Martin Marietta Materials, Inc. (referred to as Martin Marietta) and Texas Industries, Inc. (referred to as TXI) have
entered into an Agreement and Plan of Merger, dated as of January 27, 2014 (referred to as the merger agreement). Pursuant to the terms of the merger agreement, a wholly owned subsidiary of Martin Marietta will merge with and into
TXI (referred to as the merger) with TXI surviving the merger as a wholly owned subsidiary of Martin Marietta.
If the merger
is completed, TXI stockholders will have the right to receive 0.70 shares of Martin Marietta common stock for each share of TXI common stock, with cash paid in lieu of fractional shares. This exchange ratio is fixed and will not be adjusted to
reflect stock price changes prior to closing of the merger. Based on the closing price of Martin Marietta common stock on the New York Stock Exchange (referred to as the NYSE), on January 27, 2014, the last trading day before public
announcement of the merger, the 0.70 exchange ratio represented approximately $71.95 in value for each share of TXI common stock. Based on such price on May 29, 2014, the latest practicable date before the date of this joint proxy
statement/prospectus, the 0.70 exchange ratio represented approximately $86.51 in value for each share of TXI common stock. Martin Marietta shareholders will continue to own their existing Martin Marietta shares. TXI common stock is currently traded
on the NYSE under the symbol TXI and Martin Marietta common stock is currently traded on the NYSE under the symbol MLM.
We urge you to obtain current market quotations of TXI and Martin Marietta common stock.
Based on the estimated number of shares of TXI common stock outstanding on the record date for the special meetings, Martin Marietta expects
to issue approximately 20.3 million shares of Martin Marietta common stock to TXI stockholders in the merger. Upon completion of the merger, we estimate that current Martin Marietta shareholders will own approximately 70% of the combined company and
former TXI stockholders will own approximately 30% of the combined company.
Martin Marietta and TXI will each hold special meetings of
their respective shareholders or stockholders in connection with the proposed merger.
At the special meeting of Martin Marietta
shareholders, Martin Marietta shareholders will be asked to consider and vote on (i) a proposal to approve the issuance of Martin Marietta common stock to TXI stockholders in connection with the merger (referred to as the share issuance
proposal) and (ii) a proposal to adjourn the Martin Marietta special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the issuance of Martin Marietta common stock to TXI
stockholders in connection with the merger (referred to as the Martin Marietta adjournment proposal). Approval of the share issuance proposal requires the affirmative vote of holders of a majority of the votes cast on such proposal by
holders of Martin Marietta common stock. Approval of the Martin Marietta adjournment proposal requires that the votes cast in favor of the Martin Marietta adjournment proposal exceed the votes cast against it.
At the special meeting of TXI stockholders, TXI stockholders will be asked to consider and vote on (i) a proposal to approve the adoption
of the merger agreement (referred to as the merger proposal), (ii) a proposal to adjourn the TXI special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to adopt the merger
agreement (referred to as the TXI adjournment proposal) and (iii) a non-binding, advisory proposal to approve the compensation that may become payable to TXIs named executive officers in connection with the completion of the
merger (referred to as the compensation proposal). Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of TXI common stock entitled to vote on the proposal. Approval of the TXI
adjournment proposal and the compensation proposal each requires the affirmative vote of holders of a majority of the issued and outstanding shares of TXI common stock present in person or represented by proxy at the TXI special meeting and entitled
to vote at the meeting.
In connection with the merger agreement, each of NNS Holding (referred to as NNS) and
Southeastern Asset Management (referred to as SAM), who, collectively, hold approximately 51% of the outstanding shares of TXI common stock, entered into voting agreements pursuant to which each such stockholder agreed to vote all of its
shares of TXI common stock in favor of the merger proposal and the approval of the transactions contemplated by the merger agreement and against, among other things, alternative transactions. In the event that TXIs board of directors
changes its recommendation that TXI stockholders adopt the merger agreement, NNS and SAM will only be required to vote shares representing at most 35% of the outstanding TXI common stock in favor of the merger proposal, with the balance of their
shares being voted in such circumstances in NNSs and SAMs sole discretion.
We cannot complete the merger unless the Martin
Marietta shareholders approve the share issuance proposal and the TXI stockholders approve the merger proposal.
Your vote is very important, regardless of the number of shares you own. Whether or not you expect to attend your special meeting in
person, please vote your shares as promptly as possible by (1) accessing the Internet website specified on your proxy card, (2) calling the toll-free number specified on your proxy card or (3) marking, signing, dating and returning
all proxy cards that you receive in the postage-paid envelope provided, so that your shares may be represented and voted at the Martin Marietta or TXI special meeting, as applicable.
The
obligations of Martin Marietta and TXI to complete the merger are subject to the satisfaction or waiver of several conditions set forth in the merger agreement. More information about Martin Marietta, TXI and the merger is contained in this joint
proxy statement/prospectus.
Martin Marietta and TXI encourage you to read this entire joint proxy statement/prospectus carefully, including the section entitled
Risk Factors
beginning on page 20.
ABOUT THIS JOINT PROXY STATEMENT/PROSPECTUS
This joint proxy statement/prospectus, which forms part of a registration statement on Form S-4 filed with the U.S. Securities and Exchange
Commission (referred to as the SEC) by Martin Marietta (File No. 333-194288), constitutes a prospectus of Martin Marietta under Section 5 of the Securities Act of 1933, as amended (referred to as the Securities
Act), with respect to the shares of Martin Marietta common stock to be issued to TXI stockholders pursuant to the merger agreement. This joint proxy statement/prospectus also constitutes a joint proxy statement under Section 14(a) of the
Securities Exchange Act of 1934, as amended (referred to as the Exchange Act). It also constitutes a notice of meeting with respect to the special meeting of Martin Marietta shareholders and a notice of meeting with respect to the
special meeting of TXI stockholders.
You should rely only on the information contained or incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you with information that is different from that contained in, or incorporated by reference into, this joint proxy statement/prospectus. This joint proxy statement/prospectus is dated May
30, 2014. You should not assume that the information contained in, or incorporated by reference into, this joint proxy statement/prospectus is accurate as of any date other than that date. Neither our mailing of this joint proxy statement/prospectus
to Martin Marietta shareholders or TXI stockholders, nor the issuance by Martin Marietta of common stock in connection with the merger will create any implication to the contrary.
This joint proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the
solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this joint proxy statement/prospectus regarding Martin Marietta has been
provided by Martin Marietta and information contained in this joint proxy statement/prospectus regarding TXI has been provided by TXI.
Unless otherwise indicated or as the context otherwise requires, all references in this joint
proxy statement/prospectus to:
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combined company refer collectively to Martin Marietta and TXI, following completion of the merger;
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Martin Marietta refer to Martin Marietta Materials, Inc., a North Carolina corporation;
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Martin Marietta common stock include, where appropriate, the associated share purchase rights under the Rights Agreement, dated as of September 27, 2006, between Martin Marietta and American Stock
Transfer & Trust Company;
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merger agreement refer to the Agreement and Plan of Merger, dated January 27, 2014, among Martin Marietta, TXI and Merger Sub, a copy of which is attached as Annex A to this joint proxy
statement/prospectus and is incorporated herein by reference;
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Merger Sub refer to Project Holdings, Inc., a North Carolina corporation and wholly owned subsidiary of Martin Marietta;
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NNS refer to NNS Holding;
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SAM refer to Southeastern Asset Management, Inc.;
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TXI refer to Texas Industries, Inc., a Delaware corporation;
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voting agreements refer collectively to the Voting Agreement, dated as of January 27, 2014, between Martin Marietta and NNS and the Voting Agreement, dated as of January 27, 2014, between Martin
Marietta and SAM, copies of which are attached as Exhibit 2.2 and Exhibit 2.3, respectively, to the Current Reports on Form 8-K filed by Martin Marietta and TXI with the SEC on January 30, 2014 and are incorporated herein by reference;
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we, our and us refer to Martin Marietta and TXI, collectively.
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Table of Contents
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QUESTIONS AND ANSWERS
The following are some questions that you, as a shareholder of Martin Marietta or stockholder of TXI, may have regarding the merger and the
other matters being considered at the special meetings and the answers to those questions. Martin Marietta and TXI urge you to read carefully the remainder of this joint proxy statement/prospectus because the information in this section does not
provide all the information that might be important to you with respect to the merger and the other matters being considered at the special meetings. Additional important information is also contained in the annexes to and the documents incorporated
by reference into this joint proxy statement/prospectus.
Q:
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Why am I receiving this joint proxy statement/prospectus?
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A:
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You are receiving this joint proxy statement/prospectus because you were a shareholder of record of Martin Marietta or a stockholder of record of TXI as of the close of business on the record date for the Martin
Marietta special meeting or the TXI special meeting, respectively. Martin Marietta and TXI have agreed to the combination of TXI and Martin Marietta under the terms of a merger agreement that is described in this joint proxy statement/prospectus. A
copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A and is incorporated herein by reference.
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This joint proxy statement/prospectus serves as the proxy statement through which Martin Marietta and TXI will solicit proxies to obtain the
necessary shareholder or stockholder approvals for the proposed merger. It also serves as the prospectus by which Martin Marietta will issue shares of its common stock as the merger consideration.
In order to complete the merger, among other things, Martin Marietta shareholders must vote to approve the issuance of shares of Martin
Marietta common stock to TXI stockholders in connection with the merger and TXI stockholders must vote to adopt the merger agreement.
Martin Marietta and TXI will hold separate special meetings to obtain these approvals. This joint proxy statement/prospectus contains important
information about the merger and the special meetings of the shareholders of Martin Marietta and stockholders of TXI, and you should read it carefully and in its entirety. The enclosed voting materials allow you to vote your shares without attending
your respective special meeting.
Your vote is important. We encourage you to vote as soon as possible.
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What will I receive in the merger?
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If the merger is completed, holders of TXI common stock will be entitled to receive 0.70 shares of Martin Marietta common stock for each share of TXI common stock they hold at the effective time of the merger. TXI
stockholders will not receive any fractional shares of Martin Marietta common stock in the merger. Instead, Martin Marietta will pay cash in lieu of any fractional shares of Martin Marietta common stock that a TXI stockholder would otherwise have
been entitled to receive.
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If the merger is completed, Martin Marietta shareholders will not receive any merger consideration
and will continue to hold their shares of Martin Marietta common stock.
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If I am a TXI stockholder, how will I receive the merger consideration to which I am entitled?
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After receiving the proper documentation from you, following the effective date of the merger, the exchange agent will forward to you the Martin Marietta common stock and cash in lieu of fractional shares to which you
are entitled. For additional information about the exchange of TXI shares of common stock for Martin Marietta shares of common stock, see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger
AgreementExchange of Shares in the Merger beginning on page 79.
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Q:
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What is the value of the merger consideration?
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Because Martin Marietta will issue 0.70 shares of Martin Marietta common stock in exchange for each share of TXI common stock, the value of the merger consideration that TXI stockholders receive will depend on the price
per share of Martin Marietta common stock at the effective time of the merger. That price will not be known at the time of the special meetings and may be less than the current price or the price at the time of the special meetings. Based on the
closing price of Martin Marietta common stock on the New York Stock Exchange (referred to as the NYSE), on May 29, 2014, the latest practicable date before the date of this joint proxy statement/prospectus, the 0.70 exchange ratio
represented approximately $86.51 in value for each share of TXI common stock. We urge you to obtain current market quotations of Martin Marietta and TXI common stock.
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When and where will the special meetings be held?
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The Martin Marietta special meeting will be held at 2710 Wycliff Road, Raleigh, North Carolina 27607 on June 30, 2014, at 11:30 a.m., local time. The TXI special meeting will be held at The Omni Dallas Hotel at Park
West, 1590 LBJ Freeway, Dallas, Texas 75234 on June 30, 2014, at 9:30 a.m., local time.
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Who is entitled to vote at the special meeting?
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Only shareholders of record of Martin Marietta common stock at the close of business on May 28, 2014, are entitled to vote at the special meeting and any adjournment or postponement of the Martin Marietta special
meeting. Only stockholders of record of TXI at the close of business on May 28, 2014 are entitled to notice of, and to vote at, the special meeting and at any adjournment of the TXI special meeting.
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How can I attend the special meeting?
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All of Martin Mariettas shareholders are invited to attend the Martin Marietta special meeting and all of TXIs stockholders are invited to attend the TXI special meeting. You may be asked to present valid
photo identification, such as a drivers license or passport, before being admitted to the applicable special meeting. If you hold your shares in street name, you also may be asked to present proof of ownership to be admitted to the
applicable special meeting. A brokerage statement or letter from your broker, bank, trust company or other nominee proving ownership of the shares on the record date for the applicable special meeting are examples of proof of ownership. To help
Martin Marietta and TXI plan for the special meetings, please indicate whether you expect to attend by responding affirmatively when prompted during internet or telephone proxy submission or by marking the attendance box on your proxy card.
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What proposals will be considered at the special meeting?
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At the special meeting of Martin Marietta shareholders, Martin Marietta shareholders will be asked to consider and vote on (i) the share issuance proposal and (ii) the Martin Marietta adjournment proposal.
Martin Marietta will transact no other business at its special meeting except such business as may properly be brought before the Martin Marietta special meeting or any adjournment or postponement thereof.
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At the special meeting of TXI stockholders, TXI stockholders will be asked to consider and vote on (i) the merger proposal, (ii) the
TXI adjournment proposal and (iii) the compensation proposal. TXI will transact no other business at its special meeting except such business as may properly be brought before the TXI special meeting or any adjournment or postponement thereof.
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Why are the merger agreement and the merger not being considered and voted upon by Martin Marietta shareholders?
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Under North Carolina law, Martin Marietta shareholders are not required to approve the merger or adopt the merger agreement. Martin Marietta shareholders are being asked to consider and vote on the issuance of Martin
Marietta common stock in connection with the merger.
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Q:
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How does the Martin Marietta board of directors recommend that I vote?
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The Martin Marietta board of directors (referred to as the Martin Marietta board) unanimously approved the merger agreement and the issuance of shares of Martin Marietta common stock to TXI stockholders in
connection with the merger and determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Martin Marietta common stock to TXI stockholders pursuant to the merger, are advisable
and in the best interests of Martin Marietta and its shareholders. The Martin Marietta board accordingly unanimously recommends that the Martin Marietta shareholders vote FOR each of the share issuance proposal and the Martin Marietta
adjournment proposal.
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How does the TXI board of directors recommend that I vote?
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The TXI board of directors (referred to as the TXI board) unanimously approved the merger agreement and determined that the merger agreement and the transactions contemplated thereby, including the merger,
are advisable and in the best interests of TXI and its stockholders. The TXI board accordingly unanimously recommends that the TXI stockholders vote FOR each of the merger proposal, the TXI adjournment proposal and the compensation
proposal.
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If you are a shareholder of record of Martin Marietta as of the close of business on the record date for the Martin Marietta special meeting or a stockholder of record of TXI as of the close of business on the record
date for the TXI special meeting, you may vote in person by attending your special meeting or, to ensure your shares are represented at the meeting, you may vote by:
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accessing the Internet website specified on your proxy card;
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calling the toll-free number specified on your proxy card; or
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marking, signing, dating and returning the enclosed proxy card in the postage-paid envelope provided.
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If you hold Martin Marietta or TXI shares in the name of a bank or broker, please follow the voting instructions provided by your bank or
broker to ensure that your shares are represented at your special meeting.
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What vote is required to approve each proposal?
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Martin Marietta
. Approval of the share issuance proposal requires the affirmative vote of holders of a majority of the votes cast on such proposal by holders of Martin Marietta common stock. Approval of the
Martin Marietta adjournment proposal requires that the votes cast in favor of the Martin Marietta adjournment proposal exceed the votes cast against it.
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TXI
. Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of TXI common
stock entitled to vote on the proposal. Approval of the TXI adjournment proposal and the compensation proposal each requires the affirmative vote of holders of a majority of the issued and outstanding shares of TXI common stock present in person or
represented by proxy at the TXI special meeting and entitled to vote at the meeting.
In connection with the merger agreement, each of NNS
and SAM, who, collectively, hold approximately 51% of the outstanding shares of TXI common stock, entered into voting agreements pursuant to which each such stockholder agreed to vote all of its shares of TXI common stock in favor of the merger
proposal and the approval of the transactions contemplated by the merger agreement and against, among other things, alternative transactions. In the event that TXIs board of directors changes its recommendation that TXI stockholders adopt the
merger agreement, NNS and SAM will only be required to vote shares representing at most 35% of the outstanding TXI common stock in favor of the merger proposal, with the balance of their
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shares being voted in such circumstances in NNSs and SAMs sole discretion. For additional information about the voting agreements, see the section entitled The Issuance of
Martin Marietta Shares and the Adoption of the Merger AgreementVoting Agreements beginning on page 103.
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How many votes do I have?
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Martin Marietta
. You are entitled to one vote for each share of Martin Marietta common stock that you owned as of the close of business on the Martin Marietta record date. As of the close of business on the
Martin Marietta record date, there were 46,240,568 shares of Martin Marietta common stock outstanding and entitled to vote at the Martin Marietta special meeting.
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TXI
. You are entitled to one vote for each share of TXI common stock that you owned as of the close of business on the TXI record date.
As of the close of business on the TXI record date, there were 28,855,704 shares of TXI common stock outstanding and entitled to vote at the TXI special meeting.
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What will happen if I fail to vote or I abstain from voting?
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Martin Marietta
. If you are a Martin Marietta shareholder and fail to vote or fail to instruct your broker or nominee to vote, it will have no effect on the share issuance proposal or the Martin Marietta
adjournment proposal. If you are a Martin Marietta shareholder and you mark your proxy or voting instructions to abstain, it will have the effect of a vote against the share issuance proposal and will have no effect on the Martin Marietta
adjournment proposal.
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TXI
. If you are a TXI stockholder and fail to vote, fail to instruct your broker or nominee to
vote, or vote to abstain, it will have the same effect as a vote against the merger proposal. If you are a TXI stockholder and fail to vote or fail to instruct your broker or nominee to vote, it will have no effect on the TXI adjournment proposal or
the compensation proposal, assuming a quorum is present. If you are a TXI stockholder and you mark your proxy or voting instructions to abstain, it will have the effect of a vote against the TXI adjournment proposal and the compensation proposal.
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What constitutes a quorum?
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Martin Marietta
. The presence of shareholders entitled to cast at least a majority of the votes entitled to be cast on a proposal constitutes a quorum for the transaction of business at the Martin Marietta
special meeting. Shares of Martin Marietta common stock represented at the Martin Marietta special meeting and entitled to vote but not voted, including shares for which a shareholder directs an abstention from voting and broker
non-votes (shares held by banks, brokerage firms or nominees that are present in person or by proxy at the Martin Marietta special meeting but with respect to which the broker or other shareholder of record is not instructed by the beneficial owner
of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on such proposal), will be counted as present for purposes of establishing a quorum. Shares of Martin Marietta common stock held in treasury
will not be included in the calculation of the number of shares of Martin Marietta common stock represented at the meeting for purposes of determining whether a quorum is present.
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TXI
. Stockholders who hold at least a majority of the outstanding TXI common stock as of the close of business on the record date and
who are entitled to vote must be present or represented by proxy in order to constitute a quorum for the transaction of business at the TXI special meeting. Shares of TXI common stock represented at the TXI special meeting but not voted, including
shares for which a shareholder directs an abstention from voting, will be counted as present for purposes of establishing a quorum. Broker non-votes (shares held by banks, brokerage firms or nominees that are present in person or by
proxy at the TXI special meeting but with respect to which the broker or other stockholder of record is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting
power on such proposal) will not be counted as present for purposes of establishing a
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quorum. Shares of TXI common stock held in treasury will not be included in the calculation of the number of shares of TXI common stock represented at the meeting for purposes of determining
whether a quorum is present.
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If my shares are held in street name by my broker, will my broker automatically vote my shares for me?
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No. If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in street name), your broker, bank, trust company or other nominee cannot vote your shares
on non-routine matters without instructions from you. You should instruct your broker, bank, trust company or other nominee as to how to vote your shares, following the directions from your broker, bank, trust company or other nominee
provided to you. Please check the voting form used by your broker, bank, trust company or other nominee. If you are a TXI stockholder and you do not provide your broker, bank, trust company or other nominee with instructions and your broker, bank,
trust company or other nominee submits an unvoted proxy, your shares of TXI common stock will not be counted for purposes of determining a quorum at the TXI special meeting and they will not be voted on any proposal at the TXI special meeting on
which your broker, bank, trust company or other nominee does not have discretionary authority. If you are a Martin Marietta shareholder and you do not provide your broker, bank, trust company or other nominee with instructions and your broker, bank,
trust company or other nominee submits an unvoted proxy, your shares of Martin Marietta common stock will be counted for purposes of determining a quorum at the Martin Marietta special meeting, but will not be voted on any proposal on which your
broker, bank, trust company or other nominee does not have discretionary authority.
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Please note that you may not vote shares
held in street name by returning a proxy card directly to Martin Marietta or TXI or by voting in person at your special meeting unless you provide a legal proxy, which you must obtain from your broker, bank, trust company or other
nominee.
If you are a Martin Marietta shareholder and you do not instruct your broker on how to vote your shares, your broker may not vote
your shares on the share issuance proposal or the Martin Marietta adjournment proposal, which will have no effect on the vote on these proposals.
If you are a TXI stockholder and you do not instruct your broker on how to vote your shares, your broker may not vote your shares, which will
have the same effect as a vote against the merger proposal and, assuming a quorum is present, will have no effect on the TXI adjournment proposal or the compensation proposal.
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What will happen if I return my proxy card without indicating how to vote?
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If you return your proxy card without indicating how to vote on any particular proposal, the Martin Marietta common stock or TXI common stock represented by your proxy will be voted in favor of that proposal.
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Can I change my vote after I have returned a proxy or voting instruction card?
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Yes. You can change your vote at any time before your proxy is voted at your special meeting. You can do this in one of three ways:
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you can send a signed notice of revocation;
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you can grant a new, valid proxy bearing a later date (including by telephone or through the Internet); or
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if you are a holder of record, you can attend your special meeting and vote in person, which will automatically cancel any proxy previously given, or you may revoke your proxy in person, but your attendance alone will
not revoke any proxy that you have previously given.
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If you choose either of the first two methods, you must submit your notice of revocation or your
new proxy to the Corporate Secretary of Martin Marietta or Secretary of TXI, as appropriate, no later than the beginning of the applicable special meeting. If your shares are held in street name by your bank or broker, you should contact your broker
to change your vote or revoke your proxy.
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What happens if I transfer my shares of Martin Marietta or TXI common stock before the special meeting?
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The record dates for the Martin Marietta and TXI special meetings are earlier than both the date of the special meetings and the date that the merger is expected to be completed. If you transfer your Martin Marietta or
TXI shares after the applicable record date but before the applicable special meeting, you will retain your right to vote at the applicable special meeting. However, if you are a TXI stockholder, you will have transferred the right to receive the
merger consideration in the merger. In order to receive the merger consideration, you must hold your shares through the effective date of the merger.
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What if I hold shares in both Martin Marietta and TXI?
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If you are both a shareholder of Martin Marietta and a stockholder of TXI, you will receive two separate packages of proxy materials. A vote cast as a Martin Marietta shareholder will not count as a vote cast as a TXI
stockholder, and a vote cast as a TXI stockholder will not count as a vote cast as a Martin Marietta shareholder. Therefore, please separately submit a proxy for each of your Martin Marietta and TXI shares.
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Who is the inspector of election?
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The board of directors of Martin Marietta has appointed a representative of American Stock Transfer & Trust Company to act as the inspector of election at the Martin Marietta special meeting. The board of
directors of TXI has appointed a representative of Computershare Investor Services to act as the inspector of election at the TXI special meeting.
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Where can I find the voting results of the special meeting?
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The preliminary voting results will be announced at the Martin Marietta and TXI special meetings. In addition, within four business days following certification of the final voting results, each of Martin Marietta and
TXI intends to file the final voting results of its special meeting with the SEC on Form 8-K.
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What will happen if all of the proposals to be considered at the special meeting are not approved?
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As a condition to completion of the merger, Martin Mariettas shareholders must approve the share issuance proposal and TXIs stockholders must approve the merger proposal. Completion of the merger is not
conditioned or dependent on approval of any of the other proposals to be considered at the special meetings.
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Are Martin Marietta shareholders or TXI stockholders entitled to appraisal rights?
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No. Under the General Corporation Law of the State of Delaware (referred to as the DGCL), the holders of TXI common stock are not entitled to appraisal rights in connection with the merger. Under the North
Carolina Business Corporation Act (referred to as the NCBCA), the holders of Martin Marietta common stock are not entitled to appraisal rights in connection with the share issuance proposal.
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Why are TXI stockholders being asked to approve, on a non-binding advisory basis, the compensation that may be paid or become payable to TXIs named executive officers in connection with the completion of the
merger?
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The rules promulgated by the SEC under Section 14A of the Exchange Act require TXI to seek a non-binding, advisory vote with respect to certain compensation that may be paid or become payable to TXIs named
executive officers in connection with the merger. For more information regarding such payments, see the section entitled Advisory (Non-Binding) Vote on Compensation beginning on page 105.
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What will happen if TXI stockholders do not approve, on a non-binding advisory basis, the payments to TXIs named executive officers in connection with the completion of the merger?
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The vote on the compensation proposal is a vote separate and apart from the vote on the merger proposal. Accordingly, TXI stockholders may vote in favor of the merger proposal and not in favor of the compensation
proposal, or vice versa. Approval of the compensation proposal is not a condition to consummation of the merger with Martin Marietta, and it is advisory in nature only, meaning it will not be binding on either Martin Marietta or TXI. Accordingly,
because TXI is contractually obligated to pay such compensation, if the proposed merger with Martin Marietta is completed, the compensation will be payable, subject only to the conditions applicable to such compensation payments, regardless of the
outcome of the advisory vote.
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What are the material U.S. federal income tax consequences of the merger to U.S. holders of TXI common shares?
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A:
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TXI and Martin Marietta intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (referred to as the Code).
It is a condition to Martin Mariettas obligation to complete the merger that Martin Marietta receive an opinion from Cravath, Swaine & Moore LLP (referred to as Cravath), counsel to Martin Marietta, to the effect that the
merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to TXIs obligation to complete the merger that TXI receive an opinion from Wachtell, Lipton, Rosen & Katz
(referred to as Wachtell Lipton), special counsel to TXI, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the
registration statement of which this document is a part, each of Martin Marietta and TXI expects to receive an opinion from its counsel to the same effect as the opinions described above. Accordingly, and on the basis of the opinions expected to be
received in connection herewith, a U.S. holder (as defined on page 77) of TXI common stock will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of shares of TXI common stock for shares of Martin Marietta common
stock in the merger, except with respect to cash received in lieu of fractional shares.
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Please carefully review the
information set forth in the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 77 for a description of the
material U.S. federal income tax consequences of the merger.
The tax consequences to you of the merger will depend on your own situation. Please consult your own tax advisors as to the specific tax consequences to you of the merger.
Q:
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What are the conditions to completion of the merger?
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A:
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In addition to the approval of the share issuance proposal by Martin Mariettas shareholders and the approval of the merger proposal by TXIs stockholders as described above, completion of the merger is
subject to the satisfaction of a number of other conditions, including regulatory clearance. For additional information on the regulatory clearance required to complete the merger, see the section entitled The Issuance of Martin Marietta
Shares and the Adoption of the Merger AgreementRegulatory Clearances Required for the Merger beginning on page 79. For additional information on the conditions to completion of the merger, see the section entitled The Issuance of
Martin Marietta Shares and the Adoption of the Merger AgreementThe Merger AgreementConditions to Completion of the Merger beginning on page 99.
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Q:
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Will I still be paid dividends prior to the merger?
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A:
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Martin Marietta has historically paid quarterly dividends of $0.40 per share to its shareholders. Martin Marietta may continue to declare and pay its
regular quarterly cash dividend with declaration, record and payment dates consistent with past practice and in accordance with its dividend policy without TXIs
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consent. TXIs board of directors has not approved a dividend on TXIs capital stock in calendar year 2014 and TXI did not pay dividends on its capital stock in calendar year 2013. The
merger agreement prohibits TXI from declaring, setting aside or paying any dividends on its capital stock without Martin Mariettas consent before the earlier of the closing of the merger or the termination of the merger agreement in accordance
with its terms.
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Q:
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When do you expect the merger to be completed?
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A:
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Martin Marietta and TXI hope to complete the merger as soon as reasonably practicable and are working to complete the merger in the second quarter of 2014. However, the merger is subject to regulatory clearances and
other conditions, and it is possible that factors outside the control of both companies could result in the merger being completed at a later time, or not at all. There may be a substantial amount of time between the respective Martin Marietta and
TXI special meetings and the completion of the merger.
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What will happen to outstanding TXI equity awards in the merger?
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A:
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Upon consummation of the merger, each outstanding stock option and stock appreciation right with respect to TXI common stock will automatically vest and convert into a vested option or stock appreciation right, as
applicable, on the same terms as were applicable prior to the merger, with respect to a corresponding number of shares of Martin Marietta common stock after giving effect to the 0.70 exchange ratio. Upon consummation of the merger, each TXI
restricted stock unit (other than those described in the immediately following sentence) will automatically vest and convert into the right to receive a corresponding number of shares of Martin Marietta common stock after giving effect to the 0.70
exchange ratio, with cash provided in lieu of fractional shares. Under certain circumstances, TXI may grant a limited number of TXI restricted stock units to certain employees (subject to Martin Mariettas consent). Such TXI restricted stock
units will not vest upon consummation of the merger (or a subsequent termination of employment), but will be converted upon consummation of the merger into Martin Marietta restricted stock units, on the same terms as were applicable prior to the
merger, with respect to a corresponding number of shares of Martin Marietta after giving effect to the 0.70 exchange ratio and, unlike other TXI restricted stock units, they will still be subject to vesting following closing of the merger.
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What do I need to do now?
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A:
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Carefully read and consider the information contained in and incorporated by reference into this joint proxy statement/prospectus, including its annexes.
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If you are a holder of record, in order for your shares to be represented at your special meeting:
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you can attend your special meeting in person;
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you can vote through the Internet or by telephone by following the instructions included on your proxy card; or
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you can indicate on the enclosed proxy card how you would like to vote and return the proxy card in the accompanying pre-addressed postage paid envelope.
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If you hold your shares in street name, in order for your shares to be represented at your special meeting, you should instruct your broker,
bank, trust company or other nominee as to how to vote your shares, following the directions from your broker, bank, trust company or other nominee provided to you.
Q:
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Do I need to do anything with my shares of TXI common stock now?
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A:
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If you are a TXI stockholder, after the merger is completed, your shares of TXI common stock will be automatically converted into Martin Marietta shares. You will receive instructions at that time regarding exchanging
your shares for shares of Martin Marietta common stock. You do not need to take any action at this time. Please do not send your TXI stock certificates with your proxy card.
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If you are a Martin Marietta shareholder, you are not required to take any action with respect to
your Martin Marietta stock certificates. You will continue to hold your shares of Martin Marietta common stock.
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Are there any risks in the merger or the Martin Marietta share issuance that I should consider?
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A:
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Yes. There are risks associated with all business combinations, including the merger, and the related Martin Marietta share issuance. These risks are discussed in more detail in the section entitled Risk
Factors beginning on page 20.
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Q:
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Who can help answer my questions?
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A:
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Martin Marietta shareholders or TXI stockholders who have questions about the merger, the Martin Marietta share issuance or the other matters to be voted on at the special meetings or desire additional copies of this
joint proxy statement/prospectus or additional proxy cards should contact:
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if you are a Martin Marietta shareholder:
Morrow & Co., LLC
470 West Avenue
Stamford, CT
06902
(203) 658-9400
(877)
757-5404 (toll free)
(800) 662-5200 (banks and brokers)
or
Martin Marietta Materials,
Inc.
2710 Wycliff Road
Raleigh,
NC 27607
(919) 783-4540
Attn:
Corporate Secretary
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if you are a TXI stockholder:
Texas Industries, Inc.
1503 LBJ
Freeway, Suite 400
Dallas, Texas 75234
(972) 647-6700
Attn: Investor
Relations
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SUMMARY
This summary highlights information contained elsewhere in this joint proxy statement/prospectus and may not contain all the information
that is important to you. Martin Marietta and TXI urge you to read carefully the remainder of this joint proxy statement/prospectus, including the attached annexes and the other documents to which we have referred you, because this section does not
provide all the information that might be important to you with respect to the merger and the other matters being considered at the applicable special meeting. See also the section entitled Where You Can Find More Information beginning
on page 146. We have included page references to direct you to a more complete description of the topics presented in this summary.
The Companies
Martin Marietta Materials, Inc. (See page 29)
Martin Marietta Materials, Inc.
2710 Wycliff Road
Raleigh, NC
27607
Telephone: (919) 783-4540
Martin Marietta Materials, Inc., a North Carolina corporation, is the nations second largest producer of aggregates products (crushed
stone, sand and gravel) for the construction industry, including infrastructure, nonresidential, residential, railroad ballast, agricultural and chemical grade stone used in environmental applications. Martin Mariettas aggregates business also
includes asphalt products, ready mixed concrete and road paving operations. Martin Marietta also has a Specialty Products segment that manufactures and markets magnesia-based chemical products used in industrial, agricultural and environmental
applications, and dolomitic lime sold primarily to customers in the steel industry.
Martin Mariettas common stock is listed on the
NYSE under the symbol MLM.
Additional information about Martin Marietta and its subsidiaries is included in documents
incorporated by reference in this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146.
Texas Industries, Inc. (See page 29)
Texas Industries, Inc.
1503 LBJ
Freeway, Suite 400
Dallas, Texas 75234
Telephone: (972) 647-6700
Texas
Industries, Inc., a Delaware corporation, is a leading supplier of heavy construction materials in the southwestern United States through three business segments: cement, aggregates and concrete. TXIs cement production and distribution
facilities are concentrated primarily in Texas and California, the two largest cement markets in the United States. Based on production capacity, TXI is the largest producer of cement in Texas with a 32% share in that state. TXIs aggregate
segment produces natural aggregates, including sand, gravel and crushed limestone. TXIs concrete segment produces ready-mix concrete. TXI is a major supplier of natural aggregates and ready-mix concrete in Texas and northern Louisiana and, to
a lesser extent, in Oklahoma and Arkansas.
TXIs common stock is listed on the NYSE under the symbol TXI.
Additional information about TXI and its subsidiaries is included in documents incorporated by reference in this joint proxy
statement/prospectus. See Where You Can Find More Information beginning on page 146.
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Project Holdings, Inc. (See page 29)
Project Holdings, Inc., a wholly owned subsidiary of Martin Marietta (referred to as Merger Sub), is a North Carolina corporation
that was formed on January 14, 2014 for the purpose of effecting the merger. Upon completion of the merger, Merger Sub will be merged with and into TXI, with TXI surviving as a wholly owned subsidiary of Martin Marietta. Merger Sub has not
conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement in connection with the merger.
The Merger and the Merger Agreement
A copy of the merger agreement is attached as Annex A to this joint proxy statement/prospectus. Martin Marietta and TXI encourage you to read
the entire merger agreement carefully because it is the principal document governing the merger and the Martin Marietta share issuance. For more information on the merger agreement, see the section entitled The Issuance of Martin Marietta
Shares and the Adoption of the Merger AgreementThe Merger Agreement beginning on page 87.
Effects of Merger (See page
38)
Subject to the terms and conditions of the merger agreement, at the effective time of the merger, Merger Sub, a direct, wholly
owned subsidiary of Martin Marietta formed for the purposes of the merger, will be merged with and into TXI. TXI will survive the merger as a direct, wholly owned subsidiary of Martin Marietta.
Merger Consideration; Treatment of Stock Options and Other Equity-Based Awards (See pages 80 and 88)
TXI stockholders will receive 0.70 shares of Martin Marietta common stock for each share of TXI common stock they hold, with cash paid in lieu
of fractional shares. The exchange ratio is fixed and will not be adjusted for changes in the market value of the common stock of TXI or Martin Marietta. Because of this, the implied value of the consideration to TXI stockholders will fluctuate
between now and the completion of the merger. Based on the closing price of Martin Marietta common stock on the NYSE, on January 27, 2014, the last trading day before public announcement of the merger, the 0.70 exchange ratio represented
approximately $71.95 in value for each share of TXI common stock. Based on the closing price of Martin Marietta common stock on the NYSE on May 29, 2014, the latest practicable date before the date of this joint proxy statement/prospectus, the 0.70
exchange ratio represented approximately $86.51 in value for each share of TXI common stock.
Upon consummation of the merger, each
outstanding stock option and stock appreciation right with respect to TXI common stock will automatically vest and convert into a vested option or stock appreciation right, as applicable, on the same terms as were applicable prior to the merger,
with respect to a corresponding number of shares of Martin Marietta common stock after giving effect to the 0.70 exchange ratio. Upon consummation of the merger, each TXI restricted stock unit (other than those described in the immediately following
sentence) will automatically vest and convert into the right to receive a corresponding number of shares of Martin Marietta common stock after giving effect to the 0.70 exchange ratio, with cash provided in lieu of fractional shares. Under certain
circumstances, TXI may grant a limited number of TXI restricted stock units to certain employees (subject to Martin Mariettas consent). Such TXI restricted stock units will not vest upon consummation of the merger (or a subsequent termination
of employment), but will be converted upon consummation of the merger into Martin Marietta restricted stock units, on the same terms as were applicable prior to the merger, with respect to a corresponding number of shares of Martin Marietta after
giving effect to the 0.70 exchange ratio and, unlike other TXI restricted stock units, they will still be subject to vesting following closing of the merger.
Material U.S. Federal Income Tax Consequences of the Merger (See page 77)
TXI and Martin Marietta intend for the merger to qualify as a reorganization within the meaning of Section 368(a) of the Code.
It is a condition to Martin Mariettas obligation to complete the merger that Martin Marietta receive an opinion from Cravath, counsel to Martin Marietta, to the effect that the merger will qualify as
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a reorganization within the meaning of Section 368(a) of the Code. It is a condition to TXIs obligation to complete the merger that TXI receive an opinion from Wachtell
Lipton, special counsel to TXI, to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this
document is a part, each of Martin Marietta and TXI expects to receive an opinion from its counsel to the same effect as the opinions described above. Accordingly, and on the basis of the opinions expected to be received in connection herewith, a
U.S. holder (as defined on page 77) of TXI common stock will not recognize any gain or loss for U.S. federal income tax purposes upon the exchange of shares of TXI common stock for shares of Martin Marietta common stock in the merger, except with
respect to cash received in lieu of fractional shares of Martin Marietta common stock.
Please carefully review the information set forth
in the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 77 for a description of the material U.S. federal
income tax consequences of the merger.
Please consult your own tax advisors as to the specific tax consequences to you of the merger.
Recommendation of the Martin Marietta Board of Directors (See page 45)
After careful consideration, the Martin Marietta board, on January 27, 2014, unanimously approved the merger agreement and the issuance of
shares of Martin Marietta common stock to TXI stockholders pursuant to the merger and determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Martin Marietta common stock to
TXI stockholders pursuant to the merger, are advisable and in the best interests of Martin Marietta and its shareholders. For the factors considered by the Martin Marietta board in reaching its decision to approve the merger agreement, see the
section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementMartin Mariettas Reasons for the Merger; Recommendation of the Martin Marietta Board of Directors beginning on page 45.
The
Martin Marietta board unanimously recommends that the Martin Marietta shareholders vote FOR each of the share issuance proposal and the Martin Marietta adjournment proposal
.
Recommendation of the TXI Board of Directors (See page 48)
After careful consideration, the TXI board, on January 27, 2014, unanimously approved the merger agreement and determined that the merger
agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TXI and its stockholders. For the factors considered by the TXI board in reaching its decision to adopt the merger agreement, see
the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementTXIs Reasons for the Merger; Recommendation of the TXI Board of Directors beginning on page 48.
The TXI board unanimously
recommends that the TXI stockholders vote FOR each of the merger proposal, the TXI adjournment proposal and the compensation proposal.
Opinions of Martin Mariettas Financial Advisors (See page 51)
J.P. Morgan Securities LLC (referred to as J.P. Morgan), Deutsche Bank Securities Inc. (referred to as Deutsche Bank)
and Barclays Capital Inc. (referred to as Barclays and, together with J.P. Morgan and Deutsche Bank, sometimes referred to as the Martin Marietta Financial Advisors) each delivered its opinion to the Martin Marietta board on
January 27, 2014 that, as of such date, the exchange ratio of 0.70 shares of Martin Marietta common stock to be issued in exchange for each share of TXI common stock in the merger was fair, from a financial point of view, to Martin Marietta.
The full texts of the written opinions of J.P. Morgan, Deutsche Bank and Barclays, each dated January 27, 2014, which set forth,
among other things, the assumptions made, procedures followed, matters and factors considered and limitations and qualifications on the review undertaken by each of J.P. Morgan, Deutsche Bank and Barclays in rendering its opinion, are attached to
this joint proxy statement/prospectus as Annexes B, C and
3
D, respectively.
You are urged to, and should, read the opinions carefully and in their entirety. Each such opinion was addressed and directed to the board of directors of Martin Marietta in
connection with its evaluation of the merger, addresses only the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger and does not constitute a recommendation to any shareholder of Martin Marietta as to
how such shareholder should vote with respect to the share issuance or any other matter.
None of J.P. Morgan, Deutsche Bank or Barclays has expressed any opinion as to the underlying business decision by Martin Marietta to engage in the merger.
Opinion of TXIs Financial Advisor (See page 66)
Citigroup Global Markets Inc. (referred to as Citigroup) delivered its opinion to the TXI board on January 27, 2014 that, as
of such date, and based on and subject to the matters described in its opinion, the exchange ratio was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates).
The full text of Citigroups written opinion, dated January 27, 2014, which describes the assumptions made, procedures followed, matters
considered and limitations on the review undertaken, is attached to this joint proxy statement/prospectus as Annex E and is incorporated into this joint proxy statement/prospectus by reference.
You are encouraged to, and should, read the opinion
carefully and in its entirety. Citigroups opinion was provided to the TXI board in connection with its evaluation of the exchange ratio from a financial point of view to holders of TXI common stock (other than Martin Marietta and its
affiliates) and does not address any other aspects or implications of the merger or the underlying business decision of TXI to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist
for TXI or the effect of any other transaction in which TXI might engage. Citigroups opinion is not intended to be and does not constitute a recommendation to any securityholder as to how such securityholder should vote or act on any matters
relating to the merger
.
Financial Interests of Martin Marietta Directors and Officers in the Merger (See page 72)
Martin Mariettas directors and executive officers have financial interests in the merger that are different from, or in addition to,
their interests as Martin Marietta shareholders. The Martin Marietta board was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending to Martin Marietta
shareholders the approval of the share issuance proposal and the Martin Marietta adjournment proposal.
Financial Interests of
TXIs Directors and Officers in the Merger (See page 73)
Certain members of the board of directors and executive officers of
TXI may be deemed to have interests in the merger that are in addition to, or different from, the interests of other TXI stockholders. The TXI board was aware of these interests and considered them, among other matters, in approving the merger and
the merger agreement and in making the recommendations that the TXI stockholders approve and adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. These interests include:
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Outstanding TXI options, stock appreciation rights and restricted stock units held by TXIs executive officers will vest pursuant to their terms upon consummation of the merger. The merger agreement provides for
the conversion of outstanding TXI options and stock appreciation rights into vested options and stock appreciation rights in respect of shares of Martin Marietta common stock and the cancelation of TXI restricted stock units held by TXIs
executive officers for the right to receive the merger consideration.
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Change-in-control severance agreements with TXIs executive officers provide for severance benefits in the event of certain qualifying terminations of employment following the merger.
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TXIs Executive Financial Security Plans provide, in the event of certain qualifying terminations of employment or the termination of the plans following the merger, that (i) TXIs executive officers who
are age 55 or older would become fully vested in their benefits and would begin receiving payments as if they had reached age 65, and (ii) TXIs executive officers who are under age 55 would have five years added to their credited years of
service, but they would not begin to receive payments until they reach age 65.
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TXIs directors and executive officers are entitled to continued indemnification and insurance coverage under the merger agreement.
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Board of Directors Following the Merger (See page 76)
Pursuant to the merger agreement, promptly following the merger, a new director will be appointed to Martin Mariettas board of directors.
The new director will be a person who is mutually agreed upon by Martin Marietta and TXI (or one of TXIs current two largest stockholders designated by TXIs board of directors) following good faith consultations between Martin Marietta
and TXI (or such designee) and a determination by Martin Mariettas Nominating and Corporate Governance Committee that the proposed individual is an appropriate person to add to the Martin Marietta board.
Regulatory Clearances Required for the Merger (See page 79)
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (referred to as the HSR
Act), which prevents Martin Marietta and TXI from completing the merger until the applicable waiting period under the HSR Act is terminated or expires. On February 18, 2014, Martin Marietta and TXI filed the requisite notification and
report forms under the HSR Act with the Antitrust Division of the Department of Justice (referred to as the DOJ) and the Federal Trade Commission (referred to as the FTC). On March 20, 2014, Martin Marietta voluntarily
withdrew its notification and report forms. Martin Marietta refiled its notification and report forms on March 24, 2014 with the DOJ and the FTC. On April 23, 2014, the DOJ issued a request for additional information and documentary material
(referred to as a second request). The waiting period initiated by the second request will expire on the thirtieth day after Martin Marietta and TXI have substantially complied with the second request, unless that period is extended
voluntarily by the parties or terminated sooner at the direction of the DOJ. The DOJ and others may challenge the merger on antitrust grounds either before or after expiration or termination of the waiting period. At any time before or after the
completion of the merger, any of the DOJ, the FTC or another person could take action under the antitrust laws as it deems necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger,
seeking a rescission or other unwinding of the merger, or permitting completion subject to regulatory concessions or conditions. We cannot assure you that a challenge to the merger will not be made or that, if a challenge is made, it will not
succeed.
Completion of the Merger (See page 87)
We currently expect to complete the merger in the second quarter of 2014, subject to receipt of required shareholder and stockholder approvals
and regulatory clearance and the satisfaction or waiver of the other closing conditions. It is possible that factors outside the control of Martin Marietta or TXI could result in the merger being completed at a later time or not at all.
No Solicitation of Alternative Proposals (See page 94)
Martin Marietta and TXI have each agreed that, from the time of the execution of the merger agreement until the earlier of the consummation of
the merger or the termination of the merger agreement, not to, and not to
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authorize or permit any of its respective affiliates, directors, officers, employees or representatives to, directly or indirectly (i) solicit, initiate or knowingly encourage, induce or
facilitate any takeover proposal (as defined on page 95) or any inquiry or proposal that may reasonably be expected to lead to a takeover proposal or (ii) participate in any discussions or negotiations with any person regarding, or cooperate
with or furnish information to any person with respect to, a takeover proposal or any inquiry or proposal that may reasonably be expected to lead to a takeover proposal.
Notwithstanding these restrictions, if at any time prior to obtaining the approval of its shareholders or stockholders, as applicable, Martin
Marietta or TXI receives a bona fide written takeover proposal that its board of directors determines in good faith (after consultation with its advisors) constitutes or is reasonably expected to result in a superior proposal (as defined on page 95)
which did not result from a breach of the merger agreement or, in the case of TXI, the exclusivity agreement entered into between Martin Marietta and TXI, then such party and its representatives may (i) furnish information with respect to
itself and its subsidiaries to the person making such takeover proposal (subject to certain conditions and obligations in the merger agreement) and (ii) participate in discussions regarding the terms of such takeover proposal and negotiate such
terms with the person making such takeover proposal.
Martin Marietta and TXI have each also agreed (i) to notify the other within 24
hours of obtaining knowledge of a takeover proposal or an inquiry or proposal that may reasonably be expected to lead to a takeover proposal, (ii) to keep the other informed in all material respects of the status and details of any takeover
proposal and (iii) to provide the other as soon as practicable all drafts of agreements relating to a takeover proposal and all written proposals containing material terms of and counterproposals to a takeover proposal that are exchanged with
the person making the takeover proposal or any of its affiliates or representatives.
Changes in Board Recommendations (See page 95)
The merger agreement provides that, subject to certain exceptions, neither Martin Mariettas board of directors, nor
TXIs board of directors, will (i) withdraw, modify (in a manner adverse to the other party) or propose publicly to withdraw or modify (in a manner adverse to the other party) its recommendation of the share issuance proposal or the merger
proposal, as applicable, or (ii) adopt, or propose publicly to adopt, or allow the applicable party or any of its affiliates to enter into an agreement or arrangement relating to a takeover proposal (other than a confidentiality agreement
otherwise permitted by the merger agreement). Notwithstanding the foregoing restrictions, at any time prior to obtaining the relevant shareholder or stockholder approval, the board of directors of Martin Marietta or TXI, as applicable, may, if it
determines in good faith (after consultation with its advisors) that the failure to take such action would be inconsistent with its fiduciary duties and subject to compliance with certain obligations set forth in the merger agreement (including
providing the other party with prior notice and the right under certain circumstances to negotiate to match the terms of any superior proposal), (i) make an adverse recommendation change or terminate the merger agreement to enter into a binding
agreement providing for a takeover proposal that did not result from a breach of the non-solicitation provisions in the merger agreement that it determines in good faith (after consultation with its advisors) constitutes a superior proposal or
(ii) make an adverse recommendation change in response to an intervening event (as defined on page 96).
Conditions to
Completion of the Merger (See page 99)
The obligations of each of Martin Marietta and TXI to effect the merger are subject to the
satisfaction or waiver of the following conditions:
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the approval by TXI stockholders of the merger proposal;
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the approval by Martin Marietta shareholders of the share issuance proposal;
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the approval for listing by the NYSE, subject to official notice of issuance, of the Martin Marietta common stock issuable to TXI stockholders in the merger;
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the termination or expiration of any applicable waiting period under the HSR Act;
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the absence of any law, order, judgment or other legal restraint by a court or other governmental entity that prevents, makes illegal or prohibits the closing of the merger;
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the SEC having declared effective the registration statement of which this joint proxy statement/prospectus forms a part;
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the representations and warranties of the other party relating to organization, standing, corporate power, capital structure, authority, execution and delivery, enforceability and brokers fees and expenses being
true and correct in all material respects as of the date of the merger agreement and as of the date of the closing of the merger (except to the extent expressly made as of an earlier date, in which case, as of such earlier date);
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each other representation and warranty of the other party being true and correct as of the date of the merger agreement and as of the date of the closing of the merger (except to the extent expressly made as of an
earlier date, in which case, as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate has not had and would not reasonably be expected to have a material
adverse effect (as defined on page 88);
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the other party having performed in all material respects, all obligations required to be performed by it under the merger agreement;
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the absence of a material adverse effect on the other party since the date of the merger agreement;
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the receipt of an officers certificate executed by an executive officer of the other party certifying that the four preceding conditions have been satisfied; and
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the receipt of an opinion of that partys counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.
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In addition, the obligations of Martin Marietta and Merger Sub to effect the merger are conditioned on the absence of any legal restraint
issued or promulgated by a U.S. governmental entity that would result in a requirement to dispose of or hold separate, or any prohibition or limitation on the ownership, operation or control of, any business, properties or assets, which would
reasonably be expected to result in a substantial detriment (as defined on page 97).
We cannot be certain when, or if, the conditions to
the merger will be satisfied or waived, or that the merger will be completed.
Termination of the Merger Agreement (See page
99
)
Martin Marietta and TXI may mutually agree to terminate the merger agreement before completing the merger, even
after shareholder or stockholder approval.
In addition, either Martin Marietta or TXI may terminate the merger agreement, even after
shareholder or stockholder approval:
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if the merger is not consummated by July 27, 2014 (which deadline may be extended, under certain circumstances, for one or more one-month periods by either Martin Marietta or TXI up to January 27, 2015);
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if Martin Marietta shareholders fail to approve the share issuance proposal;
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if TXI stockholders fail to approve the merger proposal;
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|
to enter into a binding agreement providing for a superior proposal (so long as the terminating party has complied with its non-solicitation obligations under the merger agreement);
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if the other party breaches the merger agreement in a way that would entitle the party seeking to terminate the agreement not to consummate the merger, subject to the right of the breaching party to cure the breach; or
|
|
|
|
if the board of directors of the other party withdraws, modifies (in a manner adverse to the terminating party) or proposes publicly to withdraw or modify (in a manner adverse to the terminating party) its
recommendation of the share issuance proposal or the merger proposal, as applicable, or fails to include in this joint proxy statement/prospectus its recommendation of the share issuance proposal or the merger proposal, as applicable.
|
Expenses and Termination Fees (See page 100
)
Generally, all fees and expenses incurred in connection with the merger and the transactions contemplated by the merger agreement will be paid
by the party incurring those expenses. However, the merger agreement provides that, upon termination of the merger agreement under certain circumstances, Martin Marietta may be obligated to pay TXI a termination fee of $140 million and TXI may
be obligated to pay Martin Marietta a termination fee of $70 million. The merger agreement also provides that, upon termination of the merger agreement under certain antitrust-related circumstances, Martin Marietta may be required to pay TXI a
termination fee of $25 million and to provide TXI with the option to lease three of Martin Mariettas distribution yards in Texas. See the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger
AgreementThe Merger AgreementExpenses and Termination Fees beginning on page 100 for a more complete discussion of the circumstances under which termination fees will be required to be paid and the section entitled The
Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementLease Agreements beginning on page 103 for a more complete discussion of the lease agreements entered into between Martin Marietta and TXI concurrently with the
execution of the merger agreement.
Accounting Treatment (See page 79
)
Martin Marietta prepares its financial statements in accordance with accounting principles generally accepted in the United States
(referred to as GAAP). The merger will be accounted for by Martin Marietta in accordance with Accounting Standards Codification Topic 805,
Business Combinations
(referred to as ASC 805). The purchase price will be
determined based on the number of common shares issued and the Martin Marietta stock price on the date of the merger. The purchase price will also include additional consideration related to converted TXI equity awards for amounts attributable to
pre-combination services. The purchase price will be allocated to the fair values of assets acquired and liabilities assumed. Any excess purchase price after this allocation will be assigned to goodwill. Under the acquisition method of accounting,
goodwill is not amortized but is tested for impairment at least annually, or more frequently if circumstances indicate potential impairment. The operating results of TXI will be part of the combined company beginning on the date of the merger. See
the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementAccounting Treatment beginning on page 79.
No Appraisal Rights (See page 81
)
Under the DGCL, the holders of TXI common stock are not entitled to appraisal rights in connection with the merger. Under the NCBCA, the
holders of Martin Marietta common stock are not entitled to appraisal rights in connection with the share issuance proposal.
8
Litigation Related to the Merger (See page 86
)
Following the announcement of the merger, a purported stockholder of TXI filed a putative class action lawsuit against TXI and members of the
TXI board, and against Martin Marietta and one of its affiliates, in the United States District Court for the Northern District of Texas, captioned
Maxine Phillips, Individually and
on Behalf of All Others Similarly Situated v. Texas
Industries, Inc., et al.
, Case 3:14-cv-00740-B (referred to as the
Phillips
Action). The plaintiff in the
Phillips
Action alleges in an amended complaint, among other things, (i) that members of the TXI
board breached their fiduciary duties to TXIs stockholders by failing to fully disclose material information regarding the proposed transaction and by adopting the merger agreement for inadequate consideration and pursuant to an inadequate
process, (ii) that Martin Marietta and one of Martin Mariettas affiliates aided and abetted the TXI board in their alleged breaches of fiduciary duty and (iii) that the registration statement of which this joint proxy statement/prospectus
forms a part contains certain material misstatements and omissions in violation of Section 14(a) and 20(a) of the Exchange Act. The plaintiff in the
Phillips
Action seeks, among other things, injunctive relief enjoining TXI and Martin
Marietta from proceeding with the merger, rescission in the event the merger is consummated, damages, and an award of attorneys and other fees and costs. We believe the lawsuit is without merit.
Voting Agreements
In connection with the merger agreement, Martin Marietta entered into separate voting agreements with each of NNS and SAM, who, collectively,
hold approximately 51% of the outstanding shares of TXI common stock. Pursuant to the voting agreements, each such stockholder agreed to vote all of its shares of TXI common stock in favor of the merger proposal and the approval of the
transactions contemplated by the merger agreement and against, among other things, alternative transactions. In the event that TXIs board of directors changes its recommendation that TXI stockholders adopt the merger agreement (as described in
the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementThe Merger AgreementChanges in Board Recommendation beginning on page 95), NNS and SAM will only be required to vote shares
representing at most 35% of the outstanding TXI common stock in favor of the merger proposal, with the balance of their shares being voted in such circumstances in NNSs and SAMs sole discretion. Copies of NNSs and SAMs voting
agreements are attached as Exhibit 2.2 and Exhibit 2.3, respectively, to the Current Reports on Form 8-K filed by Martin Marietta and TXI with the SEC on January 30, 2014 and are incorporated herein by reference. The foregoing description of
the voting agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the voting agreements. See the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger
AgreementVoting Agreements beginning on page 103 for additional information about the voting agreements.
Lease Agreements
On January 27, 2014, concurrently with the execution of the merger agreement, Martin Marietta and/or an affiliate of Martin Marietta and
an affiliate of TXI entered into three lease agreements (referred to as the lease agreements) pursuant to which TXIs affiliate has the option to lease space at three of Martin Mariettas distribution yards in Texas for initial
terms of seven years each. At the expiration of the initial term, subject to the terms of the applicable lease agreement, TXI will have an option to extend each lease for an additional term of five years on mutually agreeable market terms at the
time of the extension. In the event the merger agreement is terminated in circumstances where Martin Marietta is not required to pay the $25 million termination fee to TXI described in the section entitled The Issuance of Martin Marietta
Shares and the Adoption of the Merger AgreementThe Merger AgreementExpenses and Termination Fees beginning on page 100, the leases will also terminate. See the section entitled The Issuance of Martin Marietta Shares and the
Adoption of the Merger AgreementLease Agreements beginning on page 103 for additional information about the lease agreements.
9
Listing, Delisting and Deregistration
It is a condition to the completion of the merger that the Martin Marietta common stock to be issued to TXI stockholders in connection with the
merger be approved for listing on the NYSE, subject to official notice of issuance. When the merger is completed, the TXI common stock currently listed on the NYSE will cease to be quoted on the NYSE and will subsequently be deregistered under the
Exchange Act.
Comparison of Rights of Martin Marietta Shareholders and TXI Stockholders
TXI stockholders receiving the merger consideration will have different rights once they become shareholders of Martin Marietta due to
differences between the governing corporate documents of Martin Marietta and the governing corporate documents of TXI and applicable law. These differences are described in detail in the section entitled Comparison of Rights of Martin Marietta
Shareholders and TXI Stockholders beginning on page 125.
The Special Meetings
The Martin Marietta Special Meeting (See page 30
)
The Martin Marietta special meeting will be held at 2710 Wycliff Road, Raleigh, North Carolina 27607, on June 30, 2014, at 11:30 a.m., local
time. At the Martin Marietta special meeting, Martin Marietta shareholders will be asked:
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to consider and vote on the share issuance proposal; and
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to consider and vote on the Martin Marietta adjournment proposal.
|
You may vote at the Martin
Marietta special meeting if you owned shares of Martin Marietta common stock at the close of business on May 28, 2014, the record date. As of the close of business on the record date, there were 46,240,568 shares of common stock of Martin Marietta
outstanding and entitled to vote. You may cast one vote for each share of common stock of Martin Marietta that you owned as of the close of business on the Martin Marietta record date.
As of the close of business on the record date, approximately 1.55% of the outstanding Martin Marietta common shares were held by Martin
Mariettas directors and executive officers and their affiliates. We currently expect that Martin Mariettas directors and executive officers will vote their shares in favor of the above-listed proposals, although none of them has entered
into any agreements obligating him or her to do so.
Completion of the merger is conditioned on approval of the share issuance proposal.
Approval of the share issuance proposal requires the affirmative vote of holders of a majority of the votes cast on such proposal by holders of Martin Marietta common stock. Approval of the Martin Marietta adjournment proposal requires that the
votes cast in favor of the Martin Marietta adjournment proposal exceed the votes cast against it.
The TXI Special Meeting (See page
34
)
The special meeting of TXI stockholders will take place at The Omni Dallas Hotel at Park West, 1590 LBJ Freeway,
Dallas, Texas 75234, on June 30, 2014, at 9:30 a.m., local time. At the special meeting, stockholders of TXI will be asked:
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to consider and vote on the merger proposal;
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|
to consider and vote on the TXI adjournment proposal; and
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|
to consider and vote on the compensation proposal.
|
10
You may vote at the TXI special meeting if you owned common stock of TXI at the close of
business on May 28, 2014, the record date. As of the close of business on the record date, there were 28,855,704 shares of common stock of TXI outstanding and entitled to vote. You may cast one vote for each share of common stock of TXI that you
owned as of the close of business on the record date.
As of the close of business on the record date, approximately 1.73% of the
outstanding common stock of TXI was held by its directors and executive officers and their affiliates. We currently expect that TXIs directors and executive officers will vote their shares in favor of the above-listed proposals, although none
of them has entered into any agreements obligating him or her to do so.
Completion of the merger is conditioned on approval of the merger
proposal. Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of TXI common stock entitled to vote on the proposal. Approval of the TXI adjournment proposal and the compensation proposal
each requires the affirmative vote of holders of a majority of the issued and outstanding shares of TXI common stock present in person or represented by proxy at the TXI special meeting and entitled to vote at the meeting.
In connection with the merger agreement, each of NNS and SAM, who, collectively, hold approximately 51% of the outstanding shares of TXI
common stock, entered into voting agreements pursuant to which each such stockholder agreed to vote all of its shares of TXI common stock in favor of the merger proposal and the approval of the transactions contemplated by the merger agreement
and against, among other things, alternative transactions. In the event that TXIs board of directors changes its recommendation that TXI stockholders adopt the merger agreement, NNS and SAM will only be required to vote shares representing at
most 35% of the outstanding TXI common stock in favor of the merger proposal, with the balance of their shares being voted in such circumstances in NNSs and SAMs sole discretion. For additional information about the voting agreements,
see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementVoting Agreements beginning on page 103.
11
Selected Historical Financial Data of Martin Marietta
The following table sets forth selected historical consolidated financial information for Martin Marietta. The historical consolidated
financial information is derived from the audited consolidated financial statements of Martin Marietta as of and for each of the years in the five-year period ended December 31, 2013. The historical consolidated financial information for Martin
Marietta as of and for the three months ended March 31, 2014 and 2013 has been derived from unaudited interim consolidated financial statements of Martin Marietta and, in the opinion of Martin Mariettas management, include all normal and
recurring adjustments that are considered necessary for the fair presentation of the results for the interim periods. The following information should be read together with Martin Mariettas consolidated financial statements and the notes
related to those financial statements incorporated herein by reference. See Where You Can Find More Information beginning on page 146. Martin Mariettas historical consolidated financial information may not be indicative of the
future performance of Martin Marietta or the combined company.
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|
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|
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|
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As of and for the
three months
ended March 31,
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|
As of and for year ended December 31,
|
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(add 000, except per share and ratio)
|
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2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Statement of Earnings Data:
(1)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Consolidated Operating Results
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Net sales
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$
|
379,678
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|
|
$
|
344,059
|
|
|
$
|
1,943,218
|
|
|
$
|
1,832,957
|
|
|
$
|
1,519,754
|
|
|
$
|
1,475,638
|
|
|
$
|
1,419,604
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|
Freight and delivery revenues
|
|
|
48,951
|
|
|
|
39,850
|
|
|
|
212,333
|
|
|
|
198,944
|
|
|
|
193,862
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|
|
|
177,168
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|
|
|
153,648
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total revenues
|
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|
428,629
|
|
|
|
383,909
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|
|
|
2,155,551
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|
|
|
2,031,901
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|
|
|
1,713,616
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|
|
|
1,652,806
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|
|
|
1,573,252
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Cost of sales
|
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|
353,843
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|
|
|
331,238
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|
|
|
1,579,261
|
|
|
|
1,505,823
|
|
|
|
1,217,752
|
|
|
|
1,153,987
|
|
|
|
1,088,091
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|
Freight and delivery costs
|
|
|
48,951
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|
|
|
39,850
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|
|
|
212,333
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|
|
|
198,944
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|
|
|
193,862
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|
|
|
177,168
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|
|
|
153,648
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cost of revenues
|
|
|
402,794
|
|
|
|
371,088
|
|
|
|
1,791,594
|
|
|
|
1,704,767
|
|
|
|
1,411,614
|
|
|
|
1,331,155
|
|
|
|
1,241,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Gross Profit
|
|
|
25,835
|
|
|
|
12,821
|
|
|
|
363,957
|
|
|
|
327,134
|
|
|
|
302,002
|
|
|
|
321,651
|
|
|
|
331,513
|
|
Selling, general and administrative expenses
|
|
|
34,247
|
|
|
|
37,648
|
|
|
|
150,091
|
|
|
|
138,398
|
|
|
|
124,138
|
|
|
|
130,422
|
|
|
|
135,881
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|
Business development costs
|
|
|
9,512
|
|
|
|
307
|
|
|
|
671
|
|
|
|
35,140
|
|
|
|
18,575
|
|
|
|
1,220
|
|
|
|
2,199
|
|
Other operating (income) and expenses, net
|
|
|
(2,026
|
)
|
|
|
(1,814
|
)
|
|
|
(4,793
|
)
|
|
|
(2,574
|
)
|
|
|
(1,720
|
)
|
|
|
(8,298
|
)
|
|
|
10,586
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings from Operations
|
|
|
(15,898
|
)
|
|
|
(23,320
|
)
|
|
|
217,988
|
|
|
|
156,170
|
|
|
|
161,009
|
|
|
|
198,307
|
|
|
|
182,847
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|
Interest expense
|
|
|
12,201
|
|
|
|
13,496
|
|
|
|
53,467
|
|
|
|
53,339
|
|
|
|
58,586
|
|
|
|
68,440
|
|
|
|
73,455
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|
Other nonoperating expenses and (income), net
|
|
|
3,463
|
|
|
|
623
|
|
|
|
295
|
|
|
|
(1,299
|
)
|
|
|
1,834
|
|
|
|
198
|
|
|
|
(1,165
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
(Loss) Earnings from continuing operations before taxes
on income
|
|
|
(31,562
|
)
|
|
|
(37,439
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)
|
|
|
164,226
|
|
|
|
104,130
|
|
|
|
100.589
|
|
|
|
129,669
|
|
|
|
110,557
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|
Taxes on income
|
|
|
(8,424
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)
|
|
|
(8,398
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)
|
|
|
44,045
|
|
|
|
17,431
|
|
|
|
21,003
|
|
|
|
30,913
|
|
|
|
25,981
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings from Continuing Operations
|
|
|
(23,138
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)
|
|
|
(29,041
|
)
|
|
|
120,181
|
|
|
|
86,699
|
|
|
|
79.586
|
|
|
|
98,756
|
|
|
|
84,576
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|
Less: Net (loss) earnings attributable to noncontrolling interests
|
|
|
(1,535
|
)
|
|
|
(1,490
|
)
|
|
|
(1,905
|
)
|
|
|
1,053
|
|
|
|
1,194
|
|
|
|
1,652
|
|
|
|
2,705
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Earnings From Continuing Operations Attributable to Controlling Interests
|
|
$
|
(21,603
|
)
|
|
$
|
(27,551
|
)
|
|
$
|
122,086
|
|
|
$
|
85,646
|
|
|
$
|
78,392
|
|
|
$
|
97,104
|
|
|
$
|
81,871
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) Earnings Per Common Share Attributable to Controlling Interests:
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share from continuing operations attributable to common shareholders
|
|
$
|
(0.47
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
2.64
|
|
|
$
|
1.86
|
|
|
$
|
1.70
|
|
|
$
|
2.11
|
|
|
$
|
1.84
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per common share from continuing operations attributable to common shareholders
|
|
$
|
(0.47
|
)
|
|
$
|
(0.60
|
)
|
|
$
|
2.63
|
|
|
$
|
1.86
|
|
|
$
|
1.69
|
|
|
$
|
2.10
|
|
|
$
|
1.83
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
46,315
|
|
|
|
46,028
|
|
|
|
46,164
|
|
|
|
45,828
|
|
|
|
45,652
|
|
|
|
45,485
|
|
|
|
44,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
46,315
|
|
|
|
46,028
|
|
|
|
46,285
|
|
|
|
45,970
|
|
|
|
45,793
|
|
|
|
45,659
|
|
|
|
44,190
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Dividends Per Common Share
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
three months
ended March 31,
|
|
|
As of and for year ended December 31,
|
|
(add 000, except per share and ratio)
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$
|
3,255,257
|
|
|
$
|
3,154,775
|
|
|
$
|
3,259,826
|
|
|
$
|
3,160,926
|
|
|
$
|
3,147,822
|
|
|
$
|
3,074,743
|
|
|
$
|
3,239,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilitiesother
|
|
$
|
181,355
|
|
|
$
|
163,013
|
|
|
$
|
198,146
|
|
|
$
|
167,659
|
|
|
$
|
166,530
|
|
|
$
|
136,779
|
|
|
$
|
147,434
|
|
Current maturities of long-term debt
and short-term facilities
|
|
|
12,403
|
|
|
|
5,677
|
|
|
|
12,403
|
|
|
|
5,676
|
|
|
|
7,182
|
|
|
|
248,714
|
|
|
|
226,119
|
|
Long-term debt
|
|
|
1,055,541
|
|
|
|
1,072,850
|
|
|
|
1,018,518
|
|
|
|
1,042,183
|
|
|
|
1,052,902
|
|
|
|
782,045
|
|
|
|
1,023,492
|
|
Other noncurrent liabilities
|
|
|
461,665
|
|
|
|
503,178
|
|
|
|
455,840
|
|
|
|
495,109
|
|
|
|
472,344
|
|
|
|
438,946
|
|
|
|
435,827
|
|
Shareholders equity
|
|
|
1,508,785
|
|
|
|
1,371,791
|
|
|
|
1,537,877
|
|
|
|
1,410,545
|
|
|
|
1,409,321
|
|
|
|
1,425,440
|
|
|
|
1,365,240
|
|
Noncontrolling interests
|
|
|
35,508
|
|
|
|
38,266
|
|
|
|
37,042
|
|
|
|
39,754
|
|
|
|
39,543
|
|
|
|
42,819
|
|
|
|
41,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
3,255,257
|
|
|
$
|
3,154,775
|
|
|
$
|
3,259,826
|
|
|
$
|
3,160,926
|
|
|
$
|
3,147,822
|
|
|
$
|
3,074,743
|
|
|
$
|
3,239.283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio of earnings to fixed charges
|
|
|
|
|
|
|
|
|
|
|
3.41
|
|
|
|
2.45
|
|
|
|
2.31
|
|
|
|
2.40
|
|
|
|
2.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts may not equal amounts reported in Martin Mariettas prior Annual Reports on Form 10-K, as amounts have been recast to reflect discontinued operations.
|
13
Selected Historical Financial Data of TXI
The following table sets forth selected historical consolidated financial information for TXI. The historical consolidated financial
information for TXI for each of the years in the five-year period ended May 31, 2013 is derived from the audited consolidated financial statements of TXI as of and for each of the five years ended May 31, 2013. The historical consolidated
financial information for TXI as of and for the nine months ended February 28, 2014 and 2013 has been derived from unaudited interim consolidated financial statements of TXI and, in the opinion of TXIs management, includes all normal and
recurring adjustments that are considered necessary for the fair presentation of the results for the interim periods. The following information should be read together with TXIs consolidated financial statements and the notes related to those
financial statements incorporated herein by reference. See Where You Can Find More Information beginning on page 146. TXIs historical consolidated financial information may not be indicative of the future performance of TXI or the
combined company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for nine months
ended February 28,
|
|
|
As of and for year ended May 31,
|
|
(add 000, except per share)
|
|
2014
|
|
|
2013
|
|
|
2013
|
|
|
2012
|
|
|
2011
|
|
|
2010
|
|
|
2009
|
|
Statements of Earnings Data
:
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
649,802
|
|
|
$
|
483,575
|
|
|
$
|
697,081
|
|
|
$
|
594,105
|
|
|
$
|
571,906
|
|
|
$
|
571,684
|
|
|
$
|
770,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings from continuing operations
|
|
$
|
(38,979
|
)
|
|
$
|
(26,098
|
)
|
|
$
|
(10,494
|
)
|
|
$
|
1,928
|
|
|
$
|
(69,472
|
)
|
|
$
|
(44,702
|
)
|
|
$
|
(26,960
|
)
|
Net earnings from discontinued operations
|
|
|
|
|
|
|
6,504
|
|
|
|
35,044
|
|
|
|
5,548
|
|
|
|
4,559
|
|
|
|
5,849
|
|
|
|
9,313
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings
|
|
$
|
(38,979
|
)
|
|
$
|
(19,594
|
)
|
|
$
|
24,550
|
|
|
$
|
7,476
|
|
|
$
|
(64,913
|
)
|
|
$
|
(38,853
|
)
|
|
$
|
(17,647
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.36
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(2.49
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.98
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.23
|
|
|
|
1.24
|
|
|
|
0.20
|
|
|
|
0.16
|
|
|
|
0.21
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operations
|
|
$
|
(1.36
|
)
|
|
$
|
(0.70
|
)
|
|
$
|
0.87
|
|
|
$
|
0.27
|
|
|
$
|
(2.33
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(1.36
|
)
|
|
$
|
(0.93
|
)
|
|
$
|
(0.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(2.49
|
)
|
|
$
|
(1.61
|
)
|
|
$
|
(0.98
|
)
|
Discontinued operations
|
|
|
|
|
|
|
0.23
|
|
|
|
1.24
|
|
|
|
0.20
|
|
|
|
0.16
|
|
|
|
0.21
|
|
|
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operations
|
|
$
|
(1.36
|
)
|
|
$
|
(0.70
|
)
|
|
$
|
0.87
|
|
|
$
|
0.27
|
|
|
$
|
(2.33
|
)
|
|
$
|
(1.40
|
)
|
|
$
|
(0.64
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Number of Common Shares Outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
28,629
|
|
|
|
28,073
|
|
|
|
28,163
|
|
|
|
27,914
|
|
|
|
27,825
|
|
|
|
27,744
|
|
|
|
27,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
28,629
|
|
|
|
28,073
|
|
|
|
28,163
|
|
|
|
28,016
|
|
|
|
27,825
|
|
|
|
27,744
|
|
|
|
27,614
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash dividends declared per share
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.075
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
$
|
0.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
1,587,030
|
|
|
$
|
1,548,471
|
|
|
$
|
1,635,825
|
|
|
$
|
1,576,928
|
|
|
$
|
1,551,011
|
|
|
$
|
1,531,747
|
|
|
$
|
1,572,544
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net working capital
|
|
$
|
185,754
|
|
|
$
|
182,505
|
|
|
$
|
187,297
|
|
|
$
|
218,299
|
|
|
$
|
260,822
|
|
|
$
|
257,684
|
|
|
$
|
232,704
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
|
$
|
656,797
|
|
|
$
|
658,392
|
|
|
$
|
657,935
|
|
|
$
|
656,949
|
|
|
$
|
652,403
|
|
|
$
|
538,620
|
|
|
$
|
541,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders equity
|
|
$
|
732,088
|
|
|
$
|
695,041
|
|
|
$
|
753,464
|
|
|
$
|
696,271
|
|
|
$
|
695,582
|
|
|
$
|
761,248
|
|
|
$
|
803,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts may not equal amounts reported in TXIs prior Annual Reports on Form 10-K, as amounts have been recast to reflect discontinued operations.
|
14
Summary Unaudited Pro Forma Condensed Combined Consolidated
Financial Information
The following table shows summary unaudited pro forma condensed combined consolidated financial information
(referred to as the summary pro forma financial statements) about the financial condition and results of operations of Martin Marietta, after giving effect to the merger. The information under Unaudited Pro Forma Condensed Combined
Consolidated Statement of Earnings Data (referred to as the summary pro forma statement of earnings) gives effect to the merger as if it was consummated on January 1, 2013. The information under Unaudited Pro Forma
Condensed Combined Consolidated Balance Sheet Data (referred to as the summary pro forma balance sheet) gives effect to the merger as if it was consummated on March 31, 2014. TXIs fiscal year ends May 31. The summary pro
forma statement of earnings for the three months ended March 31, 2014 includes TXIs results for the three months ended February 28, 2014. The summary pro forma statement of earnings for the year ended December 31, 2013 includes
TXIs results for the twelve months ended November 30, 2013. The summary pro forma balance sheet as of March 31, 2014 includes TXIs balance sheet as of February 28, 2014. There were no significant transactions outside the ordinary
course of business for TXI in the months ended March 31, 2014, and December 31, 2013 and 2012.
The summary pro forma financial
statements do not reflect any cost savings or associated costs to achieve such savings from operating efficiencies, synergies, debt refinancing, utilization of TXI net operating loss carryforwards or other restructuring that result from the merger.
Further, the summary pro forma financial statements do not reflect the effect of any regulatory actions that may impact the summary pro forma financial statements when the acquisition is completed. In addition, the summary pro forma financial
statements do not purport to project the future financial position or operating results of the combined company. Transactions between Martin Marietta and TXI during the period presented in the summary pro forma financial statements have been
eliminated as if Martin Marietta and TXI were consolidated affiliates during the period.
The summary pro forma financial statements are
presented for illustrative purposes only and are not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the beginning of the periods presented, nor are they
necessarily indicative of the future operating results or financial position of the combined company. In addition, the summary pro forma financial statements include adjustments which are preliminary and may be revised. There can be no assurance
that such revisions will not result in material changes to the information presented.
