-step approach. First, an engineering estimate is made for the cost of all claims that have been asserted by customers. Second, based on historical, accepted claims experience, a cost is accrued for all products still within a warranty period for which no claims have been filed. The Company provides for the estimated cost of product warranties at the time revenue is recognized related to products covered by warranties and assesses the adequacy of the resulting reserves on a quarterly basis. As of December 31, 2019 and 2018, the Company's accrual for warranty costs was $2.6 million and $2.9 million, respectively, which is included in accrued liabilities within the Consolidated Balance Sheets.

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Derivative Instruments

The Company may, from time to time, use derivative instruments to mitigate the impact of changes in interest rates or changes in foreign currency exchange rates. For derivative instruments designated as hedges, the Company formally documents the relationship between the derivative instrument and the hedged item, as well as the risk management objective and strategy for the use of the derivative instrument. This documentation includes linking the derivative to specific assets or liabilities on the balance sheet, commitments, or forecasted transactions. At the time a derivative instrument is entered into, and at least quarterly thereafter, the Company assesses whether the derivative instrument is effective in offsetting the changes in fair value or cash flows of the hedged item. Any change in the fair value of the hedged instrument is recorded in accumulated other comprehensive loss ("AOCL") as a separate component of stockholders' equity and reclassified into earnings in the period during which the hedged transaction affects earnings. The Company monitors its derivative positions and the credit ratings of its counterparties and does not anticipate losses due to counterparties' non-performance.

Foreign Currency Translation

Certain operations outside the U.S. prepare financial statements in currencies other than the U.S. dollar. The income statement amounts are translated at average exchange rates for the year, while the assets and liabilities are translated at year-end exchange rates. Translation adjustments are accumulated as a separate component of stockholders' equity and other comprehensive income. The functional currency of our Mexico operations is considered to be the U.S. dollar. The functional currency of our Canadian operations is considered to be the Canadian dollar.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of foreign currency translation adjustments and the effective unrealized gains and losses on the Company's derivative financial instruments, the sum of which, along with net income, constitutes comprehensive net income (loss). See Note 12 Accumulated Other Comprehensive Loss. All components are shown net of tax.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

Effective as of January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers,” (“ASU 2014-09”), which provides common revenue recognition guidance for GAAP. Under ASU 2014-09, an entity recognizes revenue when it transfers promised goods or services to customers in an amount that reflects what it expects to receive in exchange for the goods or services. It also requires additional detailed disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenues and cash flows arising from contracts with customers.

The Company applied ASU 2014-09 to all contracts that were not complete as of January 1, 2018 using the modified retrospective method of adoption, resulting in a reduction to Former Parent's Net Investment of $4.0 million, net of tax, as of January 1, 2018 related to the cumulative effect of applying this standard. Therefore, the comparative information for the year ended December 31, 2017 has not been adjusted and continue to be reported under ASC Topic 605.

The primary impact of adopting the standard is a change in the timing of revenue recognition for our wind towers, certain utility structures, and certain storage tank product lines within our Energy Equipment Group. Previously, the Company recognized revenue when the product was delivered. Under ASU 2014-09, revenue is recognized over time as the products are manufactured. Revenue recognition policies in our other business segments remain substantially unchanged.

Effective as of January 1, 2019, the Company adopted Accounting Standards Update No. 2016-02, “Leases”, (“ASU 2016-02”), which amends 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 Company elected to use the optional transition method that allows the Company to apply the provisions of the standard at the effective date without adjusting the comparative prior periods. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard which allowed us to carry forward the historical lease classification. The cumulative effect of adopting the standard on the opening balance of retained earnings was not significant.

The primary impact of adopting the standard was the recognition of a right-of-use asset of $23.7 million and corresponding lease liability of $27.5 million for our operating leases included in other assets and other liabilities, respectively, on the Consolidated Balance Sheet. See Note 8 Leases for further discussion.

The Company has implemented processes and a lease accounting system to ensure adequate internal controls were in place to assess our contracts and enable proper accounting and reporting of financial information upon adoption.

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Recently issued accounting pronouncements not adopted as of December 31, 2019

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2016-13, “Financial Instruments - Credit Losses”, (“ASU 2016-13”), which amends the existing accounting guidance for recognizing credit losses on financial assets and certain other instruments not measured at fair value through net income, including financial assets measured at amortized cost, such as trade receivables and contract assets. ASU 2016-13 replaces the existing incurred loss impairment model with an expected credit loss model that requires consideration of a broader range of information to estimate expected credit losses over the lifetime of the asset. The new guidance is expected to result in earlier recognition of credit losses. ASU 2016-13 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2019, with early adoption permitted. The Company will adopt the new standard on January 1, 2020 and does not expect the adoption of the guidance to have a material impact on our consolidated financial statements.

In December 2019, the FASB issued Accounting Standards Updated No. 2019-12, “Simplifying the Accounting for Income Taxes”, (“ASU 2019-12”), which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. ASU 2019-12 will become effective for public companies during interim and annual reporting periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of adoption on our consolidated financial statements.

Management's Estimates

The preparation of financial statements in conformity with 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 as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain prior year balances have been reclassified in the Consolidated and Combined Financial Statements to conform with the 2019 presentation.

Note 2. Acquisitions and Divestitures

The Company's acquisition and divestiture activities are summarized below:



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Acquisitions:
Purchase price	$	39.2	$	334.1	$	63.0
Net cash paid	$	32.9	$	333.2	$	47.5
Goodwill recorded	$	12.6	$	120.9	$	25.0

Acquisitions - ACG Materials

On December 5, 2018, we completed the stock acquisition of ACG Materials (“ACG”), a producer of specialty materials and aggregates which is included in our Construction Products Group. The purchase price of $309.1 million was funded with a combination of cash on-hand and a $180.0 million borrowing under the Company's credit facility. Acquisition-related transaction costs incurred after the Separation were insignificant. Costs incurred by the Former Parent prior to the Separation were included in the allocation of corporate costs in accordance with the methodology described in Note 1.

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The acquisition was recorded as a business combination with valuations of the acquired assets and liabilities at their acquisition date fair value using level three inputs, defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The following table represents our final purchase price allocation (in millions):



Accounts receivable	$	23.8
Inventories	12.5
Property, plant, and equipment	77.8
Mineral reserves	137.3
Goodwill	105.5
Other assets	6.3
Accounts payable	(10.2		)
Accrued and other liabilities	(14.5		)
Capital lease obligations	(8.3		)
Deferred income taxes	(21.1		)
Total net assets acquired	$	309.1

The goodwill acquired, none of which is tax deductible, primarily relates to ACG's geographic footprint, market position, and existing workforce. Revenues included in the Consolidated Statement of Operations from the date of the acquisition were approximately $11.7 million during the year ended December 31, 2018, whereas operating profit during the same period was insignificant.

The following table represents the unaudited pro-forma consolidated operating results of the Company as if the ACG acquisition had been completed on January 1, 2017. The unaudited pro-forma information makes certain adjustments to depreciation, depletion, and amortization expense to reflect the fair value recognized in the purchase price allocation, as well as to align ACG's capital structure and debt financing with that of the Company at the acquisition date. As a measure of unaudited pro-forma earnings, we have presented income before income taxes because our effective tax rates for 2018 and 2017 were impacted by one-time effects of the Act that would be impracticable to calculate for ACG. The unaudited pro-forma information should not be considered indicative of the results that would have occurred if the acquisition had been completed on January 1, 2017, nor is such unaudited pro-forma information necessarily indicative of future results.



	Year Ended December 31, 2018		Year Ended December 31, 2017
	(in millions)
Revenues	$	1,604.1	$	1,594.4
Income before income taxes	$	97.6	$	133.6

Acquisitions - Other

In June 2019, we completed acquisitions of certain assets and liabilities of an inland barge components business within our Transportation Products Group and the acquisition of certain assets and liabilities of a construction aggregates business in our Construction Products Group. In August 2019, we completed the acquisitions of certain assets and liabilities of two construction aggregates businesses in our Construction Products Group. The total purchase price for the four businesses acquired in 2019 was $39.2 million, a portion of which includes estimated payments to the seller of a construction aggregates business over the next 10 years. The acquisitions have been recorded as business combinations based on preliminary valuations of the assets acquired and liabilities assumed at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $12.2 million of goodwill in our Transportation Products Group and $0.4 million in our Construction Products Group. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated and segment level.

In March 2018, we completed the acquisition of certain assets of an inland barge business with a purchase price and net cash paid of $25.0 million. The acquisition was recorded as a business combination based on valuations of the acquired assets and liabilities at their acquisition date fair value using level three inputs. The valuation resulted in the recognition of $9.5 million of goodwill in our Transportation Products Group. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated and combined or segment level.

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In May 2017, we completed the acquisition of the assets of a lightweight aggregates business paid for with cash of $6.2 million. In October 2017, we completed the acquisition of the assets of a lightweight aggregates business paid for with shares of Trinity stock valued at $14.7 million. In July 2017, we completed the acquisition of the assets of a trench shoring products business for $42.1 million. All three acquisitions were in our Construction Products Group. These acquisitions were recorded as business combinations based on valuations of the acquired assets and liabilities at their acquisition date fair value using level three inputs. Such assets and liabilities were not significant in relation to assets and liabilities at the consolidated or segment level.

Acquisitions - Cherry

On January 6, 2020, we completed the stock acquisition of Cherry Industries, Inc. and affiliated entities (“Cherry”), a leading producer of natural and recycled aggregates in the Houston, Texas market which will be included in our Construction Products Group. The purchase price of approximately $298.0 million was funded with a combination of cash on-hand and advances under a new $150.0 million five-year term loan. See Note 7 Debt for additional information on our credit facility. Transaction costs incurred during the year ended December 31, 2019 related to the Cherry acquisition were not significant. The acquisition will be recorded as a business combination. We expect to complete our purchase price allocation as soon as reasonably possible not to exceed one year from the acquisition date. Due to the timing of the acquisition, additional quantitative disclosures are, at this time, impracticable.

Divestitures

We have concluded that the divestiture of these businesses did not represent a strategic shift that would result in a material effect on our operations and financial results; therefore, these disposals have not been reflected in discontinued operations in our Consolidated and Combined Financial Statements.

There was no divestiture activity during the years ended December 31, 2019 and December 31, 2017.

Note 3. Fair Value Accounting

Assets and liabilities measured at fair value on a recurring basis are summarized below:



	Fair Value Measurement as of December 31, 2019
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash equivalents	$	155.3	$	—	$	—	$	155.3
Total assets	$	155.3	$	—	$	—	$	155.3

Liabilities:
Interest rate hedge⁽¹⁾	$	—	$	4.3	$	—	$	4.3
Contingent consideration⁽²⁾	—		—		6.4		6.4
Total liabilities	$	—	$	4.3	$	6.4	$	10.7

	Fair Value Measurement as of December 31, 2018
	Level 1		Level 2		Level 3		Total
	(in millions)
Assets:
Cash equivalents	$	30.0	$	—	$	—	$	30.0
Total assets	$	30.0	$	—	$	—	$	30.0

Liabilities:
Interest rate hedge⁽¹⁾	$	—	$	1.2	$	—	$	1.2
Total liabilities	$	—	$	1.2	$	—	$	1.2

⁽¹⁾Included in other liabilities on the Consolidated Balance Sheet.

⁽²⁾ Current portion included in accrued liabilities and non-current portion included in other liabilities on the Consolidated Balance Sheets.

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for that asset or liability in an orderly transaction between market participants on the measurement date. An entity is required to establish a fair value hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair values are listed below:

Level 1 – This level is defined as quoted prices in active markets for identical assets or liabilities. The Company’s cash equivalents are instruments of the U.S. Treasury or highly-rated money market mutual funds.

Level 2 – This level is defined as observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Interest rate hedges are valued at exit prices obtained from each counterparty. See Note 7 Debt.

Level 3 – This level is defined as unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Contingent consideration relates to estimated future payments owed to the sellers of businesses previously acquired. We estimate the fair value of the contingent consideration using a discounted cash flow model. The fair value is sensitive to changes in the forecast of sales and changes in discount rates and is reassessed quarterly based on assumptions used in our latest projections.

Note 4. Segment Information

The Company reports operating results in three principal business segments:

Construction Products. The Construction Products segment produces and sells construction aggregates and manufactures and sells trench shields and shoring products and services for infrastructure-related projects.

Energy Equipment. The Energy Equipment segment manufactures and sells products for energy-related businesses, including structural wind towers, steel utility structures for electricity transmission and distribution, and storage and distribution tanks.

Transportation Products. The Transportation Products segment manufactures and sells products for the inland waterway and rail transportation industries including barges, barge-related products, axles, and couplers.

The financial information for these segments is shown in the tables below. We operate principally in North America.

Year Ended December 31, 2019



	Revenues			Operating Profit (Loss)			Assets		Depreciation, Depletion, & Amortization		Capital Expenditures


Construction aggregates	$	364.7
Other	75.0
Construction Products Group	439.7			$	52.7		$	785.0	$	38.0	$	30.2

Wind towers and utility structures	625.4
Other	211.2
Energy Equipment Group	836.6			100.7			934.9		27.9		25.0

Inland barges	293.9
Steel components	171.8
Transportation Products Group	465.7			46.8			316.5		16.3		21.8

Segment Totals before Eliminations and Corporate	1,742.0			200.2			2,036.4		82.2		77.0
Corporate	—			(47.3		)	266.1		3.6		8.4
Eliminations	(5.1		)	—			—		—		—
Consolidated Total	$	1,736.9		$	152.9		$	2,302.5	$	85.8	$	85.4

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Year Ended December 31, 2018



	Revenues			Operating Profit (Loss)			Assets		Depreciation, Depletion, & Amortization		Capital Expenditures


Construction aggregates	$	217.9
Other	74.4
Construction Products Group	292.3			$	50.4		$	769.8	$	21.9	$	17.2

Wind towers and utility structures	582.9
Other	197.2
Energy Equipment Group	780.1			28.6			976.2		29.7		16.0

Inland barges	170.2
Steel components	221.2
Transportation Products Group	391.4			48.4			305.0		15.5		10.3

All Other	—			(0.1		)	—		—		—

Segment Totals before Eliminations and Corporate	1,463.8			127.3			2,051.0		67.1		43.5
Corporate	—			(32.1		)	121.2		0.5		1.3
Eliminations	(3.4		)	(0.3		)	—		—		—
Consolidated and Combined Total	$	1,460.4		$	94.9		$	2,172.2	$	67.6	$	44.8

Year Ended December 31, 2017



	Revenues			Operating Profit (Loss)			Assets		Depreciation, Depletion, & Amortization		Capital Expenditures


Construction aggregates	$	204.9
Other	54.0
Construction Products Group	258.9			$	53.7		$	391.2	$	18.4	$	48.9

Wind towers and utility structures	652.1
Other	192.0
Energy Equipment Group	844.1			78.4			928.8		30.2		27.7

Inland barges	157.9
Steel components	205.4
Transportation Products Group	363.3			39.0			257.5		17.1		5.8

All Other	—			(0.1		)	—		—		—

Segment Totals before Eliminations and Corporate	1,466.3			171.0			1,577.5		65.7		82.4
Corporate	—			(39.3		)	25.0		—		—
Eliminations	(3.9		)	—			—		—		—
Combined Total	$	1,462.4		$	131.7		$	1,602.5	$	65.7	$	82.4

Corporate assets are composed of cash and cash equivalents, certain property, plant, and equipment, and other assets. Capital expenditures exclude amounts paid for business acquisitions but include amounts paid for the acquisition of land and reserves in our Construction Products Group.

Revenues from one customer included in the Energy Equipment Group constituted 18.2%, 19.4%, and 22.9% of consolidated or combined revenues for the years ended December 31, 2019, 2018, and 2017, respectively.

Revenues and operating profit for our Mexico operations for the years ended December 31, 2019, 2018, and 2017 are presented below. Our Canadian operations were not significant in relation to the consolidated financial statements.

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	Year Ended December 31,
	2019		2018			2017
	(in millions)
Mexico:
Revenues:
External	$	110.1	$	108.2		$	118.2
Intercompany	88.0		82.3			62.6
	$	198.1	$	190.5		$	180.8

Operating profit	$	4.8	$	(11.0	)	$	1.4

Total assets and long-lived assets for our Mexico operations as of December 31, 2019 and 2018 are presented below:



	Total Assets				Long-Lived Assets
	December 31,
	2019		2018		2019		2018
	(in millions)
Mexico	$	202.2	$	203.8	$	85.5	$	85.8

Note 5. Property, Plant, and Equipment

The following table summarizes the components of property, plant, and equipment as of December 31, 2019 and 2018.



	December 31, 2019			December 31, 2018
	(in millions)
Land⁽¹⁾	$	331.4		$	316.5
Buildings and improvements	280.5			267.5
Machinery and other	755.7			715.9
Construction in progress	38.6			28.8
	1,406.2			1,328.7
Less accumulated depreciation and depletion	(590.0		)	(525.7		)
	$	816.2		$	803.0

⁽¹⁾ Includes depletable land of $211.0 million as of December 31, 2019 and $201.9 million as of December 31, 2018.

We did not capitalize any interest expense as part of the construction of facilities and equipment during 2019 or 2018.

We estimate the fair market value of properties no longer in use based on the location and condition of the properties, the fair market value of similar properties in the area, and the Company's experience selling similar properties in the past. As of December 31, 2019, the Company had non-operating plants with a net book value of $47.4 million. Our estimated fair value of these assets exceeds their book value.

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Note 6. Goodwill

Goodwill by segment is as follows:



	December 31, 2019		December 31, 2018
	(in millions)
Construction Products Group	$	166.2	$	171.7
Energy Equipment Group	416.9		416.9
Transportation Products Group	38.8		26.6
	$	621.9	$	615.2

As of December 31, 2019, the Company's annual impairment test of goodwill was completed at the reporting unit level and no impairment charges were determined to be necessary. The decrease in the Construction Products Group goodwill during the year ended December 31, 2019 is primarily due to the refinement of the purchase price allocation for ACG. The increase in the Transportation Products Group goodwill during the year ended December 31, 2019 is due to an acquisition. See Note 2 Acquisitions and Divestitures.

Note 7. Debt

The following table summarizes the components of debt as of December 31, 2019 and December 31, 2018:



	December 31, 2019		December 31, 2018
	(in millions)
Revolving credit facility	$	100.0	$	180.0
Finance leases	7.3		5.5
Total debt	$	107.3	$	185.5

As of December 31, 2019, we had $100.0 million of outstanding loans borrowed under the facility and there were approximately $42.5 million in letters of credit issued, leaving $257.5 million available for borrowing. All of the outstanding letters of credit as of December 31, 2019 are expected to expire in 2020. The majority of our letters of credit obligations support the Company’s various insurance programs and warranty claims and generally renew by their terms each year.

The Company's revolving credit facility requires the maintenance of certain ratios related to leverage and interest coverage. As of December 31, 2019, we were in compliance with all such financial covenants. Borrowings under the credit facility are guaranteed by certain wholly-owned subsidiaries of the Company.

The carrying value of borrowings under our revolving credit facility approximates fair value because the interest rate adjusts to the market interest rate (Level 3 input). See Note 3 Fair Value Accounting.

As of December 31, 2019, the Company had $1.2 million of unamortized debt issuance cost related to the revolving credit facility, which is included in other assets on the Consolidated Balance Sheet.

The remaining principal payments under existing debt agreements as of December 31, 2019 are as follows:



	2020		2021		2022		2023		2024		Thereafter
	(in millions)
Revolving credit facility	$	—	$	—	$	—	$	100.0	$	—	$	—

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On January 2, 2020, the Company entered into an Amended and Restated Credit Agreement to increase the revolving credit facility from $400.0 million to $500.0 million and added a term loan facility of $150.0 million, in each case with a maturity date of January 2, 2025. The mechanism for determining and the applicable ranges for the interest rate margin and commitment fee rate are unchanged. The interest rate on the revolving credit facility was initially set at one-month LIBOR plus 1.50% and the interest rate on the term loan facility was initially set at three-month LIBOR plus 1.50%. The commitment fee rate on both facilities was initially set at set at 0.25%. The entire term loan was advanced on January 2, 2020 in connection with the closing of the acquisition of Cherry. See Note 2 Acquisitions and Divestitures.

Interest rate hedges

Note 8. Leases

We have various leases primarily for office space and certain equipment. At inception, we determine if an arrangement contains a lease and whether that lease meets the classification criteria of a finance or operating lease. For leases that contain options to purchase, terminate, or extend, such options are included in the lease term when it is reasonably certain that the option will be exercised. Some of the Company's lease arrangements contain lease components and non-lease components which are accounted for as a single lease component as we have elected the practical expedient to group lease and non-lease components for all leases.

As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on information available at commencement date in determining the present value of lease payments.

Operating Leases

The following table presents information about the amount, timing, and uncertainty of cash flows arising from the Company's operating leases as of December 31, 2019.



	December 31, 2019
	(in millions)
Maturity of Lease Liabilities
2020	$	6.4
2021	4.0
2022	2.6
2023	2.0
2024	1.7
Thereafter	6.0
Total undiscounted operating lease payments	22.7
Less imputed interest	(3.7		)
Present value of operating lease liabilities	$	19.0

Balance Sheet Classification
Other assets	$	15.6

Accrued liabilities	$	5.5
Other liabilities	13.5
Total operating lease liabilities	$	19.0

Other Information
Weighted average remaining lease term	5.8 years
Weighted average discount rate	4.8		%

Operating lease costs were $8.2 million during the year ended December 31, 2019. Costs related to variable lease rates or leases with terms less than twelve months were not significant.

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Cash paid for amounts included in the measurement of operating lease liabilities was $7.8 million during the year ended December 31, 2019 and is included in operating cash flows. The additional right-of-use assets recognized as non-cash asset additions that resulted from new operating lease liabilities during the year ended December 31, 2019 were not significant.

Finance Leases

Finance leases are included in property, plant, and equipment, net and debt on the consolidated balance sheets. The associated amortization expense and interest expense are included in depreciation and interest expense, respectively, on the consolidated income statements. These leases are not material to the consolidated financial statements as of December 31, 2019.

Disclosures related to periods prior to adoption of ASU 2016-02



	December 31, 2018
	(in millions)
Future Minimum Rent Expense
2019	$	7.7
2020	5.7
2021	3.5
2022	2.3
2023	1.8
Thereafter	7.6
Total undiscounted operating lease payments	$	28.6

Note 9. Other, Net

Other, net (income) expense consists of the following items:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Interest income	$	(1.4	)	$	(0.4	)	$	(0.1	)
Foreign currency exchange transactions	1.5			(0.2		)	2.2
Other	(0.8		)	(0.4		)	(0.5		)
Other, net (income) expense	$	(0.7	)	$	(1.0	)	$	1.6

Note 10. Income Taxes

The components of the provision for income taxes are as follows:



	Year Ended December 31,
	2019			2018			2017
	(in millions)
Current:
Federal	$	7.6		$	(5.4	)	$	29.3
State	3.0			0.8			0.5
Foreign	5.6			1.5			0.3
Total current	16.2			(3.1		)	30.1
Deferred:
Federal:
Effect of Tax Cuts and Jobs Act	—			(1.5		)	(6.2		)
Other	22.6			24.8			16.6
	22.6			23.3			10.4
State	(0.6		)	5.4			0.9
Foreign	(4.7		)	(6.3		)	(1.0		)
Total deferred	17.3			22.4			10.3
Provision	$	33.5		$	19.3		$	40.4

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The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate on income before income taxes:



	Year Ended December 31,
	2019		2018		2017
Statutory rate	21.0	%	21.0	%	35.0	%
State taxes	3.1		3.1		2.5
Domestic production activities deduction	—		—		(2.1	)
Changes in valuation allowances and reserves	(1.3	)	(1.2	)	1.3
Changes in tax reserves	(0.3	)	(1.4	)	0.8
Effect of Tax Cuts and Jobs Act	—		(1.6	)	(5.0	)
Prior year true-ups	(0.5	)	(0.4	)	(2.2	)
Foreign adjustments	0.6		2.4		1.8
Other, net	0.2		(1.6	)	(1.0	)
Effective rate	22.8	%	20.3	%	31.1	%

The Tax Cuts and Jobs Act ("the Act") was enacted on December 22, 2017. The Act reduced the U.S. federal corporate income tax rate from 35% to 21%, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign-sourced earnings. For the year ended December 31, 2017, we recognized a provisional benefit of $6.2 million, primarily related to the impact of the Act on our deferred taxes. During the year ended December 31, 2018, we finalized the accounting for the enactment of the Act and recorded an additional $1.5 million benefit, primarily as a result of the true-up of our deferred taxes. There was no additional impact to the year-ended December 31, 2019.

Income (loss) before income taxes for the December 31, 2019, 2018, and 2017 was $143.6 million, $106.6 million, and $139.9 million, respectively, for U.S. operations, and $3.2 million, $(11.6) million, and $(9.8) million, respectively, for foreign operations, principally Mexico and Canada. The Company provides deferred income taxes on the unrepatriated earnings of its foreign operations where it results in a deferred tax liability.

Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:



	December 31,
	2019			2018
	(in millions)
Deferred tax liabilities:
Depreciation, depletion, and amortization	$	109.1		$	103.2
Total deferred tax liabilities	109.1			103.2
Deferred tax assets:
Workers compensation, pensions, and other benefits	21.6			16.2
Warranties and reserves	1.7			2.2
Tax loss carryforwards and credits	14.8			31.0
Inventory	22.7			10.8
Accrued liabilities and other	1.0			(2.7		)
Total deferred tax assets	61.8			57.5
Net deferred tax assets (liabilities) before valuation allowances	(47.3		)	(45.7		)
Valuation allowances	4.8			5.7
Adjusted net deferred tax assets (liabilities)	$	(52.1	)	$	(51.4	)

At December 31, 2019, the Company had $22.0 million of federal consolidated net operating loss carryforwards, primarily from businesses acquired, and $0.6 million of tax-effected state loss carryforwards remaining. In addition, the Company had $36.9 million of foreign net operating loss carryforwards that will begin to expire in the year 2022.

We have established a valuation allowance for state and foreign tax operating losses and credits that we have estimated may not be realizable.

Income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the United States. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. The amount of such temporary differences totaled approximately $79.4 million as of December 31, 2019. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.

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Taxing authority examinations

We have multiple federal tax return filings that are subject to examination by the Internal Revenue Service. We filed the initial Arcosa, Inc. federal return for 2018 and it will remain open for three years. The 2015-2018 tax years are open for the ACG federal returns. We have various subsidiaries that file separate state tax returns and are subject to examination by taxing authorities at different times. The entities are generally open for their 2015 tax years and forward. We have various subsidiaries in Mexico that file separate tax returns and are subject to examination by taxing authorities at different times. The entities are generally open for their 2014 tax years and forward.

Unrecognized tax benefits

The change in unrecognized tax benefits for the years ended December 31, 2019, 2018, and 2017 was as follows:



	December 31,
	2019			2018			2017
	(in millions)
Beginning balance	$	0.5		$	1.3		$	7.4
Additions for tax positions related to the current year	—			—			—
Additions for tax positions of prior years	—			0.1			0.2
Reductions for tax positions of prior years	—			—			—
Settlements	—			—			(6.0		)
Expiration of statute of limitations	(0.5		)	(0.9		)	(0.3		)
Ending balance	$	—		$	0.5		$	1.3

The additions for tax positions of prior years of $0.1 million and $0.2 million for the years ended December 31, 2018 and 2017, respectively, are due to foreign tax positions.

Settlements for the year ended December 31, 2017 were due to the resolution of our 2006-2009 tax years.

Expiration of statutes of limitations during the years ended December 31, 2019 and 2017 relate to foreign tax returns. Expiration of statutes of limitations during the year ended December 31, 2018 relate to state and foreign tax returns.

The total amount of unrecognized tax benefits including interest and penalties at December 31, 2018 and 2017, that would affect the Company’s effective tax rate if recognized was $0.5 million and $1.9 million, respectively. The total amount of tax benefit including interest and penalties recognized in 2019 due to lapses in statutes of limitations was $0.5 million.

Arcosa accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of December 31, 2019, 2018, and 2017 was $0.0 million, $0.0 million, and $0.9 million, respectively. Income tax expense for the years ended December 31, 2019, 2018, and 2017 included decreases of $0.0 million, $0.9 million, and $1.5 million, respectively, with regard to interest expense and penalties related to uncertain tax positions.

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Note 11. Employee Retirement Plans

The Company sponsors defined benefit plans and defined contribution profit sharing plans that provide retirement income and death benefits for eligible employees and retirees of the Company. For periods prior to the Separation, the participation of employees of the Company in defined benefit plans sponsored by Trinity is reflected in the combined financial statements as though the Company participated in a multiemployer plan with Trinity. The assets and liabilities of the defined benefit plans were retained by Trinity.

Prior to the Separation, the expenses of these benefit plans were allocated to Arcosa based on a review of personnel and personnel costs by business unit and funded through intercompany transactions with Trinity. A proportionate share of the cost is reflected in the combined financial statements.

In connection with the Separation, certain defined contribution profit sharing plans were separated into standalone plans for Arcosa and Trinity.

Total employee retirement plan expense, which includes related administrative expenses, is as follows:



	Year Ended December 31,
	2019		2018		2017
	(in millions)
Defined contribution plans	$	8.5	$	8.3	$	6.9
Multiemployer plan	1.8		2.1		2.1
	$	10.3	$	10.4	$	9.0

Defined Contribution Plans

Established under Internal Revenue Code Section 401(k), the Arcosa, Inc. Profit Sharing Plan ("401(k) Plan") is a defined contribution plan available to all eligible employees. Participants in the 401(k) Plan are eligible to receive future retirement benefits through a company-funded annual retirement contribution and company match, both of which are discretionary, requiring board approval, and are made annually, in the year following service, with the investment of the funds directed by the participants.

The Company also sponsors a fully‑funded, non-qualified deferred compensation plan. The invested assets and related liabilities of these participants were approximately $3.9 million and $2.8 million at December 31, 2019 and 2018, respectively, which are included in “Other assets” and “Other liabilities” on the Consolidated Balance Sheets. There were no distributions from the Company’s non-qualified deferred compensation plan to participants for the years ended December 31, 2019 and 2018.

Multiemployer Plan

The Company contributes to a multiemployer defined benefit pension plan under the terms of a collective-bargaining agreement that covers certain union-represented employees at one of the facilities of Meyer Utility Structures, a subsidiary of Arcosa. The risks of participating in a multiemployer plan are different from a single-employer plan in the following aspects:

•Assets contributed to a multiemployer plan by one employer may be used to provide benefits to employees of other participating employers.

•If a participating employer stops contributing to a multiemployer plan, the unfunded obligations of the plan may be borne by the remaining participating employers.

•If the Company chooses to stop participating in the multiemployer plan, the Company may be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

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Our participation in the multiemployer plan for the year ended December 31, 2019 is outlined in the table below. The Pension Protection Act ("PPA") zone status at December 31, 2019 and 2018 is as of the plan years beginning January 1, 2019 and 2018, respectively, and is obtained from the multiemployer plan's regulatory filings available in the public domain and certified by the plan's actuary. Among other factors, plans in the yellow zone are less than 80% funded while plans in the red zone are less than 65% funded. Federal law requires that plans classified in the yellow or red zones adopt a funding improvement plan or a rehabilitation plan in order to improve the financial health of the plan. The Company's contributions to the multiemployer plan were less than 5% of total contributions to the plan. The last column in the table lists the expiration date of the collective bargaining agreement to which the plan is subject.



		PPA Zone Status			Contributions for Year Ended December 31,
Pension Fund	Employer Identification Number	2019	2018	Rehabilitation plan status	2019		2018		2017		Surcharge imposed	Expiration date of collective bargaining agreement
					(in millions)
Boilermaker-Blacksmith National Pension Trust	48-6168020	Red	Yellow	Implemented	$	1.8	$	2.1	$	1.9	Yes	June 30, 2022

Employer contributions to the multiemployer plan for the year ending December 31, 2020 are expected to be $1.8 million.

ACG Pension Plan

In connection with the acquisition of ACG in December 2018, the Company assumed the assets and liabilities related to a defined benefit pension plan. As of December 31, 2019, the plan assets totaled $3.2 million and the projected benefit obligation totaled $3.1 million, for a net over funded status of $0.1 million, which is included in other assets on the Consolidated Balance Sheet. The net pension expense for the year ended December 31, 2019 was not significant. Employer contributions for the ACG pension plan for the year ending December 31, 2020 are not expected to be significant.

Note 12. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss for the twelve months ended December 31, 2019, December 31, 2018, and December 31, 2017 are as follows:



	Currency translation adjustments			Unrealized loss on derivative financial instruments			Accumulated Other Comprehensive Loss
	(in millions)
Balances at December 31, 2016	$	(18.4	)	$	—		$	(18.4	)
Other comprehensive loss, net of tax, before reclassifications	(1.4		)	—			(1.4		)
Other comprehensive loss	(1.4		)	—			(1.4		)
Balances at December 31, 2017	(19.8		)	—			(19.8		)
Other comprehensive loss, net of tax, before reclassifications	—			(0.9		)	(0.9		)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $0.0, $0.0, and $0.0	3.0			—			3.0
Other comprehensive income (loss)	3.0			(0.9		)	2.1
Balances at December 31, 2018	(16.8		)	(0.9		)	(17.7		)
Other comprehensive income (loss), net of tax, before reclassifications	0.5			(2.8		)	(2.3		)
Amounts reclassified from accumulated other comprehensive loss, net of tax benefit of $0.0, $0.1, and $0.1	—			0.3			0.3
Other comprehensive income (loss)	0.5			(2.5		)	(2.0		)
Balances at December 31, 2019	$	(16.3	)	$	(3.4	)	$	(19.7	)

Reclassifications of unrealized before-tax losses on derivative financial instruments are included in interest expense in the Consolidated and Combined Statements of Operations. The reclassifications of unrealized before-tax losses on currency translation adjustments for the year ended December 31, 2018 relates to the divestiture of certain Canadian operations and are included in the impairment charge recorded on these businesses in the Consolidated and Combined Statement of Operations.

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Note 13. Stock-Based Compensation

Prior to the Separation, Arcosa employees participated in Trinity's equity incentive plans, including equity awards of restricted stock, restricted stock units, and performance-based restricted stock units in respect of Trinity common shares. For periods prior to the Separation, Arcosa's Consolidated and Combined Financial Statements reflect compensation expense for these stock-based plans associated with the portion of Trinity's equity incentive plans in which Arcosa employees participated.

