-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AI+uPsJPIpIDhxGevLMOZJpETi1cYqyo7oPY7x0cBvu62Gg1vPgIyn3EUs3wyUs4 ggQCOU7/AvOs4ZYv1csUbA== 0000950134-03-011574.txt : 20030813 0000950134-03-011574.hdr.sgml : 20030813 20030813134225 ACCESSION NUMBER: 0000950134-03-011574 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 26 CONFORMED PERIOD OF REPORT: 20030630 FILED AS OF DATE: 20030813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX CORP CENTRAL INDEX KEY: 0000018532 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 750778259 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-06776 FILM NUMBER: 03840275 BUSINESS ADDRESS: STREET 1: 2728 N HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214-981-5000 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 FORMER COMPANY: FORMER CONFORMED NAME: CENTEX CONSTRUCTION CO INC DATE OF NAME CHANGE: 19681211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 3333 HOLDING CORP CENTRAL INDEX KEY: 0000818762 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 752178860 STATE OF INCORPORATION: NV FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09624 FILM NUMBER: 03840274 BUSINESS ADDRESS: STREET 1: 2728 N. HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 214-981-6770 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTEX DEVELOPMENT CO LP CENTRAL INDEX KEY: 0000818764 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 752168471 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09625 FILM NUMBER: 03840273 BUSINESS ADDRESS: STREET 1: 2728 N. HARWOOD STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 214-981-6770 MAIL ADDRESS: STREET 1: PO BOX 199000 STREET 2: - CITY: DALLAS STATE: TX ZIP: 75219 10-Q 1 d08056e10vq.htm FORM 10-Q e10vq
Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

JOINT QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended

June 30, 2003

Commission File No. 1-6776

Centex Corporation

A Nevada Corporation

IRS Employer Identification No. 75-0778259
2728 N. Harwood
Dallas, Texas 75201
(214) 981-5000

Commission File Nos. 1-9624 and 1-9625, respectively

3333 Holding Corporation
A Nevada Corporation
Centex Development Company, L.P.
A Delaware Limited Partnership

IRS Employer Identification Nos. 75-2178860 and 75-2168471, respectively
2728 N. Harwood
Dallas, Texas 75201
(214) 981-6770

The registrants have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and have been subject to such filing requirements for the past 90 days.

Indicate the number of shares of each of the registrants’ classes of common stock (or other similar equity securities) outstanding as of the close of business on August 8, 2003:

                 
Centex Corporation   Common Stock           61,757,886 shares
3333 Holding Corporation   Common Stock  


  1,000 shares
Centex Development Company, L.P.   Class A Units of Limited Partnership Interest  


  32,260 units
Centex Development Company, L.P.   Class C Units of Limited Partnership Interest  


  208,330 units

 

TABLE OF CONTENTS

Part I. Financial Information
Item 1. Financial Statements
Statements of Consolidated Earnings
Consolidated Balance Sheets with Consolidating Details
Consolidated Balance Sheets with Consolidating Details
Statements of Consolidated Cash Flows with Consolidating Details
Statements of Consolidated Cash Flows with Consolidating Details
Notes to Consolidated Financial Statements
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Part I. Financial Information
Item 1. Financial Statements
Condensed Combining Statements of Operations
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
EXHIBIT INDEX
EX-3.2 Amended and Restated By-Laws
EX-4.3.2 Second Supplement to Nominee Agreement
EX-10.1 Amended/Restated 1987 Stock Option Plan
EX-10.2 Seventh Amended/Restated 1998 Stock Plan
EX-10.3 Amended/Restated 2001 Stock Option Plan
EX-10.10 Amended/Restated Long Term Incentive Plan
EX-10.13 2003 Annual Incentive Compensation Plan
EX-10.14 2003 Equity Incentive Plan
EX-10.15 Distribution Agreement
EX-10.16 Administrative Services Agreement
EX-10.17 Tax Sharing Agreement
EX-10.18 Agreement to Assign Trademark Rights
EX-10.19 Amendment No. 1 to Distribution Agreement
EX-31.1 Certification of CEO - Rule 13a-14(a)
EX-31.2 Certification of CFO - Rule 13a-14(a)
EX-31.3 Certification of CEO - Rule 13a-14(a)
EX-31.4 Certification of CFO - Rule 13a-14(a)
EX-31.5 Certification of CEO - Rule 13a-14(a)
EX-31.6 Certification of CFO - Rule 13a-14(a)
EX-32.1 Certification of CEO - Section 906
EX-32.2 Certification of CFO - Section 906
EX-32.3 Certification of CEO - Section 906
EX-32.4 Certification of CFO - Section 906
EX-32.5 Certification of CEO - Section 906
EX-32.6 Certification of CFO - Section 906

Table of Contents

Centex Corporation and Subsidiaries
3333 Holding Corporation and Subsidiary
Centex Development Company, L.P. and Subsidiaries

Form 10-Q Table of Contents

June 30, 2003

Centex Corporation and Subsidiaries

                         
                    Page
Part I   Financial Information
        Item 1.   Financial Statements        
               
Statements of Consolidated Earnings
     1  
               
Consolidated Balance Sheets with Consolidating Details
     2  
               
Statements of Consolidated Cash Flows with Consolidating Details
     4  
               
Notes to Consolidated Financial Statements
     6  
        Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of
    Operations		     26  
        Item 3.   Quantitative and Qualitative Disclosures about Market Risk     47  
        Item 4.   Controls and Procedures     47  
Part II   Other Information
        Item 6.   Exhibits and Reports on Form 8-K     48  
Signatures                 50  

i

Table of Contents

3333 Holding Corporation and Subsidiary
Centex Development Company, L.P. and Subsidiaries

                         
                    Page
Part I   Financial Information
        Item 1.   Financial Statements        
               
Condensed Combining Statements of Operations
     51  
               
Condensed Combining Balance Sheets
     52  
               
Condensed Combining Statements of Cash Flows
     53  
               
Notes to Condensed Combining Financial Statements
     54  
        Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of
    Operations		     61  
        Item 3.   Quantitative and Qualitative Disclosures about Market Risk     68  
        Item 4.   Controls and Procedures     68  
Part II   Other Information
        Item 6.   Exhibits and Reports on Form 8-K     68  
Signatures                 70  

ii

Table of Contents

Part I. Financial Information

Item 1. Financial Statements

Centex Corporation and Subsidiaries
Statements of Consolidated Earnings
(Dollars in thousands, except per share data)
(unaudited)

                     
       
 
        For the Three Months Ended June 30,  
       
 
        2003     2002  
       
   
 
Revenues
                
 
Home Building
   $ 1,504,493     $ 1,105,515  
 
Financial Services
     266,860       180,540  
 
Construction Products
     144,089       128,775  
 
Construction Services
     375,755       360,721  
 
Investment Real Estate
     2,745       6,643  
 
Other
     22,776       29,219  
 
  
   
 
 
     2,316,718       1,811,413  
 
  
   
 
Costs and Expenses
                
 
Home Building
     1,349,041       1,005,452  
 
Financial Services
     201,261       156,234  
 
Construction Products
     121,210       101,043  
 
Construction Services
     371,196       352,641  
 
Investment Real Estate
     1,990       2,548  
 
Other
     24,349       31,424  
 
Corporate General and Administrative
     19,232       12,634  
 
Interest Expense
     16,964       15,334  
 
Minority Interest
     7,485       8,882  
 
  
   
 
 
     2,112,728       1,686,192  
 
  
   
 
Earnings (Loss) from Unconsolidated Entities
     5,080       (495 )
 
  
   
 
Earnings from Continuing Operations Before Income Taxes
     209,070       124,726  
 
Income Taxes
     66,736       37,456  
 
  
   
 
Earnings from Continuing Operations
     142,334       87,270  
Earnings from Discontinued Operations, net of Taxes of $246 and $261
     456       485  
 
  
   
 
Net Earnings
   $ 142,790     $ 87,755  
 
  
   
 
Basic Earnings Per Share
                
 
Continuing Operations
   $ 2.32     $ 1.42  
 
Discontinued Operations
     0.01       0.01  
 
  
   
 
 
   $ 2.33     $ 1.43  
 
  
   
 
Diluted Earnings Per Share
                
 
Continuing Operations
   $ 2.22     $ 1.37  
 
Discontinued Operations
     0.01       0.01  
 
  
   
 
 
   $ 2.23     $ 1.38  
 
  
   
 
Average Shares Outstanding
                
 
Basic
     61,245,265       61,168,777  
 
Dilutive Securities:
                
   
Options
     2,522,463       1,998,229  
   
Other
     165,118       430,110  
 
  
   
 
 
Diluted
     63,932,846       63,597,116  
 
  
   
 
Cash Dividends Per Share
   $ 0.04     $ 0.04  
 
  
   
 

See Notes to Consolidated Financial Statements.

1

Table of Contents

Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands)

                       
         
 
          Centex Corporation and Subsidiaries  
         
 
          June 30, 2003*     March 31, 2003  
         
   
 
Assets
                
 
Cash and Cash Equivalents
   $ 111,025     $ 469,778  
 
Restricted Cash
     214,442       172,321  
 
Receivables -
                
   
Residential Mortgage Loans Held for Investment, net
     5,105,695       4,642,826  
   
Residential Mortgage Loans Held for Sale
     347,012       303,328  
   
Construction Contracts
     287,560       251,024  
   
Trade, including Notes of $66,478 and $31,315
     439,018       406,008  
 
Inventories -
                
   
Housing Projects
     3,599,916       3,306,655  
   
Land Held for Development and Sale
     102,212       106,057  
   
Land Held Under Option Agreements not Owned
     50,092       —  
   
Construction Products
     54,894       58,254  
   
Other
     16,041       15,278  
 
Investments -
                
   
Centex Development Company, L.P.
    296,903       281,100  
   
Joint Ventures and Other
     118,397       102,277  
   
Unconsolidated Subsidiaries
     —       —  
 
Property and Equipment, net
     672,955       681,165  
 
Other Assets -
                
   
Deferred Income Taxes
     58,195       52,929  
   
Goodwill
     303,800       304,780  
   
Mortgage Securitization Residual Interest
     104,917       108,102  
   
Deferred Charges and Other, net
     205,359       238,290  
 
Assets of Discontinued Operations
     10,704       110,364  
 
  
   
 
 
   $ 12,099,137     $ 11,610,536  
 
  
   
 
Liabilities and Stockholders’ Equity
                
 
Accounts Payable
   $ 619,055     $ 630,118  
 
Accrued Liabilities
     938,558       1,028,211  
 
Debt -
                
   
Centex
     2,083,960       2,105,880  
   
Financial Services
     5,483,846       4,998,819  
 
Payables to Affiliates
     —       —  
 
Liabilities of Discontinued Operations
     910       19,435  
 
Minority Interests
     224,237       170,227  
 
Stockholders’ Equity -
                
   
Preferred Stock: Authorized 5,000,000 Shares, None Issued
     —       —  
   
Common Stock: $.25 Par Value; Authorized 100,000,000
                
     
Shares; Outstanding 61,887,222 and 60,836,091 Shares, Respectively
     15,746       15,483  
   
Capital in Excess of Par Value
     161,258       98,711  
   
Unamortized Value of Deferred Compensation
     (31,337 )     (2,398 )
   
Retained Earnings
     2,644,436       2,597,078  
   
Treasury Stock, at Cost; 1,095,648 and 1,096,844 Shares, Respectively
     (45,011 )     (45,037 )
   
Accumulated Other Comprehensive Income (Loss)
     3,479       (5,991 )
 
  
   
 
 
Total Stockholders’ Equity
     2,748,571       2,657,846  
 
  
   
 
 
   $ 12,099,137     $ 11,610,536  
 
  
   
 

See Notes to Consolidated Financial Statements.
*Unaudited

2

Table of Contents

Centex Corporation and Subsidiaries
Consolidated Balance Sheets with Consolidating Details
(Dollars in thousands)

                                 
   
   
 
    Centex**     Financial Services  
   
   
 
    June 30, 2003*     March 31, 2003     June 30, 2003*     March 31, 2003  
   
   
   
   
 
 
                
  $ 99,541     $ 454,696     $ 11,484     $ 15,082  
    36,218       8,349       178,224       163,972  
 
    —       —       5,105,695       4,642,826  
    —       —       347,012       303,328  
    287,560       251,024       —       —  
    228,626       207,704       210,392       198,304  
 
    3,599,916       3,306,655       —       —  
    102,212       106,057       —       —  
    50,092       —       —       —  
    54,894       58,254       —       —  
    5,936       6,832       10,105       8,446  
 
    296,903       281,100       —       —  
    118,397       102,277       —       —  
    455,183       405,407       —       —  
    630,315       639,069       42,640       42,096  
 
    (33,816 )     (36,534 )     92,011       89,463  
    287,198       287,725       16,602       17,055  
    —       —       104,917       108,102  
    117,634       156,650       87,725       81,640  
    10,704       110,364       —       —  
 
  
   
   
   
 
  $ 6,347,513     $ 6,345,629     $ 6,206,807     $ 5,670,314  
 
  
   
   
   
 
 
  $ 571,129     $ 589,530     $ 47,926     $ 264,352  
    720,635       804,447       217,923       —  
 
    2,083,960       2,105,880       —       —  
    —       —       5,483,846       4,998,819  
    —       —       35,882       25,736  
    910       19,435       —       —  
    222,308       168,491       1,929       1,736  
 
    —       —       —       —  
 
    15,746       15,483       1       1  
    161,258       98,711       200,467       200,467  
    (31,337 )     (2,398 )     —       —  
    2,644,436       2,597,078       239,332       198,145  
    (45,011 )     (45,037 )     —       —  
    3,479       (5,991 )     (20,499 )     (18,942 )
 
  
   
   
   
 
    2,748,571       2,657,846       419,301       379,671  
 
  
   
   
   
 
  $ 6,347,513     $ 6,345,629     $ 6,206,807     $ 5,670,314  
 
  
   
   
   
 

   

**   In the supplemental data presented above, “Centex” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex and Financial Services have been eliminated from the Centex Corporation and Subsidiaries balance sheets.

3

Table of Contents

Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)
(unaudited)

                     
       
 
        Centex Corporation and Subsidiaries  
       
 
        For the Three Months Ended June 30,  
       
 
        2003     2002  
       
   
 
Cash Flows — Operating Activities
                
 
Net Earnings from Continuing Operations
   $ 142,334     $ 87,270  
 
Adjustments-
                
   
Depreciation, Depletion and Amortization
     29,961       23,726  
   
Provision for Losses on Residential Mortgage Loans Held for Investment
     15,762       7,043  
   
Deferred Income Tax (Benefit) Provision
     (6,255 )     (5,133 )
   
Equity in (Earnings) Loss of Centex Development Company, L.P. and Joint Ventures
     (4,352 )     25  
   
Equity in Earnings of Unconsolidated Subsidiaries
     —       —  
   
Minority Interest, net of Taxes
     4,978       5,907  
 
Changes in Assets and Liabilities, Excluding Effect of Acquisitions
                
   
Increase in Restricted Cash
     (42,121 )     (13,008 )
   
Increase in Receivables
     (69,546 )     (40,708 )
   
(Increase) Decrease in Residential Mortgage Loans Held for Sale
     (43,684 )     34,777  
   
Increase in Housing Projects and Land Held for Development and Sale Inventories
     (294,622 )     (338,541 )
   
Decrease (Increase) in Construction Products and Other Inventories
     2,562       (7,012 )
   
(Decrease) Increase in Accounts Payable and Accrued Liabilities
     (110,650 )     (78,071 )
   
Decrease (Increase) in Other Assets, net
     31,944       12,892  
   
Increase (Decrease) in Payables to Affiliates
     —       —  
   
Other
     3,494       7,646  
 
  
   
 
 
     (340,195 )     (303,187 )
 
  
   
 
Cash Flows — Investing Activities
                
 
Increase in Residential Mortgage Loans Held for Investment
     (478,631 )     (252,645 )
 
Increase in Investment and Advances to Centex Development Company, L.P. and Joint Ventures
     (16,098 )     (15,850 )
 
(Increase) Decrease in Investment and Advances to Unconsolidated Subsidiaries
     —       —  
 
Purchases of Property and Equipment, net
     (10,109 )     (27,661 )
 
Discontinued Operations
     (11,369 )     (653 )
 
  
   
 
 
     (516,207 )     (296,809 )
 
  
   
 
Cash Flows — Financing Activities
                
 
Increase (Decrease) in Short-Term Debt, net
     76,833       624,363  
 
Centex
                
   
Issuance of Long-Term Debt
     6,626       30,256  
   
Repayment of Long-Term Debt
     (3,289 )     (37,882 )
 
Financial Services
                
   
Issuance of Long-Term Debt
     1,309,791       30,949  
   
Repayment of Long-Term Debt
     (926,854 )     (209,951 )
 
Proceeds from Stock Option Exercises
     36,988       2,515  
 
Treasury Stock, net
     26       (4,983 )
 
Dividends Paid
     (2,472 )     (2,463 )
 
  
   
 
 
     497,649       432,804  
 
  
   
 
Net Decrease in Cash and Cash Equivalents
     (358,753 )     (167,192 )
Cash and Cash Equivalents at Beginning of Period
     469,778       218,869  
 
  
   
 
Cash and Cash Equivalents at End of Period
   $ 111,025     $ 51,677  
 
  
   
 

See Notes to Consolidated Financial Statements.

4

Table of Contents

Centex Corporation and Subsidiaries
Statements of Consolidated Cash Flows with Consolidating Details
(Dollars in thousands)
(unaudited)

                                 
   
   
 
    Centex **     Financial Services  
   
   
 
    For the Three Months Ended June 30,     For the Three Months Ended June 30,  
   
   
 
    2003     2002     2003     2002  
   
   
   
   
 
 
                
  $ 142,334     $ 87,270     $ 41,187     $ 22,951  
 
    25,422       19,622       4,539       4,104  
    —       —       15,762       7,043  
    (6,255 )     (5,133 )     (1,795 )     189  
    (4,352 )     25       —       —  
    (41,187 )     (22,951 )     —       —  
    4,978       5,907       —       —  
 
    (27,869 )     (8,381 )     (14,252 )     (4,627 )
    (57,458 )     (12,044 )     (12,088 )     (28,664 )
    —       —       (43,684 )     34,777  
    (294,622 )     (338,541 )     —       —  
    4,221       (7,729 )     (1,659 )     (9,858 )
    (112,147 )     (81,559 )     (60 )     569  
    37,520       (3,264 )     (3,781 )     12,744  
    —       —       10,146       (126,023 )
    3,301       7,895       193       (249 )
 
  
   
   
   
 
    (326,114 )     (358,883 )     (5,492 )     (87,044 )
 
  
   
   
   
 
 
    —       —       (478,631 )     (242,070 )
 
    (16,098 )     (15,850 )     —       —  
    (8,589 )     132,165       —       —  
    (5,607 )     (30,451 )     (4,502 )     2,790  
    (11,369 )     (653 )     —       —  
 
  
   
   
   
 
    (41,663 )     85,211       (483,133 )     (239,280 )
 
  
   
   
   
 
 
    (25,257 )     125,744       102,090       498,619  
 
    6,626       30,256       —       —  
    (3,289 )     (37,882 )     —       —  
 
    —       —       1,309,791       30,949  
    —       —       (926,854 )     (209,951 )
    36,988       2,515       —       —  
    26       (4,983 )     —       —  
    (2,472 )     (2,463 )     —       —  
 
  
   
   
   
 
    12,622       113,187       485,027       319,617  
 
  
   
   
   
 
    (355,155 )     (160,485 )     (3,598 )     (6,707 )
    454,696       191,744       15,082       27,125  
 
  
   
   
   
 
  $ 99,541     $ 31,259     $ 11,484     $ 20,418  
 
  
   
   
   
 

**   In the supplemental data presented above, “Centex” represents the consolidation of all subsidiaries other than those included in Financial Services. Transactions between Centex and Financial Services have been eliminated from the Centex Corporation and Subsidiaries statements of cash flows.

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Centex Corporation and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 2003
(Dollars and shares in thousands, except per share data)
(unaudited)

(A) BASIS OF PRESENTATION

     The consolidated interim financial statements include the accounts of Centex Corporation and subsidiaries (the “Company”) after elimination of all significant intercompany balances and transactions. The statements have been prepared, without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

     In the opinion of the Company, all adjustments (consisting of normal, recurring adjustments) necessary to present fairly the information in the consolidated financial statements of the Company have been included. The results of operations for such interim periods are not necessarily indicative of results for the full year. The Company suggests that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes to consolidated financial statements included in the Company’s latest Annual Report on Form 10-K.

