UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of The Securities Exchange Act of
1934
Date
of
Report (Date of the earliest event reported)
March
26, 2007
Valhi,
Inc.
(Exact
name of registrant as specified in its charter)
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Delaware
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1-5467
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87-0110150
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(State
or other jurisdiction of incorporation)
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(Commission
File
Number)
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(IRS
Employer
Identification
No.)
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5430
LBJ Freeway, Suite 1700, Dallas, Texas
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75240-2697
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
(972)
233-1700
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(Former
name or former address, if changed since last report.)
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2):
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o
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Written
communications pursuant to Rule 425 under the Securities Act (17
CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17
CFR
240.14d-2(b))
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¨
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17
CFR
240.13e-4(c))
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Item
1.01
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Entry
into a Material Definitive
Agreement.
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Item
2.01
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Completion
of Acquisition or Disposition of
Assets.
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Item
3.02
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Unregistered
Sales of Equity Securities
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Item
5.03
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Amendments
to Articles of Incorporation or Bylaws; Change in Fiscal
Year.
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On
March
26,
2007, the registrant completed the previously reported special dividend to
its
stockholders, paid in the form of shares of Titanium Metals Corporation
(“TIMET”)
common
stock owned by the registrant. As a result of this special dividend
declaration:
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the
registrant distributed to its stockholders approximately 56.8 million
shares of TIMET common stock having an aggregate value based on the
closing price of a share of TIMET common stock on March 26, 2007
of $2.1
billion and representing approximately 35.1% of the outstanding TIMET
common stock; and
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the
registrant’s common stockholders received approximately .4776 of a share
of TIMET common stock for each share of the registrant’s common stock that
they owned at the close of business on March 12, 2007 (the record
date for
the special dividend) and cash in lieu of any resulting fractional
share
of TIMET common stock.
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Immediately
after the payment of the special dividend, Contran Corporation and its
subsidiaries and related parties continued to own approximately 51.9% of the
outstanding TIMET common stock compared to the approximately 53.8% of the
outstanding TIMET common stock held by Contran and its subsidiaries and related
parties (including the registrant) prior to the special dividend, in each case
assuming the full conversion of any TIMET 6¾% series A convertible preferred
stock held by such entities or parties.
The
registrant is a member of the consolidated U.S. federal tax group of which
Contran is the parent company. As a member of the Contran consolidated tax
group
and pursuant to a pre-existing tax policy between the registrant and Contran,
the registrant computes its provision for U.S. income taxes on a separate
company basis using tax elections made by Contran and makes payments to Contran
or receives payments from Contran in amounts it would have paid to or received
from the U.S. Internal Revenue Service had it not been a member of the Contran
tax group but instead had been a separate taxpayer.
Upon
the
payment of the special dividend and pursuant to the tax policy between the
registrant and Contran, the registrant incurred a tax obligation to Contran.
The
amount of the obligation is a function of the difference between the aggregate
value of the TIMET common stock shares distributed based on the closing market
price of the distributed shares of TIMET common stock on the date of
distribution ($36.90 per share) less the registrant's aggregate tax basis in
such shares. This obligation is approximately $667.3 million. In order to
discharge this obligation to Contran, the registrant and Contran entered into
a
stock purchase agreement dated March 26, 2007 (the
“Stock
Purchase Agreement”)
whereby,
among other things:
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the
registrant agreed to issue 5,000 shares of a newly established 6%
series A
preferred stock, par value $0.01 per share (the “Preferred
Stock”),
having an aggregate liquidation preference equal to the tax obligation
created by the special dividend and such other terms as set forth
in the
agreement; and
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Contran
agreed to indemnify the registrant against all damages incurred by
the
registrant resulting from the tax obligation, subject to certain
limitations related to any adjustment to the registrant’s aggregate tax
basis in or the value of the shares
distributed.
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Pursuant
to the
Stock Purchase Agreement, on
the
same day the registrant:
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filed
with the Secretary of State of the state of Delaware a certificate
of designations, rights and preferences of the Preferred Stock (the
“Certificate
of Designations”)
in order to formally establish the terms of the Preferred Stock effective
on that date; and
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issued
the 5,000 shares of Preferred Stock to
Contran.
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The
issuance of the Preferred Stock was not registered under the Securities Act
of
1933, as amended, pursuant to the exemption provided by section 4(1) of that
act
due to Contran’s financial sophistication. This
summary of the terms of the Stock Purchase Agreement does not purport
to be
complete and is qualified in its entirety by reference to the Stock Purchase
Agreement, a copy of which has been filed as Exhibit 10.1 to this
report.
A
holder
of Preferred Stock:
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is
entitled upon any liquidation, dissolution or winding up of the affairs
of
the registrant to be paid a liquidation preference of $133,466.75
per
share of Series A Preferred Stock (the “Liquidation
Preference”),
plus an amount equal to any accrued and unpaid dividends (whether
or not
declared) to the date of payment, before any distribution of assets
is
made to holders of the registrant’s common
stock;
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is
entitled to receive, when and as authorized by the registrant’s board of
directors, cash dividends at the annual rate of 6% of the per share
Liquidation Preference, which dividends shall be payable quarterly
in
arrears and shall accrue until
paid;
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is
not entitled to a preferential dividend right that is senior to the
registrant’s common stock;
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does
not have, except in limited circumstances, any voting rights;
and
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has
no redemption or conversion rights or maturity date or protections
provided by a sinking fund.
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This
summary of the terms of the Preferred Stock does not purport
to be
complete and is qualified in its entirety by reference to the Certificate of
Designations that established the Preferred Stock, a copy of which has been
filed as Exhibit 4.1 to this report.
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Item
7.01
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Regulation
FD Disclosure.
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The
registrant hereby furnishes the information set forth in its press release
issued on March 26, 2007, a copy of which is attached hereto as Exhibit 99.2
and
incorporated herein by reference. This Exhibit 99.2 that the registrant has
furnished in this report is not deemed “filed” for purposes of section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that section. Registration statements or other documents filed
with the U.S. Securities and Exchange Commission shall not incorporate this
exhibit by reference, except as otherwise expressly stated in such
filing.
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Item
9.01
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Financial
Statements and Exhibits.
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(b)
and (d)
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Pro
forma financial
information
and
exhibits
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Item
No.
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Exhibit
Index
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3.1
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Amended
and Restated Certificate of Incorporation of Valhi,
Inc.
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4.1
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Certificate
of Designations, Rights And Preferences of the 6% Series
A Preferred Stock of Valhi, Inc.
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10.1
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Stock
Purchase Agreement dated as of March 26, 2007 between Valhi, Inc.
and
Contran Corporation
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99.1
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Unaudited
Pro Forma Condensed Consolidated Financial Statements of the
registrant.
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99.2
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Press
release dated March 26, 2007 issued by the
registrant.
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SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Valhi,
Inc.
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(Registrant)
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By: /s/
Gregory M. Swalwell
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Date:
March 27, 2007
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Gregory
M. Swalwell, Vice President
and
Controller
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INDEX
TO EXHIBITS
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Item
No.
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Exhibit
Index
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3.1
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Amended
and Restated Certificate of Incorporation of Valhi,
Inc.
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4.1
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Certificate
of Designations, Rights And Preferences of the 6% Series
A Preferred Stock of Valhi, Inc.
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10.1
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Stock
Purchase Agreement dated as of March 26, 2007 between Valhi, Inc.
and
Contran Corporation
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99.1
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Unaudited
Pro Forma Condensed Consolidated Financial Statements of the
registrant.
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99.2
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Press
release dated March 26, 2007 issued by the
registrant.
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RESTATED
CERTIFICATE OF
INCORPORATION
OF VALHI, INC.
(Original
Certificate of Incorporation
Filed
December 1, 1932 under
the
name
Liberty Loan Corporation)
ARTICLE
I
The
name
of the corporation is Valhi, Inc. (the “Corporation”).
ARTICLE
II
The
address of the registered office of the Corporation in the State of Delaware
is
1209 Orange Street, in the City of Wilmington, County of New Castle.
The
name
of its registered agent at such address is The Corporation Trust
Company.
ARTICLE
III
The
purpose for which the
Corporation is organized is to engage in any lawful act or activity for which
corporations may be organized under the Delaware General Corporation
Law.
ARTICLE
IV
The
total
number of shares of all classes of stock which the Corporation has authority
to
issue is one hundred fifty-five million (155,000,000) shares, of which one
hundred fifty million (150,000,000) shares are common stock, $.01 par value
per
share (hereinafter referred to as “Common
Stock”),
and
five million (5,000,000) shares are preferred stock $.01 par value per share
(hereinafter referred to as “Preferred
Stock”).
The
designation and the powers, preferences and rights of the shares of Common
Stock
and Preferred Stock and the qualifications, limitations and restrictions thereof
are as follows:
1. Common
Stock.
A. Shares
of
Common Stock may be issued from time to time as the Board of Directors shall
determine and on such terms and for such consideration as shall be fixed by
the
Board of Directors. Each share of Common Stock shall be equal to every other
share of Common Stock in every respect.
B. The
holders of Common Stock shall be entitled to one vote for each share of Common
Stock held of record on the books of the Corporation with respect to all matters
submitted for stockholder approval.
2. Preferred
Stock.