15
The summary pro forma financial statements have been derived from and should be read in
conjunction with the consolidated financial statements and the related notes of both Martin Marietta and TXI, incorporated herein by reference, and the more detailed unaudited pro forma condensed combined consolidated financial information,
including the notes thereto, appearing elsewhere in this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146 and Unaudited Pro Forma Condensed Combined Consolidated Financial
Information beginning on page 106.
|
|
|
|
|
|
|
|
|
(add 000, except per share)
|
|
As of and for the
three months ended
March 31, 2014
|
|
|
For year ended
December 31, 2013
|
|
Net sales
|
|
$
|
571,046
|
|
|
$
|
2,671,131
|
|
Cost of sales
|
|
|
534,630
|
|
|
|
2,226,629
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
36,416
|
|
|
$
|
444,502
|
|
|
|
|
|
|
|
|
|
|
Consolidated (loss) earnings from continuing operations
|
|
$
|
(37,194
|
)
|
|
$
|
110,741
|
|
Less: Net loss attributable to noncontrolling interests
|
|
|
(1,535
|
)
|
|
|
(1,905
|
)
|
|
|
|
|
|
|
|
|
|
Net (loss) earnings from continuing operations attributable to controlling interests
|
|
$
|
(35,659
|
)
|
|
$
|
112,646
|
|
|
|
|
|
|
|
|
|
|
Basic (loss) earnings per common share from continuing operations attributable to common shareholders
|
|
$
|
(0.54
|
)
|
|
$
|
1.70
|
|
|
|
|
|
|
|
|
|
|
Diluted (loss) earnings per common share from continuing operations attributable to common shareholders
|
|
$
|
(0.54
|
)
|
|
$
|
1.69
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
83,634
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
6,809,019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt, excluding current portion
|
|
$
|
1,816,338
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
$
|
2,836,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders equity
|
|
$
|
3,936,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equivalent and Comparative Per Share Information
The following table sets forth, for the three months ended March 31, 2014 and the year ended December 31, 2013, selected per share
information for Martin Marietta common stock on a historical and pro forma combined basis and, for the nine months ended February 28, 2014 and the year ended May 31, 2013, selected per share information for TXI common stock on a historical and
pro forma equivalent basis. Except for the historical information as of and for the year ended December 31, 2013, in the case of Martin Marietta, and May 31, 2013, in the case of TXI, the information in the table is unaudited. The pro
forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the merger had been completed as of the beginning of the periods presented,
nor is it necessarily indicative of the future operating results or financial position of the combined company. You should read the data with the historical consolidated financial statements and related notes of Martin Marietta and TXI contained in
their respective Annual Reports on Form 10-K for the years ended December 31, 2013 and May 31, 2013, respectively, Martin Mariettas Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, and TXIs Quarterly
Reports on Form 10-Q for the quarter ended February 28, 2014, all of which are incorporated by reference into this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146.
16
The Martin Marietta pro forma combined earnings per share were calculated using the
methodology as described below in the section entitled Unaudited Pro Forma Condensed Combined Consolidated Financial Information beginning on page 106. The Martin Marietta pro forma combined cash dividends per common share represent
Martin Mariettas historical cash dividends per common share. The Martin Marietta pro forma combined book value per share was calculated by dividing total combined Martin Marietta and TXI pro forma common shareholders equity by pro forma
equivalent common shares. The TXI pro forma equivalent per common share amounts were calculated by multiplying the Martin Marietta pro forma combined per share amounts by the exchange ratio of 0.70.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Martin Marietta
|
|
|
TXI
|
|
|
|
Historical
|
|
|
Pro Forma
Combined
|
|
|
Pro Forma
Equivalent
|
|
Basic earnings per common share from continuing operations attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2014
|
|
$
|
(0.47
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
(0.38
|
)
|
Year ended December 31, 2013
|
|
$
|
2.64
|
|
|
$
|
1.70
|
|
|
$
|
1.19
|
|
Diluted earnings per common share from continuing operations attributable to common shareholders
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2014
|
|
$
|
(0.47
|
)
|
|
$
|
(0.54
|
)
|
|
$
|
(0.38
|
)
|
Year ended December 31, 2013
|
|
$
|
2.63
|
|
|
$
|
1.69
|
|
|
$
|
1.18
|
|
Cash dividends declared per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2014
|
|
$
|
0.40
|
|
|
$
|
0.40
|
|
|
$
|
0.28
|
|
Year ended December 31, 2013
|
|
$
|
1.60
|
|
|
$
|
1.60
|
|
|
$
|
1.12
|
|
Book value per common share
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2014
|
|
$
|
32.55
|
|
|
$
|
59.08
|
|
|
$
|
41.35
|
|
As of December 31, 2013
|
|
$
|
33.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TXI
|
|
|
|
Historical
|
|
Basic earnings per common share from continuing operations
|
|
|
|
|
Nine months ended February 28, 2014
|
|
$
|
(1.36
|
)
|
Year ended May 31, 2013
|
|
$
|
(0.37
|
)
|
Diluted earnings per common share from continuing operations
|
|
|
|
|
Nine months ended February 28, 2014
|
|
$
|
(1.36
|
)
|
Year ended May 31, 2013
|
|
$
|
(0.37
|
)
|
Cash dividends declared per common share
|
|
|
|
|
Nine months ended February 28, 2014
|
|
$
|
0.00
|
|
Year ended May 31, 2013
|
|
$
|
0.00
|
|
Book value per common share
|
|
|
|
|
As of February 28, 2014
|
|
$
|
25.42
|
|
As of May 31, 2013
|
|
$
|
26.37
|
|
17
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents incorporated by reference into this joint proxy statement/prospectus contain
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the financial condition, results of operations, business strategies, operating efficiencies or synergies, revenue enhancements,
competitive positions, growth opportunities, plans and objectives of the management of each of Martin Marietta, TXI and the combined company, the merger and the markets for Martin Marietta and TXI common stock and other matters. Statements in this
joint proxy statement/prospectus and the documents incorporated by reference herein that are not historical facts are hereby identified as forward-looking statements for the purpose of the safe harbor provided by Section 21E of the
Exchange Act, and Section 27A of the Securities Act. These forward-looking statements, including, without limitation, those relating to the future business prospects, revenues and income of Martin Marietta and TXI, wherever they occur in this
joint proxy statement/prospectus or the documents incorporated by reference herein, are necessarily estimates reflecting the best judgment of the respective managements of Martin Marietta and TXI and involve a number of risks and uncertainties that
could cause actual results to differ materially from those suggested by the forward-looking statements. These forward-looking statements should, therefore, be considered in light of various important factors, including those set forth in and
incorporated by reference into this joint proxy statement/prospectus.
Words such as estimate, project,
plan, intend, expect, anticipate, believe, would, should, could and similar expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this joint proxy statement/prospectus, including in the section entitled Risk Factors beginning on page 20. Important factors that could cause actual results to differ
materially from those indicated by such forward-looking statements include those set forth in Martin Mariettas and TXIs filings with the SEC, including their respective Annual Reports on Form 10-K for the fiscal years ended
December 31, 2013 and May 31, 2013, those set forth in the section entitled Risk Factors, beginning on page 20, as well as, among others, risks and uncertainties relating to:
|
|
|
the receipt of approval of both Martin Mariettas shareholders and TXIs stockholders;
|
|
|
|
the regulatory clearance required for the transactions contemplated by the merger agreement not being obtained on the terms expected or on the anticipated schedule;
|
|
|
|
the parties ability to meet expectations regarding the timing, completion and accounting and tax treatments of the merger;
|
|
|
|
the possibility that the parties may be unable to achieve expected synergies and operating efficiencies in connection with the merger within the expected time-frames or at all and to successfully integrate TXIs
operations into those of Martin Marietta;
|
|
|
|
the integration of TXIs operations into those of Martin Marietta being more difficult, time-consuming or costly than expected;
|
|
|
|
operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, clients or suppliers) being greater than expected following the
transaction;
|
|
|
|
the retention of certain key employees of TXI being difficult;
|
|
|
|
Martin Mariettas and TXIs ability to adapt its services to changes in technology or the marketplace;
|
|
|
|
Martin Mariettas and TXIs ability to maintain and grow its relationship with its customers;
|
|
|
|
levels of construction spending in the markets;
|
|
|
|
the outcome of litigation in which Martin Marietta or TXI is or may become involved;
|
|
|
|
a decline in the commercial component of the nonresidential construction market and the subsequent impact on construction activity;
|
18
|
|
|
a slowdown in residential construction recovery;
|
|
|
|
unfavorable weather conditions;
|
|
|
|
a widespread decline in product pricing;
|
|
|
|
changes in the cost of raw materials, fuel and energy and the availability and cost of construction equipment in the United States;
|
|
|
|
the timing and amount of federal, state and local transportation and infrastructure funding;
|
|
|
|
the ability of states and/or other entities to finance approved projects either with tax revenues or alternative financing structures; and
|
|
|
|
changes to and the impact of the laws, rules and regulations (including tax and environmental laws, rules and regulations) that apply to and regulate Martin Mariettas and TXIs operations.
|
The parties undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or
otherwise. In the event that a party does update any forward-looking statement, no inference should be made that the parties will make additional updates with respect to that statement, related matters or any other forward-looking statements.
19
RISK FACTORS
In addition to the other information included and incorporated by reference into this joint proxy statement/prospectus, including the
matters addressed in the section entitled Cautionary Statement Regarding Forward-Looking Statements beginning on page 18, you should carefully consider the following risks before deciding whether to vote for the merger proposal, in the
case of TXI stockholders, or for the share issuance proposal, in the case of Martin Marietta shareholders. In addition, you should read and consider the risks associated with each of the businesses of Martin Marietta and TXI because these risks will
also affect the combined company. Descriptions of some of these risks can be found in Martin Mariettas Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and TXIs Annual Report on Form 10-K for the fiscal year
ended May 31, 2013, as, in each case, updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and incorporated by reference into this joint proxy statement/prospectus. You
should also read and consider the other information in this joint proxy statement/prospectus and the other documents incorporated by reference into this joint proxy statement/prospectus. See the section entitled Where You Can Find More
Information beginning on page 146
.
Risk Factors Relating to the Merger
The exchange ratio is fixed and will not be adjusted in the event of any change in either Martin Mariettas or TXIs stock
price.
Upon closing of the merger, each share of TXI common stock will be converted into the right to receive 0.70 shares of
Martin Marietta common stock with cash paid in lieu of fractional shares. This exchange ratio was fixed in the merger agreement and will not be adjusted for changes in the market price of either Martin Marietta common stock or TXI common stock.
Changes in the price of Martin Marietta common stock prior to the merger will affect the market value that TXI stockholders will receive on the date of the merger. Stock price changes may result from a variety of factors (many of which are beyond
our control), including the following:
|
|
|
changes in our respective businesses, operations and prospects;
|
|
|
|
changes in market assessments of the business, operations and prospects of either company;
|
|
|
|
investor behavior and strategies, including market assessments of the likelihood that the merger will be completed, including related considerations regarding regulatory clearance of the merger;
|
|
|
|
interest rates, general market and economic conditions and other factors generally affecting the price of Martin Mariettas and TXIs common stock; and
|
|
|
|
federal, state and local legislation, governmental regulation and legal developments in the businesses in which TXI and Martin Marietta operate.
|
The price of Martin Marietta common stock at the closing of the merger may vary from its price on the date the merger agreement was executed,
on the date of this joint proxy statement/prospectus and on the date of the special meetings of Martin Marietta and TXI. As a result, the market value represented by the exchange ratio will also vary. For example, based on the range of closing
prices of Martin Marietta common stock during the period from January 27, 2014, the last trading day before public announcement of the merger, through May 29, 2014, the latest practicable date before the date of this joint proxy
statement/prospectus, the exchange ratio represented a market value ranging from a low of $71.95 to a high of $89.85 for each share of TXI common stock.
Martin Mariettas stock price may be negatively impacted by risks and conditions that apply to Martin Marietta, which are different
from the risks and conditions applicable to TXI.
Upon completion of the merger, TXI stockholders will become holders of Martin
Marietta common stock. The businesses and markets of Martin Marietta and its subsidiaries and the other companies it may acquire in the
20
future are different from those of TXI. There is a risk that various factors, conditions and developments that would not affect the price of TXI common stock could negatively affect the price of
Martin Marietta common stock. Please see Martin Mariettas Annual Report on Form 10-K for the fiscal year ended December 31, 2013, as updated by any subsequent Quarterly Reports on Form 10-Q or Current Reports on Form 8-K filed with the
SEC, all of which are incorporated by reference in this joint proxy statement/prospectus, and the section entitled Cautionary Statements Regarding Forward-Looking Statements beginning on page 18 for a summary of some of the key factors
that might affect Martin Marietta and the prices at which Martin Mariettas common stock may trade from time to time.
Our
ability to complete the merger is subject to the receipt of antitrust clearance from government entities, which may impose conditions that could have an adverse effect on Martin Marietta or TXI or could delay or cause us to abandon the merger.
We are unable to complete the merger until after the applicable waiting period under the HSR Act expires or is terminated. In
deciding whether to grant antitrust clearance, the DOJ, which is reviewing the merger under the HSR Act, will consider the effect of the merger on competition within the relevant markets. The DOJ may seek a court order enjoining the transaction or
may seek an agreement from us imposing certain requirements or obligations as conditions for not seeking an injunction or otherwise challenging the transaction.
The merger agreement requires us to accept certain conditions from regulators that could adversely impact the combined company. We can provide
no assurance that we will obtain the necessary clearance or that any required conditions will not have a material adverse effect on the combined company following the merger. In addition, we can provide no assurance that the regulatory review
process or the regulatory conditions will not result in a delay or the abandonment of the merger. See The The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementRegulatory Clearances Required for the
Merger beginning on page 79 and The Merger Agreement Conditions to Completion of the Merger beginning on page 99.
Failure to complete the merger could negatively impact the stock prices and the future business and financial results of TXI and Martin
Marietta.
If the merger is not completed, the ongoing businesses of TXI or Martin Marietta may be adversely affected and TXI and
Martin Marietta will be subject to several risks, including the following:
|
|
|
being required, under certain circumstances, to pay a termination fee of $70 million, in the case of a payment by TXI to Martin Marietta, or $25 million or $140 million, in the case of a payment by Martin
Marietta to TXI;
|
|
|
|
having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees;
|
|
|
|
under the merger agreement, each of Martin Marietta and TXI being subject to certain restrictions on the conduct of its business, which may adversely affect its ability to execute certain business strategies; and
|
|
|
|
the focus of management of each of the companies on the merger instead of on pursuing other opportunities that could be beneficial to the companies;
|
in each case, without realizing any of the benefits of having the merger completed. In addition, if the merger is not completed, Martin Marietta and/or TXI
may experience negative reactions from the financial markets and from their respective customers and employees. Martin Marietta and/or TXI could also be subject to litigation related to any failure to complete the merger or to enforcement
proceedings commenced against Martin Marietta or TXI to perform their respective obligations under the merger agreement. If the merger is not completed, TXI and Martin Marietta cannot assure their respective shareholders or stockholders that these
risks will not materialize and will not materially affect the business, financial results and stock prices of TXI or Martin Marietta.
21
Any delay in completing the merger may reduce or eliminate the expected benefits from the
transaction.
In addition to the required regulatory clearance and the shareholder and stockholder approvals, the merger is subject
to a number of other conditions beyond Martin Mariettas and TXIs control that may prevent, delay or otherwise materially adversely affect its completion. Martin Marietta and TXI cannot predict whether and when these other conditions will
be satisfied. Furthermore, the requirements for obtaining the required clearances and approvals could delay the completion of the merger for a significant period of time or prevent it from occurring. Any delay in completing the merger could cause
the combined company not to realize some or all of the synergies and other benefits that it expects to achieve if the merger is successfully completed within its expected time frame. See the section entitled The Issuance of Martin Marietta
Shares and the Adoption of the Merger AgreementThe Merger AgreementConditions to Completion of the Merger beginning on page 99.
The merger agreement contains provisions that could discourage a potential competing acquiror of either TXI or Martin Marietta or could
result in any competing proposal being at a lower price than it might otherwise be.
The merger agreement contains no
shop provisions that, subject to limited exceptions, restrict TXIs and Martin Mariettas ability to solicit, encourage, facilitate or discuss competing third-party proposals to acquire all or a significant part of TXI or Martin
Marietta. Further, even if the TXI board or Martin Marietta board withdraws or modifies its recommendation of the merger proposal or the share issuance proposal, as applicable, they will still be required to submit the matter to a vote of their
respective shareholders at the special meetings unless the merger agreement is terminated in accordance with its terms. In addition, the other party generally has an opportunity to offer to modify the terms of the merger and the merger agreement in
response to any competing acquisition proposals that may be made before such board of directors may withdraw or modify its recommendation. In some circumstances, upon termination of the merger agreement, one of the parties may be required to pay a
termination fee to the other party. For additional information, see the sections entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementThe Merger AgreementNo Solicitation of Alternative
Proposals beginning on page 94, Changes in Board Recommendations beginning on page 95, Termination of the Merger Agreement beginning on page 99 and Expenses and Termination Fees beginning
on page 100.
These provisions could discourage a potential competing acquiror that might have an interest in acquiring all or a
significant part of TXI or Martin Marietta from considering or proposing that acquisition, even if it were prepared to pay consideration with a higher per share cash or market value than that market value proposed to be received or realized in the
merger, or might result in a potential competing acquiror proposing to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances.
The merger will involve substantial costs.
Martin Marietta and TXI have incurred and expect to continue to incur substantial costs and expenses relating directly to the merger and the
Martin Marietta share issuance, including debt refinancing costs, fees and expenses payable to financial advisors, other professional fees and expenses, insurance premium costs, fees and costs relating to regulatory filings and notices, SEC filing
fees, printing and mailing costs and other transaction-related costs, fees and expenses.
The pendency of the merger could adversely
affect the business and operations of Martin Marietta and TXI.
In connection with the pending merger, some customers, suppliers
and other entities with whom Martin Marietta or TXI have a business relationship may delay or defer decisions, which could negatively impact revenues, earnings and cash flows of Martin Marietta and TXI, as well as the market price of Martin Marietta
common stock or TXI common stock, regardless of whether the merger is completed.
22
The fairness opinions obtained by the boards of directors of Martin Marietta and TXI from
their respective financial advisors will not reflect changes in circumstances between signing the merger agreement and the completion of the merger.
Neither the Martin Marietta board nor the TXI board has obtained an updated fairness opinion as of the date of this joint proxy
statement/prospectus from J.P. Morgan, Deutsche Bank or Barclays, Martin Mariettas financial advisors, or Citigroup, TXIs financial advisor.
Changes in the operations and prospects of Martin Marietta or TXI, general market and economic conditions and other factors that may be beyond
the control of Martin Marietta and TXI, and on which the fairness opinions were based, may alter the value of Martin Marietta or TXI or the price of shares of Martin Marietta common stock or TXI common stock by the time the merger is completed. The
opinions do not speak as of the time the merger will be completed or as of any date other than the dates of such opinions. Neither Martin Marietta nor TXI anticipates asking its financial advisors to update their opinions. The opinions are included
as Annexes B, C, D and E to this joint proxy statement/prospectus. For a description of the opinions that the Martin Marietta board received from its financial advisors and a summary of the material financial analyses they provided to the Martin
Marietta board in connection with rendering such opinions, see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementOpinions of Martin Mariettas Financial Advisors beginning on
page 51. For a description of the opinion that the TXI board received from its financial advisor and a summary of the material financial analyses it provided to the TXI board in connection with rendering such opinion, see the section entitled
The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementOpinion of TXIs Financial Advisor beginning on page 66. For a description of the factors considered by the board of directors of Martin Marietta
in determining to approve the merger agreement and the merger, see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementMartin Mariettas Reasons for the Merger; Recommendation of the
Martin Marietta Board of Directors beginning on page 45. For a description of the factors considered by the board of directors of TXI in determining to approve the merger agreement and the merger, see the section entitled The Issuance of
Martin Marietta Shares and the Adoption of the Merger AgreementTXIs Reasons for the Merger; Recommendation of the TXI Board of Directors beginning on page 48.
Martin Mariettas executive officers and directors and TXIs executive officers and directors have interests in the merger
that may be different from, or in addition to, the interests of Martin Mariettas shareholders and TXIs stockholders generally.
Executive officers of Martin Marietta and TXI negotiated the terms of the merger agreement. The Martin Marietta board approved the merger
agreement and the issuance of shares of Martin Marietta common stock to TXI stockholders in connection with the merger and determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of
shares of Martin Marietta common stock to TXI stockholders in connection with the merger, are advisable and in the best interests of Martin Marietta and its shareholders. The TXI board approved the merger agreement and determined that the merger
agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TXI and its stockholders. In considering these facts and the other information contained in this joint proxy statement/prospectus,
you should be aware that Martin Mariettas executive officers and directors and TXIs executive officers and directors may have financial interests in the merger that may be different from, or in addition to, the interests of Martin
Mariettas shareholders or TXIs stockholders. See the sections entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementFinancial Interests of Martin Marietta Directors and Officers in the
Merger beginning on page 72 and Financial Interests of TXI Directors and Officers in the Merger beginning on page 73.
23
If the merger does not qualify as a reorganization within the meaning of
Section 368(a) of the Code, the stockholders of TXI may be required to pay substantial U.S. federal income taxes.
Although
Martin Marietta and TXI intend that the merger qualify as a reorganization within the meaning of Section 368(a) of the Code, it is possible that the IRS may assert that the merger fails to qualify as such. If the IRS were to be
successful in any such contention, or if for any other reason the merger were to fail to qualify as a reorganization, each U.S. holder (as defined on page 77) of TXI common stock would recognize gain or loss with respect to all such U.S.
holders shares of TXI common stock based on the difference between (i) that U.S. holders tax basis in such shares and (ii) the aggregate cash and the fair market value of the Martin Marietta common stock received. For
additional information, see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementMaterial U.S. Federal Income Tax Consequences of the Merger beginning on page 77.
TXI stockholders will not be entitled to dissenters or appraisal rights in the merger.
Dissenters or appraisal rights are statutory rights that, if applicable under law, enable stockholders to dissent from an extraordinary
transaction, such as a merger, and to demand that the corporation pay the fair value for their shares as determined by a court in a judicial proceeding instead of receiving the consideration offered to stockholders in connection with the
extraordinary transaction. Under the DGCL, stockholders do not have appraisal rights if the shares of stock they hold, at the record date for determination of stockholders entitled to vote at the meeting of stockholders to act upon the merger or
consolidation, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders. Notwithstanding the foregoing, appraisal rights are available if stockholders are required by the terms of the merger
agreement to accept for their shares anything other than (a) shares of stock of the surviving corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more
than 2,000 holders, (c) cash instead of fractional shares or (d) any combination of clauses (a)-(c).
Because TXI common stock
is listed on the NYSE, a national securities exchange, and is expected to continue to be so listed on the record date, and because the merger otherwise satisfies the foregoing requirements, holders of TXI common stock will not be entitled to
dissenters or appraisal rights in the merger with respect to their shares of TXI common stock.
Risk Factors Relating
to Martin Marietta Following the Merger
Operational Risks
Martin Marietta is expected to incur substantial expenses related to the integration of TXI.
Martin Marietta is expected to incur substantial expenses in connection with the integration of the business, policies, procedures, operations,
technologies and systems of TXI with those of Martin Marietta. There are a large number of systems that must be integrated, including management information, purchasing, accounting and finance, sales, billing, payroll and benefits, fixed asset and
lease administration systems and regulatory compliance. While Martin Marietta has assumed that a certain level of expenses would be incurred, there are a number of factors beyond its control that could affect the total amount or the timing of all of
the expected integration expenses. Moreover, many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. These expenses could, particularly in the near term, exceed the savings that Martin
Marietta expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings and synergies related to the integration of the businesses following the completion of the merger. These integration
expenses likely will result in Martin Marietta taking significant charges against earnings following the completion of the merger, but the amount and timing of such charges are uncertain at present.
24
Following the merger, the combined company may be unable to integrate successfully the
businesses of Martin Marietta and TXI and realize the anticipated benefits of the merger.
The merger involves the combination of
two companies which currently operate as independent public companies. The combined company will be required to devote significant management attention and resources to integrating its business practices and operations. The combined company may fail
to realize some or all of the anticipated benefits of the merger if the integration process takes longer than expected or is more costly than expected. Potential difficulties the combined company may encounter in the integration process include the
following:
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the inability to successfully combine the businesses of Martin Marietta and TXI in a manner that permits the combined company to achieve the cost savings and revenue synergies anticipated to result from the merger,
which would result in the anticipated benefits of the merger not being realized partly or wholly in the time frame currently anticipated or at all;
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lost sales and customers as a result of certain customers of either of the two companies deciding not to do business with the combined company;
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complexities associated with managing the combined businesses;
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integrating personnel from the two companies;
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creation of uniform standards, controls, procedures, policies and information systems;
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potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with the merger; and
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performance shortfalls at one or both of the two companies as a result of the diversion of managements attention caused by completing the merger and integrating the companies operations.
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In addition, Martin Marietta and TXI have operated and, until the completion of the merger, will continue to operate, independently. It is
possible that the integration process could result in the diversion of each companys managements attention, the disruption or interruption of, or the loss of momentum in, each companys ongoing businesses or inconsistencies in
standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, suppliers and employees or our ability to achieve the anticipated benefits of the merger, or could reduce the
earnings or otherwise adversely affect the business and financial results of the combined company.
The market price of Martin
Mariettas common stock may decline in the future as a result of the merger.
The market price of Martin Mariettas
common stock may decline in the future as a result of the merger for a number of reasons, including the unsuccessful integration of Martin Marietta and TXI (including for the reasons set forth in the preceding risk factor) or the failure of Martin
Marietta to achieve the perceived benefits of the merger, including financial results, as rapidly as or to the extent anticipated by financial or industry analysts. These factors are, to some extent, beyond the control of Martin Marietta.
Uncertainties associated with the merger may cause a loss of management personnel and other key employees of Martin Marietta or TXI
which could adversely affect the future business and operations of the combined company following the merger.
Martin Marietta and
TXI are dependent on the experience and industry knowledge of their officers and other key employees to execute their business plans. The combined companys success after the merger will depend in part upon its ability to retain key management
personnel and other key employees of Martin Marietta and TXI. Current and prospective employees of Martin Marietta and TXI may experience uncertainty about their future roles with the combined company following the merger, which may materially
adversely affect the ability of each of Martin Marietta and TXI to attract and retain key personnel during the pendency of the merger. Accordingly, no assurance can be given that the combined company will be able to retain key management personnel
and other key employees of Martin Marietta and TXI.
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The merger may not be accretive and may cause dilution to Martin Mariettas earnings
per share, which may negatively affect the market price of Martin Marietta common stock.
Martin Marietta currently anticipates
that the merger will be accretive to earnings per share in 2014, assuming refinancing of TXIs outstanding debt at or around the closing of the merger and excluding one-time costs. This expectation is based on preliminary estimates which may
materially change, including the currently expected timing of the merger. Martin Marietta could also encounter additional transaction-related costs or other factors such as a delay in the closing of the merger and/or the failure to realize all of
the benefits anticipated in the merger. All of these factors could cause dilution to Martin Mariettas earnings per share or decrease or delay the expected accretive effect of the merger and cause a decrease in the market price of Martin
Marietta common stock.
Current Martin Marietta shareholders and current TXI stockholders will have a reduced ownership and voting
interest in the combined company after the merger and will exercise less influence over the combined companys management.
Current Martin Marietta shareholders currently have the right to vote in the election of Martin Mariettas board of directors and other
matters affecting Martin Marietta. Current TXI stockholders currently have the right to vote in the election of TXIs board of directors and on other matters affecting TXI. Immediately after the merger is completed, it is expected that current
Martin Marietta shareholders will own approximately 70% of the Martin Marietta common stock and current TXI stockholders will own approximately 30% of the outstanding shares of Martin Marietta common stock.
As a result of the merger, current Martin Marietta shareholders and current TXI stockholders will have less influence on the combined
companys management and policies than they now have on the management and policies of Martin Marietta and TXI, respectively.
The unaudited pro forma financial data for Martin Marietta included in this joint proxy statement/prospectus are preliminary, and Martin
Mariettas actual financial position and operations after the merger may differ materially from the unaudited pro forma financial data included in this joint proxy statement/prospectus.
The unaudited pro forma financial data for Martin Marietta included in this joint proxy statement/prospectus is presented for illustrative
purposes only and is not necessarily indicative of what Martin Mariettas actual financial position or operations would have been had the merger been completed on the dates indicated. Martin Mariettas actual results and financial position
after the merger may differ materially and adversely from the unaudited pro forma financial data included in this joint proxy statement/prospectus. Further, the combined company expects to recognize a significant amount of additional goodwill in the
merger. The goodwill will be subject to annual impairment assessments and a charge may be necessary if the results of operations and cash flows are unable to support the goodwill subsequent to the merger. For more information see the sections
entitled SummarySummary Unaudited Pro Forma Combined Condensed Financial Information beginning on page 15 and Unaudited Pro Forma Combined Condensed Financial Information beginning on page 106.
The internal financial forecasts for Martin Marietta and TXI included in this joint proxy statement/prospectus reflect management
estimates and Martin Mariettas and TXIs actual performance may differ materially from the internal financial forecasts included in this joint proxy statement/prospectus.
The internal financial forecasts for Martin Marietta and TXI included in this joint proxy statement/prospectus are based on assumptions of, and
information available to, Martin Marietta and TXI, at the time such internal financial forecasts were prepared. Martin Marietta and TXI do not know whether the assumptions made will prove correct. Any or all of such information may turn out to be
wrong. Such information can be adversely affected by inaccurate assumptions or by known or unknown risks and uncertainties, many of which are beyond
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Martin Mariettas or TXIs control. Further, internal financial forecasts of this type are based on estimates and assumptions that are inherently subject to factors such as company
performance, industry performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of Martin Marietta and TXI, respectively, including the
factors described under Risk Factors beginning on page 20 and Cautionary Statement Regarding Forward-Looking Statements beginning on page 18, which factors and changes may cause the internal financial forecasts or the
underlying assumptions to be inaccurate. As a result of these contingencies, there can be no assurance that the internal financial forecasts of Martin Marietta or TXI will be realized or that actual results will not be significantly higher or lower
than projected. In view of these uncertainties, the inclusion of the internal financial forecasts of Martin Marietta and TXI in this joint proxy statement/prospectus should not be regarded as an indication that the board of directors of TXI or
Martin Marietta, TXI, Martin Marietta, Merger Sub, Citigroup, J.P. Morgan, Deutsche Bank, Barclays or any other recipient of this information considered, or now considers, it to be an assurance of the achievement of future results.
The internal financial forecasts were prepared for internal use and to assist TXI and Martin Marietta with their due diligence investigations
and their respective financial advisors with their financial analyses. The internal financial forecasts were not prepared with a view toward public disclosure or toward compliance with GAAP, published guidelines of the SEC or the guidelines
established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Ernst & Young LLP (Ernst & Young), Martin Mariettas and TXIs
independent registered public accounting firm, has neither examined, compiled nor performed any procedures with respect to the internal financial forecasts.
In addition, the internal financial forecasts have not been updated or revised to reflect information or results after the date the internal
financial forecasts were prepared or as of the date of this joint proxy statement/prospectus. Except as required by applicable securities laws, neither Martin Marietta nor TXI intends to update or otherwise revise its internal financial forecasts or
the specific portions presented to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error. For more information see the
sections entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementCertain Martin Marietta Forecasts beginning on page 81 and Certain TXI Forecasts beginning on page 84.
Martin Mariettas future results will suffer if the combined company does not effectively manage its expanded operations following
the merger.
Following the merger, the size of the business of the combined company will increase significantly beyond the current
size of either Martin Mariettas or TXIs current businesses. In addition, the combined company may continue to expand its operations through additional acquisitions or other strategic transactions. Martin Mariettas future success
depends, in part, upon its ability to manage its expanded business, which may pose substantial challenges for management, including challenges related to the management and monitoring of new operations and associated increased costs and complexity.
There can be no assurances that the combined company will be successful or that it will realize the expected economies of scale, cost savings, revenue synergies and other benefits currently anticipated from the merger or anticipated from any
additional acquisitions or strategic transactions.
Martin Marietta cannot assure you that it will be able to continue paying
dividends at the current rate.
As noted elsewhere in this joint proxy statement/prospectus, Martin Marietta plans to continue its
current dividend practices following the merger. However, you should be aware that Martin Marietta shareholders may not receive the same dividends following the merger for reasons that may include any of the following factors:
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the combined company may not have enough cash to pay such dividends due to changes in Martin Mariettas cash requirements, capital spending
plans, cash flow or financial position;
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while the dividend practices of Martin Marietta involve the distribution of a portion of Martin Mariettas cash available to pay dividends, the Martin Marietta board could change its practices at any time;
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the actual amount of dividends distributed and the decision to make any distribution will remain at all times entirely at the discretion of the Martin Marietta board; and
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the amount of dividends that Martin Marietta may distribute is subject to restrictions under North Carolina law.
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Martin Mariettas shareholders should be aware that they have no contractual or other legal right to dividends.
The shares of Martin Marietta common stock to be received by TXI stockholders as a result of the merger will have different rights from
the shares of TXI common stock currently held by TXI stockholders.
Upon completion of the merger, TXI stockholders will become
Martin Marietta shareholders and their rights as shareholders will be governed by the NCBCA and Martin Mariettas Restated Articles of Incorporation, as amended (referred to as Martin Mariettas Charter) and Martin
Mariettas Restated Bylaws (referred to as Martin Mariettas Bylaws). The rights associated with Martin Marietta common stock are different from the rights associated with TXI common stock. See the section entitled
Comparison of Rights of Martin Marietta Shareholders and TXI Stockholders beginning on page 125 for a discussion of the different rights associated with Martin Marietta common stock.
Other Risk Factors of Martin Marietta and TXI
Martin Mariettas and TXIs businesses are and will be subject to the risks described above. In addition, Martin Marietta and TXI
are, and will continue to be, subject to the risks described in Martin Mariettas Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and TXIs Annual Report on Form 10-K for the fiscal year ended May 31, 2013,
respectively, as, in each case, updated by any subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, all of which are filed with the SEC and are incorporated by reference into this joint proxy statement/prospectus. See
Where You Can Find More Information beginning on page 146 for the location of information incorporated by reference in this joint proxy statement/prospectus.
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THE COMPANIES
Martin Marietta Materials, Inc.
Martin Marietta Materials, Inc.
2710 Wycliff Road
Raleigh, NC
27607
Telephone: (919) 783-4540
Martin Marietta Materials, Inc., a North Carolina corporation, is the nations second largest producer of aggregates products (crushed
stone, sand and gravel) for the construction industry, including infrastructure, nonresidential, residential, railroad ballast, agricultural and chemical grade stone used in environmental applications. Martin Mariettas aggregates business also
includes asphalt products, ready mixed concrete and road paving operations. Martin Marietta also has a Specialty Products segment that manufactures and markets magnesia-based chemical products used in industrial, agricultural and environmental
applications, and dolomitic lime sold primarily to customers in the steel industry.
Martin Mariettas common stock is listed on the
NYSE under the symbol MLM.
Additional information about Martin Marietta and its subsidiaries is included in documents
incorporated by reference in this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146.
Texas Industries, Inc.
Texas Industries, Inc.
1503 LBJ
Freeway, Suite 400
Dallas, Texas 75234
Telephone: (972) 647-6700
Texas
Industries, Inc., a Delaware corporation, is a leading supplier of heavy construction materials in the southwestern United States through three business segments: cement, aggregates and concrete. TXIs cement production and distribution
facilities are concentrated primarily in Texas and California, the two largest cement markets in the United States. Based on production capacity, TXI is the largest producer of cement in Texas with a 32% share in that state. TXIs aggregate
segment produces natural aggregates, including sand, gravel and crushed limestone. TXIs concrete segment produces ready-mix concrete. TXI is a major supplier of natural aggregates and ready-mix concrete in Texas and northern Louisiana and, to
a lesser extent, in Oklahoma and Arkansas.
TXIs common stock is listed on the NYSE under the symbol TXI.
Additional information about TXI and its subsidiaries is included in documents incorporated by reference in this joint proxy
statement/prospectus. See Where You Can Find More Information beginning on page 146.
Project Holdings, Inc.
Project Holdings, Inc., a wholly owned subsidiary of Martin Marietta (referred to as Merger Sub), is a North Carolina
corporation that was formed on January 14, 2014 for the purpose of effecting the merger. Upon completion of the merger, Merger Sub will be merged with and into TXI, with TXI surviving as a wholly owned subsidiary of Martin Marietta. Merger Sub
has not conducted any activities other than those incidental to its formation and the matters contemplated by the merger agreement in connection with the merger.
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THE MARTIN MARIETTA SPECIAL MEETING
Date, Time and Place
The special meeting of Martin Marietta shareholders will be held at 2710 Wycliff Road, Raleigh, North Carolina 27607, on June 30, 2014 at
11:30 a.m., local time.
Purpose of the Martin Marietta Special Meeting
At the Martin Marietta special meeting, Martin Marietta shareholders will be asked:
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to consider and vote on the share issuance proposal; and
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to consider and vote on the Martin Marietta adjournment proposal.
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Recommendation of the Board of Directors of Martin Marietta
After careful consideration, the Martin Marietta board, on January 27, 2014, unanimously approved the merger agreement and the issuance of
shares of Martin Marietta common stock to TXI stockholders in connection with the merger and determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Martin Marietta common
stock to TXI stockholders pursuant to the merger, are advisable and in the best interests of Martin Marietta and its shareholders.
The
Martin Marietta board accordingly unanimously recommends that the Martin Marietta shareholders vote FOR each of the share issuance proposal and the Martin Marietta adjournment proposal.
Martin Marietta Record Date; Shareholders Entitled to Vote
Only holders of record of shares of Martin Marietta common stock at the close of business on May 28, 2014, the record date for the Martin
Marietta special meeting, will be entitled to notice of, and to vote at, the Martin Marietta special meeting or any adjournments or postponements thereof. A list of shareholders of record entitled to vote at the special meeting will be available
beginning two business days after notice of the special meeting is given, and continuing through the special meeting, at our executive offices and principal place of business at 2710 Wycliff Road, Raleigh, North Carolina 27607 for inspection by
stockholders during ordinary business hours for any purpose germane to the special meeting. The list will also be available at the special meeting for examination by any shareholder of record present at the special meeting.
As of the close of business on the record date, there were outstanding a total of 46,240,568 shares of Martin Marietta common stock entitled
to vote at the Martin Marietta special meeting. As of the close of business on the record date, approximately 1.55% of the outstanding Martin Marietta common shares were held by Martin Marietta directors and executive officers and their affiliates.
We currently expect that Martin Mariettas directors and executive officers will vote their shares in favor of the above listed proposals, although none of them has entered into any agreements obligating him or her to do so.
Quorum
A
quorum is necessary to transact business at the Martin Marietta special meeting. The presence of shareholders entitled to cast at least a majority of the votes entitled to be cast on a proposal constitutes a quorum for the transaction of business at
the Martin Marietta special meeting. Shares of Martin Marietta common stock represented at the Martin Marietta special meeting and entitled to vote but not voted, including shares for which a shareholder directs an abstention from voting
and broker non-votes (shares held by banks, brokerage firms or nominees that are present in person or by proxy at the Martin Marietta special meeting but with respect to which
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the broker or other shareholder of record is not instructed by the beneficial owner of such shares how to vote on a particular proposal and the broker does not have discretionary voting power on
such proposal), will be counted as present for purposes of establishing a quorum. Shares of Martin Marietta common stock held in treasury will not be included in the calculation of the number of shares of Martin Marietta common stock represented at
the meeting for purposes of determining whether a quorum is present.
Required Vote
Approval of the share issuance proposal requires the affirmative vote of holders of a majority of the votes cast on such proposal by holders of
Martin Marietta common stock. Approval of the Martin Marietta adjournment proposal requires that the votes cast in favor of the Martin Marietta adjournment proposal exceed the votes cast against it.
Abstentions and Broker Non-Votes
If you are a Martin Marietta shareholder and fail to vote or fail to instruct your broker or nominee to vote, it will have no effect on the
share issuance proposal or the Martin Marietta adjournment proposal. If you are a Martin Marietta shareholder and you mark your proxy or voting instructions to abstain, it will have the effect of a vote against the share issuance proposal and will
have no effect on the Martin Marietta adjournment proposal.
Voting in Person
If you plan to attend the Martin Marietta special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please
note, however, that if your shares are held in street name, and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder (your broker, bank,
trust company or other nominee) of the shares authorizing you to vote at the special meeting.
In addition, if you are a registered
shareholder, please be prepared to provide proper identification, such as a drivers license or passport. If you hold your shares in street name, you will need to provide proof of ownership, such as a recent account statement or
letter from your broker, bank, trust company or other nominee proving ownership on the Martin Marietta record date, along with proper identification. Shareholders will not be allowed to use cameras, recording devices and other similar electronic
devices at the meeting.
Voting of Proxies
A proxy card is enclosed for your use. Martin Marietta requests that you mark, sign and date the accompanying proxy and return it promptly in
the enclosed postage-paid envelope. When the accompanying proxy is returned properly executed, the shares of Martin Marietta common stock represented by it will be voted at the Martin Marietta special meeting or any adjournment thereof in accordance
with the instructions contained in the proxy.
If a proxy is returned without an indication as to how the shares of Martin Marietta common
stock represented are to be voted with regard to a particular proposal, the Martin Marietta common stock represented by the proxy will be voted in favor of each such proposal. At the date hereof, management has no knowledge of any business that will
be presented for consideration at the special meeting and which would be required to be set forth in this joint proxy statement/prospectus or the related Martin Marietta proxy card other than the matters set forth in Martin Mariettas Notice of
Special Meeting of Shareholders. If any other matter is properly presented at the Martin Marietta special meeting for consideration, it is intended that the persons named in the enclosed form of proxy and acting thereunder will vote in accordance
with their best judgment on such matter.
Your vote is important. Accordingly, please mark, sign, date and return the enclosed proxy
card whether or not you plan to attend the Martin Marietta special meeting in person.
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How Proxies Are Counted
All shares represented by properly executed proxies received in time for the Martin Marietta special meeting will be voted at the meeting in
the manner specified by the shareholder giving those proxies. Properly executed proxies that do not contain voting instructions with respect to the share issuance proposal or the Martin Marietta adjournment proposal will be voted FOR
that proposal.
Participants in Benefit Plans
Participants in Martin Mariettas Performance Sharing Plan and Savings and Investment Plan have received voting instruction cards in lieu
of a proxy card. Only the trustees of these plans, in their capacity as directed trustees, can vote the plan shares at the Martin Marietta special meeting. However, if you are a participating current or former Martin Marietta employee, you are
designated as a Named Fiduciary for voting purposes, which entitles you, on a confidential basis, to instruct the trustees how to cast the votes attributable to the shares allocated to your plan account, as well as a proportionate number
of plan shares for which properly executed instructions are not timely received. By signing and returning your voting instruction card, you are accepting your designation under the plans as a Named Fiduciary, and you therefore are
required to exercise your voting rights prudently and in the interest of all plan participants. If you elect not to vote the shares allocated to your accounts, your shares will be voted in accordance with voting instructions received by the trustees
from Martin Marietta, or if no such instructions are received from Martin Marietta, your shares will be voted proportionally in accordance with the voting instructions received by the trustees from those plan participants who do vote.
Shares Held in Street Name
If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in street name), you must
provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your bank or broker. Please note that you may not vote shares held in street name
by returning a proxy card directly to Martin Marietta or by voting in person at your special meeting unless you provide a legal proxy, which you must obtain from your bank or broker. Further, brokers who hold shares of Martin Marietta
common stock on behalf of their customers may not give a proxy to Martin Marietta to vote those shares without specific instructions from their customers.
If you are a Martin Marietta shareholder and you do not instruct your broker on how to vote your shares, your broker may not vote your shares,
which will have no effect on any of the proposals to be considered at the Martin Marietta special meeting.
Revocability of
Proxies
You have the power to revoke your proxy at any time before your proxy is voted at the Martin Marietta special meeting. You can
revoke your proxy in one of three ways:
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you can send a signed notice of revocation;
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you can grant a new, valid proxy bearing a later date (including by telephone or through the Internet); or
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if you are a holder of record, you can attend the Martin Marietta special meeting and vote in person, which will automatically cancel any proxy previously given, or you can revoke your proxy in person, but your
attendance alone will not revoke any proxy that you have previously given.
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If you choose either of the first two methods,
your notice of revocation or your new proxy must be received by Martin Mariettas Secretary at 2710 Wycliff Road, Raleigh, North Carolina 27607, no later than the beginning of the Martin Marietta special meeting. If your shares are held in
street name by your bank or broker, you should contact your broker to change your vote or revoke your proxy.
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Tabulation of Votes
Martin Marietta has appointed one or more representatives of American Stock Transfer & Trust Company to serve as the inspector of
election for the Martin Marietta special meeting. The inspector of election will, among other matters, determine the number of shares represented at the Martin Marietta special meeting to confirm the existence of a quorum, determine the validity of
all proxies and ballots and certify the results of voting on all proposals submitted to the shareholders.
Solicitation of
Proxies
In accordance with the merger agreement, the cost of proxy solicitation for the Martin Marietta special meeting will be borne
by Martin Marietta. In addition to the use of the mail, proxies may be solicited by officers and directors and regular employees of Martin Marietta, some of whom may be considered participants in the solicitation, without additional remuneration, by
personal interview, telephone, facsimile or otherwise. Martin Marietta will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record on the record date and will
provide customary reimbursement to such firms for the cost of forwarding these materials. Martin Marietta has retained Morrow & Co., LLC to assist in its solicitation of proxies and has agreed to pay them a fee of approximately $25,000,
plus reasonable expenses, for these services.
Adjournments
If a quorum is not present or represented, the shareholders entitled to vote at the Martin Marietta special meeting, present in person or
represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If a quorum is present at the special meeting but there are not
sufficient votes at the time of the special meeting to approve the share issuance proposal, then Martin Marietta shareholders may be asked to vote on the Martin Marietta adjournment proposal. No notices of an adjourned meeting need be given unless
the adjournment is for more than 120 days or, if after the adjournment, a new record date is or must be fixed for the adjourned meeting, in which case a notice of the adjourned meeting will be given to each shareholder of record entitled to vote at
the meeting. At any subsequent reconvening of the special meeting at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would
have been voted at the original convening of the special meeting, except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Assistance
If
you need assistance in completing your proxy card or have questions regarding the Martin Marietta special meeting, please contact Morrow & Co., LLC at 470 West Avenue, Stamford, CT 06902, email at: MLM.info@morrowco.com, call collect at
(203) 658-9400, or call toll-free at (877) 757-5404.
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THE TXI SPECIAL MEETING
Date, Time and Place
The special meeting is scheduled to be held at The Omni Dallas Hotel at Park West, 1590 LBJ Freeway, Dallas, Texas 75234, on June 30, 2014 at
9:30 a.m., local time.
Purpose of the TXI Special Meeting
At the TXI special meeting, TXI stockholders will be asked:
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to consider and vote on the merger proposal;
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to consider and vote on the TXI adjournment proposal; and
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to consider and vote on the compensation proposal.
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Recommendation of the Board
of Directors of TXI
After careful consideration, the TXI board, on January 27, 2014, unanimously approved the merger agreement
and determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TXI and its stockholders.
The TXI board accordingly unanimously recommends that the TXI stockholders vote FOR each of the merger proposal, the TXI
adjournment proposal and the compensation proposal.
TXI Record Date; Stockholders Entitled to Vote
Only holders of record of shares of TXI common stock at the close of business on May 28, 2014, the record date for the TXI special meeting,
will be entitled to notice of, and to vote at, the TXI special meeting and at any adjournment of the meeting. A list of stockholders of record of TXI entitled to vote at the special meeting will be available for ten days before the special meeting
at our executive offices and principal place of business at 1503 LBJ Freeway, Suite 400, Dallas, Texas 75234 for inspection by stockholders during ordinary business hours for any purpose germane to the special meeting. The list will also be
available at the special meeting for examination by any stockholder of record present at the special meeting.
As of the close of business
on the record date, there were outstanding a total of 28,855,704 shares of TXI common stock entitled to vote at the TXI special meeting. As of the close of business on the record date, approximately 1.73% of the outstanding shares of TXI common
stock were held by TXI directors and executive officers and their affiliates. We currently expect that TXIs directors and executive officers will vote their shares in favor of above listed proposals, although none of them has entered into any
agreements obligating him or her to do so.
Quorum
A quorum is necessary to transact business at the TXI special meeting. Stockholders who hold at least a majority of the outstanding TXI common
stock as of the close of business on the record date and who are entitled to vote must be present or represented by proxy in order to constitute a quorum for the transaction of business at the TXI special meeting. Shares of TXI common stock
represented at the TXI special meeting but not voted, including shares for which a shareholder directs an abstention from voting, will be counted as present for purposes of establishing a quorum. Broker non-votes (shares held by banks,
brokerage firms or nominees that are present in person or by proxy at the TXI special meeting but with respect to which the broker or other stockholder of record is not instructed by the beneficial owner of such shares how to vote on a particular
proposal and the broker does not have discretionary voting power on such proposal) will not be counted as present for purposes of establishing a quorum. Shares of TXI common stock held in treasury will not be included in the calculation of the
number of shares of TXI common stock represented at the meeting for purposes of determining whether a quorum is present.
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Required Vote
Approval of the merger proposal requires the affirmative vote of holders of a majority of the outstanding shares of TXI common stock entitled
to vote on the proposal. Approval of the TXI adjournment proposal and the compensation proposal each requires the affirmative vote of holders of a majority of the issued and outstanding shares of TXI common stock present in person or represented by
proxy at the TXI special meeting and entitled to vote at the meeting.
In connection with the merger agreement, each of NNS and SAM, who,
collectively, hold approximately 51% of the outstanding shares of TXI common stock, entered into voting agreements pursuant to which each such stockholder agreed to vote all of its shares of TXI common stock in favor of the merger proposal and
the approval of the transactions contemplated by the merger agreement and against, among other things, alternative transactions. In the event that TXIs board of directors changes its recommendation that TXI stockholders adopt the merger
agreement, NNS and SAM will only be required to vote shares representing at most 35% of the outstanding TXI common stock in favor of the merger proposal, with the balance of their shares being voted in such circumstances in NNSs and SAMs
sole discretion. For additional information about the voting agreements, see the section entitled The Issuance of Martin Marietta Shares and the Adoption of the Merger AgreementVoting Agreements beginning on page 103.
Abstentions and Broker Non-Votes
If you are a TXI stockholder and fail to vote, fail to instruct your broker or nominee to vote, or vote to abstain, it will have the same
effect as a vote against the merger proposal. If you are a TXI stockholder and fail to vote or fail to instruct your broker or nominee to vote, it will have no effect on the TXI adjournment proposal or the compensation proposal, assuming a quorum is
present. If you are a TXI stockholder and you mark your proxy or voting instructions to abstain, it will have the effect of a vote against the TXI adjournment proposal and the compensation proposal.
Voting in Person
If you plan to attend the TXI special meeting and wish to vote in person, you will be given a ballot at the special meeting. Please note,
however, that if your shares are held in street name, and you wish to vote at the special meeting, you must bring to the special meeting a legal proxy executed in your favor from the record holder (your broker, bank, trust
company or other nominee) of the shares authorizing you to vote at the special meeting.
In addition, if you are a registered stockholder,
please be prepared to provide proper identification, such as a drivers license or passport. If you hold your shares in street name, you will need to provide proof of ownership, such as a recent account statement or letter from your
broker, bank, trust company or other nominee proving ownership on the TXI record date, along with proper identification. Stockholders will not be allowed to use cameras, recording devices and other similar electronic devices at the meeting.
Voting of Proxies
A proxy card is enclosed for your use. TXI requests that you mark, sign and date the accompanying proxy and return it promptly in the enclosed
postage-paid envelope. When the accompanying proxy is returned properly executed, the shares of TXI common stock represented by it will be voted at the TXI special meeting or any adjournment thereof in accordance with the instructions contained in
the proxy.
If a proxy is returned without an indication as to how the shares of TXI common stock represented are to be voted with regard
to a particular proposal, the TXI common stock represented by the proxy will be voted in favor of each such proposal. At the date hereof, management has no knowledge of any business that will be presented
35
for consideration at the special meeting and which would be required to be set forth in this joint proxy statement/prospectus or the related TXI proxy card other than the matters set forth in
TXIs Notice of Special Meeting of Stockholders. If any other matter is properly presented at the TXI special meeting for consideration, it is intended that the persons named in the enclosed form of proxy and acting thereunder will vote in
accordance with their best judgment on such matter.
Your vote is important. Accordingly, please mark, sign, date and return the
enclosed proxy card whether or not you plan to attend the TXI special meeting in person.
How Proxies Are Counted
All shares represented by properly executed proxies received in time for the TXI special meeting will be voted at the meeting in the
manner specified by the stockholder giving those proxies. Properly executed proxies that do not contain voting instructions with respect to the merger proposal, the TXI adjournment proposal or the compensation proposal will be voted FOR
that proposal.
Shares Held in Street Name
If you hold your shares in a stock brokerage account or if your shares are held by a bank or nominee (that is, in street name), you must
provide the record holder of your shares with instructions on how to vote your shares if you wish them to be counted. Please follow the voting instructions provided by your bank or broker. Please note that you may not vote shares held in street name
by returning a proxy card directly to TXI or by voting in person at your special meeting unless you provide a legal proxy, which you must obtain from your bank or broker. Further, brokers who hold shares of TXI common stock on behalf of
their customers may not give a proxy to TXI to vote those shares without specific instructions from their customers.
If you are a TXI
stockholder and you do not instruct your broker on how to vote your shares, your broker may not vote your shares, which will have the same effect as a vote against the merger proposal. If you are a TXI stockholder and do not instruct your broker on
how to vote your shares, it will have no effect on the TXI adjournment proposal and the compensation proposal, assuming a quorum is present.
Revocation of Proxies
You have the power to revoke your proxy at any time before your proxy is voted at the TXI special meeting.
You can revoke your proxy in one of three ways:
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you can send a signed notice of revocation;
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you can grant a new, valid proxy bearing a later date (including by telephone or through the Internet); or
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if you are a holder of record, you can attend the TXI special meeting and vote in person, which will automatically cancel any proxy previously given, or you can revoke your proxy in person, but your attendance alone
will not revoke any proxy that you have previously given.
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If you choose either of the first two methods, your notice of
revocation or your new proxy must be received by TXIs Corporate Secretary at 1503 LBJ Freeway, Suite 400, Dallas, Texas 75234 no later than the beginning of the TXI special meeting. If your shares are held in street name by your
bank or broker, you should contact your broker to change your vote or revoke your proxy.
Tabulation of Votes
TXI has appointed one or more representatives of Computershare Investor Services to serve as the inspector of election for the TXI special
meeting. The inspector of election will, among other matters, determine the number of shares represented at the TXI special meeting to confirm the existence of a quorum, determine the validity of all proxies and ballots and certify the results of
voting on all proposals submitted to the stockholders.
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Solicitation of Proxies
In accordance with the merger agreement, the cost of proxy solicitation for the TXI special meeting will be borne by TXI. In addition to the
use of the mail, proxies may be solicited by officers and directors and regular employees of TXI, some of whom may be considered participants in the solicitation, without additional remuneration, by personal interview, telephone, facsimile or
otherwise. TXI will also request brokerage firms, nominees, custodians and fiduciaries to forward proxy materials to the beneficial owners of shares held of record on the record date and will provide customary reimbursement to such firms for the
cost of forwarding these materials.
Adjournments
If a quorum is not present or represented, the stockholders entitled to vote at the TXI special meeting, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum is present or represented. If a quorum is present at the special meeting but there are not sufficient votes at
the time of the special meeting to approve the merger proposal, then TXI stockholders may be asked to vote on the TXI adjournment proposal. No notices of an adjourned meeting need be given unless the adjournment is for more than 30 days or, if after
the adjournment, a new record date is fixed for the adjourned meeting, in which case a notice of the adjourned meeting will be given to each stockholder of record entitled to vote at the meeting. At any subsequent reconvening of the special meeting
at which a quorum is present, any business may be transacted that might have been transacted at the original meeting and all proxies will be voted in the same manner as they would have been voted at the original convening of the special meeting,
except for any proxies that have been effectively revoked or withdrawn prior to the time the proxy is voted at the reconvened meeting.
Assistance
If you need assistance in completing your proxy card or have questions regarding the TXI special meeting, please
contact TXIs investor relations department:
Texas Industries, Inc.
1503 LBJ Freeway, Suite 400
Dallas, Texas 75234
(972) 647-6700
Attn: Investor Relations
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MARTIN MARIETTA PROPOSAL 1 AND TXI PROPOSAL 1: THE ISSUANCE OF
MARTIN MARIETTA SHARES AND THE ADOPTION OF THE MERGER AGREEMENT
Effects of the Merger
At the effective time of the merger, Merger Sub, a wholly owned subsidiary of Martin Marietta formed to effect the merger, will merge with and
into TXI. TXI will be the surviving corporation in the merger and will thereby become a wholly owned subsidiary of Martin Marietta.
In
the merger, each outstanding share of TXI common stock (other than shares owned by TXI, Martin Marietta or Merger Sub, which will be cancelled) will be converted into the right to receive 0.70 shares of Martin Marietta common stock for each share of
TXI common stock, with cash paid in lieu of fractional shares. This exchange ratio is fixed and will not be adjusted to reflect stock price changes prior to closing of the merger. Martin Marietta shareholders will continue to hold their existing
Martin Marietta shares.
Background of the Merger
TXIs management and board of directors regularly review TXIs performance, prospects and strategy in light of the current business
and economic environment, as well as developments in the heavy construction materials industry and opportunities and challenges facing participants in that industry. These reviews have included consideration, from time to time, of potential
strategic alternatives, including strategic acquisitions and divestitures, a sale of the company and remaining an independent, stand-alone entity. Similarly, Martin Mariettas management and board of directors regularly review Martin
Mariettas prospects and strategy in light of the current business and economic environment, as well as developments in the heavy-construction materials industry and opportunities and challenges facing participants in that industry. These
reviews have included consideration, from time to time, of potential strategic alternatives, including strategic acquisitions, divestitures and business combination transactions.
On March 25, 2013, C. Howard Nye, president and chief executive officer of Martin Marietta, met with Nassef Sawiris, a representative of
NNS (which held approximately 23% of TXIs outstanding shares at that time) to discuss potential business opportunities between Martin Marietta and TXI in order to ascertain the interest of one of the largest stockholders of TXI in such
opportunities. The meeting had been organized by representatives of Barclays. At this meeting and in the subsequent meetings and conversations between Mr. Nye and Mr. Sawiris, Mr. Sawiris acted solely in his capacity as a
representative of NNS and did not purport to act for or represent TXI, the TXI board or any other stockholder. During the meeting, Mr. Sawiris indicated that NNS would, and that he believed that other TXI stockholders might, potentially be
interested in a strategic transaction between TXI and Martin Marietta, at a price and on terms that would be favorable to TXI stockholders. Following the meeting, Mr. Nye distributed a memorandum to the Martin Marietta board describing his
conversation with Mr. Sawiris and stating his intent to begin reviewing, together with other members of Martin Mariettas management, the possibility of a strategic transaction with TXI.
On May 23, 2013, the Martin Marietta board met, together with Martin Mariettas management, to, among other things, discuss
managements review of a number of strategic alternatives. At the meeting, Mr. Nye reviewed managements preliminary consideration of a potential transaction with TXI and the potential strategic benefits and alternatives in
structuring such a transaction. The Martin Marietta board indicated that it supported management further investigating the potential transaction.
Following the board meeting, beginning on May 31, 2013, Mr. Nye requested and engaged in a number of additional discussions with
Mr. Sawiris, acting solely in his capacity as a representative of NNS, regarding the terms that NNS would be prepared to support in the event of a potential transaction between Martin Marietta and TXI. These discussions were exploratory in
nature, and included discussions concerning the potential structure of such a transaction, the due diligence work that would need to be completed and the possibility of TXI
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representation on the Martin Marietta board following the consummation of the transaction, it being understood that any preliminary agreement would be subject to the approval of the Martin
Marietta board and the TXI board. Throughout these discussions with Mr. Sawiris and the conversations that followed with TXIs other stockholders, management and representatives, Mr. Nye and other members of Martin Mariettas
management kept the Martin Marietta board informed of the discussions through meetings and communications with the directors. None of Martin Marietta, TXI, NNS or any of their respective affiliates entered into, or committed to enter into, any
agreement of any kind as a result of, or in connection with, any of the foregoing meetings or discussions.
In July 2013, the TXI board
asked Citigroup to assist it in a review of market developments and potential strategic alternatives. On August 6, 2013, the TXI board met with members of TXIs management and representatives of Citigroup to discuss this review. Following
presentations and discussion at this meeting, the TXI board instructed Citigroup to contact a select number of parties to determine such parties interest in a joint venture or purchase of TXIs California plants, an acquisition of TXI or
a merger with TXI.
During the second half of August and the first half of September, as directed by the TXI board, Citigroup contacted 15
parties, including Martin Marietta, 13 of which, including Martin Marietta, expressed interest in exploring a potential transaction and entered into confidentiality agreements with TXI. During this time, representatives of Citigroup and TXIs
management also began to engage in conversations with the interested parties to discuss certain initial diligence matters. On August 16, 2013, Mr. Nye and Mel G. Brekhus, TXIs president and chief executive officer, spoke by phone to
discuss the possibility of a strategic transaction between Martin Marietta and TXI. Martin Marietta and TXI entered into a confidentiality agreement on August 29, 2013, and Martin Marietta began to conduct a diligence review of TXI. As part of
this diligence review, on September 3, 2013, Mr. Nye and other members of Martin Mariettas management met with representatives of Citigroup to receive a high-level presentation regarding TXIs business and operations.
On September 26, 2013, and again on October 7, 2013, the TXI board met, together with Citigroup. Following these meetings, based on
the informal feedback received from the potentially interested parties, the TXI board authorized Citigroup to solicit formal but non-binding indications of interest from the potentially interested parties, with a deadline of October 30, 2013,
and to provide limited due diligence to those parties. Beginning on October 11, 2013, Citigroup sent a letter to each potentially interested party, including Martin Marietta, detailing the process and setting the October 30th deadline for
indications of interest.
On October 29, 2013, the Martin Marietta board met, together with Martin Mariettas management, to
receive an update on the status of the preliminary conversations and analyses that had been undertaken in connection with the potential transaction with TXI. Mr. Nye reviewed the recent discussions regarding the potential transaction and
members of Martin Mariettas management provided reports on business, financial and legal aspects of a transaction with TXI based on the due diligence review that had been conducted by Martin Marietta. Mr. Nye also discussed the Martin
Marietta boards finance committees review, on October 23, 2013, of the potential financial impact on Martin Marietta of a transaction with TXI, and reviewed managements proposed response to TXIs request for a non-binding
indication of interest, which included a stock-for-stock merger transaction at an exchange ratio in the range of 0.65 to 0.70 Martin Marietta shares for each outstanding TXI share (which implied a valuation range of $64.60 to $69.57 per TXI share
based upon the closing price of Martin Marietta shares on October 29, 2013). Members of Martin Mariettas management then reviewed likely next steps in the process. Following an extensive discussion, the Martin Marietta board authorized
Martin Mariettas management to pursue the proposed transaction with TXI, subject to further and final approval by the Martin Marietta board.
By November 1, 2013, TXI received one indication of interest for a transaction involving the whole of TXI (which was the proposal from
Martin Marietta proposing the merger transaction), as well as one indication of interest for an operating lease of TXIs California assets, one indication of interest in a transaction involving only TXIs California operations that did not
indicate a price, and one indication of interest for a transaction involving only TXIs aggregate operations.
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On November 4, 2013, the TXI board met, together with members of management and
representatives of Citigroup and Wachtell Lipton, TXIs outside legal counsel, to consider these indications of interest. Among other things, the TXI board determined that the indications of interest relating to TXIs California operations
or aggregate operations were unattractive financially and strategically, but that the indication of interest received from Martin Marietta warranted further exploration and development. In particular, the TXI board considered that the two alternate
proposals that did indicate a value range did not appear to be at attractive valuation levels and that all three of the alternative transactions would have shrunk the scope and scale of TXIs operations, which would likely diminish rather than
enhance TXIs strategic positioning and ability to create stockholder value in the future. Accordingly, the TXI board considered that a strategic merger with Martin Marietta in the value range suggested by Martin Mariettas proposal would
be both financially and strategically superior to the alternative of remaining independent, with or without a transaction involving TXIs aggregates or California operations. As a result of this meeting, the TXI board instructed
Mr. Brekhus to contact Mr. Nye to determine whether Martin Marietta could be convinced to agree to a higher exchange ratio of 0.75. During the period from November 6 through November 12, 2013, Mr. Brekhus spoke to
Mr. Nye, and directed representatives of Citigroup to speak with Martin Mariettas management and financial advisors, to discuss whether Martin Marietta would be willing to agree to a higher exchange ratio. After discussion with Martin
Mariettas advisors, Martin Mariettas representatives requested additional due diligence information and an opportunity to meet with TXIs management before providing Martin Mariettas response on valuation.
At an in-person meeting on November 18, 2013, members of TXIs management and representatives of Citigroup provided a management
presentation and select due diligence information to Martin Mariettas management. The parties continued their conversations and Martin Marietta continued to conduct diligence on TXI over the next nine days.
On November 26, 2013, the Martin Marietta board met, together with Martin Mariettas management and representatives of J.P. Morgan
and Deutsche Bank, to discuss, among other things, TXIs counterproposal on valuation and to receive an update with respect to the additional diligence that had been conducted. At the meeting, members of Martin Mariettas management
reviewed with the Martin Marietta board managements estimates of potential synergies related to a strategic transaction with TXI and updated the Martin Marietta board as to the additional business, financial and legal due diligence that had
been conducted. The Martin Marietta board indicated that it supported management continuing to work on the proposed transaction and authorized Mr. Nye to offer an exchange ratio above 0.70 if necessary.
On the morning of November 27, 2013, Mr. Nye met with Mr. Brekhus to inform him that based on the information received by
Martin Marietta so far, and subject to further due diligence, Mr. Nye would be willing to recommend to the Martin Marietta board an exchange ratio of 0.72 (which implied a value of $70.08 per TXI share based upon the closing price of Martin
Marietta shares on November 27, 2013). Mr. Nye stated that Martin Marietta would be prepared to proceed at that exchange ratio subject to TXIs agreement to enter into exclusive negotiations through December 31, 2013.
Mr. Nye also indicated that in connection with the execution of any definitive agreement between Martin Marietta and TXI, Martin Marietta would require TXIs two largest stockholders, SAM, which held approximately 28% of the TXIs
outstanding shares at that time, and NNS, to enter into voting agreements pursuant to which such stockholders would commit to vote their shares in favor of such transaction. Messrs. Nye and Brekhus also discussed certain non-financial terms of the
potential transaction, including the potential right of TXI to appoint directors to Martin Mariettas board and to terminate any definitive agreement entered into between the parties to enter into an agreement providing for a superior proposal.
Later on November 27, 2013, the TXI board met, together with members of TXIs management, to discuss Martin Mariettas
proposal. After extensive discussion, the TXI board determined to authorize TXIs management to proceed with due diligence and enter into exclusive negotiations with Martin Marietta of a definitive agreement at an exchange ratio of 0.72,
subject to further and final approval by the TXI board if such negotiations proved to be successful.
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On December 4, 2013, the parties executed an exclusivity agreement providing for exclusive
negotiations through December 31, 2013.
Throughout December 2013, TXI, Martin Marietta and their respective counsel negotiated a
definitive merger agreement and form of voting agreement, Martin Marietta continued to engage in due diligence review of TXI, and TXI engaged in due diligence review of Martin Marietta. At the start of the negotiations in December, the parties
targeted the week of January 6, 2014 for completion of negotiations and announcement of a transaction.
On December 11, 2013,
the Martin Marietta board met, together with members of management, to receive a transaction update.
Also on December 11, 2013, TXI
provided to Martin Marietta TXIs financial results for its fiscal second quarter ended November 30, 2013, which reflected a larger loss than had been forecast.
On December 12, 2013, Bloomberg reported that TXIs owners were exploring a sale of TXI, following which TXIs share price
increased by more than 13%, and closed at $66.47 per share on December 13, 2013. The report mentioned certain potential acquirors but did not identify Martin Marietta.
On December 20, 2013, the TXI board met, together with members of management and TXIs legal and financial advisors, to receive a
transaction update. Also on December 20, 2013, the Martin Marietta board met, together with members of Martin Mariettas management, to receive an update on the transaction and the results of managements due diligence.
In connection with TXIs due diligence review of Martin Marietta, members of Martin Mariettas management met with members of
TXIs management on December 23, 2013 to provide a management presentation on Martin Mariettas business. Following this presentation, Messrs. Nye and Brekhus discussed certain of the open issues in the negotiation of the merger
agreement and form voting agreements, including, among others, whether TXI would have the right to terminate the merger agreement to enter into an agreement providing for a superior proposal and certain other terms in the merger agreement related to
closing certainty.
Later on December 23, 2013, TXI provided Martin Marietta a revised forecast for full fiscal year 2014, which reflected
TXIs actual financial results (provided to Martin Marietta on December 11, 2013) for its fiscal second quarter and showed lower earnings for the full fiscal year 2014. On December 26, 2013, members of Martin Mariettas management and
TXIs management spoke by phone to discuss the revised forecast and Martin Marietta requested additional diligence information to better understand the revisions. On January 2, 2014, representatives of Martin Mariettas management,
TXIs management and their respective financial advisors met to discuss the revised forecast and TXIs prospects generally. Following the meeting, Mr. Nye and Mr. Brekhus spoke to discuss the feasibility of the
previously-targeted week of January 6, 2014 for the announcement of a transaction in light of the revised forecast. On January 3, 2014, TXI delivered to Martin Marietta the additional diligence information that Martin Marietta had
requested as a result of the revised forecast, which Martin Marietta agreed to review and evaluate.
Later on January 3, 2014,
Mr. Nye called Mr. Brekhus to inform him that Martin Marietta expected it would need additional time beyond the previously-targeted week of January 6th to analyze and consider the new information received that would likely impact
Martin Mariettas value assessment. Later that day, representatives of J.P. Morgan spoke to representatives of Citigroup to discuss the conversation between Messrs. Nye and Brekhus. During this call, the J.P. Morgan representatives
indicated that it was unlikely that Martin Marietta would continue to be supportive of a transaction at a 0.72 exchange ratio.
Later on
January 3, 2014, the TXI board met, together with members of management and TXIs legal and financial advisors. After extensive discussion, and taking into account, among other things, the directors views of TXIs prospects and
the previously stated views of TXIs largest stockholders regarding a possible transaction,
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which had been conveyed to the TXI board, the TXI board instructed Mr. Brekhus to inform Mr. Nye that TXI would be prepared to enter into a merger transaction at a slightly reduced
exchange ratio of 0.70 (which implied a value of $69.57 per TXI share based upon the closing price of Martin Marietta shares on January 3, 2014, or approximately $0.51 per share lower than the proposal under consideration by the TXI board in
late November 2013), provided that Martin Marietta agree to TXIs proposed resolution of several issues then under negotiation between the parties (including termination fees, certain terms related to closing certainty and the right to
terminate the merger agreement in the event of a superior proposal) and provided that Martin Marietta agree to enter into a definitive merger agreement by or before TXIs earnings announcement then scheduled for January 8, 2014. Following
this meeting, Mr. Brekhus conveyed the TXI proposal to Mr. Nye. On January 4, 2014, representatives of J.P. Morgan spoke to representatives of Citigroup to discuss the conversation between Messrs. Nye and Brekhus.
On January 3, 2014, January 4, 2014 and January 5, 2014, Mr. Nye reviewed and discussed the TXI proposal with the
other members of Martin Mariettas management, as well as Martin Mariettas directors and financial and legal advisors. As a result of these discussions, Martin Mariettas management determined that Martin Marietta would continue to
require additional time to consider and review TXIs proposal in light of the additional information that had been provided.
Later
on January 5, 2014, Mr. Nye called Mr. Brekhus to inform him that Martin Marietta continued to require additional time to consider and review the due diligence information and assess the situation and potentially available synergies
and, accordingly, Martin Marietta would not be able to meet TXIs timetable nor confirm Martin Mariettas willingness to engage in a merger at a 0.70 exchange ratio. Later on January 5, 2014, the TXI board met, together with members
of management and TXIs legal and financial advisors, to review and discuss the status of negotiations with Martin Marietta. The TXI board concluded that it was not willing to offer further price concessions to Martin Marietta and that TXI
would proceed on the assumption that there would be no transaction with Martin Marietta.
On January 6, 2014, Mr. Brekhus called
Mr. Nye to inform him that the TXI board was not willing to reconsider the terms it had offered. Later that day, O. Mason Hawkins, the chairman and chief executive officer of SAM, contacted Mr. Nye to convey his support for the proposal
that Mr. Brekhus had conveyed to Mr. Nye on January 3, 2014 and to encourage Martin Marietta to consider agreeing to execute a definitive agreement expeditiously.
From January 5 through January 13, 2014, Martin Marietta continued to review and evaluate a possible transaction with TXI. On
January 13, 2014, the Martin Marietta board met, together with its management, to review and discuss the potential transaction with TXI. At this meeting the Martin Marietta board provisionally determined, subject to further discussion at a
meeting of the Martin Marietta Boards finance committee and audit committee and final Martin Marietta board review and approval, that TXI should be informed that Martin Marietta would be willing to proceed with negotiations on the basis of a
0.70 exchange ratio, but subject to satisfactory resolution of several non-financial merger agreement terms and subject to TXIs two largest stockholders agreeing to enter into voting support agreements concurrently with the execution of a
definitive merger agreement between Martin Marietta and TXI. Later on January 14, 2014, Mr. Nye called Mr. Brekhus to inform him of Martin Mariettas willingness to re-initiate negotiations at a 0.70 exchange ratio and of Martin
Mariettas request that the support of TXIs two largest stockholders be obtained. During the call, Mr. Nye also conveyed Martin Mariettas positions on certain of the non-financial merger agreement terms, which included certain
terms related to closing certainty, as well as the right of TXI to appoint a director to the Martin Marietta board.
On January 15,
2014, the TXI board met, together with TXIs legal and financial advisors, to receive a transaction status update and Citigroups review of its financial analysis of the transaction and to discuss the boards position on merger
agreement issues. During the meeting, the TXI board instructed Mr. Brekhus to continue to negotiate certain non-financial open issues. During adjournments of the meeting, Mr. Ransdell,
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chairman of the TXI board, and Mr. Lanigan, one of TXIs directors, called Mr. Hawkins, and Mr. Brekhus called Mr. Sawiris, who each agreed that they were prepared to recommend to
the boards and/or investment committees of SAM and NNS, respectively, that SAM or NNS, as applicable, should enter into a separate voting agreement with Martin Marietta with respect to their respective TXI shares.
From January 15 through January 25, 2014, the parties and their legal and financial advisors engaged in discussions and negotiations
to complete due diligence and to resolve the open transaction issues. These discussions and negotiations included numerous telephone conversations between the parties executives and representatives, as well as conversations between
representatives of Martin Marietta and Mr. Hawkins.
On January 23, 2014, at a regularly-scheduled meeting of the Martin
Marietta board, Martin Marietta management provided the Martin Marietta board with a transaction update.
The TXI board met twice on
January 24, 2014, together with management and TXIs financial and legal advisors, to review and discuss the status of negotiations. Mr. Hawkins joined for a portion of the second meeting on January 24, 2014 to provide the TXI
board with the perspectives of SAM, which were favorable to the transaction. Mr. Hawkins said that he had spoken with Mr. Sawiris, who was, as a representative of NNS, similarly supportive.
Also on January 24, 2014, Bloomberg reported that Martin Marietta was in advanced discussions to acquire TXI. Following the report,
Mr. Nye and representatives of Martin Mariettas management and financial and legal advisors discussed that, given the market rumors about the transaction, it would be in Martin Mariettas best interests to convey to TXI Martin
Mariettas final positions on the remaining open issues in the negotiations. It was agreed that Martin Mariettas final positions would include some concessions to TXI, including the right to terminate the merger agreement in the event
that it received a superior proposal and the right to receive a fee of $25 million from Martin Marietta if the merger is unable to be completed due to a failure to receive regulatory clearance. Later in the day on January 24, 2014, Mr. Nye
conveyed Martin Mariettas final positions to Mr. Brekhus.
On the morning of January 25, 2014, Messrs. Brekhus and
Ransdell spoke to Mr. Nye by telephone and, later that day, Mr. Hawkins spoke to Mr. Nye by telephone. In each of these conversations, Mr. Nye confirmed that Martin Marietta had no further flexibility on the remaining points.
Representatives of J.P. Morgan also held discussions with representatives of Citigroup on January 25, 2014. Later on January 25, 2014, the TXI board met. After extensive discussion, including as to the matters discussed below in the
section entitled TXIs Reasons for the Merger; Recommendation of the TXI Board of Directors beginning on page 48, the TXI board determined to move forward on the basis proposed by Martin Marietta, subject to final board review and
formal board approval at a meeting to be scheduled after completion of the negotiations of the merger agreement, the voting agreements and the lease agreements.