(B) STATEMENTS OF CONSOLIDATED CASH FLOWS — SUPPLEMENTAL DISCLOSURES

     The following table provides supplemental disclosures related to the Statements of Consolidated Cash Flows:

                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Cash Paid for Interest
   $ 71,192     $ 68,242  
 
  
   
 
Net Cash Paid for Taxes
   $ 46,162     $ 37,131  
 
  
   
 

     Interest expense relating to the Financial Services segment is included in its cost of sales. Interest expense related to segments other than Financial Services is included as a separate line item in the Statements of Consolidated Earnings. The Company capitalizes a portion of interest incurred as a component of housing projects’ inventory cost. The relief of capitalized interest is included in Home Building’s cost of sales. Capitalized interest relieved was $13.2 million and $8.3 million for the three months ended June 30, 2003 and 2002, respectively.

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    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Total Interest Incurred
   $ 88,307     $ 78,532  
Interest Capitalized
     (20,315 )     (18,551 )
Less — Financial Services
     (51,028 )     (44,647 )
 
  
   
 
Interest Expense, net
   $ 16,964     $ 15,334  
 
  
   
 

(C) STOCK-BASED EMPLOYEE COMPENSATION ARRANGEMENTS

     On April 1, 2003, the Company adopted the fair value measurement provisions of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation” (“SFAS No. 123”), under which the Company recognizes compensation expense of a stock option award to an employee over the vesting period based on the fair value of the award on the grant date. The fair value method has been applied only to awards granted or modified on or after April 1, 2003 (the prospective method), whereas awards granted prior to such date will continue to be accounted for in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB No. 25”), and related interpretations.

     In May 2003, the Company granted approximately 1.4 million options to employees. The fair value of such options is $35.1 million, as calculated under the Black-Scholes option-pricing model, which will be recognized as compensation expense over the vesting period. Compensation expense of $2.9 million related to these stock options was recognized during the three month period ended June 30, 2003.

     The following pro forma information reflects the Company’s net earnings and earnings per share had compensation cost for all stock option plans and other equity-based compensation programs been determined based upon the fair value at the date of grant for awards outstanding during the three months ended June 30, 2003 and 2002, consistent with the provisions of SFAS No. 123.

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Net Earnings — as Reported
   $ 142,790     $ 87,755  
 
Stock-Based Employee Compensation Expense Included in Reported Net Income, net of Related Tax Effects
     3,585       1,627  
 
Total Stock-Based Employee Compensation Expense Determined Under Fair Value Based Method, net of Related Tax Effects
     (8,205 )     (7,376 )
 
  
   
 
Pro Forma Net Earnings
   $ 138,170     $ 82,006  
 
  
   
 
Earnings Per Share:
                
 
Basic — as Reported
   $ 2.33     $ 1.43  
 
Basic — Pro Forma
   $ 2.26     $ 1.34  
 
Diluted — as Reported
   $ 2.23     $ 1.38  
 
Diluted — Pro Forma
   $ 2.17     $ 1.29  

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(D) STOCKHOLDERS’ EQUITY

     A summary of changes in stockholders’ equity is presented below:

                                                                       
         
   
   
   
   
   
   
 
                                  Unamortized                     Accumulated        
          Common Stock     Capital in     Value of             Treasury     Other        
         
    Excess of     Deferred     Retained     Stock at     Comprehensive        
          Shares     Amount     Par Value     Compensation     Earnings     Cost     (Loss) Income     Total  
         
   
   
   
   
   
   
   
 
Balance, March 31, 2003
     60,836     $ 15,483     $ 98,711     $ (2,398 )   $ 2,597,078     $ (45,037 )   $ (5,991 )   $ 2,657,846  
 
Issuance of Stock Compensation
     57       14       31,541       (31,555 )     —       26       —       26  
 
Amortization of Stock Compensation
     —       —       —       2,616       —       —       —       2,616  
 
Exercise of Stock Options, Including Tax Benefits
     594       149       26,106       —       —       —       —       26,255  
 
Stock Option Expense
     —       —       2,900       —       —       —       —       2,900  
 
Cash Dividends
     —       —       —       —       (2,472 )     —       —       (2,472 )
 
Exercise of Convertible Debenture
     400       100       2,000       —       —       —       —       2,100  
 
Cavco Spin-off
     —       —       —       —       (92,960 )     —       —       (92,960 )
 
Net Earnings
     —       —       —       —       142,790       —       —       142,790  
   
Unrealized Loss on Hedging
                                                               
     
Instruments
     —       —       —       —       —       —       (1,252 )     (1,252 )
   
Foreign Currency Translation
                                                               
     
Adjustments
     —       —       —       —       —       —       10,720       10,720  
   
   
Other Comprehensive Income Items
     —       —       —       —       —       —       2       2  
 
  
   
   
   
   
   
   
   
 
Balance, June 30, 2003
     61,887     $ 15,746     $ 161,258     $ (31,337 )   $ 2,644,436     $ (45,011 )   $ 3,479     $ 2,748,571  
 
  
   
   
   
   
   
   
   
 

(E) RESIDENTIAL MORTGAGE LOANS HELD FOR INVESTMENT

     Residential mortgage loans held for investment, including real estate owned, consisted of the following:

                 
   
   
 
    June 30, 2003     March 31, 2003  
   
   
 
Residential Mortgage Loans Held for Investment
   $ 5,139,756     $ 4,671,210  
Allowance for Losses on Residential Mortgage Loans Held for Investment
     (34,061 )     (28,384 )
 
  
   
 
Residential Mortgage Loans Held for Investment, net of Allowance for Losses
   $ 5,105,695     $ 4,642,826  
 
  
   
 

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     Changes in the allowance for losses on residential mortgage loans held for investment were as follows:

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Balance at Beginning of Period
   $ 28,384     $ 14,106  
 
Provision for Losses
     15,762       7,043  
 
Recoveries on Loans Charged Off
     76       18  
 
Losses Sustained
     (10,161 )     (3,847 )
 
  
   
 
Balance at End of Period
   $ 34,061     $ 17,320  
 
  
   
 
Allowance as a Percentage of Gross Loans Held for Investment
     0.7 %     0.5 %
Allowance as a Percentage of 90+ Days Contractual Delinquency
     25.1 %     19.8 %
90+ Days Contractual Delinquency
               
 
Total Dollars Delinquent
   $ 135,651     $ 87,304  
 
% Delinquent
     2.6 %     2.5 %

(F) GOODWILL

     A summary of changes in goodwill by segment for the three months ended June 30, 2003 is presented below:

                                                 
   
   
   
   
   
   
 
    Home     Financial     Construction     Construction              
    Building     Services     Products     Services     Other     Total  
   
   
   
   
   
   
 
Balance as of March 31, 2003
   $ 123,011     $ 17,055     $ 40,290     $ 1,007     $ 123,417     $ 304,780  
Other, net
     —       (453 )     —       —       (527 )     (980 )
 
  
   
   
   
   
   
 
Balance as of June 30, 2003
   $ 123,011     $ 16,602     $ 40,290     $ 1,007     $ 122,890     $ 303,800  
 
  
   
   
   
   
   
 

     Goodwill for the Other segment at June 30, 2003 includes $71.5 million related to the Company’s home services operations and $51.4 million related to the Company’s investment in Construction Products. Included in Assets of Discontinued Operations at March 31, 2003 is $67.3 million of goodwill related to manufactured housing.

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(G) INDEBTEDNESS

Short-term Debt

     Balances of short-term debt were:

                                 
   
   
 
    June 30, 2003     March 31, 2003  
   
   
 
            Financial             Financial  
    Centex     Services     Centex     Services  
   
   
   
   
 
Financial Institutions
   $ —     $ 269,506     $ 25,257 *   $ 283,146  
Commercial Paper
     —       —       —       —  
Secured Liquidity Notes
     —       674,813 **     —       559,083 **
 
  
   
   
   
 
 
   $ —     $ 944,319     $ 25,257     $ 842,229  
 
  
   
   
   
 
Consolidated Short-term Debt
       $944,319             $867,486      
 
        
             
     

* Debt relates entirely to Construction Products.
** Debt relates entirely to Harwood Street Funding II, L.L.C.

     The Company borrows on a short-term basis from banks under uncommitted lines that bear interest at prevailing market rates. The weighted-average interest rates of balances outstanding at June 30, 2003 and March 31, 2003 were 1.5% and 1.6%, respectively.

Long-term Debt

     Balances of long-term debt and weighted-average interest rates at June 30, 2003 and March 31, 2003 were:

                                     
       
   
 
        June 30, 2003     March 31, 2003  
       
   
 
Centex
                                
 
Medium-term Note Programs, due through 2007
   $ 281,000       4.75 %   $ 281,000       4.79 %
 
Long-term Notes, due through 2012
     1,508,170       7.05 %     1,508,116       7.05 %
 
Other Indebtedness, due through 2009
     95,173       2.67 %     91,919       2.81 %
 
Subordinated Debt:
                                
   
Subordinated Debentures, due in 2006
     99,906       7.38 %     99,894       7.38 %
   
Subordinated Debentures, due in 2007
     99,711       8.75 %     99,694       8.75 %
 
  
           
         
 
     2,083,960               2,080,623          
 
  
           
         
Financial Services
                                
 
Home Equity Loans Asset-Backed Certificates, due through 2034
     4,464,527       3.63 %     4,081,590       3.67 %
 
Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, due through 2008
     75,000       3.25 %     75,000       3.38 %
 
  
           
         
 
     4,539,527               4,156,590          
 
  
           
         
Total
   $ 6,623,487             $ 6,237,213          
 
  
           
         

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     The weighted-average interest rates for long-term debt during the three months ended June 30, 2003 and 2002 were:

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Centex
                
 
Medium-term Note Programs
     5.31 %     5.37 %
 
Long-term Notes
     7.08 %     8.15 %
 
Other Indebtedness
     2.50 %     3.59 %
 
Subordinated Debentures
     8.07 %     8.07 %
Financial Services
                
 
Financial Services Long-Term Debt
     3.50 %     4.92 %

     Maturities of Centex and Financial Services long-term debt during the next five years ending March 31 are:

                           
     
   
   
 
              Financial        
      Centex     Services     Total  
     
   
   
 
 
2004
   $ 25,475     $ 926,518     $ 951,993  
 
2005
     31,971       1,040,844       1,072,815  
 
2006
     403,310       798,291       1,201,601  
 
2007
     290,431       689,442       979,873  
 
2008
     359,091       812,746       1,171,837  
Thereafter
     973,682       271,686       1,245,368  
 
  
   
   
 
 
   $ 2,083,960     $ 4,539,527     $ 6,623,487  
 
  
   
   
 

     Financial Services debt related to securitized residential mortgage loans structured as collateralized borrowings (Home Equity Loans Asset-Backed Certificates) was $4.46 billion at June 30, 2003; the holders of such debt have no recourse for non-payment to Centex Home Equity Company, L.L.C. (“Home Equity”) or Centex Corporation. The principal and interest on these notes are paid using the cash flow from the underlying residential mortgage loans, which serve as collateral for the debt. Accordingly, the timing of the principal payments on these notes is dependent upon the payments received on the underlying residential mortgage loans. The expected maturities of this component of long-term debt are based on contractual maturities adjusted for projected repayments and prepayments of principal. As is common in these structures, Home Equity remains liable for customary loan representations.

     Under the Company’s debt covenants, Centex is required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At June 30, 2003, the Company was in compliance with all of these covenants.

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Credit Facilities

     The Company’s existing credit facilities and available borrowing capacity as of June 30, 2003 are summarized below:

                   
     
   
 
      Existing Credit     Available  
      Facilities     Capacity  
     
   
 
Centex
                
 
Centex Corporation
                
 
Multi-Bank Revolving Credit Facility
   $ 700,000     $ 700,000 (1)
 
Uncommitted Bank Lines
     60,000       60,000  
 
 
Construction Products
                
 
Senior Revolving Credit Facility
     155,000       87,817 (2)
 
  
   
 
 
     915,000       847,817  
 
  
   
 
Financial Services
                
 
Unsecured Credit Facilities
     125,000       70,800 (3)
 
Secured Credit Facilities
     415,000       199,694 (4)
 
Harwood Street Funding II, L.L.C. Facility
     1,500,000       750,187  
 
  
   
 
 
     2,040,000       1,020,681  
 
  
   
 
 
   $ 2,955,000     $ 1,868,498 (5)
 
  
   
 

(1)   This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of June 30, 2003, there were no borrowings under this backup facility, and the Company’s $600 million commercial paper program had no issuance outstanding. There have been no borrowings under this facility since inception. See Note (S), “Subsequent Events.”

(2)   This committed facility was entered into by Construction Products and has no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in March 2006. Construction Products terminated its Annually Renewable Commercial Paper Conduit in June 2003.

(3)   Centex Corporation, CTX Mortgage Company, L.L.C. (“CTX Mortgage”) and Home Equity, on a joint and several basis, share in a $125 million uncommitted, unsecured credit facility.

(4)   CTX Mortgage and Home Equity share in a $250 million committed secured credit facility to finance mortgage inventory. CTX Mortgage also maintains $155 million of committed secured mortgage warehouse facilities to finance mortgages not sold to HSF-I. Home Equity also maintains a $10 million committed secured mortgage warehouse facility to finance mortgages.

(5)   The amount of available borrowing capacity includes $1.74 billion of committed borrowings and $130.8 million of uncommitted borrowings as of June 30, 2003. Although the Company believes that the uncommitted capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to the Company or its subsidiaries if and when requested to do so.

     Home Equity finances its inventory of mortgage loans held for investment through Harwood Street Funding II, L.L.C. (“HSF-II”), a wholly-owned, consolidated entity, under a revolving sales agreement that expires upon final payment of the senior and subordinated debt issued by HSF-II. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s borrowing capacity of $1.50 billion. HSF-II obtains funds through the sale of subordinated notes that are rated BBB by Standard & Poor’s (“S&P”), Baa2 by Moody’s Investors Service (“Moody’s”) and BBB by Fitch Ratings (“Fitch”) and short-term secured liquidity notes that are rated A1+ by S&P, P1 by Moody’s and F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest income and interest expense of HSF-II are reflected in the financial statements of Financial Services.

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Harwood Street Funding I, L.L.C.

     CTX Mortgage finances its inventory of mortgage loans held for sale principally through sales of Jumbo “A” and conforming loans to Harwood Street Funding I, L.L.C. (“HSF-I”), an unaffiliated entity established in 1999 that is not consolidated with Financial Services or Centex at June 30, 2003, pursuant to a mortgage loan purchase agreement (the “HSF-I Purchase Agreement”). Since 1999, CTX Mortgage has sold substantially all of the Jumbo “A” and conforming mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized medium-term debt that is currently rated AAA by S&P and Aaa by Moody’s, (2) short-term secured liquidity notes that are currently rated A1+ by S&P and P1 by Moody’s and (3) subordinated certificates maturing in September 2004, November 2005 and June 2006, extendable for up to five years, that are rated BBB by S&P and Baa2 by Moody’s. This arrangement provides CTX Mortgage with reduced financing cost for eligible mortgage loans it originates and improves its liquidity.

     Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. At June 30, 2003, the maximum amount of mortgage loans that HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement is limited to $3.00 billion.

     HSF-I’s commitment to purchase eligible mortgage loans continues in effect until the occurrence of certain termination events described in the HSF-I Purchase Agreement. These termination events primarily relate to events of default under, or other failure to comply with, the provisions, including loan portfolio limitations, of the agreements that govern the mortgage loan warehouse program but also include a downgrade in Centex Corporation’s credit ratings below BB+ by S&P or Ba1 by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would draw on existing credit facilities currently held in addition to HSF-I. In addition, it might need to make other customary financing arrangements to fund its mortgage loan origination activities. Although the Company believes that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

     In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interest of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance of obligations of CTX Mortgage, in its capacity as servicer, is guaranteed by Centex. These servicer obligations include repurchasing a mortgage loan from HSF-I in the event of a breach of CTX Mortgage’s representations and warranties as the seller of the mortgage loans, if such breach materially and adversely affects the value of the mortgage loan and is not cured within 60 days. CTX Mortgage received $4.6 million and $2.3 million in fees for servicing loans owned by HSF-I for the three months ended June 30, 2003 and 2002, respectively.

     HSF-I has entered into a swap arrangement with a bank (the “Harwood Swap”) under which the bank has agreed to make certain payments to HSF-I, and HSF-I has agreed to make certain payments to the bank, the net effect of which is that the bank has agreed to bear certain interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by HSF-I. The purpose of this arrangement is to provide credit enhancement to HSF-I by permitting it to hedge these risks with a counterparty having a

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short-term credit rating of A1+ from S&P and P1 from Moody’s. Additionally, the Company has entered into a separate swap arrangement with the bank pursuant to which the Company has agreed to pay to the bank all amounts that the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a monthly fee equal to a percentage of the notional amount of the Harwood Swap, and the bank is required to pay to the Company all amounts that the bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, the Company effectively bears all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of the Company’s risk as the counterparty to the swap supporting the payment requirements of HSF-I. The Company is also required to reimburse the bank for certain expenses, costs and damages that it may incur.

     As of June 30, 2003, HSF-I owned $2.48 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $2.34 billion of outstanding securitized term debt and $0.14 billion of outstanding subordinated certificates. The Company does not guarantee the payment of any debt or subordinated certificates of HSF-I and is not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, the Company retains certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. CTX Mortgage’s obligation to repurchase such loans is guaranteed by Centex Corporation. CTX Mortgage records a liability for its estimated losses for these obligations and such amount is included in its loan origination reserve. CTX Mortgage sold $3.79 billion and $1.84 billion of mortgage loans to HSF-I and repurchased $0.4 million and $0.6 million of delinquent or foreclosed mortgage loans from HSF-I during the three months ended June 30, 2003 and 2002, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $87.2 million and $51.0 million for the three months ended June 30, 2003 and 2002, respectively.

     In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which modifies the accounting for certain entities in which (1) equity investors do not have a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. Pursuant to FIN 46, HSF-I is a variable interest entity for which CTX Mortgage is the primary beneficiary. Accordingly, HSF-I will be consolidated in the Company’s Financial Statements beginning July 1, 2003. As a result, the Company anticipates that it will record a charge of approximately $15.0 to $20.0 million representing the cumulative effect of a change in accounting principle in the quarter ending September 30, 2003. This charge primarily represents the deferral of service release premium income, which will be recognized as loans are sold into the secondary market. Additionally, the consolidation of HSF-I will result in an increase in the Company’s residential mortgage loans held for sale with a corresponding increase in the Company’s Financial Services debt. HSF-I’s debt does not have recourse to the Company, and the consolidation of this debt will not change the Company’s credit profile or debt ratings.

(H) CENTEX DEVELOPMENT COMPANY, L.P.

     Centex Development Company, L.P. (the “Partnership”) is a master limited partnership formed by the Company in March 1987 to broaden the range of business activities that may be conducted for the benefit of the Company’s stockholders to include general real estate development. The Company believed that this

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expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

     The Partnership is authorized to issue three classes of limited partnership interest. The Company indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units (“Class A Units” and “Class C Units,” respectively), which are collectively convertible into 20% of the Partnership’s Class B limited partnership units (“Class B Units”). The Partnership may issue additional Class C Units in connection with the acquisition of real property and other assets. No Class B Units have been issued. However, the stockholders of the Company hold warrants to purchase approximately 80% of the Class B Units. The warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex Corporation.

     As holder of the Class A and Class C Units, the Company is entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing return of capital. As of June 30, 2003, these adjusted capital contributions, or Unrecovered Capital, were $241.1 million and preference payments in arrears totaled $47.4 million.

     The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation (“Holding”). The common stock of Holding is held by the stockholders of the Company through a nominee arrangement and trades in tandem with the common stock of Centex Corporation. The stockholders of the Company elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of the Company. Thus, through Holding, the stockholders of the Company control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, at June 30, 2003, the Company accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments. The Company’s accounting for its investment in the Partnership may be impacted by FIN 46. Management is in the process of evaluating the applicability of FIN 46 and the related accounting for this investment.

     Supplementary condensed combined financial statements for Centex Corporation and subsidiaries, Holding and subsidiary and the Partnership and subsidiaries are set forth below. For additional information on Holding and subsidiary and the Partnership and subsidiaries, see their separate financial statements and related footnotes included elsewhere in this Report.