Following the Separation, outstanding awards granted to Arcosa employees under Trinity's equity incentive plans were converted based on either the shareholder method or the concentration method. The shares or units converted using the shareholder method resulted in employees retaining their restricted shares or units in Trinity common stock and receiving one restricted Arcosa share or unit for every three restricted Trinity shares or units. The units converted using the concentration method were fully converted into Arcosa units using a conversion ratio based on the Volume Weighted Average Prices ("VWAP") of Trinity common stock for the 5 days prior to the Separation divided by the VWAP of Arcosa common stock for the 5 days following the Separation. The Arcosa units continue to vest in accordance with their original vesting schedules. There was no significant incremental stock-based compensation expense recorded as a result of the equity award conversions.

In connection with the Separation, effective November 1, 2018, the Board adopted and Trinity, in its capacity as sole shareholder of Arcosa prior to the Separation, approved, the Arcosa Inc. 2018 Stock Option and Incentive Plan (the "Plan"). The Plan provides for the grant of equity awards, including stock options, restricted stock, restricted stock units, performance shares, and other performance-based awards, to our directors, officers, and employees. The maximum number of shares of Arcosa common stock that may be issued under the Plan is 4.8 million shares, which includes the shares granted under the Trinity equity incentive plans that were converted and assumed by Arcosa as a result of the Separation.

At December 31, 2019, we had 2.4 million shares available for grant. Any equity awards that have been granted under the Plan that are subsequently forfeited, canceled, or tendered to satisfy tax withholding obligations are added back to the shares available for grant.

The cost of employee services received in exchange for awards of equity instruments is referred to as share-based payments and is based on the grant date fair-value of those awards. Stock-based compensation includes compensation expense, recognized over the applicable vesting periods, for share-based awards. The Company recognizes compensation expense for both the Arcosa awards and Trinity awards held by our employees. Stock-based compensation totaled $14.6 million, $9.9 million, and $9.0 million for the years ended December 31, 2019, 2018, and 2017, respectively.

The income tax benefit related to stock-based compensation expense was $2.7 million, $2.6 million, and $4.6 million for the years ended December 31, 2019, 2018, and 2017, respectively.

Equity Awards

Equity awards outstanding as of December 31, 2019 consist of restricted stock, restricted stock units, and performance units and generally vest for periods ranging from 1 to 15 years from the date of grant. Certain equity awards vest in their entirety upon the employee's retirement from the Company and may take into consideration the employee's age and years of service to the Company, as defined more specifically in the Company's award agreements. Equity awards granted to non-employee directors under the Plan generally vest one year from the grant date and are released at that time, in the case of restricted stock, or upon completion of the directors' service to the Company, in the case of restricted stock units. Expense related to equity awards issued to eligible employees and directors under the Plan is recognized ratably over the vesting period or to the date on which retirement eligibility is achieved, if shorter. Performance units vest and settle in shares of our common stock following the end of a three-year performance period contingent upon the achievement of specific performance goals during the performance period and certification by the Human Resources Committee of the Board of the achievement of the performance goals. Performance units are granted to employees based upon a target level of performance; however, depending upon the achievement of the performance goals during the performance period, performance units may be issued at an amount between 0% and 200% of the target level. Expense related to performance units is recognized ratably over the vesting period. Forfeitures are recognized as reduction to expense in the period in which they occur.

The activity for equity awards held by Arcosa employees for the year ended December 31, 2019 was as follows:



	Trinity Equity Awards Held by Arcosa Employees		Arcosa Equity Awards Held by Arcosa Employees		Weighted Average Grant-Date Fair Value per Award
Equity awards outstanding at December 31, 2018	1,156,959		1,066,165		$	21.12
Granted	—		417,008		36.21
Vested	(293,239	)	(198,762	)	20.17
Forfeited	(39,735	)	(59,743	)	25.60
Equity awards outstanding at December 31, 2019	823,985		1,224,668		$	24.20

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At December 31, 2019, unrecognized compensation expense related to equity awards totaled $24.6 million which will be recognized over a weighted average period of 2.9 years. The total vesting-date fair value of shares vested and released during the year ended December 31, 2019 was $13.3 million.

Note 14. Earnings Per Common Share

Basic earnings per common share is computed by dividing net income remaining after allocation to unvested restricted shares, which includes unvested restricted shares of Arcosa stock held by employees of the Former Parent, by the weighted average number of basic common shares outstanding for the period. Except when the effect would be antidilutive, the calculation of diluted earnings per common share includes the weighted average net impact of nonparticipating unvested restricted shares. For periods prior to the Separation, the denominator for basic and diluted net income per share was calculated using the 48.8 million shares of common stock outstanding immediately following the Separation. Total weighted average restricted shares were 1.6 million shares, 0.3 million shares, and 0.0 million shares, for the years ended December 31, 2019, 2018, and 2017, respectively. There were no weighted average restricted shares prior to the Separation.

The computation of basic and diluted earnings per share follows.



	Year Ended December 31, 2019
	(in millions, except per share amounts)
	Income (Loss)			Average Shares	EPS
Net income	$	113.3
Unvested restricted share participation	(1.1		)
Net income per common share – basic	112.2			47.9	$	2.34
Effect of dilutive securities:
Nonparticipating unvested restricted shares	—			0.5
Net income per common share – diluted	$	112.2		48.4	$	2.32



	Year Ended December 31, 2018
	(in millions, except per share amounts)
	Income (Loss)			Average Shares	EPS
Net income	$	75.7
Unvested restricted share participation	(0.2		)
Net income per common share – basic	75.5			48.8	$	1.55
Effect of dilutive securities:
Nonparticipating unvested restricted shares	—			0.1
Net income per common share – diluted	$	75.5		48.9	$	1.54



	Year Ended December 31, 2017
	(in millions, except per share amounts)
	Income (Loss)		Average Shares	EPS
Net income	$	89.7
Unvested restricted share participation	—
Net income per common share – basic	89.7		48.8	$	1.84
Effect of dilutive securities:
Nonparticipating unvested restricted shares	—		—
Net income per common share – diluted	$	89.7	48.8	$	1.84

Note 15. Commitments and Contingencies

The Company is involved in claims and lawsuits incidental to our business arising from various matters including commercial disputes, alleged product defect and/or warranty claims, intellectual property matters, personal injury claims, environmental issues, employment and/or workplace-related matters, and various governmental regulations. At December 31, 2019, the range of reasonably possible losses for such matters, taking into consideration our rights in indemnity and recourse to third parties, is $1.1 million to $4.6 million.

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The Company evaluates its exposure to such claims and suits periodically and establishes accruals for these contingencies when probable losses can be reasonably estimated. At December 31, 2019, total accruals of $3.6 million, including environmental matters described below, are included in accrued liabilities in the accompanying Consolidated Balance Sheet. The Company believes any additional liability from such claims and suits would not be material to its financial position or results of operations.

Arcosa is subject to remedial orders and federal, state, local, and foreign laws and regulations relating to the environment. The Company has reserved $1.4 million as of December 31, 2019, included in our total accruals of $3.6 million discussed above, to cover our probable and estimable liabilities with respect to the investigations, assessments, and remedial responses to such matters, taking into account currently available information and our contractual rights to indemnification and recourse to third parties.

Estimates of liability arising from future proceedings, assessments, or remediation are inherently imprecise. Accordingly, there can be no assurance that we will not become involved in future litigation or other proceedings involving the environment or, if we are found to be responsible or liable in any such litigation or proceeding, that such costs would not be material to the Company.

Other commitments

Non-cancelable purchase obligations amounted to $168.9 million as of December 31, 2019, of which $110.1 million is for the purchase of raw materials and components, primarily by the Energy Equipment and Transportation Products Groups.

Note 16. Selected Quarterly Financial Data (Unaudited)



	Three Months Ended
	March 31, 2019		June 30, 2019		September 30, 2019		December 31, 2019
	(in millions except per share data)

Revenues	$	410.9	$	434.1	$	445.0	$	446.9
Operating costs:
Cost of revenues	332.8		345.7		356.7		369.3
Selling, general, and administrative expenses	40.8		46.1		45.5		47.1
Operating profit	37.3		42.3		42.8		30.5
Income before income taxes	35.6		40.8		41.9		28.5
Provision for income taxes	7.9		9.0		9.2		7.4
Net income	$	27.7	$	31.8	$	32.7	$	21.1
Net income per common share:
Basic	$	0.57	$	0.66	$	0.68	$	0.44
Diluted	$	0.56	$	0.65	$	0.67	$	0.43

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	Three Months Ended
	March 31, 2018		June 30, 2018		September 30, 2018		December 31, 2018
	(in millions except per share data)

Revenues	$	354.4	$	353.0	$	378.6	$	374.4
Operating costs:
Cost of revenues	285.6		283.0		308.9		310.9
Selling, general, and administrative expenses	37.6		39.4		40.1		36.8
Impairment charge	—		—		23.2		—
Operating profit	31.2		30.6		6.4		26.7
Income before income taxes	30.2		29.4		6.6		28.8
Provision for income taxes	8.0		6.8		3.4		1.1
Net income	$	22.2	$	22.6	$	3.2	$	27.7
Net income per common share⁽¹⁾:
Basic	$	0.45	$	0.46	$	0.07	$	0.56
Diluted	$	0.45	$	0.46	$	0.07	$	0.56

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Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure Controls and Procedures.

The Company maintains disclosure controls and procedures designed to ensure that it is able to collect and record the information it is required to disclose in the reports it files with the Securities and Exchange Commission (“SEC”), and to process, summarize, and disclose this information within the time periods specified in the rules of the SEC. The Company's Chief Executive and Chief Financial Officers are responsible for establishing and maintaining these procedures and, as required by the rules of the SEC, evaluating their effectiveness. Based on their evaluation of the Company's disclosure controls and procedures that took place as of the end of the period covered by this report, the Chief Executive and Chief Financial Officers believe that these procedures are effective to 1) ensure that the Company is able to collect, process, and disclose the information it is required to disclose in the reports it files with the SEC within the required time periods and 2) accumulate and communicate this information to the Company's management, including its Chief Executive and Chief Financial Officers, to allow timely decisions regarding this disclosure.

Management's Report on Internal Control over Financial Reporting.

Our management is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rules 13a-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance, as opposed to absolute assurance, of achieving their internal control objectives.

Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 Framework) (“COSO”) in Internal Control - Integrated Framework. Based on our assessment, we believe that, as of December 31, 2019, our internal control over financial reporting was effective based on those criteria.

The effectiveness of internal control over financial reporting as of December 31, 2019, has been audited by Ernst & Young LLP, the independent registered public accounting firm who also audited our Consolidated and Combined Financial Statements. Ernst & Young LLP's attestation report on effectiveness of our internal control over financial reporting follows.

Changes in Internal Control over Financial Reporting.

During the three months ended December 31, 2019, there have been no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

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Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Arcosa, Inc.

Opinion on Internal Control Over Financial Reporting

We have audited Arcosa, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2019, 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, Arcosa, Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, 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, 2019 and 2018, the related consolidated and combined statements of operations, comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2019, and the related notes and our report dated February 27, 2020 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

Dallas, Texas

February 27, 2020

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Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information regarding the directors of the Company is incorporated by reference to the information set forth under the caption “Proposal 1 - Election of Class II Directors” in the Company's Proxy Statement to be filed for the 2020 Annual Meeting of Stockholders (the “2020 Proxy Statement”). Information relating to the executive officers of the Company is set forth in Part I of this report under the caption “Information About Our Executive Officers and Other Corporate Officers.” Information relating to the Board of Directors' determinations concerning whether at least one of the members of the Audit Committee is an “audit committee financial expert” as that term is defined under Item 407 (d)(5) of Regulation S-K is incorporated by reference to the information set forth under the caption “Corporate Governance - Board Meeting and Committees - Audit Committee” in the Company's 2020 Proxy Statement. Information regarding the Company's Audit Committee is incorporated by reference to the information set forth under the caption “Corporate Governance - Board Meetings and Committees - Audit Committee” in the Company's 2020 Proxy Statement. There were no delinquent Section 16(a) reports during 2019.

The Company has adopted a Code of Business Conduct and Ethics that applies to all of its directors, officers, and employees. The Code of Business Conduct and Ethics is on the Company's website at www.arcosa.com under “Additional Governance Documents” within the “Corporate Governance” tab of our website. The Company intends to post any amendments or waivers for its Code of Business Conduct and Ethics to the Company's website at www.arcosa.com to the extent applicable to an executive officer, principal accounting officer, controller, or director of the Company.

Item 11. Executive Compensation.

Information regarding compensation of executive officers and directors is incorporated by reference to the information set forth under the caption “Executive Compensation” in the Company's 2020 Proxy Statement. Information concerning compensation committee interlocks and insider participation is incorporated by reference to the information set forth under the caption “Corporate Governance - Compensation Committee Interlocks and Insider Participation” in the Company's 2020 Proxy Statement. Information about the compensation committee report is incorporated by reference to the information set forth under the caption “Executive Compensation - Human Resources Committee Report” in the Company's 2020 Proxy Statement.

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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference from the Company's 2020 Proxy Statement, under the caption “Security Ownership of Certain Beneficial Owners and Management.”

The following table sets forth information about Arcosa common stock that may be issued under Arcosa's equity compensation plan as of December 31, 2019.

Equity Compensation Plan Information

	(a)		(b)		(c)
	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Plan Category:
Equity compensation plans approved by security holders:
Restricted stock units and performance units	1,227,857	(1)	$	—	2,397,471	(2)
Equity compensation plans not approved by security holders	—				—
Total	1,227,857				2,397,471

____________

⁽¹⁾

Represents shares underlying awards that have been granted under the 2018 Stock Option and Incentive Plan (the "Incentive Plan") (including Arcosa equity awards issued in respect of outstanding Trinity equity awards in connection with the Separation). Amounts are comprised of (a) 944,260 shares of common stock issuable upon the vesting and conversion of restricted stock units and (b) 283,597 shares of common stock issuable upon the vesting and conversion of performance units, assuming payout at target performance. The restricted stock units and performance units do not have an exercise price. The performance units are granted to employees based upon a target level; however, depending upon the achievement of certain specified goals during the performance period, performance units may be issued at an amount between 0% and 200% of the target level.


⁽²⁾	For purposes of calculating the number of shares remaining available for issuance under the Incentive Plan, this calculation reserves for issuance the potential maximum payout (200% of target) of the outstanding performance units. Upon certification of actual performance, reserved shares that are not issued will again be available for issuance under the Incentive Plan.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information regarding certain relationships and related person transactions is incorporated by reference to the information set forth under the caption “Transactions with Related Persons” in the Company's 2020 Proxy Statement. Information regarding the independence of directors is incorporated by reference to the information set forth under the caption “Corporate Governance-Independence of Directors” in the Company's 2020 Proxy Statement.

Item 14. Principal Accountant Fees and Services.

Information regarding principal accountant fees and services is incorporated by reference to the information set forth under the caption “Fees of Independent Registered Public Accounting Firm for Fiscal Years 2019 and 2018” in the Company's 2020 Proxy Statement.

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PART IV

Item 15. Exhibits and Financial Statement Schedules.

(a) (1) Financial Statements.

See Item 8.

(2) Financial Statement Schedule.

All schedules are omitted because they are not required, not significant, not applicable, or the information is shown in the financial statements or the notes to consolidated financial statements.

(3) Exhibits.



NO.	DESCRIPTION
2.1	Separation and Distribution Agreement, dated as of October 31, 2018, by and between Trinity Industries, Inc. and Arcosa, Inc. (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
2.2	Purchase Agreement and Plan of Merger, dated November 14, 2018, by and among Arcosa Materials, Inc., Arcosa MS1, LLC, Harrison Gypsum Holdings, LLC, H.I.G. - HGC, LLC, and H.I.G. - HGC, LLC, not individually but solely in its capacity as the Representative. (incorporated by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2018, File No. 001-38494)
2.3	Securities Purchase Agreement dated December 12, 2019 by and among Arcosa MS2, LLC and Cherry Industries, Inc. and certain affiliated real estate holding companies, the sellers set forth therein, Leonard L. Cherry in his capacity as “Sellers Representative” and Arcosa Materials, Inc. solely as buyer guarantor (filed herewith)
3.1	Restated Certificate of Incorporation of Arcosa, Inc. (incorporated by reference to Exhibit 3.1 to the Company’s Registration Statement on Form S-8, filed on October 31, 2018, File No. 333-228098)
3.2	Amended and Restated Bylaws of Arcosa, Inc. (incorporated by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-8, filed on October 31, 2018, File No. 333-228098)
4.1	Description of Arcosa, Inc.’s Capital Stock (filed herewith)
10.1	Transition Services Agreement, dated as of October 31, 2018, by and between Trinity Industries, Inc. and Arcosa, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
10.2	Tax Matters Agreement, dated as of October 31, 2018, by and between Trinity Industries, Inc. and Arcosa, Inc. (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
10.3	Employee Matters Agreement, dated as of October 31, 2018, by and between Trinity Industries, Inc. and Arcosa, Inc. (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
10.4	Intellectual Property Matters Agreement, dated as of October 31, 2018, by and between Trinity Industries, Inc. and Arcosa, Inc. (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
*10.5	Arcosa, Inc. 2018 Stock Option and Incentive Plan (incorporated by reference to Exhibit 99.1 to the Company’s Registration Statement on Form S-8, filed on October 31, 2018, File No. 333-228098)
*10.6	Arcosa, Inc. Annual Incentive Plan (incorporated by reference to Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
*10.7	Arcosa, Inc. 2018 Deferred Plan for Director Fees (incorporated by reference to Exhibit 10.8 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
*10.8	Arcosa, Inc. Supplemental Profit Sharing Plan (incorporated by reference to Exhibit 10.9 to the Company’s Current Report on Form 8-K, filed November 1, 2018, File No. 001-38494)
*10.9	Form of Non-Employee Director Restricted Stock Grant Agreement (incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2018, File No. 001-38494)
*10.10	Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year-ended December 31, 2018, File No. 001-38494)
*10.11	Arcosa, Inc. Change in Control Severance Plan (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed December 12, 2018, File No. 001-38494)

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*10.12	Form of Former Parent Restricted Stock Grant Agreement for grants issued prior to 2008 (incorporated by reference to Exhibit 10.7.1 to Trinity Industries, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2018, File No. 001-06903)
*10.13	Form of Former Parent Restricted Stock Grant Agreement for grants issued commencing 2008 (incorporated by reference to Exhibit 10.7.1.1 to Trinity Industries, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2018, File No. 001-06903)
*10.14	Form of Former Parent Restricted Stock Unit Agreement for Non-Employee Directors for grants issued prior to 2008 (incorporated by reference to Exhibit 10.7.2 to Trinity Industries, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2018, File No. 001-06903)
*10.15	Form of Former Parent Restricted Stock Unit Agreement for Non-Employee Directors for grants issued commencing 2008 (incorporated by reference to Exhibit 10.7.2.1 to Trinity Industries, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2018, File No. 001-06903)
*10.16	Form of Former Parent Performance Restricted Stock Unit Grant Agreement for grants issued commencing 2011 through 2016 (incorporated by reference to Exhibit 10.10.6 to Trinity Industries, Inc. Annual Report on Form 10-K for the annual period ended December 31, 2016, File No. 001-06903)
*10.17	Form of Former Parent Restricted Stock Unit Agreement for grants issued commencing 2017 (incorporated by reference to Exhibit 10.2 to Trinity Industries, Inc. Form 8-K filed on May 3, 2017, File No. 001-06903)
*10.18	Form of Former Parent Performance-Based Restricted Stock Unit Grant Agreement for grants issued commencing 2017 (incorporated by reference to Exhibit 10.3 to Trinity Industries, Inc. Form 8-K filed on May 3, 2017, File No. 001-06903)
*10.19	Form of Former Parent Non-Employee Director Restricted Stock Grant Agreement for grants issued commencing 2017 (incorporated by reference to Exhibit 10.5 to Trinity Industries, Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, File No. 001-06903)
*10.20	Form of Former Parent Non-Employee Director Restricted Stock Unit Agreement for grants issued commencing 2017 (incorporated by reference to Exhibit 10.6 to Trinity Industries, Inc. Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2017, File No. 001-06903)
*10.21	Form of Restricted Stock Unit Agreement for grants commencing 2019 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on May 8, 2019, File No. 001-38494)
*10.22	Form of Non-Employee Director Restricted Stock Unit Agreement for grants commencing 2019 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed on May 8, 2019, File No. 001-38494)
*10.23	Form of Performance-Based Restricted Stock Unit Grant Agreement for grants commencing 2019 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on May 8, 2019, File No. 001-38494)
*10.24	Amendment Number One to the Arcosa, Inc. 2018 Stock Option and Incentive Plan (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, File No. 001-38494)
*10.25	Amendment Number One to the Arcosa, Inc. Supplemental Profit Sharing Plan (filed herewith)
10.26	Amended and Restated Credit Agreement dated as of January 2, 2020 by and among Arcosa, Inc., as borrower, the lenders thereto, JPMorgan Chase Bank, National Association, as administrative agent, Bank of America, N.A., as syndication agent, and Wells Fargo Bank, National Association and Truist Bank, as co-documentation agents (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed on January 6, 2020, File No. 001-38494)
21	Listing of subsidiaries of Arcosa, Inc. (filed herewith)
23	Consent of Ernst & Young LLP (filed herewith)
31.1	Rule 13a-15(e) and 15d-15(e) Certification of the Chief Executive Officer (filed herewith)
31.2	Rule 13a-15(e) and 15d-15(e) Certification of the Chief Financial Officer (filed herewith)
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
95	Mine Safety Disclosure Exhibit (filed herewith)
101.INS	Inline XBRL Instance Document (filed electronically herewith)
101.SCH	Inline XBRL Taxonomy Extension Schema Document (filed electronically herewith)
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document (filed electronically herewith)
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document (filed electronically herewith)
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document (filed electronically herewith)

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101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document (filed electronically herewith)
104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Management contracts and compensatory plan arrangements

Item 16. Form 10-K Summary.

None

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.



ARCOSA, INC.	By	/s/ Scott C. Beasley
Registrant
		Scott C. Beasley
		Chief Financial Officer
		February 27, 2020

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.



Signature	Title	Date

/s/ Antonio Carrillo	President and Chief Executive Officer and Director	February 27, 2020
Antonio Carrillo	(Principal Executive Officer)

/s/ Scott C. Beasley	Chief Financial Officer	February 27, 2020
Scott C. Beasley	(Principal Financial Officer)

/s/ Mary E. Henderson	Chief Accounting Officer	February 27, 2020
Mary E. Henderson	(Principal Accounting Officer)

/s/ Rhys J. Best	Non-Executive Chairman	February 27, 2020
Rhys J. Best

/s/ Joseph Alvarado	Director	February 27, 2020
Joseph Alvarado

/s/ David W. Biegler	Director	February 27, 2020
David W. Biegler

/s/ Jeffrey A. Craig	Director	February 27, 2020
Jeffrey A. Craig

/s/ Ronald J. Gafford	Director	February 27, 2020
Ronald J. Gafford

/s/ John W. Lindsay	Director	February 27, 2020
John W. Lindsay

/s/ Douglas L. Rock	Director	February 27, 2020
Douglas L. Rock

/s/ Melanie Trent	Director	February 27, 2020
Melanie Trent

Exhibit 2.3

SECURITIES PURCHASE AGREEMENT

by and among

ARCOSA MS2, LLC, as BUYER,

ARCOSA MATERIALS, INC., as BUYER GUARANTOR

solely for the purposes of Section 11.19,

and

THE COMPANIES, SELLERS AND SELLERS’ REPRESENTATIVE

IDENTIFIED HEREIN

Dated as of December 12, 2019

TABLE OF CONTENTS

Page



ARTICLE I CERTAIN DEFINITIONS		1
	1.1 Definitions	1
	1.2 Additional Definitions	11
	1.3 Other Definitional Provisions	12

ARTICLE II PURCHASE AND SALE OF THE SECURITIES		13
	2.1 Basic Transaction	13
	2.2 Closing Transactions	13
	2.3 Closing Cash Proceeds Adjustment; Inventory Count	15
	2.4 Withholding Rights	18

ARTICLE III CONDITIONS TO CLOSING		19
	3.1 Conditions to the Obligations of the Buyer, the Sellers and the Companies	19
	3.2 Conditions to the Obligations of the Buyer	19
	3.3 Conditions to the Obligations of the Sellers and the Companies	20
	3.4 Frustration of Conditions	20

ARTICLE IV COVENANTS OF THE PARTIES		20
	4.1 Reasonable Best Efforts	21
	4.2 Maintenance of Business	22
	4.3 Operation of Business	22
	4.4 Access	24
	4.5 Title Policy	25
	4.6 Intercompany Arrangements	25
	4.7 Exclusivity	26
	4.8 R&W Insurance Policy	27

ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE SELLERS		27
	5.1 Capacity, Organization and Power	27
	5.2 Title to Securities	28
	5.3 Authority; Noncontravention	28
	5.4 Governmental Authorities and Consents	28
	5.5 Litigation	28
	5.6 Brokerage	29

ARTICLE VI REPRESENTATIONS AND WARRANTIES OF THE COMPANIES		29
	6.1 Capacity, Organization and Corporate Power	29
	6.2 Securities and Related Matters	29
	6.3 Authorization; Noncontravention	29

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TABLE OF CONTENTS (continued)

Page



	6.4 Subsidiaries	30
	6.5 Financial Statements; No Undisclosed Liabilities	31
	6.6 Absence of Certain Developments	32
	6.7 Contracts and Commitments	32
	6.8 Intellectual Property Rights	34
	6.9 Litigation	36
	6.1 Compliance with Laws	37
	6.11 Permits	37
	6.12 Environmental Matters	37
	6.13 Employees	39
	6.14 Employee Benefit Plans	40
	6.15 Insurance	43
	6.16 Tax Matters	43
	6.17 Brokerage	45
	6.18 Affiliated Transactions	45
	6.19 Properties	45
	6.2 Customers and Suppliers	47
	6.21 Accounts Receivable; Accounts Payable	48
	6.22 Affiliate Transactions	48
	6.23 Inventory	48
	6.24 Bank Accounts	49
	6.25 Product Liability	49
	6.26 Trade Controls; Absence of Corrupt Practices	50
	6.27 NO OTHER REPRESENTATIONS AND WARRANTIES	51

ARTICLE VII REPRESENTATIONS AND WARRANTIES OF THE BUYER		51
	7.1 Organization and Power	51
	7.2 Authorization and Enforceability	51
	7.3 No Violation	52
	7.4 Governmental Authorities and Consents	52
	7.5 Litigation	52
	7.6 Brokerage	52
	7.7 Independent Investigation	52
	7.8 Financial Capability	53
	7.9 Solvency	53
	7.1 Purchase for Investment	53

ARTICLE VIII TERMINATION		54
	8.1 Termination	54
	8.2 Effect of Termination	54

ARTICLE IX ADDITIONAL AGREEMENT AND COVENANTS		55
	9.1 Acknowledgement by the Buyer	55

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TABLE OF CONTENTS (continued)

Page



	9.2 Further Assurances	56
	9.3 Employees and Employee Benefits	57
	9.4 Director and Officer Liability and Indemnification	59
	9.5 Certain Access Provisions	60
	9.6 Notification	61
	9.7 Certain Consents	61
	9.8 Tax Matters	61
	9.9 Non-Compete; Non-Solicit	66
	9.1 Buyer Right of First Refusal	67

ARTICLE X CERTAIN POST-CLOSING MATTERS		68
	10.1 Survival of Representations, Warranties and Covenants	68
	10.2 Certain Waivers	68

ARTICLE XI MISCELLANEOUS		68
	11.1 Press Releases and Communications	68
	11.2 Expenses	69
	11.3 Amendment and Waiver	69
	11.4 Notices	69
	11.5 Successors and Assigns	70
	11.6 Non-Recourse	71
	11.7 Severability	71
	11.8 Construction	71
	11.9 No Third-Party Beneficiaries	72
	11.1 Complete Agreement	72
	11.11 Electronic Delivery; Counterparts	72
	11.12 Governing Law; WAIVER OF JURY TRIAL	73
	11.13 Specific Performance	73
	11.14 Prevailing Party	74
	11.15 Acknowledgement	74
	11.16 No Right of Set-Off	74
	11.17 Relationship of the Parties	75
	11.18 Sellers’ Representative	75
	11.19 Buyer Guarantor	76

-iii-

EXHIBITS AND SCHEDULES

EXHIBITS:

Exhibit A Sellers’ Pro Rata Shares

Exhibit B Escrow Agreement

Exhibit C Rules of Engagement for Independent Accounting Firm

SCHEDULES:

Schedule I Net Working Capital

Schedule II Purchase Price Allocation Methodology

Schedule III Title Insurance Policy Proformas

SECURITIES PURCHASE AGREEMENT

THIS SECURITIES PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of December 12, 2019, by and among Arcosa MS2, LLC, a Delaware limited liability company (the “Buyer”), Cherry Industries, Inc., a Texas corporation (“Industries”), 4601 Holmes Road Corporation, a Texas corporation (“Holmes Road”), Cherry Crawford Holdings, Ltd., a Texas limited partnership (“Cherry Crawford”), Selinsky Road Holdings, Ltd., a Texas limited partnership (“Selinsky”, and, together with Industries, Holmes Road and Cherry Crawford, each a “Company” and collectively, the “Companies”), Leonard Cherry Life Insurance Trust u/t/a January 28, 2016 (“Leonard Cherry Trust”), 2019 Cherry Irrevocable Trust u/t/a July 8, 2019 (“2019 Cherry Irrevocable Trust”), Gaylinn Kay Svec 2016 Trust u/t/a October 31, 2016 (“Svec Trust”), Elaine Sue Stark 2016 Trust u/t/a October 31, 2016 (“Stark Trust”), Hayley Cherry Wagoner 2016 Trust u/t/a October 31, 2016 (“Wagoner Trust”), Leonard L. Cherry (in his individual capacity as a shareholder of each of Industries and Holmes Road, “Leonard Cherry”, and, together with Leonard Cherry Trust, 2019 Cherry Irrevocable Trust, Svec Trust, Stark Trust and Wagoner Trust, each a “Seller” and collectively, the “Sellers”), Leonard L. Cherry in his capacity as “Sellers’ Representative” under this Agreement, and Arcosa Materials, Inc., a Delaware corporation, solely for purposes of Section 11.19 (the “Buyer Guarantor”). The Buyer, the Companies, and the Sellers are sometimes each referred to herein as a “Party” and collectively as the “Parties.”

WHEREAS, the Sellers, directly or indirectly, own all of the issued and outstanding capital stock and partnership interests, as applicable, of the Companies (the “Securities”);

WHEREAS, on the terms and subject to the conditions set forth in this Agreement, the Buyer desires to purchase from the Sellers, and the Sellers desire to sell to the Buyer, all of the Securities; and

WHEREAS, the Buyer Guarantor, directly or indirectly, owns all of the issued and outstanding membership interests of the Buyer.

NOW, THEREFORE, in consideration of the mutual covenants, agreements and understandings contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, the Parties hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS

1.1 Definitions. For the purposes of this Agreement, the following terms have the meanings set forth below:

“Abandonment and Reclamation Obligations” means all past, present and future legally binding obligations to (a) abandon, shut-down, close, decommission, dismantle and remove any and all fixtures, improvements, tangible personal property, structures, foundations, buildings, pipelines, equipment and other physical facilities located on any Owned Real Property or Leased Real Property, or lands pooled or unitized therewith, used or previously used by the Companies or any of their respective Subsidiaries in respect of any mining, processing, storage, transportation or other activities; and (b) investigate, monitor, restore, remediate and reclaim the surface and subsurface locations, if any, of such Owned Real Property

or Leased Real Property, and lands pooled or unitized therewith, and any lands used to gain access thereto, including such obligations relating to any mining, processing, storage, transportation, production or other facilities that were abandoned or decommissioned, in whole or in part, prior to the Closing Date, and including the investigation, monitoring, remediation, restoration and reclamation of any other surface and subsurface lands affected by any environmental damage, contamination or other environmental issues emanating from or relating to such mining, processing, storage, transportation, production or other facilities; in each case that are required pursuant to generally accepted industry practices, any lease provisions from any lessor or landowner or any Laws.

“Affiliate” of any particular Person means any other Person controlling, controlled by or under common control with such Person on the date hereof or hereafter from time to time; provided that (a) after the Closing, none of the Companies nor any of their respective Subsidiaries shall be considered an Affiliate of the Sellers and (b) prior to the Closing, none of the Companies nor any of their respective Subsidiaries shall be considered an Affiliate of the Buyer. For purposes of this definition, “control” (including the terms “controlling,” “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, the right to appoint managing directors, by contract or otherwise.

“Affiliated Group” means an affiliated group as defined in Section 1504 of the Code (or any analogous combined, consolidated or unitary group defined under state, local or foreign income Tax law) of which any of the Companies or their respective Subsidiaries is a member.

“Attorney-Client Communication” means any communication occurring on or prior to Closing between the Law Firm, on the one hand, and any of the Companies, the Subsidiaries, the Sellers or any of their respective Affiliates on the other hand, that arises from the Law Firm’s engagement as counsel for the Sellers and the Companies in connection with this Agreement and the transactions contemplated hereby.

“Benefit Plan” means all employee benefit plans (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), whether or not subject to ERISA), and all bonus, commission, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree welfare benefit, supplemental retirement, severance or other benefit plans, arrangements, programs, procedures, payroll practices or policies, and all employment, termination, severance, change in control or other contracts or agreements sponsored, maintained, contributed to, or required to be contributed to by the Companies or any of their respective Subsidiaries with respect to any of its employees, officers or directors or former employees, officers or directors (or any dependents or beneficiaries of any such employees, officers or directors or former employees, officers or directors) or for which the Companies or any of their respective Subsidiaries have or could have any liability (whether actual or contingent).

“Business Day” means a day, other than a Saturday or Sunday, on which banks in Houston, Texas are open for business during normal banking hours.

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“Cash” means, as of a given time, (a) all cash and cash equivalents of the Companies and their respective Subsidiaries on a consolidated basis, at such time, as determined in a manner consistent with the Accounting Methods; provided that, for the avoidance of doubt, (i) outstanding checks that have not cleared as of such time in the bank accounts of the Companies and their respective Subsidiaries that are within accounts payable shall not constitute Cash (i.e., shall not reduce Cash); (ii) outstanding checks that have not cleared as of such time in the bank accounts of the Companies and their respective Subsidiaries that are not within accounts payable shall be taken into account in the calculation of Cash (i.e., shall reduce Cash), (iii) checks received that have not cleared as of such time in the bank accounts of the Companies and their respective Subsidiaries that are within accounts receivable shall not constitute Cash (i.e., shall not increase Cash), and (iv) checks received that have not cleared as of such time in the bank accounts of the Companies and their respective Subsidiaries that are not included within accounts receivable shall constitute Cash (i.e., shall increase Cash), minus (b) Restricted Cash.

