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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
| Filed by the Registrant x | |
| Filed by a Party other than the Registrant o | |
| Check the appropriate box: |
| x Preliminary Proxy Statement | |
| o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
| o Definitive Proxy Statement | |
| o Definitive Additional Materials | |
| o Soliciting Material Pursuant to §240.14a-12 |
CENTEX CONSTRUCTION PRODUCTS, INC.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
| x No fee required. | |
| o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
| 1) Title of each class of securities to which transaction applies: |
| 2) Aggregate number of securities to which transaction applies: |
| 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): |
| 4) Proposed maximum aggregate value of transaction: |
| 5) Total fee paid: |
| o Fee paid previously with preliminary materials. |
| o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. |
| 1) Amount Previously Paid: |
| 2) Form, Schedule or Registration Statement No.: |
| 3) Filing Party: |
| 4) Date Filed: |
| SEC 1913 (02-02) | Persons who potentially are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
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Centex Construction Products, Inc.
, 2003
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of Centex Construction Products, Inc., which we refer to as “CXP,” to be held at 9:00 a.m., local time, on , 2003, at 2728 N. Harwood, 10th Floor, Dallas, Texas. At the special meeting, you will be asked to consider and vote upon seven proposals. The first of these proposals relates to a reclassification of the common stock of CXP that is necessary to permit the tax-free distribution by Centex Corporation, which we refer to as “Centex,” of all of the shares of CXP common stock held by Centex to its stockholders. Centex currently holds 11,962,304 shares of common stock, representing approximately 65% of our outstanding common stock. We refer to our currently existing class of common stock as our “common stock” prior to the reclassification and as “Class A common stock” after the reclassification.
Given the nature of Centex’s ownership of CXP, in order for the distribution to be tax-free for U.S. federal income tax purposes, among other things, Centex must own, at the time of the distribution, capital stock of CXP having the right to elect at least 85% of the members of our board of directors, and Centex must distribute all of that stock to its stockholders in a single transaction. Accordingly, the proposal provides for the reclassification of 9,220,000 of the 11,962,304 shares of our common stock held by Centex into a new class of common stock, called the “Class B common stock,” having the right to elect at least 85% of the members of our board of directors. In all other respects the rights of the holders of these two classes of stock will be substantially the same. Immediately after the reclassification, all of the Class B common stock and the remaining 2,742,304 shares of our Class A common stock held by Centex will be distributed to Centex stockholders.
As a technical matter, you will be voting to adopt an agreement and plan of merger, dated as of July 21, 2003, among CXP, Centex and ARG Merger Corporation, a newly formed wholly-owned subsidiary of Centex, as a means to effect the reclassification. The merger agreement provides for certain amendments to our certificate of incorporation that are necessary to effect the reclassification. One of these amendments will change our name to .
If the reclassification is approved and other conditions are satisfied or waived, CXP will declare and pay a special one-time cash dividend to CXP stockholders (including Centex) of $6.00 per share, payable to stockholders of record prior to the distribution.
The reclassification, the distribution and related transactions, which are described in detail in the accompanying proxy statement, are expected to provide the following benefits:
| • | As a 65% owned subsidiary of Centex, we currently must compete for capital with Centex’s other lines of business. The proposed transactions will permit us to manage our business and seek growth opportunities without regard to considerations or limitations related to Centex’s other businesses. | |
| • | The proposed transactions will permit us to pursue our business interests independent of Centex, particularly with respect to acquisitions, business and asset sales and other corporate opportunities. |
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| • | The proposed transactions will significantly increase the public float and liquidity of our capital stock by increasing the number of shares held by stockholders (other than Centex) from about 6.5 million shares to about 18.4 million shares, which includes shares of the Class A common stock and shares of the Class B common stock. The proposed transactions will also significantly increase the public float and liquidity of our existing class of common stock by increasing the number of shares of that class held by stockholders (other than Centex) from about 6.5 million shares to about 9.2 million shares. In addition, the transactions will result in a broader stockholder base when Centex distributes the shares of Class B common stock and Class A common stock held by it to its stockholders. We estimate that there will be at least 28,000 beneficial owners of our capital stock immediately following the distribution, which represents more than ten times our current number of beneficial owners. | |
| • | We believe that a broader stockholder base, coupled with increased public float and liquidity of our capital stock may attract additional analyst coverage of us, which we believe would enhance the market’s awareness of our capital stock and stimulate interest from new investors. | |
| • | We expect that an expansion of our stockholder base and broader exposure in the investment community will enhance our ability to use our capital stock as an acquisition currency and as a means of raising capital. | |
| • | The transactions may permit our stockholders to share in any premium associated with a future transfer of control of CXP, if such an event should occur. |
You will also be asked to consider and vote upon certain corporate governance and authorized capital proposals which are described in detail in the attached proxy statement. You are also being asked to approve a stockholders’ rights plan. We believe that these proposals will help foster our long-term growth as an independent company following the distribution and, in the case of the governance and the stockholders’ rights plan proposals, will help protect our stockholders from potentially coercive or abusive takeover tactics and attempts to acquire control of us at a price or on terms that are not in the best interests of our stockholders. In addition, we have agreed to indemnify Centex for tax liabilities under certain circumstances if the distribution becomes subject to tax. The likelihood of the distribution losing its tax-free status and CXP being subject to liability under the tax indemnification provisions of the distribution agreement increase if CXP is acquired. By making a takeover of CXP without approval of our board of directors more difficult, these proposals will also protect CXP from potential liabilities resulting from the loss of the tax-free status of the distribution. The governance and authorized capital proposals would amend our certificate of incorporation to create a classified board of directors consisting of three classes, eliminate the ability of our stockholders to act by written consent, eliminate the ability of our stockholders to call a special meeting of stockholders, require a supermajority vote by our stockholders to amend certain provisions of our certificate of incorporation and increase the amount of our authorized capital stock.
The accompanying proxy statement provides information about the proposed transactions. Our board encourages you to read the entire proxy statement and the appendices carefully.
The board of directors of CXP, upon the recommendation of its special committee consisting of independent directors, has determined that the distribution and related transactions, including the reclassification, are advisable, fair to and in the best interests of CXP and its stockholders and have unanimously approved the merger agreement and for the approval of each of the governance, authorized capital increase and stockholders’ rights plan proposals. The board of directors of CXP recommends that you vote “For” the adoption of the merger agreement and the governance, authorized capital increase and stockholders’ rights plan proposals and urges you to sign, date and mail the enclosed proxy in the reply envelope at your earliest convenience.
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Thank you for your continued support as we proceed to consider and implement these important transactions.
| Very truly yours, | |
| LAURENCE E. HIRSCH | |
| Chairman of the Board |
Your vote is important. Whether or not you plan to attend the special meeting, please fill in, sign and promptly return your proxy in the enclosed postage-paid envelope. You may revoke your proxy at any time before it is voted. Executed but unmarked proxies will be voted for the adoption of the agreement and plan of merger and for the approval of each of the governance, authorized capital increase and stockholders’ rights plan proposals. There is no need to send any CXP stock certificates to us in your proxy envelope or otherwise.
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Centex Construction Products, Inc.
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To the Stockholders:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Centex Construction Products, Inc., a Delaware corporation (“CXP”), will be held at 2728 N. Harwood, 10th Floor, Dallas, Texas 75201 at 9:00 a.m., local time, on , 2003, for the following purposes:
| (1) Reclassification Proposal. You are being asked to approve the adoption of an agreement and plan of merger, dated as of July 21, 2003, among CXP, Centex Corporation (“Centex”) and ARG Merger Corporation, a newly-formed, wholly-owned subsidiary of Centex. The merger agreement provides for the merger of ARG Merger Corporation with and into CXP in order to reclassify our capital stock to create a new class of common stock, to be called “Class B common stock,” having the right to elect at least 85% of the members of our board of directors. We refer to our existing class of common stock as “common stock” prior to the reclassification and as “Class A common stock” after the reclassification. The reclassification is being proposed to facilitate the tax-free distribution by Centex to its stockholders of its approximately 65% equity ownership interest in CXP. In the reclassification, Centex will exchange 9,220,000 shares of common stock held by it for an equal number of shares of Class B common stock. Immediately following the reclassification, Centex will distribute these shares of Class B common stock and the remaining 2,742,304 shares of Class A common stock held by Centex to its stockholders. The merger agreement provides for certain amendments to our certificate of incorporation that are necessary to effect the reclassification. One of these amendments will change our name to . | |
| (2) Governance Proposals. You are also being asked to approve a number of proposals that would, if approved, amend our certificate of incorporation at the effective time of the merger as follows: |
| • | Staggered Board Proposal. To amend our certificate of incorporation to divide our board of directors into three classes, with each director serving for a term of three years. | |
| • | Written Consent Proposal. To amend our certificate of incorporation to eliminate the ability of our stockholders to act by written consent. | |
| • | Special Meeting Proposal. To amend our certificate of incorporation to eliminate the ability of our stockholders to call special meetings of the stockholders. | |
| • | Supermajority Voting Proposal. To amend our certificate of incorporation to require approval of 66 2/3% of the outstanding shares of our common stock entitled to vote, voting together as a |
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| single class, to alter, amend, rescind or repeal our bylaws by action of our stockholders or to adopt or modify the provisions of our certificate of incorporation relating to: |
| • | the division of our board of directors into three classes; | |
| • | the inability of our stockholders to act by written consent; | |
| • | the inability of our stockholders to call special meetings of the stockholders; | |
| • | the ability of our board of directors to adopt, alter, amend and repeal the bylaws; | |
| • | a special voting provision limiting the voting rights of beneficial owners of 15% or more of the outstanding shares of our Class B common stock; and | |
| • | the 66 2/3% vote required in order for our stockholders to modify any of the provisions of the certificate of incorporation described above. |
| These proposals are collectively referred to as the “governance proposals.” None of the governance proposals will become effective unless the reclassification is completed. |
| (3) Authorized Capital Increase Proposal. To approve an amendment to our certificate of incorporation to increase the authorized number of shares of common stock and preferred stock that we may issue from 50,000,000 shares of common stock and 2,000,000 shares of preferred stock to 100,000,000 shares of common stock (consisting of 80,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock) and 5,000,000 shares of preferred stock. The authorized capital increase proposal will not become effective unless the reclassification is completed. | |
| (4) Stockholders’ Rights Plan Proposal. To approve a proposal to implement a stockholders’ rights plan. The stockholders’ rights plan proposal will not become effective unless the reclassification is completed. | |
| (5) Other Business. To conduct such other business as may properly come before the special meeting or any adjournment thereof. |
Each of the foregoing items of business is more fully described in the proxy statement accompanying this notice. We urge you to review the proxy statement and appendices thereto in their entirety.
If the reclassification is approved and other conditions to the proposed transactions are satisfied or waived, CXP will declare and pay a special one-time cash dividend to CXP stockholders (including Centex) of $6.00 per share, payable to stockholders of record prior to the distribution.
The Board of Directors of CXP has fixed the close of business on , 2003 as the record date for the determination of stockholders entitled to notice of and to vote at the special meeting or any adjournment thereof. Only stockholders of record at the close of business on the record date are entitled to notice of and to vote at the special meeting. The transfer books will not be closed.
You are cordially invited to attend the special meeting. Whether or not you expect to attend the special meeting in person, you are urged to sign, date and mail promptly the accompanying form of proxy so that your shares may be represented and voted at the special meeting. Your proxy will be returned to you if you choose to attend the special meeting and request that it be returned.
| By Order of the Board of Directors | |
| James H. Graass | |
| Executive Vice President, | |
| General Counsel and Secretary |
Dallas, Texas
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TABLE OF CONTENTS
| Page | |||||
|
QUESTIONS AND ANSWERS ABOUT THE RECLASSIFICATION,
THE GOVERNANCE PROPOSALS, THE AUTHORIZED CAPITAL INCREASE
PROPOSAL AND THE STOCKHOLDERS’ RIGHTS PLAN
|
1 | ||||
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SUMMARY
|
4 | ||||
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Centex Construction
Products, Inc.
|
4 | ||||
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Centex Corporation
|
4 | ||||
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Background and Proposed Transactions
|
4 | ||||
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Expected Benefits of the Transactions to CXP and
its Stockholders
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9 | ||||
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Conditions to the Transactions and Other Proposals
|
9 | ||||
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Special Meeting
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10 | ||||
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Board of Directors Recommendation
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10 | ||||
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Required Vote
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10 | ||||
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Appendices
|
11 | ||||
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THE SPECIAL MEETING
|
12 | ||||
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Date, Time and Place of the Special Meeting of
Stockholders
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12 | ||||
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Recommendation of the Board of Directors of CXP
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12 | ||||
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Record Date and Shares Entitled to Vote
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13 | ||||
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Voting of Proxies
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13 | ||||
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Required Vote
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13 | ||||
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Quorum, Abstentions and Broker Non-Votes
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14 | ||||
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Other Matters
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14 | ||||
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Solicitation of Proxies and Expenses
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15 | ||||
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CERTAIN CONSIDERATIONS
|
16 | ||||
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PROPOSAL ONE: THE RECLASSIFICATION AND RELATED
TRANSACTIONS
|
20 | ||||
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Background of the Reclassification and the
Related Transactions
|
20 | ||||
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CXP’s Reasons for the Reclassification and
Related Transactions
|
24 | ||||
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Opinion of the Special Committee’s Financial
Advisor
|
27 | ||||
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Description of the Reclassification Proposal
|
35 | ||||
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Description of Bylaws Amendments
|
37 | ||||
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Recommendation of the CXP Board
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37 | ||||
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Required Vote
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38 | ||||
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Effects of the Reclassification on Outstanding
Shares
|
38 | ||||
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Cash Dividend
|
38 | ||||
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Tax Matters — Reclassification and
Distribution
|
38 | ||||
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Tax Matters — Cash Dividend
|
40 | ||||
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Interests of Our Officers and Directors in the
Reclassification
|
41 | ||||
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Relationship Between Centex and CXP after the
Distribution
|
41 | ||||
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New York Stock Exchange Approvals
|
42 | ||||
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Federal Securities Law Consequences
|
42 | ||||
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No Appraisal Rights
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42 | ||||
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DESCRIPTION OF THE MERGER AGREEMENT AND
DISTRIBUTION AGREEMENT
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43 | ||||
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The Merger Agreement
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43 | ||||
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The Distribution Agreement
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45 | ||||
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| Page | |||||
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PROPOSALS TWO, THREE, FOUR, FIVE, SIX AND SEVEN:
GOVERNANCE PROPOSALS, AUTHORIZED CAPITAL INCREASE PROPOSAL AND
STOCKHOLDERS’ RIGHTS PLAN PROPOSAL
|
50 | ||||
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General
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50 | ||||
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Purpose and Effects of the Governance Proposals
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50 | ||||
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Purpose and Effects of the Authorized Capital
Increase Proposal
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52 | ||||
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The Governance Proposals and the Authorized
Capital Increase Proposal
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52 | ||||
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Recommendation of the CXP Board
|
55 | ||||
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Description of Bylaws Amendments
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55 | ||||
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Stockholders’ Rights Plan Proposal
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55 | ||||
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Recommendation of the CXP Board
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61 | ||||
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Required Vote
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61 | ||||
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT OF CXP
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62 | ||||
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BOARD OF DIRECTORS AND MANAGEMENT OF CXP
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65 | ||||
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DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
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66 | ||||
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Appendix A — Agreement and Plan of
Merger
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|||||
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Appendix B — Distribution Agreement
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|||||
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Appendix C — Restated Certificate
of Incorporation of CXP
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Appendix D — Bylaws of CXP
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Appendix E — Opinion of Bear,
Stearns & Co. Inc.
|
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QUESTIONS AND ANSWERS ABOUT THE RECLASSIFICATION,
| Q: | What am I being asked to vote upon in the reclassification? | |
| A: | You are being asked to adopt a merger agreement providing for the reclassification of our capital stock. If the merger is approved and completed, a new class of common stock of CXP will be created that will be called Class B common stock and will have the right to elect at least 85% of our directors. The holders of shares of our Class A common stock will have the right to elect the remaining members of our board of directors. Centex currently holds 11,962,304 shares of our common stock. Centex will exchange 9,220,000 of these shares for an equal number of shares of Class B common stock in the reclassification. Centex will then distribute all of the 9,220,000 shares of Class B common stock that it receives in the reclassification, together with the remaining 2,742,304 shares of Class A common stock held by it, to its stockholders in the distribution. After the reclassification and distribution, the number of outstanding shares of our Class A common stock and Class B common stock will be substantially equal. If the reclassification is approved and other conditions to the proposed transactions are satisfied or waived, CXP will declare and pay a special one-time cash dividend to CXP stockholders (including Centex) of $6.00 per share, payable to stockholders of record prior to the distribution. | |
| Q: | Other than the voting rights for the board of directors, is there any difference between a share of our Class A common stock and a share of Class B common stock? | |
| A: | No. In all other respects the rights of the holders of our Class A common stock and Class B common stock will be substantially the same, including with respect to voting rights on fundamental transactions affecting CXP. | |
| Q: | What stockholder approvals are needed for the reclassification proposal? | |
| A: | The reclassification requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock. In addition, the reclassification will occur only if approved by the affirmative vote of the holders of a majority of the shares of our common stock, other than Centex, that vote on the reclassification in person or by proxy at the special meeting. | |
| Q: | Other than the stockholder approvals discussed above, are there other conditions to the reclassification? | |
| A: | Yes. The reclassification will occur only if all of the conditions described under the caption “Description of the Merger Agreement and Distribution Agreement — The Merger Agreement — Conditions to the Merger” are satisfied or waived. These conditions include, among other things, the receipt of a ruling from the Internal Revenue Service confirming that the reclassification and distribution will be tax-free transactions. | |
| Q: | If the reclassification and distribution occur, will CXP’s name be changed? | |
| A: | Yes. If the reclassification and distribution occur, our certificate of incorporation will be amended to change our name to . | |
| Q: | Will the cash dividend be paid if the reclassification proposal is not approved? | |
| A: | No. We will declare and pay a special one-time cash dividend of $6.00 per share to the holders of our existing class of common stock, including Centex, only if the reclassification is approved. | |
| Q: | Why is CXP recommending the governance proposals and stockholders’ rights plan proposal? | |
| A: | We believe that, after the reclassification and distribution, we may be vulnerable to unsolicited attempts to acquire control of our company. We have agreed to indemnify Centex for tax liabilities under certain circumstances if the distribution becomes subject to tax. The likelihood of the distribution losing its tax-free status and CXP being subject to liability under the tax indemnification provisions of the distribution agreement increase if CXP is acquired. By making a |
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| takeover of CXP without approval of our board of directors more difficult, these proposals, will protect CXP from potential liabilities resulting from the loss of the tax-free status of the distribution. We also believe that the governance proposals and stockholders’ rights plan proposal will help foster our long-term growth as an independent company following the reclassification and the distribution and will help protect our stockholders from potentially abusive takeover tactics and attempts to acquire control of CXP at a price or on terms that are not in the best interests of all of our stockholders. | ||
| Q: | Why is CXP recommending the authorized capital increase proposal? | |
| A: | Our board of directors believes that an increase in our authorized capital will ensure that there remains a sufficient authorized number of shares of common stock and preferred stock after the reclassification and distribution in order to provide for potential future stock splits, sales of our securities to raise additional capital, acquisitions of other companies or their businesses or assets, establishing strategic relationships with third parties, and providing options or other stock incentives to our employees, consultants or others. | |
| Q: | What stockholder approvals are needed for the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal? | |
| A: | Each of the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal requires the affirmative vote of the holders of a majority of our outstanding shares of common stock. Since Centex has informed us that it will vote its shares of our common stock in favor of each of these proposals, the approval of these proposals is assured. | |
| Q: | Will the governance proposals, authorized capital increase proposal or stockholders’ rights plan proposal be implemented even if the reclassification and distribution do not occur? | |
| A: | No. | |
| Q: | What if I do not vote? | |
| A: | The failure to vote your shares will have the same effect as a vote against the reclassification, the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal, although it will have no effect with respect to the separate required vote on the reclassification by stockholders other than Centex. If you respond and do not indicate how you want to vote, your proxy will be counted as a vote in favor of the reclassification, the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal. If you respond and abstain from voting, your proxy will have the same effect as a vote against the reclassification, the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal, although your abstention will have no effect with respect to the separate required vote on the reclassification by stockholders other than Centex. | |
| Q: | Can I change my vote after I have delivered my proxy? | |
| A: | Yes. You can change your vote at any time before your proxy is voted at the special meeting. You can do this in one of three ways. First, you can revoke your proxy. Second, you can submit a new proxy. If you choose either of these two methods, you must submit your notice of revocation or your new proxy to the secretary of CXP before the special meeting. If your shares are held in an account at a brokerage firm or bank, you should contact your brokerage firm or bank to change your vote. Third, if you are a holder of record, you can attend the special meeting and vote in person. | |
| Q: | Should I send in my stock certificates now? | |
| A: | No. Other than Centex, our stockholders will not be exchanging share certificates. Please do not send in your stock certificates with your proxy or otherwise. |
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| Q: | Will the shares of our common stock continue to be listed on the New York Stock Exchange? | |
| A: | Following the reclassification and distribution, shares of our Class A common stock will continue to be listed on the New York Stock Exchange under the symbol “CXP.” The Class B common stock is expected to be listed on the New York Stock Exchange under the symbol “ .” | |
| Q: | When do you expect the reclassification and distribution to be completed? | |
| A: | We expect the reclassification and the distribution to be completed promptly following receipt of stockholder approval of the reclassification proposal and the satisfaction or waiver of the applicable conditions to completion of the distribution. | |
| Q: | Who can help answer my questions? | |
| A: | If you have any questions about the reclassification or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, you should contact: |
| Georgeson Shareholder Communications Inc. | |
| 17 State Street, 28th Floor | |
| New York, New York 10004 | |
| (800) |
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SUMMARY
This summary highlights selected information in the proxy statement and may not contain all the information that is important to you. You should carefully read this entire proxy statement and the attached appendices for a more complete understanding of the transactions. References in this proxy statement to “CXP,” “we,” “us,” “ours” or like terms refer to Centex Construction Products, Inc. In this proxy statement we refer to our currently existing class of common stock as our “common stock” prior to the reclassification described below and as “Class A common stock” after the reclassification. Additionally, we refer to the new class of common stock created pursuant to the reclassification as “Class B common stock.” This proxy statement and the accompanying proxy were first sent to our stockholders on or about , 2003.
Centex Construction Products, Inc.
We produce and sell cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete used in residential, industrial, commercial and infrastructure applications. We are a holding company and the businesses of the consolidated group are conducted through our subsidiaries. Prior to April 19, 1994, CXP was a wholly-owned subsidiary of Centex Corporation which we refer to as “Centex.” On April 19, 1994, we completed an initial public offering of 51% of our common stock. Our existing common stock, par value $0.01 per share, began trading publicly on the New York Stock Exchange on April 19, 1994. Centex currently owns approximately 65% of our common stock. Our principal executive offices are located at 2728 N. Harwood, Dallas, Texas 75201, and our telephone number at that location is (214) 981-5000.
Centex Corporation
Centex, through its subsidiaries, is engaged in five principal business segments: home building, financial services, construction products, construction services and investment real estate. Centex’s home building operations involve the purchase and development of land or lots and the construction and sale of single-family homes, townhomes and low-rise condominiums. Through its financial services operations, Centex is engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market, and include mortgage origination, servicing and other related services. Centex’s construction products operations are conducted through its ownership interest in CXP. The construction services operations involve the construction of buildings for both private and government interests, including office, commercial and industrial buildings, hospitals, hotels, correctional facilities, education institutions, museums, libraries, airport facilities and sports facilities. Centex’s investment real estate operations involve the acquisition, development and sale of land, primarily for industrial office, multi-family, retail, residential and mixed-use projects. Centex’s principal executive offices are located at 2728 N. Harwood, Dallas, Texas 75201, and its telephone number at that location is (214) 981-5000.
Background and Proposed Transactions
CXP and Centex have agreed, subject to various conditions, to effect a series of transactions that will permit Centex to distribute its entire equity interest in CXP to Centex’s stockholders in a tax-free distribution. In order to permit this distribution to be tax-free for U.S. federal income tax purposes, CXP proposes to make the changes to its capital structure described in this proxy statement.
The transactions submitted for approval by our stockholders and certain related transactions consist of the following elements:
Reclassification Proposal. You are being asked to approve the adoption of an agreement and plan of merger, dated as of July 21, 2003, among CXP, Centex and ARG Merger Corporation, a newly formed wholly-owned subsidiary of Centex that we refer to as “Merger Sub.” This agreement and plan of merger, which we refer to as the “merger agreement,” provides for the merger of Merger Sub with CXP in order to reclassify its common stock to create a new class of our common stock called Class B common stock.
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The holders of shares of Class B common stock will be entitled to elect at least 85% of our board of directors. The holders of shares of our Class A common stock will have the right to elect the remaining member or members of our board of directors. The minimum number of directors of our board will be set at seven so that the holders of our Class A common stock will always be entitled to elect at least one director. In all other respects, the rights of the holders of our Class A common stock and the Class B common stock will be substantially the same, including with respect to voting rights on fundamental transactions affecting CXP. See “Proposal One: The Reclassification and Related Transactions — Description of the Reclassification Proposals” and “Description of the Merger Agreement and Distribution Agreement — The Merger Agreement — Reclassification and Merger.”
The merger agreement provides for certain amendments to our certificate of incorporation necessary to effect the reclassification. The amendments also include a special voting provision that limits the voting rights of holders of 15% or more of the Class B common stock as described under “Proposal One: The Reclassification and Related Transactions — Description of the Reclassification Proposals — Limitation on Voting Rights of Class B Common Stock.” One of these amendments will also change our name to .
Cash Dividend. If the reclassification proposal is approved and the other conditions described in the merger agreement and the distribution agreement, dated as of July 21, 2003, between CXP and Centex are satisfied or waived, then we will declare a special one-time cash dividend to our holders of common stock (including Centex) of $6.00 per share, payable to stockholders of record as of a date prior to the record date for the distribution. See “Description of the Merger Agreement and Distribution Agreement — The Distribution Agreement.”
Distribution. If the reclassification proposal is approved and the other conditions described in the merger agreement and the distribution agreement are satisfied or waived, then immediately following the payment of the cash dividend and completion of the reclassification, Centex will distribute to its stockholders, in proportion to the number of Centex shares they hold, all of the shares of Class B common stock that Centex receives in the reclassification, together with all of the remaining shares of Class A common stock owned by Centex. Centex estimates that a holder of a share of Centex common stock will receive approximately .19 shares of CXP stock pursuant to the distribution, consisting of .04 shares of Class A common stock and .15 shares of Class B common stock. No fractional CXP shares will be distributed in the distribution. Fractional shares will instead be aggregated and sold in the public market by the distribution agent, and the aggregate net cash proceeds will be distributed ratably to those stockholders who would otherwise receive fractional interests. After the reclassification and distribution, the number of outstanding shares of our Class A common stock and Class B common stock will be substantially equal. See “Proposal One: The Reclassification and Related Transactions” and “Description of the Merger Agreement and Distribution Agreement — The Distribution Agreement.”
Governance Proposals. We are asking our stockholders to approve a number of governance proposals that we believe would, if approved, foster our long-term growth as an independent company following the distribution and protect our stockholders from potentially coercive or abusive takeover tactics and attempts to acquire CXP at a price or on terms that are not in the best interests of CXP stockholders. In addition,
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| • | Staggered Board Proposal. If this proposal is approved, our certificate of incorporation will be amended to divide our board of directors into three classes, with each director serving for a term of three years. | |
| • | Written Consent Proposal. If this proposal is approved, our certificate of incorporation will be amended to eliminate the ability of our stockholders to act by written consent. | |
| • | Special Meeting Proposal. If this proposal is approved, our certificate of incorporation will be amended to eliminate the ability of our stockholders to call special meetings of the stockholders. | |
| • | Supermajority Voting Proposal. If this proposal is approved, our certificate of incorporation will be amended to require the approval of 66 2/3% of the outstanding shares of our stock entitled to vote, voting together as a single class, to alter, amend, rescind or repeal our bylaws by action of our stockholders or to adopt or modify the provisions of our certificate of incorporation relating to: |
| • | the division of our board of directors into three classes; | |
| • | the inability of our stockholders to act by written consent; | |
| • | the inability of our stockholders to call special meetings of the stockholders; | |
| • | the ability of our board of directors to adopt, alter, amend and repeal the bylaws; | |
| • | the special voting limitation that limits the voting rights of beneficial owners of 15% or more of the outstanding shares of our Class B common stock; and | |
| • | the 66 2/3% vote required in order for our stockholders to modify any of the provisions of the certificate of incorporation described above. |
See “Proposals Two, Three, Four, Five, Six and Seven: Governance Proposals, Authorized Capital Increase Proposal and Stockholders’ Rights Plan Proposal — The Governance Proposals and the Authorized Capital Increase Proposal.”
Authorized Capital Increase Proposal. We are asking our stockholders to approve a proposal that would, if approved, provide us with sufficient authorized capital stock for future issuances. If this proposal is approved, our certificate of incorporation will be amended to increase our authorized common stock from 50,000,000 to 100,000,000 shares of common stock (consisting of 80,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock). We are also proposing to increase our authorized preferred stock from 2,000,000 to 5,000,000 shares. Our board of directors believes that this increase in our authorized capital will ensure that there remains a sufficient authorized number of shares of common stock and preferred stock after the reclassification in order to provide for potential future stock splits, sales of our securities to raise additional capital, acquisitions of other companies or their businesses or assets, establishing strategic relationships with third parties, and providing options or other stock incentives to our employees, consultants or others. See “Proposals Two, Three, Four, Five, Six and Seven: Governance Proposals, Authorized Capital Increase Proposal and Stockholders’ Rights Plan Proposal — The Governance Proposals and the Authorized Capital Increase Proposal.”
Stockholders’ Rights Plan Proposal. Our board of directors has approved a stockholders’ rights plan to be implemented, subject to approval by our stockholders, upon consummation of the distribution. The purpose of the stockholders’ rights plan is to enhance the ability of our board of directors to ensure that our stockholders receive full, fair value for their shares of common stock in the event of a hostile takeover attempt. The stockholders’ rights plan encourages potential acquirors to negotiate with our board of directors and discourages certain coercive takeover tactics. In addition, by making a takeover or other change of control of CXP without approval of our board of directors more difficult, this proposal will also
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Transaction and Ownership Structure
The following chart illustrates CXP’s current ownership structure, the effect of the reclassification, dividend and distribution, and the ownership of CXP immediately after the reclassification and the distribution:
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Expected Benefits of the Transactions to CXP and its Stockholders
The reclassification, the distribution and the related transactions described in this proxy statement are expected to result in the following benefits, which are described in greater detail under “Proposal One: The Reclassification and Related Transactions — CXP’s Reasons for the Reclassification and Related Transactions”:
| • | As a 65% owned subsidiary, we currently must compete for capital with Centex’s other businesses. The proposed transactions will permit us to manage our business and seek growth opportunities without regard to considerations or restraints related to Centex’s other businesses, including capital structure limitations required for Centex to maintain its current credit rating. | |
| • | The proposed transactions will permit us to pursue our business interests independent of Centex, particularly with respect to acquisitions, business and asset sales and other corporate opportunities, and are designed to enhance the long term value of CXP. | |
| • | The proposed transactions will significantly increase the public float and liquidity of our capital stock by increasing the number of shares held by stockholders (other than Centex) from about 6.5 million shares to about 18.4 million shares, which includes shares of the Class A common stock and shares of the Class B common stock. The proposed transactions will also significantly increase the public float and liquidity of our existing class of common stock by increasing the number of shares of that class held by stockholders (other than Centex) from about 6.5 million shares to about 9.2 million shares. In addition, the transactions will result in a broader stockholder base when Centex distributes the shares of Class B common stock and the Class A common stock held by it to its stockholders. We estimate that there will be at least 28,000 beneficial owners of our capital stock immediately following the distribution, which represents more than ten times our current number of beneficial owners. | |
| • | We believe that a broader stockholder base, coupled with increased public float and liquidity of our capital stock, may attract additional analyst coverage of CXP, which we believe would enhance the market’s awareness of our capital stock and stimulate interest from new investors. | |
| • | We expect that an expansion of our stockholder base and broader exposure in the investment community will enhance our ability to use of our capital stock as an acquisition currency and as a means of raising capital. | |
| • | Our stockholders will receive immediate tangible value through the special one-time cash dividend. | |
| • | The transactions may permit our stockholders to share in any premium associated with a future transfer of control of CXP, if such an event should occur. | |
| • | The proposed transactions will allow the public holders of our Class A common stock to elect one director, compared to the current inability to significantly influence the election of any directors due to Centex’s majority voting control. | |
| • | The proposed transactions are expected to enhance the attractiveness of our equity-based compensation plans due to the increased public float and liquidity of our capital stock, thereby increasing our ability to attract and retain qualified employees. | |
| • | The governance proposals and stockholders’ rights plan proposal will help foster our long-term growth as an independent company following the reclassification and the distribution by protecting our stockholders from potentially coercive or abusive takeover tactics and attempts to acquire control of CXP at a price or on terms that are not in the best interests of all of CXP’s stockholders. |
Conditions to the Transactions and Other Proposals
The reclassification and the distribution will occur only if all of the necessary conditions contained in the merger agreement and the distribution agreement are satisfied or waived. These conditions include,
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Special Meeting
We have called a special meeting of our stockholders to be held at 9:00 a.m., local time, on , 2003, at 2728 N. Harwood, 10th Floor, Dallas, Texas. At the special meeting, you will be asked to consider and vote upon the adoption of the merger agreement and upon the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal.
Board of Directors Recommendation
Our board of directors, upon the recommendation of the special committee, has unanimously approved the merger agreement and each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal. Our board of directors has determined, based upon the recommendations of the special committee, that the distribution and related transactions, including the reclassification, are advisable, fair to and in the best interests of CXP and its stockholders. Our board of directors has also determined, based upon the recommendations of the special committee, that each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal are advisable and in the best interests of CXP and our stockholders. Our board of directors recommends that you vote “For” the adoption of the merger agreement and each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal.
Required Vote
Each outstanding share of our common stock is entitled to one vote on each proposal. Under Delaware corporate law, adoption of the merger agreement and approval of each of the governance proposals and the authorized capital increase proposal require the affirmative vote of the holders of a majority of our common stock entitled to vote on such proposal. The approval of the stockholders’ rights plan proposal is also being submitted for the affirmative vote of the holders of a majority of our common stock entitled to vote on such proposal. In addition, the reclassification will occur only if the holders of a majority of the shares of our common stock present in person or by proxy at the special meeting and voting on the reclassification proposal, other than Centex, vote to adopt the merger agreement. Throughout this proxy statement, when we refer to the approval of the reclassification proposal by our stockholders, we are referring to both the adoption of the merger agreement by the vote required under Delaware corporate law and the vote described in the previous sentence. See “Proposal One: The Reclassification and Related Transactions — Required Vote” and “Proposals Two, Three, Four, Five, Six and Seven: Governance Proposals, Authorized Capital Increase Proposal and Stockholders’ Rights Plan Proposal — Required Vote.”
Centex has informed us that it will vote its shares of our common stock in favor of the reclassification proposal, each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal. Since Centex owns approximately 65% of our outstanding shares, the approval of each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal is assured.
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Appendices
The merger agreement is attached as Appendix A to this proxy statement. The distribution agreement is attached as Appendix B. The proposed restated certificate of incorporation is attached as Appendix C and includes provisions that reflect the reclassification proposal, governance proposals and authorized capital increase proposal, which will become effective if these proposals are approved. The proposed amended and restated bylaws are attached as Appendix D and include proposals adopted in connection with our board’s approval of the reclassification proposal as well as changes to our bylaws relating solely to the governance proposals, which will become effective if the reclassification proposal and the governance proposals are approved. The opinion of Bear, Stearns & Co. Inc., the special committee’s financial advisor, relating to the financial fairness of the reclassification, the cash dividend and the distribution, taken as a whole, to CXP’s public stockholders, is attached as Appendix E.
We encourage you to read this proxy statement, the merger agreement, the distribution agreement, the proposed certificate of incorporation and bylaws and the opinion of Bear Stearns carefully and in their entirety.
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THE SPECIAL MEETING
This proxy statement is being furnished to our stockholders on or about , 2003 in connection with the solicitation of proxies by our board of directors for use at a special meeting of stockholders at which our stockholders are being asked to vote on the adoption of the merger agreement and on the governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal. When we refer to the special meeting in this proxy statement, we are also referring to any adjournments or postponements of the special meeting.
Date, Time and Place of the Special Meeting of Stockholders
The special meeting of stockholders will be held at 9:00 a.m., local time, on , 2003, at 2728 N. Harwood, 10th Floor, Dallas, Texas 75201.
Recommendation of the Board of Directors of CXP
Reclassification Proposal. Our board of directors, upon the recommendation of the special committee, has unanimously determined that the distribution and related transactions, including the reclassification, are advisable, fair to and in the best interests of CXP and our stockholders. These transactions will give voting control of CXP to public stockholders and are expected to result in certain benefits that are described under “Proposal One: Reclassification and Related Transactions — CXP’s Reasons for the Reclassification and Related Transactions.” In addition to the long-term benefits of independence for CXP, the proposed transactions will deliver immediate value to our stockholders by virtue of the cash dividend. To effect the reclassification, we are proposing certain amendments to our certificate of incorporation, including, among others, an amendment to change our name to . Our board of directors recommends that you vote “For” the adoption of the merger agreement.
Governance Proposals. Our board of directors, upon recommendation of the special committee, has unanimously determined that each of the staggered board proposal, the written consent proposal, the special meeting proposal and the supermajority voting proposal is advisable and in the best interests of CXP and our stockholders. Because Centex will no longer own a majority of our capital stock after the distribution, our board of directors believes that the distribution will make it easier for a third party to attempt to acquire CXP. Our board of directors also believes that companies can be and are acquired, and that changes in control of companies can and do occur, at prices below realistically achievable levels when boards do not have measures in place to require an acquiror to negotiate the terms of any acquisition directly with the board. Many companies have put in place provisions that effectively require such negotiations. The governance proposals are intended to make it more difficult for a potential acquiror to seek to acquire control of CXP by means of a proxy contest, merger or tender offer which is not negotiated with our board of directors. In addition, by making a takeover or other change of control of CXP without approval of our board of directors more difficult, these proposals will also protect CXP from potential liabilities under the distribution agreement resulting from the loss of the tax free status of the distribution. Our board of directors recommends that you vote “For” approval of each of the governance proposals.
Authorized Capital Increase Proposal. Our board of directors has unanimously determined that the authorized capital increase proposal is advisable and in the best interests of CXP and our stockholders. Our board of directors believes that the increase in capital stock will ensure that there remains a sufficient authorized number of shares of common stock and preferred stock after the reclassification for potential future stock splits, sales of our securities to raise additional capital, acquisitions of other companies or their businesses or assets, establishing strategic relationships with third parties, or providing options or other stock incentives to our employees, consultants or others. Our board of directors recommends that you vote “For” approval of the authorized capital increase proposal.
Stockholders’ Rights Plan Proposal. Our board of directors has unanimously determined that the stockholders’ rights plan proposal is advisable and in the best interests of CXP and its stockholders. Our board of directors believes that implementation of the stockholders’ rights plan will enhance the ability of
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Record Date and Shares Entitled to Vote
Only holders of record of our common stock as of the close of business on the record date, which is , 2003, will be entitled to notice of, and to vote at, the special meeting or any adjournments or postponements of the special meeting. A list of the stockholders of record will be available for inspection at the special meeting and at our headquarters located at 2728 N. Harwood, Dallas, Texas 75201, during ordinary business hours during the ten-day period prior to the special meeting. As of the close of business on the record date, there were shares of our common stock outstanding and entitled to vote at the special meeting. A majority of these shares, present in person or represented by proxy, will constitute a quorum for the transaction of business.
Voting of Proxies
The proxy accompanying this proxy statement is solicited on behalf of our board of directors for use at the special meeting. Stockholders are requested to complete, date and sign the accompanying proxy card and promptly return it in the enclosed envelope. So long as they are not revoked, all properly executed proxies received prior to the vote at the special meeting will be voted at the special meeting in accordance with the instructions indicated on the proxies or, if no direction is indicated, to approve the adoption of the merger agreement and each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal. You may revoke your proxy at any time before its use by delivering to our secretary at the above address, written notice of revocation or a duly executed proxy bearing a later date, or by attending the special meeting and voting in person.
Required Vote
Each outstanding share of our common stock is entitled to one vote on each of the proposals described above and any other matter which properly comes before the special meeting.
Reclassification Proposal. Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock. In addition, the reclassification will be implemented only if the holders of a majority of the shares of our common stock voting on the reclassification proposal, in person or by proxy, at the special meeting, other than Centex, vote to adopt the merger agreement.
Staggered Board Proposal. The staggered board proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
Written Consent Proposal. The written consent proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
Special Meeting Proposal. The special meeting proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
Supermajority Voting Proposal. The supermajority voting proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
Authorized Capital Increase Proposal. The authorized capital increase proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
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Stockholders’ Rights Plan Proposal. The stockholders’ rights plan proposal requires the affirmative vote of the holders of a majority of the outstanding shares of our common stock.
As of the record date, current executive officers and directors of CXP owned shares of our common stock, representing approximately % of the shares outstanding. CXP has been advised by its executive officers and directors that all of such persons intend to vote in favor of each of the proposals described above at the special meeting.
As of the record date, Centex owned 11,962,304 shares of our common stock, representing approximately 65% of the shares outstanding at that date. Centex has informed us that it intends to vote all of the shares of our common stock owned by it in favor of the adoption of the merger agreement and each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal. Accordingly, approval of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal is assured.
Quorum, Abstentions and Broker Non-Votes
The required quorum for the transaction of business at the special meeting is the presence in person or by proxy of a majority of the shares of common stock issued and outstanding and entitled to vote at the special meeting. If your shares are held in an account at a brokerage firm or bank, you must instruct them on how to vote your shares. If an executed proxy card is returned by a broker or bank holding shares which indicates that the broker or bank does not have discretionary authority to vote for approval of the reclassification proposal, the governance proposals, the authorized capital increase proposal and/or the stockholders’ rights plan proposal, this will be considered to be a broker non-vote. Abstentions and broker non-votes each will be included in determining the number of shares present at the special meeting for the purpose of determining the presence of a quorum. Because the adoption of the merger agreement and approval of each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal require the affirmative vote of a majority of the outstanding shares of our common stock entitled to vote thereon, abstentions and broker non-votes will have the same effect as votes against each of the proposals. Centex has agreed that the approval of the reclassification proposal will also require the approval of the holders of a majority of the shares of our common stock that are present, in person or by proxy, at the special meeting and vote upon the proposal, other than Centex. Abstentions and broker non-votes will not be counted in that vote and therefore will not have any effect on the special approval condition for the reclassification proposal.
The actions proposed in this proxy statement are not matters that can be voted on by brokers holding shares for beneficial owners without the owners’ specific instructions. Accordingly, all beneficial owners of common stock are urged to instruct their brokers how to vote.