On January 26, 2014, Mr. Nye had several conversations with Messrs. Brekhus and Ransdell and with Mr. Hawkins regarding the
right of TXI or its stockholders to appoint directors to Martin Mariettas board, one of which was joined by Stephan P. Zelnak, Jr., Chairman of the Martin Marietta board. Financial advisors for TXI and Martin Marietta also spoke on
January 26, 2014. In the evening on January 26, 2014, Mr. Nye called Messrs. Brekhus and Ransdell and indicated that Martin Marietta was prepared to move forward on the basis discussed, subject to final Martin Marietta board review
and approval.
On January 26 and January 27, 2014, counsel for TXI and Martin Marietta completed negotiations of the merger
agreement, the voting agreements and the lease agreements.
On January 27, 2014, the Martin Marietta board met, together with Martin
Mariettas management and financial and legal advisors, to consider and approve the transaction. Members of Martin Mariettas management reviewed the negotiations that had occurred since the last update and reported that due diligence and
negotiations
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had been completed and that all material outstanding issues had been resolved or addressed. At such meeting, representatives of J.P. Morgan, Deutsche Bank and Barclays presented joint materials
and each rendered its respective oral opinion to the Martin Marietta board, each of which was later confirmed by delivery of separate written opinions, each dated January 27, 2014, that, as of such date, and subject to the assumptions made,
procedures followed, matters and factors considered and limitations and qualifications on the review undertaken set forth in each such opinion, the 0.70 exchange ratio was fair, from a financial point of view, to Martin Marietta. Representatives of
Cravath then reviewed with the directors certain legal matters related to the transaction, including its fiduciary obligations in connection with its consideration of the transaction and the principal terms of the proposed transaction agreements,
and representatives of McDermott Will & Emery LLP provided an analysis of the regulatory implications of the proposed transaction. After discussions, including as to the matters discussed in the section entitled Martin Mariettas
Reasons for the Merger; Recommendation of the Martin Marietta Board of Directors beginning on page 45, the Martin Marietta board unanimously determined that the merger and the issuance of shares of Martin Marietta common stock to TXI
stockholders in connection with the merger, and the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Martin Marietta common stock to TXI stockholders pursuant to the merger, are advisable
and in the best interests of Martin Marietta and its shareholders, and resolved to recommend that the Martin Marietta shareholders approve the issuance of shares of Martin Marietta common stock to TXI stockholders pursuant to the merger agreement.
Later on January 27, 2014, the TXI board met, together with members of management and TXIs legal and financial advisors.
During this meeting, the TXI directors reviewed TXIs strategic alternatives and TXIs prospects as an independent company. Wachtell Lipton then reviewed with the TXI board its fiduciary obligations, summarized the material terms of the
proposed merger agreement and voting agreements, and reported on the resolution of open issues during the course of negotiations with Martin Marietta. Citigroup provided to the TXI board Citigroups financial analysis of the transaction, and
Citigroup rendered to the TXI board an oral opinion, confirmed by delivery of a written opinion dated January 27, 2014, to the effect that, as of that date and based on and subject to the matters described in its opinion, the exchange ratio of
0.70 Martin Marietta shares for each TXI was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates). After discussions, including as to the matters discussed below in the section
entitled TXIs Reasons for the Merger; Recommendation of the TXI Board of Directors beginning on page 48, the TXI board, by unanimous vote of all of its members, approved the merger agreement and determined that the merger agreement
and the transactions contemplated thereby, including the merger, are advisable and in the best interests of TXI and its stockholders, and resolved to recommend that TXIs stockholders vote to adopt the merger agreement.
Following the conclusion of the TXI board meeting, TXI, Martin Marietta and their respective counsel finalized the transaction documentation,
the parties executed the merger agreement and lease agreements, and SAM and NNS each executed a voting agreement with Martin Marietta. On the morning of January 28, 2014, the parties publicly released a joint announcement of the transaction.
In mid-April 2014, TXI and Martin Marietta discovered that certain portions of the forecasts for Martin Marietta for the calendar/fiscal
years ended December 31, 2014E 2018E provided by Martin Marietta to TXI in December 2013 (which we refer to as the Provided Forecasts) differed, due to an inadvertent error contained in the Provided Forecasts and the application
of a different assumed tax rate, from the forecasts prepared and approved for use by Martin Marietta management in connection with the Martin Marietta Financial Advisors respective discounted cash flow analyses of Martin Marietta (which we
refer to as the Martin Marietta Internal Forecasts). The primary difference between the two forecasts was that the Provided Forecasts omitted approximately $126 million of estimated cash spending that was included in the Martin
Marietta Internal Forecasts and that represented amounts Martin Marietta projected to spend on acquisitions during 2014. After discovery of the differences between the Provided Forecasts and the Martin Marietta Internal Forecasts in mid-April 2014,
Martin Marietta provided TXI and Citigroup with the Martin Marietta Internal Forecasts and an explanation of the differences between the Martin Marietta Internal Forecasts and the Provided Forecasts.
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Summaries of the estimated unlevered free cash flows calculated by the Martin Marietta Financial Advisors based on the Martin Marietta Internal Forecasts and by Citigroup based on the Provided
Forecasts are set forth below in the section entitled Certain Martin Marietta Forecasts beginning on page 81.
On April 29,
2014, the TXI board met, together with members of management and TXIs legal and financial advisors. During this meeting, TXI management reviewed with the TXI directors the differences between the Provided Forecasts and the Martin Marietta
Internal Forecasts and provided its perspectives, including managements view that substituting the Martin Marietta Internal Forecasts for the Provided Forecasts resulted in an immaterial difference to the overall assessment of the transaction.
Citigroup reviewed with the TXI board the differences between the Provided Forecasts and the Martin Marietta Internal Forecasts, and reviewed the differences between Citigroups discounted cash flow analysis using the Provided Forecasts versus
using the Martin Marietta Internal Forecasts, which differences, Citigroup noted, resulted in an immaterial difference in the range of exchange ratios implied by its discounted cash flow analyses. Citigroup noted that, if Citigroup had received the
Martin Marietta Internal Forecasts as of January 27, 2014, those forecasts would not have changed Citigroups overall determination that, as of such date, based on all of the valuation analyses conducted by Citigroup, the exchange ratio of 0.70
Martin Marietta shares for each TXI share was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates). Citigroup also noted that the recent receipt of the Martin Marietta Internal
Forecasts had not caused it to withdraw or modify its opinion, delivered to the TXI board on and dated as of January 27, 2014, to the effect that, as of that date and subject to the matters described in its opinion, the exchange ratio of 0.70 Martin
Marietta shares for each TXI share was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates). After discussing the matter further, the TXI board, by unanimous vote of those present,
determined to continue to recommend that TXIs stockholders vote to adopt the merger agreement. The two TXI directors who did not attend the April 29 meeting later confirmed their agreement with the TXI boards determination to Mr.
Brekhus.
Martin Mariettas Reasons for the Merger; Recommendation of the Martin Marietta Board of Directors
At its meeting on January 27, 2014, the Martin Marietta board unanimously approved the merger agreement and the issuance of shares of
Martin Marietta common stock to TXI stockholders in connection with the merger and determined that the merger agreement and the transactions contemplated thereby, including the merger and the issuance of shares of Martin Marietta common stock to TXI
stockholders pursuant to the merger, are advisable and in the best interests of Martin Marietta and its shareholders. Accordingly, the Martin Marietta board unanimously recommends that the Martin Marietta shareholders vote FOR each of
the share issuance proposal and the Martin Marietta adjournment proposal.
In evaluating the merger agreement and the issuance of shares
of Martin Marietta common stock to TXI stockholders, the Martin Marietta board consulted with and received the advice of Martin Mariettas management and its legal and financial advisors. In reaching its decision, the Martin Marietta board
considered a number of factors, including, but not limited to, the following factors which the Martin Marietta board viewed as generally supporting its decision to approve and enter into the merger agreement and recommend that Martin Marietta
shareholders vote FOR the share issuance proposal and the Martin Marietta adjournment proposal.
Strategic
Considerations.
The Martin Marietta board believes the merger will provide a number of significant strategic opportunities, including the following:
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the merger will create a leading supplier of aggregates and heavy building materials, with low-cost, vertically integrated aggregates and cement operations, and will create a combined company with uniquely positioned
assets across some of the nations largest and fastest growing geographies, such as Texas and California;
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with a significant increase in scale and potential to achieve substantial synergies, the combined company will have greater potential to grow faster and more efficiently than either Martin Marietta or TXI could on a
standalone basis;
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select vertical integration as a result of the merger will improve distribution and transportation costs, diversify end-markets and drive other value enhancing efficiencies;
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the combined company is expected to generate meaningful synergies through, among other drivers, the consolidation of corporate overhead and duplicate functions, enhanced vertical pull through revenue opportunities and
increased operational efficiencies through the adoption of best practices and capabilities from each company;
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the combination of Martin Marietta and TXI will enable Martin Marietta to provide customers with even more value through a collective workforce of approximately 7,000 highly skilled employees and a shared commitment to
provide the best materials, services and solutions;
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the combination of Martin Marietta and TXI will create a stronger base of talent by uniting two workforces and will provide employees of both Martin Marietta and TXI with benefits from greater career and professional
development opportunities generated by the merger;
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the combined company is expected to have a strong financial position; and
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the merger is expected to deliver accretion to Martin Mariettas earnings per share in 2014, assuming refinancing of TXIs outstanding debt at or around the closing of the merger and excluding one-time costs,
which will add value to Martin Mariettas shareholders.
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Other Factors Considered by the Martin Marietta Board.
In addition to considering the strategic factors described above, the Martin Marietta board considered the following additional factors, all of which it viewed as supporting its decision to approve the merger:
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its knowledge of Martin Mariettas business, operations, financial condition, earnings and prospects and of TXIs business, operations, financial condition, earnings and prospects, taking into account the
results of Martin Mariettas due diligence review of TXI;
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the current and prospective business climate in the industry in which Martin Marietta and TXI operate, including the potential for further consolidation, and the alternatives reasonably available to Martin Marietta if
it did not pursue the merger;
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the projected financial results of TXI as a standalone company and the fit of the transaction with Martin Mariettas previously established strategic goals;
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the opinions of J.P. Morgan, Deutsche Bank and Barclays, each dated January 27, 2014, to the Martin Marietta board to the effect that, as of that date, and subject to the assumptions made, procedures followed,
matters and factors considered and limitations and qualifications on the review undertaken set forth in such opinions, the 0.70 exchange ratio was fair, from a financial point of view, to Martin Marietta, as more fully described below under the
section entitled Opinions of Martin Mariettas Financial AdvisorsOpinion of J.P. Morgan Securities LLC, Opinion of Deutsche Bank Securities Inc. and Opinion of Barclays Capital Inc.
beginning on page 51;
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the terms and conditions of the merger agreement, including the strong commitments by both Martin Marietta and TXI to complete the merger;
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the fact that the merger agreement provides for a fixed exchange ratio and that no adjustment will be made in the merger consideration to be received by TXI stockholders in the merger as a result of possible increases
or decreases in the trading price of Martin Mariettas common stock following the announcement of the merger;
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the terms and conditions of the voting agreements, including the commitments by each of NNS and SAM to vote all of their shares of TXI common stock in favor of the merger proposal, unless the TXI board changes its
recommendation of the merger proposal, in which case, such stockholders will be required to vote shares representing at most 35% of the outstanding TXI common stock in favor of the merger proposal;
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the results of the due diligence review of TXI and its business conducted by Martin Marietta and its legal advisors;
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the anticipated customer, supplier and stakeholder reaction to the merger; and
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the anticipated market capitalization, revenues, free cash flow and capital structure of the combined company.
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The Martin Marietta board weighed these advantages and opportunities against a number of other factors identified in its deliberations
weighing negatively against the merger, including:
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the challenges inherent in the combination of two businesses of the size and scope of Martin Marietta and TXI and the size of the companies relative to each other, including the risk that integration costs may be
greater than anticipated and the possible diversion of management attention for an extended period of time;
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the potential that the fixed exchange ratio under the merger agreement could result in Martin Marietta delivering greater value to the TXI stockholders than had been anticipated by Martin Marietta should the value of
the shares of Martin Marietta common stock increase from the date of the execution of the merger agreement;
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TXIs right, subject to certain conditions, to respond to and negotiate with respect to certain alternative takeover proposals made prior to the time TXI stockholders adopt the merger agreement and TXIs
right, subject to TXIs paying Martin Marietta a termination fee of $70 million, to terminate the merger agreement to enter into a binding agreement providing for a superior proposal;
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the restrictions in the merger agreement on the conduct of Martin Mariettas and TXIs business during the period between execution of the merger agreement and the consummation of the merger;
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the risk that regulatory agencies may object to and challenge the merger or may impose terms and conditions in order to resolve those objections that adversely affect the financial results of the combined company; see
the section entitled Regulatory Clearances Required for the Merger beginning on page 79;
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the risk that the pendency of the merger for an extended period of time following the announcement of the execution of the merger agreement could have an adverse impact on Martin Marietta or the combined company;
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the potential for diversion of management and employee attention during the period prior to completion of the merger, and the potential negative effects on Martin Mariettas and the combined companys
businesses;
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the risk that, despite the efforts of Martin Marietta and TXI prior to the consummation of the merger, the combined company may lose key personnel;
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the risk of not capturing all the anticipated cost savings and synergies between Martin Marietta and TXI and the risk that other anticipated benefits might not be realized;
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the possibility that the combined company might not achieve its projected financial results;
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the risk that credit rating agencies might downgrade Martin Mariettas ratings or might place Martin Mariettas credit ratings under review for downgrade as a result of the merger or the announcement of the
merger;
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the risk that changes in the regulatory landscape or new technological developments may adversely affect the business benefits anticipated to result from the merger; and
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the risks of the type and nature described under Risk Factors beginning on page 20 and the matters described under Cautionary Statement Regarding Forward-Looking Statements beginning on
page 18.
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The foregoing discussion of the factors considered by the Martin Marietta board is not intended
to be exhaustive, but rather includes the principal factors considered by the Martin Marietta board. In view of the wide variety of factors considered in connection with its evaluation of the merger and the complexity of these matters, the Martin
Marietta board did not find it useful and did not attempt to quantify or assign any relative or specific weights to the various factors that it considered in reaching its determination to approve the merger and the merger agreement and to make its
recommendations to Martin Marietta shareholders. In addition, individual members of the Martin Marietta board may have given differing weights to different factors. The Martin Marietta board conducted an overall review of the factors described
above, including thorough discussions with Martin Mariettas management and outside legal and financial advisors.
In considering the
recommendation of the Martin Marietta board to approve the share issuance proposal, Martin Marietta shareholders should be aware that Martin Mariettas directors may have interests in the merger that are different from, or in addition to, those
of Martin Marietta shareholders generally. For additional information, see the section entitled Financial Interests of Martin Marietta Directors and Officers in the Merger beginning on page 72.
The explanation of the reasoning of the Martin Marietta board and certain information presented in this section are forward-looking in nature
and, therefore, the information should be read in light of the factors discussed in the section entitled Cautionary Statement Regarding Forward-Looking Statements beginning on page 18 of this joint proxy statement/prospectus.
TXIs Reasons for the Merger; Recommendation of the TXI Board of Directors
On January 27, 2014, the TXI board unanimously approved the merger agreement and determined that the merger agreement and the transactions
contemplated thereby, including the merger, are advisable and in the best interests of TXI and its stockholders. Accordingly, the TXI board unanimously recommends that the TXI stockholders vote FOR each of the merger proposal and the TXI
adjournment proposal.
In the course of reaching its decision to approve the merger and the merger agreement, the TXI board consulted with
outside legal and financial advisors and TXIs management team and considered a number of factors that it believed supported its decision, including the following:
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Attractive Relative and Absolute Value.
The TXI board considered the current and historical market prices of TXI and Martin Marietta common stock, including the market price and performance of the common stock
relative to those of other participants in TXIs industry and general market indices, including the fact that the fixed exchange ratio of 0.70 shares of Martin Marietta common stock per share of TXI common stock represented:
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a premium of approximately 15% to the exchange ratio implied by the trading prices of Martin Marietta and TXI stock on December 12, 2013, the day before speculation regarding a potential sale of TXI was made
public;
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a premium of approximately 11% to the exchange ratio implied by the trading prices of Martin Marietta and TXI stock on January 23, 2014, the day before it was publicly reported that TXI and Martin Marietta were in
advanced discussions regarding a potential merger; and
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an implied value, based on the trading price of Martin Marietta stock on January 23, 2014, of $76.42 per TXI share, representing a premium of approximately 30% to the trading price of TXI shares on
December 12, 2013, the day before speculation regarding a potential sale of TXI was made public.
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The TXI board also
considered that the exchange ratio would result in TXI stockholders owning a favorable level of equity ownership of the combined company (approximately 31%) compared to the relative contributions of TXI and Martin Marietta to the pro forma operating
results of the combined company.
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Opportunity to Participate in Potential Synergies and Value Appreciation of the Combined Company
.
The TXI board considered the structure of the transaction as a stock-for-stock merger following which
TXIs existing stockholders will continue as stockholders of the combined company and will participate in the future success of the combined company and participate in the benefits of synergies and any future transactions that might be pursued
by the combined company. The TXI board noted that Martin Marietta expects the merger to result in approximately $70 million of annual pre-tax synergies by 2017.
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Full Exploration of Strategic Alternatives
. As discussed in the section entitled Background of the Merger beginning on page 38, the TXI board actively explored strategic alternatives, including
soliciting indications of interest for a variety of potential transactions including an acquisition or joint venture involving TXIs California plants, an acquisition of all of TXI or a merger with TXI. The Martin Marietta transaction proposal
was the only proposal received for a transaction involving the whole of TXI, and the only proposal to likely be in the best interests of TXI and its stockholders relative to the alternative of continuing to operate its business as an independent,
standalone company.
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Opportunity to Receive Alternative Takeover Proposals and to Terminate the Merger Agreement with Martin Marietta in Order to Accept a Superior Proposal.
The TXI board considered the terms of the merger agreement
permitting TXI to respond to unsolicited alternative takeover proposals, and the other terms and conditions of the merger agreement, including:
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TXIs right, subject to certain conditions, to respond to and negotiate unsolicited takeover proposals prior to the time TXIs stockholders approve the merger proposal;
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the provision of the merger agreement allowing the TXI board to terminate the merger agreement in specified circumstances and upon payment of a termination fee of $70 million, in order to enter into a binding agreement
providing for a superior proposal, which amount the directors believed to be reasonable under the circumstances and taking into account the range of such termination fees in similar transactions, and the unlikelihood that a fee of such size would be
a meaningful deterrent to alternative takeover proposals; and
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the fact that, although rumors of a possible transaction involving TXI became public in mid-December 2013, and the transaction with Martin Marietta was publicly announced on January 28, 2014, as of January 27,
2014, the date the TXI board voted to approve the Merger Agreement (and as of May 30, 2014, the date of this joint proxy statement/prospectus), no person had made any inquiry or proposal regarding, or otherwise contacted TXI concerning, an
acquisition or merger transaction involving TXI.
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Best Alternative for Maximizing Stockholder Value.
The TXI board considered that the merger would likely be more favorable to TXIs stockholders than the potential value that might result from other
alternatives reasonably available to TXI, including, but not limited to, the continued operation of TXI on a standalone basis, in light of a number of factors, including the following:
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the TXI boards assessment of TXIs business, assets and prospects, its competitive position and historical and projected financial performance, its short-term and long-term capital needs and costs and the
nature of the industry in which TXI competes;
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the strategic and other alternatives reasonably available to TXI, including the alternative of remaining a standalone public company, in light of a number of factors, and the risks and uncertainty associated with those
alternatives, none of which were deemed likely to result in value to TXI stockholders that would exceed, on a present-value basis, the value of the merger consideration. In particular, the TXI board considered the significant risks and challenges
inherent in TXIs standalone plans for developing and realizing the value of its assets, the capital that would be required to achieve TXIs plans, the cost of capital to TXI, and the likelihood that TXIs assets could be more
successfully utilized as part of a larger organization;
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the course and history of the negotiations between Martin Marietta and TXI, which resulted in a final exchange ratio of 0.70 shares of Martin Marietta common stock per share of TXI common stock, which the TXI board
believed, based on Martin Mariettas positions during such negotiations, was in the TXI boards view, the maximum merger consideration that Martin Marietta would be willing to pay for TXI;
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the expectation that the increased scale and geographic and product diversity of the combined company resulting from the merger will provide a broader set of opportunities for organic and inorganic growth;
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the announced intention of Martin Marietta to maintain the dividend at Martin Mariettas current rate of $0.40 per Martin Marietta share quarterly, equivalent to $0.28 per TXI share quarterly, compared with no cash
dividend currently paid by TXI.
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Receipt of Fairness Opinion from Citigroup
. The TXI board considered the financial analysis presentation of Citigroup and the opinion of Citigroup that, as of January 27, 2014 and on the basis of and subject
to the factors and assumptions set forth therein, the exchange ratio of 0.70 shares of Martin Marietta common stock per share of TXI common stock is fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta
and its affiliates), as more fully described in the section entitled Opinion of TXIs Financial Advisor beginning on page 66.
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Tax-Free Nature of the Transaction.
The TXI board considered the expectation that the transaction will be generally tax-free for U.S. federal income tax purposes to TXIs stockholders.
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Mitigation of Regulatory Consequences.
If the merger with Martin Marietta is unable to be completed due to a failure to receive regulatory clearance, TXI would be entitled to receive a fee of $25 million from
Martin Marietta and the option to lease space at three of Martin Mariettas distribution yards in Texas.
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Appointment of a Mutually Acceptable New Director to the Martin Marietta Board.
Under the merger agreement, promptly following the merger, Martin Marietta will appoint to its board an individual to be mutually
agreed upon by Martin Marietta and TXI (or one of TXIs current two largest stockholders designated by TXIs board) following good faith consultations between Martin Marietta and TXI (or such designee) and a determination by Martin
Mariettas Nominating and Corporate Governance Committee that the proposed individual is an appropriate person to add to the Martin Marietta board.
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In the course of reaching the determinations and decisions and making the recommendation described above, the TXI board considered the
following risks and potentially negative factors relating to the merger agreement, the merger and the transactions contemplated thereby:
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the risks and costs to TXI if the merger is not completed, including uncertainty about the effect of the proposed merger on TXIs employees, customers, potential customers, suppliers and other parties,
which may impair TXIs ability to attract, retain and motivate key personnel and could cause customers, potential customers, suppliers and others to seek to change or not enter into business relationships with TXI, and the risk that
the trading price of the common stock of TXI could be materially adversely affected. Reasons the transaction may not be completed include, among others, the failure of the parties to obtain the requisite approvals of TXIs stockholders and
Martin Mariettas shareholders and the possibility that regulatory authorities seek to challenge the merger or to impose conditions that Martin Marietta is not required to accept (see Regulatory Clearances Required for the Merger
beginning on page 79 and The Merger AgreementConditions to Completion of the Merger beginning on page 99 for additional information);
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the merger agreements restrictions on the conduct of TXIs business prior to the completion of the merger, generally requiring TXI to conduct its business only in the ordinary course and subject to specific
limitations, which may (but are not likely to) delay or prevent TXI from undertaking business opportunities that may arise pending completion of the merger;
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the possibility that, under certain circumstances under the merger agreement, TXI may be required to pay a termination fee of $70 million, as more fully described in the section entitled The
Merger AgreementExpenses and Termination Fees beginning on page 108;
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the risk of incurring substantial expenses related to the merger, including in connection with any litigation that may result from the announcement or pendency of the merger;
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the regulatory and other approvals required in connection with the merger, including the risk that regulatory clearances may not be obtained, and the risk that the $25 million termination fee and lease options to which
TXI may be entitled in such circumstances would not be sufficient to compensate TXI for the harm it would suffer as a result;
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the potential risks associated with achieving anticipated cost synergies and savings and successfully integrating TXIs business, operations and workforce with those of Martin Marietta;
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the potential risk of diverting management attention and resources from the operation of TXIs business and towards completion of the merger; and
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the right of Martin Marietta to receive alternative takeover proposals and to terminate the transaction in order to enter into a binding agreement providing for a superior proposal, including:
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Martin Mariettas right, subject to certain conditions, to respond to and negotiate unsolicited takeover proposals prior to the time Martin Mariettas shareholders approve the share issuance proposal; and
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the provision of the merger agreement allowing the Martin Marietta board to terminate the merger agreement in specified circumstances and upon payment of a termination fee of $140 million, in order to enter into a
binding agreement providing for a superior proposal.
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In addition, the TXI board was aware of and considered the interests
described in the section entitled Financial Interests of TXI Directors and Officers in the Merger beginning on page 73.
The foregoing discussion of the information and factors considered by the TXI board is not meant to be exhaustive, but includes the material
factors considered by the board. In view of the variety of factors considered in connection with its evaluation of the merger, the TXI board did not find it practicable to, and did not, quantify or otherwise assign relative weights to the specific
factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors. The TXI board recommended the merger agreement and the merger based upon the totality of
the information it considered.
Opinions of Martin Mariettas Financial Advisors
Martin Marietta retained J.P. Morgan, Deutsche Bank and Barclays as its financial advisors to advise the Martin Marietta board in connection
with the merger. Pursuant to their engagement, Martin Marietta requested each of the Martin Marietta Financial Advisors to evaluate the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger. At a meeting of
the Martin Marietta board on January 27, 2014, the Martin Marietta Financial Advisors presented joint materials and each rendered its respective oral opinion, subsequently confirmed in writing, that as of such date and based upon and subject to
the assumptions made, procedures followed, matters and factors considered and limitations and qualifications on the review undertaken set forth in each such opinion, the exchange ratio in the merger was fair, from a financial point of view, to
Martin Marietta.
Opinion of J.P. Morgan Securities LLC
The full text of the written opinion of J.P. Morgan dated January 27, 2014, which sets forth, among other things, the assumptions made,
procedures followed, matters and factors considered and limitations
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and qualifications on the review undertaken by J.P. Morgan in rendering its opinion, is attached as Annex B to this joint proxy statement/prospectus and is incorporated into this joint proxy
statement/prospectus by reference. You are urged to, and should, read the opinion carefully and in its entirety. J.P. Morgans written opinion was addressed and directed to the Martin Marietta board in connection with its evaluation of the
merger, addresses only the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger and does not constitute a recommendation to any shareholder of Martin Marietta as to how such shareholder should vote with
respect to the share issuance or any other matter. The following is a summary of J.P. Morgans opinion and the methodology that J.P. Morgan used to render its opinion. This summary is qualified in its entirety by reference to the full text of
the opinion.
In arriving at its opinion, J.P. Morgan, among other things:
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reviewed the merger agreement;
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reviewed certain publicly available business and financial information concerning TXI and Martin Marietta and the industries in which they operate;
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reviewed publicly available financial terms of certain precedent transactions;
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compared the financial and operating performance of TXI and Martin Marietta with publicly available information concerning certain other companies it deemed relevant and reviewed the current and historical market prices
of TXI common stock and Martin Marietta common stock and certain publicly traded securities of such other companies;
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reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of Martin Marietta relating to the respective businesses of Martin Marietta and TXI, including the estimated
amount and timing of the cost savings and related expenses and synergies expected to result from the merger and the anticipated accelerated utilization of TXIs net operating tax losses (referred to as the Synergies), and the
expected proceeds of certain anticipated non-operating real estate asset divestitures (referred to as the Real Estate Proceeds); and
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performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.
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J.P. Morgan also held discussions with certain members of the management of Martin Marietta with respect to certain aspects of the merger, and
the past and current business operations of TXI and Martin Marietta, the financial condition and future prospects and operations of TXI and Martin Marietta, the effects of the merger on the financial condition and future prospects of TXI and Martin
Marietta, and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.
J.P. Morgan relied upon, and assumed
the accuracy and completeness of, all information that was publicly available or was furnished to or discussed with J.P. Morgan by TXI and Martin Marietta or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (nor
has J.P. Morgan assumed responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct, nor was it provided with, any valuation or appraisal of any assets or liabilities,
nor did J.P. Morgan evaluate the solvency of TXI or Martin Marietta under any state or federal laws relating to bankruptcy, insolvency or similar matters.
In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, including the Synergies and the Real Estate
Proceeds, J.P. Morgan assumed that they had been reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of TXI
and Martin Marietta to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts (including the Synergies and the Real Estate Proceeds) or the assumptions on which they were based.
In rendering its opinion, J.P. Morgan assumed that the merger will qualify as a tax free reorganization for United States federal income tax
purposes and that the merger and the other transactions contemplated by the
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merger agreement will be consummated as described in the merger agreement. J.P. Morgan also assumed that the representations and warranties made by Martin Marietta and TXI in the merger agreement
and the related agreements are and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and it relied on the assessments made by advisors to Martin Marietta with respect to such
issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on TXI or Martin Marietta or on the contemplated
benefits of the merger.
J.P. Morgans opinion is necessarily based on economic, market and other conditions as in effect on, and the
information made available to J.P. Morgan as of, the date of its opinion. Subsequent developments may affect J.P. Morgans opinion, and J.P. Morgan does not have any obligation to update, revise or reaffirm such opinion. J.P. Morgans
opinion is limited to the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger, and J.P. Morgan has expressed no opinion as to the fairness of such exchange ratio to the holders of any class of securities,
creditors or other constituencies of Martin Marietta or as to the underlying decision by Martin Marietta to engage in the merger. J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors or
employees of any party to the merger, or any class of such persons relative to the exchange ratio in the merger or with respect to the fairness of any such compensation. Furthermore, J.P. Morgan expressed no opinion as to the price at which TXI
common stock or Martin Marietta common stock will trade at any future time.
In the ordinary course of its businesses, J.P. Morgan and its
affiliates may actively trade the debt and equity securities of Martin Marietta and TXI for their own account or for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.
The issuance of J.P. Morgans opinion was approved by a fairness opinion committee of J.P. Morgan.
Opinion of Deutsche Bank Securities Inc.
The full text of the written opinion of Deutsche Bank dated January 27, 2014, which sets forth, among other things, the assumptions
made, procedures followed, matters and factors considered and limitations and qualifications on the review undertaken by Deutsche Bank in rendering its opinion, is attached as Annex C to this joint proxy statement/prospectus and is incorporated
into this joint proxy statement/prospectus statement by reference. You are urged to, and should, read the opinion carefully and in its entirety. Deutsche Banks written opinion was addressed and directed to the Martin Marietta board in
connection with its evaluation of the merger, addresses only the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger and does not constitute a recommendation to any shareholder of Martin Marietta as to
how such shareholder should vote with respect to the share issuance or any other matter. The following is a summary of Deutsche Banks opinion and the methodology that Deutsche Bank used to render its opinion. This summary is qualified in its
entirety by reference to the full text of the opinion.
In connection with Deutsche Banks role as financial advisor to Martin
Marietta, and in arriving at its opinion, Deutsche Bank reviewed certain publicly available financial and other information concerning TXI and Martin Marietta, and certain internal analyses, financial forecasts and other information relating to TXI
and Martin Marietta prepared by management of Martin Marietta. Deutsche Bank also held discussions with certain senior officers and other representatives and advisors of TXI and Martin Marietta regarding the businesses and prospects of TXI and
Martin Marietta, respectively, and of Martin Marietta after giving effect to the merger, including certain cost savings, operating efficiencies, financial synergies and other strategic benefits projected by the management of Martin Marietta to
result from the merger, the anticipated accelerated utilization of TXIs net operating tax losses and the proceeds of certain anticipated non-operating real estate asset divestitures. In addition, Deutsche Bank:
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reviewed the reported prices and trading activity for TXI common stock and Martin Marietta common stock;
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to the extent publicly available, compared certain financial and stock market information for TXI and Martin Marietta with similar information for certain other companies Deutsche Bank considered relevant whose
securities are publicly traded;
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to the extent publicly available, reviewed the financial terms of certain precedent business combinations;
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reviewed the merger agreement and certain related documents; and
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performed such other studies and analyses and considered such other factors as Deutsche Bank deemed appropriate.
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Deutsche Bank did not assume responsibility for independent verification of, and did not independently verify, any information, whether
publicly available or furnished to it, concerning TXI or Martin Marietta, including, without limitation, any financial information considered in connection with the rendering of its opinion. Accordingly, for purposes of its opinion, Deutsche Bank,
with the knowledge and permission of the Martin Marietta board, assumed and relied upon the accuracy and completeness of all such information. Deutsche Bank did not conduct a physical inspection of any of the properties or assets, and did not
prepare, obtain or review any independent evaluation or appraisal of any of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets or liabilities), of TXI or Martin Marietta or any of their respective
subsidiaries, nor did Deutsche Bank evaluate the solvency or fair value of TXI, Martin Marietta or any of Martin Mariettas subsidiaries under any state or federal law relating to bankruptcy, insolvency or similar matters. With respect to the
financial forecasts, including, without limitation, the analyses and forecasts in respect of the amount and timing of the Synergies and the Real Estate Proceeds, in each case prepared by the management of Martin Marietta and used in Deutsche
Banks analyses, Deutsche Bank assumed, with the knowledge and permission of the Martin Marietta board, that such forecasts, including the Synergies and the Real Estate Proceeds, had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of Martin Marietta as to the matters covered thereby and that such forecasts and projections will be realized in the amounts and in the time periods currently estimated by the management
of Martin Marietta. In rendering its opinion, Deutsche Bank expressed no view as to the reasonableness of such forecasts and projections, including, without limitation, the Synergies and the Real Estate Proceeds, or the assumptions on which they
were based. Deutsche Banks opinion was necessarily based upon economic, market and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Deutsche Bank expressly disclaimed any undertaking or
obligation to advise any person of any change in any fact or matter affecting its opinion of which it becomes aware after the date of its opinion.
For purposes of rendering its opinion, Deutsche Bank assumed with the knowledge and permission of the Martin Marietta board that, in all
respects material to its analysis, the representations and warranties of Martin Marietta and TXI contained in the merger agreement are true and correct. Additionally, Deutsche Bank assumed with the knowledge and permission of the Martin Marietta
board that, in all respects material to its analysis, the merger will be consummated in accordance with the terms of the merger agreement, without any waiver, modification or amendment of any term, condition or agreement that would be material to
its analysis. Deutsche Bank also assumed with the knowledge and permission of the Martin Marietta board that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the merger will be
obtained and that in connection with obtaining any necessary governmental, regulatory or other approvals and consents no restrictions, terms or conditions would be imposed that would be material to its analysis, including any divestitures by Martin
Marietta or TXI. Deutsche Bank is not a legal, regulatory, tax or accounting expert and Deutsche Bank relied on the assessments made by Martin Marietta and its other advisors with respect to such issues. Deutsche Bank assumed with the knowledge and
permission of the Martin Marietta board that the merger will qualify as a tax free reorganization for United States federal income tax purposes.
The Deutsche Bank opinion was approved and authorized for issuance by a Deutsche Bank fairness opinion review committee and is addressed to,
and is for the use and benefit of, the Martin Marietta board in connection
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with and for the purpose of its evaluation of the merger and is not a recommendation to the security holders of Martin Marietta as to how they should vote with respect to the share issuance or
any transactions contemplated thereby. The Deutsche Bank opinion was limited to the fairness of the exchange ratio in the merger, from a financial point of view, to Martin Marietta as of the date of its opinion and did not address any other terms of
the merger, the merger agreement or any other agreement entered into in connection with the merger. Deutsche Bank was not asked to, and its opinion did not, address the fairness of the merger or any consideration paid in connection therewith, to the
holders of any class of securities, creditors or other constituencies of Martin Marietta, nor did it address the fairness of the contemplated benefits of the merger. Deutsche Bank did not express any opinion as to the merits of the underlying
decision by Martin Marietta to engage in the merger or the relative merits of the merger as compared to any alternative transactions or business strategies. In addition, Deutsche Bank did not express any view or opinion as to the fairness, financial
or otherwise, of the amount or nature of any compensation payable to or to be received by any of the officers, directors or employees of any parties to the merger, or any class of such persons, in connection with the merger relative to the exchange
ratio. Deutsche Banks opinion did not in any manner address the prices at which TXI common stock will trade following the announcement of the merger and Martin Marietta common stock or other Martin Marietta securities will trade following the
announcement or consummation of the merger.
In the ordinary course of business, Deutsche Bank and its affiliates may actively trade in
the securities and other instruments and obligations of TXI, Martin Marietta and their respective affiliates for their own accounts and for the accounts of their customers. Accordingly, Deutsche Bank and its affiliates may at any time hold a long or
short position in such securities, instruments and obligations.
Opinion of Barclays Capital Inc.
The full text of the written opinion of Barclays dated January 27, 2014, which sets forth, among other things, the assumptions made,
procedures followed, matters and factors considered and limitations and qualifications on the review undertaken by Barclays in rendering its opinion, is attached as Annex D to this joint proxy statement/prospectus and is incorporated into this joint
proxy statement/prospectus statement by reference. You are urged to, and should, read the opinion carefully and in its entirety. Barclays written opinion was addressed and directed to the Martin Marietta board in connection with its evaluation
of the merger, addresses only the fairness, from a financial point of view, to Martin Marietta of the exchange ratio in the merger and does not constitute a recommendation to any shareholder of Martin Marietta as to how such shareholder should vote
with respect to the share issuance or any other matter. The following is a summary of Barclays opinion and the methodology that Barclays used to render its opinion. This summary is qualified in its entirety by reference to the full text of the
opinion.
Barclays was not requested to address, and its opinion does not in any manner address, Martin Mariettas underlying
business decision to proceed with or effect the merger or the likelihood of consummation of the merger. In addition, Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any
compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the exchange ratio in the merger or otherwise.
In arriving at its opinion, Barclays reviewed and analyzed, among other things:
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the merger agreement and the specific terms of the merger;
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publicly available information concerning Martin Marietta and TXI that Barclays believed to be relevant to its analysis, including Martin Mariettas Annual Report on Form 10-K for the fiscal year ended
December 31, 2012, Martin Mariettas Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2013, June 30, 2013 and September 30, 2013, TXIs Annual Report on Form 10-K for the fiscal year ended
May 31, 2013 and TXIs Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 2013 and November 30, 2013;
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financial and operating information with respect to the business, operations and prospects of Martin Marietta furnished to Barclays by Martin Marietta, including financial projections of Martin Marietta furnished to
Barclays by management of Martin Marietta;
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financial and operating information with respect to the business, operations and prospects of TXI furnished to Barclays by Martin Marietta, including financial projections of TXI furnished to Barclays by management of
Martin Marietta;
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the pro forma impact of the merger on the future financial performance of the combined company, including the Synergies and the Real Estate Proceeds;
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trading history of each of the Martin Marietta common stock and the TXI common stock from January 28, 2013 to January 24, 2014 and a comparison of such trading histories with those of other companies that
Barclays deemed relevant;
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a comparison of the historical financial results and present financial condition of Martin Marietta and TXI with each other and with those of other companies that Barclays deemed relevant; and
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the financial terms of certain precedent transactions.
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In addition, Barclays had discussions
with the management of Martin Marietta concerning its business, operations, assets, liabilities, financial condition and prospects and undertook such other studies, analyses and investigations as Barclays deemed appropriate.
In arriving at its opinion, Barclays assumed and relied upon the accuracy and completeness of the financial and other information used by
Barclays without any independent verification of such information (and Barclays has not assumed responsibility or liability for any independent verification of such information) and further relied upon the assurances of the management of Martin
Marietta that they are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of Martin Marietta, including the financial projections of Martin Marietta furnished
to Barclays by management of Martin Marietta, upon the advice of Martin Marietta, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Martin
Marietta as to the future financial performance of Martin Marietta and that Martin Marietta will perform substantially in accordance with such projections. With respect to the financial projections of TXI, including the financial projections of TXI
furnished to Barclays by management of Martin Marietta and the Synergies and the Real Estate Proceeds, upon the advice of Martin Marietta, Barclays assumed that such projections were reasonably prepared on a basis reflecting the best currently
available estimates and judgments of the management of Martin Marietta as to the future financial performance of TXI and that TXI will perform substantially in accordance with such projections. Furthermore, upon the advice of Martin Marietta,
Barclays assumed that the amounts and timing of the Synergies and the Real Estate Proceeds are reasonable and that the Synergies and the Real Estate Proceeds will be realized in accordance with such estimates. Barclays assumed no responsibility for
and expressed no view as to any such projections or estimates or the assumptions on which they are based.
In arriving at its opinion,
Barclays did not conduct a physical inspection of the properties and facilities of Martin Marietta or TXI and did not make or obtain any evaluations or appraisals of the assets or liabilities of Martin Marietta or TXI. Barclays opinion
necessarily is based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of its opinion. Barclays assumed no responsibility for updating or revising its opinion based on events or circumstances that
may occur after the date of its opinion. Barclays expressed no opinion as to the prices at which shares of TXI common stock would trade following the announcement of the merger or shares of Martin Marietta common stock would trade following the
announcement or consummation of the merger. Barclays opinion should not be viewed as providing any assurance that the market value of the shares of Martin Marietta common stock to be held by the stockholders of Martin Marietta after the
consummation of the merger will be in excess of the market value of Martin Marietta common stock owned by such stockholders at any time prior to the announcement or consummation of the merger.
56
Barclays assumed, upon the advice of Martin Marietta, in all respects material to its analysis,
the accuracy of the representations and warranties contained in the merger agreement and all agreements related thereto. Barclays also assumed, upon the advice of Martin Marietta, that all material governmental, regulatory and third party approvals,
consents and releases for the merger will be obtained within the constraints contemplated by the merger agreement and that, in all respects material to its analysis, the merger will be consummated in accordance with the terms of the merger agreement
without waiver, modification or amendment of any material term, condition or agreement thereof and without any divestitures by Martin Marietta or TXI. Additionally, Barclays assumed, upon the advice of Martin Marietta, that the merger will qualify
as a tax free reorganization for United States federal income tax purposes. Barclays did not express any opinion as to any tax or other consequences that might result from the merger, nor does its opinion address any legal, tax, regulatory or
accounting matters, as to which Barclays understands that Martin Marietta has obtained such advice as it deemed necessary from qualified professionals.
Barclays and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management and other
financial and non-financial services. In the ordinary course of its business, Barclays and its affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial instruments
(including loans and other obligations) of Martin Marietta, TXI and /or their respective affiliates for our own account and for the accounts of its customers and, accordingly, may at any time hold long or short positions and investments in such
securities and financial instruments.
The issuance of Barclays opinion was approved by a fairness opinion committee of Barclays.
Summary of Material Joint Analyses
The following is a summary of the material financial analyses in the joint presentation that was made by the Martin Marietta Financial Advisors
to the Martin Marietta board on January 27, 2014, and does not purport to be a complete description of the analyses underlying the Martin Marietta Financial Advisors respective opinions, nor does the order of analyses described represent
the relative importance or weight given to those analyses by the Martin Marietta Financial Advisors. Some of the summaries of financial analyses are presented in tabular format. To fully understand the financial analyses, the tables should be read
together with the text of each summary. Considering the data set forth in the tables without considering the narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of the financial analyses. Except as otherwise noted, the following quantitative information, to the extent that it is based on market data, is based on market data as it existed on or before January 24, 2014, and
is not necessarily indicative of current market conditions.
Transaction Overview
Based on the closing price of the Martin Marietta common stock of $104.32 as of January 24, 2014, the Martin Marietta Financial Advisors
noted that the implied price per share to be paid by Martin Marietta in the transaction as of January 24, 2014 was $73.02, representing an aggregate value of the equity to be paid by Martin Marietta in the merger of approximately $2.2 billion.
The Martin Marietta Financial Advisors also noted that Martin Mariettas current shareholders would own approximately 69% of Martin Marietta after giving effect to the issuance of Martin Marietta common stock in connection with the merger,
assuming an exchange ratio of 0.70 shares of Martin Marietta common stock for each share of TXI common stock. This calculation assumed that approximately 20.7 million shares of Martin Marietta common stock would be issuable in connection with
or as a result of the merger, resulting in a total pro forma diluted share count of approximately 67 million.
Estimates
In performing their respective analyses of TXI, each of the Martin Marietta Financial Advisors relied upon forecasts for TXI for the fiscal
years ended May 31, 2014 through 2023 prepared by Martin Mariettas management.
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This ten-year forecast was approved for use by the management of Martin Marietta and is more fully described in the section entitled Certain Martin Marietta Forecasts beginning on
page 81. For certain analyses, on behalf of the management of Martin Marietta, calendar year forecasts were prepared based on the above mentioned fiscal year forecasts. Such fiscal and calendar year forecasts are collectively referred to in this
joint proxy statement/prospectus as the TXI Base Case. The Martin Marietta Financial Advisors also relied upon financial estimates for TXIs earnings before interest, taxes, depreciation and amortization (referred to as
EBITDA), for the 2014 calendar year ending December 31st (referred to as CY2014E) and the 2015 calendar year ending December 31st (referred to as CY2015E) based upon publicly available estimates from The
Institutional Brokers Estimate System (I/B/E/S). Such estimates are collectively referred to in this joint proxy statement/prospectus as the TXI Street Case.
In performing their respective analyses of Martin Marietta, each of the Martin Marietta Financial Advisors relied upon forecasts for Martin
Marietta for the fiscal/calendar years ended December 31, 2014 through 2018 prepared and approved for use by Martin Mariettas management, as well as an extension of such forecasts prepared at the direction of Martin Mariettas
management for the fiscal/calendar years ended December 31, 2019 through 2023. The management of Martin Marietta reviewed the extension of such forecasts for the fiscal/calendar years ended December 31, 2019 through 2023 and approved such
extension for use by the Martin Marietta Financial Advisors in their financial analyses. The forecasts provided by Martin Mariettas management and the extension of such forecasts prepared at the direction of Martin Mariettas management
are collectively referred to in this joint proxy statement/prospectus as the Martin Marietta Base Case and are more fully described in the section entitled Certain Martin Marietta Forecasts beginning on page 81. The Martin
Marietta Financial Advisors also relied upon financial estimates for Martin Mariettas CY2014E and CY2015E EBITDA based upon publicly available estimates from The Institutional Brokers Estimate System (I/B/E/S). Such estimates are
collectively referred to in this joint proxy statement/prospectus as the Martin Marietta Street Case.
Public Trading Multiples Analysis
The Martin Marietta Financial Advisors reviewed and compared certain financial information, ratios and public market multiples for
TXI and Martin Marietta to the corresponding financial information, ratios and public market multiples for the publicly traded companies listed below.
For TXI, the following companies were selected by the Martin Marietta Financial Advisors:
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Vulcan Materials Company
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For Martin Marietta, the following companies were selected by the
Martin Marietta Financial Advisors:
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Vulcan Materials Company
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In addition to the above companies, Barclays also considered the
following publicly traded companies for both TXI and Martin Marietta:
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Although none of the selected companies are directly comparable to TXI or Martin
Marietta, the companies included were chosen because they are publicly traded companies and based on product mix, lines of business and exposure to the U.S. market. J.P. Morgan and Deutsche Bank did not consider the additional companies considered
by Barclays due to lower exposure to the U.S. market.
For each selected company and for each of TXI and Martin Marietta, the Martin
Marietta Financial Advisors calculated such companys:
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firm value as a multiple of estimated calendar year 2014 EBITDA (referred to as 2014 FV/EBITDA); and
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firm value as a multiple of estimated calendar year 2015 EBITDA (referred to as 2015 FV/EBITDA).
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For purposes of this analysis, a companys firm value was calculated as the fully diluted common equity value of such company as of
January 24, 2014 based on publicly available information plus the value of such companys indebtedness and non-controlling interests, minus such companys cash, cash equivalents and marketable securities. Amounts of the indebtedness,
non-controlling interests, cash, cash equivalents and marketable securities for each of the selected companies were based on the information available in each companys most recent public filings. The estimated CY2014 and CY2015 EBITDA for each
of the selected companies listed above and used by the Martin Marietta Financial Advisors in their analysis were based on I/B/E/S analyst consensus estimates.
The following table represents the results of the Martin Marietta Financial Advisors analysis of selected publicly traded companies as
of January 24, 2014:
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Peer group
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2014 FV/EBITDA
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2015 FV/EBITDA
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Low
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High
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Low
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High
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Selected companies for TXI (J.P. Morgan and Deutsche Bank)
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9.9x
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17.1x
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8.6x
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13.7x
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Selected companies for TXI (Barclays)
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7.4x
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17.1x
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6.6x
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13.7x
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Selected companies for Martin Marietta (J.P. Morgan and Deutsche Bank)
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9.9x
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17.1x
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8.6x
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13.7x
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Selected companies for Martin Marietta (Barclays)
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7.4x
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17.1x
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6.6x
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13.7x
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TXI
. Based on an analysis of relevant metrics for each of the selected companies and certain judgments
about TXIs business and the businesses of the selected companies, the Martin Marietta Financial Advisors selected a reference range of EBITDA multiples of 12.0x to 15.0x to be applied to TXIs CY2014E EBITDA and 10.0x to 12.0x to be
applied to TXIs CY2015E EBITDA based on (i) the TXI Base Case EBITDA forecasts for CY2014E and CY2015E, and (ii) the TXI Street Case EBITDA estimates for CY2014E and CY2015E. This analysis implied a per share equity value reference
range for TXI as follows:
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Estimate case
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Implied reference range
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12.0x to 15.0x CY2014E TXI Base Case EBITDA
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$54 to $72
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12.0x to 15.0x CY2014E TXI Street Case EBITDA
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$48 to $65
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10.0x to 12.0x CY2015E TXI Base Case EBITDA
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$66 to $83
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10.0x to 12.0x CY2015E TXI Street Case EBITDA
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$58 to $73
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Martin Marietta
. Based on an analysis of relevant metrics for each of the selected companies and
certain judgments about Martin Mariettas business and the businesses of the selected companies, the Martin Marietta Financial Advisors selected a reference range of EBITDA multiples of 10.5x to 13.5x to be applied to Martin Mariettas
CY2014E EBITDA and 9.0x to 11.0x to be applied to Martin Mariettas CY2015E EBITDA based on (i) the Martin Marietta Base Case EBITDA forecasts for CY2014E and CY2015E, and (ii) the Martin Marietta
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Street Case EBITDA estimates for CY2014E and CY2015E. This analysis implied a per share equity value reference range for Martin Marietta as follows:
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Estimate case
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Implied reference range
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10.5x to 13.5x CY2014E Martin Marietta Base Case EBITDA
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$79 to $108
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10.5x to 13.5x CY2014E Martin Marietta Street Case EBITDA
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$84 to $114
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9.0x to 11.0x CY2015E Martin Marietta Base Case EBITDA
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$87 to $111
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9.0x to 11.0x CY2015E Martin Marietta Street Case EBITDA
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$90 to $115
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Based upon the implied per share equity values for Martin Marietta and TXI described above, each of the Martin
Marietta Financial Advisors calculated a reference range of implied exchange ratios by dividing the equity value per share of TXI common stock at the high end of the calculated range by the equity value per share of Martin Marietta common stock at
the low end of the calculated range and the equity value per share of TXI common stock at the low end of the calculated range by the equity value per share of Martin Marietta common stock at the high end of the calculated range. The Martin Marietta
Financial Advisors noted that such analysis indicated a range of implied exchange ratio reference ranges as summarized in the table below.
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Estimate case
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Implied reference range
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CY2014E Base Case EBITDA
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0.500 to 0.910
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CY2014E Street Case EBITDA
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0.422 to 0.771
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CY2015E Base Case EBITDA
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0.598 to 0.959
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CY2015E Street Case EBITDA
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0.502 to 0.807
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Discounted Cash Flow Analysis Excluding Synergies
The Martin Marietta Financial Advisors calculated ranges of implied fully diluted equity value per share for both Martin Marietta and TXI by
performing a discounted cash flow analysis for each company on a standalone basis without regard to synergies. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered free cash flows generated by
the asset and taking into consideration the time value of money with respect to those future cash flows by calculating their present value. Present value refers to the current value of estimated future cash flows generated by the asset,
and is obtained by discounting those cash flows (including the assets terminal value) back to the present using a discount rate that takes into account macroeconomic assumptions and estimates of risk, the opportunity cost of capital,
capitalized returns and other relevant factors. Terminal value refers to the capitalized value of all estimated cash flows generated by an asset during periods beyond the final forecast period.
The discounted cash flow analysis for both Martin Marietta and TXI assumed a valuation date of December 31, 2013 and was based on
forecasts reviewed and approved for use by the Martin Marietta Financial Advisors in their analyses by Martin Marietta management.
In
arriving at the implied enterprise value of TXI as a standalone entity excluding synergies, the Martin Marietta Financial Advisors calculated the unlevered free cash flows that TXI is expected to generate during the time period from January 1,
2014 through May 31, 2023 based upon the TXI Base Case. The Martin Marietta Financial Advisors also calculated a range of terminal values of TXI at the end of the 10-year estimate period by applying a perpetual growth rate ranging from 2.5% to
3.5% of the unlevered free cash flow of TXI for the terminal period based on the TXI Base Case. The terminal period cash flow reflected a steady-state operating environment as reviewed and approved by Martin Marietta management. The unlevered free
cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 10.5% to 11.5%, which was chosen by each of the Martin Marietta Financial Advisors based upon their respective analyses of the
weighted average cost of capital of TXI.
In arriving at the implied enterprise value of Martin Marietta as a standalone entity excluding
synergies, the Martin Marietta Financial Advisors calculated the unlevered free cash flows that Martin Marietta is expected to generate during the time period from January 1, 2014 through December 31, 2023 based upon the Martin
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Marietta Base Case. The Martin Marietta Financial Advisors also calculated a range of terminal values of Martin Marietta at the end of the 10-year estimate period by applying a perpetual growth
rate ranging from 2.5% to 3.5% of the unlevered free cash flow of Martin Marietta for the terminal period based on the Martin Marietta Base Case. The terminal period cash flow reflected a steady-state operating environment as reviewed and approved
by Martin Marietta management. The unlevered free cash flows and the range of terminal values were then discounted to present values using a range of discount rates from 9.0% to 10.0%, which was chosen by J.P. Morgan and Deutsche Bank based upon
their respective analyses of the weighted average cost of capital of Martin Marietta. Barclays used a discount rate range of 9.5% to 10.5% based on its analysis of the weighted average cost of capital of Martin Marietta.
The ranges of discount rates used by the Martin Marietta Financial Advisors in their respective analyses were estimated using traditional
investment banking methodology, including an analysis of selected publicly traded companies that each Martin Marietta Financial Advisor deemed comparable to Martin Marietta and TXI. These publicly traded companies were analyzed to determine the
appropriate beta (an estimate of systematic risk) and target debt/total capital ratio to use in calculating the ranges of discount rates described above. The companies analyzed by each Martin Marietta Financial Advisor were the same as those used in
connection with the Public Trading Multiples Analysis for Martin Marietta and TXI described above.
In arriving at the implied equity
value per share of TXI, the Martin Marietta Financial Advisors calculated the equity value for TXI by adding to the implied enterprise value of TXI calculated as described above (i) cash and cash equivalents, less the value of its debt, in each
case as of the most recent public filings, (ii) estimated present value of the net operating loss carryforwards (referred to as the Stand-alone Tax Assets), and (iii) estimated present value of Martin Marietta managements
estimates of the Real Estate Proceeds. The Martin Marietta Financial Advisors calculated the estimated present value of the Stand-alone Tax Assets and the Real Estate Proceeds by applying a range of discount rates from 10.5% to 11.5% to such
amounts. The Martin Marietta Financial Advisors calculated the estimated present value of the Stand-alone Tax Assets as ranging from $109 million to $112 million and the estimated present value of the Real Estate Proceeds as ranging from $63 million
to $88 million.
In arriving at the implied equity value per share of Martin Marietta, the Martin Marietta Financial Advisors calculated
the equity value for Martin Marietta by adding to the implied enterprise value of Martin Marietta calculated as described above cash and cash equivalents as of December 31, 2013, and subtracting the value of its debt and non-controlling
interests as of December 31, 2013.
A summary of the implied valuation ranges of Martin Marietta and TXI that the Martin Marietta
Financial Advisors derived from such analyses is set forth below.
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Implied reference range
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TXI Base Case
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$68 to $87
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Martin Marietta Base Case (J.P. Morgan and Deutsche Bank)
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$86 to $115
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Martin Marietta Base Case (Barclays)
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$79 to $104
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Based upon the implied per share equity values for Martin Marietta and TXI described above, each Martin
Marietta Financial Advisor calculated a reference range of implied exchange ratios by dividing the equity value per share of TXI common stock at the high end of the calculated range by the equity value per share of Martin Marietta common stock at
the low end of the calculated range and the equity value per share of TXI common stock at the low end of the calculated range by the equity value per share of Martin Marietta common stock at the high end of the calculated range. A summary of the
range of implied exchange ratios that the Martin Marietta Financial Advisors derived from such analyses is set forth below.
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Implied reference range
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Base Case (J.P. Morgan and Deutsche Bank)
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0.589 to 1.014
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Base Case (Barclays)
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0.654 to 1.104
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Discounted Cash Flow Analysis Including Synergies J.P. Morgan
J.P. Morgan further calculated ranges of implied fully diluted equity value per share for TXI including the impact of 50% and 100% of the
expected synergies from the merger based upon estimates from Martin Marietta management. In arriving at the implied equity value per share of TXI with 50% and 100% of the synergies from the merger:
(i) J.P. Morgan calculated the unlevered free cash flows that are expected to be generated during the time period from January 1, 2014
through December 31, 2023 based upon estimates from Martin Marietta management for cost savings and other operating synergies, net of implementation costs (collectively referred to as Operational Synergies) in the fiscal years ended
December 31, 2014 through 2017 and certain extrapolations to those operational synergies as reviewed and approved by Martin Marietta management. By applying a range of discount rates from 9.0% to 10.0% and a perpetual growth rate ranging from
1.0% to 3.0% to the estimates, J.P. Morgan calculated the implied present value of Operational Synergies as ranging from $487 million to $667 million.
(ii) J.P. Morgan further calculated the implied synergistic benefits of the merger on the accelerated utilization of TXIs net operating
loss carry-forward tax assets (referred to as the Tax Asset Synergies) by comparing the total utilization of the net operating loss carry-forward tax assets in the merger relative to the utilization of the tax assets by TXI on a
stand-alone basis, both based on the TXI Base Case and Martin Marietta Base Case forecasts, and discounting these benefits to December 31, 2013 at a range of 9.0% to 10.0%. J.P. Morgan calculated the implied present value of Tax Asset Synergies
as ranging from $13 million to $14 million.
Each of the Martin Marietta Financial Advisors, based on their respective professional
judgments, (i) estimated the same range of discount rates for the Operational Synergies and the Tax Asset Synergies as they estimated for Martin Mariettas standalone unlevered free cash flows, as the realization of such synergies will be
dependent on execution by Martin Marietta following the consummation of the transaction, and (ii) calculated a perpetual growth rate for the Operational Synergies based on their respective analyses of the growth rate expected to be achieved for the
Operational Synergies, which was slightly more conservative than the growth rate estimated for the overall operations of the business of Martin Marietta because the Operational Synergies are mainly cost-related.
In calculating the implied equity value per share with 50% of synergies, J.P. Morgan summed the (i) implied fully diluted equity value
per share of TXI, excluding synergies, as described above, (ii) 50% of the present value of the Operational Synergies and (iii) the Tax Asset Synergies assuming only 50% of the Operational Synergies were achieved in the merger.
In calculating the implied equity value per share with 100% of synergies, J.P. Morgan summed the (i) implied fully diluted equity value
per share of TXI, excluding synergies, as described above, (ii) 100% of the present value of the Operational Synergies and (iii) the Tax Asset Synergies assuming 100% of the Operational Synergies were achieved in the merger.
A summary of the implied valuation ranges of Martin Marietta and TXI that J.P. Morgan derived from such analyses is set forth below.
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Implied reference range
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TXI Base Case (50% of synergies)
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$76 to $98
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TXI Base Case (100% of synergies)
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$84 to $109
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Based upon the implied per share equity values for Martin Marietta and TXI described above, J.P.
Morgan calculated a range of implied exchange ratios by dividing the equity value per share of TXI common stock at the high end of the calculated range by the equity value per share of Martin Marietta common stock at the low end of the calculated
range and the equity value per share of TXI common stock at the low end of the calculated range by the equity value per share of Martin Marietta common stock at the high end of the calculated range. J.P. Morgan noted that such analysis indicated a
range of implied exchange ratios as summarized in the table below.
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Implied reference range
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50% of synergies
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0.663 to 1.148
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100% of synergies
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0.732 to 1.276
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Other Information
One or more of the Martin Marietta Financial Advisors also reviewed, for reference purposes only and not as a component of their respective
fairness analyses, certain of the following information:
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Potential Pro Forma Value Creation Analysis
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An illustrative analysis prepared by the Martin Marietta Financial Advisors of the potential impact of the merger on the equity value per share
held by Martin Marietta shareholders by comparing the closing per share price of Martin Marietta common stock on January 23, 2014, prior to the Bloomberg report that Martin Marietta was in advanced discussions to acquire TXI, with the
illustrative equity value per share of Martin Marietta common stock after giving effect to the merger (and including the impact of certain operating synergies, tax benefits, transaction costs and additional shares of Martin Marietta common stock to
be issued to TXI stockholders in connection with the merger). This analysis indicated that the merger had the potential to increase equity value per share held by Martin Marietta shareholders.
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Analysis of Merger Impact on Earnings per Share (EPS)
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An illustrative analysis prepared by the Martin Marietta Financial Advisors of the potential pro forma financial effects of the merger on Martin
Mariettas standalone estimated EPS for calendar years 2014 through 2016 as provided by Martin Marietta management, after taking into account the earnings of TXI, the Operational Synergies expected to result from the merger, cash flows from the
Stand-alone Tax Assets, the Tax Asset Synergies and the Real Estate Proceeds expected to result from the merger, as well as estimated purchase accounting, estimated pro forma diluted share count and other pro forma adjustments (but excluding the
estimated impact of any restructuring and other non-recurring costs associated with the merger). The analysis indicated that, as of the date of the Martin Marietta Financial Advisors respective opinions and based on the 0.70 exchange ratio in
the merger, the merger was expected to be accretive relative to Martin Mariettas standalone estimated EPS (i) during all years in such period assuming refinancing of TXIs 9.25% Senior Notes due in 2020 at the expected closing of the
merger (assumed to be May 31, 2014 for illustrative purposes) and (ii) during 2015 through 2016 assuming refinancing of TXIs 9.25% Senior Notes due in 2020 at the first call date in August 2015. The actual results achieved by the
combined company may vary from projected results and the variations may be material.
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Historical share price analysis
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Historical trading prices during the 52-week period ended January 24, 2014 of TXIs common stock and Martin Marietta common stock ranged from approximately $53 to $77 per share and approximately $93 to $115
per share, respectively;
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The implied historical exchange ratios during the 52-week period ended January 24, 2014 were calculated by dividing the daily closing prices per share of TXI common stock during this period by those of Martin
Marietta common stock on the same day. Those implied historical exchange ratios ranged from 0.545 to 0.720.
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Sell-side equity research analyst price targets (undiscounted)
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As of January 24, 2014, sell-side equity research analysts price targets for TXI common stock and Martin Marietta common stock were $65 to $80 per share and $90 to $128 per share, respectively. Based on these
implied price target ranges, comparing the high price target for TXI to the low price target for Martin Marietta, and the low price target for TXI to the high price target for Martin Marietta, the Martin Marietta Financial Advisors calculated a
range of implied exchange ratios of 0.508 to 0.889. The public market trading price targets published by equity research analysts do not necessarily reflect current market trading prices for Martin Marietta common stock and TXI common stock, and
these estimates are subject to uncertainties, including the future financial performance of Martin Marietta and TXI and future financial market conditions.
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Precedent transaction multiples
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J.P. Morgan reviewed the (i) cement capacity price per ton paid and the latest 12 months EBITDA (referred to as LTM EBITDA) multiples paid in selected completed precedent transactions involving heavy
construction companies, as applied to non-cement LTM EBITDA, and (ii) LTM EBITDA multiples paid in selected completed precedent transactions involving heavy construction companies, as applied to a consolidated run-rate EBITDA, and determined to
review such analyses for reference purposes only, and not to rely on such analyses for valuation purposes, due to the highly cyclical nature of the business and a shortage of relevant precedent transactions announced during a corresponding point in
the cycle; and
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Barclays reviewed the LTM EBITDA and the forward 12 months expected EBITDA (based on Wall Street research, company filings and/or press releases published at the time of announcement) multiples paid in selected
completed precedent transactions involving heavy construction companies and determined to review such analyses for reference purposes only, and not to rely on such analysis for valuation purposes, due to the highly cyclical nature of the business
and a shortage of relevant precedent transactions announced during a corresponding point in the cycle.
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General
The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by
the Martin Marietta Financial Advisors. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the applications of those methods to the
particular circumstances and, therefore, is not necessarily susceptible to partial analysis or summary description. In arriving at their respective opinions, the Martin Marietta Financial Advisors did not attribute any particular weight to any
analyses or factors considered by them and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of their opinions. In addition, each of the Martin Marietta Financial Advisors may have given
various analyses and factors more or less weight than other analyses and factors, and may have deemed various assumptions more or less probable than other assumptions. The Martin Marietta Financial Advisors made their respective determinations as to
fairness after considering the results of all of their respective analyses assessed as a whole. Accordingly, each of the Martin Marietta Financial Advisors believes that the foregoing summary and its analyses must be considered as a whole and that
selecting portions of the foregoing summary and such analyses, or focusing on information presented in tabular format, without considering all of its analyses as a whole, could create a misleading or incomplete view of the processes underlying its
analyses and opinions. The ranges of valuations resulting from any particular analysis or combination of analyses described above should not be taken to be the view of any of the Martin Marietta Financial Advisors with respect to the actual value of
TXI or Martin Marietta or their respective shares of common stock.
In performing its analyses, each of the Martin Marietta Financial
Advisors considered and made numerous assumptions with respect to industry performance, general business, regulatory, economic, market and financial
64
conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Martin Marietta and TXI. No company, business or transactions used in those analyses
as a comparison is identical or directly comparable to Martin Marietta, TXI or the merger, and an evaluation of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed.
The estimates contained in the analyses performed by the Martin Marietta Financial Advisors and the valuation ranges resulting from any
particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such estimates. In addition, analyses relating to the value of
the businesses or securities do not necessarily purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. At the direction of the Martin Marietta board, the Martin Marietta Financial Advisors relied on
the financial forecasts of Martin Marietta and TXI (including the Synergies and the Real Estate Proceeds) provided to the Martin Marietta Financial Advisors. Accordingly, the estimates used in, and the results derived from, the analyses performed by
the Martin Marietta Financial Advisors are inherently subject to substantial uncertainty.
The type and amount of consideration payable in
the merger were determined through arms-length negotiations between Martin Marietta and TXI and were approved by the Martin Marietta board. None of the Martin Marietta Financial Advisors recommended any specific amount, type or mix of
consideration in connection with the merger (including any specific exchange ratio) or advised that any specific consideration constituted the only appropriate consideration for the merger. The opinions of each of the Martin Marietta Financial
Advisors and their joint presentation to the Martin Marietta board were among many factors considered by the Martin Marietta board in its evaluation of the merger and should not be viewed as determinative of the views of the Martin Marietta board or
Martin Marietta management with respect to the merger or the exchange ratio in the merger.
In selecting the Martin Marietta Financial
Advisors as its financial advisors in connection with the merger, Martin Marietta considered, among other things, their qualifications, expertise and reputations for providing financial advisory services. In addition, the Martin Marietta Financial
Advisors have longstanding relationships and are familiar with Martin Marietta and have substantial knowledge of and experience in the aggregates, cement and other heavy construction sectors. The Martin Marietta Financial Advisors are
internationally recognized investment banking firms that regularly engage in the valuation of businesses and their securities in connection with mergers and acquisitions, underwritings, competitive bids, secondary distributions of listed and
unlisted securities, private placements and valuations for estate, corporate and other purposes. For the foregoing reasons, Martin Marietta selected the Martin Marietta Financial Advisors as financial advisors in connection with the merger.
Pursuant to the terms of their respective engagement letters, each of the Martin Marietta Financial Advisors acted as financial advisors to
the Martin Marietta board in connection with the merger, and Martin Marietta agreed to pay the Martin Marietta Financial Advisors an aggregate transaction fee of approximately $32 million, approximately $6 million of which was payable in connection
with, and upon the rendering of, their opinions and approximately $26 million of which is contingent upon the consummation of the transaction. Martin Marietta has also agreed to reimburse each of the Martin Marietta Financial Advisors for their
respective expenses incurred in performing their services, including customary out-of-pocket travel and other expenses and reasonable fees and expenses of their legal counsel. In addition, Martin Marietta has agreed to indemnify each of the Martin
Marietta Financial Advisors and their respective affiliates, directors, officers, agents and employees and each person, if any, controlling any of the Martin Marietta Financial Advisors or any of their respective affiliates against certain
liabilities and expenses, including certain liabilities under the federal securities laws, related to or arising out of the engagement of each of the Martin Marietta Financial Advisors.
In the two years prior to the date of their opinions, (i) J.P. Morgan and Deutsche Bank have provided commercial or investment banking
services to Martin Marietta for which they have received customary
65
compensation, including, in each case, acting as joint lead arranger and joint bookrunner on Martin Mariettas revolving credit facility and term loan facility in November 2013,
(ii) none of the Martin Marietta Financial Advisors have provided any material financial advisory or material commercial or investment banking services to TXI and (iii) J.P. Morgans commercial banking affiliate has provided treasury
and securities services to NNS Holding, a significant stockholder of TXI, for which it has received customary compensation. J.P. Morgan, Deutsche Bank and Barclays may also seek to provide financial advisory, commercial or investment banking
services to Martin Marietta, TXI and their respective affiliates in the future and may receive fees for rendering of these services.
Opinion of TXIs Financial Advisor
TXI has retained Citigroup as its financial advisor in connection with the merger. In
connection with this engagement, TXI requested that Citigroup evaluate the fairness, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates) of the 0.70 exchange ratio provided for in the
merger agreement. On January 27, 2014, at a meeting of the TXI board held to evaluate the merger, Citigroup rendered to the TXI board an oral opinion, which was confirmed by delivery of a written opinion dated January 27, 2014, to the
effect that, as of that date and based on and subject to the matters described in its opinion, the exchange ratio was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates).
The full text of Citigroups written opinion, dated January 27, 2014, which describes the assumptions made, procedures
followed, matters considered and limitations on the review undertaken, is attached to this joint proxy statement/prospectus as Annex E and is incorporated into this joint proxy statement/prospectus by reference.
You are encouraged to, and
should, read the opinion carefully and in its entirety. Citigroups opinion was provided to the TXI board in connection with its evaluation of the exchange ratio from a financial point of view to holders of TXI common stock (other than Martin
Marietta and its affiliates) and does not address any other aspects or implications of the merger or the underlying business decision of TXI to effect the merger, the relative merits of the merger as compared to any alternative business strategies
that might exist for TXI or the effect of any other transaction in which TXI might engage. Citigroups opinion is not intended to be and does not constitute a recommendation to any securityholder as to how such securityholder should vote or act
on any matters relating to the merger. The following is a summary of Citigroups opinion and the methodology that Citigroup used to render its opinion. This summary is qualified in its entirety by reference to the full text of the opinion.
In arriving at its opinion, Citigroup:
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reviewed the merger agreement;
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held discussions with certain senior officers, directors and other representatives and advisors of TXI and received information and data from certain senior officers and other representatives and advisors of Martin
Marietta, in each case concerning the businesses, operations and prospects of TXI and Martin Marietta;
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reviewed certain publicly available business and financial information relating to TXI and Martin Marietta;
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reviewed certain internal financial forecasts for Martin Marietta and TXI and other information and data relating to TXI and Martin Marietta which were provided to or discussed with Citigroup by the managements of TXI
and Martin Marietta, including information relating to potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of Martin Marietta to result from the merger,
which Citigroup evaluated at the direction and with the consent of TXI;
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66
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reviewed the financial terms of the merger as set forth in the merger agreement in relation to, among other things, current and historical market prices and trading volumes of TXI common stock and Martin Marietta common
stock, TXIs and Martin Mariettas historical and projected earnings and other operating data and TXIs and Martin Mariettas capitalization and financial condition;
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analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citigroup considered relevant in evaluating those of TXI and Martin
Marietta;
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considered, to the extent publicly available, the financial terms of certain other transactions which Citigroup considered relevant in evaluating the merger;
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evaluated certain potential pro forma financial effects of the merger on TXI and Martin Marietta utilizing, among other things, the financial forecasts and estimates relating to TXI and Martin Marietta referred to above
after giving effect to the potential strategic implications and operational benefits anticipated by the management of Martin Marietta to result from the merger, which Citigroup evaluated at the direction and with the consent of TXI; and
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conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citigroup deemed appropriate in arriving at its opinion.
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In rendering its opinion, Citigroup assumed and relied, without independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citigroup and upon the assurances of the managements of TXI and Martin Marietta that they were not aware of any relevant information that was
omitted or remained undisclosed to Citigroup. Citigroup considered the selected precedent transactions that Citigroup reviewed to lack sufficient comparability due to various factors and circumstances that distinguish the merger from such
transactions and, accordingly, did not perform a selected precedent transactions analysis in reaching Citigroups opinion. With respect to financial forecasts and other information and data provided to or otherwise reviewed by or discussed with
Citigroup relating to TXI and Martin Marietta and potential pro forma financial effects of, and strategic implications and operational benefits resulting from, the merger, Citigroup was advised by the management of TXI, and Citigroup assumed, with
TXIs consent, that the forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements of TXI and Martin Marietta as to the future financial
performance of TXI and Martin Marietta, such strategic implications and operational benefits, and the other matters covered thereby. Citigroup also assumed, with TXIs consent, that the financial results (including the potential strategic
implications and operational benefits anticipated to result from the merger) reflected in such financial forecasts and other information and data will be realized in the amounts and at the times projected. Citigroup relied, at the direction of TXI,
upon the assessments of the management of TXI as to market and cyclical trends and prospects relating to the building materials industry and the potential impact of such trends and prospects on TXI and Martin Marietta, including the assumptions of
the management of TXI as to building materials prices, supply and demand trends reflected in the financial forecasts and other information and data utilized in Citigroups analyses, including the assessment of mid-cycle EBITDA for TXI and
Martin Marietta, all of which are subject to significant volatility and which, if different than as assumed, could have a material impact on Citigroups analyses or opinion. Citigroup assumed, at the direction of TXI, that there would be no
developments with respect to any of the foregoing that would be material to Citigroups analyses or opinion.
Citigroup assumed, with
TXIs consent, that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement, and that, in the course of obtaining the necessary regulatory or third
party approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on TXI, Martin Marietta or the contemplated benefits of the merger. Citigroup also
assumed, with TXIs consent, that the merger would qualify for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code. Citigroups opinion relates to the relative values of
TXI and Martin Marietta. Citigroup
67
did not express any opinion as to what the value of Martin Marietta common stock actually would be when issued pursuant to the merger or the prices at which TXI common stock or Martin Marietta
common stock would trade at any time. Citigroup did not make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of TXI or Martin Marietta, and Citigroup did not make any
physical inspection of the properties or assets of TXI or Martin Marietta. Citigroup expressed no view as to, and its opinion did not address, the underlying business decision of TXI to effect the merger, the relative merits of the merger as
compared to any alternative business strategies that might exist for TXI or the effect of any other transaction in which TXI might engage. Citigroups opinion did not address any terms (other than the exchange ratio to the extent expressly
specified in the opinion) or other aspects or implications of the merger, including, without limitation, the form or structure of the merger or any voting or other agreement, arrangement or understanding to be entered into in connection with or
contemplated by the merger or otherwise. Citigroup expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or
employees of any parties to the merger, or any class of such persons, relative to the exchange ratio. Citigroups opinion was necessarily based on information available to Citigroup, and financial, stock market and other conditions and
circumstances existing and disclosed to Citigroup, as of the date of its opinion. The credit, financial and stock markets are experiencing unusual volatility, and Citigroup expressed no opinion or view as to any potential effects of such volatility
on TXI, Martin Marietta or the contemplated benefits of the merger. Although subsequent developments may affect its opinion, Citigroup does not have any obligation to update, revise or reaffirm its opinion.
In preparing its opinion, Citigroup performed a variety of financial and comparative analyses, including those described below. The summary of
these analyses is not a complete description of the analyses underlying Citigroups opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods
of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citigroup arrived at its ultimate opinion based on the results of all
analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citigroup believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a
misleading or incomplete view of the processes underlying its analyses and opinion.
In its analyses, Citigroup considered industry
performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of TXI and Martin Marietta. No company, business or transaction used in those
analyses as a comparison is identical to TXI, Martin Marietta or the merger, and an evaluation of those analyses is not entirely mathematical. Rather, the analyses involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the acquisition, public trading or other values of the companies, business segments or transactions analyzed. Accordingly, such analyses may not necessarily utilize all companies or transactions
that could be deemed comparable to TXI, Martin Marietta or the merger.
The estimates contained in Citigroups analyses and the
valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition,
analyses relating to the value of businesses or securities do not necessarily purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold. Accordingly, the estimates used in, and the results derived from,
Citigroups analyses are inherently subject to substantial uncertainty.
The type and amount of consideration payable in the merger
was determined through negotiations between TXI and Martin Marietta and the decision to enter into the merger agreement was solely that of the TXI board. Citigroups opinion was only one of many factors considered by the TXI board in its
evaluation of the merger and should not be viewed as determinative of the views of the TXI board or management with respect to the merger or the exchange ratio.