Preferred Stock may be issued from time to time in one or more series with
such
distinctive designations as may be stated in the resolution or resolutions
providing for the issue of such stock from time to time adopted by the Board
of
Directors. The resolution or resolutions providing for the issues of shares
of a
particular series shall fix, subject to applicable laws and provisions of this
Article IV, the designation, rights, preferences and limitations of the shares
of each such series. The authority of the Board of Directors in respect to
each
series shall include, but not be limited to, determination of the
following:
(i) the
consideration for which such Preferred Stock shall be issued;
(ii) the
number of shares constituting such series, including the authority to increase
or decrease such number, and the distinctive designation of such
series;
(iii) the
dividend rate of the shares of such series, whether the dividends shall be
cumulative and, if so, the date from which they shall be cumulative, and the
relative rights of priority, if any, of payment of dividends on shares of such
series;
(iv) the
right, if any, of the Corporation to redeem shares of such series and the terms
and conditions of such redemption;
(v) the
rights of the shares in case of a voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, and the relative rights of
priority, if any, of payment of shares of such series;
(vi) the
obligation, if any, of Corporation to retire shares of such series pursuant
to a
retirement or sinking fund or funds of a similar nature or otherwise and the
terms and conditions of such obligation;
(vii) the
terms
and conditions, if any, upon which shares of such series shall be convertible
into or exchangeable for shares of stock of any other class or classes,
including the price or prices or the rate or rates of conversion or exchange
and
the terms of adjustment, if any;
(viii) the
voting rights, if any, of the shares of such series, in addition to any voting
rights required by law; and
(ix) any
other
rights, preferences or limitations of shares of such series.
3. No
holder
of stock of any class or series or of other securities of the Corporation,
or of
options, warrants or other rights to purchase stock of any class or series
or
other securities of the Corporation, shall have any preemptive or preferential
right to purchase or subscribe for any securities of the
Corporation.
ARTICLE
V
1. Number
of Directors.
The
number of Directors of the Corporation shall be as set forth in the Bylaws
of
the Corporation, as they may be amended from time to time. No decrease in the
number of Directors by amendment of the Bylaws shall have the effect of
shortening the term of any Director then in office.
2. Vacancies.
Vacancies on the Board of Directors, whether created by increase in the number
of Directors, or by death, disability, resignation or removal, shall be filled
by a majority of the Directors then remaining in office.
3. Removal.
A
Director may be removed by the stockholders of the Corporation only for cause
at
a meeting of stockholders, called for such purpose in conformity with the
Bylaws, by the affirmative vote of a majority of the shares entitled to vote
at
such meeting.
4. Liability
of Directors.
A
Director of the Corporation shall not be personally liable to the Corporation
or
its stockholders for monetary damages for breach of fiduciary duty as a
Director, except for liability (i) for any breach of the Director’s duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions
not
in good faith or which involve intentional misconduct or a knowing violation
of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the Director derived any improper personal
benefit. If the Delaware General Corporation Law is hereafter amended, then
the
liability of a Director of the Corporation shall be eliminated or limited to
the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of this paragraph 4 shall not aversely affect any
right or protection of a Director of the Corporation existing at the time of
such repeal or modification.
ARTICLE
VI
In
furtherance of, and not in limitation of, the powers conferred by statute,
the
Board of Directors is hereby expressly authorized and empowered to adopt, alter,
amend or repeal the Bylaws of the Corporation, without any action or approval
by
the stockholders of the Corporation, by the affirmative vote of a majority
of
the Directors then in office.
ARTICLE
VII
1. The
Corporation may in its Bylaws confer powers upon its Board of Directors in
addition to, but not in contravention of, those elsewhere provided in this
Certificate of Incorporation and in addition to, but not in contravention of,
the powers and authorities expressly conferred upon the Board of Directors
by
the laws of the State of Delaware. All of the powers of the Corporation, insofar
as the same be lawfully vested by this Certificate of Incorporation in the
Board
of Directors, are hereby conferred upon and vested in the Board of Directors
of
the Corporation.
2. The
Board
of Directors and stockholders of the Corporation shall have the power, to the
extent provided by the Bylaws, to hold their respective meetings within or
outside the State of Delaware. The Directors shall have the power to keep the
books, papers, documents and records of the Corporation within or without the
State of Delaware (except to the extent required by the laws of the State of
Delaware to be kept within that state), and to establish one or more offices
of
the Corporation within or without the State of Delaware as the Board of
Directors may from time to time authorize. Election of Directors need not be
by
written ballot unless the Bylaws of the Corporation so provide.
3. The
Corporation reserves the right to amend, alter, change or repeal any provision
contained in this Certificate of Incorporation in the manner now or hereafter
provided by statute, and all rights conferred upon stockholders herein are
granted subject to this reservation.
CERTIFICATE
OF DESIGNATIONS, RIGHTS AND PREFERENCES OF
6%
SERIES A PREFERRED STOCK
Pursuant
to Section 151 of the
General
Corporation Law of the State of Delaware
Valhi,
Inc.,
a
Delaware corporation (the “Corporation”),
certifies as follows:
FIRST:
The
Certificate of Incorporation of the Corporation authorizes the issuance of
5,000,000 shares of Preferred Stock, par value $.01 per share, and, further,
authorizes the Board of Directors of the Corporation, subject to the limitations
prescribed by law and the provisions of the Certificate of Incorporation, to
provide for the issuance of shares of the Preferred Stock or to provide for
the
issuance of shares of the Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each such series and
to
fix the designations, voting powers, preference rights and qualifications,
limitations or restrictions of the shares of the Preferred Stock of each such
series.
SECOND:
The
Board of Directors of the Corporation, as of February 28, 2007, duly adopted
the
following resolutions, authorizing the creation and issuance of a series of
said
Preferred Stock to be known as 6% Series A Preferred Stock:
RESOLVED,
the
Board of Directors, pursuant to the authority vested in it by the provisions
of
the Certificate of Incorporation of the Corporation, hereby authorizes the
issuance of a series of the Corporation’s Preferred Stock, par value $.01 per
share, consisting of 5,000 shares of which are authorized to be issued under
the
Corporation’s Certificate of Incorporation (such 5,000 shares being hereinafter
referred to as the “Series
A Preferred Stock”),
of
the Corporation and hereby fixes the number, designations, preferences, rights
and limitations thereof in addition to those set forth in said Certificate
of
Incorporation as follows:
Section 1. Certain
Definitions.
As used
in this Certificate, the following terms shall have the following meanings,
unless the context otherwise requires:
“Board
of Directors”
means
either the board of directors of the Corporation or any duly authorized
committee of such board.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which state or U.S. federally
chartered banking institutions in New York, New York are not required to be
open.
“Capital
Stock”
of
any
Person means any and all shares, interests, participations or other equivalents
however designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such Person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such Person
that
are traded on an established national or regional trading market or exchange,
including but not limited to the common stock, par value $.01 per share, of
Valhi, Inc., a Delaware corporation.
“Certificate”
means
this Certificate of Designations, Rights and Preferences of 6% Series A
Preferred Stock.
“Certificate
of Incorporation”
means
the Certificate of Incorporation of the Corporation, as amended from time to
time.
“Common
Stock”
means
the voting Common Stock, $.01 par value per share, of the Corporation and any
other stock of any class of the Corporation that has no preference in respect
of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
“Corporation”
means
Valhi, Inc., a Delaware corporation, and its successors.
“Dividend
Payment Date”
means
March 31, June 30, September 30 and December 31, of each year, or if any such
date is not a Business Day, on the next succeeding Business Day.
“Dividend
Period”
means
the period beginning on, and including, a Dividend Payment Date and ending
on,
and excluding, the immediately succeeding Dividend Payment Date.
“Liquidation
Preference”
has
the
meaning assigned to such term in Section
4(a).
“Original
Issue Date”
has
the
meaning assigned to such term in Section
3(a).
“Outstanding”
means,
when used with respect to Series A Preferred Stock, as of any date of
determination, all shares of Series A Preferred Stock outstanding as of such
date; provided
further
that, in
determining whether the holders of Series A Preferred Stock have given any
request, demand, authorization, direction, notice, consent or waiver or taken
any other action hereunder, Series A Preferred Stock owned by the Corporation
shall be deemed not to be outstanding.
“Parity
Stock”
has
the
meaning assigned to such term in Section
2.
“Person”
means
an individual, a corporation, a partnership, a limited liability company, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Record
Date”
means
with respect to the dividends payable on March 31, June 30, September 30 and
December 31 of each year, March 15, June 15, September 15 and December 15
of each year, respectively, or such other record date, not more than 60 days
and
not less than 10 days preceding the applicable Dividend Payment Date, as may
be
fixed by the Board of Directors.
“Senior
Stock”
has
the
meaning assigned to such term in Section
2.
“Series
A Preferred Stock”
has
the
meaning assigned to such term in the Resolution set forth in the Preamble
hereto.
Section 2. Rank.
The
Series A Preferred Stock shall, with respect to rights upon liquidation,
dissolution or winding up of the Corporation, rank (a) senior to all classes
or
series of Common Stock and to any other class or series of equity securities
issued by the Corporation not referred to in clauses (b) or (c) of this
paragraph, (b) on a parity with all equity securities issued by the Corporation
in the future, the terms of which specifically provide that such equity
securities rank on a parity with the Series A Preferred Stock with respect
to
dividend rights or rights upon the liquidation, dissolution or winding up of
the
Corporation (“Parity
Stock”)
and
(c) junior to all equity securities issued by the Corporation in the future
the
terms of which specifically provide that such equity securities rank senior
to
the Series A Preferred Stock with respect to dividend rights or rights upon
the
liquidation, dissolution or winding up of the Corporation (“Senior
Stock”).
The
term “equity securities” shall not include convertible debt
securities.
Section 3. Dividends.
(a) Holders
of the then Outstanding shares of Series A Preferred Stock shall be entitled
to
receive, when and as authorized by the Board of Directors, out of funds legally
available for the payment of dividends, cash dividends at the rate of 6% of
the
$133,466.75 per share Liquidation Preference per annum. Such dividends shall
accrue from the first date on which any Series A Preferred Stock is issued
(the
“Original
Issue Date”)
and
shall be payable quarterly in arrears on each Dividend Payment Date. Any
dividend payable on the Series A Preferred Stock for any partial dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in the
stock records of the Corporation at the close of business on the applicable
Record Date.
(b) No
dividends on shares of Series A Preferred Stock shall be declared by the
Corporation or paid or set apart for payment by the Corporation at such time
as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibit such declaration, payment
or
setting apart for payment or provide that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder,
or
if such declaration or payment shall be restricted or prohibited by
law.