Other Matters
Only one proxy statement is being delivered to multiple security holders who share an address unless we have received contrary instructions from one or more of the security holders. We will deliver promptly, upon written or oral request, a separate copy of this proxy statement to a security holder of a shared address to which a single copy was delivered. Also, security holders sharing an address may request a single copy of proxy statements if they are currently receiving multiple copies. Such requests can be made by contacting the Secretary at our principal executive offices.
The board of directors is not currently aware of any business to be acted upon at the special meeting, other than as described herein. If, however, other matters are properly brought before the special meeting, the persons appointed as proxies will have discretion to vote or act on these matters according to their best judgment, to the extent permitted by applicable law and unless otherwise indicated on any particular proxy. Notwithstanding the foregoing, shares represented by proxies voting against any proposal described in this proxy statement will not be voted in favor of a proposal to adjourn the special meeting for the purposes of soliciting additional proxies with respect to such proposal.
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Solicitation of Proxies and Expenses
We have engaged Georgeson Shareholder Communications Inc. to assist us in soliciting proxies from banks, brokers and nominees. Georgeson will be paid fees of approximately $8,500 for its services, and will be reimbursed for out-of-pocket expenses. In addition, the directors, officers and employees of CXP may solicit proxies from stockholders by telephone, facsimile or in person. Following the original mailing of this proxy statement, CXP will request banks, brokers, custodians, nominees and other record holders to forward copies of this proxy statement to people on whose behalf they hold shares of common stock and to request authority for the exercise of proxies by the record holders on behalf of those people. In those cases, CXP, upon the request of the record holders, will reimburse those holders for their reasonable expenses incurred in connection with requesting authority to vote.
The matters to be considered at the special meeting are of great importance to the stockholders of CXP. Accordingly, you are urged to read and carefully consider the information presented in this proxy statement and the appendices, and to complete, date, sign and promptly return the enclosed proxy card in the enclosed postage-paid envelope. No physical substitution of stock certificates will be required as a result of the reclassification, and your existing certificates will continue to represent your shares of Class A common stock after the reclassification.
Who can help answer your questions
If you have questions about the proposals in this proxy statement, you should contact:
| Georgeson Shareholder Communications Inc. | |
| 17 State Street, 28th Floor | |
| New York, New York 10004 | |
| (800) |
STOCKHOLDERS SHOULD NOT SEND
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CERTAIN CONSIDERATIONS
You should carefully consider the factors described below before voting on the proposals set forth in this proxy statement.
The tax-free distribution by Centex results in potential limitations on our ability to effect certain transactions and could potentially result in significant liabilities.
In the distribution agreement, we have agreed that, if the reclassification and distribution are completed, for a period of two years after the distribution, we will not:
| • | merge or consolidate with or into any other corporation; | |
| • | liquidate or partially liquidate; | |
| • | sell or transfer all or substantially all of our assets in a single transaction or series of transactions; | |
| • | except as permitted under the IRS procedures applicable to spin-offs, redeem or otherwise repurchase any of our capital stock; or | |
| • | subject to certain exceptions, take any other actions that would cause or permit one or more persons to acquire stock representing a 50% or greater interest in CXP; |
unless, before taking any of these actions, either Centex has obtained a ruling from the IRS (at the expense of CXP) or we have received an opinion of counsel reasonably satisfactory to Centex, that the contemplated actions will not result in the distribution failing to qualify as a tax-free transaction. We have also agreed, in the distribution agreement, to indemnify Centex under certain circumstances for taxes that may become payable by Centex, each member of the consolidated group of companies of which Centex is the common parent corporation and each direct and indirect subsidiary of Centex or its stockholders, whom we refer to collectively as the “Centex group,” if our actions give rise to the imposition of those taxes. As a result, we may be reluctant to pursue or undertake certain mergers, asset sales and other transactions during the two-year period following the reclassification and distribution. These restrictions and potential liabilities may make CXP less attractive to a potential acquiror and reduce the possibility that an acquiror will propose or seek to effect certain transactions with CXP during this two-year period. See “Proposal One: The Reclassification and Related Transactions — CXP’s Reasons for the Reclassification and Related Transactions” and “— Tax Matters — Reclassification and Distribution.”
Our borrowings to pay the cash dividend could limit our future operational flexibility.
In order to pay the special one-time cash dividend to our stockholders, we will use available cash and expect to incur up to approximately $ million of debt financing. Based on, among other things, our current stockholders’ equity and our expected debt repayments during the next few months, we expect that our debt-to-capitalization ratio immediately after the distribution and the payment of the cash dividend will be approximately 22%. Our ability to make principal and interest payments on debt incurred to finance payment of the cash dividend will depend on our future operating performance, which will depend on a number of factors, many of which are outside our control. These factors include prevailing economic conditions, fluctuations in prices for our products, prices for natural gas and other energy costs and competitive and other factors affecting our business and operations. Although we believe that our cash flow from operations, together with our other sources of liquidity, will be adequate to make required payments on our indebtedness, finance anticipated capital expenditures and fund working capital requirements, we cannot assure you that this will be the case.
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In addition, the terms of our indebtedness will impose financial and other covenants on us and will limit the amount of cash or borrowings available to us in the future, and this could adversely affect our operations in various ways, including the following:
| • | our ability to respond to adverse economic and industry conditions could be limited; | |
| • | we expect to dedicate a substantial portion of our cash flow from operations to the payment of principal and interest on our indebtedness, which will reduce the available cash to pay for future business activities, including acquisitions, significant investments or significant capital expenditures; and | |
| • | we will have reduced ability to obtain additional financing to fund our future business activities. |
The Class B common stock will control the election of at least 85% of our board of directors.
Following the reclassification, holders of Class B common stock will be entitled to elect at least 85% of the members of our board of directors. Accordingly, if any person or group of persons is able to exercise a majority of the voting power of our outstanding shares of Class B common stock, that person or group will be able to eventually obtain control of CXP by electing a majority of our board of directors. Consequently, the creation and issuance of Class B common stock could render us more susceptible to unsolicited takeover bids from third parties. This risk is partially mitigated by the governance proposals and the stockholders’ rights plan proposal and by an additional provision to be included in our certificate of incorporation to the effect that any person who beneficially owns 15% or more of the outstanding shares of Class B common stock may only vote in any election of directors that percentage of the shares of Class B common stock which is equal to the lesser of its percentage ownership of Class B common stock or its percentage ownership of Class A common stock. This provision is intended to protect our public stockholders by ensuring that anyone seeking to accumulate shares of our common stock must acquire a substantial ownership interest in each class of our common stock in order to exercise control over CXP.
Stock sales following the distribution may affect our stock price.
All of the shares of our Class A common stock and Class B common stock distributed by Centex in the distribution, other than shares distributed to our affiliates, will be eligible for immediate resale in the public market. It is likely that some Centex stockholders will sell shares of our Class A common stock and Class B common stock received in the distribution for various reasons, including the fact that our business profile or market capitalization does not fit their investment objectives. Moreover, a substantial number of shares of Centex common stock are held by index funds tied to the Standard & Poor’s 500 Index or other indices. These index funds may be required to sell the shares of our capital stock that they receive in the distribution, as our stock may not be included in the underlying indices. Any sales of substantial amounts of our Class A common stock or Class B common stock in the public market, or the perception that such sales might occur, could depress the market price of our Class A common stock or Class B common stock. We are unable to predict whether substantial amounts of our Class A common stock or Class B common stock will be sold in the open market following the distribution.
We are currently dependent on Centex for the performance of certain corporate functions.
In the past, Centex has performed certain significant corporate functions for us, including legal functions, accounting, benefit program administration, insurance administration and internal audit services. Centex will continue to provide some of these services to us during an interim period after the distribution in exchange for a fee payable by us pursuant to an administrative services agreement. For a description of the terms of this agreement, see “Proposal One: The Reclassification and Related Transactions — Relationship Between Centex and CXP after the Distribution.” Once the distribution is completed, we intend to take steps to create our own, or to engage third parties to provide, corporate business functions that will replace many of those currently provided by Centex. As an independent public company, we will be required to bear the costs of replacing these services, which costs will likely exceed the fees we pay to Centex. There can be no assurance that we will be able to perform, or engage third parties to provide,
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The governance proposals and stockholders’ rights plan proposal could limit another party’s ability to acquire us and could deprive you of an opportunity to obtain a takeover premium for your shares of our common stock.
The governance proposals and stockholders’ rights plan proposal, together with the Delaware business combination statute, as described under “Proposals Two, Three, Four, Five, Six and Seven: Governance Proposals, Authorized Capital Increase Proposal and Stockholders’ Rights Plan Proposal — Purpose and Effects of the Governance Proposals” and “— Stockholders’ Rights Plan Proposal,” may discourage unsolicited takeover bids from third parties or efforts to remove incumbent management or our board of directors, or make these actions more difficult to accomplish, even if a substantial number of stockholders believe that these actions would be in their best interests. In addition, upon completion of the reclassification and distribution, our certificate of incorporation will contain a special voting provision that may limit the voting rights of holders of 15% or more of the Class B common stock, as described under “Proposal One: The Reclassification and Related Transactions — Description of the Reclassification Proposals — Limitation on Voting Rights of Class B Common Stock”, which may have the effect of delaying, deterring or preventing a change in control of CXP.
If the authorized capital increase proposal is approved, we will have a significant number of authorized but unissued shares which, if issued, could dilute the equity interests of our existing stockholders and adversely affect earnings per share.
If a significant number of additional shares of our Class A common stock are issued following the distribution, the equity interests of our existing stockholders would be diluted and our earnings per share could be adversely affected. If the authorized capital increase proposal is approved, immediately following the distribution, we will be authorized to issue up to additional shares of our Class A common stock, 10,780,000 shares of Class B common stock and 5,000,000 shares of preferred stock. Our board of directors has full discretion to issue additional shares at any time in the future without stockholder approval, subject to applicable legal, stock exchange and other regulatory requirements.
Forward-looking statements may prove inaccurate.
This proxy statement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties that may cause our actual results to be materially different from planned or expected results. Those risks and uncertainties include, but are not limited to:
| • | levels of construction spending in major markets; | |
| • | price fluctuations and supply and demand for cement, wallboard and our other products; | |
| • | significant changes in the cost of natural gas, other energy costs and cost of other raw materials; | |
| • | availability of raw materials; | |
| • | the cyclical nature of our businesses; | |
| • | national and regional economic conditions; | |
| • | interest rates; | |
| • | seasonality of our operations; | |
| • | unfavorable weather conditions during peak construction periods; |
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| • | changes in and implementation of environmental and other governmental regulations; | |
| • | the ability to successfully identify, complete and efficiently integrate acquisitions; | |
| • | the ability to successfully penetrate new markets; | |
| • | international events that may disrupt the world economy; | |
| • | unexpected operating difficulties; and | |
| • | competition from new or existing competitors. |
In general, we are subject to the risks and uncertainties of the construction industry and of doing business in the U.S. The forward-looking statements are made as of the date of this proxy statement, and we undertake no obligation to update them, whether as a result of new information, future events or otherwise.
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PROPOSAL ONE:
THE RECLASSIFICATION AND RELATED TRANSACTIONS
Background of the Reclassification and the Related Transactions
Centex, through its subsidiaries, is a multi-industry company with five principal business segments: home building, financial services, construction products, construction services and investment real estate. Prior to April 19, 1994, we were a wholly-owned subsidiary of Centex. On April 19, 1994, we completed an initial public offering of 51% of our common stock. As a result of the initial public offering, Centex’s percentage ownership interest in CXP was reduced to 49%.
Principally as a result of certain repurchases by CXP of its common stock from the public since fiscal year 1997, Centex’s ownership interest in CXP has increased in recent years, and Centex owns approximately 65% of the outstanding shares of our common stock as of the date of this proxy statement.
During April and May 2003, Centex’s senior management informally advised certain members of our board of directors and management that, because of the continued strong performance of Centex’s core home building and financial services businesses and the likelihood that Centex’s capital would continue to be allocated to its homebuilding business, they were considering whether it was still desirable for Centex to maintain its current ownership interest in CXP. In that regard, Centex further indicated that, although it had made no determination to do so, Centex was evaluating the possibility of distributing to its stockholders on a tax-free basis all or a portion of its equity interest in CXP.
In early June 2003, Centex summarized for our board of directors the preliminary terms under which Centex would be willing to discuss a possible distribution by Centex of its interest in CXP to its stockholders. Centex indicated that one of the principal purposes of the distribution would be to eliminate the competition for capital between CXP and Centex’s other businesses and permit a sharper focus by Centex’s management on its core businesses. Centex also emphasized that it would only consider a distribution of its interest in CXP if the transaction could be accomplished on a tax-free basis. In order for the transaction to be tax-free, Centex indicated that it believed that, among other things, it would be necessary for CXP to reclassify the shares of our common stock held by Centex into a new class of common stock with increased voting rights that would then be distributed to Centex’s stockholders. Centex also indicated that it believed it would be appropriate to discuss the payment by us to our stockholders of a special cash dividend in the range of $100 million to $150 million.
To facilitate a full and fair evaluation of any transactions to be discussed with Centex, in June 2003, our board of directors formed a special committee of its independent directors consisting of Robert L. Clarke (Chairman), Michael R. Nicolais, Harold K. Work and F. William Barnett. Our board of directors discussed and confirmed that each committee member is independent from Centex and its management, and satisfied itself that the committee members could independently evaluate the proposed transactions free of influence from Centex or its management. The special committee was charged with, among other things, reviewing, considering and negotiating the terms, conditions and merits of a possible distribution by Centex of its interest in CXP and any related transactions and determining whether these transactions are advisable, fair to, and in the best interests of, our current stockholders (other than Centex). Due to the amount of time that it was expected members of the special committee would need to devote to the evaluation and consideration of the distribution and related transactions, the board of directors determined that the chairman of the special committee should be paid a one-time fee of $17,500, each other director should be paid a one-time fee of $10,000, and each committee member should be paid a fee of $2,000 for each meeting of the special committee he attended in person or by telephone, plus expenses.
To assist it in evaluating the proposed transactions, the special committee, after interviewing several firms, selected the law firm of Haynes and Boone, LLP to serve as its legal advisors, and the investment banking firm of Bear, Stearns & Co. Inc. to serve as its financial advisors. Haynes and Boone and Bear Stearns provided to the special committee certain advice and assistance with respect to the structuring and
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Each of Haynes and Boone and Bear Stearns will receive customary fees as the legal advisors and financial advisors, respectively, for the performance of their services to the special committee in connection with the proposed transactions.
On July 1, 2003, Centex provided to counsel for the special committee preliminary drafts of transaction documents that reflected certain of the principal terms it would be willing to discuss with the special committee. On July 2, 2003, at a meeting of the special committee, at which its legal counsel was present, the special committee considered the basic terms of the distribution and related transactions as reflected in such preliminary drafts, including the possible reclassification and cash dividend. The special committee also discussed the proposed terms of the engagement letter to be entered into with Bear Stearns. The special committee discussed possible alternative transactions that it believed Centex might have an interest in pursuing in the event that the special committee was not willing to pursue the distribution and related transactions. Bear Stearns also attended a portion of this meeting to answer questions from the special committee about the distribution and related transactions and alternatives, and to discuss the analysis expected to be performed by Bear Stearns in determining the financial fairness of the transactions to our stockholders (other than Centex). At this meeting, the special committee met with four senior members of our management team on an individual basis to seek their respective input on these transactions, their effect on us, and ideas concerning our possible strategies as a fully independent company.
From July 1, 2003 until July 17, 2003, the special committee and the financial and legal advisors to the special committee evaluated the terms and conditions of the possible distribution and related transactions, considered the nature and scope of the amendments to our certificate of incorporation and bylaws that would be needed in connection with these transactions, considered governance issues that would arise if we became a fully independent company and began formulating proposed changes to each of the draft transaction documents and the charter and bylaw amendments.
On July 17, 2003, the special committee, along with its legal advisors and financial advisors, met to continue the evaluation of the proposed transactions. At this meeting, Bear Stearns made a presentation on the form, structure, terms and financial aspects of the proposed transactions. In its presentation Bear Stearns:
| • | provided a summary description of the proposed transactions and reviewed with the committee the primary terms of the proposed transactions; | |
| • | provided a financial and capital markets overview of CXP, which presentation included an analysis of CXP’s recent stock performance and the stock performance of several comparable publicly-traded companies; | |
| • | discussed the considerations of a cash dividend as proposed by Centex versus a potential share repurchase by us, including the value received by our stockholders, the tax implications to our stockholders and the likely effect on our earnings per share; | |
| • | delivered a pro forma financial analysis of the proposed transactions versus several alternatives that the special committee might consider in lieu of or in addition to the distribution and related transactions (including (1) effecting the distribution but not the cash dividend, (2) effecting the distribution, eliminating the cash dividend and then effecting a share repurchase and (3) effecting the distribution, the cash dividend and a share repurchase); | |
| • | discussed the capital markets considerations of the proposed transactions; | |
| • | discussed stock float, trading volume and research analyst coverage of several comparable publicly-traded companies; |
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| • | discussed in detail an analysis of comparable precedent spin-off transactions; and | |
| • | discussed in detail an analysis of publicly-traded companies with dual-class stock structures. |
Based upon their review and analysis of the terms and financial aspects of the distribution and related transactions being discussed by the parties, Bear Stearns recommended that the special committee consider certain adjustments to the structure of these transactions that they believed would provide greater value to CXP and its minority public stockholders. Bear Stearns also suggested that the special dividend be at the lower end of the range initially discussed by Centex and CXP. Bear Stearns advised that the reclassification and distribution on the terms initially discussed with Centex (under which Centex would convert all of the shares of our common stock held by it into Class B common stock, followed by a distribution of all of the Class B common stock to holders of Centex’s common stock) would not enhance the public float and liquidity of our common stock. For that reason, Bear Stearns recommended that the reclassification be structured in such a way that Centex would convert less than all of its shares of our common stock into Class B common stock, and then distribute to its stockholders both its Class B common stock and the remaining shares of our common stock held by it. Specifically, Bear Stearns suggested that the transaction should provide for the conversion of a number of shares equal to approximately one-half of the outstanding shares of our common stock into Class B common stock so that after the reclassification there would be approximately equal numbers of outstanding shares of Class B common stock and Class A common stock. This approach would increase the float and liquidity of our common stock, which Bear Stearns believed would be more advantageous for the minority public stockholders and would have no material adverse consequences to Centex and its stockholders. After extensive discussion and analysis of the approach suggested by Bear Stearns, the special committee determined to request the changes to the reclassification and distribution recommended by Bear Stearns.
At the July 17, 2003 meeting, the special committee also considered a general overview of the nature and substance of the transaction documents previously provided by Centex and discussed each of the material terms in the transaction documents in greater detail. The special committee also considered potential corporate governance measures that we might consider placing in our certificate of incorporation and bylaws in order to deter hostile takeovers. The special committee also considered the legal issues and financial implications of declaring the cash dividend.
On the morning of July 18, 2003, the special committee, along with its legal advisors and financial advisors met with Mr. Laurence E. Hirsch, Chairman and Chief Executive Officer of Centex, and with Centex’s financial advisors, Merrill Lynch, Pierce, Fenner & Smith Incorporated, to discuss their rationale for the distribution and related transactions and the alternatives to these transactions that had been considered by Centex. Mr. Hirsch explained that Centex was considering the distribution because, among other things, it would eliminate the competition for capital between CXP and Centex’s other businesses and permit a sharper focus by Centex’s management on its core businesses. Mr. Hirsch also explained that Centex had considered alternatives to the distribution, including a possible sale of CXP (or its stake in CXP), maintaining the status quo with CXP continuing as a majority-owned subsidiary of Centex or purchasing the minority interest in CXP, but had determined that these alternatives had significant disadvantages from Centex’s viewpoint. Merrill Lynch discussed with the special committee some of the key terms of the distribution and related transactions. The special committee and its advisors questioned Mr. Hirsch and the Merrill Lynch representatives regarding various transaction terms and raised certain key concerns of the special committee. One of the principal concerns expressed by the special committee was that the reclassification as proposed did not directly enhance the float and liquidity of our common stock. In addition, the special committee indicated that while it was comfortable with a special dividend, it preferred to see the aggregate dividend at the lower end of the range initially discussed with Centex.
On the afternoon of July 18, 2003, the special committee met again to continue discussions regarding the terms and provisions contained in the transaction documents and the proposed amendments to our certificate of incorporation and bylaws and to further analyze the proposed transactions in light of the special committee’s meetings earlier that morning with representatives of Centex and Merrill Lynch. During this meeting, the special committee extensively discussed and evaluated the merits of the proposed
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Between July 18, 2003 and July 21, 2003, Centex and its advisors and the special committee and its advisors engaged in negotiations regarding the terms of the definitive agreements to be entered into in connection with the distribution and related transactions, including the merger agreement, the distribution agreement and the necessary amendments to our certificate of incorporation and bylaws. In the course of these negotiations, Centex agreed to various accommodations requested by the special committee and its counsel with respect to the terms of the transaction documents. In particular, Centex agreed to the following changes proposed by the special committee:
| • | to pay our expenses with respect to the proposed transactions in the event that the proposed transactions are not consummated for any reason; | |
| • | to revise the distribution agreement provisions to limit the circumstances in which we would be obligated to provide indemnification against certain tax liabilities; | |
| • | to ensure that the conditions to our obligations to pay the cash dividend and to effect the reclassification were substantially equivalent to the obligations of Centex to effect the distribution; | |
| • | to require that the administrative services and office space currently being provided by Centex to CXP will continue to be so provided upon substantially the same terms for a limited time following completion of the distribution; | |
| • | to include additional amendments to our certificate of incorporation relating to voting limitations of Class B common stock, the calling of a stockholders’ meeting, institution of a super-majority voting provision for amendments to the charter and the increase in our authorized capital stock; and | |
| • | to cause our board of directors to consider the adoption of a stockholders’ rights plan. |
During this period, the special committee expressed concern regarding the fact that CXP would be subject to covenants limiting its ability to engage in various types of transactions during the two-year period following the distribution and regarding certain related tax indemnities given by CXP to the Centex group. The special committee indicated that it believed that it was important for the governance proposals and stockholders’ rights plan proposal to be submitted to and considered by our stockholders in order, among other things, to reduce the likelihood of liability under these tax indemnification provisions. The special committee was also concerned that CXP could be more susceptible to unsolicited takeover bids from third parties, including offers that our board of directors may regard as being below our intrinsic value or as not being in the best interests of our stockholders. Centex indicated to the special committee that it intended to vote in favor of such proposals.
On the evening of July 20, 2003, the special committee met with its legal advisors to review and discuss the revised transaction documents. On July 21, 2003, the special committee reconvened and continued its review of the transaction documents. Bear Stearns delivered and discussed with the special committee a written report and its opinion that the reclassification, the cash dividend and the distribution, taken as a whole, were fair from a financial point of view to CXP’s stockholders, other than Centex. After a careful evaluation of the proposed transactions and their anticipated effects on CXP and its stockholders
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Subsequently, that evening our board of directors convened a meeting at which the special committee reported to our board of directors the results of their consideration of the proposed transactions and their recommendations. The special committee advised that the proposed transactions were advisable, fair to and in the best interests of CXP and its stockholders (other than Centex) and recommended to our board of directors that it should approve the proposed transactions and each of the merger agreement, the distribution agreement, the certificate of incorporation and the bylaws and that our board of directors should submit such proposals to our stockholders. Bear Stearns also attended this meeting and summarized its report and opinion for the full board. Based upon the recommendation of the special committee, our board of directors determined that the proposed transactions were advisable, fair to and in the best interests of CXP and its stockholders and it approved the proposed transactions and each of the merger agreement, the distribution agreement, and the amendments to the certificate of incorporation and the bylaws. Our board of directors also resolved to submit the proposed transactions to our stockholders for their approval.
By reason of the retirement policy of our board of directors, Mr. Harold K. Work formally retired from our board of directors effective as of our annual stockholders meeting held in the morning of July 21, 2003. However, due to Mr. Work’s extensive business experience and long-standing involvement with CXP, the special committee requested that Mr. Work continue to participate in certain portions of the committee’s deliberations on July 21. While not a formal member of the special committee at the time of its vote to approve the transactions, Mr. Work did state that he supported the special committee’s conclusions and final decision.
In the evening of July 21, 2003, Centex and CXP entered into the merger agreement and distribution agreement, and each of them issued a public announcement regarding the distribution and related transactions.
CXP’s Reasons for the Reclassification and Related Transactions
Our board of directors, upon the recommendation of the special committee, has unanimously determined that the distribution and related transactions, including the reclassification, are advisable, fair to and in the best interests of CXP and our stockholders. In reaching its conclusion, our board of directors and the special committee considered a number of factors including the following:
Expected Benefits of the Transactions to CXP and its Stockholders. The special committee and our board of directors considered the following expected benefits of the proposed transactions:
| • | As a 65% owned subsidiary, we currently must compete for capital with Centex’s other businesses. The proposed transactions will permit us to manage our business and growth opportunities without regard to considerations or limitations related to Centex’s other businesses, including capital structure limitations required for Centex to maintain its current credit rating. | |
| • | The proposed transactions will permit us to pursue our business interests independent of Centex, particularly with respect to acquisitions, business and asset sales, and other corporate opportunities, and are designed to enhance the long-term value of CXP. | |
| • | The proposed transactions will significantly increase the public float and liquidity of our capital stock by increasing the number of shares held by stockholders (other than Centex) from about 6.5 million shares to about 18.4 million shares, which includes shares of the Class A common stock and shares of the Class B common stock. The proposed transactions will also significantly increase the public float and liquidity of our existing class of common stock by increasing the number of shares of that class held by stockholders (other than Centex) from about 6.5 million shares to about 9.2 million shares. In addition, the transactions will result in a broader stockholder base when Centex distributes the shares of Class B common stock and Class A common stock held by it to its |
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| stockholders. We estimate that there will be at least 28,000 beneficial owners of our capital stock immediately following the distribution, which represents more than ten times our current number of beneficial owners. | ||
| • | We expect that a broader stockholder base, coupled with increased public float and liquidity of our capital stock, may attract additional analyst coverage of CXP, which we believe would enhance the market’s awareness of our capital stock and stimulate interest from new investors. | |
| • | We believe that an expansion of our stockholder base and broader exposure in the investment community will enhance our ability to use our capital stock as an acquisition currency and as a means of raising capital. | |
| • | Our stockholders will receive immediate tangible value through the special one-time cash dividend. | |
| • | The transactions may permit our stockholders to share in any premium associated with a transfer of control of CXP, if such an event should occur. | |
| • | The proposed transactions will allow the public holders of our Class A common stock to elect one director, compared to the current inability to elect any directors due to Centex’s majority voting control. | |
| • | The proposed transactions are expected to enhance the attractiveness of our equity-based compensation plans due to the increased public float and liquidity of our capital stock, thereby increasing our ability to attract and retain quality employees. |
Economic and Financial Factors. The special committee and our board of directors considered the economic and financial factors associated with the proposed transactions, including the effect of the reclassification, the cash dividend and the distribution on the Class A common stock following the distribution, and the impact on our financial position following the distribution. In this regard the special committee and our board of directors considered the following factors:
| • | The reclassification and the distribution are structured to be tax-free to Centex’s stockholders. | |
| • | The advice of Bear Stearns that the trading characteristics of our Class A common stock, including trading volume and liquidity, institutional stockholdings and research analyst coverage, are likely to improve over time. | |
| • | Based on the ability of our businesses to generate significant cash flow, we do not expect that the payment of the cash dividend will materially adversely affect our ability to fund all of our operational needs. We believe that all or substantially all of our current funded indebtedness will be substantially repaid by December 31, 2003. Accordingly, we expect to have considerable borrowing capacity at the time of the payment of the special cash dividend. Based on, among other things, our current stockholders’ equity and our expected debt repayments during the next few months, we expect that our debt-to-capitalization ratio immediately after the distribution and the payment of the cash dividend will be approximately 22%. Moreover, we do not believe these borrowings will materially impair our ability to raise additional capital as necessary to fund any growth plans. |
Governance Matters. The special committee and our board of directors considered that, as a result of the elimination of Centex’s approximate 65% ownership stake through the reclassification and the distribution, we might be more vulnerable to attempts by third parties to acquire control of CXP in a manner not in the best interests of CXP and its stockholders. In that regard they considered the following factors:
| • | The distribution agreement limits our ability to undertake a merger, asset sale or similar transaction for two years following the distribution unless it can be established that such transaction will not impair the tax-free status of the distribution to Centex and its stockholders. | |
| • | The governance proposals and stockholders’ rights plan proposal, if approved, would give us additional means to ensure that we do not engage in any transactions that could cause the |
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| distribution to be taxable, thereby triggering our obligation to indemnify Centex under certain circumstances. The circumstances under which this indemnity obligation would apply are described under “— Tax Matters — Reclassification and Distribution” and “Description of the Merger Agreement and Distribution Agreement — The Distribution Agreement — Other Agreements — Indemnification Against Tax and Other Liabilities.” | ||
| • | If the governance proposals and the stockholders’ rights plan proposal are approved, we would be able to invoke these provisions in response to potentially coercive or abusive takeover tactics and efforts to acquire control of us at a price or on terms that are not in the best interests of all CXP stockholders. | |
| • | The risk that the dual class common stock structure could lead to a person or group gaining control of our board of directors by acquiring a majority of the Class B common stock, and the fact that this risk would be reduced if the governance proposals are approved. | |
| • | The fact that the ability of the holders of Class B common stock to elect at least 85% of our board of directors will not provide those holders with materially different rights than Centex currently possesses because, as the holder of approximately 65% of our common stock, Centex currently has the ability to control the election of our entire board of directors. |
Negative Factors. In addition, the special committee and our board of directors considered and balanced against the potential benefits of the reclassification and related transactions a number of potentially negative factors, including the following:
| • | The proposed transactions require us to borrow a significant amount of funds in order to finance the cash dividend. | |
| • | There may be a short-term adverse impact on the market price of our Class A common stock resulting from any sales of Class B common stock or Class A common stock by Centex stockholders who receive such shares in the distribution. | |
| • | The proposed transactions potentially limit our ability to undertake some types of transactions for a period of time in the future which, if pursued or undertaken, could impair the tax-free nature of the distribution to Centex and its stockholders and give rise to an indemnification obligation of CXP to Centex. | |
| • | An acquisition of CXP at any time within two years following the distribution could, in some circumstances, trigger the obligation to indemnify Centex and its stockholders against significant tax liabilities. See “— Tax Matters — Reclassification and Distribution.” | |
| • | In the past, Centex has performed certain corporate functions for us, including legal, accounting, benefit program administration, insurance administration and internal audit services. As an independent public company, we will be required, after an interim transition period, to replace these services, which costs will likely exceed the fees we pay to Centex. | |
| • | By becoming independent from Centex, CXP would lose any positive perceptions from which it may benefit as a result of being associated with a company of Centex’s stature and industry recognition. |
Procedural Factors. The special committee and our board of directors also considered the procedural protections that were implemented to ensure a fair and impartial evaluation and negotiation of the proposed transactions and to provide for consideration and approval of any transactions by our minority stockholders, including the following:
| • | Our board of directors formed a special committee composed solely of its outside, independent directors which evaluated, negotiated and ultimately made a recommendation to the board of directors with respect to the proposed transactions. |
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| • | The special committee hired its own independent financial advisor and legal counsel to assist and advise the special committee. | |
| • | It is a condition to approval of the merger agreement that holders of a majority of the shares of our common stock, other than Centex, must vote in favor of adopting the merger agreement. |
The factors described above were considered by the special committee and by our board of directors in their assessment of the proposed transactions. Neither the special committee nor our board of directors quantified or attached any particular weight to the various factors that it considered in reaching its determination that the proposed transactions are advisable and fair to and in the best interests of CXP and its stockholders. Different members of our board may have assigned different weights to different factors. In reaching its determination, the special committee and our board of directors took the various factors into account collectively and did not perform a factor-by-factor analysis.
Opinion of the Special Committee’s Financial Advisor
| Overview of Bear Stearns’ Fairness Opinion |
The special committee of our board of directors engaged Bear Stearns to act as its exclusive financial advisor in connection with the proposed reclassification, cash dividend and distribution, which are collectively referred to in this section as the “Transaction,” and to assist the special committee in evaluating and negotiating the Transaction. On July 21, 2003, Bear Stearns rendered its written opinion to the special committee that, as of such date, and based upon qualifications, assumptions, limitations and other matters set forth in the written opinion, the Transaction, taken as a whole, is fair from a financial point of view to the holders of shares of our common stock, other than Centex.
The full text of Bear Stearns’ written opinion dated July 21, 2003, which sets forth the assumptions made, matters considered and qualifications and limitations on the review undertaken by Bear Stearns, is attached as Appendix E to this proxy statement. You are urged to read the Bear Stearns opinion in its entirety. In reading the description of the Bear Stearns fairness opinion set forth below, you should be aware that such fairness opinion:
| • | was provided to the board of directors and the special committee for their benefit and use in connection with their consideration of the Transaction; | |
| • | did not constitute a recommendation to the board of directors or the special committee in connection with the Transaction; | |
| • | does not constitute a recommendation to any holders of our common stock as to how to vote in connection with the reclassification proposal; | |
| • | did not address CXP’s underlying business decision to pursue the Transaction, the relative merits of the Transaction as compared to alternative business strategies that might exist for CXP, the financing of the Transaction or the effects of any other transaction in which CXP might engage; and | |
| • | did not express an opinion as to the price or range of prices at which the shares of our common stock would trade subsequent to the announcement of the Transaction or as to the price or range of prices at which the shares of our Class A common stock or Class B common stock may trade subsequent to the consummation of the Transaction. |
Although Bear Stearns evaluated the financial fairness of the Transaction, the terms and conditions of the Transaction were determined by arm’s-length negotiations between the special committee and Centex. Bear Stearns provided advice to the special committee during the course of such negotiations as requested by the special committee. None of Centex, CXP, our board of directors or the special committee provided specific instructions to, imposed any limitations on the scope of investigation by, or put in place any procedures to be followed or factors to be considered by, Bear Stearns in performing its analyses or providing its fairness opinion.
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In connection with rendering its fairness opinion, Bear Stearns, among other things:
| • | reviewed the final drafts of the merger agreement and the distribution agreement; | |
| • | reviewed the final drafts of the restated certificate of incorporation, including the terms of the Class B common stock and Class A common stock as described therein, and the amended and restated bylaws; | |
| • | reviewed CXP’s Annual Reports to Stockholders and Annual Reports on Form 10-K for the fiscal years ended March 31, 2001 through 2003, its preliminary results for the quarter ended June 30, 2003 and its Current Reports on Form 8-K for the three years ended the date thereof; | |
| • | reviewed certain operating and financial information relating to CXP’s business and prospects, including projections for the five years ended March 31, 2008, all as prepared and provided by CXP’s management; | |
| • | met with certain members of CXP’s senior management to discuss CXP’s business, operations, historical and projected financial results and future prospects both on a status quo basis and giving effect to the Transaction; | |
| • | met with certain members of Centex’s senior management and with the financial advisors of Centex to discuss Centex’s strategic and financial rationale for the Transaction; | |
| • | met with the special committee to discuss the Transaction rationale, the Transaction structure and its impact on the public holders of our common stock and alternatives for enhancing the stock float of our common stock; | |
| • | reviewed the historical prices, trading multiples, trading volumes and stock float of our common stock; | |
| • | reviewed publicly available financial data, stock market performance data, trading multiples and stock float of companies which Bear Stearns deemed generally comparable to CXP; | |
| • | reviewed the terms, stock price performance and stock float characteristics of selected spin-off transactions and step-up spin-off transactions which Bear Stearns deemed generally comparable to the Transaction; | |
| • | reviewed the trading performance of companies with dual-class stock structures that Bear Stearns deemed generally comparable to the dual-class stock structure that CXP will maintain after consummation of the Transaction; | |
| • | reviewed the pro forma financial results, financial condition and capitalization of CXP giving effect to the Transaction; and | |
| • | conducted such other studies, analyses, inquiries and investigations as Bear Stearns deemed appropriate. |
In preparing its opinion, Bear Stearns relied upon and assumed, without independent verification, the accuracy and completeness of the financial and other information provided by CXP, including, without limitation, the projections. With respect to CXP’s projected financial results, Bear Stearns relied on representations that they had been reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior management of CXP as to the expected future performance of CXP. Bear Stearns did not, and does not, assume any responsibility for the independent verification of any such information or of the projections provided to it, and Bear Stearns further relied upon the assurances of the senior management of CXP that they were unaware of any facts that would make the information and projections provided to Bear Stearns incomplete or misleading.
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In arriving at its opinion, Bear Stearns did not perform or obtain any independent appraisal of the assets or liabilities (contingent or otherwise) of CXP, nor was Bear Stearns furnished with any such appraisals. Bear Stearns assumed, with the consent of the special committee, that:
| • | the reclassification and the merger will qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code; | |
| • | the distribution will qualify as a tax-free transaction within the meaning of Section 355 of the Internal Revenue Code; | |
| • | the cash dividend will be a taxable dividend to CXP’s stockholders; | |
| • | the administrative services agreement, the intellectual property agreement and the sublease agreement, when executed, will provide that the transactions and services contemplated by such agreements will be effected on terms substantially equivalent to the current arrangements between Centex and CXP with respect thereto; and | |
| • | the Transaction will be consummated in a timely manner and in accordance with the terms of the merger agreement and distribution agreement without any limitations, restrictions, conditions, amendments, waivers or modifications, regulatory or otherwise, that collectively would have a material effect on CXP or the stockholders of CXP (other than Centex). |
| Summary of Bear Stearns’ Reviews and Analyses |
The following is a summary of the principal reviews and financial and valuation analyses presented by Bear Stearns to the special committee at its meeting held on July 21, 2003. In order to understand fully the reviews and financial and valuation analyses used by Bear Stearns, any information presented in tabular format must be read together with the accompanying text. The tables alone do not represent a complete description of any such reviews or financial and valuation analyses. This summary does not purport to be a complete description of the analyses underlying the Bear Stearns fairness opinion. All such reviews and financial and valuation analyses were based on information available to Bear Stearns on July 21, 2003, and Bear Stearns has assumed no responsibility for updating or revising its opinion based on circumstances or events occurring after such date, except as may be requested by the special committee in accordance with the terms of its engagement letter with Bear Stearns.
The principal reviews and financial and valuation analyses, upon which the fairness opinion rendered by Bear Stearns was based, included the following:
| • | an equity market analysis, which included a review of (i) the stock price performance and trading characteristics of publicly traded subsidiaries that were the subject of recent spin-offs, including seven spin-offs in which the publicly traded subsidiary effected a recapitalization of its capital stock into high vote (with superior voting rights relating solely to the election of directors) and low vote stock in order to permit the parent company to distribute the subsidiary stock to its stockholders on a tax-free basis (which we refer to as “step-up spin-offs”) and (ii) the historical trading prices of high vote and low vote stock of certain public companies with dual classes of common stock, including six of the publicly traded subsidiaries that were the subject of the step-up spin-offs. | |
| • | an analysis of the financial effects of the Transaction on certain historical and projected credit statistics and earnings estimates for CXP. | |
| • | a stock market performance analysis involving a review and evaluation of the historical stock price performance, trading multiples and stock float of the shares of CXP common stock as compared to similar data for other publicly traded companies that Bear Stearns regarded as comparable. |
In connection with its equity market analysis, Bear Stearns stated that it could not predict how shares of CXP’s common stock would perform after the Transaction or what trading differences, if any, would likely arise between the Class B common stock and the Class A common stock or whether any such differences would be material. However, Bear Stearns noted that, in the case of the step-up spin-offs that
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In connection with its analysis of the financial effects of the Transaction, Bear Stearns noted that the Transaction would involve the payment of a substantial one-time cash dividend to the holders of CXP’s common stock and that this dividend would be funded through the incurrence of additional debt. Bear Stearns reviewed projections provided by CXP for the fiscal years ending March 31, 2004 and 2005 and noted that these projections indicated that CXP expects to generate substantial cash flows that would be available to service this additional debt. Bear Stearns’ analysis showed that CXP’s pro forma ratio of debt to EBITDA for the twelve months ended June 30, 2003 would be below the median ratio of its peer group.
In connection with its stock market performance analysis, Bear Stearns noted that, although CXP’s common stock has performed reasonably well as compared to its peer group and the S&P 500 Index, it has tended to trade at a lower price/earnings ratio than CXP’s peer group. Bear Stearns also indicated that one factor that likely affected the price/earnings ratio of our stock was the fact that we have a much lower public float than our peer group. In this regard, Bear Stearns again noted that our public float would improve as a result of the Transaction.
Equity Market Analysis. In its equity market analysis, Bear Stearns reviewed and evaluated (i) the stock price performance and trading characteristics of publicly traded subsidiaries that were the subject of recent spin-offs, including seven step-up spin-offs and (ii) the historical trading prices of high vote and low vote stock of certain public companies with dual classes of common stock, including six public companies that were the subject of the step-up spin-offs.
Selected Precedent Spin-Off Analysis. Bear Stearns reviewed and analyzed 26 completed spin-offs of publicly traded subsidiaries that were announced since 1998 and also reviewed and analyzed seven step-up spin-offs completed since 1995.
The following table identifies the seven step-up spin-offs reviewed by Bear Stearns:
Precedent Step-Up Spin-Offs
| Announce Date | Effective Date | Parent Co. | Spin Co. | |||||||
| 11/06/00 | 11/29/01 | Unitrin | Curtiss-Wright | |||||||
| 05/17/00 | 06/20/00 | Silicon Graphics | MIPS Technologies | |||||||
| 10/27/99 | 10/10/00 | St. Joe Paper | Florida East Coast Industries | |||||||
| 05/17/99 | 10/22/99 | Harcourt General | Neiman-Marcus | |||||||
| 11/12/98 | 07/27/99 | IMS Health | Gartner | |||||||
| 03/31/95 | 10/02/95 | Peter Kiewit Sons | MFS Communications | |||||||
| 05/03/94 | 07/17/95 | Freeport McMoRan | Freeport McMoRan Copper & Gold | |||||||
Each of these step-up spin-offs involved a publicly traded subsidiary that underwent a recapitalization prior to the spin-off in which all or a part of the parent company’s shares were exchanged for, or converted into, high vote stock in order to permit the parent company to effect a tax-free distribution of the subsidiary shares to the parent company’s stockholders. In each of these step-up spin-offs, the only difference between the high vote and low vote stock was that the high vote class was afforded superior
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In connection with its analysis, Bear Stearns evaluated the low vote stock price performance of the recent step-up spin-offs. Bear Stearns noted that the low vote stock price performance on average outperformed the S&P 500 Index by 3.8% from the respective announcement date of each step-up spin-off to its effective date plus 30 days. The following table summarizes the average stock price performance of the low vote stock class relative to the S&P 500 Index over the specified time periods:
Precedent Step-Up Spin-Offs — Average Low Vote Stock
| One Day | One Day | |||||||||||||||||
| Prior to | One Day | One Day Prior | One Day Prior | Prior to | ||||||||||||||
| Announce vs. | Prior to | to Effective Date | to Effective Date | Announce vs. | ||||||||||||||
| Announce | Announce vs. | vs. Effective Date | vs. Effective Date | Effective Date | ||||||||||||||
| + 5 Days | Effective Date | + 5 Days | + 30 Days | + 30 Days | ||||||||||||||
| (6.3)% | (0.8)% | (2.2)% | 5.5% | 3.8% | ||||||||||||||
Additionally, Bear Stearns compared the trading characteristics of the low vote stock for the 60 days prior to the announcement of each step-up spin-off to the trading characteristics for the 60 days after the effective date. Bear Stearns noted that the average daily trading volume of the low vote shares increased on average by 138.4% as a result of the step-up spin-off.
