SEPARATION AND DISTRIBUTION AGREEMENT

Exhibit 10.3

[EXECUTION]

SEPARATION AND DISTRIBUTION AGREEMENT

Dated as of  July 6, 2005

Between

TEXAS INDUSTRIES, INC.

and

CHAPARRAL STEEL COMPANY

TABLE OF CONTENTS

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SEPARATION AND DISTRIBUTION AGREEMENT

          THIS AGREEMENT is made as of July 6, 2005 by and between Texas Industries, Inc. (“ TXI ”), a Delaware corporation, and Chaparral Steel Company (“ Chaparral ”), a Delaware corporation, and, as of the date hereof, a wholly-owned subsidiary of TXI.

          WHEREAS, TXI, through certain subsidiaries, is engaged in the business of manufacturing and selling steel products (the “ Chaparral Business ”).

          WHEREAS, the Board of Directors of TXI has determined that it would be advisable and in the best interests of TXI and its stockholders for TXI to transfer and assign, or cause to be transferred and assigned, to Chaparral the business, operations, assets and liabilities related to the Chaparral Business;

          WHEREAS, TXI has agreed to transfer, assign or lease, or cause to be transferred, assigned or leased, to the Chaparral Parties (as hereinafter defined) substantially all of the assets and properties of the Chaparral Business, and Chaparral has agreed to the transfer, assignment or lease of such assets and to assume, or cause to be assumed, substantially all of the liabilities and obligations arising out of or relating to the Chaparral Business (the “ Contribution ”);

          WHEREAS, the Board of Directors of TXI has determined that it would be advisable and in the best interests of TXI and its stockholders for TXI to distribute on a pro rata basis to the holders of TXI’s common stock, par value $1.00 per share (“ TXI Common Stock ”), without any consideration being paid by the holders of such TXI Common Stock, all of the outstanding shares of Chaparral common stock, par value $0.01 per share (together with the preferred share purchase rights associated therewith, the “ Chaparral Common Stock ”), then owned by TXI (the “ Distribution ”);

          WHEREAS, for federal income tax purposes, the Contribution and Distribution are intended to qualify for tax-free treatment under Sections 355, 361 and 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the “ Code ”); and

          WHEREAS, it is appropriate and desirable to set forth the principal transactions required to effect the Contribution and Distribution and certain other agreements that will govern the relationship of TXI and Chaparral following the Distribution.

          NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto hereby agree as follows:

ARTICLE I
DEFINITIONS

          SECTION 1.1  Definitions .  As used in this Agreement, the following terms shall have the meanings set forth in this Section 1.1.

          “Actions” means any action, claim, demand, suit, arbitration, inquiry, subpoena, discovery request, proceeding or investigation by or before any court or grand jury, any governmental or other regulatory or administrative entity, agency or commission or any arbitration tribunal, domestic or foreign.

          “Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by or is under common control with such Person. For the purpose of this definition, the term “control” means the power to direct the management of an entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the term “controlled” has the meaning correlative to the foregoing. After the Distribution, Chaparral and TXI shall not be deemed to be under common control for purposes hereof due solely to the fact that Chaparral and TXI have stockholders in common.

          “Agent” means Mellon Investor Services, LLC, the distribution agent appointed by TXI to distribute shares of Chaparral Common Stock pursuant to the Distribution.

          “Ancillary Agreements” means the Tax Sharing Agreement, the TXI Real Estate Leases, the Chaparral Real Estate Leases, an Environmental Monitoring and Management Agreement, a Preliminary Single Property Designation Agreement, a Software License and any other agreement regarding the ongoing business and service relationships between the TXI Parties and Chaparral Parties.

          “Assumed Actions” has the meaning set forth in Section 6.10(a).

          “Assumed Liabilities” has the meaning set forth in Section 2.3.

          “Cessation Time” has the meaning set forth in Section 5.5.

          “Chaparral” has the meaning set forth in the first paragraph of this Agreement.

          “Chaparral 401(k) Plan” has the meaning set forth in Section 5.18(a)(i).

           “Chaparral Business” has the meaning set forth in the recitals.

          “Chaparral Business Employee” means (i) any individual employed at any time on or prior to the Distribution Date by TXI or any of its Subsidiaries who has, as of the Distribution Date, or who, immediately prior to his or her termination of employment by TXI or any of its Subsidiaries had, employment duties primarily related to the Chaparral Business, and (ii) any other individual employed prior to the Distribution Date by TXI or any of its Subsidiaries who accepts an offer to become an employee of Chaparral on the Distribution Date.

          “Chaparral Common Stock” has the meaning set forth in the recitals.

          “Chaparral Distributable Share” means for each holder of record of TXI Common Stock as of the close of business on the Record Date one share of Chaparral Common Stock for every share of TXI Common Stock outstanding and held of record by such holder at such time.

          “Chaparral FSP” has the meaning set forth in Section 5.18(b)(i).