“Cause” means: (i) a Retained Employee’s indictment for any crime involving monies or other property or any felony, crime, or any offense of moral turpitude, or such Retained Employee’s fraud, embezzlement, theft, dishonesty, willful misconduct, or deliberate injury to the Buyer or its Affiliates in the performance of his duties hereunder; (ii) a Retained Employee’s intentional or grossly negligent refusal or failure to perform such Retained Employee’s duties or carry out lawful and reasonable directions of the Buyer or its Affiliates; (iii) a Retained Employee’s breach of any of his fiduciary duties to the Buyer or its Affiliates or making of a willful misrepresentation or failure to act, which breach or misrepresentation or failure to act is reasonably expected to have a material adverse effect on the business of the Buyer or its Affiliates; (iv) a Retained Employee’s engagement in any willful misconduct which has or is reasonably expected to have a material adverse effect on the reputation or standing in the business community of the Buyer or its Affiliates or the community as a whole; or (v) any misappropriation by a Retained Employee of funds or property of the Buyer or its Affiliates.

“Closing Cash” means Cash as of the close of business on the day immediately prior to the Closing Date.

“Closing Cash Proceeds” means (a) the Transaction Price, plus (b) the amount of Closing Cash, minus (c) the amount of Closing Indebtedness, minus (d) the amount (if any) by which Closing Net Working Capital is less than the Minimum Net Working Capital Amount, plus (e) the amount (if any) by which Closing Net Working Capital is greater than the Maximum Net Working Capital Amount, minus (f) the amount of Company Transaction Expenses, minus (g) the Purchase Price Escrow Amount, in each case as determined in a manner consistent with the Accounting Methods. For the avoidance of doubt, no items included in the definitions of Cash, Net Working Capital, Indebtedness or Company Transaction Expenses shall be double counted for purposes of calculating the Closing Cash Proceeds hereunder.

“Closing Date” means the date of the Closing.

“Closing Indebtedness” means Indebtedness outstanding as of the close of business on the day immediately prior to the Closing Date.

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“Closing Net Working Capital” means Net Working Capital as of the close of business on the day immediately prior to the Closing Date as calculated in accordance with the Accounting Methods.

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

“Company Transaction Expenses” means, without duplication, to the extent not paid prior to the Closing, (a) whether identified or unidentified prior to the Closing, all fees, costs and expenses (including fees, costs and expenses of legal counsel, accountants, investment bankers or other professional advisors) incurred by or on behalf of, or paid or to be paid directly by, the Companies and their respective Subsidiaries or any Person that the Companies or any of their Subsidiaries pay or reimburse or are otherwise legally obligated to pay or reimburse (including any such fees, costs and expenses incurred by or on behalf of the Sellers or the Seller Representative, but excluding any such fees, costs and expenses incurred by or on behalf of the Buyer or any of its Affiliates) in connection with the negotiation of and consummation of the transactions contemplated by this Agreement, including any stay bonuses, sale bonuses, change of control payments, severance, termination, or retention obligations, synthetic equity payments, or similar amounts payable in the future or due by the Companies or any of their respective Subsidiaries in connection with the transactions contemplated hereby, including any Taxes payable in connection therewith, including the payments set forth on Section 1.1(a) of the Disclosure Schedules, minus (b) the portion of the premium for the D&O Tail Policy paid by the Companies or their respective Subsidiaries prior to the Closing or included in the calculation of any component of the Closing Cash Proceeds. For the avoidance of doubt, “Company Transaction Expenses” shall not include any transfer Taxes or any amounts with respect to or included in Net Working Capital.

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated August 7, 2019, by and between Industries and Arcosa, Inc.

“Customs and International Trade Laws” means any executive order, requirement of Law, license, directive, regulation, award or other decision or requirement, including any amendments, having the force or effect of requirements of Law, of any Governmental Authority, concerning the importation, exportation, re-exportation or deemed exportation of products, technical data, technology or services, and the terms and conduct of transactions and making or receiving of payment related to such importation, exportation, re-exportation or deemed exportation, including, as applicable, the Tariff Act of 1930; the Export Administration Act of 1979; the Export Administration Regulations, 15 C.F.R. Part 730 et seq.; the Foreign Trade Regulations, 15 C.F.R. Part 30; the Arms Export Control Act; the International Traffic in Arms Regulations, 22 C.F.R. Part 120-130; executive orders, laws and regulations administered by the OFAC; the International Emergency Economic Powers Act; the Trading With the Enemy Act; the anti-boycott laws and regulations administered by the U.S. Department of Commerce and the U.S. Department of the Treasury; and any norms, guidelines or rules of interpretation issued by any corresponding Governmental Authority.

“Data Room” means the virtual data room described on Section 1.1(b) of the Disclosure Schedules.

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“Encumbrance” means any lien, pledge, security interest, charge, encumbrance, mortgage or adverse claims.

“Environmental Laws” means all Laws concerning pollution or protection of the environment, including all those relating to the presence, use, production, generation, handling, transportation, treatment, storage, disposal, distribution, discharge or release of any Hazardous Materials, as in effect as of the Closing.

“Escrow Agent” means JPMorgan, or its successor, in its capacity as such pursuant to the Escrow Agreement.

“Escrow Agreement” means an escrow agreement in substantially the form attached hereto as Exhibit B, by and among the Buyer, the Sellers’ Representative and the Escrow Agent.

“Employment Period” means the period during which Leonard Cherry is employed by any of the Companies or their Affiliates.

“Fraud” shall mean an intentional misrepresentation of a material fact that is made with specific intent to deceive a Party regarding a representation set forth in this Agreement.

“GAAP” means the generally accepted accounting principles in the United States.

“Governmental Authority” means any transnational, domestic or foreign federal, state, provincial or local governmental, quasi-governmental, regulatory or administrative authority, agency, commission, official, body, department, division, board, bureau or instrumentality or any court, tribunal or judicial or arbitral body (public or private).

“Hazardous Materials” means any waste or other substance that is regulated, listed, defined, designated or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant due to its dangerous or deleterious qualities under or pursuant to any Environmental Laws, including petroleum and derivatives thereof, radiation, and friable asbestos.

“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

“Indebtedness” means, as of a given time and without duplication, the sum of (a) the unpaid principal amount of accrued interest, premiums, penalties and other fees (including such amounts that would become due as a result of the consummation of the transactions contemplated by this Agreement) in respect of (i) indebtedness for borrowed money of the Companies and their respective Subsidiaries, (ii) indebtedness evidenced by notes, debentures, bonds or other similar instruments and (iii) all obligations with respect to interest-rate hedging, swaps or similar financial instruments (valued at the termination value thereof and net of all payments owed to the Companies and their Affiliates thereunder), (b) all obligations under capitalized leases with respect to which the Companies or any of their Subsidiaries is liable, determined on a consolidated basis in accordance with GAAP, (c) any amounts for the deferred purchase price of goods and services, including any earn-out liabilities associated with past acquisitions, (d) all deposits and monies received in advance, (e) all indebtedness created or arising under any conditional sale or other title retention agreement, and (f) all obligations of the Companies or their Subsidiaries in respect

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of guarantees of obligations of the types described in clauses (a) through (e) of any other Person, in the case of each of clauses (a) through (e), as determined in a manner consistent with the Accounting Methods; provided that without limiting other amounts that are not to be included therewith, in no event shall Indebtedness include (x) any amounts with respect to or included in Net Working Capital or Company Transaction Expenses or (y) any amounts related to inter-company debt between the Companies, on the one hand, and any of their respective Subsidiaries, on the other hand, and any Subsidiary of the Companies and another Subsidiary of the Companies.

“Indemnified Taxes” means (a) all Taxes of the Sellers and their direct and indirect owners (including Taxes that could become a liability of, or be assessed or collected against, the Buyer or any of its Affiliates (including the Companies or any of their Subsidiaries after Closing) or that could give rise to an Encumbrance on any of the assets, properties or rights of the Companies or any their Subsidiaries); (b) all Taxes of the Companies and their respective Subsidiaries (including, for the avoidance of doubt, all Taxes of any predecessor) that are attributable to any Pre-Closing Tax Period (including, for the avoidance of doubt, the pre-Closing portion of any Straddle Period); (c) any actual out-of-pocket losses, damages, liabilities, deficiencies, claims, interest, awards, Taxes, judgments, penalties, costs and expenses asserted against, incurred, sustained or suffered by the Buyer or any of its Affiliates (including the Companies or any of their Subsidiaries after the Closing) as a result of, arising out of or otherwise relating to a breach of (i) any representation or warranty contained in Section 6.16 or (ii) any covenant set forth in Section 9.8; and (d) any reasonable attorneys’ fees, costs and other out-of-pocket expenses incurred by the Buyer or its Affiliates (including the Companies and their respective Subsidiaries after the Closing) with respect to the foregoing.

“Intellectual Property Rights” means all of the following: (a) patents and patent applications, (b) trademarks, service marks, trade names, trade dress, logos, registrations and applications for registration thereof, Internet domain names and website content, and the goodwill of the business associated with the foregoing (collectively, the “Marks”), (c) unregistered copyrights, and copyright registrations and copyright applications, and (d) trade secrets, know-how, manufacturing and production processes, inventions, improvements, methods, techniques, formula, compositions, software, data, databases, and other confidential information, in each case, that derive independent economic value from not being generally known to, and not being readily ascertainable by proper means by, other Persons who can obtain economic value from their disclosure and use (collectively, the “Trade Secrets”).

“Inventory” means all raw materials, work-in-process, parts, spare parts, packaging materials, labels, supplies, finished goods (including in transit, on consignment or in the possession of any third party) and other inventories.

“knowledge” or “known” means, (a) with respect to a Person (other than the Companies), the actual knowledge of such Person and such knowledge as would be imputed to such Person upon reasonable inquiry and (b) with respect to the Companies, the actual knowledge of Leonard Cherry, Ivan Svec, Joel Gutierez and Matt Ling and such knowledge as would be imputed to such individuals upon reasonable inquiry, in each case as of the date of determination.

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“Law” means any transnational, domestic or foreign federal, state, local or provincial statute, law, ordinance, principle of common law, constitution, treaty, convention, regulation, rule, code, order, injunction, judgment, determination, directive, ruling, decree, requirement or rule of law, or any other provision, decision or requirement having the force and effect of law.

“Material Adverse Effect” means any fact, event, circumstance, effect or change that (a) has had or would reasonably be expected to have, individually or in the aggregate with any other fact, event, circumstance, effect or change, a material adverse effect on the business, condition (financial or otherwise) or results of operations of the Companies and their respective Subsidiaries, taken as a whole or (b) materially impairs or would reasonably be expected to materially impair the ability of any of the Sellers or the Companies to consummate the transactions contemplated hereby, or to perform their respective obligations hereunder, in each case in a timely manner; provided, however, that in the case of clause (a) only, a Material Adverse Effect shall not include any fact, event, circumstance, effect or change to the extent resulting from: (i) changes in, or conditions affecting, interest rates, general economic, financial or political conditions (including changes in the price of gas, oil or other natural resources) or the banking or securities market (or any segment thereof) in the United States or any other country (including (1) any disruption of any of the foregoing, (2) any decline or rise in the price of any security, commodity, contract or index and (3) any increased cost, or decreased availability, of capital or pricing or terms related to any financing for the transactions contemplated hereby); (ii) changes in, or conditions affecting, the industries in which the Companies and their respective Subsidiaries operate; (iii) seasonal fluctuations in the business of the Companies and their respective Subsidiaries or the industries in which the Companies and their respective Subsidiaries operate; (iv) any national or international political or social event or occurrence, acts of war, sabotage, hostility, terrorism, crisis or other similar events; (v) natural disasters, including earthquakes, wild fires, floods, mud slides, tsunamis, storms and other similar force majeure events; (vi) changes in Law, GAAP or other applicable regulatory accounting requirements, or in the interpretation thereof by any Person other than the Companies (including, for the avoidance of doubt, any such items related to or arising under the HSR Act, including the failure to procure the expiration or termination of any waiting period under the HSR Act); (vii) any failure by the Companies or their respective Subsidiaries to meet any internal or published performance or financial budgets, projections, forecasts or predictions (it being understood that the underlying facts giving rise or contributing to such failure described in this clause (vii) may be taken into account in determining whether there has been a Material Adverse Effect if such facts are not otherwise excluded under this definition); (viii) any existing fact, event, circumstance, effect or change that is disclosed in the Disclosure Schedules; (ix) any actions or omissions to act by the Sellers, the Companies and/or their respective Subsidiaries that are requested by the Buyer, or the Buyer’s failure to consent to any of the actions restricted by Section 4.2 or Section 4.3 after the Sellers requested such consent in writing; (x) any actions or omissions to act by the Buyer or any of its Affiliates; (xi) changes (including any cancellations of, or delays in, customer purchases or orders or any reduction in customer order forecasts) resulting from the announcement of this Agreement or the pendency of the transactions contemplated herein or any other transaction (including any costs or expenses required by such transactions or the loss of any employees); or (xii) the entry into this Agreement, the announcement, pendency or consummation of the transactions contemplated hereby or the identity, nature or ownership of the Buyer; except, in the case of each of clauses (i) through (vi), only to the extent the Companies or their respective Subsidiaries are materially disproportionately affected thereby as compared with other participants in the industries in which the Companies and their respective Subsidiaries operate.

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“Maximum Net Working Capital Amount” means $36,000,000.

“Minimum Net Working Capital Amount” means $31,000,000.

“Net Working Capital” means, as of a given time, the consolidated current assets (excluding all Tax assets) of the Companies and their respective Subsidiaries less the consolidated current liabilities (excluding all Tax liabilities) of the Companies and their respective Subsidiaries, in each case (a) as determined in a manner consistent with the Accounting Methods, (b) excluding any amounts taken into account in the calculation of Cash or Indebtedness and (c) excluding any amounts with respect to or included in Company Transaction Expenses.

“Permitted Encumbrances” means (a) Encumbrances for Taxes, assessments and charges or levies by Governmental Authorities not yet due and payable or the validity of which is being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (b) statutory landlord’s, mechanic’s, carrier’s, workmen’s, repairmen’s, materialmen’s or other Encumbrances arising or incurred in the ordinary course of business and that secure either (i) amounts not yet due and payable or (ii) amounts that are being contested in good faith by appropriate proceedings, which, as of the Closing Date, shall not involve any substantial risk of sale, forfeiture or loss of any part of the Leased Real Property or the Owned Real Property, as the case may be, title thereto or any interest therein and shall not interfere in any material respect with the ownership, financing, leasing, occupation, design, construction, equipping, testing, repair, operation, maintenance, use, value, marketability or disposition of the Leased Real Property or the Owned Real Property, or any improvements constructed thereon, (c) the purchase money Encumbrances and Encumbrances securing rental payments under capital lease arrangements set forth on Section 1.1(c) of the Disclosure Schedules, (d) Encumbrances imposed by applicable Law, (e) pledges or deposits to secure obligations under workers’ compensation laws or similar legislation or to secure public or statutory obligations; (f) pledges and deposits to secure the performance of bids, trade contracts, leases, surety and appeal bonds, performance bonds and other obligations of a similar nature, in each case in the ordinary course of business; (g) any Encumbrances appearing as exceptions in a Title Policy, and zoning, building, land use Laws and other similar restrictions on the use of the Leased Real Property or Owned Real Property, in each case that do not adversely affect in any material respect the current use or ownership of the applicable property owned, leased, used or held for use by the Companies or any of their respective Subsidiaries; (h) non-disclosure agreements entered into in the ordinary course of business; (i) matters which would be disclosed by a current, complete and accurate survey or inspection of each parcel of property which do not, individually or in the aggregate, materially impair the occupancy, current use, value or marketability of the Owned Real Property or the Leased Real Property; and (j) the Encumbrances listed on Section 1.1(c) of the Disclosure Schedules.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated association, corporation, limited liability company, syndicate, person, trust or other entity or organization, including any Governmental Authority.

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“Pre-Closing Tax Period” means any taxable period (or portion thereof) ending on or prior to the Closing Date.

“Pro Rata Share” means, with respect to each Seller, such Seller’s proportionate interest in the Transaction Price arising from such Seller’s interest in the Companies, as applicable, and as described on Exhibit A.

“Purchase Price Escrow Account” means an account established by the Escrow Agent pursuant to the Escrow Agreement.

“Purchase Price Escrow Amount” means an amount deposited at the Closing in the Purchase Price Escrow Account with the Escrow Agent pursuant to the terms and conditions of the Escrow Agreement, which shall be $2,980,000.

“Related Party” means, with respect to any Person, any of such Person’s former, current and future equityholders, controlling Persons, directors, officers, employees, agents, representatives, Affiliates, members, managers, general or limited partners, or assignees (or any former, current or future equityholder, controlling Person, director, officer, employee, agent, representative, Affiliate, member, manager, general or limited partner, or assignee of any of the foregoing).

“Restricted Cash” means (a) the amount of any cash and cash equivalents that is not freely usable by and available to the Companies or their respective Subsidiaries because it is subject to restrictions or Taxes on use or distribution by contract or due to requirements of Law, including security deposits, bond guarantees, collateral reserve accounts, cash that sits in a court registry and other amounts held in escrow by the Companies and their respective Subsidiaries for the benefit of third Persons, and (b) $1,000,000 awarded or held in the court registry in connection with condemnation proceeding No. 201930404 (Harris County Flood Control District v Cherry Land Holdings, L.L.C. and Wells Fargo Bank, National Association) in the District Court of Harris County, Texas, in each case whether or not required to be reported as cash and cash equivalents under the Accounting Methods.

“Restricted Period” means the period commencing on the date hereof and ending on the fifth (5^th) anniversary of the date hereof.

“Straddle Period” means any taxable period that includes (but does not end on) the Closing Date.

“Subsidiary” means, with respect to any Person, any corporation, partnership, limited liability company, association or other business entity of which (a) if a corporation, a majority of the total voting power of shares of stock entitled (irrespective of whether, at the time, stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (b) if a partnership, limited liability company, association or other business entity, either (i) a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination

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thereof, or (ii) such Person is a general partner, managing member or managing director of such partnership, limited liability company, association or other entity.

“Tax” means any federal, state, local, provincial or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, goods and services, harmonized sales, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, unclaimed property, capital stock, social security, pension plan, employment, disability, payroll, license, employee, employer health or other withholding, or other tax of any kind whatsoever, including any interest, penalties, installment or additions to tax or additional amounts in respect of the foregoing.

“Tax Returns” means returns, declarations, reports, claims for refund, information returns or other documents (including any related or supporting schedules, statements or information) filed or required to be filed in connection with the determination, assessment or collection of any Taxes of any party or the administration of any Laws relating to any Taxes.

“Title Company” means Fidelity National Title Insurance Company.

“Title Policy” means, with respect to each Owned Real Property, a Texas Form T-1 owner’s title insurance policy (Rev. 1/3/14), each in form and substance consistent with the Title Proformas.

“Title Proforma(s)” means, individually or collectively, as the context may require, those certain proforma title insurance policies issued by the Title Company and described on Schedule III hereto.

“Transaction Price” means Two Hundred Ninety-Eight Million dollars ($298,000,000).

“Transaction Tax Deductions” means, without duplication and solely to the extent either (a) such amounts are actually paid by any of the Sellers (or any Affiliate of a Seller, including the Companies and their respective Subsidiaries prior to the Closing) or (b) the payment of such amounts actually reduces the Closing Cash Proceeds, (i) any and all stay bonuses, sale bonuses, change in control payments, retention payments, synthetic equity payments, or similar payments made or to be made by any Company or any Subsidiary of a Company in connection with or resulting from the Closing (or included as a liability in the Closing Net Working Capital) excluding any transaction success bonus payments made pursuant to any offer letter or agreement entered into by the Buyer whether before, on or after the Closing, (ii) all fees, expenses and interest (including amounts treated as interest for U.S. federal income Tax purposes), original issue discount, unamortized debt financing costs, breakage fees, tender premiums, consent fees, redemption, retirement or make-whole payments, defeasance in excess of par or similar payments incurred in respect of the Indebtedness or other indebtedness in connection with the Closing or included as a liability in Closing Net Working Capital, (iii) all fees, costs and expenses incurred by any Company or any Subsidiary of a Company in connection with or incident to this Agreement and the transactions contemplated hereby, including any such legal, accounting and investment banking fees, costs and expenses, and (iv) any employment Taxes with respect to the amounts set forth in the foregoing clause (i). The parties shall apply the safe harbor election set forth in Internal Revenue Service (“IRS”) Revenue Procedure 2011-29 to determine the amount of any success-based fees for purposes of clause (iii) above.

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1.2 Additional Definitions.



Term	Section
Accounting Methods	2.3(d)
Agreement	Preamble
Allocation Schedule	9.8(c)
Buyer	Preamble
Buyer Guarantor	Preamble
Closing	2.2(a)
Closing Balance Sheet	2.3(c)
Closing Statement	2.3(c)
Company or Companies	Preamble
Company Environmental Permit	6.12(a)
Company Intellectual Property	6.8(a)
Company Permit	6.11(a)
Company Personal Property	6.19(a)
Competing Business	9.9(a)
D&O Tail Policy	9.4(b)
Disclosure Schedules	Article V
Electronic Delivery	11.11
End Date	8.1(d)
ERISA	1.1
Estimated Closing Cash Proceeds	2.3(a)
Imputed Underpayment	9.8(k)
Independent Accounting Firm	2.3(f)
Inventory Amount	2.3(b)
IRS	1.1
IT Systems	6.8(j)
Latest Balance Sheets	6.5(a)(iv)
Law Firm	11.15
Lease	6.19(b)
Leased Real Property	6.19(b)
Majority Holders	11.18(c)
Marks	1.1
Material Contract	6.7(a)
Multiemployer Plan	6.14(e)
Multiple Employer Plan	6.14(e)
Objection Notice	2.3(f)
Option Agreements	6.19(d)
Owned Real Property	6.19(c)
Party or Parties	Preamble
Payoff Indebtedness	2.2(b)(iii)

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Term	Section
Property Offer	9.10(b)
Purchase Price Shortfall	2.3(i)(ii)
Representative Losses	11.18(d)
Restricted Person Lists	6.26
Retained Employee	9.3(a)
R&W Insurance Policy	4.8
Securities	Recitals
Securities Act	7.10
Seller	Preamble
Seller Group	11.15
Seller Person	4.6(a)
Seller Released Matters	4.6(b)
Seller Releasing Party	4.6(b)
Sellers’ Representative	Preamble
Subject Property	9.10(a)
Tax Allocation Purchase Price Tax Proceeding	9.8(c) 9.8(j)
Trade Secrets	1.1
Waiver Exceptions	10.2
WARN Act	4.3(m)
Warranty	6.25(b)

1.3 Other Definitional Provisions.

(a) The terms “hereof,” “herein” and “hereunder” and terms of similar import are references to this Agreement as a whole and not to any particular provision of this Agreement. Section, clause, schedule and exhibit references contained in this Agreement are references to sections, clauses, schedules and exhibits in or to this Agreement, unless otherwise specified. All exhibits and schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein. Any capitalized terms used in any exhibit or schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.

(b) “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.

(c) Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation.” Where the context permits, the use of the term “or” shall be equivalent to the use of the term “and/or.”

(d) Words denoting any gender shall include all genders, including the neutral gender. Where a word is defined herein, references to the singular shall include references to the plural and vice versa.

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(e) All references to “$” and dollars shall be deemed to refer to United States currency unless otherwise specifically provided.

(f) All references to a day or days shall be deemed to refer to a calendar day or calendar days, as applicable, unless otherwise specifically provided.

(g) Any document or item will be deemed “delivered”, “provided” or “made available” within the meaning of this Agreement if such document or item is included in the Data Room at least two (2) Business Days prior to the date of this Agreement.

(h) Any references to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder. Any reference to any agreement or contract referenced herein or in the Disclosure Schedules shall be a reference to such agreement or contract, as amended, modified, supplemented or waived.

(i) References to any Person shall include the successors and permitted assigns of that Person. References from or through any date shall mean, unless otherwise specified, from and including or through and including, respectively.

ARTICLE II

PURCHASE AND SALE OF THE SECURITIES

2.1 Basic Transaction. On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Buyer shall purchase, accept and acquire from the Sellers, and the Sellers shall sell, convey, assign, transfer and deliver to the Buyer, all of the Securities, free and clear of all Encumbrances.

2.2 Closing Transactions.

(a) Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) shall take place at the offices of Bradley Arant Boult Cummings LLP, JPMorgan Chase Tower, 600 Travis Street, Suite 4800, Houston, Texas 77002, as promptly as practicable after the date hereof, but in any event no later than the third (3rd) Business Day following the satisfaction or, to the extent permissible, waiver by the Party or Parties entitled to the benefit of the conditions set forth in Article III (other than conditions which by their terms or nature are to be satisfied at the Closing, but subject to the satisfaction or, to the extent permissible, waiver by the Party or Parties entitled to the benefit of those conditions at the Closing), or on such other date as is mutually agreeable to the Buyer and the Sellers; provided, however, that, notwithstanding anything to the contrary set forth in this Agreement, the Parties agree that the Closing shall not occur prior to January 3, 2020. By mutual agreement of the Buyer and the Sellers, the Closing may take place by conference call and electronic (i.e., email/pdf) signatures, with exchange of original signatures to follow.

(b) Deliveries. At the Closing:

(i) The Sellers’ Representative shall deliver, or cause to be delivered, to the Buyer all of the stock certificates and other applicable instruments evidencing the Securities and the equity interests of the Companies’ Subsidiaries. The stock certificates and other applicable interests evidencing

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the Securities owned directly by the Sellers shall be duly endorsed for transfer or accompanied by duly executed stock powers or other applicable forms of assignment and transfer or, in the case of any lost, stolen or destroyed certificates with respect to such Securities, an affidavit of lost certificate with respect to such Securities;

(ii) The Buyer shall pay by wire transfer of immediately available funds an aggregate amount equal to the Estimated Closing Cash Proceeds to an account designated by the Sellers’ Representative at least two (2) Business Days prior to the Closing Date for distribution to each Seller in accordance with such Seller’s Pro Rata Share as set forth on Exhibit A;

(iii) The Buyer shall repay, or cause to be repaid, on behalf of the Companies and/or their respective Subsidiaries, all amounts necessary to discharge fully the then-outstanding balance and other monetary obligations in respect of all Indebtedness of the Companies and their respective Subsidiaries identified on Section 2.2(b)(iii) of the Disclosure Schedules (the “Payoff Indebtedness”) with the result that immediately following the Closing there will be no further monetary obligations of the Companies or any of their Subsidiaries with respect to such Payoff Indebtedness, and the Sellers shall provide an itemized list of each component of Payoff Indebtedness and payoff letters with respect to all Payoff Indebtedness outstanding immediately prior to Closing at least two (2) Business Days prior to the Closing Date, which payoff letters shall indicate the amount required to discharge in full the relevant portion of the Payoff Indebtedness as of the Closing and include an undertaking by the counterparty or holder to provide all authorizations, instructions and documents necessary to discharge upon receipt of such amount as of the Closing and any further obligations of the Companies or any of their Subsidiaries with respect to such Payoff Indebtedness and any Encumbrances securing such Payoff Indebtedness;

(iv) The Buyer shall pay, on behalf of the Companies and the Sellers, all Company Transaction Expenses, and the Sellers shall provide an itemized list of all Company Transaction Expenses and invoices with respect to the Company Transaction Expenses at least two (2) Business Days prior to the Closing Date, which list shall include the identity of each payee, dollar amounts owed, wire instructions and any other information necessary to effect the final payment in full thereof, and which invoices shall include acknowledgments from each payee of the invoiced amounts as full and final payment for all services rendered to the Companies and their respective Subsidiaries;

(v) The Buyer shall deliver the Purchase Price Escrow Amount by wire transfer of immediately available funds to the Escrow Agent;

(vi) The Sellers’ Representative shall deliver, or cause to be delivered, to the Buyer (1) a certified copy of the resolutions of the board of directors and general partners, as applicable, of each Company, authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by such Company; and (2) if requested by the Buyer, the resignations, effective as of the Closing, of each director of each Company that is a corporation; and

(vii) The Buyer shall deliver to the Sellers’ Representative a certified copy of the resolutions of the manager of the Buyer authorizing the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the Buyer.

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2.3 Closing Cash Proceeds Adjustment; Inventory Count.

(a) At least two (2) Business Days prior to the Closing Date, the Sellers’ Representative shall prepare and deliver to the Buyer a good-faith estimate of the Closing Cash Proceeds (the “Estimated Closing Cash Proceeds”), including each of the components thereof, based on the books and records of the Companies and their respective Subsidiaries and other information then available.

(b) The Sellers and the Buyer shall jointly conduct a physical count of the Inventory of the Companies and their respective Subsidiaries on the Closing Date, or on such other date as mutually agreed, which physical count shall be conducted in accordance with the practices, policies and procedures set forth on Schedule I. The physical counting process shall be observed by representatives of the Buyer and representatives of Sellers. For purposes of this Agreement, the term “Inventory Amount” shall mean the physical count of Inventory of the Companies and their respective Subsidiaries, as rolled forward or backward from the date of the account, so as to be the amount of Inventory of the Companies and their respective Subsidiaries existing as of the Closing Date, as agreed to by the Sellers and the Buyer in accordance with this Section 2.3(b). If the Parties cannot agree on the results of such count, the Buyer shall use its calculation of the Inventory Amount for purposes of the Closing Statement, and any disputes shall then be settled by the Independent Accounting Firm in accordance with this Section 2.3.

(c) As promptly as practicable after the Closing, but in no event later than 60 days after the Closing Date, the Buyer shall prepare and deliver to the Sellers’ Representative a statement setting forth the Buyer’s calculation of the Closing Cash Proceeds, including each of the components thereof (the “Closing Statement”), and a consolidated balance sheet of the Companies and their respective Subsidiaries as of the close of business on the day immediately prior to the Closing Date (the “Closing Balance Sheet”).

(d) The Estimated Closing Cash Proceeds, the Closing Statement and the Closing Balance Sheet shall (i) be prepared, and each component thereof shall be determined, in accordance with (1) the terms and conditions of this Agreement, (2) to the extent not inconsistent with the foregoing clause (1), the accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) that are consistent with the calculation set forth on Schedule I, (3) to the extent not inconsistent with the foregoing clauses (1) or (2), accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) adopted in connection with the Latest Balance Sheets, and (4) to the extent not inconsistent with the foregoing clauses (1), (2) or (3), GAAP as in effect on the Closing Date and (ii) not include any changes in assets or liabilities as a result of purchase accounting adjustments or other changes arising from or resulting as a consequence of the transactions contemplated hereby ((i) and (ii) collectively, the “Accounting Methods”).

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(e) The post-Closing adjustment procedures as set forth in this Section 2.3 are not intended to permit the introduction of different or additional accounting methods, policies, practices, procedures, conventions, categorizations, definitions, principles, judgments, assumptions, techniques or estimation methods with respect to the financial statements, their classification or presentation or otherwise (including with respect to the nature of accounts, level of reserves or level of accruals) from the Accounting Methods.

(f) The Companies, their respective Subsidiaries and the Buyer shall assist the Sellers’ Representative and the Sellers’ Representative’s representatives in the review of the Closing Statement and the Closing Balance Sheet (including by furnishing on a timely basis all information reasonably necessary or useful in connection with such review) and shall provide the Sellers’ Representative and the Sellers’ Representative’s representatives reasonable access, during normal business hours, and upon reasonable advance notice, to the books, records (including work papers, schedules, memoranda and other documents), supporting data, facilities and relevant personnel of the Companies and their respective Subsidiaries (including personnel responsible for accounting and finance, senior management and accountants and advisors) for purposes of their review of the Closing Statement and the Closing Balance Sheet; provided that the Sellers’ Representative shall, and shall cause its representatives to, use its and their reasonable best efforts to conduct such review in a manner that will not disrupt the operation of the business of the Companies, their respective Subsidiaries or the Buyer. If the Sellers’ Representative disagrees with any part of the Buyer’s calculation of the Closing Cash Proceeds as set forth on the Closing Statement or the Closing Balance Sheet, the Sellers’ Representative shall, within 45 days after the Sellers’ Representative’s receipt of the Closing Statement and the Closing Balance Sheet, notify the Buyer in writing of such disagreement by setting forth the Sellers’ Representative’s calculation of the Closing Cash Proceeds, including each of the components thereof, and describing in reasonable detail the basis for such disagreement (an “Objection Notice”); provided, that if the Sellers’ Representative requests, in good faith, an extension of time to review the Buyer’s determination of the Closing Cash Proceeds as set forth on the Closing Statement or the Closing Balance Sheet, the Sellers’ Representative shall be given an additional 30 days within which to deliver an Objection Notice. If an Objection Notice is delivered to the Buyer, then the Buyer and the Sellers’ Representative shall negotiate in good faith to resolve their disagreements with respect to the computation of the Closing Cash Proceeds. In the event that the Buyer and the Sellers’ Representative are unable to resolve all such disagreements within 30 days after the Buyer’s receipt of such Objection Notice (or such longer period as the Buyer and the Seller may agree in writing), the Buyer and the Sellers’ Representative shall submit such remaining disagreements to PricewaterhouseCoopers, or another nationally-recognized accounting firm as is acceptable to the Buyer and the Sellers’ Representative (the “Independent Accounting Firm”).

(g) The Independent Accounting Firm shall make a final and binding determination with respect to the computation of the Closing Cash Proceeds, including each of the components thereof, to the extent such amounts are in dispute, in accordance with the guidelines and procedures set forth in this Agreement and on Exhibit C. The Buyer and the Sellers’ Representative shall cooperate with the Independent Accounting Firm during the term of its engagement and shall use reasonable best efforts to cause the Independent Accounting Firm to resolve all remaining disagreements with respect to the computation of the Closing Cash Proceeds, including each of the components thereof, as soon as practicable. The Independent Accounting Firm shall consider only those items and amounts in the Buyer’s and the Sellers’ Representative’s respective calculations of the Closing Cash Proceeds, including each of the

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components thereof, that are identified as being items and amounts to which the Buyer and the Sellers’ Representative have been unable to agree. In resolving any disputed item, the Independent Accounting Firm may not assign a value to any item greater than the greatest value for such item claimed by either Party or less than the smallest value for such item claimed by either Party. The Independent Accounting Firm’s determination of the Closing Cash Proceeds, including each of the components thereof, shall be based solely on written materials submitted by the Buyer and the Sellers’ Representative (i.e., not on independent review) and on the definitions, terms and conditions included herein. The determination of the Independent Accounting Firm shall be conclusive and binding upon the Parties and shall not be subject to appeal or further review.