Bear Stearns also examined the pre- and post-spin stock float in each of the seven step-up spin-offs. Bear Stearns observed that the Peter Kiewit Sons/ MFS Communications transaction was the only step-up spin-off in which the float of the low vote stock increased significantly and directly, with the publicly-held low vote shares in that transaction increasing by approximately 2.88x. In the other six step-up spin-offs, there was no immediate increase in the stock float for the low vote class of stock. In the Transaction as contemplated, Bear Stearns noted that the float of CXP’s existing class of common stock would increase by approximately 1.44x, thereby creating a significantly larger pool of shares available for public trading.
Although Bear Stearns viewed the above step-up spin-offs as being more comparable to the Transaction, Bear Stearns also reviewed a broader group of 26 spin-offs of publicly traded subsidiaries announced since 1998. Bear Stearns examined the stock price performance of these spin-offs which, on average, underperformed the S&P 500 Index by (7.9%) from the respective announcement date of each spin-off to its effective date plus 30 days. The following table summarizes the average stock price performance of the stock of these spin-offs relative to the S&P 500 Index over specified periods:
Precedent Spin-Offs Since 1998 — Average Stock
| One Day | One Day | |||||||||||||||||
| Prior to | One Day | One Day Prior | One Day Prior | Prior to | ||||||||||||||
| Announce vs. | Prior to | to Effective Date | to Effective Date | Announce vs. | ||||||||||||||
| Announce | Announce vs. | vs. Effective Date | vs. Effective Date | Effective Date | ||||||||||||||
| + 5 Days | Effective Date | + 5 Days | + 30 Days | + 30 Days | ||||||||||||||
| (3.8)% | (9.3)% | (4.1)% | 0.6% | (7.9)% | ||||||||||||||
Additionally, Bear Stearns compared the trading characteristics of the stock of each of the broader group of precedent spin-offs for the 60 days prior to the spin-off announcement to the trading characteristics for the 60 days after the effective date. Bear Stearns noted that the average daily trading volume of the stocks increased on average by 479.7% as a result of the spin-off.
Based on the precedent spin-off analysis described above, Bear Stearns stated that it could not predict how CXP’s common stock would perform after the Transaction. However, Bear Stearns noted that, in the case of the step-up spin-offs, on average, the average daily trading volume of the low vote stock increased significantly and, in the case of the broader group of spin-offs, on average, both float and the average daily trading volume of the stock that was spun off increased significantly. Furthermore, Bear Stearns noted that the Transaction would directly and significantly increase the total public float of CXP’s capital stock and
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Dual-Class Structure Trading Price Analysis. Bear Stearns examined the historical trading prices of 60 public companies with dual classes of common stock. Out of this broad group of companies with dual-class share structures, Bear Stearns segmented its analysis into two groups: (i) six companies that participated in step-up spin-off transactions similar to the Transaction (where the high vote stock had superior voting rights only in relation to the election of directors) and (ii) 54 other companies with differential voting structures (i.e., vote/no-vote or high vote/low vote structures).
For each of the six step-up spin-offs (excluding the Peter Kiewit Sons/MFS Communications transaction, which was not comparable due to the fact that there was only one publicly traded class of MFS Communications stock after the transaction), Bear Stearns analyzed the trading disparity between high vote and low vote common stock for certain periods after the effective date. This analysis showed that in the case of the step-up spin-offs, the high vote common stock traded on average at a discount to the low vote common stock:
Step-Up Spin-Offs — High Vote Stock Price (Discount)
| Effective Date | ||||||||||
| + 20 Trading Days | + 60 Trading Days | + 240 Trading Days | ||||||||
| (3.9 | )% | (3.8 | )% | (4.9 | )% | |||||
Additionally, Bear Stearns analyzed the same six step-up spin-offs based on the average trading price disparity between high vote and low vote common stock immediately after the effective date segmented into two groups: (i) a group in which the low vote common stock was the more liquid stock class (as defined as the stock class with the higher average daily trading volume for the 120 trading days after the effective date) and (ii) a group in which the high vote common stock was the more liquid stock class (as defined in the same manner). This analysis showed that in the case of the step-up spin-offs the high vote common stock traded on average at a greater discount when it was the less liquid of the two classes of common stock:
Step-Up Spin-Offs — High Vote Stock Price Premium (Discount) versus Liquidity
| Effective Date | ||||||||||||
| + 20 | + 60 | + 240 | ||||||||||
| Trading | Trading | Trading | ||||||||||
| Liquidity of Classes | Days | Days | Days | |||||||||
|
Low Vote More Liquid
|
(5.0 | )% | (4.9 | )% | (6.8 | )% | ||||||
|
High Vote More Liquid
|
(1.9 | )% | (1.4 | )% | (1.1 | )% | ||||||
Bear Stearns also analyzed the average trading disparity between high vote and low vote common stock for the step-up spin-offs for certain trading periods prior to June 30, 2003. Of the six step-up spin-offs examined above, five had dual-class share structures as of June 30, 2003. Freeport McMoRan Copper & Gold was excluded since its dual-class shares were collapsed into one share class in 2002. In all five cases, the low vote class was the more liquid share class. The analysis showed that in the case of the
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Step-Up Spin-Offs — High Vote Stock Price (Discount)
| Trading Days Prior to 6/30/03 | ||||||||||
| 20 Trading Days | 60 Trading Days | 240 Trading Days | ||||||||
| (2.5 | )% | (3.2 | )% | (4.5 | )% | |||||
Although Bear Stearns viewed the dual-class structures of the step-up spin-offs as being more comparable to the Transaction, Bear Stearns also examined the historical trading prices of 54 other public companies with dual-classes of common stock. In particular, Bear Stearns analyzed the average trading price disparity between high vote and low vote common stock for certain trading periods prior to June 30, 2003. This analysis showed that in these 54 dual-class structures, the high vote common stock traded on average at a premium to the low vote common stock:
Other Dual-Class Structures — High Vote Stock Price Premium
| Trading Days Prior to 6/30/03 | ||||||||||
| 20 Trading Days | 60 Trading Days | 240 Trading Days | ||||||||
| 3.5 | % | 4.7 | % | 5.2 | % | |||||
For these same 54 companies, Bear Stearns analyzed the trading price disparity between low vote and high vote common stock prior to June 30, 2003 segmented into two groups: (i) the low vote common stock was the more liquid stock class (as defined as the stock class with the higher average daily trading volume for the 120 trading days prior to June 30, 2003) and (ii) the high vote common stock was the more liquid stock class (as defined in the same manner). This analysis showed that in these 54 dual-class structures, the high vote common stock traded on average at a premium when it was both the more liquid and the less liquid share class:
Other Dual-Class Structures — High Vote Stock Price Premium
| Trading Days Prior to 6/30/03 | ||||||||||||
| Liquidity of Classes | 20 Trading Days | 60 Trading Days | 240 Trading Days | |||||||||
|
Low Vote More Liquid
|
4.0 | % | 5.4 | % | 6.1 | % | ||||||
|
High Vote More Liquid
|
0.8 | % | 0.8 | % | 0.9 | % | ||||||
Bear Stearns noted that it did not regard the dual-class structures of these 54 companies as being as comparable to the Transaction as the dual-class structures of the step-up spin-offs, given that (i) the nature of the superior voting rights of the high vote stock issued by these companies was not necessarily the same as the Class B common stock to be created in the Transaction, which has superior voting rights only as to the election of directors and (ii) in some cases there were economic and other differences between the classes of stock issued by these companies that did not relate solely to their voting rights.
Based on the dual-class structure trading price analysis described above, Bear Stearns stated that it could not predict what trading differences, if any, would likely arise between the Class B common stock and the Class A common stock after consummation of the Transaction or whether any such differences would be material. However, Bear Stearns noted that after the Transaction (i) the float of the Class A common stock and of the Class B common stock would be substantially equal, which should tend to mitigate any typical differences in trading volume due to the difference in float between the two classes, (ii) the only difference in voting rights between the Class B common stock and the Class A common
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Pro Forma Financial Analysis. Bear Stearns reviewed and analyzed certain financial effects of the Transaction on CXP. Bear Stearns noted that the Transaction would involve the payment of a substantial one-time cash dividend to the holders of CXP’s common stock and that this dividend would be funded through the incurrence of additional debt. Specifically, Bear Stearns analyzed the effect of the Transaction (including the cash dividend) on CXP’s (i) credit statistics for the last twelve months ended June 30, 2003 and for the projected fiscal year ended March 31, 2004 and (ii) estimated earnings per share for the projected fiscal years ending March 31, 2004 and March 31, 2005. Bear Stearns’ analysis compared actual or projected credit statistics and earnings estimates on a pro forma basis (i.e., giving effect to the Transaction, including incurrence of the debt required to fund payment of the dividend) to actual or projected credit statistics and earnings estimates on a status quo basis (i.e., without giving effect to the Transaction). Based on this analysis:
| • | CXP’s pro forma total debt/ EBITDA for the twelve months ended June 30, 2003 was 1.4x as compared to a status quo ratio of 0.5x, and its pro forma total debt/ EBITDA for the projected fiscal year ending March 31, 2004 would be 0.8x versus a status quo projected ratio of 0.0x. Bear Stearns noted that CXP’s pro forma ratio of total debt/ EBITDA for the twelve months ended June 30, 2003 of 1.4x was below the median ratio of total debt/ EBITDA for the twelve months ended June 30, 2003 of its peers of 3.0x. Bear Stearns noted that projections provided to it by CXP indicated that CXP expects to generate substantial cash flows that would be available to service the additional debt that would be incurred to fund payment of the cash dividend. Based upon these projections, the ratio of pro forma total debt/ EBITDA is expected to decline from 1.4x for the twelve months ended June 30, 2003 to 0.8x for the twelve months ended March 31, 2004. | |
| • | Additionally, after factoring in the estimated costs of CXP’s operating independently from Centex and additional interest costs from increased debt as a result of the cash dividend, Bear Stearns’ analysis suggested that the effect of these costs on CXP’s earnings per share for the fiscal years ending March 31, 2004 and March 31, 2005 would be a reduction of (4.2%) (or $0.14 per share) and (4.0%) (or $0.17 per share), respectively. |
CXP Stock Market Performance. Bear Stearns also reviewed and analyzed the historical stock price performance, trading multiples, trading volumes and stock float of the shares of our common stock and compared such data to various publicly traded companies deemed by Bear Stearns to be comparable to CXP. Among other things, Bear Stearns noted that CXP’s common stock had traded up since the beginning of 2003 and closed at $37.90 on July 18, 2003 (versus a high price during the past year of $43.99 and a low price during the past year of $31.25). Bear Stearns noted that the shares of CXP’s common stock had performed reasonably well versus its peer group and the S&P 500 Index, but that CXP’s common stock tended to trade at a lower price/ earnings ratio than its peer group. Bear Stearns also noted that, primarily by virtue of Centex’s majority ownership of approximately 65% of CXP’s common stock, CXP had much lower stock float than most of its peer group, and that the Transaction would result in an overall increase in CXP’s stock float.
| Other Considerations |
The preparation of a fairness opinion is a complex process that involves various judgments and determinations as to the most appropriate and relevant methods of financial and valuation analysis and the application of those methods to the particular circumstances. The opinion is, therefore, not necessarily susceptible to partial analysis or summary description. Bear Stearns believes that its analyses must be considered as a whole and that selecting portions of its analyses and the factors considered, without considering all of the analyses and factors, would create a misleading and incomplete view of the processes underlying its opinions. Bear Stearns did not form an opinion as to whether any individual analysis or
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The special committee retained Bear Stearns based upon Bear Stearns’ qualifications, experience and expertise. Bear Stearns is an internationally recognized investment banking firm which, as part of its investment banking business, is regularly engaged in the valuation of businesses and securities in connection with mergers and acquisitions, spin-offs and split-offs, recapitalizations, restructurings, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements and valuations for corporate and other purposes. In the ordinary course of business, Bear Stearns and its affiliates may actively trade the equity and debt securities and/or bank debt of Centex and CXP for its own account and for the accounts of its customers and, accordingly, may at any time hold a long or short position in such securities or bank debt.
Pursuant to an engagement letter, CXP agreed to pay Bear Stearns a financial advisory fee customary for such engagements. In addition, CXP agreed to reimburse Bear Stearns, upon request from Bear Stearns from time to time, for all out-of-pocket expenses, including the reasonable fees and expenses of its legal counsel, incurred by Bear Stearns in connection with its engagement. CXP has also agreed to indemnify Bear Stearns against specific liabilities in connection with its engagement, including liabilities under the federal securities laws. Except in connection with the Transaction, neither Centex nor CXP has paid Bear Stearns any fees for investment banking or other advisory services within the past five years.
Description of the Reclassification Proposal
If our stockholders approve the adoption of the merger agreement, our certificate of incorporation will, upon filing the certificate of merger with the Secretary of State of the State of Delaware, be amended and restated to include the reclassification proposals described below and included in Appendix C. The reclassification proposals include the changes necessary to permit the distribution to be tax-free to Centex and its stockholders.
For the distribution to be tax-free to Centex and its stockholders, current U.S. federal income tax law requires that, among other things, given the nature of Centex’s ownership interest in CXP, Centex must own, at the time of the distribution, capital stock of CXP having the right to elect at least 85% of our board of directors, and that Centex distribute all of that stock to its stockholders in a single transaction. Accordingly, the reclassification proposal creates a new Class B common stock of CXP that is entitled to elect at least 85% of our board of directors. All of the Class B common stock, together with the remaining shares of our Class A common stock owned by Centex, will be distributed by Centex to its stockholders promptly following the reclassification. Unless and until the holders of at least two-thirds of our Class A common stock and Class B common stock, voting together as a single class, vote to eliminate the special voting rights of the Class B common stock described in the previous sentence, the minimum number of directors on our board will be set at seven so that the holders of our Class A common stock will always be entitled to elect at least one director. The holders of the Class A common stock and the Class B common stock cannot eliminate the special voting rights of the Class B common stock until after the second anniversary of the distribution.
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The reclassification proposal also:
| • | provides for the designation of Class A common stock directors and Class B common stock directors and related matters; | |
| • | provides that vacancies on our board may be filled only by the directors, or if there are no directors, by the stockholders, of the class, whether Class A common stock or Class B common stock, in which the vacancy exists; | |
| • | provides that so long as any person or group of persons beneficially owns 15% or more of the outstanding shares of Class B common stock, then such person or group may only vote in any election of directors that number of shares of Class B common stock which is equal to the lesser of the percentage ownership of the number of shares of Class B common stock or shares of Class A common stock owned by it; and | |
| • | provides for the change of our name to . |
Authorization of Class A Common Stock and Class B Common Stock. If the authorized capital increase proposal is approved, together with the reclassification proposal, the number of shares of our authorized capital stock will be increased to 105,000,000 shares to be divided among three classes of capital stock: 5,000,000 shares of preferred stock, 80,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock. If the reclassification proposal is approved but the authorized capital increase proposal is not approved, then the current 52,000,000 shares of our authorized capital stock will be divided as follows: 2,000,000 shares of preferred stock, 40,780,000 shares of Class A common stock and 9,220,000 shares of Class B common stock. The authorized number of shares of any class of our capital stock may be increased or decreased by the vote of a majority of the outstanding shares of our capital stock. The Class A common stock and the Class B common stock will have the same rights, except for the fact that the holders of the Class B common stock will have the power to elect 85% of our board, or the next highest whole number, and the holders of Class A common stock will have the power to elect the remaining members of our board. At any time after the second anniversary of the distribution, if approved by our board of directors, the special class voting rights of Class A common stock and Class B common stock with respect to the election of directors may be terminated by at least two-thirds of the outstanding shares of the Class A common stock and the Class B common stock, voting together as a single class, at any annual or special meeting of stockholders. For so long as these special class voting rights continue in effect, the minimum number of directors on our board will be set at seven in order to ensure that the holders of Class A common stock will be entitled to elect at least one director. Except as required by law, the holders of Class A common stock and Class B common stock will vote together as one class on all other matters, including acquisitions and other fundamental transactions, with each share of Class A common stock and Class B common stock having one vote.
Creation of Class A Common Stock and Class B Common Stock Directors. Currently, our board has one class of directors. The reclassification proposal would amend our certificate of incorporation to provide that our board of directors following the reclassification will consist of at least seven directors which are divided into two classes based on the class of stock that is entitled to elect such directors. Messrs. Barnett, Clarke, Hirsch, Nicolais and Quinn will each remain a director of our board following the completion of the reclassification. Messrs. and will be appointed to our board of directors immediately following the reclassification. See “Board of Directors and Management of CXP.” Upon completion of the reclassification, will be designated the “common stock director” and the remaining six directors will be designated “Class B common stock directors.” In future elections, the director designated the common stock director will be elected by the holders of the Class A common stock and the directors designated as Class B common stock directors will be elected by the holders of the Class B common stock.
Filling of Board Vacancies. The reclassification proposal would amend the certificate of incorporation to provide that any vacancy in the office of a common stock director or Class B common stock director will be filled only by the vote of the majority of the remaining directors in the class in which the vacancy
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Limitations on Voting Rights of Class B Common Stock. The reclassification proposal also includes an amendment to our certificate of incorporation which would help mitigate the potential takeover risks associated with the special voting rights of the Class B common stock in the election of directors. This provision states that so long as any person or group of persons beneficially owns 15% or more of the outstanding shares of Class B common stock, then such person or group may only vote in any election or removal of directors a percentage of shares of Class B common stock equal to the lesser of its percentage ownership of Class B common stock or its percentage ownership of Class A common stock. The purpose of this provision is to ensure that any person, entity or group cannot seek to obtain control of our board of directors solely by acquiring a majority of the outstanding shares of Class B common stock. It is intended to protect our public stockholders by ensuring that anyone seeking to accumulate a substantial number of shares of our capital stock must acquire shares of each class of our common stock in order to exercise control over CXP.
Effecting the Name Change. Because we will no longer be a majority-owned subsidiary of Centex and in order to establish an independent market presence in the construction products industry, our board of directors has determined that our name should be changed to eliminate the reference to Centex. Our board of directors believes that the name “ ” will express our identity and our primary business focus and will effectively establish our new independent presence in the public capital markets and our industry generally.
Effecting the name change will not affect our business, operations or capital structure and will be accomplished at nominal expense to CXP. In addition, the name change will not affect the rights of our stockholders or the validity or transferability of the stock certificates currently outstanding. Our stockholders will not be required to surrender or exchange any stock certificates of CXP that they currently hold. For the immediate future, the trading symbol for our Class A common stock on the New York Stock Exchange will remain “CXP.” The trading symbol for the Class B common stock on the New York Stock Exchange will be “ .”
Description of Bylaws Amendments
In connection with the proposed reclassification and distribution, our board of directors has also approved amendments to our bylaws necessary to conform the bylaws to our certificate of incorporation if the reclassification proposal is approved. We refer you to the full text of the amended and restated bylaws, which are attached as Appendix D. The proposed amendments were approved by our board of directors in connection with the reclassification proposal and are referred to in this proxy statement as the reclassification bylaws amendments. The bylaws amendments will become effective at the time of reclassification.
Recommendation of the CXP Board
Our board of directors, upon recommendation of the special committee, has unanimously approved the reclassification proposal, including the merger agreement and the cash dividend. Our board of directors
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Required Vote
Each outstanding share of our common stock is entitled to one vote on each matter which may properly come before the special meeting. Under Delaware corporate law, adoption of the merger agreement requires the affirmative vote of a majority of the outstanding shares of our common stock, including shares held by Centex. Centex currently owns approximately 65% of our common stock and has informed us that it will vote these shares in favor of adoption of the merger agreement. In addition, the reclassification will be implemented only if the holders of a majority of the shares of our common stock, other than Centex, voting in person or by proxy at the special meeting on the adoption of the merger agreement vote to adopt the merger agreement.
Effects of the Reclassification on Outstanding Shares
Our Class A common stock and Class B common stock will have the same rights, except for voting rights with respect to the election of our board of directors. The holders of Class B common stock will be entitled to elect 85% of the board of directors or, if 85% is not a whole number, then the nearest higher whole number of directors. The holders of Class A common stock will be entitled to elect our remaining director or directors. On all other matters requiring a stockholder vote, including acquisitions and other fundamental transactions, the holders of Class A common stock and Class B common stock will vote together as a single class on a one-share, one-vote basis.
Under the terms governing our two classes of common stock after the reclassification, CXP will not be permitted to reorganize or consolidate with, merge with or enter into a similar combination with a third party unless each holder of Class A common stock and Class B common stock is entitled to receive the same kind and amount of consideration per share receivable upon such reorganization, consolidation, merger or other combination as each other holder of Class A common stock and Class B common stock. However, the holders of Class A common stock and Class B common stock may receive as consideration different kinds of stock if our board of directors determines in good faith that these different kinds of stock differ only in the same manner as the Class A common stock differ from the Class B common stock.
Cash Dividend
If the reclassification proposal is approved and other conditions are satisfied or waived, we will declare and pay a special one-time cash dividend pro-rata to all holders of our common stock, including Centex, in the amount of $6.00 per share of our common stock. The record date for the cash dividend will be prior to the record date for the distribution so that Centex will receive a pro rata share of the cash dividend. The declaration of the cash dividend is contingent, however, upon the approval of the reclassification proposal by our stockholders and the satisfaction of certain other conditions. Please see “Proposal One: Description of the Merger Agreement and Distribution Agreement — The Distribution Agreement — Conditions to the Distribution and the Declaration of the Cash Dividend.”
Tax Matters — Reclassification and Distribution
On May 9, 2003, Centex requested a ruling from the IRS to the effect that, for U.S. federal income tax purposes, among other things:
| • | the reclassification will be a tax-free transaction to Centex and CXP under Sections 354, 368(a) and 1032 of the Internal Revenue Code, respectively; and | |
| • | the distribution will be tax-free to Centex and its stockholders under Section 355 of the Internal Revenue Code. |
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In order to obtain the ruling and protect the tax-free status of the distribution, we have agreed to certain undertakings, including that, for a period of two years after the date of the distribution, we will maintain our status as a company engaged in the active conduct of a trade or business, and will take no action to facilitate certain acquisitions of our stock, as more fully explained below. If we fail to comply with any such undertakings, or take any other action or fail to take any other required action, and that failure to comply, action or omission contributes to a determination that the distribution fails to qualify under Section 355(a) of the Internal Revenue Code or that the CXP shares fail to qualify as qualified property for purposes of Section 355(c)(2) of the Internal Revenue Code by reason of Section 355(e) of the Internal Revenue Code, we will be required to indemnify Centex and the other members of the Centex group:
| • | for all federal, state and local taxes, including any interest, penalty or additions to tax, incurred or imposed upon Centex or any other members of the Centex group; and | |
| • | for any established tax liabilities of Centex stockholders resulting from the distribution evidenced by (i) an amended tax return of the Centex stockholder reflecting the amount of the tax liability, together with proof of payment of the amount, or (ii) a deficiency notice received by the Centex stockholder from the IRS setting forth the amount of the tax liability, together with proof of payment of the amount. |
Under Section 355(e) of the Internal Revenue Code, the distribution will be taxable to Centex if the distribution is part of a plan or series of related transactions pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest, based on either vote or value, in Centex or CXP. Acquisitions that occur during the period beginning two years before the distribution and ending two years after the distribution are subject to a rebuttable presumption that they are part of a plan. If Centex becomes subject to tax under Section 355(e), its tax liability will be based upon the difference between the fair market value of the 9,220,000 shares of Class B common stock and the 2,742,304 shares of our common stock at the time of the distribution and its adjusted basis in the stock at that time, and this tax liability will be a significant amount.
Accordingly, under the distribution agreement, we have agreed that, until two years after the distribution date, we will not:
| • | merge or consolidate with or into any other corporation, which would have the effect of causing or permitting one or more persons to acquire directly or indirectly stock representing a 50% or greater interest, within the meaning of Section 355(e) of the Internal Revenue Code, in CXP, | |
| • | liquidate or partially liquidate, | |
| • | sell or transfer all or substantially all of our assets in a single transaction or series of transactions, | |
| • | redeem or otherwise repurchase any CXP capital stock, except as permitted under the IRS procedures applicable to spin-offs, or | |
| • | take any other action or actions which, in the aggregate, would have the effect of causing or permitting one or more persons to acquire directly or indirectly stock representing a 50% or greater interest, within the meaning of Section 355(e) of the Internal Revenue Code, in CXP, |
unless prior to taking any action set forth in the list above, either (1) Centex has obtained, at the expense of CXP, a supplemental ruling from the IRS or (2) CXP has obtained an opinion in form and substance reasonably satisfactory to Centex, that the action will not result in:
| • | the distribution failing to qualify under Section 355(a) of the Internal Revenue Code, or | |
| • | the CXP shares failing to qualify as qualified property for purposes of Section 355(c)(2) of the Internal Revenue Code by reason of Section 355(e) of the Code. |
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We have also agreed to indemnify Centex and the other members of the Centex group for:
| • | all federal, state and local taxes, including any interest, penalty or additions to tax, incurred or imposed upon Centex or any other members of the Centex group; and | |
| • | any established tax liabilities of any stockholder of Centex evidenced by (i) an amended tax return of the Centex stockholder reflecting the amount of the tax liability, together with proof of payment of the amount or (ii) a deficiency notice received by the Centex stockholder from the IRS setting forth the amount of the tax liability, together with proof of payment of the amount, |
arising from either (1) any inaccuracy in, or failure by CXP to comply with, any representation or undertaking made by CXP to the IRS (or made by Centex to the IRS based upon information provided by CXP) in connection with the IRS ruling request if such inaccuracy or failure was intentional or resulted from gross negligence on the part of CXP or (2) our taking or failing to take any action that contributes to the distribution not being treated as a tax-free transaction, each subject to some exceptions.
CXP will not be obligated to indemnify Centex or any other members of the Centex group for any liability that results solely from an inaccuracy in or failure by Centex to comply with any representation or undertaking by Centex to the IRS in connection with the IRS ruling request (except to the extent such inaccuracy or failure is in respect of a representation based in whole or in part upon inaccurate information provided by CXP, if such inaccuracy was intentional or resulted from gross negligence on the part of CXP). Further, if any liability arises as a result of both:
| • | either (i) our taking or failing to take any action that contributes to the distribution not being treated as a tax-free transaction or (ii) an inaccuracy in, or failure by us to comply with, any representation or undertaking made by us to the IRS (or made by Centex to the IRS based upon information provided by CXP) in connection with IRS ruling request if such inaccuracy or failure was intentional or resulted from gross negligence on the part of CXP, and | |
| • | an inaccuracy in or failure by Centex to comply with any representation or undertaking by Centex to the IRS in connection with the IRS ruling request |
and each failure is an independent cause of such liability, then CXP and Centex will allocate the resulting liability among themselves in a proportion that reflects the relative fault of each party.
Centex has agreed to indemnify CXP and other members of the CXP group for all liabilities arising from any inaccuracy in, or failure by Centex to comply with, any representation or undertaking made by Centex to the IRS in connection with the IRS ruling request. Centex will not be obligated to indemnify CXP or any member of the CXP group if such liability results solely from an inaccuracy in, or failure by CXP to comply with, any representation or undertaking made by CXP to the IRS or based upon information provided by CXP to Centex and made by Centex to the IRS in connection with the IRS ruling request if such inaccuracy or failure was intentional or resulted from gross negligence on the part of CXP or a failure on the part of CXP to comply with its obligations described above.
Tax Matters — Cash Dividend
The cash dividend will generally constitute a dividend taxable as ordinary income in the year of receipt to the extent that CXP has current or accumulated “earnings and profits” as of the end of the taxable year in which the cash dividend is made. If the cash dividend exceeds a stockholder’s allocable share of our current and accumulated earnings and profits for federal income tax purposes determined as of the end of our fiscal year ending March 31, 2004, the excess will generally be treated first as a tax-free return of capital to the extent of the stockholder’s basis in his or her shares of common stock, and after this basis is reduced to zero, as capital gain. Our management has advised that, based on the information currently available, our current and accumulated earnings and profits at March 31, 2004 is expected to be such that the cash dividend will not exceed any stockholder’s allocable share of such earnings and profits. Thus it is expected that the cash dividend will be taxable as ordinary income.
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For corporate holders of our common stock, the cash dividend (to the extent treated as ordinary income) will be eligible for a “dividends-received” deduction, subject to limitations and exclusions provided by the Internal Revenue Code. However, the extraordinary dividend rules would apply to the cash dividend paid to a corporate holder with respect to shares of our common stock if such shares have not been held for more than two years before the dividend announcement date and the cash dividend equals or exceeds 10% of the holder’s tax basis in such shares. If the extraordinary dividend rules apply to shares held by a corporate holder, the holder would be required to reduce its tax basis in such shares by the untaxed portion of the dividend. Moreover, to the extent that the untaxed distribution exceeds the corporate holder’s basis, gain will be recognized.
Under recently enacted legislation, the tax rate applicable to qualifying corporate dividends received by individuals has been reduced to a maximum rate of 15%. In order to qualify for this reduced rate, the shares on which the dividends are paid must have been held by the individual for more than 60 days during the 120 day period beginning 60 days before the ex-dividend date. If the dividend paid to an individual with respect to our shares of common stock qualifies for this reduced rate, and the amount of such dividend equals or exceeds 10% of the individual’s tax basis in such shares, any subsequent loss on such shares will be treated as a long-term capital loss to the extent of the dividend.
Although this discussion does not generally address tax consequences of the cash dividend to foreign holders of our common stock, such holders should note that the cash dividend (to the extent of such foreign holder’s allocable share of our current and accumulated earnings and profits) will generally be subject to U.S. withholding tax at the rate of 30%. This rate may be reduced by income tax treaties to which the United States is a party.
Finally, to the extent that the cash dividend constitutes ordinary income, it will generally be subject to back-up withholding with respect to our stockholders who, before the cash dividend, have not provided their correct taxpayer identification numbers to us on an IRS Form W-9 or a substitute for such form.
Interests of Our Officers and Directors in the Reclassification
In considering the recommendation of our board of directors, you should be aware that some of our officers and directors may have interests in the reclassification that are or may be different from, or in addition to, the interests of our public stockholders. As of , 2003, our directors and executive officers beneficially owned an aggregate of shares of our common stock, including shares that may be acquired upon the exercise of outstanding stock options exercisable within 60 days of , 2003. In addition, two of our directors, Messrs. Hirsch and Eller, are executive officers and directors of Centex and one of our directors, Mr. Quinn, is a former executive officer and current director of Centex. As of , 2003, of our directors and executive officers beneficially owned shares of our common stock of Centex.
The merger agreement provides that our board of directors following the reclassification will consist of seven members. Messrs. Barnett, Clarke, Hirsch, Nicolais and Quinn will each remain as directors following the completion of the reclassification. Mr. Eller will cease to serve as a director prior to the completion of the reclassification. Messrs. and will be appointed to our board of directors immediately following the reclassification. Mr. will become the common stock director upon completion of the reclassification, and our remaining directors will become Class B directors upon completion of the reclassification. The composition of our board otherwise will not be affected by the reclassification or the distribution. See “Board of Directors and Management of CXP.”
Relationship Between Centex and CXP after the Distribution
Administrative Services Agreement. At or prior to the completion of the distribution, we and Centex Service Company, a subsidiary of Centex, will enter into an amended and restated administrative services agreement, which will amend and restate a similar agreement that we entered into with Centex in 1994. Under the terms of the administrative services agreement, Centex Service Company will provide us with employee benefit administration, public/investor relations and certain other services. The administrative
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Intellectual Property Agreement. At or prior to the completion of the distribution, we and Centex will enter into a intellectual property agreement. Under the terms of the intellectual property agreement, Centex will grant to us and our wholly-owned subsidiaries an exclusive, perpetual and royalty-free license to use all trademarks held by Centex which relate primarily or exclusively to our business. In addition, Centex will consent to our use of the tradename “Centex” for a period of six months in connection with our business. We must, however, as soon as practicable, and in any event within six months after the date of the distribution, remove any and all exterior and interior signs and identifiers which refer or pertain to Centex at our expense. After such six-month period, we cannot use or display the name “Centex” or any variations thereof, or other trademarks, tradenames, logos or identifiers using the name “Centex” or otherwise owned by or licensed to Centex which have not been assigned or licensed to us without the prior written consent of Centex.
Sublease Agreement. At or prior to the completion of the distribution, we and Centex Service Company will enter into a sublease agreement which will provide that, for a term of one year, Centex Service Company will lease to us the same office space currently occupied by us at the same lease rate we are currently paying, which is approximately $21,000 per month. CXP will have the right to terminate the sublease agreement at any time upon 30 days’ prior written notice to Centex Service Company.
New York Stock Exchange Approvals
We are in the process of obtaining the necessary approval from the New York Stock Exchange in order to list the shares of Class B common stock. Our common stock is currently listed on the New York Stock Exchange under the symbol “CXP.” Following the reclassification and distribution, our Class A common stock will continue to be listed on the New York Stock Exchange under the symbol “CXP” and our Class B common stock is expected to be listed on the New York Stock Exchange under the symbol “ .”
Federal Securities Law Consequences
All shares of Class A and Class B common stock received by holders of Centex common stock following the reclassification and distribution will be freely transferable, except that shares of our Class A common stock and Class B common stock received by persons who are deemed to be “affiliates” of CXP may be resold by them only in transactions permitted by the resale provision of Rule 144 promulgated under the Securities Act of 1933, or otherwise in compliance with, or pursuant to an exemption from, the registration requirements of the Securities Act of 1933.
No Appraisal Rights
Holders of our common stock are not entitled to appraisal rights under Section 262 of the General Corporation Law of the State of Delaware in connection with the reclassification or any of the other transactions discussed in this proxy statement.
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DESCRIPTION OF THE MERGER AGREEMENT
CXP and Centex have entered into a merger agreement and a distribution agreement which will govern the terms of the reclassification, the cash dividend and the distribution.
The Merger Agreement
The following is a summary of the material terms of the merger agreement, a copy of which is attached as Appendix A. This summary does not contain all of the terms of the merger agreement. All stockholders are urged to read carefully the merger agreement in its entirety.
| Reclassification and Merger |
The reclassification will be implemented by a merger of Merger Sub into CXP. The merger agreement provides for the amendment of our certificate of incorporation to provide for the Class B common stock, as well as other proposals to implement the governance proposals and the authorized capital increase proposal, if approved.
If the merger agreement is adopted by a majority of the outstanding shares of our common stock, and by a majority of those stockholders present in person or by proxy and voting on the reclassification proposal, other than Centex, our certificate of incorporation will be amended to create the Class B common stock. None of the governance proposals, authorized capital increase proposal or stockholders’ rights plan proposal will be implemented unless the reclassification and distribution are completed.
Centex has informed us that it will vote the shares of our common stock owned by it in favor of the adoption of the merger agreement, each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal.
| Merger and Exchange of Shares |
The merger agreement provides that before the reclassification, Centex will contribute 9,220,000 shares of our common stock held by it to Merger Sub and retain the remaining 2,742,304 shares of our common stock owned by it. At the effective time of the merger, Merger Sub will be merged into CXP and the separate corporate existence of Merger Sub will cease and CXP will be the surviving corporation. All of the shares of Merger Sub common stock outstanding immediately before the effective time of the merger will be converted into 9,220,000 shares of our Class B common stock, each of the shares of our common stock held by Merger Sub will automatically be canceled and retired, and each other share of our common stock will remain issued and outstanding. As a result of and following the reclassification, Centex will own 9,220,000 shares of Class B common stock and 2,742,304 shares of our common stock. Each other stockholder of CXP will own the same number of shares of our common stock as it owned before the reclassification.
| Conditions to the Merger |
Conditions to Both Parties’ Obligations. None of CXP, Centex nor Merger Sub are obligated to complete the reclassification unless the following conditions are satisfied or waived, except that none of the parties may waive the required stockholder approvals with respect to the merger agreement:
| • | the merger agreement shall have been approved by the holders of (i) a majority of the shares of our common stock outstanding and entitled to vote thereon and (ii) a majority of the shares of our common stock, other than shares held directly or indirectly by Centex or Merger Sub, that are present in person or by proxy at the special meeting and voting on the reclassification proposal; |
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| • | all actions or filings with any governmental entity required to permit the completion of the reclassification shall be completed, except those that would not reasonably be expected to have a material adverse effect on any party’s ability to complete the transactions; and | |
| • | the distribution agreement shall be in full force and effect. |
These conditions are for the benefit of us or Centex, as applicable, and do not give rise to or create any duty on the part of us or Centex, as applicable, to waive or not waive any of these conditions.
Conditions to Our Obligations. In addition, we are not obligated to complete the reclassification unless the following additional conditions are satisfied or waived by us:
| • | the board of directors of Centex shall have declared the distribution subject to the prior completion of the reclassification; and | |
| • | all conditions to our obligation to pay the cash dividend shall be satisfied or waived by us. |
These conditions are for the sole benefit of us and do not give rise to or create any duty on our part to waive or not to waive any of these conditions.
Conditions to Centex’s Obligations. In addition, Centex and Merger Sub are not obligated to consummate the reclassification unless the following additional conditions are satisfied or waived by them:
| • | all the conditions to the declaration of the distribution and the distribution shall be satisfied, other than the prior completion of the reclassification; and | |
| • | we shall have declared and paid the cash dividend to our stockholders (including Centex) in the amount of $6.00 per share. |
These conditions are for the sole benefit of Centex and Merger Sub and do not give rise to or create any duty on the part of Centex or Merger Sub to waive or not waive any of these conditions.
| Termination |
The merger agreement may be terminated and the reclassification may be abandoned at any time before the effective time of the merger, notwithstanding any approval of the merger agreement by the stockholders of CXP:
| • | by mutual written consent of CXP and Centex; | |
| • | by either CXP or Centex, if the completion of the merger or the distribution is illegal or otherwise prohibited or if any judgment, injunction, order or decree enjoining CXP or Merger Sub from completing the merger or Centex from completing the distribution is entered and becomes final and nonappealable; | |
| • | by either CXP or Centex, if the required CXP stockholder approval for the reclassification proposal is not obtained; or | |
| • | by either CXP or Centex, if the merger is not completed by January 30, 2004. If the merger agreement has been adopted by the vote set forth under “Proposal One: The Reclassification and Related Transactions — Required Vote” by January 30, 2004, but the merger has not been completed by such date, then the date will be extended for a period that ends 30 days (or longer if agreed by Centex and CXP) after the stockholders meeting at which the merger agreement was adopted by the requisite vote. |
The merger agreement will terminate automatically in the event the distribution agreement is terminated according to its terms.
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| Other Agreements |
Under the merger agreement, each of CXP and Centex has agreed to exercise its reasonable best efforts to promptly obtain any necessary consents and approvals and to take actions as may be necessary or desirable to obtain these consents and approvals.
The Distribution Agreement
We have entered into the distribution agreement with Centex. The following is a summary of the material terms of the distribution agreement, a copy of which is attached as Appendix B. This summary does not contain all of the terms of the distribution agreement. All stockholders are urged to read carefully the distribution agreement in its entirety.
| The Distribution |
Centex will appoint a distribution agent to distribute to the holders of record of Centex common stock in proportion to the number of Centex shares they hold on the record date for the distribution, all shares of our Class A common stock and Class B common stock held by Centex on the date of the distribution. The distribution agent will aggregate all fractional shares of our Class A common stock and Class B common stock that would otherwise be distributed and sell them in an orderly manner after the date of the distribution in the open market and, after completion of the sales, distribute the pro-rata portion of the net proceeds from these sales to each stockholder of Centex who would otherwise have received a fractional share.
| Conditions to the Distribution and the Declaration of the Cash Dividend |
Conditions to the Distribution. The obligations of Centex to declare the distribution and to cause the distribution to occur are subject to the satisfaction or waiver, as determined by Centex in its sole discretion, of the conditions set forth below:
| • | a private letter ruling from the IRS shall be obtained which provides that the reclassification and distribution will be a tax-free transaction, which ruling is satisfactory to Centex in its sole discretion, and that Centex and CXP shall have complied with all provisions in the ruling applicable prior to the declaration of the distribution and the distribution; | |
| • | any material governmental approvals and consents required in connection with the completion of the transactions shall have been received and shall be in full force; | |
| • | no order, injunction or decree or other prohibition preventing the distribution or the completion of the other transactions contemplated by the merger agreement and the distribution agreement shall be in effect and no other event outside the control of Centex that prevents the legal completion of the distribution or the other transactions shall have occurred; | |
| • | the transactions contemplated by the merger agreement and the distribution agreement shall be in compliance with applicable federal and state securities and other applicable laws; | |
| • | all consents required in connection with the completion of the transactions shall have been obtained; | |
| • | in the case of the declaration of the distribution, all conditions to the payment of the cash dividend shall be satisfied or waived by us, the cash dividend shall have been declared and no circumstances shall exist that would reasonably be expected to prevent the payment of the cash dividend prior to the distribution and, in the case of making the distribution, the cash dividend shall have been paid to our stockholders (including Centex); | |
| • | in the case of the declaration of the distribution, all conditions to Centex’s obligation to complete the reclassification, other than the satisfaction of the obligations to complete the distribution and the prior payment of the cash dividend, shall be satisfied or waived by Centex, and no |
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| circumstances shall exist that would reasonably be expected to prevent the completion of the reclassification immediately prior to the distribution and, in the case of making the distribution, the reclassification shall be completed; | ||
| • | a registration statement on Form 8-A registering the Class B common stock under the Securities Exchange Act of 1934 shall be filed with the Securities and Exchange Commission; | |
| • | the Class B common stock shall be approved for listing on the New York Stock Exchange, subject to official notice of issuance; | |
| • | our representations and warranties set forth in the distribution agreement and the merger agreement shall be true and correct as of the date of the distribution; and | |
| • | we shall have performed or complied in all material respects with all agreements and covenants required to be performed by us under the distribution agreement and the merger agreement at or prior to the date of the distribution. |
These conditions are for the sole benefit of Centex and do not give rise to or create any duty on the part of Centex to waive or not waive any of these conditions.