          “Chaparral Indemnified Parties” has the meaning set forth in Section 10.3.

          “Chaparral Parties” means Chaparral, the direct or indirect Subsidiaries acquired by Chaparral as part of the Transferred Assets and any Subsidiaries formed or acquired after the date hereof.

          “Chaparral Real Estate Leases” has the meaning set forth in Section 2.1(b)(i).

          “Chaparral Share(s)” mean(s) each share of Chaparral Common Stock.

          “COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Part 6 of Subtitle B of Title I of ERISA and at section 4980B of the Code.

          “Code” has the meaning set forth in the Recitals.

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          “Contracts” has the meaning set forth in Section 2.1(a)(vi).

          “Contribution” has the meaning set forth in the Recitals.

          “Conveyancing Instruments” has the meaning set forth in Section 4.1.

          “Copyrights” means United States and foreign copyrights, both registered and unregistered, along with the registrations and applications to register any such copyrights.

          “Credit Facility” means a $ 150 million senior secured revolving credit facility to be entered into by Chaparral.

          “Debt Issuance Costs” means the underwriting commitment and syndication fees and any other fees and expenses under the Credit Facility and the Note Offering, plus all rating agency fees, plus all counsel and  accounting fees (including the fees of lenders’ counsel relating to the Credit Facility) and other costs relating to the Credit Facility and Note Offering.

          “Distribution” has the meaning set forth in the Recitals.

          “Distribution Date” means the date determined by the Board of Directors of TXI as the date on which the Distribution is payable to holders of TXI Common Stock on the Record Date.

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended, 29 U.S.C. §1001, et. seq.

          “Escalation Notice” has the meaning set forth in Section 11.1(a).

          “Exchange Act” means the Securities Exchange Act of 1934, as amended.

          “Expenses” means any and all expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel, investigators, expert witnesses, consultants, accountants and other professionals).

          “Governmental Authority” means any foreign, federal, state, local or other government, governmental, statutory or administrative authority, regulatory body or commission or any court, tribunal or judicial or arbitral body.

          “Indemnified Party” has the meaning set forth in Section 10.5(a).

          “Indemnifying Party” has the meaning set forth in Section 10.5(a).

          “Indemnity Payment” has the meaning set forth in Section 10.5(a).

          “Information” has the meaning set forth in Section 12.1(a).

          “Information Statement” has the meaning set forth in Section 6.8(a).

          “Insurance Charges” has the meaning set forth in Section 8.6.

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          “Intellectual Property License Agreements” means licenses relating to the Patents and patent disclosures set forth on Schedule 2.1(a)(v).

          “Intercompany Agreements” means any contract, agreement or lease between a TXI Party and  a Chaparral Party entered into prior to the Distribution excluding this Agreement and the Ancillary Agreements.

          “IRS” means the U.S. Internal Revenue Service.

          “Liability” means any and all debts, liabilities and obligations, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising (unless otherwise specified in this Agreement), including all costs and Expenses relating thereto, and including, without limitation, those debts, liabilities and obligations arising under any law, rule, regulation, Action, threatened Action, order or consent decree of any Governmental Authority or any award of any arbitrator of any kind, and those arising under any contract, commitment or undertaking.

          “Losses” means any and all losses, costs, obligations, Liabilities, settlement payments, awards, judgments, fines, penalties, damages, fees, expenses, deficiencies, claims or other charges, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown (including, without limitation, the costs and Expenses of any and all Actions, threatened Actions, demands, assessments, judgments, settlements and compromises relating thereto and attorneys’ fees and any and all Expenses whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened Actions).

          “Material Governmental Approvals and Consents” means any material notices, reports or other filings to be made with or to, or any material consents, registrations, approvals, permits, clearances or authorizations to be obtained from, any Governmental Authority.

           “Non-ERISA Benefit Arrangement” means each contract, agreement, policy, practice, program, plan, trust or arrangement, other than a Pension Plan or Welfare Plan, providing for benefits, perquisites or compensation of any nature to any Chaparral Business Employee, or to any family member, dependent or beneficiary of any such Chaparral Business Employee, including, without limitation, disability, severance, health, dental, life, accidental death and dismemberment, travel and accident, tuition reimbursement, supplemental unemployment, vacation, sick, personal or bereavement days, holidays, retirement, deferred compensation, profit sharing, bonus, stock-based compensation or other forms of incentive compensation.

          “Non-Permitted Names” has the meaning set forth in Section 6.11.

          “Note Offering” means the offering by Chaparral pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended, of senior unsecured notes of Chaparral in the aggregate principal amount of up to $300 million.

           “Offering Memorandum” means Chaparral’s offering memorandum relating to the Note Offering.

          “Owned Real Property” has the meaning set forth in Section 2.1(a)(ii).

          “Party” means the TXI Parties or the Chaparral Parties.