(c) Notwithstanding
the foregoing, dividends on the Series A Preferred Stock shall accrue whether
or
not the terms and provisions set forth in Section
3(b)
hereof
at any time prohibit the current payment of dividends, whether or not the
Corporation has earnings, whether or not there are funds legally available
for
the payment of such dividends and whether or not such dividends are declared.
Accrued but unpaid dividends on the Series A Preferred Stock will accumulate
as
of the Dividend Payment Date on which they first become payable, but interest
will not accrue on any amount of accrued but unpaid dividends on the Series
A
Preferred Stock.
(d) Nothing
contained herein shall prevent or restrict the Corporation from the declaration,
payment or set aside for payment or any other distribution of cash or other
property, directly or indirectly, on or with respect to any shares of the Common
Stock, or shares of any other class or series of equity securities ranking
junior to or on a parity with the Series A Preferred Stock as to dividends
or
upon liquidation, including without limitation accrued and unpaid dividends
on
the Series A Preferred Stock. Further, nothing contained herein shall prevent
or
restrict the Corporation from redeeming, purchasing or otherwise acquiring
for
any consideration (or any moneys be paid to or made available for a sinking
fund
for the redemption of any such shares) by the Corporation any shares of Common
Stock, or any shares of equity securities ranking junior to or on a parity
with
the Series A Preferred Stock as to dividends or upon liquidation.
(e) When
dividends are not paid in full (or a sum sufficient for such full payment is
not
so set apart) on the Series A Preferred Stock and the shares of any other class
or series of equity securities ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon the Series A Preferred
Stock and any other class or series of such equity securities ranking on a
parity as to dividends with the Series A Preferred Stock shall be declared
pro
rata
so that
the amount of dividends declared per share of Series A Preferred Stock and
such
other class or series of such equity securities shall in all cases bear to
each
other the same ratio that accrued dividends per share on the Series A Preferred
Stock and such other class or series of such equity securities (which shall
not
include any accrual in respect of unpaid dividends for prior dividend periods
if
such other class or series of equity securities does not have a cumulative
dividend) bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on Series A
Preferred Stock which may be in arrears.
(f) Any
dividend payment made on shares of the Series A Preferred Stock shall be
credited against the accrued but unpaid dividends due as designated by the
Corporation. Holders of the Series A Preferred Stock shall not be entitled
to
any dividend, whether payable in cash, property or shares of Capital Stock
in
excess of full accrued dividends on the Series A Preferred Stock as described
above.
Section 4. Liquidation
Preference.
(a) Upon
any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of Series A Preferred Stock then
Outstanding are entitled to be paid out of the assets of the Corporation,
legally available for distribution to its stockholders, a liquidation preference
of $133,466.75 per share of Series A Preferred Stock (the “Liquidation
Preference”),
plus
an amount equal to any accrued and unpaid dividends (whether or not declared)
to
the date of payment, before any distribution of assets is made to holders of
Common Stock or any other class or series of equity securities that ranks junior
to the Series A Preferred Stock as to liquidation rights.
(b) In
the
event that, upon any such voluntary or involuntary liquidation, dissolution
or
winding up, the available assets of the Corporation are insufficient to pay
the
amount of the liquidating distributions on all Outstanding shares of Series
A
Preferred Stock and the corresponding amounts payable on all shares of each
other class or series of equity securities ranking on a parity with the Series
A
Preferred Stock as to liquidation rights, then the holders of the Series A
Preferred Stock and each such other class or series of equity securities shall
share proportionately in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be respectively
entitled.
(c) After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Series A Preferred Stock will have no right or claim
to
any of the remaining assets of the Corporation.
(d) Written
notice of any such liquidation, dissolution or winding up of the Corporation,
stating the payment date or dates when, and the place or places where, the
amounts distributable in such circumstances shall be payable, shall be given
by
first class mail, postage pre-paid, not less than 30 nor more than 60 days
prior
to the payment date stated therein, to each record holder of the Series A
Preferred Stock at the respective addresses of such holders as the same shall
appear on the stock transfer records of the Corporation.
(e) The
consolidation or merger of the Corporation with or into any other corporation,
trust or entity or of any other corporation with or into the Corporation, or
the
sale, lease or conveyance of all or substantially all of the property or
business of the Corporation, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Corporation.
Section 5. Voting
Rights.
(a) Holders
of the Series A Preferred Stock will not have any voting rights, except as
set
forth below or as otherwise provided in the Certificate of Incorporation, by
law
or pursuant to agreements among the holders of voting equity securities of
the
Corporation.
(b) The
affirmative vote of holders of at least two-thirds of the Outstanding shares
of
the Series A Preferred Stock and all other Parity Stock with like voting rights,
voting as a single class, in person or by proxy, at a special meeting called
for
the purpose, or by written consent in lieu of meeting, shall be required to
alter, repeal or amend, whether by merger, consolidation, combination,
reclassification or otherwise, any provisions of the Certificate of
Incorporation if the amendment would amend, alter or affect the powers,
preferences or rights of the Series A Preferred Stock, so as to adversely affect
the holders thereof; provided,
however,
that
any increase in the amount of the authorized common stock or authorized
preferred stock or the creation and issuance of other series of common stock
or
preferred stock will not be deemed to materially and adversely affect such
powers, preferences or special rights.
Section 6. Consolidation,
Merger and Sale of Assets.
The
Corporation, without the consent of the holders of any of the Outstanding Series
A Preferred Stock, may consolidate with or merge into any other Person or
convey, transfer or lease all or substantially all of its assets to any Person
or may permit any Person to consolidate with or merge into, or transfer or
lease
all or substantially all its properties to the Corporation.
Section 7. Headings.
The
headings of the Sections of this Certificate are for convenience of reference
only and shall not define, limit or affect any of the provisions
hereof.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
its
name and on its behalf on this 26th
day of
March, 2007.
Valhi,
Inc.
By:
Gregory
M. Swalwell
Vice
President and Controller
CERTIFICATE
OF DESIGNATIONS, RIGHTS AND PREFERENCES OF
6%
SERIES A PREFERRED STOCK
Pursuant
to Section 151 of the
General
Corporation Law of the State of Delaware
Valhi,
Inc.,
a
Delaware corporation (the “Corporation”),
certifies as follows:
FIRST:
The
Certificate of Incorporation of the Corporation authorizes the issuance of
5,000,000 shares of Preferred Stock, par value $.01 per share, and, further,
authorizes the Board of Directors of the Corporation, subject to the limitations
prescribed by law and the provisions of the Certificate of Incorporation, to
provide for the issuance of shares of the Preferred Stock or to provide for
the
issuance of shares of the Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each such series and
to
fix the designations, voting powers, preference rights and qualifications,
limitations or restrictions of the shares of the Preferred Stock of each such
series.
SECOND:
The
Board of Directors of the Corporation, as of February 28, 2007, duly adopted
the
following resolutions, authorizing the creation and issuance of a series of
said
Preferred Stock to be known as 6% Series A Preferred Stock:
RESOLVED,
the
Board of Directors, pursuant to the authority vested in it by the provisions
of
the Certificate of Incorporation of the Corporation, hereby authorizes the
issuance of a series of the Corporation’s Preferred Stock, par value $.01 per
share, consisting of 5,000 shares of which are authorized to be issued under
the
Corporation’s Certificate of Incorporation (such 5,000 shares being hereinafter
referred to as the “Series
A Preferred Stock”),
of
the Corporation and hereby fixes the number, designations, preferences, rights
and limitations thereof in addition to those set forth in said Certificate
of
Incorporation as follows:
Section 1. Certain
Definitions.
As used
in this Certificate, the following terms shall have the following meanings,
unless the context otherwise requires:
“Board
of Directors”
means
either the board of directors of the Corporation or any duly authorized
committee of such board.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which state or U.S. federally
chartered banking institutions in New York, New York are not required to be
open.
“Capital
Stock”
of
any
Person means any and all shares, interests, participations or other equivalents
however designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such Person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such Person
that
are traded on an established national or regional trading market or exchange,
including but not limited to the common stock, par value $.01 per share, of
Valhi, Inc., a Delaware corporation.
“Certificate”
means
this Certificate of Designations, Rights and Preferences of 6% Series A
Preferred Stock.
“Certificate
of Incorporation”
means
the Certificate of Incorporation of the Corporation, as amended from time to
time.
“Common
Stock”
means
the voting Common Stock, $.01 par value per share, of the Corporation and any
other stock of any class of the Corporation that has no preference in respect
of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
“Corporation”
means
Valhi, Inc., a Delaware corporation, and its successors.
“Dividend
Payment Date”
means
March 31, June 30, September 30 and December 31, of each year, or if any such
date is not a Business Day, on the next succeeding Business Day.
“Dividend
Period”
means
the period beginning on, and including, a Dividend Payment Date and ending
on,
and excluding, the immediately succeeding Dividend Payment Date.
“Liquidation
Preference”
has
the
meaning assigned to such term in Section
4(a).
“Original
Issue Date”
has
the
meaning assigned to such term in Section
3(a).
“Outstanding”
means,
when used with respect to Series A Preferred Stock, as of any date of
determination, all shares of Series A Preferred Stock outstanding as of such
date; provided
further
that, in
determining whether the holders of Series A Preferred Stock have given any
request, demand, authorization, direction, notice, consent or waiver or taken
any other action hereunder, Series A Preferred Stock owned by the Corporation
shall be deemed not to be outstanding.
“Parity
Stock”
has
the
meaning assigned to such term in Section
2.
“Person”
means
an individual, a corporation, a partnership, a limited liability company, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Record
Date”
means
with respect to the dividends payable on March 31, June 30, September 30 and
December 31 of each year, March 15, June 15, September 15 and December 15
of each year, respectively, or such other record date, not more than 60 days
and
not less than 10 days preceding the applicable Dividend Payment Date, as may
be
fixed by the Board of Directors.
“Senior
Stock”
has
the
meaning assigned to such term in Section
2.
“Series
A Preferred Stock”
has
the
meaning assigned to such term in the Resolution set forth in the Preamble
hereto.