(h) The costs and expenses of the Independent Accounting Firm in determining the Closing Cash Proceeds, including each of the components thereof, shall be borne by the Buyer, on the one hand, and the Sellers, on the other hand, based upon the percentage which the portion of the contested amount not awarded to each Party bears to the amount actually contested by such Party. For example, if the Buyer claims the Closing Cash Proceeds is one thousand dollars ($1,000) less than the Estimated Closing Cash Proceeds, and the Sellers’ Representative contests only five hundred dollars ($500) of the amount claimed by the Buyer, and if the Independent Accounting Firm ultimately resolves the dispute by awarding the Buyer three hundred dollars ($300) of the five hundred dollars ($500) contested, then the costs and expenses of the Independent Accounting Firm will be allocated sixty percent (60%) (i.e., 300 ÷ 500) to the Sellers and forty percent (40%) (i.e., 200 ÷ 500) to the Buyer. Prior to the Independent Accounting Firm’s determination of Closing Cash Proceeds, (i) the Buyer, on the one hand, and the Sellers, on the other hand, will each pay fifty percent (50%) of any retainer paid to the Independent Accounting Firm; and (ii) during the engagement of the Independent Accounting Firm, the Independent Accounting Firm will bill fifty percent (50%) of the total charges to each of the Buyer, on the one hand, and the Sellers, on the other hand. In connection with the Independent Accounting Firm’s determination of the Closing Cash Proceeds, the Independent Accounting Firm shall also determine, pursuant to the terms of the first and second sentences of this Section 2.3(h), and taking into account all fees and expenses already paid by each of the Buyer, on the one hand, and the Sellers, on the other hand, as of the date of such determination, the allocation of its fees and expenses between the Buyer and the Seller, which such determination shall be conclusive and binding upon the Parties hereto.

(i) Within five (5) Business Days after the Closing Cash Proceeds, including each of the components thereof, is finally determined pursuant to this Section 2.3:

(i) If the Closing Cash Proceeds as finally determined pursuant to this Section 2.3 is greater than the Estimated Closing Cash Proceeds, the Buyer shall promptly (but in any event within five (5) Business Days after the determination thereof) deliver to the Sellers’ Representative the amount of such excess by wire transfer of immediately available funds to an account or accounts designated by the Sellers’ Representative for distribution to each Seller in accordance with such Seller’s Pro Rata Share as set forth on Exhibit A. Immediately following payment of any amounts determined pursuant to this Section 2.3(i)(i) to be owing to the Sellers, the Sellers’ Representative and the Buyer shall deliver joint instructions to the Escrow Agent instructing the Escrow Agent to pay to the Sellers’ Representative all remaining funds in the Purchase Price Escrow Account, in accordance with the terms of the Escrow Agreement, for distribution to each Seller in accordance with such Seller’s Pro Rata Share as set forth on Exhibit A.

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(ii) If the Closing Cash Proceeds as finally determined pursuant to this Section 2.3 is less than the Estimated Closing Cash Proceeds (such shortfall, the “Purchase Price Shortfall”), the Sellers’ Representative and the Buyer shall promptly (but in any event within five (5) Business Days after the determination of the Closing Cash Proceeds) deliver joint instructions to the Escrow Agent instructing the Escrow Agent to pay from the Purchase Price Escrow Account to an account or accounts designated by the Buyer an amount equal to the Purchase Price Shortfall by wire transfer of immediately available funds. Immediately following payment of any amounts determined pursuant to this Section 2.3(i)(ii) to be owing to the Buyer, the Sellers’ Representative and the Buyer shall deliver joint instructions to the Escrow Agent instructing the Escrow Agent to pay to the Sellers’ Representative all remaining funds in the Purchase Price Escrow Account, in accordance with the terms of the Escrow Agreement for distribution to each Seller in accordance with such Seller’s Pro Rata Share as set forth on Exhibit A.

(j) All adjustments pursuant to this Section 2.3, other than payments of stated interest, shall be treated by all Parties for Tax purposes as adjustments to the Transaction Price to the extent permitted under applicable Law.

(k) The Buyer agrees that (i) payment pursuant to Section 2.3(i) from the Purchase Price Escrow Account in accordance with the Escrow Agreement shall be the sole and exclusive remedy for payment of the Purchase Price Shortfall, if any, and the Purchase Price Escrow Account shall be the sole and exclusive source of recovery for any amounts owing to the Buyer pursuant to this Section 2.3, even if the Purchase Price Shortfall exceeds the Purchase Price Escrow Amount, and (ii) the adjustment and the dispute resolution provisions provided for in this Section 2.3 shall be the exclusive remedies for the matters addressed or that could be addressed by this Section 2.3. For the avoidance of doubt, and without limiting the generality of the foregoing, no claim by the Buyer or any of its Affiliates or representatives for the payment of the Purchase Price Shortfall shall be asserted against the Sellers. The payment(s) pursuant to this Section 2.3 shall not be considered a breach of any representation, warranty or other provision of this Agreement or any document delivered pursuant to this Agreement. Except in the case of Fraud by the Sellers or the Sellers’ Representative, neither the Buyer nor any of its Affiliates or representatives shall make any claim in respect of the determination of the Closing Cash Proceeds or any component thereof other than in accordance with and as set forth in this Section 2.3.

2.4 Withholding Rights. The Buyer and each of the Companies (and each of their respective Affiliates) shall be entitled to deduct and withhold from any amount otherwise payable to any Person pursuant to this Agreement such amounts of Tax as the Buyer or the applicable Company (or any of their respective Affiliates) is required to deduct and withhold with respect to the making of such payment to such Person. All amounts that are deducted or withheld by the Buyer or the applicable Company (or any of their respective Affiliates), as the case may be, and paid over to or deposited with the relevant Governmental Authority by the Buyer or the applicable Company (or their respective Affiliates), as the case may be, shall be treated for all purposes of this Agreement as having been paid to the applicable Person in respect to which such deduction and withholding was made (and immediately thereafter paid over to or deposited with the relevant Governmental Authority by such Person).

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ARTICLE III

CONDITIONS TO CLOSING

3.1 Conditions to the Obligations of the Buyer, the Sellers and the Companies. The obligations of the Buyer, the Sellers and the Companies to consummate the transactions contemplated by this Agreement are subject to the satisfaction of the following conditions on or prior to the Closing Date:

(a) Any applicable waiting period under the HSR Act relating to the transactions contemplated by this Agreement shall have expired or been terminated; and

(b) No provision of any applicable Law that is then in effect shall enjoin, restrain, condition, make illegal or otherwise prohibit the consummation of the transactions contemplated by this Agreement.

3.2 Conditions to the Obligations of the Buyer. The obligations of the Buyer to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver of the following conditions at or prior to the Closing:

(a) (i) The representations and warranties set forth in Section 5.1 (Capacity, Organization and Power), Section 5.2 (Title to Securities), Section 5.3(a) (Authority), Section 5.6 (Brokerage), Section 6.1 (Capacity, Organization and Power), Section 6.2 (Securities and Related Matters), Section 6.3(a) (Authorization), Section 6.17 (Brokerage) and clause (a) of Section 6.6 (Absence of Certain Developments) shall be true and correct in all respects as of the Closing Date; and (ii) the representations and warranties set forth in Article V and Article VI (other than those listed in the preceding clause (i)) shall be true and correct in all respects as of the Closing Date (disregarding all qualifications or limitations as to “materiality”, “in all material respects” or “Material Adverse Effect” and words of similar import set forth therein) (other than representations and warranties which by their terms address matters as of another specified time, which shall be true and correct in all respects as of such time), except in each case under this clause (ii), as had not had, and would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect;

(b) The Sellers and the Companies shall have performed in all material respects all of the covenants and agreements required to be performed by the Sellers and the Companies hereunder prior to the Closing;

(c) The Escrow Agent and the Sellers’ Representative shall have each executed and delivered signatures to the Escrow Agreement to the Buyer;

(d) The Title Company shall be irrevocably committed to issue each Title Policy, dated as of the Closing Date (provided that any requirement by the Title Company that a survey be obtained for the issuance of a Title Policy or an endorsement thereto shall not be conditions to Buyer’s obligation to consummate the transactions contemplated by this Agreement); and

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(e) The Sellers’ Representative shall deliver, or cause to be delivered, to the Buyer a certificate signed by the Companies, dated the Closing Date, stating that the conditions specified in Section 3.2(a) and Section 3.2(b) above have been satisfied as of the Closing.

3.3 Conditions to the Obligations of the Sellers and the Companies. The obligations of the Sellers and the Companies to consummate the transactions contemplated by this Agreement are subject to the satisfaction or waiver of the following conditions at or prior to the Closing:

(a) (i) The representations and warranties set forth in Section 7.1 (Organization and Power), Section 7.2 (Authorization and Enforceability) and Section 7.6 (Brokerage) shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date, (ii) the representations and warranties set forth in Article VII (other than those listed in the preceding clause (i)) that are subject to materiality qualifications shall be true and correct in all respects as of the date of this Agreement and as of the Closing Date (other than any such representations and warranties which by their terms address matters as of another specified time, which shall be true and correct in all respects as of such time), and (iii) the representations and warranties contained in Article VII (other than those listed in the preceding clause (i)) that are not subject to materiality qualifications shall be true and correct in all material respects at as of the date of this Agreement and as of the Closing Date (other than representations and warranties which by their terms address matters as of another specified time, which shall be true and correct in all material respects as of such time);

(b) The Buyer shall have performed in all material respects all the covenants and agreements required to be performed by the Buyer hereunder prior to the Closing;

(c) The Escrow Agent and the Buyer shall have each executed and delivered signatures to the Escrow Agreement to the Sellers’ Representative; and

(d) At the Closing, the Buyer shall deliver to the Sellers’ Representative a certificate signed by the Buyer, dated the Closing Date, stating that the conditions specified in Section 3.3(a) and Section 3.3(b) above have been satisfied.

3.4 Frustration of Conditions. None of the Buyer, the Companies or the Sellers may rely on the failure of any condition set forth in this Article III, as applicable, to be satisfied if such failure was caused by such Party’s failure to use, as required by this Agreement, its reasonable best efforts to consummate the Closing and the transactions contemplated hereby or any other material breach by such Party of this Agreement.

ARTICLE IV

COVENANTS OF THE PARTIES

Each of the Parties agrees as follows with respect to the period between the date of this Agreement and the Closing:

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4.1 Reasonable Best Efforts.

(a) Subject to the terms of this Agreement, each Party shall use reasonable best efforts to take, or cause to be taken, all actions necessary, proper or advisable in order to consummate and make effective the transactions contemplated by this Agreement and the Escrow Agreement (including satisfaction, but not waiver, of the conditions set forth in Article III). The Sellers and the Buyer agree, and the Sellers, prior to the Closing, and the Buyer, after the Closing, agree to cause the Companies and their respective Subsidiaries, to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement; provided, that nothing in this Section 4.1(a) shall require any of the Sellers, the Companies or the Buyer to expend any funds to obtain any third-party consents, and provided, further, that the Buyer shall have no obligation to consent to any change in the terms of any agreement or arrangement that would, or that would reasonably be expected to, be materially adverse to the interests of the Buyer or the Companies. At the Closing, the applicable Parties shall execute and deliver the other agreements and instruments contemplated hereby to be executed and delivered at the Closing.

(b) In furtherance and not in limitation of the foregoing, each of the Buyer and the Sellers shall (i) make an appropriate filing of a Notification and Report Form pursuant to the HSR Act with respect to the transactions contemplated hereby as promptly as practicable and in any event within three (3) Business Days of the date hereof; (ii) cooperate and coordinate with the other in the identification of any necessary filings and in the making of such filings; (iii) supply as promptly as practicable and after consultation with the other Parties any additional information and documentary material that may be requested by any Governmental Authority pursuant to the HSR Act; and (iv) use reasonable best efforts to cooperate with each other (1) in determining whether any action by or in respect of, or filing with, any other Governmental Authority is required, or any other actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (2) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers in order to permit the consummation of the transactions contemplated hereby. To the extent permitted by applicable Law, each Party will permit the other to review in advance any proposed written submissions to any Governmental Authority and will, to the extent allowed by the Governmental Authority, permit the other to attend any meetings with the Governmental Authority. Any filing fees payable under the HSR Act relating to the transactions contemplated by this Agreement shall be borne by the Buyer.

(c) Notwithstanding anything to the contrary herein, the Buyer agrees to use its reasonable best efforts to eliminate each and every impediment under any antitrust, competition or trade regulation Law that is asserted by any Governmental Authority or any other party so as to enable the Parties to close the transactions contemplated hereby. Notwithstanding the foregoing or any other provision of this Agreement, the Parties understand and agree that the reasonable best efforts of either Party shall not obligate the Buyer or any of its Affiliates to divest or otherwise hold separate (including by establishing a trust or otherwise), or take any similar action (or otherwise agreeing to do any of the foregoing) with respect to any business, asset or property that was owned by the Companies, their respective Subsidiaries, the Buyer or any of their respective Affiliates prior to the date hereof.

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(d) Subject to all applicable Laws, each Party will notify the other promptly upon the receipt of (i) any comments from any officials of any Governmental Authority in connection with any filings made pursuant to this Section 4.1 and (ii) any request by any officials of any Governmental Authority for amendments or supplements to any filings made pursuant to, or information provided to comply in all material respects with, any Laws. Whenever any event occurs that is required to be set forth in an amendment or supplement to any filing made pursuant to this Section 4.1, the Party filing such amendment or supplement will promptly inform the other of such occurrence.

4.2 Maintenance of Business. From the date hereof until the earlier of the Closing and the termination of this Agreement, the Companies shall and shall cause their respective Subsidiaries to (and the Sellers shall cause the Companies and their respective Subsidiaries to) use reasonable best efforts to (a) maintain their assets in good operating condition and repair in accordance with past practices (normal wear and tear excepted), (b) maintain insurance reasonably comparable to that in effect on the date of the Latest Balance Sheets, and (c) maintain their books, accounts and records in accordance with past custom and practice as used in the preparation of the Latest Balance Sheet.

4.3 Operation of Business. From the date hereof until the earlier of the Closing or the termination of this Agreement, the Companies shall and shall cause their respective Subsidiaries to (and the Sellers shall cause the Companies and their respective Subsidiaries to) use reasonable best efforts to (i) operate their business in the ordinary course of business consistent with past practice, (ii) preserve substantially intact their business organization and assets, (iii) keep available the services of their key officers, employees and independent contractors and (iv) keep and maintain their assets and properties in good operating condition and repair, ordinary wear and tear expected. Without limiting the generality of the foregoing, prior to the Closing, except as set forth on Section 4.3 of the Disclosure Schedules, the Companies and their respective Subsidiaries shall not (and the Sellers shall cause the Companies and their respective Subsidiaries not to):

(a) amend its certificate of incorporation or by-laws (or similar constituent documents);

(b) issue, sell, pledge, transfer, dispose of or otherwise subject to any Encumbrance any shares of capital stock of the Companies or any of their respective Subsidiaries, or any options, warrants, convertible securities or other rights of any kind to acquire any such shares, or any other equity or ownership interest in the Companies or any of their respective Subsidiaries;

(c) declare, set aside, make or pay any non-cash dividend or other distribution on or with respect to any of its capital stock or other equity or ownership interest;

(d) reclassify, combine, split, subdivide or redeem, or purchase or otherwise acquire, directly or indirectly, any of its capital stock or other equity or ownership interest, or make any other change with respect to its capital structure;

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(e) adopt a plan of liquidation, dissolution, merger, consolidation or other reorganization;

(f) execute any guaranty, issue any debt, borrow any money, make any loans or advances (other than loans to employees permitted by Section 4.3(l)), or otherwise incur or create any Indebtedness in excess of $100,000 individually or $250,000 in the aggregate (other than in the ordinary course of business consistent with past practice); provided, that in no event shall any Company or any of their respective Subsidiaries (i) incur, assume or guarantee any long-term indebtedness for borrowed money or (ii) make any optional repayment of any indebtedness for borrowed money (except as required by this Agreement, including any repayment of Payoff Indebtedness);

(g) purchase, sell, lease or dispose of or otherwise subject to any Encumbrance any material property or assets, other than (i) sell or transfer Inventory in the ordinary course of business consistent with past practice and (ii) consummate the transactions set forth in the Option Agreements, in accordance with the terms and conditions set forth therein;

(h) acquire any corporation, partnership, limited liability company, other business organization or division thereof or any material amount of assets, or enter into any joint venture, strategic alliance, exclusive dealing, noncompetition or similar contract or arrangement;

(i) sell, license, assign or abandon any material Intellectual Property Rights owned by the Companies or any of their Subsidiaries (except for (i) licenses granted in the ordinary course of business consistent with past practice and (ii) abandonment in the ordinary course of business consistent with past practice);

(j) amend, waive, modify or consent to the termination of any Material Contract, or amend, waive, modify or consent to the termination of the Companies’ or any of their respective Subsidiaries’ rights thereunder;

(k) authorize, or make any commitment with respect to, any capital expenditures other than in accordance with the Companies’ 2019 capital expenditure budget (a copy of which has been made available to the Buyer), or fail to make any capital expenditures set forth in such budget; provided, however, that the Companies may amend line items within such budget from time to time without increasing or materially decreasing the total amount remaining to be expended under such budget;

(l) (i) increase the compensation payable or to become payable or the benefits provided to its directors, officers or employees, except for (A) normal merit and cost-of-living increases in salaries or wages of employees of the Companies or any of their Subsidiaries consistent with past practice, with the prior consent of the Buyer (such consent not to be unreasonably withheld, conditioned or delayed), and (B) payment of employee holiday bonuses prior to December 31, 2019 consistent with past practice and which do not exceed $2,000,000 in the aggregate; (ii) grant any severance or termination payment to, or pay, loan or advance any amount to, any director, officer or employee of the Companies or any of their Subsidiaries, except for properly documented interest-free loans made to non-management employees consistent with past practice which do not exceed, individually, an amount equal to two (2) weeks’ pay for the borrower, (iii) hire or terminate any officer or employee with a base annual salary in excess of $200,000,

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other than terminations for cause; or (iv) establish, adopt, enter into, amend or terminate any Benefit Plan (or any arrangement that would be a Benefit Plan if in effect on the date hereof);

(m) effectuate a “plant closing” or “mass layoff” as those terms are defined in the Worker Adjustment and Retraining Notification Act and any similar state or local law (collectively, the “WARN Act”);

(n) enter into any collective bargaining agreement, works council agreement, or agreement or arrangement with any union or labor organization;

(o) permit the lapse of any existing policy of insurance relating to the business or assets of the Companies and their respective Subsidiaries;

(p) accelerate the collection of or discount any accounts receivable, delay the payment of accounts payable or defer expenses, reduce inventories or otherwise increase cash on hand, except in the ordinary course of business consistent with past practice;

(q) make any change in any method of accounting or accounting practice or policy, except as required by GAAP;

(r) settle any claim, action, suit, inquiry, proceeding, audit or investigation, or any other arbitration, mediation or similar proceeding, where the Companies or their respective Subsidiaries are the defendant or are otherwise subject to a proceeding initiated by another Person seeking equitable relief or which is not insured and involves an amount in controversy greater than $25,000;

(s) commence or settle any claim, action, suit, proceeding or arbitration brought or initiated by the Companies or their respective Subsidiaries against another Person seeking equitable relief or involving an amount in controversy greater than $100,000 (other than routine collection actions against customers); or

(t) announce an intention or enter into any formal or informal agreement, or otherwise make a commitment, to do any of the foregoing.

Notwithstanding the foregoing, nothing in Section 4.2 or this Section 4.3 shall prohibit the Companies and their respective Subsidiaries from taking any action or omitting to take any action (i) as required or permitted by this Agreement, (ii) as consented to in writing by the Buyer (such consent not to be unreasonably withheld, delayed or conditioned) or (iii) as required by Law.

4.4 Access. From the date hereof until the earlier of the Closing and the termination of this Agreement, the Companies shall and shall cause their respective Subsidiaries to (and the Sellers shall cause the Companies and their respective Subsidiaries to) afford, and cause their key management personnel, accountants and other representatives to afford, to the Buyer and its representatives, reasonable access, during normal business hours, and upon reasonable advance notice, to the Companies’ personnel, and to business, financial, legal, tax, compensation and other data and information concerning the Companies’ affairs and operations; provided, that the Buyer shall use its reasonable best efforts to conduct its due diligence review in a manner which will not disrupt the operation of the Companies’ businesses; provided

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further, that all requests for access shall be directed to Stephens Inc. (as representative for the Companies) or such other person as the Companies may designate from time to time. Notwithstanding the foregoing, (a) the Buyer shall not have access to personnel records of the Companies and their respective Subsidiaries relating to individual performance or evaluation records, medical histories or other information which in the Sellers’ reasonable good faith opinion is sensitive or the disclosure of which could subject the Sellers, the Companies or any of their respective Subsidiaries to risk of liability; and (b) nothing herein shall require the Companies or the Sellers to provide access to, or to disclose any information to, the Buyer if such access or disclosure (i) would cause significant competitive harm to a Company or any of its Subsidiaries if the transactions contemplated by this Agreement are not consummated, (ii) would require the Companies, any of their respective Subsidiaries, the Sellers or their respective Affiliates to disclose any financial or proprietary information of or regarding the Affiliates of the Companies or the Sellers (excluding the Subsidiaries of the Companies) or otherwise disclose information regarding the Affiliates of the Companies or the Sellers (excluding any Subsidiaries of the Companies) that the Companies reasonably deem to be commercially sensitive, (iii) would waive any legal privilege or (iv) would be in violation of applicable Law (including the HSR Act) or the provisions of any agreement to which the Companies, any of their respective Subsidiaries, the Sellers or any of their respective Affiliates is a party; provided, however, that the applicable Seller or Company party to such agreement shall use its reasonable best efforts to obtain consent to disclose such information thereunder. None of the Companies and their respective Subsidiaries nor the Sellers or their respective Affiliates and representatives make any representation or warranty as to the accuracy of any information (if any) provided or made available pursuant to this Section 4.4, and the Buyer and its Affiliates and representatives may not rely on the accuracy of any such information, in each case other than the representations and warranties expressly and specifically set forth in Article V or Article VI, as qualified by the Disclosure Schedules. The information provided or made available pursuant to this Section 4.4 will be governed by all the terms and conditions of the Confidentiality Agreement.

4.5 Title Policy. On or before the Closing Date, the Parties shall use their respective commercially reasonable efforts to cause the Title Company to, upon payment of the Title Company’s premium, issue each Title Policy. The cost of any title reports, each Title Policy, endorsements and affirmative coverages and any related new ALTA Survey for the Owned Real Property and Leased Real Property will be borne by the Buyer. The appropriate officers and directors of the Companies and the Sellers shall execute and deliver to the Title Company such reasonable affidavits, indemnification agreements and bonds as may be necessary to cause the Title Company to issue the endorsements and affirmative coverages included in each of the Title Proformas, including a non-imputation endorsement.

4.6 Intercompany Arrangements.

(a) Prior to the Closing, the Sellers shall and shall cause their respective Affiliates to cancel, retire, payoff or otherwise extinguish (by way of capital contribution, cash settlement or as otherwise reasonably determined by such Seller) all contracts and agreements, and all payables and receivables under any arrangements by and among any Seller Person, on the one hand, and any Company or any Subsidiary of a Company, on the other hand, and all other intercompany advances, accounts, payables and receivables between any Company or any Subsidiary of a Company, on the one hand, and any Seller Person, on the other hand (excluding, however, any outstanding employee loans as described in Section 4.3(l)). The Sellers shall and shall cause their respective Affiliates to execute and deliver all termination and other appropriate documentation at or after the Closing as is reasonably requested by the Buyer to fully effectuate and

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document the provisions of this Section 4.6(a). “Seller Person” means each Seller, its Affiliates and its and their respective officers, directors, employees, partners, members, managers, agents, attorneys, representatives, successors and permitted assigns.

(b) From and after the Closing, to the fullest extent permitted under applicable Law, including by contractually shortening the applicable statute of limitations, each Seller does hereby, for itself and on behalf of each other Seller Person (each, a “Seller Releasing Party”), release, irrevocably waive and absolutely forever discharge the Companies and their respective Subsidiaries from and against all Seller Released Matters. “Seller Released Matters” means any and all rights, claims and causes of action against the Companies, their Affiliates their respective officers, directors, employees, partners, members, managers, agents, attorneys, representatives, successors and permitted assigns relating to the Sellers’ ownership of the Companies, the operation of the Companies’ business or any contract or agreement with the Companies, whether arising under, or based upon, any Law (including any right, whether arising at law or in equity, to seek indemnification, contribution, cost recovery, damages or any other recourse or remedy, including as may arise under common law), in each case, which occurred or existed prior to the Closing; provided, however, that nothing contained in this Section 4.6(b) shall release, discharge or waive the rights or obligations of any Person to the extent arising under this Agreement. It is the intention of the Sellers in providing this release to the Companies, and in giving and receiving the consideration called for in this Agreement, that this release shall be effective as a full and final accord and satisfaction and general release of the Companies from and against the Seller Released Matters and the final resolution by the applicable Seller Releasing Party and the Companies of all Seller Released Matters.

4.7 Exclusivity.

(a) Each Seller agrees that between the date of this Agreement and the earlier of the Closing and the termination of this Agreement, the Sellers shall not, and shall take all action necessary to ensure that none of the Sellers, the Companies or any of their respective Affiliates, officers, directors employees and agents shall, directly or indirectly: (i) solicit, initiate, consider, encourage or accept any other proposals or offers from any Person (A) relating to any direct or indirect acquisition or purchase of all or any portion of the capital stock or other equity or ownership interest of the Companies or their Subsidiaries or the assets of the Companies or their Subsidiaries, other than inventory to be sold in the ordinary course of business consistent with past practice, (B) to enter into any merger, consolidation or other business combination relating to the Companies or their Subsidiaries or (C) to enter into a recapitalization, reorganization or any other extraordinary business transaction involving or otherwise relating to the Companies or their Subsidiaries; or (ii) participate in any discussions, conversations, negotiations or other communications regarding, or furnish to any other Person any information with respect to, or otherwise cooperate in any way, assist or participate in, facilitate or encourage any effort or attempt by any other Person to seek to do any of the foregoing. The Sellers immediately shall cease and cause to be terminated all existing discussions, conversations, negotiations and other communications with any Persons conducted heretofore with respect to any of the foregoing.

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(b) The Sellers’ Representative shall notify the Buyer promptly, but in any event within twenty-four (24) hours, orally and in writing if any such proposal or offer, or any inquiry or other contact with any Person with respect thereto, is made. Any such notice to the Buyer shall indicate in reasonable detail the identity of the Person making such proposal, offer, inquiry or other contact and the terms and conditions of such proposal, offer, inquiry or other contact. The Sellers shall not, and shall cause the Companies and their respective Subsidiaries not to, release any Person from, or waive any provision of, any confidentiality agreement to which any Seller, Company or Subsidiary of a Company is a party, without the prior written consent of the Buyer.

4.8 R&W Insurance Policy. As of the date of this Agreement, the Buyer or its Affiliates have conditionally bound, or obtained an irrevocable commitment for the issuance of, a buy-side representations and warranties insurance policy in respect of the representations and warranties contained in this Agreement and in any certificate or other instrument contemplated by or delivered in connection with this Agreement (such policy, a copy of which has been furnished to the Sellers’ Representative, the “R&W Insurance Policy”). At such time as the Buyer obtains the final R&W Insurance Policy, the Buyer shall provide a copy of such policy to the Sellers’ Representative as promptly as practicable, including all riders, certificates, declarations and attachments thereto. All premiums, underwriting fees, brokers’ commissions and other costs and expenses related to the R&W Insurance Policy shall be borne by the Buyer, the R&W Insurance Policy shall not provide for any “seller retention” (as such phrase is commonly used in the R&W Insurance Policy industry), the R&W Insurance Policy shall expressly waive any claims of subrogation, indemnification, contribution or other rights to pursue any claims against any Seller or the Sellers’ Representative (except claims for Fraud against the Sellers), and none of the Buyer or any of its Affiliates shall amend, waive, modify, cancel or otherwise revise the R&W Insurance Policy in any manner inconsistent with the foregoing.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE SELLERS

Each Seller severally represents and warrants to the Buyer that the statements in this Article V are correct as to such Seller, as applicable, except as set forth in the confidential disclosure schedules set forth in the letter, dated as of the date of this Agreement, delivered by the Sellers to the Buyer in connection with the execution and delivery of this Agreement (collectively, the “Disclosure Schedules”). Capitalized terms used in the Disclosure Schedules and not otherwise defined therein have the meanings given to them in this Agreement.

5.1 Capacity, Organization and Power. With respect to each Seller that is an entity or other organization, such Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation and has the requisite power, authority and legal capacity to enter into this Agreement and the other agreements and instruments contemplated hereby to which it is a party and to perform its obligations hereunder and thereunder. With respect to each individual Seller, such Seller has the requisite legal capacity to enter into this Agreement and the other agreements and instruments contemplated hereby to which such Seller is a party and to perform such Seller’s obligations hereunder and thereunder.

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5.2 Title to Securities. Each Seller legally and beneficially owns and controls all of the Securities shown as being owned by such Seller in Section 5.2 of the Disclosure Schedules, and at the Closing, such Seller shall deliver to the Buyer good and marketable title to such Securities, free and clear of all Encumbrances, except (a) restrictions on transfer arising under applicable Law and (b) for Encumbrances arising from acts of the Buyer or its Affiliates.

5.3 Authority; Noncontravention.

(a) With respect to each Seller that is an entity or organization, the execution, delivery and performance of this Agreement by such Seller and all of the other agreements and instruments contemplated hereby to which such Seller is a party has been duly authorized by such Seller, and no other corporate act or other proceeding on its part is necessary to authorize the execution, delivery or performance of this Agreement or the other agreements and instruments contemplated hereby and the consummation of the transactions contemplated hereby or thereby.

(b) This Agreement has been duly executed and delivered by such Seller and constitutes such Seller’s valid and binding obligation, enforceable in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. Except for compliance with any applicable requirements of the HSR Act, such Seller’s execution and delivery of this Agreement and all of the other agreements and instruments contemplated hereby to which such Seller is or will be a party and its fulfillment of and compliance with the respective terms hereof and thereof do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a violation or default under (whether with or without the passage of time, the giving of notice or both), (iii) result in the creation of any Encumbrance (other than Permitted Encumbrances) upon such Seller’s Securities, property or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in the loss of any benefit pursuant to, or (vi) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with, any third party or any Governmental Authority pursuant to, (1) its charter documents, by-laws or other constituent documents, as applicable, (2) any Law to which such Seller is subject, or (3) any material agreement, instrument, license, permit, order, judgment or decree to which such Seller is subject, with only such exceptions in the case of clauses (2) and (3) as would not reasonably be expected to, individually or in the aggregate, be material to the Companies and their respective Subsidiaries.

5.4 Governmental Authorities and Consents. Other than compliance with and filings under the HSR Act, no permit, consent, approval or authorization of, or declaration to or filing with, or any other action by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery or performance of this Agreement or any other agreement or instrument contemplated hereby by such Seller or the consummation by such Seller of the transactions contemplated hereby or thereby.

5.5 Litigation. There are no actions, suits, proceedings, orders or investigations pending or, to such Seller’s knowledge, threatened against or affecting such Seller, at law or in equity, or before or by any federal, state, provincial, municipal or other Governmental Authority which would reasonably be expected to, individually or in the aggregate, be material to the Companies and their respective Subsidiaries.

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5.6 Brokerage. Except for Stephens, Inc. whose fees will be paid by the Companies and will constitute Company Transaction Expenses, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on its behalf who might be entitled to brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon it.

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANIES

The Companies represent and warrant to the Buyer that the statements in this Article VI are correct, except as set forth in the Disclosure Schedules.

6.1 Capacity, Organization and Corporate Power. Each Company is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation or incorporation and has the requisite power, authority and capacity to own its property and assets and to carry on its business as presently conducted. Each Company is qualified to do business and is in good standing (or its equivalent) in every jurisdiction in which its ownership of property or the conduct of business as now conducted requires it to qualify, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of each Company’s organizational documents have been furnished to the Buyer’s counsel and reflect all amendments made thereto at any time prior to the date of this Agreement, are correct and complete and are in full force and effect.

6.2 Securities and Related Matters. Section 6.2 of the Disclosure Schedules lists the number of each class and series of authorized and issued and outstanding Securities of each Company with the name of the record and beneficial holder of such Securities. All of the issued and outstanding Securities of each Company have been duly authorized, are validly issued, fully paid, and non-assessable and are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal. No Company has outstanding any Securities convertible or exchangeable for any other Securities of such Company or containing any profit participation features, nor any rights or options to subscribe for or to purchase such Company’s Securities or any stock appreciation rights or phantom stock plan. No Company is subject to any option or obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its Securities or any warrants, options or other rights to acquire its Securities. There are no binding agreements to which any Seller or a Company is a party with respect to the voting or transfer of such Company’s Securities.

6.3 Authorization; Noncontravention.

(a) The execution, delivery and performance of this Agreement and all of the other agreements and instruments contemplated hereby to which each Company is a party are within such Company’s powers and have been duly authorized by such Company, and no other act or other proceeding on the part of such Company or its boards of directors or other governing authority are necessary to authorize the execution, delivery or performance of this Agreement or the other agreements and instruments contemplated hereby and the consummation of the transactions contemplated hereby or thereby.

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(b) This Agreement has been duly executed and delivered by each Company and constitutes a valid and binding obligation of such Company, enforceable in accordance with its terms, except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by rules of law governing specific performance, injunctive relief or other equitable remedies. Except for compliance with any applicable requirements of the HSR Act, the execution and delivery by each Company of this Agreement and all of the other agreements and instruments contemplated hereby to which such Company is or will be a party and the fulfillment of and compliance with the respective terms hereof and thereof by such Company do not and shall not (i) conflict with or result in a breach of the terms, conditions or provisions of, (ii) constitute a violation or default under (whether with or without the passage of time, the giving of notice or both), (iii) result in the creation of any Encumbrance (other than Permitted Encumbrances) upon such Company’s Securities or property or assets pursuant to, (iv) give any third party the right to modify, terminate or accelerate any obligation under, (v) result in the loss of any benefit pursuant to or (vi) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with, any third party or any Governmental Authority pursuant to, such Company’s (1) organizational constituent documents, (2) any Law to which such Company is subject or (3) any material agreement, instrument, license, permit, order, judgment or decree to which such Company is subject.

