TLEMENT AGREEMENT COMPLIANCE AND BETWEEN ‘THE BAY AREA AIR QUALITY MANAGEMENT DISTRICT ‘AND LEHIGH SOUTHWEST CEMENT COMPANY This Compliance and Settlement Agreement ("Agreement") is entered into as ofthe date of execution by and berween I ehigh Southwest Cement Company LIC (“Lehigh”), and the BAY AREA AIR QUALITY MANAGEMENT DISTRICT ("DISTRICT"), hereinafter collectively referred to as the “Parties.” RECITALS WHEREAS, the DISTRICT is the regional agency with primary responsibility for the comtrot of air pollution from stationary sources. such as cement plants. in the San Francisco Bay Area air basin: and WHEREAS, pursuant to its responsibility, the DISTRICT issues permits to operate cement plants ‘and regulates cement plants located within the DISTRICT's jurisdiction: and WHEREAS. Lehigh owns and operates @ cement plant located at 2400] Stevens Creek Boulevard, Cupertino, California, commonly known as the Permanente Plant ("Facility"): and WHEREAS. |ehigh filed a Petition for Writ of Administrative Mandate against the DISTRICT in Santa Clara County Superior Court on November 26, 2012 in an action entitled Lehigh Southwest Cement Company v. Bay Aree Air Quality Management District etal, Case No. 112CV236602 (“the Action”) challenging District Regulation 9, Rule 13 (the "Rule": and gh and the DISTRICT desire to resolve their disputes in the Action and agree upon ‘ean comply with the Rule: and WHEREAS, a method whereby { WITEREAS, the Rule which requires in Section 303 that Lehigh demonstrate compliance with the State Air Toxics Hot Spots Information and Assessments Act codified at California Health and Safety Code Seetion 44300 ef seg. and the DISTRICT’s Air Toxies Hot Spots Program (collectively. “Hot Spots Program”) by September 9, 2013; and WHEREAS, Section 50} of the Rule requires continuous emissions and/or parameter monitoring relative fo certain pollutants, which in tum will require the installation of new monitoring systems at the Facility; and WHEREAS. the Parties believe that at certain production levels Lehigh currently complies with the ot Spots Program and Section 303 of the Rule, ané that compliance with the continuous monitoring requirements of Seetion 501 of the Rule will ultimately be achieved through construction of one or more tall stacks that minimize the number of emission points while also more efficiently dispersing emissions: and WHEREAS, itis expected that I chigh will encounter practical and regulatory challenges to constructing and operating one or more tall emission stacks by the September 9, 2013 deadline: and WHEREAS, the DISTRICT agrees to work with Leigh to facilitate consteuction of new emission stacks through among other things working with other regulatory agencics regarding permits and approvals regarding the samme: and nsTissgsa:39. 31WHEREAS, Lehigh currently anticipates that a new emission stack configuration that ensures compliance with Section 501 of the Rule will be operational by the end of January, 2015:.and WHEREAS, the Facility has an annual production capacity of 1.6 million short tons of clinker and a permit for such production; and WHEREAS, pursuant 10 the most recent health risk assessment entitled Addendum to Health Risk Assessment Evaluation of Toxie Air Contamination Impacts AB2588 Air Toxies Hot Spots Program dated May 2013, forthe Facility (“Risk Assessment”), the DISTRICT believes that Lehigh is in compliance with the Hat Spots Program if its production does not exceed 1.1275 million short tons of clinker per year regardless of the construction ofa new emissions stack; and WHEREAS. in lieu of compliance with Section $01 of the Rule, Lehigh agrees to implement an enhanced monitoring plan for the Term (defined herealter) of the Agreement; and relieves a civil penalty is appropriate to reflect that monitoring will not WHEREAS, the Distr The District also believes @ fully comply with Section SOT of the Rule during the Term of the Agreement civil penalty would be appropriate in the event that clinker production exceeds the limit set in this Agreement during the Term of the Agreement. NOW THERFFORE, based on the foregoing recitals, all of which are made a part of this Agreement, and in consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledyed, the Parties agree as follows AGREEMENT wal of the Action: Within 5 business days of the date that each of the Parties has executed, finally approved, and delivered this Agreement to each other, Lehigh and the DISTRICT shal fle & Request for Dismissal of the entire Action with prejudice. Atl parties will bear their own attorneys’ Fees and costs, Lehigh's Representations and Agreemen Compliance Schedule 1. Lehigh agrees to, and shall, comply with all terms of this Agreement, including the Compliance Schedule described in this sub-section, and the payment of civil monetary penalties described the section entitled “Penalties” below. 