Section 2. Rank.
The
Series A Preferred Stock shall, with respect to rights upon liquidation,
dissolution or winding up of the Corporation, rank (a) senior to all classes
or
series of Common Stock and to any other class or series of equity securities
issued by the Corporation not referred to in clauses (b) or (c) of this
paragraph, (b) on a parity with all equity securities issued by the Corporation
in the future, the terms of which specifically provide that such equity
securities rank on a parity with the Series A Preferred Stock with respect
to
dividend rights or rights upon the liquidation, dissolution or winding up of
the
Corporation (“Parity
Stock”)
and
(c) junior to all equity securities issued by the Corporation in the future
the
terms of which specifically provide that such equity securities rank senior
to
the Series A Preferred Stock with respect to dividend rights or rights upon
the
liquidation, dissolution or winding up of the Corporation (“Senior
Stock”).
The
term “equity securities” shall not include convertible debt
securities.
Section 3. Dividends.
(a) Holders
of the then Outstanding shares of Series A Preferred Stock shall be entitled
to
receive, when and as authorized by the Board of Directors, out of funds legally
available for the payment of dividends, cash dividends at the rate of 6% of
the
$133,466.75 per share Liquidation Preference per annum. Such dividends shall
accrue from the first date on which any Series A Preferred Stock is issued
(the
“Original
Issue Date”)
and
shall be payable quarterly in arrears on each Dividend Payment Date. Any
dividend payable on the Series A Preferred Stock for any partial dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in the
stock records of the Corporation at the close of business on the applicable
Record Date.
(b) No
dividends on shares of Series A Preferred Stock shall be declared by the
Corporation or paid or set apart for payment by the Corporation at such time
as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibit such declaration, payment
or
setting apart for payment or provide that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder,
or
if such declaration or payment shall be restricted or prohibited by
law.
(c) Notwithstanding
the foregoing, dividends on the Series A Preferred Stock shall accrue whether
or
not the terms and provisions set forth in Section
3(b)
hereof
at any time prohibit the current payment of dividends, whether or not the
Corporation has earnings, whether or not there are funds legally available
for
the payment of such dividends and whether or not such dividends are declared.
Accrued but unpaid dividends on the Series A Preferred Stock will accumulate
as
of the Dividend Payment Date on which they first become payable, but interest
will not accrue on any amount of accrued but unpaid dividends on the Series
A
Preferred Stock.
(d) Nothing
contained herein shall prevent or restrict the Corporation from the declaration,
payment or set aside for payment or any other distribution of cash or other
property, directly or indirectly, on or with respect to any shares of the Common
Stock, or shares of any other class or series of equity securities ranking
junior to or on a parity with the Series A Preferred Stock as to dividends
or
upon liquidation, including without limitation accrued and unpaid dividends
on
the Series A Preferred Stock. Further, nothing contained herein shall prevent
or
restrict the Corporation from redeeming, purchasing or otherwise acquiring
for
any consideration (or any moneys be paid to or made available for a sinking
fund
for the redemption of any such shares) by the Corporation any shares of Common
Stock, or any shares of equity securities ranking junior to or on a parity
with
the Series A Preferred Stock as to dividends or upon liquidation.
(e) When
dividends are not paid in full (or a sum sufficient for such full payment is
not
so set apart) on the Series A Preferred Stock and the shares of any other class
or series of equity securities ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon the Series A Preferred
Stock and any other class or series of such equity securities ranking on a
parity as to dividends with the Series A Preferred Stock shall be declared
pro
rata
so that
the amount of dividends declared per share of Series A Preferred Stock and
such
other class or series of such equity securities shall in all cases bear to
each
other the same ratio that accrued dividends per share on the Series A Preferred
Stock and such other class or series of such equity securities (which shall
not
include any accrual in respect of unpaid dividends for prior dividend periods
if
such other class or series of equity securities does not have a cumulative
dividend) bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on Series A
Preferred Stock which may be in arrears.
(f) Any
dividend payment made on shares of the Series A Preferred Stock shall be
credited against the accrued but unpaid dividends due as designated by the
Corporation. Holders of the Series A Preferred Stock shall not be entitled
to
any dividend, whether payable in cash, property or shares of Capital Stock
in
excess of full accrued dividends on the Series A Preferred Stock as described
above.
Section 4. Liquidation
Preference.
(a) Upon
any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of Series A Preferred Stock then
Outstanding are entitled to be paid out of the assets of the Corporation,
legally available for distribution to its stockholders, a liquidation preference
of $133,466.75 per share of Series A Preferred Stock (the “Liquidation
Preference”),
plus
an amount equal to any accrued and unpaid dividends (whether or not declared)
to
the date of payment, before any distribution of assets is made to holders of
Common Stock or any other class or series of equity securities that ranks junior
to the Series A Preferred Stock as to liquidation rights.
(b) In
the
event that, upon any such voluntary or involuntary liquidation, dissolution
or
winding up, the available assets of the Corporation are insufficient to pay
the
amount of the liquidating distributions on all Outstanding shares of Series
A
Preferred Stock and the corresponding amounts payable on all shares of each
other class or series of equity securities ranking on a parity with the Series
A
Preferred Stock as to liquidation rights, then the holders of the Series A
Preferred Stock and each such other class or series of equity securities shall
share proportionately in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be respectively
entitled.
(c) After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Series A Preferred Stock will have no right or claim
to
any of the remaining assets of the Corporation.
(d) Written
notice of any such liquidation, dissolution or winding up of the Corporation,
stating the payment date or dates when, and the place or places where, the
amounts distributable in such circumstances shall be payable, shall be given
by
first class mail, postage pre-paid, not less than 30 nor more than 60 days
prior
to the payment date stated therein, to each record holder of the Series A
Preferred Stock at the respective addresses of such holders as the same shall
appear on the stock transfer records of the Corporation.
(e) The
consolidation or merger of the Corporation with or into any other corporation,
trust or entity or of any other corporation with or into the Corporation, or
the
sale, lease or conveyance of all or substantially all of the property or
business of the Corporation, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Corporation.
Section 5. Voting
Rights.
(a) Holders
of the Series A Preferred Stock will not have any voting rights, except as
set
forth below or as otherwise provided in the Certificate of Incorporation, by
law
or pursuant to agreements among the holders of voting equity securities of
the
Corporation.
(b) The
affirmative vote of holders of at least two-thirds of the Outstanding shares
of
the Series A Preferred Stock and all other Parity Stock with like voting rights,
voting as a single class, in person or by proxy, at a special meeting called
for
the purpose, or by written consent in lieu of meeting, shall be required to
alter, repeal or amend, whether by merger, consolidation, combination,
reclassification or otherwise, any provisions of the Certificate of
Incorporation if the amendment would amend, alter or affect the powers,
preferences or rights of the Series A Preferred Stock, so as to adversely affect
the holders thereof; provided,
however,
that
any increase in the amount of the authorized common stock or authorized
preferred stock or the creation and issuance of other series of common stock
or
preferred stock will not be deemed to materially and adversely affect such
powers, preferences or special rights.
Section 6. Consolidation,
Merger and Sale of Assets.
The
Corporation, without the consent of the holders of any of the Outstanding Series
A Preferred Stock, may consolidate with or merge into any other Person or
convey, transfer or lease all or substantially all of its assets to any Person
or may permit any Person to consolidate with or merge into, or transfer or
lease
all or substantially all its properties to the Corporation.
Section 7. Headings.
The
headings of the Sections of this Certificate are for convenience of reference
only and shall not define, limit or affect any of the provisions
hereof.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
its
name and on its behalf on this 26th
day of
March, 2007.
Valhi,
Inc.
By:
Gregory
M. Swalwell
Vice
President and Controller
STOCK
PURCHASE AGREEMENT
This
Stock Purchase Agreement (the “Agreement”)
is
made and entered into as of March 26, 2007 between Contran Corporation, a
Delaware corporation (“Contran”),
and
Valhi, Inc., a Delaware corporation (“Valhi”).
Recitals
A. Valhi
has
today paid a stock dividend (the “Stock
Dividend”)
to its
stockholders of record as of March 12, 2007 of approximately 56.8 million shares
(the “Shares”) in the aggregate of the common stock, par value $0.01 per share,
of Titanium Metals Corporation, a Delaware corporation and an affiliate of
Valhi.
B. Valhi
is
a member of the consolidated U.S. federal tax return of which Contran is the
parent company (the “Contran
Tax Group”).
C. As
a
member of the Contran Tax Group and pursuant to a tax policy between Valhi
and
Contran, Valhi computes provisions for U.S. income taxes on a separate company
basis using tax elections made by Contran and makes payments to Contran or
receives payments from Contran in amounts it would have paid to or received
from
the U.S. Internal Revenue Service had it not been a member of the Contran Tax
Group but instead had been a separate taxpayer.
D. Upon
the
payment of the Stock Dividend and pursuant to the tax policy between Valhi
and
Contran, Valhi has incurred a tax obligation to Contran, which obligation
is a function of the difference between the aggregate value of the Shares
distributed based on their closing market price on the date of distribution
($36.90 per share) less Valhi's aggregate tax basis in such Shares (the
“Tax
Obligation”).
E. On
the
terms and subject to the conditions of this Agreement, including the release
and
indemnity of the Tax Obligation by Contran, Valhi wishes to today issue 5,000
shares (the “Shares”)
of its
6% series A preferred stock, par value $0.01 per share, of Valhi, to Contran,
and Contran wishes to purchase the Shares (the “Transaction”).
Agreement
The
parties agree as follows:
ARTICLE I.
THE
CLOSING
Section 1. Closing
and Deliveries. The
closing of the purchase and sale of the Shares shall take place effective as
of
March 26, 2007 (the “Closing
Date”).
On
the Closing Date:
(a) Valhi
shall issue and deliver to Contran certificates representing the Shares;
and
(b) Contran
shall undertake responsibility for and shall release Valhi from, and indemnify
Valhi against, the Tax Obligation as set forth in Article IV and Section 5.2
of
this Agreement.