6.4 Subsidiaries.

(a) Each Subsidiary of a Company is duly formed and validly existing under the laws of the jurisdiction of its formation or incorporation, as applicable, and has all necessary power, authority and capacity to own its property and assets and to carry on its business as presently conducted. Each Subsidiary of a Company is qualified to do business and is in good standing (or its equivalent) in every jurisdiction in which its ownership of property or the conduct of its business as now conducted requires it to qualify, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. Copies of each such Subsidiary’s organizational or constituent documents have been made available to the Buyer’s counsel and reflect all amendments made thereto at any time prior to the date of this Agreement, are correct and complete and are in full force and effect.

(b) Section 6.4(b) of the Disclosure Schedules lists the number of each class and series of authorized and issued and outstanding securities in the capital of each Subsidiary of each Company together with the name of the record and beneficial holder of such securities. All of the issued and outstanding securities in the capital of each Subsidiary of each Company have been duly authorized, are validly issued, fully paid, and non-assessable and are not subject to, nor were they issued in violation of, any preemptive rights or rights of first refusal. None of the Subsidiaries of any Company has outstanding any securities convertible or exchangeable for any other securities of such Subsidiary or containing any profit participation features, nor any rights or options to subscribe for or to purchase any securities of such Subsidiary or any stock appreciation rights or phantom stock plan. None of the Subsidiaries of any Company is subject to any option or obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of securities of such Subsidiary or any warrants, options or other rights to acquire such Subsidiary’s securities. There are no agreements with respect to the voting or transfer of the securities of any Subsidiary of any Company.

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(c) Except for the securities listed on Section 6.4(b) of the Disclosure Schedules, no Company or its Subsidiaries owns, directly or indirectly, any equity interest in, or voting security of, any other Person or any interest convertible into, exercisable for the purchase of or exchangeable for any such equity interest or voting security. None of the Companies or any of their respective Subsidiaries is under any current or prospective obligation to make any loan or capital contribution to or other investment in, or assume any liability or obligation of, any Person (other than another Company or a Subsidiary of a Company).

6.5 Financial Statements; No Undisclosed Liabilities.

(a) Section 6.5(a) of the Disclosure Schedules contains the following financial statements:

(i) the audited consolidated balance sheet of Industries and its Subsidiaries as of December 31, 2018, and related audited consolidated statements of income, changes in shareholder’s equity and cash flows for the fiscal year then ended;

(ii) the unaudited consolidated balance sheet of Industries and its Subsidiaries as of October 31, 2019, and the related unaudited consolidated statement of income for the ten (10)-month period then ended;

(iii) the audited consolidated balance sheet of Holmes Road and its Subsidiary and Affiliate as of December 31, 2018, and related audited consolidated statements of income, changes in shareholder’s equity and cash flows for the fiscal year then ended; and

(iv) the unaudited consolidated balance sheet of Holmes Road and its Subsidiary and Affiliate as of October 31, 2019 (together with the unaudited consolidated balance sheet of Industries and its Subsidiaries referenced in clause (ii) above, the “Latest Balance Sheets”), and the related unaudited consolidated statement of income for the ten (10)-month period then ended.

(b) Each of the foregoing financial statements (including in all cases the notes thereto, if any) is correct and complete in all material respects and has been prepared in accordance with the information contained in the books and records of the Companies and their respective Subsidiaries and Affiliates, as applicable, fairly presents in all material respects the financial condition and operating results of such entities for the periods covered thereby, and has been prepared in accordance with GAAP as in effect from time to time consistently applied throughout the periods covered thereby (except as may be indicated in the notes thereto), subject, in the case of the unaudited financial statements, to the absence of footnote disclosures and other presentation items and changes resulting from normal year-end adjustments that are not, individually or in the aggregate, material. The books of account and financial records of the Companies and their respective Subsidiaries and Affiliates are true and correct in all material respects and have been prepared and are maintained in accordance with sound accounting practice.

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(c) Except as and to the extent adequately accrued or reversed against in the Latest Balances Sheets, none of the Companies or any of their respective Subsidiaries has any liability or obligation of any nature, whether accrued, absolute, contingent or otherwise, whether known or unknown and whether or not required by GAAP or the Accounting Methods to be reflected in a consolidated balance sheet of any Company or its Subsidiaries or disclosed in the notes thereto, except for liabilities and obligations, incurred in the ordinary course of business consistent with past practice since the date of the Latest Balance Sheets, that are not, individually or in the aggregate, material to the Companies or any of their Subsidiaries.

6.6 Absence of Certain Developments. Since the date of the Latest Balance Sheets, (a) there has occurred no fact, event or circumstance which has had or would have, individually or in the aggregate, a Material Adverse Effect, and (b) none of the Companies nor any of their respective Subsidiaries has suffered any loss, damage, destruction or other casualty affecting any of its material properties or assets, which amount to more than $25,000 individually or $100,000 in the aggregate and are not covered by insurance. Except as expressly contemplated by this Agreement, since the date of the Latest Balance Sheets, the Companies have not engaged in any material transaction that was not in the ordinary course of business. Without limiting the generality of the foregoing, and except as expressly contemplated by this Agreement or as disclosed on Section 6.6 of the Disclosure Schedules, since the date of the Latest Balance Sheets, the Companies have not taken any action that would have been prohibited by Section 4.3 if it had been taken after the date hereof and prior to the Closing Date.

6.7 Contracts and Commitments.

(a) Section 6.7(a) of the Disclosure Schedules sets forth each written contract or agreement (other than this Agreement) and a description of each oral contract or agreement to which any Company or any Subsidiary of a Company is a party or by which its properties are bound, in each case, as of the date of this Agreement (each, a “Material Contract”):

(i) that is a collective bargaining agreement or other contract or agreement with any labor organization representing business employees;

(ii) pursuant to which any Company or any Subsidiary of a Company is required to make any advance, loan, extension of credit or capital contribution to, or other investment in, any other Person, in each case, in an amount exceeding, individually, $100,000;

(iii) that evidences (A) outstanding Indebtedness, (B) any guarantee, covenant, indemnity, surety bond, letter of credit, comfort letter or similar assurance of credit support provided by any Company or any Subsidiary of a Company with respect to any obligation of any other Person or (C) any guarantee, covenant, indemnity, surety bond, letter of credit, comfort letter or similar assurance of credit support provided by any Company or any Subsidiary of a Company with respect to any obligation of such Company or such Subsidiary, in the case of each of clauses (A) through (C), in an amount exceeding, individually, $100,000;

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(iv) that mortgages, pledges, or otherwise places an Encumbrance (other than Permitted Encumbrances) on, any material asset or material group of assets of the Companies or their respective Subsidiaries, including the Company Personal Property, Owned Real Property and Leased Real Property;

(v) pursuant to which any Company or one of its Subsidiaries is the lessee or lessor of or holds or operates, or makes available for use to any Person (other than a Company or one of its Subsidiaries) any (A) tangible personal property, or (B) real property, and, in the case of clause (A), that involves an aggregate future or potential liability or receivables, as the case may be, in excess of $100,000;

(vi) that is with the same party or group of affiliated parties and the performance of which involves consideration, individually or in the aggregate, in excess of $100,000;

(vii) that (A) prohibits any Company or its Subsidiaries from freely engaging in any business or competing anywhere in the world or (B) contains a grant of exclusivity by such Company or its Subsidiaries to any other Person;

(viii) (A) pursuant to which any Company or any of its Subsidiaries is obligated to make aggregate future payments to any other Person, or pursuant to which any Company or any of its Subsidiaries is entitled to receive aggregate future payments from any other Person, in excess of $100,000 during any twelve-month period, other than any purchase order or sales order entered into in the ordinary course of business, or (B) that has a term greater than one year and is not terminable by such Company or such Subsidiary without penalty by notice of not more than 180 days;

(ix) that was entered into in the past three years and pursuant to which any Company or any Subsidiary of a Company disposed of any asset, property or business for consideration exceeding $100,000 and has a continuing obligation to indemnify any other Person;

(x) pursuant to which any Company or any of its Subsidiaries is (A) a licensee of any Intellectual Property Rights that are material to the business as currently conducted, or (B) a licensor of any right to use Company Intellectual Property;

(xi) that creates or involves any material joint venture, partnership or similar arrangement;

(xii) with any Governmental Authority;

(xiii) that requires a consent to, or that would prohibit, delay or give the counterparty thereto any termination right as a result of, the consummation of the transactions contemplated by this Agreement;

(xiv) to which any Seller or any of its Affiliates (other than the Companies or their respective Affiliates), or any officer or director of a Seller or any of its Affiliates, is a party, in each case, other than (A) any contract that will expire or be terminated at or prior to the Closing, (B) any Benefit Plan and (C) any contract that, individually or in the aggregate, is not, and would not reasonably be expected to be, material to the Companies and their respective Subsidiaries; or

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(xv) relating to settlement of any administrative or judicial proceedings within the past five (5) years which was not covered by insurance and which exceeded $100,000.

(b) Each of the contracts, leases, agreements and instruments listed or required to be listed on Section 6.7(a) of the Disclosure Schedules is in full force and effect and will continue to be in full force and effect immediately following the consummation of the transactions contemplated by this Agreement, and is the legal, valid and binding obligation of the Company or its Subsidiary which is or are party thereto, and, to the knowledge of the Companies, of the other parties thereto, enforceable against each of them in accordance with its terms. None of the Companies or their respective Subsidiaries is or has received any notice alleging that such Company or its Subsidiary is (or, with or without notice or lapse of time or both, would be) in default under any contract, lease, agreement and instrument listed on Section 6.7(a) of the Disclosure Schedules. To the knowledge of the Companies, the other parties to each of the contracts, leases, agreements and instruments listed on Section 6.7(a) of the Disclosure Schedules are not (or, with or without notice or lapse of time or both, would not be) in default thereunder. The Companies have made available to the Buyer true and correct copies of each contract, lease, agreement or instrument listed on Section 6.7(a) of the Disclosure Schedules, together with all amendments, modifications or supplements thereto in effect on the date hereof.

6.8 Intellectual Property Rights.

(a) Section 6.8(a) of the Disclosure Schedules contains a list of all issued patents, trademark registrations, copyright registrations, and Internet domain names, and applications for the foregoing, in each case, that are owned by any of the Companies or their respective Subsidiaries and material to the operation of the business of the Companies and their respective Subsidiaries (the “Company Intellectual Property”). The Companies or their respective Subsidiaries, as applicable, own the Company Intellectual Property listed on Section 6.8(a) of the Disclosure Schedules, free and clear of Encumbrances other than Permitted Encumbrances.

(b) There is no claim pending and, to the knowledge of the Companies, during the previous five (5) years, no claim has been alleged or threatened, against any Company or any Subsidiary of a Company by any Person nor, to the knowledge of the Companies, is there any ground for any claim: (i) to the effect that the development, import, export, marketing, manufacture, sale, licensing, disclosure, distribution or use of any products as now offered, used, sold or licensed or proposed for use, sale or license by any Company or any of its Subsidiaries misappropriates, infringes or violates a third party’s Intellectual Property Rights, (ii) against the use by any Company or any of its Subsidiaries of any Company Intellectual Property in the business as currently conducted or (iii) challenging the validity, ownership, effectiveness or enforceability of any of the Company Intellectual Property. To the knowledge of the Companies, no Person claims the right to use any Mark that is identical, or confusingly similar, to any of the Marks comprising Company Intellectual Property. To the knowledge of the Companies, there is no unauthorized use, disclosure, dissemination, infringement or misappropriation of any of Company Intellectual Property by any third party, including any employee or former employee of any Company or any of its Subsidiaries.

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(c) Except as set forth in Section 6.8(c) of the Disclosure Schedules, as of the date of this Agreement, no Company or any of its Subsidiaries is a party to any material license, consent or agreement for the use of any Intellectual Property Rights owned by any other Person, other than non-exclusive licenses (including sublicenses) (i) for commercially available software or (ii) granted in the ordinary course of business.

(d) To the knowledge of the Companies, no third party is infringing, diluting, misappropriating or otherwise violating any item of the Company Intellectual Property.

(e) To the knowledge of the Companies, the conduct of business by each Company and its Subsidiaries does not infringe, dilute, misappropriate or otherwise violate, and the Companies and their respective Subsidiaries are not infringing, diluting, misappropriating or otherwise violating and in the past five (5) years have not infringed, diluted, misappropriated or otherwise violated, the Intellectual Property Rights of any third party.

(f) All registered, granted or issued Intellectual Property Rights comprising Company Intellectual Property are valid and subsisting, have not been canceled, abandoned or otherwise terminated and, if applicable, have been duly issued or filed, and none have been or currently are involved in any interference, reissue, reexamination, nullification, opposition, concurrent use, cancellation or similar proceeding. The Companies or their respective Subsidiaries, as applicable, are listed in the records of the appropriate U.S., state or foreign registry as the sole current owner of record for each listed application or registration set forth in Section 6.8(a) of the Disclosure Schedules, and no third party has any ownership interest, or right to claim any ownership interest in any such listed application or registration.

(g) The Companies and their respective Subsidiaries have implemented commercially reasonable measures to protect and preserve the confidentiality of all Trade Secrets (including Trade Secrets of any other Person disclosed pursuant to a written non-disclosure agreement binding on any of the Companies or any of their respective Subsidiaries) used in the business as currently conducted. No such Trade Secrets have been disclosed by the Companies or any of their respective Subsidiaries to any Person except pursuant to valid and enforceable non-disclosure agreements or other written agreement entered into in the ordinary course of business.

(h) To the knowledge of the Companies, no employee, consultant, contractor or agent of any of the Companies or any of their respective Subsidiaries is in breach of any agreement with any former employer or other third party concerning the Company Intellectual Property.

(i) The consummation of the transactions contemplated by this Agreement will not result in the loss or impairment of any of the Companies’ or any of their respective Subsidiaries’ right to own, use, or hold for use any Intellectual Property Rights as owned, used, or held for use (including for defensive purposes) in the conduct of its business as currently conducted. No current or former partner, director, officer, stockholder, or employee of any of the Companies or any of their respective Subsidiaries will, after giving effect to the transactions contemplated hereby, own or retain any rights in or to any of the Company Intellectual Property.

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(j) The information technology systems of the Companies and their respective Subsidiaries (the “IT Systems”), and all components thereof, are in satisfactory working order and, to the knowledge of Companies, have been designed or configured and maintained to meet industry standard security, backups, disaster recovery arrangements and hardware and software support and maintenance. To the knowledge of the Companies, there have been no unauthorized intrusions or breaches of the security of the IT Systems.

(k) In connection with any collection of personally identifiable information or non-public data, in the past five (5) years, the Companies and their respective Subsidiaries have complied in all material respects with all applicable Laws relating to the collection, use, storage and processing of any personally identifiable information or non-public data collected or processed by the Companies or their respective Subsidiaries or, to the knowledge of the Companies, by third parties having authorized access to the IT Systems or records of the Companies or their respective Subsidiaries.

(l) The Companies and their respective Subsidiaries have not (i) suffered any personal data breach or cybersecurity incident that has permitted any unauthorized access to the personally identifiable information or non-public data under its control or possession; or (ii) received any notice, request or other written communication from any Governmental Authority, or been subject to any enforcement action (including any fines or other sanctions) or proceeding, in each case relating to a breach or alleged breach of their obligations under Laws relating to data privacy, data security or data protection or any other Laws applicable to cybersecurity that would reasonably be expected, individually or in the aggregate, to be material to the Companies.

(m) All of the domain names identified in Section 6.8(a) of the Disclosure Schedules are registered in the name of, or in an account used for the benefit of the Companies and their respective Subsidiaries. Except as set forth in Section 6.8(m) of the Disclosure Schedules, the Companies and their respective Subsidiaries are currently in material compliance with all contracts and agreements with the third-party companies with whom the domain names are registered, and there have been no complaints, disputes or proceedings (including any Uniform Domain-Name Dispute Resolution Policy proceedings) filed by or on behalf of or against the Companies or their respective Subsidiaries with respect to such domain names.

6.9 Litigation.

(a) There are no actions, suits or proceedings pending or, to the Companies’ knowledge, threatened against any of the Companies or their respective Subsidiaries, at law or in equity, or before or by any Governmental Authority.

(b) No Company or any of its Subsidiaries is subject to, or in default under, any material restraining order, injunction or other judgment, order or decree issued or granted by a Governmental Authority having jurisdiction over the subject matter thereof and any Person or property bound thereby, nor, to the knowledge of Companies, has any such material restraining order, injunction or other judgment order or decree been threatened.

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(c) There is no proceeding by any Company or any of its Subsidiaries pending, or which any Company or any of its Subsidiaries has commenced preparations to initiate, against any other Person.

6.10 Compliance with Laws. The Companies and their respective Subsidiaries are in compliance in all material respects with all applicable Laws relating to the operation of their respective businesses and the maintenance and operation of their respective properties and assets, and no notices have been received by, and no claims have been filed against, any of the Companies or their respective Subsidiaries alleging noncompliance of any such Laws.

6.11 Permits.

(a) Section 6.11 of the Disclosure Schedules sets forth a list of each material license, certificate, permit, authorization, registration or approval issued or granted by a Governmental Authority required for the conduct of the business of the Companies and their respective Subsidiaries as presently conducted (each, a “Company Permit”).

(b) Except with respect to Company Environmental Permits, which are addressed in Section 6.12 (Environmental Matters):

(i) Each Company or its Subsidiary, as applicable, validly holds each Company Permit and is and has been in material compliance with each Company Permit, and there is no lawsuit, claim, suit, action, audit, investigation, arbitration or similar legal proceeding pending to revoke, terminate, suspend or cancel any Company Permits. No event has occurred that (with or without notice or lapse of time, or both) would constitute a default under, or violation of, in any material respect, any Company Permit.

(ii) No Company or its Subsidiary has received any written notice, the subject matter of which remains unresolved or which was received in the past five (5) years, of any lawsuit, claim, suit, action, audit, investigation, arbitration or similar legal proceeding relating to the revocation, nonrenewal or modification of any Company Permit. No Company Permit is held in the name of any employee, officer, director, stockholder, agent or otherwise on behalf of any Seller, Company, or its Subsidiary.

(iii) None of the Company Permits will be impaired or adversely affected by the consummation of the transactions contemplated by this Agreement, and each Company Permit will remain in full force and effect immediately following the consummation of the transactions contemplated by this Agreement.

6.12 Environmental Matters.

(a) Section 6.12(a) of the Disclosure Schedules sets forth a list of each material license, certificate, permit, authorization, registration or approval issued or granted by a Governmental Authority pursuant to or required under any Environmental Law (each, a “Company Environmental Permit”).

(b) Except as disclosed in Section 6.12(b) of the Disclosure Schedules:

(i) Since January 1, 2015, the Companies and their respective Subsidiaries have been in compliance in all material respects with all Environmental Laws;

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(ii) Since January 1, 2015, each Company or its Subsidiary, as applicable, has validly held and has been in material compliance with each Company Environmental Permit, and there is no lawsuit, claim, suit, action, audit, investigation, arbitration or similar legal proceeding pending to revoke, terminate, suspend or cancel any such Company Environmental Permit. No event has occurred that (with or without notice or lapse of time, or both) would constitute a default under, or violation of, in any material respect, any Company Environmental Permit;

(iii) Since January 1, 2015, no Company or any of its Subsidiaries has received any written or, to the knowledge of the Companies, other communication, the subject matter of which remains unresolved from a Governmental Authority or other Person (i) alleging that any Company or its Subsidiary is in violation of any applicable Environmental Law, (ii) alleging that any Company, its Subsidiary or any predecessor thereof is a potentially responsible party or requesting information under the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, (iii) regarding any investigation, remediation or corrective obligation, relating to a Company, its Subsidiaries, the Owned Real Property or the Leased Real Property or (iv) regarding any material liability or obligation arising under Environmental Laws;

(iv) No lawsuit, claim, suit, action, audit, investigation, arbitration or similar legal proceeding is pending or, to the knowledge of Companies, has been threatened against any Company or any of its Subsidiaries since January 1, 2015 alleging any (i) non-compliance by any Company or any of its Subsidiaries with any applicable Environmental Law or any Company Environmental Permit or (ii) material liability or obligation arising under Environmental Laws;

(v) None of the Company Environmental Permits will be materially impaired or materially adversely affected by the consummation of the transactions contemplated by this Agreement, and each Company Environmental Permit will remain in full force and effect immediately following the consummation of the transactions contemplated by this Agreement;

(vi) Hazardous Materials have not been treated, stored, disposed, generated or released by any Company or any of their respective Subsidiaries or, to the knowledge of the Companies, by any predecessor thereof or any other Person for whom the Companies or their respective subsidiaries may be held responsible under any Environmental Law at, on or under the Owned Real Property, Leased Real Property or any property owned, leased or operated by any Company, any of their respective Subsidiaries or any predecessor thereof since January 1, 2015, in each case, in material violation of Environmental Laws or in a manner that could reasonably be expected to result in any material liability to or obligation of any Company or any of its Subsidiaries under any applicable Environmental Law;

(vii) There is no asbestos or asbestos-containing material that must be removed, abated or encapsulated to comply with applicable Environmental Laws located at or on any Owned Real Property or Leased Real Property.

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(viii) There is not currently, nor has there been since January 1, 2015, any leaking underground storage tanks in which Hazardous Materials are being or have been treated, stored or disposed of on any Owned Real Property or Leased Real Property and for which the Companies or their respective Subsidiaries would be required to perform remedial or corrective action in order to comply with Environmental Laws;

(ix) All mining, processing, storage, transportation, production or other facilities located in or on the Owned Real Property or Leased Real Property, or lands pooled or unitized therewith, that have been abandoned by any Company, any of its Subsidiaries or any of their predecessors in interest for which such Company or such Subsidiary may have continuing responsibility, have been abandoned in accordance in all material respects with any lease provisions from the land owner (in the case of Leased Real Property), and in material compliance with all applicable Laws and all applicable Company Environmental Permits. Each Company or its Subsidiary, as applicable, has fully performed any Abandonment and Reclamation Obligations required to be performed by it since January 1, 2015. All Abandonment and Reclamation Obligations currently pending, in process or, to the knowledge of Companies, to be performed in the future have been described on Section 6.12(b)(ix) of the Disclosure Schedules;

(x) No Company or any of its Subsidiaries has assumed or provided an indemnity for, either contractually or by operation of Law, any material liabilities or obligations arising under Environmental Law (including Abandonment and Reclamation Obligations) of a third party that would reasonably be expected to form the basis of a lawsuit, claim, suit, action, audit, investigation, arbitration or similar legal proceeding against such Company or Subsidiary; and

(xi) The Companies have made available the Buyer (i) copies of all material environmental reports and audits and all material correspondence since January 1, 2016 relating to environmental matters pertaining to the Leased Real Property and the Owned Real Property, and (ii) copies of all material correspondence since January 1, 2016 relating to environmental matters pertaining to any real property formerly owned, leased, or operated by any Company or any of its Subsidiaries, in each case that are within the Companies’ or their Subsidiaries’ possession or control and (iii) copies of all Company Environmental Permits.

6.13 Employees.

(a) Section 6.13(a) of the Disclosure Schedules contains a complete and accurate list of each employee of the Companies and any of their respective Subsidiaries, setting forth the (i) name, (ii) title, (iii) current annual base salary or hourly wage rate, (iv) annual rate of cash bonus potential; (v) date of hire (and any other service crediting date), (vi) all vacation and personal holiday pay accruals, and (vii) leave status (including type of leave and expected date of return to work). Since the date of the Latest Balance Sheets, there has not been any material change in the compensation of any officers or employees of the Companies or any of their respective Subsidiaries.

(b) (i) The Companies and their respective Subsidiaries are in compliance in all material respects with all Laws relating to the employment of labor (including provisions thereof relating to labor or employment standards, human rights, labor relations, workers compensation, wages, hours, pay equity, classification of employees and independent contractors, fair employment practices, employment

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discrimination, harassment, retaliation, reasonable accommodation, disability rights or benefits, immigration, working conditions, meal and break periods, privacy, health and safety, workers’ compensation, termination, leaves of absence and unemployment insurance), and the Companies and their respective Subsidiaries have not had any threatened or actual strikes, picketing, labor disputes, slowdowns, or work stoppages or material grievances in the past five (5) years; and (ii) none of the Companies or their respective Subsidiaries nor, to the Companies’ knowledge, any employees of the Companies or any of their respective Subsidiaries, are subject to any non-compete, non-disclosure, confidentiality, employment, consulting or similar agreements affecting or in conflict with the present business activities of the Companies, except for agreements between the Companies and their present and former employees.

(c) None of the Companies or their respective Subsidiaries is party to or bound by any collective bargaining agreement or similar agreement with any labor organization. To the Companies’ knowledge, there are no threatened or apparent union organizing activities involving employees of the Companies or their respective Subsidiaries, nor to the knowledge of the Companies have there been any such activities in the last five (5) years.

(d) The Sellers do not anticipate or have any reason to believe that there will be, any adverse change in relations with key employees of the Companies as a result of the announcement of the transactions contemplated by this Agreement. To the knowledge of the Companies, no current officer of the Companies or any of their respective Subsidiaries intends, or is expected, to terminate his or her employment relationship with such entity following the consummation of the transactions contemplated hereby.

(e) Neither the Companies nor any of their respective Subsidiaries is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental Authority relating to employees or employment practices. None of the Companies, any of their respective Subsidiaries or any of their officers has received within the past five (5) years any notice of intent by any Governmental Authority responsible for the enforcement of labor or employment laws to conduct an investigation relating to the Companies or any of their respective Subsidiaries and, to the knowledge of the Companies, no such investigation is in progress.

(f) The Companies and each of their respective Subsidiaries have withheld and paid to the appropriate Governmental Authority or are holding for payment not yet due to such Governmental Authority all amounts required to be withheld from employees of the Companies or any of their respective Subsidiaries and are not liable for any arrears of wages, taxes, penalties or other sums for failure to comply with any applicable Laws relating to the employment of labor. The Companies and each of their respective Subsidiaries have paid in full to all their respective employees or adequately accrued in accordance with GAAP for all wages, salaries, commissions, bonuses, benefits and other compensation due to or on behalf of such employees.

6.14 Employee Benefit Plans.

(a) Section 6.14(a) of the Disclosure Schedules sets forth an accurate and complete list of each material Benefit Plan.

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(b) The Sellers have made available to the Buyer a true and complete copy of each Benefit Plan (or a written description of each Benefit Plan that is not in writing) and have delivered to the Buyer a true and complete copy of each material document, if any, prepared in connection with each Benefit Plan, including (i) a copy of each trust or other funding arrangement, (ii) each summary plan description and summary of material modifications, (iii) the two most recently filed IRS Form 5500, (iv) the most recently received IRS determination letter for each Benefit Plan and (v) the most recently prepared actuarial report and financial statements in connection with each Benefit Plan. Each Benefit Plan has been established and maintained in material compliance with the terms thereof and all applicable Laws, including ERISA and the Code. Each of the Companies and their respective Subsidiaries has performed all obligations required to be performed by it and is not in any respect in default under or in violation under any Benefit Plan, nor do the Companies have any knowledge of any such default or violation by any other party to any Benefit Plan.

(c) Except as required by applicable Law, since the date of the Latest Balance Sheets, there have been no material amendments, improvements, increases or changes to or promised material amendments, improvements, increases or changes to the benefits provided under any Benefit Plan. Neither the Companies nor any of their Subsidiaries has any express or implied commitment (i) to create, incur liability with respect to or cause to exist any other employee benefit plan, program or arrangement, (ii) to enter into any contract to provide compensation or benefits to any individual or (iii) to modify, change or terminate any Benefit Plan, other than with respect to a modification, change or termination required by ERISA or the Code. All employer or employee payments, contributions and premiums required to be remitted or paid to or in respect of each Benefit Plan have been paid or remitted on or before their due dates in accordance with the terms thereof and all Laws, and no material Taxes, penalties or fees are owing under any Benefit Plan. All such contributions have been fully deducted for income tax purposes. No such deduction has been challenged or disallowed by any Governmental Authority and no fact or event exists that would give rise to any such challenge or disallowance. As of the Closing Date, no Benefit Plan that is subject to Title IV of ERISA will have an “unfunded benefit liability” within the meaning of Section 4001(a)(18) of ERISA.

(d) There are no actions, claims, suits or proceedings pending or, to the knowledge of Companies, threatened, anticipated or expected to be asserted involving any Benefit Plan, any related trust, other funding medium or its assets or with respect to the Companies as the sponsor or fiduciary thereof or with respect to any other fiduciary thereof, and to the knowledge of the Companies, no facts exist that would reasonably be expected to give rise to any such action, suit or proceeding.

(e) None of the Benefit Plans is a multiemployer plan within the meaning of Section 3(37) or 4001(a)(3) of ERISA (a “Multiemployer Plan”) or a single employer pension plan within the meaning of Section 4001(a)(15) of ERISA for which the Companies or any of their respective Subsidiaries could incur liability under Section 4063 or 4064 of ERISA (a “Multiple Employer Plan”). None of the Benefit Plans: (i) provides for the payment of separation, severance, termination or similar-type benefits to any person; (ii) obligates the Companies or any of their respective Subsidiaries to pay separation, severance, termination or similar-type benefits solely or partially as a result of the transactions contemplated by this Agreement; or (iii) obligates the Companies or any of their respective Subsidiaries to make any payment or provide any benefit as a result of the transactions contemplated by this Agreement. Each of

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the Benefit Plans is maintained in the United States and is subject only to the Laws of the United States or a political subdivision thereof.

(f) Each Benefit Plan that is intended to be qualified under Section 401(a) of the Code is so qualified and has received or is entitled to rely upon a timely favorable opinion letter from the IRS. Each trust established in connection with any Benefit Plan which is intended to be exempt from federal income taxation under Section 501(a) of the Code is so exempt. No fact or event has occurred since the date of such determination letter or letters from the IRS that could adversely affect the qualified status of any such Benefit Plan or the exempt status of any such trust.

(g) There has not been any prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, with respect to any Benefit Plan. None of the Companies or any of their respective Subsidiaries has incurred any liability under, arising out of or by operation of Title IV of ERISA, other than liability for premiums to the Pension Benefit Guaranty Corporation arising in the ordinary course, including any liability in connection with (i) the termination or reorganization of any employee benefit plan subject to Title IV of ERISA or (ii) the withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or event exists that would give rise to any such liability.

(h) Except as required by applicable Law, none of the Benefit Plans provide for health, disability or life insurance benefits beyond retirement or other termination of service to former employees of the Companies or their respective Subsidiaries or to the beneficiaries or dependents of such former employees.

(i) No Benefit Plan or any related trust or other funding medium thereunder or any fiduciary thereof is, to the knowledge of the Companies, the subject of an audit, investigation or examination by any Governmental Authority.

(j) No “reportable event,” as such term is used in Section 4043 of ERISA, “accumulated funding deficiency,” as such term is used in Sections 412 or 4971 of the Code or Section 302 of ERISA, or application for or receipt of a waiver from the IRS of any funding requirement under Section 412 of the Code has occurred with respect to any Benefit Plan.

(k) The Companies and their respective Subsidiaries do not maintain any Benefit Plan that is a “group health plan,” as such term is defined in Section 5000(b)(1) of the Code, that has not been administered and operated in all respects in compliance with the applicable requirements of Section 601 of ERISA, Section 4980B(b) of the Code and the applicable provisions of the Health Insurance Portability and Accountability Act of 1996 and the Patient Protection and Affordable Care Act. The Companies and their respective Subsidiaries are not subject to any liability, including additional contributions, fines, penalties or loss of tax deduction as a result of such administration and operation.

(l) With respect to each Benefit Plan that is a “nonqualified deferred compensation plan” (as defined for purposes of Section 409A(d)(1) of the Code), (i) such plan or arrangement has been operated since January 1, 2005 in compliance with Section 409A of the Code and all applicable IRS guidance promulgated thereunder to the extent such plan or arrangement is subject to Section 409A of the Code and so as to avoid any tax, interest or penalty thereunder; (ii) the document or documents that evidence each such plan or arrangement have conformed to the provisions of Section 409A of the Code and the final

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regulations under Section 409A of the Code since December 31, 2008; and (iii) as to any such plan or arrangement in existence prior to January 1, 2005 and not subject to Section 409A of the Code, has not been “materially modified” (within the meaning of IRS Notice 2005‑1) at any time after October 3, 2004.

(m) The Companies and their respective Subsidiaries are not obligated to make any payments, including under any Benefit Plan, that reasonably could be expected to be “excess parachute payments” pursuant to Section 280G of the Code.

6.15 Insurance. Section 6.15 of the Disclosure Schedules contains a true and complete list of all casualty, directors and officers liability, general liability, product liability and all other types of insurance policies maintained with respect to the Companies and their respective Subsidiaries together with the carriers and liability limits for each such policy. Each such policy is in full force and effect as of the Closing, and no application for any such policy included a material misstatement or omission. None of the Companies or their respective Subsidiaries has received written or, to the knowledge of the Companies, oral notice of cancellation, non-renewal, disallowance, material premium increases or reduction in coverage with respect to any such insurance policy, and none of the Companies or their respective Subsidiaries is in default in any material respect with respect to its obligations under any such insurance policy. No claim currently is pending under any such policy involving an amount in excess of $100,000. Section 6.15 of the Disclosure Schedules identifies which insurance policies are “occurrence” or “claims made” and which Person is the policy holder. The business of the Companies and their respective Subsidiaries has been conducted in a manner so as to conform in all material respects to all applicable provisions of such insurance policies.

6.16 Tax Matters.

(a) The Companies and their respective Subsidiaries, and any Affiliated Group, have timely filed all Tax Returns required to be filed by them, and each such Tax Return has been prepared in material compliance with all applicable Laws. All Taxes due and payable by the Companies and their respective Subsidiaries and any Affiliated Group have been paid and the Companies and their respective Subsidiaries have withheld and paid over to the appropriate taxing authority all Taxes which it is required to withhold from amounts paid or owing to any employee, stockholder, creditor or other third party.

(b) (i) None of the Companies or their respective Subsidiaries, nor any Affiliated Group, has requested or been granted an extension of the time for filing any Tax Return which has not yet been filed and (ii) none of the Companies or their respective Subsidiaries, nor any Affiliated Group, has consented to extend to a date later than the date hereof the time in which any Tax may be assessed or collected by any taxing authority.

(c) There is no material dispute or claim concerning any Tax liability of the Companies or their respective Subsidiaries, or any Affiliated Group, either claimed or raised by any taxing authority in writing.