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Supplementary Condensed Combined Balance Sheets of Centex Corporation and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                   
     
   
 
      June 30,     March 31,  
      2003     2003  
     
   
 
Assets
                
 
Cash and Cash Equivalents
   $ 146,361     $ 474,891  
 
Restricted Cash
     214,442       172,321  
 
Receivables
     6,205,275       5,633,999  
 
Inventories
     4,382,149       4,026,246  
 
Investments in Joint Ventures and Other
     122,318       106,250  
 
Assets Held for Sale
     8,291       7,585  
 
Property and Equipment, net
     675,449       683,473  
 
Other Assets
     725,813       755,036  
 
Assets of Discontinued Operations
     10,704       110,364  
 
  
   
 
 
   $ 12,490,802     $ 11,970,165  
 
  
   
 
Liabilities and Stockholders’ Equity
                
 
Accounts Payable and Accrued Liabilities
   $ 1,698,081     $ 1,795,247  
 
Liabilities Related to Assets Held for Sale
     6,941       6,436  
 
Short-term Debt
     1,149,639       1,042,825  
 
Long-term Debt
     6,661,152       6,276,992  
 
Liabilities of Discontinued Operations
     910       19,435  
 
Minority Stockholders’ Interest
     225,508       171,384  
 
Stockholders’ Equity
     2,748,571       2,657,846  
 
  
   
 
 
   $ 12,490,802     $ 11,970,165  
 
  
   
 

Supplementary Condensed Combined Statements of Earnings of Centex Corporation and Subsidiaries, Holding and Subsidiary and Partnership and Subsidiaries

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Revenues
   $ 2,408,807     $ 1,876,707  
Costs and Expenses
     2,200,407       1,752,490  
Earnings (Loss) from Unconsolidated Entities
     757       268  
 
    
   
 
Earnings Before Income Taxes
     209,157       124,485  
Income Taxes
     66,736       37,456  
 
    
   
 
Earnings from Continuing Operations
     142,421       87,029  
Earnings from Discontinued Operations
     369       726  
 
  
   
 
Net Earnings
     142,790       87,755  
Other Comprehensive Income (Loss)
     9,470       6,091  
 
    
   
 
Comprehensive Income
   $ 152,260     $ 93,846  
 
    
   
 

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(I) COMMITMENTS AND CONTINGENCIES

     The Company conducts a portion of its land acquisition, development and other activities through its participation in joint ventures in which the Company holds less than a majority interest. These joint ventures are typically large in nature, and partnering with other developers allows Centex Homes to share the risks and rewards of ownership while providing for efficient asset utilization. The Company’s investment in these non-consolidated joint ventures was $118.4 million and $102.3 million at June 30, 2003 and March 31, 2003, respectively. These joint ventures had total outstanding secured construction debt of approximately $236.8 million and $232.5 million at June 30, 2003 and March 31, 2003, respectively. The Company’s liability with respect to this debt, based on its ownership percentage of the related joint ventures, is limited to approximately $62.2 million and $56.4 million at June 30, 2003 and March 31, 2003, respectively. Under the structure of this debt, the Company becomes liable up to these amounts only to the extent that the construction debt exceeds a certain percentage of the value of the project. At June 30, 2003 and March 31, 2003, the Company was not liable for any of this debt. Management does not believe that FIN 46 will have a material impact on the Company’s accounting for these investments.

     In the normal course of its business, the Company issues certain representations, warranties and guarantees related to its home sales, land sales, building sales, commercial construction and mortgage loan originations. Based on historical evidence, the Company does not believe that any of these representations, warranties or guarantees would result in a material effect on our consolidated financial condition or operations. See further discussion of our warranty liability below.

     Centex Homes offers a ten-year limited warranty for most homes constructed and sold in the United States. The warranty covers defects in materials or workmanship in the first year of the home and certain designated components or structural elements of the home in the second through tenth years. In California, effective January 1, 2003, Centex Homes began following the statutory provisions of Senate Bill 800, which, in part, provide a statutory warranty to customers and a statutory dispute resolution process. Centex Homes estimates the costs that may be incurred under its warranty program for which it will be responsible and records a liability at the time each home is closed. Factors that affect Centex Homes’ warranty liability include the number of homes closed, historical and anticipated rates of warranty claims and cost per claim. Centex Homes periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

     Changes in Centex Homes’ contractual warranty liability during the three months ended June 30, 2003 are as follows:

         
   
 
    For the Three Months  
    Ended June 30, 2003  
   
 
Balance at Beginning of Period
   $ 16,125  
Warranties Issued
     3,894  
Settlements Made
     (4,337 )
Changes in Liability of Pre-Existing Warranties, Including Expirations
     451  
 
  
 
Balance at End of Period
   $ 16,133  
 
  
 

     CTX Mortgage has established a liability for anticipated losses associated with loans originated and sold to HSF-I or other unaffiliated third parties, as further discussed above in Note (G), “Indebtedness.”

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     Changes in CTX Mortgage’s mortgage loan origination reserve for the three months ended June 30, 2003 are as follows:

         
   
 
    For the Three Months  
    Ended June 30, 2003  
   
 
Balance at Beginning of Period
   $ 28,594  
Provision for Losses
     937  
Settlements
     (354 )
 
  
 
Balance at End of Period
   $ 29,177  
 
  
 

(J) LAND HELD UNDER OPTION AGREEMENTS NOT OWNED AND OTHER LAND DEPOSITS

     In order to ensure the future availability of land for homebuilding, the Company enters into lot option purchase agreements with unaffiliated third parties and with the Partnership, as discussed in Note (O), “Related Party Transactions,” below. Under the option agreements, the Company pays a stated deposit in consideration for the right to purchase land at a future time, usually at predetermined prices. These options, which do not contain performance requirements from the Company nor obligate the Company to purchase the land in the event the land values deteriorate, expire at various dates through the year 2010.

     The Company has evaluated those option agreements entered into after January 31, 2003 under the provisions of FIN 46. The Company does not have legal title to the optioned land; however, under FIN 46, if the option agreements are entered into with entities that qualify as variable interest entities and if the Company qualifies as the primary beneficiary of those entities, the Company must consolidate such entities by recording the land under option and an offsetting liability at fair value (the exercise price of the option). The Company has determined that it is the primary beneficiary of several such agreements at June 30, 2003. As a result, the Company recorded $45.5 million of land as inventory under the caption Land Held Under Option Agreements not Owned, with a corresponding increase to minority interest. In addition, the Company reclassified $4.5 million of deposits related to these options, previously included in land held for development and sale, to the new inventory caption.

     The Company also has option agreements entered into before February 1, 2003. These agreements must be evaluated for consolidation under FIN 46 effective July 1, 2003. Management is in the process of determining the impact of FIN 46 on these agreements.

     At June 30, 2003, the Company had deposited or invested with third parties $81.1 million (excluding the $4.5 million of deposits discussed above) related to land option agreements. These agreements had a total remaining purchase price of approximately $2.4 billion.

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(K) COMPREHENSIVE INCOME

     A summary of comprehensive income for the three months ended June 30, 2003 and 2002 is presented below:

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Net Earnings
   $ 142,790     $ 87,755  
Other Comprehensive Income (Loss), net of Tax:
                
 
Unrealized (Loss) Gain on Hedging Instruments
     (1,252 )     13,976  
 
Foreign Currency Translation Adjustments
     10,720       (6,951 )
 
Other
     2       (934 )
 
  
   
 
Comprehensive Income
   $ 152,260     $ 93,846  
 
  
   
 

     The foreign currency translation adjustments are primarily the result of Centex’s investment in the Partnership. For additional information on the Partnership and subsidiaries, see their separate financial statements included elsewhere in the Report. The unrealized gain or loss on hedging instruments represents the deferral in other comprehensive income of the unrealized gain or loss on swap agreements designated as cash flow hedges. The accounting for interest rate swaps and other derivative financial instruments is discussed in detail in Note (N), “Derivatives and Hedging.”

(L) BUSINESS SEGMENTS

     The Company operates in five principal business segments: Home Building, Financial Services, Construction Products, Construction Services and Investment Real Estate. These segments operate primarily in the United States, and their markets are nationwide. Revenues from any one customer are not significant to the Company.

     Intersegment revenues and investments in joint ventures are not material and are not shown in the following tables. The investment in the Partnership (approximately $296.9 million as of June 30, 2003) is included in the Investment Real Estate segment.

Home Building

     Home Building’s operations involve the purchase and development of land or lots and the construction and sale of detached and attached single-family homes.

Financial Services

     Financial Services’ mortgage operations consist primarily of home financing, sub-prime home equity lending and the sale of title insurance and other various insurance coverages. These activities include mortgage origination, servicing and other related services for homes sold by the Company’s subsidiaries and others. Financial Services’ revenues include interest income of $106.7 million and $80.8 million for the three months ended June 30, 2003 and 2002, respectively. Substantially all of the Company’s interest income in each year is earned by the Financial Services segment. Financial Services’ cost of sales is comprised of

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interest expense related to debt issued to fund its home financing and sub-prime home equity lending activities.

Construction Products

     Construction Products’ operations involve the manufacture, production, distribution and sale of cement, gypsum wallboard, recycled paperboard, aggregates and readymix concrete. The Company owned 64.9% of Centex Construction Products, Inc. at June 30, 2003 and 64.6% at June 30, 2002. Construction Products’ results are shown before minority interest in the tables presented below. See Note (S), “Subsequent Events,” for more information on the planned spin-off of this segment.

Construction Services

     Construction Services’ operations involve the construction of buildings for both private and government interests including office, commercial and industrial buildings, hospitals, hotels, correctional facilities, educational institutions, museums, libraries, airport facilities and sports facilities. As this segment generates positive cash flow, intercompany interest income (credited at the prime rate in effect) of $1.4 million and $1.6 million for the three months ended June 30, 2003 and 2002, respectively, is included in management’s evaluation of this segment. However, the intercompany interest income is eliminated in consolidation and excluded from the tables presented below.

Investment Real Estate

     Investment Real Estate’s operations involve the acquisition, development and sale of land, primarily for industrial, office, multi-family, retail, residential and mixed-use projects. Under the equity method of accounting for investments, Investment Real Estate also records as revenues any income or loss from its investment in the Partnership, including the International Home Building business located in the United Kingdom.

Other

     The Company’s Other segment includes Corporate general and administrative expenses, interest expense and minority interest. Also included in the Other segment are the Company’s home services operations, which are not material for purposes of segment reporting. In June 2003, the Company spun off its manufactured housing operations, which had previously been included in the Other segment. As a result of the spin-off, the manufactured housing operations are reflected as a discontinued operation and not included in the segment information below. Earnings related to the operations that were spun off have been reclassified to discontinued operations.

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     The following are included in Other in the tables below (dollars in millions):

                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Operating Loss from Home Services
   $ (1.3 )   $ (1.6 )
Corporate General and Administrative Expense
     (19.2 )     (12.6 )
Interest Expense
     (17.0 )     (15.4 )
Minority Interest
     (7.5 )     (8.9 )
Other
     (0.3 )     (0.6 )
 
  
   
 
 
   $ (45.3 )   $ (39.1 )
 
  
   
 
                                                         
   
 
    For the Three Months Ended June 30, 2003  
    (Dollars in millions)  
   
 
    Home     Financial     Construction     Construction     Investment              
    Building     Services     Products     Services     Real Estate     Other     Total  
   
   
   
   
   
   
   
 
Revenues
   $ 1,504.5     $ 266.9     $ 144.1     $ 375.8     $ 2.7     $ 22.7     $ 2,316.7  
Cost of Sales
     (1,127.4 )     (51.0 )     (119.7 )     (356.8 )     (0.9 )     (9.4 )     (1,665.2 )
Selling, General and Administrative Expenses
     (221.7 )     (150.3 )     (1.5 )+     (14.4 )     (1.0 )     (58.6 )     (447.5 )
Earnings from Unconsolidated Entities
     1.2       —       —       —       3.9       —       5.1  
 
  
   
   
   
   
   
   
 
Earnings (Loss) from Continuing Operations Before Income Tax
   $ 156.6     $ 65.6     $ 22.9 *   $ 4.6     $ 4.7     $ (45.3 )   $ 209.1  
 
  
   
   
   
   
   
   
 

+   Represents Construction Products’ Corporate general and administrative expenses. General and administrative expenses related to Construction Products’ operating units of $6.5 million are classified as Cost of Sales.
*   Before Minority Interest

                                                         
   
 
    For the Three Months Ended June 30, 2002  
    (Dollars in millions)  
   
 
    Home     Financial     Construction     Construction     Investment              
    Building     Services     Products     Services     Real Estate     Other     Total  
   
   
   
   
   
   
   
 
Revenues
   $ 1,105.5     $ 180.5     $ 128.8     $ 360.7     $ 6.6     $ 29.3     $ 1,811.4  
Cost of Sales
     (823.6 )     (44.6 )     (99.7 )     (335.4 )     (0.4 )     (11.6 )     (1,315.3 )
Selling, General and Administrative Expenses
     (181.8 )     (111.6 )     (1.4 ) +     (17.2 )     (2.1 )     (56.8 )     (370.9 )
Earnings (Loss) from Unconsolidated Entities
     0.2       —       —       —       (0.7 )     —       (0.5 )
 
  
   
   
   
   
   
   
 
Earnings (Loss) from Continuing Operations Before Income Tax
   $ 100.3     $ 24.3     $ 27.7 *   $ 8.1     $ 3.4     $ (39.1 )   $ 124.7  
 
  
   
   
   
   
   
   
 

+   Represents Construction Products’ Corporate general and administrative expenses. General and administrative expenses related to Construction Products’ operating units of $6.0 million are classified as Cost of Sales.
*   Before Minority Interest

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(M) INCOME TAXES

     Income tax expense for the Company increased from $37.5 million to $66.7 million and the effective tax rate increased from 30.0% to 31.9% for the three months ended June 30, 2002 and 2003, respectively. The increase in the effective tax rate is primarily the result of the expected decrease in the availability of net operating loss carryforwards during fiscal 2004 compared to fiscal 2003.

(N) DERIVATIVES AND HEDGING

     The Company is exposed to the risk of interest rate fluctuations on its debt and other obligations. As part of its strategy to manage the obligations that are subject to changes in interest rates, the Company has entered into various interest rate swap agreements, designated as cash flow hedges as described below. The swap agreements are recorded at their fair value in Other Assets or Accrued Liabilities in the consolidated balance sheets. To the extent the hedging relationship is effective, gains or losses in the fair value of the derivative are deferred as a component of Stockholders’ Equity through Other Comprehensive (Loss) Income. Fluctuations in the fair value of the ineffective portion of the derivative are reflected in the current period earnings, although such amounts are insignificant.

     At June 30, 2003, Centex Corporation has an interest rate swap agreement that, in effect, fixes the variable interest rate on $25.0 million of its outstanding debt at 6.7% and expires in October 2005. During the three months ended June 30, 2003, the hedge related to this derivative was effective. Amounts to be received or paid under the swap agreement are recognized as a change in interest incurred on the related debt instrument. Based on the balance in Accumulated Other Comprehensive Loss at June 30, 2003 related to this derivative, the Company estimates increases in interest incurred over the next 12 months to be approximately $1.4 million. As of June 30, 2003, the balance in Accumulated Other Comprehensive Loss related to this derivative was $3.2 million ($2.1 million net of tax).

     At June 30, 2003, Construction Products has an interest rate swap agreement that, in effect, fixes the variable interest rate on $55.0 million of its outstanding debt at 4.5% and expires in August 2003. During the three months ended June 30, 2003, the hedge related to this derivative was effective. Amounts to be received or paid under the swap agreement are recognized as a change in interest incurred on the related debt instrument. Based on the balance in Accumulated Other Comprehensive Loss at June 30, 2003 related to this derivative, the Company estimates increases in interest incurred over the next 12 months to be approximately $0.3 million. As of June 30, 2003, the balance in Accumulated Other Comprehensive Loss related to this derivative was $0.3 million ($0.2 million net of tax).

     Financial Services, through Home Equity, uses interest rate swaps to hedge the market risk associated with the anticipated issuance of fixed rate securitization debt used to finance sub-prime mortgages. Changes in fair value of these derivatives are deferred in Accumulated Other Comprehensive Loss and recorded through current earnings as an adjustment of the interest incurred over the life of the securitization debt. Home Equity also uses interest rate swaps that, in effect, fix the interest rate on its variable interest rate debt. Amounts to be received or paid as a result of these swap agreements are recognized as adjustments to interest incurred on the related debt instrument. During the three months ended June 30, 2003, the hedges related to these interest rate swaps were effective. At June 30, 2003, Home Equity was hedging $1.43 billion of its outstanding debt with these interest rate swaps at a weighted-average interest rate of 2.4%. These swaps expire at varying times through December 2008. Based on the balance in Accumulated Other Comprehensive Loss at June 30, 2003 related to these derivatives, the Company estimates increases in interest incurred over the next 12 months to be approximately $8.9 million. As of June 30, 2003, the balance in Accumulated Other Comprehensive Loss related to these derivatives was $12.2 million ($7.9 million net of tax).

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     Financial Services, through CTX Mortgage, enters into interest rate lock commitments (“IRLCs”) with its customers under which CTX Mortgage agrees to make mortgage loans at agreed upon rates within a period of time, generally from 1 to 30 days, if certain conditions are met. In order to hedge the risk of fluctuations in the value of these IRLCs and mortgage loans held by it, CTX Mortgage executes mandatory forward trades of mortgage loans and mortgage-backed securities. CTX Mortgage also uses mandatory forward trades to hedge the Company’s obligation, created through the Harwood Swap, to protect against certain interest rate risk and non-credit related market risk related to mortgage loans held by HSF-I, an unaffiliated entity that is not consolidated with Financial Services or the Company. At June 30, 2003, the Company has elected not to utilize hedge accounting treatment under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” (“SFAS No. 133”) for these derivatives. Initially, the fair value of the IRLCs is recorded on the balance sheet as a deferred item. Subsequent changes in the fair value of the IRLCs, mandatory forward trades and swaps are recorded as an adjustment to earnings. The net change in the estimated fair value of these derivative positions resulted in a loss of $8.3 million for the three months ended June 30, 2003. In connection with the consolidation of HSF-I, CTX Mortgage elected as of July 1, 2003 to utilize hedge accounting treatment under SFAS No. 133 for mandatory forward trades used to hedge changes in the value of its mortgage loan portfolio.

(O) RELATED PARTY TRANSACTIONS

     Centex Homes purchased land from the Partnership during the three months ended June 30, 2003 and 2002 totaling $12.0 million and $21.1 million, respectively.

     At June 30, 2003 and March 31, 2003, Centex Homes had $7.8 million and $7.2 million, respectively, deposited with the Partnership as option deposits for the purchase of land. Centex Homes also entered into agreements to reimburse the Partnership for certain costs and fees incurred by the Partnership in the purchase and ownership of these tracts of land. During the three months ended June 30, 2003 and 2002, Centex Homes paid $0.4 million and $1.4 million, respectively, to the Partnership in fees and reimbursements pursuant to these agreements. Centex Homes expects to pay an additional $19.0 million to the Partnership to complete the purchase of these tracts of land over the next three years.

     Construction Services has historically executed construction contracts with the Partnership. At March 31, 2003, contracts for the construction of two industrial facilities were completed and no additional contracts were outstanding. At June 30, 2003, a $10.6 million contract for the construction of an office building had been executed with the Partnership and was outstanding. During the three months ended June 30, 2003 and 2002, the Partnership paid zero and $3.5 million, respectively, to Construction Services pursuant to these contracts.

(P) RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued FIN 46, which modifies the accounting for certain entities in which (1) equity investors do not have a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. FIN 46 applied immediately for certain disclosure requirements and to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. At June 30, 2003, the Company has interests in the Partnership, HSF-I, land option agreements and certain joint ventures that are or may be affected by this interpretation. In accordance with FIN 46, the nature

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of these entities’ operations, the Company’s potential maximum exposure related to these entities and the applicability of FIN 46 to these entities are discussed as follows:

     
The Partnership   Financial statements filed in tandem with this Report
    Note (H), “Centex Development Company, L.P.”
HSF-I   Note (G), “Indebtedness”
Land Option Agreements   Note (J), “Land Held Under Option Agreements not
Owned and Other Land Deposits”
Joint Ventures   Note (I), “Commitments and Contingencies”

     The Company has historically accounted for stock-based compensation in accordance with APB No. 25 and related interpretations as permitted by SFAS No. 123. On April 1, 2003, the Company adopted the fair value measurement provisions of SFAS No. 123 under which the Company will recognize compensation expense of a stock option award to an employee over the vesting period based on the fair value of the award on the grant date. The fair value method has been applied only to awards granted or modified on or after April 1, 2003 (the prospective method), whereas awards granted prior to such date will continue to be accounted for under APB No. 25. See Note (C), “Stock-Based Employee Compensation Arrangements.”