ARTICLE II.
REPRESENTATIONS
AND WARRANTIES OF VALHI
Valhi
hereby represents and warrants to Contran as of the date of this Agreement
as
follows:
Section 2.1. Authority. It
is a corporation validly existing and in good standing under the laws of the
state of its incorporation. It has full corporate power and authority, without
the consent or approval of any other person, to execute and deliver this
Agreement and to consummate the Transaction. All corporate action required
to be
taken by or on behalf of it to authorize the execution, delivery and performance
of this Agreement has been duly and properly taken.
Section 2.2. Validity. This
Agreement is duly executed and delivered by it and constitutes its lawful,
valid
and binding obligation, enforceable in accordance with its terms. The execution
and delivery of this Agreement and the consummation of the Transaction by it
are
not prohibited by, do not violate or conflict with any provision of, and do
not
result in a default under (a) its charter or bylaws; (b) any material contract,
agreement or other instrument to which it is a party or by which it is bound;
(c) any order, writ, injunction, decree or judgment of any court or governmental
agency applicable to it; or (d) any law, rule or regulation applicable to it,
except in each case for such prohibitions, violations, conflicts or defaults
that would not have a material adverse consequence to the
Transaction.
Section 2.3. Terms
of the Shares. The
certificate of designations, rights and preferences of Valhi’s 6% series A
preferred stock is set forth on Exhibit
A
attached
hereto.
Section 2.4. Title
to the Shares. Upon
consummation of the transactions contemplated by this Agreement, Contran will
acquire good and marketable title to the Shares, free and clear of any liens,
encumbrances, security interests, restrictive agreements, claims or
imperfections of any nature whatsoever, other than restrictions on transfer
imposed by applicable securities laws.
ARTICLE III.
REPRESENTATIONS
AND WARRANTIES OF CONTRAN
Contran
hereby represents and warrants to Valhi as of the date of this Agreement as
follows:
Section 3.1. Authority. It
is a corporation validly existing and in good standing under the laws of the
state of Delaware. It has full corporate power and authority, without the
consent or approval of any other person, to execute and deliver this Agreement
and to consummate the Transaction. All corporate and other actions required
to
be taken by or on behalf of it to authorize the execution, delivery and
performance of this Agreement have been duly and properly taken.
Section 3.2. Validity. This
Agreement is duly executed and delivered by it and constitutes its lawful,
valid
and binding obligation, enforceable in accordance with its terms. The execution
and delivery of this Agreement and the consummation of the Transaction by it
are
not prohibited by, do not violate or conflict with any provision of, and do
not
result in a default under (a) its charter or bylaws; (b) any material contract,
agreement or other instrument to which it is a party or by which it is bound;
(c) any order, writ, injunction, decree or judgment of any court or governmental
agency applicable to it; or (d) any law, rule or regulation applicable to it,
except in each case for such prohibitions, violations, conflicts or defaults
that would not have a material adverse consequence to the
Transaction.
Section 3.3. Purchase
for Investment. It
is purchasing the Shares to be sold and delivered to it hereunder for investment
solely for its own account and not with a view to, or for resale in connection
with, the distribution thereof. It understands that such Shares are restricted
securities under the Securities Act of 1933, as amended (the “Securities
Act”),
and
that such Shares must be held indefinitely unless they are registered under
the
Securities Act and any applicable state securities or blue sky laws or an
exemption from such registration is available.
Section 3.4. Nature
of Purchaser. It
has such knowledge and experience in financial and business matters that it
is
capable of evaluating the merits and risks of the purchase of the
Shares.
ARTICLE IV.
RELEASE
Upon
the
purchase of the Shares pursuant to the terms of this Agreement, Contran from
and
after the Closing releases and forever discharges Valhi from the Tax Obligation.
Notwithstanding the foregoing, if any settlement with the U.S. Internal Revenue
Service, state or local tax authority or court decision which has become final
during any taxable period preceding Closing, including the period beginning
January 1, 2007 and ending on the Closing Date, results in any adjustment to
Valhi’s aggregate tax basis or the aggregate value of the Shares which affects
or relates to the Tax Obligation, then the Tax Obligation shall be re-determined
to give effect to such adjustment as if it had been made as part of or reflected
in the original computation of such Tax Obligation. If the effect of such
adjustment results in an increase or decrease in the Tax Obligation, then such
amount shall promptly be paid to Contran by Valhi or paid to Valhi by Contran,
respectively.
ARTICLE V.
INDEMNIFICATION
Section 5.1. Indemnification
by Valhi From
and after the Closing, Valhi shall defend, indemnify, save and keep harmless
Contran and its successors and assigns against and from all Damages (as defined
below) sustained or incurred by Contran resulting from or arising out of or
by
virtue of any inaccuracy in or breach of any representation or warranty made
by
Valhi in this Agreement or in any closing document delivered to Contran by
Valhi
in connection with this Agreement, or any breach by Valhi of, or failure by
Valhi to comply with, any of its covenants or obligations under this
Agreement.
As
used
in this Agreement, “Damages”
mean
all liabilities, demands, claims, actions or causes of action, regulatory,
legislative or judicial proceedings or investigations, assessments, levies,
losses, fines, penalties, damages, costs and expenses, including, without
limitation: (a) reasonable attorneys’, accountants’, investigators’, and
experts’ fees and expenses sustained or incurred in connection with the defense
or investigation of any such liability, and (b) any and all reasonable costs
and
expenses (including reasonable legal fees and expenses) arising from any Damages
or incurred in an investigation and defense, or in enforcing the indemnification
provisions of this Agreement.
Section 5.2. Indemnification
by Contran. From
and after the Closing, Contran shall defend, indemnify, save and keep harmless
Valhi and its successors and assigns against and from all Damages sustained
or
incurred by Valhi resulting from or arising out of or by virtue of:
(a) the
Tax
Obligation or adjustments, modifications or changes to the Tax Obligation now
existing or arising in the future, subject to the provisions set forth in
Article IV; and
(b) any
inaccuracy in or breach of any representation or warranty made by Contran in
this Agreement or in any closing document delivered to Contran by Valhi in
connection with this Agreement, or any breach by Contran of, or failure by
Contran to comply with, any of its covenants or obligations under this
Agreement.
ARTICLE VI.
GENERAL
PROVISIONS
Section 6.1.
Survival. The
representations, warranties covenants and other agreements set forth in this
Agreement shall survive the execution of this Agreement and the consummation
of
the transactions contemplated herein.
Section 6.2. Amendment
and Waiver. No
amendment or waiver of any provision of this Agreement shall in any event be
effective unless the same shall be in a writing referring to this Agreement
and
signed by the parties hereto, and then such amendment, waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.
Section 6.3. Parties
and Interest. This
Agreement shall bind and inure to the benefit of the parties named herein and
their respective heirs, successors and assigns.
Section 6.4. Entire
Transaction. This
Agreement contains the entire understanding among the parties with respect
to
the transactions contemplated hereby and supersedes all other agreements and
understandings among the parties with respect to the subject matter of this
Agreement.
Section 6.5. Applicable
Law. This
Agreement shall be governed by and construed in accordance with the domestic
laws of the state of Delaware, without giving effect to any choice of law or
conflict of law provision or rule (whether of the state of Delaware or any
other
jurisdiction) that would cause the application of the laws of any jurisdiction
other than the state of Delaware.
Section 6.6.
Severability. If
any provision of this Agreement is found to violate any statute, regulation,
rule, order or decree of any governmental authority, court, agency or exchange,
such invalidity shall not be deemed to effect any other provision hereof or
the
validity of the remainder of this Agreement and such invalid provision shall
be
deemed deleted to the minimum extent necessary to cure such
violation.
Section 6.7. Notice. All
notices, requests, demands and other communications hereunder shall be in
writing and shall be sent by registered or certified mail, postage prepaid
as
follows:
If
toValhi: Valhi,
Inc.
5430
LBJ
Freeway
Three
Lincoln Centre, Suite 1700
Dallas,
Texas 75240-2697
Attention: Secretary
If
to
Contran: Contran
Corporation
5430
LBJ
Freeway
Three
Lincoln Centre, Suite 1700
Dallas,
Texas 75240-2697
Attention: General
Counsel
Section 6.8. Headings. The
sections and other headings contained in this Agreement are for reference
purposes only and shall not effect in any way the meaning or interpretation
of
this Agreement.
The
parties hereto have caused this Agreement to be executed by their duly
authorized officers as of the date first written above.
VALHI,
INC.
By:
Gregory
M. Swalwell, Vice President
CONTRAN
CORPORATION
By:
Bobby
D. O’Brien, Vice President
c:\documents
and settings\mdowning\local settings\temporary internet
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Exhibit
A
Certificate
of Designations, Rights and Preferences of 6% Series A Preferred Stock of Valhi,
Inc.
CERTIFICATE
OF DESIGNATIONS, RIGHTS AND PREFERENCES OF
6%
SERIES A PREFERRED STOCK
Pursuant
to Section 151 of the
General
Corporation Law of the State of Delaware
Valhi,
Inc.,
a
Delaware corporation (the “Corporation”),
certifies as follows:
FIRST:
The
Certificate of Incorporation of the Corporation authorizes the issuance of
5,000,000 shares of Preferred Stock, par value $.01 per share, and, further,
authorizes the Board of Directors of the Corporation, subject to the limitations
prescribed by law and the provisions of the Certificate of Incorporation, to
provide for the issuance of shares of the Preferred Stock or to provide for
the
issuance of shares of the Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each such series and
to
fix the designations, voting powers, preference rights and qualifications,
limitations or restrictions of the shares of the Preferred Stock of each such
series.