Conditions to the Cash Dividend. Our obligations to declare the cash dividend and to cause the cash dividend to be paid are subject to the satisfaction or waiver, as determined by us in our sole discretion, of the conditions set forth below:
| • | any material governmental approvals and consents needed to complete the transactions shall have been received and shall be in full force; | |
| • | no order, injunction or decree or other prohibition preventing the declaration or payment of the cash dividend or the completion of the other transactions contemplated by the merger agreement and the distribution agreement shall be in effect and no other event outside of our control that prevents the declaration or lawful payment of the cash dividend or completion of the other transaction shall have occurred; | |
| • | the transactions contemplated by the merger agreement and the distribution agreement shall be in compliance with applicable federal and state securities and other applicable laws; | |
| • | all consents required in connection with the completion of the transactions shall have been obtained; | |
| • | in the case of the declaration of the cash dividend, all conditions to the distribution (other than the declaration and payment of the cash dividend) shall have been satisfied or waived by Centex, and, in the case of the declaration and the payment of the cash dividend, the distribution shall have been declared by the board of directors of Centex substantially simultaneously with the declaration of the cash dividend and no circumstances shall exist that would reasonably be expected to prevent the prompt completion of the distribution following payment of the cash dividend; | |
| • | in the case of the declaration of the cash dividend, all conditions to our obligation to complete the reclassification shall be satisfied or waived by us and, in the case of the payment of the cash dividend, no circumstances shall exist that would reasonably be expected to prevent the prompt completion of the reclassification following payment of the cash dividend; | |
| • | a registration statement on Form 8-A registering the Class B common stock under the Securities Exchange Act of 1934 shall be filed with the Securities and Exchange Commission; | |
| • | the Class B common stock shall be approved for listing on the New York Stock Exchange, subject to official notice of issuance; | |
| • | Centex’s representations and warranties set forth in the distribution agreement and the merger agreement shall be true and correct as of the date of the declaration of the cash dividend and the date of payment of the cash dividend; |
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| • | Centex shall have performed or complied, in all material respects, with all agreements and covenants required to be performed by it under the distribution agreement and the merger agreement at or prior to the date of the distribution; | |
| • | we shall have entered into loan agreements for financing which will permit the payment of the cash dividend and would reasonably allow us sufficient cash to meet our business needs; and | |
| • | the payment of the cash dividend shall be permitted by the applicable provisions of Delaware law and our board of directors shall have obtained any reasonable and customary assurances that it requires to authorize the cash dividend. |
These conditions are for the sole benefit of us and do not give rise to or create any duty on the part of us to waive or not waive any of these conditions.
Other. Each of CXP and Centex has agreed that the distribution and the declaration of the cash dividend and the distribution will occur as soon as reasonably practicable following the satisfaction or waiver of the conditions to the distribution. The parties have agreed to cause their respective boards of directors (or, in the case of Centex, a duly authorized committee thereof) to meet on the date of the declaration of the distribution and the cash dividend to take any corporate action at the meeting required to effect the transactions contemplated by the distribution agreement and the merger agreement. Following these meetings, CXP and Centex will complete the reclassification in accordance with the terms of the merger agreement, including the filing of the certificate of merger relating to the reclassification with the Secretary of State of the State of Delaware.
| Other Agreements |
Indemnification Against Tax and Other Liabilities. The distribution agreement provides that Centex and CXP will comply with and not take any action during the relevant time period that is inconsistent with the representations made to the IRS in connection with the request for the IRS ruling described under “Proposal One: The Reclassification and Related Transactions — Tax Matters — Reclassification and Distribution.” To this end, until the second anniversary of the distribution, we have agreed to maintain our status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Internal Revenue Code, and not to facilitate certain acquisitions of our stock or assets.
In addition, under Section 355(e) of the Internal Revenue Code, the distribution will be taxable to Centex if the distribution is part of a plan or series of related transactions pursuant to which one or more persons acquire directly or indirectly stock representing a 50% or greater interest, based on either vote or value, in Centex or CXP. Acquisitions that occur during the period beginning two years before the distribution and ending two years after the distribution are subject to a rebuttable presumption that they are part of such a plan. If Centex becomes subject to tax under Section 355(e), its tax liability will be based upon the difference between the fair market value of the shares of Class B common stock and the shares of retained common stock at the time of the distribution and its adjusted basis in such stock at that time and this tax liability will be a significant amount.
If we take any action or fail to take any required action, and that failure to comply, action or omission contributes to a determination that the distribution fails to qualify under Section 355(a) of the Internal Revenue Code or that the CXP shares fail to qualify as qualified property for purposes of Section 355(c)(2) of the Internal Revenue Code by reason of Section 355(e) of the Internal Revenue Code, we have agreed to indemnify Centex and the other members of the Centex group for:
| • | all federal, state and local taxes, including any interest, penalties or additions to tax; and | |
| • | any established liability of any Centex stockholders resulting from the distribution evidenced by (i) an amended tax return of the Centex stockholder reflecting the amount of the tax liability, together with proof of payment of the amount or (ii) a deficiency notice received by the Centex stockholder from the IRS setting forth the amount of the tax liability, together with proof of payment of the amount. |
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In addition, we have agreed to indemnify Centex and the other members of the Centex group for:
| • | all actual tax liability of Centex or any other members of the Centex group; and | |
| • | for any established tax liabilities of any stockholder of Centex evidenced by (i) an amended tax return of the Centex stockholder reflecting the amount of the tax liability, together with proof of payment of the amount or (ii) a deficiency notice received by the Centex stockholder from the IRS setting forth the amount of the tax liability, together with proof of payment of the amount, |
arising from either (1) any inaccuracy in, or failure by us to comply with, any representation or undertaking made by us to the IRS (or made by Centex to the IRS based upon information provided by us) in connection with the IRS ruling request if such inaccuracy or failure was intentional or resulted from our gross negligence or (2) our taking or failure to take any action that contributes to the distribution not being treated as a tax-free transaction, subject to certain exceptions.
We will not be obligated to indemnify Centex or any other members of the Centex group for any tax liability that results solely from an inaccuracy in or failure by Centex to comply with any representation or undertaking by Centex to the IRS in connection with the IRS ruling request (except to the extent such inaccuracy or failure is in respect of a representation based in whole or in part upon inaccurate information provided by us, if such inaccuracy was intentional or resulted from our gross negligence). Furthermore, if any tax liability arises as a result of both:
| • | either (1) our taking or failing to take any action that contributes to the distribution not being treated as a tax-free transaction or (2) an inaccuracy in or failure by us to comply with any representation or undertaking made by us to the IRS (or made by Centex to the IRS based upon information provided by us) in connection with the IRS ruling request if such inaccuracy or failure was intentional or resulted from our gross negligence; and | |
| • | an inaccuracy in or failure by Centex to comply with any representation or undertaking by Centex to the IRS in connection with the IRS ruling request, |
and each failure is an independent cause of the liability, then we and Centex will allocate the tax liability among ourselves in a proportion that reflects the relative fault of each party.
Centex has agreed to indemnify CXP and other members of the CXP group for all liabilities arising from any inaccuracy in, or failure by Centex to comply with, any representation or undertaking made by Centex to the IRS in connection with the IRS ruling request. Centex will not be obligated to indemnify CXP or any member of the CXP group if such liability results solely from an inaccuracy in, or failure by CXP to comply with, any representation or undertaking made by CXP to the IRS or based upon information provided by CXP to Centex and made by Centex to the IRS in connection with the IRS ruling request if such inaccuracy or failure was intentional or resulted from gross negligence on the part of CXP, or a failure on the part of CXP to comply with its obligations described above.
Any indemnity payment made by us pursuant to the provisions described above will be made on an after-tax basis, calculated according to the actual tax position of the person receiving the payment.
As a result of the representations in the IRS ruling request and the covenants in the distribution agreement, the acquisition of control of CXP prior to the second anniversary of the distribution date may be more difficult or less likely to occur because of the potential indemnification liability associated with a breach of these representations or covenants. In addition, our ability to undertake acquisitions and other transactions may be substantially restricted for the two-year period following the distribution.
The distribution agreement also provides for assumptions of liabilities and cross-indemnities designed to allocate financial responsibility for former, current, or future liabilities arising out of or in connection with the businesses of each respective party.
No Solicitation. CXP and Centex have agreed not to solicit or negotiate in connection with any proposal for the acquisition by any third party of any shares of capital stock of CXP or the acquisition of,
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| • | our board of directors approves an alternative transaction during the pendency of the transactions, does not recommend or withdraws its recommendation in favor of the transactions or modifies its recommendation in a manner adverse to Centex; | |
| • | we breach or fail to comply with any of our material obligations under the distribution agreement or merger agreement and fail to cure the breach or failure within 30 days following notice; or | |
| • | Centex receives a written proposal for an alternative transaction and the board of directors of Centex in good faith determines that it would be inconsistent with the Centex board’s fiduciary duties to Centex stockholders if the Centex board did not commence discussions or negotiations with the person making the proposal, but only with respect to that specific proposal. |
We will be released from this obligation if we receive a written proposal for an alternative transaction and our board of directors in good faith determines that it would be inconsistent with our fiduciary duties to our stockholders if we did not commence discussions or negotiations with the person making the proposal. This release will only be with respect to that specific proposal.
Expenses. The distribution agreement also provides that all expenses in connection with the reclassification and distribution shall be paid by the party incurring such costs and expenses, provided that if the distribution agreement is terminated for any reason without the distribution having been completed, then Centex will pay all out-of-pocket expenses incurred by us in connection with the distribution agreement and merger agreement.
| Termination |
The distribution agreement may be terminated:
| • | by us if Centex is in material breach of any of its obligations or representations and warranties under the distribution agreement, and the breach would reasonably be expected to result in a material adverse effect on us after giving effect to the distribution, and Centex has not substantially cured the breach within 30 days following notice; or | |
| • | by Centex in its sole discretion. |
The distribution agreement will terminate automatically in the event the merger agreement is terminated in accordance with its terms. After payment of the cash dividend, the distribution agreement may not be terminated except pursuant to the written agreement of the parties which, in our case, has been approved by a majority of its directors that are not affiliated with Centex.
Except in circumstances where a party is required to pay the fees and expenses of the other party as set forth above, and except for liability for any breach by either party of the distribution agreement or merger agreement, no party will be liable to any other party or any other person as a result of termination of the distribution agreement.
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PROPOSALS TWO, THREE, FOUR, FIVE, SIX AND SEVEN:
GOVERNANCE PROPOSALS, AUTHORIZED CAPITAL INCREASE PROPOSAL AND
The governance proposals, authorized capital increase proposal and stockholders’ rights plan proposal will not be implemented if the reclassification proposal is not approved. The following summary is qualified in its entirety by reference to the text of the proposed amendments to our certificate of incorporation and our bylaws, which are attached to this proxy statement as Appendices C and D. All stockholders are urged to read carefully the proposed certificate of incorporation and the proposed bylaws, each as proposed to be amended, and the proposed stockholders’ rights plan in their entirety.
General
We believe the governance proposals, authorized capital increase proposal and the stockholders’ rights plan proposal are necessary to foster our long-term growth as an independent company following the reclassification and the distribution and to protect our stockholders from unsolicited, potentially coercive or abusive takeover tactics and efforts to acquire control of CXP at a price or on terms that are not in the best interests of all of our stockholders. The authorized capital increase proposal includes changes to our certificate of incorporation intended, among other things, to provide CXP with financing flexibility.
Our board of directors has also approved amendments to our bylaws that are more fully described under “Proposal One: The Reclassification and Related Transactions — Description of Bylaws Amendments” and “— Description of Bylaws Amendments.” Under the terms of our existing certificate of incorporation, our board of directors has the power to amend our bylaws without stockholder approval. As a result, separate stockholder approval is not required to effect the bylaws amendments. However, the bylaws amendments relating to the governance proposals are subject to the approval of the reclassification proposal, and the governance proposals will become effective only upon the completion of the reclassification. In addition to containing the amendments to our bylaws discussed in “Proposal One: Reclassification and Related Transactions — Description of Bylaws Amendments,” the bylaws amendments contain changes necessary to conform our bylaws to our certificate of incorporation if the governance proposals are approved.
Purpose and Effects of the Governance Proposals
The proposed reclassification and distribution may make it easier for a single person or group of related persons to gain control over CXP. Because Centex currently holds approximately 65% of our common stock, it is unlikely at the present time that any person could gain control of CXP without acquiring from Centex at least a majority of the shares of our common stock held by it. However, following the reclassification and distribution, holders of Class B common stock will have the right to elect at least 85% of our board of directors. Accordingly, a person or group of related persons could attempt to gain control of CXP by acquiring a sufficient number of shares of Class B common stock to elect a majority of the members of our board of directors. For these reasons, the proposed reclassification and distribution could render CXP more susceptible to unsolicited takeover bids from third parties, including offers that our board of directors may regard as being below our intrinsic value or as not being in the best interests of our stockholders. However, the ability of a person to gain control of our board of directors by acquiring shares of Class B common stock would be hindered by a proposed revision to our certificate of incorporation to the effect that a holder of 15% or more of the outstanding shares of Class B common stock can only vote for the election or removal of directors that percentage of the shares of Class B common stock which is equal to the lesser of its percentage ownership of Class B common stock or its percentage ownership of Class A common stock.
In order to mitigate the concerns described above, the governance proposals and authorized capital increase proposal, together with the bylaws amendments and the stockholders’ rights plan, are intended to make it more difficult for a potential acquiror of CXP to take advantage of our new capital structure to acquire us by means of a transaction which is not negotiated with our board of directors. The governance
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Our board of directors believes that when companies do not have measures in place to address unsolicited takeover bids, change in control transactions occur at prices below the best price that might otherwise be attainable. Many companies have put provisions in place which effectively require potential acquirors to negotiate with the companies’ boards of directors. Our board of directors desires to provide CXP with the flexibility to grow its business without being subject to unsolicited takeover proposals either at inadequate prices or by means of unfair takeover tactics. Our board of directors is aware of, and committed to, its fiduciary obligations to CXP and its stockholders in respect of these measures.
State Anti-Takeover Statutes. Under the business combination statute of the Delaware General Corporation Law, a corporation is generally restricted from engaging in a business combination with an interested stockholder for a three-year period following the time the stockholder became an interested stockholder. An interested stockholder is defined as a stockholder who, together with its affiliates or associates, owns, or who is an affiliate or associate of the corporation and within the prior three-year period did own, 15% or more of the corporation’s voting stock. This restriction applies unless:
| • | prior to the time the stockholder became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; | |
| • | the interested stockholder owned at least 85% of the voting stock of the corporation, excluding specified shares, upon completion of the transaction which resulted in the stockholder becoming an interested stockholder; or | |
| • | at or subsequent to the time the stockholder became an interested stockholder, the business combination was approved by the board of directors of the corporation and authorized by the affirmative vote, at an annual or special meeting, and not by written consent, of at least 66 2/3% of the outstanding voting shares of the corporation, excluding shares held by that interested stockholder. |
A business combination generally includes:
| • | mergers, consolidations and sales or other dispositions of 10% or more of the assets of a corporation to or with an interested stockholder; | |
| • | transactions resulting in the issuance or transfer to an interested stockholder of any capital stock of the corporation or its subsidiaries, subject to certain exceptions; | |
| • | transactions having the effect of increasing the proportionate share of the interested stockholder in the capital stock of the corporation or its subsidiaries, subject to certain exceptions; and | |
| • | other transactions resulting in a disproportionate financial benefit to an interested stockholder. |
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The provisions of the Delaware business combination statute do not apply to a corporation if, subject to certain requirements, the certificate of incorporation or bylaws of the corporation contain a provision expressly electing not to be governed by the provisions of the statute or the corporation does not have voting stock listed on a national securities exchange, authorized for quotation on the Nasdaq Stock Market or held of record by more than 2,000 stockholders.
We have not adopted any provision in our certificate of incorporation or bylaws electing not to be governed by the Delaware business combination statute. As a result, the statute is applicable to business combinations involving CXP.
The governance proposals and the authorized capital increase proposal, together with the bylaws amendments and the stockholders’ rights plan, may reduce the ability of our stockholders to influence the governance of CXP.
Purpose and Effects of the Authorized Capital Increase Proposal
The authorized capital increase proposal would increase our authorized capital. See “The Governance Proposals and the Authorized Capital Increase Proposal — Proposal 6: Authorized Capital Increase Proposal.” Although CXP is not proposing the increase in the authorized shares of our common stock or preferred stock with the sole intention of using the additional shares for anti-takeover purposes, the increase in the number of authorized shares of our Class A common stock, Class B common stock and preferred stock and any subsequent issuance of such shares also could have the effect of delaying or preventing a change in control without further action by the stockholders. As of the date of this proxy statement, we are unaware of any pending or threatened efforts to acquire control of CXP. Shares of our authorized and unissued common stock (within the limits imposed by applicable law and New York Stock Exchange rules) or our preferred stock could be issued in one or more transactions that would make a change in control more difficult, and therefore less likely.
If the authorized capital increase proposal is adopted, our board of directors would be able to issue such additional shares without further stockholder approval, except as may be required by applicable law or exchange rules. In addition, our stockholders have no statutory preemptive rights with respect to future issuances of our common stock or preferred stock. Our board of directors has no present agreement or arrangement, plan or understanding with respect to the issuance of any such additional shares, other than under its existing employee benefits plans. The increase in our authorized capital will not have any immediate effect on the rights of our existing stockholders. To the extent that the additional authorized shares are issued in the future, however, they will decrease our then-existing stockholders’ percentage equity ownership and, depending on the price at which they are issued, could be dilutive to our then-existing stockholders.
The Governance Proposals and the Authorized Capital Increase Proposal
In deciding to approve the governance proposals, we determined that it would be beneficial to have the protections of the governance proposals in place following the reclassification and the distribution. In deciding to approve the authorized capital increase proposal, our board of directors determined that it would be beneficial to provide CXP with financing flexibility following the distribution. The following is a description of the material terms of the governance proposals and the authorized capital increase proposal.
Proposal Two: Staggered Board Proposal. If this proposal is approved, our certificate of incorporation will be amended to divide our board of directors into three classes based on their terms of office: Class I, Class II and Class III. Upon the approval of our stockholders, the Class I directors shall include , the Class II directors shall include and the Class III directors shall include . Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting of stockholders following the annual meeting at which that director was elected. However, the directors first designated as Class I directors shall serve for a term expiring at the next annual meeting of stockholders following the date of this special meeting of stockholders, the directors first designated as Class II directors shall serve for a term expiring at the
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The vote of 66 2/3% of all CXP capital stock entitled to vote, voting together as a single class, will be required to alter, amend, rescind or repeal this provision of the certificate of incorporation or to adopt any provision inconsistent with this provision if the supermajority voting proposal described below is adopted.
Proposal Three: Written Consent Proposal. Unless otherwise provided in a company’s certificate of incorporation, Delaware law permits any action required or permitted to be taken by stockholders at a meeting to be taken without notice, without a meeting and without a stockholder vote if a written consent setting forth the action to be taken is signed by the holders of outstanding shares of stock having the requisite number of votes that would be necessary to authorize the action at a meeting of stockholders at which all shares entitled to vote were present and voted. Our certificate of incorporation does not currently provide otherwise. Moreover, our bylaws currently provide for stockholder action by written consent. The written consent proposal will amend our certificate of incorporation, and conforming changes will be made to our bylaws, to require that stockholder action be taken at an annual or special meeting of stockholders, and will prohibit stockholder action by written consent.
The written consent proposal will give all stockholders of CXP the opportunity to participate in determining any proposed action and will prevent the holders of a majority of the voting stock from using the written consent procedure to take stockholder action without affording all stockholders an opportunity to participate. This proposal will prevent stockholders from taking action other than at an annual or special meeting of stockholders at which the proposal is submitted to stockholders in accordance with the advance notice provisions of the bylaws. This could lengthen the amount of time required to take stockholder actions, which will ensure that stockholders will have sufficient time to weigh the arguments presented by both sides in connection with any contested stockholder vote. If the special meeting proposal is adopted, our stockholders will no longer have the ability to call a special meeting of stockholders to take corporate action between annual meetings. Accordingly, the written consent proposal in conjunction with the special meeting proposal may discourage, delay or prevent a change in control of CXP. For example, a proposal for the removal of directors for cause could, if our board of directors desired, be delayed until the next annual meeting of our stockholders.
The vote of 66 2/3% of all CXP capital stock entitled to vote, voting together as a single class, will be required to alter, amend, rescind or repeal this provision of the certificate of incorporation or to adopt any provision inconsistent with this provision if the supermajority voting proposal described below is adopted.
Proposal Four: Special Meeting Proposal. Under our bylaws, a special meeting of stockholders may be called by the president or by the secretary, if requested to do so by a majority of the members of our board of directors. If the special meeting proposal is adopted, our certificate of incorporation will be amended, and conforming changes will be made to our bylaws, to expressly prohibit our stockholders from calling a special meeting. This would mean that proposals for stockholder action, such as a proposed amendment to the bylaws or a proposal for the removal of directors for cause, could, if our board of directors desired, be delayed until the next annual meeting of our stockholders. A common tactic of bidders attempting a takeover is to initiate a proxy contest by calling a special meeting. By eliminating the stockholders’ right to call a special meeting, expensive proxy contests cannot occur other than in connection with our annual meeting. Our board of directors can still call a special meeting of the stockholders when issues arise that require a stockholder meeting. The inability of a stockholder to call a special meeting might impact a person’s decision to purchase our voting securities.
The vote of 66 2/3% of all CXP capital stock entitled to vote, voting together as a single class, will be required to alter, amend, rescind or repeal this provision of the certificate of incorporation or to adopt any provision inconsistent with this provision if the supermajority voting proposal described below is adopted.
Proposal Five: Supermajority Voting Proposal. Currently, in addition to the approval of our board of directors, the approval of the holders of a majority of the outstanding shares of stock entitled to vote
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| • | the provision limiting the voting rights of beneficial owners of 15% or more of the outstanding shares of our Class B common stock; | |
| • | the provision dividing our board of directors into three classes; | |
| • | the provision concerning the inability of our stockholders to act by written consent; | |
| • | the provision concerning the inability of our stockholders to call special meetings of the stockholders; | |
| • | the provision concerning the ability of our board of directors to adopt, alter, amend and repeal the bylaws; and | |
| • | the provision requiring a 66 2/3% vote of stockholders to amend the bylaws or to amend the provisions of the certificate of incorporation described above. |
The “supermajority” voting provisions may discourage or deter a person from attempting to obtain control of CXP by making it more difficult to amend some provisions of our certificate of incorporation or for our stockholders to amend any provision of our bylaws, whether to eliminate provisions that have an anti-takeover effect or those that protect the interests of minority stockholders. The supermajority voting provisions will make it more difficult for a stockholder or stockholder group to amend our bylaws or put pressure on our board of directors to amend our certificate of incorporation to facilitate a takeover attempt. Adoption of the supermajority voting proposal requires only the approval of a majority of the outstanding shares of our common stock. If the supermajority voting proposal is adopted by less than a 66 2/3% vote, stockholders having the same percentage of voting power as those who voted in favor of its adoption will not have sufficient voting power to alter, amend or repeal these provisions at a later date.
Proposal Six: Authorized Capital Increase Proposal. If this proposal is adopted, our certificate of incorporation will be amended to provide for an increase in the authorized number of shares of common stock and preferred stock which we may issue. Currently, our certificate of incorporation authorizes the issuance of 50,000,000 shares of our common stock, of which are issued and outstanding as of , 2003, and 2,000,000 shares of preferred stock, none of which are outstanding as of this time. We have shares of common stock reserved for issuance upon the exercise of outstanding options. The remainder of the shares of authorized common stock were not issued or subject to reservation. If the reclassification proposal is adopted by the holders of our common stock, but the authorized capital increase proposal is not adopted, the 50,000,000 shares of our common stock would be divided between 40,780,000 shares of Class A common stock and 9,220,000 shares of Class B common stock. If the authorized capital increase proposal is adopted, our certificate of incorporation will be amended to increase our authorized capitalization to 100,000,000 shares of common stock (consisting of 80,000,000 shares of Class A common stock and 20,000,000 shares of Class B common stock) and 5,000,000 shares of preferred stock. Our board of directors believes that such an increase in the authorized number of shares of Class A common stock, Class B common stock and preferred stock will ensure that there remains a sufficient authorized number of shares after the reclassification for potential future stock splits, sales of our securities to raise additional capital, acquisitions of other companies or their businesses or assets, establishing strategic relationships with third parties, or providing options or other stock incentives to our employees, consultants or others. Our board of directors will determine whether, when and on what terms the issuance of shares of Class A common stock, Class B common stock or preferred stock may be warranted in connection with any of the foregoing purposes. Our board of directors believes that it is
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Recommendation of the CXP Board
Our board of directors, upon the recommendation of the special committee, has unanimously approved the governance proposals and the authorized capital increase proposal and has determined that each of the governance proposals and the authorized capital increase proposal is advisable and in the best interests of CXP and our stockholders. Our board of directors recommends that you vote “For” the approval of each of the governance proposals and the authorized capital increase proposal.
Description of Bylaws Amendments
As discussed under “Proposal One: The Reclassification and Related Transactions — Description of Bylaws Amendments,” our board of directors has unanimously approved amendments to our bylaws. If our stockholders vote to approve the reclassification proposal and the governance proposals, the amendments to our bylaws described under “Proposal One: The Reclassification and Related Transactions — Description of Bylaws Amendments” will be implemented as well as provisions necessary to conform our bylaws to the governance proposals. We refer you to the full text of the proposals to our bylaws, which are attached as Appendix D. If the reclassification proposal is approved but any of the governance proposals are not approved, our bylaws will be amended as indicated by the footnotes to the bylaws included in Appendix D.
The amendments to our bylaws relating to the governance proposals are subject to the approval of the reclassification proposal and the governance proposals and will become effective only upon the completion of the reclassification. The amendments to our bylaws do not require separate stockholder approval. A description of the amendments to our bylaws is included in this proxy statement for informational purposes only.
Stockholders’ Rights Plan Proposal
| Terms of Stockholders’ Rights Plan |
Our board of directors has approved, subject to approval by our stockholders, implementation of a stockholders’ rights plan containing the material terms and provisions described in this proxy statement. The following summary is qualified in its entirety by reference to the terms of the stockholders’ rights plan to be entered into between CXP and , as rights agent, filed as an exhibit to our Current Report on Form 8-K dated , 2003.
If the stockholders’ rights plan proposal is approved by our stockholders, immediately after the consummation of the distribution by Centex, our board of directors will distribute to our stockholders of record at the close of business as of a date subsequent to the date of the distribution by Centex:
| • | one preferred stock purchase right for each outstanding share of our Class A common stock that will entitle the registered holder to purchase from CXP one one-thousandth of a share of Series A preferred stock, par value $ per share (the “Series A preferred stock”), at a purchase price of $ per one one-thousandth of a share, subject to adjustment (a “Class A right”); and | |
| • | one preferred stock purchase right for each outstanding share of our Class B common stock that will entitle the registered holder to purchase from CXP one one-thousandth of a share of Series B preferred stock, par value $ per share (the “Series B preferred stock”), at a purchase price of $ per one one-thousandth of a share, subject to adjustment (a “Class B right,” and collectively with the Class A rights, the “rights”). |
Separation and Distribution of Rights; Exercisability. Initially, the Class A rights will be attached to all certificates representing shares of our Class A common stock then outstanding and the Class B rights will be attached to all certificates representing shares of our Class B common stock then outstanding, and no separate rights certificates will be distributed with respect to any of the rights. The Class A rights will
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| • | ten business days following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire, beneficial ownership of (a) shares of our Class A common stock and/or Class B common stock representing in the aggregate percent or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and Class B common stock then outstanding, voting together as a class, or (b) percent or more of the shares of Class B common stock then outstanding (the person or group is referred to in this section as the “acquiring person”). | |
| • | ten business days (or some later date as determined by our board of directors) following the commencement of a tender or exchange offer that would result in a person or group beneficially owning (a) shares of our Class A common stock and/or Class B common stock representing in the aggregate percent or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and Class B common stock then outstanding, voting together as a class, or (b) percent or more of the shares of Class B common stock then outstanding. |
The date the Class A rights separate from our Class A common stock and the Class B rights separate from our Class B common stock is referred to as the “distribution date.”
Until the distribution date, (i) the rights will be evidenced by and transferred with and only with the stock certificates representing the Class A common stock or Class B common stock to which they are attached, (ii) new stock certificates issued after , 2003 will contain a notation incorporating the stockholders’ rights plan by reference, and (iii) the surrender for transfer of any certificates for Class A common stock or Class B common stock outstanding will also constitute the transfer of the rights associated with stock represented by those certificates. Pursuant to the stockholders’ rights plan, we reserve the right to require prior to the occurrence of a triggering event (as discussed below) that, upon any exercise of rights, a number of rights be exercised so that only whole shares of preferred stock will be issued.
The rights are not exercisable until the distribution date and will expire at the close of business on , 2013, unless earlier redeemed by CXP as described below.
As soon as practicable after the distribution date, separate rights certificates will be mailed to the holders of record of our Class A common stock and Class B common stock as of the close of business on the distribution date and, after that, the separate rights certificates will represent the rights. Except in connection with shares of our Class A common stock or Class B common stock issued or sold pursuant to the exercise of stock options under any employee plan or arrangements, or upon the exercise, conversion or exchange of securities issued by CXP in the future, or as otherwise determined by our board of directors, only shares of Class A common stock or Class B common stock issued prior to the distribution date will be issued with rights.
Flip-in Events. Each holder of a Class A right (other than the acquiring person and some related parties) will have the right to receive, upon exercise, shares of Class A common stock (or, in some circumstances, cash, property or other securities of CXP) and each holder of a Class B right (other than the acquiring person and some related parties) will have the right to receive, upon exercise, shares of Class B common stock (or, in some circumstances, cash, property or other securities of CXP), in each case having a value equal to two times the purchase price of the Class A or Class B right, as the case may be, if:
| • | any person acquires beneficial ownership of (a) shares of our Class A common stock and/or Class B common stock representing, in the aggregate, percent or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and Class B common stock then outstanding, voting together as a class, or |
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| (b) percent or more of the outstanding shares of Class B common stock (except pursuant to specified exceptions, including an offer made for all outstanding shares of Class A common stock and Class B common stock at a price and upon terms and conditions that the board of directors determines to be in the best interests of CXP and its stockholders); | ||
| • | CXP is the surviving corporation in a merger with an acquiring person and neither Class A common stock nor Class B common stock is changed or exchanged; or | |
| • | during the time that there is an acquiring person, an event occurs that results in increasing the acquiring person’s (a) total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and Class B common stock then outstanding, voting together as a class, by more than 1% or (b) ownership interest of shares of Class B common stock by more than 1%. |
Notwithstanding any of the foregoing, following the occurrence of any of the events described in this paragraph, all rights that are, or (under some circumstances specified in the stockholders’ rights plan) were, beneficially owned by any acquiring person will be null and void. The events described in this paragraph are referred to as “flip-in events.”
For example, at a purchase price of $200.00 per right, each Class A right not owned by an acquiring person (or by some related parties or transferees) following an event set forth in the preceding paragraph would entitle its holder to purchase $400.00 worth of Class A common stock (or other consideration, as noted above) for $200.00 and each Class B right not owned by an acquiring person (or by some related parties or transferees) following an event set forth in the preceding paragraph would entitle its holder to purchase $400.00 worth of Class B common stock (or other consideration, as noted above) for $200.00.
Flip-over Events. At any time following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire beneficial ownership of (a) shares of our Class A common stock and/or Class B common stock representing, in the aggregate, percent or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and Class B common stock then outstanding, voting together as a class, or (b) percent or more of the outstanding shares of Class B common stock, each holder of a Class A right or a Class B right (except rights which previously have been voided as set forth above) will have the right to receive, upon exercise, common stock of an acquiring company having a value equal to two times the purchase price of the Class A right or the Class B right, as the case may be, if any of the following occur:
| • | CXP enters into a merger in which CXP is not the surviving corporation; | |
| • | CXP is the surviving corporation in a merger pursuant to which all or part of either one or both of the outstanding shares of our Class A common stock or Class B common stock are changed into or exchanged for stock or other securities of any other person or cash or any other property; or | |
| • | more than 50% of the combined assets, cash flow or earning power of CXP and its subsidiaries is sold or transferred (in each case other than some consolidations with, mergers with and into, or sales of assets, cash flow or earning power by or to subsidiaries of CXP as specified in the stockholders’ rights plan). |
The events described in this paragraph are referred to as “flip-over events.” Flip-in events and flip-over events are referred to collectively as “triggering events.”
Anti-dilution Adjustments; Fractional Shares. The applicable purchase price payable, the number of shares of the applicable series of preferred stock or other securities or property issuable upon the exercise of the rights, and the number of applicable rights outstanding are subject to adjustment from time to time to prevent dilution:
| • | in the event of a stock dividend on, or a subdivision, combination or reclassification of, the applicable series of preferred stock; |
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| • | if the holders of the applicable series of preferred stock are granted some rights, options or warrants to subscribe for the applicable preferred stock or securities convertible into the applicable preferred stock at less than the current market price of the applicable preferred stock; or | |
| • | upon the distribution to holders of the applicable series of preferred stock of evidences of indebtedness, cash (excluding regular quarterly cash dividends), assets (other than dividends payable in preferred stock) or subscription rights or warrants (other than those referred to in the bullet point immediately above). |
The number of outstanding rights are also subject to adjustment in the event of a stock dividend on, or a subdivision, combination or recapitalization of the applicable class of common stock. With some exceptions, no adjustment in the purchase price relating to a right will be required until cumulative adjustments amount to at least one percent of the purchase price relating to the right.
No fractional shares of Series A preferred stock or Series B preferred stock are required to be issued (other than fractions which are integral multiples of one one-thousandth of a share of the applicable preferred stock) and, in lieu of the issuance of fractional shares, we may make an adjustment in cash based on the market price of the Series A preferred stock or the Series B preferred stock, as the case may be, on the trading date immediately prior to the date of exercise.
Dividend, Liquidation and Redemption Rights of the Preferred Stock. Each share of the applicable series of preferred stock will be entitled, when, as and if declared, to a minimum preferential quarterly dividend payment equal to the greater of $0.001 per share and an aggregate amount of 1,000 times the dividend declared per share of our Class A common stock or Class B common stock, as the case may be (other than stock dividends payable in Class A common stock or Class B common stock). Upon liquidation, the holders of each series of preferred stock will be entitled to the greater of (1) a minimum preferential liquidation payment of $ per share (plus any accrued but unpaid dividends) and (2) an aggregate payment of 1,000 times the payment made per share of our Class A common stock or Class B common stock, as the case may be. Each share of the applicable series of preferred stock will have 1,000 times the number of votes each share of our Class A common stock or Class B common stock, as the case may be, has on matters the respective class is entitled to vote on, which will be voted together with the applicable class of our Class A common stock or Class B common stock. Upon any merger, consolidation or other transaction in which shares of our Class A common stock or Class B common stock are converted or exchanged, each share of the applicable series of preferred stock will be entitled to receive 1,000 times the amount received per share of our Class A common stock or Class B common stock, as the case may be. These rights are protected by customary antidilution provisions.
At any time, or from time to time, our board of directors may redeem the outstanding shares of Series A preferred stock or Series B preferred stock, in whole but not in part, at a cash price per share equal to percent of (a) 1,000 (subject to adjustment) times the average market value of our Class A common stock or Class B common stock plus (b) all accrued and unpaid dividends of the Series A preferred stock or the Series B preferred stock, as the case may be, as of the redemption date.
Because of the nature of the dividend, liquidation and voting rights of each series of preferred stock, the value of the one one-thousandth interest in a share of Series A preferred stock purchasable upon exercise of each Class A right and the value of the one one-thousandth interest in a share of Series B preferred stock purchasable upon exercise of each Class B right, should approximate the value of one share of our Class A common stock and Class B common stock, respectively.
Exchange of the Rights. At any time after the occurrence of a flip-in event, and prior to the acquisition by a person or group of (a) fifty percent or more of the outstanding shares of Class B common stock or (b) shares of our Class A common stock and/or our Class B common stock representing, in the aggregate, 50% or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of our Class A common stock and our Class B common stock then
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| • | one Class A right (other than the Class A rights owned by the acquiring person or group, which will become void) for one share of Class A common stock or one-half of the shares or other units of other property for which a Class A right is exercisable immediately prior to the time of our decision to exchange the Class A rights (subject to adjustment); and | |
| • | one Class B right (other than Class B rights owned by the acquiring person or group, which will become void) for one share of Class B common stock (or in some circumstances preferred stock) or one-half of the shares or other units of other property for which a Class B right is exercisable immediately prior to the time of our decision to exchange the Class B rights (subject to adjustment). |
Redemption of the Rights. At any time until a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire beneficial ownership of (a) Class A common stock and/or Class B common stock representing, in the aggregate, percent or more of the total number of votes entitled to be cast generally (other than in an election of directors) by the holders of Class A common stock and Class B common stock then outstanding, voting together as a class or (b) percent or more of the outstanding shares of Class B common stock, we may redeem all, but not less than all, of the rights at a price of $0.001 per right (payable in cash, shares of Class A common stock, Class B common stock or other consideration deemed appropriate by our board of directors and subject to adjustment).
Immediately upon the action of our board of directors ordering redemption of the rights, the applicable rights will terminate and the only right of the holders of these rights will be to receive the redemption price.
No Rights as Stockholder. Until a right is exercised, the holder will have no rights as a stockholder of CXP, including, without limitation, the right to vote or to receive dividends.
Amendment of the Rights Agreement. Other than those provisions relating to the principal economic terms of the rights, any of the provisions of the stockholders’ rights plan may be amended by our board of directors at any time during the period in which the rights are redeemable. At any time when the rights are no longer redeemable, the provisions of the stockholders’ rights plan may be amended by our board only if the amendment does not adversely affect the interest of holders of rights (excluding the interest of any acquiring person) or cause the rights to become redeemable again.
Periodic Review. Our board of directors will appoint a committee that is comprised of at least three (3) directors of CXP who are not officers, employees or affiliates of CXP, to review and evaluate the stockholders’ rights plan beginning on 2005 and at least every three years thereafter or sooner if any person shall become an acquiring person in order to consider whether the maintenance of the stockholders’ rights plan continues to be in the best interests of CXP and its stockholders. Following each review, the committee will communicate its conclusions to our full board of directors including any recommendation as to whether the rights agreement should be modified or the rights should be redeemed.
| Objectives and Potential Advantages |
Stockholders’ rights agreements are widely accepted as a means of discouraging certain coercive takeover tactics. Our board of directors believes that the proposed rights agreement is similar to those adopted by many other corporations. The overriding objective of our board of directors in adopting our rights agreement was to enhance the ability of our board of directors to ensure that our stockholders receive full, fair value for their shares of common stock in a hostile takeover attempt.
The rights agreement is not intended to prevent a takeover on terms that are in the best interests of all our stockholders, and it is not intended to deter a proxy contest initiated by any of our stockholders. The rights agreement is designed to provide our board of directors with the ability to take what the board
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In the view of our board of directors, the experiences of other companies indicate that rights agreements do not necessarily prevent unsolicited offers from occurring or prevent companies from being acquired in transactions that are fair to all stockholders. In recent years, a number of public companies with rights agreements similar to our proposed rights agreement have received unsolicited offers, many of which were successfully completed after the directors of those companies were satisfied that the transaction, as negotiated, was fair to and in the best interests of all stockholders.
The proposed rights agreement was not designed or intended to entrench management. Our board of directors unanimously adopted the proposed rights agreement. Our board of directors did not adopt the proposed rights agreement as a result of any specific effort to obtain control of CXP.
In adopting the stockholders’ rights plan and submitting it for stockholder approval, our board of directors has given careful and thoughtful consideration to the interests of the stockholders of CXP and the effects of the stockholders’ rights plan on them. In the course of that review, our board of directors concluded that numerous means existed by which a bidder could obtain control of CXP through tactics that may unfairly pressure our stockholders to sell their investments at less than full value and that the stockholders’ rights plan was a prudent measure to counteract those means.
| Potential Disadvantages |
The stockholders’ rights plan will substantially dilute both the voting and economic interests of any person who attempts to acquire control of CXP without satisfying our board of directors as to the fairness of their offer in relation to the interests of the other stockholders of CXP. As a result, the stockholders’ rights plan may discourage some tender offers and other attempts to acquire CXP or change control of CXP, even though stockholders might feel the acquisition would be beneficial to them or CXP. In addition, the stockholders’ rights plan may discourage tender offers, open market purchases in anticipation of tender offers, and other investment and speculative market activity that may have the effect of increasing the market price of or price volatility in CXP’s stock. As a result, our stockholders could in some circumstances be deprived of opportunities to sell their shares at higher prices.
| Current Anti-Takeover Provisions Available to CXP |
During the time that we have been a majority-owned subsidiary of Centex, our board of directors believed that it was not necessary to adopt anti-takeover provisions that are typically found in public companies that do not have a majority stockholder. Because we will not be a majority-owned subsidiary of Centex after the reclassification and the distribution, our board of directors believes that it is advisable to adopt anti-takeover provisions that are typically found in non-majority owned public companies. The following factors, and the potential for each to have an anti-takeover effect, should be reviewed in evaluating the proposal to approve the stockholders’ rights plan.
Change of Control Provisions. Our stock compensation plans contain provisions to the effect that, if there occurs a change of control of CXP, all options granted pursuant to such plans will vest and become exercisable and all restrictions will lapse on shares of restricted stock granted under such plans.
CXP’s Certificate of Incorporation and Bylaws. Although our certificate of incorporation and bylaws do not currently provide for common anti-takeover protections, we are asking our stockholders to approve a
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Blank-Check Preferred Stock. Our authorized capital stock currently includes 2,000,000 shares of preferred stock, par value $0.01 per share. No preferred stock was outstanding as of the date of this proxy statement. Our board of directors has the authority to authorize the issuance of our preferred stock in one or more series and to fix the rights (including the voting rights, if any), preferences, privileges and restrictions granted to or imposed upon any series, without any further vote or action by our stockholders.
We believe that our preferred stock provides us with increased flexibility in structuring possible future financings and acquisitions, and in meeting other corporate needs that might arise. Having authorized preferred shares available for issuance will allow CXP to issue shares of preferred stock without further action by our stockholders, unless stockholder action is required by applicable laws or the rules of any stock exchange or market on which CXP’s securities may be listed. Our board of directors will make any determination to issue preferred shares based on its judgment as to the best interests of CXP and our stockholders at the time of issuance. Our board of directors, in so acting, could issue preferred stock having terms which could discourage an acquisition attempt or other transaction that some, or a majority, of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of their stock.
State Anti-Takeover Statute. For a discussion of the state anti-takeover statute that we are subject to, see “— Purpose and Effects of the Governance Proposals — State Anti-Takeover Statutes.”
Recommendation of the CXP Board
Our board of directors has unanimously approved the stockholders’ rights plan proposal and has determined that the stockholders’ rights plan proposal is advisable and in the best interests of CXP and our stockholders. Our board of directors recommends that you vote “For” the approval of the stockholders’ rights plan proposal.
Required Vote
Approval of each of the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal requires the affirmative vote of a majority of the shares of our common stock outstanding as of the record date. Unless the merger agreement is adopted by the holders of our common stock as described under “Proposal One: The Reclassification and Related Transactions — Required Vote” and the reclassification is completed, the governance proposals, the authorized capital increase proposal and the stockholders’ rights plan proposal will not be implemented.
If the governance proposals and the authorized capital increase proposal are approved and the reclassification is completed, our certificate of incorporation will be amended as indicated in Appendix C, which includes the reclassification proposals, the governance proposals and the authorized capital increase proposal. If the stockholders’ rights plan proposal is approved, we will adopt the stockholders’ rights plan.