68
As discussed on pages 44 and 45 in the section entitled Background of the Merger, in
mid-April 2014, Citigroup became aware of differences between the Provided Forecasts (as defined on page 44) and the Martin Marietta Internal Forecasts, which Citigroup was informed were due to an inadvertent error contained in the Provided
Forecasts and the application of a different assumed tax rate. On April 29, 2014, Citigroup reviewed with the TXI board the differences between Citigroups discounted cash flow analysis using the Provided Forecasts versus using the Martin
Marietta Internal Forecasts, which differences, Citigroup noted, resulted in an immaterial difference in the range of exchange ratios implied by its discounted cash flow analyses. Citigroup noted that, if Citigroup had received the Martin Marietta
Internal Forecasts as of January 27, 2014, those forecasts would not have changed Citigroups overall determination that, as of such date, based on all of the valuation analyses conducted by Citigroup, the exchange ratio of 0.70 Martin Marietta
shares for each TXI share was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates). Citigroup also noted that the receipt of the Martin Marietta Internal Forecasts in mid-April 2014
had not caused it to withdraw or modify its opinion, delivered to the TXI board on and dated as of January 27, 2014, to the effect that, as of that date and subject to the matters described in its opinion, the exchange ratio of 0.70 Martin
Marietta shares for each TXI share was fair, from a financial point of view, to the holders of TXI common stock (other than Martin Marietta and its affiliates).
The following is a summary of the material financial analyses presented to the TXI board in connection with Citigroups opinion.
The financial analyses summarized below include information presented in tabular format. In order to fully understand Citigroups financial analyses, the tables must be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a
misleading or incomplete view of Citigroups financial analyses.
Selected Public Companies Analysis
Citigroup performed separate selected publicly traded companies analyses of TXI and Martin Marietta in which Citigroup reviewed publicly
available financial and stock market information for TXI, Martin Marietta and the following seven selected publicly traded companies. Of the seven selected publicly traded companies, five are global producers of building materials and two are U.S.
producers of building materials. These companies were selected generally because they are publicly-traded companies in the heavyside building materials industry with significant operations in the United States (which is the industry and geography in
which TXI and Martin Marietta operate) and were not viewed as distressed companies:
Global Producers
U.S. Producers
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Vulcan Materials Company
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Citigroup did not include the following publicly traded companies in the heavyside building
materials industry for purposes of its selected companies analysis: GCC, Buzzi Unicem, Italcementi Group, Titan Cement and Vicat. Citigroup did not include such companies because they do not have significant operations in the United States relative
to the companies that Citigroup did select for its analysis. In addition, the companies that were not included by Citigroup each had relatively large private or insider ownership which, in Citigroups view, distorts the valuation analysis with
respect to such companies. Citigroup reviewed, among other things, the enterprise values of the selected companies, TXI and Martin Marietta, calculated as equity value (based on closing stock prices on January 24, 2014) plus debt and minority
interests, less cash, as a multiple of calendar years 2013 and 2014 EBITDA. Financial data of TXI, Martin Marietta and the selected public companies were based on public filings and other publicly available information. The TXI internal financial
forecasts for fiscal years ended May 31 were calendarized to December 31 using the following methodology: five-twelfths of the current fiscal year plus seven-twelfths of the next fiscal year for each calendar year. Citigroup then applied a
range of selected EBITDA multiples derived from the selected companies and Martin Marietta to TXIs calendar year 2014 estimated EBITDA and a range of selected EBITDA multiples derived from the selected companies and TXI to Martin
Mariettas calendar year 2014 estimated EBITDA. This indicated an implied per share equity reference range for TXI of approximately $51.75 to $58.25 per share and for Martin Marietta of approximately $95.75 to $110.00 per share (noting that the
closing price of TXI common stock on January 24, 2014 was $75.06 per share, the unaffected closing price of TXI common stock on December 12, 2013 was $58.54 per share and the implied merger consideration based on the exchange ratio
provided for in the merger agreement and the closing price of Martin Marietta common stock on January 24, 2014 was approximately $73.02 per share). Based on the implied per share equity reference ranges derived for TXI and Martin Marietta, this
analysis indicated the following implied exchange ratio reference range, as compared to the exchange ratio provided for in the merger agreement:
|
|
|
Implied Exchange Ratio Reference Range
|
|
Merger Agreement
Exchange Ratio
|
0.470 0.608
|
|
0.700
|
Discounted Cash Flow Analysis
Citigroup performed separate discounted cash flow analyses of TXI and Martin Marietta to calculate the estimated present value of the
standalone unlevered, after-tax free cash flows that each of TXI and Martin Marietta was forecasted to generate during fiscal years 2014 through 2018 (ending May 31, 2018 for TXI and ending December 31, 2018 for Martin Marietta). Based on
the internal financial forecasts of TXIs management for TXI, and the Provided Forecast (as defined on page 44) and public research for Martin Marietta, and historical financial results for TXI and Martin Marietta, unlevered, after-tax free
cash flows were calculated as estimated adjusted earnings before interest and taxes (referred to as adjusted EBIT), plus depreciation and amortization, less capital expenditures and adjustments for changes in working capital. In the case
of Martin Marietta, Citigroup performed this analysis without taking into account potential strategic implications and operational benefits anticipated by Martin Mariettas management to result from the merger (referred to as potential
synergies). Estimated terminal values for TXI and Martin Marietta were calculated by applying to each of TXIs and Martin Mariettas estimated mid-cycle EBITDA terminal value for the fiscal year 2018 mid-cycle EBITDA multiples of
8.0x to 10.0x in the case of TXI, and 9.5x to 11.0x in the case of Martin Marietta, which ranges were derived taking into consideration, among other things, historical mid-cycle EBITDA trading multiples for TXI, Martin Marietta and the selected
companies described above under Selected Public Companies Analysis. The cash flows and terminal values were then discounted to present value as of December 31, 2013 using discount rates ranging from 8.0% to 10.2% in the case of TXI
and 8.1% to 10.3% in the case of Martin Marietta, which ranges were derived taking into account, among other things, a weighted average cost of capital calculation based on factors commonly considered for purposes of calculating an estimated
weighted average cost of capital, including the trading volatility of the common stock of TXI, Martin Marietta and the selected companies described above under Selected Public Companies Analysis relative to the overall market. This
indicated an implied per share equity reference range for TXI of approximately $73.25 to $100.75 per share and for Martin Marietta of approximately $94.75 to $121.00 per share (without taking into
70
account potential synergies). Based on the implied per share equity reference ranges derived for TXI and Martin Marietta, this analysis indicated the following implied exchange ratio reference
ranges, as compared to the exchange ratio provided for in the merger agreement:
|
|
|
Implied Exchange Ratio Reference Range
|
|
Merger Agreement
Exchange Ratio
|
0.606 1.063
|
|
0.700
|
Contribution Analysis
Citigroup reviewed the relative financial contributions of TXI and Martin Marietta to the future financial performance of the combined company
on a pro forma basis based on historical financial results, the internal financial forecasts of TXIs management for TXI and the internal financial forecasts of Martin Mariettas management for Martin Marietta, without giving effect to
potential synergies anticipated by Martin Mariettas management to result from the merger. The TXI internal financial forecast for fiscal years ended May 31 was calendarized to December 31 using the following methodology:
five-twelfths of the current fiscal year plus seven-twelfths of the next fiscal year for each calendar year. For purposes of this analysis, Citigroup reviewed TXIs and Martin Mariettas equity value, enterprise value, estimated net
revenue, EBITDA, EBIT and net income for calendar years 2013, 2014 and 2015.
Citigroup then derived from the relative contributions
implied by these metrics a selected ownership percentage range for TXI of approximately 8% to 30% and for Martin Marietta of approximately 70% to 92%. Based on these ranges for TXI and Martin Marietta, this analysis indicated the following exchange
ratio reference range, as compared to the exchange ratio provided for in the merger agreement:
|
|
|
Selected Exchange Ratio Reference Range
|
|
Merger Agreement
Exchange Ratio
|
0.130 0.666
|
|
0.700
|
Pro Forma Financial Analysis
Citigroup reviewed the potential pro forma financial effects of the merger on, among other things, the combined companys full calendar
years 2014 and 2015 estimated EPS based on the internal financial forecasts of TXIs management for TXI and the internal financial forecasts of Martin Mariettas management for Martin Marietta, after taking into account potential pre-tax
run-rate synergies anticipated by Martin Mariettas management to result from the merger of $70 million per year, phased in over two years (in which Citigroup assumed, based on discussions with TXI management, $35 million of synergies would be
achieved in 2014 due to the expectation that the merger would close in mid-2014). The TXI projected financial information for fiscal years ended May 31 was calendarized to December 31 using the following methodology: five-twelfths of the
current fiscal year plus seven-twelfths of the next fiscal year for each calendar year. Based on the exchange ratio provided for in the merger agreement, this analysis indicated that the merger would be accretive to TXI calendar years 2014 and 2015
estimated EPS:
|
|
|
|
|
|
|
Percentage
Accretion/(Dilution)
|
|
EPS (including deal-related intangibles)
:
(1)
|
|
|
|
|
Calendar Year 2014
|
|
|
104.5
|
%
|
Calendar Year 2015
|
|
|
10.2
|
%
|
EPS (excluding deal-related intangibles)
:
(2)
|
|
|
|
|
Calendar Year 2014
|
|
|
126.5
|
%
|
Calendar Year 2015
|
|
|
16.8
|
%
|
(1)
|
Includes a preliminary assumption of amortization of intangible assets resulting from a preliminary assumption of percentage of excess purchase price, over TXI net tangible asset book value, that may be allocated to
intangible assets under acquisition accounting.
|
71
(2)
|
Excludes a preliminary assumption of amortization of intangible assets resulting from a preliminary assumption of percentage of excess purchase price, over TXI net tangible asset book value, that may be allocated to
intangible assets under acquisition accounting.
|
The actual results achieved by the combined company may vary from
forecasted results and the variations may be material.
Miscellaneous
Under the terms of Citigroups engagement, TXI has agreed to pay Citigroup for its financial advisory services in connection with the
merger an aggregate fee of approximately $14.1 million, $2.5 million of which was payable upon delivery of Citigroups opinion and approximately $11.6 million of which is contingent upon completion of the merger. TXI also has
agreed to reimburse Citigroup for reasonable expenses incurred by Citigroup in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Citigroup and related persons against liabilities, including
liabilities under the federal securities laws, arising out of its engagement.
In the past two years, Citigroup has not provided any
investment banking services to TXI unrelated to the merger. Citigroup may provide services unrelated to the merger to or with respect to TXI in the future for which Citigroup may receive compensation. Citigroup and its affiliates in the past have
provided, currently are providing and in the future may provide services to Martin Marietta unrelated to the merger, for which services Citigroup and its affiliates have received and expect to receive compensation, including, without limitation,
(1) loan portfolio management in 2012 and 2013 for which Citigroup received aggregate compensation of approximately $584,000, and (2) prepaid card services in 2013 for which Citigroup received
de minimis
compensation. In the
ordinary course of business, Citigroup and its affiliates may actively trade or hold the securities of TXI and Martin Marietta for its own account or for the account of its customers and, accordingly, may at any time hold a long or short position in
those securities. In addition, Citigroup and its affiliates, including Citigroup Inc. and its affiliates, may maintain relationships with TXI, Martin Marietta and their respective affiliates.
TXI selected Citigroup as its financial advisor in connection with the merger based on Citigroups reputation and experience. Citigroup
is an internationally recognized investment banking firm which regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of
listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The issuance of Citigroups opinion was authorized by Citigroups fairness opinion committee.
Financial Interests of Martin Marietta Directors and Officers in the Merger
In considering the recommendation of the Martin Marietta board that Martin Marietta shareholders vote to approve the issuance of Martin
Marietta common stock to TXI stockholders, you should be aware that some of Martin Mariettas directors and executive officers have financial interests in the merger that may be different from, or in addition to, their interests as Martin
Marietta shareholders. The board of directors of Martin Marietta was aware of and considered these potential interests, among other matters, in evaluating and negotiating the merger agreement and the merger, in approving the merger agreement and in
recommending the approval of the share issuance proposal and the Martin Marietta adjournment proposal.
Martin Mariettas directors
and executive officers will not receive any special compensation the payment of which is contingent upon completion of the merger. Certain of Martin Mariettas executive officers may receive compensation under Martin Mariettas executive
compensation programs attributable to additional responsibilities in connection with the merger and subsequent integration process. Martin Mariettas director and executive compensation programs are described in further detail in Martin
Mariettas Proxy Statement on Schedule 14A, filed with the SEC on April 17, 2014 and incorporated herein by reference.
72
Financial Interests of TXI Directors and Officers in the Merger
Certain members of the board of directors and executive officers of TXI may be deemed to have interests in the merger that are in addition to,
or different from, the interests of other TXI stockholders. TXIs board of directors was aware of these interests and considered them, among other matters, in approving the merger and the merger agreement and in making the recommendations that
the TXI stockholders approve and adopt the merger agreement and approve the merger and the other transactions contemplated by the merger agreement. For purposes of the TXI agreements and plans described below, to the extent applicable, the
completion of the transactions contemplated by the merger agreement will constitute a change of control, change in control or term of similar meaning. These interests are described in further detail below, and certain of them are quantified in the
narrative and table below.
Treatment of TXI Equity-Based Awards
Stock Options
. Upon consummation of the merger, each outstanding option to purchase TXI common stock held by TXIs executive
officers will automatically vest and convert into a vested option to purchase, on the same terms as were applicable prior to the merger, a number of shares of Martin Marietta common stock equal to the product determined by multiplying the total
number of shares of TXI common stock subject to that option immediately prior to the merger by 0.70 (rounded down to the nearest whole number of shares). The per-share exercise price for these options will be equal to the quotient determined by
dividing the exercise price per share of TXI common stock at which the option was exercisable immediately prior to the merger by 0.70 (rounded up to the nearest whole cent).
Stock Appreciation Rights
. Upon consummation of the merger, each stock appreciation right in respect of TXI common stock held by
TXIs executive officers will automatically vest and convert into a vested stock appreciation right, on the same terms as were applicable prior to the merger, corresponding to the number of shares of Martin Marietta common stock equal to the
product determined by multiplying the total number of shares of TXI common stock corresponding to that stock appreciation right immediately prior to the merger by 0.70 (rounded down to the nearest whole number of shares). The per-share base price
for these stock appreciation rights will be equal to the quotient determined by dividing the base price per share of TXI common stock corresponding to the stock appreciation right immediately prior to the merger by 0.70 (rounded up to the nearest
whole cent).
Restricted Stock Units
. Upon consummation of the merger, each TXI restricted stock unit held by TXIs executive
officers will automatically vest and convert into the right to receive a number of shares of Martin Marietta common stock equal to the product determined by multiplying the total number of shares of TXI common stock subject to the restricted stock
unit by 0.70, with cash provided in lieu of fractional shares.
For an estimate of the amounts that would become payable to each of
TXIs named executive officers on settlement of their unvested equity-based awards, see Quantification of Potential Payments and Benefits to TXIs Named Executive Officers in Connection with the Merger below. We estimate
that the aggregate amount that would become payable to TXIs three other executive officers on settlement of their unvested equity-based awards if the effective time of the merger were February 24, 2014, and based on a price per share of
TXI common stock of $73.95 (the average closing price of a share of TXI common stock on the five days following the announcement of the merger), is $2,893,283.
Change in Control Severance Agreements
TXI is party to change in control severance agreements with its executive officers that provide for the severance benefits described below upon
a termination of employment without cause or for good reason within two years following the consummation of the merger (a Qualifying Termination).
73
Severance Payment
. Upon a Qualifying Termination, the executive officer would become
entitled to a lump sum payment in an amount equal to the product of two multiplied by the sum of (a) the executive officers annual base salary in effect at the time of the Qualifying Termination (or in effect immediately prior to the
merger, if greater) and (b) the executive officers short- and long-term incentive compensation for the last performance periods that ended prior to the Qualifying Termination (or that ended prior to the merger, if greater).
Insurance Continuation
. Upon a Qualifying Termination, the executive officer may elect to continue receiving, for two years following
such Qualifying Termination, life, disability, accident, medical and dental insurance benefits substantially similar to those that he was receiving immediately prior to the Qualifying Termination and for which he would be required to pay no more
than the amounts he was paying immediately prior to such Qualifying Termination.
Reimbursement of Golden Parachute Excise Taxes
.
In the event that it is determined that any of the payments and benefits described above or any other payments would subject the executive officer to excise taxes under Section 4999 of the Internal Revenue Code, TXI will provide for
reimbursement of any such excise taxes.
For an estimate of the value of the payments and benefits described above that would become
payable under the change in control severance agreements to each of TXIs named executive officers, see Quantification of Potential Payments and Benefits to TXIs Named Executive Officers in Connection with the Merger
below. We estimate that the aggregate amount of the cash severance payments described above that would become payable to TXIs three other executive officers if the effective time of the merger were February 24, 2014 and they all
experienced a Qualifying Termination at such time is $3,605,612.
Executive Financial Security Plans
Under the Executive Financial Security Plans, if the employment of a TXI executive officer who is age 55 or older were terminated by TXI
without cause within two years after the merger or by the executive officer for any reason within one year after the merger, or if the plan is terminated, he would become fully vested in his benefits and would begin receiving payments as if he had
reached age 65. In the case of a TXI executive officer who is under age 55 whose employment is terminated by TXI without cause within two years after the merger or by the executive officer for any reason within one year after the merger, or if the
plan is terminated, five years would be added to his credited years of service, but he would not begin to receive payments until he reached age 65. Benefits under the Executive Financial Security Plans are payable to the executives or their
beneficiaries in equal monthly installments over, in the case of Mr. Brekhus, 102.5 months and, in the case of all other executive officers, until the later of death and the receipt of 180 months of benefits. Mr. Brekhus is currently fully
vested in his benefits under the Executive Financial Security Plans and, accordingly, would not be entitled to any incremental increase in benefits in connection with the merger.
For an estimate of the value of the incremental increase in benefits under the Executive Financial Security Plans payable to each of
TXIs named executive officers under the circumstances described above, see Quantification of Potential Payments and Benefits to TXIs Named Executive Officers in Connection with the Merger below. We estimate that the
aggregate amount of the incremental increase in benefits under the Executive Financial Security Plans payable to TXIs three other executive officers if the effective time of the merger were February 24, 2014 and, at such time, they all
experienced a termination of employment by the Company without cause or by the applicable executive for any reason is $1,957,335.
Restrictive
Covenants
Mr. Brekhus is also party to an employment agreement with TXI that contains a non-competition covenant and states he is
eligible to receive severance benefits pursuant to his change in control severance agreement. However, in the event his employment is terminated for any reason after the consummation of the merger, the non-competition covenant in the employment
agreement (and any similar provision of his Executive Financial Security Plan) will be deemed waived by TXI.
74
Indemnification Insurance
Pursuant to the terms of the merger agreement, TXIs directors and executive officers will be entitled to certain ongoing indemnification
and coverage under directors and officers liability insurance policies from Martin Marietta following the merger. Such indemnification and insurance coverage is further described in the section entitled The Merger
AgreementIndemnification and Insurance beginning on page 98.
Quantification of Potential Payments and Benefits to TXIs Named
Executive Officers in Connection with the Merger
The information set forth in the table below is intended to comply with
Item 402(t) of Regulation S-K, which requires disclosures of information about certain compensation for each of TXIs named executive officers that is based on or otherwise relates to the merger (merger-based compensation) and
assumes, among other things, that the named executive officers will incur a Qualifying Termination immediately following a change in control. For additional details regarding the terms of the payments described below, see the discussion under the
caption Financial Interests of TXI Directors and Officers in the Merger above.
Please note that the amounts indicated below
are estimates based on multiple assumptions that may or may not actually occur or be accurate on the relevant date, including assumptions described below, and do not reflect certain compensation actions that may occur before the completion of the
merger. For purposes of calculating such amounts, we have assumed:
|
|
|
February 24, 2014 as the closing date of the merger, and
|
|
|
|
a Qualifying Termination.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Cash
($)
(1)
|
|
|
Equity
($)
(2)
|
|
|
Pension/
NQDC
($)
(3)
|
|
|
Perquisites/
Benefits
($)
(4)
|
|
|
Tax
Reimbursement
($)
(5)
|
|
|
Total ($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mel G. Brekhus
|
|
|
1,509,126
|
|
|
|
3,251,605
|
|
|
|
0
|
|
|
|
23,297
|
|
|
|
0
|
|
|
|
4,784,028
|
|
Kenneth R. Allen
|
|
|
677,731
|
|
|
|
1,328,990
|
|
|
|
1,283,916
|
|
|
|
23,297
|
|
|
|
1,054,305
|
|
|
|
4,368,239
|
|
Frederick G. Anderson
|
|
|
701,847
|
|
|
|
1,437,123
|
|
|
|
554,173
|
|
|
|
33,716
|
|
|
|
821,438
|
|
|
|
3,548,297
|
|
James B. Rogers
|
|
|
698,417
|
|
|
|
1,492,092
|
|
|
|
215,057
|
|
|
|
33,716
|
|
|
|
656,949
|
|
|
|
3,096,231
|
|
Stephen D. Mayfield
|
|
|
553,615
|
|
|
|
1,185,457
|
|
|
|
308,151
|
|
|
|
22,123
|
|
|
|
568,531
|
|
|
|
2,637,877
|
|
(1)
|
The cash severance amount payable to each of the named executive officers consists of a lump sum payment in an amount equal to the product of two multiplied by the sum of (a) the named executive officers
annual base salary in effect at the time of the Qualifying Termination and (b) the named executive officers short- and long-term incentive compensation for the last performance periods that ended prior to the Qualifying Termination. The
base salary and incentive components of the cash severance amount are set forth in the table below. The cash severance amount is double-trigger.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Base Salary
Component
(a) ($)
|
|
|
Incentive
Component
(b) ($)
|
|
|
Total
Cash
(2x ((a) + (b))
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
Mel G. Brekhus
|
|
|
700,000
|
|
|
|
54,563
|
|
|
|
1,509,126
|
|
Kenneth R. Allen
|
|
|
320,000
|
|
|
|
18,866
|
|
|
|
677,731
|
|
Frederick G. Anderson
|
|
|
330,000
|
|
|
|
20,924
|
|
|
|
701,847
|
|
James B. Rogers
|
|
|
330,000
|
|
|
|
19,209
|
|
|
|
698,417
|
|
Stephen D. Mayfield
|
|
|
260,000
|
|
|
|
16,808
|
|
|
|
553,615
|
|
75
(2)
|
As described in more detail in Treatment of TXI Equity-Based Awards, upon the consummation of the merger, unvested stock options in respect of TXI common stock held by TXIs named executive officers
would vest and be converted into options in respect of Martin Marietta common stock and unvested restricted stock units in respect of TXI common stock held by TXIs named executives officers would vest and be converted into the right to receive
the merger consideration. In addition, upon consummation of the merger, stock appreciation rights in respect of TXI common stock held by Mr. Brekhus will convert into stock appreciation rights in respect of Martin Marietta common stock;
however, such awards are currently vested and not included in the amounts above. The amounts above and in the table below assume a price per share of TXI common stock of $73.95 (the average closing price of shares of TXI common stock on the five
days following the announcement of the merger). Set forth below are the values of each type of equity-based award that would become payable in connection with the merger. All such amounts are single-trigger.
|
|
|
|
|
|
|
|
|
|
Name
|
|
Options
($)
|
|
|
Restricted
Stock Units
($)
|
|
Named Executive Officers
|
|
|
|
|
|
|
|
|
Mel G. Brekhus
|
|
|
1,326,760
|
|
|
|
1,924,845
|
|
Kenneth R. Allen
|
|
|
795,958
|
|
|
|
533,032
|
|
Frederick G. Anderson
|
|
|
849,442
|
|
|
|
587,681
|
|
James B. Rogers
|
|
|
941,386
|
|
|
|
550,706
|
|
Stephen D. Mayfield
|
|
|
719,794
|
|
|
|
465,663
|
|
(3)
|
The amounts above are the estimated value of the incremental increase in benefits under the Executive Financial Security Plans that would become payable to each of the named executive officers upon a Qualifying
Termination. Mr. Brekhus is fully vested in his benefits under the Executive Financial Security Plans and would not be entitled to any incremental increase in benefits in connection with the merger. In the case of Messrs. Brekhus, Allen and
Anderson, benefits under the Executive Financial Security Plans would commence upon the first day of the calendar month following such Qualifying Termination and, in the case of Messrs. Rogers and Mayfield, such benefits would commence upon
attaining age 65. Benefits under the Executive Financial Security Plans are payable to the executives or their beneficiaries in equal monthly installments over, in the case of Mr. Brekhus, 102.5 months and, in the case of all other named
executive officers, until the later of death and the receipt of 180 months of benefits. For the named executive officers other than Mr. Brekhus, assumptions regarding mortality are based on the applicable mortality table for 2014
promulgated under Section 417(e)(3) of the Code. All such benefits are double-trigger.
|
(4)
|
The amounts above are the estimated value of premiums for life, disability, accident, medical and dental insurance benefits for each named executive officer and his or her eligible dependents until the second
anniversary of the Qualifying Termination. All such benefits are double-trigger.
|
(5)
|
The estimated excise tax reimbursements are subject to change based on the actual closing date of the merger, date of termination of employment (if any) of the named executive officer, interest rates then in effect and
certain other assumptions used in the calculations. The excise tax reimbursements are double-trigger.
|
Board of Directors Following the Merger
Pursuant to the merger agreement, promptly following the merger, a new director will be
appointed to Martin Mariettas board of directors. The new director will be a person who is mutually agreed upon by Martin Marietta and TXI (or one of TXIs current two largest stockholders designated by TXIs board of directors)
following good faith consultations between Martin Marietta and TXI (or such designee) and a determination by Martin Mariettas Nominating and Corporate Governance Committee that the proposed individual is an appropriate person to add to the
Martin Marietta board.
76
Material U.S. Federal Income Tax Consequences of the Merger
The following is a discussion of the material U.S. federal income tax consequences of the merger to U.S. holders (as defined below) of TXI
common stock.
This discussion addresses only holders of TXI common stock who hold their stock as a capital asset within the meaning of
Section 1221 of the Code (generally, property held for investment). This discussion does not address any non-income taxes or any foreign, state or local tax consequences of the merger, nor does it address any tax consequences arising under the
unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to holders of TXI common stock in light
of their particular circumstances or to holders subject to special rules (including controlled foreign corporations, passive foreign investment companies, companies that accumulate earnings to avoid U.S. federal income tax, tax-exempt organizations,
financial institutions, brokers or dealers in securities, insurance companies, regulated investment companies, real estate investment trusts, persons who hold TXI common stock as part of a hedging or conversion transaction or as part of a short-sale
or straddle, certain U.S. expatriates, persons whose functional currency is not the U.S. dollar, partnerships or other pass-through entities for U.S. federal income tax purposes or persons who acquired TXI common stock pursuant to the exercise of
options or otherwise as compensation). This discussion is based on the Code, applicable Treasury regulations, administrative interpretations and court decisions, each as in effect as of the date of this joint proxy statement/prospectus and all of
which are subject to change, possibly with retroactive effect. Any such change could affect the validity of this discussion.
For purposes
of this discussion, a U.S. holder is:
|
|
|
an individual citizen or resident of the United States;
|
|
|
|
a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
|
|
|
|
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
|
|
|
|
a trust (i) that is subject to the primary supervision of a court within the United States and all the substantial decisions of which are controlled by one or more U.S. persons or (ii) that has a valid
election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.
|
If a partnership (or an
entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds TXI common stock, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. Partners of
partnerships holding TXI common stock should consult their own tax advisors.
THE FOLLOWING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE
ANALYSIS OR DISCUSSION OF ALL OF THE POTENTIAL TAX CONSEQUENCES OF THE MERGER. PLEASE CONSULT YOUR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO YOU OF THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS AND THE APPLICABILITY AND
EFFECT OF U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN LIGHT OF YOUR PARTICULAR CIRCUMSTANCES.
General
TXI and Martin Marietta intend for the merger to qualify as a reorganization within the meaning of Section 368(a)
of the Code. It is a condition to Martin Mariettas obligation to complete the merger that Martin Marietta receive an opinion from Cravath, counsel to Martin Marietta, to the effect that the merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code. It is a condition to TXIs obligation to complete the merger that TXI receive an opinion from Wachtell Lipton, special counsel to TXI, to the effect that
77
the merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which
this document is a part, each of Martin Marietta and TXI expects to receive an opinion from its counsel to the same effect as the opinions described above.
These opinions will be based on customary assumptions and representations from Martin Marietta, TXI and Merger Sub, as well as certain
covenants and undertakings by Martin Marietta, TXI and Merger Sub. If any of the assumptions, representations, covenants or undertakings is incorrect, incomplete or inaccurate or is violated, the validity of the opinions described above may be
affected and the tax consequences of the merger could differ from those described in this joint proxy statement/prospectus.
An opinion of
counsel represents counsels best legal judgment but is not binding on the IRS or any court, so there can be no certainty that the IRS will not challenge the conclusions reflected in the opinion or that a court would not sustain such a
challenge. Neither Martin Marietta nor TXI intends to obtain a ruling from the IRS on the tax consequences of the merger. If the IRS were to successfully challenge the reorganization status of the merger, the tax consequences could
differ from those described in this joint proxy statement/prospectus.
U.S. Federal Income Tax Consequences to U.S. Holders
Accordingly, and on the basis of the opinions expected to be received in connection herewith, and subject to the discussion below
relating to the receipt of cash in lieu of fractional shares:
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|
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a U.S. holder of TXI common stock will not recognize any gain or loss upon the exchange of shares of TXI common stock for shares of Martin Marietta common stock in the merger;
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|
|
|
a U.S. holder of TXI common stock will have a tax basis in the Martin Marietta common stock received in the merger equal to the tax basis of the TXI common stock surrendered in exchange therefor; and
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|
|
|
a U.S. holder of TXI common stock will have a holding period for shares of Martin Marietta common stock received in the merger that includes its holding period for its shares of TXI common stock surrendered in exchange
therefor.
|
Cash in Lieu of Fractional Shares
No fractional shares of Martin Marietta common stock will be distributed to holders of TXI common stock in connection with the merger. A U.S.
holder that receives cash in lieu of a fractional share of Martin Marietta common stock as a part of the merger will generally recognize capital gain or loss measured by the difference between the cash received for such fractional share and the
portion of the U.S. holders tax basis in the shares of TXI common stock allocable to the fractional share. Such capital gain or loss will generally be long term capital gain or loss if the holding period for such shares of TXI common stock is
more than one year. Long term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates. The deductibility of capital losses is subject to limitations.
Backup Withholding
Backup withholding at the applicable rate (currently 28%) may apply with respect to certain payments, such as cash received for fractional
shares, unless the holder of the TXI common stock receiving such payments (i) is an exempt holder (generally, corporations, tax-exempt organizations, qualified pension and profit-sharing trusts, individual retirement accounts, or nonresident
aliens who, when required, provide certification as to their status) or (ii) provides a certificate containing the holders name, address, correct federal taxpayer identification number and a statement that the holder is exempt from backup
withholding. Backup withholding does not constitute an additional tax, and any amounts withheld from payments to a holder under the backup withholding rules will be allowed as a refund or credit against the holders U.S. federal income tax
liability, provided the required information is timely furnished to the IRS.
78
Accounting Treatment
Martin Marietta prepares its financial statements in accordance with GAAP. The merger will be accounted for in accordance with ASC 805. The
purchase price will be determined based on the number of common shares issued and the Martin Marietta stock price on the date of the merger. The purchase price will also include additional consideration related to converted TXI equity awards for
amounts attributable to pre-combination services. The purchase price will be allocated to the fair values of assets acquired and liabilities assumed. Any excess purchase price after this allocation will be assigned to goodwill. Under the acquisition
method of accounting, goodwill is not amortized but is tested for impairment at least annually, or more frequently if circumstances indicate potential impairment. The operating results of TXI will be part of the combined company beginning on the
date of the merger.
Regulatory Clearances Required for the Merger
The merger is subject to the requirements of the HSR act, which prevents Martin Marietta and TXI from completing the merger until the
applicable waiting period under the HSR Act is terminated or expires. On February 18, 2014, Martin Marietta and TXI filed the requisite notification and report forms under the HSR Act with the DOJ and the FTC. On March 20, 2014, Martin Marietta
voluntarily withdrew its notification and report forms. Martin Marietta refiled its notification and report forms on March 24, 2014 with the DOJ and the FTC. On April 23, 2014, the DOJ issued a second request. The waiting period initiated by the
second request will expire on the thirtieth day after Martin Marietta and TXI have substantially complied with the second request, unless that period is extended voluntarily by the parties or terminated sooner at the direction of the DOJ. The DOJ
and others may challenge the merger on antitrust grounds either before or after expiration or termination of the waiting period. At any time before or after the completion of the merger, any of the DOJ, the FTC or another person could take action
under the antitrust laws as it deems necessary or desirable in the public interest, including without limitation seeking to enjoin the completion of the merger, seeking a rescission or other unwinding of the merger, or permitting completion subject
to regulatory concessions or conditions. We cannot assure you that a challenge to the merger will not be made or that, if a challenge is made, it will not succeed.
Martin Marietta and TXI have each agreed to use their reasonable best efforts to take or cause to be taken all actions, and do, or cause to be
done, and assist and cooperate with each other in doing, all things reasonably appropriate to consummate and make effective, as soon as reasonably possible, the transactions contemplated by the merger agreement, subject to certain exceptions and
limitations, including that neither Martin Marietta nor TXI will be required to commit to or effect any action, prohibition, limitations, requirement or undertaking that would or would reasonably be expected to have a substantial detriment (as
defined on page 97). For a description of certain of Martin Mariettas and TXIs specific obligations in the merger agreement related to regulatory clearances, see the section entitled The Merger AgreementEfforts to Complete
the Merger beginning on page 97.
Exchange of Shares in the Merger
Prior to the effective time of the merger, Martin Marietta will appoint an exchange agent reasonably acceptable to TXI to handle the exchange
of TXI common stock for Martin Marietta common stock. Shares of TXI common stock (other than shares held by Martin Marietta, Merger Sub and TXI, which will be canceled) will be automatically converted into shares of Martin Marietta common stock
without the need for any action by the holders of such stock.
As promptly as reasonably practicable after the effective time of the
merger, Martin Marietta will cause the exchange agent to mail to each holder of record of TXI common stock a letter of transmittal specifying that delivery will be effected and risk of loss and title to any certificates representing TXI shares shall
pass only upon delivery of such certificates to the exchange agent. The letter will also include instructions explaining the procedure for surrendering TXI stock certificates, if any, in exchange for shares of Martin Marietta common stock.
79
TXI stockholders will not receive any fractional shares of Martin Marietta common stock in the
merger. Instead, each TXI stockholder will be entitled to receive a cash payment in lieu of any fractional shares of Martin Marietta common stock it otherwise would have received pursuant to the merger equal to the product obtained by multiplying
(i) the fractional share interest to which such holder would otherwise be entitled (after taking into account all shares of TXI common stock exchanged by such holder) by (ii) the last reported sale price of Martin Marietta common stock on
the NYSE on the last complete trading day prior to the date of the effective time of the merger.
After the effective time of the merger,
shares of TXI common stock will no longer be outstanding, will automatically be canceled and will cease to exist and certificates that previously represented shares of TXI common stock will represent only the right to receive the merger
consideration as described above. Until holders of TXI common stock have surrendered their shares to the exchange agent for exchange, those holders will not receive dividends or distributions declared or made with respect to shares of Martin
Marietta common stock with a record date after the effective time of the merger. However, upon the surrender of their shares of TXI common stock, such holders will receive the amount of dividends or other distributions with respect to shares of
Martin Marietta common stock theretofore paid with a record date after the effective time of the merger.
After the effective time of the
merger, TXI will not register any transfers of the shares of TXI common stock.
Martin Marietta shareholders need not take any action with
respect to their stock certificates.
Treatment of Stock Options and Other Equity-Based Awards
Stock Options.
Upon consummation of the merger, each outstanding option to purchase TXI common stock will automatically vest and convert
into a vested option to purchase, on the same terms as were applicable prior to the merger, a number of shares of Martin Marietta common stock equal to the product determined by multiplying the total number of shares of TXI common stock subject to
that option immediately prior to the merger by 0.70 (rounded down to the nearest whole number of shares). The per-share exercise price for these options will be equal to the quotient determined by dividing the exercise price per share of TXI common
stock at which the option was exercisable immediately prior to the merger by 0.70 (rounded up to the nearest whole cent).
Stock
Appreciation Rights.
Upon consummation of the merger, each stock appreciation right in TXI will automatically vest and convert into a vested stock appreciation right, on the same terms as were applicable prior to the merger, corresponding to the
number of shares of Martin Marietta common stock equal to the product determined by multiplying the total number of shares of TXI common stock corresponding to that stock appreciation right immediately prior to the merger by 0.70 (rounded down to
the nearest whole number of shares). The per-share base price for these stock appreciation rights will be equal to the quotient determined by dividing the base price per share of TXI common stock corresponding to the stock appreciation right
immediately prior to the merger by 0.70 (rounded up to the nearest whole cent).
Restricted Stock Units.
Upon consummation of the
merger, each TXI restricted stock unit (other than those described in the immediately following sentence) will automatically vest and convert into the right to receive a number of shares of Martin Marietta common stock equal to the product
determined by multiplying the total number of shares of TXI common stock subject to the restricted stock unit by 0.70, with cash provided in lieu of fractional shares.
Under certain circumstances, TXI may grant a limited number of TXI restricted stock units to certain employees (subject to Martin
Mariettas consent). These TXI restricted stock units will not vest upon the consummation of the merger (or a subsequent termination of employment), but will be converted upon consummation of the merger into Martin Marietta restricted stock
units, on the same terms as were applicable prior to the merger, with respect to a number of shares of Martin Marietta common stock determined by multiplying the number of shares of TXI common stock subject to the TXI restricted stock unit by 0.70
(rounded down to the nearest whole number of shares).
80
Dividends and Share Repurchases
Martin Marietta currently pays a quarterly cash dividend of $0.40 per share of common stock. Martin Marietta intends to continue its current
dividend practices through the consummation of the merger. Martin Mariettas initial stock repurchase program, which authorized the repurchase of 2.5 million shares of common stock, was announced in a press release dated May 6, 1994,
and has been updated as appropriate. The program does not have an expiration date. Martin Marietta announced in a press release, dated February 22, 2006, that its board of directors had authorized the repurchase of an additional five million
shares of common stock and in a press release, dated August 15, 2007, that its board of directors had authorized the repurchase of an additional five million shares of common stock. The merger agreement prohibits Martin Marietta from
repurchasing shares of its common stock until the earlier of the closing of the merger or the termination of the merger agreement.
TXIs board of directors has not approved a dividend on TXIs capital stock in calendar year 2014 and TXI did not pay dividends on
its capital stock in calendar year 2013. TXI does not currently have any share repurchase programs in place. The merger agreement prohibits TXI from declaring or paying dividends or other distributions on its common stock and from repurchasing
shares of its common stock until the earlier of the closing of the merger or the termination of the merger agreement.
Listing of Martin Marietta Common Stock
It is a condition to the completion of the merger that the Martin Marietta common stock to be issued to TXI stockholders pursuant to the merger
be approved for listing on the NYSE, subject to official notice of issuance.
De-Listing and Deregistration of TXI Common
Stock
Upon the completion of the merger, the TXI common stock currently listed on the NYSE will cease to be quoted on the NYSE and
will subsequently be deregistered under the Exchange Act.
Combined Company Headquarters
The headquarters of the combined company will be located in Raleigh, North Carolina at Martin Mariettas current headquarters. The
combined company will maintain a significant presence in Dallas.
No Appraisal Rights
Under the DGCL, holders of TXI common stock are not entitled to appraisal rights in connection with the merger. Under the NCBCA, the holders of
Martin Marietta common stock are not entitled to appraisal rights in connection with the share issuance proposal. For additional information, see the section entitled No Appraisal Rights beginning on page 143.
Certain Martin Marietta Forecasts
Martin Marietta does not as a matter of course make public forecasts as to future performance, earnings or other results, and forecasts for
extended periods of time are of particular concern to Martin Marietta due to the unpredictability of the underlying assumptions and estimates. However, in connection with the due diligence review of Martin Marietta by TXI, Martin Mariettas
management provided to TXI, as well as to TXIs and Martin Mariettas respective advisors and board of directors, non-public, internal financial forecasts regarding Martin Mariettas anticipated future operations for the fiscal years
ending December 31, 2014 through 2018. In addition, non-public internal financial forecasts regarding TXIs anticipated future operations for the fiscal years ending May 31, 2014 through 2023 were prepared by Martin Mariettas
management and were provided to the Martin Marietta board and approved by Martin Mariettas management for use by the Martin Marietta Financial Advisors. Martin Marietta has included below a summary of these forecasts to provide its
shareholders access to certain non-public information that was furnished to the above-listed parties and considered by the Martin Marietta Financial Advisors in connection with their respective financial analyses.
81
The internal financial forecasts were not prepared for the purpose of public disclosure, nor were
they prepared in compliance with published guidelines of the SEC, the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of financial forecasts, or GAAP. The summary of these internal
financial forecasts is not being included in this joint proxy statement/prospectus to influence your decision whether to vote for the merger proposal or the share issuance proposal, but because these internal financial forecasts were provided by
Martin Marietta to TXI, as well as to Martin Mariettas and TXIs respective advisors and board of directors, in the case of the internal financial forecasts related to Martin Mariettas anticipated future operations, and by Martin
Marietta to Martin Mariettas advisors and board of directors, in the case of the internal financial forecasts related to TXIs anticipated future operations. Ernst & Young, Martin Mariettas independent registered public
accounting firm, has neither examined, compiled nor performed any procedures with respect to the accompanying prospective financial information, and accordingly, Ernst & Young does not express an opinion or any other form of assurance with
respect thereto. The Ernst & Young report incorporated by reference in this joint proxy statement/prospectus relates to Martin Mariettas historical financial information. It does not extend to the prospective financial information and
should not be read to do so.
These internal financial forecasts were based on numerous variables and assumptions that are inherently
uncertain and may be beyond the control of Martin Mariettas management. Important factors that may affect actual results and cause the internal financial forecasts to not be achieved include, but are not limited to, risks and uncertainties
relating to Martin Mariettas or TXIs businesses (including their ability to achieve strategic goals, objectives and targets over applicable periods), industry performance, the regulatory environment, general business and economic
conditions and other factors described under Cautionary Statement Regarding Forward-Looking Statements beginning on page 18. The internal financial forecasts also reflect assumptions as to certain business decisions that are subject to
change. The internal financial forecasts assumed that no restrictions, terms or other conditions would be imposed in connection with the receipt of any necessary governmental, regulatory or other approvals or consents in connection with the
consummation of the proposed merger, including any divestitures or other actions contemplated by the merger agreement. As a result, actual results may differ materially from these internal financial forecasts. Accordingly, there can be no assurance
that the forecasts will be realized.
None of Martin Marietta, TXI or their respective affiliates, advisors, officers, directors or other
representatives can provide any assurance that actual results will not differ from these internal financial forecasts, and none of them undertakes any obligation to update, or otherwise revise or reconcile, these internal financial forecasts to
reflect circumstances existing after the date the internal financial forecasts were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the forecasts are shown to be in error. For
the avoidance of doubt, the internal financial forecasts for the fiscal year ended December 31, 2013 are historical estimates and do not represent actual results of operations. Since the date of the internal financial forecasts, Martin Marietta has
made publicly available its actual results of operations for the fiscal year ended December 31, 2013. You should review Martin Mariettas Annual Report on Form 10-K filed with the SEC on February 24, 2014 for this information.
None of Martin Marietta or its respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any shareholder or other person regarding Martin Mariettas ultimate performance that forecasted
results will be achieved. Martin Marietta has made no representation to TXI, in the merger agreement or otherwise, concerning these internal financial forecasts.
82
The following table presents a summary of the internal financial forecasts for Martin Marietta
that were prepared by Martin Mariettas management (dollars in millions and rounded to the nearest million):
(2)(3)
(4)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY/CY 12/31
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net Sales/Revenues
|
|
$
|
1,928
|
|
|
$
|
2,089
|
|
|
$
|
2,299
|
|
|
$
|
2,588
|
|
|
$
|
2,854
|
|
|
$
|
3,127
|
|
EBITDA
(1)
|
|
|
388
|
|
|
|
454
|
|
|
|
570
|
|
|
|
709
|
|
|
|
853
|
|
|
|
1,019
|
|
Capital Expenditures
|
|
|
(155
|
)
|
|
|
(155
|
)
|
|
|
(175
|
)
|
|
|
(225
|
)
|
|
|
(225
|
)
|
|
|
(225
|
)
|
(1)
|
EBITDA is defined as earnings before interest expense, income taxes and depletion, depreciation and amortization. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income
or net earnings as a measure of operating performance, or as an alternative to cash flows, as a measure of liquidity.
|
(2)
|
In addition to the forecasts set forth above, the following extension of such forecasts was prepared at the direction of Martin Mariettas management, and Martin Mariettas management reviewed such extension
and approved such extension for use by the Martin Marietta Financial Advisors in their financial analyses (dollars in millions and rounded to the nearest million): EBITDA for the fiscal/calendar years ended December 31, 2019E, 2020E, 2021E, 2022E
and 2023E was projected to be $788, $668, $794, $913 and $1,015, respectively. Net sales/revenues for the fiscal/calendar years ended December 31, 2019E, 2020E, 2021E, 2022E and 2023E were projected to be $2,814, $2,674, $2,941, $3,147 and $3,273,
respectively. Capital expenditures for the fiscal/calendar years ended December 31, 2019E, 2020E, 2021E, 2022E and 2023E were projected to be $(175), $(175), $(193), $(206) and $(214), respectively.
|
(3)
|
The estimated unlevered free cash flows for Martin Marietta calculated by the Martin Marietta Financial Advisors based on the internal financial forecasts for Martin Marietta prepared by Martin Mariettas
management and the extension thereof for the fiscal/calendar years ended December 31, 2014E-2023E were as follows (dollars in millions and rounded to the nearest million): $92, $283, $320, $420, $539, $471, $373, $413, $493, $566.
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(4)
|
The estimated unlevered free cash flows for Martin Marietta for the calendar/fiscal years ended December 31, 2014E-2018E calculated by Citigroup based on the Provided Forecasts (as defined on page 44) were as
follows (dollars in millions and rounded to the nearest million): $219, $271, $318, $423, $545. The estimated unlevered free cash flows for Martin Marietta for the calendar/fiscal years ended December 31, 2014E-2018E calculated by Citigroup
based on the Martin Marietta Internal Forecasts (as defined on page 44) were consistent with the estimated unlevered free cash flows for Martin Marietta for the calendar/fiscal years ended December 31, 2014E-2018E calculated by the Martin Marietta
Financial Advisors, which are described in footnote (3) above.
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EBITDA is a non-GAAP financial measure. A reconciliation of
EBITDA to the most directly comparable GAAP measure is provided below. The information contained in the reconciliation was prepared by Martin Marietta and was made available to TXI, as well as to TXIs and Martin Mariettas respective
advisors and board of directors.
EBITDA
(dollars in millions and rounded to the nearest million)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 12/31
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
EBITDA
|
|
$
|
388
|
|
|
$
|
454
|
|
|
$
|
570
|
|
|
$
|
709
|
|
|
$
|
853
|
|
|
$
|
1,019
|
|
Depletion, Depreciation & Amortization
|
|
|
(174
|
)
|
|
|
(169
|
)
|
|
|
(177
|
)
|
|
|
(177
|
)
|
|
|
(177
|
)
|
|
|
(177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
|
214
|
|
|
|
285
|
|
|
|
393
|
|
|
|
532
|
|
|
|
676
|
|
|
|
842
|
|
Income Tax Expense
(1)
|
|
|
(42
|
)
|
|
|
(64
|
)
|
|
|
(96
|
)
|
|
|
(139
|
)
|
|
|
(182
|
)
|
|
|
(232
|
)
|
Interest Expense
|
|
|
(54
|
)
|
|
|
(55
|
)
|
|
|
(52
|
)
|
|
|
(52
|
)
|
|
|
(49
|
)
|
|
|
(42
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
118
|
|
|
$
|
166
|
|
|
$
|
246
|
|
|
$
|
341
|
|
|
$
|
445
|
|
|
$
|
569
|
|
(1)
|
Non-GAAP income tax effect calculated using a rate of 26% in 2013E, 28% in 2014E and 2015E and 29% in 2016E, 2017E and 2018E.
|
83
The following table presents a summary of the internal financial forecasts for TXI that were
prepared by Martin Mariettas management and were provided to the Martin Marietta board and approved by Martin Mariettas management for use by the Martin Marietta Financial Advisors (dollars in millions and rounded to the nearest
million):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 5/31
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
|
2019E
|
|
|
2020E
|
|
|
2021E
|
|
|
2022E
|
|
|
2023E
|
|
Net Sales/Revenues
|
|
$
|
907
|
|
|
$
|
1,065
|
|
|
$
|
1,246
|
|
|
$
|
1,361
|
|
|
$
|
1,439
|
|
|
$
|
1,378
|
|
|
$
|
1,389
|
|
|
$
|
1,465
|
|
|
$
|
1,581
|
|
|
$
|
1,672
|
|
EBITDA
(1)
(2)
|
|
|
129
|
|
|
|
200
|
|
|
|
291
|
|
|
|
355
|
|
|
|
398
|
|
|
|
346
|
|
|
|
354
|
|
|
|
392
|
|
|
|
465
|
|
|
|
519
|
|
Capital Expenditures
|
|
|
(76
|
)
|
|
|
(48
|
)
|
|
|
(43
|
)
|
|
|
(56
|
)
|
|
|
(53
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
|
|
(40
|
)
|
(1)
|
EBITDA is defined as earnings before interest expense, income taxes and depletion, depreciation and amortization. EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income
or net earnings as a measure of operating performance, or as an alternative to cash flows, as a measure of liquidity.
|
(2)
|
Calendar year 2014-2024 EBITDA forecasts for TXI prepared on behalf of Martin Mariettas management based on the fiscal year internal financial forecasts for TXI that were prepared by Martin Mariettas
management were as follows (dollars in millions and rounded to the nearest million): $170, $253, $329, $380, $368, $351, $376, $435, $497, $493, $483. The estimated unlevered free cash flows for TXI calculated by the Martin Marietta Financial
Advisors based on the internal financial forecasts for TXI prepared by Martin Mariettas management for the fiscal years ended May 31, 2014E-2024E were as follows (dollars in millions and rounded to the nearest million): $63, $98, $137, $206,
$245, $238, $231, $247, $292, $331, $298.
|
Certain TXI Forecasts
TXI does not as a matter of course make public forecasts as to future performance or earnings beyond the current fiscal year and is especially
wary of making forecasts for extended periods due to the unpredictability of the underlying assumptions and estimates. However, in connection with TXIs regular planning process and with the merger, TXIs management prepared certain
unaudited internal financial forecasts, which were provided to TXIs board of directors and to its financial advisor, Citigroup, in connection with their respective analyses of the merger. The internal financial forecasts were also provided to
Martin Marietta and its financial advisors. We have included a summary of the internal financial forecasts below to give stockholders access to certain nonpublic information provided to such recipients for purposes of considering and evaluating the
merger. The inclusion of the internal financial forecasts should not be regarded as an indication that the board of directors of TXI or Martin Marietta, TXI, Martin Marietta, Merger Sub, Citigroup, J.P. Morgan, Deutsche Bank or Barclays or any other
recipient of this information considered, or now considers, it to be an assurance of the achievement of future results.
TXI advised the
recipients of the internal financial forecasts that its internal financial forecasts are subjective in many respects. The internal financial forecasts reflect numerous assumptions with respect to company performance, industry performance, general
business, economic, market and financial conditions and other matters, many of which are difficult to predict and are subject to significant economic and competitive uncertainties and beyond TXIs control. As a result, there can be no assurance
that the internal financial forecasts will be realized or that actual results will not be significantly higher or lower than projected.
The internal financial forecasts were prepared for internal use and to assist TXI, Martin Marietta and their respective financial advisors
with their due diligence investigations or financial analyses, as applicable, of TXI. The internal financial forecasts were not prepared with a view toward public disclosure or toward compliance with GAAP, published guidelines of the SEC or the
guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. The prospective financial information included in this joint proxy statement/prospectus has been
prepared by, and is the responsibility of, TXIs management. Ernst & Young, TXIs independent registered public accounting firm, has neither examined, compiled nor performed any procedures with respect to the accompanying
prospective
84
financial information, and accordingly, Ernst & Young does not express an opinion or any other form of assurance with respect thereto. The Ernst & Young report incorporated by
reference in this joint proxy statement/prospectus relates to TXIs historical financial information. It does not extend to the prospective financial information and should not be read to do so.
Forecasts of this type are based on estimates and assumptions that are inherently subject to factors such as company performance, industry
performance, general business, economic, regulatory, market and financial conditions, as well as changes to the business, financial condition or results of operations of TXI, including the factors described under Risk Factors and
Cautionary Statement Regarding Forward-Looking Statements, which factors may cause the internal financial forecasts or the underlying assumptions to be inaccurate. Since the internal financial forecasts cover multiple years, such
information by its nature becomes less reliable with each successive year. The internal financial forecasts do not take into account any circumstances or events occurring after the date they were prepared.
The following table presents a summary of TXIs internal financial forecasts (dollars in millions and rounded to the nearest million):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 5/31
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Net Sales/Revenues
|
|
$
|
946
|
|
|
$
|
1,072
|
|
|
$
|
1,175
|
|
|
$
|
1,276
|
|
|
$
|
1,419
|
|
EBITDA
(1)
(2)(3)
|
|
$
|
129
|
|
|
$
|
219
|
|
|
$
|
280
|
|
|
$
|
339
|
|
|
$
|
418
|
|
Capital Expenditures
|
|
$
|
76
|
|
|
$
|
90
|
|
|
$
|
43
|
|
|
$
|
43
|
|
|
$
|
40
|
|
(1)
|
For purposes of the internal financial forecasts, EBITDA is a non-GAAP measure representing income before interest, income taxes, depreciation and amortization. EBITDA is not necessarily comparable to similarly titled
measures used at other companies.
|
(2)
|
For purposes of financial advisor analyses, estimated EBITDA for TXI for fiscal years ended May 31 was calendarized to December 31 using the following methodology: five-twelfths of the current fiscal year plus
seven-twelfths of the next fiscal year for each calendar year. EBITDA for TXI for the calendar years ended December 31, 2013E-2015E was projected to be $103, $181 and $255 (dollars in millions and rounded to the nearest million).
|
(3)
|
The estimated unlevered free cash flows for TXI calculated by TXI based on the internal financial forecasts for the fiscal years ended May 31, 2014E-2018E were as follows (dollars in millions and rounded to the nearest
million): $39, $69, $168, $210, $264.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CY
12/31
(1)
|
|
2013E
|
|
|
2014E
|
|
|
2015E
|
|
Net Revenues
|
|
$
|
770
|
|
|
$
|
927
|
|
|
$
|
1,018
|
|
Net Income
|
|
$
|
(16
|
)
|
|
$
|
30
|
|
|
$
|
98
|
|
EBIT
|
|
$
|
33
|
|
|
$
|
99
|
|
|
$
|
167
|
|
(1)
|
TXIs fiscal year ends May 31. The forecasts set forth above were calendarized to December 31 using the following methodology: five-twelfths of the current fiscal year plus seven-twelfths of the next fiscal year
for each calendar year. EBIT for TXI for the fiscal years ended May 31, 2014E-2016E was projected to be $50, $134 and $190 (dollars in millions and rounded to the nearest million).
|
A reconciliation of EBITDA to the most directly comparable GAAP measure is provided below (dollars in millions and rounded to the nearest
million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 5/31
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Income before taxes
|
|
$
|
(18
|
)
|
|
$
|
65
|
|
|
$
|
120
|
|
|
$
|
178
|
|
|
$
|
257
|
|
Depreciation and amortization
|
|
$
|
78
|
|
|
$
|
85
|
|
|
$
|
91
|
|
|
$
|
92
|
|
|
$
|
92
|
|
Interest expense
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
EBITDA
|
|
$
|
129
|
|
|
$
|
219
|
|
|
$
|
280
|
|
|
$
|
339
|
|
|
$
|
418
|
|
85
A reconciliation of EBIT to the most directly comparable GAAP measure is provided below (dollars
in millions and rounded to the nearest million).
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 5/31
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
Income before taxes
|
|
$
|
(18
|
)
|
|
$
|
65
|
|
|
$
|
120
|
|
Interest expense
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBIT
|
|
$
|
50
|
|
|
$
|
134
|
|
|
$
|
190
|
|
A reconciliation of unlevered free cash flow to the most directly comparable GAAP measure is provided below
(dollars in millions and rounded to the nearest million).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 5/31
|
|
2014E
|
|
|
2015E
|
|
|
2016E
|
|
|
2017E
|
|
|
2018E
|
|
Income before taxes
|
|
$
|
(18
|
)
|
|
$
|
65
|
|
|
$
|
120
|
|
|
$
|
178
|
|
|
$
|
257
|
|
Income taxes
|
|
$
|
(15
|
)
|
|
$
|
(40
|
)
|
|
$
|
(57
|
)
|
|
$
|
(74
|
)
|
|
$
|
(98
|
)
|
Interest
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
|
$
|
69
|
|
Depreciation
|
|
$
|
78
|
|
|
$
|
85
|
|
|
$
|
91
|
|
|
$
|
92
|
|
|
$
|
92
|
|
(Increase)/decrease in net working capital
|
|
$
|
2
|
|
|
$
|
(19
|
)
|
|
$
|
(12
|
)
|
|
$
|
(12
|
)
|
|
$
|
(17
|
)
|
Capital expenditures
|
|
$
|
(76
|
)
|
|
$
|
(90
|
)
|
|
$
|
(43
|
)
|
|
$
|
(43
|
)
|
|
$
|
(40
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unlevered Free Cash Flow
|
|
$
|
39
|
|
|
$
|
69
|
|
|
$
|
168
|
|
|
$
|
210
|
|
|
$
|
264
|
|
Readers of this joint proxy statement/prospectus are cautioned not to place undue reliance on the specific
portions of the internal financial forecasts set forth above.
For the foregoing reasons, as well as the basis and assumptions on which
the internal financial forecasts were compiled, the inclusion of specific portions of the internal financial forecasts in this joint proxy statement/prospectus should not be regarded as an indication that such internal financial forecasts will be an
accurate prediction of future events, and they should not be relied on as such. Except as required by applicable securities laws, TXI does not intend to update or otherwise revise the internal financial forecasts or the specific portions presented
to reflect circumstances existing after the date when made or to reflect the occurrence of future events, even in the event that any or all of the assumptions are shown to be in error.
In addition, the internal financial forecasts have not been
updated or revised to reflect information or results after the date the internal financial forecasts were prepared or as of the date of this joint proxy statement/prospectus.
Litigation Related to the Merger
Following the announcement of the merger, a purported stockholder of TXI filed a putative class action lawsuit against TXI and members of the
TXI board, and against Martin Marietta and one of its affiliates, in the United States District Court for the Northern District of Texas, captioned
Maxine Phillips, Individually and on Behalf of All Others Similarly Situated v. Texas Industries,
Inc., et al.
, Case 3:14-cv-00740-B (the
Phillips
Action). The plaintiff in the
Phillips
Action alleges in an amended complaint, among other things, (i) that members of the TXI board breached their fiduciary duties
to TXIs stockholders by failing to fully disclose material information regarding the proposed transaction and by adopting the merger agreement for inadequate consideration and pursuant to an inadequate process, (ii) that Martin Marietta
and one of Martin Mariettas affiliates aided and abetted the TXI board in their alleged breaches of fiduciary duty and (iii) that the registration statement of which this joint proxy statement/prospectus forms a part contains certain material
misstatements and omissions in violation of Section 14(a) and 20(a) of the Exchange Act. The plaintiff in the
Phillips
Action seeks, among other things, injunctive relief enjoining TXI and Martin Marietta from proceeding with the merger,
rescission in the event the merger is consummated, damages, and an award of attorneys and other fees and costs. We believe the lawsuit is without merit.
86
The Merger Agreement
The following summarizes material provisions of the merger agreement. This summary does not purport to be complete and may not contain all of
the information about the merger agreement that is important to you. The rights and obligations of the parties are governed by the express terms and conditions of the merger agreement and not by this summary or any other information contained in
this joint proxy statement/prospectus. Martin Marietta shareholders and TXI stockholders are urged to read the merger agreement carefully and in its entirety, as well as this joint proxy statement/prospectus, before making any decisions regarding
the merger. This summary is qualified in its entirety by reference to the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus and is incorporated by reference herein.
In reviewing the merger agreement and this summary, please remember that they have been included to provide you with information regarding the
terms of the merger agreement and are not intended to provide any other factual information about Martin Marietta, TXI or any of their subsidiaries. The merger agreement contains representations and warranties and covenants by each of the parties to
the merger agreement, which are summarized below. These representations and warranties have been made solely for the benefit of the other parties to the merger agreement and:
|
|
|
were not intended as statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
|
|
|
|
have been qualified by certain confidential disclosures that were made to the other party in connection with the negotiation of the merger agreement, which disclosures are not reflected in the merger agreement; and
|
|
|
|
may apply standards of materiality in a way that is different from what may be viewed as material by you or other investors.
|
Moreover, information concerning the subject matter of the representations and warranties in the merger agreement and described below may have
changed since the date of the merger agreement and subsequent developments or new information qualifying a representation or warranty may have been included in this joint proxy statement/prospectus. In addition, if specific material facts arise that
contradict the representations and warranties in the merger agreement, Martin Marietta or TXI as applicable, will disclose those material facts in the public filings that it makes with the SEC if it determines that it has a legal obligation to do
so. Accordingly, the representations and warranties and other provisions of the merger agreement should not be read alone, but instead should be read together with the information provided elsewhere in this joint proxy statement/prospectus and in
the documents incorporated by reference into this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146.
Terms of the Merger
The merger agreement provides that, on the terms and subject to the conditions in the merger agreement, and in accordance with the NCBCA and
the DGCL, at the effective time of the merger, Merger Sub will merge with and into TXI. At the effective time of the merger, the separate corporate existence of Merger Sub will cease and TXI will continue as the surviving corporation in the merger
as a subsidiary of Martin Marietta.
Completion of the Merger
Unless the parties agree otherwise, the closing of the merger will take place on a date specified by TXI and Martin Marietta (sometimes
referred to herein as the parties), but no later than the second business day after all closing conditions have been satisfied or waived (other than those conditions that by their nature are to be satisfied or waived at the closing, but
subject to the satisfaction or waiver of those conditions). The merger will be effective at the time that the parties file articles of merger with the Secretary of State of the State of North Carolina and a certificate of merger with the Secretary
of State of the State of Delaware, unless the parties agree to a later time for the completion of the merger and specify that time in the articles of merger and certificate of merger.
87
We currently expect to complete the merger in the second quarter of 2014, subject to receipt of
required shareholder and stockholder approvals and regulatory clearances or other delays in the satisfaction or waiver of the conditions to the merger described below, but we cannot guarantee when or if the merger will be completed.
Merger Consideration
Under the terms of the merger agreement, at the effective time of the merger, each outstanding share of TXI common stock (other than shares
held by Martin Marietta, Merger Sub or TXI, which will be canceled) will be converted into the right to receive 0.70 shares of Martin Marietta common stock.
TXI stockholders will not receive any fractional shares of Martin Marietta common stock in the merger. Instead, each TXI stockholder will be
entitled to receive a cash payment in lieu of any fractional shares of Martin Marietta common stock it otherwise would have received pursuant to the merger equal to the product obtained by multiplying (i) the fractional share interest to which
such holder would otherwise be entitled (after taking into account all shares of TXI common stock exchanged by such holder) by (ii) the last reported sale price of Martin Marietta common stock on the NYSE on the last complete trading day prior
to the date of the effective time of the merger.
Martin Marietta Board of Directors Following the Merger
Pursuant to the merger agreement, promptly following the merger, a new director will be appointed to Martin Mariettas board of directors.
The new director will be a person who is mutually agreed upon by Martin Marietta and TXI (or one of TXIs current two largest stockholders designated by TXIs board of directors) following good faith consultations between Martin Marietta
and TXI (or such designee) and a determination by Martin Mariettas Nominating and Corporate Governance Committee that the proposed individual is an appropriate person to add to the Martin Marietta board.
Representations and Warranties
The merger agreement contains representations and warranties made by TXI to Martin Marietta and Merger Sub and by Martin Marietta and Merger
Sub to TXI. Certain of the representations and warranties in the merger agreement are subject to materiality or material adverse effect qualification (that is, they will not be deemed to be untrue or incorrect unless their failure to be true or
correct is material or would result in a material adverse effect). In addition, certain of the representations and warranties in the merger agreement are subject to knowledge qualifications, which means that those representations and warranties
would not be deemed untrue or incorrect as a result of matters of which certain officers of the party making the representation did not have actual knowledge.
The merger agreement provides that a material adverse effect means, with respect to a party, any fact, circumstance, effect,
change, event or development that materially adversely affects the business, properties, financial condition or results of operations of such party and its subsidiaries, taken as a whole. However, no fact, circumstance, effect, change, event or
development resulting from the following will be taken into account in determining whether there has been a material adverse effect:
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|
|
changes or conditions generally affecting the industries in which such party or its subsidiaries operates, except to the extent such effect has a disproportionate effect on such party and its subsidiaries, taken as a
whole, relative to others in such industries;
|
|
|
|
general economic or political conditions or securities, credit, financial or other capital market conditions in the United States or any foreign jurisdiction, except to the extent such effect has a disproportionate
effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in which such party and its subsidiaries operate;
|
88
|
|
|
any failure, in and of itself, by such party to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for any period
(provided that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a material adverse effect to the extent otherwise
permitted by the definition of material adverse effect);
|
|
|
|
the execution and delivery of the merger agreement or the public announcement or pendency of the transactions contemplated thereby, including the impact thereof on the relationships, contractual or otherwise, of such
party or any of its subsidiaries with employees, labor unions, customers, suppliers or partners;
|
|
|
|
any change, in and of itself, in the market price or trading volume of such partys securities or in its credit rating (provided that the facts or occurrences giving rise to or contributing to such change may be
deemed to constitute, or be taken into account in determining whether there has been or will be, a material adverse effect to the extent otherwise permitted by the definition of material adverse effect);
|
|
|
|
any change in applicable law, regulation or GAAP, except to the extent such effect has a materially disproportionate effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in
which such party and its subsidiaries operate;
|
|
|
|
geopolitical conditions, the outbreak or escalation of hostilities, any acts of war, sabotage or terrorism, except to the extent such effect has a disproportionate effect on such party and its subsidiaries, taken as a
whole, relative to others in the industries in which such party and its subsidiaries operate;
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|
|
|
any natural disaster, except to the extent such effect has a disproportionate effect on such party and its subsidiaries, taken as a whole, relative to others in the industries in which such party operates;
|
|
|
|
any litigation arising from allegations of a breach of fiduciary duty or other violation of applicable law relating to the merger agreement or the transactions contemplated thereby; and
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|
|
|
any taking of any action at the written request of another party to the merger agreement.
|
In
the merger agreement, Martin Marietta and Merger Sub have made representations and warranties regarding, among other topics:
|
|
|
organization, standing, corporate power, organizational documents and ownership of subsidiaries;
|
|
|
|
capital structure, including the number of shares of Martin Marietta common stock and equity-based awards outstanding;
|
|
|
|
authority to execute and deliver and perform its obligations under, and to consummate the transactions contemplated by, the merger agreement and the enforceability of the merger agreement against Martin Marietta;
|
|
|
|
the declaration of advisability of the merger agreement by Martin Mariettas board of directors and the approval of the merger agreement and the transactions contemplated thereby by Martin Mariettas board of
directors;
|
|
|
|
the inapplicability of state takeover statutes to the transactions contemplated by the merger agreement;
|
|
|
|
the absence of conflicts with, or violations of, organizational documents, applicable law and certain contracts as a result of Martin Marietta entering into the merger agreement and consummating the merger and the other
transactions contemplated by the merger agreement;
|
|
|
|
the consents and approvals required in connection with the transactions contemplated by the merger agreement;
|
|
|
|
SEC documents, financial statements, internal controls and accounting or auditing practices;
|
|
|
|
the absence of undisclosed liabilities and off-balance-sheet arrangements;
|
|
|
|
accuracy of information supplied or to be supplied in this joint proxy statement/prospectus;
|
89
|
|
|
the absence of a material adverse effect since December 31, 2012 and the conduct of business in the ordinary course in all material respects since December 31, 2012;
|
|
|
|
tax matters and intended tax treatment of the merger;
|
|
|
|
absence of certain litigation and governmental orders;
|
|
|
|
compliance with applicable laws and permits;
|
|
|
|
brokers fees and expenses payable in connection with the merger;
|
|
|
|
the receipt of opinions from the Martin Marietta Financial Advisors; and
|
|
|
|
the absence of prior activities by Merger Sub.
|
In the merger agreement, TXI has made
representations and warranties regarding, among other topics:
|
|
|
organization, standing, corporate power, organizational documents and ownership of subsidiaries;
|
|
|
|
capital structure, including the number of shares of TXI common stock, stock options and other equity-based awards outstanding;
|
|
|
|
authority to execute and deliver and perform its obligations under, and to consummate the transactions contemplated by, the merger agreement and the enforceability of the merger agreement against TXI;
|
|
|
|
the declaration of advisability of the merger agreement by TXIs board of directors and the approval of the merger agreement and the transactions contemplated thereby by TXIs board of directors;
|
|
|
|
the inapplicability of state takeover statutes to the transactions contemplated by the merger agreement;
|
|
|
|
the absence of conflicts with, or violations of, organizational documents, applicable law and certain contracts as a result of TXIs entering into the merger agreement and consummating the merger and the other
transactions contemplated by the merger agreement;
|
|
|
|
the consents and approvals required in connection with the transactions contemplated by the merger agreement;
|
|
|
|
SEC documents, financial statements, internal controls and accounting or auditing practices;
|
|
|
|
the absence of undisclosed liabilities and off-balance-sheet arrangements;
|
|
|
|
accuracy of information supplied or to be supplied in this joint proxy statement/prospectus;
|
|
|
|
the absence of a material adverse effect since May 31, 2013 and the conduct of business in the ordinary course in all material respects since May 31, 2013;
|
|
|
|
tax matters and intended tax treatment of the merger;
|
|
|
|
employee benefit matters, including matters related to employee benefit plans, and compliance with the Employee Retirement Income Security Act of 1974, as amended;
|
|
|
|
absence of certain litigation and governmental orders;
|
|
|
|
compliance with applicable laws and permits;
|
|
|
|
owned and leased real property;
|
|
|
|
collective bargaining agreements and other labor matters;
|
90
|
|
|
brokers fees and expenses payable in connection with the merger;
|
|
|
|
the receipt of an opinion from Citigroup;
|
|
|
|
insurance policies; and
|
|
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the absence of certain affiliate transactions.
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Conduct of Business
Each of Martin Marietta and TXI has undertaken certain covenants in the merger agreement restricting the conduct of their respective businesses
between the date of the merger agreement and the effective time of the merger. In general, each of Martin Marietta and TXI has agreed to (i) conduct its business in the ordinary course consistent with past practice in all material respects and
(ii) use its reasonable best efforts to preserve intact its business organization and advantageous business relationships and keep available the services of its current officers and employees.
In addition, between the date of the merger agreement and the effective time of the merger, Martin Marietta has agreed to various specific
restrictions relating to the conduct of its business, including with respect to the following (subject in each case to exceptions specified in the merger agreement or previously disclosed in writing to the other party as provided in the merger
agreement):
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declaring or paying dividends or other distributions, other than regular quarterly cash dividends not exceeding $0.40 per share and dividends or distributions by a wholly owned subsidiary to its parent;
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splitting, combining, subdividing or reclassifying any of its or its subsidiaries capital stock, equity interests or voting securities, or securities convertible into or exchangeable or exercisable for such stock,
interests or securities or issuing of any other securities in substitution for shares of its or its subsidiaries capital stock, other equity interests or voting securities;
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repurchasing, redeeming or otherwise acquiring its or its subsidiaries capital stock, voting securities or equity interests (or any securities convertible into or exchangeable or exercisable for such stock,
interests or securities);
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except in accordance with Martin Marietta stock plans, issuing, delivering, selling, granting, pledging or otherwise encumbering or subjecting to any lien (i) shares of its or its subsidiaries capital stock
(other than upon the exercise of stock options or the vesting or delivery of awards pursuant to stock plans), (ii) any of its or its subsidiaries other equity interest or voting securities, (iii) any securities convertible into or
exchangeable or exercisable for, or any rights to acquire, its or its subsidiaries capital stock, equity interests or voting securities, (iv) any warrants, calls, options or other rights to acquire any capital stock, equity interests or
voting securities of it or its subsidiaries, (v) any rights issued by it or its subsidiaries that are linked to the price or value of capital stock in it or its subsidiaries or the value of or any dividends or other distributions declared or
paid by it or its subsidiaries, (vi) Martin Marietta voting debt or (vii) Martin Marietta preferred stock;
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amending its articles of incorporation or by-laws, except as required by law or the rules and regulations of the SEC or the NYSE;
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making any material change in financial accounting methods, except as required by a change in GAAP;
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acquiring or agreeing to acquire any equity interest in, or business of, any corporation, partnership, association or other similar business entity or division thereof or any properties or assets (other than supplies
and inventory in the ordinary course of business consistent with past practice or a transaction solely between Martin Marietta and any of its wholly owned subsidiaries or between such wholly owned subsidiaries) that would reasonably be expected to
delay or make it more difficult to obtain any approval required in connection with the merger or that would reasonably be expected to prevent or materially delay or impede the consummation of the transactions contemplated by the merger agreement;
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soliciting or entering into any transaction or agreement requiring or reasonably expected to cause Martin Marietta to abandon, terminate, materially delay or not consummate, or that would require, or would reasonably be
expected to cause, Martin Marietta to fail to comply in any material respect with the merger agreement;
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taking actions or omitting to take actions that would or would be reasonably likely to (i) result in any of the conditions to the consummation of the merger not being satisfied, (ii) result in new or
additional required approvals from a governmental entity in connection with the transactions contemplated by the merger agreement or (iii) materially impair the ability of Martin Marietta, TXI or Merger Sub to consummate the transactions
contemplated by the merger agreement in accordance with the terms of the applicable agreements or materially delay such consummation; and
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authorizing or committing to, resolving or agreeing to take, any of the foregoing actions.