SECOND:
The
Board of Directors of the Corporation, as of February 28, 2007, duly adopted
the
following resolutions, authorizing the creation and issuance of a series of
said
Preferred Stock to be known as 6% Series A Preferred Stock:
RESOLVED,
the
Board of Directors, pursuant to the authority vested in it by the provisions
of
the Certificate of Incorporation of the Corporation, hereby authorizes the
issuance of a series of the Corporation’s Preferred Stock, par value $.01 per
share, consisting of 5,000 shares of which are authorized to be issued under
the
Corporation’s Certificate of Incorporation (such 5,000 shares being hereinafter
referred to as the “Series
A Preferred Stock”),
of
the Corporation and hereby fixes the number, designations, preferences, rights
and limitations thereof in addition to those set forth in said Certificate
of
Incorporation as follows:
Section 1. Certain
Definitions.
As used
in this Certificate, the following terms shall have the following meanings,
unless the context otherwise requires:
“Board
of Directors”
means
either the board of directors of the Corporation or any duly authorized
committee of such board.
“Business
Day”
means
any day other than a Saturday, Sunday or a day on which state or U.S. federally
chartered banking institutions in New York, New York are not required to be
open.
“Capital
Stock”
of
any
Person means any and all shares, interests, participations or other equivalents
however designated of corporate stock or other equity participations, including
partnership interests, whether general or limited, of such Person and any rights
(other than debt securities convertible or exchangeable into an equity
interest), warrants or options to acquire an equity interest in such Person
that
are traded on an established national or regional trading market or exchange,
including but not limited to the common stock, par value $.01 per share, of
Valhi, Inc., a Delaware corporation.
“Certificate”
means
this Certificate of Designations, Rights and Preferences of 6% Series A
Preferred Stock.
“Certificate
of Incorporation”
means
the Certificate of Incorporation of the Corporation, as amended from time to
time.
“Common
Stock”
means
the voting Common Stock, $.01 par value per share, of the Corporation and any
other stock of any class of the Corporation that has no preference in respect
of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation.
“Corporation”
means
Valhi, Inc., a Delaware corporation, and its successors.
“Dividend
Payment Date”
means
March 31, June 30, September 30 and December 31, of each year, or if any such
date is not a Business Day, on the next succeeding Business Day.
“Dividend
Period”
means
the period beginning on, and including, a Dividend Payment Date and ending
on,
and excluding, the immediately succeeding Dividend Payment Date.
“Liquidation
Preference”
has
the
meaning assigned to such term in Section
4(a).
“Original
Issue Date”
has
the
meaning assigned to such term in Section
3(a).
“Outstanding”
means,
when used with respect to Series A Preferred Stock, as of any date of
determination, all shares of Series A Preferred Stock outstanding as of such
date; provided
further
that, in
determining whether the holders of Series A Preferred Stock have given any
request, demand, authorization, direction, notice, consent or waiver or taken
any other action hereunder, Series A Preferred Stock owned by the Corporation
shall be deemed not to be outstanding.
“Parity
Stock”
has
the
meaning assigned to such term in Section
2.
“Person”
means
an individual, a corporation, a partnership, a limited liability company, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
“Record
Date”
means
with respect to the dividends payable on March 31, June 30, September 30 and
December 31 of each year, March 15, June 15, September 15 and December 15
of each year, respectively, or such other record date, not more than 60 days
and
not less than 10 days preceding the applicable Dividend Payment Date, as may
be
fixed by the Board of Directors.
“Senior
Stock”
has
the
meaning assigned to such term in Section
2.
“Series
A Preferred Stock”
has
the
meaning assigned to such term in the Resolution set forth in the Preamble
hereto.
Section 2. Rank.
The
Series A Preferred Stock shall, with respect to rights upon liquidation,
dissolution or winding up of the Corporation, rank (a) senior to all classes
or
series of Common Stock and to any other class or series of equity securities
issued by the Corporation not referred to in clauses (b) or (c) of this
paragraph, (b) on a parity with all equity securities issued by the Corporation
in the future, the terms of which specifically provide that such equity
securities rank on a parity with the Series A Preferred Stock with respect
to
dividend rights or rights upon the liquidation, dissolution or winding up of
the
Corporation (“Parity
Stock”)
and
(c) junior to all equity securities issued by the Corporation in the future
the
terms of which specifically provide that such equity securities rank senior
to
the Series A Preferred Stock with respect to dividend rights or rights upon
the
liquidation, dissolution or winding up of the Corporation (“Senior
Stock”).
The
term “equity securities” shall not include convertible debt
securities.
Section 3. Dividends.
(a) Holders
of the then Outstanding shares of Series A Preferred Stock shall be entitled
to
receive, when and as authorized by the Board of Directors, out of funds legally
available for the payment of dividends, cash dividends at the rate of 6% of
the
$133,466.75 per share Liquidation Preference per annum. Such dividends shall
accrue from the first date on which any Series A Preferred Stock is issued
(the
“Original
Issue Date”)
and
shall be payable quarterly in arrears on each Dividend Payment Date. Any
dividend payable on the Series A Preferred Stock for any partial dividend period
will be computed on the basis of a 360-day year consisting of twelve 30-day
months. Dividends will be payable to holders of record as they appear in the
stock records of the Corporation at the close of business on the applicable
Record Date.
(b) No
dividends on shares of Series A Preferred Stock shall be declared by the
Corporation or paid or set apart for payment by the Corporation at such time
as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibit such declaration, payment
or
setting apart for payment or provide that such declaration, payment or setting
apart for payment would constitute a breach thereof or a default thereunder,
or
if such declaration or payment shall be restricted or prohibited by
law.
(c) Notwithstanding
the foregoing, dividends on the Series A Preferred Stock shall accrue whether
or
not the terms and provisions set forth in Section
3(b)
hereof
at any time prohibit the current payment of dividends, whether or not the
Corporation has earnings, whether or not there are funds legally available
for
the payment of such dividends and whether or not such dividends are declared.
Accrued but unpaid dividends on the Series A Preferred Stock will accumulate
as
of the Dividend Payment Date on which they first become payable, but interest
will not accrue on any amount of accrued but unpaid dividends on the Series
A
Preferred Stock.
(d) Nothing
contained herein shall prevent or restrict the Corporation from the declaration,
payment or set aside for payment or any other distribution of cash or other
property, directly or indirectly, on or with respect to any shares of the Common
Stock, or shares of any other class or series of equity securities ranking
junior to or on a parity with the Series A Preferred Stock as to dividends
or
upon liquidation, including without limitation accrued and unpaid dividends
on
the Series A Preferred Stock. Further, nothing contained herein shall prevent
or
restrict the Corporation from redeeming, purchasing or otherwise acquiring
for
any consideration (or any moneys be paid to or made available for a sinking
fund
for the redemption of any such shares) by the Corporation any shares of Common
Stock, or any shares of equity securities ranking junior to or on a parity
with
the Series A Preferred Stock as to dividends or upon liquidation.
(e) When
dividends are not paid in full (or a sum sufficient for such full payment is
not
so set apart) on the Series A Preferred Stock and the shares of any other class
or series of equity securities ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends declared upon the Series A Preferred
Stock and any other class or series of such equity securities ranking on a
parity as to dividends with the Series A Preferred Stock shall be declared
pro
rata
so that
the amount of dividends declared per share of Series A Preferred Stock and
such
other class or series of such equity securities shall in all cases bear to
each
other the same ratio that accrued dividends per share on the Series A Preferred
Stock and such other class or series of such equity securities (which shall
not
include any accrual in respect of unpaid dividends for prior dividend periods
if
such other class or series of equity securities does not have a cumulative
dividend) bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on Series A
Preferred Stock which may be in arrears.
(f) Any
dividend payment made on shares of the Series A Preferred Stock shall be
credited against the accrued but unpaid dividends due as designated by the
Corporation. Holders of the Series A Preferred Stock shall not be entitled
to
any dividend, whether payable in cash, property or shares of Capital Stock
in
excess of full accrued dividends on the Series A Preferred Stock as described
above.
Section 4. Liquidation
Preference.
(a) Upon
any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation, the holders of shares of Series A Preferred Stock then
Outstanding are entitled to be paid out of the assets of the Corporation,
legally available for distribution to its stockholders, a liquidation preference
of $133,466.75 per share of Series A Preferred Stock (the “Liquidation
Preference”),
plus
an amount equal to any accrued and unpaid dividends (whether or not declared)
to
the date of payment, before any distribution of assets is made to holders of
Common Stock or any other class or series of equity securities that ranks junior
to the Series A Preferred Stock as to liquidation rights.
(b) In
the
event that, upon any such voluntary or involuntary liquidation, dissolution
or
winding up, the available assets of the Corporation are insufficient to pay
the
amount of the liquidating distributions on all Outstanding shares of Series
A
Preferred Stock and the corresponding amounts payable on all shares of each
other class or series of equity securities ranking on a parity with the Series
A
Preferred Stock as to liquidation rights, then the holders of the Series A
Preferred Stock and each such other class or series of equity securities shall
share proportionately in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be respectively
entitled.
(c) After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Series A Preferred Stock will have no right or claim
to
any of the remaining assets of the Corporation.
(d) Written
notice of any such liquidation, dissolution or winding up of the Corporation,
stating the payment date or dates when, and the place or places where, the
amounts distributable in such circumstances shall be payable, shall be given
by
first class mail, postage pre-paid, not less than 30 nor more than 60 days
prior
to the payment date stated therein, to each record holder of the Series A
Preferred Stock at the respective addresses of such holders as the same shall
appear on the stock transfer records of the Corporation.
(e) The
consolidation or merger of the Corporation with or into any other corporation,
trust or entity or of any other corporation with or into the Corporation, or
the
sale, lease or conveyance of all or substantially all of the property or
business of the Corporation, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Corporation.
Section 5. Voting
Rights.
(a) Holders
of the Series A Preferred Stock will not have any voting rights, except as
set
forth below or as otherwise provided in the Certificate of Incorporation, by
law
or pursuant to agreements among the holders of voting equity securities of
the
Corporation.