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STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as of , 2003 with respect to the beneficial ownership of our common stock before and after the proposed transactions by:
| • | each person known to us to own beneficially more than 5% of the outstanding shares of our common stock or Centex common stock; | |
| • | our four most highly-compensated executive officers of CXP; | |
| • | each director of CXP; and | |
| • | all current executive officers and directors of CXP as a group. |
There may be other people that own shares of both our common stock and Centex common stock who would own, collectively, following the reclassification and the distribution, more than 5% of the total voting power of our Class A common stock and Class B common stock.
| Percent of | Number of Shares | ||||||||||||||||||||
| Number of | Common | and Percent of Class Owned | Percent of Total | ||||||||||||||||||
| Shares Owned | Stock Prior | After the Transactions | Capital Stock | ||||||||||||||||||
| Prior to the | to the | Owned After the | |||||||||||||||||||
| Name of Beneficial Owner | Transactions (*) | Transactions | Class A | Class B | Transactions | ||||||||||||||||
|
Centex Corporation
|
11,962,304 | 65.08 | % | 0 | 0 | 0 | |||||||||||||||
|
2728 N. Harwood Dallas, Texas 75201 |
|||||||||||||||||||||
|
Artisan Partners Limited Partnership
|
1,429,983 | 7.8 | % | 1,429,983/15.49 | % | 0 | 7.8 | % | |||||||||||||
|
Artisan Investment Corporation Andrew A. Ziegler Carlene Murphy Ziegler 1000 North Water Street, #1770 Milwaukee, Wisconsin 53202(1) |
|||||||||||||||||||||
|
FMR Corp
|
1,242,254 | 6.76 | % | 1,242,254/13.45 | % | 0 | 6.76 | % | |||||||||||||
|
82 Devonshire Street Boston, Massachusetts 02109(2) |
|||||||||||||||||||||
|
AXA Assurances I.A.R.D. Mutuelle
|
0 | 0 | % | 235,310/2.56 | % | 882,413/9.57 | % | 6.06 | % | ||||||||||||
|
370 Rue Saint Honore Paris, France 75001(3) |
|||||||||||||||||||||
|
Greenhaven Associates, Inc.
|
0 | 0 | % | 173,212/1.88 | % | 649,545/7.04 | % | 4.46 | % | ||||||||||||
|
3 Manhattan Road Purchase, New York 10577(4)** |
|||||||||||||||||||||
|
F. William Barnett
|
0 | (5 | ) | 0 | 0 | (5 | ) | ||||||||||||||
|
Robert L. Clarke(6)
|
16,029 | (5 | ) | 16,029/(5 | ) | 0 | (5 | ) | |||||||||||||
|
Timothy R. Eller(7)**
|
0 | (5 | ) | 5,860/(5 | ) | 21,975/(5 | ) | (5 | ) | ||||||||||||
|
Gerald J. Essl
|
0 | (5 | ) | 0 | 0 | (5 | ) | ||||||||||||||
|
Laurence E. Hirsch(7)**
|
10,000 | (5 | ) | 54,730/(5 | ) | 167,740/1.82 | % | 1.21 | % | ||||||||||||
|
H. David House(8)
|
80,918 | (5 | ) | 80,918/(5 | ) | 0 | (5 | ) | |||||||||||||
|
Michael R. Nicolais(9)**
|
6,463 | (5 | ) | 6,479/(5 | ) | 60/(5 | ) | (5 | ) | ||||||||||||
|
David W. Quinn(7)**
|
2,000 | (5 | ) | 2,952/(5 | ) | 3,572/(5 | ) | (5 | ) | ||||||||||||
|
Steven R. Rowley(10)
|
82,083 | (5 | ) | 82,083/(5 | ) | 0 | (5 | ) | |||||||||||||
|
Arthur R. Zunker, Jr.(11)**
|
70,924 | (5 | ) | 70,932/(5 | ) | 32/(5 | ) | (5 | ) | ||||||||||||
|
Directors and Executive Officers as a group
(10 persons)
|
268,417 | 1.5 | % | 319,983/3.38 | % | 193,379/2.1 | % | 2.75 | % | ||||||||||||
| * | Unless otherwise indicated in the following footnotes, each stockholder referred to above has sole voting and dispositive power with respect to the shares listed. |
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| ** | Assumes a distribution ratio of .15 shares of Class B common stock for each share of Centex common stock and .04 shares of Class A common stock for each share of Centex common stock. |
| (1) | Based solely upon information contained in the Schedule 13G of Artisan Partners Limited Partnership (“Artisan Partners”), Artisan Investment Corporation (“Artisan Corporation”), Andrew A. Ziegler and Carlene Murphy Ziegler (collectively, “Artisan”) filed with the SEC on January 31, 2003 with respect to shares of common Stock owned as of December 31, 2002 (the “Artisan 13G”), but calculating the percentage shown by dividing the number of such shares by the total number of shares of common stock issued and outstanding on the record date. According to the Artisan 13G, such number represents shares acquired on behalf of discretionary clients of Artisan Partners, an investment adviser registered under the Investment Advisers Act of 1940, none of whom has an economic interest in more than five percent of the outstanding shares of common stock. According to the Artisan 13G, Artisan Partners, Artisan Corporation, in its capacity as corporate general partner of Artisan Partners, and Andrew A. Ziegler and Carlene Murphy Ziegler, in their capacity as principal stockholders of Artisan Corporation, had shared power to vote or to direct the vote and shared power to dispose or to direct the disposition of such shares. As of , 2003, Artisan has made no public filings regarding any ownership of shares of Centex common stock. The table assumes Artisan owns no shares of Centex common stock; however, it could own up to 5% of such shares without making any public filling regarding such ownership. If Artisan were to own any shares of Centex common stock prior to the transactions, the number of shares of Class A and Class B common stock owned after the transactions would be adjusted accordingly. | |
| (2) | Based solely on information contained in the Schedule 13G of FMR Corp. filed with the SEC on February 14, 2003 with respect to shares of common stock owned as of December 31, 2002 (the “FMR 13G”), but calculating the percentage shown by dividing the number of such shares by the total number of shares of common stock issued and outstanding on the record date. According to the FMR 13G, FMR Corp. had sole dispositive power over such shares. As of , 2003, FMR Corp. has made no public filings regarding any ownership of shares of Centex common stock. The table assumes FMR Corp. owns no shares of Centex common stock; however, it could own up to 5% of such shares without making any public filing regarding such ownership. If FMR Corp. were to own any shares of Centex common stock prior to the transactions, the number of shares of Class A and Class B common stock owned after the transactions would be adjusted accordingly. | |
| (3) | Based solely upon information contained in the Schedule 13G of AXA Assurances I.A.R.D. Mutuelle filed with the SEC on February 12, 2003 with respect to shares of Centex common stock owned as of December 31, 2002 (the “AXA 13G”), but calculating the percentage shown by dividing the number of such shares of Centex common stock by the total number of shares of Centex common stock issued and outstanding on record date. According to the AXA 13G, such number includes the following: sole voting power — 2,991,465; shared voting power — 646,115; sole dispositive power — 5,290,498; and shared dispositive power — 592,260. As of , 2003, AXA has made no public filings regarding any ownership of shares of CXP common stock. The table assumes AXA owns no shares of CXP common stock; however, it could own up to 5% of such shares without making any public filing regarding such ownership. If AXA were to own any shares of CXP common stock prior to the transactions, the number of shares of Class A common stock owned after the transactions would be adjusted accordingly. | |
| (4) | Based solely upon information contained in the Schedule 13G of Greenhaven Associates, Inc. filed with the SEC on January 21, 2003 with respect to shares of Centex common stock owned as of December 31, 2002 (“Greenhaven 13G”), but calculating the percentage shown by dividing the number of such shares by the total number of shares of Centex common stock issued and outstanding on the record date. According to the Greenhaven 13G, such number includes 1,031,000 shares over which Greenhaven Associates, Inc. had both sole voting power and sole dispositive power, and 3,299,300 shares over which Greenhaven Associates, Inc. had shared dispositive power. As of , 2003, Greenhaven has made no public filings regarding any ownership of shares of CXP common stock. The table assumes Greenhaven owns no shares of CXP common stock; however, it could own up to 5% of such shares without making any public filing |
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| regarding such ownership. If Greenhaven were to own any shares of CXP common stock prior to the transactions, the number of shares of Class A common stock owned after the transactions would be adjusted accordingly. | ||
| (5) | Less than one percent. | |
| (6) | The total number of shares includes 13,029 shares covered by stock options that are outstanding under the Centex Construction Products, Inc. Stock Option Plan (the “CXP Stock Option Plan”) which are exercisable on June 2, 2003 or within 60 days thereafter. | |
| (7) | Does not include 11,962,304 shares of common stock owned by Centex, which shares may be deemed to be beneficially owned indirectly by each of Messrs. Eller, Hirsch and Quinn because of their positions of directors and/or executive officers of Centex. | |
| (8) | The total number of shares includes 80,918 shares covered by stock options that are outstanding under the CXP Stock Option Plan which are exercisable on June 2, 2003 or within 60 days thereafter. | |
| (9) | The total number of shares of our common stock owned prior to the transactions and the total number of shares of Class A common stock owned after the transactions include 3,063 shares covered by stock options that are outstanding under the CXP Stock Option Plan which are exercisable on June 2, 2003 or within 60 days thereafter and 400 shares owned by Mr. Nicolais’ wife. The total number of shares owned after the transactions includes shares to be received as a result of 400 shares of common stock of Centex owned by Mr. Nicolais’ wife. |
| (10) | The total number of shares includes 80,918 shares covered by stock options that are outstanding under the CXP Stock Option Plan which are exercisable on June 2, 2003 or within 60 days thereafter and 1,165 shares that are held for the account of Mr. Rowley as of June 2, 2003 pursuant to the Common Stock Fund of the Profit Sharing and Retirement Plan of Centex Construction Products, Inc. |
| (11) | The total number of shares of our common stock owned prior to the transactions and the total number of shares of Class A common stock owned after the transactions include 65,612 shares covered by stock options that are outstanding under the Centex Construction Products, Inc. Stock Option Plan which are exercisable on June 2, 2003 or within 60 days thereafter and 5,302 shares that are held for the account of Mr. Zunker as of June 2, 2003 pursuant to the Common Stock Fund of the Profit Sharing and Retirement Plan of Centex Construction Products, Inc. The total number of shares owned after the transactions includes shares to be received as a result of 216 shares of common stock of Centex owned by Mr. Zunker. |
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BOARD OF DIRECTORS AND MANAGEMENT OF CXP
Board of Directors
Set forth below are the names, ages at , 2003, and principal occupations for each director of CXP:
F. William Barnett, 56, has been a member of our board of directors since June 2003 and serves as Chairman of the Compensation and Stock Options Committee and on our Audit Committee and the Nominating Committee. Mr. Barnett recently retired from his position as a director in the Dallas office of McKinsey & Company, Inc. after 23 years with the firm. Mr. Barnett is also a director of Papa Johns International, Inc.
Robert L. Clarke, 60, has been a member of our board of directors since 1994, and serves as Chairman of the Audit Committee of our board of directors and also on the Compensation and Stock Option Committee and Nominating Committee of our board of directors. He has been a partner in the law firm of Bracewell & Patterson, L.L.P. from 1971 to December 1985 and since March 1992. From December 1985 to February 1992, he was Comptroller of the Currency of the United States. Mr. Clarke is also a director of First Investors Financial Services, Inc.
Timothy R. Eller, 54, has been a member of our board of directors since May 10, 2001. He was elected President and Chief Operating Officer of Centex in April 2002 and has been a director of Centex since July 2002. Mr. Eller joined Centex Homes’ Illinois operations in 1973 and was named Project Manager for the Illinois division in 1975. He became Vice President of the Minnesota division in 1977 and the division’s President in 1981. He was named an Executive Vice President of Centex Real Estate Corporation in 1985 and elected as the company’s President and Chief Operating Officer in January 1990. In July 1991, he was named President and Chief Executive Officer of Centex Homes and served as Chairman of Centex Homes from April 1998 to 2003. In August 1998, Mr. Eller was named Executive Vice President of Centex Corporation. Mr. Eller is the Chairman of the High Production Home Builders Council of the National Association of Home Builders and is a life trustee of the National Housing Endowment. He is Chairman of the Policy Advisory Board for Harvard University’s Joint Center for Housing Studies, a member of the Advisory Board of JP Morgan Chase Dallas Region and serves on the Board of Trustees of the Nature Conservancy of Texas. Mr. Eller has a B.S. in construction management from the University of Nebraska.
Laurence E. Hirsch, 57, has been a member of our board of directors since 1985, has been the Chief Executive Officer of CXP since April 2003, and serves as Chairman of the Executive Committee of our board of directors. He has served as Chairman of our board of directors from January 1994 through December 1997 and from July 1999 to the present. Mr. Hirsch has served as a director of Centex since 1985, as Chief Executive Officer of Centex since July 1988 and as Chairman of the Board of Centex since July 1991. He also served as President of Centex from March 1985 until July 1991. Mr. Hirsch also serves as a director of Belo Corp. and Luminex Corporation, and as an advisory director of Heidelberger Zement AG.
Michael R. Nicolais, 44, has been a member of our board of directors since May 2001, and serves on the Audit Committee, the Compensation and Stock Option Committee and as Chairman of the Nominating Committee of our board of directors. In August 2002, Mr. Nicolais became a managing director of Stephens, Inc., an investment banking firm. He was a partner in the private investment firm of Olivhan Investments, L.P. from March 2001 until August 2002. From August 1986 to December 2000, he was employed by Donaldson, Lufkin & Jenrette Securities Corporation’s Investment Banking Division, most recently in the position of Managing Director and Co-head of the firm’s Dallas office.
David W. Quinn, 61, has been a member of our board of directors since 1994, and serves on the Executive Committee of our board of directors. He has served as a director of Centex since 1989, served as Vice Chairman of the Board of Centex from May 1996 until March 2002, and as Executive Vice President of Centex from February 1987 until May 1996 and Chief Financial Officer of Centex from
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Executive Officers
Listed below are the names, ages at , 2003, and principal occupations of each executive officer of CXP who is not also a director of CXP. All these people have been elected to serve until the next annual election of officers and their successors are elected or until their earlier resignation or removal.
| Name | Age | Title | ||||
|
Arthur R. Zunker, Jr.
|
60 | Senior Vice President — Finance and Treasurer; (Senior Vice President — Finance and Treasurer since January 1994; Senior Vice President — Administration from August 1984 to January 1994). | ||||
|
Steven R. Rowley
|
50 | Executive Vice President and Chief Operating Officer (Chief Operating Officer since January 2003; Executive Vice President — Cement/ Concrete and Aggregates from January 2001 to January 2003; Executive Vice President — Cement from January 1998 through January 2001; Executive V.P. of Illinois Cement Company from June 1995 through December 1997; Plant Manager at Nevada Cement Company from April 1991 through May 1995). | ||||
|
H. David House
|
61 | Executive Vice President — Gypsum and Paperboard (Executive Vice President — Gypsum and Paperboard since November 2000; Executive Vice President — Gypsum from January 1998 through 2000; President of American Gypsum Company since June 1997). | ||||
|
Gerald J. Essl
|
53 | Executive Vice President — Cement/ Concrete and Aggregates (Executive Vice President — Cement/ Concrete and Aggregates since January 2003; President of Texas-Lehigh Cement Company from 1985 through December 2002). | ||||
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Next year’s annual meeting of stockholders is scheduled to be held on July 22, 2004. In order to be considered for inclusion in CXP’s proxy material for that meeting, stockholder proposals must be received at our executive offices, addressed to the attention of the Secretary, not later than February 27, 2004.
For any proposal that is not submitted for inclusion in our proxy material for the 2004 annual meeting of stockholders but is instead sought to be presented directly at that meeting, Rule 14a-4(c) under the Securities Exchange Act of 1934 permits management to exercise discretionary voting authority under proxies it solicits unless CXP is notified about the proposal on or before April 23, 2004, and the stockholder satisfies the other requirements of Rule 14a-4(c). Our bylaws provide that, to be considered at the 2004 annual meeting, a stockholder proposal must be submitted in writing and received by the Secretary at the executive offices of CXP during the period beginning on January 23, 2004 and ending April 23, 2004, and must contain the information specified by and otherwise comply with our bylaws. Any stockholder wishing to receive a copy of our bylaws should direct a written request to the Secretary at our principal executive offices.
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AGREEMENT AND PLAN OF MERGER
Table of Contents
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I THE MERGER | A-2 | |||||
|
SECTION 1.1.
|
The Merger | A-2 | ||||
|
SECTION 1.2.
|
Effect on Capital Stock | A-2 | ||||
|
SECTION 1.3.
|
Share Certificates | A-3 | ||||
| ARTICLE II THE SURVIVING CORPORATION | A-3 | |||||
|
SECTION 2.1.
|
Certificate of Incorporation | A-3 | ||||
|
SECTION 2.2.
|
By-Laws | A-3 | ||||
|
SECTION 2.3.
|
Directors and Officers | A-4 | ||||
| ARTICLE III COVENANTS; REPRESENTATIONS AND WARRANTIES | A-4 | |||||
|
SECTION 3.1.
|
Stockholders Meeting | A-4 | ||||
|
SECTION 3.2.
|
Filings; Other Actions | A-5 | ||||
|
SECTION 3.3.
|
Reasonable Best Efforts | A-5 | ||||
|
SECTION 3.4.
|
Representations and Warranties of the Company | A-6 | ||||
|
SECTION 3.5.
|
Representations and Warranties of Centex and Merger Sub | A-6 | ||||
| ARTICLE IV CONDITIONS TO THE MERGER | A-7 | |||||
|
SECTION 4.1.
|
Conditions to the Obligations of the Company | A-7 | ||||
|
SECTION 4.2.
|
Conditions to the Obligations of Centex and Merger Sub | A-8 | ||||
| ARTICLE V TERMINATION | A-8 | |||||
|
SECTION 5.1.
|
Termination | A-8 | ||||
|
SECTION 5.2.
|
Effect of Termination | A-8 | ||||
| ARTICLE VI MISCELLANEOUS | A-9 | |||||
|
SECTION 6.1.
|
Notices | A-9 | ||||
|
SECTION 6.2.
|
Defined Terms | A-10 | ||||
|
SECTION 6.3.
|
Successors and Assigns | A-10 | ||||
|
SECTION 6.4.
|
Governing Law | A-10 | ||||
|
SECTION 6.5.
|
Counterparts; Effectiveness | A-11 | ||||
|
SECTION 6.6.
|
Amendments | A-11 | ||||
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of July 21, 2003 (this “Agreement”), is entered into by and among CENTEX CONSTRUCTION PRODUCTS, INC., a Delaware corporation (the “Company”), CENTEX CORPORATION, a Nevada corporation (“Centex”), and ARG MERGER CORPORATION, a Delaware corporation and a wholly owned subsidiary of Centex (“Merger Sub”).
WITNESSETH:
WHEREAS, Centex owns (i) all of the issued and outstanding shares of common stock, par value $.01 per share, of Merger Sub (“Merger Sub Common Stock”) and (ii) an aggregate of 11,962,304 shares of common stock, par value $.01 per share (“Common Stock”), of the Company, representing approximately 65% of the total number of issued and outstanding shares of Common Stock;
WHEREAS, prior to the Effective Time (as hereinafter defined) of the Merger (as hereinafter defined), Centex plans to contribute to Merger Sub an aggregate of 9,220,000 shares of Common Stock owned by it (the “Contributed Shares”) and will retain 2,742,304 shares of Common Stock owned by it (the “Additional Shares”);
WHEREAS, Centex and the Company desire that Merger Sub be merged with and into the Company (the “Merger”), upon the terms and subject to the conditions set forth in this Agreement and in accordance with the applicable provisions of the General Corporation Law of the State of Delaware (the “DGCL”), with the result that (i) all of the issued and outstanding shares of Merger Sub Common Stock will be converted into an aggregate of 9,220,000 shares of a new class of common stock of the Company to be designated as Class B Common Stock, par value $.01 per share (“Class B Common Stock”), and (ii) all of the issued and outstanding shares of Common Stock, including the Additional Shares (other than the Contributed Shares, which will be canceled with no securities or other consideration being issued in exchange therefor) will remain issued and outstanding;
WHEREAS, concurrently with the execution hereof, the Company and Centex are entering into a Distribution Agreement, dated as of the date hereof (the “Distribution Agreement”), pursuant to which Centex has agreed, subject to the satisfaction of certain conditions set forth in the Distribution Agreement, to distribute on a pro rata basis to the holders of the common stock, par value $.25 per share, of Centex (the “Distribution”) (i) all of the Additional Shares and (ii) all of the shares of Class B Common Stock received by it as a result of the Merger (the Class B Common Stock and the Additional Shares shall be collectively referred to herein as the “Distributable Shares”);
WHEREAS, the Distribution Agreement provides that the Company will pay a pro rata cash dividend (the “Cash Dividend”) to all of its stockholders in the amount of $6.00 per share of Common Stock;
WHEREAS, in accordance with the terms of the Distribution Agreement, the Cash Dividend is to be paid prior to the Effective Time of the Merger, and the Merger is to occur prior to the consummation of the Distribution;
WHEREAS, a special committee of the Board of Directors of the Company (the “Special Committee”) has determined that this Agreement and the Merger are fair to, and in the best interests of, the Company and its stockholders (other than Centex and Merger Sub);
WHEREAS, the Board of Directors of the Company has, based in part on the determination of the Special Committee referred to above, (i) determined that this Agreement and the Merger are fair to and in the best interests of, the Company and its stockholders, (ii) approved this Agreement and, subject to obtaining the approval of the stockholders of the Company as required under applicable law, the Merger, and (iii) declared this Agreement to be advisable;
WHEREAS, the Board of Directors of the Company has directed that this Agreement and the Governance Proposals (as hereinafter defined) and the Stockholder Rights Plan Proposal (as hereinafter
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WHEREAS, the Board of Directors of Merger Sub has (i) determined that this Agreement and the Merger are fair to and in the best interests of, Merger Sub and its sole stockholder, (ii) approved this Agreement and the Merger and (iii) declared the Merger Agreement to be advisable;
WHEREAS, the sole stockholder of Merger Sub has approved this Agreement and the Merger by written consent of such sole stockholder;
WHEREAS, the Merger is intended to constitute a reorganization within the meaning of Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended; and
WHEREAS, capitalized terms used herein have the meanings assigned to them in the provisions identified in Section 6.2;
NOW, THEREFORE, in consideration of the premises, the terms and conditions set forth herein, the mutual benefits to be gained from the performance thereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1. The Merger.
(a) Upon the terms and subject to the conditions of this Agreement and in accordance with the applicable provisions of the DGCL, at the Effective Time, Merger Sub shall be merged with and into the Company, whereupon the separate corporate existence of Merger Sub shall cease, and the Company shall be the surviving corporation (the “Surviving Corporation”).
(b) Following satisfaction or waiver of the conditions specified in Article IV, the Company and Merger Sub shall file a certificate of merger (the “Certificate of Merger”) with the Secretary of State of the State of Delaware and make all other filings or recordings required by the DGCL in connection with the Merger. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Secretary of State of the State of Delaware, or at such later time as is specified in the Certificate of Merger in accordance with applicable law (the “Effective Time”).
(c) The Merger shall have the effects set forth in Section 259 of the DGCL. Without limiting the generality of the foregoing, from and after the Effective Time, the Surviving Corporation shall possess all the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of the Company and Merger Sub, all as provided in the DGCL.
SECTION 1.2. Effect on Capital Stock. At the Effective Time, automatically and without necessity of any action on the part of the Company or Merger Sub:
(a) all of the shares of Merger Sub Common Stock outstanding immediately prior to the Effective Time shall be canceled and converted into 9,220,000 fully paid and non-assessable shares of Class B Common Stock of the Surviving Corporation and shall have the rights and privileges set forth in the Surviving Corporation Certificate of Incorporation (as hereinafter defined);
(b) all of the Contributed Shares shall be canceled and shall cease to exist, and no stock of the Surviving Corporation or any other consideration shall be delivered in exchange therefor; and
(c) all of the shares of Common Stock (including the Additional Shares) outstanding immediately prior to the Effective Time (other than the Contributed Shares), shall remain issued and outstanding, and each share of Common Stock that immediately prior to the Effective Time was held in the treasury of the Company, if any, shall remain in the treasury of the Company and, in each case, such shares shall have the rights and privileges set forth in the Surviving Corporation Certificate of Incorporation.
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SECTION 1.3. Share Certificates.
(a) As soon as practicable after the Effective Time:
| (i) the Surviving Corporation shall deliver, or cause to be delivered, to Centex a certificate or certificates issued in the name of Centex, representing an aggregate of 9,220,000 shares of Class B Common Stock to be issued pursuant to Section 1.2(a); | |
| (ii) Merger Sub shall surrender the certificates representing the Contributed Shares to the Surviving Corporation, and the Surviving Corporation shall cancel such certificates; and | |
| (iii) the certificates that immediately prior to the Effective Time represented shares of Common Stock (including the Additional Shares) that remain issued and outstanding or in the treasury of the Company in accordance with Section 1.2(c) shall not be exchanged and shall continue to represent the same number of shares of Common Stock of the Surviving Corporation, without physical substitution of share certificates. |
(b) Any dividend or other distribution declared or made with respect to any shares of capital stock of the Company, whether the record date for such dividend or distribution is before or after the Effective Time, shall be paid to the holder of record of such shares of capital stock on such record date, regardless of whether such holder has surrendered its certificates representing Common Stock or received certificates representing shares of Class B Common Stock pursuant to Section 1.3(a)(i).
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1. Certificate of Incorporation.
(a) In the event that this Agreement is adopted by the stockholders, and each of the Written Consent Proposal, the Staggered Board Proposal, the Special Meeting Proposal, the Supermajority Voting Proposal and the Authorized Capital Increase Proposal (in each case as hereinafter defined, and collectively, the “Governance Proposals”) are adopted by the stockholders of the Company at the Stockholders Meeting, at the Effective Time, the Restated Certificate of Incorporation of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in its entirety as set forth in Exhibit A-1 hereto, and as so amended shall be the Restated Certificate of Incorporation of the Surviving Corporation.
(b) In the event the adoption of any of the Governance Proposals is not approved, but the adoption of this Agreement is approved, by the stockholders of the Company at the Stockholders Meeting, at the Effective Time, the Restated Certificate of Incorporation of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in its entirety as set forth in Exhibit A-2 hereto (with such changes as are set forth in Exhibit A-2 hereto to reflect such of the Governance Proposals, if any, as may be approved by the stockholders of the Company at the Stockholders Meeting in accordance with Section 242 of the DGCL), and as so amended shall be the Restated Certificate of Incorporation of the Surviving Corporation.
(c) The Restated Certificate of Incorporation of the Surviving Corporation that becomes effective pursuant to Section 2.1(a) or 2.1(b) is herein referred to as the “Surviving Corporation Certificate of Incorporation.”
SECTION 2.2. By-Laws.
(a) In the event that this Agreement is adopted by the stockholders of the Company, and each of the Governance Proposals are adopted by the stockholders of the Company at the Stockholders Meeting, at the Effective Time, the Amended and Restated Bylaws of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in their entirety as set forth in Exhibit B-1 hereto, and as so amended shall be the Amended and Restated Bylaws of the Surviving Corporation.
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(b) In the event the adoption of any of the Governance Proposals is not approved, but the adoption of this Agreement is approved, by the stockholders of the Company at the Stockholders Meeting, at the Effective Time, the Amended and Restated Bylaws of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in their entirety as set forth in Exhibit B -2 hereto (with such changes as are set forth in Exhibit B-2 hereto to reflect such of the Governance Proposals, if any, as may be approved by the stockholders of the Company at the Stockholders Meeting in accordance with Section 242 of the DGCL), and as so amended shall be the Amended and Restated Bylaws of the Surviving Corporation.
(c) The Amended and Restated Bylaws of the Surviving Corporation as amended pursuant to Section 2.2(a) or 2.2(b) are herein referred to as the “Surviving Corporation Bylaws.”
SECTION 2.3. Directors and Officers.
(a) The Board of Directors of the Surviving Corporation initially shall consist of the persons serving as members of the Board of Directors immediately prior to the Effective Time, together with one or more additional directors to be designated by the Board of Directors of the Company prior to the Effective Time, to the extent necessary to ensure that the total number of members of the Board of Directors shall be at least seven immediately after the Effective Time. From and after the Effective Time, the directors of the Surviving Corporation shall consist of the directors of the Company specified in the immediately preceding sentence, until the earlier of their removal or resignation or until their successors are duly elected or appointed and qualified in accordance with applicable law. At the Effective Time, the directors of the Surviving Corporation shall be divided pursuant to the Surviving Corporation Certificate of Incorporation into (i) two separate classes (each a “Voting Constituency Class” and together, the “Voting Constituency Classes”) based on the class of common stock of the Surviving Corporation the holders of which are entitled to elect the directors serving as members of each such Voting Constituency Class and (ii) if the Staggered Board Proposal is adopted, three classes (each a “Term of Office Class” and collectively, the “Term of Office Classes”) based on the expiration of the term of office of the members of each such Term of Office Class. Each director in office as of the Effective Time shall be allocated to a Voting Constituency Class and (in the event the Staggered Board Proposal is adopted) a Term of Office Class in accordance with the applicable provisions of the Surviving Corporation Certificate of Incorporation. The Voting Constituency Class and (in the event the Staggered Board Proposal is adopted) the Term of Office Class to which each director is to be allocated shall be set forth in the Proxy Statement (as hereinafter defined) at the time it is mailed to the stockholders of the Company.
(b) From and after the Effective Time, until the earlier of their removal or resignation or until their successors are duly appointed and qualified in accordance with applicable law and the Surviving Corporation Bylaws, the officers of the Company in office at the Effective Time shall be the officers of the Surviving Corporation.
ARTICLE III
COVENANTS; REPRESENTATIONS AND WARRANTIES
SECTION 3.1. Stockholders Meeting. The Company shall, as soon as practicable following the date of this Agreement, duly call, give notice of, convene and hold a meeting of its stockholders (the “Stockholders Meeting”) for the purpose of considering, as seven separate proposals, (i) the adoption of this Agreement; (ii) the approval of an amendment to the Restated Certificate of Incorporation of the Company to eliminate the ability of stockholders to act by written consent (the “Written Consent Proposal”); (iii) the approval of an amendment to the Restated Certificate of Incorporation of the Company to divide the Board of Directors into three Term of Office Classes (the “Staggered Board Proposal”); (iv) the approval of an amendment to the Restated Certificate of Incorporation of the Company eliminating the ability of the Surviving Corporation’s stockholders to call a special meeting of the stockholders (the “Special Meeting Proposal”); (v) the approval of an amendment to the Restated Certificate of Incorporation of the Company requiring a supermajority vote of the Company’s stockholders
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SECTION 3.2. Filings; Other Actions.
(a) Subject to the provisions of this Agreement and the Distribution Agreement, the Company shall prepare and file with the Securities and Exchange Commission (the “SEC”) as soon as reasonably practicable following the execution hereof a proxy statement (the “Proxy Statement”) for the solicitation of proxies in favor of (i) the adoption of this Agreement and (ii) the approval of the Governance Proposals and the Stockholder Rights Proposal. The Company shall not propose to its stockholders the adoption of any of the Governance Proposals or the Stockholder Rights Proposal as independent amendments to the Company’s Restated Certificate of Incorporation, but only as amendments to be adopted upon the effectiveness of the Merger. The Company shall use all reasonable efforts to have the Proxy Statement cleared by the SEC for mailing in definitive form as promptly as practicable after such filing. The Company and Centex shall cooperate with each other in the preparation of the Proxy Statement and any amendment or supplement thereto, and the Company shall notify Centex of the receipt of any comments of the SEC with respect to the Proxy Statement and of any requests by the SEC for any amendment or supplement thereto or for additional information, and shall provide to Centex promptly copies of all correspondence between the SEC and the Company or any of its advisors with respect to the Proxy Statement. The Company shall give Centex and its counsel appropriate advance opportunity to review the Proxy Statement and all responses to requests for additional information by and replies to comments of the SEC, and shall incorporate therein any reasonable comments Centex may deliver to the Company with respect thereto, before such Proxy Statement, response or reply is filed with or sent to the SEC. The Company agrees to use its reasonable best efforts, after consultation with Centex and its advisors, to respond promptly to all such comments of, and requests by, the SEC and to cause the Proxy Statement to be mailed to the holders of the Common Stock entitled to vote at the Stockholders Meeting promptly upon the resolution of all such comments and requests or at such other time agreed to by the parties hereto.
(b) The Company agrees promptly to furnish to Centex all copies of written communications (and summaries of the substance of all oral communications) received by it, or any of its affiliates or representatives from, or delivered by any of its affiliates or representatives to, any federal, state or local or international court, commission, governmental body, agency, authority, tribunal, board or other governmental entity (each a “Governmental Entity”) in respect of the transactions contemplated hereby.
SECTION 3.3. Reasonable Best Efforts. Upon the terms and subject to the conditions set forth in this Agreement, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to obtain the adoption of this Agreement by the stockholders of the Company as contemplated by Sections 4.1(a) and 4.2(a) and to consummate as soon as practicable following such approval, the Merger and the other transactions contemplated by this Agreement and the Distribution Agreement, including, but not limited to (a) the obtaining of all necessary actions, waivers, consents and approvals from all Governmental Entities and the making of all necessary registrations and filings (including filings with the SEC and all other Governmental Entities) and the
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SECTION 3.4. Representations and Warranties of the Company. The Company hereby represents and warrants to Centex and Merger Sub that:
(a) the Special Committee has determined that this Agreement and the Merger are fair to, and in the best interests of, the Company and its stockholders (other than Centex and Merger Sub); and the Board of Directors of the Company has, based in part on the determination of the Special Committee referred to above, (i) determined that this Agreement and the Merger are fair to, and in the best interests of, the Company and its stockholders, (ii) approved this Agreement and, subject to obtaining the approval of the stockholders of the Company as required under applicable law, the Merger, and (iii) declared this Agreement to be advisable;
(b) the Proxy Statement, the form of proxy and any other solicitation material used in connection therewith and any oral solicitations of proxies made by the Company shall not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading or omit any statement necessary to correct any statement in any earlier communication with respect to any solicitation of a proxy for any of the matters to be voted upon at the Stockholders Meeting which has become false or misleading, except that no representation or warranty is made by the Company with respect to information relating to Centex or Merger Sub that is provided by Centex in writing specifically for inclusion in the Proxy Statement or any such other solicitation materials or oral solicitations;
(c) this Agreement has been duly executed and delivered by the Company and constitutes a valid and binding agreement of the Company, enforceable in accordance with its terms, except insofar as enforcement may be limited by (i) any bankruptcy, reorganization, insolvency, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such is considered in a proceeding at law or in equity); and
(d) subject to the changes in the Company’s capitalization contemplated by this Agreement, the authorized, issued and outstanding capitalization of the Company is as follows:
| (i) 50,000,000 authorized shares of Common Stock, of which 18,440,000 shares were outstanding at the close of business on July 18, 2003; and | |
| (ii) 2,000,000 authorized shares of preferred stock, of which no shares are outstanding on the date of this Agreement. |
SECTION 3.5. Representations and Warranties of Centex and Merger Sub. Centex and Merger Sub jointly and severally represent and warrant to the Company that:
(a) this Agreement has been approved by the Board of Directors or a duly authorized committee thereof of each of Centex and Merger Sub; no approval by the shareholders of Centex is required for the consummation of the transactions contemplated by this Agreement; and the sole stockholder of Merger Sub has approved this Agreement and the Merger;
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(b) this Agreement has been duly executed and delivered by Centex and Merger Sub and constitutes a valid and binding agreement of each of them, enforceable against Centex and Merger Sub in accordance with its terms, except insofar as enforcement may be limited by (i) any bankruptcy, reorganization, insolvency, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such is considered in a proceeding at law or in equity);
(c) Centex owns beneficially and of record all outstanding capital stock of Merger Sub free and clear of any claims, liens or encumbrances and no other person holds any capital stock of Merger Sub nor has any right to acquire any interest in Merger Sub;
(d) Centex beneficially owns an aggregate of 11,962,304 shares of Common Stock free and clear of any claims, liens or encumbrances;
(e) immediately prior to the Effective Time, all of the Contributed Shares shall be owned beneficially and of record by Merger Sub free and clear of any claims, liens or encumbrances;
(f) Merger Sub was formed by Centex solely for the purposes of effectuating the Merger upon the terms and subject to the conditions of this Agreement, and Merger Sub has no liabilities, commitments or obligations of any kind (known or unknown, fixed or contingent) other than the obligations set forth in or arising from this Agreement and has not entered into any contracts, agreements, commitments or arrangements other than this Agreement; and
(g) the information provided to the Company in writing specifically for inclusion in the Proxy Statement or other solicitation materials by Centex or the Merger Sub shall not contain any untrue statement of material fact or omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.
ARTICLE IV
CONDITIONS TO THE MERGER
SECTION 4.1. Conditions to the Obligations of the Company. The obligations of the Company to consummate the Merger are subject to the satisfaction (or waiver by the Company, except that the condition set forth in Section 4.1(a) may not be waived) of the following conditions:
(a) a proposal to adopt this Agreement shall have been approved by the holders of (i) a majority of the shares of Common Stock issued and outstanding and entitled to vote thereon and (ii) a majority of the shares of Common Stock (other than shares held directly or indirectly by Centex or Merger Sub) present in person or by proxy at the Stockholders Meeting and voting on such proposal;
(b) all actions by or in respect of or filings with any Governmental Entity required to permit the consummation of the Merger shall have been obtained, except those that would not reasonably be expected to have a material adverse effect on any party’s ability to consummate the transactions contemplated by this Agreement;
(c) the Distribution Agreement shall be in full force and effect;
(d) prior to the Effective Time, the Board of Directors of Centex shall have declared the Distribution (subject to the prior consummation of the Reclassification (as defined in the Distribution Agreement)); and
(e) all conditions to the obligations of CXP to pay the Cash Dividend shall have been satisfied or waived by CXP.
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SECTION 4.2. Conditions to the Obligations of Centex and Merger Sub. The obligations of Centex and Merger Sub to consummate the Merger are subject to the satisfaction (or waiver by Centex, except that the condition set forth in Section 4.2(a) may not be waived) of the following conditions:
(a) a proposal to adopt this Agreement and approve the Merger shall have been approved by the holders of (i) a majority of the shares of Common Stock issued and outstanding and entitled to vote thereon and (ii) a majority of the shares of Common Stock (other than shares held directly or indirectly by Centex or Merger Sub) present in person or by proxy at the Stockholders Meeting and voting on such proposal;
(b) all actions by or in respect of or filings with any Governmental Entity required to permit the consummation of the Merger shall have been obtained, except those that would not reasonably be expected to have a material adverse effect on any party’s ability to consummate the transactions contemplated by this Agreement;
(c) the Distribution Agreement shall be in full force and effect;
(d) immediately prior to the Effective Time, all the conditions to declaration of the Distribution and the making of the Distribution set forth in the Distribution Agreement, other than the prior consummation of the Merger, shall have been satisfied; and
(e) prior to the Effective Time, the Company shall have declared and paid the Cash Dividend.
ARTICLE V
TERMINATION
SECTION 5.1. Termination
(a) This Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding any approval of this Agreement by the stockholders of the Company):
| (i) by mutual written consent of the Company and Centex; | |
| (ii) by either the Company or Centex, if there shall be any law or regulation that makes consummation of the Merger or the Distribution illegal or otherwise prohibited or if there shall be entered any judgment, injunction, order or decree enjoining the Company or Merger Sub from consummating the Merger or enjoining Centex from consummating the Distribution and, in either case, such judgment, injunction, order or decree shall have become final and nonappealable; | |
| (iii) by either the Company or Centex if, after a vote on the matter by the Company’s stockholders at the Stockholders Meeting, the condition set forth in Sections 4.1(a) and 4.2(a) shall not be satisfied; or | |
| (iv) by either the Company or Centex, if the Merger is not consummated by January 30, 2004; provided that if the Stockholders Meeting shall have been held and the conditions set forth in Section 4.1(a) and 4.2(a) shall have been satisfied by January 30, 2004, but the Merger shall not have been consummated by such date, then the time period set forth in this clause (iv) shall be extended to the date that is 30 days after the date of the Stockholders Meeting (or such longer period as is agreed by the parties). |
(b) This Agreement shall terminate automatically without any action on the part of the Company, Centex or Merger Sub in the event that the Distribution Agreement is terminated in accordance with its terms.
SECTION 5.2. Effect of Termination. If this Agreement is terminated pursuant to Section 5.1, this Agreement shall become void and of no effect with no liability on the part of any party hereto.
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ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of facsimile or electronic message transmission with delivery confirmed (by voice or otherwise), or by overnight courier to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:
If to Centex or Merger Sub:
| c/o Centex Corporation | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6859 | |
| Attention: Chief Executive Officer | |
| with a copy to: | |
| Baker Botts L.L.P. | |
| 2001 Ross Avenue | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 953-6503 | |
| Attention: Geoffrey L. Newton | |
| If to the Company: | |
| Centex Construction Products, Inc. | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6559 | |
| Attention: Chief Operating Officer | |
| and: | |
| The Special Committee of the Board of Directors | |
| c/o The Secretary of the Company | |
| Centex Construction Products, Inc. | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6559 | |
| with a copy to: | |
| Haynes and Boone, LLP | |
| 901 Main Street, Suite 3100 | |
| Dallas, Texas 75202 | |
| Attention: Michael M. Boone | |
| Fax No.: (214) 651-5940 | |
| and | |
| Attention: William L. Boeing | |
| Fax No.: (972) 692-9053 |
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SECTION 6.2. Defined Terms. The following terms have the meanings assigned to them in the provisions of this Agreement referred to in the table below:
| Term | Section | |
|
Additional Shares
|
Recitals | |
|
Agreement
|
Preamble | |
|
Authorized Capital Increase Proposal
|
Section 3.1 | |
|
Centex
|
Preamble | |
|
Certificate of Merger
|
Section 1.1(b) | |
|
Class B Common Stock
|
Recitals | |
|
Common Stock
|
Recitals | |
|
Company
|
Preamble | |
|
Contributed Shares
|
Recitals | |
|
Distributable Shares
|
Recitals | |
|
Distribution
|
Recitals | |
|
Distribution Agreement
|
Recitals | |
|
DGCL
|
Recitals | |
|
Effective Time
|
Section 1.1(b) | |
|
Governance Proposals
|
Section 2.1(b) | |
|
Governmental Entity
|
Section 3.2(b) | |
|
Merger
|
Recitals | |
|
Merger Sub
|
Preamble | |
|
Merger Sub Common Stock
|
Recitals | |
|
Proxy Statement
|
Section 3.2(a) | |
|
Special Committee
|
Recitals | |
|
Special Meeting Proposal
|
Section 3.1 | |
|
Staggered Board Proposal
|
Section 3.1 | |
|
Stockholder Rights Plan Proposal
|
Section 3.1 | |
|
Stockholders Meeting
|
Section 3.1 | |
|
Supermajority Voting Proposal
|
Section 3.1 | |
|
Surviving Corporation
|
Section 1.1(a) | |
|
Surviving Corporation Bylaws
|
Section 2.2(c) | |
|
Surviving Corporation Certificate of Incorporation
|
Section 2.1(c) | |
|
Term of Office Classes
|
Section 2.3(a) | |
|
Voting Constituency Classes
|
Section 2.3(a) | |
|
Written Consent Proposal
|
Section 3.1 |
SECTION 6.3. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other party hereto, except that Merger Sub may at any time prior to the mailing of the Proxy Statement assign all of its rights and obligations under this Agreement to any other wholly owned subsidiary of Centex, and in the case of such assignment, the parties hereto agree to amend this Agreement to reflect such assignment.