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In
addition, between the date of the merger agreement and the effective time of the merger, TXI has agreed to various specific restrictions relating to the conduct of its business, including with respect to the following (subject in each case to
exceptions specified in the merger agreement or previously disclosed in writing to the other party as provided in the merger agreement):
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declaring or paying dividends or other distributions, other than dividends or distributions by a wholly owned subsidiary to its parent;
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splitting, combining, subdividing or reclassifying any of its or its subsidiaries capital stock, equity interests or voting securities, or securities convertible into or exchangeable or exercisable for such stock,
interests or securities or issuing of any other securities in substitution for shares of its or its subsidiaries capital stock, other equity interests or voting securities;
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repurchasing, redeeming or otherwise acquiring its or its subsidiaries capital stock, voting securities or equity interests (or any securities convertible into or exchangeable or exercisable for such stock,
interests or securities);
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except for grants of certain specified TXI restricted stock units, issuing, delivering, selling, granting, pledging or otherwise encumbering or subjecting to any lien (i) shares of its or its subsidiaries
capital stock (other than upon the exercise of stock options and stock appreciation rights or the vesting or delivery of other awards pursuant to stock plans), (ii) any other of its or its subsidiaries equity interest or voting
securities, (iii) any securities convertible into or exchangeable or exercisable for, or any rights to acquire, its or its subsidiaries capital stock, equity interests or voting securities, (iv) any warrants, calls, options or other
rights to acquire any capital stock, equity interests or voting securities of it or its subsidiaries, (v) any rights issued by it or its subsidiaries that are linked to the price or value of capital stock in it or its subsidiaries or the value
of or any dividends or other distributions declared or paid by it or its subsidiaries, (vi) TXI voting debt or (vii) TXI preferred stock;
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amending its organizational documents or amending in any material respect the organizational document of any if its subsidiaries, except as required by law or the rules and regulations of the SEC or the NYSE;
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granting to any current or former (i) director of TXI, (ii) director of any TXI subsidiary (in his or her capacity as a director), (iii) executive officer of TXI or (iv) officer or employee of TXI or
any TXI subsidiary who is a party to or participant in a plan or agreement that provides for certain severance benefits upon or following the effective time of the merger, any increase in compensation, bonus or benefits or any type of compensation
or benefit to which such person was not already entitled, except to the extent required under any TXI benefit plan;
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granting to directors, officers or employees not described in the preceding bullet any increase in compensation, bonus or benefits or any type of compensation or benefit to which such person was not already entitled,
except in the ordinary course of business consistent with past practice or to the extent required under any TXI benefit plan;
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engaging in promotions of employees, filling open employee positions or modifying employee job descriptions, except in the ordinary course of business consistent with past practice;
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granting any person severance, retention, change in control or termination compensation or benefits (or any increase therein), except with respect to new hires or promotions in the ordinary course of business consistent
with past practice or to the extent required under a TXI benefit plan;
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entering into or adopting material TXI benefit plans or amending in any material respect any material TXI benefit plan or award issued under such TXI benefit plan, except in the ordinary course of business consistent
with past practice or as necessary to comply with applicable law;
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making any material change in financial accounting methods, except as required by a change in GAAP;
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acquiring or agreeing to acquire any equity interest in, or business of, any corporation, partnership, association or other similar business entity or division thereof or any properties or assets (other than supplies
and inventory in the ordinary course of business consistent with past practice or a transaction solely between TXI and any of its wholly owned subsidiaries or between such wholly owned subsidiaries, in each case, in the ordinary course of business
consistent with past practice) if the amount of the consideration paid by TXI or its subsidiaries in connection with such transaction or transactions would exceed $1 million individually or $5 million in the aggregate;
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selling, leasing, mortgaging, encumbering, subjecting to a lien or otherwise disposing of properties or assets (other than sales of products and services in the ordinary course of business consistent with past practice)
that individually have a fair market value greater than $1 million or in the aggregate have a fair market value greater than $5 million;
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incurring indebtedness, except for (i) indebtedness incurred in the ordinary course of business consistent with past practice not to exceed $5 million in the aggregate, (ii) indebtedness in replacement of
existing indebtedness, (iii) guarantees by TXI of indebtedness of a wholly owned subsidiary or guarantees by a subsidiary of indebtedness of TXI or any other wholly owned TXI subsidiary, in each case, in the ordinary course of business
consistent with past practice, (iv) intercompany indebtedness in the ordinary course of business consistent with past practice and (v) borrowings under TXIs revolving credit facility in the ordinary course of business consistent with
past practice;
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making or agreeing to capital expenditures, other than capital expenditures set forth on a confidential capital plan provided by TXI to Martin Marietta or expenditures required to be made by a governmental entity or in
response to an emergency;
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entering into or amending any contract, if such contract or amendment would reasonably be expected to prevent or materially impede, interfere with or delay the consummation of the transactions under the merger
agreement;
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soliciting or entering into any transaction or agreement requiring or reasonably expected to cause TXI to abandon, terminate, materially delay or not consummate, or that would require, or would reasonably be expected to
cause, TXI to fail to comply in any material respect with the merger agreement;
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entering into or amending material contracts, to the extent that consummation of the merger or compliance by TXI or its subsidiaries with the merger agreement would reasonably be expected to conflict with, cause a
default under, give rise to a right of termination, cancelation or acceleration of an obligation under, result in the creation of a lien upon material properties or assets of TXI or its subsidiaries or require Martin Marietta, TXI or any of their
respective subsidiaries to license or transfer any of its material properties or assets under, or give rise to any increased, additional, accelerated or guaranteed right or entitlements of any third party under, or result in any material alteration
of, such material contract or amendment;
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entering into, amending or terminating collective bargaining or other labor union contracts, other than in the ordinary course of business consistent with past practice;
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waiving, releasing, assigning or settling any claim, action or proceeding, other than for an amount equal to or less than amounts reserved with respect thereto or $1 million in the aggregate;
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abandoning, encumbering, conveying or exclusively licensing material intellectual property rights or entering into agreements that impose material restrictions on TXI or its subsidiaries with respect to intellectual
property rights owned by any third party, in each case, other than in the ordinary course of business consistent with past practice;
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materially amending or modifying certain material contracts, including non-compete agreements, joint ventures and partnerships, other than in the ordinary course of business;
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changing any material method of tax accounting, settling any material tax claim or proceeding or making any material tax election, in each case, other than in the ordinary course of business consistent with past
practice;
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entering into a new line of business outside its existing business;
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taking actions or omitting to take actions that would or would be reasonably likely to (i) result in any of the conditions to the consummation of the merger not being satisfied, (ii) result in new or
additional required approvals from a governmental entity in connection with the transactions contemplated by the merger agreement or (iii) materially impair the ability of Martin Marietta, TXI or Merger Sub to consummate the transactions
contemplated by the merger agreement in accordance with the terms of the applicable agreements or materially delay such consummation;
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dissolving or liquidating any of its subsidiaries; and
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authorizing or committing to, resolving or agreeing to take, any of the foregoing actions.
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No Solicitation of Alternative Proposals
Martin Marietta and TXI have each agreed, from the time of the execution of the merger agreement until the earlier of the consummation of the
merger or the termination of the merger agreement, not to, and not to authorize or permit any of its respective affiliates, directors, officers, employees or representatives to, directly or indirectly:
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solicit, initiate or knowingly encourage, induce or facilitate a takeover proposal (as defined below) or an inquiry or proposal that may reasonably be expected to lead to a takeover proposal; or
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participate in discussions or negotiations regarding, or furnish to any person information with respect to, or cooperate with any person with respect to, a takeover proposal or an inquiry or proposal that may reasonably
be expected to lead to a takeover proposal.
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Additionally, except as permitted by the merger agreement and described below,
each party was required, upon execution of the merger agreement, to (i) immediately cease and cause to be terminated all existing discussions or negotiations with respect to a takeover proposal or an inquiry or proposal that may reasonably be
expected to lead to a takeover proposal and (ii) request prompt return or destruction of all confidential information previously furnished to any person or its representatives with respect to a takeover proposal and immediately terminate all
physical and electronic data room access previously granted to any such person.
Notwithstanding these restrictions, the merger agreement
provides that, if at any time prior to obtaining the approval of its shareholders or stockholders, as applicable, Martin Marietta or TXI receives a bona fide written takeover proposal that its board of directors determines in good faith (after
consultation with outside counsel and a financial advisor of nationally recognized reputation) constitutes or is reasonably expected to result in a superior proposal (as defined below) and which did not result from a breach of the non-solicitation
obligations set forth in the merger agreement or, in the case of TXI, the exclusivity agreement entered into between Martin Marietta and TXI, then Martin Marietta or TXI, as applicable, may (i) furnish information with respect to itself and its
subsidiaries to the person making such takeover proposal and its representatives pursuant to a customary confidentiality agreement (provided that such information must have been previously provided to the other party
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or must be provided to the other party prior to or substantially concurrent with the time that it is provided to such person) and (ii) participate in discussions regarding the terms of such
takeover proposal and negotiate such terms with the person making such takeover proposal.
The merger agreement also requires each party
(i) to notify the other within 24 hours of obtaining knowledge of a takeover proposal or any inquiry or proposal that may reasonably be expected to lead to a takeover proposal, including the material terms of any such takeover proposal
(including any changes thereto) and the identity of the person making a takeover proposal, (ii) to keep the other informed in all material respects on a reasonably current basis of the status and details of takeover proposals and (iii) to
provide the other, as soon as practicable, all drafts of agreements relating to a takeover proposal and all written proposals containing material terms of and counterproposals to takeover proposals that are exchanged with the person making the
takeover proposal or any of its affiliates or representatives.
For purposes of the merger agreement, takeover proposal means
any bona fide proposal or offer (whether or not in writing) from a third party with respect to any (i) merger, consolidation, share exchange, other business combination or similar transaction involving a party or any of its subsidiaries,
(ii) sale, lease, contribution or other disposition, directly or indirectly, of any business or assets of a party or its subsidiaries representing 20% or more of the consolidated revenues, net income or assets of such party and its
subsidiaries, taken as a whole, (iii) issuance, sale or other disposition, directly or indirectly, to any person or group of securities representing 20% or more of the total outstanding voting power of a party, (iv) transaction in which
any person will acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of any group which beneficially owns, or has the right to acquire beneficial ownership of, 20% or more of a
partys common stock or (v) combination of the foregoing.
For purposes of the merger agreement, superior proposal
means any bona fide written offer from a third party that, if consummated, would result in such person (or the stockholders of such person) acquiring, directly or indirectly, more than 50% of the voting power of a partys common stock or all or
substantially all the assets of a party and its subsidiaries, taken as a whole, and which offer, in the good faith judgment of such partys board of directors (after consultation with outside counsel and a financial advisor of nationally
recognized reputation) is more favorable to the partys shareholders or stockholders, as applicable, than the merger, taking into account all of the terms and conditions of, and the likelihood of completion of, such offer and of the merger
agreement (including any changes to the terms of the merger agreement proposed in response to such superior proposal or otherwise).
Changes in Board Recommendations
Martin Marietta and TXI have agreed under the merger agreement to, through their respective board of directors, recommend to their shareholders
or stockholders, as applicable, the share issuance proposal and the merger proposal, respectively, and to include such recommendations in this joint proxy statement/prospectus.
The merger agreement provides that, subject to the exceptions described below, neither Martin Mariettas board of directors, nor
TXIs board of directors will (i) withdraw, modify (in a manner adverse to the other party) or propose publicly to withdraw or modify (in a manner adverse to the other party) its recommendation of the share issuance proposal or the merger
proposal, as applicable, (ii) approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, a takeover proposal or (iii) adopt, or propose publicly to adopt, or allow such party or any of its
affiliates to enter into an agreement or arrangement relating to, a takeover proposal (other than a confidentiality agreement otherwise permitted by the merger agreement).
Notwithstanding the foregoing restrictions, at any time prior to obtaining the relevant shareholder or stockholder approval, the board of
directors of Martin Marietta or TXI, as applicable, may, if it determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) that the failure to take such action would be inconsistent
with its fiduciary duties under applicable law, (i) make
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an adverse recommendation change or terminate the merger agreement to enter into a binding agreement providing for a superior proposal (in each case following receipt of a takeover proposal that
did not result from a breach of the non-solicitation provisions in the merger agreement and that it determines in good faith, after consultation with outside counsel and a financial advisor of nationally recognized reputation, constitutes a superior
proposal) or (ii) make an adverse recommendation change in response to an intervening event (as defined below). However, no adverse recommendation change and no termination of the merger agreement to accept a superior proposal may be made
unless such party first delivers to the other party written notice of its intent to take such action specifying the reasons therefor and reaffirms in good faith, four business days after the delivery of such notice, after consultation with outside
counsel and a financial advisor of nationally recognized reputation, that (i) such takeover proposal continues to constitute a superior proposal or such intervening event remains in effect and (ii) the failure to make an adverse
recommendation change would be inconsistent with its fiduciary duties.
In the event of any revisions to a superior proposal, a party must
deliver a new notice of superior proposal to the other party and again comply with the requirements set forth above with respect to such revised superior proposal (except that references to the four business day period will, after the expiration of
the initial four business day period, be deemed to be references to a three business day period). In determining whether to make an adverse recommendation change or terminate the merger agreement in response to a superior proposal, a partys
board of directors must take into account any changes to the terms of the merger agreement proposed by the other party and if requested by the other party, engage in good faith negotiations with such party regarding any proposed changes.
For purposes of the merger agreement, intervening event means, with respect to either Martin Marietta or TXI, a material event,
fact, circumstance, development or occurrence that is unknown to or by the board of directors of such party as of the date of the merger agreement (or if known, the magnitude or material consequences of which were not known or understood by such
board of directors on the date of the merger agreement), which event, fact, circumstance, development, occurrence, magnitude or material consequence becomes known to or by such board of directors prior to obtaining the relevant shareholder or
stockholder approval, provided, however, that the following will not constitute an intervening event: (i) any action taken by a party pursuant to and in compliance with the antitrust-related covenants in the merger agreement, (ii) changes
in the market price or trading volume of a partys securities or its credit ratings and (iii) the receipt, existence or terms of a takeover proposal or any inquiry relating thereto or the consequences thereof.
Efforts to Obtain Required Shareholder Votes
TXI has agreed to hold a meeting of its stockholders as soon as is reasonably practicable for the purpose of obtaining TXI stockholder approval
of the merger proposal. Subject to the ability of the TXI board to make an adverse recommendation change, TXI is required to use its reasonable best efforts to solicit stockholder approval of the merger proposal. Unless the merger agreement is
validly terminated in accordance with its terms, TXI must submit the merger proposal to a stockholder vote even if its board of directors no longer recommends the merger proposal. The board of directors of TXI has approved the merger by a unanimous
vote of the directors present at the relevant meeting and adopted resolutions directing that the merger proposal be submitted to the TXI stockholders for their consideration.
Martin Marietta has also agreed to hold a meeting of its shareholders as soon as reasonably practicable for the purpose of obtaining Martin
Marietta shareholder approval of the share issuance proposal. Subject to the ability of the Martin Marietta board to make an adverse recommendation change, Martin Marietta is required to use its reasonable best efforts to solicit shareholder
approval of the share issuance proposal. Unless the merger agreement is validly terminated in accordance with its terms, Martin Marietta must submit the share issuance proposal to a shareholder vote even if its board of directors no longer
recommends the share issuance proposal. The board of directors of Martin Marietta has unanimously approved the merger and issuance of shares of Martin Marietta common stock to TXI stockholders in connection with the merger and has adopted
resolutions directing that the share issuance proposal be submitted to Martin Marietta shareholders for their consideration.
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Both TXI and Martin Marietta are required to use their reasonable best efforts to hold the TXI
special meeting and the Martin Marietta special meeting on the same day at the same time.
Efforts to Complete the Merger
Martin Marietta and TXI have each agreed to use their reasonable best efforts to take or cause to be taken all actions, and do, or
cause to be done, and assist and cooperate with each other in doing, all things reasonably appropriate to consummate and make effective, as soon as reasonably possible, the transactions contemplated by the merger agreement. In connection with the
foregoing, each party has agreed to:
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use its reasonable best efforts to take all action reasonably appropriate to ensure that no state takeover statute is or becomes applicable to the transactions contemplated by the merger agreement and, if any such
statute becomes applicable, take all action reasonably appropriate to ensure that the transactions contemplated by the merger agreement may be consummated as promptly as practicable on the terms contemplated by the applicable agreement;
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cooperate in good faith to seek to obtain all consents, approvals and waivers required by any material contract or permit in connection with the transactions contemplated by the merger agreement;
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promptly enter into discussions with the governmental entities from whom consents or nonactions are required to be obtained in connection with the consummation of the transactions contemplated by the merger agreement to
obtain all required consents and nonactions so as to enable the closing to occur as soon as reasonably possible and no later than the end date (as defined below);
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to the extent necessary to obtain required consents and nonactions, use its reasonable best efforts to jointly negotiate, commit to and effect the sale, divestiture or disposition of, or prohibition or limitation on the
ownership or operation of, or requirements or undertakings with respect to the conduct by TXI, Martin Marietta or any of their respective subsidiaries of, any portion of the business, properties or assets of TXI, Martin Marietta or any of their
respective subsidiaries; and
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to the extent necessary to satisfy the conditions to closing, use their reasonable best efforts to initiate or participate in proceedings to oppose or defend against any action by a governmental entity to prevent or
enjoin the consummation of the transactions contemplated by the merger agreement or take such action as necessary to overturn any regulator action by a governmental entity to block consummation of the transactions contemplated by the merger
agreement.
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The foregoing obligations are subject to certain exceptions and limitations, including that neither Martin
Marietta nor TXI will be required to commit to or effect any action, prohibition, limitation, requirement or undertaking that is not conditioned upon the consummation of the merger or that would or would reasonably be expected to have a substantial
detriment. For purposes of the merger agreement, substantial detriment means any sale, divestiture or disposition of, or prohibition or limitation on the ownership or operation of, or requirements or undertakings with respect to the
conduct by TXI or its subsidiaries, or Martin Marietta or its subsidiaries, of, any portion of any business, properties or assets, other than (i) one of the quarries located in Mill Creek, Oklahoma currently held by TXI or Martin Marietta,
(ii) up to two of the related rail yards located in Dallas, Texas and (iii) other assets specifically associated with the assets described in clause (i) or (ii).
Employee Benefits Matters
The merger agreement requires that, from and after the effective time of the merger, TXI will honor all TXI benefit plans in accordance with
their terms as in effect immediately before the effective time of the merger. Martin Marietta and TXI have agreed that, for a period of one year immediately following the effective time of the merger, Martin Marietta will provide each TXI employee
with:
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base salaries or wage rates that are no less favorable than those that were provided to the TXI employee immediately before the effective time of the merger;
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employee benefits that are substantially comparable in the aggregate to either those that were provided to TXI employees immediately prior to the effective time of the merger or those provided to similarly situated
Martin Marietta employees; and
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severance benefits that are no less favorable than those that were provided by TXI immediately prior to the effective time of the merger to TXI employees who are terminated during the one-year period following the
effective time of the merger.
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Martin Marietta will generally recognize each TXI employees years of service with TXI
for purposes of vacation eligibility and participation in Martin Mariettas long-service award programs, so long as that recognition does not result in the duplication of benefits. With respect to any welfare plan maintained by Martin Marietta
in which TXI employees are eligible to participate after the effective time of the merger, the Martin Marietta will use commercially reasonable efforts to provide each TXI employee with credit for any copayments and deductibles paid by such TXI
employee prior to the effective time of the merger in satisfying any similar deductible or out-of-pocket requirements under any Martin Marietta plan to the extent they were credited under the applicable TXI plan. Martin Marietta acknowledges that a
change of control will occur at or prior to the effective time of the merger under the TXI benefit plans.
Indemnification and Insurance
The merger agreement provides that the indemnification and exculpation rights of each former and present director and officer of TXI or any TXI
subsidiary, and each person who served as a director, officer, member, trustee or fiduciary of another entity or employee benefit plan at the request or for the benefit of TXI or any TXI subsidiary (each an indemnified party), that are
provided for in any organizational document of TXI or any TXI subsidiary or in any other agreement that was provided to Martin Marietta prior to the date of the merger agreement, will survive the merger. The merger agreement requires Martin Marietta
to indemnify the indemnified parties to the fullest extent permitted by applicable law against costs, expenses, losses and amounts paid in settlement in connection with any action arising out of or pertaining to the fact that the indemnified party
is or was an officer or director of TXI or a TXI subsidiary or is or was serving at the request of TXI or a TXI subsidiary.
The merger
agreement also requires Martin Marietta to maintain for six years following the merger directors and officers liability insurance on terms and conditions not less favorable to the insured persons and at an annual cost not to exceed 250%
of TXIs 2012 aggregate annual premium for such insurance policy (referred to as the maximum amount). TXI may in its discretion purchase, and Martin Marietta may in its discretion purchase if TXI declines to do so, a
tail directors and officers liability insurance policy in lieu of the foregoing, in each case for a cost not to exceed the maximum amount.
Other Covenants and Agreements
The merger agreement contains certain other covenants and agreements, including covenants relating to:
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cooperation between Martin Marietta and TXI in the preparation of this joint proxy statement/prospectus;
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confidentiality and access by each party to certain information about the other party during the period prior to the effective time of the merger;
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the use of each partys reasonable best efforts to cause the merger to qualify as a tax-free reorganization within the meaning of the Code;
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cooperation between Martin Marietta and TXI in the defense or settlement of any securityholder litigation relating to the merger;
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cooperation between Martin Marietta and TXI in connection with public announcements;
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the use of reasonable best efforts by Martin Marietta to cause the shares of Martin Marietta common stock to be issued in the merger to be approved for listing on the NYSE; and
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the composition of the Martin Marietta board following the merger, as described under The Merger AgreementMartin Marietta Board of Directors Following the Merger.
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Conditions to Completion of the Merger
The obligations of each of Martin Marietta and TXI to effect the merger are subject to the satisfaction or waiver of the following conditions:
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the approval by TXI stockholders of the merger proposal;
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the approval by Martin Marietta shareholders of the share issuance proposal;
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the approval for listing by the NYSE, subject to official notice of issuance, of the Martin Marietta common stock issuable to TXI stockholders in the merger;
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the termination or expiration of any applicable waiting period under the HSR Act;
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the absence of any law, order, judgment or other legal restraint by a court or other governmental entity that prevents, makes illegal or prohibits the closing of the merger;
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the SEC having declared effective the registration statement of which this joint proxy statement/prospectus forms a part;
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the representations and warranties of the other party relating to organization, standing, corporate power, capital structure, authority, execution and delivery, enforceability and brokers fees and expenses being
true and correct in all material respects as of the date of the merger agreement and as of the date of the closing of the merger (except to the extent expressly made as of an earlier date, in which case, as of such earlier date);
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each other representation and warranty of the other party being true and correct as of the date of the merger agreement and as of the date of the closing of the merger (except to the extent expressly made as of an
earlier date, in which case, as of such earlier date), except where the failure of such representations and warranties to be true and correct, individually and in the aggregate, has not had and would not reasonably be expected to have a material
adverse effect;
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the other party having performed in all material respects all obligations required to be performed by it under the merger agreement;
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the absence of a material adverse effect on the other party since the date of the merger agreement;
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the receipt of an officers certificate executed by an executive officer of the other party certifying that the four preceding conditions have been satisfied; and
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the receipt of an opinion of that partys counsel to the effect that the merger will qualify as a reorganization under the Code.
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In addition, the obligations of Martin Marietta and Merger Sub to effect the merger are conditioned on the absence of any legal restraint
issued or promulgated by a U.S. governmental entity that would result in a requirement to dispose of or hold separate, or any prohibition or limitation on the ownership, operation or control of, any business, properties or assets, which would
reasonably be expected to result in a substantial detriment.
Termination of the Merger Agreement
The merger agreement may be terminated at any time prior to the effective time of the merger, whether before or after the receipt of the
requisite shareholder and stockholder approvals, under the following circumstances:
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by mutual written consent of Martin Marietta and TXI;
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by either Martin Marietta or TXI:
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if the merger is not consummated by July 27, 2014 (which deadline may be extended if certain conditions related to antitrust clearances have not been satisfied or waived, for one or more one-month periods by Martin
Marietta or TXI up to January 27, 2015 and, as it may be so extended, is referred to as the end date); provided that this right to terminate the merger agreement will only be available to a party that complied with its covenant to
use reasonable best efforts to consummate the merger and all related covenants and will not be available to a party if the failure of the merger to occur on or before the end date is a proximate result of a breach of the merger agreement by such
party;
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if Martin Marietta shareholders fail to approve the share issuance proposal at Martin Mariettas special meeting;
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if TXI stockholders fail to approve the merger proposal at TXIs special meeting;
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if the other party breaches or fails to perform any of its covenants or agreements in the merger agreement, or if the other partys representations or warranties fail to be true and correct, in either case, such
that the conditions to the terminating partys obligations to complete the merger would not then be satisfied and such breach is not reasonably capable of being cured or is not cured by the breaching party, as the case may be, within 90 days
after receiving written notice;
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if (i) prior to obtaining the approval of the other partys shareholders or stockholders, as applicable, required to consummate the merger, the board of directors of the other party withdraws, modifies (in a
manner adverse to the terminating party) or proposes publicly to withdraw or modify (in a manner adverse to the terminating party), its recommendation of the merger proposal or the share issuance proposal, as applicable, or (ii) the other party
fails to include its recommendation of the merger proposal or the share issuance proposal, as applicable, in this joint proxy statement/prospectus; or
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if permitted by and in compliance with the terms of the merger agreement, prior to obtaining its shareholder or stockholder approval, as applicable, in order to enter into a binding agreement providing for a superior
proposal.
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If the merger agreement is validly terminated, the agreement will become void and have no effect, without any
liability or obligation on the part of any party except in the case of fraud, intentional misrepresentation or intentional breach of a covenant or agreement contained in the merger agreement. The provisions of the merger agreement relating to fees
and expenses, effects of termination, governing law, jurisdiction, waiver of jury trial and specific performance, as well as the confidentiality agreement entered into between Martin Marietta and TXI, will continue in effect notwithstanding
termination of the merger agreement.
Expenses and Termination Fees
Generally, each party shall pay all fees and expenses incurred by it in connection with the merger and the other transactions and agreements
contemplated by the merger agreement. However, upon a termination of the merger agreement, a party may become obligated to pay to the other party a termination fee, in the following circumstances:
TXI will be obligated to pay a termination fee of $70 million to Martin Marietta if:
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the merger agreement is terminated by Martin Marietta, or in certain circumstances, could have been terminated by Martin Marietta, because (i) prior to obtaining the approval of the TXI stockholders of the merger
proposal, the board of directors of TXI withdrew, modified (in a manner adverse to Martin Marietta) or proposed publicly to withdraw or modify (in a manner adverse to Martin Marietta), its recommendation of the merger proposal or (ii) TXI
failed to include its recommendation of the merger proposal in this joint proxy statement/prospectus;
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the merger agreement is terminated by TXI, as permitted by and in compliance with the terms of the merger agreement, prior to obtaining the approval of the TXI stockholders required to consummate the merger, in order to
enter into a binding agreement providing for a superior proposal; or
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each of the following three events occurs:
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the merger agreement is terminated (i) because the merger had not been consummated by the end date, (ii) because TXI stockholders failed to approve the merger proposal or (iii) by Martin Marietta, because
TXI breached or failed to perform any of its covenants or agreements in the merger agreement, or because any of TXIs representations or warranties failed to be true and correct, in either case, such that the conditions to Martin
Mariettas obligations to complete the merger were not then satisfied (in the case of clause (iii), subject to the cure right described in the section entitled Termination of the Merger Agreement beginning on page 99);
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prior to TXIs special meeting, in the case of clause (ii) in the immediately preceding bullet, or prior to the termination of the merger agreement, in the case of clauses (i) or (iii) in the
immediately preceding bullet, a third party made a takeover proposal with respect to TXI that had become known to the public or publicly announced an intention to make a takeover proposal with respect to TXI; and
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within 12 months after such termination, TXI enters into a definitive contract to consummate or consummated a takeover proposal (provided that for the purposes of the foregoing, the references to 20% in the definition
of takeover proposal will be deemed references to 50%).
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Martin Marietta will be obligated to pay a termination
fee of $140 million to TXI if:
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the merger agreement is terminated by TXI (or in certain circumstances, could have been terminated by TXI) because (i) prior to obtaining the approval of Martin Marietta shareholders of the share issuance proposal,
the board of directors of Martin Marietta withdrew, modified (in a manner adverse to TXI) or proposed publicly to withdraw or modify (in a manner adverse to TXI), its recommendation of the share issuance proposal or (ii) Martin Marietta failed
to include its recommendation of the share issuance proposal in this joint proxy statement/prospectus;
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the merger agreement is terminated by Martin Marietta, as permitted by and in compliance with the terms of the merger agreement, prior to obtaining the approval of the Martin Marietta shareholders required to issue
Martin Marietta shares to TXIs stockholders in connection with the merger, in order to enter into a binding agreement providing for a superior proposal; or
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each of the following three events occurs:
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the merger agreement is terminated (i) because the merger had not been consummated by the end date, (ii) because Martin Marietta shareholders failed to approve the share issuance proposal at Martin
Mariettas special meeting or (iii) by TXI, because Martin Marietta breached or failed to perform any of its covenants or agreements in the merger agreement, or because any of Martin Mariettas representations or warranties failed to
be true and correct, in either case, such that the conditions to TXIs obligations to complete the merger were not then satisfied (in the case of clause (iii), subject to the cure right described under Termination of the Merger
Agreement beginning on page 99);
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prior to Martin Mariettas special meeting, in the case of clause (ii) in the immediately preceding bullet, or prior to the termination of the merger agreement, in the case of clauses (i) or (iii) in
the immediately preceding bullet, a third party made a takeover proposal with respect to Martin Marietta that had become known to the public or publicly announced an intention to make a takeover proposal with respect to Martin Marietta; and
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within 12 months after such termination, Martin Marietta enters into a definitive contract to consummate or consummated a takeover proposal (provided that for the purposes of the foregoing, the references to 20% in the
definition of takeover proposal will be deemed to be references to 50%).
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Martin Marietta will be obligated to
pay a termination fee of $25 million to TXI (and to provide TXI with the option to lease space at three of Martin Mariettas distribution yards in Texas as described under Lease Agreements beginning on page 103) if the merger
agreement is terminated because the merger has not been consummated by the end date and at the time of such termination all of the conditions to the consummation of the merger have been satisfied or waived (or were capable of being satisfied or
would have been so satisfied if the closing of the merger would have occurred) except for conditions related to:
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the termination or expiration of the waiting period applicable to the merger under the HSR Act;
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legal restraints by a court or governmental entity that prevent, make illegal or prohibit the merger (if the failure of such condition is due to a legal restraint relating to antitrust laws);
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the registration statement of which this joint proxy statement/prospectus forms a part not being declared effective by the SEC (if a primary reason for the failure of such condition is a breach by Martin Marietta of its
obligations in the merger agreement or the inability to obtain approval or clearance for the merger under antitrust laws); or
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a legal restraint issued or promulgated by a U.S. governmental entity that would reasonably be expected to result in a substantial detriment.
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In no event will either party be obligated to pay more than one termination fee pursuant to the merger agreement.
Amendments, Extensions and Waivers
Amendment
. The merger agreement may be amended by the parties at any time before or after receipt of the shareholder or stockholder
approvals. However, after shareholder or stockholder approval has been received, no amendment is permissible that would require further shareholder or stockholder approval under applicable law without the further approval of such shareholders or
stockholders.
Extension;
Waiver. At any time prior to the effective time of the merger, any party may, in writing, (i) extend
the time for performance of any obligation or act of the other party, (ii) waive any inaccuracy in a representation or warranty of the other party, (iii) waive compliance by the other party with any of the covenants and agreements
contained in the merger agreement or (iv) waive the satisfaction of any of the conditions contained in the merger agreement.
No Third Party Beneficiaries
The merger agreement is not intended to confer any rights or remedies upon any person other than the parties and, as described in the section
entitled Indemnification and Insurance beginning on page 98, the indemnified parties.
Specific Performance
The parties have agreed in the merger agreement that irreparable damage would occur and that monetary damages, even if available, would not be
an adequate remedy in the event that any of the provisions of the merger agreement are not performed in accordance with their specific terms or are otherwise breached. The parties have agreed that they will be entitled to an injunction or
injunctions to prevent breaches of the merger agreement and to enforce specifically the performance of its terms and provisions, without proof of actual
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damages. The parties have further agreed not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to law or inequitable for any reason, nor to assert that a remedy
of monetary damages would provide an adequate remedy for any breach.
Voting Agreements
In connection with the merger agreement, Martin Marietta entered into separate voting agreements with each of NNS and SAM, who, collectively,
hold approximately 51% of the outstanding shares of TXI common stock. Pursuant to the voting agreements, each such stockholder agreed to vote all of its shares of TXI common stock in favor of the merger proposal and the approval of the
transactions contemplated by the merger agreement and against, among other things, alternative transactions. In the event that TXIs board of directors changes its recommendation that TXI stockholders adopt the merger agreement (as described
under The Merger AgreementChanges in Board Recommendation beginning on page 95), NNS and SAM will only be required to vote shares representing at most 35% of the outstanding TXI common stock in favor of the merger proposal, with
the balance of their shares being voted in such circumstances in NNSs and SAMs sole discretion.
In addition, NNS and SAM have
agreed not to (i) subject to certain exceptions, transfer their shares of TXI common stock or (ii) solicit alternative transactions or participate in discussions or negotiations concerning, or furnish information with respect to, any
alternative transaction.
The voting agreements will terminate upon the earlier of (i) immediately following the meeting of
TXIs stockholders at which TXIs stockholders vote on the merger proposal, (ii) the termination of the merger agreement in accordance with its terms and (iii) in the case of SAM, the date on which SAM no longer beneficially owns
TXI common stock (provided that it has not transferred TXI common stock in violation of its voting agreement).
Copies of NNSs and
SAMs voting agreements are attached as Exhibit 2.2 and Exhibit 2.3, respectively, to the Current Reports on Form 8-K filed by Martin Marietta and TXI with the SEC on January 30, 2014 and are incorporated by reference herein. The foregoing
description of the voting agreements does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the voting agreements.
Lease Agreements
In connection with the merger agreement, Martin Marietta and/or an affiliate of Martin Marietta and an affiliate of TXI entered into three
lease agreements pursuant to which TXIs affiliate has the option to lease space at three of Martin Mariettas distribution yards in Texas for initial terms of seven years each. At the expiration of the initial term, subject to the terms
of the applicable lease agreement, TXI will have an option to extend each lease for an additional term of five years on mutually agreeable market terms at the time of the extension. In the event the merger agreement is terminated in circumstances
where Martin Marietta is not required to pay the $25 million termination fee to TXI (as described in the section entitled The Merger AgreementExpenses and Termination Fees beginning on page 100), the leases will also terminate.
IF YOU ARE A MARTIN MARIETTA SHAREHOLDER, THE MARTIN MARIETTA BOARD
RECOMMENDS THAT YOU VOTE FOR MARTIN MARIETTA PROPOSAL 1.
IF YOU ARE A TXI STOCKHOLDER, THE TXI BOARD
RECOMMENDS THAT YOU VOTE FOR TXI PROPOSAL 1.
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SHAREHOLDER PROPOSALS
Martin Marietta
Martin Marietta will hold an annual meeting in 2014 regardless of whether the merger has been completed. Martin Mariettas Bylaws require
shareholders to furnish timely written notice of their intent to nominate a director or bring any other matter before a shareholder meeting, whether or not they wish to include their proposal in Martin Mariettas proxy materials. In general,
notice must be received by Martin Mariettas Corporate Secretary no earlier than January 16, 2014 and no later than February 15, 2014 and must contain specified information concerning, among other things, the matters to be brought
before such meeting and concerning the shareholder proposing such matters. If the date of the 2014 annual meeting is advanced by more than 30 days or delayed by more than 60 days from April 16, 2014, notice must be received by Martin
Mariettas Corporate Secretary not earlier than the 90th day prior to such annual meeting and not later than the close of business on the later of the 60th day prior to such annual meeting or the 10th day following the day on which public
announcement of the date of such meeting is first made by Martin Marietta.
Martin Marietta shareholders are no longer eligible to submit
proposals for inclusion in Martin Mariettas proxy statement and accompanying proxy at the 2014 annual meeting of shareholders. In order for a shareholder proposal to have been eligible under the federal proxy rules for consideration for such
inclusion, the proposal must have been received by Martin Mariettas corporate secretary on or before December 17, 2013.
Additional information regarding Martin Mariettas procedures is located in Martin Mariettas Proxy Statement on Schedule 14A filed
April 17, 2014, which is incorporated by reference into this joint proxy statement/prospectus. See Where You Can Find More Information beginning on page 146.
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TXI
TXI will hold an annual meeting in 2014 only if the merger has not already been completed. If an annual meeting is held, notice of a
stockholder nomination or proposal (other than a proposal submitted for inclusion in TXIs proxy statement pursuant to the federal proxy rules) intended to be presented at the TXI 2014 annual meeting of stockholders must be received at the
principal executive offices of TXI no earlier than June 18, 2014 and no later than the close of business on July 18, 2014. In accordance with TXIs Bylaws, if the date of the annual meeting is advanced by more than 30 days or delayed
by more than 60 days from August 23, 2014, notice by a stockholder must be delivered to the TXIs principal executive offices not earlier than the close of business on the 120th day prior to such meeting and not later than the close of
business on the later of the 90th day prior to such meeting or the 10th day following the day on which public announcement of the date of such meeting is first made by TXI. Proposals for inclusion in TXIs proxy statement pursuant to the
federal proxy rules must be received at the principal executive offices of TXI by the close of business on April
25, 2014.
OTHER MATTERS
As of the date of this joint proxy statement/prospectus, neither the Martin Marietta board nor the TXI board knows of any matters that will be
presented for consideration at either the Martin Marietta special meeting or the TXI special meeting other than as described in this joint proxy statement/prospectus. If any other matters come before either of the meetings or any adjournments or
postponements of the meetings and are voted upon, the enclosed proxies will confer discretionary authority on the individuals named as proxies to vote the shares represented by the proxies as to any other matters. The individuals named as proxies
intend to vote in accordance with their best judgment as to any other matters.
HOUSEHOLDING
The SEC has adopted rules that permit companies and intermediaries such as brokers to satisfy delivery requirements for proxy statements and
annual reports with respect to two or more stockholders sharing the same address by delivering a single proxy statement or annual report, as applicable, addressed to those stockholders. This process, which is commonly referred to as
householding, potentially provides extra convenience for stockholders and cost savings for companies.
TXI has elected to
implement the SECs householding rules. Accordingly, only one copy of this joint proxy statement/prospectus is being delivered to TXI stockholders residing at the same address, unless such stockholders have notified TXI of their desire to
receive multiple copies of the joint proxy statement/prospectus. If you are a TXI stockholder and, at any time, you no longer wish to participate in householding and would prefer to receive a separate joint proxy statement/prospectus, or if you are
receiving multiple copies of this joint proxy statement/prospectus and wish to receive only one, please call Computershare Investor Services at (866) 641-4276 or write to Texas Industries, Inc., c/o Computershare Investor Services, P.O. Box
43006, Providence, RI 02940-3006. If you are a TXI stockholder and hold shares in street name, you may request a separate copy by calling Investor Communication Services at (800) 542-1061, or by writing to Investor Communication Services,
Householding Department, 51 Mercedes Way, Edgewood, New York 11717. For future annual or special meetings, TXI stockholders may request separate voting materials, or request that TXI send only one set of proxy materials by contacting Investor
Communication Services at the above phone number or address.
Martin Marietta has not instituted householding for shareholders of record.
However, certain brokerage firms may have instituted householding for beneficial owners of shares of Martin Marietta common stock held through brokerage firms. If your household has multiple accounts holding shares of Martin Marietta common stock,
you may have already received householding notification from your broker. Please contact your broker directly if you have any questions or require additional copies of this proxy statement. The broker will arrange for delivery of a separate copy of
this proxy statement promptly upon your request. Martin Marietta shareholders may decide at any time to revoke a decision to household, and thereby receive multiple copies.
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WHERE YOU CAN FIND MORE INFORMATION
Martin Marietta and TXI file annual, quarterly and special reports, proxy statements and other information with the SEC under the Exchange
Act. You may read and copy any of this information at the SECs Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. The SEC
also maintains an Internet website that contains reports, proxy and information statements, and other information regarding issuers, including Martin Marietta and TXI, who file electronically with the SEC. The address of that site is
www.sec.gov
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Investors may also consult Martin Mariettas or TXIs website for more information concerning the merger
described in this joint proxy statement/prospectus. Martin Mariettas website is www.martinmarietta.com. TXIs website is www.TXI.com. Information included on either website is not incorporated by reference into this joint proxy
statement/prospectus. The information contained on the websites of Martin Marietta, TXI and the SEC (except for the filings described below) is expressly not incorporated by reference into this joint proxy statement/prospectus.
Martin Marietta has filed with the SEC a registration statement of which this joint proxy statement/prospectus forms a part. The registration
statement registers the shares of Martin Marietta common stock to be issued to TXI stockholders in connection with the merger. The registration statement, including the attached exhibits and schedules, contains additional relevant information about
Martin Marietta common stock. The rules and regulations of the SEC allow Martin Marietta and TXI to omit certain information included in the registration statement from this joint proxy statement/prospectus.
In addition, the SEC allows Martin Marietta and TXI to disclose important information to you by referring you to other documents filed
separately with the SEC. This information is considered to be a part of this joint proxy statement/prospectus, except for any information that is superseded by information included directly in this joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference the documents listed below that Martin Marietta has previously filed or will
file with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K). They contain important information about Martin Marietta, its financial condition and other matters.
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Annual Report on Form 10-K for the fiscal year ended December 31, 2013.
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Proxy Statement on Schedule 14A filed April 17, 2014.
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Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2014.
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Current Reports on Form 8-K, dated March 21, 2014, April 16, 2014, April 23, 2014, April 24, 2014, April 25, 2014 and April 29, 2014 (other than the portions of those documents not deemed to be filed).
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The description of Martin Marietta common stock contained in Item 1 of Martin Mariettas Registrations Statement on Form 8-A filed on January 13, 1994 and October 19, 2006, including all amendments
and reports filed for the purpose of updating such description.
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The description of Martin Mariettas rights plan as contained in Item 1 of Martin Mariettas Registration Statement on Form 8-A, filed on October 19, 2006, including all amendments and reports filed
for the purpose of updating such description.
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In addition, Martin Marietta incorporates by reference any future filings it
makes with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K) after the date of this joint proxy
statement/prospectus and prior to the date of the Martin Marietta special meeting. Such documents are considered to be a part of this joint proxy statement/prospectus, effective as of the date such documents are filed. In the event of conflicting
information in these documents, the information in the latest filed document should be considered correct.
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You can obtain any of the documents listed above from the SEC, through the SECs website at
the address described above or from Martin Marietta by requesting them in writing or by telephone at the following address:
Martin
Marietta Materials, Inc.
2710 Wycliff Road
Raleigh, NC 27607
Attention:
Corporate Secretary
Telephone: (919) 783-4540
These documents are available from Martin Marietta without charge, excluding any exhibits to them unless the exhibit is specifically listed as
an exhibit to the registration statement of which this joint proxy statement/prospectus forms a part.
This joint proxy
statement/prospectus also incorporates by reference the documents listed below that TXI has previously filed or will file with the SEC (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K).
They contain important information about TXI, its financial condition and other matters.
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Annual Report on Form 10-K for the fiscal year ended May 31, 2013.
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Proxy Statement on Schedule 14A filed August 23, 2013.
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Quarterly Reports on Form 10-Q for the quarterly periods ended August 31, 2013, November 30, 2013 and February 28, 2014.
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Current Reports on Form 8-K, dated June 12, 2013, June 19, 2013, October 18, 2013, January 28, 2014, January 30, 2014 and April 3, 2014 (other than the portions of those documents
not deemed to be filed).
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In addition, TXI incorporates by reference any future filings it makes with the SEC under
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act (other than information furnished pursuant to Item 2.02 or Item 7.01 of a Current Report on Form 8-K) after the date of this joint proxy statement/prospectus and prior to the date
of the TXI special meeting. Such documents are considered to be a part of this joint proxy statement/prospectus, effective as of the date such documents are filed. In the event of conflicting information in these documents, the information in the
latest filed document should be considered correct.
You can obtain any of the documents listed above from the SEC, through the SECs
website at the address described above or from TXI by requesting them in writing or by telephone at the following address:
Texas
Industries, Inc.
1503 LBJ Freeway, Suite 400
Dallas, Texas 75234
Attention:
Investor Relations
Telephone: (972) 647-6700
These documents are available from TXI without charge, excluding any exhibits to them unless the exhibit is specifically listed as an exhibit
to the registration statement of which this joint proxy statement/prospectus forms a part.
If you are a shareholder of Martin Marietta or
a stockholder of TXI and would like to request documents, please do so by June 23, 2014 to receive them before the Martin Marietta special meeting and the TXI special meeting. If you request any documents from Martin Marietta or TXI, Martin Marietta
or TXI will mail them to you by first class mail, or another equally prompt means, within one business day after Martin Marietta or TXI receives your request.
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This joint proxy statement/prospectus is a prospectus of Martin Marietta and is a joint proxy
statement of Martin Marietta and TXI for the Martin Marietta special meeting and the TXI special meeting. You should rely only on the information contained or incorporated by reference in this joint proxy statement/prospectus. Neither Martin
Marietta nor TXI has authorized anyone to give any information or make any representation about the merger or Martin Marietta or TXI that is different from, or in addition to, that contained in this joint proxy statement/prospectus or in any of the
materials that Martin Marietta or TXI has incorporated by reference into this joint proxy statement/prospectus. Therefore, if anyone does give you information of this sort, you should not rely on it. The information contained in this joint proxy
statement/prospectus speaks only as of the date of this joint proxy statement/prospectus unless the information specifically indicates that another date applies. Neither our mailing of this joint proxy statement/prospectus to Martin Marietta
shareholders or TXI stockholders, nor the issuance by Martin Marietta of shares of common stock pursuant to the merger, will create any implication to the contrary.
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ANNEX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
Dated as of January 27, 2014
Among
TEXAS INDUSTRIES, INC.,
MARTIN MARIETTA MATERIALS, INC.
and
PROJECT HOLDINGS, INC.
TABLE OF CONTENTS
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Page
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ARTICLE I
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The Merger
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SECTION 1.01.
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The Merger
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A-1
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SECTION 1.02.
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Closing
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A-1
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SECTION 1.03.
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Effective Time
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A-2
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SECTION 1.04.
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Effects
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A-2
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SECTION 1.05.
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Certificate of Incorporation and By-Laws
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A-2
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SECTION 1.06.
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Directors and Officers of Surviving Company and Company Subsidiaries
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A-2
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ARTICLE II
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Effect on the Capital Stock of the Constituent Entities;
Exchange of Certificates
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SECTION 2.01.
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Effect on Capital Stock
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A-2
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SECTION 2.02.
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Exchange of Certificates
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A-3
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ARTICLE III
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Representations and Warranties of Parent and Merger Sub
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SECTION 3.01.
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Organization, Standing and Power
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A-6
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SECTION 3.02.
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Parent Subsidiaries
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A-6
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SECTION 3.03.
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Capital Structure
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A-6
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SECTION 3.04.
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Authority; Execution and Delivery; Enforceability
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A-8
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SECTION 3.05.
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No Conflicts; Consents
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A-8
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SECTION 3.06.
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SEC Documents; Undisclosed Liabilities
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A-9
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SECTION 3.07.
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Information Supplied
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A-11
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SECTION 3.08.
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Absence of Certain Changes or Events
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A-11
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SECTION 3.09.
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Taxes
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A-11
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SECTION 3.10.
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Intended Tax Treatment
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A-11
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SECTION 3.11.
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Litigation
|
|
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A-11
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SECTION 3.12.
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Compliance with Applicable Laws
|
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SECTION 3.13.
|
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Environmental Matters
|
|
|
A-12
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SECTION 3.14.
|
|
Brokers Fees and Expenses
|
|
|
A-13
|
|
SECTION 3.15.
|
|
Opinions of Financial Advisors
|
|
|
A-13
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SECTION 3.16.
|
|
Merger Sub
|
|
|
A-13
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SECTION 3.17.
|
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No Other Representations or Warranties
|
|
|
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A-i
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ARTICLE IV
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|
|
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|
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Representations and Warranties of the Company
|
|
|
|
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|
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SECTION 4.01.
|
|
Organization, Standing and Power
|
|
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A-14
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SECTION 4.02.
|
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Company Subsidiaries
|
|
|
A-14
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SECTION 4.03.
|
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Capital Structure
|
|
|
A-14
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SECTION 4.04.
|
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Authority; Execution and Delivery; Enforceability
|
|
|
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SECTION 4.05.
|
|
No Conflicts; Consents
|
|
|
A-16
|
|
SECTION 4.06.
|
|
SEC Documents; Undisclosed Liabilities
|
|
|
A-17
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|
SECTION 4.07.
|
|
Information Supplied
|
|
|
A-18
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SECTION 4.08.
|
|
Absence of Certain Changes or Events
|
|
|
A-18
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|
SECTION 4.09.
|
|
Taxes
|
|
|
A-18
|
|
SECTION 4.10.
|
|
Intended Tax Treatment
|
|
|
A-19
|
|
SECTION 4.11.
|
|
Benefits Matters; ERISA Compliance
|
|
|
A-19
|
|
SECTION 4.12.
|
|
Litigation
|
|
|
A-22
|
|
SECTION 4.13.
|
|
Compliance with Applicable Laws
|
|
|
A-22
|
|
SECTION 4.14.
|
|
Environmental Matters
|
|
|
A-22
|
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SECTION 4.15.
|
|
Contracts
|
|
|
A-23
|
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SECTION 4.16.
|
|
Properties
|
|
|
A-24
|
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SECTION 4.17.
|
|
Intellectual Property
|
|
|
A-24
|
|
SECTION 4.18.
|
|
Labor Matters
|
|
|
A-25
|
|
SECTION 4.19.
|
|
Brokers Fees and Expenses
|
|
|
A-25
|
|
SECTION 4.20.
|
|
Opinion of Financial Advisor
|
|
|
A-25
|
|
SECTION 4.21.
|
|
Insurance
|
|
|
A-26
|
|
SECTION 4.22.
|
|
Affiliate Transactions
|
|
|
A-26
|
|
SECTION 4.23.
|
|
No Other Representations or Warranties
|
|
|
A-26
|
|
|
|
ARTICLE V
|
|
|
|
|
|
|
Covenants Relating to Conduct of Business
|
|
|
|
|
|
|
|
SECTION 5.01.
|
|
Conduct of Business
|
|
|
A-26
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SECTION 5.02.
|
|
No Solicitation by the Company; Company Recommendation
|
|
|
A-31
|
|
SECTION 5.03.
|
|
No Solicitation by Parent; Parent Recommendation
|
|
|
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|
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ARTICLE VI
|
|
|
|
|
|
|
Additional Agreements
|
|
|
|
|
|
|
|
SECTION 6.01.
|
|
Preparation of the Form S-4 and the Joint Proxy Statement; Company
Stockholders Meeting and Parent Shareholders Meeting
|
|
|
A-36
|
|
SECTION 6.02.
|
|
Access to Information; Confidentiality
|
|
|
A-38
|
|
SECTION 6.03.
|
|
Required Actions
|
|
|
A-39
|
|
SECTION 6.04.
|
|
Stock Plans
|
|
|
A-40
|
|
SECTION 6.05.
|
|
Indemnification, Exculpation and Insurance
|
|
|
A-41
|
|
SECTION 6.06.
|
|
Fees and Expenses
|
|
|
A-43
|
|
A-ii
|
|
|
|
|
|
|
SECTION 6.07.
|
|
Certain Tax Matters
|
|
|
A-44
|
|
SECTION 6.08.
|
|
Transaction Litigation
|
|
|
A-45
|
|
SECTION 6.09.
|
|
Section 16 Matters
|
|
|
A-45
|
|
SECTION 6.10.
|
|
Public Announcements
|
|
|
A-45
|
|
SECTION 6.11.
|
|
Stock Exchange Listing
|
|
|
A-45
|
|
SECTION 6.12.
|
|
Director Appointment
|
|
|
A-46
|
|
SECTION 6.13.
|
|
Certain Transfer Taxes
|
|
|
A-46
|
|
SECTION 6.14.
|
|
Employee Matters
|
|
|
A-46
|
|
|
|
ARTICLE VII
|
|
|
|
|
|
|
Conditions Precedent
|
|
|
|
|
|
|
|
SECTION 7.01.
|
|
Conditions to Each Partys Obligation to Effect the Merger
|
|
|
A-47
|
|
SECTION 7.02.
|
|
Condition to Parents and Merger Subs Obligation to Effect the Merger
|
|
|
A-47
|
|
SECTION 7.03.
|
|
Condition to the Companys Obligation to Effect the Merger
|
|
|
A-48
|
|
|
|
ARTICLE VIII
|
|
|
|
|
|
|
Termination, Amendment and Waiver
|
|
|
|
|
|
|
|
SECTION 8.01.
|
|
Termination
|
|
|
A-49
|
|
SECTION 8.02.
|
|
Effect of Termination
|
|
|
A-50
|
|
SECTION 8.03.
|
|
Amendment
|
|
|
A-50
|
|
SECTION 8.04.
|
|
Extension; Waiver
|
|
|
A-50
|
|
|
|
ARTICLE IX
|
|
|
|
|
|
|
General Provisions
|
|
|
|
|
|
|
|
SECTION 9.01.
|
|
Nonsurvival of Representations and Warranties
|
|
|
A-51
|
|
SECTION 9.02.
|
|
Notices
|
|
|
A-51
|
|
SECTION 9.03.
|
|
Definitions
|
|
|
A-51
|
|
SECTION 9.04.
|
|
Interpretation
|
|
|
A-56
|
|
SECTION 9.05.
|
|
Severability
|
|
|
A-57
|
|
SECTION 9.06.
|
|
Counterparts
|
|
|
A-57
|
|
SECTION 9.07.
|
|
Entire Agreement; No Third-Party Beneficiaries
|
|
|
A-57
|
|
SECTION 9.08.
|
|
Governing Law; Consent to Jurisdiction; Venue
|
|
|
A-57
|
|
SECTION 9.09.
|
|
Assignment
|
|
|
A-57
|
|
SECTION 9.10.
|
|
Specific Performance
|
|
|
A-58
|
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SECTION 9.11.
|
|
Waiver of Jury Trial
|
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|
A-58
|
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A-iii
AGREEMENT AND PLAN OF MERGER (this
Agreement
) dated as of January 27,
2014, among TEXAS INDUSTRIES, INC., a Delaware corporation (the
Company
), MARTIN MARIETTA MATERIALS, INC., a North Carolina corporation (
Parent
), and PROJECT HOLDINGS, INC., a North Carolina corporation and a
wholly owned subsidiary of Parent (
Merger Sub
).
WHEREAS the Board of Directors of the Company, the Board of Directors
of Parent, and the Board of Directors of Merger Sub have approved or adopted, as applicable, this Agreement, determined that the terms of this Agreement are in the best interests of the Company, Parent or Merger Sub, as applicable, and their
respective shareholders or stockholders, as applicable, and declared the advisability of this Agreement;
WHEREAS the Board of Directors
of the Company and the Board of Directors of Merger Sub have recommended adoption and approval of this Agreement by their respective shareholders or stockholders, as applicable;
WHEREAS simultaneously with the execution and delivery of this Agreement, Parent and certain stockholders of the Company (the
Principal Stockholders
) are entering into agreements (the
Stockholder Agreements
and, together with this Agreement, the
Transaction Agreements
) pursuant to which the Principal Stockholders
shall agree, among other things, to take specified actions in furtherance of the Merger;
WHEREAS, simultaneously with the execution and
delivery of this Agreement, Parent and the Company (or their respective affiliates) are entering in agreements relating to the lease of certain properties in Tomball, Robstown and Mont Belvieu, Texas (the
Lease Agreements
); and
WHEREAS, for U.S. Federal income Tax purposes, it is intended that (i) the Merger will qualify as a reorganization
within the meaning of Section 368(a) of the Code and (ii) Parent, the Company and Merger Sub each will be a party to such reorganization within the meaning of Section 368(b) of the Code, and this Agreement is intended to be, and is
adopted as, a plan of reorganization for purposes of Sections 354, 361 and 368 of the Code.
NOW, THEREFORE, in consideration
of the foregoing and the representations, warranties, covenants and agreements herein and intending to be legally bound, the parties hereto agree as follows:
ARTICLE I
The Merger
SECTION 1.01.
The Merger.
On the terms and subject to the conditions set forth in this Agreement, and in accordance with the North
Carolina Business Corporation Act (the
NCBCA
) and the General Corporation Law of the State of Delaware (the
DGCL
), on the Closing Date, Merger Sub shall be merged with and into the Company (the
Merger
). At the Effective Time, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the surviving company in the Merger (the
Surviving Company
). The Merger, the issuance
by Parent of Parent Common Stock in connection with the Merger (the
Share Issuance
) and the other transactions contemplated by the Transaction Agreements are referred to in this Agreement collectively as the
Transactions
.
SECTION 1.02.
Closing.
The closing (the
Closing
) of the Merger shall take
place at the offices of Cravath, Swaine & Moore LLP, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019, at 10:00 a.m., New York City time, on a date to be specified by the Company and Parent, which shall be no later than the
second Business Day following the satisfaction or (to the extent permitted by Law) waiver by the party or parties entitled to the benefits thereof of the conditions set forth in Article VII (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or (to the extent permitted by Law) waiver of those conditions), or at such other place, time and date as shall be agreed in writing between the Company and Parent;
provided
,
however
, that if all the conditions set forth in Article VII shall not have been satisfied or (to the extent permitted by Law) waived on such second Business Day, then the Closing shall take place on the second
A-1
Business Day on which all such conditions shall have been satisfied or (to the extent permitted by Law) waived, or at such other place, time and date as shall be agreed in writing between the
Company and Parent. The date on which the Closing occurs is referred to in this Agreement as the
Closing Date
.
SECTION
1.03.
Effective Time.
Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall (a) file with the Secretary of State of the State of North Carolina the articles of merger relating to the
Merger (the
Articles of Merger
) executed and acknowledged in accordance with the relevant provisions of the NCBCA, and, as soon as practicable on or after the Closing Date, shall make all other filings required under the NCBCA or
by the Secretary of State of the State of North Carolina in connection with the Merger and (b) file with the Secretary of State of the State of Delaware a certificate of merger relating to the Merger (the
Certificate of
Merger
) executed and acknowledged in accordance with the relevant provisions of the DGCL, and, as soon as practicable on or after the Closing Date, shall make all other filings required under the DGCL or by the Secretary of State of the
State of Delaware in connection with the Merger. The Merger shall become effective at the time that the Articles of Merger have been duly filed with the Secretary of State of the State of North Carolina and the Certificate of Merger has been duly
filed with the Secretary of State of the State of Delaware, or at such later time as the Company and Parent shall agree and specify in the Articles of Merger and the Certificate of Merger (the time the Merger becomes effective being the
Effective Time
).
SECTION 1.04.
Effects.
The Merger shall have the effects set forth in this Agreement and the
applicable provisions of the NCBCA and the DGCL.
SECTION 1.05.
Certificate of Incorporation and By-Laws.
At the Effective Time,
the certificate of incorporation in the form attached hereto as Exhibit A shall be the certificate of incorporation of the Surviving Company until thereafter changed or amended as provided therein or by applicable Law. At the Effective Time, the
by-laws in the form attached hereto as Exhibit B shall be the by-laws of the Surviving Company until thereafter changed or amended as provided therein or by applicable Law.
SECTION 1.06.
Directors and Officers of Surviving Company and Company Subsidiaries.
The directors of Merger Sub immediately prior to
the Effective Time shall be the directors of the Surviving Company until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Company until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualified, as the case may be. To the extent
requested by Parent prior to the Effective Time, the Company shall use its reasonable best efforts to cause the applicable officers and directors of each Company Subsidiary (or those Company Subsidiaries so specified by Parent) to tender their
resignations as officers or directors of the applicable Company Subsidiaries, effective as of the Effective Time, to deliver to Parent written evidence of such resignations (to be effective as of the Effective Time) prior to the Effective Time. In
connection with the foregoing, the Company shall reasonably cooperate with Parent, including by providing to Parent information and access pursuant to and subject to Section 6.02 reasonably requested by Parent. Parent agrees that as a condition
to any resignation contemplated by this Section 1.06 requested by Parent, Parent will acknowledge in writing that such resignation is without prejudice to the applicable individuals rights under any applicable Company Benefit Plan.
ARTICLE II
Effect on the
Capital Stock of the Constituent Entities;
Exchange of Certificates
SECTION 2.01.
Effect on Capital Stock.
At the Effective Time, by virtue of the Merger and without any action on the part of the
Company, Parent, Merger Sub or the holders of any shares of Company Common Stock or Merger Sub Common Stock:
(a)
Conversion of Merger
Sub Common Stock.
Each share of common stock, par value $0.01 per share, in Merger Sub (the
Merger Sub Common Stock
) issued and outstanding immediately prior to the Effective
A-2
Time shall be converted into one fully paid and nonassessable share of common stock, par value $0.01 per share, of the Surviving Company with the same rights, powers and privileges as the shares
so converted and shall constitute the only outstanding shares of capital stock of the Surviving Company. From and after the Effective Time, all certificates representing shares of Merger Sub Common Stock shall be deemed for all purposes to represent
the number of shares of common stock of the Surviving Company into which they were converted in accordance with the immediately preceding sentence.
(b)
Cancellation of Treasury Stock and Parent-Owned Stock.
Each share of common stock, par value $1.00 per share, in the Company (the
Company Common Stock
) that is owned by the Company as treasury stock and each share of Company Common Stock that is owned by Parent or Merger Sub immediately prior to the Effective Time shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and no consideration shall be delivered in exchange therefor.
(c)
Conversion of
Company Common Stock.
Subject to Section 2.02, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than shares to be canceled in accordance with Section 2.01(b)) shall be converted
into the right to receive 0.70 of a fully paid and nonassessable share (the
Exchange Ratio
) of Parent Common Stock, together with the associated preferred share purchase rights granted pursuant to the Rights Agreement (the
Merger Consideration
). All such shares of Company Common Stock, when so converted, shall no longer be outstanding and shall automatically be canceled and shall cease to exist, and each holder of a certificate (or evidence of
shares in book-entry form) that immediately prior to the Effective Time represented any such shares of Company Common Stock (each, a
Certificate
) shall cease to have any rights with respect thereto, except the right to receive the
Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock to be issued or paid in consideration therefor and any dividends or other distributions to which holders become entitled upon the surrender of such Certificate in
accordance with Section 2.02, without interest. Notwithstanding the foregoing, if between the date of this Agreement and the Effective Time the outstanding shares of Parent Common Stock or Company Common Stock shall have been changed into a
different number of shares or a different class, by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination, consolidation or exchange of shares, or any similar event shall have occurred, then any number or
amount contained herein which is based upon the number of shares of Parent Common Stock or Company Common Stock, as the case may be, will be appropriately adjusted to provide to Parent and the holders of Company Common Stock the same economic effect
as contemplated by this Agreement prior to such event;
provided
,
however
, that this sentence shall not be construed to permit Parent or the Company to take any action with respect to its securities that is prohibited by the terms of
this Agreement. As and to the extent provided in Section 2.02(j), the right of any holder of a Certificate to receive the Merger Consideration shall be subject to and reduced by the amount of any withholding under applicable Tax Law.
SECTION 2.02.
Exchange of Certificates.
(a)
Exchange Agent.
Prior to the Effective Time, Parent shall appoint a bank or
trust company reasonably acceptable to the Company to act as exchange agent (the
Exchange Agent
) for the payment of the Merger Consideration. At or prior to the Effective Time, Parent shall deposit with the Exchange Agent, for the
benefit of the holders of Certificates, for exchange in accordance with this Article II through the Exchange Agent, certificates representing the shares of Parent Common Stock to be issued as Merger Consideration and cash sufficient to make payments
in lieu of fractional shares pursuant to Section 2.02(f). All such Parent Common Stock and cash deposited with the Exchange Agent is hereinafter referred to as the
Exchange Fund
.
(b)
Letter of Transmittal.
As promptly as reasonably practicable after the Effective Time, Parent shall cause the Exchange Agent to
mail to each holder of record of Company Common Stock a form of letter of transmittal (the
Letter of Transmittal
) (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in such form and have such other provisions (including customary provisions with respect to delivery of an agents message with respect to shares held in
book-entry form) as Parent may specify subject to the Companys reasonable approval prior to the Effective Time), together with instructions thereto.
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(c)
Merger Consideration Received in Connection with Exchange.
Upon (i) in the case
of shares of Company Common Stock represented by a Certificate, the surrender of such Certificate for cancellation to the Exchange Agent, or (ii) in the case of shares of Company Common Stock held in book-entry form, the receipt of an
agents message by the Exchange Agent, in each case together with the Letter of Transmittal, duly, completely and validly executed in accordance with the instructions thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such shares shall be entitled to receive in exchange therefor (A) the Merger Consideration into which such shares of Company Common Stock have been converted pursuant to Section 2.01 and (B) any
cash in lieu of fractional shares which the holder has the right to receive pursuant to Section 2.02(f) and in respect of any dividends or other distributions which the holder has the right to receive pursuant to Section 2.02(d). In the
event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, a certificate representing the proper number of shares of Parent Common Stock pursuant to Section 2.01 and cash in lieu of
fractional shares which the holder has the right to receive pursuant to Section 2.02(f) and in respect of any dividends or other distributions which the holder has the right to receive pursuant to Section 2.02(d) may be issued to a
transferee if the Certificate representing such Company Common Stock (or, if such Company Common Stock is held in book-entry form, proper evidence of such transfer) is presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock transfer Taxes have been paid. Until surrendered as contemplated by this Section 2.02(c), each share of Company Common Stock, and any Certificate with respect thereto,
shall be deemed at any time from and after the Effective Time to represent only the right to receive upon such surrender the Merger Consideration which the holders of shares of Company Common Stock were entitled to receive in respect of such shares
pursuant to Section 2.01 (and cash in lieu of fractional shares pursuant to Section 2.02(f) and in respect of any dividends or other distributions pursuant to Section 2.02(d)). No interest shall be paid or shall accrue on the cash
payable upon surrender of any Certificate (or shares of Company Common Stock held in book-entry form).
(d)
Treatment of Unexchanged
Shares.
No dividends or other distributions declared or made with respect to Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any unsurrendered Certificate (or shares of Company Common Stock held in
book-entry form) with respect to the shares of Parent Common Stock issuable upon surrender thereof, and no cash payment in lieu of fractional shares shall be paid to any such holder pursuant to Section 2.02(f), until the surrender of such
Certificate (or shares of Company Common Stock held in book-entry form) in accordance with this Article II. Subject to escheat, Tax or other applicable Law, following surrender of any such Certificate (or shares of Company Common Stock held in
book-entry form), there shall be paid to the holder of the certificate representing whole shares of Parent Common Stock issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of any cash payable in lieu of
a fractional share of Parent Common Stock to which such holder is entitled pursuant to Section 2.02(f) and the amount of dividends or other distributions with a record date after the Effective Time theretofore paid with respect to such whole
shares of Parent Common Stock and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to such surrender and a payment date subsequent to such surrender
payable with respect to such whole shares of Parent Common Stock.
(e)
No Further Ownership Rights in Company Common Stock.
The
shares of Parent Common Stock issued and cash paid in accordance with the terms of this Article II upon conversion of any shares of Company Common Stock (including any cash paid pursuant to Section 2.02(f)) shall be deemed to have been issued
and paid in full satisfaction of all rights pertaining to such shares of Company Common Stock. From and after the Effective Time, there shall be no further registration of transfers on the stock transfer books of the Surviving Company of shares of
Company Common Stock that were outstanding immediately prior to the Effective Time. If, after the Effective Time, any Certificates formerly representing shares of Company Common Stock (or shares of Company Common Stock held in book-entry form) are
presented to Parent or the Exchange Agent for any reason, they shall be canceled and exchanged as provided in this Article II.
(f)
No
Fractional Shares.
No certificates or scrip representing fractional shares of Parent Common Stock shall be issued upon the conversion of Company Common Stock pursuant to Section 2.01. Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock
A-4
converted pursuant to the Merger who would otherwise have been entitled to receive a fraction of a share of Parent Common Stock (after taking into account all shares of Company Common Stock
exchanged by such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to such fractional amount multiplied by the last reported sale price of Parent Common Stock on the New York Stock Exchange (the
NYSE
) (as reported in
The Wall Street Journal
or, if not reported therein, in another authoritative source mutually selected by Parent and the Company) on the last complete trading day prior to the date of the Effective
Time.
(g)
Termination of Exchange Fund
. Any portion of the Exchange Fund (including any interest received with respect thereto)
that remains undistributed to the holders of Company Common Stock for 180 days after the Effective Time shall be delivered to Parent and any holder of Company Common Stock who has not theretofore complied with this Article II shall thereafter look
only to Parent for payment of its claim for Merger Consideration, any cash in lieu of fractional shares and any dividends and distributions to which such holder is entitled pursuant to this Article II, in each case without any interest thereon.
(h)
No Liability.
None of the Company, Parent, Merger Sub or the Exchange Agent shall be liable to any Person in respect of any portion
of the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any portion of the Exchange Fund which remains undistributed to the holders of Certificates for two years after the Effective
Time (or immediately prior to such earlier date on which the Exchange Fund would otherwise escheat to, or become the property of, any Governmental Entity) shall, to the extent permitted by applicable Law, become the property of Parent, free and
clear of all claims or interest of any Person previously entitled thereto.
(i)
Investment of Exchange Fund.
The Exchange Agent
shall invest any cash in the Exchange Fund as directed by Parent. Any interest and other income resulting from such investments shall be paid to Parent.
(j)
Withholding Rights.
Each of Parent and the Exchange Agent (without duplication) shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of Company Common Stock pursuant to this Agreement any amounts required to be deducted and withheld with respect to the making of such payment under applicable Tax Law. Amounts so withheld and paid over
to the appropriate taxing authority shall be treated for all purposes of this Agreement as having been paid to the holder of Company Common Stock in respect of which such deduction or withholding was made.
(k)
Lost Certificates.
If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the Person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such Person of a bond, in such reasonable and customary amount as Parent may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue, in exchange for such lost, stolen or destroyed Certificate, the Merger Consideration, any cash in lieu of fractional shares and any dividends and distributions on the
Certificate deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
Representations and Warranties of Parent and Merger Sub
Parent and Merger Sub jointly and severally represent and warrant to the Company that the statements contained in this Article III are true
and correct except as set forth in the Parent SEC Documents filed and publicly available after January 1, 2012 and at least two Business Days prior to the date of this Agreement (the
Filed Parent SEC
Documents
)
(excluding any disclosures in the Filed Parent SEC Documents in any risk factors section, any forward looking disclosure in any section related to forward looking statements and other disclosures that are predictive or forward-looking in nature,
other than historical facts included therein) or in the
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disclosure letter delivered by Parent to the Company at or before the execution and delivery by Parent and Merger Sub of this Agreement (the
Parent Disclosure Letter
). The
Parent Disclosure Letter shall be arranged in numbered and lettered sections corresponding to the numbered and lettered sections contained in this Article III, and the disclosure in any section shall be deemed to qualify other sections in this
Article III to the extent (and only to the extent) that it is reasonably apparent that such disclosure also qualifies or applies to such other sections.
SECTION 3.01.
Organization, Standing and Power.
Each of Parent and each of Parents Subsidiaries (the
Parent
Subsidiaries
) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized (in the case of good standing, to the extent such jurisdiction recognizes such concept), except, in the case
of the Parent Subsidiaries, where the failure to be so organized, existing or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each of Parent and the
Parent Subsidiaries has all requisite power and authority and possesses all governmental franchises, licenses, permits, authorizations, variances, exemptions, orders, registrations, clearances and approvals (collectively,
Permits
)
necessary to enable it to own, operate, lease or otherwise hold its properties and assets and to conduct its businesses as presently conducted (the
Parent Permits
), except where the failure to have such power or authority or to
possess Parent Permits, individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect. Each of Parent and the Parent Subsidiaries is duly qualified or licensed to do business in each
jurisdiction where the nature of its business or the ownership or leasing of its properties make such qualification necessary, other than in such jurisdictions where the failure to be so qualified or licensed, individually or in the aggregate, has
not had and would not reasonably be expected to have a Parent Material Adverse Effect. Parent has delivered or made available to the Company, prior to execution of this Agreement, true and complete copies of (a) the restated articles of
incorporation of Parent, as amended, in effect as of the date of this Agreement (the
Parent Articles
) and the restated bylaws of Parent in effect as of the date of this Agreement (the
Parent By-laws
) and
(b) the constituent documents of Merger Sub.
SECTION 3.02.
Parent Subsidiaries.
(a) All the outstanding shares of
capital stock or voting securities of, or other equity interests in, each of the Parent Subsidiaries have been validly issued and are owned by Parent, by another Parent Subsidiary or by Parent and another Parent Subsidiary, free and clear of all
material pledges, liens, claims, charges, mortgages, deeds of trust, rights of first offer or first refusal, options, encumbrances and security interests of any kind or nature whatsoever (collectively, with covenants, conditions, restrictions,
easements, encroachments, title retention agreements or other third party rights or title defect of any kind or nature whatsoever,
Liens
), and free of any other restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock, voting securities or other equity interests), except for restrictions imposed by applicable securities laws. Section 3.02(a) of the Parent Disclosure Letter sets forth, as of the date of this Agreement,
a true and complete list of the Parent Subsidiaries.
(b) Except for the capital stock and voting securities of, and other equity
interests in, the Parent Subsidiaries, neither Parent nor any Parent Subsidiary owns, directly or indirectly, any capital stock or voting securities of, or other equity interests in, or any interest convertible into or exchangeable or exercisable
for, any capital stock or voting securities of, or other equity interests in, any firm, corporation, partnership, company, limited liability company, trust, joint venture, association or other entity other than ordinary course investments in
publicly traded securities constituting one percent or less of a class of outstanding securities of any entity.
SECTION 3.03.
Capital
Structure.
(a) The authorized capital stock of Parent consists of 100,000,000 shares of common stock, par value $0.01 per share (
Parent Common Stock
), and 10,000,000 shares of preferred stock, par value $0.01 per share,
(the
Parent Preferred Stock
and, together with the Parent Common Stock, the
Parent Capital Stock
). At the close of business on December 31, 2013, (i) 46,111,115 shares of Parent Common Stock were
issued and outstanding, (ii) no shares of Parent Preferred Stock were issued and outstanding and (iii) 1,929,362 shares of Parent Common Stock were reserved and available for issuance pursuant to the Parent Stock Plans, including
(A) 882,416 shares of Parent Common Stock issuable upon the
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exercise of outstanding Parent Stock Options (whether or not presently exercisable), (B) 1,021,815 shares of Parent Common Stock issuable upon settlement of outstanding Parent RSUs and
(C) 25,131 shares of Parent Common Stock issuable upon settlement of outstanding incentive stock plan units of Parent (the
Parent ISPUs
). Except as set forth in this Section 3.03(a) (and other than shares of Parent
Capital Stock that may be issued pursuant to the Rights Agreement), at the close of business on December 31, 2013, no shares of capital stock or voting securities of, or other equity interests in, Parent were issued, reserved for issuance or
outstanding. From the close of business on December 31, 2013 to the date of this Agreement, there have been no issuances by Parent of shares of capital stock or voting securities of, or other equity interests in, Parent other than the issuance
of Parent Common Stock upon the exercise of Parent Stock Options or upon the vesting of Parent RSUs or Parent ISPUs, in each case, outstanding at the close of business on December 31, 2013 and in accordance with their terms in effect at such
time.
(b) All outstanding shares of Parent Capital Stock are, and, at the time of issuance, all such shares that may be issued upon the
exercise or vesting of Parent Stock Options, Parent RSUs or Parent ISPUs will be, duly authorized, validly issued, fully paid and nonassessable and not subject to, or issued in violation of, any purchase option, call option, right of first refusal,
preemptive right, subscription right or any similar right under any provision of the NCBCA, the Parent Articles, the Parent By-laws or any Contract to which Parent is a party or otherwise bound (other than rights granted pursuant to the Rights
Agreement). The shares of Parent Common Stock constituting the Merger Consideration will be, when issued, duly authorized, validly issued, fully paid and nonassessable and not subject to, or issued in violation of, any purchase option, call option,
right of first refusal, preemptive right, subscription right or any similar right under any provision of the NCBCA, the Parent Articles, the Parent By-laws or any Contract to which Parent is a party or otherwise bound (other than rights granted
pursuant to the Rights Agreement). Except as set forth above in this Section 3.03 (and other than obligations under the Rights Agreement), pursuant to the Parent Deferral Plans as in effect as of the date of this Agreement or pursuant to the
terms of this Agreement, there are no issued, reserved for issuance or outstanding, and there are no outstanding obligations of Parent or any Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, (x) any capital
stock of Parent or any Parent Subsidiary or any securities of Parent or any Parent Subsidiary convertible into or exchangeable or exercisable for shares of capital stock or voting securities of, or other equity interests in, Parent or any Parent
Subsidiary, (y) any warrants, calls, options or other rights to acquire from Parent or any Parent Subsidiary, or any other obligation of Parent or any Parent Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any
capital stock or voting securities of, or other equity interests in, Parent or any Parent Subsidiary, or (z) any rights issued by or other obligations of Parent or any Parent Subsidiary that are linked in any way to the price of any class of
Parent Capital Stock or any shares of capital stock of any Parent Subsidiary, the value of Parent, any Parent Subsidiary or any part of Parent or any Parent Subsidiary or any dividends or other distributions declared or paid on any shares of capital
stock of Parent or any Parent Subsidiary. Other than (1) the acquisition by Parent of shares of Parent Common Stock in connection with the surrender of shares of Parent Common Stock by holders of Parent Stock Options in order to pay the
exercise price thereof, (2) the withholding of shares of Parent Common Stock to satisfy tax obligations with respect to awards granted pursuant to the Parent Stock Plans, (3) the acquisition by Parent of awards granted pursuant to the
Parent Stock Plans in connection with the forfeiture of such awards and (4) obligations under the Rights Agreement, there are not any outstanding obligations of Parent or any of the Parent Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock or voting securities or other equity interests of Parent or any Parent Subsidiary or any securities, interests, warrants, calls, options or other rights referred to in clause (x), (y) or (z) of the immediately
preceding sentence. There are no bonds, debentures, notes or other Indebtedness of Parent having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Parent may
vote (collectively,
Parent Voting Debt
). Neither Parent nor any of the Parent Subsidiaries is a party to any voting agreement with respect to the voting of any capital stock or voting securities of, or other equity interests in,
Parent. Neither Parent nor any of the Parent Subsidiaries is a party to any agreement pursuant to which any Person is entitled to elect, designate or nominate any director of Parent or any of the Parent Subsidiaries.
(c) As of the date hereof, neither Parent nor any Parent Subsidiary owns any shares of Company Common Stock.
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SECTION 3.04.
Authority; Execution and Delivery; Enforceability.
(a) Each of Parent
and Merger Sub has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger and the other transactions contemplated by this Agreement, subject, in the case
of the Share Issuance, to the receipt of the Parent Shareholder Approval and, in the case of the Merger, to the approval of this Agreement by Parent as the sole shareholder of Merger Sub. The Board of Directors of Parent (the
Parent
Board
) has unanimously adopted resolutions (i) determining that the terms of the Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of Parent and its shareholders,
(ii) approving this Agreement, the Merger and the other transactions contemplated by this Agreement and (iii) recommending that Parents shareholders approve the Share Issuance (the
Parent Recommendation
) and
directing that the Share Issuance be submitted to Parents shareholders for approval at a duly held meeting of such shareholders for such purpose (the
Parent Shareholders Meeting
). As of the date of this Agreement, such
resolutions have not been amended or withdrawn. The Board of Directors of Merger Sub has adopted resolutions (A) determining that the terms of the Merger and the other transactions contemplated by this Agreement are advisable and in the best
interests of Merger Sub and Parent, as its sole shareholder, (B) approving this Agreement, the Merger and the other transactions contemplated by this Agreement and (C) recommending that Parent, as sole shareholder of Merger Sub, approve
this Agreement and directing that this Agreement be submitted to Parent, as sole shareholder of Merger Sub, for approval. As of the date of this Agreement, such resolutions have not been amended or withdrawn. Except (x) solely in the case of
the Share Issuance, for the approval of the Share Issuance by the affirmative vote of the holders of a majority of the voting power of the shares of Parent Common Stock and Parent Preferred Stock represented in person or by proxy at the Parent
Shareholders Meeting, as required by Section 312.03(c) of the NYSE Listed Company Manual (the
Parent Shareholder Approval
), and (y) solely in the case of the Merger, for the approval of this Agreement by Parent as the
sole shareholder of Merger Sub, no other corporate proceedings on the part of Parent or Merger Sub are necessary to authorize, adopt or approve, as applicable, this Agreement or to consummate the Transactions (except for the filing of the
appropriate merger documents as required by the DGCL and the NCBCA). Each of Parent and Merger Sub has duly executed and delivered this Agreement and, assuming the due authorization, execution and delivery by the Company, this Agreement constitutes
its legal, valid and binding obligation, enforceable against it in accordance with its terms except, in each case, as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors rights generally and
by general principles of equity.