2 Lehigh shall demonstrate compliance with the Rate as follows A. Onor betore February 28, 2015 (Compliance Date”), Lehigh shall demonstrate that ii able to comply with the monitoring requirements under Section SOI of the Rule, The DISTRICT confirms that based upon the Risk Assessment the Facility currently i in ‘compliance with the Hot Spots Program notwithstanding whether a new stack is installed, at production limits at or below 1.1275 million short tons of elinker per year B. Unless and until Lehigh demonstrates that it complies with the Hot Spots Program at a ipacity above 1.1275 million short tons of elinker per year, Lehigh shall limit its production ensmise9se139. 32of clinker to no more than 1.1275 million short tons (“Produetion Limit") per rolling 12- month period during the Term of this Agreement. If Lehigh demonstrates that it complies ‘with the Hot Spots Program at a capacity above 1.1275 million short tons of elinker per year that new, higher capacity number will be used as the Production Limit during the Term. The prodetion average will be recalculated on the ninth day of each month during the Term of the Agreement. The first period for determining compliance with the Production Limit will bbe data from September 9, 2013, to September 8, 2014. Lehigh shall maintain production records demonstrating compliance with the Production Limit starting with monthly data froin September 9. 2013 to October 9, 2013 and data from each month thereafter, and Lehigh shall make these records available to the Distrit upon request. . If Lehigh is unable to meet the date set forth in Paragraph 2.4. above inchding building. connecting and operating its stack by thar date, due to events that are beyond its reasonable control, Lehigh may request « modification ofthe schedule to address the unforeseen events. ‘Lchigh shall describe the events, the now proposed deadline, and the measures chit shall take to meet a new Compliance Date. Events beyond Lehigh’ reasonable control include ‘weather conditions, labor strikes and obtaining all necessary permits and approvals. The DISTRICT will not unreasonably withhold approval of a modification of the Compliance Date due to unforeseen circumstances tht are beyond Lehigh’s reasonable conteol. An additional penalty may be appropriate to address non-compliance. with the Compliance Date. Ifthe DISTRICT desires to impose such a penalty for such non-compliance the DISTRICT and {-ehigh will meot and confer about the appropriate magnitude of any such penalty. In setting such penalty the DISTRICT will consider whether and to what extent the delays were caused by events outside of Lehigh’s reasonable control 3. In tieu of compliance with the monitoring req Term, Lehigh shall implement and eomply with an alternative inte A during the Term, irements of Section $01 of the Rule during the m monitoring plan as set forth in Exhibit Penal 4 ti the event that Lehigh exceeds the Production Lint set forth in Paragraph 2.B. above during Term, Lehigh agrees to pay a civil penalty as follows: A. $75,000 (Seventy-Five Thousand Dollars) for the first month that production exceeds the 12-month average rolled monthly 1B, $200,000 (Two Hundred ‘Thousand Dollars) for the second month and an additional $200,000 (Two Hundred Thousand Dotlars) for each additional month during the Term of the Agreement that production exceeds the 12-month average rolled monthly, 5. For non-compliance with Section 507 of the Rule during the Term of the Agreement, and in addition to compliance with the alternative interim monitoring plan described in Paragraph 3 above, Lehigh agrees to pay a one-time total civil penalty of $50,000 (Fifty Thousand Dollars) to the District, all applicable civil monetary penalties by wire transfer, corporate check, oF (othe following address: 6 money ord {Lehigh shall pa rmade payable to the "Bay Area Air Quality Managemen! District" BRIAN C. BUNGER, DISTRICT COUNSEL OFFICE OF THE DISTRICT COUNSEL EASTIE605¢199, 33BAY AREA AIR QUALITY MANAGEMENT DISTRICT 539 BLLIS STREET. 