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” (“SFAS No. 149”). The statement amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under SFAS No. 133 by requiring that contracts with comparable characteristics be accounted for similarly, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. A portion of this statement is effective for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The remainder of this statement codifies previously issued SFAS No. 133 implementation guidance, which retains its original effective dates. The Company does not expect the implementation of SFAS No. 149 to have a material impact on its results of operations or financial position.

(Q) OFF-BALANCE-SHEET OBLIGATIONS

     The Company enters into various “off-balance-sheet” transactions in the normal course of business in order to reduce financing costs and improve access to liquidity, facilitate homebuilding activities and manage exposure to changing interest rates. Further discussion regarding these transactions can be found above in Note (G), “Indebtedness,” Note (H), “Centex Development Company, L.P.,” Note (I), “Commitments and Contingencies” and Note (N), “Derivatives and Hedging.”

(R) SPIN-OFF OF MANUFACTURED HOUSING

     In June 2003, the Company spun off its manufactured housing operations, which had previously been included in the Other segment. As a result of the spin-off, the manufactured housing operations’ earnings have been reclassified to discontinued operations in the statements of consolidated earnings, and any assets or liabilities related to these discontinued operations have been disclosed separately on the consolidated balance sheets. All prior period information related to these discontinued operations has been reclassified to be consistent with the June 30, 2003 presentation. All assets and liabilities related to these discontinued operations that remain with the Company at June 30, 2003 are in the process of being sold and/or disposed. For the three months ended June 30, 2003 and 2002, discontinued operations had revenues of $39.5 million and $32.9 million, respectively, and operating earnings of $702 thousand and $746 thousand, respectively.

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(S) SUBSEQUENT EVENTS

     On July 21, 2003, the Company announced the planned tax-free spin-off of its entire equity interest in Centex Construction Products, Inc. The spin-off is contingent upon approval by the Centex Construction Products, Inc. shareholders, approval by the Internal Revenue Service of the tax-free nature of the spin-off and other conditions. The Company anticipates that the spin-off will be concluded on or about December 31, 2003.

     In August 2003, the Company completed a new committed $800 million multi-bank extendible revolving credit facility which will mature in August 2006. This facility replaces the $700 million revolving credit in effect at June 30, 2003. No borrowings are outstanding under the new facility. In addition, the Company completed a committed $250 million multi-bank letter of credit facility which will mature in August 2004.

(T) RECLASSIFICATIONS

     Certain prior year balances have been reclassified to be consistent with the June 30, 2003 presentation.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     For the three months ended June 30, 2003, our consolidated revenues were $2.32 billion, a 28.2% increase over $1.81 billion for the same period last year. Earnings from continuing operations before income taxes were $209.1 million, 67.7% higher than $124.7 million for the same period last year. The changes in our revenues and earnings from continuing operations before income taxes are explained below by segment. The principal reasons for the increases in consolidated revenues and income from continuing operations before income taxes are the continued growth of our Home Building operations and a substantial increase in the refinancing activity of our Financial Services operations.

     Net earnings from continuing operations for the three months ended June 30, 2003 were $142.3 million, 63.0% higher than $87.3 million for the same period last year. The increase in net earnings from continuing operations is less than the increase in earnings from continuing operations before income taxes due to a slight increase in our effective tax rate. Our effective tax rate related to continuing operations increased to 31.9% for the three months ended June 30, 2003 from 30.0% for the three months ended June 30, 2002. The increase in the effective tax rate is primarily the result of the expected decrease in the availability of net operating loss carryforwards during fiscal 2004 compared to fiscal 2003.

     Any reference herein to we, us or our includes Centex Corporation and its subsidiary companies.

HOME BUILDING

     The following summarizes the results of our Home Building operations for the three months ended June 30, 2003 compared to the same period last year (dollars in millions, except per unit data):

                                 
   
 
    For the Three Months Ended June 30,  
   
 
    2003     2002  
   
   
 
    % of Revenues     % of Revenues  
Revenues — Housing
   $ 1,477.4       98.2 %   $ 1,068.1       96.6 %
Revenues — Land Sales and Other
     27.1       1.8 %     37.4       3.4 %
Cost of Sales — Housing
     (1,102.6 )     (73.3 %)     (798.5 )     (72.2 %)
Cost of Sales — Land Sales and Other
     (24.8 )     (1.6 %)     (25.1 )     (2.3 %)
Selling, General and Administrative Expenses
     (221.7 )     (14.7 %)     (181.8 )     (16.4 %)
Earnings from Unconsolidated Entities
     1.2       — %     0.2       — %
 
  
   
   
   
 
Operating Earnings
   $ 156.6       10.4 %   $ 100.3       9.1 %
 
  
   
   
   
 
            % Change           % Change
Units Closed
     6,349       27.1 %     4,995       3.0 %
Average Unit Sales Price
   $ 232,699       8.8 %   $ 213,825       1.5 %
Operating Earnings Per Unit
   $ 24,667       22.9 %   $ 20,073       8.8 %
Backlog Units
     14,111       26.6 %     11,150       9.8 %
Ending Operating Neighborhoods
     562       13.1 %     497       4.6 %

     Revenues for the three months ended June 30, 2003 increased 36.1% versus prior year, primarily due to an increase in units closed and higher unit sales prices. Units closed during the three months ended June 30, 2003 increased 27.1% from 4,995 units to 6,349 units, and the average unit sales price increased 8.8% from $213,825 to $232,699. The increase in average units closed was the result of a higher number of operating neighborhoods in the current year and an increase in average units closed per neighborhood versus last year.

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The increase in the unit sales price was largely driven by higher selling prices in the California, Washington, D.C. and Florida markets.

     The relief of capitalized interest is included in Home Building’s cost of sales. Capitalized interest relieved was $13.2 million and $8.3 million for the three months ended June 30, 2003 and 2002, respectively.

     Gross Margin was 25.1% of revenues for the three months ended June 30, 2003 compared to 25.5% of revenues for the same period last year. The decrease was attributable to margins on Land Sales and Other which may vary significantly from period to period depending on the timing and amount of the related revenues. Excluding the effect of Land and Other, margins were 25.4% of revenues compared to 25.2% of revenues for the same period last year.

     Selling, general and administrative expenses for the three months ended June 30, 2003 were $221.7 million, or 14.7% of revenues, as compared to the $181.8 million and 16.4% of revenues reported for the same period last year. The dollar increase resulted from incremental costs associated with closing more homes. The decrease as a percentage of revenues is reflective of the revenue growth exceeding the incremental selling, general and administrative costs associated with the growth in home closings.

     Operating earnings for the three months ended June 30, 2003 were 10.4% of revenues and approximately $24,667 on a per-unit basis, compared to operating earnings of 9.1% of revenues and approximately $20,073 on a per-unit basis for the same period last year.

     Units in backlog increased 26.6% to 14,111 units at June 30, 2003 compared to 11,150 units at June 30, 2002. The increase in backlog resulted from a 13.1% increase in ending operating neighborhoods, which helped drive a 24.2% increase in new sales (orders) versus the prior year. Centex Homes defines backlog units as units that have been sold, as indicated by a signed contract, but not closed. Centex Homes ended its first quarter of fiscal 2004 with a record backlog of home sales.

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FINANCIAL SERVICES

     The Financial Services segment primarily is engaged in the residential mortgage banking business, as well as in other financial services that are in large part related to the residential mortgage market. Its operations include mortgage origination, servicing and other related services for purchasers of homes sold by our Home Building operations and other homebuilders, as well as sub-prime home equity lending and the sale of title insurance and various other insurance coverages. The following summarizes Financial Services’ results for the three months ended June 30, 2003 compared to the same period last year (dollars in millions):

                     
       
 
        For the Three Months Ended June 30,  
       
 
        2003     2002  
       
   
 
Revenues
   $ 266.9     $ 180.5  
 
  
   
 
Interest Margin
   $ 55.7     $ 36.1  
 
  
   
 
Operating Earnings
   $ 65.6     $ 24.3  
 
  
   
 
Origination Volume
   $ 5,432.1     $ 2,979.1  
 
  
   
 
Number of Loans Originated
               
 
CTX Mortgage Company, L.L.C.
               
   
Centex-built Homes (“Builder”)
     4,435       3,378  
   
Non-Centex-built Homes (“Retail”)
     22,792       12,406  
 
  
   
 
 
     27,227       15,784  
 
Centex Home Equity Company, L.L.C
     8,995       6,359  
 
  
   
 
 
     36,222       22,143  
 
  
   
 

                                 
    CTX Mortgage     Centex Home Equity  
    Company, L.L.C.     Company, L.L.C.  
   
   
 
    For the Three Months     For the Three Months  
    Ended June 30,     Ended June 30,  
   
   
 
    2003     2002     2003     2002  
   
   
   
   
 
Average Interest Earning Assets
   $ 307.6     $ 182.7     $ 4,876.1     $ 3,402.4  
Average Yield
     5.77 %     7.87 %     8.39 %     8.99 %
Average Interest Bearing Liabilities
   $ 202.6     $ 132.5     $ 5,065.0     $ 3,535.6  
Average Rate Paid
     2.01 %     2.91 %     3.88 %     4.83 %

     Financial Services’ results are primarily derived from conforming mortgage banking and sub-prime home equity lending operations as described below.

Conforming Mortgage Banking

     The revenues and operating earnings of CTX Mortgage Company, L.L.C. and related entities, or CTX Mortgage, are derived primarily from the sale of mortgage loans, inclusive of all service rights and, to a lesser extent, interest income and other fees. CTX Mortgage’s business strategy of selling conforming loans reduces our capital investment and related risks, provides substantial liquidity and is an efficient process given the size and maturity of the conforming mortgage loan secondary capital markets. CTX Mortgage originates mortgage loans, holds them for a short period and sells them to Harwood Street Funding I, L.L.C., or HSF-I,

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and investors. HSF-I is an unaffiliated entity that is not consolidated with Financial Services or Centex Corporation and subsidiaries at June 30, 2003. HSF-I purchases mortgage loans from CTX Mortgage with the proceeds from the issuance of securitized term debt, secured liquidity notes and subordinated certificates that are extendable for up to five years. The debt, interest income and interest expense of HSF-I are not reflected in the financial statements of Financial Services or Centex Corporation and subsidiaries at June 30, 2003. CTX Mortgage sold $3.79 billion and $1.84 billion of mortgage loans to HSF-I and repurchased $0.4 million and $0.6 million of delinquent or foreclosed mortgage loans from HSF-I during the three months ended June 30, 2003 and 2002, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $87.2 million and $51.0 million for the three months ended June 30, 2003 and 2002, respectively. Interpretation No. 46, “Consolidation of Variable Interest Entities,” or FIN 46, will impact CTX Mortgage’s accounting for HSF-I. For additional information regarding HSF-I and the implication of recent accounting pronouncements on HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 40-42 of this Report.

     Revenues increased 63.5% to $147.0 million for the three months ended June 30, 2003 as compared to the same period last year. The increase in revenues for the period is primarily related to an increase in CTX Mortgage originations due to an increase in mortgage loans originated for refinancing and for Centex Homes’ buyers, as well as higher revenues from Title and Insurance operations. Refinanced mortgages accounted for 51% of originations for the quarter this year compared to 21% for the same quarter last year. CTX Mortgage’s “capture” rate of Centex Homes’ buyers was 74% for the quarter this year compared to 72% for the same quarter last year.

     For the three months ended June 30, 2003, originations totaled 27,227 compared to 15,784 originations in the same period last year; loan volume was $4.55 billion compared to $2.48 billion for the same period last year; the per-loan profit was $1,769, an increase of 87.6% compared to $943 for the same period last year and total mortgage applications increased 96.7% to 31,319 from 15,919 applications for the same period last year. For the three months ended June 30, 2003, per-loan profit increased due to increased operational leverage as a result of the increase in the volume of originations, as well as an increase in Title and Insurance earnings.

     CTX Mortgage’s selling, general and administrative expenses increased $20.6 million to $93.6 million at June 30, 2003. This increase was primarily due to increased employee related costs and overhead related to the increased volume in loan originations. CTX Mortgage’s operating earnings were $48.1 million for the three months ended June 30, 2003, resulting in a 222.8% increase as compared to the same period last year. The increase in operating earnings for the period is primarily due to the increase in revenues discussed above and a decrease in the cost per loan originated.

     In the normal course of its activities, CTX Mortgage carries inventories of loans pending sale to investors other than HSF-I and earns an interest margin, which we define as the difference between interest revenue on mortgage loans held for sale or investment and interest expense on debt used to fund the mortgage loans. CTX Mortgage uses short-term mortgage warehouse facilities to finance these inventories of loans. CTX Mortgage’s interest margin increased 4.6% for the three months ended June 30, 2003 as compared to the same period last year, from $2.38 million to $2.49 million. This increase is reflective of an increase in originations, partially offset by a decrease in the spread between the average yield on interest earning assets and the average rate paid on interest bearing liabilities.

     The results of operations of CTX Mortgage depend to a significant extent on the level of interest rates. Any significant increases in mortgage rates above currently prevailing levels could adversely affect the volume of loan originations and may result in a significant curtailment of refinancing activity, which

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represents a substantial portion of our business. There can be no assurance that mortgage rates will remain at the current level in the future.

Sub-Prime Home Equity Lending

     The revenues of Centex Home Equity Company, L.L.C., or Home Equity, increased 32.2% to $119.9 million for the three months ended June 30, 2003, as compared to the same period last year, as a result of continued growth in our portfolio of residential mortgage loans held for investment. Interest margin increased to $53.2 million for the three months ended June 30, 2003 as compared to $33.8 million for the same period last year. The increase in interest margin is primarily a result of an increase in the portfolio of mortgage loans held for investment and a decrease in interest rates on debt used to fund mortgage loans. Home Equity reported operating earnings of $14.2 million for the three months ended June 30, 2003, as compared to operating earnings of $10.7 million for the same period last year. The increase in Home Equity’s operating earnings is primarily the result of the increase in interest margin, as noted above. Interest income will be positively affected as the portfolio of mortgage loans held for investment increases and matures. The increase in interest margin was partially offset by an increase in servicing and production costs, mostly attributable to loan volume and loan servicing growth, and an increase in the provision for losses on residential mortgage loans held for investment. Home Equity’s selling, general and administrative expenses increased $19.3 million to $56.6 million for the three months ended June 30, 2003 as a result of Home Equity’s growth. Home Equity’s increase in loan production volume, the expansion of its branch offices and the increase in the number of its employees has resulted in a corresponding increase in salaries and related costs, rent expense, group insurance costs and advertising expenditures of approximately $9.5 million. The remainder of the increase was due to higher charges to the provision for loan losses, as discussed below.

     For the three months ended June 30, 2003, originations totaled 8,995 compared to 6,359 originations for the same period last year; origination volume was $877.5 million compared to $497.9 million for the same period last year and total applications increased 61.1% to 80,637 from 50,044 applications for the same period last year. For the three months ended June 30, 2003, originations increased 41.5% while origination volume increased 76.2% due to an increase in average loan size. The smaller increase in the number of originations relative to the larger increase in total applications is reflective of Home Equity’s continued adherence to its credit underwriting guidelines. Average interest earning assets increased 43.3%, from $3,402.4 million in the three months ended June 30, 2002 to $4,876.1 million in the three months ended June 30, 2003, and the corresponding average interest bearing liabilities increased 43.3%, from $3,535.6 million in the three months ended June 30, 2002 to $5,065.0 million in the three months ended June 30, 2003, primarily due to an increase in the volume of loan originations and an increase in average loan size. The average yield earned on these assets decreased from 8.99% in the three months ended June 30, 2002 to 8.39% in the three months ended June 30, 2003, and the average rate paid on these liabilities decreased from 4.83% in the three months ended June 30, 2002 to 3.88% in the three months ended June 30, 2003, primarily due to lower interest rates in fiscal 2004 compared to fiscal 2003. The fact that the average rate paid on interest bearing liabilities decreased significantly more than the yield earned on interest earning assets decreased and the increase in originations noted above led to a 57.5% increase in net interest margin from $33.8 million in the three months ended June 30, 2002 to $53.2 million in the three months ended June 30, 2003.

     At June 30, 2003, Home Equity’s total servicing portfolio consisted of 78,126 loans totaling $5.9 billion compared to 65,107 loans totaling $4.5 billion at June 30, 2002. For the three months ended June 30, 2003, service fee income related to this servicing was $14.6 million compared to $11.8 million for the same period last year.

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     The primary risks in Home Equity’s operations are consistent with those of the financial services industry and include credit risk associated with its loans, liquidity risk related to funding its loans and interest rate risk prior to securitization of the loans. In addition, as Home Equity services its loans, it is also subject to customer prepayment risks.

Allowance for Losses

     Home Equity originates and purchases loans in accordance with standard underwriting criteria. The underwriting standards are primarily intended to assess the creditworthiness of the borrower and the value of the mortgaged property and to evaluate the adequacy of the property as collateral for the home equity loan.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statement of consolidated earnings when it believes an event causing a loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     We believe that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. We evaluate the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects our judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

     Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

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     Changes in the allowance for losses on residential mortgage loans held for investment were as follows (dollars in thousands):

                     
       
 
        For the Three Months Ended June 30,  
       
 
        2003     2002  
       
   
 
Balance at Beginning of Period
   $ 28,384     $ 14,106  
   
Provision for Losses
     15,762       7,043  
   
Recoveries on Loans Charged Off
     76       18  
   
Losses Sustained
     (10,161 )     (3,847 )
 
  
   
 
Balance at End of Period
   $ 34,061     $ 17,320  
 
  
   
 
Allowance as a Percentage of Gross Loans Held for Investment
     0.7 %     0.5 %
Allowance as a Percentage of 90+ Days Contractual Delinquency
     25.1 %     19.8 %
90+ Days Contractual Delinquency
                
    Total Dollars Delinquent   $ 135,651     $ 87,304  
    % Delinquent     2.6 %     2.5 %

     The increase in the allowance for losses in the current quarter occurred primarily because the amount of the residential mortgage loans held for investment increased and the residential mortgage loan portfolio continued to mature. As the age and size of the residential mortgage loan portfolio continues to mature and grow, we expect the balance in the allowance for losses, the loans charged off and the allowance ratios to continue to increase. The increase in 90+ days contractual delinquency at June 30, 2003 occurred primarily because the residential mortgage loan portfolio continued to mature.

CONSTRUCTION PRODUCTS

     The following summarizes Construction Products’ results for the three months ended June 30, 2003 compared to the same period last year (dollars in millions):

                 
   
 
    For the Three Months Ended June 30,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 144.1     $ 128.8  
Cost of Sales and Expenses
     (119.7 )     (99.7 )
Selling, General and Administrative Expenses+
     (1.5 )     (1.4 )
 
  
   
 
Operating Earnings *
   $ 22.9     $ 27.7  
 
  
   
 

+   Represents Construction Products’ Corporate general and administrative expenses.
*   Before Minority Interest of $7.5 million and $8.9 million for the three months ended June 30, 2003 and 2002, respectively.

     Construction Products’ revenues for the three months ended June 30, 2003 were 11.9% greater than the same period last year. These increases were primarily the result of a $10.9 million increase in gypsum wallboard revenues and a $2.5 million increase in paperboard revenues. The increase in gypsum wallboard and paperboard revenues was primarily caused by higher sales volume when compared to the same period last year.

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     Construction Products’ cost of sales for the three months ended June 30, 2003 was 20.1% higher than the same period last year, primarily due to increased sales volume in all segments, except aggregates, higher maintenance costs for cement manufacturing facilities and higher energy costs for gypsum wallboard and paperboard. Construction Products’ selling, general and administrative expenses for the three months ended June 30, 2003 remained relatively consistent with prior year.

     For the three months ended June 30, 2003, Construction Products’ operating earnings, net of minority interest, decreased 17.3% from results for the same period a year ago. Operating earnings decreased primarily due to the increase in gypsum wallboard and paperboard energy costs noted above.