(b) No fair price, moratorium, control share acquisition or other
similar antitakeover statute or similar statute or regulation applies to Parent or Merger Sub with respect to the Transaction Agreements or the Transactions.
SECTION 3.05.
No Conflicts; Consents.
(a) The execution and delivery by each of Parent and Merger Sub of this Agreement does not,
and the performance by each of Parent and Merger Sub of its obligations hereunder and the consummation of the Merger and the other transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation of any
provision of, the Parent Articles, the Parent By-laws or the comparable charter or organizational documents of any Parent Subsidiary (assuming that the Parent Shareholder Approval is obtained), (ii) conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, any obligation to make an offer to purchase or redeem any Indebtedness or capital stock or
any loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or any Parent Subsidiary under, any provision of any contract, lease, license, indenture, note, bond, agreement, concession,
franchise or other instrument (each, excluding any Parent Benefit Plan or Company Benefit Plan, a
Contract
) to which Parent or any Parent Subsidiary is a party or by which any of their respective properties or assets is bound or
any Parent Permit or (iii) conflict with, or result in any violation of any provision of, subject to the filings and other matters referred to in Section 3.05(b), any judgment, order or decree (
Judgment
) or statute, law
(including common law), ordinance, rule or regulation (
Law
), in each case, applicable to Parent or any Parent Subsidiary or their respective properties or assets (assuming that the Parent Shareholder Approval is obtained), other
than, in the case of clauses (ii) and (iii) above, any matters that, individually or in the aggregate, have not
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had and would not reasonably be expected to have a Parent Material Adverse Effect (it being agreed that for purposes of this Section 3.05(a), effects resulting from or arising in connection
with the execution and delivery of this Agreement, as set forth in clause (iv) of the definition of the term Material Adverse Effect, shall not be excluded in determining whether a Parent Material Adverse Effect has occurred or
would reasonably be expected to occur) and would not prevent or materially impede, interfere with, hinder or delay the consummation of the Merger.
(b) No consent, approval, clearance, waiver, Permit or order (
Consent
) of or from, or registration, declaration, notice or
filing made to or with any federal, national, state, provincial or local, whether domestic or foreign, government or any court of competent jurisdiction, administrative agency or commission or other governmental authority or instrumentality, whether
domestic, foreign or supranational (a
Governmental Entity
), is required to be obtained or made by or with respect to Parent or any Parent Subsidiary in connection with the execution and delivery of this Agreement or its
performance of its obligations hereunder or the consummation of the Transactions, other than (i) (A) the filing with the Securities and Exchange Commission (the
SEC
) of the Joint Proxy Statement in definitive form,
(B) the filing with the SEC, and declaration of effectiveness under the Securities Act of 1933, as amended (the
Securities Act
), of the registration statement on Form
S-4
in connection
with the issuance by Parent of the Merger Consideration, in which the Joint Proxy Statement will be included as a prospectus (the
Form
S-4
), and (C) the filing with the SEC of such
reports and other filings under, and such other compliance with, the Securities Exchange Act of 1934, as amended (the
Exchange Act
), and the Securities Act, and the rules and regulations thereunder, as may be required in
connection with this Agreement, the Merger and the other transactions contemplated by this Agreement, (ii) compliance with and filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the
HSR Act
), (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, the filing of the Articles of Merger with the Secretary of State of the State of North
Carolina and the filing of appropriate documents with the relevant authorities of the other jurisdictions in which Parent and the Company are qualified to do business, (iv) such Consents, registrations, declarations, notices or filings as are
required to be made or obtained under the securities or blue sky laws of various states in connection with the issuance of the shares of Parent Common Stock as Merger Consideration, (v) such filings with and approvals of the NYSE as
are required to permit the consummation of the Merger and the listing of the shares of Parent Common Stock to be issued as Merger Consideration and (vi) such other matters that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Parent Material Adverse Effect (it being agreed that for purposes of this Section 3.05(b), effects resulting from or arising in connection with the execution and delivery of this Agreement, as set forth in
clause (iv) of the definition of the term Material Adverse Effect, shall not be excluded in determining whether a Parent Material Adverse Effect has occurred or would reasonably be expected to occur) and would not prevent or
materially impede, interfere with, hinder or delay the consummation of the Merger.
SECTION 3.06.
SEC Documents; Undisclosed
Liabilities.
(a) Parent has furnished or filed all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) required to be furnished or filed by Parent with the SEC since
January 1, 2012 (such documents, together with any documents filed with the SEC during such period by Parent on a voluntary basis on a Current Report on Form 8-K, but excluding the Joint Proxy Statement and the Form
S-4,
being collectively referred to as the
Parent SEC Documents
).
(b) Each Parent
SEC Document (i) at the time filed, complied in all material respects with the requirements of the Sarbanes-Oxley Act of 2002 (
SOX
) and the Exchange Act or the Securities Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such Parent SEC Document and (ii) did not at the time it was filed (or if amended or superseded by a filing or amendment prior to the date of this Agreement, then at the time of such filing or
amendment) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
Each of the consolidated financial statements of Parent included in the Parent SEC Documents complied at the time it was
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filed as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, was prepared in accordance with United
States generally accepted accounting principles (
GAAP
) (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly presented in all material respects the consolidated financial position of Parent and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods
shown (subject, in the case of unaudited statements, to normal year-end audit adjustments).
(c) Except (i) as reflected or reserved
against in Parents consolidated audited balance sheet as of December 31, 2012 (or the notes thereto) as included in the Filed Parent SEC Documents, (ii) for liabilities and obligations incurred since December 31, 2012 in the
ordinary course of business and (iii) for liabilities and obligations incurred as permitted by this Agreement, neither Parent nor any Parent Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or
otherwise) that, individually or in the aggregate, have had or would reasonably be expected to have a Parent Material Adverse Effect.
(d)
Each of the chief executive officer of Parent and the chief financial officer of Parent (or each former chief executive officer of Parent and each former chief financial officer of Parent, as applicable) has made all applicable certifications
required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of SOX with respect to the Parent SEC Documents, and the statements contained in such certifications are true and accurate. For purposes of this Agreement, chief
executive officer and chief financial officer shall have the meanings given to such terms in SOX. None of Parent or any of the Parent Subsidiaries has outstanding, or has arranged any outstanding, extensions of credit
to directors or executive officers within the meaning of Section 402 of SOX.
(e) Parent maintains a system of internal control
over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) sufficient to provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in
conformity with GAAP, consistently applied, (B) that transactions are executed only in accordance with the authorization of management and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of
Parents properties or assets.
(f) The disclosure controls and procedures (as defined in Rules
13a-15(e)
and 15d-15(e) of the Exchange Act) utilized by Parent are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by Parent in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that all such information required to be disclosed is accumulated and communicated to the
management of Parent, as appropriate, to allow timely decisions regarding required disclosure and to enable the chief executive officer and chief financial officer of Parent to make the certifications required under the Exchange Act with respect to
such reports.
(g) Neither Parent nor any of the Parent Subsidiaries is a party to, or has any commitment to become a party to, any joint
venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among Parent and any of the Parent Subsidiaries, on the one hand, and any unconsolidated
Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any off-balance sheet arrangements (as defined in Item 303(a) of Regulation S-K under the Exchange Act)), where
the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, Parent or any of the Parent Subsidiaries in Parents or such Parent Subsidiarys published
financial statements or other Parent SEC Documents.
(h) Since December 31, 2012, none of Parent, Parents independent
accountants, the Parent Board or the audit committee of the Parent Board has received any oral or written notification of any (x) significant
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deficiency in the internal controls over financial reporting of Parent, (y) material weakness in the internal controls over financial reporting of Parent or (z) fraud,
whether or not material, that involves management or other employees of Parent who have a significant role in the internal controls over financial reporting of Parent. For purposes of this Agreement, the terms significant deficiency and
material weakness shall have the meanings assigned to them in Auditing Standard No. 5 of the Public Company Accounting Oversight Board, as in effect on the date of this Agreement.
(i) None of the Parent Subsidiaries is, or has at any time since January 1, 2012 been, subject to the reporting requirements of
Section 13(a) or 15(d) of the Exchange Act.
SECTION 3.07.
Information Supplied.
None of the information supplied or to be
supplied by Parent for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 or any amendment or supplement thereto is declared effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to each of Parents shareholders and
the Companys stockholders or at the time of each of the Parent Shareholders Meeting and the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange Act and the
rules and regulations thereunder, except that no representation is made by Parent or Merger Sub with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by
reference therein.
SECTION 3.08.
Absence of Certain Changes or Events.
From December 31, 2012 to the date of this Agreement,
there has not occurred any fact, circumstance, effect, change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect. From December 31, 2012 to the date of
this Agreement, Parent and the Parent Subsidiaries have conducted the business of Parent and the Parent Subsidiaries in the ordinary course in all material respects.
SECTION 3.09.
Taxes.
Except as would not reasonably be expected to have, individually or in the aggregate, a Parent Material Adverse
Effect, each of Parent and each Parent Subsidiary (a) has duly and timely filed, or caused to be filed, taking into account any extensions, all Tax Returns required to have been filed by it and such Tax Returns are true, correct and complete
and (b) has duly and timely paid all Taxes required to have been paid by it (including any Taxes required to be withheld from amounts owing to any employee, creditor, stockholder or other third party), except in each case of clauses
(a) and (b), with respect to matters contested in good faith in appropriate proceedings and for which adequate reserves have been established in accordance with GAAP in the Parent SEC Documents.
SECTION 3.10.
Intended Tax Treatment.
Neither Parent nor any Parent Subsidiary (including Merger Sub) has taken or agreed to take any
action or knows of the existence of any fact that is reasonably likely to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 3.11.
Litigation.
There is no, and since January 1, 2012 there has been no, suit, action or other proceeding pending or,
to the Knowledge of Parent, threatened against Parent or any Parent Subsidiary or any of their respective properties or assets that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
There is no, and since January 1, 2012 there has been no, Judgment outstanding against or, to the Knowledge of Parent, investigation by any Governmental Entity involving Parent or any Parent Subsidiary or any of their respective properties or
assets that, individually or in the aggregate, has had or would reasonably be expected to have a Parent Material Adverse Effect.
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SECTION 3.12.
Compliance with Applicable Laws.
Except for matters that, individually or in
the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect, Parent and the Parent Subsidiaries are, and since January 1, 2012 have been, in compliance with all applicable Laws and Parent Permits.
Except for matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Parent Material Adverse Effect, there is no, and since January 1, 2012, there has been no, action, demand or investigation by
or before any Governmental Entity pending or, to the Knowledge of Parent, threatened alleging that Parent or a Parent Subsidiary is not in compliance with any applicable Law or Parent Permit or which challenges or questions the validity of any
rights of the holder of any Parent Permit. To the Knowledge of Parent, Parent is, and since January 1, 2012, has been, in compliance with the Foreign Corrupt Practices Act of 1977, as amended (the
FCPA
) and any rules and
regulations thereunder, other than as has not had and would not reasonably be expected to have a Parent Material Adverse Effect. This section does not relate to Tax matters or environmental matters, which are the subjects of Sections 3.09 and 3.13,
respectively.
SECTION 3.13.
Environmental Matters.
Except for matters that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Parent Material Adverse Effect:
(a) Parent and the Parent Subsidiaries are and, since
January 1, 2010, have been, in compliance with all Environmental Laws, and neither Parent nor any Parent Subsidiary has received any (i) written communication from a Governmental Entity or other Person that alleges that Parent or any
Parent Subsidiary is in violation of, or has liability under, any Environmental Law or any Permit issued pursuant to Environmental Law or (ii) written request for information pursuant to any Environmental Law that is outstanding or unresolved
(including any such request relating to the new source review, NESHAPs or other requirements under the Clean Air Act) that would form the basis of any violation or liability under Environmental Law;
(b) Parent and Parent Subsidiaries have obtained and are and, since January 1, 2010, have been, in compliance with all Permits required
pursuant to any Environmental Law for the operations (as currently conducted) of Parent, the Parent Subsidiaries and the real property owned or leased by Parent and the Parent Subsidiaries and all such Permits are valid and in good standing and will
not be subject to modification or revocation as a result of the transactions contemplated by this Agreement;
(c) to the Knowledge of
Parent and the Parent Subsidiaries, maintaining or achieving compliance with applicable Environmental Laws, including any requirement to install, upgrade or replace pollution control equipment, meet emission standards or otherwise comply with the
Clean Air Act, to surrender or acquire emission allowances or credits or otherwise comply with AB 32, or to reclaim or restore any mined real properties, will not require Parent or the Parent Subsidiaries to incur costs beyond those reflected or
reserved against in Parents consolidated audited balance sheet as of December 31, 2012 (or the notes thereto) as included in the Filed Parent SEC Documents;
(d) there are no Environmental Claims pending or, to the Knowledge of Parent, threatened against Parent or any of the Parent Subsidiaries;
(e) there has been no Release of, or exposure to, any Hazardous Material that would reasonably be expected to form the basis of any
Environmental Claim against Parent or any of the Parent Subsidiaries or against any Person whose liabilities for such Environmental Claim Parent or any of Parent Subsidiaries has, or may have, retained or assumed, either contractually or by
operation of Law;
(f) neither Parent nor any of the Parent Subsidiaries has retained or assumed, either contractually or by operation of
Law, any liabilities or obligations (including any reclamation obligations) that would reasonably be expected to form the basis of any Environmental Claim against Parent or any of the Parent Subsidiaries; and
(g) with respect to the real properties owned, leased or mined by Parent or any Parent Subsidiary, there are and have been no significant and
substantial mining safety or health hazards or pattern of violations, as
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regulated or defined under the MSHA, or similar safety or health hazards at any such property arising under the OSHA or any other federal, state or local Law similar to MSHA or OSHA, which would
reasonably be expected to result in Parent or any Parent Subsidiary incurring any liability or require Parent or any Parent Subsidiary to cease operations at such property.
SECTION 3.14.
Brokers Fees and Expenses.
No broker, investment banker, financial advisor or other Person, other than Barclays
Capital Inc., Deutsche Bank Securities Inc. and J.P. Morgan Securities LLC (the
Parent Financial Advisors
), the fees and expenses of which will be paid by Parent, is entitled to any brokers, finders, financial
advisors or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of Parent.
SECTION 3.15.
Opinions of Financial Advisors.
The Parent Board has received an opinion from each of the Parent Financial Advisors to
the effect that, as of the date of each such opinion, and subject to the assumptions, limitations, qualifications and conditions set forth therein, the Exchange Ratio in the Merger was fair, from a financial point of view, to Parent. Promptly after
the execution of this Agreement, Parent will furnish the Company, solely for informational purposes, true and complete copies of the written opinions of the Parent Financial Advisors.
SECTION 3.16.
Merger Sub.
Parent is the sole shareholder of Merger Sub. Since its date of incorporation, Merger Sub has not carried on
any business or conducted any operations other than the execution of this Agreement, the performance of its obligations hereunder and matters ancillary thereto.
SECTION 3.17.
No Other Representations or Warranties.
Except for the representations and warranties contained in Article IV, Parent
acknowledges that none of the Company, the Company Subsidiaries or any other Person on behalf of the Company makes any other express or implied representation or warranty whatsoever, and specifically (but without limiting the generality of the
foregoing) that none of the Company, the Company Subsidiaries or any other Person on behalf of the Company makes any representation or warranty with respect to: (i) any projections, estimates or budgets delivered or made available to Parent or
any of its affiliates or Representatives of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of the Company and the Company Subsidiaries or (ii) the future business
and operations of the Company and the Company Subsidiaries, including in the case of (i) and (ii) with respect to any information, documents, projections, forecasts or other material made available to Parent or its affiliates and
Representatives in certain data rooms or management presentations in expectation of the transactions contemplated by this Agreement, and Parent has not relied on any such information or any representation or warranty not set forth in
Article IV.
ARTICLE IV
Representations and Warranties of the Company
The Company represents and warrants to Parent and Merger Sub that the statements contained in this Article IV are true and correct except as
set forth in the Company SEC Documents filed and publicly available after January 1, 2012 and at least two Business Days prior to the date of this Agreement (the
Filed Company SEC
Documents
) (excluding any disclosures
in the Filed Company SEC Documents in any risk factors section, any forward looking disclosure in any section related to forward looking statements and other disclosures that are predictive or forward-looking in nature, other than historical facts
included therein) or in the disclosure letter delivered by the Company to Parent at or before the execution and delivery by the Company of this Agreement (the
Company Disclosure Letter
). The Company Disclosure Letter shall be
arranged in numbered and lettered sections corresponding to the numbered and lettered sections contained in this Article IV, and the disclosure in any section shall be deemed to qualify other sections in this Article IV to the extent (and only to
the extent) that it is reasonably apparent that such disclosure also qualifies or applies to such other sections.
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SECTION 4.01.
Organization, Standing and Power.
Each of the Company and each of the
Companys Subsidiaries (the
Company Subsidiaries
) is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized (in the case of good standing, to the extent such
jurisdiction recognizes such concept), except, in the case of the Company Subsidiaries, where the failure to be so organized, existing or in good standing, individually or in the aggregate, has not had and would not reasonably be expected to have a
Company Material Adverse Effect. Each of the Company and the Company Subsidiaries has all requisite power and authority and possesses all Permits necessary to enable it to own, operate, lease or otherwise hold its properties and assets and to
conduct its businesses as presently conducted (the
Company Permits
), except where the failure to have such power or authority or to possess the Company Permits, individually or in the aggregate, has not had and would not
reasonably be expected to have a Company Material Adverse Effect. Each of the Company and the Company Subsidiaries is duly qualified or licensed to do business in each jurisdiction where the nature of its business or the ownership or leasing of its
properties make such qualification necessary, other than in such jurisdictions where the failure to be so qualified or licensed, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse
Effect. The Company has delivered or made available to Parent, prior to execution of this Agreement, true and complete copies of the certificate of incorporation of the Company in effect as of the date of this Agreement (the
Company
Charter
) and the by-laws of the Company in effect as of the date of this Agreement (the
Company By-laws
).
SECTION 4.02.
Company Subsidiaries.
(a) All the outstanding shares of capital stock or voting securities of, or other equity
interests in, each of the Company Subsidiaries have been validly issued and are owned by the Company, by another Company Subsidiary or by the Company and another Company Subsidiary, free and clear of all material Liens, and free of any other
restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock, voting securities or other equity interests), except for restrictions imposed by applicable securities laws. Section 4.02(a) of the
Company Disclosure Letter sets forth, as of the date of this Agreement, a true and complete list of the Company Subsidiaries.
(b) Except
for the capital stock and voting securities of, and other equity interests in, the Company Subsidiaries, neither the Company nor any Company Subsidiary owns, directly or indirectly, any capital stock or voting securities of, or other equity
interests in, or any interest convertible into or exchangeable or exercisable for, any capital stock or voting securities of, or other equity interests in, any firm, corporation, partnership, company, limited liability company, trust, joint venture,
association or other entity other than ordinary course investments in publicly traded securities constituting one percent or less of a class of outstanding securities of any entity.
SECTION 4.03.
Capital Structure.
(a) The authorized capital stock of the Company consists of 100,000,000 shares of Company Common
Stock and 100,000 shares of cumulative preferred stock, without par value (the
Company Preferred Stock
and together with Company Common Stock, the
Company Capital Stock
). At the close of business on
December 31, 2013, (i) 28,622,741 shares of Company Common Stock were issued and outstanding, (ii) no shares of Company Preferred Stock and no Company Restricted Shares were issued and outstanding, (iii) no shares of Company
Common Stock were held by the Company in its treasury and (iv) 4,141,504 shares of Company Common Stock were reserved and available for issuance pursuant to the Company Stock Plans, including (A) 1,466,841 shares of Company Common Stock
issuable upon the exercise of outstanding Company Stock Options (whether or not presently exercisable), (B) 133,315 shares of Company Common Stock issuable pursuant to outstanding Company SARs and (C) 177,464 shares of Company Common Stock
issuable upon settlement of outstanding Company RSUs. Except as set forth in this Section 4.03(a), at the close of business on December 31, 2013, no shares of capital stock or voting securities of, or other equity interests in, the Company
were issued, reserved for issuance or outstanding. From the close of business on December 31, 2013 to the date of this Agreement, there have been no issuances by the Company of shares of capital stock or voting securities of, or other equity
interests in, the Company, other than the issuance of Company Common Stock upon the exercise of the Company Stock Options or upon the vesting of Company RSUs, in each case, outstanding at the close of business on December 31, 2013 and in
accordance with their terms in effect at such time.
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(b) All outstanding shares of Company Capital Stock are, and, at the time of issuance, all such
shares that may be issued upon the exercise or vesting of the Company Stock Options, Company SARs or Company RSUs will be, duly authorized, validly issued, fully paid and nonassessable and not subject to, or issued in violation of, any purchase
option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the DGCL, the Company Charter, the Company By-laws or any Contract to which the Company is a party or otherwise bound.
Except as set forth above in this Section 4.03 or pursuant to the Company Deferral Plans as in effect as of the date of this Agreement, there are no issued, reserved for issuance or outstanding, and there are no outstanding obligations of the
Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, (x) any capital stock of the Company or any Company Subsidiary or any securities of the Company or any Company Subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or voting securities of, or other equity interests in, the Company or any Company Subsidiary, (y) any warrants, calls, options or other rights to acquire from the Company or any Company
Subsidiary, or any other obligation of the Company or any Company Subsidiary to issue, deliver or sell, or cause to be issued, delivered or sold, any capital stock or voting securities of, or other equity interests in, the Company or any Company
Subsidiary or (z) any rights issued by or other obligations of the Company or any Company Subsidiary that are linked in any way to the price of any class of the Company Capital Stock or any shares of capital stock of any Company Subsidiary, the
value of the Company, any Company Subsidiary or any part of the Company or any Company Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of the Company or any Company Subsidiary. Other than
(1) the acquisition by the Company of shares of Company Common Stock in connection with the surrender of shares of Company Common Stock by holders of Company Stock Options in order to pay the exercise price thereof, (2) the withholding of
shares of Company Common Stock to satisfy tax obligations with respect to awards granted pursuant to the Company Stock Plans and (3) the acquisition by the Company of awards granted pursuant to the Company Stock Plans in connection with the
forfeiture of such awards, there are not any outstanding obligations of the Company or any of the Company Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or voting securities or other equity interests of the
Company or any Company Subsidiary or any securities, interests, warrants, calls, options or other rights referred to in clause (x), (y) or (z) of the immediately preceding sentence. There are no bonds, debentures, notes or other
Indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote (collectively,
Company Voting Debt
).
Neither the Company nor any of the Company Subsidiaries is a party to any voting agreement with respect to the voting of any capital stock or voting securities of, or other equity interests in, the Company. Neither the Company nor any of the Company
Subsidiaries is a party to any agreement pursuant to which any Person is entitled to elect, designate or nominate any director of the Company or any of the Company Subsidiaries.
(c) No subsidiary of the Company owns any shares of Company Common Stock.
SECTION 4.04.
Authority; Execution and Delivery; Enforceability.
(a) The Company has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder
and to consummate the Merger and the other transactions contemplated by this Agreement, subject, in the case of the Merger, to the receipt of the Company Stockholder Approval. The Board of Directors of the Company (the
Company
Board
) has adopted resolutions, by unanimous vote at a meeting duly called at which a quorum of directors of the Company was present, (i) approving the execution, delivery and performance of this Agreement and the transactions
contemplated hereby, including the Merger, (ii) determining that entering into this Agreement is in the best interests of the Company and its stockholders, (iii) declaring this Agreement advisable and (iv) recommending that the
Companys stockholders adopt this Agreement (the
Company Recommendation
) and directing that this Agreement be submitted to the Companys stockholders for adoption at a duly held meeting of such stockholders for such
purpose (the
Company Stockholders Meeting
). As of the date of this Agreement, such resolutions have not been amended or withdrawn. Except for the adoption of this Agreement by the stockholders of the Company in accordance with the
Companys Charter and the DGCL (the
Company Stockholder Approval
), no
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other corporate proceedings on the part of the Company are necessary to authorize, adopt or approve, as applicable, the Transaction Agreements or to consummate the Transactions (except for the
filing of the appropriate merger documents as required by the DGCL and NCBCA). The Company has duly executed and delivered this Agreement and, assuming the due authorization, execution and delivery by Parent and Merger Sub, this Agreement
constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except, in each case, as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors rights
generally and by general principles of equity.
(b) (i) The Company Board has adopted such resolutions as are necessary to render
inapplicable to the Transaction Agreements and the Transactions the restrictions on business combinations (as defined in Section 203 of the DGCL) as set forth in Section 203 of the DGCL and (ii) no other fair
price, moratorium, control share acquisition or other similar antitakeover statute or similar statute or regulation applies to the Company with respect to the Transaction Agreements or the Transactions.
SECTION 4.05.
No Conflicts; Consents.
(a) The execution and delivery by the Company of this Agreement does not, and the
performance by it of its obligations hereunder and the consummation of the Merger and the other transactions contemplated by this Agreement will not, (i) conflict with, or result in any violation of any provision of, the Company Charter, the
Company By-laws or the comparable charter or organizational documents of any Company Subsidiary (assuming that the Company Stockholder Approval is obtained), (ii) conflict with, or result in any violation of or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, any obligation to make an offer to purchase or redeem any Indebtedness or capital stock or any loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or assets of the Company or any Company Subsidiary under, any provision of any Contract to which the Company or any Company Subsidiary is a party or by which any of their
respective properties or assets is bound or any Company Permit or (iii) conflict with, or result in any violation of any provision of, subject to the filings and other matters referred to in Section 4.05(b), any Judgment or Law, in each
case, applicable to the Company or any Company Subsidiary or their respective properties or assets (assuming that the Company Stockholder Approval is obtained), other than, in the case of clauses (ii) and (iii) above, any matters that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect (it being agreed that for purposes of this Section 4.05(a), effects resulting from or arising in connection with the
execution and delivery of this Agreement, as set forth in clause (iv) of the definition of the term Material Adverse Effect, shall not be excluded in determining whether a Company Material Adverse Effect has occurred or would
reasonably be expected to occur) and would not prevent or materially impede, interfere with, hinder or delay the consummation of the Merger.
(b) No Consent of or from, or registration, declaration, notice or filing made to or with any Governmental Entity is required to be obtained
or made by or with respect to the Company or any Company Subsidiary in connection with the execution and delivery of this Agreement or its performance of its obligations hereunder or the consummation of the Transactions, other than
(i) (A) the filing with the SEC of the Joint Proxy Statement in definitive form, the filing with the SEC, and the declaration of effectiveness under the Securities Act, of the Form
S-4
and
(B) the filing with the SEC of such reports and other filings under, and such other compliance with, the Exchange Act and the Securities Act, and the rules and regulations thereunder, as may be required in connection with the Transaction
Agreements or the Transactions, (ii) compliance with and filings under the HSR Act, (iii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, the filing of the Articles of Merger with the Secretary
of State of the State of North Carolina and the filing of appropriate documents with the relevant authorities of the other jurisdictions in which Parent and the Company are qualified to do business, (iv) such Consents, registrations,
declarations, notices or filings as are required to be made or obtained under the securities or blue sky laws of various states in connection with the issuance of the shares of Parent Common Stock to be issued as Merger Consideration,
(v) such filings with and approvals of the NYSE as are required to permit the consummation of the Merger and the listing of the shares of Parent Common Stock to be issued as Merger Consideration and (vi) such other matters that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect
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(it being agreed that for purposes of this Section 4.05(b), effects resulting from or arising in connection with the execution and delivery of this Agreement, as set forth in clause
(iv) of the definition of the term Material Adverse Effect, shall not be excluded in determining whether a Company Material Adverse Effect has occurred or would reasonably be expected to occur) and would not prevent or materially
impede, interfere with, hinder or delay the consummation of the Merger.
SECTION 4.06.
SEC Documents; Undisclosed Liabilities.
(a) The Company has furnished or filed all reports, schedules, forms, statements and other documents (including exhibits and other information incorporated therein) required to be furnished or filed by the Company with the SEC since
January 1, 2012 (such documents, together with any documents filed with the SEC during such period by the Company on a voluntary basis on a Current Report on Form 8-K, but excluding the Joint Proxy Statement and the Form
S-4,
being collectively referred to as the
Company SEC Documents
).
(b) Each Company
SEC Document (i) at the time filed, complied in all material respects with the requirements of SOX and the Exchange Act or the Securities Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to
such Company SEC Document and (ii) did not at the time it was filed (or if amended or superseded by a filing or amendment prior to the date of this Agreement, then at the time of such filing or amendment) contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the consolidated financial
statements of the Company included in the Company SEC Documents complied at the time it was filed as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto,
was prepared in accordance with GAAP (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly presented
in all material respects the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods shown (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(c) Except (i) as reflected or reserved against in the Companys
consolidated audited balance sheet as of May 31, 2013 (or the notes thereto) as included in the Filed Company SEC Documents, (ii) for liabilities and obligations incurred since May 31, 2013 in the ordinary course of business and
(iii) for liabilities and obligations incurred as permitted by this Agreement, neither the Company nor any Company Subsidiary has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) that,
individually or in the aggregate, have had or would reasonably be expected to have a Company Material Adverse Effect.
(d) Each of the
chief executive officer of the Company and the chief financial officer of the Company (or each former chief executive officer of the Company and each former chief financial officer of the Company, as applicable) has made all applicable
certifications required by Rule 13a-14 or 15d-14 under the Exchange Act and Sections 302 and 906 of SOX with respect to the Company SEC Documents, and the statements contained in such certifications are true and accurate. None of the Company or any
of the Company Subsidiaries has outstanding, or has arranged any outstanding, extensions of credit to directors or executive officers within the meaning of Section 402 of SOX.
(e) The Company maintains a system of internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) sufficient to provide reasonable assurance (A) that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP, consistently applied, (B) that transactions are executed
only in accordance with the authorization of management and (C) regarding prevention or timely detection of the unauthorized acquisition, use or disposition of the Companys properties or assets.
(f) The disclosure controls and procedures (as defined in Rules
13a-15(e)
and 15d-15(e) of
the Exchange Act) utilized by the Company are reasonably designed to ensure that all information (both financial and non-financial) required to be disclosed by the Company in the reports that it files or submits under the
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Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that all such information required to be disclosed is
accumulated and communicated to the management of the Company, as appropriate, to allow timely decisions regarding required disclosure and to enable the chief executive officer and chief financial officer of the Company to make the certifications
required under the Exchange Act with respect to such reports.
(g) Neither the Company nor any of the Company Subsidiaries is a party to,
or has any commitment to become a party to, any joint venture, off-balance sheet partnership or any similar Contract (including any Contract or arrangement relating to any transaction or relationship between or among the Company and any of the
Company Subsidiaries, on the one hand, and any unconsolidated Affiliate, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any off-balance sheet arrangements (as defined in
Item 303(a) of Regulation S-K under the Exchange Act)), where the result, purpose or intended effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, the Company or any of the Company
Subsidiaries in the Companys or such Company Subsidiarys published financial statements or other the Company SEC Documents.
(h) Since May 31, 2013, none of the Company, the Companys independent accountants, the Company Board or the audit committee of the
Company Board has received any oral or written notification of any (x) significant deficiency in the internal controls over financial reporting of the Company, (y) material weakness in the internal controls over
financial reporting of the Company or (z) fraud, whether or not material, that involves management or other employees of the Company who have a significant role in the internal controls over financial reporting of the Company.
(i) None of the Company Subsidiaries is, or has at any time since January 1, 2012 been, subject to the reporting requirements of
Section 13(a) or 15(d) of the Exchange Act.
SECTION 4.07.
Information Supplied.
None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in (i) the Form S-4 will, at the time the Form S-4 or any amendment or supplement thereto is declared effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading or (ii) the Joint Proxy Statement will, at the date it is first mailed to each of Parents
shareholders and the Companys stockholders or at the time of each of the Parent Shareholders Meeting and the Company Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Joint Proxy Statement will comply as to form in all material respects with the requirements of the Exchange
Act and the rules and regulations thereunder, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Sub for inclusion or
incorporation by reference therein.
SECTION 4.08.
Absence of Certain Changes or Events.
From May 31, 2013 to the date of this
Agreement, there has not occurred any fact, circumstance, effect, change, event or development that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect. From May 31, 2013 to the
date of this Agreement, the Company and the Company Subsidiaries have conducted the business of the Company and the Company Subsidiaries in the ordinary course in all material respects.
SECTION 4.09.
Taxes.
(a) Except as would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect:
(i) Each of the Company and each Company Subsidiary (A) has duly and timely filed, or caused to be filed, taking into
account any extensions, all Tax Returns required to have been filed by it and such Tax Returns are true, correct and complete, and (B) has duly and timely paid all Taxes required to have been
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paid by it (including any Taxes required to be withheld from amounts owing to any employee, creditor, stockholder or other third party) except, in each case of clauses (A) and (B), with
respect to matters contested in good faith in appropriate proceedings and for which adequate reserves have been established in accordance with GAAP in the Company SEC Documents.
(ii) To the Knowledge of the Company, no claim has been made in the past three years by a Governmental Entity in a jurisdiction
where the Company or any Company Subsidiary does not file Tax Returns that the Company or any Company Subsidiary is or may be subject to Taxes in such jurisdiction.
(iii) Neither the Company nor any Company Subsidiary has received any written notice of any audit, judicial proceeding or other
examination against or with respect to the Company or any Company Subsidiary with respect to Taxes. As of the date of this Agreement, there are no pending requests for waivers of time to assess any Tax.
(iv) Neither the Company nor any Company Subsidiary has waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to the assessment or collection of any Taxes, which waiver or extension is currently in effect (other than pursuant to extensions of time to file Tax Returns obtained in the ordinary course of business).
(v) There are no liens or other security interests upon any property or assets of the Company or any Company Subsidiary for
Taxes, except for liens for Taxes (A) not yet due and payable or (B) being contested in good faith and for which adequate reserves have been established in accordance with GAAP in the Company SEC Documents.
(vi) Neither the Company nor any Company Subsidiary is a party to or is bound by any Tax sharing, allocation or indemnification
agreement (other than (A) any such agreement exclusively between or among the Company and/or wholly owned Company Subsidiaries and (B) (1) any lease or financing arrangement or (2) any other agreement (a) the primary purpose
of which is not the allocation or payment of Tax liability and (b) that was entered into in the ordinary course of business). Neither the Company nor any Company Subsidiary is or may be liable under Treasury Regulation section 1.1502-6 (or any
similar provision of the Tax Laws of any state, local or foreign jurisdiction) for Taxes of any person other than the Company and the Company Subsidiaries.
(vii) Within the past two years, neither the Company nor any Company Subsidiary has been a distributing corporation
or a controlled corporation in a distribution intended to qualify for tax-free treatment under Section 355 of the Code.
(viii) Neither the Company nor any Company Subsidiary has been a party to a transaction that, as of the date of this Agreement,
constitutes a listed transaction for purposes of Section 6011 of the Code and applicable Treasury Regulations thereunder (or a similar provision of state law).
(b) The Company had Federal net operating loss carryforwards of at least $409 million as of May 31, 2013. As of immediately prior to the
Effective Time, such net operating loss carryforwards will not be subject to limitation under Section 382 of the Code or any similar provision of applicable Tax Law (not taking into account the effect, if any, of this Agreement).
SECTION 4.10.
Intended Tax Treatment.
Neither the Company nor any Company Subsidiary has taken or agreed to take any action or knows of
the existence of any fact that is reasonably likely to prevent or impede the Merger from qualifying as a reorganization within the meaning of Section 368(a) of the Code.
SECTION 4.11.
Benefits Matters; ERISA Compliance.
(a) Section 4.11(a) of the Company Disclosure Letter sets forth, as of the
date of this Agreement, a complete and correct list identifying any material Company Benefit Plan. The Company has delivered or made available to Parent true and complete copies of (i) all material Company Benefit Plans or, in the case of any
unwritten material Company Benefit Plan, a description thereof, (ii) the most recent annual report on Form 5500 (other than Schedule SSA thereto) filed with the Internal Revenue Service (the
IRS
) with respect to each material
Company Benefit Plan (if any such report was
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required), (iii) the most recent summary plan description for each material Company Benefit Plan for which such summary plan description is required, (iv) each trust agreement and group
annuity contract relating to any material Company Benefit Plan and (v) the most recent financial statements and actuarial reports for each Company Benefit Plan (if any). For purposes of this Agreement,
Company Benefit Plans
means, collectively (A) all employee pension benefit plans (as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended (
ERISA
)), other than any plan which is a
multiemployer plan within the meaning of Section 4001(a)(3) of ERISA (a
Multiemployer Plan
), employee welfare benefit plans (as defined in Section 3(1) of ERISA) and all other bonus, pension,
profit sharing, retirement, deferred compensation, incentive compensation, equity or equity-based compensation, severance, retention, change in control, disability, vacation, death benefit, hospitalization, medical or other plans, arrangements or
understandings providing, or designed to provide, material benefits to any current or former directors, officers, employees or consultants of the Company or any Company Subsidiary and (B) all employment, consulting, indemnification, severance,
retention, change of control or termination agreements or arrangements between the Company or any Company Subsidiary and any current or former directors, officers, employees or consultants of the Company or any Company Subsidiary.
(b) All Company Benefit Plans which are intended to be qualified under Section 401(a) of the Code have been the subject of, have timely
applied for or have not been eligible to apply for, as of the date of this Agreement, determination letters from the IRS to the effect that such Company Benefit Plans and the trusts created thereunder are so qualified, and no such determination
letter has been revoked nor, to the Knowledge of the Company, has revocation been threatened, nor has any such Company Benefit Plan been amended since the date of its most recent determination letter or application therefor in any respect that would
adversely affect its qualification.
(c) Except for matters that, individually or in the aggregate, have not had and would not reasonably
be expected to have a Company Material Adverse Effect, (i) no Company Benefit Plan which is subject to Title IV of ERISA, Section 302 of ERISA, Section 412 of the Code or Section 4971 of the Code (a
Company Pension
Plan
) has failed to meet any minimum funding standards, as applicable (as such terms are defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived, (iii) none of the Company, any Company
Subsidiary, any officer of the Company or any Company Subsidiary or any Company Benefit Plans which are subject to ERISA, including the Company Pension Plans, any trust created thereunder or, to the Knowledge of the Company, any trustee or
administrator thereof, has engaged in a prohibited transaction (as such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any other breach of fiduciary responsibility that could subject the Company, any
Company Subsidiary or any officer of the Company or any Company Subsidiary to the Tax or penalty on prohibited transactions imposed by the Code, ERISA or other applicable Law, (iv) no Company Pension Plans or related trusts have been
terminated, nor is there any intention or expectation to terminate any Company Pension Plans or related trusts, (v) no Company Pension Plans or related trusts are the subject of any proceeding by any Person, including any Governmental Entity,
that would be reasonably expected to result in a termination of any Company Pension Plan or related trust, and (vi) there has not been any reportable event (as that term is defined in Section 4043 of ERISA) with respect to any
Company Pension Plan during the last six years as to which the 30-day advance-notice requirement has not been waived. Neither the Company nor any Company Subsidiary has, or within the past six years had, contributed to, been required to contribute
to, or has any liability (including withdrawal liability within the meaning of Title IV of ERISA) with respect to, any Multiemployer Plan.
(d) With respect to each Company Benefit Plan that is an employee welfare benefit plan (including any health reimbursement
account), such Company Benefit Plan (including any Company Benefit Plan covering retirees or other former employees) may be amended to reduce benefits or limit the liability of the Company or the Company Subsidiaries or terminated, in each
case, without material liability to Parent and its Subsidiaries on or at any time after the Effective Time.
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(e) No Company Benefit Plan provides health, medical or other welfare benefits after retirement
or other termination of employment (other than for continuation coverage required under Section 4980(B)(f) of the Code or applicable Law where the cost thereof is borne entirely by the former employee (or his or her eligible dependents or
beneficiaries)).
(f) Except for matters that, individually or in the aggregate, have not had and would not reasonably be expected to have
a Company Material Adverse Effect, (i) each Company Benefit Plan and its related trust, insurance contract or other funding vehicle has been administered in accordance with its terms and is in compliance with ERISA, the Code and all other Laws
applicable to such Company Benefit Plan and (ii) the Company and each of the Company Subsidiaries is in compliance with ERISA, the Code and all other Laws applicable to the Company Benefit Plans.
(g) Except for matters that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material
Adverse Effect, there are no pending or, to the Knowledge of the Company, threatened claims by or on behalf of any participant in any of the Company Benefit Plans, or otherwise involving any such Company Benefit Plan or the assets of any Company
Benefit Plan, other than routine claims for benefits.
(h) Except as provided by this Agreement or pursuant to applicable Law, none of the
execution and delivery of the Transaction Agreements, the obtaining of the Company Stockholder Approval or the consummation of the Transactions (alone or in conjunction with any other event, including any termination of employment on or following
the Effective Time) will (A) entitle any current or former director, officer, employee or consultant of the Company or any of the Company Subsidiaries to any compensation or benefit, (B) accelerate the time of payment or vesting, or
trigger any payment or funding, of any compensation or benefits or trigger any other material obligation under any Company Benefit Plan or (C) result in any breach or violation of, default under or limit the Companys right to amend,
modify or terminate any Company Benefit Plan.
(i) Since January 1, 2011, there has been, and in connection with the consummation of
the transactions contemplated hereby there will be, no disallowance of a deduction under Section 162(m) or 280G of the Code for any amount paid or payable by the Company or any Company Subsidiary as employee compensation, whether under any
contract, plan, program or arrangement, understanding or otherwise, that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
(j) Each Company Benefit Plan that is a nonqualified deferred compensation plan (as defined in Section 409A(d)(1) of the
Code) that is subject to Section 409A of the Code has since (i) January 1, 2005 been maintained and operated in good faith compliance with Section 409A of the Code and Notice 2005-1 and (ii) January 1, 2009, been in
documentary and operational compliance in all material respects with Section 409A of the Code.
(k) Except as, individually or in the
aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, all contributions required to be made to any Company Benefit Plan by applicable Law, regulation, any plan document or other contractual
undertaking, and all premiums due or payable with respect to insurance policies funding any Company Benefit Plan, for any period through the date hereof have been timely made or paid in full or, to the extent not required to be made or paid on or
before the date hereof, have been fully reflected on the financial statements set forth in the Company SEC Documents. Each Company Benefit Plan that is an employee welfare benefit plan under Section 3(1) of ERISA either (i) is funded
through an insurance company contract and is not a welfare benefit fund within the meaning of Section 419 of the Code or (ii) is unfunded.
(l) Except as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect,
there does not now exist, nor do any circumstances exist that are reasonably likely to result in, any Controlled Group Liability that would be a liability of the Company or any
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Company Subsidiary following the Closing, other than any such Controlled Group Liability relating to any Company Benefit Plan. Without limiting the generality of the foregoing, except as,
individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect, neither the Company nor any Company Subsidiary, nor any of their respective ERISA Affiliates, has engaged in any
transaction described in (i) Section 4069 or (ii) Section 4204 or 4212 of ERISA with respect to any Multiemployer Plans.
SECTION 4.12.
Litigation.
There is no, and since January 1, 2012 there has been no, suit, action or other proceeding pending or,
to the Knowledge of the Company, threatened against the Company or any Company Subsidiary or any of their respective properties or assets that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material
Adverse Effect. There is no, and since January 1, 2012 there has been no, Judgment outstanding against or, to the Knowledge of the Company, investigation by any Governmental Entity involving the Company or any Company Subsidiary or any of their
respective properties or assets that, individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.13.
Compliance with Applicable Laws.
Except for matters that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Company Material Adverse Effect, the Company and the Company Subsidiaries are, and since January 1, 2012 have been, in compliance with all applicable Laws and the Company Permits. Except for matters that,
individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect, there is no, and since January 1, 2012, there has been no, action, demand or investigation by or before any
Governmental Entity pending or, to the Knowledge of the Company, threatened alleging that the Company or a Company Subsidiary is not in compliance with any applicable Law or the Company Permit or which challenges or questions the validity of any
rights of the holder of any Company Permit. To the Knowledge of the Company, the Company is, and since January 1, 2012, has been, in compliance with the FCPA and any rules and regulations thereunder, other than as has not had and would not
reasonably be expected to have a Company Material Adverse Effect. This section does not relate to Tax matters, employee benefits matters, environmental matters or Intellectual Property Rights matters, which are the subjects of Sections 4.09, 4.11,
4.14 and 4.17, respectively.
SECTION 4.14.
Environmental Matters.
Except for matters that, individually or in the aggregate, have
not had and would not reasonably be expected to have a Company Material Adverse Effect:
(a) the Company and the Company Subsidiaries are
and, since January 1, 2010, have been, in compliance with all Environmental Laws, and neither the Company nor any Company Subsidiary has received any (i) written communication from a Governmental Entity or other Person that alleges that
the Company or any Company Subsidiary is in violation of, or has liability under, any Environmental Law or any Permit issued pursuant to Environmental Law or (ii) written request for information pursuant to any Environmental Law that is
outstanding or unresolved (including any such request relating to the new source review, NESHAPs or other requirements under the Clean Air Act) that would form the basis of any violation or liability under Environmental Law;
(b) the Company and the Company Subsidiaries have obtained and are and, since January 1, 2010, have been, in compliance with all Permits
required pursuant to any Environmental Law for the operations (as currently conducted) of the Company, the Company Subsidiaries and the Company Properties and all such Permits are valid and in good standing and will not be subject to modification or
revocation as a result of the transactions contemplated by this Agreement;
(c) to the Knowledge of the Company and the Company
Subsidiaries, maintaining or achieving compliance with applicable Environmental Laws, including any requirement to install, upgrade or replace pollution control equipment, meet emission standards or otherwise comply with the Clean Air Act, to
surrender or acquire emission allowances or credits or otherwise comply with AB32, or to reclaim or restore any mined
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real properties, will not require the Company or the Company Subsidiaries to incur costs beyond those reflected or reserved against in the Companys consolidated audited balance sheet as of
May 31, 2013 (or the notes thereto) as included in the Filed Company SEC Documents;
(d) there are no Environmental Claims pending
or, to the Knowledge of the Company, threatened against the Company or any of the Company Subsidiaries;
(e) there has been no Release of,
or exposure to, any Hazardous Material that would reasonably be expected to form the basis of any Environmental Claim against the Company or any of the Company Subsidiaries or against any Person whose liabilities for such Environmental Claim the
Company or any of the Company Subsidiaries has, or may have, retained or assumed, either contractually or by operation of Law;
(f)
neither the Company nor any of the Company Subsidiaries has retained or assumed, either contractually or by operation of Law, any liabilities or obligations (including any reclamation obligations) that would reasonably be expected to form the basis
of any Environmental Claim against the Company or any of the Company Subsidiaries; and
(g) with respect to the real properties owned,
leased or mined by the Company or any Company Subsidiary, there are and have been no significant and substantial mining safety or health hazards or pattern of violations, as regulated or defined under the MSHA, or similar safety or
health hazards at any such property arising under the OSHA or any other federal, state or local Law similar to MSHA or OSHA, which would reasonably be expected to result in the Company or any Company Subsidiary incurring any liability or require the
Company or any Company Subsidiary to cease operations at such property.
SECTION 4.15.
Contracts.
(a) As of the date of this
Agreement, neither the Company nor any Company Subsidiary is a party to any Contract required to be filed by the Company as a material contract pursuant to Item 601(b)(10) of Regulation S-K under the Securities Act (a
Filed
Company Contract
) that has not been so filed.
(b) Section 4.15 of the Company Disclosure Letter sets forth, as of the date
of this Agreement, a true and complete list, and the Company has made available to Parent true and complete copies, of (i) each agreement, Contract, understanding, or undertaking to which the Company or any of the Company Subsidiaries is a
party that (A) restricts the ability of the Company or the Company Subsidiaries to compete in any business or with any Person in any geographical area in a manner that is material to the Company and the Company Subsidiaries, taken as a whole or
(B) would restrict in any respect the ability of Parent or any of the Parent Subsidiaries to compete in any business or with any Person in any geographical area after the Effective Time, (ii) each loan and credit agreement, Contract, note,
debenture, bond, indenture, mortgage, security agreement, pledge, or other similar agreement pursuant to which any material Indebtedness of the Company or any of the Company Subsidiaries is outstanding or may be incurred, other than any such
agreement between or among the Company and the wholly owned Company Subsidiaries, (iii) each partnership, joint venture or similar agreement, Contract, understanding or undertaking to which the Company or any of the Company Subsidiaries is a
party relating to the formation, creation, operation, management or control of any partnership or joint venture, in each case, material to the Company and the Company Subsidiaries, taken as a whole, and (iv) each agreement, Contract,
understanding or undertaking relating to the disposition or acquisition by the Company or any of the Company Subsidiaries, other than in the ordinary course of business, of any material business or any material amount of assets (excluding
dispositions or acquisitions which were consummated prior to the date of this Agreement). Each agreement, Contract, understanding or undertaking of the type described in this Section 4.15(b) and each Filed Company Contract is referred to herein
as a
Company Material Contract
.
(c) Except for matters which, individually or in the aggregate, have not had and would
not reasonably be expected to have a Company Material Adverse Effect, (i) each Company Material Contract (including, for purposes of this Section 4.15(c), any Contract entered into after the date of this Agreement that would have been
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a Company Material Contract if such Contract existed on the date of this Agreement) is a valid, binding and legally enforceable obligation of the Company or one of the Company Subsidiaries, as
the case may be, and, to the Knowledge of the Company, of the other parties thereto, except, in each case, as enforcement may be limited by bankruptcy, insolvency, reorganization or similar Laws affecting creditors rights generally and by
general principles of equity, (ii) each such Company Material Contract is in full force and effect and (iii) none of the Company or any of the Company Subsidiaries is (with or without notice or lapse of time, or both) in breach or default
under any such Company Material Contract and, to the Knowledge of the Company, no other party to any such Company Material Contract is (with or without notice or lapse of time, or both) in breach or default thereunder.
SECTION 4.16.
Properties.
(a) The Company and each Company Subsidiary has good and valid title to, and with respect to real
property owned by the Company or any Company Subsidiary, insurable fee simple interest in, or valid license or leasehold interests in, all their respective properties and assets (the
Company Properties
) except (i) for Liens
permitted by the penultimate sentence of this Section 4.16(a) and (ii) in respects that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company Properties
are, in all respects, adequate and sufficient, and in satisfactory condition, to support the operations of the Company and the Company Subsidiaries as presently conducted, except in respects that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Company Material Adverse Effect. All of the Company Properties owned by the Company or any Company Subsidiary are owned free and clear of all Liens, except for (i) Liens on material Company Properties
that, individually or in the aggregate, do not materially impair and would not reasonably be expected to materially impair, the continued use and operation of such material Company Property to which they relate in the conduct of the Company and the
Company Subsidiaries as presently conducted, (ii) Permitted Liens and (iii) Liens that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. This
Section 4.16(a) does not relate to Intellectual Property Rights matters, which are the subject of Section 4.17.
(b) The Company
and each of the Company Subsidiaries has complied with the terms of all leases, subleases and licenses entitling it to the use of real property owned by third parties (the
Company Leases
), and all the Company Leases are valid and
in full force and effect, except, in each case, as, individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. The Company and each Company Subsidiary is in exclusive possession of
the properties or assets purported to be leased under all the Company Leases, except for (i) such failures to have such possession of material properties or assets as, individually or in the aggregate, do not materially impair and would not
reasonably be expected to materially impair, the continued use and operation of such material assets to which they relate in the conduct of the Companys and the Company Subsidiaries business as presently conducted and (ii) failures
to have such possession of properties or assets as, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect.
SECTION 4.17.
Intellectual Property.
The Company and the Company Subsidiaries own, or are validly licensed or otherwise have the right
to use, all patents, patent applications, trademarks, trademark rights, trade names, service marks, copyrights, trade secrets, designs, domain names, data, databases, processes, methods, schematics, technology, software, know-how, documentation, and
other intellectual property rights (collectively,
Intellectual Property Rights
) as used in their business as presently conducted, except where the failure to own or have the right to use such Intellectual Property Rights,
individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect. No actions, suits or other proceedings are pending or, to the Knowledge of the Company, threatened that allege that the
Company or any of the Company Subsidiaries is infringing, misappropriating or otherwise violating any Persons Intellectual Property Rights, except for matters that, individually or in the aggregate, have not had and would not reasonably be
expected to have a Company Material Adverse Effect. To the Knowledge of the Company, no Person is infringing, misappropriating or otherwise violating any Intellectual Property Right owned by the Company or any of the Company Subsidiaries, except for
such infringement, misappropriation or violation that, individually or in
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the aggregate, has not had and would not reasonably be expected to have, a Company Material Adverse Effect. Since January 1, 2012, no prior or current employee or officer or any prior or
current consultant or contractor of the Company or any of the Company Subsidiaries has asserted or, to the Knowledge of the Company, has any ownership in any Intellectual Property Rights owned by the Company or any of the Company Subsidiaries,
except as has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect.
SECTION 4.18.
Labor Matters.
As of the date of this Agreement, Section 4.18 of the Company Disclosure Letter sets forth a true and
complete list of all collective bargaining or other labor union contracts applicable to any employees of the Company or any of the Company Subsidiaries. To the Knowledge of the Company, as of the date of this Agreement, no labor organization or
group of employees of the Company or any Company Subsidiary has made a pending demand for recognition or certification, and there are no representation or certification proceedings or petitions seeking a representation proceeding presently pending
or threatened to be brought or filed, with the National Labor Relations Board or any other labor relations tribunal or authority. To the Knowledge of the Company, as of the date of this Agreement, there are no material organizing activities,
strikes, work stoppages, slowdowns, lockouts, material arbitrations or material grievances, or other material labor disputes pending or threatened against or involving the Company or any Company Subsidiary. None of the Company or any of the Company
Subsidiaries has breached or otherwise failed to comply with any provision of any collective bargaining agreement or other labor union Contract applicable to any employees of the Company or any of the Company Subsidiaries, except for any breaches or
failures to comply that, individually or in the aggregate, have not had and would not reasonably be expected to have a Company Material Adverse Effect. There are no written grievances or written complaints by represented employees of the Company or
its Subsidiaries and, to the Knowledge of the Company, no such grievances or complaints are threatened, in each case, that individually or in the aggregate, has had or would reasonably be expected to have a Company Material Adverse Effect. The
Company has made available to Parent true and complete copies of all collective bargaining agreements and other material labor union contracts (including all amendments thereto) applicable to any employees of the Company or any Company Subsidiary
(the
Company CBAs
). Except as otherwise set forth in the Company CBAs, neither the Company nor any Company Subsidiary (a) as of the date of this Agreement, has entered into any agreement, arrangement or understanding, whether
written or oral, with any union, trade union, works council or other employee representative body or any material number or category of its employees which would prevent, restrict or materially impede the consummation of the Transactions or the
implementation of any layoff, redundancy, severance or similar program within its or their respective workforces (or any part of them) or (b) has any express commitment, whether legally enforceable or not, to, or not to, modify, change or
terminate any Company CBAs. Except for the labor organizations identified in the Company CBAs, no labor organization or group of employees represents or purports to represent any employees of the Company or any of the Company Subsidiaries with
respect to their service to the Company or any of the Company Subsidiaries.
SECTION 4.19.
Brokers Fees and Expenses.
No
broker, investment banker, financial advisor or other Person, other than Citigroup Global Markets Inc. (the
Company Financial Advisor
), the fees and expenses of which will be paid by the Company, is entitled to any brokers,
finders, financial advisors or other similar fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. Prior to the execution of this Agreement, the Company has furnished to Parent
true and complete copies of all agreements between or among the Company and the Company Financial Advisor relating to the Transactions.
SECTION 4.20.
Opinion of Financial Advisor.
The Company Board has received an opinion from the Company Financial Advisor to the effect
that, as of the date of such opinion, and subject to the assumptions, limitations, qualifications and conditions set forth therein, the Exchange Ratio in the Merger was fair, from a financial point of view, to the holders of Company Common Stock.
Promptly after the execution of this Agreement, the Company will furnish Parent, solely for informational purposes, a true and complete copy of the written opinion of the Company Financial Advisor.
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SECTION 4.21.
Insurance.
Each of the Company and the Company Subsidiaries maintains
insurance policies with reputable insurance carriers against all risks of a character and in such amounts as are usually insured against by similarly situated companies in the same or similar businesses. Except as has not had and would not
reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect, (i) each insurance policy of the Company or any Company Subsidiary is in full force and effect and was in full force and effect during the
periods of time such insurance policy are purported to be in effect, and (ii) neither the Company nor any of the Company Subsidiaries is (with or without notice or lapse of time, or both) in breach or default (including any such breach or
default with respect to the payment of premiums or the giving of notice) under any such policy. There is no claim by the Company or any of the Company Subsidiaries pending under any such policies that (a) to the Knowledge of the Company, has
been denied or disputed by the insurer other than denials and disputes in the ordinary course of business consistent with past practice or (b) if not paid would constitute a Company Material Adverse Effect.
SECTION 4.22.
Affiliate Transactions.
Except for (i) employment-related Contracts filed or incorporated by reference as an exhibit
to the Filed Company SEC Documents or (ii) the Company Benefits Plans, Section 4.22 of the Company Disclosure Letter sets forth a correct and complete list of the contracts or arrangements that are in existence as of the date of this
Agreement between the Company or any of its Subsidiaries, on the one hand, and, on the other hand, any (x) present executive officer or director of the Company, (y) Person that, to the Knowledge of the Company, is the record or beneficial
owner of more than 5% of the shares of Company Common Stock as of the date hereof or (z) to the Knowledge of the Company, any affiliate of any such executive officer, director or owner (other than the Company or any of the Company
Subsidiaries).
SECTION 4.23.
No Other Representations or Warranties.
Except for the representations and warranties contained in
Article III, the Company acknowledges that none of Parent, the Parent Subsidiaries or any other Person on behalf of Parent makes any other express or implied representation or warranty whatsoever, and specifically (but without limiting the
generality of the foregoing) that none of Parent, the Parent Subsidiaries or any other Person on behalf of Parent makes any representation or warranty with respect to: (i) any projections, estimates or budgets delivered or made available to the
Company or any of its affiliates or Representatives of future revenues, results of operations (or any component thereof), cash flows or financial condition (or any component thereof) of Parent and the Parent Subsidiaries or (ii) the future
business and operations of Parent and the Parent Subsidiaries, including in the case of (i) and (ii) with respect to any information, documents, projections, forecasts or other material made available to the Company or its affiliates and
Representatives in certain data rooms or management presentations in expectation of the transactions contemplated by this Agreement, and the Company has not relied on any such information or any representation or warranty not set forth
in Article III.
ARTICLE V
Covenants Relating to Conduct of Business
SECTION 5.01.
Conduct of Business.
(a)
Conduct of Business by Parent.
Except for matters set forth in Section 5.01(a)
of the Parent Disclosure Letter or otherwise expressly permitted or expressly contemplated by this Agreement or required by applicable Law or with the prior written consent of the Company (which shall not be unreasonably withheld, conditioned or
delayed), from the date of this Agreement to the Effective Time, or, if earlier, the termination of this Agreement in accordance with its terms, Parent shall, and shall cause each Parent Subsidiary to, (i) conduct its business in the ordinary
course consistent with past practice in all material respects and (ii) use reasonable best efforts to preserve intact its business organization and advantageous business relationships and keep available the services of its current officers and
employees. In addition, and without limiting the generality of the foregoing, except for matters set forth in the Parent Disclosure Letter or otherwise expressly permitted or expressly contemplated by this Agreement or required by applicable Law or
with the prior
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written consent of the Company (which shall not be unreasonably withheld, conditioned or delayed), from the date of this Agreement to the Effective Time, or, if earlier, the termination of this
Agreement in accordance with its terms, Parent shall not, and shall not permit any Parent Subsidiary to, do any of the following:
(i) (A) declare, set aside or pay any dividends on, or make any other distributions (whether in cash, stock or property or any
combination thereof) in respect of, any of its capital stock, other equity interests or voting securities, other than (x) regular quarterly cash dividends of $0.40 per share of Parent Common Stock payable by Parent in respect of shares of
Parent Common Stock with declaration, record and payment dates consistent with past practice and in accordance with Parents current dividend policy and (y) dividends and distributions by a direct or indirect wholly owned Parent Subsidiary
to its parent, (B) split, combine, subdivide or reclassify any of its capital stock, other equity interests or voting securities, or securities convertible into or exchangeable or exercisable for capital stock or other equity interests or
voting securities or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other equity interests or voting securities or (C) repurchase, redeem or otherwise acquire, or
offer to repurchase, redeem or otherwise acquire, any capital stock or voting securities of, or equity interests in, Parent or any Parent Subsidiary or any securities of Parent or any Parent Subsidiary convertible into or exchangeable or exercisable
for capital stock or voting securities of, or equity interests in, Parent or any Parent Subsidiary, or any warrants, calls, options or other rights to acquire any such capital stock, securities or interests, other than (1) the acquisition by
Parent of shares of Parent Common Stock in connection with the surrender of shares of Parent Common Stock by holders of Parent Stock Options in order to pay the exercise price thereof, (2) the withholding of shares of Parent Common Stock to
satisfy tax obligations with respect to awards granted pursuant to the Parent Stock Plans and (3) the acquisition by Parent of awards granted pursuant to the Parent Stock Plans in connection with the forfeiture of such awards;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject to any Lien (except for transactions among Parent and
wholly owned Parent Subsidiaries and for any liens in favor of the administrative agent under Parents existing credit agreement) (A) any shares of capital stock of Parent or any Parent Subsidiary (other than the issuance of Parent Common
Stock upon the exercise of Parent Stock Options and the vesting or delivery of other awards pursuant to the Parent Stock Plans), (B) any other equity interests or voting securities of Parent or any Parent Subsidiary, (C) any securities
convertible into or exchangeable or exercisable for capital stock or voting securities of, or other equity interests in, Parent or any Parent Subsidiary, (D) any warrants, calls, options or other rights to acquire any capital stock or voting
securities of, or other equity interests in, Parent or any Parent Subsidiary, (E) any rights issued by Parent or any Parent Subsidiary that are linked in any way to the price of any class of Parent Capital Stock or any shares of capital stock
of any Parent Subsidiary, the value of Parent, any Parent Subsidiary or any part of Parent or any Parent Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of Parent or any Parent Subsidiary,
(F) any Parent Voting Debt, or (G) any Parent Preferred Stock, except, in each case (A)-(F), for grants of awards pursuant to and in accordance with the Parent Stock Plans;
(iii) amend the Parent Articles or the Parent By-laws, except as may be required by Law or the rules and regulations of the SEC
or the NYSE;
(iv) make any material change in financial accounting methods, principles or practices, except insofar as may
have been required by a change in GAAP (after the date of this Agreement);
(v) (A) directly or indirectly acquire or
agree to acquire in any transaction any equity interest in or business of any firm, corporation, partnership, company, limited liability company, trust, joint venture, association or other entity or division thereof or any properties or assets
(other than purchases of supplies and inventory in the ordinary course of business consistent with past practice or any transaction solely between Parent and a wholly owned Parent Subsidiary or between wholly owned Parent Subsidiaries), other than
any of the foregoing that would not reasonably be expected to delay or make it more difficult to obtain any authorization, consent or approval required in connection with the Merger and that would not reasonably be expected to prevent or materially
delay or impede the consummation of the transactions
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contemplated by this Agreement, including the Merger or (B) solicit or enter into any transaction or Contract requiring (including because conditioned upon), or reasonably expected to cause,
Parent to abandon, terminate, materially delay or not consummate the Transactions, or requiring, or reasonably expected to cause, Parent to fail to comply in any material respect with this Agreement;
(vi) take any actions or omit to take any actions that would or would be reasonably likely to (i) result in any of the
conditions set forth in Article VII not being satisfied, (ii) result in new or additional required approvals from any Governmental Entity in connection with the Transactions or (iii) materially impair the ability of Parent, the Company or
Merger Sub to consummate the Transactions in accordance with the terms of the applicable Transaction Agreements or materially delay such consummation; or
(vii) authorize any of, or commit, resolve or agree to take any of, the foregoing actions.
(b)
Conduct of Business by the Company.
Except for matters set forth in Section 5.01(b) of the Company Disclosure Letter or
otherwise expressly permitted or expressly contemplated by this Agreement or required by applicable Law or with the prior written consent of Parent (which shall not be unreasonably withheld, conditioned or delayed), from the date of this Agreement
to the Effective Time, or, if earlier, the termination of this Agreement in accordance with its terms, the Company shall, and shall cause each Company Subsidiary to, (i) conduct its business in the ordinary course consistent with past practice
in all material respects and (ii) use reasonable best efforts to preserve intact its business organization and advantageous business relationships and keep available the services of its current officers and employees. In addition, and without
limiting the generality of the foregoing, except for matters set forth in the Company Disclosure Letter or otherwise expressly permitted or expressly contemplated by this Agreement or required by applicable Law or with the prior written consent of
Parent (which shall not be unreasonably withheld, conditioned or delayed), from the date of this Agreement to the Effective Time, or, if earlier, the termination of this Agreement in accordance with its terms, the Company shall not, and shall not
permit any Company Subsidiary to, do any of the following:
(i) (A) declare, set aside or pay any dividends on, or make any
other distributions (whether in cash, stock or property or any combination thereof) in respect of, any of its capital stock, other equity interests or voting securities, other than dividends and distributions by a direct or indirect wholly owned
Company Subsidiary to its parent, (B) split, combine, subdivide or reclassify any of its capital stock, other equity interests or voting securities, or securities convertible into or exchangeable or exercisable for capital stock or other equity
interests or voting securities or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for its capital stock, other equity interests or voting securities or (C) repurchase, redeem or otherwise
acquire, or offer to repurchase, redeem or otherwise acquire, any capital stock or voting securities of, or equity interests in, the Company or any Company Subsidiary or any securities of the Company or any Company Subsidiary convertible into or
exchangeable or exercisable for capital stock or voting securities of, or equity interests in, the Company or any Company Subsidiary, or any warrants, calls, options or other rights to acquire any such capital stock, securities or interests, other
than (1) the acquisition by the Company of shares of Company Common Stock in connection with the surrender of shares of Company Common Stock by holders of Company Stock Options in order to pay the exercise price thereof, (2) the
withholding of shares of Company Common Stock to satisfy tax obligations with respect to awards granted pursuant to the Company Stock Plans and (3) the acquisition by the Company of awards granted pursuant to the Company Stock Plans in
connection with the forfeiture of such awards;
(ii) issue, deliver, sell, grant, pledge or otherwise encumber or subject
to any Lien (except for transactions among the Company and wholly owned Company Subsidiaries and for any liens in favor of the administrative agent under the Companys existing credit agreement) (A) any shares of capital stock of the
Company or any Company Subsidiary (other than the issuance of Company Common Stock upon the exercise of the Company Stock Options and the Company SARs and the vesting or delivery of other awards pursuant to the Company Stock Plans, in each case
outstanding at the close of business on the date of this Agreement or as may be granted in accordance with the terms of this Agreement), (B) any other equity interests or voting securities of the Company or any Company Subsidiary, (C) any
securities convertible into or exchangeable or exercisable for capital stock or voting securities of, or other equity interests in, the
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Company or any Company Subsidiary, (D) any warrants, calls, options or other rights to acquire any capital stock or voting securities of, or other equity interests in, the Company or any
Company Subsidiary, (E) any rights issued by the Company or any Company Subsidiary that are linked in any way to the price of any class of Company Capital Stock or any shares of capital stock of any Company Subsidiary, the value of the Company,
any Company Subsidiary or any part of the Company or any Company Subsidiary or any dividends or other distributions declared or paid on any shares of capital stock of the Company or any Company Subsidiary, (F) any Company Voting Debt or
(G) any Company Preferred Stock, except, in each case (A) (F), for Company RSUs (other than Matching RSUs (as defined in the Companys Management Deferred Compensation Plan)) to the extent required to be granted to
employees and directors of the Company with respect to deferral elections pursuant to and in accordance with the Companys Management Deferred Compensation Plan as in effect as of the date of this Agreement;
(iii) (A) amend the Company Charter or the Company By-laws or (B) amend in any material respect the charter or
organizational documents of any Company Subsidiary, except, in the case of each of the foregoing clauses (A) and (B), as may be required by Law or the rules and regulations of the SEC or the NYSE;
(iv) (A)(1) grant to any current or former (a) director of the Company, (b) director of any Company Subsidiary (in
his or her capacity as a director of a Company Subsidiary), (c) executive officer of the Company or (d) officer or employee of the Company or any Company Subsidiary who is a party to a Change in Control Severance Agreement or a participant
in or party to any plan, program, policy, agreement or arrangement that provides for severance or similar payments in an amount equal to or in excess of one years salary to be made upon or following a change in control or similar event (alone
or in conjunction with any other event, including any termination of employment on or following the Effective Time) (each such officer or employee, a
Change in Control Individual
), in each case, any increase in compensation, bonus
or fringe or other benefits or grant any type of compensation or benefit to any such Person not previously receiving or entitled to receive such compensation, except to the extent required under any Company Benefit Plan as in effect as of the date
of this Agreement (or any Company Benefit Plan entered into, adopted or amended following the date hereof to the extent permitted by Section 5.01(b)(iv)(D)), or (2) grant to any director of a Company Subsidiary (other than in his or her
capacity as a director), or any officer or employee of the Company or any Company Subsidiary not described in Section 5.01(b)(iv)(A)(1), in each case, any increase in compensation, bonus or fringe or other benefits or grant any type of
compensation or benefit to any such Person not previously receiving or entitled to receive such compensation, except in the ordinary course of business consistent with past practice or to the extent required under any Company Benefit Plan as in
effect as of the date of this Agreement (or any Company Benefit Plan entered into, adopted or amended following the date hereof to the extent permitted by Section 5.01(b)(iv)(D)), (B) engage in promotions of employees, fill open employee
positions or modify employee job descriptions, except in each case in the ordinary course of business consistent with past practice, (C) grant to any Person any severance, retention, change in control or termination compensation or benefits or
any increase therein, except with respect to new hires or to employees in the context of promotions based on job performance or workplace requirements, in each case in the ordinary course of business consistent with past practice, or except to the
extent required under any Company Benefit Plan as in effect as of the date of this Agreement (or any Company Benefit Plan entered into, adopted or amended following the date hereof to the extent permitted by Section 5.01(b)(iv)(D)), or
(D) enter into or adopt any material Company Benefit Plan or amend in any material respect any material Company Benefit Plan or any award issued thereunder, except for any amendments in the ordinary course of business consistent with past
practice or as necessary to comply with applicable Law (including Section 409A of the Code);
(v) make any material
change in financial accounting methods, principles or practices, except insofar as may have been required by a change in GAAP (after the date of this Agreement);
(vi) directly or indirectly acquire or agree to acquire in any transaction any equity interest in or business of any firm,
corporation, partnership, company, limited liability company, trust, joint venture, association or other entity or division thereof or any properties or assets (other than purchases of supplies
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and inventory in the ordinary course of business consistent with past practice or any transaction solely between the Company and a wholly owned Company Subsidiary or between wholly owned Company
Subsidiaries, in each case, in the ordinary course of business consistent with past practice) if the amount of the consideration paid or transferred by the Company and the Company Subsidiaries in connection with any such transactions would exceed
$1,000,000 individually or $5,000,000 in the aggregate;
(vii) sell, lease (as lessor), license, mortgage, sell and
leaseback or otherwise encumber or subject to any Lien, or otherwise dispose of any properties or assets (other than sales of products or services in the ordinary course of business consistent with past practice) or any interests therein that
individually have a fair market value in excess of $1,000,000 or in the aggregate have a fair market value in excess of $5,000,000, except (A) any of the foregoing with respect to inventory in the ordinary course of business consistent with
past practice, (B) any of the foregoing with respect to obsolete or worthless equipment in the ordinary course of business consistent with past practice or (C) in relation to mortgages, liens and pledges to secure Indebtedness for borrowed
money permitted to be incurred under Section 5.01(b)(viii) and guarantees thereof and for any transactions among the Company and the wholly owned Company Subsidiaries in the ordinary course of business consistent with past practice;
(viii) incur any Indebtedness, except for (A) Indebtedness incurred in the ordinary course of business consistent with
past practice not to exceed $5,000,000 in the aggregate; (B) Indebtedness in replacement of existing Indebtedness,
provided
that the execution, delivery, and performance of this Agreement and the consummation of the Transactions shall
not conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or any loss of a material benefit under, or
result in the creation of any Lien, under such replacement Indebtedness; (C) guarantees by the Company of Indebtedness of any wholly owned Company Subsidiary and guarantees by any Company Subsidiary of Indebtedness of the Company or any other
wholly owned Company Subsidiary, in each case, in the ordinary course of business consistent with past practice, (D) intercompany Indebtedness among the Company and the wholly owned Company Subsidiaries in the ordinary course of business
consistent with past practice or (E) making borrowings under the Companys revolving credit facility (as existing on the date hereof) in the ordinary course of business consistent with past practice;
provided
,
however
, that
the Company shall coordinate with Parent in order to minimize the cost of repaying such borrowings at Closing, including with respect to any breakage costs;
(ix) make, or agree or commit to make, any capital expenditure except for capital expenditures (A) in accordance with the
capital plans for 2014 set forth in Section 5.01(b)(ix) of the Company Disclosure Letter, (B) as required by a Governmental Entity or (C) in response to any emergency, whether caused by war, terrorism, weather events, public health
events, outages or otherwise;
(x) (A) enter into or amend any Contract if such Contract or amendment of a Contract
would reasonably be expected to prevent or materially impede, interfere with, hinder or delay the consummation of the Transactions or (B) solicit or enter into any transaction or Contract requiring (including because conditioned upon), or
reasonably expected to cause, the Company to abandon, terminate, materially delay or not consummate the Transactions, or requiring, or reasonably expected to cause, the Company to fail to comply in any material respect with this Agreement;
(xi) enter into any new, or amend any, material Contract to the extent that, as a result of such entry or amendment,
consummation of the Merger or compliance by the Company or any Company Subsidiary with the provisions of this Agreement would reasonably be expected to conflict with, or result in a violation of or default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation, any obligation to make an offer to purchase or redeem any Indebtedness or capital stock or any loss of a material benefit under, or result in the
creation of any Lien upon any of the material properties or assets of the Company or any Company Subsidiary under, or require Parent, the Company or any of their respective Subsidiaries to license or transfer any of its material properties or assets
under, or give rise to any increased, additional, accelerated, or guaranteed right or entitlements of any third party under, or result in any material alteration of, any provision of such Contract or amendment;
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(xii) enter into, modify, amend, extend, renew, replace or terminate any
collective bargaining or other labor union Contract applicable to the employees of the Company or any of the Company Subsidiaries, other than modifications, amendments, extensions, renewals, replacements or terminations of such Contracts in the
ordinary course of business consistent with past practice;
(xiii) waive, release, assign, settle or compromise any claim,
action or proceeding, other than waivers, releases, assignments, settlements or compromises that do not create obligations of the Company or any of the Company Subsidiaries other than the payment of monetary damages (a) equal to or less than
the amounts reserved with respect thereto on the Filed Company SEC Documents or (b) not in excess of $1,000,000 in the aggregate;
(xiv) abandon, encumber, convey title (in whole or in part), exclusively license or grant any right or other licenses to
material trademarks, trademark rights, trade names or service marks owned by or exclusively licensed to the Company or any Company Subsidiary, or enter into licenses or agreements that impose material restrictions upon the Company or any of its
Affiliates with respect to trademarks, trademark rights, trade names or service marks owned by any third party, in each case other than in the ordinary course of business consistent with past practice;
(xv) other than in the ordinary course of business, materially amend or modify any Company Material Contract or enter into,
materially amend or modify any Contract that would be a Company Material Contract if it had been entered into prior to the date of this Agreement;
(xvi) change any material method of Tax accounting, settle any material claim, action or proceeding relating to Taxes or make
any material Tax election, in each case except for such actions taken in the ordinary course of business consistent with past practice;
(xvii) enter into any new line of business outside of its existing business;
(xviii) take any actions or omit to take any actions that would or would be reasonably likely to (i) result in any of the
conditions set forth in Article VII not being satisfied, (ii) result in new or additional required approvals from any Governmental Entity in connection with the Transactions or (iii) materially impair the ability of Parent, the Company or
Merger Sub to consummate the Transactions in accordance with the terms of the applicable Transaction Agreements or materially delay such consummation;
(xix) dissolve or liquidate any Company Subsidiary; or
(xx) authorize any of, or commit, resolve or agree to take any of, the foregoing actions.
(c)
Control of Operations.
Nothing contained in this Agreement shall give Parent or the Company, directly or indirectly, the right to
control or direct the other partys operations prior to the Effective Time.