(b) The
affirmative vote of holders of at least two-thirds of the Outstanding shares
of
the Series A Preferred Stock and all other Parity Stock with like voting rights,
voting as a single class, in person or by proxy, at a special meeting called
for
the purpose, or by written consent in lieu of meeting, shall be required to
alter, repeal or amend, whether by merger, consolidation, combination,
reclassification or otherwise, any provisions of the Certificate of
Incorporation if the amendment would amend, alter or affect the powers,
preferences or rights of the Series A Preferred Stock, so as to adversely affect
the holders thereof; provided,
however,
that
any increase in the amount of the authorized common stock or authorized
preferred stock or the creation and issuance of other series of common stock
or
preferred stock will not be deemed to materially and adversely affect such
powers, preferences or special rights.
Section 6. Consolidation,
Merger and Sale of Assets.
The
Corporation, without the consent of the holders of any of the Outstanding Series
A Preferred Stock, may consolidate with or merge into any other Person or
convey, transfer or lease all or substantially all of its assets to any Person
or may permit any Person to consolidate with or merge into, or transfer or
lease
all or substantially all its properties to the Corporation.
Section 7. Headings.
The
headings of the Sections of this Certificate are for convenience of reference
only and shall not define, limit or affect any of the provisions
hereof.
IN
WITNESS WHEREOF, the Corporation has caused this Certificate to be signed in
its
name and on its behalf on this 26th
day of
March, 2007.
Valhi,
Inc.
|
By:
|
Gregory
M. Swalwell
Vice
President and Controller
|
|
Exhibit
99.1
|
||||||
|
Valhi,
Inc. and Subsidiaries
|
|||||||
|
Index
to Unaudited Pro Forma Condensed Consolidated Financial
Statements
|
|||||||
|
|
Page |
||||||
|
Unaudited
Pro Forma Condensed Consolidated Balance Sheet -
|
|||||||
|
December
31, 2006
|
F-2
|
||||||
|
Notes
to Unaudited Pro Forma Condensed Consolidated
|
F-3
|
||||||
|
Balance
Sheet
|
|||||||
|
Unaudited
Pro Forma Condensed Consolidated Statement of Income -
|
|||||||
|
Year
ended December 31, 2006
|
F-4
|
||||||
|
Notes
to Unaudited Pro Forma Condensed Consolidated Statement
|
|||||||
|
of
Income
|
F-5
|
||||||
|
These
unaudited pro forma condensed consolidated financial statements
should
be
|
|||||||
|
read
in conjunction with our historical consolidated financial statements.
These
|
|||||||
|
unaudited
pro forma condensed consolidated financial statements are not
necessarily
|
|||||||
|
indicative
of our consolidated financial position or results of operations
as they
may
|
|||||||
|
be
in the future.
|
|||||||
|
F
-
1
|
|||||||
|
Valhi,
Inc. and Subsidiaries
|
||||||||||||||||||||||||||||||||||
|
Pro
Forma Condensed Consolidated Balance Sheet
|
||||||||||||||||||||||||||||||||||
|
December
31, 2006
|
||||||||||||||||||||||||||||||||||
|
(In
thousands)
|
||||||||||||||||||||||||||||||||||
|
(Unaudited)
|
||||||||||||||||||||||||||||||||||
|
Pro
forma adjustments
|
||||||||||||||||||||||||||||||||||
|
Historical
|
I
|
II
|
III
|
IV
|
V
|
Pro
forma
|
||||||||||||||||||||||||||||
|
Cash
and equivalents
|
$189,153
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$189,153
|
|||||||||||||||||||||
|
Other
current assets
|
590,204
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
590,204
|
|||||||||||||||||||||
|
Investment
in TIMET
|
264,302
|
|
(264,302)
|
|
10,470
|
|
55,924
|
|
-
|
|
-
|
|
66,394
|
|||||||||||||||||||||
|
Other
assets
|
1,761,067
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,761,067
|
|||||||||||||||||||||
|
$2,804,726
|
|
($264,302)
|
|
$10,470
|
|
$55,924
|
|
$
-
|
|
$
-
|
|
$2,606,818
|
||||||||||||||||||||||
|
Taxes
payable to affiliate
|
$
-
|
|
$
-
|
|
$
-
|
|
$
-
|
|
$521,600
|
|
($521,600)
|
|
$0
|
|||||||||||||||||||||
|
Other
current liabilities
|
253,262
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
253,262
|
|||||||||||||||||||||
|
Noncurrent
deferred income taxes
|
479,161
|
|
(48,345)
|
|
-
|
|
-
|
|
20,200
|
|
|
|
451,016
|
|||||||||||||||||||||
|
Other
noncurrent liabilities
|
1,081,828
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,081,828
|
|||||||||||||||||||||
|
Minority
interest
|
123,696
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
123,696
|
|||||||||||||||||||||
|
Stockholders
equity:
|
||||||||||||||||||||||||||||||||||
|
Preferred stock
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
521,600
|
|
521,600
|
|||||||||||||||||||||
|
Common stock at par value
|
1,189
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1,189
|
|||||||||||||||||||||
|
Additional paid-in capital
|
107,444
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
107,444
|
|||||||||||||||||||||
|
Retained earnings
|
839,188
|
|
(221,982)
|
|
10,470
|
|
-
|
|
(522,227)
|
|
-
|
|
105,449
|
|||||||||||||||||||||
|
Accumulated other comprehensive
|
||||||||||||||||||||||||||||||||||
|
income (loss)
|
(43,100)
|
|
6,025
|
|
-
|
|
55,924
|
|
(19,573)
|
|
-
|
|
(724)
|
|||||||||||||||||||||
|
Treasury stock
|
(37,942)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(37,942)
|
|||||||||||||||||||||
|
Total stockholders' equity
|
866,779
|
|
(215,957)
|
|
10,470
|
|
55,924
|
|
(541,800)
|
|
521,600
|
|
697,016
|
|||||||||||||||||||||
|
$2,804,726
|
|
($264,302)
|
|
$10,470
|
|
$55,924
|
|
$0
|
|
$0
|
|
$2,606,818
|
||||||||||||||||||||||
|
F-2
|
||||||||||||||||||||||||||||||||||
|
Valhi,
Inc. and Subsidiaries
|
||||||||||
|
Notes
to Unaudited Pro Forma Condensed Consolidated Balance
Sheet
|
||||||||||
|
(Unaudited)
|
||||||||||
|
Note
1 - Basis of presentation:
|
||||||||||
|
We
have prepared the Unaudited Pro Forma Condensed Consolidated Balance
Sheet
|
||||||||||
|
assumming
the following transactions, more fully described elsewhere in this
Current
Report
|
||||||||||
|
on
Form 8-K, had occurred on December 31, 2006:
|
||||||||||
|
*
|
Our
distribution of shares of TIMET common stock to our
|
|||||||||
|
stockholders
in a pro-rata distribution.
|
||||||||||
|
*
|
Our
issuance to Contran of 5,000 shares of Valhi 6% Series A
|
|||||||||
|
Preferred
Stock in exchange for the satisfaction of our income
|
||||||||||
|
tax
liability generated from the distribution of TIMET shares.
|
||||||||||
|
Note
2 - Pro forma adjustments:
|
||||||||||
|
I
-
|
Reflect
our distribution of shares of TIMET common stock
|
|||||||||
|
to
our stockholders in a pro-rata distribution. We will
|
||||||||||
|
account
for this distribution by reducing our equity for the
|
||||||||||
|
carrying
value of our shares of TIMET common stock, net
|
||||||||||
|
of
applicable deferred income taxes, that we distribute to
|
||||||||||
|
our
stockholders. We will also reverse the accumulated
|
||||||||||
|
amount
of other comprehensive income items we have
|
||||||||||
|
recognized
with respect to our investment in TIMET, net of
|
||||||||||
|
applicable
deferred income taxes.
|
||||||||||
|
II
-
|
As
discussed in our Annual Report on Form 10-K for the
|
|||||||||
|
year
ended December 31, 2006, NL Industries, Inc., one
|
||||||||||
|
of
our majority-owned subsidiaries, owns shares of our common
|
||||||||||
|
stock.
Under Delaware corporation law, NL receives dividends
|
||||||||||
|
on
these shares. Therefore, NL will receive a portion of the
|
||||||||||
|
TIMET
shares we will distribute to our stockholders. The
|
||||||||||
|
TIMET
shares we distribute to NL will initially be reflected in
|
||||||||||
|
our
Consolidated Balance Sheet at our carryover basis.
|
||||||||||
|
This
pro forma adjustment reinstates the carrying value of the
TIMET
|
||||||||||
|
shares
that will be distributed to NL at our carryover basis.
|
||||||||||
|
However,
since we expect that following the distribution NL will only
own
|
||||||||||
|
approximately
1% of the total number of TIMET common
|
||||||||||
|
shares
outstanding, following the distribution we and NL will
|
||||||||||
|
account
for these TIMET shares as an available-for-sale
|
||||||||||
|
marketable
security carried at fair value. See pro forma adjustment
III.
|
||||||||||
|
III
-
|
Increase
the carrying value of the TIMET shares that will be
|
|||||||||
|
distributed
to NL to their aggregate fair market value, based on the
December
|
||||||||||
|
31,
2006 quoted market price for TIMET common stock of $29.51
|
||||||||||
|
per
share.
|
||||||||||
|
IV
-
|
Recognize
the current income tax liability that will be generated from
our
|
|||||||||
|
distribution
of the TIMET shares. At December 31, 2006, Valhi had a net
operating
|
||||||||||
|
loss
carryforward for U.S. federal income tax purposes (approximately
$20.2
million
|
||||||||||
|
tax
effected), and the amount of the current income tax liability that
will
be
|
||||||||||
|
generated
from the distribution will be reduced by the amount of
such
|
||||||||||
|
carryforward.