CONSTRUCTION SERVICES

     The following summarizes Construction Services’ results for the three months ended June 30, 2003 compared to the same period last year (dollars in millions):

                 
   
 
    For the Three Months Ended June 30,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 375.8     $ 360.7  
 
  
   
 
Operating Earnings
   $ 4.6     $ 8.1  
 
  
   
 
New Contracts Executed and Change Orders
   $ 261.3     $ 272.3  
 
  
   
 
Backlog of Uncompleted Contracts
   $ 1,404.8     $ 2,091.9  
 
  
   
 

     Construction Services’ revenues for the three months ended June 30, 2003 were 4.2% higher than revenues for the same period last year. The increase in revenues was primarily the result of the stage of execution of certain longer-term contracts, as well as an increase in the volume of shorter-term contracts. Operating earnings for the group decreased 43.2% in the three months ended June 30, 2003 compared to the same period last year primarily as a result of the prior year including certain high margin contracts. For the three months ended June 30, 2003, new contracts executed and change orders decreased 4.0% from the same period last year, and backlog of uncompleted contracts decreased 32.8% from June 30, 2002. The decrease in backlog is primarily due to delays in the execution of contracts for awarded projects. Construction Services defines backlog as the uncompleted portion of all signed contracts. In addition to backlog, Construction Services has been awarded work that is pending execution of a signed contract. At June 30, 2003 and 2002, respectively, such work, which is not included in backlog, was approximately $2.02 billion and $1.46 billion, respectively. There is no guarantee that these unsigned contracts will result in future revenues.

     The Construction Services segment provided a positive average net cash flow in excess of our investment in the segment of $126.9 million for the three months ended June 30, 2003 compared to $129.3 million for the same period last year.

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INVESTMENT REAL ESTATE

     The following summarizes Investment Real Estate’s results for the three months ended June 30, 2003 compared to the same period last year (dollars in millions):

                 
   
 
    For the Three Months Ended June 30,  
   
 
    2003     2002  
   
   
 
Revenues
   $ 2.7     $ 6.6  
 
  
   
 
Earnings (Loss) from Unconsolidated Entities and Other
   $ 3.9     $ (0.7 )
 
  
   
 
Operating Earnings
   $ 4.7     $ 3.4  
 
  
   
 

     Investment Real Estate’s revenues for the three months ended June 30, 2003 were 59.1% lower than revenues for the same period last year. Operating earnings from Investment Real Estate for the three months ended June 30, 2003 totaled $4.7 million compared to $3.4 million in the same period last year. The fluctuations in revenues and operating earnings were primarily related to the receipt of a cash settlement from litigation in the prior year and, as discussed below, fluctuations in results from Investment Real Estate’s investment in Centex Development Company, L.P., or the Partnership.

     Property sales contributed operating earnings of $1.8 million for the three months ended June 30, 2003 and $1.8 million for the same period last year. The timing of land sales is uncertain and can vary significantly from period to period.

     Included in Investment Real Estate’s operating earnings for the three months ended June 30, 2003 were earnings of $4.5 million derived from its investment in the Partnership compared to a loss of $0.8 million for the same period last year. As noted in Note (H), “Centex Development Company, L.P.,” of the Notes to Consolidated Financial Statements of Centex, the investment in the Partnership is not consolidated and is accounted for on the equity method of accounting.

     The largest component of the Partnership is its International Home Building segment, based near London, England. Included in Investment Real Estate’s operating earnings were earnings of $4.8 million and a loss of $0.4 million for the three months ended June 30, 2003 and 2002, respectively, derived from International Home Building. The increase in earnings from last year was primarily due to an improvement in homebuilding operating margins and an increase in the number of units closed. For the three months ended June 30, 2003 and 2002, this segment closed 313 units at an average sales price per unit of $283,534 and 269 units at an average sales price per unit of $226,662, respectively. Operating earnings per unit, before interest, were $17,083 and $461 for the three months ended June 30, 2003 and 2002, respectively.

     It is not currently anticipated that any significant capital will be allocated to Investment Real Estate for new business development. Through its investment in the Partnership, Investment Real Estate will focus on the International Home Building operations and evaluate opportunistic real estate transactions.

OTHER

     Our Other segment includes Corporate general and administrative expense, interest expense and minority interest. Also included in our Other segment are the Company’s home services operations, which are not material for purposes of segment reporting. In June 2003, the Company spun off its manufactured housing

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operations which had previously been included in the Other segment. As a result of the spin-off, manufactured housing operations are reflected as a discontinued operation and not included in the segment information below. Earnings related to the operations that were spun off have been reclassified to discontinued operations.

     Other consisted of the following (dollars in millions):

                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Operating Loss from Home Services
   $ (1.3 )   $ (1.6 )
 
  
   
 
Corporate General and Administrative Expense
   $ 19.2     $ 12.6  
 
  
   
 
Interest Expense
   $ 17.0     $ 15.4  
 
  
   
 
Minority Interest
   $ 7.5     $ 8.9  
 
  
   
 
Other
   $ (0.3 )   $ (0.6 )
 
  
   
 

     The improvement in our home services division’s operating earnings in the current year is primarily due to lower general and administrative expenses.

     As noted above, earnings related to the manufactured housing operations that were spun off have been reclassified to discontinued operations. For the three months ended June 30, 2003 and 2002, discontinued operations had revenues of $39.5 million and $32.9 million, respectively; operating earnings of $702 thousand and $746 thousand, respectively; and net income of $456 thousand and $485 thousand, respectively.

     Corporate general and administrative expense represents compensation and other costs not identifiable with a specific segment. The increase in corporate general and administrative expense is primarily related to an increase in personnel and higher compensation resulting from continued improvements in our profitability.

     The change in interest expense is primarily related to an increase in average debt outstanding for the three months ended June 30, 2003, as compared to the same period last year. This increase is offset by slightly lower borrowing costs during the three months ended June 30, 2003, as compared to the same period last year.

     The decrease in minority interest is primarily related to a decrease in the earnings of Centex Construction Products, Inc.

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FINANCIAL CONDITION AND LIQUIDITY

     At June 30, 2003, we had cash and cash equivalents of $111.0 million, including $11.5 million in Financial Services and $11.5 million belonging to our 64.9%-owned Construction Products subsidiary. The net cash used in or provided by the operating, investing and financing activities for the three months ended June 30, 2003 and 2002 is summarized below (dollars in thousands). See “Statements of Consolidated Cash Flows with Consolidating Details” on pages 4-5 of this Report for the detail supporting this summary. Note that we use the term Centex to represent a supplemental consolidating presentation that reflects the Financial Services segment as if accounted for under the equity method.

                     
       
 
        For the Three Months  
        Ended June 30,  
       
 
        2003     2002  
       
   
 
Net Cash (Used in) Provided by
                
 
Centex*
                
   
Operating Activities
   $ (326,114 )   $ (358,883 )
   
Investing Activities
     (41,663 )     85,211  
   
Financing Activities
     12,622       113,187  
 
  
   
 
 
     (355,155 )     (160,485 )
 
  
   
 
 
Financial Services
                
   
Operating Activities
     (5,492 )     (87,044 )
   
Investing Activities
     (483,133 )     (239,280 )
   
Financing Activities
     485,027       319,617  
 
  
   
 
 
     (3,598 )     (6,707 )
 
  
   
 
 
Centex Corporation and Subsidiaries
                
   
Operating Activities
     (340,195 )     (303,187 )
   
Investing Activities
     (516,207 )     (296,809 )
   
Financing Activities
     497,649       432,804  
 
  
   
 
Net Decrease in Cash
   $ (358,753 )   $ (167,192 )
 
  
   
 

   

*   “Centex” represents a supplemental presentation that reflects the Financial Services segment as if accounted for under the equity method. We believe that separate disclosure of the consolidating information is useful because the Financial Services subsidiaries operate in a distinctly different financial environment that generally requires significantly less equity to support their higher debt levels compared to the operations of our other subsidiaries; the Financial Services subsidiaries have structured their financing programs substantially on a stand alone basis; and we have limited obligations with respect to the indebtedness of our Financial Services subsidiaries. Management uses this information in its financial and strategic planning. We also use this presentation to allow investors to compare us to homebuilders that do not have financial services operations.

     We generally fund our Centex operating and other short-term needs through cash from operations, borrowings from commercial paper and other short-term credit arrangements and the issuance of medium-term notes and other debt securities. During the three months ended June 30, 2003, cash was primarily used in Centex Operating Activities to finance increases in housing inventories relating to the increased level of sales and resulting units under construction during the year and for the acquisition of land held for development. The funds provided by Centex Financing Activities were primarily from new debt used to fund the increased homebuilding activity.

     We generally fund our Financial Services operating and other short-term needs through credit facilities, securitizations, proceeds from the sale of mortgage loans to HSF-I and cash flows from operations, as described below. During the three months ended June 30, 2003, cash was primarily used in Financial Services Investing Activities to finance increases in residential mortgage loans held for investment. The funds

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provided by Financial Services Financing Activities were primarily from new debt used to fund the increased residential mortgage loan activity.

     Centex Corporation currently has an investment-grade credit rating from each of the principal credit rating agencies. Our ability to finance our activities on favorable terms is dependent to a significant extent on whether we are able to maintain our investment-grade credit ratings. We attempt to manage our debt levels in order to maintain investment-grade ratings. If, however, our debt ratings were downgraded, we would not have direct access to the commercial paper markets and might need to draw on our existing committed backup facility, which exceeds our commercial paper program size.

     Our existing credit facilities and available borrowing capacity as of June 30, 2003 are summarized below (dollars in thousands):

                   
       
   
 
        Existing Credit     Available  
        Facilities     Capacity  
       
   
 
Centex
                
 
Centex Corporation
                
 
Multi-Bank Revolving Credit Facility
   $ 700,000     $ 700,000 (1)
 
Uncommitted Bank Lines
     60,000       60,000  
 
 
Construction Products
                
 
Senior Revolving Credit Facility
     155,000       87,817 (2)
 
  
   
 
 
     915,000       847,817  
 
  
   
 
Financial Services
                
 
Unsecured Credit Facilities
     125,000       70,800 (3)
 
Secured Credit Facilities
     415,000       199,694 (4)
 
Harwood Street Funding II, L.L.C. Facility
     1,500,000       750,187  
 
  
   
 
 
     2,040,000       1,020,681  
 
  
   
 
 
   $ 2,955,000     $ 1,868,498 (5)
 
  
   
 

(1)   This is a committed, multi-bank revolving credit facility, maturing in August 2005, which serves as backup for commercial paper borrowings. As of June 30, 2003, there were no borrowings under this backup facility, and our $600 million commercial paper program had no issuance outstanding. We have not borrowed under this facility since its inception. See Note (S), “Subsequent Events.”

(2)   This committed facility was entered into by Construction Products and has no recourse to Centex Corporation. The Senior Revolving Credit Facility matures in March 2006. Construction Products terminated its Annually Renewable Commercial Paper Conduit in June 2003.

(3)   Centex Corporation, CTX Mortgage and Home Equity, on a joint and several basis, share in a $125 million uncommitted, unsecured credit facility.

(4)   CTX Mortgage and Home Equity share in a $250 million committed secured credit facility to finance mortgage inventory. CTX Mortgage also maintains $155 million of committed secured mortgage warehouse facilities to finance mortgages not sold to HSF-I. Home Equity also maintains a $10 million committed secured mortgage warehouse facility to finance mortgages.

(5)   The amount of available borrowing capacity consists of $1.74 billion of committed borrowings and $130.8 million of uncommitted borrowings as of June 30, 2003. Although we believe that the uncommitted capacity is currently available, there can be no assurance that the lenders under the applicable facilities would elect to make advances to Centex Corporation or its subsidiaries if and when requested to do so.

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     CTX Mortgage finances its inventory of mortgage loans principally through sales of Jumbo “A” and conforming loans to HSF-I. HSF-I acquires mortgage loans from CTX Mortgage, holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing investment grade senior debt obligations and subordinated certificates. The purpose of this arrangement is to allow CTX Mortgage to reduce the cost of financing the mortgage loans originated by it and to improve its liquidity. For additional information regarding HSF-I, see “Certain Off-Balance-Sheet and Other Obligations” on pages 40-42 of this Report.

     Home Equity finances its inventory of mortgage loans through Harwood Street Funding II, L.L.C., or HSF-II, a wholly-owned, consolidated entity, under a revolving sales agreement that expires upon final payment of the senior and subordinated debt issued by HSF-II. This arrangement, where HSF-II has committed to finance all eligible loans, gives Home Equity daily access to HSF-II’s borrowing capacity of $1.50 billion. HSF-II obtains funds through the sale of subordinated notes that are rated BBB by Standard & Poor’s, or S&P, Baa2 by Moody’s Investors Service, or Moody’s, and BBB by Fitch Ratings, or Fitch, and short-term secured liquidity notes that are rated A1+ by S&P, P1 by Moody’s and F1+ by Fitch. Because HSF-II is a consolidated entity, the debt, interest income and interest expense of HSF-II are reflected in the financial statements of Financial Services.

     Under our debt covenants, we are required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At June 30, 2003, Centex Corporation was in compliance with all of these covenants.

     As of June 30, 2003, our short-term debt was $944.3 million, all of which was applicable to Financial Services. Excluding Financial Services and Construction Products, our short-term borrowings are generally financed at prevailing market interest rates from our commercial paper programs and from uncommitted bank facilities.

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     Our outstanding debt as of June 30, 2003 was as follows (dollars in thousands)(1):

               
 
Centex
        
   
Short-Term Notes Payable
   $ —  
   
Senior Debt:
        
     
Medium-Term Note Programs, weighted-average rate 4.75%, due through 2007
     281,000  
     
Long-Term Notes, weighted-average rate 7.05%, due through 2012
     1,508,170  
     
Other Indebtedness, weighted-average rate 2.67%, due through 2009
     95,173  
   
Subordinated Debt:
        
     
Subordinated Debentures, 7.38%, due in 2006
     99,906  
     
Subordinated Debentures, 8.75%, due in 2007
     99,711  
 
  
 
 
     2,083,960  
 
  
 
 
Financial Services
        
   
Short-Term Debt:
        
     
Short-Term Notes Payable
     269,506  
     
Harwood Street Funding II, L.L.C. Secured Liquidity Notes
     674,813  
   
Home Equity Loans Asset-Backed Certificates, weighted-average rate 3.63%, due through 2034
     4,464,527  
   
Harwood Street Funding II, L.L.C. Variable Rate Subordinated Notes, weighted-average rate 3.25%, due through 2008
     75,000  
 
  
 
 
     5,483,846  
 
  
 
 
Total
   $ 7,567,806  
 
  
 

(1)   Certain of the borrowings described in the table above vary on a seasonal basis and depend on the working capital needs of our operations.

     Maturities of long-term debt of Centex and Financial Services (in thousands) during the next five years ending March 31 are:

                           
     
 
      Long-term Debt  
     
 
              Financial        
      Centex     Services     Total  
     
   
   
 
 
2004    
   $ 25,475     $ 926,518     $ 951,993  
 
2005 
     31,971       1,040,844       1,072,815  
 
2006 
     403,310       798,291       1,201,601  
 
2007 
     290,431       689,442       979,873  
 
2008 
     359,091       812,746       1,171,837  
    Thereafter
     973,682       271,686       1,245,368  
 
  
   
   
 
 
   $ 2,083,960     $ 4,539,527     $ 6,623,487  
 
  
   
   
 

     Financial Services debt related to securitized residential mortgage loans structured as collateralized borrowings (Home Equity Loans Asset-Backed Certificates) was $4.46 billion at June 30, 2003 and has no recourse to Home Equity or Centex Corporation. The principal and interest on these notes are paid using the cash flow from the underlying residential mortgage loans, which serve as collateral for the debt. Accordingly, the timing of the principal payments on these notes is dependent upon the payment received on the underlying residential mortgage loans. The expected maturities of this component of long-term debt are based on contractual maturities adjusted for projected repayments and prepayments of principal. As is common in these structures, Home Equity remains liable for customary loan representations.

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CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS

     The following is a summary of certain off-balance-sheet arrangements and other obligations and their possible effects on our liquidity and capital resources.

Harwood Street Funding I, L.L.C.

     HSF-I is an unaffiliated entity established in July 1999 that is not consolidated with Financial Services or Centex Corporation and subsidiaries as of June 30, 2003. Since December 1999, CTX Mortgage has sold substantially all of the Jumbo “A” and conforming mortgage loans that it originates to HSF-I in accordance with the HSF-I Purchase Agreement. When HSF-I acquires these loans, it typically holds them for a period averaging between 45 and 60 days and then resells them into the secondary market. HSF-I obtains the funds needed to purchase eligible mortgage loans from CTX Mortgage by issuing (1) securitized medium-term debt that is currently rated AAA by S&P and Aaa by Moody’s, (2) short-term secured liquidity notes that are currently rated A1+ by S&P and P1 by Moody’s and (3) subordinated certificates maturing in September 2004, November 2005 and June 2006, extendable for up to five years, that are rated BBB by S&P and Baa2 by Moody’s. This arrangement provides CTX Mortgage with reduced financing cost for eligible mortgage loans it originates and improves its liquidity.

     Under the terms of the HSF-I Purchase Agreement, CTX Mortgage may elect to sell to HSF-I, and HSF-I is obligated to purchase from CTX Mortgage, mortgage loans that satisfy certain eligibility criteria and portfolio requirements. The maximum amount of mortgage loans that HSF-I is allowed to carry in its inventory under the HSF-I Purchase Agreement is limited to $3.00 billion.

     HSF-I’s commitment to purchase eligible mortgage loans continues in effect until the occurrence of certain termination events described in the HSF-I Purchase Agreement. These termination events primarily relate to events of default under, or other failure to comply with, the provisions, including loan portfolio limitations, of the agreements that govern the mortgage loan warehouse program but also include a downgrade in Centex Corporation’s credit ratings below BB+ by S&P or Ba1 by Moody’s. In the event CTX Mortgage was unable to sell loans to HSF-I, it would draw on existing credit facilities currently held in addition to HSF-I. In addition, it might need to make other customary financing arrangements to fund its mortgage loan origination activities. Although we believe that CTX Mortgage could arrange for alternative financing that is common for non-investment grade mortgage companies, there can be no assurance that such financing would be available on satisfactory terms, and any delay in obtaining such financing could adversely affect the results of operations of CTX Mortgage.

     In accordance with the HSF-I Purchase Agreement, CTX Mortgage acts as servicer of the loans owned by HSF-I and arranges for the sale of the eligible mortgage loans into the secondary market. In its capacity as servicer, CTX Mortgage must act in the best interests of HSF-I so as to maximize the proceeds of sales of eligible mortgage loans. The performance of obligations of CTX Mortgage, solely in its capacity as servicer, is guaranteed by Centex Corporation. CTX Mortgage received $4.6 million and $2.3 million in fees for servicing loans owned by HSF-I in the three months ended June 30, 2003 and 2002, respectively. These servicer obligations include repurchasing a mortgage loan from HSF-I in the event of a breach of the servicer’s representations and warranties, which materially and adversely affects the value of the mortgage loan and is not cured within 60 days.

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     HSF-I has entered into a swap arrangement with a bank, that we refer to as the Harwood Swap, under which the bank has agreed to make certain payments to HSF-I, and HSF-I has agreed to make certain payments to the bank, the net effect of which is that the bank has agreed to bear certain interest rate risks, non-credit related market risks and prepayment risks related to the mortgage loans held by HSF-I. The purpose of this arrangement is to provide credit enhancement to HSF-I by permitting it to hedge these risks with a counterparty having a short-term credit rating of A1+ from S&P and P1 from Moody’s. Additionally, we have entered into a separate swap arrangement with the bank pursuant to which we have agreed to pay to the bank all amounts that the bank is required to pay to HSF-I pursuant to the Harwood Swap plus a monthly fee equal to a percentage of the notional amount of the Harwood Swap, and the bank is required to pay to us all amounts that the bank receives from HSF-I pursuant to the Harwood Swap. Accordingly, we effectively bear all interest rate risks, non-credit related market risks and prepayment risks that are the subject of the Harwood Swap. Financial Services executes the forward sales of CTX Mortgage’s loans to hedge the risk of reductions in value of mortgages sold to HSF-I or maintained under secured financing agreements. This offsets most of our risk as the counterparty to the swap supporting the payment requirements of HSF-I. We are also required to reimburse the bank for certain expenses, costs and damages that it may incur.