SECTION 5.02.
No Solicitation by the Company; Company
Recommendation.
(a) Except as otherwise provided in this Agreement, from the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with its terms, the Company shall not, nor shall it
authorize or permit any of its Affiliates or any of its or their respective directors, officers or employees or any of their respective investment bankers, accountants, attorneys or other advisors, agents or representatives (collectively,
Representatives
) to, (i) directly or indirectly solicit or initiate, or knowingly encourage, induce or facilitate, any Company Takeover Proposal or any inquiry or proposal that may reasonably be expected to lead to a Company
Takeover Proposal, or (ii) directly or indirectly participate in any discussions or negotiations with any Person regarding, or furnish to any Person any information with respect to, or cooperate in any way with any Person (whether or not a
Person making a Company Takeover Proposal) with respect to, any Company Takeover Proposal or any inquiry or proposal that may reasonably be expected to lead to a Company Takeover Proposal. The Company shall, and shall cause its Affiliates and its
and their respective Representatives to, immediately cease and cause to be terminated all existing discussions or negotiations with any Person conducted heretofore with respect to any Company Takeover Proposal or any inquiry or proposal that may
reasonably be expected to lead to a Company Takeover Proposal, request the prompt return or destruction of all confidential information
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previously furnished any such Person or its Representatives and immediately terminate all physical and electronic data room access previously granted to any such Person or its Representatives.
Notwithstanding the foregoing, at any time prior to obtaining the Company Stockholder Approval, in response to a bona fide written Company Takeover Proposal that the Company Board determines in good faith (after consultation with outside counsel and
a financial advisor of nationally recognized reputation) constitutes or is reasonably expected to result in a Superior Company Proposal, and which Company Takeover Proposal did not result from a breach of this Section 5.02(a) or the Letter
Agreement, the Company, and its Representatives at the request of the Company may, subject to compliance with Section 5.02(c), (x) furnish information with respect to the Company and the Company Subsidiaries to the Person making such
Company Takeover Proposal (and its Representatives) (
provided
that all such information has previously been provided to Parent or is provided to Parent prior to or substantially concurrent with the time it is provided to such Person) pursuant
to a customary confidentiality agreement not less restrictive of such Person than the Confidentiality Agreement (other than with respect to standstill provisions), and (y) participate in discussions regarding the terms of such
Company Takeover Proposal and the negotiation of such terms with, and only with, the Person or Persons making such Company Takeover Proposal (and such Persons or Persons Representatives and financing sources). Without limiting the
foregoing, it is agreed that any violation of the restrictions set forth in this Section 5.02(a) by any Affiliates of the Company or any of its or their Representatives shall constitute a breach of this Section 5.02(a) by the Company.
(b) Except as set forth in this Section 5.02, neither the Company Board nor any committee thereof shall (i) (A) withdraw (or
modify in any manner adverse to Parent), or propose publicly to withdraw (or modify in any manner adverse to Parent), the Company Recommendation or (B) approve, recommend or declare advisable, or propose publicly to approve, recommend or
declare advisable, any Company Takeover Proposal (any action in this clause (i) being referred to as a
Company Adverse Recommendation Change
) or (ii) adopt, or propose publicly to adopt, or allow the Company or any of
its Affiliates to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle, merger agreement, acquisition agreement, option agreement, joint venture agreement, alliance agreement, partnership agreement or
other agreement or arrangement (other than a confidentiality agreement referred to in Section 5.02(a)) relating to any Company Takeover Proposal. Notwithstanding the foregoing, at any time prior to obtaining the Company Stockholder Approval,
the Company Board may (1) make a Company Adverse Recommendation Change or terminate this Agreement in accordance with Section 8.01(h), in each case following receipt of a Company Takeover Proposal after the execution of this Agreement that
did not result from a breach of Section 5.02(a) or the Letter Agreement and that the Company Board determines in good faith, after consultation with outside counsel and a financial advisor of nationally recognized reputation, constitutes a
Superior Company Proposal or (2) make a Company Adverse Recommendation Change in response to a Company Intervening Event, in each case referred to in the foregoing clauses (1) and (2), only if the Company Board determines in good faith
(after consultation with outside counsel and a financial advisor of nationally recognized reputation) that the failure to do so would be inconsistent with its fiduciary duties under applicable Law;
provided
,
however
, that the Company
shall not be entitled to exercise its rights to make a Company Adverse Recommendation Change or terminate this Agreement in accordance with Section 8.01(h) unless (i) the Company delivers to Parent a written notice (a
Company
Notice
) advising Parent that the Company Board intends to take such action and specifying the reasons therefor, including in the case of a Superior Company Proposal, the terms and conditions of any Superior Company Proposal that is the
basis of the proposed action by the Company Board and (ii) on or after the Applicable Time on the fourth Business Day following the day on which Parent received the Company Notice (it being understood that for purposes of calculating such four
Business Days, the first Business Day shall be the first Business Day after the date of such receipt), the Company reaffirms in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) that
(A) such Company Takeover Proposal continues to constitute a Superior Company Proposal or such Company Intervening Event remains in effect and (B) the failure to make a Company Adverse Recommendation Change as a result thereof would be
inconsistent with its fiduciary duties under applicable Law (it being understood and agreed that any amendment to any material term of such Superior Company Proposal shall require a new Company Notice and a new three Business Day period (it being
understood that any such three Business Day period shall be calculated in the same manner as the initial four Business Day period)). In determining whether to make a Company Adverse Recommendation Change or
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terminate this Agreement in accordance with Section 8.01(h), the Company Board shall take into account any changes to the terms of this Agreement proposed by Parent in response to a Company
Notice or otherwise, and if requested by Parent, the Company shall engage in good faith negotiations with Parent regarding any changes to the terms of this Agreement proposed by Parent. The Company shall provide Parent with written information
describing any Company Intervening Event that would reasonably be expected to entitle the Company to make a Company Adverse Recommendation Change pursuant to this Section 5.02 in reasonable detail promptly after becoming aware of it, and shall
keep Parent reasonably informed of material developments with respect to such Company Intervening Event.
(c) In addition to the
obligations of the Company set forth in paragraphs (a) and (b) of this Section 5.02, the Company shall promptly, and in any event within 24 hours of the Company obtaining Knowledge of the receipt thereof, advise Parent in writing of
any Company Takeover Proposal or any inquiry or proposal that may reasonably be expected to lead to a Company Takeover Proposal, the material terms and conditions of any such Company Takeover Proposal (including any changes thereto) and the identity
of the Person making any such Company Takeover Proposal. The Company shall (i) keep Parent informed in all material respects and on a reasonably current basis of the status and details (including any material change to the terms thereof) of any
Company Takeover Proposal and (ii) provide to Parent as soon as practicable after receipt or delivery thereof all drafts of agreements relating to any Company Takeover Proposal and any written proposals containing any material terms of a
Company Takeover Proposal or a counterproposal to a Company Takeover Proposal, in each case exchanged between any of the Company or any of its Subsidiaries or any of their Representatives, on the one hand, and the Person making any such Company
Takeover Proposal or any of its Affiliates or any of their Representatives, on the other hand. If Parent requests, the information required to be provided in clause (i) above shall be provided on a daily basis pursuant to a phone call between
senior representatives of outside counsel or financial advisors of the parties to be held at mutually agreeable times;
provided
,
however
, that such phone calls need not be longer than 30 minutes on any given day; and
provided
further
that nothing in this sentence shall in any way expand or otherwise change the Companys obligations contained in clause (i) above.
(d) Nothing contained in this Section 5.02 shall prohibit the Company from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act;
provided
,
however
, that in no event shall the Company or the Company Board or any committee thereof take, or agree or resolve to take, any action prohibited by Section 5.02(b).
(e) For purposes of this Agreement:
Company Takeover Proposal
means any bona fide proposal or offer (whether or not in writing) from a third
party (other than Parent or Merger Sub or any of their respective Subsidiaries) with respect to any (i) merger, consolidation, share exchange, other business combination or similar transaction involving the Company or any Company Subsidiary,
(ii) sale, lease, contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership, joint venture, sale of capital stock of or other equity interests
in a Company Subsidiary or otherwise) of any business or assets of the Company or the Company Subsidiaries representing 20% or more of the consolidated revenues, net income or assets of the Company and the Company Subsidiaries, taken as a whole,
(iii) issuance, sale or other disposition, directly or indirectly, to any Person (or the stockholders of any Person) or group of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such
securities) representing 20% or more of the total outstanding voting power of the Company, (iv) transaction in which any Person (or the stockholders of any Person) shall acquire, directly or indirectly, beneficial ownership, or the right to
acquire beneficial ownership, or formation of any group which beneficially owns or has the right to acquire beneficial ownership of, 20% or more of the Company Common Stock or (v) combination of the foregoing (in each case, other than the
Transactions).
Superior Company Proposal
means any bona fide written offer from a third party (other
than Parent or Merger Sub or any of their respective Subsidiaries) that, if consummated, would result in such Person (or,
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in the case of a direct merger between such Person and the Company, the stockholders of such Person) acquiring, directly or indirectly, more than 50% of the voting power of the Company Common
Stock or all or substantially all the assets of the Company and its Subsidiaries, taken as a whole, and which offer, in the good faith judgment of the Company Board (after consultation with outside counsel and a financial advisor of nationally
recognized reputation), is more favorable to the stockholders of the Company than the Transactions (taking into account all of the terms and conditions of, and the likelihood of completion of, such offer and of this Agreement (including any changes
to the terms of this Agreement proposed by Parent in response to such Superior Company Proposal or otherwise)).
SECTION 5.03.
No
Solicitation by Parent; Parent Recommendation.
(a) Except as otherwise provided in this Agreement, from the date of this Agreement until the Effective Time or, if earlier, the termination of this Agreement in accordance with its terms,
Parent shall not, nor shall it authorize or permit any of its Affiliates or any of its or their respective Representatives to, (i) directly or indirectly solicit or initiate, or knowingly encourage, induce or facilitate, any Parent Takeover
Proposal or any inquiry or proposal that may reasonably be expected to lead to a Parent Takeover Proposal, or (ii) directly or indirectly participate in any discussions or negotiations with any Person regarding, or furnish to any Person any
information with respect to, or cooperate in any way with any Person (whether or not a Person making a Parent Takeover Proposal) with respect to, any Parent Takeover Proposal or any inquiry or proposal that may reasonably be expected to lead to a
Parent Takeover Proposal. Parent shall, and shall cause its Affiliates and its and their respective Representatives to, immediately cease and cause to be terminated all existing discussions or negotiations with any Person conducted heretofore with
respect to any Parent Takeover Proposal or any inquiry or proposal that may reasonably be expected to lead to a Parent Takeover Proposal, request the prompt return or destruction of all confidential information previously furnished any such Person
or its Representatives and immediately terminate all physical and electronic data room access previously granted to any such Person or its Representatives. Notwithstanding the foregoing, at any time prior to obtaining the Parent Shareholder
Approval, in response to a bona fide written Parent Takeover Proposal that the Parent Board determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) constitutes or is reasonably
expected to result in a Superior Parent Proposal, and which Parent Takeover Proposal did not result from a breach of this Section 5.03(a), Parent, and its Representatives at the request of Parent may, subject to compliance with
Section 5.03(c), (x) furnish information with respect to Parent and the Parent Subsidiaries to the Person making such Parent Takeover Proposal (and its Representatives) (
provided
that all such information has previously been
provided to the Company or is provided to the Company prior to or substantially concurrent with the time it is provided to such Person) pursuant to a customary confidentiality agreement not less restrictive of such Person than the Confidentiality
Agreement (other than with respect to standstill provisions), and (y) participate in discussions regarding the terms of such Parent Takeover Proposal and the negotiation of such terms with, and only with, the Person or Persons
making such Parent Takeover Proposal (and such Persons or Persons Representatives and financing sources). Without limiting the foregoing, it is agreed that any violation of the restrictions set forth in this Section 5.03(a) by any
Affiliates of Parent or any of its or their Representatives shall constitute a breach of this Section 5.03(a) by Parent.
(b) Except
as set forth in this Section 5.03, neither the Parent Board nor any committee thereof shall (i) (A) withdraw (or modify in any manner adverse to the Company), or propose publicly to withdraw (or modify in any manner adverse to the
Company), the Parent Recommendation or (B) approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, any Parent Takeover Proposal (any action in this clause (i) being referred to as a
Parent Adverse Recommendation Change
) or (ii) adopt, or propose publicly to adopt, or allow Parent or any of its Affiliates to execute or enter into, any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture agreement, alliance agreement, partnership agreement or other agreement or arrangement (other than a confidentiality agreement referred to in Section 5.03(a)) relating to
any Parent Takeover Proposal. Notwithstanding the foregoing, at any time prior to obtaining the Parent Shareholder Approval, the Parent Board may (1) make a Parent Adverse Recommendation Change or terminate this Agreement in accordance with
Section 8.01(i), in each case following receipt of a Parent Takeover Proposal after
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the execution of this Agreement that did not result from a breach of Section 5.03(a) and that the Parent Board determines in good faith, after consultation with outside counsel and a
financial advisor of nationally recognized reputation, constitutes a Superior Parent Proposal or (2) make a Parent Adverse Recommendation Change in response to a Parent Intervening Event, in each case referred to in the foregoing clauses
(1) and (2), only if the Parent Board determines in good faith (after consultation with outside counsel and a financial advisor of nationally recognized reputation) that the failure to do so would be inconsistent with its fiduciary duties under
applicable Law;
provided
,
however
, that Parent shall not be entitled to exercise its rights to make a Parent Adverse Recommendation Change or terminate this Agreement in accordance with Section 8.01(i) unless (i) Parent
delivers to the Company a written notice (a
Parent Notice
) advising the Company that the Parent Board intends to take such action and specifying the reasons therefor, including in the case of a Superior Parent Proposal, the terms
and conditions of any Superior Parent Proposal that is the basis of the proposed action by the Parent Board and (ii) on or after the Applicable Time on the fourth Business Day following the day on which the Company received the Parent Notice
(it being understood that for purposes of calculating such four Business Days, the first Business Day shall be the first Business Day after the date of such receipt), Parent reaffirms in good faith (after consultation with outside counsel and a
financial advisor of nationally recognized reputation) that (A) such Parent Takeover Proposal continues to constitute a Superior Parent Proposal or such Parent Intervening Event remains in effect and (B) the failure to make a Company
Adverse Recommendation Change as a result thereof would be inconsistent with its fiduciary duties under applicable Law (it being understood and agreed that any amendment to any material term of such Superior Parent Proposal shall require a new
Parent Notice and a new three Business Day period (it being understood that any such three Business Day period shall be calculated in the same manner as the initial four Business Day period)). In determining whether to make a Parent Adverse
Recommendation Change or terminate this Agreement in accordance with Section 8.01(i), the Parent Board shall take into account any changes to the terms of this Agreement proposed by the Company in response to a Parent Notice or otherwise, and
if requested by the Company, Parent shall engage in good faith negotiations with the Company regarding any changes to the terms of this Agreement proposed by the Company. Parent shall provide the Company with written information describing any
Parent Intervening Event that would reasonably be expected to entitle Parent to make a Parent Adverse Recommendation Change pursuant to this Section 5.03 in reasonable detail promptly after becoming aware of it, and shall keep the Company
reasonably informed of material developments with respect to such Parent Intervening Event.
(c) In addition to the obligations of Parent
set forth in paragraphs (a) and (b) of this Section 5.03, Parent shall promptly, and in any event within 24 hours of Parent obtaining Knowledge of the receipt thereof, advise the Company in writing of any Parent Takeover Proposal or
any inquiry or proposal that may reasonably be expected to lead to a Parent Takeover Proposal, the material terms and conditions of any such Parent Takeover Proposal (including any changes thereto) and the identity of the Person making any such
Parent Takeover Proposal. Parent shall (i) keep the Company informed in all material respects and on a reasonably current basis of the status and details (including any material change to the terms thereof) of any Parent Takeover Proposal and
(ii) provide to the Company as soon as practicable after receipt or delivery thereof all drafts of agreements relating to any Parent Takeover Proposal and any written proposals containing any material terms of a Parent Takeover Proposal or a
counterproposal to a Parent Takeover Proposal, in each case exchanged between any of Parent or any of its Subsidiaries or any of their Representatives, on the one hand, and the Person making any such Parent Takeover Proposal or any of its Affiliates
or any of their Representatives, on the other hand. If the Company requests, the information required to be provided in clause (i) above shall be provided on a daily basis pursuant to a phone call between senior representatives of outside
counsel or financial advisors of the parties to be held at mutually agreeable times;
provided
,
however
, that such phone calls need not be longer than 30 minutes on any given day; and
provided
further
that nothing in this
sentence shall in any way expand or otherwise change Parents obligations contained in clause (i) above.
(d) Nothing contained
in this Section 5.03 shall prohibit Parent from complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act;
provided
,
however
, that in no event shall Parent or the Parent Board or any committee thereof take, or
agree or resolve to take, any action prohibited by Section 5.03(b).
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(e) For purposes of this Agreement:
Parent Takeover Proposal
means any bona fide proposal or offer (whether or not in writing) from a third
party (other than the Company or any of its Subsidiaries) with respect to any (i) merger, consolidation, share exchange, other business combination or similar transaction involving Parent or any Parent Subsidiary, (ii) sale, lease,
contribution or other disposition, directly or indirectly (including by way of merger, consolidation, share exchange, other business combination, partnership, joint venture, sale of capital stock of or other equity interests in a Parent Subsidiary
or otherwise) of any business or assets of Parent or the Parent Subsidiaries representing 20% or more of the consolidated revenues, net income or assets of Parent and the Parent Subsidiaries, taken as a whole, (iii) issuance, sale or other
disposition, directly or indirectly, to any Person (or the stockholders of any Person) or group of securities (or options, rights or warrants to purchase, or securities convertible into or exchangeable for, such securities) representing 20% or more
of the total outstanding voting power of Parent, (iv) transaction in which any Person (or the stockholders of any Person) shall acquire, directly or indirectly, beneficial ownership, or the right to acquire beneficial ownership, or formation of
any group which beneficially owns or has the right to acquire beneficial ownership of, 20% or more of the Parent Common Stock or (v) combination of the foregoing (in each case, other than the Transactions).
Superior Parent Proposal
means any bona fide written offer from a third party (other than the Company or any
of its Subsidiaries) that, if consummated, would result in such Person (or, in the case of a direct merger between such Person and Parent, the stockholders of such Person) acquiring, directly or indirectly, more than 50% of the voting power of the
Parent Common Stock or all or substantially all the assets of Parent and its Subsidiaries, taken as a whole, and which offer, in the good faith judgment of the Parent Board (after consultation with outside counsel and a financial advisor of
nationally recognized reputation), is more favorable to the shareholders of Parent than the Transactions (taking into account all of the terms and conditions of, and the likelihood of completion of, such offer and of this Agreement (including any
changes to the terms of this Agreement proposed by the Company in response to such Superior Parent Proposal or otherwise)).
ARTICLE VI
Additional Agreements
SECTION 6.01.
Preparation of the Form S-4 and the Joint Proxy Statement; Company Stockholders Meeting and Parent Shareholders Meeting.
(a) As promptly as reasonably practicable following the date of this Agreement, Parent and the Company shall jointly prepare and cause to be filed with the SEC a joint proxy statement to be sent to the shareholders of Parent and the
stockholders of the Company relating to the Parent Shareholders Meeting and the Company Stockholders Meeting (together with any amendments or supplements thereto, the
Joint Proxy Statement
) and Parent shall prepare and cause to be
filed with the SEC the Form
S-4,
in which the Joint Proxy Statement will be included as a prospectus, and Parent and the Company shall use their respective reasonable best efforts to have the Form S-4 declared
effective under the Securities Act as promptly as reasonably practicable after such filing. Each of the Company and Parent shall furnish all information concerning such Person and its Affiliates to the other, and provide such other assistance, as
may be reasonably requested in connection with the preparation, filing and distribution of the Form S-4 and Joint Proxy Statement, and the Form S-4 and Joint Proxy Statement shall include all information reasonably requested by such other party to
be included therein. Each of the Company and Parent shall promptly notify the other upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to the Form S-4 or Joint Proxy Statement and shall provide
the other with copies of all correspondence between it and its Representatives, on the one hand, and the SEC, on the other hand. Each of the Company and Parent shall use its reasonable best efforts to respond as promptly as reasonably practicable to
any comments from the SEC with respect to the Form S-4 or Joint Proxy Statement. Notwithstanding the foregoing, prior to filing the Form S-4 (or any amendment or supplement thereto) or mailing the Joint Proxy Statement (or any amendment or
supplement thereto) or responding to any comments of the SEC with respect thereto, each of the Company and Parent (i) shall provide the other an opportunity to review and comment on such document or response (including the proposed final
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version of such document or response), (ii) shall include in such document or response all comments reasonably proposed by the other and (iii) shall not file or mail such document or
respond to the SEC prior to receiving the approval of the other, which approval shall not be unreasonably withheld, conditioned or delayed. Each of the Company and Parent shall advise the other, promptly after receipt of notice thereof, of the time
of effectiveness of the Form S-4, the issuance of any stop order relating thereto or the suspension of the qualification of the Merger Consideration for offering or sale in any jurisdiction, and each of the Company and Parent shall use its
reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. Each of the Company and Parent shall also take any other action (other than qualifying to do business in any jurisdiction in which it is not
now so qualified) required to be taken under the Securities Act, the Exchange Act, any applicable state securities or blue sky laws and the rules and regulations thereunder in connection with the Transactions.
(b) If prior to the Effective Time, any event occurs with respect to Parent or any Parent Subsidiary, or any change occurs with respect to
other information supplied by Parent for inclusion in the Joint Proxy Statement or the Form S-4, which is required to be described in an amendment of, or a supplement to, the Joint Proxy Statement or the Form S-4, Parent shall promptly notify the
Company of such event, and the Company and Parent shall cooperate in the prompt filing with the SEC of any necessary amendment or supplement to the Joint Proxy Statement or the Form S-4 and, as required by Law, in disseminating the information
contained in such amendment or supplement to Parents shareholders and the Companys stockholders. Nothing in this Section 6.01(b) shall limit the obligations of any party under Section 6.01(a).
(c) If prior to the Effective Time, any event occurs with respect to the Company or any Company Subsidiary, or any change occurs with respect
to other information supplied by the Company for inclusion in the Joint Proxy Statement or the Form S-4, which is required to be described in an amendment of, or a supplement to, the Joint Proxy Statement or the Form S-4, the Company shall promptly
notify Parent of such event, and the Company and Parent shall cooperate in the prompt filing with the SEC of any necessary amendment or supplement to the Joint Proxy Statement or the Form S-4 and, as required by Law, in disseminating the information
contained in such amendment or supplement to Parents shareholders and the Companys stockholders. Nothing in this Section 6.01(c) shall limit the obligations of any party under Section 6.01(a).
(d) Parent shall, as soon as reasonably practicable following the date of this Agreement, duly call, give notice of, convene and hold the
Parent Shareholders Meeting for the sole purpose of seeking the Parent Shareholder Approval. Parent shall use its reasonable best efforts to (i) cause the Joint Proxy Statement to be mailed to Parents shareholders and to hold the Parent
Shareholders Meeting as soon as reasonably practicable after the Form S-4 is declared effective under the Securities Act and (ii) subject to Section 5.03(b), solicit the Parent Shareholder Approval. Parent shall, through the Parent Board,
recommend to its shareholders that they give the Parent Shareholder Approval and shall include such recommendation in the Joint Proxy Statement, except to the extent that the Parent Board shall have made a Parent Adverse Recommendation Change as
permitted by Section 5.03(b). Notwithstanding the foregoing provisions of this Section 6.01(d), if on a date for which the Parent Shareholders Meeting is scheduled, Parent has not received proxies representing a sufficient number of shares
of Parent Common Stock to obtain the Parent Shareholder Approval, whether or not a quorum is present, Parent shall have the right to make one or more successive postponements or adjournments of the Parent Shareholders Meeting, provided that the
Parent Shareholders Meeting is not postponed or adjourned to a date that is more than 30 days after the date for which the Parent Shareholders Meeting was originally scheduled (excluding any adjournments or postponements required by applicable Law).
Parent agrees that its obligations pursuant to this Section 6.01 shall not be affected by the commencement, public proposal, public disclosure or communication to Parent of any Parent Takeover Proposal, by the making of any Parent Adverse
Recommendation Change by the Parent Board or the occurrence of a Parent Intervening Event.
(e) The Company shall, as soon as reasonably
practicable following the date of this Agreement, duly call, give notice of, convene and hold the Company Stockholders Meeting for the sole purpose of seeking the
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Company Stockholder Approval. The Company shall use its reasonable best efforts to (i) cause the Joint Proxy Statement to be mailed to the Companys stockholders as promptly as
reasonably practicable after the Form S-4 is declared effective under the Securities Act and to hold the Company Stockholders Meeting as soon as reasonably practicable after the Form S-4 becomes effective and (ii) subject to
Section 5.02(b), solicit the Company Stockholder Approval. The Company shall, through the Company Board, recommend to its stockholders that they give the Company Stockholder Approval and shall include such recommendation in the Joint Proxy
Statement, except to the extent that the Company Board shall have made a Company Adverse Recommendation Change as permitted by Section 5.02(b). Notwithstanding the foregoing provisions of this Section 6.01(e), if on a date for which the
Company Stockholders Meeting is scheduled, the Company has not received proxies representing a sufficient number of shares of Company Common Stock to obtain the Company Stockholder Approval, whether or not a quorum is present, the Company shall have
the right to make one or more successive postponements or adjournments of the Company Stockholders Meeting, provided that the Company Stockholders Meeting is not postponed or adjourned to a date that is more than 30 days after the date for which the
Company Stockholders Meeting was originally scheduled (excluding any adjournments or postponements required by applicable Law). The Company agrees that its obligations pursuant to this Section 6.01 shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any Company Takeover Proposal, by the making of any Company Adverse Recommendation Change by the Company Board or the occurrence of a Company Intervening Event.
(f) The parties shall use their reasonable best efforts to hold the Company Stockholders Meeting and the Parent Shareholders Meeting on the
same day at the same time.
(g) Parent, as sole shareholder of Merger Sub, has, in connection with the execution and delivery of this
Agreement by each of the parties hereto, approved this Agreement.
SECTION 6.02.
Access to Information; Confidentiality.
(a) Subject to applicable Law, the Company shall, and shall cause each of the Company Subsidiaries to, afford to Parent and to Parents Representatives reasonable access, upon reasonable advance notice, during the period from the date of
this Agreement until the earlier of the Effective Time or termination of this Agreement in accordance with its terms, to all their respective properties, books, contracts, commitments, personnel and records and, during such period, the Company
shall, and shall cause each of the Company Subsidiaries to, furnish promptly to Parent all information concerning its business, properties and personnel as Parent may reasonably request in connection with this Agreement and the transactions
contemplated hereby, including for purposes of any business planning (including for post-Closing periods) and integration;
provided
,
however
, that the Company (i) shall not be required to afford such access if it would
unreasonably disrupt the operations of the Company, (ii) may withhold any document or information the disclosure of which would cause a violation of any agreement to which the Company or such Company Subsidiary is a party (
provided
that
the Company shall use its reasonable best efforts to obtain the required consent of such third party to such access or disclosure) and (iii) may withhold any document or information the disclosure of which would be reasonably likely to risk a
loss of legal privilege (
provided
that the Company shall use its reasonable best efforts to allow for such access or disclosure (or as much of it as possible) in a manner that would not be reasonably likely to risk a loss of legal privilege).
If any material is withheld by the Company pursuant to the immediately preceding sentence, the Company shall, to the extent possible without violating an agreement or risking a loss of legal privilege, inform Parent as to the general nature of what
is being withheld. All information exchanged pursuant to this Section 6.02(a) shall be subject to the confidentiality agreement dated August 29, 2013 between Parent and the Company (the
Confidentiality Agreement
).
(b) Subject to applicable Law, Parent shall, and shall cause each of the Parent Subsidiaries to, afford to the Company and to the
Companys Representatives reasonable access, upon reasonable advance notice, during the period from the date of this Agreement until the earlier of the Effective Time or termination of this Agreement in accordance with its terms, to all their
respective properties, books, contracts, commitments, personnel and records and, during such period, Parent shall, and shall cause each of the Parent Subsidiaries to, furnish promptly to the Company all information concerning its business,
properties and personnel as the Company may reasonably request in connection with this Agreement and the transactions contemplated hereby;
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provided
,
however
, that Parent (i) shall not be required to afford such access if it would unreasonably disrupt the operations of Parent, (ii) may withhold any document or
information the disclosure of which would cause a violation of any agreement to which Parent or such Parent Subsidiary is a party (
provided
that Parent shall use its reasonable best efforts to obtain the required consent of such third party
to such access or disclosure) and (iii) may withhold any document or information the disclosure of which would be reasonably likely to risk a loss of legal privilege (
provided
that Parent shall use its reasonable best efforts to allow
for such access or disclosure (or as much of it as possible) in a manner that would not be reasonably likely to risk a loss of legal privilege). If any material is withheld by Parent pursuant to the immediately preceding sentence, Parent shall, to
the extent possible without violating an agreement or risking a loss of legal privilege, inform the Company as to the general nature of what is being withheld. All information exchanged pursuant to this Section 6.02(b) shall be subject to the
Confidentiality Agreement.
SECTION 6.03.
Required Actions.
(a) Each of the parties shall use their respective reasonable best
efforts to take, or cause to be taken, all actions, and do, or cause to be done, and assist and cooperate with the other parties in doing, all things reasonably appropriate to consummate and make effective, as soon as reasonably possible, the
Transactions.
(b) In connection with and without limiting Section 6.03(a), the Company and the Company Board and Parent and the
Parent Board shall use their respective reasonable best efforts to (x) take all action reasonably appropriate to ensure that no state takeover statute or similar statute or regulation is or becomes applicable to the Transaction Agreements or
the Transactions and (y) if any state takeover statute or similar statute or regulation becomes applicable to the Transaction Agreements or the Transactions, take all action reasonably appropriate to ensure that the Transactions may be
consummated as promptly as practicable on the terms contemplated by the applicable Transaction Agreements.
(c) In connection with and
without limiting Section 6.03(a), Parent and the Company shall cooperate in good faith to seek to obtain all consents, approvals and waivers required by the terms of any material Contracts with third parties or material Permits in connection
with the transactions contemplated hereby.
(d) In connection with and without limiting Section 6.03(a), the Company and Parent shall
promptly enter into discussions with the Governmental Entities from whom Consents or nonactions are required to be obtained in connection with the consummation of the Merger and the other transactions contemplated by this Agreement in order to
obtain all such required Consents or nonactions from such Governmental Entities, in each case with respect to the Merger, so as to enable the Closing to occur as soon as reasonably possible, and in any event no later than the End Date. To the extent
necessary in order to accomplish the foregoing and subject to the limitations set forth in Section 6.03(f), the Company and Parent shall use their respective reasonable best efforts to jointly negotiate, commit to and effect, by consent decree,
hold separate order, condition or approval or otherwise, the sale, divestiture or disposition of, or prohibition or limitation on the ownership or operation of, or requirements or undertakings with respect to the conduct by the Company, Parent or
any of their respective Subsidiaries of, any portion of the business, properties or assets of the Company, Parent or any of their respective Subsidiaries;
provided
,
however
, that neither Parent nor the Company shall be required
pursuant to this Section 6.03(d) to commit to or effect any action, prohibition, limitation, requirement or undertaking that is not conditioned upon the consummation of the Merger or that would or would reasonably be expected to have a
Substantial Detriment. If the actions taken by Parent and the Company pursuant to the immediately preceding sentence do not result in the conditions set forth in Sections 7.01(c) and (d) being satisfied, then, during the term of this Agreement,
each of Parent and the Company shall use their reasonable best efforts to initiate or participate in any proceedings, whether judicial or administrative, in order to (i) oppose or defend against any action by any Governmental Entity to prevent
or enjoin the consummation of the Transactions or (ii) take such action as necessary to overturn any regulatory action by any Governmental Entity to block consummation of the Transactions, including by defending any suit, action or other legal
proceeding brought by any Governmental Entity in order to avoid the entry of, or to have vacated, overturned or terminated, including by appeal if necessary, any Legal Restraint resulting from any suit, action or other legal proceeding that would
cause any condition set forth in Section 7.01(c) or (d) not to be satisfied.
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(e) In connection with and without limiting the generality of the foregoing, each of Parent and
the Company shall:
(i) make or cause to be made as promptly as reasonably practicable (and in any event no later than 15
Business Days following the date of this Agreement), in consultation and cooperation with the other, all filings required under the HSR Act relating to the Merger;
(ii) use its reasonable best efforts to furnish to the other all assistance, cooperation and information required for any such
registration, declaration, notice or filing and in order to achieve the effects set forth in Section 6.03(d);
(iii)
give the other reasonable prior notice of any such registration, declaration, submission, notice or filing and, to the extent reasonably practicable, of any communication with any Governmental Entity regarding the Merger (including with respect to
any of the actions referred to in Section 6.03(d) and in this Section 6.03(e)), and permit the other to review and discuss in advance, and consider in good faith the views of, and secure the participation of, the other in connection with
any such registration, declaration, submission, notice, filing or communication;
(iv) use its reasonable best efforts to
respond as promptly as reasonably practicable to any inquiries or requests received from any Governmental Entity or any other authority enforcing applicable antitrust, competition, trade regulation or similar Laws for additional information or
documentary material in connection with antitrust, competition, trade regulation or similar matters (including a second request under the HSR Act), and not extend any waiting period under the HSR Act or enter into any agreement with such
Governmental Entities or other authorities not to consummate any of the transactions contemplated by this Agreement, except with the prior written consent of the other parties hereto, which consent shall not be unreasonably withheld or delayed; and
(v) unless prohibited by applicable Law or by the applicable Governmental Entity, (A) to the extent reasonably
practicable, not participate in or attend any meeting, or engage in any conversation with any Governmental Entity in respect of the Merger (including with respect to any of the actions referred to in Section 6.03(d) and in this
Section 6.03(e)) without the other, (B) to the extent reasonably practicable, give the other reasonable prior notice of any such meeting or conversation, (C) in the event one party is prohibited by applicable Law or by the applicable
Governmental Entity from participating in or attending any such meeting or engaging in any such conversation, keep such party reasonably apprised with respect thereto, (D) cooperate in the filing of any substantive memoranda, white papers,
filings, correspondence or other written communications explaining or defending this Agreement and the Merger, articulating any regulatory or competitive argument, or responding to requests or objections made by any Governmental Entity and
(E) furnish the other party with copies of all correspondence, filings and communications (and memoranda setting forth the substance thereof) between it and its Affiliates and their respective Representatives on the one hand, and any
Governmental Entity or members of any Governmental Entitys staff, on the other hand, with respect to this Agreement and the Merger, subject to redaction of competitively sensitive information, valuation material or information subject to
attorney client privilege.
(f) Notwithstanding anything else contained herein but subject to the proviso of the second sentence of
Section 6.03(d), the provisions of this Section 6.03 shall not be construed to require the Company, Parent or their respective Subsidiaries to offer, take, commit to or accept any action, restrictions or limitations of or on the Company,
Parent or their respective Subsidiaries, or to permit such actions, restrictions or limitations without the prior written consent of the other party, if such actions, restrictions or limitations, individually or in the aggregate, would or would
reasonably be expected to result in a Substantial Detriment.
SECTION 6.04.
Stock Plans.
(a) Each Company Stock Option, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, as of the
Effective Time, automatically and without any action on the part of the holders thereof, vest and be converted into a Parent Stock Option on the same terms and conditions (except as provided
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in this Section 6.04(a)) as were applicable under such Company Stock Option immediately prior to the Effective Time, to purchase (i) that number of shares of Parent Common Stock equal
to the product determined by multiplying (A) the total number of shares of Company Common Stock subject to such Company Stock Option immediately prior to the Effective Time by (B) the Exchange Ratio, rounded down to the nearest whole
number of shares of Parent Common Stock, (ii) at a per-share exercise price equal to the quotient determined by dividing (A) the exercise price per share of Company Common Stock at which such Company Stock Option was exercisable
immediately prior to the Effective Time by (B) the Exchange Ratio, and rounding the resulting per-share exercise price up to the nearest whole cent.
(b) Each Company SAR granted, whether vested or unvested, that is outstanding immediately prior to the Effective Time shall, as of the
Effective Time, automatically and without any action on the part of the holders thereof, vest and be converted into a stock appreciation right (a
Parent SAR
), on the same terms and conditions (except as provided in this
Section 6.04(b)) as were applicable under such Company SAR immediately prior to the Effective Time, corresponding to (i) that number of shares of Parent Common Stock equal to the product determined by multiplying (A) the total number
of shares of Company Common Stock corresponding to such Company SAR immediately prior to the Effective Time by (B) the Exchange Ratio, rounded down to the nearest whole number of shares of Parent Common Stock, (ii) at a per-share base
price equal to the quotient determined by dividing (A) the base price per share of Company Common Stock corresponding to such Company SAR immediately prior to the Effective Time by (B) the Exchange Ratio, and rounding the resulting
per-share base price up to the nearest whole cent.
(c) Effective as of the Effective Time, each Company RSU (other than a Company
Rollover RSU) shall, as of the Effective Time, whether or not then vested or free of conditions to payment, vest and automatically and without any action on the part of the holder thereof, be converted, into the right to receive from Parent, a
number of shares of Parent Common Stock (and cash in lieu of fractional shares to be paid by the Surviving Company to the holder) equal to the product determined by multiplying (i) the total number of shares of Company Common Stock subject to
such Company RSU by (ii) the Exchange Ratio and be settled within ten Business Days following the Effective Time. For purposes of this Section 6.04(c), with respect to any Company RSU that is subject to performance goals, the vesting
provided for in this Section 6.04(c) shall be based on the deemed achievement in full of such performance goals (i.e., the award shall vest with respect to 100% of the shares underlying the award).
(d) Effective as of the Effective Time, each Company Rollover RSU shall, as of the Effective Time, be converted into restricted share units,
otherwise on the same terms and conditions as were applicable under such Company Rollover RSU immediately prior to the Effective Time, with respect to a number of shares of Parent Common Stock determined by multiplying the number of shares of
Company Common Stock subject to such Company Rollover RSU immediately prior to the Effective Time by the Exchange Ratio;
provided
that any fractional share of Parent Common Stock resulting therefrom shall be rounded down to the nearest whole
share.
(e) Prior to the Effective Time, the Company Board (or, if appropriate, any committee thereof administering the Company Stock
Plans) shall pass resolutions to effect the foregoing provisions of this Section 6.04.
(f) As soon as practicable after the
Effective Time, Parent shall prepare and file with the SEC a Form S-8 (or file such other appropriate form) registering a number of shares of Parent Common Stock necessary to fulfill Parents obligations under this Section 6.04.
SECTION 6.05.
Indemnification, Exculpation and Insurance.
(a) From and after the Effective Time, Parent and Merger Sub agree that
all rights to indemnification, advancement of expenses and exculpation of each former and present director or officer of the Company or any Company Subsidiary and each person who served as a director, officer, member, trustee or fiduciary of another
corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise if such service was at the request or for the benefit of the
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Company or any Company Subsidiary (each, together with such persons heirs, executors or administrators, a
Company Indemnified Party
), against all claims, losses,
liabilities, damages, judgments, inquiries, fines and reasonable fees, costs and expenses, including attorneys fees and disbursements, incurred in connection with any claim, action, suit or proceeding, whether civil, criminal, administrative
or investigative, with respect to matters existing or occurring at or prior to the Effective Time (including this Agreement and the transactions and actions contemplated hereby), arising out of or pertaining to the fact that the Company Indemnified
Party is or was an officer or director of the Company or any Company Subsidiary or is or was serving at the request of the Company or any Company Subsidiary as a director or officer of another Person, whether asserted or claimed prior to, at or
after the Effective Time as provided in their respective certificates of incorporation or by-laws (or comparable organizational documents) as in effect on the date of this Agreement or in any agreement, a true and complete copy of which agreement
has been provided by the Company to Parent prior to the date hereof, to which the Company or any of its Subsidiaries is a party, shall survive the Merger and continue in full force and effect in accordance with their terms. For a period of six years
from the Effective Time, Parent shall, and shall cause the Surviving Company to, maintain in effect the exculpation, indemnification and advancement of expenses provisions of the Companys and any Company Subsidiarys articles of
incorporation and by-laws or other organization documents in effect immediately prior to the Effective Time or in any agreement, a true and complete copy of which agreement has been provided by the Company to Parent prior to the date hereof, to
which the Company or any of its Subsidiaries is a party, in each case in effect immediately prior to the Effective Time and shall not amend, repeal or otherwise modify any such provisions or the exculpation, indemnification or advancement of
expenses provisions of the Surviving Companys articles of incorporation and by-laws set forth in Exhibit A and Exhibit B in any manner that would adversely affect the rights thereunder of any individual who immediately before the Effective
Time was a Company Indemnified Party;
provided
,
however
, that all rights to indemnification in respect of any Action pending or asserted or any claim made within such period shall continue until the disposition of such Action or
resolution of such claim.
(b) At and after the Effective Time, Parent shall indemnify and hold harmless (and advance funds in respect of
the foregoing) each Company Indemnified Party to the fullest extent permitted under applicable Law against any costs or expenses (including advancing attorneys fees and expenses in advance of the final disposition of any claim, suit,
proceeding or investigation to each Indemnified Party), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any actual or threatened claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative (each, an
Action
), arising out of or pertaining to the fact that the Company Indemnified Party is or was an officer or director of the Company or any Company Subsidiary or is or was
serving at the request of the Company or any Company Subsidiary as a director or officer of another Person, whether asserted or claimed prior to, at or after the Effective Time. Parent and the Surviving Company shall reasonably cooperate with the
Indemnified Party in the defense of any such Action.
(c) For a period of six years from the Effective Time, Parent shall cause to be
maintained in effect the coverage provided by the policies of directors and officers liability insurance and fiduciary liability insurance in effect as of the Effective Time by the Company and its Subsidiaries from a carrier with
comparable or better credit ratings to the Companys existing directors and officers insurance and fiduciary liability insurance policy carrier and on terms and conditions not less favorable to the insured Persons than the
directors and officers liability insurance and fiduciary liability insurance coverage currently maintained by the Company with respect to claims arising from facts, events, acts or omissions that occurred on or before the Effective Time,
except that in no event shall Parent be required to pay an annual premium for such insurance in excess of 250% of the aggregate annual premium payable by the Company for such insurance policy for the year ended December 31, 2012 (the
Maximum Amount
);
provided
,
however
, that if such insurance can only be obtained at an annual premium in excess of the Maximum Amount, Parent shall obtain the most advantageous policy of directors and
officers insurance obtainable for an annual premium equal to the Maximum Amount. In lieu of the foregoing, the Company may in its discretion purchase, and Parent may in its discretion purchase if the Company declines to do so, a
tail directors and officers liability insurance and fiduciary liability insurance policy covering the six-year period from and after the Effective Time from a carrier with comparable or better credit ratings to the
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Companys existing directors and officers insurance and fiduciary liability insurance policy carrier and on terms and conditions not less favorable to the insured Persons than
the directors and officers liability insurance and fiduciary liability insurance coverage currently maintained by the Company with respect to claims arising from facts, events, acts or omissions that occurred on or before the Effective
Time,
provided
that without the Parents consent, the cost of such tail policy shall not exceed the Maximum Amount.
(d) In the event that Parent, the Surviving Company or any of their respective successors or assigns (i) consolidates with or merges into
any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, Parent
or the Surviving Company shall cause proper provision to be made so that the successors and assigns of Parent or the Surviving Company, as the case may be, assume the obligations set forth in this Section 6.05.
(e) The provisions of this Section 6.05 shall (i) survive consummation of the Merger, (ii) are intended to be for the benefit
of, and will be enforceable by, each indemnified or insured party (including the Company Indemnified Parties), his or her heirs and his or her representatives and (iii) are in addition to, and not in substitution for, any other rights to
indemnification or contribution that any such Person may have by contract or otherwise.
SECTION 6.06.
Fees and Expenses.
(a) Except as provided in Section 6.06(b), 6.06(c) and 6.06(d), all fees and expenses incurred in connection with the Transaction Agreements and the Transactions shall be paid by the party incurring such fees or expenses, whether or not
such transactions are consummated.
(b) The Company shall pay to Parent the Company Termination Fee if:
(i) Parent terminates this Agreement pursuant to Section 8.01(e);
provided
that if either the Company or Parent
terminates this Agreement pursuant to Section 8.01(b)(i) (solely in the event that the Company Stockholders Meeting has not occurred at least five Business Days prior to such time) or Section 8.01(b)(iv) at any time after Parent would have
been permitted to terminate this agreement pursuant to Section 8.01(e), this Agreement shall be deemed terminated pursuant to Section 8.01(e) for purposes of this Section 6.06(b)(i);
(ii) the Company terminates this Agreement pursuant to Section 8.01(h); or
(iii) (A) this Agreement is terminated pursuant to Section 8.01(b)(i) (solely in the event that the Company Stockholders
Meeting has not occurred at least five Business Days prior to such time), Section 8.01(b)(iv) or Section 8.01(d), (B) after the date hereof, but prior to the date of the Company Stockholders Meeting (in the case of
Section 8.01(b)(iv)) or prior to the date this Agreement is terminated (in the case of Section 8.01(b)(i) or Section 8.01(d)), a third party has made a Company Takeover Proposal that has become known to the public or a third party has
publicly announced an intention to make a Company Takeover Proposal, and (C) within 12 months of such termination, the Company enters into a definitive Contract to consummate any Company Takeover Proposal or any Company Takeover Proposal is
consummated. For the purposes of Section 6.06(b)(iii)(C) only, the term Company Takeover Proposal shall have the meaning assigned to such term in Section 5.02(e) except that all references to 20% therein shall be
deemed to be references to 50%.
(c) Parent shall pay to the Company the Parent Termination Fee if:
(i) the Company terminates this Agreement pursuant to Section 8.01(f);
provided
that if either the Company or
Parent terminates this Agreement pursuant to Section 8.01(b)(i) (solely in the event that the Parent Shareholders Meeting has not occurred at least five Business Days prior to such time) or Section 8.01(b)(iii) at any time after the
Company would have been permitted to terminate this agreement pursuant to Section 8.01(f), this Agreement shall be deemed terminated pursuant to Section 8.01(f) for purposes of this Section 6.06(c)(i);
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(ii) Parent terminates this Agreement pursuant to Section 8.01(i); or
(iii) (A) this Agreement is terminated pursuant to Section 8.01(b)(i) (solely in the event that the Parent Shareholders
Meeting has not occurred at least five Business Days prior to such time), Section 8.01(b)(iii) or Section 8.01(c), (B) after the date hereof, but prior to the date of the Parent Shareholders Meeting (in the case of
Section 8.01(b)(iii)) or prior to the date this Agreement is terminated (in the case of Section 8.01(b)(i) or Section 8.01(c)), a third party has made a Parent Takeover Proposal that has become known to the public or a third party has
publicly announced an intention to make a Parent Takeover Proposal, and (C) within 12 months of such termination, Parent enters into a definitive Contract to consummate any Parent Takeover Proposal or any Parent Takeover Proposal is
consummated. For the purposes of Section 6.06(c)(iii)(C) only, the term Parent Takeover Proposal shall have the meaning assigned to such term in Section 5.03(e) except that all references to 20% therein shall be
deemed to be references to 50%.
(d) Parent shall pay to the Company the Reverse Termination Fee, if this Agreement is
terminated pursuant to Section 8.01(b)(i) and at the time of such termination all of the conditions set forth in Sections 7.01 and 7.02 have been satisfied or waived (or with respect to the conditions set forth in Section 7.01(b) and
7.02(e) and the conditions that by their nature are to be satisfied at the Closing) were capable of being satisfied or would have been so satisfied if the Closing would have occurred) except for any conditions set forth in (w) Section 7.01(c),
(x) Section 7.01(d) (if the failure of such condition is due to a Legal Restraint relating to antitrust Laws), (y) Section 7.01(e) (if a primary reason for the failure of such condition is due to (i) a breach by Parent of its
obligations under this Agreement or (ii) the failure to obtain approval or clearance for the Merger under antitrust Laws) or (z) Section 7.02(d).
(e) Any Company Termination Fee, Parent Termination Fee or Reverse Termination Fee due under Section 6.06(b), 6.06(c) or 6.06(d) shall be
paid by wire transfer of same-day funds (x) in the case of Section 6.06(b)(i), 6.06(b)(ii), 6.06(c)(i), 6.06(c)(ii) or 6.06(d), on the Business Day immediately following the date of termination of this Agreement and (y) in the case of
Section 6.06(b)(iii) or 6.06(c)(iii), on the date of the first to occur of the events referred to in Section 6.06(b)(iii)(C) or 6.06(c)(iii)(C), as applicable.
(f) Parent and the Company acknowledge and agree that the agreements contained in Section 6.06(b), 6.06(c) and 6.06(d) are an integral
part of the transactions contemplated by this Agreement, and that, without these agreements, Parent and the Company would not have entered into this Agreement. Accordingly, if either party fails promptly to pay the amount due pursuant to
Section 6.06(b), 6.06(c) or 6.06(d), as applicable, and, in order to obtain such payment, the other party commences a suit, action or other proceeding that results in a Judgment in its favor for such payment, the Company or Parent, as
applicable, shall pay to the other party such payment and its costs and expenses (including attorneys fees and expenses) in connection with such suit, action or other proceeding, together with interest on the amount of such payment from the
date such payment was required to be made until the date of payment at the prime rate of JPMorgan Chase Bank, N.A. in effect on the date such payment was required to be made. In no event shall either party be obligated to pay more than one
termination fee pursuant to this Section 6.06.
SECTION 6.07.
Certain Tax Matters.
(a) The Company, Parent and Merger Sub
shall each use its reasonable best efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, including by not taking any action (or failing to take any action) that is reasonably
likely to prevent or impede such qualification. Parent will report the Transactions in a manner consistent with such qualification.
(b)
(i) The Company shall use its reasonable best efforts to deliver to Wachtell, Lipton, Rosen & Katz, special
counsel to the Company (
Companys Counsel
), and Cravath, Swaine & Moore LLP, counsel to Parent (
Parents Counsel
), a tax representation letter dated as of the Closing Date (and, if requested,
dated as of the date the Form S-4 is declared effective by the SEC) and signed by an officer of the Company,
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containing representations of the Company, and Parent shall use its reasonable best efforts to deliver to Companys Counsel and Parents Counsel a tax representation letter dated as of
the Closing Date (and, if requested, dated as of the date the Form S-4 is declared effective by the SEC) and signed by an officer of Parent and Merger Sub, containing representations of Parent and Merger Sub (collectively, the
Tax
Representation Letters
), in each case as reasonably necessary and appropriate to enable Companys Counsel to render the opinion described in Section 7.03(d) and Parents Counsel to render the opinion described in
Section 7.02(e).
(ii) Each of the Company and Parent shall use its reasonable best efforts not to take or cause to be
taken any action that would cause to be untrue (or fail to take or cause not to be taken any action which inaction would cause to be untrue) any of the representations included in the Tax Representation Letters.
SECTION 6.08.
Transaction Litigation.
Subject to applicable Law, Parent shall give the Company the opportunity to participate in the
defense or settlement of any litigation by a holder of securities of Parent against Parent or its directors relating to the Transactions and no such settlement shall be agreed to without the prior written consent of the Company, which consent shall
not be unreasonably withheld, conditioned or delayed. Subject to applicable Law, the Company shall give Parent the opportunity to participate in the defense or settlement of any litigation against the Company or its directors or officers by a holder
of securities of the Company relating to the Transactions and no such settlement shall be agreed to without the prior written consent of Parent. Without limiting in any way the parties obligations under Section 6.03, each of Parent and
the Company shall cooperate, shall cause the Parent Subsidiaries and the Company Subsidiaries, as applicable, to cooperate, and shall use its reasonable best efforts to cause its directors, officers, employees, agents, legal counsel, financial
advisors, independent auditors, and other advisors and representatives to cooperate in the defense against such litigation by a holder of securities of the Company or of Parent, as applicable.
SECTION 6.09.
Section 16 Matters.
Prior to the Effective Time, the Company, Parent and Merger Sub each shall take all such steps
as may be required to cause (a) any dispositions of Company Common Stock (including derivative securities with respect to Company Common Stock) resulting from the Transactions by each individual who will be subject to the reporting requirements
of Section 16(a) of the Exchange Act with respect to the Company immediately prior to the Effective Time to be exempt under Rule 16b-3 promulgated under the Exchange Act and (b) any acquisitions of Parent Common Stock (including derivative
securities with respect to Parent Common Stock) resulting from the Merger and the other transactions contemplated by this Agreement, by each individual who may become or is reasonably expected to become subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Parent to be exempt under Rule 16b-3 promulgated under the Exchange Act.
SECTION
6.10.
Public Announcements.
Except with respect to any Company Adverse Recommendation Change or Parent Adverse Recommendation Change made in accordance with the terms of this Agreement, Parent and the Company will use reasonable best efforts
to develop a joint communications plan and to consult with each other before issuing, and give each other the opportunity to review and comment upon, any press release or other public statements with respect to the Transactions, and not to issue any
such press release or make any such public statement prior to such consultation, except as such party may reasonably conclude may be required by applicable Law, court process or by obligations pursuant to any listing agreement with any national
securities exchange or national securities quotation system. The Company and Parent agree that the initial press release to be issued with respect to the Transactions shall be in the form heretofore agreed to by the parties. Notwithstanding the
foregoing sentences of this Section 6.10, Parent and the Company may make any oral or written public announcements, releases or statements without complying with the foregoing requirements if the substance of such announcements, releases or
statements, was publicly disclosed and previously subject to the foregoing requirements.
SECTION 6.11.
Stock Exchange Listing.
Parent shall use its reasonable best efforts to cause the shares of Parent Common Stock to be issued in the Merger to be approved for listing on the NYSE, subject to official notice of issuance, prior to the Closing Date.
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SECTION 6.12.
Director Appointment.
Parent agrees that it will cause to be appointed the
Agreed Individual to the Parent Board promptly after the Effective Time.
Agreed Individual
shall mean an individual to be mutually agreed by Parent and the Company (or one of the current two largest stockholders of the Company
designated by the Company Board) following (a) consultations between Parent and the Company (or such designee) regarding potential candidates whom they believe in good faith would be valuable additions to the Parent Board and (b) a
determination by the Nominating and Corporate Governance Committee of the Parent Board that such individual is an appropriate person to add to the Parent Board, taking into account such committees Guidelines for New Directors.
SECTION 6.13.
Certain Transfer Taxes
. Except to the extent set forth in Section 2.02(c), any liability arising out of any
documentary, sales, use, real property transfer, registration, transfer, stamp, recording and similar Taxes with respect to the transactions contemplated by this Agreement shall be borne by the Surviving Company and expressly shall not be a
liability of stockholders of the Company.
SECTION 6.14.
Employee Matters.
(a) From and after the Effective Time, the Company shall, and Parent shall cause the Company to, honor all Company Benefit Plans in accordance
with their terms as in effect immediately before the Effective Time. For a period of one year following the Effective Time, Parent shall provide, or shall cause to be provided, to each employee of the Company and its Subsidiaries as of the Effective
Time (each, a
Company Employee
) (i) base salaries or wage rates, as applicable, that, in each case, are no less favorable than were provided to the Company Employee immediately before the Effective Time and (ii) employee
benefits that are substantially comparable in the aggregate to either (A) those that were provided to the Company Employees immediately before the Effective Time or (B) those provided to similarly situated employees of Parent.
Notwithstanding any other provision of this Agreement to the contrary, (x) Parent shall or shall cause the Surviving Company to provide the Company Employees whose employment terminates during the one-year period following the Effective Time
with severance benefits that are no less favorable than were provided to the Company Employees immediately before the Effective Time and (y) any such severance benefits shall be determined without regard to any reduction following the Effective
Time in base salary or base wage rates.
(b) For purposes of vacation eligibility and participation in long-service award programs of
Parent, each Company Employee shall be credited with his or her years of service with the Company and its Subsidiaries (but not any predecessor) to the same extent as such Company Employee was entitled, before the Effective Time, to credit for such
service under any similar Company Benefit Plan in which such Company Employee participated or was eligible to participate immediately prior to the Effective Time;
provided
that (i) the foregoing shall not apply to the extent that its
application would result in a duplication of benefits and (ii) Parent shall not be obligated to provide credit for service with the Company or any of its Subsidiaries for any other purpose. Parent shall use its commercially reasonable efforts
to cause any eligible expenses incurred by each Company Employee and his or her covered dependents during the portion of the plan year in which the Effective Time occurs to be taken into account for purposes of satisfying such years
deductible, coinsurance and maximum out-of-pocket requirements applicable to such employee and his or her covered dependents for the applicable employee welfare benefit plan in which they will be eligible to participate from and after the Effective
Time, to the extent credited under the employee welfare benefit plans maintained by the Company prior to the Effective Time.
(c) Parent
hereby acknowledges that a change of control (or similar phrase) within the meaning of the Company Benefit Plans will occur at or prior to the Effective Time, as applicable.
(d) At or prior to the Effective Time, the Company shall terminate each health reimbursement account within the meaning of the
applicable Company Benefit Plan in accordance with the terms of such plan.
(e) Without limiting the generality of Section 9.07, the
provisions of this Section 6.14 are solely for the benefit of the parties to this Agreement, and no current or former director, officer, employee or independent
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contractor or any other Person shall be a third-party beneficiary of this Agreement. Nothing herein shall be construed as an amendment to any Parent Benefit Plan, Company Benefit Plan or other
compensation or benefit plan or arrangement for any purpose or as prohibiting or limiting the ability of Parent to amend, modify or terminate any plans, programs, policies, agreements, arrangements or understandings of the Company or Parent. Nothing
herein shall be construed as requiring, and the Company shall take no action that would have the effect of requiring, Parent to continue any specific plans or to continue the employment, or any changes to the terms and conditions of the employment,
of any specific person.
ARTICLE VII
Conditions Precedent
SECTION 7.01.
Conditions to Each Partys Obligation to Effect the Merger.
The respective obligation of each party to effect the
Merger is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a)
Shareholder and
Stockholder Approvals.
The Parent Shareholder Approval and the Company Stockholder Approval shall have been obtained.
(b)
Listing.
The shares of Parent Common Stock issuable as Merger Consideration pursuant to this Agreement shall have been approved for listing on the NYSE, subject to official notice of issuance.
(c)
HSR Act.
Any waiting period applicable to the Merger under the HSR Act shall have been terminated or shall have expired.
(d)
No Legal Restraints.
No applicable Law and no Judgment, preliminary, temporary or permanent, or other legal restraint or
prohibition and no binding order or ruling by any Governmental Entity (collectively, the
Legal Restraints
) shall be in effect that prevents, makes illegal or prohibits the consummation of the Merger.
(e)
Form S-4.
The Form S-4 shall have been declared effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the
Form S-4
shall have been issued by the SEC and no proceedings for that purpose shall have been initiated or threatened by the SEC.
SECTION 7.02.
Condition to Parents and Merger Subs Obligation to Effect the Merger.
The obligation of Parent and Merger Sub
to consummate the Merger is further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a)
Representations and Warranties.
The representations and warranties of the Company contained in this Agreement (except for the representations and warranties contained in Sections 4.01, 4.03, 4.04 and 4.19) shall be true and correct (without
giving effect to any limitation as to materiality or Company Material Adverse Effect set forth therein) at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to materiality or
Company Material Adverse Effect set forth therein), individually or in the aggregate, has not had and would not reasonably be expected to have a Company Material Adverse Effect (it being agreed that with respect to any representation or
warranty with respect to which effects resulting from or arising in connection with the matters set forth in clause (iv) of the definition of the term Material Adverse Effect are not excluded in determining whether a Company
Material Adverse Effect has occurred or would reasonably be expected to occur, such effects shall similarly not be excluded for purposes of this Section 7.02(a)), and the representations and warranties of the Company contained in Sections 4.01,
4.03, 4.04 and 4.19 shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which
case as of such earlier date). Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such effect.
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(b)
Performance of Obligations of the Company.
The Company shall have performed in all
material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such
effect.
(c)
Absence of Company Material Adverse Effect.
Since the date of this Agreement, except to the extent contained in any
Company Material Adverse Effect Condition Exceptions, there shall not have occurred a Company Material Adverse Effect, and Parent shall have received a certificate signed on behalf of the Company by an executive officer of the Company to such
effect.
(d)
No Substantial Detriment.
No Legal Restraints issued or promulgated by a U.S. Governmental Entity shall be in effect
that results, directly or indirectly, in (i) any prohibition or limitation on the ownership or operation by the Company, Parent or any of their respective Subsidiaries of any portion of the business, properties or assets of the Company, Parent
or any of their respective Subsidiaries, (ii) the Company, Parent or any of their respective Subsidiaries being compelled to dispose of or hold separate any portion of the business, properties or assets of the Company, Parent or any of their
respective Subsidiaries, in each case as a result of the Merger, (iii) any prohibition or limitation on the ability of Parent to acquire or hold, or exercise full right of ownership of, any shares of the capital stock of the Company or the
Company Subsidiaries, including the right to vote, or (iv) any prohibition or limitation on Parent effectively controlling the business or operations of the Company and the Company Subsidiaries, which, individually or in the aggregate, in the
case of each of clauses (i)-(iv), would reasonably be expected to result in a Substantial Detriment.
(e)
Tax Opinion.
Parent shall
have received the written opinion of Parents Counsel, dated as of the Closing Date, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering the opinion
described in this Section 7.02(e), Parents Counsel shall be entitled to receive and rely upon the Tax Representation Letters.
SECTION 7.03.
Condition to the Companys Obligation to Effect the Merger.
The obligations of the Company to consummate the Merger
are further subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:
(a)
Representations and
Warranties.
The representations and warranties of Parent and Merger Sub contained in this Agreement (except for the representations and warranties contained in Sections 3.01, 3.03, 3.04 and 3.14) shall be true and correct (without giving effect
to any limitation as to materiality or Parent Material Adverse Effect set forth therein) at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date), except where the failure of such representations and warranties to be true and correct (without giving effect to any limitation as to materiality or
Parent Material Adverse Effect set forth therein), individually or in the aggregate, has not had and would not reasonably be expected to have a Parent Material Adverse Effect (it being agreed that with respect to any representation or
warranty with respect to which effects resulting from or arising in connection with the matters set forth in clause (iv) of the definition of the term Material Adverse Effect are not excluded in determining whether a Parent Material
Adverse Effect has occurred or would reasonably be expected to occur, such effects shall similarly not be excluded for purposes of this Section 7.03(a)) and the representations and warranties of Parent and Merger Sub contained in Sections 3.01,
3.03, 3.04 and 3.14 shall be true and correct in all material respects at and as of the date of this Agreement and at and as of the Closing Date as if made at and as of such time (except to the extent expressly made as of an earlier date, in which
case as of such earlier date). The Company shall have received a certificate signed on behalf of each of Parent and Merger Sub by an executive officer of each of Parent and Merger Sub, respectively, to such effect.
(b)
Performance of Obligations of Parent and Merger Sub.
Parent and Merger Sub shall have performed in all material respects all
obligations required to be performed by them under this Agreement at or
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prior to the Closing Date, and the Company shall have received a certificate signed on behalf of each of Parent and Merger Sub by an executive officer of each of Parent and Merger Sub,
respectively, to such effect.
(c)
Absence of Parent Material Adverse Effect.
Since the date of this Agreement, except to the
extent contained in any Parent Material Adverse Effect Condition Exceptions, there shall not have occurred a Parent Material Adverse Effect, and the Company shall have received a certificate signed on behalf of Parent by an executive officer of
Parent to such effect.
(d)
Tax Opinion.
The Company shall have received the written opinion of Companys Counsel, dated as of
the Closing Date, to the effect that the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. In rendering the opinion described in this Section 7.03(d), Companys Counsel shall be
entitled to receive, and rely upon the Tax Representation Letters.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.01.
Termination.
This Agreement may be terminated at any time prior to the Effective Time, whether before or after the
receipt of the Company Stockholder Approval or the Parent Shareholder Approval, as follows:
(a) by mutual written consent
of the Company and Parent;
(b) by either the Company or Parent:
(i) if the Merger is not consummated on or before the End Date. The
End Date
shall mean six months from
signing;
provided
,
however
, that if all of the conditions to Closing shall have been satisfied or shall be then capable of being satisfied (other than the condition set forth in Sections 7.01(c) or 7.01(d) (to the extent relating to
antitrust Laws), the End Date may be extended for one or more periods of one month each by either Parent or the Company by written notice to the other party, up to a date not beyond the one year anniversary of this Agreement, the latest of any of
which dates shall thereafter be deemed to be the End Date; and
provided further
that (A) any such extensions shall be made only in the five Business Day period prior to the then applicable End Date and (B) only one such extension
shall be made in any such one-month extension period; and
provided
,
further
,
however
, that the terminating party shall have complied with its obligations pursuant to Section 6.03 and the right to terminate this Agreement
under this Section 8.01(b)(i) shall not be available to any party if such failure of the Merger to occur on or before the End Date is a proximate result of a breach of this Agreement by such party (including, in the case of Parent, Merger Sub);
(ii) [Reserved.]
(iii) if the Parent Shareholder Approval is not obtained at the Parent Shareholders Meeting duly convened (unless such Parent
Shareholders Meeting has been adjourned, in which case at the final adjournment thereof); or
(iv) if the Company
Stockholder Approval is not obtained at the Company Stockholders Meeting duly convened (unless such Company Stockholders Meeting has been adjourned, in which case at the final adjournment thereof);
(c) by the Company, if Parent or Merger Sub breaches or fails to perform any of its covenants or agreements contained in this Agreement, or if
any of the representations or warranties of Parent or Merger Sub contained herein fails to be true and correct, which breach or failure (i) would give rise to the failure of a condition set forth in Section 7.03(a) or 7.03(b) and
(ii) is not reasonably capable of being cured by the End Date or is not cured by Parent or Merger Sub, as the case may be, within 90 days after receiving written notice from the Company;
(d) by Parent, if the Company breaches or fails to perform any of its covenants or agreements contained in this Agreement, or if any of the
representations or warranties of the Company contained herein fails to be true
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and correct, which breach or failure (i) would give rise to the failure of a condition set forth in Section 7.02(a) or 7.02(b) and (ii) is not reasonably capable of being cured by
the End Date or is not cured by the Company, as the case may be, within 90 days after receiving written notice from Parent;
(e) by
Parent, in the event that (i) a Company Adverse Recommendation Change shall have occurred or (ii) the Company shall have failed to include in the Joint Proxy Statement, the Company Recommendation;
(f) by the Company, in the event that (i) a Parent Adverse Recommendation Change shall have occurred or (ii) Parent shall have
failed to include in the Joint Proxy Statement, the Parent Recommendation;
(g) [Reserved.]
(h) by the Company, if permitted by Section 5.02(b) and provided that the Company has complied with its obligations under
Section 5.02(b), at any time prior to obtaining the Company Stockholder Approval, in order to enter into a binding agreement that provides for a Superior Company Proposal; or
(i) by Parent, if permitted by Section 5.03(b) and provided that Parent has complied with its obligations under Section 5.03(b), at
any time prior to obtaining the Parent Shareholder Approval, in order to enter into a binding agreement that provides for a Superior Parent Proposal.
The
party desiring to terminate this Agreement pursuant to clause (b), (c), (d), (e), (f), (h) or (i) of this Section 8.01 shall give written notice of such termination to the other parties in accordance with Section 9.02, specifying
the provision of this Agreement pursuant to which such termination is effected.
SECTION 8.02.
Effect of Termination.
In the event
of termination of this Agreement by either Parent or the Company as provided in Section 8.01, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of the Company, Parent or Merger Sub,
other than the last sentence of Section 6.02(a), the last sentence of Section 6.02(b), Section 6.06, this Section 8.02 and Article IX, which provisions shall survive such termination, and no such termination shall relieve any
party from any liability for fraud, intentional misrepresentation or intentional breach of any covenant or agreement set forth in this Agreement.
SECTION 8.03.
Amendment.
Prior to the Effective Time, this Agreement may be amended by the parties at any time before or after receipt
of the Company Stockholder Approval or the Parent Shareholder Approval;
provided
,
however
, that (i) after receipt of the Company Stockholder Approval, there shall be made no amendment that by Law requires further approval by the
stockholders of the Company without the further approval of such stockholders and (ii) after receipt of the Parent Shareholder Approval, there shall be made no amendment that by Law requires further approval by the shareholders of Parent
without the further approval of such shareholders. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties.
SECTION 8.04.
Extension; Waiver.
At any time prior to the Effective Time, the parties may (a) extend the time for the performance
of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement, (c) waive compliance with
any covenants and agreements contained in this Agreement or (d) waive the satisfaction of any of the conditions contained in this Agreement. No extension or waiver by Parent shall require the approval of the shareholders of Parent unless such
approval is required by Law and no extension or waiver by the Company shall require the approval of the stockholders of the Company unless such approval is required by Law. Any agreement on the part of a party to any such extension or waiver shall
be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights.
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ARTICLE IX
General Provisions
SECTION 9.01.
Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 9.01 shall not limit Section 8.02 or any covenant or agreement of the parties which by its terms contemplates performance after the Effective
Time.
SECTION 9.02.
Notices.
All notices, requests, demands and other communications under this Agreement shall be in writing and
shall be deemed to have been duly given when delivered in accordance with the following clauses (i) and (ii): (i) by email to the parties at the following email addresses (or at such other email address for a party as shall be specified by
like notice) and (ii) by email and hand delivery to the parties counsel at the following email addresses and street addresses (or at such other email address or street address for a partys counsel as shall be specified by like
notice):
|
(a)
|
if to the Company, by email to:
|
Texas Industries, Inc.
1503 LBJ Freeway, Suite 400
Dallas, Texas 75234
Attention:
General Counsel
Email: fanderson@txi.com
and by email and hand delivery to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York,
New York 10019
Attention: Gordon S. Moodie
Email: gsmoodie@wlrk.com
|
(b)
|
if to Parent or Merger Sub, by email to:
|
Martin Marietta Materials, Inc.
2710 Wycliff Road
Raleigh,
North Carolina 27607
Attention: General Counsel
Email: roselyn.bar@martinmarietta.com
and by email and hand delivery to:
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth
Avenue
New York, New York 10019
Attention: Scott A. Barshay
George F. Schoen
Email: sbarshay@cravath.com
gschoen@cravath.com
SECTION 9.03.
Definitions.
For purposes of this Agreement:
An
Affiliate
of any Person means another Person that directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first Person. For the avoidance of doubt, none of Southeastern Asset Management Inc. or any of its Affiliates or NNS Holding or any of its Affiliates shall be considered an Affiliate of the
Company or any of its Subsidiaries, and neither the Company nor any of its Subsidiaries shall be considered an Affiliate of any of the foregoing.
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Applicable Time
means the actual time of day at which the applicable Company
Notice or Parent Notice was received by Parent or the Company, as applicable (e.g., if the applicable notice was received at 4:00 p.m. on the day on which it was received, then the Applicable Time on any subsequent day shall be 4:00 p.m.).
Business Day
means any day other than (i) a Saturday or a Sunday or (ii) a day on which banking and savings and
loan institutions are authorized or required by Law to be closed in New York City.
Clean Air Act
means the federal
Clean Air Act, 42 U.S.C. 7401 et seq., as amended, and all related regulations and standards, including requirements relating to NESHAPs, new source performance standards and maximum achievable control technology standards.
Code
means the Internal Revenue Code of 1986, as amended.
Company Deferral Plan
means each of the Companys Management Deferred Compensation Plan and the Companys
Deferred Compensation Plan for Directors.
Company Intervening Event
means a material event, fact, circumstance,
development or occurrence that is unknown to or by the Board of Directors of the Company as of the date of this Agreement (or if known, the magnitude or material consequences of which were not known or understood by the Board of Directors of the
Company as of the date of this Agreement), which event, fact, circumstance, development, occurrence, magnitude or material consequences becomes known (or the magnitude or material consequences thereof become known or understood) to or by the Board
of Directors of the Company prior to obtaining the Company Stockholder Approval;
provided
,
however
that none of the following shall constitute a Company Intervening Event: (i) any action taken by any party hereto pursuant to and
in compliance with the affirmative covenants set forth in Section 6.03, (ii) changes in the market price or trading volume of the Companys securities or its credit ratings and (iii) the receipt, existence of or terms of a
Company Takeover Proposal or any inquiry relating thereto or the consequences thereof.
Company Material Adverse Effect
means a Material Adverse Effect with respect to the Company.
Company Material Adverse Effect Condition Exception
means
(i) any disclosures in the Filed Company SEC Documents (excluding any disclosures in the Filed Company SEC Documents in any risk factors section, any forward looking disclosure in any section related to forward looking statements and other
disclosures that are predictive or forward-looking in nature, other than historical facts included therein) to the extent describing matters that constituted or contributed to the occurrence of a Company Material Adverse Effect since the date of
this Agreement or (ii) any disclosures in Section 4.08 of the Company Disclosure Letter or in any other section of the Company Disclosure Letter to the extent (and only to the extent) that it is reasonably apparent that such disclosure
applies to Section 4.08.
Company Restricted Share
means any award of Company Common Stock that is subject to
restrictions based on performance or continuing service and granted under any Company Stock Plan.
Company Rollover RSU
means any Company RSU granted pursuant to Section 5.01(b)(ii) of the Company Disclosure Letter.
Company RSU
means
any award of restricted stock units corresponding to shares of Company Common Stock, which award is subject to restrictions based on performance or continuing service and granted under any Company Stock Plan.
Company SAR
means a stock appreciation right relating to shares of Company Common Stock granted under any Company Stock
Plan.
A-52
Company Stock Option
means a stock option to acquire Company Common Stock
granted under any Company Stock Plan.
Company Stock Plans
means the Companys 2004 Omnibus Equity Compensation
Plan, the Companys 2003 Share Appreciation Rights Plan, the Company Deferral Plans and each other Company Benefit Plan that provides for the award of rights of any kind to receive shares of Company Common Stock or benefits measured in whole or
in part by reference to shares of Company Common Stock.
Company Termination Fee
means $70 million in cash.
Controlled Group Liability
means any and all liabilities (i) under Title IV of ERISA, (ii) under
Section 302 or 4068(a) of ERISA, (iii) under Section 430(k) or 4971 of the Code, (iv) for violation of the continuation coverage requirements of Sections 601
et seq.
of ERISA and Section 4980B of the Code or the group
health requirements of Sections 701
et seq.
of ERISA and Sections 9801
et seq.
of the Code and (v) any foreign Law similar to the foregoing clauses (i) through (iv).
Environmental Claim
means any administrative, regulatory or judicial actions, suits, orders, demands, directives, claims,
liens, investigations, proceedings or written or oral notices of noncompliance or violation by or from any Person alleging liability of whatever kind or nature arising out of, based on or resulting from (x) the presence or Release of, or
exposure to, any Hazardous Materials at any location; or (y) the failure to comply with any Environmental Law or any Permit issued pursuant to Environmental Law.
Environmental Laws
means all applicable Federal, national, state, provincial or local Laws, Judgments, or Contracts issued,
promulgated or entered into by or with any Governmental Entity, relating to pollution, natural resources or protection of endangered or threatened species, the climate, human health or the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including the Clean Air Act and similar state and local requirements and including all Laws relating to providing notice to workers, consumers or the public of regarding the use or presence of
hazardous, toxic or carcinogenic materials (such as Californias Safe Drinking Water and Toxic Enforcement Act of 1986 commonly known as Proposition 65), relating to the regulation of greenhouse gases (such as Californias Global Warming
Solutions Act of 2006 (
AB 32
)) or relating to the reclamation and closure of mining sites.
Hazardous
Materials
means (x) any petroleum or petroleum products, explosive or radioactive materials or wastes, asbestos in any form, chromium and other metals, silica and silica dust, hydrochloric acid and polychlorinated biphenyls; and
(y) any other chemical, material, substance or waste that in relevant form or concentration is prohibited, limited or regulated under any Environmental Law.
Indebtedness
means, with respect to any Person, without duplication, (i) all obligations of such Person for borrowed
money, or with respect to deposits or advances of any kind to such Person, (ii) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (iii) all capitalized lease obligations of such Person or
obligations of such Person to pay the deferred and unpaid purchase price of property and equipment, (iv) all obligations of such Person pursuant to securitization or factoring programs or arrangements, (v) all guarantees and arrangements
having the economic effect of a guarantee of such Person of any Indebtedness of any other Person (other than any guarantee by Parent or any wholly owned Parent Subsidiary with respect to Indebtedness of Parent or any wholly owned Parent Subsidiary,
or any guarantee by the Company or any wholly owned Company Subsidiary with respect to Indebtedness of the Company or any wholly owned Company Subsidiary), (vi) all obligations or undertakings of such Person to maintain or cause to be
maintained the financial position or covenants of others or to purchase the obligations or property of others, (vii) net cash payment obligations of such Person under swaps, options, derivatives and other hedging agreements or arrangements that
will be payable upon termination thereof (assuming they were terminated on the date of determination) or (viii) letters of credit, bank guarantees, and other similar contractual obligations entered into by or on behalf of such Person.
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The
Knowledge
of any Person that is not an individual means, with respect to
any matter in question, in the case of Parent, the actual knowledge of any of the Persons set forth on Section 9.03 of the Parent Disclosure Letter and, in the case of the Company, the actual knowledge of any of the Persons set forth on
Section 9.03 of the Company Disclosure Letter.