SECTION 6.4. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware.
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SECTION 6.5. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by the other party hereto.
SECTION 6.6. Amendments. Any provision of this Agreement may be amended or waived prior to the Effective Time (whether before or after approval of matters presented in connection with the Merger by the stockholders of the Company) if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by the Company, Centex and Merger Sub or, in the case of a waiver, by the party against whom such waiver is to be effective; provided that after the adoption of this Agreement by the stockholders of the Company, no amendment shall become effective without a vote of the stockholders approving such amendment if such stockholder vote is required by applicable law in order to effect the proposed amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
| CENTEX CONSTRUCTION PRODUCTS, INC. |
| By: | /s/ STEVEN R. ROWLEY |
|
|
|
| Name: Steven R. Rowley | |
| Title: Executive Vice President & COO | |
| CENTEX CORPORATION |
| By: | /s/ LAURENCE E. HIRSCH |
|
|
|
| Name: Laurence E. Hirsch | |
| Title: Chairman & CEO | |
| ARG MERGER CORPORATION |
| By: | /s/ LAURENCE E. HIRSCH |
|
|
|
| Name: Laurence E. Hirsch | |
| Title: President |
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DISTRIBUTION AGREEMENT
Table of Contents
TABLE OF CONTENTS
| Page | ||||||
| ARTICLE I. DEFINITIONS | B-2 | |||||
|
SECTION 1.1
|
Certain Definitions | B-2 | ||||
|
SECTION 1.2
|
Other Defined Terms | B-6 | ||||
| ARTICLE II. THE DISTRIBUTION AND CASH DIVIDEND | B-6 | |||||
|
SECTION 2.1
|
The Distribution | B-6 | ||||
|
SECTION 2.2
|
The Cash Dividend | B-9 | ||||
|
SECTION 2.3
|
Declaration Date; Further Assurances | B-11 | ||||
| ARTICLE III. REPRESENTATIONS AND WARRANTIES | B-11 | |||||
|
SECTION 3.1
|
Representations and Warranties of CXP | B-11 | ||||
|
SECTION 3.2
|
Representations and Warranties of Centex | B-12 | ||||
| ARTICLE IV. COVENANTS | B-13 | |||||
|
SECTION 4.1
|
Access to Information | B-13 | ||||
|
SECTION 4.2
|
Confidentiality | B-14 | ||||
|
SECTION 4.3
|
Litigation Cooperation | B-14 | ||||
|
SECTION 4.4
|
No Solicitation | B-14 | ||||
|
SECTION 4.5
|
Certain Post-Distribution Transactions | B-15 | ||||
|
SECTION 4.6
|
Public Announcements | B-16 | ||||
|
SECTION 4.7
|
Required Consents | B-16 | ||||
|
SECTION 4.8
|
Stockholder Rights Plan | B-16 | ||||
| ARTICLE V. INDEMNIFICATION | B-16 | |||||
|
SECTION 5.1
|
Indemnification by CXP | B-16 | ||||
|
SECTION 5.2
|
Indemnification by Centex | B-17 | ||||
|
SECTION 5.3
|
Procedures for Indemnification | B-18 | ||||
|
SECTION 5.4
|
Subrogation | B-19 | ||||
|
SECTION 5.5
|
Remedies Not Exclusive | B-19 | ||||
|
SECTION 5.6
|
Indemnification Payments | B-19 | ||||
| ARTICLE VI. MISCELLANEOUS | B-20 | |||||
|
SECTION 6.1
|
Notices | B-20 | ||||
|
SECTION 6.2
|
Interpretation | B-20 | ||||
|
SECTION 6.3
|
Amendments; No Waivers | B-21 | ||||
|
SECTION 6.4
|
Assignment | B-21 | ||||
|
SECTION 6.5
|
Successors and Assigns | B-21 | ||||
|
SECTION 6.6
|
Governing Law | B-21 | ||||
|
SECTION 6.7
|
Counterparts; Effectiveness | B-21 | ||||
|
SECTION 6.8
|
Exhibits and Schedules | B-21 | ||||
|
SECTION 6.9
|
Entire Agreement | B-21 | ||||
|
SECTION 6.10
|
Severability | B-22 | ||||
|
SECTION 6.11
|
Termination | B-22 | ||||
|
SECTION 6.12
|
Survival of Agreements | B-22 | ||||
|
SECTION 6.13
|
Expenses | B-22 | ||||
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| EXHIBITS | ||||||
| Exhibit A — Form of Administrative Services Agreement | ||||||
| Exhibit B — Form of Intellectual Property Agreement | ||||||
| Exhibit C — Form of Sublease Agreement | ||||||
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DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of July 21, 2003 (this “Agreement”), is made between CENTEX CORPORATION, a Nevada corporation (“Centex”), and CENTEX CONSTRUCTION PRODUCTS, INC., a Delaware corporation (“CXP”).
WITNESSETH:
WHEREAS, as of the date hereof, Centex owns 11,962,304 shares of Common Stock, par value $.01 per share, of CXP (“Common Stock”), representing approximately 65% of the outstanding shares of such class;
WHEREAS, prior to the date upon which the Reclassification (as hereinafter defined) is consummated, Centex will contribute 9,220,000 shares of Common Stock (the “Contributed Shares”) to ARG Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Centex (“Merger Sub”) and will continue to own 2,742,304 shares of Common Stock (the “Additional Shares”);
WHEREAS, concurrently with the execution hereof, CXP, Centex and Merger Sub are entering into an Agreement and Plan of Merger, dated as of the date hereof (as amended from time to time, the “Merger Agreement”), pursuant to which, among other things, Merger Sub will merge with and into CXP (the “Merger”), with the result that the following changes will be made to the capital stock of CXP and Merger Sub: (i) the Contributed Shares will be canceled and retired with no securities or other consideration issued in exchange therefor; (ii) all of the outstanding shares of common stock of Merger Sub will be converted into an aggregate of 9,220,000 shares (the “Class B Shares”) of a new class of common stock of the Company to be designated as Class B Common Stock, par value $.01 per share (“Class B Common Stock”), which class will be entitled to elect at least 85% of the members of the Board of Directors of CXP and will in all other respects be identical to the Common Stock; and (iii) all other shares of Common Stock held by the stockholders of CXP, including the Additional Shares, will remain issued and outstanding (such changes, as they relate to the capital stock of CXP, being referred to herein as the “Reclassification”);
WHEREAS, the Board of Directors of Centex has determined that it is desirable and in the best interests of Centex and its stockholders to distribute the Class B Shares and all shares of Common Stock owned by Centex on the Distribution Date (as hereinafter defined) (collectively, the “Distributable Shares”), on the terms and subject to the conditions set forth in this Agreement, to the holders of record of the Common Stock, par value $.25 per share (“Centex Common Stock”), of Centex as of the Distribution Record Date (as hereinafter defined) (the “Distribution”);
WHEREAS, upon the terms and subject to the conditions of this Agreement, the Board of Directors of CXP shall declare the Cash Dividend (as hereinafter defined), payable on a pro rata basis to the holders of record of Common Stock as of the Cash Dividend Record Date (as hereinafter defined);
WHEREAS, the Cash Dividend shall be paid prior to the consummation of the Reclassification and the Distribution;
WHEREAS, Centex has submitted a request for a ruling (as it may be amended from time to time, the “Ruling Request”) from the IRS (as hereinafter defined) confirming that the Distribution will be a tax-free distribution within the meaning of Section 355 of the Code (as defined herein); and
WHEREAS, each of Centex and CXP desire to set forth their agreement as to the principal corporate transactions required in order to effect the Reclassification, the Cash Dividend, the Distribution and the other Transactions (as hereinafter defined);
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NOW, THEREFORE, in consideration of the premises, the terms and conditions set forth herein, the mutual benefits to be gained from the performance thereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1 Certain Definitions. The following terms, as used herein, shall have the following meanings:
“Action” means any suit, action, arbitration, inquiry, investigation or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any arbitrator or Governmental Entity or similar Person or body.
“Administrative Services Agreement” means the Administrative Services Agreement to be entered into prior to or on the Distribution Date between CXP and Centex Service Company, which agreement shall provide that, for a period of up to two years after the Distribution Date, Centex Service Company shall continue to provide to CXP the same intercompany services that Centex Service Company currently provides to CXP on substantially the same terms as they are currently provided (it being understood that the form, terms and provisions of such agreement shall be mutually agreed upon by the parties and attached as Exhibit A to this Agreement prior to the date the Proxy Statement is mailed to the stockholders of CXP); provided, that the Administrative Services Agreement shall supersede any and all prior administrative services or other agreements between the parties with respect to the subject matter thereof.
“Affiliate” means, when used with respect to a specified Person, another Person that controls, is controlled by, or is under common control with such Person. As used in this definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other interests, by contract or otherwise.
“Ancillary Agreements” means all agreements, certificates, deeds, instruments, assignments and other written arrangements (other than this Agreement) entered into between Centex or any of its Affiliates (including Centex Service Company) on the one hand and CXP or any of its Affiliates on the other hand in connection with the Transactions, including the Administrative Services Agreement, the Intellectual Property Agreement and the Sublease Agreement.
“Assets” means assets, properties and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), whether real, personal or mixed, tangible, intangible or contingent, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of any Person.
“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.
“Cash Dividend Date” means the close of business on the Business Day next preceding to the Distribution Date.
“Cash Dividend Record Date” means the close of business on the Business Day next preceding the Distribution Record Date.
“Centex Business” means each and every business conducted at any time prior to, on or after the Distribution Date by Centex or any current, former or future Subsidiary of Centex (other than CXP and its Subsidiaries), whether or not such Subsidiary is a Subsidiary of Centex on the date hereof, except for the CXP Business.
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“Centex Group” means Centex and each Person (other than any member of the CXP Group) that is a Subsidiary of Centex immediately prior to the Distribution Date.
“Centex Indemnitees” means Centex, each member of the Centex Group, each of their respective present and former directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.
“Centex Liabilities” means any and all Liabilities whatsoever that arise out of, result from or are related to the operation of the Centex Business or the ownership of the Assets of the Centex Business by Centex, any predecessor entity of Centex (and all predecessors thereto) or any current, former or future Subsidiary of Centex (other than CXP and its Subsidiaries), whether such Liabilities arise before, on or after the Distribution Date and whether known or unknown, fixed or contingent, and shall include, without limitation:
| (a) any Liabilities for a breach by Centex of any representation, warranty or covenant herein or in the Merger Agreement; and | |
| (b) any and all Liabilities which CXP incurs as a result of, and to the extent resulting from, information provided by Centex in writing relating to Centex specifically for inclusion in the Proxy Statement (or any Amendment thereto), any other solicitation materials or any oral solicitation of proxies or any report or document filed by CXP with the Commission. |
“Code” means the Internal Revenue Code of 1986, as amended, and the Treasury regulations promulgated thereunder, including any successor legislation.
“Commission” means the Securities and Exchange Commission.
“CXP Business” means each and every business conducted at any time prior to, on or after the Distribution Date by CXP or any current, former or future Subsidiary of CXP, whether or not such Subsidiary is a Subsidiary of CXP on the date hereof.
“CXP Certificate of Incorporation” means the Restated Certificate of Incorporation of CXP as in effect immediately after the Reclassification.
“CXP Group” means CXP and each Person that is a Subsidiary of CXP immediately prior to the Distribution Date.
“CXP Indemnitees” means CXP, each member of the CXP Group, each of their respective present and former directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing.
“CXP Liabilities” means any and all Liabilities whatsoever that arise out of, result from or are related to the operation of the CXP Business or the ownership of the Assets of the CXP Business by CXP, any predecessor entity of CXP (and all predecessors thereto) or any current, former or future Subsidiary of CXP or any such predecessor, whether such Liabilities arise before, on or after the Distribution Date and whether known or unknown, fixed or contingent, and shall include, without limitation:
| (a) any and all Liabilities to which Centex or any of its predecessors or successors may become subject arising from or based upon its status or alleged status as a “controlling person” (as defined under Section 15 of the Securities Act and Section 20 of the Exchange Act) of CXP or a stockholder of CXP relating to (i) the Proxy Statement (or any amendment thereto) or any other solicitation materials or any oral solicitations of proxies (except for liabilities which CXP incurs as a result of, and to the extent resulting from, information provided by Centex in writing relating to Centex specifically for inclusion in the Proxy Statement (or any amendment thereto) or any such other solicitation materials or oral solicitation); or (ii) any other report or document filed by CXP with the Commission at any time before, on or after the Distribution Date (except for liabilities which CXP incurs as a result of, and to the extent resulting from, information provided by Centex in writing relating to Centex specifically for inclusion in such report or document); |
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| (b) any Liabilities for a breach by CXP of any representation, warranty or covenant herein or in the Merger Agreement; and | |
| (c) any and all Liabilities which Centex incurs as a result of, and to the extent resulting from, information provided in writing by CXP relating to CXP specifically for inclusion in any proxy or information statement provided by Centex to its stockholders or any related solicitation materials or other similar communications or any report or document filed by Centex with the Commission. |
“Declaration Date” means the date on which (a) the Centex Board of Directors shall authorize and declare the Distribution and (b) the CXP Board of Directors shall authorize and declare the Cash Dividend.
“DGCL” means the General Corporation Law of the State of Delaware.
“Distribution Agent” means the distribution agent selected by Centex to effect the Distribution, which may be Centex’s stock transfer agent.
“Distribution Date” means a Business Day determined by the Board of Directors of Centex, which shall be after the payment of the Cash Dividend and the consummation of the Reclassification, for the mailing of certificates evidencing Distributable Shares to stockholders of Centex in the Distribution.
“Distribution Record Date” means a Business Day determined by the Board of Directors of Centex as the record date for the determination of the holders of record of Centex Common Stock entitled to receive the Distributable Shares in the Distribution.
“Established Liability” means, with respect to each Centex stockholder, the amount of Tax Liability (including interest and penalties) resulting directly from the Distribution, as evidenced by (i) an amended tax return of such Centex stockholder reflecting the amount of such Tax Liability, together with proof of payment of such amount, or (ii) a deficiency notice received by such Centex stockholder from the IRS setting forth the amount of such Tax Liability, together with proof of payment of such amount.
“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
“Form 8-A” means a registration statement on Form 8-A of CXP pursuant to which the Class B Common Stock is to be registered under the Exchange Act, including all amendments thereto.
“Governance Proposals” has the meaning set forth in the Merger Agreement.
“Governmental Entity” means any federal, state, local, or foreign government or any court, tribunal, administrative agency or commission or other governmental or regulatory authority or agency, domestic, foreign or supranational.
“Intellectual Property Agreement” means the Intellectual Property Agreement to be entered into prior to or on the Distribution Date between Centex and CXP, which agreement shall provide that (i) prior to the Distribution Date, Centex shall transfer to CXP all of the trademarks and other intellectual property held in the name of Centex that relates primarily or exclusively to the CXP Business and (ii) CXP shall have a limited right to use the “Centex” name in connection with the CXP Business for a mutually agreed period after the Distribution Date in a manner consistent with its current use of such name; provided, however, that corporate name of CXP shall not include the word “Centex” from and after the Distribution Date (it being understood and agreed that the form, terms and provisions of such agreement shall be mutually agreed upon and attached as Exhibit B to this Agreement prior to the date the Proxy Statement is mailed to the stockholders of CXP).
“IRS” means the Internal Revenue Service.
“Liabilities” shall mean any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exonerations, covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations,
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“Material Adverse Effect” means, with respect to any Person, any change, effect, event, occurrence or development that is, individually or in the aggregate, materially adverse to the business, operations, assets, liabilities, condition (financial or otherwise), results of operations or prospects of such Person.
“NYSE” means the New York Stock Exchange, Inc.
“NYSE Listing Application” shall mean the application to be submitted by CXP to the NYSE for the listing of the Class B Common Stock.
“Person” means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature.
“Proxy Statement” has the meaning set forth in the Merger Agreement.
“Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
“Stockholders Meeting” has the meaning set forth in the Merger Agreement.
“Sublease Agreement” means the Sublease Agreement to be entered into prior to or on the Distribution Date between CXP and Centex Service Company, which agreement shall provide that, for a mutually agreed term from and after the Distribution Date, Centex Service Company shall lease to CXP the same office space currently occupied by CXP at the same lease rate as is currently paid by CXP (it being understood that the form, terms and provisions of such agreement shall be mutually agreed upon and attached as Exhibit C to this Agreement prior to the date the Proxy Statement is mailed to the stockholders of CXP).
“Subsidiary” means, with respect to any Person, (i) any corporation of which at least a majority of the securities or other ownership interests having by their terms ordinary voting power to elect a majority of the board of directors are directly or indirectly owned or controlled by such Person and its Subsidiaries, (ii) any partnership of which such Person or one of its Subsidiaries is a general partner or as to which such Person and its Subsidiaries are entitled to receive at least a majority of the assets upon the liquidation thereof or (iii) any limited liability company of which such Person or one of its Subsidiaries is a manager (or is entitled as a member to exercise management rights over the conduct of the business of such limited liability company) or as to which such Person and its Subsidiaries are entitled to receive at least a majority of the assets upon the liquidation thereof.
“Tax” or “Taxes” means taxes of any kind, levies or other like assessments, customs, duties, imposts, charges or fees, including income, gross receipts, ad valorem, value added, excise, real or personal property, asset, sales, use, license, payroll, transaction, capital, net worth and franchise taxes, withholding, employment, social security, workers compensation, utility, severance, production, unemployment compensation, occupation, premium, windfall profits, transfer and gains taxes or other governmental taxes imposed or payable to the United States, or any state, county, local or foreign government or subdivision or agency thereof, and in each instance such term shall include any interest, penalties, additions to tax or additional amounts attributable to any such tax.
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“Transaction Agreements” means this Agreement, the Merger Agreement and the Ancillary Agreements.
“Transactions” means the Reclassification, the Cash Dividend, the Distribution and the other transactions contemplated by the Transaction Agreements.
SECTION 1.2 Other Defined Terms. The following terms have the meanings assigned to them in the provisions of this Agreement referred to in the table below:
| Term | Section | |
|
355 Failure
|
5.1(b) | |
|
Acquisition Proposal
|
4.4(a) | |
|
Additional Shares
|
Recitals | |
|
Cash Dividend
|
2.2(a) | |
|
Centex
|
Preamble | |
|
Centex Common Stock
|
Recitals | |
|
Centex Failure
|
5.2(b) | |
|
Centex Member
|
5.1(b) | |
|
Centex Tax Liability
|
5.1(c) | |
|
Common Stock
|
Recitals | |
|
CXP
|
Preamble | |
|
CXP Failure
|
5.1(b) | |
|
CXP Member
|
5.2(b) | |
|
Distribution
|
Recitals | |
|
Distributable Shares
|
Recitals | |
|
Final Determination
|
5.3(b) | |
|
Indemnifying Party
|
5.3(a) | |
|
Indemnitee
|
5.3(a) | |
|
IRS Ruling
|
2.1(b)(i) | |
|
Merger
|
Recitals | |
|
Merger Agreement
|
Recitals | |
|
Merger Sub
|
Recitals | |
|
Required Consents
|
4.7 | |
|
Ruling Request
|
Recitals | |
|
Target Date
|
4.1(c) | |
|
Tax Claim
|
5.3(b) | |
|
Third Party Claim
|
5.3(a) |
ARTICLE II.
THE DISTRIBUTION AND CASH DIVIDEND
SECTION 2.1 The Distribution.
(a) The Distribution. Subject to the conditions set forth in Section 2.1(b), on the Declaration Date, the Board of Directors of Centex shall declare the Distribution. In addition, in order to effect the Distribution, on the Distribution Date, if the Cash Dividend shall have been paid and the Reclassification shall have been consummated and subject to the other conditions set forth in Section 2.1(b), Centex shall cause the Distribution Agent to distribute the Distributable Shares to the holders of record of Centex Common Stock as of the Distribution Record Date, on a pro rata basis and taking into account the provisions of Section 2.1(c). Upon receipt by Centex of certificates representing the Class B Shares as a
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(b) Conditions to the Distribution. The obligations of Centex to declare the Distribution on the Declaration Date and to cause the Distribution to be effected on the Distribution Date are subject to the satisfaction or waiver by Centex, as determined by Centex in its sole discretion, of the conditions set forth below (which conditions must be satisfied or waived on or prior to the Declaration Date unless any such condition by its terms can only be satisfied after the Declaration Date, in which case such condition must be satisfied or waived on or prior to the Distribution Date):
| (i) a private letter ruling from the IRS shall have been obtained, and shall continue in effect, providing that, among other things, the Reclassification and the Distribution will qualify as tax-free transactions for federal income tax purposes under Sections 368(a), 354 and 355 of the Code (the “IRS Ruling”), which ruling shall be in form and substance satisfactory to Centex in its sole discretion; and Centex and CXP shall have complied with all conditions set forth in such ruling that are required to be complied with prior to the Declaration Date and the Distribution Date; | |
| (ii) any material governmental approvals and consents necessary for Centex to declare and effect the Distribution and the other Transactions shall have been obtained and shall be in full force and effect; | |
| (iii) no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the declaration and effectuation of the Distribution or the consummation of the other Transactions shall be in effect and no other event outside the control of Centex shall have occurred or failed to occur that prevents the lawful declaration and effectuation of the Distribution or the consummation of the other Transactions; | |
| (iv) the Distribution and the other Transactions shall be in compliance with applicable federal and state securities and other applicable laws; | |
| (v) all of the Required Consents shall have been obtained; | |
| (vi) in the case of the obligation to declare the Distribution, (A) all conditions to the payment of the Cash Dividend shall have been satisfied or waived by CXP; (B) the Cash Dividend shall have been declared by the Board of Directors of CXP and (C) no circumstances shall exist that, in the reasonable judgment of Centex, could be expected to prevent the payment of the Cash Dividend prior to the Distribution; and, in the case of the obligation to effect the Distribution, the Cash Dividend shall have been paid to the stockholders of CXP (including Centex); | |
| (vii) in the case of the obligation to declare the Distribution, (A) all conditions to the obligations of Centex to consummate the Reclassification set forth in the Merger Agreement (other than the conditions set forth in Section 4.2(d) and the conditions set forth in Section 4.2(e) to the extent it requires that the Cash Dividend have been paid) shall have been satisfied or waived by Centex; and (B) no circumstances shall exist that, in the reasonable judgment of Centex, could be expected to prevent the consummation of the Reclassification immediately prior to the Distribution; and, in the case of the obligation to effect the Distribution, the Reclassification shall have been consummated; | |
| (viii) the Form 8-A shall have been filed with the Commission; | |
| (ix) the Class B Shares shall have been approved for listing on the NYSE, subject to official notice of issuance; |
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| (x) all representations and warranties of CXP set forth in this Agreement and the Merger Agreement that are qualified as to materiality shall be true and correct, and any such representations and warranties that are not so qualified shall be true and correct in all material respects, as of the Distribution Date; and | |
| (xi) all covenants to have been performed at or prior to the Distribution Date by CXP pursuant to this Agreement or the Merger Agreement shall have been performed at or prior to the Distribution Date by CXP in all material respects. |
The foregoing conditions are solely for the benefit of Centex and shall not give rise to or create any duty on the part of Centex to waive or not waive any such condition.
(c) Sale of Fractional Shares. Centex shall appoint the Distribution Agent as agent for each holder of record of Centex Common Stock who would otherwise be entitled to receive in the Distribution any fractional Distributable Share. The Distribution Agent shall aggregate all such fractional shares and sell them in an orderly manner after the Distribution Date in the open market and, after completion of such sales, distribute a pro rata portion of the net proceeds from such sales, based upon the gross selling price of all such fractional shares, to each shareholder of Centex who would otherwise have received a fractional share. Centex shall reimburse the Distribution Agent for its reasonable costs, expenses and fees (other than selling expenses) in connection with the sale of fractional Distributable Shares and the distribution of the proceeds thereof in accordance with this Section 2.1(c).
(d) Other Actions.
| (i) Centex shall prepare and mail, at such time as determined by Centex, to the holders of Centex Common Stock, such information concerning CXP, its business, operations and management, the Distribution and the tax consequences thereof and such other matters as Centex shall reasonably determine or as may be required by law. Centex shall give CXP and its counsel reasonably appropriate advance opportunity to review and comment upon such documents and shall consider in good faith any comments CXP timely delivers to Centex with respect to such information. CXP agrees to cooperate with Centex in the preparation of, and provide any information reasonably requested by Centex for inclusion in, such mailing. CXP represents that all information provided to Centex for such mailing shall be true and correct in all material respects. Centex and CXP will prepare, and CXP will, to the extent required under applicable law, file with the Commission any such documentation, including any no action letters or other requests for interpretive or regulatory assistance, if any, which Centex reasonably determines are necessary or desirable to effectuate the Distribution and the other transactions contemplated hereby and by the Merger Agreement and Centex and CXP shall each use its reasonable best efforts to obtain all necessary approvals from the Commission with respect thereto as soon as practicable. | |
| (ii) CXP and Centex shall take all such action as may be necessary or appropriate under the securities or blue sky laws of the United States (and any comparable laws under any foreign jurisdiction) in connection with the Distribution and the other Transactions. | |
| (iii) CXP shall prepare and file, and shall use its reasonable best efforts to have approved, subject to official notice of issuance, the NYSE Listing Application. | |
| (iv) CXP shall prepare and file the Form 8-A (which may include or incorporate by reference information contained in the Proxy Statement) with the Commission as promptly as practicable following the execution hereof, and shall use its reasonable best efforts to cause the Form 8-A to become effective under the Exchange Act immediately following the consummation of the Reclassification or as soon as practicable thereafter. | |
| (v) On or prior to the Distribution Date, CXP shall from time to time, as and to the extent reasonably requested by Centex or requested by the IRS, provide any documentation, certifications or other information necessary to enable Centex to obtain the IRS Ruling. |
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| (vi) Centex shall keep CXP informed regarding the status of the IRS Ruling and any significant requests made by the IRS for changes or undertakings in connection with the Transactions and shall provide CXP with copies of any additional submissions by Centex to the IRS related to the IRS Ruling. | |
| (vii) Subject to the terms and conditions of this Agreement, on or prior to the Distribution Date, each of Centex and CXP shall consummate the transactions in connection with the Distribution that are contemplated by the IRS Ruling, the Ruling Request and any related submissions by Centex to the IRS. | |
| (viii) Centex shall give CXP and its counsel reasonably appropriate advance opportunity to review and comment upon filings to be made by Centex with the Commission with respect to this Agreement, the Merger Agreement or any of the Transactions and shall consider in good faith any comments CXP timely delivers to Centex with respect to such filing. | |
| (ix) In addition to those matters specifically set forth above, Centex and CXP shall each take such other reasonable steps as are necessary and appropriate to cause the conditions set forth in Section 2.1(b) to be satisfied and to effect the Distribution on the Distribution Date. | |
| (x) CXP agrees that it shall not file with the Commission any report or other document that contains any disclosure relating to the Transaction Agreements or the Transactions without the prior written consent of Centex with respect to such disclosure, which consent shall not be unreasonably withheld. Centex will review all such draft reports and other documents promptly and will provide any comments to CXP within a reasonable period of time. | |
| (xi) Prior to the Distribution Date, CXP shall not amend, and the CXP Board of Directors shall not approve any amendment to, CXP’s Restated Certificate of Incorporation or CXP’s Amended and Restated Bylaws, other than the Governance Proposals and the amendments to the Certificate of Incorporation, which will take effect upon the filing of the certificate of merger with the Secretary of State of the State of Delaware in connection with the Reclassification in accordance with the terms of the Merger Agreement. | |
| (xii) On or prior to the Distribution Date, each of Centex (or, in the case of the Administrative Services Agreement and the Sublease Agreement, Centex Service Company) and CXP shall enter into the Administrative Services Agreement, the Intellectual Property Agreement and the Sublease Agreement, which agreements shall be on terms reasonably satisfactory to the parties. | |
| (xiii) Except as expressly provided otherwise herein, all agreements and arrangements existing on the date hereof between Centex or any of its Subsidiaries on the one hand and CXP and any of its Subsidiaries on the other hand, whether written or oral, shall continue in full force and effect in accordance with their terms and consistent with past practice from the date hereof, through the Distribution Date and thereafter. | |
| (xiv) On or prior to the Distribution Date, each of Centex and CXP, as the case may be, shall, from time to time and to the extent reasonably requested by the other, provide any documentation, certifications or other information to make required filings in connection with the transactions contemplated by this Agreement and the Merger Agreement. |
SECTION 2.2 The Cash Dividend.
(a) The Cash Dividend. Subject to the conditions set forth in Section 2.2(b), on the Declaration Date, the Board of Directors of CXP shall declare a pro rata cash dividend to the holders of record of CXP Common Stock as of the Cash Dividend Record Date in the amount of $6.00 per share (the “Cash Dividend”). In addition, subject to the conditions set forth in Section 2.2(b), on the Cash Dividend Date, CXP shall pay the Cash Dividend to the holders of record of CXP Common Stock as of the Cash Dividend Record Date, on a pro rata basis.
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(b) Conditions of the Cash Dividend. The obligations of CXP to declare the Cash Dividend on the Declaration Date and to cause the Cash Dividend to be paid on the Cash Dividend Date are subject to the satisfaction or waiver by CXP, as determined by CXP in its sole discretion, of the conditions set forth below (which conditions must be satisfied or waived on or prior to the Declaration Date unless any such condition by its terms can only be satisfied after the Declaration Date, in which case such condition must be satisfied or waived on or prior to the Cash Dividend Distribution Date):
| (i) any material governmental approvals and consents necessary for CXP to declare and pay the Cash Dividend and consummate the other Transactions shall have been obtained and shall be in full force and effect; | |
| (ii) no order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition in each case preventing the declaration or payment by CXP of the Cash Dividend or the consummation of the other Transactions shall be in effect and no other event outside the control of CXP shall have occurred or failed to occur that prevents the declaration or the lawful payment of the Cash Dividend or consummation of the other Transactions; | |
| (iii) the Cash Dividend and the other Transactions shall be in compliance with applicable federal and state securities and other applicable laws; | |
| (iv) all of the Required Consents shall have been obtained ; | |
| (v) in the case of the obligation to declare the Cash Dividend, all conditions to the Distribution (other than the declaration and payment of the Cash Dividend) shall have been satisfied or waived by Centex; in the case of the declaration and the payment of the Cash Dividend, the Distribution shall have been declared by the Board of Directors of Centex substantially simultaneously with the declaration of the Cash Dividend and no circumstances shall exist that would reasonably be expected to prevent the prompt consummation of the Distribution following payment of the Cash Dividend; | |
| (vi) in the case of the obligation to declare the Cash Dividend, all conditions to the obligations on the part of CXP to consummate the Reclassification set forth in the Merger Agreement shall have been satisfied or waived; in the case of the payment of the Cash Dividend, no circumstances shall exist that would reasonably be expected to prevent the prompt consummation of the Reclassification following payment of the Cash Dividend; | |
| (vii) the Form 8-A shall have been filed with the Commission; | |
| (viii) the Class B Common Stock shall have been approved for listing on the NYSE, subject to official notice of issuance; | |
| (ix) all representations and warranties of Centex set forth in this Agreement and the Merger Agreement that are qualified as to materiality shall be true and correct, and any such representations and warranties that are not so qualified shall be true and correct in all material respects as of the Declaration Date and the Cash Dividend Date; | |
| (x) all covenants to have been performed at or prior to the Distribution Date by Centex pursuant to this Agreement or the Merger Agreement shall have been performed by Centex at or prior to the Distribution Date in all material respects; | |
| (xi) CXP shall have entered into definitive loan agreements for financing which, when added to CXP’s available cash and reasonably anticipated cash flow through the Declaration Date, will permit the payment of the Cash Dividend, with sufficient cash available, in the reasonable judgment of the Board of Directors of CXP, to meet the needs of CXP’s business, and which are subject only to customary conditions. CXP shall provide copies of such loan agreements to Centex and shall provide such other documents and information in connection therewith as Centex shall reasonably request; and |
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| (xii) the payment of the Cash Dividend shall be permitted by the applicable provisions of the DGCL, and the Board of Directors of CXP shall have obtained such reasonable and customary assurances as the Board of Directors of CXP deems necessary for the authorization of such dividend. |
The foregoing conditions are solely for the benefit of CXP and shall not give rise to or create any duty on the part of CXP to waive or not waive any such condition.
(c) Certain Limitations on Expenditures by CXP. Until such time as the Cash Dividend has been paid, CXP shall not, and shall not permit any of its Subsidiaries to, without the prior written consent of Centex, (i) pay any other cash dividends on any of its capital stock other than regular quarterly cash dividends not in excess of $0.05 per share of Common Stock, or (ii) repurchase any shares of its capital stock, except purchases necessary to offset exercises of employee stock options that are outstanding on the date hereof.
(d) Financing. CXP agrees that it will use its commercially reasonable efforts to secure financing which, when added to its available cash and reasonably anticipated cash flow through the Declaration Date, will permit payment of the Cash Dividend, with sufficient cash available, in the reasonable judgment of the Board of Directors of CXP, to meet the needs of CXP’s business.
SECTION 2.3 Declaration Date; Further Assurances.
(a) The parties agree that the Declaration Date shall occur as soon as reasonably practicable following the satisfaction or waiver of the conditions to the declaration of the Distribution set forth in Section 2.1(b) (other than the declaration of the Cash Dividend) and the conditions to the declaration of the Cash Dividend set forth in Section 2.2(b). The parties shall cause their respective Boards of Directors (or in the case of Centex, a duly authorized committee thereof) to meet in person or telephonically on the Declaration Date and each shall take such corporate action at such meeting as shall be required to (in the case of CXP) declare the Cash Dividend and (in the case of Centex) declare the Distribution. Following such meetings, the parties shall take all actions required to consummate the Reclassification in accordance with the terms of the Merger Agreement, including the filing of the certificate of merger relating to the Reclassification with the Secretary of State of the State of Delaware.
(b) Subject to each of Centex’s and CXP’s right to terminate this Agreement in accordance with Section 6.11, if at any time after the date hereof any further action is reasonably necessary or desirable to carry out the Transactions or any other purpose of the Transaction Agreements, the proper officers of each party to this Agreement shall take all such necessary action. Without limiting the foregoing, and subject as aforesaid, Centex and CXP shall use all reasonable efforts to obtain the IRS Ruling and all consents and approvals, to enter into all amendatory agreements to make all filings and applications that may be required for the consummation of the transactions contemplated by this Agreement and the Merger Agreement, including all applicable governmental and regulatory filings.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of CXP. CXP hereby represents and warrants to Centex as follows:
| (a) Organization; Good Standing. CXP is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware and has all corporate power required to consummate the Transactions. | |
| (b) Authorization. The execution, delivery and performance by CXP of the Transaction Agreements and the consummation by CXP of the Transactions have been duly authorized by all necessary corporate action on the part of CXP, other than the formal declaration of the Cash Dividend by the Board of Directors of CXP and the approval of the Reclassification and the Governance Proposals by the stockholders of CXP. Each of this Agreement and the Merger |
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| Agreement constitutes, and each other Transaction Agreement executed and delivered or to be executed and delivered by CXP will, upon such execution and delivery, constitute a legal, valid and binding obligation of CXP, enforceable against CXP in accordance with its terms, except insofar as enforcement may be limited by (i) any bankruptcy, reorganization, insolvency, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such is considered in a proceeding at law or in equity). | |
| (c) Consents and Filings. Except (i) for the filing of a certificate of merger in connection with the Reclassification and any other filings required to be made with the Secretary of State of the State of Delaware, (ii) for the IRS Ruling, (iii) for the filing of the Proxy Statement and the Form 8-A and any other reports or documents required to be filed under the Exchange Act and (iv) the NYSE Listing Application, no consent of, or filing with, any Governmental Entity which has not been obtained or made is required for or in connection with the execution and delivery of the Transaction Agreements by CXP or the consummation by CXP of the Transactions. | |
| (d) Noncontravention. Except in the case of any consents that CXP will use its reasonable best efforts to obtain prior to the Distribution Date (which consents are listed on Schedule 3.1(d)), the execution, delivery and performance of the Transaction Agreements by CXP do not, and the consummation by CXP of the Transactions will not, (i) violate any applicable federal, state or local statute, law, rule or regulation, (ii) violate any provision of the Restated Certificate of Incorporation or the Amended and Restated Bylaws of CXP or (iii) violate any provision of, or result in the termination or acceleration of, or entitle any party to accelerate any obligation or indebtedness under, any mortgage, lease, franchise, license, permit, agreement, instrument, order, arbitration award, judgment or decree to which CXP or any of its Subsidiaries is a party or by which any of them are bound, except for, in the case of clauses (i) and (iii) above, such violations as would not result in a Material Adverse Effect with respect to CXP or prevent the parties from complying with the terms and provisions of the Transaction Agreements in any material respect. | |
| (e) Litigation. There are no actions or suits against CXP pending, or to the knowledge of CXP, threatened which seek to, and CXP is not subject to any judgments, decrees or orders which, enjoin or rescind the Transactions or otherwise prevent CXP from complying with the terms and provisions of the Transaction Agreements. | |
| (f) Change of Control Adjustments. None of the Transactions will (i) constitute a “change of control” or otherwise result in the increase or acceleration of any benefits, including to employees of CXP, under any agreement to which CXP or any of its Subsidiaries is a party or by which it or any of its Subsidiaries is bound, or (ii) result in any adjustment of the number of shares subject to, or the terms of, including exercise price, any outstanding employee stock options of CXP. | |
| (g) Certain Transactions. Except for transactions or other actions that occurred prior to January 1, 2002 or that are described in Schedule 3.1(g), neither CXP nor any other member of the CXP Group has engaged in any transaction or taken any other action, or engaged in any negotiations or discussions, involving or relating to any sale of CXP or a substantial portion of its business in a single transaction or series of related transactions (whether in the form of an asset sale, stock sale, merger or otherwise) or the issuance of any substantial portion of the capital stock of CXP or options, warrants or other rights to acquire capital stock of CXP (other than compensatory stock plan issuances). None of the transactions or other actions, negotiations or discussions described in Schedule 3.1(g) were undertaken by CXP in contemplation of the Distribution or are related to the Distribution. |
SECTION 3.2 Representations and Warranties of Centex. Centex hereby represents and warrants to CXP as follows:
| (a) Organization; Good Standing. Centex is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Nevada and has all corporate power required to consummate the Transactions. |
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| (b) Authorization. The execution, delivery and performance by Centex of the Transaction Agreements and the consummation by Centex of the Transactions have been duly authorized by all necessary corporate action on the part of Centex, other than the formal declaration of the Distribution by the Board of Directors of Centex (or a committee thereof). Each of this Agreement and Merger Agreement constitutes, and each other Transaction Agreement executed and delivered or to be executed and delivered by Centex pursuant to this Agreement will, upon such execution and delivery, constitute, a legal, valid and binding obligation of Centex, enforceable against Centex in accordance with its terms, except insofar as enforcement may be limited by (i) any bankruptcy, reorganization, insolvency, fraudulent conveyance or transfer, moratorium or similar laws affecting creditors’ rights generally and (ii) general principles of equity (regardless of whether such is considered in a proceeding at law or in equity). | |
| (c) Consents and Filings. Except (i) for the filing of a certificate of merger in connection with the Reclassification and any other filings required to be made with the Secretary of State of the State of Delaware, (ii) for the IRS Ruling and (iii) for any reports or documents required to be filed under the Exchange Act, no material consent of, or filing with, any Governmental Entity which has not been obtained or made is required for or in connection with the execution and delivery of the Transaction Agreements by Centex or the consummation by Centex of the Transactions. | |
| (d) Noncontravention. The execution, delivery and performance of the Transaction Agreements do not, and the consummation by Centex of the Transactions will not, (i) violate any applicable federal, state or local statute, law, rule or regulation, (ii) violate any provision of the Restated Articles of Incorporation or the Amended and Restated By-Laws of Centex or (iii) violate any provision of, or result in the termination or acceleration of, or entitle any party to accelerate any obligation or indebtedness under, any mortgage, lease, franchise, license, permit, agreement, instrument, order, arbitration award, judgment or decree to which Centex or any of its Subsidiaries is a party or by which any of them are bound, except for, in the case of clause (iii) above, such violations that would not prevent Centex from complying with the terms and provisions of the Transaction Agreements in any material respect. | |
| (e) Litigation. There are no actions or suits against Centex pending, or to the knowledge of Centex, threatened which seek to, and Centex is not subject to any judgments, decrees or orders which, enjoin or rescind the Transactions or otherwise prevent Centex from complying with the terms and provisions of the Transaction Agreements. |
ARTICLE IV.
COVENANTS
SECTION 4.1 Access to Information.
(a) Other than in circumstances in which indemnification is sought pursuant to Article V (in which event the provisions of such Article will govern), from and after the Distribution Date, each of CXP and Centex shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for classified, privileged or confidential information, to the personnel, properties, books and records of such party and its Subsidiaries insofar as such access is reasonably required by the other party and relates to such other party’s performance of its obligations under the Transaction Agreements or such party’s financial, tax and other reporting obligations.
(b) A party providing information or access to information to the other party under this Article IV shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such information or access to information.
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(c) For a period of two years following the Distribution Date, CXP shall provide to Centex: (i) promptly following the date (the “Target Date”) as of which there has been an aggregate change in the outstanding equity or capital structure of CXP (measured during the period beginning on the Distribution Date and ending on the Target Date and not taking into account the Reclassification or transfers of shares by CXP stockholders, unless CXP participates in such transfers or such transfers are reported on a Schedule 13D or 13G under the Exchange Act) that accounts for at least 10% of the total outstanding equity of CXP as of the Distribution Date written notice of such change and (ii) after the Target Date, reasonably detailed reports delivered promptly following the occurrence of each additional change or changes (if any) in the outstanding equity or capital structure of CXP that, individually or in the aggregate (not taking into account the Reclassification or transfers of shares by CXP stockholders, unless CXP participates in such transfers or such transfers are reported on a Schedule 13D or 13G under the Exchange Act), account for at least 5% of the total outstanding equity of CXP as of the Distribution Date.
SECTION 4.2 Confidentiality. Each of CXP and its Subsidiaries and Centex and its Subsidiaries shall keep, and shall cause its employees, consultants, agents and advisors to keep, confidential all information concerning the other parties in its possession, its custody or under its control (except to the extent that (a) such information has been in the public domain through no fault of such party, (b) such information has been later lawfully acquired from other sources by such party or (c) the Transaction Agreements permit the use or disclosure of such information), and each party shall not (without the prior written consent of the other) otherwise release or disclose such information to any other person, except such party’s auditors and attorneys, unless compelled to disclose such information by judicial or administrative process or unless such disclosure is required by law and such party has used commercially reasonable efforts to consult with the other affected party or parties prior to such disclosure, and in each such case shall exercise all reasonable efforts to obtain reliable assurance that such information will be accorded confidential treatment.
SECTION 4.3 Litigation Cooperation. Each of Centex and CXP shall use reasonable efforts to make available to the other party, upon written request and at the expense of the other party, its officers, directors, employees and agents as witnesses to the extent that such persons may reasonably be required in connection with any Action arising out of the business of such other party and its predecessors, if any, in which the requesting party may from time to time be involved; provided, that such Action does not involve a claim between either of Centex or CXP against the other.