          “Patents” means United States and foreign patents and applications for patents, including any continuations, continuations-in-part, divisions, renewals, reissues and extensions thereof.

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           “Pension Plan” means any pension plan as defined in section 3(2) of ERISA, without regard to sections 4(b)(4) or 4(b)(5) of ERISA.

          “Person” means any individual, corporation, partnership, joint venture, limited liability company, association, joint-stock company, trust, unincorporated organization or Governmental Authority.

          “Personal Property Leases” has the meaning set forth in Section 2.1(a)(iii).

          “Prime Rate” means the rate that Bank of America (or any successor thereto or other major money center commercial bank agreed to by the Parties) announces from time to time as its prime lending rate, as in effect from time to time.

          “Privilege” has the meaning set forth in Section 12.8(a).

          “Privileged Information” has the meaning set forth in Section 12.8(a).

          “Record Date” means the date determined by the Board of Directors of TXI as the record date for the Distribution.

          “Registration Statement” has the meaning set forth in Section 6.8(a).

          “Retained Assets” means all of the TXI Parties’ assets other than the Transferred Assets.

          “Retained Business” means the business of the TXI Parties other than the Chaparral Business.

          “Retained Liabilities” means all of the TXI Parties’ Liabilities other than the Assumed Liabilities.

          “SEC” means the United States Securities and Exchange Commission.

          “Shared Contract” means a contract, agreement or lease with a third Person that directly benefits both a TXI Party and a Chaparral Party.

          “Software” means computer software programs, in source code and object code form, including, without limitation, all related source diagrams, flow charts, specifications, documentation and all other materials and documentation necessary to allow a reasonably skilled third party programmer or technician to maintain, support or enhance the Software.

          “Subsidiary” means, when used with reference to any Person, any corporation or other organization whether incorporated or unincorporated of which at least a majority of the securities or interests having by the terms thereof ordinary voting power to elect at least a majority of the board of directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person or by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries; provided, however, that no Person that is not directly or indirectly wholly-owned by any other Person shall be a Subsidiary of such other Person unless such other Person controls, or has the right, power or ability to control, that Person. After the Distribution, Chaparral and TXI shall not be deemed to be under common control for purposes hereof due solely to the fact that Chaparral and TXI have stockholders in common.

           “Tax Benefit” means a reduction in the tax liability of a taxpayer for any taxable period.  A Tax Benefit shall be deemed to have been realized or received in a taxable period only if and to the extent that the tax liability of the taxpayer for such period, after taking into account the effect of the relevant item on the tax liability of such taxpayer in all prior periods, is less than it would have been if such liability were determined without regard to such item.

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           “Tax Cost” means an increase in the tax liability of a taxpayer for any taxable period.  A Tax Cost shall be deemed to arise in a taxable period only if and to the extent that the tax liability of the taxpayer for such period, after taking into account the effect of the relevant item on the tax liability of such taxpayer in all prior periods, is greater than it would have been if such tax liability were determined without regard to such item.

          “Substitute Option” has the meaning set forth in Section 5.14(a).

          “Tax Sharing Agreement” means the Tax Sharing and Indemnification Agreement, dated the date hereof, between TXI and Chaparral.

          “Third Party Claim” has the meaning set forth in Section 10.6(a).

          “Third Party Consents” has the meaning set forth in Section 6.1.

          “Trademarks” means all United States, state and foreign trademarks, service marks, logos, trade dress and trade names, whether registered or unregistered, including all goodwill associated with the foregoing, and all registrations and pending applications to register the foregoing.

          “Transferred Actions” has the meaning set forth in Section 6.10(b).

          “Transferred Assets” has the meaning set forth in Section 2.1.

          “Transferred Intellectual Property” has the meaning set forth in Section 2.1(a)(v).

          “TXI” has the meaning set forth in the first paragraph of this Agreement.

          “TXI 401(k) Plan” has the meaning set forth in Section 5.18(a)(i).

          “TXI Business Employee” means any individual employed at any time on or prior to the Distribution Date by TXI or any of its Subsidiaries who has, as of the Distribution Date, or who, immediately prior to his or her termination of employment by TXI or any of its Subsidiaries had ,employment duties primarily related to the Retained Business

          “TXI Common Stock” has the meaning set forth in the Recitals.

          “TXI FSP” has the meaning set forth in Section 5.18(b)(i).

          “TXI Indemnified Parties” has the meaning set forth in Section 10.2.

           “TXI Option” has the meaning set forth in Section 5.14(a).

          “TXI Parties” means TXI and its direct and indirect Subsidiaries (including those formed or acquired after the date hereof), other than the Chaparral Parties.

          “TXI Policies” has the meaning set forth in Section 8.2.

          “TXI Real Estate Leases” has the meaning set forth in Section 2.1(b)(ii).

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          “Welfare Plan” means any employee welfare plan as defined in section 3(1) of ERISA, without regard to sections 4(b)(4) or 4(b)(5) of ERISA.