Letter Agreement
means the letter agreement, dated as of
December 4, 2013, between Parent and the Company.
Material Adverse Effect
with respect to any Person means any
fact, circumstance, effect, change, event or development that materially adversely affects the business, properties, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole, excluding any fact,
circumstance, effect, change, event or development to the extent that it results from or arises out of (i) changes or conditions generally affecting the industries in which such Person and any of its Subsidiaries operate, except to the extent
such fact, circumstance, effect, change, event or development has a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, relative to others in such industries in respect of the business conducted in such
industries, (ii) general economic or political conditions or securities, credit, financial or other capital markets conditions, in each case in the United States or any foreign jurisdiction, except to the extent such fact, circumstance, effect,
change, event or development has a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, relative to others in the industries in which such Person and any of its Subsidiaries operate in respect of the business
conducted in such industries, (iii) any failure, in and of itself, by such Person to meet any internal or published projections, forecasts, estimates or predictions in respect of revenues, earnings or other financial or operating metrics for
any period (it being understood that the facts or occurrences giving rise to or contributing to such failure may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect, to the
extent permitted by this definition), (iv) the execution and delivery of this Agreement or the public announcement or pendency of the Transactions, including the impact thereof on the relationships, contractual or otherwise, of such Person or
any of its Subsidiaries with employees, labor unions, customers, suppliers or partners, (v) any change, in and of itself, in the market price or trading volume of such Persons securities or in its credit ratings (it being understood that
the facts or occurrences giving rise to or contributing to such change may be deemed to constitute, or be taken into account in determining whether there has been or will be, a Material Adverse Effect, to the extent permitted by this definition),
(vi) any change in applicable Law, regulation or GAAP (or authoritative interpretation thereof), except to the extent such fact, circumstance, effect, change, event or development has a materially disproportionate effect on such Person and its
Subsidiaries, taken as a whole, relative to others in the industries in which such Person and any of its Subsidiaries operate in respect of the business conducted in such industries, (vii) geopolitical conditions, the outbreak or escalation of
hostilities, any acts of war, sabotage or terrorism, or any escalation or worsening of any such acts of war, sabotage or terrorism threatened or underway as of the date of this Agreement, except to the extent such fact, circumstance, effect, change,
event or development has a materially disproportionate effect on such Person and its Subsidiaries, taken as a whole, relative to others in the industries in which such Person and any of its Subsidiaries operate in respect of the business conducted
in such industries (viii) any hurricane, tornado, flood, earthquake or other natural disaster, except to the extent such fact, circumstance, effect, change, event or development has a materially disproportionate effect on such Person and its
Subsidiaries, taken as a whole, relative to others in the industries in which such Person and any of its Subsidiaries operate in respect of the business conducted in such industries, (ix) any litigation arising from allegations of a breach of
fiduciary duty or other violation of applicable Law relating to this Agreement or the transactions contemplated hereby, or (x) any taking of any action at the written request of the other party hereto.
MSHA
means the Federal Mine Safety & Health Act of 1977, as amended.
NESHAPs
means National Emission Standards for Hazardous Air Pollutants.
OSHA
means the Occupational Safety and Health Act of 1970, as amended.
A-54
Parent Benefit Plans
means, collectively (i) all employee pension
benefit plans (as defined in Section 3(2) of ERISA), other than any plan which is a Multiemployer Plan, employee welfare benefit plans (as defined in Section 3(1) of ERISA) and all other bonus, pension, profit sharing,
retirement, deferred compensation, incentive compensation, equity or equity-based compensation, severance, retention, change in control, disability, vacation, death benefit, hospitalization, medical or other plans, arrangements or understandings
providing, or designed to provide, material benefits to any current or former directors, officers, employees or consultants of Parent or any Parent Subsidiary and (ii) all employment, consulting, indemnification, severance, retention, change of
control or termination agreements or arrangements between Parent or any Parent Subsidiary and any current or former directors, officers, employees or consultants of Parent or any Parent Subsidiary.
Parent Deferral Plan
means each of Parents Incentive Stock Plan and Parents Common Stock Purchase Plan for
Directors.
Parent Intervening Event
means a material event, fact, circumstance, development or occurrence that is
unknown to or by the Board of Directors of Parent as of the date of this Agreement (or if known, the magnitude or material consequences of which were not known or understood by the Board of Directors of Parent as of the date of this Agreement),
which event, fact, circumstance, development, occurrence, magnitude or material consequences becomes known (or the magnitude or material consequences thereof become known or understood) to or by the Board of Directors of Parent prior to obtaining
the Parent Shareholder Approval;
provided
,
however
that none of the following shall constitute a Parent Intervening Event: (i) any action taken by any party hereto pursuant to and in compliance with the affirmative covenants set
forth in Section 6.03, (ii) changes in the market price or trading volume of Parents securities or its credit ratings and (iii) the receipt, existence of or terms of a Parent Takeover Proposal or any inquiry relating thereto or
the consequences thereof.
Parent Material Adverse Effect
means a Material Adverse Effect with respect to Parent.
Parent Material Adverse Effect Condition Exception
means (i) any disclosures in the Filed Parent SEC Documents
(excluding any disclosures in the Filed Parent SEC Documents in any risk factors section, any forward looking disclosure in any section related to forward looking statements and other disclosures that are predictive or forward-looking in nature,
other than historical facts included therein) to the extent describing matters that constituted or contributed to the occurrence of a Parent Material Adverse Effect since the date of this Agreement or (ii) any disclosures in Section 3.08
of the Parent Disclosure Letter or in any other section of the Parent Disclosure Letter to the extent (and only to the extent) that it is reasonably apparent that such disclosure applies to Section 3.08.
Parent RSU
means any award of the right to receive Parent Common Stock that is subject to restrictions based on performance
or continuing service and granted under any Parent Stock Plan.
Parent Stock Option
means any option to purchase Parent
Common Stock granted under any Parent Stock Plan.
Parent Stock Plans
means Parents Amended and Restated
Stock-Based Award Plan, Parents Amended Omnibus Securities Award Plan, the Parent Deferral Plans and each other Parent Benefit Plan that provides for the award of rights of any kind to receive shares of Parent Common Stock or benefits measured
in whole or in part by reference to shares of Parent Common Stock.
Parent Termination Fee
means $140 million in cash.
Permitted Liens
means any Lien (A) for Taxes or governmental assessments, charges or claims of payment
(i) not yet due or (ii) being contested in good faith in appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (B) which is a carriers, warehousemens, mechanics,
A-55
materialmens, repairmens, or other similar lien arising in the ordinary course of business, or (C) which is disclosed on the most recent consolidated balance sheet of the Company
or notes thereto included in the Company SEC Documents filed prior to the date hereof or securing liabilities reflected on such balance sheet.
Person
means any natural person, firm, corporation, partnership, company, limited liability company, trust, joint venture,
association, Governmental Entity or other entity.
Release
means any actual or threatened release, spill, emission,
leaking, dumping, injection, pouring, deposit, disposal, discharge, dispersal, leaching or migration into or through the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or within or from any
building, structure, facility or fixture.
Reverse Termination Fee
means $25 million in cash.
Rights Agreement
means the Rights Agreement, dated September 27, 2006, between Parent and American Stock
Transfer & Trust Company, as Rights Agent.
A
Subsidiary
of any Person means another Person, an amount of the
voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing Person or body (or, if there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or indirectly by such first Person.
Substantial Detriment
means any sale,
divestiture or disposition of, or prohibition or limitation on the ownership or operation of, or requirements or undertakings with respect to the conduct by the Company or any of its Subsidiaries, or Parent or any of its Subsidiaries, of, any
portion of any business, properties or assets (or any combination thereof), other than (i) one of the quarries located in Mill Creek, Oklahoma currently held by the Company or Parent, (ii) up to two of the related rail yards located in
Dallas, Texas and (iii) other assets specifically associated with the assets described in clause (i) or (ii).
Tax
Return
means all Tax returns, declarations, statements, reports, schedules, forms and information returns, any amended Tax return and any other document filed or required to be filed relating to Taxes.
Taxes
means all taxes, customs, tariffs, imposts, levies, duties, fees or other like assessments or charges of any kind
imposed by a Governmental Entity, together with all interest, penalties and additions imposed with respect to such amounts.
SECTION 9.04.
Interpretation.
When a reference is made in this Agreement to an Exhibit, an Article or a Section, such reference shall be to an Exhibit, an Article or a Section of this Agreement unless otherwise indicated. The table of contents, index of
defined terms and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words include, includes or
including are used in this Agreement, they shall be deemed to be followed by the words without limitation. The words hereof, hereto, hereby, herein and hereunder and
words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. The term or is not exclusive. The word extent in the phrase to the
extent shall mean the degree to which a subject or other thing extends, and such phrase shall not mean simply if. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.
Any agreement, instrument or Law defined or referred to herein means such agreement, instrument or Law as from time to time amended, modified or supplemented, unless otherwise specifically indicated. References to a Person are also to its permitted
successors and assigns. Unless otherwise specifically indicated, all references to dollars and $ will be deemed references to the lawful money of the United States of America. Each of the parties has participated in the
drafting and negotiation of this Agreement. If an ambiguity or question of intent or
A-56
interpretation arises, this Agreement must be construed as if it is drafted by all the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of
authorship of any of the provisions of this Agreement.
SECTION 9.05.
Severability.
If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule or Law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as either the economic or legal
substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party or such party waives its rights under this Section 9.05 with respect thereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 9.06.
Counterparts.
This Agreement may be executed
in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties.
SECTION 9.07.
Entire Agreement; No Third-Party Beneficiaries.
This Agreement, taken together with the Parent Disclosure Letter, the
Company Disclosure Letter, the Stockholder Agreements, the Lease Agreements and the Confidentiality Agreement, (a) constitutes the entire agreement, and supersedes all prior agreements and understandings, both written and oral, between the
parties with respect to the Transactions and (b) except for Section 6.05, is not intended to confer upon any Person other than the parties any rights or remedies.
SECTION 9.08.
Governing Law; Consent to Jurisdiction; Venue.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, without giving effect to any choice or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than
the State of New York.
(b) Each of the parties hereto hereby (i) expressly and irrevocably submits to the exclusive personal
jurisdiction of the United States District Court of the Southern District of New York (or, to the extent such court declines to accept jurisdiction over a particular matter, the Supreme Court of the State of New York in New York County) in the event
any dispute arises out of the Transaction Agreements or the Transactions, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will
not bring any action relating to the Transaction Agreements or the Transactions in any court other than the United States District Court of the Southern District of New York (or, to the extent such court declines to accept jurisdiction over a
particular matter, the Supreme Court of the State of New York in New York County), (iv) agrees that each of the other parties shall have the right to bring any action or proceeding for enforcement of a judgment entered by United States District
Court of the Southern District of New York (or, to the extent such court declines to accept jurisdiction over a particular matter, the Supreme Court of the State of New York in New York County) and (v) expressly and irrevocably waives (and
agrees not to plead or claim) any objection to the laying of venue of any action arising out of the Transaction Agreements or the Transactions in United States District Court of the Southern District of New York (or, to the extent such court
declines to accept jurisdiction over a particular matter, the Supreme Court of the State of New York in New York County) or that any such action brought in any such court has been brought in an inconvenient forum. Each of Parent, Merger Sub and the
Company agrees that a final judgment in any action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law.
SECTION 9.09.
Assignment.
Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of Law or otherwise by any of the parties without the prior written consent of the other parties;
provided
, that Parent and Merger Sub may assign their rights and obligations pursuant to this
Agreement to any direct or indirect wholly owned Subsidiary of Parent so long as Parent continues to remain primarily liable for all of such rights and obligations as if no such
A-57
assignment had occurred. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 9.10.
Specific Performance.
The parties
acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available,
would not be an adequate remedy therefor. It is accordingly agreed that, prior to the termination of this Agreement pursuant to Article VIII, the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the performance of terms and provisions of this Agreement, without proof of actual damages (and each party hereby waives any requirement for the securing or posting of any bond in connection with such remedy), this being in
addition to any other remedy to which they are entitled at law or in equity. The parties further agree not to assert that a remedy of specific enforcement is unenforceable, invalid, contrary to Law or inequitable for any reason, nor to assert that a
remedy of monetary damages would provide an adequate remedy for any such breach.
SECTION 9.11.
Waiver of Jury Trial.
EACH PARTY
HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THE TRANSACTION AGREEMENTS OR ANY OF THE TRANSACTIONS. EACH PARTY
HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THIS SECTION 9.11.
[Remainder of page left intentionally blank]
A-58
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have duly executed this Agreement, all as
of the date first written above.
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TEXAS INDUSTRIES, INC.
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|
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By:
|
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/s/ Mel G. Brekhus
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Name: Mel G. Brekhus
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Title: President and CEO
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MARTIN MARIETTA MATERIALS, INC.
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By:
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/s/ C. Howard Nye
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Name: C. Howard Nye
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Title: President and CEO
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PROJECT HOLDINGS, INC.
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By:
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/s/ C. Howard Nye
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Name: C. Howard Nye
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Title: President
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Index of Defined Terms
|
|
|
Term
|
|
Section
|
AB 32
|
|
Section 9.03
|
Actions
|
|
Section 6.05(b)
|
Affiliate
|
|
Section 9.03
|
Agreed Individual
|
|
Section 6.12
|
Agreement
|
|
Preamble
|
Applicable Time
|
|
Section 9.03
|
Articles of Merger
|
|
Section 1.03
|
Business Day
|
|
Section 9.03
|
Certificate
|
|
Section 2.01(c)
|
Certificate of Merger
|
|
Section 1.03
|
Change in Control Individual
|
|
Section 5.01(b)(iv)
|
Clean Air Act
|
|
Section 9.03
|
Closing
|
|
Section 1.02
|
Closing Date
|
|
Section 1.02
|
Code
|
|
Section 9.03
|
Company
|
|
Preamble
|
Company Adverse Recommendation Change
|
|
Section 5.02(b)
|
Company Benefit Plans
|
|
Section 4.11(a)
|
Company Board
|
|
Section 4.04(a)
|
Company By-laws
|
|
Section 4.01
|
Company Capital Stock
|
|
Section 4.03(a)
|
Company CBAs
|
|
Section 4.18
|
Company Charter
|
|
Section 4.01
|
Company Common Stock
|
|
Section 2.01(b)
|
Company Deferral Plan
|
|
Section 9.03
|
Company Disclosure Letter
|
|
ARTICLE IV
|
Company Employee
|
|
Section 6.14(a)
|
Company Financial Advisor
|
|
Section 4.19
|
Company Indemnified Party
|
|
Section 6.05(a)
|
Company Intervening Event
|
|
Section 5.02(b)
|
Company Leases
|
|
Section 4.16(b)
|
Company Material Adverse Effect
|
|
Section 9.03
|
Company Material Adverse Effect Condition Exception
|
|
Section 9.03
|
Company Material Contract
|
|
Section 4.15(b)
|
Company Notice
|
|
Section 5.02(b)
|
Company Pension Plan
|
|
Section 4.11(c)
|
Company Permits
|
|
Section 4.01
|
Company Preferred Stock
|
|
Section 4.03(a)
|
Company Properties
|
|
Section 4.16(a)
|
Company Recommendation
|
|
Section 4.04(a)
|
Company Restricted Share
|
|
Section 9.03
|
Company Rollover RSU
|
|
Section 9.03
|
Company RSU
|
|
Section 9.03
|
Company SAR
|
|
Section 9.03
|
Company SEC Documents
|
|
Section 4.06(a)
|
Company Stockholder Approval
|
|
Section 4.04(a)
|
Company Stockholders Meeting
|
|
Section 4.04(a)
|
Company Stock Option
|
|
Section 9.03
|
Company Stock Plans
|
|
Section 9.03
|
Company Subsidiaries
|
|
Section 4.01
|
Company Takeover Proposal
|
|
Section 5.02(e)
|
Company Termination Fee
|
|
Section 9.03
|
Company Voting Debt
|
|
Section 4.03(b)
|
Companys Counsel
|
|
Section 6.07(b)(i)
|
Confidentiality Agreement
|
|
Section 6.02(a)
|
Consent
|
|
Section 3.05(b)
|
|
|
|
Term
|
|
Section
|
Contract
|
|
Section 3.05(a)
|
Controlled Group Liability
|
|
Section 9.03
|
DGCL
|
|
Section 1.01
|
Effective Time
|
|
Section 1.03
|
End Date
|
|
Section 8.01(b)(i)
|
Environmental Claim
|
|
Section 9.03
|
Environmental Laws
|
|
Section 9.03
|
ERISA
|
|
Section 4.11(a)
|
Exchange Act
|
|
Section 3.05(b)
|
Exchange Agent
|
|
Section 2.02(a)
|
Exchange Fund
|
|
Section 2.02(a)
|
Exchange Ratio
|
|
Section 2.01(c)
|
FCPA
|
|
Section 3.12
|
Filed Company Contract
|
|
Section 4.15(a)
|
Filed Company SEC Documents
|
|
ARTICLE IV
|
Filed Parent SEC Documents
|
|
ARTICLE III
|
Form S-4
|
|
Section 3.05(b)
|
GAAP
|
|
Section 3.06(b)
|
Governmental Entity
|
|
Section 3.05(b)
|
Hazardous Materials
|
|
Section 9.03
|
HSR Act
|
|
Section 3.05(b)
|
Indebtedness
|
|
Section 9.03
|
Intellectual Property Rights
|
|
Section 4.17
|
IRS
|
|
Section 4.11(a)
|
Joint Proxy Statement
|
|
Section 6.01(a)
|
Judgment
|
|
Section 3.05(a)
|
Knowledge
|
|
Section 9.03
|
Law
|
|
Section 3.05(a)
|
Lease Agreements
|
|
Recitals
|
Legal Restraints
|
|
Section 7.01(d)
|
Letter Agreement
|
|
Section 9.03
|
Letter of Transmittal
|
|
Section 2.02(b)
|
Liens
|
|
Section 3.02(a)
|
Material Adverse Effect
|
|
Section 9.03
|
Maximum Amount
|
|
Section 6.05(c)
|
Merger
|
|
Section 1.01
|
Merger Consideration
|
|
Section 2.01(c)
|
Merger Sub
|
|
Preamble
|
Merger Sub Common Stock
|
|
Section 2.01(a)
|
MSHA
|
|
Section 9.03
|
Multiemployer Plan
|
|
Section 4.11(a)
|
NCBCA
|
|
Section 1.01
|
NESHAPs
|
|
Section 9.03
|
NYSE
|
|
Section 2.02(f)
|
OSHA
|
|
Section 9.03
|
Parent
|
|
Preamble
|
Parent Adverse Recommendation Change
|
|
Section 5.03(b)
|
Parent Articles
|
|
Section 3.01
|
Parent Benefit Plans
|
|
Section 9.03
|
Parent Board
|
|
Section 3.04(a)
|
Parent By-laws
|
|
Section 3.01
|
Parent Capital Stock
|
|
Section 3.03(a)
|
Parent Common Stock
|
|
Section 3.03(a)
|
Parent Deferral Plan
|
|
Section 9.03
|
Parent Disclosure Letter
|
|
ARTICLE III
|
Parent Financial Advisors
|
|
Section 3.14
|
Parent Intervening Event
|
|
Section 9.03
|
|
|
|
Term
|
|
Section
|
Parent ISPUs
|
|
Section 3.03(a)
|
Parent Material Adverse Effect
|
|
Section 9.03
|
Parent Material Adverse Effect Condition Exception
|
|
Section 9.03
|
Parent Notice
|
|
Section 5.03(b)
|
Parent Permits
|
|
Section 3.01
|
Parent Preferred Stock
|
|
Section 3.03(a)
|
Parent Recommendation
|
|
Section 3.04(a)
|
Parent RSU
|
|
Section 9.03
|
Parent SAR
|
|
Section 6.02(b)
|
Parent SEC Documents
|
|
Section 3.06(a)
|
Parent Shareholder Approval
|
|
Section 3.04(a)
|
Parent Shareholders Meeting
|
|
Section 3.04(a)
|
Parent Stock Option
|
|
Section 9.03
|
Parent Stock Plans
|
|
Section 9.03
|
Parent Subsidiaries
|
|
Section 3.01
|
Parent Takeover Proposal
|
|
Section 5.03(e)
|
Parent Termination Fee
|
|
Section 9.03
|
Parent Voting Debt
|
|
Section 3.03(b)
|
Parents Counsel
|
|
Section 6.07(b)(i)
|
Permits
|
|
Section 3.01
|
Permitted Liens
|
|
Section 9.03
|
Person
|
|
Section 9.03
|
Principal Stockholders
|
|
Recitals
|
Release
|
|
Section 9.03
|
Representatives
|
|
Section 5.02(a)
|
Reverse Termination Fee
|
|
Section 9.03
|
Rights Agreement
|
|
Section 9.03
|
SEC
|
|
Section 3.05(b)
|
Securities Act
|
|
Section 3.05(b)
|
Share Issuance
|
|
Section 1.01
|
SOX
|
|
Section 3.06(b)
|
Stockholder Agreements
|
|
Recitals
|
Subsidiary
|
|
Section 9.03
|
Substantial Detriment
|
|
Section 9.03
|
Superior Company Proposal
|
|
Section 5.02(e)
|
Superior Parent Proposal
|
|
Section 5.03(e)
|
Surviving Company
|
|
Section 1.01
|
Tax Representation Letters
|
|
Section 6.07(b)(i)
|
Tax Return
|
|
Section 9.03
|
Taxes
|
|
Section 9.03
|
Transaction Agreements
|
|
Recitals
|
Transactions
|
|
Section 1.01
|
Index of Exhibits and Schedules
|
|
|
Exhibit A
|
|
Surviving Company Certificate of Incorporation
|
|
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Exhibit B
|
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Surviving Company By-laws
|
Company Disclosure Letter*
Parent Disclosure Letter*
*
|
Pursuant to Item 601(b)(2) of Regulation S-K, the disclosure letters of both Martin Marietta and TXI have been omitted. The registrant hereby agrees to furnish supplementally a copy of any omitted attachment to the
SEC on a confidential basis upon request.
|
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EXHIBIT A
STATE
of
DELAWARE
CERTIFICATE
OF INCORPORATION
OF
TEXAS INDUSTRIES, INC.
FIRST
: The name of the corporation (hereinafter called the
Corporation
) is Texas Industries, Inc.
SECOND
: The address, including street, number, city, and county, of the registered office of the Corporation in the State of Delaware
is Corporation Trust Center, 1209 Orange Street, County of New Castle, Wilmington, Delaware 19801 and the name of the registered agent of the Corporation in the State of Delaware at such address is The Corporation Trust Company.
THIRD
: 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 amended from time to time, the
DGCL
).
FOURTH
: The
aggregate number of shares which the Corporation shall have authority to issue is 100,000 shares of common stock, par value $0.01 per share. Each share of common stock shall be entitled to one vote and to all other rights of shareholders.
FIFTH
: All corporate powers shall be exercised by or under the authority of, and the business and affairs of the Corporation shall be
managed by or under the direction of, the board of directors of the Corporation (the
Board of Directors
). The size of the Board of Directors shall be determined as set forth in the bylaws of the Corporation, as in effect from time
to time (the
Bylaws
). The election of directors need not be by written ballot unless the Bylaws shall so require.
SIXTH
: In furtherance and not in limitation of the powers conferred upon the Board of Directors by law, the Board of Directors is
expressly authorized to adopt, amend or repeal from time to time the Bylaws of the Corporation, subject to the right of the stockholders entitled to vote with respect thereto to alter and repeal bylaws made by the Board of Directors.
SEVENTH
: It is hereby expressly provided that the directors and officers and former directors and officers of the corporation shall be
fully protected and indemnified against any personal liability to others that may arise by reason of any of their actions taken in good faith on behalf or for the benefit of the Corporation to the fullest extent permitted by the laws of the State of
Delaware. To the fullest extent permitted by the DGCL, directors and former directors of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director.
EIGHTH
: The books of the Corporation may (subject to any statutory requirements) be kept outside the State of Delaware as may be
designated by the Board of Directors or in the Bylaws.
NINTH
: The Corporation shall not be governed by Section 203 of the
DGCL.
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EXHIBIT B
BYLAWS
OF
TEXAS INDUSTRIES, INC.
ARTICLE I
Meetings of
Stockholders; Stockholders
Consent in Lieu of Meeting
SECTION 1.01.
Annual Meeting.
The annual meeting of the stockholders for the election of directors, and for the transaction of such
other business as may properly come before the meeting, shall be held at such place, date and hour as shall be fixed by the Board of Directors and designated in the notice or waiver of notice thereof; except that no annual meeting need be held if
all actions, including the election of directors, required by the General Corporation Law of the State of Delaware (as amended from time to time, the
DGCL
) to be taken at a stockholders annual meeting are taken by written
consent in lieu of a meeting pursuant to Section 1.03 of this Article.
SECTION 1.02.
Special Meetings.
A special meeting of
the stockholders for any purpose or purposes may be called by the Board of Directors, the Chairman of the Board of Directors, the President or the Secretary of the Corporation or a stockholder or stockholders holding of record at least a majority of
the shares of common stock, par value $0.01 per share, of the Corporation (
Common Stock
) issued and outstanding, such meeting to be held at such place, date and hour as shall be designated in the notice or waiver of notice
thereof.
SECTION 1.03.
Stockholders Consent in Lieu of Meeting.
Any action required by the DGCL to be taken at any annual or
special meeting of the stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
SECTION 1.04.
Quorum and Adjournment.
Except as otherwise provided by law, by the Certificate of Incorporation
or by these Bylaws, the presence, in person or by proxy, of the holders of a majority of the aggregate voting power of the stock issued and outstanding, entitled to vote thereat, shall be requisite and shall constitute a quorum for the transaction
of business at all meetings of stockholders. If, however, such a quorum shall not be present or represented at any meeting of stockholders, the stockholders present, although less than a quorum, shall have the power to adjourn the meeting.
SECTION 1.05.
Majority Vote Required.
When a quorum is present at any meeting of stockholders, the affirmative vote of the majority of
the aggregate voting power of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall constitute the act of the stockholders, unless by express provision of law, the Certificate of
Incorporation or these Bylaws a different vote is required, in which case such express provision shall govern and control.
SECTION 1.06.
Manner of Voting.
At each meeting of stockholders, each stockholder having the right to vote shall be entitled to vote in person or by proxy. Proxies need not be filed with the Secretary of the Corporation until the meeting is called to
order, but shall be filed before being voted. Each stockholder shall be entitled to vote each share of stock having voting power registered in his or her name on the books of the Corporation on the record date fixed, as provided in Section 6.07
of these Bylaws, for the determination of stockholders entitled to vote at such meeting. No election of directors need be by written ballot.
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ARTICLE II
Board of Directors
SECTION 2.01.
General Powers.
All corporate powers shall be exercised by or under the authority of, and the business and affairs of the
Corporation shall be vested in, the Board of Directors, which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation directed or required to be exercised or
done by the stockholders.
SECTION 2.02.
Number and Term of Office.
The initial Board of Directors of the Corporation shall consist
of three members. The number of directors which shall constitute the whole Board of Directors shall be fixed from time to time the Board of Directors then in office or by the stockholders. The term whole Board of Directors is used herein
to refer to the total number of directors which the Corporation would have if there were no vacancies. Directors need not be stockholders. Each director shall hold office until his or her successor is elected and qualified, or until his or her
earlier death or resignation or removal in the manner hereinafter provided.
SECTION 2.03.
Resignation, Removal and Vacancies.
Any
director may resign at any time by giving written notice of his or her resignation to the Board of Directors, the Chairman of the Board of Directors, the President or the Secretary of the Corporation. Such resignation shall take effect at the time
specified therein or, if the time be not specified, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective.
Any director or the entire Board of Directors may be removed, with or without cause, at any time by the holders of a majority of the shares
then entitled to vote at an election of directors or by written consent of the stockholders pursuant to Section 1.03 of these Bylaws.
Vacancies in the Board of Directors and newly created directorships resulting from any increase in the authorized number of directors may be
filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
SECTION 2.04.
Meetings.
(a)
Annual Meeting.
As soon as practicable after each annual election of directors, the Board of Directors shall meet for the purpose of organization and the transaction of other business, unless it shall have transacted
all such business by written consent pursuant to Section 2.05 of this Article.
(b)
Other Meetings.
Other meetings of the
Board of Directors shall be held at such times and places as the Board of Directors, the Chairman of the Board of Directors or the President shall from time to time determine.
(c)
Notice of Meetings.
The Secretary of the Corporation shall give notice to each director of each meeting, including the time, place
and purpose of such meeting. Notice of each such meeting shall be mailed to each director, addressed to him or her at his or her residence or usual place of business, at least two days before the day on which such meeting is to be held, or shall be
sent to him or her at such place by telephone, facsimile or other form of wireless communication, or be delivered personally or by telephone not later than the day before the day on which such meeting is to be held, but notice need not be given to
any director who shall attend such meeting. A written waiver of notice, signed by the person entitled thereto, whether before or after the time of the meeting stated therein, shall be deemed equivalent to notice.
(d)
Place of Meetings.
The Board of Directors may hold its meetings at such place or places within or without the State of Delaware as
the Board of Directors may from time to time determine, or as shall be designated in the respective notices or waivers of notice thereof.
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(e)
Quorum and Manner of Acting.
A majority of the total number of directors then in
office (but not less than two), or, if there shall be only one director then in office, such director, shall be present in person at any meeting of the Board of Directors in order to constitute a quorum for the transaction of business at such
meeting, and the vote of a majority of those directors present at any such meeting at which a quorum is present shall be necessary for the passage of any resolution or act of the Board of Directors, except as otherwise expressly required by law or
these Bylaws. In the absence of a quorum for any such meeting, a majority of the directors present thereat may adjourn such meeting from time to time until a quorum shall be present.
(f)
Organization.
At each meeting of the Board of Directors, one of the following shall act as chairman of the meeting and preside, in
the following order of precedence:
(i) the Chairman of the Board of Directors;
(ii) the President (if the President shall be a member of the Board of Directors at such time); and
(iii) any director chosen by a majority of the directors present.
The Secretary of the Corporation or, in the case of his or her absence, any person (who shall be an Assistant Secretary of the Corporation, if an Assistant
Secretary of the Corporation is present) whom the Chairman of the Board of Directors shall appoint shall act as secretary of such meeting and keep the minutes thereof.
SECTION 2.05.
Directors Consent in Lieu of Meeting.
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 and the writing or writings are filed with the minutes or the proceedings of
the Board of Directors or committee.
SECTION 2.06.
Action by Means of Conference Telephone or Similar Communications Equipment.
Any one or more members of the Board of Directors, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or any such committee 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 by such means shall constitute presence in person at such meeting.
ARTICLE III
Committees of the
Board
SECTION 3.01.
Appointment of Executive Committee.
The Board of Directors may from time to time by resolution passed by a
majority of the whole Board of Directors designate from its members an Executive Committee to serve at the pleasure of the Board of Directors. The Chairman of the Executive Committee shall be designated by the Board of Directors. The Board of
Directors may designate one or more directors as alternate members of the Executive Committee, who may replace any absent or disqualified member or members at any meeting of the Executive Committee. The Board of Directors shall have power at any
time to change the membership of the Executive Committee, to fill all vacancies in it and to discharge it, either with or without cause.
SECTION 3.02.
Procedures of Executive Committee.
The Executive Committee, by a vote of a majority of its members, shall fix by whom its
meetings may be called and the manner of calling and holding its meetings, shall determine the number of its members requisite to constitute a quorum for the transaction of business and shall prescribe its own rules of procedure, no change in which
shall be made except by a majority vote of its members or by the Board of Directors.
SECTION 3.03.
Powers of Executive Committee.
During the intervals between the meetings of the Board of Directors, unless otherwise determined from time to time by resolution passed by the whole Board of
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Directors, the Executive Committee shall possess and may exercise all the powers and authority of the Board of Directors in the management and direction of the business and affairs of the
Corporation to the extent permitted by the DGCL, and may authorize the seal of the Corporation to be affixed to all papers which may require it, except that the Executive Committee shall not have power or authority in reference to:
(a) amending the Certificate of Incorporation;
(b) adopting an agreement of merger or consolidation;
(c) recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporations property
and assets;
(d) recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution;
(e) submitting to the stockholders of the Corporation any action which pursuant to the DGCL requires stockholder approval;
(f) filling vacancies in the Board of Directors or in any committee or fixing compensation of members of the Board of Directors
for serving on the Board of Directors or on any committee;
(g) amending or repealing these Bylaws;
(h) declaring a dividend or authorizing the issuance of stock; or
(i) amending or repealing any resolution of the Board of Directors which by its terms is not so amendable or repealable.
SECTION 3.04.
Reports of Executive Committee.
The Executive Committee shall keep regular minutes of its proceedings, and all action by
the Executive Committee shall be reported promptly to the Board of Directors. Such action shall be subject to review by the Board of Directors, provided that no rights of third parties shall be affected by such review.
SECTION 3.05.
Other Committees.
The Board of Directors may from time to time by resolution passed by a majority of the whole Board of
Directors designate from among its members one or more other committees, each of which shall have such authority of the Board of Directors as may be specified in the resolution of the Board of Directors designating such committee;
provided
,
however
, that any such committee so designated shall not have any powers not allowed to the Executive Committee under Section 3.03 of this Article. The Board of Directors shall have power at any time to change the members of any such
committee, designate alternate members of any such committee and fill vacancies therein; and any such committee shall serve at the pleasure of the Board of Directors.
ARTICLE IV
Officers
SECTION 4.01.
Executive Officers.
The executive officers of the Corporation shall be a President, a Secretary and a Treasurer and may
include such other officers, if any, as the Board of Directors from time to time in its discretion elect or appoint, including without limitation, a Chairman of the Board of Directors, one or more Vice Presidents and one or more Assistant
Secretaries or Assistant Treasurers. Any two or more offices may be held by the same person.
SECTION 4.02.
Authority and Duties.
Subject to applicable law, the Certificate of Incorporation and the other provisions of these Bylaws, all officers, as between themselves and the Corporation, shall have such authority and perform such duties in the management of the Corporation as
are commonly incident to their offices or as may be provided in these Bylaws or by the Board of Directors.
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SECTION 4.03.
Term of Office, Resignation and Removal.
All officers shall be elected or
appointed by the Board of Directors and shall hold office for such term as may be prescribed by the Board of Directors. The Chairman of the Board of Directors, if any, shall be elected or appointed from among the members of the Board of Directors.
Each officer shall hold office until his or her successor has been elected or appointed and qualified or his or her earlier death or resignation or removal in the manner hereinafter provided.
Any officer may resign at any time by giving written notice to the President or the Secretary of the Corporation, and such resignation shall
take effect at the time specified therein or, if the time when it shall become effective is not specified therein, at the time it is accepted by action of the Board of Directors. Except as aforesaid, the acceptance of such resignation shall not be
necessary to make it effective.
All officers and agents elected or appointed by the Board of Directors shall be subject to removal at any
time by the Board of Directors with or without cause.
SECTION 4.04.
Vacancies.
If an office becomes vacant for any reason, the
Board of Directors shall fill such vacancy. Any officer so appointed or elected by the Board of Directors shall serve only until such time as the unexpired term of his or her predecessor shall have expired unless reelected or reappointed by the
Board of Directors.
SECTION 4.05.
Chairman of the Board of Directors.
If there shall be a Chairman of the Board of Directors, he
or she shall preside at meetings of the Board of Directors and of the stockholders at which he or she is present. He or she shall perform such other duties as the Board of Directors may from time to time determine.
SECTION 4.06.
The President.
The President shall be the Chief Executive Officer of the Corporation and, unless the Chairman of the
Board of Directors be present or the Board of Directors has provided otherwise by resolution, he or she shall preside at all meetings of the Board of Directors and the stockholders at which he or she is present except, in the case of a meeting of
the Board of Directors, if the President is not a member of the Board of Directors at such time. He or she shall have general and active management and control of the business and affairs of the Corporation subject to the control of the Board of
Directors and the Executive Committee, if any, and shall see that all orders and resolutions of the Board of Directors and the Executive Committee, if any, are carried into effect.
SECTION 4.07.
Vice Presidents.
The Vice President of the Corporation, if any, or if there be more than one, the Vice Presidents in the
order of their seniority or in any other order determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall generally assist the President and
perform such other duties as the Board of Directors or the President shall prescribe.
SECTION 4.08.
The Secretary.
The Secretary
of the Corporation shall, to the extent practicable, attend all meetings of the Board of Directors and all meetings of the stockholders and shall record all votes and the minutes of all proceedings in a book to be kept for that purpose, and shall
perform like duties for any standing committees when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the
Board of Directors or the President, under whose supervision he or she shall perform such duties. He or she shall keep in safe custody the seal of the Corporation and affix the same to any duly authorized instrument requiring it and, when so
affixed, it shall be attested by his or her signature or by the signature of the Treasurer or an Assistant Secretary or Assistant Treasurer. He or she shall keep in safe custody the certificate books and stockholder records and such other books and
records as the Board of Directors may direct and shall perform all other duties as from time to time may be assigned to him or her by the Chairman of the Board of Directors, the President or the Board of Directors.
SECTION 4.09.
Assistant Secretaries.
The Assistant Secretary of the Corporation, if any, or if there be more than one, the Assistant
Secretaries in order of their seniority or in any other order determined by the Board
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of Directors, shall, in the absence or disability of the Secretary of the Corporation, perform the duties and exercise the powers of the Secretary of the Corporation and shall perform such other
duties as the Board of Directors or the Secretary of the Corporation shall prescribe.
SECTION 4.10.
The Treasurer.
The Treasurer
shall have the care and custody of the corporate funds and other valuable effects, including 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 President and directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation; and, in general, perform all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him or her by the President or the Board of Directors.
SECTION 4.11.
Assistant Treasurers.
The Assistant Treasurer of the Corporation, if any, or if there be more than one, the Assistant
Treasurers in the order of their seniority or in any other order determined by the Board of Directors, shall in the absence or disability of the Treasurer perform the duties and exercise the powers of the Treasurer and shall perform such other
duties as the Board of Directors or the Treasurer shall prescribe.
ARTICLE V
Contracts, Checks, Drafts, Bank Accounts, etc.
SECTION 5.01.
Execution of Documents.
The Board of Directors shall designate the officers, employees and agents of the Corporation who
shall have power to execute and deliver deeds, contracts, mortgages, bonds, debentures, checks, drafts and other orders for the payment of money and other documents for and in the name of the Corporation, and may authorize such officers, employees
and agents to delegate such power (including authority to redelegate) by written instrument to other officers, employees or agents of the Corporation; and, unless so designated or expressly authorized by these Bylaws, no officer or agent or employee
shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount.
SECTION 5.02.
Deposits.
All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the
Corporation or otherwise as the Board of Directors or Treasurer or any other officer of the Corporation to whom power in this respect shall have been given by the Board of Directors shall select.
SECTION 5.03.
Proxies in Respect of Stock or Other Securities of Other Corporations.
The Board of Directors shall designate the
officers of the Corporation who shall have authority from time to time to appoint an agent or agents of the Corporation to exercise in the name and on behalf of the Corporation the powers and rights which the Corporation may have as the holder of
stock or other securities in any other corporation, and to vote or consent in respect of such stock or securities; such designated officers may instruct the person or persons so appointed as to the manner of exercising such powers and rights; and
such designated officers may execute or cause to be executed in the name and on behalf of the Corporation and under its corporate seal, or otherwise, such written proxies, powers of attorney or other instruments as they may deem necessary or proper
in order that the Corporation may exercise its said powers and rights.
ARTICLE VI
Shares and Their Transfer; Fixing Record Date
SECTION 6.01.
Certificates for Shares.
Every owner of stock of the Corporation shall be entitled to have a certificate certifying the
number and class of shares owned by him or her in the Corporation, which shall
A-70
otherwise be in such form as shall be prescribed by the Board of Directors. Certificates of each class shall be issued in consecutive order and shall be numbered in the order of their issue, and
shall be signed by, or in the name of the Corporation by the Chairman of the Board of Directors, the President or a Vice President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the Corporation.
SECTION 6.02.
Record.
A record (herein called the
stock record
) in one or more counterparts shall be kept of the
name of the person, firm or corporation owning the shares represented by each certificate for stock of the Corporation issued, the number of shares represented by each such certificate, the date thereof and, in the case of cancelation, the date of
cancelation. Except as otherwise expressly required by law, the person, firm or corporation in whose name shares of stock stand on the stock record of the Corporation shall be deemed the owner thereof for all purposes as regards the Corporation.
SECTION 6.03.
Registration of Stock.
Registration of transfers of shares of the Corporation shall be made only on the books of the
Corporation upon request of the registered holder thereof, or of his or her attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the Corporation, and upon the surrender of the certificate or certificates
for such shares properly endorsed or accompanied by a stock power duly executed.
SECTION 6.04.
Addresses of Stockholders.
Each
stockholder shall designate to the Secretary of the Corporation an address at which notices of meetings and all other corporate notices may be served or mailed to him or her, and, if any stockholder shall fail to designate such address, corporate
notices may be served upon him or her by mail directed to him or her at his or her post office address, if any, as the same appears on the share record books of the Corporation or at his or her last known post office address.
SECTION 6.05.
Lost, Destroyed and Mutilated Certificates.
The Board of Directors or a committee designated thereby with power so to act
may, in its discretion, cause to be issued a new certificate or certificates for stock of the Corporation in place of any certificate issued by it and reported to have been lost, destroyed or mutilated, upon the surrender of the mutilated
certificates or, in the case of loss or destruction of the certificate, upon satisfactory proof of such loss or destruction, and the Board of Directors or such committee may, in its discretion, require the owner of the lost, destroyed or mutilated
certificate or his or her legal representative to give the Corporation a bond in such sum and with such surety or sureties as it may direct to indemnify the Corporation against any claim that may be made against it on account of the alleged loss,
destruction or mutilation of any such certificate.
SECTION 6.06.
Regulations.
The Board of Directors may make such rules and
regulations as it may deem expedient, not inconsistent with these Bylaws or applicable law, concerning the issue, transfer and registration of certificates for stock of the Corporation.
SECTION 6.07.
Fixing Date for Determination of Stockholders of Record.
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 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 precede the date upon
which the resolution fixing such record date is adopted and which (i) in the case of determining the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, shall not be more than 60 nor less
than 10 days before the date of such meeting, (ii) in the case of determining the stockholders entitled to express consent to corporate action in writing without a meeting, shall not be more than 10 days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors and (iii) in the case of determining the stockholders 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, shall not be more than 60 days prior to such action. A determination of stockholders entitled to notice of or to vote at a meeting of
the 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.
A-71
ARTICLE VII
Fiscal Year
The fiscal
year of the Corporation shall end on December 31 of each year, unless changed by resolution of the Board of Directors.
ARTICLE VIII
Indemnification and Insurance
SECTION 8.01.
Indemnification.
The Corporation shall indemnify every person who was or is 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, including an action by or in the right of the Corporation, by reason of the fact that said person 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, against expenses (including attorneys fees), judgments,
fines and amounts paid in settlement incurred by said person in connection with such action, suit or proceeding, to the full extent permitted by the DGCL or any other applicable law in effect from time to time. Expenses (including attorneys
fees) incurred by an officer or director in defending a civil or criminal action, suit or proceeding shall be paid by the Corporation in advance of the final disposition of any such action, suit or proceeding upon receipt of an undertaking by or on
behalf of such officer or director to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified as authorized in this Section. The indemnification provided in this Section shall not be deemed exclusive
of any other right to which a person seeking indemnity may be entitled under any law (common or statutory), agreement, vote of stockholders or disinterested directors or otherwise, both as to action in said persons official capacity and as to
action in another capacity while holding office or while employed by or acting as agent for the Corporation, and shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of the estate, heirs, executors
and administrators of said person. All rights to indemnification under this Section shall be deemed to be a contract between the Corporation and each director or officer of the Corporation who serves or served in such capacity at any time while this
Section is in effect. Any repeal or modification of this Section or any repeal or modification of relevant provisions of the DGCL or any other applicable laws shall not in any way diminish any rights to indemnification of such director or officer of
the Corporation hereunder.
SECTION 8.02.
Insurance.
The Corporation may purchase and maintain insurance on behalf of each said
person against any liability asserted against and incurred by said person in any such aforesaid capacity, or arising out of said persons status as such, to the full extent permitted by the DGCL or any other applicable law in effect from time
to time.
SECTION 8.03.
Severability.
If this Article or any portion thereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless indemnify each director or officer of the Corporation as to costs, charges and expenses (including attorneys fees), judgments, fines and amounts paid in settlement with respect to
any action, suit or proceeding, whether civil, criminal, administrative or investigative, including an action by or in the right of the Corporation, to the full extent permitted by any applicable portion of this Section that shall not have been
invalidated and to the full extent permitted by applicable law.
ARTICLE IX
Waiver of Notice
Whenever any notice is required to be given by these Bylaws or the Certificate of Incorporation or the laws of the State of Delaware, the
person entitled thereto may, in person or by attorney thereunto authorized, in
A-72
writing signed by such person or by electronic communication, waive such notice, whether before or after the meeting or other matter in respect of which such notice is given, and in such event
such notice need not be given to such person and such waiver shall be deemed equivalent to such notice.
ARTICLE X
Amendments
Any Bylaw
(including these Bylaws) may be adopted, amended or repealed by the stockholders entitled to vote thereon or by the Board of Directors, in each case, in any manner not inconsistent with the laws of the State of Delaware or the Certificate of
Incorporation.
A-73
ANNEX B
January 27, 2014
The Board of Directors
Martin Marietta Materials, Inc.
2710 Wycliff Road,
Raleigh, NC 27607
Members of the Board of Directors:
You have requested our
opinion as to the fairness, from a financial point of view, to Martin Marietta Materials, Inc., a North Carolina corporation (the
Company),
of the Exchange Ratio (as defined below) in the proposed merger (the
Transaction) of Project Holdings, Inc., a North Carolina corporation and a wholly-owned subsidiary of the Company
(Merger Sub),
with Texas Industries, Inc., a Delaware corporation
(TXI),
with TXI
continuing as the surviving corporation. Pursuant to the Agreement and Plan of Merger Agreement, dated as of January 27, 2014 (the
Agreement
), among the Company, Merger Sub and TXI, TXI will become a wholly-owned subsidiary
of the Company, and each outstanding share of common stock, par value $1.00 per share, of TXI (the
TXI Common Stock),
other than shares of TXI Common Stock held in treasury or owned by the Company or Merger Sub, will be converted
into the right to receive 0.70 shares (the
Exchange
Ratio)
of the Companys common stock, par value $0.01 per share (the
Company Common Stock),
together with the associated preferred share purchase
rights granted pursuant to the Rights Agreements (as defined in the Agreement).
In connection with preparing our opinion, we have (i) reviewed the
Agreement; (ii) reviewed certain publicly available business and financial information concerning TXI and the Company and the industries in which they operate; (iii) reviewed publicly available financial terms of certain precedent
transactions; (iv) compared the financial and operating performance of TXI and the Company with publicly available information concerning certain other companies we deemed relevant and reviewed the current and historical market prices of TXI
Common Stock and the Company Common Stock and certain publicly traded securities of such other companies; (v) reviewed certain internal financial analyses and forecasts prepared by or at the direction of the management of the Company relating
to the respective businesses of the Company and TXI, as well as the estimated amount and timing of (x) the cost savings and related expenses and synergies expected to result from the Transaction and the anticipated accelerated utilization of
TXIs net operating tax losses (collectively, the
Synergies
) and (y) the expected proceeds of certain anticipated non-operating real estate asset divestitures (the
Real Estate Proceeds);
and
(vi) performed such other financial studies and analyses and considered such other information as we deemed appropriate for the purposes of this opinion.
In addition, we have held discussions with certain members of the management of the Company with respect to certain aspects of the Transaction, and the past
and current business operations of TXI and the Company, the financial condition and future prospects and operations of TXI and the Company, the effects of the Transaction on the financial condition and future prospects of the Company, and certain
other matters we believed necessary or appropriate to our inquiry.
In giving our opinion, we have relied upon and assumed the accuracy and completeness
of all information that was publicly available or was furnished to or discussed with us by TXI and the Company or otherwise reviewed by or for us, and we have not independently verified (nor have we assumed responsibility or liability for
independently verifying) any such information or its accuracy or completeness. We have not conducted or been
B-1
provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of TXI or the Company under any state or federal laws relating to bankruptcy, insolvency
or similar matters. In relying on financial analyses and forecasts provided to us or derived therefrom, including the Synergies and the Real Estate Proceeds, we have assumed that they have been reasonably prepared based on assumptions reflecting the
best currently available estimates and judgments by management as to the expected future results of operations and financial condition of TXI and the Company to which such analyses or forecasts relate. We express no view as to such analyses or
forecasts (including the Synergies and the Real Estate Proceeds) or the assumptions on which they were based. We have also assumed that the Transaction will qualify as a tax free reorganization for United States federal income tax purposes and that
the Transaction and the other transactions contemplated by the Agreement will be consummated as described in the Agreement. We have also assumed that the representations and warranties made by the Company and TXI in the Agreement and the related
agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the assessments made by advisors to the Company with respect to such issues. We have further assumed
that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on TXI or the Company or on the contemplated benefits of the Transaction.
Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It
should be understood that subsequent developments may affect this opinion, and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, to the Company of
the Exchange Ratio in the proposed Transaction and we express no opinion as to the fairness of the Exchange Ratio to the holders of any class of securities, creditors or other constituencies of the Company or as to the underlying decision by the
Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons relative to the
Exchange Ratio in the Transaction or with respect to the fairness of any such compensation. We are expressing no opinion herein as to the price at which TXI Common Stock or the Company Common Stock will trade at any future time.
We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a
substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. Please be advised that during the two years
preceding the date of this letter, neither we nor our affiliates have had any material financial advisory or material commercial or investment banking relationships with TXI. During the two years preceding the date of this letter, we and our
affiliates have had commercial or investment banking relationships with the Company for which we and such affiliates have received customary compensation. Such services during such period have included acting as lead arranger and joint bookrunner on
the Companys revolving credit facility and term loan facility in November 2013. In addition, our commercial banking affiliate provides treasury and securities services to NNS Holding, a significant shareholder of TXI, and is an agent bank and
a lender under outstanding credit facilities of the Company, for which it receives customary compensation or other financial benefits. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities
of the Company or TXI for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities.
On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Exchange Ratio in the proposed Transaction is fair, from a
financial point of view, to the Company.
The issuance of this opinion has been approved by a fairness opinion committee of J.P. Morgan Securities LLC.
This letter is provided to the Board of Directors of the Company (in its capacity as such) in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the
Company as to how such shareholder should vote with respect to the Transaction or any other
B-2
matter. This opinion may not be disclosed, referred to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion
may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but may not otherwise be disclosed publicly in any manner without our prior written approval.
Very truly yours,
J.P. MORGAN SECURITIES LLC
J.P. Morgan Securities LLC
B-3
ANNEX C
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January 27, 2014
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Deutsche Bank Securities Inc.
60 Wall
Street
New York, NY 10005
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Board of Directors
Martin Marietta Materials, Inc.
270 Wycliff Road
Raleigh, NC 27607
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Ladies and Gentlemen:
Deutsche
Bank Securities Inc. (
Deutsche Bank
) has acted as financial advisor to Martin Marietta Materials, Inc., a North Carolina corporation (
Parent
), in connection with the Agreement and Plan of Merger, dated as of
January 27, 2014 (the
Merger Agreement
), among Parent, Project Holdings, Inc., a North Carolina corporation and a wholly-owned subsidiary of Parent (
Merger Sub
), and Texas Industries, Inc., a Delaware
corporation (
TXI
), which provides, among other things, for the merger of Merger Sub with and into TXI, as a result of which TXI will become a wholly owned subsidiary of Parent (the
Transaction
). As set forth
more fully in the Merger Agreement, as a result of the Transaction, each share of common stock, par value $1.00 per share (the
TXI Common Stock
), of TXI, other than treasury shares and shares owned by Merger Sub or Parent, will be
converted into the right to receive 0.70 shares (the
Exchange Ratio
) of common stock, par value $0.01 per share, of Parent (the
Parent Common Stock
), together with the associated preferred share purchase rights
granted pursuant to the Rights Agreement (as defined in the Merger Agreement).
You have requested our opinion, as investment bankers, as to the fairness
of the Exchange Ratio, from a financial point of view, to Parent.
In connection with our role as financial advisor to Parent, and in arriving at our
opinion, we reviewed certain publicly available financial and other information concerning TXI and Parent, and certain internal analyses, financial forecasts and other information relating to TXI and Parent prepared by management of Parent. We have
also held discussions with certain senior officers and other representatives and advisors of TXI and Parent regarding the businesses and prospects of TXI and Parent, respectively, and of Parent after giving effect to the Transaction, including
certain cost savings, operating efficiencies, financial synergies and other strategic benefits projected by the management of Parent to result from the Transaction, the anticipated accelerated utilization of Stars net operating tax losses and
the proceeds of certain anticipated non-operating real estate asset divestitures. In addition, we have (i) reviewed the reported prices and trading activity for TXI Common Stock and Parent Common Stock, (ii) to the extent publicly
available, compared certain financial and stock market information for TXI and Parent with similar information for certain other companies we considered relevant whose securities are publicly traded, (iii) to the extent publicly available,
reviewed the financial terms of certain precedent business combinations, (iv) reviewed the Merger Agreement and certain related documents, and (v) performed such other studies and analyses and considered such other factors as we deemed
appropriate.
We have not assumed responsibility for independent verification of, and have not independently verified, any information, whether publicly
available or furnished to us, concerning TXI or Parent, including, without limitation, any financial information considered in connection with the rendering of our opinion. Accordingly, for purposes of our opinion, we have, with your knowledge and
permission, assumed and relied upon the accuracy and completeness of all such information. We have not conducted a physical inspection of any of the properties or assets, and have not prepared, obtained or reviewed any independent evaluation or
appraisal of any
Confidential
C-1
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Deutsche Bank
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Board of Directors of Martin Marietta Materials, Inc.
January 27, 2014
Page 2
of the assets or liabilities (including any contingent, derivative or off-balance-sheet assets or liabilities), of TXI or Parent or any of their respective subsidiaries, nor have we evaluated the
solvency or fair value of TXI, Parent or any of Parents subsidiaries under any state or federal law relating to bankruptcy, insolvency or similar matters. With respect to the financial forecasts, including, without limitation, the analyses and
forecasts in respect of the amount and timing of (x) certain cost savings, operating efficiencies, financial synergies and other strategic benefits projected by Parent to be achieved as a result of the Transaction and the anticipated
accelerated utilization of TXIs net operating tax losses (collectively, the
Synergies
) and (y) the proceeds of certain anticipated non-operating real estate asset divestitures (the
Real Estate
Proceeds
), in each case prepared by the management of Parent and used in our analyses, we have assumed, with your knowledge and permission, that such forecasts, including the Synergies and the Real Estate Proceeds, have been reasonably
prepared on bases reflecting the best currently available estimates and judgments of the management of Parent as to the matters covered thereby and that such forecasts and projections will be realized in the amounts and in the time periods currently
estimated by the management of Parent. In rendering our opinion, we express no view as to the reasonableness of such forecasts and projections, including, without limitation, the Synergies and the Real Estate Proceeds, or the assumptions on which
they are based. Our opinion is necessarily based upon economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. We expressly disclaim any undertaking or obligation to advise any person of
any change in any fact or matter affecting our opinion of which we become aware after the date hereof.
For purposes of rendering our opinion, we have
assumed with your knowledge and permission that, in all respects material to our analysis, the representations and warranties of Parent and TXI contained in the Merger Agreement are true and correct. Additionally, we have assumed with your knowledge
and permission that, in all respects material to our analysis, the Transaction will be consummated in accordance with the terms of the Merger Agreement, without any waiver, modification or amendment of any term, condition or agreement that would be
material to our analysis. We also have assumed with your knowledge and permission that all material governmental, regulatory or other approvals and consents required in connection with the consummation of the Transaction will be obtained and that in
connection with obtaining any necessary governmental, regulatory or other approvals and consents, no restrictions, terms or conditions will be imposed that would be material to our analysis, including any divestitures by Parent or TXI. We are not
legal, regulatory, tax or accounting experts and have relied on the assessments made by Parent and its other advisors with respect to such issues. We have assumed with your knowledge and permission that the Transaction will qualify as a tax free
reorganization for United States federal income tax purposes.
This opinion has been approved and authorized for issuance by a Deutsche Bank fairness
opinion review committee and is addressed to, and is for the use and benefit of, the Board of Directors of Parent in connection with and for the purpose of its evaluation of the Transaction and is not a recommendation to the security holders of
Parent as to how they should vote with respect to the Transaction or any transactions contemplated thereby. This opinion is limited to the fairness of the Exchange Ratio, from a financial point of view, to Parent as of the date hereof. This opinion
does not address any other terms of the Transaction or the Merger Agreement. Nor does it address the terms of any other agreement entered into in connection with the Transaction. You have not asked us to, and this opinion does not, address the
fairness of the Transaction, or any consideration paid in connection therewith, to the holders of any class of securities, creditors or other constituencies of Parent, nor does it address the fairness of the contemplated benefits of the Transaction.
We express no opinion as to the merits of the underlying decision by Parent to engage in the Transaction or the relative merits of the Transaction as compared
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Deutsche Bank
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Board of Directors of Martin Marietta Materials, Inc.
January 27, 2014
Page 3
to any alternative transactions or business strategies. In addition, we do not express any view or opinion as to the fairness, financial or otherwise, of the amount or nature of any compensation
payable to or to be received by any of the officers, directors, or employees of any parties to the Transaction, or any class of such persons, in connection with the Transaction relative to the Exchange Ratio. This opinion does not in any manner
address the prices at which TXI Common Stock will trade following the announcement of the Transaction and Parent Common Stock or other Parent securities will trade following the announcement or consummation of the Transaction.
Deutsche Bank will be paid a fee for its services as financial advisor to Parent in connection with the Transaction, a portion of which becomes payable upon
delivery of this opinion (or would have become payable if Deutsche Bank had advised the Board of Directors that it was unable to render this opinion) and a substantial portion of which is contingent upon consummation of the Transaction. Parent has
also agreed to reimburse Deutsche Bank for its expenses, and to indemnify Deutsche Bank against certain liabilities, in connection with its engagement. We are an affiliate of Deutsche Bank AG (together with its affiliates, the
DB
Group
). One or more members of the DB Group have, from time to time, provided, and are currently providing, investment banking, commercial banking (including extension of credit) and other financial services to Parent or its
affiliates for which they have received, and in the future may receive, compensation, including: (i) having acted as financial advisor to Parent on its proposed acquisition of Vulcan Materials Company (December 2011); and (ii) having acted
as a joint lead arranger and a joint bookrunner for a $350 million revolving credit facility and a $250 million term loan (November 2013). The DB Group may also provide investment and commercial banking services to TXI, Parent and/or their
respective affiliates in the future, for which we would expect the DB Group to receive compensation. In the ordinary course of business, members of the DB Group may actively trade in the securities and other instruments and obligations of TXI,
Parent and their respective affiliates for their own accounts and for the accounts of their customers. Accordingly, the DB Group may at any time hold a long or short position in such securities, instruments and obligations.
Based upon and subject to the foregoing assumptions, limitations, qualifications and conditions, it is Deutsche Banks opinion as investment bankers
that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to Parent.
This opinion may not be disclosed, summarized,
referred to, or communicated (in whole or in part) to any other person for any purpose whatsoever except with our prior written approval, provided that, if required by applicable law, this opinion may be included in any disclosure document filed by
Parent with the Securities and Exchange Commission with respect to the Transaction, provided, further, that it is reproduced in full and that any description of or reference to Deutsche Bank or summary of this opinion in the disclosure document is
in a form reasonably acceptable to Deutsche Bank and its counsel.
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Very truly yours,
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DEUTSCHE BANK SECURITIES INC.
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ANNEX D
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745 Seventh Avenue
New York, NY 10019
United States
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January 27, 2014
Board of Directors
Martin Marietta Materials, Inc.
2719 Wycliff Road
Raleigh, NC 27607
Members of the Board of Directors:
We understand
that Martin Marietta Materials, Inc., a North Carolina corporation (the
Company
), intends to enter into a transaction (the
Proposed Transaction
) with Texas Industries, Inc., a Delaware corporation
(
TXI
), pursuant to which Project Holdings, Inc., a North Carolina corporation and a wholly-owned subsidiary of the Company (the
Merger Sub
), will merge with and into TXI, with TXI surviving as a wholly owned
subsidiary of the Company (the
Merger
) and each issued and outstanding share of common stock, par value $1.00 per share, of TXI (the
TXI Common Stock
), other than shares of TXI Common Stock held in treasury or
owned by the Company or Merger Sub, will be converted into the right to receive 0.70 shares (the
Exchange Ratio
) of the Companys common stock, par value $0.01 per share (the
Company Common Stock
), together
with the associated preferred share purchase rights granted pursuant to the Rights Agreement (as defined in the Agreement). The terms and conditions of the Proposed Transaction are set forth in more detail in the Agreement and Plan of Merger
Agreement dated January 27, 2014 among the Company, Merger Sub and TXI (the
Agreement
). The summary of the Proposed Transaction set forth above is qualified in its entirety by the terms of the Agreement.
We have been requested by the Board of Directors of the Company to render our opinion with respect to the fairness, from a financial point of
view, to the Company of the Exchange Ratio in the Proposed Transaction. We have not been requested to opine as to, and our opinion does not in any manner address, the Companys underlying business decision to proceed with or effect the Proposed
Transaction or the likelihood of consummation of the Proposed Transaction. In addition, we express no opinion on, and our opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors
or employees of any parties to the Proposed Transaction, or any class of such persons, relative to the Exchange Ratio or otherwise.
In
arriving at our opinion, we reviewed and analyzed: (1) the Agreement and the specific terms of the Proposed Transaction; (2) publicly available information concerning the Company and TXI that we believe to be relevant to our analysis,
including the Companys Annual Report on Form 10-K for the fiscal year ended December 31, 2012, the Companys Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2013, June 30, 2013 and
September 30, 2013, TXIs Annual Report on Form 10-K for the fiscal year ended May 31, 2013 and TXIs Quarterly Reports on Form 10-Q for the fiscal quarters ended August 31, 2013 and November 30, 2013;
(3) financial and operating information with respect to the business, operations and prospects of the Company furnished to us by the Company, including
D-1
Page 2 of 4
financial projections of the Company furnished to us by management of the Company (the
Company Projections
); (4) financial and operating information with respect to the
business, operations and prospects of TXI furnished to us by the Company, including financial projections of TXI furnished to us by management of the Company (the
TXI Projections
); (5) the pro forma impact of the Proposed
Transaction on the future financial performance of the combined company, including cost savings, operating synergies and other strategic benefits expected by the management of the Company to result from the combination of the businesses of TXI and
the Company and the anticipated accelerated utilization of TXIs net operating tax losses (collectively, the
Expected Synergies
) as well as the amount of time the management of the Company anticipates will be needed for the
combined company to realize such Expected Synergies, and the proceeds of certain anticipated real estate asset divestitures (the
Expected Real Estate Proceeds
); (6) trading history of each of the Company Common Stock and TXI
Common Stock from January 28, 2013 to January 24, 2014 and a comparison of such trading histories with those of other companies that we deemed relevant; (7) a comparison of the historical financial results and present financial
condition of the Company and TXI with each other and with those of other companies that we deemed relevant; and (8) the financial terms of certain precedent transactions. In addition, we have had discussions with the management of the Company
concerning their respective business, operations, assets, liabilities, financial condition and prospects and have undertaken such other studies, analyses and investigations as we deemed appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and completeness of the financial and other information used by us
without any independent verification of such information (and have not assumed responsibility or liability for any independent verification of such information) and have further relied upon the assurances of the management of the Company that they
are not aware of any facts or circumstances that would make such information inaccurate or misleading. With respect to the financial projections of the Company, including the Company Projections, upon the advice of the Company, we have assumed that
such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of the Company and that the Company will perform
substantially in accordance with such projections. With respect to the financial projections of TXI, including the TXI Projections and the Expected Synergies and the Expected Real Estate Proceeds, upon the advice of the Company, we have assumed that
such projections have been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of the Company as to the future financial performance of TXI and that TXI will perform substantially in
accordance with such projections. Furthermore, upon the advice of the Company, we have assumed that the amounts and timing of the Expected Synergies and the Expected Real Estate Proceeds are reasonable and that the Expected Synergies and the
Expected Real Estate Proceeds will be realized in accordance with such estimates. We assume no responsibility for and we express no view as to any such projections or estimates or the assumptions on which they are based. In arriving at our opinion,
we have not conducted a physical inspection of the properties and facilities of the Company or TXI and have not made or obtained any evaluations or appraisals of the assets or liabilities of the Company or TXI. Our opinion necessarily is based upon
market, economic and other conditions as they exist on, and can be evaluated as of, the date of this letter. We assume no responsibility for updating or revising our opinion based on events or circumstances that may occur after the date of this
letter. We express no opinion as to the prices at
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Page 3 of 4
which shares of TXI Common Stock would trade following the announcement of the Proposed Transaction or shares of the Company Common Stock would trade following the announcement or consummation of
the Proposed Transaction. Our opinion should not be viewed as providing any assurance that the market value of the shares of Company Common Stock to be held by the stockholders of the Company after the consummation of the Proposed Transaction will
be in excess of the market value of the Company Common Stock owned by such stockholders at any time prior to the announcement or consummation of the Proposed Transaction.
We have assumed upon the advice of the Company that, in all respects material to our analysis, the accuracy of the representations and warranties
contained in the Agreement and all agreements related thereto. We have also assumed, upon the advice of the Company, that all material governmental, regulatory and third party approvals, consents and releases for the Proposed Transaction will be
obtained within the constraints contemplated by the Agreement and that, in all respects material to our analysis, the Proposed Transaction will be consummated in accordance with the terms of the Agreement without waiver, modification or amendment of
any material term, condition or agreement thereof and without any divestitures by the Company or TXI. Additionally, we have also assumed, upon the advice of the Company, that the Proposed Transaction will qualify as a tax free reorganization for
United States federal income tax purposes. We do not express any opinion as to any tax or other consequences that might result from the Proposed Transaction, nor does our opinion address any legal, tax, regulatory or accounting matters, as to which
we understand that the Company has obtained such advice as it deemed necessary from qualified professionals.
Based upon and subject to the
foregoing, we are of the opinion as of the date hereof that, from a financial point of view, the Exchange Ratio in the Proposed Transaction is fair to the Company.
We have acted as financial advisor to the Company in connection with the Proposed Transaction and will receive a fee for our services a portion
of which is payable upon rendering this opinion and a substantial portion of which is contingent upon the consummation of the Proposed Transaction. In addition, the Company has agreed to reimburse our expenses and indemnify us for certain
liabilities that may arise out of our engagement. We expect to perform various investment banking and financial services for the Company in the future, and expect to receive customary fees for such services.
Barclays Capital Inc. and its affiliates engage in a wide range of businesses from investment and commercial banking, lending, asset management
and other financial and non-financial services. In the ordinary course of our business, we and our affiliates may actively trade and effect transactions in the equity, debt and/or other securities (and any derivatives thereof) and financial
instruments (including loans and other obligations) of the Company, TXI and /or their respective affiliates for our own account and for the accounts of our customers and, accordingly, may at any time hold long or short positions and investments in
such securities and financial instruments.
This opinion, the issuance of which has been approved by our Fairness Opinion Committee, is for
the use and benefit of the Board of Directors of the Company and is rendered to the Board of Directors in connection with its consideration of the Proposed Transaction. This opinion is not intended to be and
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Page 4 of 4
does not constitute a recommendation to any stockholder of the Company as to how such stockholder should vote with respect to the Proposed Transaction. This opinion may not be disclosed, referred
to, or communicated (in whole or in part) to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full in any proxy or information statement mailed to shareholders of the Company but
may not otherwise be disclosed publicly in any manner without our prior written approval.
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Very truly yours,
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BARCLAYS CAPITAL INC.
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D-4
ANNEX E
388 Greenwich Street
New York,
NY 10013
January 27, 2014
The Board of Directors
Texas Industries, Inc.
1503 LBJ Freeway, Suite 400
Dallas, TX 75234
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of view, to the holders of the common stock of Texas Industries, Inc. (the
Company) (other than Martin Marietta (defined below) and its affiliates) of the Exchange Ratio (defined below) set forth in the Agreement and Plan of Merger, dated as of January 27, 2014 (the Merger Agreement), among the
Company, Martin Marietta Materials, Inc. (Martin Marietta) and Project Holdings, Inc., a wholly owned subsidiary of Martin Marietta (Merger Sub). As more fully described in the Merger Agreement, Merger Sub will be merged with
and into the Company (the Merger) and each outstanding share of the common stock, par value $1.00 per share, of the Company (Company Common Stock) will be converted into the right to receive 0.700 (the Exchange
Ratio) of a share of the common stock, par value $0.01 per share, of Martin Marietta (Martin Marietta Common Stock).
In arriving at our
opinion, we reviewed the Merger Agreement and also held discussions with certain senior officers, directors and other representatives and advisors of the Company and received information and data from certain senior officers and other
representatives and advisors of Martin Marietta, in each case concerning the businesses, operations and prospects of the Company and Martin Marietta. We reviewed certain publicly available business and financial information relating to the Company
and Martin Marietta as well as certain financial forecasts and other information and data relating to the Company and Martin Marietta which were provided to or discussed with us by the managements of the Company and Martin Marietta, including
information relating to potential strategic implications and operational benefits (including the amount, timing and achievability thereof) anticipated by the management of Martin Marietta to result from the Merger, which we evaluated at the
direction and with the consent of the Company. We reviewed the financial terms of the Merger as set forth in the Merger Agreement in relation to, among other things: current and historical market prices and trading volumes of Company Common Stock
and Martin Marietta Common Stock; the historical and projected earnings and other operating data of the Company and Martin Marietta; and the capitalization and financial condition of the Company and Martin Marietta. We considered, to the extent
publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Merger and analyzed certain financial, stock market and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of the Company and Martin Marietta. We also evaluated certain potential pro forma financial effects of the Merger on the Company and Martin Marietta utilizing, among other things,
the financial forecasts and estimates relating to the Company and Martin Marietta referred to above after giving effect to the potential strategic implications and operational benefits anticipated by the
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The Board of Directors
Texas Industries, Inc.
January 27, 2014
Page 2
management of Martin Marietta to result from the Merger, which we evaluated at the direction and with the
consent of the Company. In addition to the foregoing, we conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. The
issuance of our opinion has been authorized by our fairness opinion committee.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with us and upon the assurances of the managements of the Company and Martin
Marietta that they are not aware of any relevant information that has been omitted or that remains undisclosed to us. As discussed, we considered the selected precedent transactions that we reviewed to lack sufficient comparability due to various
factors and circumstances that distinguish the proposed Merger from such transactions and, accordingly, did not perform a selected precedent transactions analysis in reaching our opinion. With respect to financial forecasts and other information and
data provided to or otherwise reviewed by or discussed with us relating to the Company and Martin Marietta and potential pro forma financial effects of, and strategic implications and operational benefits resulting from, the Merger, we have been
advised by the management of the Company, and we have assumed, with your consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of the managements
of the Company and Martin Marietta as to the future financial performance of the Company and Martin Marietta, such strategic implications and operational benefits and the other matters covered thereby. We also have assumed, with your consent, that
the financial results (including the potential strategic implications and operational benefits anticipated to result from the Merger) reflected in such financial forecasts and other information and data will be realized in the amounts and at the
times projected. We have relied, at the direction of the Company, upon the assessments of the management of the Company as to market and cyclical trends and prospects relating to the building materials industry and the potential impact of such
trends and prospects on the Company and Martin Marietta, including the assumptions of the management of the Company as to building materials prices, supply and demand trends reflected in the financial forecasts and other information and data
utilized in our analyses, including the assessment of mid-cycle EBITDA for the Company and Martin Marietta, all of which are subject to significant volatility and which, if different than as assumed, could have a material impact on our analyses or
opinion. We have assumed, at the direction of the Company, that there will be no developments with respect to any of the foregoing that would be material to our analyses or opinion.
We have assumed, with your consent, that the Merger will be consummated in accordance with its terms without waiver, modification or amendment of any material
term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents, releases and waivers for the Merger, no delay, limitation, restriction or condition will be imposed that would have an
adverse effect on the Company, Martin Marietta or the contemplated benefits of the Merger. We also have assumed, with your consent, that the Merger will qualify for federal income tax purposes as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended. Our opinion, as set forth herein, relates to the relative values of the Company and Martin Marietta. We are not expressing any opinion as to what the value of Martin Marietta
Common Stock
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The Board of Directors
Texas Industries, Inc.
January 27, 2014
Page 3
actually will be when issued pursuant to the Merger or the prices at which Company Common Stock or Martin Marietta Common Stock will trade at any time. We have not made or been provided with an
independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of the Company or Martin Marietta nor have we made any physical inspection of the properties or assets of the Company or Martin Marietta. We express no view
as to, and our opinion does not address, the underlying business decision of the Company to effect the Merger, the relative merits of the Merger as compared to any alternative business strategies that might exist for the Company or the effect of any
other transaction in which the Company might engage. Our opinion does not address any terms (other than the Exchange Ratio to the extent expressly specified herein) or other aspects or implications of the Merger, including, without limitation, the
form or structure of the Merger or any voting or other agreement, arrangement or understanding to be entered into in connection with or contemplated by the Merger or otherwise. We express no view as to, and our opinion does not address, the fairness
(financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Merger, or any class of such persons, relative to the Exchange Ratio. Our opinion is necessarily
based upon information available to us, and financial, stock market and other conditions and circumstances existing and disclosed to us, as of the date hereof. As you are aware, the credit, financial and stock markets are experiencing unusual
volatility and we express no opinion or view as to any potential effects of such volatility on the Company, Martin Marietta or the contemplated benefits of the Merger.
Citigroup Global Markets Inc. has acted as financial advisor to the Company in connection with the proposed Merger and will receive a fee for such services, a
significant portion of which is contingent upon the consummation of the Merger. We also will receive a fee in connection with the delivery of this opinion. In addition, the Company has agreed to reimburse certain of our expenses arising, and
indemnify us against certain liabilities that may arise, out of our engagement. In the past two years, we have not provided any investment banking services to the Company or its affiliates unrelated to the proposed Merger. We may provide services
unrelated to the proposed Merger to or with respect to the Company or its affiliates in the future for which we may receive compensation. We and our affiliates in the past have provided, currently are providing and in the future may provide services
to Martin Marietta unrelated to the proposed Merger, for which services we and such affiliates have received and expect to receive compensation, including, without limitation, (i) loan portfolio management in 2012 and 2013 and (ii) prepaid
card services in 2013. In the ordinary course of our business, we and our affiliates may actively trade or hold the securities of the Company and Martin Marietta for our own account or for the account of our customers and, accordingly, may at any
time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may maintain relationships with the Company, Martin Marietta and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the information of the Board of Directors of the Company (in its capacity as such) in
its evaluation of the proposed Merger, and our opinion is not intended to be and does not constitute a recommendation to any securityholder as to how such securityholder should vote or act on any matters relating to the proposed Merger or otherwise.
Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are
of the opinion that, as of the date hereof, the Exchange Ratio is fair, from a financial point of view, to the holders of Company Common Stock (other than Martin Marietta and its affiliates).
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The Board of Directors
Texas Industries, Inc.
January 27, 2014
Page 4
Very truly yours,
CITIGROUP GLOBAL MARKETS INC.
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Electronic Voting Instructions
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Available 24 hours a day, 7 days a week!
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Instead of mailing your proxy, you may choose one of the
voting methods outlined below to vote your proxy.
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VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE
BAR.
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Proxies submitted by the Internet or telephone must be
received by 11:59 p.m., Eastern Time, on June 29, 2014.
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Vote by Internet
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Go to
www.envisionreports.com/TXI
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Or scan the QR code with your smartphone
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Follow the steps outlined on the secure website
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Vote by telephone
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Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a
touch tone telephone
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Using a
black ink
pen, mark your votes with an
X
as shown in this example. Please do not write outside the designated areas.
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x
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Follow the instructions provided by the recorded message
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q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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A
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Proposals The Board of Directors recommends you vote
FOR
proposals 1, 2 and 3.
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For
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Against
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Abstain
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For
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Against
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Abstain
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1.
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Adoption of the Agreement and Plan of Merger, dated as of January 27, 2014, by and among TXI, Martin Marietta Materials, Inc. and Project Holdings, Inc.
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2.
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Approval of the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are not sufficient votes to approve the proposal to adopt the Agreement and Plan of
Merger.
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3.
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Approval, on a non-binding, advisory basis, of the compensation that may be paid or become payable to the named executive officers of TXI in connection with the merger.
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NOTE:
Any other matters that may properly come before the meeting or any adjournment(s) thereof.
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Change of Address
Please print your new address below.
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Comments
Please print your comments below.
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Meeting Attendance
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Mark the box to the
right if you plan to
attend the Annual
Meeting.
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C
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Authorized Signatures This section must be completed for your vote to be counted. Date and Sign Below
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Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary,
please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer.
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Date (mm/dd/yyyy) Please print date below.
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Signature 1 Please keep signature within the box.
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Signature 2 Please keep signature within the box.
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01UJ1B
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting:
The Notice & Proxy Statement and Proxy Card are available at www.envisionreports.com/TXI.
q
IF YOU HAVE NOT VOTED VIA THE INTERNET
OR
TELEPHONE, FOLD ALONG
THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
q
Proxy TEXAS INDUSTRIES, INC.
Special Meeting of Stockholders June 30, 2014