SECTION 4.4 No Solicitation.
(a) Subject to Sections 4.4(b) and 4.4(c), neither Centex nor CXP shall, directly or indirectly, through any officer, director, employee, representative, securityholder or agent solicit, initiate or encourage any inquiries, offers or proposals or any indication of interest or the commencement of negotiations or continue any current negotiations or conduct any negotiations or enter into any agreement with respect to, or provide any nonpublic information regarding or in connection with, any proposal for the acquisition by any third party of any shares of capital stock of CXP from CXP or Centex (other than issuances of common stock by CXP pursuant to existing employee stock plans in the ordinary course of business) or the acquisition of, or business combination with, CXP or its businesses or operations through any other means, including a merger or purchase of assets (an “Acquisition Proposal”), until the earlier to occur of the termination of this Agreement or the time at which the Distribution is consummated; provided, however, that Centex and CXP may respond to any unsolicited inquiries or proposals solely to indicate that it is bound by this Section 4.4. If either of CXP or Centex receives any such inquiry or proposal, then CXP or Centex, as the case may be, shall inform the other of the terms and conditions, if any, of such inquiry or proposal and the identity of the Person making the proposal and shall keep such party promptly advised of all further communications relating to such inquiry or proposal.
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(b) Centex shall be relieved of its obligations under Section 4.4(a) (in the case of clause (iii) below, only to the extent set forth therein) if:
| (i) the Board of Directors of CXP shall or shall resolve to (A) not recommend, or withdraw its approval or recommendation of, the Transactions or the Transaction Agreements, (B) modify any such approval or recommendation in a manner adverse to Centex or (C) approve, recommend or enter into any agreement for any Acquisition Proposal; | |
| (ii) CXP breaches or fails to comply with any of its material obligations set forth in this Agreement or the Merger Agreement and fails to cure such breach or failure within 30 days following written notice from Centex; or | |
| (iii) after receipt of a bona fide written Acquisition Proposal, the Board of Directors of Centex determines reasonably and in good faith that it would be inconsistent with the Board’s fiduciary duties to stockholders of Centex not to commence discussions or negotiations with, or not to provide nonpublic information (other than nonpublic information with respect to CXP) to, the person making such Acquisition Proposal; provided, however, that Centex shall only be released from its obligations under Section 4.4(a) pursuant to this Section 4.4(b)(iii) with respect to such Acquisition Proposal. |
(c) CXP shall be relieved of its obligations under Section 4.4(a) (to the extent specifically set forth in this Section 4.4(c)) if (i) after receipt of a bona fide written Acquisition Proposal, the Board of Directors of CXP determines reasonably and in good faith that it would be inconsistent with the Board’s fiduciary duties to stockholders of CXP not to commence discussions or negotiations with, or provide nonpublic information to, the person making such Acquisition Proposal; provided, however, that CXP shall only be released from its obligations under Section 4.4(a) pursuant to this Section 4.4(c) with respect to such Acquisition Proposal, or (ii) if Centex breaches or fails to comply with any of its material obligations set forth in this Agreement or the Merger Agreement and fails to cure such breach or failure within 30 days following written notice from CXP.
SECTION 4.5 Certain Post-Distribution Transactions.
(a) CXP and Centex shall each comply with, and shall cause its respective Subsidiaries to comply with, and otherwise not take, and prevent its respective Subsidiaries from taking, any action inconsistent with each representation and statement made by such respective party to the IRS in connection with the request by Centex for the IRS Ruling. Without limiting the generality of the foregoing, until two years after the Distribution Date, CXP will maintain its status as a company engaged in the active conduct of a trade or business, as defined in Section 355(b) of the Code.
(b) CXP agrees that, prior to the second anniversary of the Distribution Date, it will not (i) merge or consolidate with or into any other corporation, which would have the effect of causing or permitting one or more persons to acquire directly or indirectly stock representing a 50 percent or greater interest (within the meaning of Section 355(e) of the Code) in CXP, (ii) liquidate or partially liquidate, (iii) sell or transfer all or substantially all of its assets (within the meaning of Rev. Proc. 77-37, 1977-2 C.B. 568) in a single transaction or series of transactions, (iv) redeem or otherwise repurchase any CXP stock (other than as described in Section 4.05(1)(b) of Rev. Proc. 96-30, 1996-1 C.B. 696), or (v) take any other action or actions which in the aggregate (and taking into account the Reclassification) would have the effect of causing or permitting one or more persons to acquire directly or indirectly stock representing a 50 percent or greater interest (within the meaning of Section 355(e) of the Code) in CXP, unless prior to taking any such action set forth in the foregoing clauses (i) through (v), CXP has obtained (and provided to Centex) a written opinion in form and substance reasonably acceptable to Centex of a law firm reasonably acceptable to Centex, or Centex has obtained (at the reasonable request and at the expense of CXP) a supplemental ruling from the IRS, that such action or actions will not result in (i) the Distribution failing to qualify under Section 355(a) of the Code or (ii) the CXP shares failing to qualify as qualified property for purposes of Section 355(c)(2) of the Code by reason of Section 355(e) of the Code. CXP further agrees that, prior to the second anniversary of the Distribution Date, it shall not initiate or support, or call any meeting of its stockholders with respect to, any action that would in any way
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SECTION 4.6 Public Announcements. No public release or announcement concerning the Transactions shall be issued by either party without the prior written consent of the other (which shall not be unreasonably withheld), except as such release or announcement may be required by law or the rules or regulations of any United States securities exchange, in which case the party required to make the release or announcement shall use its commercially reasonable efforts to allow each other party reasonable time to comment on each release or announcement in advance of such issuance.
SECTION 4.7 Required Consents. Each of Centex and CXP shall use commercially reasonable efforts to obtain all of the consents, waivers or authorizations required to be obtained by it in connection with the Transactions completion that are listed on Schedule 4.7 (the “Required Consents”).
SECTION 4.8 Stockholder Rights Plan. The Special Committee has recommended that the Board of Directors of CXP consider the adoption of a stockholder rights plan. CXP agrees to use its reasonable best efforts to have its Board of Directors give due consideration to the adoption of a stockholders right plan to be effective upon the consummation of the Distribution, subject to ratification by the stockholders at the Stockholders Meeting as contemplated by the Merger Agreement.
ARTICLE V.
INDEMNIFICATION
SECTION 5.1 Indemnification by CXP.
(a) CXP shall, to the fullest extent permitted by law, indemnify, defend and hold harmless the Centex Indemnitees from and against any and all CXP Liabilities or third party allegations of CXP Liabilities.
(b) CXP shall, to the fullest extent permitted by law, indemnify, defend and hold harmless (i) Centex, (ii) each member of the consolidated group of corporations of which Centex is the common parent corporation (within the meaning of Section 1504 of the Code) and (iii) each direct or indirect Subsidiary of Centex (each Person referred to in clauses (ii) and (iii), a “Centex Member”) from and against (A) any actual Liability of Centex or any Centex Member (including any actual Liability for Taxes to the extent that, in the absence of any Liability for Taxes resulting from a determination that the Distribution fails to qualify under Section 355(a) of the Code or Section 355(e) of the Code or that the CXP shares fail to qualify as qualified property for purposes of Section 355(c)(2) of the Code (each, a “355 Failure”), such Liability would otherwise have been reduced or eliminated by a net operating loss deduction (within the meaning of Section 172 of the Code and the Treasury regulations thereunder)), and (B) any Established Liability of any stockholder of Centex (it being understood that any Established Liability of any stockholder of Centex shall be deemed to be an actual Liability of Centex for purposes of determining CXP’s indemnification obligation hereunder, regardless of whether such stockholder actually has or pursues a valid claim for such Established Liability against Centex), in each case arising from any
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(c) If CXP (or any of its Subsidiaries) fails to comply with any of its obligations under Section 4.5(a) or (b) or takes any action or fails to take any action, and such failure to comply, action or omission is the direct and primary or exclusive cause of a 355 Failure, then CXP shall, to the fullest extent permitted by law, indemnify, defend and hold harmless Centex and each Centex Member from and against (i) any and all federal, state and local Taxes, including any interest, penalties or additions to Tax, imposed upon or incurred by Centex and any Centex Member and (ii) any Established Liability of any stockholder of Centex (it being understood that any Established Liability of any stockholder of Centex shall be deemed to be a Centex Tax Liability (as defined below) for purposes of determining CXP’s indemnification obligation hereunder, regardless of whether such stockholder actually has or pursues a valid claim for such Established Liability against Centex), in each case arising from such 355 Failure (any such Tax, interest, penalty or addition to Tax, together with any such Established Liability, a “Centex Tax Liability”).
(d) Any indemnity payment made by CXP pursuant to either clause (b) or (c) above shall be made on an after-tax basis, based on the actual tax position of Centex, the Centex Member or Centex stockholder, as the case may be, in the taxable year such indemnity payment is received and taking into account the deductibility for federal income tax purposes of any state taxes.
SECTION 5.2 Indemnification by Centex.
(a) Centex shall, to the fullest extent permitted by law, indemnify, defend and hold harmless the CXP Indemnitees from and against any and all Centex Liabilities or third party allegations of Centex Liabilities.
(b) Centex shall, to the fullest extent permitted by law, indemnify, defend and hold harmless CXP and each member of the consolidated group of corporations of which CXP is the common parent corporation (within the meaning of Section 1504 of the Code) (each an “CXP Member”) from and against any actual Liability of CXP or any CXP Member arising from any inaccuracy in, or failure by Centex to comply with, any representation or undertaking made by Centex to the IRS in connection with the request by Centex for the IRS Ruling (referred to herein as a “Centex Failure”); provided, however, that, notwithstanding the foregoing, Centex shall not indemnify CXP or any CXP Member for any liability that results solely from a CXP Failure or a failure on the part of CXP to comply with its obligations under Section 4.5(a) or (b) (except to the extent that any such failure is in respect of a representation based in whole or in part upon information provided by Centex); and provided, further, that if any Liability described in this clause (b) arises as a result of both a Centex Failure and a CXP Failure or a failure on the part of CXP to comply with its obligations under Section 4.5(a) or (b), and each such failure is an independent cause of such Liability, then Centex and CXP shall allocate such Liability between themselves in such proportion as is appropriate to reflect the relative fault of Centex on the one hand and CXP on the other with respect to such Liability.
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SECTION 5.3 Procedures for Indemnification.
(a) Third Party Claims. If a claim or demand is made against a CXP Indemnitee or a Centex Indemnitee (each, an “Indemnitee”) by any person who is not a party to this Agreement (a “Third Party Claim”) as to which such Indemnitee is entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the party which is or may be required pursuant to the terms hereof to make such indemnification (the “Indemnifying Party”) in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within five Business Days) after receipt by such Indemnitee of written notice of the Third Party Claim; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except to the extent the Indemnifying Party shall have been actually prejudiced as a result of such failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly (and in any event within two Business Days) after the Indemnitee’s receipt thereof, copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim.
If a Third Party Claim is made against an Indemnitee with respect to which a claim for indemnification is made pursuant to Section 5.1 or Section 5.2 hereof, the Indemnifying Party shall be entitled to participate in the defense thereof and, if it so chooses and acknowledges in writing its obligation to indemnify the Indemnitee therefor, to assume the defense thereof with counsel selected by the Indemnifying Party; provided that the Indemnitee does not reasonably object to such counsel. Should the Indemnifying Party so elect to assume the defense of a Third Party Claim, the Indemnifying Party shall, within 30 days (or sooner if the nature of the Third Party Claim so requires), notify the Indemnitee of its intent to do so, and the Indemnifying Party shall thereafter not be liable to the Indemnitee for legal or other expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, that such Indemnitee shall have the right to employ counsel to represent such Indemnitee if, in such Indemnitee’s reasonable judgment, a conflict of interest between such Indemnitee and such Indemnifying Party exists in respect of such claim which would make representation of both such parties by one counsel inappropriate, and in such event the fees and expenses of such separate counsel shall be paid by such Indemnifying Party.
If the Indemnifying Party assumes the defense of a Third-Party Claim, the Indemnitee shall have the right to participate in the defense thereof and to employ counsel, but the fees and expenses of such counsel shall, subject to the proviso of the preceding sentence, be at its own expense, it being understood that the Indemnifying Party shall control such defense. If the Indemnifying Party assumes the defense of a Third Party Claim, all of the Indemnitees shall cooperate with the Indemnifying Party in the defense or prosecution thereof, including by providing or causing to be provided, records and witnesses as soon as reasonably practicable after receiving any request therefor from or on behalf of the Indemnifying Party.
If the Indemnifying Party assumes the defense of a Third Party Claim, then in no event will the Indemnitee admit any liability with respect to, or settle, compromise or discharge, any Third Party Claim without the Indemnifying Party’s prior written consent (which shall not be unreasonably withheld); provided, however, that the Indemnitee shall have the right to settle, compromise or discharge such Third Party Claim without the consent of the Indemnifying Party if the Indemnitee releases the Indemnifying Party from its indemnification obligation hereunder with respect to such Third Party Claim and such settlement, compromise or discharge would not otherwise adversely affect the Indemnifying Party. If the Indemnifying Party assumes the defense of a Third Party Claim, the Indemnifying Party shall be permitted to enter into, and the Indemnitee shall agree to, any settlement, compromise or discharge of a Third Party Claim that the Indemnifying Party may recommend and that by its terms obligates the Indemnifying Party to pay the full amount of the liability in connection with such Third Party Claim and releases the Indemnitee completely in connection with such Third Party Claim and that would not otherwise adversely affect the Indemnitee or subject the Indemnitee to any equitable remedy.
If an Indemnifying Party elects not to assume the defense of a Third Party Claim, or fails to notify an Indemnitee of its election to do so as provided herein, such Indemnitee may compromise, settle or defend
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Notwithstanding the foregoing, the Indemnifying Party shall not be entitled to assume the defense of any Third Party Claim (and shall be liable for the reasonable fees and expenses of counsel incurred by the Indemnitee in defending such Third Party Claim) if the Third Party Claim seeks an order, injunction or other equitable relief or relief for other than money damages against the Indemnitee which the Indemnitee reasonably determines, after conferring with its counsel, cannot be separated from any related claim for money damages. If such equitable relief or other relief portion of the Third Party Claim can be so separated from that for money damages, the Indemnifying Party shall be entitled to assume the defense of the portion relating to money damages.
(b) In the event any Tax Claim is disposed of pursuant to the provisions of this Section 5.3 or a Final Determination has been made in circumstances that give rise to a Tax Liability or an Established Liability on the part of Centex, any Centex Member or any Centex stockholder, as the case may be, then CXP shall pay to Centex all amounts in respect of any Tax Claim within twenty (20) business days after such Tax Claim is disposed of or such Final Determination has been made. For purposes of this Section 5.3(b), (i) “Tax Claim” shall mean any notice of deficiency, proposed adjustment, adjustment, assessment, audit, examination, suit, dispute or other written claim which is commenced or initiated against Centex, any Centex Member or any Centex stockholder with respect to Taxes that are attributable to the Reclassification or Distribution and which result from any act or acts of CXP or its Subsidiaries described in Section 4.5 or the breach by CXP of any representation or warranty set forth in this Agreement and (ii) “Final Determination” shall mean (A) the entry of a decision of a court of competent jurisdiction at such time as an appeal may no longer be taken from such decision or (B) the execution of a closing agreement or its equivalent between the particular taxpayer and the particular relevant taxing authority.
SECTION 5.4 Subrogation. In the event of payment by an Indemnifying Party to any Indemnitee in connection with any Third-Party Claim, such Indemnifying Party shall be subrogated to and shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right or claim relating to such Third-Party Claim against any claimant or plaintiff or other person or entity asserting such Third-Party Claim, or any other person who is not a party to this Agreement. Such Indemnitee shall cooperate with such Indemnifying Party in a reasonable manner, and at the cost and expense of such Indemnifying Party, in prosecuting any subrogated right or claim.
SECTION 5.5 Remedies Not Exclusive. The remedies provided in this Article V shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party; provided, however, that upon the consummation of the Distribution, the Indemnification Agreement, dated as of April 19, 1994, among CXP, Centex and the other parties named therein shall be terminated and be of no further force or effect.
SECTION 5.6 Indemnification Payments. Indemnification required by this Article V shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or loss, liability, claim, damage or expense is incurred.
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ARTICLE VI.
MISCELLANEOUS
SECTION 6.1 Notices. All notices and other communications hereunder shall be in writing and hand delivered or mailed by registered or certified mail (return receipt requested) or sent by any means of electronic message transmission with delivery confirmed (by voice or otherwise), or by overnight courier service to the parties at the following addresses (or at such other addresses for a party as shall be specified by like notice) and will be deemed given on the date on which such notice is received:
| To Centex: | |
| Centex Corporation | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6859 | |
| Attn: Chief Executive Officer | |
| with a copy to: | |
| Baker Botts L.L.P. | |
| 2001 Ross Avenue | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 953-6503 | |
| Attn: Geoffrey L. Newton | |
| To CXP: | |
| Centex Construction Products, Inc. | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6559 | |
| Attn: Chief Operating Officer | |
| and: | |
| The Special Committee of the Board of Directors | |
| c/o The Secretary of Centex Construction Products, Inc. | |
| Centex Construction Products, Inc. | |
| 2728 North Harwood | |
| Dallas, Texas 75201 | |
| Fax No.: (214) 981-6559 | |
| with a copy to: | |
| Haynes and Boone, LLP | |
| 901 Main Street, Suite 3100 | |
| Dallas, Texas 75202 | |
| Attention: Michael M. Boone | |
| Fax No.: (214) 651-5940 | |
| and | |
| Attention: William L. Boeing | |
| Fax No.: (972) 692-9053 |
SECTION 6.2 Interpretation.
(a) The article, section and paragraph headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said articles, sections or paragraphs. Whenever the words “include,” “includes” and “including” are used in this Agreement, they shall be deemed followed by the words “without limitation.” Whenever a reference is made in this Agreement to a “party” or “parties,” such reference shall be to a party or parties to this Agreement unless otherwise indicated.
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(b) Each party hereto stipulates and agrees that the rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor any party against the other, and that no party, including any drafting party, shall have the benefit of any legal presumption (including “meaning of the authors”) or the detriment of any burden of proof by reason of any ambiguity or uncertain meaning contained in this Agreement.
SECTION 6.3 Amendments; No Waivers. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each party, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 6.4 Assignment. This Agreement shall not be assignable, in whole or in part, directly or indirectly, by any party hereto without the prior written consent of the other party hereto, and any attempt to assign any rights or obligations arising under this Agreement without such consent shall be void.
SECTION 6.5 Successors and Assigns. The provisions to this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and permitted assigns. Nothing contained in this Agreement is intended to confer upon any Person other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement, except that the provisions of Article V shall inure to the benefit of the Centex Indemnitees and the CXP Indemnitees. In addition, the provisions of this Agreement shall be binding upon any person that acquires, directly or indirectly, 50% or more of the (a) voting power, in an election of directors or otherwise, represented by the outstanding common stock, (b) shares of outstanding common stock or (c) assets of CXP on or after the Distribution Date, but CXP shall not enter into any agreement with respect to the foregoing or permit to be consummated any such transaction unless and until a writing shall be signed by any such person and delivered to Centex whereby such person agrees to assume the obligations of CXP hereunder.
SECTION 6.6 Governing Law. Except insofar as mandatory conflicts of law principles require that the Distribution be governed by Nevada law, this Agreement shall be governed by and construed in accordance with the Laws of the State of Delaware applicable to contracts made and to be performed in the State of Delaware.
SECTION 6.7 Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto.
SECTION 6.8 Exhibits and Schedules. The Exhibits and Schedules shall be construed with and as an integral part of this Agreement to the same extent as if the same had been set forth verbatim herein.
SECTION 6.9 Entire Agreement. This Agreement and the other Transaction Agreements constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding,
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SECTION 6.10 Severability. If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a declaration, the parties shall modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.
SECTION 6.11 Termination. This Agreement may be terminated and the Transactions may be amended, modified or abandoned at any time prior to the filing of the certificate of merger relating to the Reclassification by and in the sole discretion of Centex without the approval of CXP or the stockholders of CXP. This Agreement may be terminated by CXP only upon (i) a material breach by Centex of a representation, warranty or covenant contained in this Agreement, which breach is reasonably expected to result in a Material Adverse Effect with respect to CXP after giving effect to the Distribution and has not been substantially cured (so that no Material Adverse Effect would result therefrom) within 30 days after written notice thereof has been given to Centex or (ii) the termination of the Merger Agreement pursuant to Section 5.1(a)(iv) thereof. This Agreement shall terminate automatically without any action on the part of Centex or CXP in the event that the Merger Agreement is terminated in accordance with its terms. In the event of termination of this Agreement by either party hereto, except as set forth in Section 6.13, no party shall have any liability of any kind to any other party or any other person. After the payment of the Cash Dividend, this Agreement may not be terminated except by an agreement in writing signed by both parties and approved by a majority of the directors of CXP that are not affiliated with Centex.
SECTION 6.12 Survival of Agreements. Except as otherwise contemplated by this Agreement, all covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date.
SECTION 6.13 Expenses. Except as otherwise set forth in this Agreement or in the Merger Agreement, all costs and expenses incurred in connection with the preparation, execution and delivery and the consummation of the Transactions shall be charged to and borne by the party incurring such costs and expenses. Notwithstanding the foregoing, if this Agreement is terminated for any reason without the Distribution having been consummated, Centex shall pay all out-of-pocket expenses of CXP incurred in connection with the Transaction Agreements. The provisions of this Section 6.13 shall survive any termination of this Agreement.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written.
| CENTEX CORPORATION |
| By: | /s/ LAURENCE E. HIRSCH |
|
|
|
| Name: Laurence E. Hirsch | |
| Title: Chairman & CEO | |
| CENTEX CONSTRUCTION PRODUCTS, INC. |
| By: | /s/ STEVEN R. ROWLEY |
|
|
|
| Name: Steven R. Rowley | |
| Title: Executive Vice President & COO |
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RESTATED CERTIFICATE OF INCORPORATION
The undersigned, being the President of Centex Construction Products, Inc., a Delaware corporation, hereby certifies that:
| 1. The name of the corporation is , INC.1 (the “Corporation”). The name under which the Corporation was originally incorporated is Centex Construction Products, Inc. and the date of filing the original Certificate of Incorporation of the Corporation with the Secretary of State of the State of Delaware was January 27, 1994. | |
| 2. This Restated Certificate of Incorporation amends and restates the provisions of the Certificate of Incorporation of the Corporation and was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. | |
| 3. The Restated Certificate of Incorporation of the Corporation, as restated and amended hereby, shall, upon its filing with the Secretary of State of the State of Delaware, read in its entirety as follows: |
ARTICLE I
The name of the Corporation is , Inc.1
ARTICLE II
The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware. The name of the registered agent of the Corporation at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “DGCL”), and the Corporation shall have perpetual existence.
ARTICLE IV
[The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 105,000,000 shares, consisting of (i) 5,000,000 shares of Preferred Stock, par value $.01 per share (“Preferred Stock”), (ii) 80,000,000 shares of Common Stock, par value $.01 per share (“Common Stock”), and (iii) 20,000,000 shares of Class B Common Stock, par value $.01 per share (“Class B Common Stock” and, together with the Common Stock, the “Corporation Common Stock”).]2
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The powers, preferences and rights of each class of capital stock, and the qualifications, limitations and restrictions thereof, are as follows:
A. Preferred Stock.
Shares of Preferred Stock may be issued in such series as may from time to time be determined by the Board of Directors. Prior to the issuance of a series, the Board of Directors by resolution shall designate the series to distinguish it from any other classes or series of capital stock of the Corporation, shall specify the number of shares to be included in the series and shall fix the powers, preferences and relative, participating, optional or other special rights of the series, and the qualifications, limitations or restrictions thereof. Without limiting the generality of the foregoing, any such resolution of the Board of Directors may set forth the following characteristics of the series:
| (i) the designation of, and the number of shares of Preferred Stock which shall constitute, the series, which number may be increased (except as otherwise provided by the Board of Directors) or decreased (but not below the number of shares thereof then outstanding) from time to time by action of the Board of Directors; | |
| (ii) the rate or rates and the date or dates at which (or the method of determination thereof), and the terms and conditions upon which, dividends, if any, on shares of the series shall be paid, the nature of any preferences or the relative rights of priority of such dividends to the dividends payable on any other class or classes of capital stock of the Corporation or on any series of Preferred Stock of the Corporation, and whether such dividends shall be cumulative; | |
| (iii) whether shares of the series shall be convertible into or exchangeable for shares of capital stock or other securities or property of the Corporation or of any other corporation or entity, and, if so, the terms and conditions of such conversion or exchange, including any provisions for the adjustment of the conversion or exchange rate upon the occurrence of such events as the Board of Directors shall determine; | |
| (iv) whether shares of the series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable and the amount and type of consideration payable upon redemption, which amount may vary under different conditions and at different redemption dates; | |
| (v) whether shares of the series shall have a sinking fund or redemption or purchase account for the redemption or purchase of shares of the series, and if so, the terms, conditions and amount of such sinking fund or redemption or purchase account; | |
| (vi) the rights of the holders of shares of the series upon voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding up of the Corporation; | |
| (vii) whether shares of the series shall have voting rights in addition to the voting rights provided by law, which may include (a) the right to more or less than one vote per share on any or all matters submitted to a vote of the stockholders of the Corporation and (b) the right to vote, as a series by itself or together with any other series of Preferred Stock or together with all series of Preferred Stock as a class or with the Common Stock as a class, upon such matters, under such circumstances and upon such conditions as the Board of Directors may fix (including, but not limited to, the right, voting as a series by itself or together with any other series of Preferred Stock or together with all series of Preferred Stock as a class, to elect one or more directors of the Corporation in the event there shall have been a default in the payment of dividends on any series of Preferred Stock or under such other circumstances and upon such other conditions as the Board of Directors may determine); and | |
| (viii) any other powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof. |
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Subject to the express terms of any series of Preferred Stock outstanding at any time, the vote or consent of the holders of Preferred Stock of any series shall not be required for the issuance of any other series of Preferred Stock, regardless of whether the powers, preferences and rights of such other series shall be fixed by the Board of Directors as senior to, on a parity with or junior to the powers, preferences and rights of such outstanding series.
B. Common Stock. The Common Stock and the Class B Common Stock shall be identical in all respects, except as otherwise provided by law or expressly provided herein. The relative powers, preferences, rights, qualifications, limitations and restrictions of the shares of Common Stock and Class B Common Stock shall be as follows:
| (1) Cash Dividends. Subject to the rights, if any, of the holders of Preferred Stock with respect to the payment of dividends and the requirements, if any, with respect to the setting aside of sums as sinking funds or redemption or purchase accounts for the benefit of such holders and subject to any other conditions that may be fixed in accordance with the provisions of paragraph A of this Article IV, then, but not otherwise, the holders of Common Stock and Class B Common Stock shall be entitled to receive such dividends, if any, as may be declared from time to time by the Board of Directors out of assets which are legally available therefor; provided, that whenever a cash dividend is paid on any Corporation Common Stock, the same amount shall be paid in respect of each outstanding share of Common Stock and Class B Common Stock. | |
| (2) Stock Dividends. If at any time a dividend is to be paid in shares of Common Stock or shares of Class B Common Stock (a “stock dividend”), such stock dividend may be declared and paid only as follows: only Common Stock may be paid to holders of Common Stock and only Class B Common Stock may be paid to holders of Class B Common Stock. Whenever a stock dividend is paid on any Corporation Common Stock, the same number of shares shall be paid in respect of each outstanding share of Common Stock and Class B Common Stock. | |
| (3) Property Dividends. If at any time a dividend is to be paid in rights to purchase shares of the capital stock of the Corporation (a “rights dividend”), then: (i) if the rights dividend is of rights that entitle the holder thereof to purchase shares of Common Stock (or shares of capital stock of the Corporation having voting rights equivalent to those of the Common Stock (“Equivalent Shares”)) or Class B Common Stock (or shares of capital stock of the Corporation having voting rights equivalent to those of the Class B Common Stock (“Equivalent Class B Shares”)) then only rights to acquire Common Stock or Equivalent Shares may be paid to holders of Common Stock and only rights to acquire Class B Common Stock or Equivalent Class B Shares may be paid to holders of Class B Common Stock; and (ii) if the rights dividend is of rights that entitle the holder thereof to purchase shares of capital stock of the Corporation other than Common Stock (or Equivalent Shares) or Class B Common Stock (or Equivalent Class B Shares) then the Board of Directors of the Corporation may pay such dividend of rights to the holders of Common Stock and Class B Common Stock in such manner as the Board of Directors may determine. Whenever any rights dividend or dividend in the form of securities or other property (other than a cash dividend or stock dividend) is paid on any Corporation Common Stock, the same number or amount and kind of rights, securities or other property shall be paid in respect of each outstanding share of Common Stock and Class B Common Stock. | |
| (4) Stock Subdivisions and Combinations. The Corporation shall not subdivide, reclassify or combine stock of any class of Corporation Common Stock without at the same time making a proportionate subdivision, reclassification or combination of shares of the other class. | |
| (5) Voting. Voting power shall be divided between the classes of Corporation Common Stock as follows: |
| (i) Subject to Section B.(5)(ii) of this Article IV, in the election of directors, holders of shares of Class B Common Stock, voting separately as a class (the “Voting B Shares”), shall be entitled to elect that number of directors which constitutes 85% of the authorized number of |
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| members of the Board of Directors (or, if 85% of the authorized number of members of the Board of Directors is not a whole number, then the nearest higher whole number) (the “Voting B Share Directors”). The initial Voting B Share Directors shall be designated by a majority of the directors of the Corporation as of the effectiveness of this Restated Certificate of Incorporation, and the holders of Voting B Shares, voting separately as a class, shall be entitled to vote for the election or replacement of such Voting B Share Directors at the next annual meeting of stockholders. Each share of Class B Common Stock shall have one vote in the election of the Voting B Share Directors. Subject to Section B.(5)(ii) of this Article IV, in the election of directors, holders of shares of Common Stock (the “Voting Shares”), shall be entitled to elect the remaining director or directors, if any (the “Voting Share Directors”). The initial Voting Share Director, if any, shall be designated by a majority of the directors of the Corporation as of the effectiveness of this Restated Certificate of Incorporation, and the holders of Voting Shares, voting separately as a class, shall be entitled to vote for the election or replacement of such Voting Share Director at the next annual meeting of stockholders. Each share of Common Stock shall have one vote in the election of the Voting Share Directors. For purposes of Sections B.(5)(i), (ii) and (iii) of this Article IV, references to the authorized number of members of the Board of Directors shall not include any directors which the holders of any shares of a series of Preferred Stock have the right to elect voting separately as one or more series. | |
| (ii) For purposes of this Section B.(5)(ii) of this Article IV, “Special Voting Rights” means the different voting rights of the holders of Common Stock, on the one hand, and the holders of Class B Common Stock, on the other hand, with respect to the election of the applicable percentages of the authorized number of members of the Board of Directors as described in Section B.(5)(i) of this Article IV. At any time after , 20053, if approved by the Board of Directors, at any annual or special meeting of stockholders of the Corporation, the holders of at least 66 2/3% of the outstanding shares of the Common Stock and Class B Common Stock, voting together as a class, may vote to eliminate the Special Voting Rights (the “Elimination Vote”), in which case the Special Voting Rights provided for in Section B.(5)(i) of this Article IV shall have no further force or effect, and thereafter holders of the Corporation Common Stock shall have equal voting rights in all respects, except as otherwise provided by law, and shall be entitled to elect the total authorized number of members of the Board of Directors voting together as a single class, with each share of Corporation Common Stock having one vote. | |
| (iii) Unless the Special Voting Rights have been eliminated in accordance with Section B.(5)(ii) of this Article IV, all newly-created directorships resulting from an increase in the authorized number of directors shall be allocated between Voting Share Directors and Voting B Share Directors such that at all times the number of Class B Common Stock directorships shall be 85% of the authorized number of members of the Board of Directors (or if such 85% is not a whole number, then the nearest higher whole number) and the remaining directorships shall be Common Stock directorships. | |
| (iv) Except as otherwise specified herein or required by law, the holders of Common Stock and Class B Common Stock shall in all matters not otherwise specified in Section B.(5)(i) of this Article IV vote together as one class, with each share of Common Stock and Class B Common Stock having one vote. | |
| (v) Notwithstanding anything to the contrary contained in Section B.(5)(i), (ii), (iii) or (iv) of this Article IV, for so long as any person or entity or group of persons or entities acting in concert beneficially own 15% or more of the outstanding shares of Class B Common Stock, then in any election of directors or other exercise of voting rights with respect to the election or removal of directors, such person, entity or group shall only be entitled to vote (or otherwise |
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| (6) Merger or Consolidation. The Corporation shall not enter into any consolidation of the Corporation with one or more other corporations, a merger of the Corporation with another corporation, a reorganization of the Corporation or other similar combination of the Corporation with one or more third parties, unless each holder of a share of Common Stock or Class B Common Stock is entitled to receive with respect to such share the same kind and amount of shares of stock and other securities and property (including cash) receivable upon such consolidation, merger, reorganization or other combination as each other holder of a share of Common Stock and Class B Common Stock; provided that, in any such transaction consummated prior to the Elimination Vote, the holders of shares of Common Stock and Class B Common Stock may each receive different kinds of shares of stock that differ to the extent and only to the extent that the Board of Directors determines in good faith that such shares differ with respect to the rights of holders of such shares to substantially the same extent as the Common Stock and the Class B Common Stock differ as provided herein. | |
| (7) Liquidation. In the event of any liquidation, dissolution or winding up of the Corporation, the holders of the Common Stock and Class B Common Stock shall participate equally per share in any distribution to stockholders, without distinction between classes. |
ARTICLE V
A. General. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors shall have concurrent power with the stockholders to make, alter, amend, change, add to or repeal the Bylaws of the Corporation. In furtherance and not in limitation of the powers conferred upon the Board of Directors by the DGCL and this Restated Certificate of Incorporation, the Board of Directors is hereby expressly empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject to the provisions of the DGCL, this Restated Certificate of Incorporation and any bylaws adopted by the stockholders of the Corporation; provided, however, that no bylaws adopted by the stockholders of the Corporation shall invalidate any prior act of the Board of Directors that would have been valid if such bylaws had not been adopted.
B. Number and Class of Directors.
| (1) Number of Directors. The number of directors that shall constitute the entire Board of Directors of the Corporation shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Board of Directors; provided, however, (i) that in no event shall the number of directors constituting the entire Board of Directors be less than three nor more than fifteen (provided, however, that until such time as an Elimination Vote occurs, the Board of Directors shall not reduce the number of directors to a number less than seven) and (ii) no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. |
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| [(2) Classified Board. The directors, other than those who may be elected by the holders of any series of Preferred Stock, shall be divided into three classes: Class I, Class II and Class III. As of the effectiveness of this Restated Certificate of Incorporation, the Board of Directors shall assign each person who is serving as a director to one of such classes, as determined in the sole discretion of the Board of Directors; provided, however, that the initial Voting Share Director shall be assigned to Class I. Such classes shall be as nearly equal in number of directors as possible. Each director shall serve for a term ending on the third annual meeting of stockholders following the annual meeting of stockholders at which that director was elected; provided, however, that the directors first designated as Class I directors shall serve for a term expiring at the annual meeting of stockholders next following the date of their designation as Class I directors, the directors first designated as Class II directors shall serve for a term expiring at the second annual meeting of stockholders next following the date of their designation as Class II directors, and the directors first designated as Class III directors shall serve for a term expiring at the third annual meeting of stockholders next following the date of their designation as Class III directors. Each director shall hold office until the annual meeting of stockholders at which his term expires and, the foregoing notwithstanding, shall serve until his successor shall have been duly elected and qualified or until his earlier death, resignation or removal. | |
| At each annual election, the directors chosen to succeed those whose terms then expire shall be of the same class as the directors they succeed, unless, by reason of any intervening changes in the authorized number of directors, the Board of Directors shall have designated one or more directorships whose term then expires as directorships of another class in order to more nearly achieve equality of number of directors among the classes. | |
| In the event of any change in the authorized number of directors, each director then continuing to serve as such shall nevertheless continue as a director of the class of which he is a member until the expiration of his current term, or his prior death, resignation or removal. The Board of Directors shall specify the class to which a newly created directorship shall be allocated.]4 |
C. Manner of Election. The election of directors at any annual or special meeting of the stockholders of the Corporation need not be by written ballot unless the Bylaws of the Corporation so provide.
D. Vacancies.
| (1) Any vacancy in the office of a director created by the death, resignation, retirement, disqualification, removal from office of a director or other cause, elected by (or appointed on behalf of) the holders of the Voting B Shares, on the one hand, or the holders of the Voting Shares, on the other hand, as the case may be, shall be filled by the vote of the majority of the directors (or the sole remaining director) elected by (or appointed on behalf of) such holders of Voting B Shares, on the one hand, or Voting Shares, on the other hand, as the case may be, unless there are no such directors in such class, in which case such vacancy shall be filled by the holders of the Voting B Shares or Voting Shares, respectively, unless the Elimination Vote shall have occurred, in which case such vacancy shall be filled by the vote of the majority of the directors (or the sole remaining director) then in office, even if less than a quorum, regardless of any quorum requirements set out in the Bylaws. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same term as that of his predecessor. | |
| (2) Unless the Elimination Vote shall have occurred, all newly-created directorships resulting from an increase in the authorized number of directors shall be allocated pursuant to Section B(5) of Article IV. Once such newly-created directorships have been allocated as Voting Share Directors or Voting B Share Directors, such newly-created directorships shall be filled by the vote of the majority of the directors in such class (or the sole remaining director in such class), as the case may be, unless |
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ARTICLE VI
A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, as the same exists or hereafter may be amended or replaced, or (iv) for any transaction from which the director derived any improper personal benefit. If the DGCL is amended after the filing of this Restated Certificate of Incorporation to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the DGCL as so amended. Any repeal or modification of this Article VI by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.
ARTICLE VII
A. Indemnification. Each person who was or is made a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), by reason of the fact that he or she is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise (an “Indemnitee”), shall be indemnified and held harmless by the Corporation to the fullest extent permitted by applicable law in effect on the date of the filing of this Restated Certificate of Incorporation, and to such greater extent as applicable law may thereafter permit, against all expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement incurred by such Indemnitee in connection with such a Proceeding, and such right of indemnification shall continue with respect to an Indemnitee who has ceased to be such a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. The rights of an Indemnitee under the immediately preceding sentence shall include, but not be limited to, the right to be indemnified to the fullest extent permitted by Section 145(b) of the DGCL in the case of Proceedings by or in the right of the Corporation and to the fullest extent permitted by Section 145(a) of the DGCL in the case of all other Proceedings.
B. Advancement of Expenses. An Indemnitee shall be entitled to the payment of expenses (including attorneys’ fees) incurred in defending any Proceeding in advance of the final disposition thereof in accordance with the provisions set forth in the Bylaws of the Corporation or, if no provisions relating to the advancement of expenses are set forth therein, in accordance with such terms and conditions as the Board of Directors deems appropriate.
C. Determination of Entitlement to Indemnification. A determination as to whether an Indemnitee is entitled to indemnification in respect of any expenses (including attorneys’ fees), judgments, fines or amounts paid in settlement incurred by such Indemnitee in connection with a Proceeding shall be made in accordance with Section 145(d) of the DGCL and the provisions set forth in the Bylaws of the Corporation.
D. Non-Exclusivity. The rights conferred by this Article VII shall not be exclusive of any other rights which an Indemnitee or any other person may now or hereafter have under this Restated Certificate of Incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise.
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ARTICLE VIII
No stockholder of the Corporation shall by reason of his or her holding shares of any class or series of its capital stock have any preemptive or preferential right to purchase or subscribe for or otherwise acquire or receive any shares of any class or series of capital stock issued by the Corporation, whether now or hereafter authorized, or any shares of any class or series of capital stock of the Corporation now or hereafter acquired by the Corporation as treasury stock and subsequently reissued or sold or otherwise disposed of, or any notes, debentures, bonds or other securities convertible into, or any warrants, rights or options exercisable for, any shares of any class or series of capital stock of the Corporation, whether or not the issuance of any such shares or such notes, debentures, bonds or other securities or warrants, rights or options would adversely affect the dividend, voting or any other rights of such stockholder.
[ARTICLE IX
Special meetings of the stockholders of the Corporation may be called only by the Chairman, or in his absence by the President, by the Board of Directors, or by the Secretary at the request in writing of a majority of the Board of Directors and may not be called by the stockholders of the Corporation.]5
[ARTICLE X
Any action required to be taken or which may be taken by the holders of the Corporation Common Stock must be effected at a duly called annual or special meeting of such holders and may not be taken by written consent in lieu of a meeting.]6
ARTICLE XI
The Board of Directors shall have the power to adopt, alter, amend and repeal the Bylaws of the Corporation, in any manner not inconsistent with the laws of the State of Delaware, subject to the power of the stockholders to adopt, amend or repeal the Bylaws.
[ARTICLE XII
Notwithstanding anything else contained in this Restated Certificate of Incorporation or the Bylaws to the contrary, the affirmative vote of the holders of record of at least 66 2/3% of the combined voting power of all of the outstanding stock of the Corporation entitled to vote in respect thereof, voting together as a single class, shall be required (A) to alter, amend, rescind or repeal Section B(5)(v) of Article IV, Article V, Article IX, Article X, Article XI or this Article XII of this Restated Certificate of Incorporation or to adopt any provision inconsistent therewith or (B) in order for the stockholders to adopt, alter, amend, rescind or repeal any Bylaws of the Corporation.]7
ARTICLE XIII
The Corporation reserves the right to amend, alter, change, rescind or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon the stockholders herein are granted subject to this reservation.