     As of June 30, 2003, HSF-I owned $2.48 billion in securitized residential mortgage loans sold to it by CTX Mortgage and had $2.34 billion of outstanding securitized term debt and $0.14 billion of outstanding subordinated certificates. We do not guarantee the payment of any debt or subordinated certificates of HSF-I, and we are not liable for credit losses relating to securitized residential mortgage loans sold to HSF-I. However, we do retain certain risks related to the portfolio of mortgage loans held by HSF-I. In particular, CTX Mortgage makes representations and warranties to HSF-I to the effect that each mortgage loan sold to HSF-I satisfies the eligibility criteria and portfolio requirements discussed above. CTX Mortgage may be required to repurchase mortgage loans sold to HSF-I if such mortgage loans are determined to be ineligible loans or there occur certain other breaches of representations and warranties of CTX Mortgage, as seller or servicer. Centex Corporation guarantees CTX Mortgage’s obligation to repurchase such loans. CTX Mortgage records a liability for its estimated losses for these obligations and such amount is included in its loan origination reserve. CTX Mortgage sold $3.79 billion and $1.84 billion of mortgage loans to HSF-I and repurchased $0.4 million and $0.6 million of delinquent or foreclosed mortgage loans from HSF-I during the three months ended June 30, 2003 and 2002, respectively. CTX Mortgage recognized gains on the sale of mortgage loans of $87.2 million and $51.0 million for the three months ended June 30, 2003 and 2002, respectively.

     In January 2003, the FASB issued FIN 46, which modifies the accounting for certain entities in which (1) equity investors do not have a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. Pursuant to FIN 46, HSF-I is a variable interest entity for which CTX Mortgage is the primary beneficiary. Accordingly, HSF-I will be consolidated in our financial statements beginning July 1, 2003. As a result, we anticipate we will record a charge of approximately $15.0 to $20.0 million representing the cumulative effect of a change in accounting principle in the quarter ending September 30, 2003. This charge primarily represents the deferral of service release premium income, which will be recognized as loans are sold into the secondary market. Additionally, the consolidation of HSF-I will result in an increase in our residential mortgage loans held for sale with a corresponding increase in our Financial Services debt. HSF-I’s debt does not have recourse to us, and the consolidation of this debt will not change our credit profile or debt ratings.

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3333 Holding Corporation, 3333 Development Corporation and Centex Development Company, L.P.

     3333 Holding Corporation, 3333 Development Corporation and the Partnership are entities that are neither affiliates of nor consolidated with Centex Corporation and subsidiaries at June 30, 2003. These entities were established in 1987 to broaden the range of business activities that may be conducted for the benefit of our stockholders to include general real estate development. We determined that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business. The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of 3333 Holding Corporation. We generally are not liable for the obligations of 3333 Holding Corporation, 3333 Development Corporation or the Partnership. However, as of June 30, 2003, we guaranteed approximately $1.1 million of indebtedness of the Partnership. In addition, we enter into certain land purchase and other transactions with the Partnership. For additional information regarding these entities, see the Joint Explanatory Note at the beginning of this Report and the financial statements of the Partnership, filed in tandem with this Report. In addition, for information regarding these entities and Centex Corporation and subsidiaries, on an aggregate basis, see Note (H), “Centex Development Company, L.P.,” of the Notes to Consolidated Financial Statements of Centex Corporation. For a discussion of the impact of FIN 46 on our accounting for transactions with these entities, see “Recent Accounting Pronouncements” below.

Joint Ventures

     We conduct a portion of our land acquisition, development and other activities through our participation in joint ventures in which we hold less than a majority interest. These joint ventures are typically large in nature, and partnering with other developers allows Centex Homes to share the risks and rewards of ownership while providing for efficient asset utilization. Our investment in these non-consolidated joint ventures, accounted for using the equity method, was $118.4 million and $102.3 million at June 30, 2003 and March 31, 2003, respectively. These joint ventures had total outstanding secured construction debt of approximately $236.8 million and $232.5 million at June 30, 2003 and March 31, 2003, respectively. Our liability with respect to this debt, based on our ownership percentage of the related joint ventures, is limited to approximately $62.2 million and $56.4 million at June 30, 2003 and March 31, 2003, respectively. Under the structure of this debt, we become liable up to these amounts only to the extent that the construction debt exceeds a certain percentage of the value of the project. At June 30, 2003 and March 31, 2003, we were not liable for any of this debt. For a discussion of the impact of FIN 46 on our accounting for transactions with non-consolidated joint ventures, see “Recent Accounting Pronouncements” below.

Letters of Credit and Guarantees

     At June 30, 2003, we had outstanding letters of credit of $124.7 million that primarily relate to development obligations of Home Building. We expect that the obligations secured by these letters of credit will generally be performed by our subsidiaries in the ordinary course of business and in accordance with the applicable contractual terms. To the extent that the underlying commercial obligations are performed by our subsidiaries, the related letters of credit will be released and we will not have any continuing obligations. We have no material third-party guarantees.

CRITICAL ACCOUNTING POLICIES

     Some of our critical accounting policies require the use of judgment in their application or require estimates of inherently uncertain matters. Although our accounting policies are in compliance with generally

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accepted accounting principles, a change in the facts and circumstances of the underlying transactions could significantly change the application of the accounting policies and the resulting financial statement impact. Listed below are those policies that we believe are critical and require the use of complex judgment in their application.

Impairment of Long-Lived Assets

     Housing projects and land held for development and sale are stated at the lower of cost (including direct construction costs, capitalized interest and real estate taxes) or fair value less cost to sell. Property and equipment is carried at cost less accumulated depreciation. We assess these assets for recoverability in accordance with the provisions of Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” or SFAS No. 144. SFAS No. 144 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Goodwill

     Goodwill represents the excess of purchase price over net assets of businesses acquired. We adopted the provisions of Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets,” or SFAS No. 142, effective April 1, 2001. Upon the adoption of SFAS No. 142, goodwill is no longer subject to amortization. Rather, goodwill is subject to at least an annual assessment for impairment, at the reporting unit level, by applying a fair value-based test. If the carrying amount exceeds the fair value, an impairment has occurred. We continually evaluate whether events and circumstances have occurred that indicate the remaining balance of goodwill may not be recoverable. Fair value is estimated using a discounted cash flow or market valuation approach. Such evaluations for impairment are significantly impacted by estimates of future revenues, costs and expenses and other factors. If the goodwill is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the goodwill exceeds the fair value of the future cash flows. We had no impairment of goodwill in the three months ended June 30, 2003.

Consolidation of Variable Interest Entities

     In January 2003, the FASB issued FIN 46, which modifies the accounting for certain entities in which (1) equity investors do not have a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. FIN 46 requires significant use of judgment and estimates in determining its application.

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Valuation of Residential Mortgage Loans Held for Investment

     Home Equity originates and purchases loans in accordance with standard underwriting criteria. The underwriting standards are primarily intended to assess the creditworthiness of the mortgagee and the value of the mortgaged property and to evaluate the adequacy of the property as collateral for the home equity loan.

     Home Equity establishes an allowance for losses by charging the provision for losses in the statement of consolidated earnings when it believes the event causing the loss has occurred. When Home Equity determines that a residential mortgage loan held for investment is partially or fully uncollectible, the estimated loss is charged against the allowance for losses. Recoveries on losses previously charged to the allowance are credited to the allowance at the time the recovery is collected.

     We believe that the allowance for losses is sufficient to provide for credit losses in the existing residential mortgage loans held for investment, which include real estate owned. We evaluate the allowance on an aggregate basis considering, among other things, the relationship of the allowance to residential mortgage loans held for investment and historical credit losses. The allowance reflects our judgment of the present loss exposure at the end of the reporting period. A range of expected credit losses is estimated using historical losses, static pool loss curves and delinquency modeling. These tools take into consideration historical information regarding delinquency and loss severity experience and apply that information to the portfolio at each reporting date.

     Although we consider the allowance for losses on residential mortgage loans held for investment reflected in our consolidated balance sheet to be adequate, there can be no assurance that this allowance will prove to be adequate over time to cover ultimate losses. This allowance may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers or industries.

Mortgage Securitization Residual Interest

     Home Equity uses mortgage securitizations to finance its mortgage loan portfolio. For securitizations prior to April 2000, which Home Equity accounted for as sales, Home Equity retained a mortgage securitization residual interest, or MSRI. The MSRI represents the present value of Home Equity’s right to receive, over the life of the securitization, the excess of the weighted-average coupon on the loans securitized over the interest rates on the securities sold, a normal servicing fee, a trustee fee and an insurance fee, where applicable, net of the credit losses relating to the loans securitized. Home Equity estimates the fair value of MSRI through the application of discounted cash flow analysis. Such analysis requires the use of various assumptions, the most significant of which are anticipated prepayments (principal reductions in excess of contractually scheduled reductions), estimated future credit losses and the discount rate applied to future cash flows.

Loan Origination Reserve

     CTX Mortgage has established a liability for anticipated losses associated with loans originated and sold to HSF-I or other unaffiliated third parties. This liability includes losses associated with certain borrower payment defaults, credit quality issues or misrepresentation. CTX Mortgage estimates the losses that may be incurred for certain loan originations based on, among other factors, historical loss rates and current trends in loan originations. This liability reflects management’s judgment of the loss exposure at the end of the reporting period.

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     Although we consider the loan origination reserve reflected in our consolidated balance sheet at June 30, 2003 to be adequate, there can be no assurance that this reserve will prove to be adequate over time to cover ultimate losses in connection with our loan originations. This reserve may prove to be inadequate due to unanticipated adverse changes in the economy or discrete events adversely affecting specific customers.

Insurance Accruals

     We have certain deductible limits under our workers’ compensation, automobile and general liability insurance policies for which reserves are actuarially determined based on claims filed and an estimate of claims incurred but not yet reported. Projection of losses concerning these liabilities is subject to a high degree of variability due to factors such as claim settlement patterns, litigation trends and legal interpretations, among others.

RECENT ACCOUNTING PRONOUNCEMENTS

     In January 2003, the FASB issued FIN 46, which modifies the accounting for certain entities in which (1) equity investors do not have a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. At June 30, 2003, we have interests in the Partnership, HSF-I and certain joint ventures and land under option agreements that are or may be affected by this interpretation. The nature of these entities’ operations, our potential maximum exposure related to these entities and the applicability of FIN 46 to these entities are discussed as follows:

     
The Partnership   Financial statements filed in tandem with this Report
    Note (H), “Centex Development Company, L.P.”
HSF-I   Note (G), “Indebtedness”
Land Option Agreements   Note (J), “Land Held Under Option Agreements not
Owned and Other Land Deposits”
Joint Ventures   Note (I), “Commitments and Contingencies”

     We have historically accounted for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” or APB No. 25, and related interpretations, as permitted by Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation,” or SFAS No. 123. On April 1, 2003, we adopted the fair value measurement provisions of SFAS No. 123 under which we will recognize compensation expense of a stock-based award to an employee over the vesting period based on the fair value of the award on the grant date. The fair value method has been applied only to awards granted or modified on or after April 1, 2003, whereas awards granted prior to such date will continue to be accounted for under APB No. 25.

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” or SFAS No. 149. The statement amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” or SFAS No. 133, by requiring that contracts with comparable characteristics be accounted for

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similarly, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. A portion of this statement is effective for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The remainder of this statement codifies previously issued SFAS No. 133 implementation guidance, which retains its original effective dates. We do not expect the implementation of SFAS No. 149 to have a material impact on our results of operations or financial position.

     

FORWARD-LOOKING STATEMENTS

     Various sections of this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results and outcomes may differ materially from what we express or forecast in these forward-looking statements. In addition to the specific uncertainties discussed elsewhere in this Report, the following risks and uncertainties may affect our actual performance and results of operations:

•   Our Home Building operations are somewhat cyclical and sensitive to changes in economic conditions, including levels of employment, consumer confidence and income, availability of financing, interest rate levels and changes in the economic condition of the local markets in which we operate.

•   Our Home Building operations are also subject to other risks and uncertainties, including seasonal variations, adverse weather conditions, the availability of adequate land in desirable locations, the cost and availability of labor and construction materials, labor disputes, the general demand for housing and new construction and the resale market for existing homes.

•   Our Construction Services operations are also somewhat cyclical and sensitive to changes in economic conditions, including overall capital spending trends in the economy, changes in federal and state appropriations for construction projects and competitive pressures on the availability and pricing of construction projects.

•   Our Construction Services operations are also subject to other risks and uncertainties, including the timing of new awards and the funding of such awards; adverse weather conditions; cancellations of, or changes in the scope to, existing contracts; the cost and availability of labor and construction materials; labor disputes; the ability to meet performance or schedule guarantees and cost overruns.

•   Virtually all of our homebuyers finance their home acquisitions through our Financial Services operations or third party lenders. In general, our Home Building operations can be adversely affected by increases in interest rates.

•   The results of operations of CTX Mortgage depend to a significant extent on the level of interest rates. Any significant increases in mortgage rates above currently prevailing levels could adversely affect the volume of loan originations. There can be no assurance that mortgage rates will remain at the current level in the future. Our mortgage loan operations are also dependent upon the securitization market for mortgage-backed securities and the availability of mortgage warehouse financing.

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•   Our Home Equity operations involve holding residential mortgage loans for investment and establishing an allowance for credit losses on these loans. Although the amount of this allowance reflects our judgment as to our present loss exposure on these loans, there can be no assurance that it will be sufficient to cover any losses that may ultimately be incurred.

•   Demand for the products that our Construction Products operations produce is directly related to activity in the homebuilding and construction industries and to general economic conditions. Our Construction Products operations are also concentrated in particular regional and local markets that may experience cyclical downturns at different times than the national economy. The price at which we sell our construction products, particularly gypsum wallboard, is highly sensitive to changes in supply and demand for such products, energy costs, raw material prices and competition from other domestic and foreign producers.

•   All of our businesses operate in very competitive environments, which are characterized by competition from a number of other homebuilders, mortgage lenders, construction products producers and contractors in each of the markets in which we operate.

•   We are subject to various federal, state and local statutes, rules and regulations that could affect our businesses, including those concerning zoning, construction, protecting the environment and health. In addition, our businesses could be affected by changes in federal income tax policy, federal mortgage loan financing programs and by other changes in regulation or policy.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     We are exposed to market risks related to fluctuations in interest rates on our direct debt obligations, on mortgage loans receivable, residual interest in mortgage securitizations and securitizations classified as debt. We utilize derivative instruments, including interest rate swaps, in conjunction with our overall strategy to manage the debt outstanding that is subject to changes in interest rates. We utilize forward sale commitments to mitigate the risk associated with the majority of our mortgage loan portfolio. Other than the forward commitments and interest rate swaps discussed earlier, we do not utilize forward or option contracts on foreign currencies or commodities, or other types of derivative financial instruments.

     There have been no material changes in our market risk from March 31, 2003. For further information regarding our market risk, refer to our Annual Report on Form 10-K for the fiscal year ended March 31, 2003.

Item 4. Controls and Procedures

     An evaluation has been performed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2003. Based on that evaluation, our management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were effective as of June 30, 2003 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There has been no change in our internal controls over financial reporting that occurred during the three months ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

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Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

       
  (1)   Exhibits

             
   
3.2
  Amended and Restated By-Laws of Centex Corporation dated May 15, 2003.
             
   
4.3.2
  Second Supplement to Nominee Agreement, dated as of June 1, 2003, by and between Centex, Holding, the Partnership, and Mellon Investor Services LLC as successor nominee and successor transfer agent.
             
   
10.1
  Centex Corporation Amended and Restated 1987 Stock Option Plan.
             
   
10.2
  Seventh Amended and Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan.
             
   
10.3
  Amended and Restated Centex Corporation 2001 Stock Option Plan.
             
   
10.10
  Amended and Restated Centex Corporation Long Term Incentive Plan.
             
   
10.13
  Centex Corporation 2003 Annual Incentive Compensation Plan.
             
   
10.14
  Centex Corporation 2003 Equity Incentive Plan.
             
   
10.15
  Distribution Agreement between Centex Corporation, Cavco Industries L.L.C. and Cavco Industries, Inc.
             
   
10.16
  Administrative Services Agreement between Centex Service Company and Cavco Industries, Inc.
             
   
10.17
  Tax Sharing Agreement between Centex Corporation and affiliates and Cavco Industries, Inc.
             
   
10.18
  Agreement to Assign Trademark Rights and Limited Consent to Use Centex Trademarks between Centex Corporation and Cavco Industries, Inc.
             
   
10.19
  Amendment No. 1 to Distribution Agreement between Centex Corporation, Cavco Industries L.L.C. and Cavco Industries, Inc.
             
   
31.1
  Certification of the Chief Executive Officer of Centex Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.2
  Certification of the Chief Financial Officer of Centex Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
32.1
  Certification of the Chief Executive Officer of Centex Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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  32.2   Certification of the Chief Financial Officer of Centex Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   

(2)
   Reports on Form 8-K
             
            Current Report on Form 8-K of Centex Corporation dated April 23, 2003 announcing (i) the Company’s fourth quarter net earnings for the quarter ended March 31, 2003; and (ii) the Company’s intention to make a tax-free spin-off of its CAVCO Industries manufactured housing company to the Company’s stockholders.
             
            Current Report on Form 8-K of Centex Corporation dated June 23, 2003 announcing that the Registration Statement on Form 10 of Cavco Industries, Inc. relating to the Cavco common stock became effective on June 22, 2003, according to the Securities and Exchange Commission.

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Signatures

     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, thereunto duly authorized.

     
    CENTEX CORPORATION
   
    Registrant
     
August 13, 2003   /s/ Leldon E. Echols
   
    Leldon E. Echols
Executive Vice President and
Chief Financial Officer
(principal financial officer)
     
August 13, 2003   /s/ Mark D. Kemp
   
    Mark D. Kemp
Vice President- Controller
(principal accounting officer)

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Part I. Financial Information

Item 1. Financial Statements

3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Statements of Operations
(Dollars in thousands, except per unit/share data)
(unaudited)

                                                   
     
 
      For the Three Months Ended June 30,  
     
 
      2003     2002  
     
   
 
              Centex                     Centex        
              Development                     Development        
              Company, L.P.     3333 Holding             Company, L.P.     3333 Holding  
              and     Corporation             and     Corporation  
      Combined     Subsidiaries     and Subsidiary     Combined     Subsidiaries     and Subsidiary  
     
   
   
   
   
   
 
Revenues
   $ 104,513     $ 104,500     $ 38     $ 87,785     $ 87,735     $ 88  
Costs and Expenses
     100,103       100,066       62       88,789       88,751       76  
Earnings (Loss) from Unconsolidated Entities and Other
     135       135       —       (10 )     (10 )     —  
 
  
   
   
   
   
   
 
Earnings (Loss) from Continuing
                                                
 
Operations Before Income Taxes
     4,545       4,569       (24 )     (1,014 )     (1,026 )     12  
Income Taxes
     1,045       1,045       —       (470 )     (470 )     —  
 
  
   
   
   
   
   
 
Earnings (Loss) from Continuing Operations
     3,500       3,524       (24 )     (544 )     (556 )     12  
Discontinued Operations:
                                                
 
(Loss) Earnings from Discontinued Operations (Including Loss on Sale of $32 for the Three Months Ended June 30, 2003)
     (87 )     (87 )     —       241       241       —  
 
  
   
   
   
   
   
 
Net Earnings (Loss)
   $ 3,413     $ 3,437     $ (24 )   $ (303 )   $ (315 )   $ 12  
 
  
   
   
   
   
   
 
Net Earnings (Loss) Allocable to Limited Partners
           $ 3,437                     $ (315 )        
 
          
                   
         
Earnings (Loss) from Continuing Operations Per Unit/Share
           $ 14.65     $ (24 )           $ (2.31 )   $ 12  
Earnings (Loss) from Discontinued Operations Per Unit/Share
             (0.36 )     —               1.00       —  
 
          
   
           
   
 
Net Earnings (Loss) Per Unit/Share
           $ 14.29     $ (24 )           $ (1.31 )   $ 12  
 
          
   
           
   
 
Weighted-Average Units/Shares Outstanding
             240,591       1,000               240,591       1,000  

See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Balance Sheets
(Dollars in thousands)

                                                             
       
   
 
        June 30, 2003*     March 31, 2003**  
       
   
 
                Centex                             Centex        
                Development                             Development        
                Company, L.P.     3333 Holding                     Company, L.P.     3333 Holding  
                and     Corporation                     and     Corporation  
        Combined     Subsidiaries     and Subsidiary     Combined     Subsidiaries     and Subsidiary  
       
   
   
   
   
   
 
Assets
                                                        
Cash and Cash Equivalents
   $ 35,336     $ 35,329     $ 7     $         5,113     $ 5,105     $ 8  
Receivables
     25,990       30,012       289               30,813       34,841       261  
Inventories
     469,284       469,284       —               447,954       447,954       —  
Investments-
                                                        
 
Commercial Properties, net
     89,667       89,667       —               92,003       92,003       —  
 
Real Estate Joint Ventures
     3,921       3,921       —               3,973       3,973       —  
 
Affiliate
     —       —       1,191               —       —       1,191  
Assets Held for Sale
     8,291       8,291       —               7,585       7,585       —  
Property and Equipment, net
     2,494       2,494       —               2,308       2,308       —  
Other Assets-
                                                        
 
Goodwill, net
     32,168       32,168       —               30,698       30,698       —  
 
Deferred Charges and Other
     21,374       19,603       1,771               20,237       18,466       1,771  
 
  
   
   
           
   
   
 
 
   $ 688,525     $ 690,769     $ 3,258             $ 640,684     $ 642,933     $ 3,231  
 
  
   
   
           
   
   
 
Liabilities, Stockholders’ Equity And Partners’ Capital
                                                        
Accounts Payable and Accrued Liabilities
   $ 135,502     $ 135,311     $ 4,551             $ 130,282     $ 130,120     $ 4,500  
Liabilities Related to Assets Held for Sale
     6,941       6,941       —               6,436       6,436       —  
Notes Payable
     242,985       242,985       —               215,118       215,118       —  
 
  
   
   
           
   
   
 
   
Total Liabilities
     385,428       385,237       4,551               351,836       351,674       4,500  
 
  
   
   
           
   
   
 
Stockholders’ Equity and Partners’ Capital
     303,097       305,532       (1,293 )             288,848       291,259       (1,269 )
 
  
   
   
           
   
   
 
 
   $ 688,525     $ 690,769     $ 3,258             $ 640,684     $ 642,933     $ 3,231  
 
  
   
   
           
   
   
 

*   Unaudited
**   Condensed from audited financial statements.