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(d) There are no Encumbrances (other than Permitted Encumbrances) for Taxes (other than for current Taxes not yet due and payable) upon the assets of any of the Companies or their respective Subsidiaries.

(e) None of the Companies or their respective Subsidiaries is party to or bound by any Tax allocation or Tax sharing agreement (other than any agreement entered into in the ordinary course of business not primarily related to Taxes and under which none of the Companies or any of their respective Subsidiaries has any material liability for Taxes).

(f) The aggregate unpaid Taxes of the Companies and their respective Subsidiaries (i) did not, as of the date hereof, exceed the accruals and reserves for Taxes (excluding accruals and reserves for deferred Taxes established to reflect timing differences between book and Tax income) set forth on the Latest Balance Sheets and (ii) do not exceed that reserve as adjusted for the passage of time through the Closing Date in accordance with the past custom and practice of the Companies and their respective Subsidiaries in filing their Tax Returns. Since the date of the Latest Balance Sheets, none of the Companies or their respective Subsidiaries has incurred any liability for Taxes arising from extraordinary gains or losses, as that term is used in GAAP, outside the ordinary course of business consistent with past custom and practice.

(g) Each Tax election made by or with respect to any of the Companies or their respective Subsidiaries (including any “S corporation” election under Section 1362(a) of the Code, as applicable) was timely and properly made.

(h) Industries is, and has been at all times since January 1, 2011, a validly electing “S corporation” under Section 1362 of the Code and any corresponding provision of state or local Tax Law. Each direct or indirect Subsidiary of Industries is, and has been at all times since January 1, 2011, a valid “qualified subchapter S subsidiary” pursuant to Section 1361(b)(3)(B) of the Code and any corresponding provision of state or local Law.

(i) Holmes Road is, and has been at all times since January 1, 2004 a validly electing “S corporation” under Section 1362 of the Code and any corresponding provision of state or local Tax Law. Holmes Road is the sole member of Cherry Land Holdings, LLC, which is a disregarded entity for federal income tax purposes pursuant to Treasury Regulations Section 301.7701-3(b)(1). Holmes Road has no Subsidiaries other than Cherry Land Holdings, LLC.

(j) Each of Cherry Crawford and Selinsky is classified as a partnership under Treasury Regulations Section 301.7701-3(b)(1)(i) for federal income Tax purposes. None of Cherry Crawford or Selinsky has any Subsidiaries.

(k) None of the Companies or their respective Subsidiaries will be liable for any Tax under Section 1374 of the Code or any corresponding or similar provision of state or local Law.

(l) None of the Companies (or any of their respective Subsidiaries) has any liability for Taxes of any Person (other than the Companies) (i) under Treasury Regulations Section 1.1502-6 or any corresponding provision of state, local or foreign income Tax law, (ii) as transferee or successor or (iii) by written contract.

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(m) None of the Companies or their respective Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, taxable income for any period (or any portion thereof) ending after the Closing Date as a result of any installment sale or other transaction on or prior to the Closing Date, any accounting method change or agreement with any Governmental Authority entered into on or prior to the Closing Date or any prepaid amount received on or prior to the Closing.

Each reference to any Company or any Subsidiary in this Section 6.16 shall include references to any Person which merged with and into or liquidated into such Company or such Subsidiary, as applicable.

6.17 Brokerage. Except for Stephens Inc. whose fees will be paid by the Companies, there is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of the Companies who might be entitled to brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon the Companies.

6.18 Affiliated Transactions. No officer, director, stockholder, member, manager, partner, key employee or Affiliate of any of the Companies or their respective Subsidiaries, including to the Companies’ knowledge any individual related by blood, marriage or adoption to any such individual or any entity in which any such Person or individual owns any material beneficial interest, is a party to any material agreement, contract, commitment or transaction with any of the Companies or their respective Subsidiaries or has any material interest in any property used by any of the Companies or their respective Subsidiaries.

6.19 Properties.

(a) Each Company or such Company’s Subsidiaries, as applicable, owns good and marketable title to, or holds a valid leasehold interest in, all of the material tangible personal property used by such Company or its Subsidiaries, as applicable, in the conduct of its business (the “Company Personal Property”), free and clear of all Encumbrances, except for Permitted Encumbrances and Encumbrances that will be terminated at or prior to the Closing. The Company Personal Property (i) has been maintained in all material respects in accordance with generally accepted industry practice, (ii) is in all material respects in good operating condition and repair, ordinary wear and tear excepted and (iii) is in suitable and adequate condition for the uses to which it is being put. No Company or any of its Subsidiaries has deferred, outside of the ordinary course of business consistent with past practice, any material maintenance of any Company Personal Property. All material Company Personal Property is located on the Owned Real Property or the Leased Real Property.

(b) Section 6.19(b) of the Disclosure Schedules contains a list of (i) all real property of which any of the Companies or their respective Subsidiaries is a lessee, sublessee or licensee or otherwise has a right to use or occupy (such real property, together with such Company’s or such Subsidiary’s right, title and interest in all buildings, improvements, facilities, systems and fixtures thereon and all water rights, easements, rights and other appurtenances thereto, the “Leased Real Property”) and (ii) all leases pursuant to which the Companies or Subsidiaries lease the Leased Real Property (each, a “Lease”). The Companies have delivered to the Buyer a true and complete copy of each Lease. With respect to the Leased Real Property: (i) each Company or a Subsidiary of a Company, as applicable, has a valid and enforceable leasehold interest in such Leased Real Property; (ii) no portion of the Leased Real Property is the subject of any pending or threatened condemnation or eminent domain proceedings or their local equivalent

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affecting or relating to such Leased Real Property; (iii) all rents, additional rents, and other sums, expenses and charges due and payable by the Companies or any of their respective Subsidiaries pursuant to the Leases have been timely paid in full, (iv) each of the Leases is valid and in full force and effect, and there is no breach, default, or event of default by any of the Companies or their respective Subsidiaries under the Leases, and there is no occurrence, condition or act which, with the giving of notice, the passage of time or the happening of a further event or condition would become a default or event of default by any of the Companies or their respective Subsidiaries under the Leases or would permit the termination, modification or acceleration of rent thereunder, (v) there are no material disputes with the lessor with respect to any of the Leases, (vi) none of the Companies nor any of their respective Subsidiaries owes any unpaid brokerage commissions with respect to the Leases and (vii) none of the Companies nor any of their respective Subsidiaries has received notice from any Governmental Authority or other Person that the use and occupancy of any of the Leased Real Property, as currently used and occupied, and the conduct of the business thereon, as currently conducted, violate in any material respect any deed restrictions, building codes, or zoning, subdivision or other land use or similar Laws.

(c) Section 6.19(c) of the Disclosure Schedules contains a list of all real property owned by the Companies and their respective Subsidiaries (such real property, together with such Company’s or its Subsidiary’s right, title and interest in all buildings, improvements, facilities, systems and fixtures thereon and all water rights, easements, rights and other appurtenances thereto, the “Owned Real Property”). Each Company or its Subsidiary, as applicable, has good and marketable fee simple title to all Owned Real Property.

(d) Section 6.19(d) of the Disclosure Schedules contains a list of all option agreements pursuant to which the Companies or their respective Subsidiaries have an option to purchase, lease, license, or otherwise occupy the real property described therein (collectively, the “Option Agreements”). Each of the Options Agreements is valid and in full force and effect, and there is no breach, default, or event of default by any of the Companies or their respective Subsidiaries under the Option Agreements, and there is no occurrence, condition or act that, with the giving of notice, the passage of time or the happening of a further event or condition would become a default or event of default by any of the Companies or their respective Subsidiaries under the Option Agreements or would permit the termination, modification or acceleration of any payments due thereunder. All amounts due and payable under the Option Agreements have been timely paid in full.

(e) No Company or Subsidiary of a Company has granted to any other Person any right to use or occupy all or any portion of any Owned Real Property or any Leased Real Property. There is no Person in possession of any Owned Real Property or Leased Real Property other than a Company or its Subsidiary. Neither the Companies nor any of their respective Subsidiaries is a party to any contract, agreement or option to purchase or sell any real property or any interest therein. The Owned Real Property and the Leased Real Property comprise all of the real property used to conduct the business of the Companies and their respective Subsidiaries consistent in all material respects with past practices.

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(f) The Companies have made available to the Buyer copies of all existing surveys, title policies, property reports and zoning reports pertaining to the Owned Real Property and Leased Real Property that are within the Companies’ or their Subsidiaries’ possession or control.

(g) Each Company or its Subsidiary, as applicable, has the right and authority to use and operate all of the improvements located on the Owned Real Property and Leased Real Property, subject to applicable Law and Permitted Encumbrances, and with respect to the Leased Real Property, the terms of the Leases. Such improvements are being used, occupied and maintained in all material respects by such Company or its Subsidiary, as applicable, in accordance with all applicable contracts, permits, Law, insurance requirements, and easements, restrictions, building setback lines, covenants and reservations of record. Certificates of occupancy and all other material permits required by any Governmental Authority having jurisdiction over the Owned Real Property or the Leased Real Property, if any, have been issued for such Company’s or its Subsidiary’s occupancy of each of such improvements, and all such permits, if any, have been paid for and are in full force and effect.

(h) No material casualty has occurred with respect to the improvements located on any of the Owned Real Property or Leased Real Property which remains unremedied.

(i) There are adequate sanitary and storm sewer, public water, gas, electrical, cable, telephone and other utilities and facilities on the Owned Real Property and Leased Real Property for the operation of the business as currently conducted thereon, and no Company or its Subsidiary has received notice from any provider of such services of any changes required to any facilities used in connection with such utilities. There are no pending or threatened moratoria or restrictions that are reasonably likely to adversely affect the cost or availability of any public utilities used in the business. Copies of all utility service and distribution agreements to the extent existing have been made available to the Buyer. No royalty payments or commissions are due by any Company or any of its Subsidiaries with respect to the installation, service or other requirements of any utility related agreement.

6.20 Customers and Suppliers.

(a) Section 6.20(a) of the Disclosure Schedules lists the ten largest customers (measured by aggregate dollar volume of purchases) of the Companies and their respective Subsidiaries during the periods beginning (i) January 1, 2018 and ending on December 31, 2018 and (ii) January 1, 2019 and ending on October 31, 2019. No Company or its Subsidiary has received any notice or has any knowledge that any of such customers (A) has ceased or substantially reduced, or will cease or substantially reduce, use of products or services of any Company or its Subsidiary or (B) has sought, or is seeking, to reduce the price it will pay for the products or services of any Company or its Subsidiary.

(b) Section 6.20(b) of the Disclosure Schedules lists the ten largest suppliers (measured by aggregate dollar volume of sales) of the Companies and their respective Subsidiaries during the periods beginning (i) January 1, 2018 and ending on December 31, 2018 and (ii) January 1, 2019 and ending on October 31, 2019. No Company or its Subsidiary has received notice or has any knowledge that there has been any material adverse change in the price of such supplies or services provided by any such supplier, or that any such supplier will not sell supplies or services to such Company or its Subsidiaries at any time after the Closing Date on terms and conditions substantially the same as those used in its current sales to such Company or its Subsidiaries, subject to general and customary price increases.

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6.21 Accounts Receivable; Accounts Payable.

(a) All accounts receivable reflected on the Latest Balance Sheets or to be reflected on the Closing Balance Sheet represent or will represent bona fide and valid obligations arising from sales actually made or services actually performed in the ordinary course of business. Unless paid prior to the Closing, all such accounts receivable will be collected in full, without any set-off, in the ordinary course of business consistent with past practice. There is no contest, claim or right of set-off, other than returns in the ordinary course of business, under any contract or agreement with any obligor of any accounts receivable related to the amount or validity of such accounts receivable.

(b) All accounts payable and notes payable by the Companies and their respective Subsidiaries to third parties have arisen in the ordinary course of business, and no such account payable or note payable is delinquent more than ninety days in its payment as of the date of this Agreement.

6.22 Affiliate Transactions. Except as set forth in Section 6.22 of the Disclosure Schedules or the arrangements that will be canceled, retired, paid off or otherwise extinguished prior to the Closing:

(a) No Related Party of the Sellers, the Companies or their respective Subsidiaries: (i) owns or has owned, directly or indirectly, any equity or other financial or voting interest in any competitor, supplier, licensor, lessor, distributor, independent contractor or customer of any Company or any of its Subsidiaries or their business; (ii) owns or has owned, directly or indirectly, or has or has had any interest in any property (real or personal, tangible or intangible) that any Company or any of its Subsidiaries uses or has used in or pertaining to their business; or (iii) has or has had any business dealings or a financial interest in any transaction with any Company or any of its Subsidiaries or involving any assets or property of any Company or any of its Subsidiaries; and

(b) Except for this Agreement, there are no contracts or agreements by and between any Company or any of its Subsidiaries, on the one hand, and any Related Party of any Seller, Company or any of its Subsidiaries, on the other hand, pursuant to which such Related Party provides or receives any information, assets, properties, support or other services to or from any Company or any of its Subsidiaries (including contracts and agreements relating to billing, financial, tax, accounting, data processing, human resources, administration, legal services, information technology and other corporate overhead matters).

6.23 Inventory. Except as set forth in Section 6.23 of the Disclosure Schedules, (a) since the date of the Latest Balance Sheets, the Inventory of the Companies and their respective Subsidiaries has been maintained in the ordinary course of business; (b) all of the Inventory recorded on the Latest Balance Sheets consists of items of a quality usable or saleable in the normal course of business consistent with past practices and are in quantities sufficient for the normal operation of the business of the Companies and their respective Subsidiaries in accordance with past practice; (c) the Inventory of the Companies and their respective Subsidiaries is of a quality and quantity sufficient to enable the Companies and their respective Subsidiaries to carry on the business of the Companies and their respective Subsidiaries as presently conducted; and (d) none of the Inventory of the Companies and their respective Subsidiaries is obsolete, damaged, defective or slow-moving, except in each case for obsolete, damaged, defective or slow-moving items that have been properly written off or written down or for which adequate reserves have been appropriately established as reflected on the Latest Balance Sheets in accordance with GAAP. All Inventory of the Companies and their respective Subsidiaries is free and clear of all Encumbrances (other than Permitted Encumbrances),

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and all Inventory of the Companies and their respective Subsidiaries is held at the Owned Real Property or Leased Real Property and no such Inventory is held on a consignment basis.

6.24 Bank Accounts. Section 6.24 of the Disclosure Schedules sets forth the following information with respect to each bank account or safe deposit box held by the Companies and their respective Subsidiaries: (a) the name of the bank or financial institution; (b) the account number; and (c) the list of Persons authorized to sign or draw upon such account or access such safe deposit box.

6.25 Product Liability.

(a) Each product produced, manufactured, sold, delivered, distributed or provided by, or on behalf of, any Company or any of its Subsidiaries in the last five (5) years has, in all material respects, been produced, delivered and distributed in conformity with all applicable contractual commitments and all Laws relating to product safety and related matters, and all express and implied warranties with respect thereto. In the past five (5) years, there have been no recalls (whether voluntary or compulsory) of any of the products produced, manufactured, sold, delivered, distributed or provided by, or on behalf of, any Company or any of its Subsidiaries. No Company or its Subsidiary is currently, and has not in the past five (5) years been, subject to any product liability lawsuits or any investigation by any Governmental Authority (other than immaterial ordinary course governmental inspections or inquiries). No Company or its Subsidiary has any liability or obligation, or to the knowledge of the Companies is there any reasonable basis for any Company or any of its Subsidiaries to be subject to, any liability or obligation arising from or alleged to arise from any injury to person or property as a result of any product produced, manufactured, sold, delivered, distributed or provided by, or on behalf of, any Company or any of its Subsidiaries.

(b) Except as set forth on Section 6.25(b) of the Disclosure Schedules, (i) no Company or its Subsidiary makes any guaranty, warranty, right of return, right of credit or other indemnity as to any products (a “Warranty”), and there is no pending or, to the knowledge of Companies, threatened proceeding alleging any breach of any Warranty and (ii) no Company or its Subsidiary has any liability or obligation under any Warranty beyond that which is typically assumed in the ordinary course of business by Persons engaged in businesses comparable in size and scope of the business of the Companies and their respective Subsidiaries. Each product produced, manufactured, sold, delivered, distributed or provided by or on behalf of any Company or its Subsidiary has been produced, manufactured, sold, delivered, distributed or provided in conformity in all material respects with all Warranties made by, and all other contractual commitments of, the Companies and their respective Subsidiaries.

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6.26 Trade Controls; Absence of Corrupt Practices. The Companies and their respective Subsidiaries and, with respect to the business of the Companies and their respective Subsidiaries, the Sellers are in compliance in all material respects with all applicable Customs and International Trade Laws, and at no time during the past five (5) years have the Companies and their respective Subsidiaries or, with respect to the business of the Companies and their respective Subsidiaries, the Sellers committed any violation of any applicable Customs and International Trade Laws, and, to the knowledge of the Companies, there are no unresolved investigations or claims concerning any liability of any Company or its Subsidiary with respect to any such requirements of Law. Without limiting the foregoing, no Company or its Subsidiary has received any written (or, to the knowledge of the Companies, oral) notice that any Company or its Subsidiary is subject to any civil or criminal investigation, audit or other inquiry involving or otherwise relating to any alleged or actual violation of the Customs and International Trade Laws. Without limiting the foregoing, none of the Companies, their Subsidiaries, the Sellers or any Person acting on any of their behalves: (a) is or has been at any time during the past five (5) years a Person, or owned or controlled directly or indirectly by or acting on behalf of a Person, that is or was at that time identified on any restricted person list of any Governmental Authority, including (i) the OFAC’s Specially Designated Nationals and Blocked Persons List or any other list maintained by the OFAC, (ii) the Denied Persons List Entity List and the Unverified List maintained by the U.S. Department of Commerce’s Bureau of Industry and Security, (iii) the U.S. Department of State’s Debarred List, and (iv) the lists maintained by the U.S. Department of State of Persons subject to sanctions by the U.S. Government for engaging in activities relating to proliferation or Iran (the lists identified in clauses (i)-(iv) above, collectively, the “Restricted Person Lists”); (b) has (i) violated any Customs and International Trade Laws or (ii) engaged in any activities with (A) Persons owned or controlled directly or indirectly by, or acting on behalf of, a government instrumentality of Cuba, Iran, Sudan, or Syria; or (B) Persons identified on any Restricted Person List. Furthermore, to the knowledge of the Companies, there are no pending investigations or inquiries, including by any Governmental Authority, relating to compliance with, or unresolved questions or claims concerning any liability of any Company or any of its Subsidiaries with respect to any applicable Customs and International Trade Laws. During the past five (5) years, none of the Companies, their Subsidiaries, the Sellers or Person acting on any of their behalves has offered, authorized or provided in connection with the business of the Companies and their respective Subsidiaries any unlawful payments or unlawful gifts, either directly or indirectly, to any Person, including any government officials or employees of any Governmental Authority. During the past five (5) years, the Companies and their respective Subsidiaries and, with respect to the business of the Companies and their respective Subsidiaries, the Sellers, are in compliance in all respects with, and have complied at all times with, all applicable anti-corruption requirements of Law, including the U.S. Foreign Corrupt Practices Act and similar requirements of Law of those countries in which the business is operated, and to the knowledge of Companies, there are no unresolved investigations or claims concerning any liability of any Company or any of its Subsidiaries or, with respect to the business of the Companies and their respective Subsidiaries, any Sellers with respect to such requirements of Law. The Companies and their respective Subsidiaries and, with respect to the business of the Companies and their respective Subsidiaries, the Sellers, are currently in material compliance with, and has complied at all times with, the applicable provisions of all requirements of Law relating to anti-money laundering.

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6.27 NO OTHER REPRESENTATIONS AND WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NONE OF THE SELLERS, THE COMPANIES OR THEIR RESPECTIVE RELATED PARTIES MAKES ANY REPRESENTATION OR WARRANTY, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, IN RESPECT OF THE SELLERS, THE COMPANIES OR THEIR RESPECTIVE SUBSIDIARIES OR AFFILIATES, AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED AND NONE SHALL BE IMPLIED AT LAW OR IN EQUITY. THE BUYER HEREBY ACKNOWLEDGES AND AGREES THAT THE BUYER IS ACQUIRING THE SECURITIES, THE COMPANIES AND THEIR RESPECTIVE SUBSIDIARIES AND THEIR UNDERLYING ASSETS, BUSINESSES AND LIABILITIES (WHETHER KNOWN OR UNKNOWN AND WHETHER ACCRUED OR NOT ON THE FINANCIAL STATEMENTS OF THE COMPANIES AND THEIR RESPECTIVE SUBSIDIARIES) ON AN “AS IS, WHERE IS” BASIS AFTER GIVING EFFECT TO THE TERMS CONTAINED HEREIN. FOR GREATER CERTAINTY, EXCEPT AS CONTEMPLATED IN SECTION 2.3, THERE WILL BE NO ADJUSTMENTS TO THE PURCHASE PRICE TO REFLECT ANY CHANGE IN THE FINANCIAL CONDITION OF THE COMPANIES AND THEIR RESPECTIVE SUBSIDIARIES AS AT THE CLOSING DATE.

ARTICLE VII

REPRESENTATIONS AND WARRANTIES OF THE BUYER

The Buyer represents and warrants to the Sellers that the statements in this Article VII are correct.

7.1 Organization and Power. The Buyer is a limited liability company duly formed and validly existing under the laws of the State of Delaware. The Buyer has all requisite limited liability company power and authority to execute and deliver this Agreement and the other agreements and instruments contemplated hereby to which the Buyer is a party and to perform its obligations hereunder and thereunder.

7.2 Authorization and Enforceability. The execution, delivery and performance by the Buyer of this Agreement and all of the other agreements and instruments contemplated hereby to which the Buyer is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Buyer and no other limited liability company act or proceeding on the part of the Buyer, its manager or member is necessary to authorize the execution, delivery or performance of this Agreement or any other agreement or instrument contemplated hereby or the consummation of the transactions contemplated hereby and thereby. This Agreement has been duly executed and delivered by the Buyer, and this Agreement constitutes a valid and legally binding obligation of the Buyer, enforceable in accordance with its terms except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by rules of Law governing specific performance, injunctive relief or other equitable remedies.

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7.3 No Violation. Other than compliance with any applicable requirements of the HSR Act, the execution and delivery by the Buyer of this Agreement and all of the other agreements and instruments contemplated hereby to which the Buyer is or will be a party and the fulfillment of and compliance with the respective terms hereof and thereof by the Buyer do not and shall not (a) conflict with or result in a breach of the terms, conditions or provisions of, (b) constitute a violation or default under (whether with or without the passage of time, the giving of notice or both), (c) result in the creation of any Encumbrance (other than Permitted Encumbrances) upon the Buyer’s or the Companies’ capital stock, property or assets pursuant to, (d) give any third party the right to modify, terminate or accelerate any obligation under, result in the loss of any benefit pursuant to, or (e) require any authorization, consent, approval, exemption or other action of or by or notice or declaration to, or filing with or any other action by or in respect of, any third party or any Governmental Authority pursuant to, (i) the Buyer’s charter documents, by-laws or other constituent documents, as applicable, (ii) any Law to which the Buyer is subject, or (iii) any material agreement, instrument, license, permit, order, judgment or decree to which the Buyer is subject, with only such exceptions in the case of clauses (ii) and (iii) as would not, individually or in the aggregate, materially impair the ability of the Buyer to consummate, or prevent or materially delay, any of the transactions contemplated by this Agreement.

7.4 Governmental Authorities and Consents. Other than compliance with and filings under the HSR Act, no permit, consent, approval or authorization of, or declaration to or filing with, or any other action by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery or performance of this Agreement or any other agreement or instrument contemplated hereby by the Buyer or the consummation by the Buyer of the transactions contemplated hereby or thereby.

7.5 Litigation. There are no actions, suits, proceedings, orders or investigations pending or, to the Buyer’s knowledge, threatened against or affecting the Buyer, at law or in equity, or before or by any federal, state, provincial, municipal or other Governmental Authority which would adversely affect the Buyer’s performance under this Agreement or the consummation of the transactions contemplated hereby.

7.6 Brokerage. The Buyer shall pay, and hold the Seller harmless against, any liability, loss or expense (including reasonable attorneys’ fees and out-of-pocket expenses) arising in connection with claims for brokerage commissions, finders’ fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Buyer or any of its Affiliates.

7.7 Independent Investigation. The Buyer acknowledges (for itself and on behalf of its Affiliates and representatives) that, as of the date hereof, the Buyer and its Affiliates and representatives (a) have received full access to (i) such books and records, facilities, equipment, contracts and other assets of the Companies and their respective Subsidiaries that the Buyer and its Affiliates and representatives, as of the date hereof, have requested to review and (ii) the Data Room, and (b) have had full opportunity to meet with the management of the Companies and their respective Subsidiaries and to discuss the business and assets of the Companies and their respective Subsidiaries. The Buyer further acknowledges (for itself and on behalf of its Affiliates and representatives) that it has conducted, to its satisfaction, its own independent investigation of the business, operations and financial condition of the Companies and their respective Subsidiaries and, in making its determination to proceed with the transactions contemplated by this Agreement, each of the Buyer and its Affiliates and representatives have relied on the results of its own

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independent investigation and the representations, warranties, covenants and agreements contained in this Agreement. The Buyer further acknowledges that it is a sophisticated purchaser and possesses such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of the transactions contemplated by this Agreement.

7.8 Financial Capability. The Buyer has sufficient funds to pay all obligations of the Buyer and its Affiliates hereunder or incurred in connection with the transactions contemplated hereby, including (i) the amounts payable pursuant to Article II, including amounts necessary to discharge fully the then-outstanding balance and other monetary obligations in respect of all Payoff Indebtedness of the Companies and their respective Subsidiaries and the Company Transaction Expenses, and (ii) all of the out-of-pocket costs and expenses of the Buyer and its Affiliates arising from the transactions contemplated by this Agreement.

7.9 Solvency. Immediately after giving effect to the transactions contemplated by this Agreement, (a) the Buyer and each of its Subsidiaries shall be able to pay their respective debts as they become due and shall own property which has a fair saleable value greater than the amounts required to pay their respective debts (including a reasonable estimate of the amount of all contingent liabilities), and (b) the assets of each of the Buyer and its Subsidiaries, in each case at a fair valuation, will exceed its respective debts (including the probable amount of all contingent liabilities). Immediately after giving effect to the transactions contemplated by this Agreement, the Buyer and each of its Subsidiaries shall have adequate capital to carry on their respective businesses. No transfer of property is being made and no obligation is being incurred in connection with the transactions contemplated by this Agreement with the intent to hinder, delay or defraud either present or future creditors of the Buyer or its Subsidiaries.

7.10 Purchase for Investment. The Buyer is acquiring the Securities sold under this Agreement for its own account for investment and not with a view to, or for sale in connection with, any distribution thereof, nor with any present intention of distributing or selling the same, in violation of any federal or state securities Laws. The Buyer has been advised and understands that the Securities have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), on the grounds that no distribution or public offering of the Securities is to be effected, and that in this connection, the Sellers are relying in part on the representations of the Buyer set forth in this Agreement. The Buyer has been further advised and understands that no public market now exists for the Securities or any of the other securities issued by the Companies or their Subsidiaries and that a public market may never exist for the Securities. The Buyer is an “Accredited Investor” (as such term is defined in Rule 501 of Regulation D of the Securities Act). The Buyer acknowledges and agrees that the Securities acquired hereunder may not be sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed of without registration under applicable securities Laws, except pursuant to an exemption from such registration. The Buyer (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Securities and is capable of bearing the economic risks of such investment.

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ARTICLE VIII

TERMINATION

8.1 Termination. This Agreement may be terminated at any time prior to the Closing only as follows:

(a) by the mutual written consent of the Buyer, on the one hand, and the Sellers (each for itself and on behalf of the Companies), on the other hand;

(b) by the Buyer, if there has been a misrepresentation or a breach of warranty or a breach of a covenant by the Sellers or the Companies in the representations and warranties or covenants set forth in this Agreement (which in the case of any breach which is curable has not been cured within thirty (30) days after written notification thereof by the Buyer to the Sellers’ Representative), such that the conditions set forth in Article III would not be satisfied; provided that the Buyer shall not be entitled to terminate this Agreement pursuant to this Section 8.1(b) if it is then in material breach of this Agreement;

(c) by the Sellers (for themselves and on behalf of the Companies), if there has been a misrepresentation or a breach of warranty or a breach of a covenant by the Buyer in the representations and warranties or covenants set forth in this Agreement (which in the case of any breach which is curable has not been cured within thirty (30) days after written notification thereof by the Sellers’ Representative to the Buyer), such that the conditions set forth in Article III would not be satisfied; provided that the Sellers shall not be entitled to terminate this Agreement pursuant to this Section 8.1(c) if any of the Sellers are then in material breach of this Agreement;

(d) by the Buyer if the Closing shall not have occurred by February 28, 2020 (the “End Date”); provided, that the Buyer shall not be entitled to terminate this Agreement pursuant to this Section 8.1(d) if the Buyer’s material breach of this Agreement has prevented the consummation of the transactions contemplated hereby; or

(e) by the Sellers (for themselves and on behalf of the Companies) if the Closing shall not have occurred by the End Date; provided, that the Sellers shall not be entitled to terminate this Agreement pursuant to this Section 8.1(e) if the Companies’ or the Sellers’ material breach of this Agreement has prevented the consummation of the transactions contemplated hereby.

In the event of termination by the Buyer or the Sellers (for themselves and on behalf of the Companies) pursuant to this Section 8.1, written notice thereof (describing in reasonable detail the basis therefor) shall forthwith be delivered to the other Parties.

8.2 Effect of Termination.

(a) In the event of termination of this Agreement by either the Buyer or the Sellers (for themselves and on behalf of the Companies) as provided above, this Agreement shall forthwith terminate and have no further force or effect (other than Article I (Certain Definitions), this Section 8.2 and Article XI (Miscellaneous), which shall survive the termination of this Agreement) without any liability or obligation on the part of any Party, (i) other than liabilities and obligations under the Confidentiality

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Agreement and (ii) except that no such termination shall relieve any Party from any liability for losses resulting from any knowing and intentional breach of this Agreement. For purposes of clarification, the Parties agree that if all of the closing conditions set forth in Article III have been satisfied or waived (other than those conditions that by their nature are to be satisfied at the Closing), but (1) the Buyer fails to complete the Closing within three (3) Business Days following the date the Closing should have occurred pursuant to Section 2.2(a), such failure or refusal to close shall be deemed to be a knowing and intentional breach of this Agreement by the Buyer or (2) the Sellers fail to complete the Closing within three (3) Business Days following the date the Closing would have occurred pursuant to Section 2.2(a), such failure or refusal to close shall be deemed to be a knowing and intentional breach of this Agreement by the Sellers.

(b) Nothing in this Section 8.2 shall limit the right of the Parties to bring or maintain any claim, action or proceeding for injunction, specific performance or other equitable relief as provided in Section 11.13 with respect to those provisions of this Agreement that survive termination.

ARTICLE IX

ADDITIONAL AGREEMENT AND COVENANTS

9.1 Acknowledgement by the Buyer.

(a) The Buyer is an informed and sophisticated purchaser, and has engaged expert advisors, experienced in the evaluation and purchase of companies such as the Companies and their respective Subsidiaries as contemplated hereunder. The Buyer has undertaken to its satisfaction such investigation and has been provided with and has evaluated such documents and information as it has deemed necessary to enable it to make an informed and intelligent decision with respect to the execution, delivery and performance of this Agreement, including without limitation an independent investigation and verification of the financial condition, results of operations, assets, properties, liabilities and prospects of the Companies and their respective Subsidiaries. The Buyer acknowledges that the Sellers have given the Buyer complete and open access to the key employees, documents and facilities of the Companies and their respective Subsidiaries. The Buyer will undertake prior to Closing such further investigation and request such additional documents and information as it deems necessary. In making its determination to proceed with the transactions contemplated by this Agreement, the Buyer (i) has relied solely on the results of its own investigation and verification and the representations and warranties of the Sellers expressly and specifically set forth in Article V and the Companies expressly and specifically set forth in Article VI, as qualified by the Disclosure Schedules, and (ii) has not relied on the accuracy or completeness of any other information, representation or warranty provided to (or otherwise acquired by) the Buyer or any of its Related Parties. The representations and warranties of the Sellers expressly and specifically set forth in Article V and the Companies expressly and specifically set forth in Article VI, in each case as qualified by the Disclosure Schedules, constitute the sole and exclusive representations, warranties, and statements (including by omission) of any kind of the Sellers, the Companies or any of their respective Related Parties in connection with the transactions contemplated by this Agreement, and all other representations, warranties, and statements (including by omission) of any kind or nature, whether oral or written, express or implied, statutory or otherwise, as to any matter concerning the Sellers, the Companies or their respective Affiliates or in connection with the transactions contemplated by this Agreement, are specifically waived by the Buyer and disclaimed by the Sellers, the Companies and each of their respective Related Parties, including, for the avoidance of doubt, any representation or warranty with respect to the historical or future

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financial or other condition, results of operations, assets, properties or liabilities of the Companies and their respective Subsidiaries, the quality, quantity, merchantability, fitness for a particular purpose, conformity to samples or other condition of the assets of the Companies and their respective Subsidiaries, or the accuracy or completeness of any other information provided to (or otherwise acquired by) the Buyer or any of its Related Parties. EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES OF THE SELLERS EXPRESSLY AND SPECIFICALLY SET FORTH IN ARTICLE V AND THE COMPANIES EXPRESSLY AND SPECIFICALLY SET FORTH IN ARTICLE VI, IN EACH CASE AS QUALIFIED BY THE DISCLOSURE SCHEDULES, THE BUYER IS ACQUIRING THE SECURITIES AND THE COMPANIES AND THEIR RESPECTIVE SUBSIDIARIES AND THEIR UNDERLYING ASSETS, BUSINESSES AND LIABILITIES (WHETHER KNOWN OR UNKNOWN AND WHETHER ACCRUED OR NOT ON THE FINANCIAL STATEMENTS OF THE COMPANIES AND THEIR RESPECTIVE SUBSIDIARIES) ON AN “AS IS, WHERE IS” BASIS.