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AMENDED AND RESTATED
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TABLE OF CONTENTS
| ARTICLE I | D-1 | |||
|
SECTION 1.1
|
Registered Office | D-1 | ||
|
SECTION 1.2
|
Other Offices | D-1 | ||
| ARTICLE II | D-1 | |||
|
SECTION 2.1
|
Place of Meetings | D-1 | ||
|
SECTION 2.2
|
Annual Meeting | D-1 | ||
|
SECTION 2.3
|
Special Meeting | D-1 | ||
|
SECTION 2.4
|
Quorum | D-2 | ||
|
SECTION 2.5
|
Voting | D-2 | ||
|
SECTION 2.6
|
Conduct of Meetings of Stockholders | D-2 | ||
|
SECTION 2.7
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Proxies | D-2 | ||
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SECTION 2.8
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Stockholder List | D-2 | ||
|
SECTION 2.9
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Stock Ledger | D-3 | ||
|
SECTION 2.10
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Stockholder Action by Written Consent | D-3 | ||
|
SECTION 2.11
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Stockholder Proposals at Annual or Special Meetings | D-3 | ||
|
SECTION 2.12
|
Stockholder Nominations of Persons for Election to the Board of Directors | D-3 | ||
| ARTICLE III | D-4 | |||
|
SECTION 3.1
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Number and Election of Directors | D-4 | ||
|
SECTION 3.2
|
Vacancies and Newly Created Directorships | D-4 | ||
|
SECTION 3.3
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Place of Meetings | D-5 | ||
|
SECTION 3.4
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Regular Meetings | D-5 | ||
|
SECTION 3.5
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Special Meetings | D-5 | ||
|
SECTION 3.6
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Quorum | D-5 | ||
|
SECTION 3.7
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Conduct of Meetings of the Board of Directors | D-5 | ||
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SECTION 3.8
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Meetings by Telephone Conference | D-6 | ||
|
SECTION 3.9
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Action by Written Consent | D-6 | ||
|
SECTION 3.10
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Committees of Directors | D-6 | ||
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SECTION 3.11
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Interested Directors | D-7 | ||
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SECTION 3.12
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Resignation | D-7 | ||
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SECTION 3.13
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Compensation of Directors | D-7 | ||
| ARTICLE IV | D-7 | |||
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SECTION 4.1
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General | D-7 | ||
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SECTION 4.2
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Election and Terms | D-7 | ||
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SECTION 4.3
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Salaries | D-7 | ||
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SECTION 4.4
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Chief Executive Officer and President | D-8 | ||
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SECTION 4.5
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Vice Presidents | D-8 | ||
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SECTION 4.6
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Secretary | D-8 | ||
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SECTION 4.7
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Treasurer | D-8 | ||
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SECTION 4.8
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Assistant Secretaries | D-8 | ||
|
SECTION 4.9
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Assistant Treasurers | D-9 | ||
|
SECTION 4.10
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Other Officers | D-9 | ||
|
SECTION 4.11
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Delegation of Authority | D-9 | ||
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|
SECTION 4.12
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Removal | D-9 | ||
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SECTION 4.13
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Resignation | D-9 | ||
| ARTICLE V | D-9 | |||
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SECTION 5.1
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Certificates Evidencing Shares | D-9 | ||
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SECTION 5.2
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Transfer Agents and Registrars | D-9 | ||
|
SECTION 5.3
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Signatures | D-9 | ||
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SECTION 5.4
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Lost, Stolen or Destroyed Stock Certificates | D-9 | ||
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SECTION 5.5
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Transfers | D-10 | ||
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SECTION 5.6
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Record Date | D-10 | ||
|
SECTION 5.7
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Registered Stockholders | D-10 | ||
| ARTICLE VI | D-10 | |||
|
SECTION 6.1
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General | D-10 | ||
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SECTION 6.2
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Expenses Related to Proceedings | D-10 | ||
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SECTION 6.3
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Advancement of Expenses | D-10 | ||
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SECTION 6.4
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Request for Indemnification | D-11 | ||
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SECTION 6.5
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Determining Entitlement to Indemnification Prior to a Change of Control | D-11 | ||
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SECTION 6.6
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Determining Entitlement to Indemnification After a Change of Control | D-11 | ||
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SECTION 6.7
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Procedures of Independent Counsel | D-11 | ||
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SECTION 6.8
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Expenses of Independent Counsel | D-12 | ||
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SECTION 6.9
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Trial De Novo | D-12 | ||
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SECTION 6.10
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Non-Exclusivity | D-12 | ||
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SECTION 6.11
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Insurance and Subrogation | D-13 | ||
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SECTION 6.12
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Severability | D-13 | ||
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SECTION 6.13
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Certain Persons Not Entitled to Indemnification | D-13 | ||
|
SECTION 6.14
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Definitions | D-13 | ||
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SECTION 6.15
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Notices | D-14 | ||
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SECTION 6.16
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Contractual Rights | D-14 | ||
| ARTICLE VII | D-14 | |||
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SECTION 7.1
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Notices | D-14 | ||
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SECTION 7.2
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Waiver of Notice | D-14 | ||
| ARTICLE VIII | D-15 | |||
|
SECTION 8.1
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Amendments by Stockholders | D-15 | ||
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SECTION 8.2
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Amendments by Directors | D-15 | ||
| ARTICLE IX | D-15 | |||
|
SECTION 9.1
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Fiscal Year | D-15 | ||
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SECTION 9.2
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Disbursements | D-15 | ||
|
SECTION 9.3
|
Corporate Seal | D-15 | ||
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AMENDED AND RESTATED
ARTICLE I
OFFICES
SECTION 1.1 Registered Office. The registered office of , Inc.3 (the “Corporation”) in the State of Delaware shall be in care of Corporation Service Company, 2711 Centerville Road, Suite 400, City of Wilmington, County of New Castle, Delaware.
SECTION 1.2 Other Offices. The Corporation may also have offices at such other places, both within and without the State of Delaware, as the Board of Directors may from time to time determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 2.1 Place of Meetings. All meetings of the stockholders shall be held at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors.
SECTION 2.2 Annual Meeting. An annual meeting of the stockholders, for the purpose of electing directors and transacting such other business as may properly be brought before the meeting, shall be held on such date in each year and at such time as shall be designated by the Board of Directors. A failure to hold the annual meeting at the designated time or to elect a sufficient number of directors to conduct the business of the Corporation shall not affect otherwise valid corporate acts or work a forfeiture or dissolution of the Corporation, except as may be otherwise specifically provided by law. If the annual meeting for election of directors is not held on the date designated therefor, the directors shall cause the meeting to be held as soon thereafter as convenient. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
SECTION 2.3 Special Meeting. [Unless otherwise prescribed by law or by the Certificate of Incorporation, a special meeting of the stockholders, for any purpose or purposes, may be called only by the Chairman of the Board or in his absence by the President, by the Board of Directors, or by the Secretary, at the request in writing of a majority of the members of the Board of Directors and may not be called by the stockholders of the Corporation.]4 Any such request shall state the purpose or purposes of the proposed meeting. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation.
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SECTION 2.4 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, the presence, in person or represented by proxy, of the holders of a majority of the voting power of the shares of capital stock of the Corporation entitled to vote on any matter shall constitute a quorum for the purpose of considering such matter at a meeting of the stockholders. If a meeting of the stockholders cannot be organized because a quorum has not attended, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have the power to adjourn the meeting from time to time until a quorum shall be present or represented. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting at which a quorum shall be present or represented, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
SECTION 2.5 Voting. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, (i) any question brought before any meeting of stockholders shall be decided by the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter and (ii) directors of the Corporation shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
SECTION 2.6 Conduct of Meetings of Stockholders. At each meeting of the stockholders, the Chairman of the Board or, in his absence, the President or, in his absence, a chairman chosen by a majority vote of the stockholders present in person or represented by proxy and entitled to vote thereat, shall preside and act as chairman of the meeting. The Secretary or, in his absence, an Assistant Secretary, or, in the absence of the Secretary and all Assistant Secretaries, a person whom the chairman of such meeting shall appoint, shall act as secretary of such meeting and keep the minutes thereof. The Board of Directors may adopt such rules and regulations as it determines are reasonably necessary or appropriate in connection with the organization and conduct of any meeting of the stockholders. Without limiting the generality of the foregoing, the Board of Directors, in its discretion, or the person presiding at a meeting of the stockholders, in his or her discretion, may require that any votes cast at such meeting be cast by written ballot.
SECTION 2.7 Proxies. Each stockholder entitled to vote at a meeting of stockholders may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the Corporation generally.
SECTION 2.8 Stockholder List. The officer or agent who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept open at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. In lieu of making and producing such list, the Corporation may make the information therein available by any other means permitted by law.
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SECTION 2.9 Stock Ledger. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 2.8 or the books of the Corporation, or to vote in person or by proxy at any meeting, of the stockholders.
SECTION 2.10 Stockholder Action by Written Consent. [No action required to be taken or which may be taken at any annual or special meeting of the stockholders of the Corporation may be taken by written consent, without a meeting, as the power of the stockholders to take action by written consent is specifically denied.]5
SECTION 2.11 Stockholder Proposals at Annual or Special Meetings. At an annual or special meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before a meeting, business must be specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, otherwise properly brought before the meeting by or at the direction of the Board of Directors or otherwise properly brought before the meeting by a stockholder. In addition to any other applicable requirements, for business to be properly brought before a meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 90 days nor more than 180 days prior to an annual meeting, or in the case of a special meeting, not less than 30 days nor more than 60 days prior to such meeting; provided, however, that in the event that less than 50 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. A stockholder’s notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the meeting, (i) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (ii) the name and record address of the stockholder proposing such business, (iii) the class and number of shares of the Corporation that are beneficially owned by the stockholder and (iv) any material interest of the stockholder in such business. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual or special meeting except in accordance with the procedures set forth in this Section 2.11; provided, however, that nothing in this Section 2.11 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with said procedures.
SECTION 2.12 Stockholder Nominations of Persons for Election to the Board of Directors. In addition to any other applicable requirements, only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at an annual or special meeting of the stockholders. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of stockholders by or at the direction of the Board of Directors, by any nominating committee or person appointed by the Board of Directors or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 2.12. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation. To be timely, a stockholder’s notice shall be delivered to or mailed and received at the principal executive offices of the Corporation not less than 90 days nor more than 180 days prior to an annual meeting or, in the case of a special meeting, not less than 30 days nor more than 60 days prior to such meeting; provided, however, that in the event that less than 50 days notice or prior public disclosure of the date of the meeting is given or made to stockholders, notice by the stockholder to be timely must be so received not later than the close of business on the seventh day following the day on which such notice of the date of the meeting was mailed or such public disclosure was made. Such stockholder’s notice shall set forth
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ARTICLE III
DIRECTORS
SECTION 3.1 Number and Election of Directors. The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The number of directors that shall constitute the entire Board of Directors of the Corporation shall be fixed from time to time exclusively by the affirmative vote of a majority of the members at any time constituting the Board of Directors, and such number may be increased or decreased from time to time; provided, however, that (i) in no event shall the number of directors serving on the Board of Directors be less than three nor more than fifteen and (ii) no decrease in the number of directors shall have the effect of shortening the term of any incumbent director. Except as provided in the Certificate of Incorporation or in Section 3.2, directors shall be elected by a plurality of the votes of the shares present or represented by proxy at annual meetings of the stockholders. Except as provided in the Certificate of Incorporation, each director shall hold office until the next annual meeting of the stockholders and until his successor shall have been duly elected and qualified. [If the Certificate of Incorporation so provides, (i) the directors of the Corporation shall be divided into classes (“Term of Office Classes”) based upon the expiration of their terms of office and (ii) the directors of the Corporation shall be divided into classes (“Voting Constituency Classes” ) based on the class of capital stock the holders of which are entitled to elect such directors. If the Certificate of Incorporation provides for both Term of Office Classes and Voting Constituency Classes, each director shall be assigned to a Term of Office Class and a Voting Constituency Class in accordance with the terms of the Certificate of Incorporation and the provisions set forth in the remainder of this Article III. Notwithstanding anything to the contrary contained in this Article III, the manner of election, terms of office and other provisions relating to directors serving in any Term of Office Classes or Voting Constituency Classes shall be as provided in the Certificate of Incorporation.]6
SECTION 3.2 Vacancies and Newly Created Directorships. In addition to any applicable requirements set forth in the Certificate of Incorporation, if at a time when the Certificate of Incorporation provides for Voting Constituency Classes7 there occurs any vacancy in the office of a Voting Share Director (as defined in Section B.(5)(i) of Article IV of the Certificate of Incorporation) or Voting B Share Director (as defined in Section B.(5)(i) of Article IV of the Certificate of Incorporation) due to the death, resignation, retirement, disqualification or removal from office of such director or other cause, such vacancy shall be filled by the vote of the majority of the Voting Share Directors (or the sole remaining Voting Share Director) or a majority of the Voting B Share Directors (or the sole remaining Voting B Share Director), as the case may be, unless there are no such directors in such class, in which
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All newly-created directorships resulting from an increase in the authorized number of directors at a time when the Certificate of Incorporation provides for Voting Constituency Classes shall be allocated between such classes pursuant to in Section B.(5)(iii) of Article IV of the Certificate of Incorporation. Once such newly-created directorships have been designated as Voting Share Directors or Voting B Share Directors, such newly created directorships shall be filled by the vote of the majority of the directors in such class (or the sole remaining director in such class), as the case may be, unless there are no such directors in such class, in which case such vacancy shall be filled by the holders of the Voting Shares or Voting B Shares, as the case may be. All newly-created directorships resulting from an increase in the authorized number of directors at a time when the Certificate of Incorporation does not provide for Voting Constituency Classes shall be filled exclusively by the vote of the majority of the directors (or the sole remaining director) then in office, even if less than a quorum, regardless of any quorum requirements set out in these Bylaws.
Any vacancies or newly-created directorships filled in accordance with this Section 3.2 at a time when the Certificate of Incorporation provides for Term of Office Classes shall be allocated among the Term of Office Classes pursuant to Section B of Article V of the Certificate of Incorporation.
No decrease in the number of authorized directors constituting the entire Board of Directors shall shorten the term of any incumbent director.
SECTION 3.3 Place of Meetings. The Board of Directors of the Corporation may hold its meetings, both regular and special, at such place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors, the Chairman of the Board or the President.
SECTION 3.4 Regular Meetings. Promptly after each annual election of directors, the Board of Directors shall meet for the purpose of the election of officers and the transaction of other business, at the place where such annual election is held. The Board of Directors may also hold other regular meetings at such time or times and at such place or places as shall be designated by the Board of Directors from time to time. Notice of regular meetings of the Board of Directors need not be given.
SECTION 3.5 Special Meetings. Special meetings of the Board of Directors may be called by (i) the Chairman of the Board or (ii) the Secretary, if requested to do so by a majority of the members of the Board of Directors. Notice shall be sent to the last known address of each director, by mail, telegram, cable or telex, at least two days before the meeting, or oral notice may be substituted for such written notice if received not later than the day preceding such meeting, and the place and time of such special meeting shall be as designated in the notice of such meetings.
SECTION 3.6 Quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors a majority of the total number of directors in office shall constitute a quorum for the transaction of business, and the vote of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until quorum shall be present.
SECTION 3.7 Conduct of Meetings of the Board of Directors. The Board of Directors may, in its discretion, elect from among its members a Chairman of the Board, who may, but need not be, an officer of the Corporation. A person elected as Chairman of the Board shall serve in such capacity for such term as is specified by the Board of Directors at the time of his or her election. At each meeting of the Board of Directors, the Chairman of the Board or, in his or her absence, any other director chosen by a majority
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SECTION 3.8 Meetings by Telephone Conference. Members of the Board of Directors of the Corporation may participate in a meeting of such Board of Directors or a committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 3.8 shall constitute presence in person at such meeting.
SECTION 3.9 Action by Written Consent. Except as otherwise provided by the Certificate of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board of Directors or committee, as the case may be, consent thereto in writing setting forth the action so taken, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.
SECTION 3.10 Committees of Directors. The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Notwithstanding the foregoing, no committee shall have the power or authority to take any of the following actions:
| (a) amend the Certificate of Incorporation (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of any series of capital stock of the Corporation adopted by the Board of Directors as permitted by the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “DGCL”), fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series); | |
| (b) adopt an agreement of merger or consolidation under the DGCL; | |
| (c) recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets; | |
| (d) recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution; or | |
| (e) amend the Bylaws of the Corporation. |
In addition, unless the resolution of the Board of Directors designating the committee expressly so provides, no such committee shall have the power or authority to take any of the following actions:
| (i) declare a dividend; | |
| (ii) authorize the issuance of stock; or | |
| (iii) adopt a certificate of ownership and merger pursuant to the DGCL. |
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Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required.
SECTION 3.11 Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or the committee in good faith authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the stockholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the stockholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified by the Board of Directors, a committee thereof or the stockholders. Interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.
SECTION 3.12 Resignation. Any director of the Corporation may resign at any time by giving written notice of his resignation to the President or the Secretary. Such resignation shall take effect at the date of receipt of such notice by the President or the Secretary, or at any later time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
SECTION 3.13 Compensation of Directors. The directors shall receive such compensation for their services as the Board of Directors may from time to time determine. No director shall be prevented from receiving compensation for his services as a director by reason of the fact that he is also an officer of the Corporation. All directors shall be reimbursed for their reasonable expenses of attendance at each regular or special meeting of the Board of Directors. Members of any committee of directors may be allowed like compensation and reimbursement for expenses for serving as members of any such committee and for attending committee meetings.
ARTICLE IV
OFFICERS
SECTION 4.1 General. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also elect a Chief Executive Officer, one or more Vice Presidents (including Executive Vice Presidents and Senior Vice Presidents), Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Certificate of Incorporation or these Bylaws. The officers of the Corporation need not be stockholders or directors of the Corporation.
SECTION 4.2 Election and Terms. The Board of Directors at its first meeting held after each annual meeting of stockholders shall elect the officers of the Corporation, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified or until their earlier resignation or removal. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors.
SECTION 4.3 Salaries. The salaries of all officers of the Corporation shall be fixed by the Board of Directors and may be altered from time to time, except as otherwise provided by contract. No officer shall be prevented from receiving a salary solely be reason of the fact that he is also a director.
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SECTION 4.4 Chief Executive Officer and President. The Chief Executive Officer, or if there be none, the President shall be the chief executive officer of the Corporation. Subject to the supervision of the Board of Directors, the Chief Executive Officer and, subject to the supervision of the Chief Executive Officer, the President shall have general charge of the business, affairs and property of the Corporation and shall have control over its officers, agents, and employees. The President shall see that all orders and resolutions of the Board of Directors and the Chief Executive Officer are carried into effect. Either the Chief Executive Officer or the President may execute and deliver certificates for shares of the Corporation, any deeds, mortgages, bonds, contracts or other instruments that the Board of Directors has authorized to be executed and delivered, except where required or permitted by law to be otherwise executed and delivered and except that the other officers of the Corporation may execute and deliver documents when authorized to do so by these Bylaws, the Board of Directors or the President. The Chief Executive Officer and the President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him or her by these Bylaws or by the Board of Directors.
SECTION 4.5 Vice Presidents. Each Vice President shall perform such duties and have such other powers as the Board of Directors from time to time may prescribe. Certain Vice Presidents may from time to time be designated by the Board of Directors as Executive Vice Presidents or Senior Vice Presidents, which positions shall have such varying degrees of authority as the Board of Directors shall prescribe.
SECTION 4.6 Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, under whose supervision he or she shall act. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then the Board of Directors may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or an Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his or her signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be.
SECTION 4.7 Treasurer. The Treasurer shall be the chief financial officer of the Corporation and shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Board of Directors, at its regular meeting, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.
SECTION 4.8 Assistant Secretaries. Except as may be otherwise provided in these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his or her disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.
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SECTION 4.9 Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his or her disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his or her office and for the restoration to the Corporation, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation.
SECTION 4.10 Other Officers. Such other officers as the Board of Directors may appoint shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.
SECTION 4.11 Delegation of Authority. In the case of the absence of any officer of the Corporation or for any other reason that the Board of Directors may deem sufficient, the Board of Directors may delegate some or all of the powers or duties of such officer to any other officer or to any director, employee, stockholder or agent for whatever period of time the Board of Directors determines is necessary or appropriate.
SECTION 4.12 Removal. Any officer may be removed, either with or without cause, by the affirmative vote of a majority of the Board of Directors, or, except in the case of any officer elected by the Board of Directors, by any officer upon whom the powers of removal may be conferred by the Board of Directors.
SECTION 4.13 Resignation. Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Corporation. Such resignation shall take effect at the date of receipt of such notice by the Corporation, or at any later time specified therein. Unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
ARTICLE V
STOCK AND STOCK CERTIFICATES
SECTION 5.1 Certificates Evidencing Shares. Every holder of stock in the Corporation shall be entitled to have a certificate evidencing the number of shares owned by such holder signed by or in the name of the Corporation by (i) the President or a Vice President and (ii) the Secretary or an Assistant Secretary.
SECTION 5.2 Transfer Agents and Registrars. The Board of Directors may appoint, or authorize any officer or officers to appoint, one or more transfer agents and one or more registrars.
SECTION 5.3 Signatures. Where a certificate is countersigned by (i) a transfer agent other than the Corporation or an employee thereof or (ii) a registrar other than the Corporation or an employee thereof, any other signature on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, such certificate may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar continued to discharge said office or function at the date of issuance.
SECTION 5.4 Lost, Stolen or Destroyed Stock Certificates. The Corporation may issue a new stock certificate in place of any certificate theretofore issued by it which is alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issuance of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require that the owner
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SECTION 5.5 Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his or her attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued.
SECTION 5.6 Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more then 60 days nor less than ten days before the date of such meeting, nor more than 60 days prior to any other action. A determination of stockholders of record entitled to notice or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
SECTION 5.7 Registered Stockholders. Except as otherwise required by law, the Corporation shall be entitled to recognize the exclusive right of the person registered on its books as the owner of shares to receive dividends in respect of such shares and to vote as the owner thereof, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have notice thereof.
ARTICLE VI
INDEMNIFICATION
SECTION 6.1 General. The Corporation shall indemnify, and advance Expenses (as this and all other capitalized words used in this Article VI and not otherwise defined shall have the respective meanings set forth in Section 6.14) to, each Indemnitee to the fullest extent permitted by applicable law in effect on the date of the adoption of these Bylaws, and to such greater extent as applicable law may thereafter permit. The rights of an Indemnitee provided under the preceding sentence shall include, but not be limited to, the right to be indemnified to the fullest extent permitted by Section 145(b) of the DGCL in the case of Proceedings by or in the right of the Corporation and to the fullest extent permitted by Section 145(a) of the DGCL in the case of all other Proceedings. The provisions set forth below in this Article VI are provided in furtherance, and not by way of limitation, of the obligations expressed in this Section 6.1.
SECTION 6.2 Expenses Related to Proceedings. If an Indemnitee is, by reason of his or her Corporate Status, a witness in or a party to and is successful, on the merits or otherwise, in any Proceeding, he or she shall be indemnified against all Expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If an Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to any Matter in such Proceeding, the Corporation shall indemnify such Indemnitee against all Expenses actually and reasonably incurred by him or her or on his or her behalf relating to such Matter. The termination of any Matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such Matter.
SECTION 6.3 Advancement of Expenses. To the fullest extent permitted by Section 145(e) of the DGCL, each Indemnitee shall be entitled to payment of, and the Corporation shall pay, Expenses in advance of the final disposition of any Proceeding within ten days after receipt by the Corporation of a written notice requesting the advancement of such Expenses, which notice shall contain an undertaking by
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SECTION 6.4 Request for Indemnification. To obtain indemnification hereunder, an Indemnitee shall submit to the Corporation a written request with such information pertinent to such request as is reasonably available to the Indemnitee. The Secretary of the Corporation shall promptly advise the Board of Directors of any such request.
SECTION 6.5 Determining Entitlement to Indemnification Prior to a Change of Control. If a Change of Control has not occurred prior to or at the time a request for indemnification hereunder is submitted to the Corporation, an Indemnitee’s entitlement to indemnification shall be determined in accordance with Section 145(d) of the DGCL. If entitlement to indemnification is to be determined by Independent Counsel, the Corporation shall furnish notice to the Indemnitee within ten days after receipt of the request for indemnification, specifying the identity and address of Independent Counsel. The Indemnitee may, within 14 days after receipt of such written notice of selection, deliver to the Corporation a written objection to such selection. Such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements of Independent Counsel and the objection shall set forth with particularity the factual basis of such assertion. If there is an objection to the selection of Independent Counsel, either the Corporation or the Indemnitee may petition the Court of Chancery of the State of Delaware or any other court of competent jurisdiction for a determination that the objection is without a reasonable basis or for the appointment of Independent Counsel selected by the court.
SECTION 6.6 Determining Entitlement to Indemnification After a Change of Control. If a Change of Control has occurred prior to or at the time a request for indemnification hereunder is submitted to the Corporation, an Indemnitee’s entitlement to indemnification shall be determined in a written opinion of Independent Counsel selected by the Indemnitee. The Indemnitee shall give the Corporation written notice advising of the identity and address of the Independent Counsel so selected. The Corporation may, within seven days after receipt of such written notice of selection, deliver to the Indemnitee a written objection to such selection. The Indemnitee may, within five days after the receipt of such objection from the Corporation, submit the name of another Independent Counsel and the Corporation may, within seven days after receipt of such written notice of selection, deliver to Indemnitee a written objection to such selection. Any objection is subject to the limitations set forth in Section 6.5. The Indemnitee may petition the Court of Chancery of the State of Delaware or any other court of competent jurisdiction for a determination that the Corporation’s objection to any selection of Independent Counsel is without a reasonable basis or for the appointment as Independent Counsel of a person selected by the court.
SECTION 6.7 Procedures of Independent Counsel. If a Change of Control has occurred prior to or at the time the request for indemnification hereunder is submitted to the Corporation, an Indemnitee shall be presumed (except as otherwise expressly provided in this Article VI) to be entitled to indemnification upon submission of a request for indemnification in accordance with Section 6.4, and thereafter the Corporation shall have the burden of proof to overcome the presumption in reaching a determination contrary to the presumption. The presumption shall be used by Independent Counsel as a basis for a determination of entitlement to indemnification unless the Corporation provides information sufficient to overcome such presumption by clear and convincing evidence or the investigation, review and analysis of Independent Counsel convinces him or her by clear and convincing evidence that the presumption should not apply.
Except where the determination of entitlement to indemnification is to be made by Independent Counsel, if the person or persons empowered under Section 6.5 or 6.6 to determine entitlement to indemnification shall not have made and furnished to the Indemnitee in writing a determination within 60 days after receipt by the Corporation of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification unless the Indemnitee knowingly misrepresented a material fact in connection with the request for indemnification. The termination of any Proceeding or of any Matter therein, by judgment,
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SECTION 6.8 Expenses of Independent Counsel. The Corporation shall pay any and all reasonable fees and expenses of Independent Counsel acting pursuant to this Article VI and in any proceeding to which it is a party or witness in respect of its investigation and written report and shall pay all reasonable fees and expenses incident to the procedures in which such Independent Counsel was selected or appointed. No Independent Counsel may serve if a timely objection has been made to his or her selection until a court has determined that such objection is without a reasonable basis.
SECTION 6.9 Trial De Novo. In the event that (a) a determination is made pursuant to Section 6.5 or 6.6 that an Indemnitee is not entitled to indemnification under this Article VI, (b) advancement of Expenses is not timely made pursuant to Section 6.3, (c) Independent Counsel has not made and delivered a written opinion determining the request for indemnification (i) within 90 days after being appointed by a court, (ii) within 90 days after objections to his or her selection have been overruled by a court or (iii) within 90 days after the time for the Corporation or the Indemnitee to object to his or her selection or (d) payment of indemnification is not made within five days after a determination of entitlement to indemnification has been made or deemed to have been made pursuant to Section 6.5, 6.6 or 6.7, the Indemnitee shall be entitled to an adjudication in any court of competent jurisdiction of his or her entitlement to such indemnification or advancement of Expenses. In the event that a determination shall have been made that the Indemnitee is not entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 6.9 shall be conducted in all respects as a de novo trial on the merits, and Indemnitee shall not be prejudiced by reason of that adverse determination. If a Change of Control shall have occurred, in any judicial proceeding commenced pursuant to this Section 6.9, the Corporation shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be. If a determination shall have been made or deemed to have been made that the Indemnitee is entitled to indemnification, the Corporation shall be bound by such determination in any judicial proceeding commenced pursuant to this Section 6.9, or otherwise, unless the Indemnitee knowingly misrepresented a material fact in connection with the request for indemnification.
The Corporation shall be precluded from asserting in any judicial proceeding commenced pursuant to this Section 6.9 that the procedures and presumptions of this Article VI are not valid, binding and enforceable and shall stipulate in any such court that the Corporation is bound by all provisions of this Article VI. In the event that an Indemnitee, pursuant to this Section 6.9, seeks a judicial adjudication to enforce his or her rights under, or to recover damages for breach of, this Article VI, the Indemnitee shall be entitled to recover from the Corporation, and shall be indemnified by the Corporation against, any and all Expenses actually and reasonably incurred by him or her in such judicial adjudication, but only if he or she prevails therein. If it shall be determined in such judicial adjudication that an Indemnitee is entitled to receive part but not all of the indemnification or advancement of Expenses sought, the Expenses incurred by the Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.
SECTION 6.10 Non-Exclusivity. The rights of indemnification and to receive advancement of Expenses provided by this Article VI shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation, these Bylaws, any agreement, vote of stockholders, resolution of the Board of Directors or otherwise. The provisions of this Article VI shall continue as to an Indemnitee whose Corporate Status has ceased and shall inure to the benefit of his or her heirs, executors and administrators.
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SECTION 6.11 Insurance and Subrogation. To the extent the Corporation maintains an insurance policy or policies providing liability insurance for directors or officers of the Corporation or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise which such person serves at the request of the Corporation, each Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of coverage available for any such director or officer under such policy or policies.
In the event of any payment hereunder, the Corporation shall be subrogated to the extent of such payment to all the rights of recovery of the Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary to enable the Corporation to bring suit to enforce such rights.
The Corporation shall not be liable under this Article VI to make any payment of amounts otherwise indemnifiable hereunder if, and to the extent that, Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement or otherwise.
SECTION 6.12 Severability. If any provision or provisions of this Article VI shall be held to be invalid, illegal or unenforceable for any reason whatsoever, the validity, legality and enforceability of the remaining provisions hereof shall not in any way be affected or impaired thereby; and, to the fullest extent permitted by law, the provisions of this Article VI shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable.
SECTION 6.13 Certain Persons Not Entitled to Indemnification. Subject to the provisions of Section 6.9, no person shall be entitled to indemnification or advancement of Expenses under this Article VI with respect to any Proceeding, or any Matter therein, brought or made by such person against the Corporation.
SECTION 6.14 Definitions. As used in this Article VI, the terms set forth below shall have the following respective meanings:
“Affiliate” means, with respect to any person, any other person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such person.
“Change of Control” means the occurrence after , 20038 of any of the following events: (a) an event required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item or any similar schedule or form) promulgated under the Exchange Act, whether or not the Corporation is then subject to such reporting requirement; (b) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 50% or more of the combined voting power of the then outstanding voting securities of the Corporation without prior approval of at least two-thirds of the members of the Board of Directors in office immediately prior to such person’s attaining such percentage interest; or (c) the Corporation is a party to a merger, consolidation, sale of assets or other reorganization, or a proxy contest, as a consequence of which members of the Board of Directors in office immediately prior to such transaction or event constitute less than a majority of the Board of Directors thereafter.
“Corporate Status” describes the status of (i) an individual who is or was a director or officer of the Corporation, (ii) an individual who is an employee or agent of the Corporation (who is not also director or officer of the Corporation), if the Board of Directors adopts a resolution that specifically states that such employee or agent shall be entitled to the benefits of this Article VI to the same extent as if he were an officer or director, or (iii) an individual identified in clause (i) or (ii) above who is serving at the request of the Corporation as a director, officer or administrator of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise.
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“Expenses” shall include all reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating or being or preparing to be a witness in a Proceeding.
“Indemnitee” includes any person who is, or is threatened to be made, a witness in or a party to any Proceeding as described in Section 6.1 or 6.2 by reason of his or her Corporate Status.
“Independent Counsel” means a law firm, or member of a law firm, that is experienced in matters of corporation law and neither presently is, nor in the five years prior to his or her selection or appointment has been, retained to represent: (a) the Corporation or the Indemnitee in any matter material to either such party, (b) any other party to the Proceeding giving rise to a claim for indemnification hereunder or (c) the beneficial owner, directly or indirectly, of securities of the Corporation representing 5% or more of the combined voting power of the then outstanding voting securities of the Corporation.
“Matter” is a claim, a material issue or a substantial request for relief.
“Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative, except one initiated by an Indemnitee pursuant to Section 6.9 to enforce his or her rights under this Article VI.
SECTION 6.15 Notices. Any notice or other communication required or permitted to be sent to the Corporation pursuant to this Article VI shall be addressed to the Secretary of the Corporation and any such notice or other communication to an Indemnitee shall be given in writing by depositing the same in the United States mail, with postage thereon prepaid, addressed to the person to whom such notice is directed at the address of such person on the records of the Corporation, and such notice shall be deemed given at the time when the same shall be so deposited in the United States mail.
SECTION 6.16 Contractual Rights. The right to be indemnified and to the advancement or reimbursement of Expenses in accordance with this Article VI (i) is a contract right based upon good and valuable consideration, pursuant to which Indemnitee may sue as if these provisions were set forth in a separate written contract between him or her and the Corporation, (ii) is and is intended to be retroactive and shall be available as to events occurring prior to the adoption of these provisions and (iii) shall continue after any rescission or restrictive modification of such provisions as to events occurring prior to such rescission or modification.
ARTICLE VII
NOTICES
SECTION 7.1 Notices. Whenever written notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telecopy, telex or cable and such notice shall be deemed given at the time when the same is sent.
SECTION 7.2 Waiver of Notice. Whenever notice is required by law, the Certificate of Incorporation or these Bylaws to be given to any director, member of a committee or stockholder, a written waiver, signed by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting of stockholders, in person or by proxy, or at a meeting of the Board of Directors or committee thereof shall constitute a waiver of notice of such meeting, except when the person attends such meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or
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ARTICLE VIII
AMENDMENTS
SECTION 8.1 Amendments by Stockholders. These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted, by the affirmative vote of the holders of record of at least 66 2/3% of the combined voting power of all the outstanding stock of the Corporation entitled to vote in respect thereof, voting together as a single class.
SECTION 8.2 Amendments by Directors. These Bylaws may be altered, amended or repealed, in whole or in part, or new Bylaws may be adopted, by action of a majority of directors then in office.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Fiscal Year. The fiscal year of the Corporation shall end on the 31st day of March of each year, unless otherwise provided by resolution of the Board of Directors.
SECTION 9.2 Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.
SECTION 9.3 Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal Delaware.” The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced.
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APPENDIX E
July 21, 2003
The Special Committee
Gentlemen:
We understand that Centex Construction Products, Inc. (“CXP”), Centex Corporation (“Centex”) and ARG Merger Corporation, (“Merger Sub”) have proposed to enter into an Agreement and Plan of Merger dated as of July 21, 2003 (the “Merger Agreement”), pursuant to which 9,222,000 of the shares of CXP Common Stock owned by Centex will be exchanged for an equal number of shares of CXP Class B Common Stock, which new class will be entitled to elect 85% of the members of the Board of Directors of CXP and in all other respects be identical to the CXP Common Stock which will be entitled to elect 15% of the members of the Board of Directors of CXP (the “Reclassification”). Additionally, we understand that CXP and Centex have proposed to enter into a Distribution Agreement dated as of July 21, 2003 (the “Distribution Agreement”), pursuant to which (i) CXP will pay a cash dividend of $6.00 per share on a pro rata basis to all of the holders of CXP Common Stock immediately prior to the Reclassification and Distribution (the “Cash Dividend”) and (ii) Centex will then distribute all of its holdings of CXP Class B Common Stock and all of its holdings of CXP Common Stock to Centex’s stockholders on a pro rata basis (the “Distribution”) (the Reclassification, the Cash Dividend and the Distribution are herein collectively referred to as the “Transaction”). You have provided us with copies of the final drafts of the Merger Agreement and the Distribution Agreement. All defined terms not otherwise defined herein shall have the meanings as ascribed to them in such documents.
You have asked us to render our opinion as to whether the Transaction, taken as a whole, is fair from a financial point of view to the holders of the shares of CXP Common Stock, other than Centex.
In the course of performing our review and analyses for rendering this opinion, we have:
| • | reviewed the final drafts of the Merger Agreement and the Distribution Agreement; | |
| • | reviewed the final drafts of the Restated Certificate of Incorporation including the terms of the CXP Class B Common Stock and CXP Common Stock as described therein and the Amended and Restated Bylaws; | |
| • | reviewed CXP’s Annual Reports to Shareholders and Annual Reports on Form 10-K for the fiscal years ended March 31, 2001 through 2003, its preliminary results for the quarter ended June 30, 2003 and its Reports on Form 8-K for the three years ended the date hereof; | |
| • | reviewed certain operating and financial information relating to CXP’s business and prospects, including projections for the five years ended March 31, 2008, all as prepared and provided to us by CXP’s management; |
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| • | met with certain members of CXP’s senior management to discuss CXP’s business, operations, historical and projected financial results and future prospects both on a status quo basis and giving effect to the Transaction; | |
| • | met with certain members of Centex’s senior management and with the financial advisors of Centex to discuss Centex’s strategic and financial rationale for the Transaction; | |
| • | met with the Special Committee of the Board of Directors of CXP to discuss the Transaction rationale, the Transaction structure and its impact on the public holders of CXP Common Stock and alternatives for enhancing the stock float of the CXP Common Stock; | |
| • | reviewed the historical prices, trading multiples, trading volumes and stock float of the CXP Common Stock; | |
| • | reviewed publicly available financial data, stock market performance data, trading multiples and stock float of companies which we deemed generally comparable to CXP; | |
| • | reviewed the terms, stock price performance and stock float characteristics of selected spin-off transactions and step-up spin-off transactions which we deemed generally comparable to the Transaction; | |
| • | reviewed the trading performance of companies with dual-class stock structures that we deemed generally comparable to the dual-class stock structure that CXP will maintain after consummation of the Transaction; | |
| • | reviewed the pro forma financial results, financial condition and capitalization of CXP giving effect to the Transaction; and | |
| • | conducted such other studies, analyses, inquiries and investigations as we deemed appropriate. |
We have relied upon and assumed, without independent verification, the accuracy and completeness of the financial and other information provided to us by CXP, including, without limitation, the projections. With respect to CXP’s projected financial results, we have relied on representations that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the senior management of CXP as to the expected future performance of CXP. We have not assumed any responsibility for the independent verification of any such information or of the projections provided to us, and we have further relied upon the assurances of the senior management of CXP that they are unaware of any facts that would make the information and projections provided to us incomplete or misleading.
In arriving at our opinion, we have not performed or obtained any independent appraisal of the assets or liabilities (contingent or otherwise) of CXP, nor have we been furnished with any such appraisals. We have assumed, with your consent, that (i) the Reclassification and Merger will qualify as a tax-free “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code, (ii) the Distribution will qualify as a tax-free transaction within the meaning of Section 355 of the Internal Revenue Code, (iii) the Cash Dividend will be a taxable dividend to CXP’s shareholders, and (iv) the Administrative Services Agreement, the Intellectual Property Agreement and the Sublease Agreement, when executed, will provide that the transactions and services contemplated by such agreements will be effected on terms substantially equivalent to the current arrangements between Centex and CXP with respect thereto. We understand that the Transaction will be conditioned upon receiving a ruling from the Internal Revenue Service to the effect that the Distribution will be a tax-free distribution within the meaning of Section 355 of the Internal Revenue Code. We have assumed that the Transaction will be consummated in a timely manner and in accordance with the terms of the Merger Agreement and Distribution Agreement without
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any limitations, restrictions, conditions, amendments, waivers or modifications, regulatory or otherwise, that collectively would have a material effect on CXP or the stockholders of CXP (other than Centex).
We do not express any opinion as to the price or range of prices at which the shares of CXP Common Stock may trade subsequent to the announcement of the Transaction or as to the price or range of prices at which the shares of CXP Common Stock or CXP Class B Common Stock may trade subsequent to the consummation of the Transaction.
We have acted as a financial advisor to the Special Committee of the Board of Directors of CXP in connection with the Transaction and will receive a customary fee for such services. In the ordinary course of business, Bear Stearns and its affiliates may actively trade the equity and debt securities and/or bank debt of Centex and CXP for our own account and for the account of our customers and, accordingly, may at any time hold a long or short position in such securities or bank debt.
It is understood that this letter is intended for the benefit and use of the Board of Directors and the Special Committee of the Board of Directors of CXP and that the Special Committee of the Board of Directors of CXP will rely, in part, upon this letter in exercising its business judgment in making a recommendation to the Board of Directors and any holders of CXP Common Stock as to how to vote in connection with the Transaction. This letter does not constitute a recommendation to the Board of Directors or the Special Committee of the Board of Directors of CXP or any holders of CXP Common Stock as to how to vote in connection with the Transaction. This opinion does not address CXP’s underlying business decision to pursue the Transaction, the relative merits of the Transaction as compared to any alternative business strategies that might exist for CXP, the financing of the Transaction or the effects of any other transaction in which CXP might engage. This letter is not to be used for any other purpose, or be reproduced, disseminated, quoted from or referred to at any time, in whole or in part, without our prior written consent; provided, however, that this letter may be included in its entirety in any proxy statement to be distributed to the holders of CXP Common Stock in connection with the Transaction. Our opinion is subject to the assumptions and conditions contained herein and is necessarily based on economic, market and other conditions, and the information made available to us, as of the date hereof. We assume no responsibility for updating or revising our opinion based on circumstances or events occurring after the date hereof except as requested by the Special Committee of the Board of Directors of CXP in accordance with the terms of our engagement letter.
Based on and subject to the foregoing, it is our opinion that, as of the date hereof, the Transaction, taken as a whole, is fair from a financial point of view to the holders of CXP Common Stock, other than Centex.
| Very truly yours, | |
| BEAR, STEARNS & CO. INC. |
| By: |
 |
| Senior Managing Director |
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CENTEX CONSTRUCTION PRODUCTS, INC.
Proxy for Special Meeting of Stockholders to be Held
, 2003
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned stockholder of Centex Construction Products, Inc., a Delaware corporation, hereby acknowledges receipt of the Notice of Special Meeting of Stockholders and Centex Construction Products, Inc. Proxy Statement, each dated , 2003, and hereby appoints , and each of them singly, each with full power of substitution, as the proxy and attorney-in-fact of the undersigned with full authority to represent and vote all shares of common stock of the undersigned at the special meeting of stockholders to be held at 2728 N. Harwood, 10th Floor, Dallas, TX on , 2003, at 10:00 a.m., local time, or at any adjournment or postponement thereof, upon the matters set forth in the Proxy Statement and upon those other matters as may properly come before the special meeting, voting as specified on the reverse side of this proxy card with respect to the matters set forth in the Proxy Statement, and voting in the discretion of the above-named person on such other matters as may properly come before the special meeting. The undersigned hereby revokes any proxy previously given.
The shares represented by this proxy will be voted as directed by the undersigned. The board of directors of Centex Construction Products, Inc. recommends a vote “FOR” each of Proposals One through Seven. IF THIS PROXY IS SIGNED AND RETURNED AND DOES NOT SPECIFY A VOTE ON ONE OR MORE OF THE PROPOSALS, THE PROXY WILL BE VOTED “FOR” EACH OF THE PROPOSALS AS TO WHICH NO VOTE IS SPECIFIED.
SEE REVERSE SIDE
(Continued and to be signed on the reverse side)
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| [ X ] | Please mark your votes as in this example | THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF PROPOSALS 1 – 7. |
| 1. Approval of Recapitalization Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 2. Approval of Staggered Board Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 3. Approval of Written Consent Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 4. Approval of Special Meeting Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 5. Approval of Supermajority Voting Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 6. Approval of Authorized Capital Increase Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN | ||||||
| 7. Approval of Stockholders’ Rights Plan Proposal | [ ] | FOR | [ ] | AGAINST | [ ] | ABSTAIN |
| [ ] |
MARK HERE IF YOU PLAN TO ATTEND THE MEETING |
|
| [ ] |
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT |
|
| Please sign exactly as your name appears on your stock certificate. For joint accounts, each owner should sign. Executors, Administrators, Trustees, etc. should give full title. | ||
| Date: | Signature: | Signature: | Title: | |||||||||||