7" FLOOR SAN FRANCISCO, CALIFORNIA 94109 ‘Term of the Agreement: 7. ‘The Term ofthe Agreement shall be from September 9, 2013. until February 28, 2015. Effect of Compliance with this Agreement: 8. Continued Operation Pending Compliance: Provided Lehigh is in compliance with the terms of this Agreement, the District shall not prosecute an action, including an accusation action against | chigh, (oF an action secking to compel Lehigh (0 cease violation of District Regulation 9, Rule 13, Sections 303 or 501 or to impose penalties for such violations, related to she faets and circumstances described in this Agreement that arise during the Term of the Agreement, For the avoidance of doubt, non-compliance with monitoring as set described in Parageaph 5 and non-compliance with the Production Limit as set forth in Paragraphs 2.B, an 4 shall not constitute non-compliance with this Agreement provided that Lehigh pays the penalties described in Paragraphs 4 and 5. 9. Upon fll satisfaction ofall obligations held by Lehigh in this Agreement, Lehigh will have satisfied all claims arising out of or relating to the allegations and eonduct that are the subject of this Agreement and that have been or could have been asserted between the DISTRICT and Lehigh related to compliance with District Regulation 9, Rule 13, Sections 303 or 501 during the Term of the Agreement. In consideration of Lehigh's compliance with this Agreement, including DISTRICT'S receipt of the civil monetary penalty, the DISTRICT hereby fally and generally releases Lehigh and its officers, directors, nts, as well as Lehigh’s parents, subsidiaries, predecessor and successor corporations, if any, and their collective officers, directors, employees and agents (eollectively, "Lehigh Entities") from any further liability, penalties, enforeements, claims and damages pertaining to Known and unknown violations of District Regulation 9. Rule 13, Sections 303 or 501 and violations arising out of or relating to the subject matter of this Agreement, during the Tetm of the Agreement, DISTRICT waives the provisions of California Civil Code Section 1542 which provides “A general release does not extend to claims which the ereditor «does not know or suspect Io exist in his or her favor at the time of executing the release, which if known by i or her settlement with the debtor employees and him or her must have materially affected 10. This Agreement precludes the DISTRICT from seeking eriminal or civil penalties including under California Health and Safety Code Sections 42400 er sey. or Califomia Business and Professions Code Sections 17200 cr seg. or from taking an administrative, civil or criminal ations against Lehigh or Lehigh Entities for the same actions and violations that is or are the subject of this Agreement and release provided above, ifany. However. nothing in this Agreement shall be constsued as limiting in any way the DISTRICTS abitity to commence an action or seek relief against Lehigh as the result of violation(s) that is or are not the subject of this Agreement and which do not arise from the action(s) and violation(s) alleged andlor subject to this Agreement. 11, Enforcement Action/Terination. If Lehigh continues to operate the Facility and also fails to comply with any of the requirements or provisions ofthis Agreement t will be in breach of this Agreement Upon any such breach, the DISTRICT shall provide writen notice wo Lehigh atthe address for notices provided below in Paragraph 14 giving I-chigh a reasonable period of time to eure such breach depending upon the ciccumstances and type of breach, but in no event less than 10 business days. If Lehigh fails to cure such breach within the cure petiod, the DISTRICT may in its sole diseretion either (a) seek to enforce the terms ofthis Agreement, or ¢b) terminate this Agreement upon written notice to Lehigh and then seek civit or ¢riminal penalties, or otherwise take any enforcement action against Lehigh. For the avoidance of doubt EASTIS595¢139, 34‘non-compliance with monitoring as set described in Paragraph $ and non-compliance with the Produetion Limit as set forth in Paragraphs 2.3, and 4 shall not constitute non-compliance with this Agreement provided that Lehigh pays the penalties deseribed in Paragraphs 4 and 5. Modification and Termination: 12, Modification. No agreement to modify, amend, extend. supersede. terminate, or discharge this Agreement, or any portion hereof, shall be valid or enforceable unless itis in writing and signed by both Parties or their successors-in-interest. 