See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Condensed Combining Statements of Cash Flows
(Dollars in thousands)
(unaudited)

                                                   
     
 
      For the Three Months Ended June 30,  
     
 
      2003     2002  
     
   
 
              Centex                     Centex        
              Development                     Development        
              Company, L.P.     3333 Holding             Company, L.P.     3333 Holding  
              and     Corporation             and     Corporation  
      Combined     Subsidiaries     and Subsidiary     Combined     Subsidiaries     and Subsidiary  
     
   
   
   
   
   
 
Cash Flows — Operating Activities
                                                
Net Earnings (Loss)
   $ 3,413     $ 3,437     $ (24 )   $ (303 )   $ (315 )   $ 12  
Adjustments:
                                                
 
Depreciation
     676       676       —       1,123       1,123       —  
 
Amortization
     168       168       —       —       —       —  
 
Deferred Tax Benefit
     (91 )     (91 )     —       —       —       —  
 
Equity in Earnings (Loss) from Joint Ventures
     (135 )     (135 )     —       10       10       —  
(Increase) Decrease in Receivables
     (6,988 )     (6,960 )     (28 )     1,535       1,582       (47 )
Decrease in Notes Receivable
     4,160       4,160       —       —       —       —  
(Increase) Decrease in Inventories
     (4,698 )     (4,698 )     —       12,430       12,430       —  
Decrease (Increase) in Commercial Properties
     1,828       1,828       —       (6,059 )     (6,059 )     —  
Increase in Other Assets
     (920 )     (920 )     —       (566 )     (555 )     (11 )
Increase (Decrease) in Payables and Accruals
     8,046       7,995       51       (10,248 )     (10,297 )     49  
 
  
   
   
   
   
   
 
 
     5,459       5,460       (1 )     (2,078 )     (2,081 )     3  
 
  
   
   
   
   
   
 
Cash Flows — Investing Activities
                                                
Decrease in Advances to Joint Ventures and Investment in Affiliate
     187       187       —       92       92       —  
Additions of Property and Equipment, net
     (238 )     (238 )     —       (78 )     (78 )     —  
 
  
   
   
   
   
   
 
 
     (51 )     (51 )     —       14       14       —  
 
  
   
   
   
   
   
 
Cash Flows — Financing Activities
                                                
Issuance in Notes Payable
     24,233       24,233       —       2,040       2,040       —  
 
  
   
   
   
   
   
 
 
     24,233       24,233       —       2,040       2,040       —  
 
  
   
   
   
   
   
 
Effect of Exchange Rate Changes on Cash
     582       582       —       1,292       1,292       —  
 
  
   
   
   
   
   
 
Net Increase (Decrease) in Cash
     30,223       30,224       (1 )     1,268       1,265       3  
Cash and Cash Equivalents at Beginning of Period
     5,113       5,105       8       22,538       22,529       9  
 
  
   
   
   
   
   
 
Cash and Cash Equivalents at End of Period
   $ 35,336     $ 35,329     $ 7     $ 23,806     $ 23,794     $ 12  
 
  
   
   
   
   
   
 

See Notes to Condensed Combining Financial Statements.

Transactions between Centex Development Company, L.P. and Subsidiaries and 3333 Holding Corporation and Subsidiary have been eliminated.

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3333 Holding Corporation and Subsidiary
and Centex Development Company, L.P. and Subsidiaries
Notes to Condensed Combining Financial Statements
June 30, 2003
(Dollars in thousands, except per share data)
(unaudited)

(A) BASIS OF PRESENTATION

     The condensed combining interim financial statements include the accounts of 3333 Holding Corporation (“Holding”) and subsidiary and Centex Development Company, L.P. (the “Partnership”) and subsidiaries (collectively, the “Companies”) after elimination of all significant intercompany balances and transactions. These statements have been prepared, without audit, in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

     In the opinion of the Companies, all adjustments (consisting of normal, recurring adjustments) necessary to present fairly the information in the condensed combining financial statements of the Companies have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The Companies suggest that these condensed combining financial statements be read in conjunction with the financial statements and the notes thereto included in the Companies’ latest Annual Report on Form 10-K.

(B) ORGANIZATION

     The Partnership is a master limited partnership formed by Centex Corporation and subsidiaries (“Centex”) in March 1987 to broaden the range of business activities that may be conducted for the benefit of Centex’s stockholders to include general real estate development. Centex believed that this expansion would improve stockholder value through longer-term real estate investments, real estate developments and the benefits of the partnership form of business.

     The Partnership is authorized to issue three classes of limited partnership interest. Centex Corporation indirectly holds 100% of the Partnership’s Class A and Class C limited partnership units (“Class A Units” and “Class C Units,” respectively), which are collectively convertible into 20% of the Partnership’s Class B limited partnership units (“Class B Units”). The Partnership may issue additional Class C Units in connection with the acquisition of real property and other assets. No Class B Units have been issued. However, the stockholders of Centex hold warrants to purchase approximately 80% of the Class B Units. The warrants are held through a nominee arrangement and trade in tandem with the common stock of Centex.

     As holder of the Class A and Class C Units, Centex is entitled to a cumulative preferred return of 9% per annum on the average outstanding balance of its capital contributions to the Partnership, adjusted for cash and other distributions representing return of capital. As of June 30, 2003, these adjusted capital contributions, or Unrecovered Capital, were $241.1 million and preference payments in arrears totaled $47.4 million.

     The Partnership is managed by its general partner, 3333 Development Corporation, a wholly-owned subsidiary of Holding. The common stock of Holding is held by the stockholders of Centex through a

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nominee arrangement and trades in tandem with the common stock of Centex. The stockholders of Centex elect the four-person board of directors of Holding, three of whom are independent outside directors who are not directors, affiliates or employees of Centex. Thus, through Holding, the stockholders of Centex control the general partner of the Partnership. The general partner, through its independent board and the independent board of Holding, including its non-executive Chairman, oversees the Partnership’s activities, including the acquisition, development, maintenance, operation and sale of properties. Consent of the limited partners for the activities of the Partnership is not required, and the limited partners cannot remove the general partner. As a result, Centex accounts for its limited partnership interest in the Partnership using the equity method of accounting for investments.

     See Note (H) to the consolidated financial statements of Centex included elsewhere in this Report for supplementary condensed combined financial statements for Centex and subsidiaries, Holding and subsidiary, and the Partnership and subsidiaries.

(C) STATEMENTS OF COMBINING CASH FLOWS — SUPPLEMENTAL DISCLOSURES

                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Cash Paid for Interest
   $ 4,210     $ 4,678  
 
  
   
 
Net Cash Paid for Taxes
   $ —     $ —  
 
  
   
 
                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Total Interest Incurred
   $ 3,581     $ 4,732  
Interest Capitalized
     (1,367 )     (1,354 )
 
  
   
 
Interest Expense
   $ 2,214     $ 3,378  
 
  
   
 

(D) RELATED PARTY TRANSACTIONS

     At June 30, 2003 and March 31, 2003, Centex Homes had $7.8 million and $7.2 million, respectively, deposited with the Partnership as option deposits for the purchase of land. Centex Homes also entered into agreements to reimburse the Partnership for certain costs and fees incurred by the Partnership in the purchase and ownership of these tracts of land. During the three months ended June 30, 2003 and 2002, Centex Homes paid $0.4 million and $1.4 million, respectively, to the Partnership in fees and reimbursements pursuant to these agreements and $12.0 million and $21.1 million, respectively, for the purchase of residential lots. The Partnership expects Centex Homes to pay an additional $19.0 million to the Partnership to complete the purchase of these tracts of land over the next three years.

     Construction Services has historically executed construction contracts with the Partnership. At March 31, 2003, contracts for the construction of two industrial facilities were completed and no additional contracts were outstanding. At June 30, 2003, a $10.6 million contract for the construction of an office building had been executed with the Partnership and was outstanding. During the three months ended June 30, 2003 and

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2002, the Partnership paid zero and $3.5 million, respectively, to Construction Services pursuant to these contracts.

(E) COMPREHENSIVE INCOME

     A summary of comprehensive income for the three months ended June 30, 2003 and 2002 is presented below:

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Net Earnings (Loss)
   $ 3,413     $ (303 )
Other Comprehensive Income (Loss):
                
       Foreign Currency Translation Adjustments
     10,735       13,973  
       Unrealized Gain (Loss) on Hedging Instruments
     101       (234 )
 
  
   
 
Comprehensive Income
   $ 14,249     $ 13,436  
 
  
   
 

(F) STOCKHOLDERS’ EQUITY

     A summary of changes in stockholders’ equity is presented below:

                                                           
     
 
              Centex Development Company     3333 Holding Corporation  
              L.P. and Subsidiaries     and Subsidiary  
             
   
 
              Class B     General     Limited             Capital in     Retained  
              Unit     Partner's     Partner's     Stock     Excess of     Earnings  
      Combined     Warrants     Capital     Capital     Warrants     Par Value     (Deficit)  
     
   
   
   
   
   
   
 
Balance at March 31, 2003
   $ 288,848     $ 500     $ 1,142     $ 289,617     $ 1     $ 800     $ (2,070 )
Net Earnings
     3,413       —       —       3,437       —       —       (24 )
Accumulated Other Comprehensive Income:
                                                        
 
     Foreign Currency Translation Adjustments
     10,735       —       —       10,735       —       —       —  
 
     Unrealized Loss on Hedging Instruments
     101       —       —       101       —       —       —  
 
  
   
   
   
   
   
   
 
Balance at June 30, 2003
   $ 303,097     $ 500     $ 1,142     $ 303,890     $ 1     $ 800     $ (2,094 )
 
  
   
   
   
   
   
   
 

(G) BUSINESS SEGMENTS

     The Companies operate in three principal business segments: International Home Building, Commercial Development and Corporate-Other. All of the segments, except for International Home Building, operate in the United States. International Home Building’s accounting policies are the same as those described in the summary of significant accounting policies in the Companies’ latest Annual Report on Form 10-K.

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     International Home Building acquires and develops residential properties and constructs single and multi-family housing units in the United Kingdom. Commercial Development develops office, industrial, retail and mixed-use projects, for sale and for investment. Corporate-Other is involved in the acquisition and disposition of land and other assets of the Partnership not identified with another specific business segment. Prior to April 1, 2003, the Companies operated a multi-family business segment (“Multi-Family”). Effective April 1, 2003, the operations of this segment were restructured to focus on leasing and disposition of remaining projects rather than new development. The operations of these projects are reflected in the Corporate-Other segment for the current and prior comparative period.

                                   
     
 
      For the Three Months Ended June 30, 2003  
     
 
      Int'l Home     Commercial     Corporate-        
      Building     Development     Other     Total  
     
   
   
   
 
Revenues
   $ 88,756     $ 3,256     $ 12,501     $ 104,513  
Cost of Sales
     (75,087 )     —       (11,962 )     (87,049 )
Selling, General & Administrative Expenses
     (8,322 )     (1,891 )     (791 )     (11,004 )
Interest Expense
     (549 )     (1,086 )     (415 )     (2,050 )
Earnings from Unconsolidated Subsidiaries and Other
     —       135       —       135  
 
  
   
   
   
 
Earnings (Loss) from Continuing Operations
                                
 
Before Income Taxes
     4,798       414       (667 )     4,545  
Loss from Discontinued Operations Before Income Taxes
     —       (87 )     —       (87 )
 
  
   
   
   
 
Earnings (Loss) Before Income Taxes
   $ 4,798     $ 327     $ (667 )   $ 4,458  
 
  
   
   
   
 
                                 
   
 
    For the Three Months Ended June 30, 2002  
   
 
    Int'l Home     Commercial     Corporate-        
    Building     Development     Other     Total  
   
   
   
   
 
Revenues
   $ 61,000     $ 3,937     $ 22,848     $ 87,785  
Cost of Sales
     (53,765 )     (275 )     (21,163 )     (75,203 )
Selling, General & Administrative Expenses
     (7,111 )     (2,213 )     (1,798 )     (11,122 )
Interest Expense
     (494 )     (1,182 )     (788 )     (2,464 )
Loss from Unconsolidated Subsidiaries and Other
     —       (10 )     —       (10 )
 
  
   
   
   
 
Earnings (Loss) from Continuing Operations Before Income Taxes
     (370 )     257       (901 )     (1,014 )
Earnings from Discontinued Operations Before Income Taxes
     —       241       —       241  
 
  
   
   
   
 
Earnings (Loss) Before Income Taxes
   $ (370 )   $ 498     $ (901 )   $ (773 )
 
  
   
   
   
 

(H) GOODWILL

     The Partnership’s International Home Building segment carries all of the Partnership’s goodwill, which arose from the April 15, 1999 acquisition of all of the voting shares of Fairclough Homes Group Limited, a British homebuilder (“Fairclough”). The carrying amount of goodwill was $32.2 million and $30.7 million at June 30, 2003 and March 31, 2003, respectively. The increase during the three months ended June 30, 2003 reflects the impact of foreign currency translation adjustments.

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(I) DERIVATIVES AND HEDGING

     The Partnership is exposed to the risk of interest rate fluctuations on its debt obligations. As part of its strategy to manage the obligations that are subject to changes in interest rates, the Partnership has entered into an interest rate swap agreement, designated as a cash flow hedge, on a portion of its debt. The swap agreement is recorded at its fair value in Other Assets or Accrued Liabilities in the condensed combining balance sheets. To the extent the hedging relationship is effective, fluctuations in the fair value of the derivative are deferred as a component of Accumulated Other Comprehensive Income. Fluctuations in the fair value of the ineffective portion of the derivative would be reflected in the current period earnings. During the three months ended June 30, 2003 there was no hedge ineffectiveness related to this derivative.

     This swap expires in March 2004. Amounts to be received or paid as a result of the swap agreement are recognized as adjustments to interest incurred on the related debt instrument. As of June 30, 2003, the Accumulated Other Comprehensive Loss was $521 thousand ($365 thousand net of tax).

(J) RECENT ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 144 (“SFAS 144”), “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for the Companies beginning April 1, 2002.

     Due to the adoption of SFAS 144, the Companies now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

     In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others” (“FIN 45”), which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. We have applied the recognition and measurement provisions of FIN 45 to guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on the Companies’ results of operations or financial position.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”), which modifies the accounting for certain entities in which (1) equity investors do not have the characteristics of a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. See Note (K), “Investments in Certain Joint Ventures,” for disclosure of the Companies’ potential maximum exposure related to these entities.      FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. As discussed above in Note (B), “Organization,” Centex indirectly holds 100% of the Partnership’s

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Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements. See Note (P) to the consolidated financial statements of Centex included elsewhere in this Report for further discussion regarding this interpretation.

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” or SFAS No. 149. The statement amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” or SFAS No. 133, by requiring that contracts with comparable characteristics be accounted for similarly, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. A portion of this statement is effective for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The remainder of this statement codifies previously issued SFAS No. 133 implementation guidance, which retains its original effective dates. The Companies do not expect the implementation of SFAS No. 149 to have a material impact on the Companies’ results of operations or financial position.

(K) INVESTMENTS IN CERTAIN JOINT VENTURES

     The Partnership conducts certain operations through its participation in joint ventures in which the Partnership holds less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $37.8 million as of June 30, 2003 and $35.8 million as of March 31, 2003. The Partnership’s liability for the obligations of these non-consolidated joint ventures is limited to approximately $8.1 million as of June 30, 2003.

(L) COMMITMENTS AND CONTINGENCIES

     As of June 30, 2003, the Partnership had remaining commitments of approximately $18.4 million on construction contracts.

     To obtain construction financing for projects being developed by its subsidiaries, the Partnership is often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, the Partnership has also executed recourse payment guarantees. At June 30, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

     Subsidiaries of the Partnership have also obtained demand notes or letters of credit from Centex for up to 10% of the construction loan commitment amount. These demand notes or letters of credit have been pledged or endorsed to the lenders as additional collateral on the construction loans, and may be called only in the event of an uncured default by the Partnership. This additional collateral totals approximately $1.1 million as of June 30, 2003.

     A subsidiary of the Partnership has agreed to develop a mixed-use project in Saint Paul, Minnesota consisting of various types of residential housing and ancillary retail space. The subsidiary has performed a significant portion of the infrastructure work and has sold several of the development sites to reputable home builders (including a 1.5 acre site to Centex Homes) pursuant to contracts that obligate the purchasers to fulfill certain of the seller’s development obligations at the project. The subsidiary of the Partnership (as the seller)

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retains the right to repurchase the site if the purchaser fails to commence the performance of such obligations. Ultimately, the Partnership’s subsidiary remains responsible for the development of the project.

     The subsidiary anticipates that the costs expended for infrastructure work will be reimbursed from the proceeds of a bond offering by a special taxing district established to aid in the development of the project. These costs will be reimbursed over time as improvements at the project generate property taxes sufficient to fund debt service on the bonds. A receivable of approximately $13.9 million is included in Other Receivables in the accompanying Combining Balance Sheets. The subsidiary has deferred recognition of this income as of June 30, 2003 as improvements to the project that will generate property taxes have just begun.

     In the normal course of its business, the Partnership issues certain representations, warranties and guarantees related to its home sales, land sales and building sales that may be affected by the Financial Accounting Standards Board’s recent issuance of FIN 45. Based on historical evidence, the Partnership does not believe that any of these representations, warranties or guarantees would result in a material effect on our consolidated financial condition or operations. See further discussion on our warranty liability below. See further discussion of FIN 45 in Note (J), “Recent Accounting Pronouncements.”

     International Home Building offers a ten-year limited warranty for most homes constructed and sold in the United Kingdom. The warranty covers defects in materials or workmanship in various components of the home for the first two years and designated structural elements of the home in the third through tenth years. International Home Building estimates the costs that may be incurred under its warranty program for which it will be responsible and records a liability at the time each home is closed. Factors that affect International Home Building’s warranty liability include the number of homes closed, historical and anticipated rates of warranty claims and cost per claim. International Home Building periodically assesses the adequacy of its recorded warranty liability and adjusts the amounts as necessary.

     Changes in International Home Building’s contractual warranty liability during the period are as follows:

         
Balance as of March 31, 2003
   $ 3,390  
Warranties Issued
     973  
Settlements Made
     (880 )
 
  
 
Balance as of June 30, 2003
   $ 3,483  
 
  
 

(M) RECLASSIFICATIONS

     Certain prior year balances have been reclassified to be consistent with the June 30, 2003 presentation.