(b) None of the Sellers, the Companies or any Related Party thereof, whether in an individual, corporate or any other capacity, will have or be subject to any liability or obligation (indemnification or otherwise) to the Buyer or any of its Related Parties resulting from (nor shall the Buyer or any of its Related Parties have any claim with respect to) the distribution to the Buyer or its Related Parties, or the Buyer’s or its Related Parties’ use of, or reliance on, any information, documents, projections, forecasts or other material made available to the Buyer or any of its Related Parties, whether through the Data Room or presentations (including, for the avoidance of doubt, any “management presentations”) or otherwise, in expectation of, or in connection with, the transactions contemplated by this Agreement, or otherwise, regardless of the legal theory under which such liability or obligation may be sought to be imposed, whether in contract or tort, at law or in equity, or otherwise.

(c) Without in any way limiting the generality of the foregoing, the Buyer acknowledges that there are uncertainties inherent in attempting to make projections, forward looking statements and other forecasts and estimates, and certain business plan information, that the Buyer is familiar with such uncertainties, that the Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of any such projections, forward looking statements, forecasts, estimates and business plan information provided to it in connection with the transactions contemplated by this Agreement (including the reasonableness of the assumptions underlying such projections, forward looking statements, forecasts, estimates and business plan information), that no representations, warranties or statements (including by omission) of any kind are being made with respect thereto, that neither the Buyer nor any of its Related Parties is relying thereon, and that the Buyer and its Related Parties shall have no claim against anyone with respect thereto.

9.2 Further Assurances. From time to time, as and when requested by any Party and at such Party’s expense, any other Party shall execute and deliver, or cause to be executed and delivered, all such documents and instruments and shall take, or cause to be taken, all such further or other actions as such requesting Party may reasonably deem necessary or desirable to evidence and/or effectuate the transactions contemplated by this Agreement.

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9.3 Employees and Employee Benefits. Within five (5) days prior to the Closing Date, the Sellers shall deliver an updated version of Section 6.13(a) of the Disclosure Schedules.

(a) Salary and Wages. Effective as of the Closing and continuing for a period of at least one (1) year thereafter, the Buyer will cause the Companies and their respective Subsidiaries to provide each employee of a Company or its Subsidiary as of immediately prior to the Closing, including each such employee on medical, disability, family or other leave of absence (each, a “Retained Employee”) who remains employed with such Company or such Subsidiary, at least the same base wages, annual base salary and annual rate of cash bonus potential in effect immediately prior the Closing Date to the extent permitted by applicable Law. Nothing in this Section 9.3(a) shall obligate the Buyer or the Companies and their respective Subsidiaries to continue the employment of any such Retained Employee for any specific period.

(b) Transaction Success Bonus. In addition to the Buyer’s obligations under Section 9.3(a), the Buyer agrees to make the transaction success bonus payments described on Section 1.1(a) of the Disclosure Schedules to the Retained Employees identified thereon. Prior to the Closing, Sellers shall have the right, from time to time, to supplement, modify or update Section 1.1(a) of the Disclosure Schedule in Sellers’ discretion. The Buyer shall make each such transaction success bonus payment less all required and authorized deductions and withholdings. If a Retained Employee’s employment is terminated for Cause or such Retained Employee voluntarily resigns, any unpaid installments of such Retained Employee’s transaction success bonus will be forfeited. If a Retained Employee is terminated without Cause, or if such Retained Employee’s employment is terminated as a result of death or disability, any unpaid installments of the transaction success bonus will be paid to such Retained Employee by Buyer in full in a lump sum upon termination. In addition, if a Retained Employee retires at age 65 or older and such Retained Employee has completed at least one (1) year of service with the Buyer, the Companies or their respective Affiliates after the Closing, any unpaid installments of such transaction success bonus will be paid by the Buyer to such Retained Employee in full in a lump sum upon such Retained Employee’s retirement. If for any reason a transaction success bonus is forfeited by a Retained Employee, or if the Buyer does not, or will not, make a payment described on Section 1.1(a) of the Disclosure Schedules, the Buyer shall promptly notify the Sellers’ Representative and pay such amount to Sellers’ Representative by wire transfer of immediately available funds to an account designated by the Sellers’ Representative for distribution to each Seller in accordance with such Seller’s Pro Rata Share as set forth on Exhibit A. For the avoidance of doubt, the payments described on Section 1.1(a) of the Disclosure Schedules shall not be counted towards the Buyer’s bonus payment obligations in Section 9.3(a). Nothing in this Section 9.3(b) shall obligate the Buyer, the Companies and their respective Subsidiaries to continue the employment of any such Retained Employee for any specific period.

(c) Employee Benefits. As of the Closing Date and for a period of at least one (1) year thereafter, to the extent permitted by applicable Law, the Buyer shall provide, or shall cause the Companies and their respective Subsidiaries to provide, each Retained Employee with employee benefits (including severance benefits) that are substantially comparable in the aggregate to the benefits provided to such Retained Employee immediately prior to the Closing Date. Effective as of the Closing Date, the Buyer shall cause the Companies and their respective Subsidiaries to honor in accordance with their terms, all Benefit Plans of the Companies and their respective Subsidiaries as in effect immediately prior to the Closing that are applicable to any current or former employees or directors of the Companies or any of their respective Subsidiaries. Nothing set forth in this Section 9.3 is intended to or shall (i) be treated as

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an amendment of any particular Benefit Plan or employee benefit plan of the Buyer or any its Affiliates, (ii) prevent the Buyer or its Affiliates from amending or terminating any of their employee benefit plans or, after the Closing Date, any Benefit Plan in accordance with its terms or (iii) prevent the Buyer or its Affiliates, after the Closing Date, from terminating the employment of any employee of the Companies or their respective Subsidiaries or changing any terms and conditions of their employment.

(d) Employee Service Credit. The Buyer (i) shall give, or cause the Companies and their respective Subsidiaries to give, each Retained Employee under any Benefit Plan that covers the Retained Employee after the Closing Date, including any vacation, sick leave and severance policies, credit for purposes of eligibility for and vesting of benefits for the Retained Employee’s service with any of Companies or their respective Subsidiaries, as applicable, prior to the Closing Date to the same extent recognized under the applicable comparable Benefit Plans immediately prior to the Closing Date and to the extent such recognition does not result in a duplication of benefits, (ii) shall use commercially reasonable efforts to allow such Retained Employees to participate in each plan providing welfare benefits (including medical, dental, vision, life insurance, short-term disability, long‑term disability insurance and long‑term care insurance) without regard to preexisting‑condition limitations, waiting periods, evidence of insurability or other exclusions or limitations not imposed on the Retained Employee by the corresponding Benefit Plans immediately prior to the Closing Date, and (iii) if any of the Benefit Plans are terminated prior to the end of the plan year that includes the Closing Date, shall use commercially reasonable efforts to credit the Retained Employee with any expenses that were covered by the Benefit Plans for purposes of determining deductibles, co‑pays and other applicable limits under any similar replacement plans.

(e) Vacation Pay and Personal Holidays. The Buyer shall cause the Companies and their respective Subsidiaries to continue to credit to each Retained Employee all vacation and personal holiday pay that the Retained Employee is entitled to use but has not used as of the Closing Date (including any earned vacation or personal holiday pay to be used in future years), and shall assume all liability for the payment of such amounts.

(f) Effective as of no later than the day immediately preceding the Closing Date, Industries shall take all actions necessary to terminate the Companies’ participation as participating employers in the AGC Southwest Chapters 401(k) Plan so that no contributions are made to such plan for any payroll date ending on or after the Closing Date. The Sellers shall provide proof of such termination of participation to the Buyer prior to the Closing Date. As soon as practicable after the Closing Date, and to the extent not prohibited under applicable Law, the Buyer shall take all action necessary to provide that each Retained Employee may elect to rollover his or her full account balance (including cash, notes (in the case of loans) or a combination thereof) from the AGC Southwest Chapters 401(k) Plan to a tax-qualified defined contribution plan established or designated by the Buyer.

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(g) No Third Party Beneficiaries. The provisions of this Section 9.3 are solely for the benefit of the Parties, and no current or former employee, officer, director or consultant, or any other individual or entity associated therewith, shall be regarded for any purpose as a third party beneficiary of this Section 9.3. In no event shall the terms of this Agreement be deemed to confer upon any current or former employee, officer, director or consultant, any right to employment or continued employment or continued service with the Buyer or any of its Subsidiaries, or constitute an amendment to any Benefit Plan or create an employment agreement with any individual.

9.4 Director and Officer Liability and Indemnification.

(a) For a period of six (6) years after the Closing Date, the Companies shall, and the Buyer shall cause the Companies and their respective Subsidiaries to, indemnify and hold harmless the present and former officers, directors, managers, partners or similar functionaries of the Companies and their respective Subsidiaries in respect of acts or omissions occurring on or prior to the Closing Date to the extent provided under the organizational or constituent documents of the Companies and their respective Subsidiaries in effect on the date hereof.

(b) Prior to or simultaneously with the Closing, the Sellers shall, or shall cause the Companies to purchase, at the Buyer’s cost and expense, from an insurance carrier with the same or better credit rating as the current insurance carrier of the Companies and their respective Subsidiaries with respect to directors’ and officers’ liability insurance, a prepaid insurance policy (i.e., “tail coverage”) which provides “directors and officers” insurance coverage for each of the individuals who were officers, directors, managers, partners or similar functionaries of any of the Companies or their respective Subsidiaries at or prior to the Closing on no less favorable terms (including in amount and scope) as the policy or policy(ies) maintained by the Companies and their respective Subsidiaries immediately prior to the Closing for the benefit of such individuals for an aggregate claims reporting or discovery period of not less than six (6) years from and after the Closing Date with respect to claims arising from acts, events or omissions that occurred at or prior to the Closing, including with respect to the transactions contemplated by this Agreement (such policy the “D&O Tail Policy”); provided that in no event shall the annual premium for the D&O Tail Policy exceed three hundred percent (300%) of the most recent aggregate annual premium allocation of the Companies and their respective Subsidiaries; and provided further that if the annual premium of such insurance coverage exceeds such amount, the Buyer shall be obligated to obtain a policy with the greatest coverage available, with respect to matters occurring prior to the Closing, for a cost not exceeding such amount.

(c) For a period of six (6) years after the Closing, the Buyer shall not, and shall not permit the Companies and their respective Subsidiaries to, amend, repeal or otherwise modify any provision in the certificate of incorporation or by-laws (or equivalent governing documents) of the Companies and their respective Subsidiaries relating to the exculpation or indemnification of any officers, directors or similar functionaries (unless to provide for greater exculpation or indemnification or unless required by Law), it being the intent of the Parties hereto that the current and former officers, directors, partners, managers and similar functionaries of any of the Companies and their respective Subsidiaries shall continue to be entitled to such exculpation and indemnification (including with respect to advancement of expenses) to the extent provided under each governing document of the Companies and their respective Subsidiaries

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in effect on the date hereof. The Buyer agrees and acknowledges that this Section 9.4 shall be binding on the Buyer’s successors and assigns.

(d) If the Buyer, the Companies or any of their respective Subsidiaries or any successor or assign of any of the foregoing (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger, or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that successors and assigns of the Buyer, the Companies or such Subsidiaries, as the case may be, shall assume all of the obligations set forth in this Section 9.4.

(e) Notwithstanding anything in this Agreement to the contrary, if on or prior to the sixth (6th) anniversary of the Closing, any claim, action, suit, proceeding or investigation (whether arising before, on or after the Closing Date) is made against any individual who was an officer, director, partner, manager or similar functionary of any of the Companies or their respective Subsidiaries at or prior to the Closing or any other party covered by directors’ and officers’ liability insurance, the provisions of this Section 9.4 shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation.

(f) The provisions of this Section 9.4 shall not be terminated or modified in such a manner as to affect adversely any indemnitee or exculpee to whom this Section 9.4 applies without the consent of such affected indemnitee or exculpee. The provisions of this Section 9.4 are intended for the benefit of, and will be enforceable by (as express third party beneficiaries), each current and former officer, director, partner, manager or similar functionary of the Companies or any their respective Subsidiaries and his or her heirs and representatives, successors and assigns and are in addition to, and not in substitution for, any other rights to indemnification or contribution that any such Person may have had by contract or otherwise.

9.5 Certain Access Provisions.

(a) For a period of five (5) years after the Closing Date, the Buyer shall preserve and retain, and the Buyer shall cause the Companies and their respective Subsidiaries to preserve and retain and maintain, in an accessible form, all corporate, accounting, legal, auditing or other books and records of the Companies and their respective Subsidiaries relating to the conduct of the business and operations of the Companies and their respective Subsidiaries prior to the Closing Date; provided, however, that the Buyer shall preserve, retain and maintain, and shall cause the Companies and their respective Subsidiaries to preserve and retain, in an accessible form, all Tax books and records until the later of (i) the fifth (5th) anniversary of the Closing Date and (ii) six (6) months after the last date required for retention of such books and records under applicable Law.

(b) After the Closing Date, upon reasonable advance written notice, the Buyer shall cause the Companies and their respective Subsidiaries to permit the Sellers (and any Seller’s counsel, advisors, agents or other representatives) to have reasonable access during normal business hours, to inspect and copy (including in electronic form) all materials referred to in this Section 9.5 as is reasonably necessary to facilitate the resolution of any claims made by or against or incurred by the Sellers or any of their respective Affiliates after the Closing or for any other reasonable business purpose. Nothing in this Section 9.5 shall obligate the Buyer to take any action that would (i) unreasonably interfere with the conduct of its business or unreasonably disrupt its normal operations, (ii) jeopardize any attorney-client privilege,

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protection under the work product doctrine or other legal privilege of such Party or any of its Affiliates, (iii) violate any applicable Law or (iv) breach any duty of confidentiality or other obligation owed to any Person.

9.6 Notification. Each of the Buyer and the Sellers shall promptly notify the other of:

(a) any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(b) any notice or other communication from any Governmental Authority in connection with the transactions contemplated by this Agreement; and

(c) any actions, suits, claims, investigations or proceedings commenced or, to its knowledge threatened in writing against, relating to or involving or otherwise affecting the Sellers, the Buyer or their respective Affiliates that, if pending on the date of this Agreement, would have been required to have been disclosed on the Disclosure Schedules or pursuant to Section 7.5, as applicable, or that relate to the consummation of the transactions contemplated by this Agreement;

provided, however, that the delivery of any notice pursuant to this Section 9.6 shall not limit any of the representations and warranties set forth in this Agreement or the remedies available hereunder to the Parties.

9.7 Certain Consents. The Buyer acknowledges that certain consents to the transactions contemplated by this Agreement may be required from parties to contracts or other agreements to which one or more of the Companies or their respective Subsidiaries is a party and that such consents have not been obtained and may not be obtained. The Buyer agrees that none of the Companies or their respective Subsidiaries or the Sellers shall have any obligation or liability whatsoever to the Buyer (and the Buyer shall not be entitled to assert any claims) arising out of or relating to the failure to obtain any consents that may have been or may be required in connection with the transactions contemplated by this Agreement or because of the default, acceleration or termination of or loss of right or benefit under any such contract or other agreement as a result thereof. The Buyer further agrees that no representation, warranty or covenant of the Companies or the Sellers contained herein shall be breached or deemed breached and no condition of the Buyer shall be deemed not to be satisfied as a result of the failure to obtain any consent or as a result of any such default, acceleration or termination or loss of right or benefit or any action commenced or threatened by or on behalf of any Person arising out of or relating to the failure to obtain any consent or any such default, acceleration or termination or loss of right or benefit.

9.8 Tax Matters.

(a) Preparation and Filing of Tax Returns.

(i) The Companies shall prepare and timely file all Tax Returns of the Companies or any of their respective Subsidiaries required to be filed (taking into account extensions) prior to the Closing Date. Unless otherwise required by Law, none of the Buyer or any of its Affiliates shall (or shall cause or permit any other Person to) (A) except as otherwise provided in this Section 9.8, amend, re-file or otherwise modify any Tax Return relating in whole or in part to the Companies or any of their respective Subsidiaries with respect to any Pre-Closing Tax Period; (B) make any Tax election not otherwise permitted

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by this Agreement that has retroactive effect to any Pre-Closing Tax Period (or portion thereof); (C) file any ruling or request with any taxing authority that relates to Taxes or Tax Returns of the Companies or any of their respective Subsidiaries for a Pre-Closing Tax Period; or (D) enter into or initiate any voluntary disclosure agreement with any taxing authority regarding any Tax or Tax Returns of the Companies or any of their respective Subsidiaries for a Pre-Closing Tax Period, in each case, without the prior written consent of the Sellers, not to be unreasonably withheld, conditioned or delayed.

(ii) Subject to Section 9.8(b), the Buyer shall prepare, or cause to be prepared, and timely file, or cause to be filed, all Tax Returns with respect to the Companies and their respective Subsidiaries that are required to be filed following the Closing Date. The Sellers shall be responsible for all Taxes that are shown as due on any such Tax Return filed by the Buyer relating to any Pre-Closing Tax Period. No later than five (5) Business Days prior to the due date of any such Tax Return, the Sellers’ Representative shall pay to the Buyer, on behalf of the Sellers, the amount of Taxes that are the Sellers’ responsibility with respect to such Tax Return under the prior sentence.

(iii) Any Tax Return of the Companies or any of their respective Subsidiaries to be prepared and filed after the Closing Date for taxable periods beginning before the Closing Date shall be prepared on a basis consistent with the last previous similar Tax Return to the extent permissible under applicable Law. Each of the Parties agrees that the Transaction Tax Deductions shall be allocated to Pre-Closing Tax Periods to the maximum extent allowable by applicable Law. The Buyer shall provide the Sellers’ Representative with a draft Tax Return for any such taxable period (and such additional information regarding such Tax Return as may reasonably be requested by the Sellers’ Representative) at least fifteen (15) days prior to the filing of such Tax Return, except that in the case of a Tax Return due within ninety (90) days following the Closing Date, the copy shall be provided to the Seller’s Representative within ten (10) days prior to the filing. The Buyer shall consider in good faith any comments of the Sellers’ Representative to such Tax Return, and shall not file any such Tax Return without the prior written consent of the Sellers’ Representative, not to be unreasonably withheld, conditioned or delayed. The Buyer and the Sellers’ Representative shall use good faith efforts to resolve any dispute regarding the preparation of Tax Returns after the Closing Date for Tax periods beginning before the Closing Date, prior to the date on which the relevant Tax Return is required to be filed. The Sellers shall be responsible for all Taxes that are shown as due on any such Tax Return filed by the Buyer relating to any Pre-Closing Tax Period. No later than five (5) Business Days prior to the due date of any such Tax Return, the Sellers’ Representative shall pay to the Buyer, on behalf of the Sellers, the amount of Taxes that are the Sellers’ responsibility with respect to such Tax Return under the prior sentence.

(b) Cooperation. The Buyer, the Companies and their respective Subsidiaries, and the Sellers shall cooperate, as reasonably requested by the other party, in connection with the filing of Tax Returns and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information that are reasonably relevant to any such audit, litigation or other proceeding and making employees available on a mutually convenient basis to provide additional information and explanation of any material provided hereunder. The Companies and their respective Subsidiaries agree to retain all books and records with respect to Tax matters pertinent to the Companies and their respective Subsidiaries relating to any taxable period beginning before the Closing Date until the expiration of the statute of limitations (and, to the extent notified by the Sellers’ Representative, any extensions thereof) of the respective taxable periods, and to abide by all record

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retention agreements entered into with any taxing authority. The Companies shall, and the Buyer shall cause the Companies to, furnish any Tax information requested by the Sellers’ Representative for inclusion in any Seller’s income Tax Returns for the period that includes the Closing Date. The Sellers shall not settle any audit in a manner that would adversely affect the Companies or of their respective Subsidiaries after the Closing Date without the prior written consent of the Buyer, which consent shall not be unreasonably withheld, conditioned, or delayed.

(c) Allocation of Purchase Price. Within one hundred and eighty (180) days following the Closing Date, the Buyer shall prepare and deliver to the Sellers’ Representative an allocation of the purchase price (adjusted as necessary to determine the purchase price for U.S. federal income tax purposes (as so adjusted for U.S. federal income tax purposes, the “Tax Allocation Purchase Price”)) among each of the Companies, and further amongst the assets of Cherry Crawford and Selinsky (including, as applicable, the assets of their respective Subsidiaries) (the “Allocation Schedule”). The Allocation Schedule shall be determined in accordance with the purchase price allocation methodology set forth on Schedule II to this Agreement (which purchase price allocation methodology is in accordance with the general principles of Sections 338 (as applicable) and 1060 of the Code and the Treasury Regulations promulgated thereunder). Unless the Sellers’ Representative objects to the Buyer’s draft of the Allocation Schedule within thirty (30) days after receipt thereof, such Allocation Schedule shall be final. If the Sellers’ Representative objects to the Buyer’s Allocation Schedule within thirty (30) days of receipt, then the Buyer and the Sellers’ Representative shall use commercially reasonable efforts to agree, within thirty (30) days of the Sellers’ Representative’s objection to the Allocation Schedule, to an allocation of the Tax Allocation Purchase Price among the assets of the Companies (and, as applicable, the Subsidiaries of the Companies). In the event such mutual agreement cannot be achieved, the Buyer shall engage the Independent Accounting Firm to determine the Allocation Schedule, the costs of which are to be shared equally among the Buyer, on the one hand, and the Sellers, on the other hand; provided, that in determining the Allocation Schedule, the Independent Accounting Firm shall apply and be bound by the purchase price allocation methodology set forth on Schedule II to this Agreement (and may not vary from such principles). Once the Allocation Schedule is final, whether by virtue of the Sellers’s Representative’s deemed acquiescence, by express written mutual agreement among the Parties, or by calculation of the Independent Accounting Firm, neither the Buyer, any of the Sellers, nor any of their respective Affiliates shall, subject to Section 9.8(e), take any position that is inconsistent with such final Allocation Schedule (or file any Tax Returns (including amended returns and claims for refund) and information reports in a manner not consistent with the Allocation Schedule).

(d) Tax Treatment of Acquisition of Cherry Crawford and Selinsky. The Buyer and the Sellers agree that the sale and purchase of the Securities of Cherry Crawford and Selinsky shall be treated for federal income Tax purposes, and, if applicable, any analogous state or local income Tax purposes, as a sale of the Securities of Cherry Crawford and Selinsky by the Sellers and acquisition of assets of Cherry Crawford and Selinsky from the Sellers by the Buyer, as provided in Situation 2 of IRS Revenue Ruling 99-6. The parties agree that the taxable year of each of Cherry Crawford and Selinsky will end as of the Closing Date with respect to the federal income Tax Returns of such Companies. Subject to Section 9.8(e), the Parties shall report, act and file Tax Returns in all respects and for all purposes consistent with the foregoing treatment and no party shall take any position (whether in audits, Tax Returns or otherwise) that is inconsistent with the foregoing treatment.

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(e) Tax Reporting Obligations. Except to the extent otherwise required pursuant to a “determination” within the meaning of Section 1313(a) of the Code, the Buyer, the Sellers, and their respective Affiliates shall report, act, and file all applicable Tax Returns in all respects and for all Tax purposes consistent with (i) the final Allocation Schedule and (ii) the agreed tax reporting for the transaction described in this Agreement (including, without limitation, Section 9.8(d)), and neither the Buyer nor any of the Sellers shall take, or permit their respective Affiliates (including the Companies or any of their respective Subsidiaries) to take, a position for Tax purposes that is inconsistent with clause (i) or clause (ii) of this Section 9.8(e); provided, that this Section 9.8(e) shall not be interpreted as limiting any Party’s ability to settle, in good faith, any Tax dispute with the appropriate Governmental Authority concerning the final Allocation Schedule.

(f) Tax Sharing Agreements. All Tax sharing agreements or similar arrangements with respect to or involving the Companies and/or any of their respective Subsidiaries (other than any agreement entered into in the ordinary course of business and not primarily concerning Taxes) shall be terminated prior to the Closing Date and, after the Closing Date, none of the Companies or any of their respective Subsidiaries shall be bound thereby or have any liability thereunder for amounts due in respect of periods ending on or before the Closing Date.

(g) Certain Post-Closing Actions. The Buyer and the Sellers agree to report all transactions not in the ordinary course of business occurring on the Closing Date after the Closing on the Buyer’s (or the applicable Company’s separate) federal income Tax Return to the extent permitted by Treas. Reg. § 1.1502-76(b)(1)(ii)(B). The Buyer agrees to indemnify the Sellers for any additional tax owed by the Sellers (or any consolidated, combined, or similar group of which the Seller is a member) resulting from any transaction engaged in by the Companies or any of their respective Subsidiaries not in the ordinary course of business occurring on the Closing Date after the Closing, except to the extent such Tax is an Indemnified Tax or results from one of the representations in Section 6.16 being untrue.

(h) Pre-Closing Tax Indemnity. Notwithstanding anything to the contrary stated elsewhere in this Agreement, the Sellers, jointly and severally, shall indemnify, defend, and hold harmless, the Buyer, the Companies, and their respective Affiliates against any and all Indemnified Taxes. The indemnification required hereunder for Indemnified Taxes shall be made by prompt payment by the Sellers’ Representative, on behalf of the Sellers, as and when the Sellers’ Representative is notified of the amount of such Taxes by the Buyer (or its Affiliate). Notwithstanding anything to the contrary stated elsewhere in this Agreement, the obligations of the Sellers (including the Sellers’ Representative) under this Section 9.8(h) shall survive until sixty (60) days after the expiration of the applicable statute of limitations (including extensions).

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(i) Sellers’ Representative Consent. Without the written consent of the Sellers’ Representative (such consent not to be unreasonably withheld, conditioned or delayed), the Buyer and the Companies shall not, and shall cause their respective Affiliates not to, (A) extend or waive, or cause to be extended or waived, or permit the Companies to extend or waive, any statute of limitations or other period for the assessment of any Tax or deficiency related to a Pre-Closing Tax Period (provided that, notwithstanding anything to the contrary in this Section 9.8(i) or elsewhere in this Agreement, the Buyer may, on behalf of any of the Companies, and without the consent of any of the Sellers (or the Sellers’ Representative), extend or waive, or cause to be extended or waived, and permit the Companies to extend or waive, any statute of limitations or other period for the assessment of any Tax or deficiency (including a Tax or deficiency related to a Pre-Closing Tax Period) in the ordinary course of business (including, without limitation, by obtaining an ordinary course extension with respect to a Tax Return filing obligation)), (B) make or change any Tax election or accounting method or practice that has retroactive effect to any Pre-Closing Tax Period, (C) initiate any voluntary disclosure or other communication with any taxing authority relating to any actual or potential Tax payment or Tax Return filing obligation of the Companies for any Pre-Closing Tax Period, or (D) take any action on or after the Closing Date that would result in any liability with respect to Taxes to the Sellers under this Agreement or otherwise.

(j) Contest Provisions. The Sellers’ Representative shall promptly notify the Buyer in writing upon receipt by the Sellers’ Representative, and the Buyer shall promptly notify the Sellers’ Representative in writing upon receipt by the Buyer, any of its Affiliates, or the Companies, of notice of any pending or threatened federal, state, local or foreign Tax audits, examinations or assessments which might affect the Tax liabilities of the Companies or any Seller for the Pre-Closing Tax Period (“Tax Proceeding”); provided, however, that failure to provide notice of a Tax Proceeding shall not relieve any party of its obligations pursuant to this Agreement except to the extent such party was materially prejudiced by such failure. The Buyer shall afford the Sellers’ Representative, on behalf of the Sellers, at the Sellers’ expense, the opportunity to control the conduct of any Tax Proceeding relating solely to a Pre-Closing Tax Period; provided, that the Buyer shall have, at the expense of the Buyer, the opportunity to reasonably participate in any such Tax Proceeding relating to a Pre-Closing Tax Period if such Tax Proceeding (or the outcome of such Tax Proceeding) could reasonably be expected to affect or have an impact on the Buyer, an Affiliate of the Buyer, or any of the Companies on or after the Closing Date. The Buyer (and any Affiliate of the Buyer), at the expense of the Buyer, shall have the right to control the conduct of any pending or threatened federal, state, local or foreign Tax audits, examinations or assessments relating to a Straddle Period that might affect the Tax liabilities of any Company, the Buyer, or any Affiliate of Buyer; provided, that the Sellers’ Representative shall have, at the expense of the Sellers, the opportunity to reasonably participate in any such audits, examinations or assessments relating to a Straddle Period if such audits, examinations or assessments (or the outcome of such audits, examinations or assessments) could reasonably be expected to have an adverse impact on the Sellers. Neither the Buyer nor the Sellers’ Representative shall settle, compromise or concede any such Tax Proceeding with respect to a Pre-Closing Tax Period or any audits, examinations or assessments with respect to a Straddle Period without the written consent of the other, which such written consent shall not be unreasonably withheld, delayed or conditioned.

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(k) If the Internal Revenue Service makes an adjustment to an item of income, gain, loss, deduction, or credit of the Cherry Crawford or Selinsky (or any partner’s distributive share thereof) that would result in an “imputed underpayment” within the meaning of Section 6225 of the Code (such imputed underpayment, together with any associated interest and penalties, an “Imputed Underpayment”), then Cherry Crawford or Selinsky shall, if permitted under Section 6226 of the Code, timely and properly make the election to “push out” any adjustments to the partners, such that Cherry Crawford or Selinsky, as applicable, shall not be liable for any Imputed Underpayment resulting from such adjustments.

9.9 Non-Compete; Non-Solicit.

(a) During the Restricted Period, each of the Sellers shall not, and shall cause its Affiliates not to, directly or indirectly in any capacity through any Person or contractual arrangement, engage in, manage, control or have any direct or indirect ownership interest in, any business anywhere in the United States, other than the Companies and their respective Subsidiaries, that engages in any business that competes with business of the Companies and their respective Subsidiaries as conducted or contemplated to be conducted on the date hereof and in the three (3) years prior to the date hereof (a “Competing Business”); provided, however, that this Section 9.9(a) shall not prevent any of the Sellers or their Affiliates from (i) holding or making investments not in excess of 2% of the outstanding securities of any publicly-traded entity regardless of whether such Person engages in a Competing Business, or (ii) purchasing, leasing, developing and selling real property containing sand reserves in accordance with Section 9.10.

(b) During the Restricted Period, each of the Sellers, shall not and shall cause each of their respective Affiliates not to, directly or indirectly through any Person or contractual arrangement, (i) solicit for employment or hire any Person who is an employee of the Companies or their respective Subsidiaries or any Person who was employed by the Companies or their respective Subsidiaries in the past six (6) months (except for a Person whose employment was terminated by the Companies without Cause within such six (6) month period), (ii) induce or encourage any director, officer or employee of the Companies or their respective Subsidiaries to terminate his or her employment with such Company or Subsidiary, (iii) influence or attempt to influence any customers, distributors or suppliers of the Companies or their Subsidiaries to divert their business to any competitor of the Companies or in any way interfere with the relationship between any such customer, distributor or supplier and the Companies (including making any disparaging or negative statements or communications about the Companies and their business), (iv) take any action that is designed or intended to have the effect of discouraging any customer, supplier, lessor, licensor, or other business associate of the Companies or their Subsidiaries from maintaining the same business relationships after the Closing as it maintained prior to the Closing, or (v) disclose, reveal, divulge or communicate to any Person other than the Companies, the Buyer or their respective Subsidiaries and their respective officers, managers, directors and employees, or use or otherwise exploit for its own benefit or the benefit of anyone other than the Companies, the Buyer or their respective Subsidiaries, any confidential or proprietary information of the Companies or their Subsidiaries; provided, that the foregoing shall not prohibit (i) a general solicitation to the public through general advertising or similar methods of solicitation not specifically directed at employees of the Companies or their Subsidiaries or (ii) the solicitation of any employee who has been terminated by any of the Companies or their Subsidiaries prior to any such solicitation. It shall not be a violation of this Section 9.9(b) for any Seller to disclose, divulge or communicate any confidential or proprietary information to the extent (A) required under applicable Law, including as a result of any judicial order or subpoena, (B) as necessary to permit Sellers to file Tax

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Returns, including discussions with their representatives or (C) to defend or enforce any claim or action arising under this Agreement.

(c) Each of the Sellers acknowledges that the covenants set forth in this Section 9.9 are an essential element of this Agreement and that any breach by any such Seller of any provision of this Section 9.9 will result in irreparable injury to the Buyer and the Companies. Each of the Sellers acknowledges that in the event of such a breach, in addition to all other remedies available at law, the Buyer shall be entitled to equitable relief, including injunctive relief, as well as such other damages as may be appropriate. Each of the Sellers has independently consulted with its counsel and after such consultation agrees that the covenants set forth in this Section 9.9 are reasonable and proper to protect the legitimate interest of the Buyer.

(d) If a court of competent jurisdiction determines that the character, duration or geographical scope of the provisions of this Section 9.9 are unreasonable, it is the intention and the agreement of the Buyer and the Sellers that these provisions shall be construed by the court in such a manner as to impose only those restrictions on the Sellers’ conduct that are reasonable in light of the circumstances and as are necessary to assure to the Companies and the Buyer the benefits of this Agreement. If, in any judicial proceeding, a court shall refuse to enforce all of the separate covenants of this Section 9.9 because taken together they are more extensive than necessary to assure to the Companies and the Buyer the intended benefits of this Agreement, it is expressly understood and agreed by the parties hereto that the provisions hereof that, if eliminated, would permit the remaining separate provisions to be enforced in such proceeding, shall be deemed eliminated, for the purposes of such proceeding, from this Agreement.

9.10 Buyer Right of First Refusal.

(a) During the Employment Period, Leonard Cherry will work to identify, on behalf of the Buyer and the Companies, real property containing sand or gravel reserves (any property so identified, a “Subject Property”). Upon identification of a Subject Property, Leonard Cherry will notify the Buyer of such Subject Property in writing, and the Buyer and its Affiliates will have the first right to acquire the Subject Property. If the Buyer or its Affiliates decline to acquire the Subject Property, Leonard Cherry will have the right to do so.

(b) During the Restricted Period, Leonard Cherry may sell or lease all or any part of interests in any real property held by Leonard Cherry and his Affiliates that contain sand or gravel reserves only after he has first offered to sell or lease, as applicable, the interest to the Buyer in writing at a market rate and on and subject to market terms and conditions (a “Property Offer”). The Buyer or its Affiliates will have 30 days to accept a Property Offer by written notice to Leonard Cherry. If the Buyer or its Affiliates do not timely accept a Property Offer, the Buyer will be deemed to have declined the Property Offer. If the Buyer declines the Property Offer, Leonard Cherry may, as applicable (i) within six months thereafter lease the interest to third parties, or (ii) within twelve months thereafter sell the interest to third parties, in each case on terms equal to or more favorable to Leonard Cherry than those contained in the Property Offer. If (x) Leonard Cherry fails to enter into an agreement for the lease of such interest with third parties within six months after the Buyer declines the Property Offer, or (y) Leonard Cherry fails to enter into a contract for the sale of such interest to third parties within six months after the Buyer declines the Property Offer and thereafter to close such sale within twelve months after the Buyer declines the

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Property Offer, Leonard Cherry shall not be permitted to sell or lease such interest without again complying with the terms and conditions of this Section 9.10(b).