The amount of the current income tax liability as presented
herein
|
||||||||||
|
is
based on the December 31, 2006 quoted market price for TIMET common
stock.
|
||||||||||
|
The
actual current income tax liability that will be generated will
be based
on the
|
||||||||||
|
quoted
market price of TIMET common stock on the actual date of
distribution.
|
||||||||||
|
V
-
|
Record
the settlement of the current income tax liablity generated
|
|||||||||
|
from
the distribution of the shares of TIMET common stock through
|
||||||||||
|
our
issuance to Contran of 5,000 shares of Valhi 6% Series A
preferred
|
||||||||||
|
stock.
|
||||||||||
|
F-3
|
||||||||||
|
Valhi,
Inc. and Subsidiaries
|
|
||||||||||||
|
|
Pro
Forma Condensed Consolidated Statement of Income
|
|
|||||||||||
|
|
Year
ended December 31, 2006
|
|
|||||||||||
|
|
(In
thousands)
|
|
|||||||||||
|
|
(Unaudited)
|
||||||||||||
|
|
Pro
forma adjustments
|
||||||||||||
|
|
Historical
|
I
|
|
|
II
|
|
|
Pro
forma
|
|||||
|
Revenues
and other income:
|
|||||||||||||
|
Net
sales
|
$
|
1,481,363
|
$
|
-
|
$
|
-
|
$
|
1,481,363
|
|||||
|
Other,
net
|
89,971
|
-
|
-
|
89,971
|
|||||||||
|
Equity
in earnings of:
|
|||||||||||||
|
TIMET
|
101,157
|
(101,157
|
)
|
-
|
-
|
||||||||
|
Other
|
3,751
|
-
|
-
|
3,751
|
|||||||||
|
Total
revenues and other income
|
1,676,242
|
(101,157
|
)
|
-
|
1,575,085
|
||||||||
|
Costs
and expenses:
|
|||||||||||||
|
Cost
of sales
|
1,139,439
|
-
|
-
|
1,139,439
|
|||||||||
|
Selling,
general and administrative
|
229,417
|
-
|
-
|
229,417
|
|||||||||
|
Loss
on prepayment of debt
|
22,311
|
-
|
-
|
22,311
|
|||||||||
|
Interest
|
67,607
|
-
|
-
|
67,607
|
|||||||||
|
Total
costs and expenses
|
1,458,774
|
-
|
-
|
1,458,774
|
|||||||||
|
Income
before income taxes
|
217,468
|
(101,157
|
)
|
-
|
116,311
|
||||||||
|
Provision
for income taxes
|
63,835
|
(35,405
|
)
|
-
|
28,430
|
||||||||
|
Minority
interest in after-tax earnings
|
11,951
|
-
|
-
|
11,951
|
|||||||||
|
Net
income
|
141,682
|
(65,752
|
)
|
-
|
75,930
|
||||||||
|
Preferred
stock dividends
|
-
|
-
|
31,296
|
31,296
|
|||||||||
|
Net
income available to
|
|||||||||||||
|
common
stockholders
|
$
|
141,682
|
($65,752
|
)
|
($31,296
|
)
|
$
|
44,634
|
|||||
|
Weighted
average shares of
|
|||||||||||||
|
common
stock outstanding
|
116,110
|
116,110
|
|||||||||||
|
Basic
earnings per share
|
$
|
1.22
|
$
|
0.38
|
|||||||||
|
F-4
|
|||||||||||||
|
Valhi,
Inc. and Subsidiaries
|
||||||||
|
Notes
to Unaudited Pro Forma Condensed Consolidated Statement of
Income
|
||||||||
|
(Unaudited)
|
||||||||
|
Note
1 - Basis of presentation:
|
||||||||
|
We
have prepared the Unaudited Pro Forma Condensed Consolidated Statement
of
Income
|
||||||||
|
assumming
the following transactions, more fully described elsewhere in this
Current
Report
|
||||||||
|
on
Form 8-K, had occurred as of January 1, 2006:
|
||||||||
|
*
|
Our
distribution of shares of TIMET common stock to our
|
|||||||
|
stockholders
in a pro-rata distribution.
|
||||||||
|
*
|
Our
issuance to Contran of 5,000 shares of Valhi 6% Series
A
|
|||||||
|
Preferred
Stock in exchange for the satisfaction of our income
|
||||||||
|
tax
liability generated from the distribution of TIMET shares.
|
||||||||
|
Note
2 - Pro forma adjustments:
|
||||||||
|
I
-
|
Reflect
the elimimation of our equity in earnings of TIMET,
|
|||||||
|
net
of applicable deferred income taxes.
|
||||||||
|
II
-
|
Reflect
the cumulative dividends on the 5,000 shares of
|
|||||||
|
Valhi
6% Series A Preferred Stock assumed to be issued
|
||||||||
|
with
an aggregate liquidation value of $521.6 million.
|
||||||||
|
F-5
|
||||||||
EXHIBIT
99.2
VALHI
COMPLETES SPECIAL DIVIDEND OF TIMET COMMON STOCK
DALLAS,
TEXAS . . . March 26, 2007 . . . Valhi, Inc. (NYSE: VHI) announced today
that it
has completed the special dividend to its stockholders of shares of Titanium
Metals Corporation (“TIMET”)
common
stock (NYSE: TIE) owned by Valhi. This special dividend was paid on
March 26, 2007 to Valhi’s stockholders of record at the close of business
on March 12, 2007. As a result of the special dividend, each Valhi
stockholder received 0.4776 of a share of TIMET common stock for each share
of
Valhi common stock held and cash in lieu of any resulting fractional share
of
TIMET common stock.
As
previously disclosed, immediately after the payment of the special dividend,
Contran Corporation and its subsidiaries and related parties continue to
own
approximately 51.9% of the outstanding TIMET common stock compared to the
approximately 53.8% held prior to the special dividend, in each case assuming
the full conversion of any TIMET 6¾% series A preferred stock held by such
entities or parties.
Tax
Matters
As
previously disclosed, subject to the determination of Valhi’s 2007 year-end
earnings and profits, the federal income tax treatment to a Valhi stockholder
of
the special dividend and regular quarterly cash dividends (the “distributions”)
will
be as follows:
| · |
The
amount of the distributions will be the value on the payment date
of the
TIMET shares (including any fractional share) of $36.90 per share
and the
cash received by a Valhi stockholder for regular quarterly
dividends;
|
| · |
The
distributions will be taxable as dividend income to the extent of
Valhi’s
current or accumulated earnings and profits;
|
| · |
If
the distributions exceed Valhi’s current or accumulated earnings and
profits, they will be treated as a non-taxable return of capital
to the
extent of a stockholder’s basis in such stockholder’s Valhi stock;
|
| · |
Any
remaining portion of the distributions will be treated as a capital
gain;
and
|
| · |
If
a stockholder receives cash in lieu of a fractional share of TIMET
common
stock, such holder may recognize short-term capital gain or loss
equal to
the difference between the cash received and the portion of the value
of
TIMET common stock that is allocable to the fractional
share.
|
Valhi
currently believes that a majority, if not all, of the distributions will
likely
be considered either a non-taxable return of capital and/or a capital gain.
However, if any or all of the distributions were to be treated as a dividend
for
federal income tax purposes, such dividend could be considered an “extraordinary
dividend” for Valhi stockholders that are corporations, which could result in a
reduction to such corporate stockholders’ tax basis in their Valhi stock.
The
specific tax treatment of the distributions will
not be determined until after December 31, 2007.
Each
stockholder should receive a Form 1099 or a letter from Valhi reporting the
appropriate tax treatment. Holders
of Valhi common stock are urged to consult with their tax advisor as to their
specific tax treatment of the distributions.
Valhi
is
a member of the consolidated U.S. federal tax group of which Contran Corporation
is the parent company. As a member of the Contran consolidated tax group
and
pursuant to a pre-existing tax policy between Valhi and Contran, Valhi computes
its provision for U.S. income taxes on a separate company basis using tax
elections made by Contran and makes payments to Contran or receives payments
from Contran in amounts it would have paid to or received from the U.S. Internal
Revenue Service had it not been a member of the Contran tax group but instead
had been a separate taxpayer.
Upon
the
payment of the special dividend and pursuant to the tax policy between Valhi
and
Contran, Valhi incurred a tax obligation to Contran. The amount of the
obligation is a function of the difference between the aggregate value of
the
TIMET common stock shares distributed based on the closing market price of
the
distributed shares of TIMET common stock on the date of distribution ($36.90
per
share) less Valhi’s tax basis in such shares. This obligation is approximately
$667.3 million. In order to discharge this obligation to Contran, Valhi has
issued to Contran 5,000 shares of a new issue of Valhi 6% series A preferred
stock having an aggregate liquidation preference equal to the actual tax
obligation created by the special dividend.
Valhi
is
engaged in the titanium dioxide pigments, component products (security products,
furniture components and performance marine components) and waste management
industries.
The
statements in this release relating to matters that are not historical facts
are
forward-looking statements that represent management’s beliefs and assumptions
based on currently available information. Forward-looking statements can
be
identified by the use of words such as “believes,” “intends,” “may,” “will,”
“should,” “could,” “anticipates,” “expects,” or comparable terminology or by
discussions of strategy or trends. Although Valhi believes that the expectations
reflected in such forward-looking statements are reasonable, it cannot give
any
assurances that these expectations will prove to be correct. Such statements
by
their nature involve risks and uncertainties, including, but not limited
to, the
cyclicality of the titanium dioxide industry, global economic and political
conditions, changes in global productive capacity, changes in customer inventory
levels, changes in product pricing, changes in product costing, changes in
foreign currency exchange rates, competitive technology positions, operating
interruptions (including, but not limited to, labor disputes, leaks, fires,
explosions, unscheduled downtime, transportation interruptions, war and
terrorist activities), the ultimate resolution of pending or possible future
lead pigment litigation and legislative developments related to the lead
paint
litigation, the outcome of other litigation, and other risks and uncertainties
detailed in the Valhi’s U.S. Securities and Exchange Commission filings. Should
one or more of these risks materialize (or the consequences of such a
development worsen), or should the underlying assumptions prove incorrect,
actual results could differ materially from those forecasted or expected.
Valhi
disclaims any intention or obligation to update publicly or revise such
statements, whether as a result of new information, future events or
otherwise.
*
* * *
*