13. Termination. This Agreement shall erminate upon the earlier of (a) the end ofthe Term, (b) Lchigh’s completion of sufficiem work to achieve full compliance with the Rule, and Lehigh's delivery of notice of termination of the Agreement. in its sole discretion tothe DISTRICT, or(e) the DISTRICT’ valid termination of this Agreement for breach afier the applicable cure period pursuant to Paragraph 11 ‘Notwithstanding termination of this Agreement the releases set forth in Paragraphs 8, 9 and 10 shall survive termination as o any violations occurring before the date ofthe termination. -ellancous: 14, Notices. Unless provided for otherwise in this Agreement, all notices and correspondence pertaining to this Agreement shall be in writing and transmitted by electroni¢ mail (e-mail); personal delivery: overnight mail, postage prepaid: or facsimile (with proof of transmission) to Lehigh and the DISTRICT at each of the following addresses: ‘ToLehigh Lehigh Southwest Cement Company 12667 Alcosta Boulevard, Suite 400 San Ramon, California 94583, ‘Attn: Region President wicopy to) Lehigh Hanson Ine. Legal Department 300 Fast John Carpenter Freeway Irving, Texas 75062 wieapy to: Matthew Covington DLA Piper LLP 555 Mission Street, Suite 2400 San Francisco Catifonia 94105 Tothe Distrier Office of the District Counsel Bay Area Air Quality Management District 939 Ellis Street San Francisco, California 94109 EasTise9se159. 35Facsimile: (415) 928-0338 All correspondence shall state that the subject of the correspondence is "Lehigh Compliance Agreement.” Delivery shall be deemed proper and complete on the day of receipt, if delivery is received by no later than 5:00 p.m. local time (otherwise delivery is deemed made the following day), to the business contact addresses set forth above. 15. ‘The settlement of the matters addressed in this Agreement, without further litigation is fair, reasonable and in the interest of the DISTRICT, Lehigh, and the public. The DISTRICT finds that. the terms and provisions set forth in this Agreement and Exhibit A hereto constitute reasonable alternative methods of ‘emissions monitoring and recordkeeping and provide equivalent performance to the monitoring and recordkeeping requirements in Regulation 9-13. 16. Date of Execution. This Agreement and all ofits terms and conditions shall become effective as of the date of execution by both the DISTRICT’s Executive Officer/APCO and Lehigh ("Date of Execution") and shall be final and binding upon the Parties. 17, This Agreement constitutes the entire agreement and understanding between the DISTRICT and Lehigh and fully supersedes and replaces any and all prior negotiations and agreements of any kind or nature, whether written or oral, between the Parties concerning the subject matter of the Agreement, terpreted and enforced in accordance with the choice of law rules. 18. California Law. This Agreement shall be laws ofthe State of California, without regard to Californi 19. Successors Bound. The terms of this Agreement shall inure to the benefit of and be binding upon the Parties and their respective suecessors-in-interest, subsidiaries, partners, limited partners, agents, principals and assigns, Lehigh agrees thet in the event of Lehigh’s transfer of any of Lehigh’s ownership interest inthe Facility, Lehigh shall provide notice of this Agreement to such new owner prior to the transfer of Lehigh’s ownership interest in the Facility and inform such new owner that the Agreement is binding on and inures to the benefit of such new owner. Lehigh agrees further that in the event Lehigh retains any ‘ownership interest in this Facility following such transfer, Lehigh shall remain a Party to this Agreement and bbe bound by its terms and otherwise Lehigh shall not continue to be bound. 20. Authority to Execute and Consult with Counsel. Hach of the undersigned expressly affirms that he or she is authorized to execute this Agreement on behalf of the Party whom he or she represents and to bind that Party to the obligations and duties under this Agreement. Lehigh and the DISTRICT hereby affirm and acknowledge that they have read this Agrecment, that they know and understand its terms, and that they have signed it voluntarily and after the opportunity to seek the advice of counsel of their own choosing, The Parties have had the opportunity to consult with their attomeys and any other consultant each deemed appropriate prior to executing this Agreement. $0 AGREED, STIPULATED TO, AND EXECUTED: ek Date: September /23013 BAY AREA AIR QUALITY LEHIGH SOUTHWEST CEMENT COMPANY MANAGEMENT DISTRICT ‘D. Saragu: (Name)Executive Officer/APCO _PRES IDENT (Title) Approved as to form: BAY AREA AIR QUALITY MANAGEMENT DISTRICT rimSehwane BAAN C. Benger SeniowAssistant- Counsel D( C7721 CT CounsEL By: Date:_4/13{ EASTIS6954139. 37