ARTICLE X

CERTAIN POST-CLOSING MATTERS

10.1 Survival of Representations, Warranties and Covenants. The representations and warranties of the Sellers, the Companies and the Buyer contained in Article V, Article VI, and Article VII, respectively, shall terminate at, and not survive, the Closing. The covenants of the Sellers, the Companies and the Buyer contained in this Agreement shall terminate at, and not survive, the Closing, except for those covenants and agreements that by their terms contemplate performance in whole or in part after the Closing (including, for the avoidance of doubt, the covenants in Section 9.8(h)), which shall survive the Closing until performed in accordance with their respective terms.

10.2 Certain Waivers. Except (i) in relation to the Closing Cash Proceeds adjustment set out in Section 2.3, (ii) with respect to any claims for Fraud and (iii) the rights or obligations of any Person to the extent arising under this Agreement, including the covenants set forth herein that contemplate performance in whole or in part after the Closing and claims pursuant to Section 9.8(h) (collectively, the “Waiver Exceptions”), from and after the Closing, the Buyer hereby waives and releases to the fullest extent permitted under applicable Law, each Seller and such Seller’s Related Parties, whether in any individual, corporate or any other capacity, from and against any and all other rights, claims and causes of action it may have against such Seller or any of such Seller’s Related Parties relating (directly or indirectly) to this Agreement or the transactions contemplated hereby (including relating to any exhibit, Disclosure Schedule or document delivered hereunder), including whether arising under or based upon any federal, state, local or foreign statute, Law or ordinance or otherwise, including any rights, claims or causes of action with respect to any environmental, health or safety matters. The limits imposed on the Parties’ remedies with respect to this Agreement and the transactions contemplated hereby (including this Section 10.2) were specifically bargained for between sophisticated parties and were specifically taken into account in the determination of the amounts to be paid to the Sellers hereunder. None of the Buyer, its Affiliates, and their respective officers, directors employees or agents may avoid the limitations on liability set forth in this Article X by seeking damages for breach of contract, tort or pursuant to any other theory of liability. Nothing in this Section 10.2 shall limit the rights of the Parties to obtain specific performance of the other Parties’ obligations hereunder in accordance with Section 11.13 or the Buyer’s rights under the R&W Insurance Policy.

ARTICLE XI

MISCELLANEOUS

11.1 Press Releases and Communications. No press release or public statement related to this Agreement or the transactions contemplated hereby shall be issued or made without the joint approval of the Buyer and the Sellers’ Representative, unless (a) such press release or other public statement is consistent in all material respects with previous press releases, public disclosures or public statements made by a Party in accordance with this Agreement or (b) required by Law (in the reasonable opinion of counsel) in which case the Buyer and the Sellers’ Representative shall have the right to review and comment on such press

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release or statement prior to publication, except that each of the Companies and their respective Subsidiaries may make announcements from time to time to their respective employees, customers, suppliers and other business relations and otherwise as the Companies may reasonably determine is necessary to comply with applicable Law or the requirements of any agreement to which the Companies or any of their respective Subsidiaries is a party.

11.2 Expenses. Whether or not the Closing takes place, except as otherwise provided herein (including as provided in Sections 2.3, 4.1(b) and 9.4), all fees, costs and expenses (including fees, costs and expenses of legal counsel, investment bankers, brokers or other representatives and consultants and appraisal fees, costs and expenses, and travel, lodging, entertainment and associated expenses) incurred in connection with the negotiation of this Agreement and the other agreements contemplated hereby, the performance of this Agreement and the other agreements contemplated hereby, and the consummation of the transactions contemplated hereby and thereby, shall be paid by the Party incurring such fees, costs and expenses.

11.3 Amendment and Waiver. Any provision of this Agreement or the Disclosure Schedules or exhibits hereto may be amended or waived only in a writing signed by the Buyer, the Sellers’ Representative and the Companies. No waiver of any provision hereunder or any breach or default thereof shall extend to or affect in any way any other provision or prior or subsequent breach or default.

11.4 Notices. All notices, requests, demands and other communications permitted or required to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed conclusively to have been given (a) when personally delivered, (b) when sent by electronic mail (so long as a receipt of such electronic mail is requested and received and with a hard copy of such electronic mail to follow) during a Business Day (or on the next Business Day if sent after the close of normal business hours or on any non-Business Day), (c) one (1) Business Day after being sent by reputable overnight express courier (charges prepaid), or (d) three (3) Business Days following mailing by certified or registered mail, postage prepaid and return receipt requested. Unless another address is specified in writing by notice in accordance with this Section 11.4, notices, requests, demands and communications to the Parties shall be sent to the addresses indicated below:

Notices to the Sellers’ Representative, the Sellers and the Companies (with respect to the Companies, prior to the Closing):

Leonard L. Cherry

6131 Selinsky

Houston, Texas 77048

Email: lcherry330@aol.com

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with mandatory copies to (which shall not constitute notice to the Sellers or the Companies):

Bradley Arant Boult Cummings LLP

1819 5^th Avenue North

Birmingham, Alabama 35203

Attention: Frederic L. Smith, Jr.

Email: fsmith@bradley.com

Bradley Arant Boult Cummings LLP

JPMorgan Chase Tower

600 Travis Street, Suite 4800

Houston, Texas 77002

Attention: Ian Faria

Email: ifaria@bradley.com

Notices to the Buyer and the Companies (with respect to the Companies, after the Closing):

Arcosa MS2, LLC

500 N. Akard St., Suite 400

Dallas, TX 75201

Attention: Reid Essl

Email: Reid.Essl@arcosa.com

and

Arcosa, Inc.

500 N. Akard St., Suite 400

Dallas, TX 75201

Attention: Mark Elmore

E-mail: Mark.Elmore@arcosa.com

with a mandatory copy to (which shall not constitute notice to the Buyer or the Companies):

Gibson, Dunn & Crutcher LLP

2001 Ross Avenue, Suite 2100

Dallas, TX 75201

Attention: Robert Little

E-mail: RLittle@gibsondunn.com

11.5 Successors and Assigns. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns, except that neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned or delegated by any Party without the prior written consent of the Buyer and the Sellers; provided, however, that the Buyer may assign this Agreement to any Affiliate of the Buyer without the prior written consent of the Sellers, provided, further, that no assignment shall limit the assignor’s obligations hereunder.

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11.6 Non-Recourse. This Agreement may only be enforced against, and any claim or cause of action based upon, arising out of or related to this Agreement may only be brought against, the Persons that are expressly named as Parties to this Agreement. Except to the extent named as a Party to this Agreement, and then only to the extent of the specific obligations of such Parties set forth in this Agreement, no past, present or future shareholder, member, partner, manager, director, officer, employee, Affiliate, agent or representative of any Party to this Agreement or of the Companies or any of their respective Subsidiaries will have any obligation or liability (whether in contract, tort, equity or otherwise) for any of the representations, warranties, covenants, agreements or other obligations or liabilities of any of the Parties to this Agreement or for any claim based upon, arising out of or related to this Agreement. Without limiting the foregoing, no claim will be brought or maintained by the Buyer, its Affiliates or representatives, or any of their respective successors or permitted assigns against any present or future shareholder, member, partner, manager, director, officer, employee, Affiliate, agent or representative of any Party to this Agreement which is not otherwise expressly identified as a Party to this Agreement, and no recourse will be brought or granted against any of them, by virtue of or based upon any alleged misrepresentation or inaccuracy in or breach or nonperformance of any of the representations, warranties, covenants or agreements of any Party hereto set forth or contained in this Agreement or any exhibit or schedule hereto or any certificate delivered hereunder.

11.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable Law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party, and upon such a holding, 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 an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

11.8 Construction. The language used in this Agreement shall be deemed to be the language chosen by the Parties to express their mutual intent, and no rule of strict construction shall be applied against any Person. The headings of the sections and paragraphs of this Agreement have been inserted for convenience of reference only and shall in no way restrict or otherwise modify any of the terms or provisions hereof. In the event a subject matter is addressed in more than one representation and warranty in Article IV and/or Article V, the Buyer shall be entitled to rely only on the most specific representation and warranty addressing such matter. If the relevance of any item, information or other matter set forth in any section of the Disclosure Schedules to any other section of the Disclosure Schedules is reasonably apparent on its face, then such item, information or other matter shall be deemed to be disclosed against such other section of the Disclosure Schedules, regardless of whether such item, information or other matter is actually set forth (by cross-reference or otherwise) in such other section of the Disclosure Schedules. The specification of any dollar amount or the inclusion of any item in the representations and warranties contained in this Agreement, the Disclosure Schedules or exhibits is not intended to imply that the amounts, or higher or lower amounts, or the items so included, or other items, are or are not required to be disclosed (including whether such amounts or items are required to be disclosed as material or threatened) or are within or outside of the ordinary course of business or past practice, and no Party shall use the fact of the setting of the amounts or the fact of the inclusion of any item in this Agreement, the Disclosure Schedules, or exhibits

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in any dispute or controversy between the Parties hereto as to whether any obligation, item or matter not set forth or included in this Agreement, the Disclosure Schedules, or exhibits is or is not required to be disclosed (including whether the amount or items are required to be disclosed as material or threatened) or is within or outside of the ordinary course of business or past practice for purposes of this Agreement. In addition, matters reflected in the Disclosure Schedules are not necessarily limited to matters required by this Agreement to be reflected in the Disclosure Schedules. Such additional matters are set forth for informational purposes only and do not necessarily include other matters of a similar nature. The information contained in this Agreement, in the Disclosure Schedules, and exhibits hereto is disclosed solely for purposes of this Agreement, and no information contained herein or therein shall be deemed to be an admission or agreement by any Party to any third party of any matter whatsoever (including any violation of Law or breach of contract).

11.9 No Third-Party Beneficiaries. The provisions of this Agreement are intended for the benefit of, and shall be enforceable by the Sellers’ Representative acting on behalf of, the Sellers, and the Sellers’ Representative shall have the right, but not the obligation, to enforce any obligations of the Buyer under this Agreement. Section 9.4 shall be enforceable by each of the current and former officers, directors, partners, managers or similar functionaries of the Companies and their respective Subsidiaries and their respective heirs and representatives. Except as otherwise expressly provided herein, nothing expressed or referred to in this Agreement will be construed to give any Person other than the Parties to this Agreement and, for purposes of Section 9.4, each of the current and former officers, directors, partners, managers or similar functionaries of the Companies and their respective Subsidiaries and their respective heirs and representatives, any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. The representations and warranties in this Agreement are the product of negotiations among the Parties and are for the sole benefit of the Parties. Any inaccuracies in such representations and warranties are subject to waiver by the Parties hereto in accordance with this Agreement without notice or liability to any other Person. In some instances, the representations and warranties in this Agreement may represent an allocation among the Parties of risks associated with particular matters regardless of the knowledge of any of the Parties. Consequently, Persons other than the Parties may not rely upon the representations and warranties in this Agreement as characterizations of actual facts or circumstances as of the date of this Agreement or as of any other date.

11.10 Complete Agreement. This Agreement and the other agreements, instruments, and documents contemplated hereby or executed in connection herewith (including the Escrow Agreement and the Confidentiality Agreement) contain the complete agreement between the Parties and supersede any prior understandings, agreements or representations by or between the Parties, written or oral, which may have related to the subject matter hereof in any way.

11.11 Electronic Delivery; Counterparts. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Any such counterpart, to the extent delivered by .pdf, .tif, .gif, .jpeg or similar attachment to electronic mail (any such delivery, an “Electronic Delivery”) shall be treated in all manner and respects as an original executed counterpart and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any Party, each other Party shall re-execute the original form of this Agreement and deliver such form to all other Parties. No Party shall raise the use of Electronic Delivery

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to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of Electronic Delivery as a defense to the formation of a contract, and each such Party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

11.12 Governing Law; WAIVER OF JURY TRIAL. All issues and questions concerning the construction, validity, interpretation and enforceability of this Agreement and the exhibits and schedules hereto, and all suits, actions or other proceedings arising hereunder or thereunder or in connection herewith or therewith, whether purporting to be sound in contract or tort, or at law or in equity, shall be governed by, and construed in accordance with, the laws of the State of Texas (including with respect to the applicable statute of limitations), without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Texas or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Texas. The Parties hereto hereby agree and consent to be subject to the exclusive jurisdiction of the state or federal courts located in Harris County, Texas (and in each case of the appropriate appellate courts therefrom), and hereby waive the right to assert the lack of personal or subject matter jurisdiction or improper venue in connection with any such suit, action or other proceeding. In furtherance of the foregoing, each of the Parties hereto (a) waives the defense of inconvenient forum, (b) agrees not to commence any suit, action or other proceeding arising out of this Agreement or any transactions contemplated hereby other than in any such court, and (c) agrees that a final judgment in any such suit, action or other proceeding shall be conclusive and may be enforced in other jurisdictions by suit or judgment or in any other manner provided by Law. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 11.4 shall be deemed effective service of process on such Party. EACH PARTY HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY AND WITH AND UPON THE ADVICE OF COMPETENT COUNSEL IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY LITIGATION, SUIT, ACTION, PROCEEDING, CROSS-CLAIM, OR COUNTERCLAIM IN ANY COURT (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF, RELATING TO OR IN CONNECTION WITH (i) THIS AGREEMENT OR THE VALIDITY, PERFORMANCE, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF, (ii) THE TRANSACTIONS CONTEMPLATED HEREBY OR (iii) THE ACTIONS OF SUCH PARTY IN THE NEGOTIATION, AUTHORIZATION, EXECUTION, DELIVERY, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF. EACH PARTY (1) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY 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 (2) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

11.13 Specific Performance. The Parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that money damages or legal remedies would not be an adequate remedy for any such damages. Therefore, it is accordingly agreed that each Party shall be entitled to enforce specifically the terms and provisions of this Agreement, or to enforce compliance with, the covenants and obligations of any other Party, in any court of competent jurisdiction, and appropriate injunctive relief shall be granted

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in connection therewith. Any Party seeking an injunction, a decree or order of specific performance shall not be required to provide any bond or other security in connection therewith and any such remedy shall be in addition to and not in substitution for any other remedy to which such Party is entitled at law or in equity.

11.14 Prevailing Party. Unless otherwise expressly provided herein, if there shall occur any dispute or proceeding between the Parties relating to this Agreement or the transactions contemplated hereby, the non-prevailing Party shall pay all reasonable costs and fees (including reasonable attorneys’ fees and expenses) of the prevailing Party.

11.15 Acknowledgement. Following the Closing, in any dispute or proceeding arising under or in connection with, or any other matter related to, this Agreement, the Sellers’ Representative and the Sellers and their respective Affiliates (individually and collectively, the “Seller Group”) shall have the right, at their respective election, to retain Bradley Arant Boult Cummings LLP (the “Law Firm”) to represent the Seller Group in such matter, and the Buyer hereby irrevocably waives and consents to (and will cause its Subsidiaries (including, after the Closing, the Companies and their respective Subsidiaries) to waive and consent to), any such representation in any such matter and the communication by such counsel to the Seller Group in connection with any such representation of any fact known to such counsel arising by reason of such counsel’s prior representation of the Companies and their respective Subsidiaries. The Buyer irrevocably acknowledges and agrees that all Attorney-Client Communications would not be subject to disclosure to the Buyer and its Affiliates in connection with any process relating to a dispute arising under or in connection with, this Agreement, shall continue after the Closing and for all purposes be deemed to be privileged communications between the Law Firm and the Seller Group, and none of the Buyer or its Affiliates (including, after Closing, the Companies and their respective Subsidiaries) nor any Person purporting to act on behalf of or through any of the foregoing shall (a) seek to obtain the same by any process on the grounds that the privilege attaching to such communications belongs to the Companies and or any of their respective Subsidiaries and not to the Seller, (b) take any action which could cause any Attorney-Client Communication to cease being a confidential communication or to otherwise lose protection under the attorney-client privilege or any other evidentiary privilege, including waiving such protection in any dispute with a Person that is not in the Seller Group, (c) use or rely on any of the Attorney-Client Communications whether located in the records or e-mail servers of the Companies or their respective Subsidiaries, or otherwise, in any action against or involving the Parties after the Closing, or (d) assert that the privilege has been waived as to the Attorney-Client Communications that may be located in the records or e-mail servers of the Companies or their respective Subsidiaries.

11.16 No Right of Set-Off. The Buyer, for itself and its successors and permitted assigns, hereby unconditionally and irrevocably waives any rights of set-off, netting, offset, recoupment, or similar rights that the Buyer or any of its successors and permitted assigns has or may have with respect to the payment of the Closing Cash Proceeds or any other payments to be made by the Buyer pursuant to this Agreement or any other document or instrument delivered by the Buyer in connection herewith.

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11.17 Relationship of the Parties. Nothing in this Agreement shall be deemed to constitute the Parties as joint venturers, alter egos, partners or participants in an unincorporated business or other separate entity, nor in any manner create any principal agent, fiduciary or other special relationship between the Parties. No Party shall have any duties (including fiduciary duties) towards any other Party except as specifically set forth herein.

11.18 Sellers’ Representative.

(a) By approving this Agreement and the transactions contemplated by this Agreement, each Seller shall have irrevocably authorized and appointed the Sellers’ Representative as such Person’s representative and attorney-in-fact to act on behalf of such Person with respect to this Agreement and the Escrow Agreement, and to take any and all actions and make any decisions required or permitted to be taken by the Sellers’ Representative pursuant to this Agreement or the Escrow Agreement, including the exercise of the power to:

(i) give and receive notices and communications;

(ii) authorize release to Buyer of amounts from the Purchase Price Escrow Account in satisfaction of any amounts owed to Buyer pursuant to Section 2.3;

(iii) agree to, negotiate, enter into settlements and compromises of, and comply with orders or otherwise handle any other matters described in Section 2.3;

(iv) execute and deliver all documents necessary or desirable to carry out the intent of this Agreement and the Escrow Agreement;

(v) make all elections or decisions contemplated by this Agreement and the Escrow Agreement;

(vi) engage, employ or appoint any agents or representatives (including attorneys, accountants and consultants) to assist the Sellers’ Representative in complying with its duties and obligations; and

(vii) take all actions necessary or appropriate in the good faith judgment of the Sellers’ Representative for the accomplishment of the foregoing.

(b) The Buyer shall be entitled to deal exclusively with the Sellers’ Representative on all matters relating to this Agreement and the Escrow Agreement and shall be entitled to rely conclusively (without further evidence of any kind whatsoever) on any document executed or purported to be executed on behalf of any Seller by the Sellers’ Representative, and on any other action taken or purported to be taken on behalf of any Seller by the Sellers’ Representative, as being fully binding upon such Person. Notices or communications to or from the Sellers’ Representative shall constitute notice to or from each of the Sellers. Any decision or action by the Sellers’ Representative hereunder, including any agreement between the Sellers’ Representative and the Buyer relating to the defense, payment or settlement of any claims for indemnification hereunder, shall constitute a decision or action of all of the Sellers and shall be final, binding and conclusive upon each such Person.

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(c) The Sellers’ Representative may resign at any time, and may be removed for any reason or no reason by the vote or written consent of a majority in interest of the Sellers according to each Seller’s Pro Rata Share (the “Majority Holders”); provided, however, in no event shall the Sellers’ Representative resign or be removed without the Majority Holders having first appointed a new Sellers’ Representative who shall assume such duties immediately upon the resignation or removal of the Sellers’ Representative. In the event of the death, incapacity, resignation or removal of the Sellers’ Representative, a new Sellers’ Representative shall be appointed by the vote or written consent of the Majority Holders. Notice of such vote or a copy of the written consent appointing such new Sellers’ Representative shall be sent to the Buyer, such appointment to be effective upon the later of the date indicated in such consent or the date such notice is received by the Buyer.

(d) The Sellers’ Representative shall not be liable to the Sellers for actions taken pursuant to this Agreement or the Escrow Agreement, except to the extent such actions shall have been determined by a court of competent jurisdiction to have constituted gross negligence or involved Fraud, intentional misconduct or bad faith (it being understood that any act done or omitted pursuant to the advice of counsel, accountants and other professionals and experts retained by the Sellers’ Representative shall be conclusive evidence of good faith). The Sellers shall severally and not jointly (in accordance with their respective Pro Rata Shares), indemnify and hold harmless the Sellers’ Representative from and against, compensate the Sellers’ Representative for, reimburse it for and pay any and all losses, liabilities, claims, actions, damages and expenses, including reasonable attorneys’ fees and disbursements, arising out of and in connection with its activities as the Sellers’ Representative under this Agreement and the Escrow Agreement (the “Representative Losses”), in each case as such Representative Loss is suffered or incurred; provided, that in the event it is finally adjudicated that a Representative Loss or any portion thereof was primarily caused by the gross negligence, Fraud, intentional misconduct or bad faith of the Sellers’ Representative, the Sellers’ Representative shall reimburse the Sellers the amount of such indemnified Representative Loss attributable to such gross negligence, Fraud, intentional misconduct or bad faith.

(e) The provisions of this Section 11.18, including the power of attorney granted hereby, are independent and severable, are irrevocable and coupled with an interest and shall not be terminated by any act of any one or more of the Sellers, or by operation of Law, whether by death or other event, and will be enforceable notwithstanding any rights or remedies that the Buyer or any Seller may have in connection with the transactions contemplated by this Agreement.

11.19 Buyer Guarantor.

(a) The Buyer Guarantor hereby unconditionally, absolutely, continuingly and irrevocably guarantees to the Sellers the timely payment and performance by the Buyer of all of the obligations and liabilities of the Buyer arising under or in connection with this Agreement. The Buyer Guarantor further agrees that if the Buyer shall fail to pay in full when due any of the Buyer’s obligations hereunder, the Buyer Guarantor shall promptly pay the same, at the place and in the manner specified herein. The Buyer Guarantor’s liabilities shall in no way be impaired, affected, reduced or released by reason of (i) the failure or delay by any Seller or any other person in pursuing any remedies or recourse against the Buyer provided for in this Agreement; or (ii) the voluntary or involuntary liquidation, dissolution, sale or other disposition of all or substantially all the assets of the Buyer or the marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,

-76-

arrangement, composition with creditors or readjustment of, or other similar proceedings or any other inability to pay or perform affecting, the Buyer or any of its assets.

(b) The Buyer Guarantor is a corporation duly incorporated and validly existing under the laws of the State of Delaware. The Buyer Guarantor has all requisite corporate power and authority to execute and deliver this Agreement and to perform its obligations hereunder. The execution, delivery and performance by the Buyer Guarantor of this Agreement have been duly and validly authorized by the Buyer Guarantor, and no other corporate act or proceeding on the part of the Buyer Guarantor, its board of directors or its shareholders is necessary to authorize the execution, delivery or performance of this Agreement. This Agreement has been duly executed and delivered by the Buyer Guarantor, and this Agreement constitutes a valid and legally binding obligation of the Buyer Guarantor, enforceable in accordance with its terms except as enforceability may be limited or affected by applicable bankruptcy, insolvency, reorganization or other Laws of general application relating to or affecting the rights of creditors and except as enforceability may be limited by rules of Law governing specific performance, injunctive relief or other equitable remedies.

* * * * *

-77-

IN WITNESS WHEREOF, the Parties hereto have executed this Securities Purchase Agreement on the date first written above.

THE BUYER:

ARCOSA MS2, LLC


By:	/s/ Reid S. Essl

Name: Reid S. Essl

Title: President

THE BUYER GUARANTOR, solely for purposes of Section 11.19:

ARCOSA MATERIALS, INC.


By:	/s/ Reid S. Essl

Name: Reid S. Essl

Title: President

Signature Page to Securities Purchase Agreement

THE COMPANIES:

CHERRY INDUSTRIES, INC.


By:	/s/ Leonard L. Cherry

Name: Leonard L. Cherry

Title: President

4601 HOLMES ROAD CORPORATION


By:	/s/ Leonard L. Cherry

Name: Leonard L. Cherry

Title: President

CHERRY CRAWFORD HOLDINGS, LTD.

By: Cherry Companies Management, Inc.
Its: General Partner


By:	/s/ Leonard L. Cherry

Name: Leonard L. Cherry

Title: President

SELINSKY ROAD HOLDINGS, LTD.

By: 4601 Holmes Road Corporation
Its: General Partner


By:	/s/ Leonard L. Cherry

Name: Leonard L. Cherry

Title: President

Signature Page to Securities Purchase Agreement

THE SELLERS:

/s/ Leonard L. Cherry

Leonard L. Cherry

LEONARD CHERRY LIFE INSURANCE TRUST

u/t/a January 28, 2016

By: /s/ Regina Sue Cherry

Regina Sue Cherry, Trustee

2019 CHERRY IRREVOCABLE TRUST

u/t/a July 8, 2019

By: /s/ Leonard Lee Cherry

Leonard Lee Cherry,

Individual Co-Trustee

ELAINE SUE STARK 2016 TRUST

u/t/a October 31, 2016

By: /s/ Elaine Sue Stark

Elaine Sue Stark, Trustee

GAYLINN KAY SVEC 2016 TRUST

u/t/a October 31, 2016

By: /s/ Gaylinn Key Svec

Gaylinn Kay Svec, Trustee

HAYLEY CHERRY WAGONER 2016 TRUST

u/t/a October 31, 2016

By: /s/ Hayley Cherry Wagoner

Hayley Cherry Wagoner, Trustee

Signature Page to Securities Purchase Agreement

THE SELLERS’ REPRESENTATIVE:

/s/ Leonard L. Cherry

Leonard L. Cherry

Signature Page to Securities Purchase Agreement

SPOUSAL CONSENT

I, Regina Sue Cherry, spouse of Leonard L. Cherry, acknowledge that I have read the Securities Purchase Agreement, dated December 12, 2019, to which this Consent is attached (the “Agreement”), and that I know the contents of the Agreement. I am aware that the Agreement contains provisions regarding the sale of my spouse’s shares of capital stock in Cherry Industries, Inc. and 4601 Holmes Road Corporation, including any interest I might have therein.

I hereby agree that my interest, if any, in any shares of capital stock of such corporations shall be irrevocably bound by the Agreement, and I further understand and agree that any community property interest I may have in such shares of capital stock of such corporations shall be similarly bound by the Agreement.

I am aware that the legal, financial and related matters contained in the Agreement are complex and that I am free to seek independent professional guidance or counsel with respect to this Consent. I have either sought such guidance or counsel or determined after reviewing the Agreement carefully that I will waive such right.


Dated: December 12, 2019	/s/ Regina Sue Cherry Name: Regina Sue Cherry

Signature Page to Securities Purchase Agreement


•	a classified board with three approximately equal classes of directors until the 2022 annual meeting of shareholders, at which time each director will stand for election annually;


•	no removal of directors without cause while the Board of Directors is classified;


•	amendment of the bylaws by the Board of Directors or by the affirmative vote of holders of at least a majority of the outstanding capital stock entitled to vote thereon;


•	the number of directors on the Board of Directors may not be less than five nor more than eleven, with the exact number of directors to be fixed exclusively by the Board of Directors and any vacancies created in the Board of Directors resulting from any increase in the authorized number of directors will be filled by a majority of the Board of Directors then in office;


•	stockholders may not call special stockholder meetings and only the Board of Directors, the Chairperson of the Board of Directors or the President may call special meetings of Arcosa stockholders;


•	action must take place at the annual or a special meeting of Arcosa stockholders and stockholders have no right to act by written consent;


•	advance notice procedures with respect to stockholder proposals and nomination of candidates for election as directors (other than nominations made by or at the direction of the Board of Directors);


•	ability to issue additional shares of common stock or preferred stock without stockholder approval, subject to applicable rules of the NYSE, or a comparable public market, and Delaware law, for a variety of corporate purposes; and


(dd)	MATCHING EMPLOYER CONTRIBUTION: Any amount credited by an Employer for a Plan Year ending prior to January 1, 2020 to a Participant pursuant to Section 4.01(b) hereof.


(pp)	TRUST (or TRUST FUND): The fund known as the ARCOSA, INC. DEFERRED COMPENSATION PLAN TRUST, maintained in accordance with the terms of the trust agreement, as from time to time amended, which constitutes part of this Plan.


(b)	Matching Employer Contributions. No Matching Employer Contributions shall be made pursuant to this Plan for any Plan Year beginning on or after January 1, 2020. For Plan Years ending prior to January 1, 2020, each Employer may credit a Matching Employer Contribution amount in the form of cash to each of its Employees for whom an amount was credited pursuant to paragraph (a) of this Section 4.01;



Year of Service	Applicable Percentage
Less than 1	0%
1 but less than 2	25%
2 but less than 3	30%
3 but less than 4	35%
4 but less than 5	40%
5 or more	50%


6.	By adding the following sentence to the end of subsection (c) in Section 4.01:

Arcosa, Inc. Active Subsidiaries as of February 27, 2020

Name of Subsidiary		Jurisdiction of Incorporation
4601 Holmes Road Corporation		Texas
Administradora Especializada, S. de R.L. de C.V.		Mexico
Arcosa ACG, Inc.		Delaware
Arcosa Aggregates, Inc.		Delaware
Arcosa Canada Distribution, Inc.		Alberta
Arcosa Canada ULC		Alberta
Arcosa Marine Components, LLC		Delaware
Arcosa Cryogenics, LLC		Delaware
Arcosa EPI, LLC		Delaware
Arcosa Industries de México, S. de R.L. de C.V.		Mexico
Arcosa International Holdings AG		Switzerland
Arcosa LWB, LLC		Delaware
Arcosa LW BR, LLC		Delaware
Arcosa LWFP, LLC		Delaware
Arcosa LW HPB, LLC		Delaware
Arcosa LW KY, LLC		Delaware
Arcosa LW, LLC		Delaware
Arcosa LWS, LLC		Delaware
Arcosa Marine Components, LLC		Delaware
Arcosa Marine Leasing, Inc.		Delaware
Arcosa Marine Products, Inc.		Delaware
Arcosa Materials, Inc.		Delaware
Arcosa Mining and Construction Equipment, Inc.		Delaware
Arcosa MS2, LLC		Delaware
Arcosa Shoring Products, Inc.		Delaware
Arcosa Tank, LLC		Delaware
Arcosa Traffic and Lighting Structures, LLC		Delaware
Arcosa Wind Towers, Inc.		Delaware
Art Wilson Co.		Nevada
Asistencia Profesional Corporativa, S. de R.L. de C.V.		Mexico
CEMC Services, LLC		Delaware
Cherry Administration Services, Inc.		Texas
Cherry Companies Management, Inc.		Texas
Cherry Concrete Removal, Ltd.		Texas
Cherry Crawford Holdings, Ltd.		Texas
Cherry Crushed Concrete, Inc.		Texas
Cherry Demolition, Inc.		Texas
Cherry Industries, Inc.		Texas
Cherry Land Holdings, L.L.C.		Texas
Cherry Moving Company, Inc.		Texas
Cherry Recycling, Inc.		Texas
Diamond Gypsum, LLC		Delaware
The Gravel Company, LLC		Texas
Harrison Gypsum Holdings, LLC		Delaware
Harrison Gypsum, LLC		Oklahoma
HG Eagle, LLC		Delaware
Imperial Limestone Company Limited		British Columbia
Inland Marine Equipment LLC		Delaware
Jack Acquisitions, Inc.		Delaware
J.A. Jack & Sons, Inc.		Washington
McConway & Torley, LLC		Delaware
Meyer Utility Structures, LLC		Delaware


1.	I have reviewed this Annual Report on Form 10-K of Arcosa, 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


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.


(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and


(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company, as of, and for, the periods presented in the Report.



Mine or Operating Name/MSHA Identification Number	Section 104 S&S Citations (#)	Section 104(b) Orders (#)	Section 104(d) Citations and Orders (#)	Section 110(b)(2) Violations (#)		Section 107(a) Orders (#)	Total Dollar Value of MSHA Assessments Proposed ($)			Total Number of Mining Related Fatalities (#)	Received Notice of Pattern of Violation Under Section 104(e) (yes/no)	Received Notice of Potential to Have Pattern under Section 104(e) (yes/no)	Legal Actions Pending as of Last Day of Period (#)	Legal Actions Initiated During Period (#)	Legal Actions Resolved During Period (#)
Asa (4104399)	—	—	—		—	—	$	363		—	No	No	—	—	—
Belton (4101043)	—	—	—		—	—	$	121		—	No	No	—	—	—
Cottonwood (4104553)	—	—	—		—	—	$	605		—	No	No	—	—	—
Curry (4105307)	1	—	—		—	—	$	977		—	No	No	—	—	—
Kopperl (4104450)	—	—	—		—	—	$	—		—	No	No	—	—	—
Malloy Bridge (4102946)	—	—	—		—	—	$	484		—	No	No	—	—	—
Paradise (4103253)	1	—	—		—	—	$	627		—	No	No	—	—	—
Anacoco (1600543)	—	—	—		—	—	$	605		—	No	No	—	—	—
Indian Village (1600348)	—	—	—		—	—	$	363		—	No	No	—	—	—
Rye (4102547)	—	—	—		—	—	$	—		—	No	No	—	—	—
Pearl River (1601334)	—	—	—		—	—	$	242		—	No	No	—	—	—
Eaves Loop (1601589)	—	—	—		—	—	$	—		—	No	No	—	—	—
Moody (4105204)	—	—	—		—	—	$	363		—	No	No	—	—	—
ACG Materials Bouse Junction (3401828)	—	—	—		—	—	$	626		—	No	No	—	—	—
ACG Materials Diamond (3401660)	1	—	—		—	—	$	121		—	No	No	—	—	—
ACG Materials Diamond North (3401977)	—	—	—		—	—	$	242		—	No	No	—	—	—
ACG Materials Shamrock (4104758)	—	—	—		—	—	$	—		—	No	No	—	—	—
Adams Claim (2600668)	7	—	—		—	—	$	8,333	²	—	No	No	—	—	—
Harrison Gypsum #2 (3401364)	—	—	—		—	—	$	121		—	No	No	—	—	—
Harrison Gypsum #5 (3401964)	2	—	—		—	—	$	745		—	No	No	—	—	—
Ludwig (2602775)	—	—	—		—	—	$	363		—	No	No	—	—	—



1		Significant and Substantial (S&S) citations are reported on this form. Non-S&S citations are not reported on this form but any assessments resulting from non-S&S citations are reported.
2		Proposed penalty amounts are pending regarding S&S citation(s) issued during the reporting period.