(N) SUBSEQUENT EVENTS

     Subsidiaries of the Partnership have executed contracts to sell four projects in Charlotte, North Carolina comprising approximately 1,000,000 square feet of industrial space. The sales are scheduled to close on or before September 22, 2003. However, the contracts specify various financing contingencies and, thus, there are no assurances that such sales will be consummated.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     On a combined basis, our revenues from continuing operations were $104.5 million for the three months ended June 30, 2003, a 19.0% increase over our revenues from continuing operations of $87.8 million for the same period last year. The revenue increase is primarily related to an increase in International Home Building’s unit closings and average unit sales price, offset by a reduction in Corporate-Other’s sale of residential lots to Centex Homes. Revenues from residential lot sales and commercial land sales can vary significantly from period to period.

     Our operating earnings from continuing operations for the three months ended June 30, 2003 were $4.5 million compared to an operating loss from continuing operations of $1.0 million for the same period last year. Our net earnings from continuing operations for the three months ended June 30, 2003 were $3.5 million compared to a net loss from continuing operations of $0.5 million for the same period last year. The increase in operating earnings and net earnings from continuing operations for the three months ended June 30, 2003 is primarily related to increased earnings from the International Home Building segment.

     Our net loss from discontinued operations for the three months ended June 30, 2003 was $87 thousand. In accordance with Statement of Financial Accounting Standards No. 144, or SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” effective for us beginning April 1, 2002, we now report assets as discontinued operations if such assets are held for sale (as defined by SFAS 144), or if such assets are sold in the current period. We sold one of these properties during the three months ended June 30, 2003. Land assets are reported in continuing operations.

     Prior to April 1, 2003, the Companies operated a multi-family business segment. Effective April 1, 2003, the operations of this segment were restructured to focus on leasing and disposition of remaining projects rather than new development. The operations of these projects are reflected in the Corporate-Other segment for the current and prior comparative period.

     Over the past year, we have taken advantage of the strong investor demand for quality properties, selling a number of matured assets and land positions. It is not currently anticipated that any significant capital will be allocated to new business development. Instead, our focus going forward will be on completing and leasing up our existing portfolio and continuing to take advantage of strong investor demand. The International Home Building segment will remain a focus as we continue to build on momentum in this segment. We will continue to evaluate strategic portfolio acquisitions and strategic development opportunities.

     Any reference herein to we, us or our includes 3333 Holding Corporation and subsidiary and Centex Development Company, L.P. and subsidiaries.

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INTERNATIONAL HOME BUILDING

     The following summarizes International Home Building’s results for the three months ended June 30, 2003 compared to the same period last year (dollars in thousands, except per unit data):

                                 
   
    For the Three Months Ended June 30,
   
    2003   2002
   
 
Revenues — Home Building
   $ 88,746       100.0 %   $ 60,972       100.0 %
Revenues — Land Sales & Other
     10       — %     28       — %
Cost of Sales — Home Building
     (75,079 )     (84.6 %)     (53,765 )     (88.1 %)
Cost of Sales — Land Sales
     (8 )     — %     —       — %
General and Administrative Expenses
     (8,322 )     (9.4 %)     (7,111 )     (11.7 %)
 
  
   
   
   
 
Operating Earnings
     5,347       6.0 %     124       0.2 %
Interest
     (549 )     (0.6 %)     (494 )     (0.8 %)
 
  
   
   
   
 
Earnings (Loss) Before Income Taxes
   $ 4,798       5.4 %   $ (370 )     (0.6 %)
 
  
   
   
   
 
            % Change             % Change
Units Closed
     313       16.4 %     269       (10.0 %)
Average Unit Sales Price
   $ 283,534       25.1 %   $ 226,662       20.7 %
Average Operating Earnings Per Unit
   $ 17,083       3,605.6 %   $ 461       (94.2 %)
Backlog Units
     480       23.4 %     389       85.2 %

     International Home Building’s revenues for the three months ended June 30, 2003 increased by $27.8 million from revenues for the same period last year. This increase is comprised of $15.3 million from an increase in the average unit sales price and $12.5 million from an increase in the number of units closed. Home sales totaled 313 units during the three months ended June 30, 2003, compared to 269 units during the same period in the preceding year, representing a 16.4% increase.

     International Home Building’s gross homebuilding margins increased for the three months ended June 30, 2003 to 15.4% from 11.8% in the same period last year. The improvement in gross margins was primarily due to an increase in the average unit sales price, partially offset by increases in labor costs caused by a shortage of skilled labor.

     International Home Building’s general and administrative expenses, as a percentage of revenues, decreased 2.3%, for the three months ended June 30, 2003 compared to the same period last year, primarily due to increased revenues.

     International Home Building’s financial statements are affected by fluctuations in exchange rates. International Home Building, whose functional currency is the British pound sterling, translates its financial statements into U.S. dollars. Income statement accounts are translated using the average exchange rate for the period, except for significant, non-recurring transactions that are translated at the rate in effect as of the date of the transaction. For the three months ended June 30, 2003 and 2002, respectively, the average exchange rate used for translation was 1.62 and 1.46, representing an increase of 10.7%.

     The backlog of homes sold but not closed at June 30, 2003 was 480 units, 23.4% more than the 389 units at the same point in the preceding year.

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COMMERCIAL DEVELOPMENT

     The following summarizes Commercial Development’s results for the three months ended June 30, 2003, compared to the same period last year (dollars and square feet in thousands):

                 
   
 
    For the Three Months  
    Ended June 30,  
   
 
    2003     2002  
   
   
 
Sales Revenues
   $ —     $ 725  
Rental Income and Other Revenues
     3,256       3,212  
Cost of Sales
     —       (275 )
Selling, General and Administrative Expense
     (1,309 )     (1,843 )
Interest
     (1,086 )     (1,182 )
 
  
   
 
Operating Earnings Before Depreciation
     861       637  
Depreciation and Amortization
     (582 )     (370 )
Earnings (Loss) from Unconsolidated Subsidiaries and Other
     135       (10 )
 
  
   
 
Operating Earnings
     414       257  
Earnings (Loss) from Discontinued Operations
     (87 )     241  
 
  
   
 
Earnings Before Income Taxes
   $ 327     $ 498  
 
  
   
 
Operating Square Footage at June 30
     2,176       2,626  

Commercial Development’s operations during the three months ended June 30, 2003 included:

•   completion of shell construction for a 138,000 square foot retail project in Santa Clara, California;

•   continued construction of a 62,000 square foot light industrial project in Camarillo, California;

•   continued construction of a 39,000 square foot light industrial project in Oxnard, California; and

•   commencement of construction on a 160,000 square foot office building in Lewisville, Texas.

Commercial Development’s discontinued operations during the three months ended June 30, 2003 consisted of the sale of a 68,000 square foot industrial project in Gardner, Massachusetts.

     Sales revenues and cost of sales for the three months ended June 30, 2002 reflect the sale of a pad site at a retail project in Lewisville, Texas. Rental income and other revenues increased slightly as the result of the late fiscal 2003 completion and leasing of a retail center in Lewisville, Texas. Selling, general and administrative expense decreased as the result of staffing reductions, a decrease in incentive compensation and a decrease in property operation expenses.

     Interest expense has decreased slightly as the result of interest rate reductions on Commercial Development’s variable rate debt, and depreciation and amortization has increased as the result of the addition of approximately 300,000 square feet of projects not in service as of June, 2002. Earnings from unconsolidated entities have increased as the result of leasing at a retail project in Santa Clara, California.

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    June 30, 2003     June 30, 2002  
   
   
 
    (000's)     Weighted     (000's)     Weighted  
    Rentable     Average     Rentable     Average  
    Sq. Ft.     Occupancy     Sq. Ft.     Occupancy  
   
   
   
   
 
Operating Properties*
                               
Industrial
     1,636       83.5 %     2,024       92.4 %
Office/Medical
     344       82.0 %     602       84.2 %
Retail
     196       94.9 %     —       —  
 
  
           
         
 
     2,176       84.3 %     2,626       90.5 %
 
  
           
         
 
                            
    (000's)           (000's)        
    Rentable           Rentable        
    Sq. Ft.           Sq. Ft.        
   
         
       
Projects Under Construction*
                                
Industrial
     150               308          
Office/Medical
     160               —          
Retail
     —               194          
 
  
           
         
 
     310               502          
 
  
           
         

* Includes assets classified as Held for Sale.

CORPORATE-OTHER

     The following summarizes the results of Corporate-Other for the three months ended June 30, 2003, compared to the same period last year (dollars in thousands):

                   
     
 
      For the Three Months  
      Ended June 30,  
     
 
      2003     2002  
     
   
 
Revenues
   $ 12,501     $ 22,848  
Cost of Sales
     (11,962 )     (21,163 )
Selling, General and Administrative Expenses
     (791 )     (1,798 )
Interest Expense
     (415 )     (788 )
 
  
   
 
Operating Loss
   $ (667 )   $ (901 )
 
  
   
 

     Our Corporate-Other segment acquires and disposes of land and other assets that are not identified with another specific business segment. Revenues and cost of sales for the three months ended June 30, 2003 relate primarily to the sale of residential lots to Centex Homes. Revenues and cost of sales for the three months ended June 30, 2002 also relate primarily to sales of residential lots to Centex Homes and an unaffiliated third party.

     Selling, general and administrative expenses decreased 56.0% for the three months ended June 30, 2003 compared to the same period last year, primarily due to staffing reductions in the former Multi-Family

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segment. Interest expense for the three months ended June 30, 2003 relates primarily to debt incurred to finance the purchase of these residential lots.

LIQUIDITY AND CAPITAL RESOURCES

     We finance land acquisition and development activities primarily from financial institution borrowings, equity contributions from third-party investors in project-specific joint ventures, seller financing, issuance of Class C limited partnership units to Centex affiliates and cash flow from operations, which is comprised largely of proceeds from the sale of real estate and operating projects.

     We typically finance properties under development through short-term variable and fixed-rate secured construction loans, and to a limited extent depending on the timing of the project construction, cash flow from operations. Construction loans totaled $75.7 million, including $0.4 million related to assets held for sale, at June 30, 2003. Under the terms of various construction loan agreements, we are required to maintain certain minimum liquidity and net worth levels. At June 30, 2003, we were in compliance with these covenants.

     Permanent commercial project loans outstanding at June 30, 2003 totaled $44.0 million, including $6.4 million related to assets held for sale. The project loans are collateralized by completed commercial properties and have original terms ranging from ten to twenty-two years with fixed interest rates ranging from 7.20% to 8.72%. These loans are non-recourse to the Partnership and its subsidiaries.

     No new seller-financed land loans were obtained during the quarters ended June 30, 2003 and 2002. Outstanding balances on seller-financed loans at June 30, 2003 totaled $19.5 million, with terms of up to three years and fixed interest rates ranging from 8.00% to 9.50%.

     The International Home Building segment has secured a revolving bank credit facility of 100 million in British pounds sterling. This facility expires in April 2006 and may be extended for up to two years with lender approval. Advances under this facility totaled £67.0 million, or $110.6 million, at June 30, 2003. Under the terms of this facility, the International Home Building segment is required to maintain certain leverage and interest coverage ratios and a minimum tangible net worth. At June 30, 2003, the International Home Building segment was in compliance with all of these covenants.

     No new Class C units were issued during the quarter ended June 30, 2003.

     We believe that the revenues, earnings, and liquidity from the sale of single-family homes, land sales, the sale and permanent financing of development projects and issuance of Class C units will be sufficient to provide the necessary funding for our current and future needs.

CERTAIN OFF-BALANCE-SHEET AND OTHER OBLIGATIONS

     The following is a summary of certain off-balance-sheet arrangements and other obligations and their possible effects on our liquidity and capital resources.

Joint Ventures

     We conduct certain operations through our participation in joint ventures in which we hold less than a majority interest. These non-consolidated joint ventures had total debt outstanding of approximately $37.8

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million as of June 30, 2003 and $35.8 million as of March 31, 2003. Our liability for the obligations of these non-consolidated joint ventures is limited to approximately $8.1 million as of June 30, 2003.

Letters of Credit, Guarantees and Leases

     At June 30, 2003, we had outstanding performance bonds and bank guarantees of $27.7 million that relate to projects undertaken by International Home Building and development obligations of International Home Building.

     To obtain construction financing for commercial and multi-family projects being developed by our subsidiaries, we are often required to guarantee, for the benefit of the construction lender, the completion of the project. In some instances, we have also executed partial recourse payment guarantees. At June 30, 2003, our subsidiaries had outstanding letters of credit of $3.9 million that primarily relate to development obligations of Multi-Family Communities.

     We expect that our subsidiaries will satisfy their loan and other contractual obligations in the ordinary course of business and in accordance with applicable contractual terms. As that occurs, our liability exposure will be decreased and, eventually, we will not have any continuing obligations with respect to these projects.

     We have no material capital or operating leases.

RECENT ACCOUNTING PRONOUNCEMENTS

     In August 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards No. 144, or SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The statement was effective for us beginning April 1, 2002.

     Due to the adoption of SFAS 144, we now report assets identified subsequent to March 31, 2002 as held for sale (as defined by SFAS 144), if any, and any such assets sold in the current period, as discontinued operations. All results of these discontinued operations, less applicable income taxes, are included as discontinued operations in the statements of operations. Prior periods are restated for comparative purposes. Land assets, and any other assets sold prior to adoption of SFAS 144, are reported in continuing operations.

     In November 2002, the FASB issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” or FIN 45, which requires certain guarantees to be recorded at fair value. FIN 45 also requires a guarantor to make certain disclosures about guarantees, including product warranties, even when the likelihood of making any payments under the guarantee is remote. We have applied the recognition and measurement provisions of FIN 45 to guarantees issued or modified after December 31, 2002. The implementation of FIN 45 did not have a material impact on our results of operations or financial position.

     In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities,” or FIN 46, which modifies the accounting for certain entities in which (1) equity investors do not have the characteristics of a controlling financial interest and/or (2) the entity is unable to finance its activities without additional subordinated financial support from other parties. Certain disclosure requirements of FIN 46 are effective for financial statements of interim or annual periods issued after January 31, 2003. FIN 46 applies immediately to variable interest entities created, or in which an enterprise obtains an interest, after January 31, 2003. For variable interest entities in which an enterprise holds a variable interest that it acquired before

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February 1, 2003, FIN 46 applies to interim or annual periods beginning after June 15, 2003. As discussed in Note (B), “Organization,” of our Notes to Condensed Combining Financial Statements, Centex indirectly holds 100% of the Partnership’s Class A and Class C Units. The manner in which Centex reports its interest in the Partnership may be affected by this interpretation. Centex and the Companies are in the process of assessing the impact FIN 46 will have on their respective financial statements. See Note (P) to the consolidated financial statements of Centex included elsewhere in this Report for further discussion regarding this interpretation.

     In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” or SFAS No. 149. The statement amends and clarifies financial accounting and reporting for derivative instruments and hedging activities under Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities,” or SFAS No. 133, by requiring that contracts with comparable characteristics be accounted for similarly, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. A portion of this statement is effective for contracts entered into or modified and for hedging relationships designated after June 30, 2003. The remainder of this statement codifies previously issued SFAS No. 133 implementation guidance, which retains its original effective dates. The Companies do not expect the implementation of SFAS No. 149 to have a material impact on the Companies’ results of operations or financial position.

     

FORWARD-LOOKING STATEMENTS

     Various sections of this Report, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934, and the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the context of the statement and generally arise when we are discussing our beliefs, estimates or expectations. These statements are not guarantees of future performance and involve a number of risks and uncertainties. Actual results and outcomes may differ materially from what is expressed or forecasted in these forward-looking statements. In addition to the specific uncertainties discussed elsewhere in this Report, the following risks and uncertainties may affect the actual performance and results of operations of the Companies:

•   Our homebuilding, commercial, multi-family and land sales operations are somewhat cyclical and sensitive to changes in economic conditions, including levels of employment, consumer confidence and income, availability of financing, interest rate levels and changes in the economic condition of the local markets in which we operate.

•   Our homebuilding, commercial, multi-family and land sales operations are also subject to other risks and uncertainties, including seasonal variations, adverse weather conditions, the availability of adequate land in desirable locations, the cost and availability of labor and construction materials, labor disputes, the general demand for housing and new construction and the resale market for existing homes.

•   All of our businesses operate in very competitive environments, which are characterized by competition from a number of other homebuilders, developers and landowners in each of the markets in which we operate.

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•   We are subject to various federal, state and local statutes, rules and regulations that could affect our businesses, including those concerning zoning, construction, protecting the environment and health. In addition, our businesses could be affected by changes in federal income tax policy, federal mortgage loan financing programs and by other changes in regulation or policy.

     Other risks and uncertainties may also affect the outcome of the actual performance and results of operations of the Partnership and Holding.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     There have been no material changes in the Companies’ market risk from March 31, 2003. For further information regarding the Companies’ market risk, refer to the Companies’ Annual Report on Form 10-K for the fiscal year ended March 31, 2003.

Item 4. Controls and Procedures

     An evaluation has been performed under the supervision and with the participation of the management of 3333 Holding Corporation and of Centex Development Company, L.P. (through its general partner, 3333 Holding Corporation), including the Chief Executive Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333 Development Corporation, of the effectiveness of the design and operation of our disclosure controls and procedures as of June 30, 2003. Based on that evaluation, the management of 3333 Holding Corporation and of Centex Development Company, L.P. (through its general partner, 3333 Holding Corporation), including the Chief Executive Officer and Chief Financial Officer of both 3333 Holding Corporation and 3333 Development Corporation, concluded that our disclosure controls and procedures were effective as of June 30, 2003 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There has been no change in our internal controls over financial reporting that occurred during the three months ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

Part II. Other Information

Item 6. Exhibits and Reports on Form 8-K

  (3)   Exhibits

             
   
4.3.2
  Second Supplement to Nominee Agreement, dated as of June 1, 2003, by and between Centex, Holding, the Partnership, and Mellon Investor Services LLC as successor nominee and successor transfer agent.
             
   
31.3
  Certification of the Chief Executive Officer of 3333 Holding Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.4
  Certification of the Chief Financial Officer of 3333 Holding Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.

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31.5
  Certification of the Chief Executive Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.6
  Certification of the Chief Financial Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
32.3
  Certification of the Chief Executive Officer of 3333 Holding Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.4
  Certification of the Chief Financial Officer of 3333 Holding Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.5
  Certification of the Chief Executive Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.6
  Certification of the Chief Financial Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

  (4)   Reports on Form 8-K
 
      The Registrant filed no reports on Form 8-K during the quarter ended June 30, 2003.

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Signatures

     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, thereunto duly authorized.

     
    3333 HOLDING CORPORATION
   
    Registrant
     
August 13, 2003   /s/ Todd D. Newman
   
    Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
principal accounting officer)

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Signatures

     Pursuant to the requirements of the Securities Exchange Act of 1934, 3333 Development Corporation, as general partner of, and on behalf of the registrant, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

     
    CENTEX DEVELOPMENT COMPANY, L.P.
   
    Registrant
By 3333 Development Corporation
General Partner
     
August 13, 2003   /s/ Todd D. Newman
   
    Todd D. Newman
Senior Vice President, Chief Financial
Officer and Treasurer
(principal financial officer and
principal accounting officer)

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EXHIBIT INDEX

             
   
3.2
  Amended and Restated By-Laws of Centex Corporation dated May 15, 2003.
             
   
4.3.2
  Second Supplement to Nominee Agreement, dated as of June 1, 2003, by and between Centex, Holding, the Partnership, and Mellon Investor Services LLC as successor nominee and successor transfer agent.
             
   
10.1
  Centex Corporation Amended and Restated 1987 Stock Option Plan.
             
   
10.2
  Sixth Amended and Restated 1998 Centex Corporation Employee Non-Qualified Stock Option Plan.
             
   
10.3
  Amended and Restated Centex Corporation 2001 Stock Option Plan.
             
   
10.10
  Amended and Restated Centex Corporation Long Term Incentive Plan.
             
   
10.13
  Centex Corporation 2003 Annual Incentive Compensation Plan.
             
   
10.14
  Centex Corporation 2003 Equity Incentive Plan.
             
   
10.15
  Distribution Agreement between Centex Corporation, Cavco Industries L.L.C. and Cavco Industries, Inc.
             
   
10.16
  Administrative Services Agreement between Centex Service Company and Cavco Industries, Inc.
             
   
10.17
  Tax Sharing Agreement between Centex Corporation and affiliates and Cavco Industries, Inc.
             
   
10.18
  Agreement to Assign Trademark Rights and Limited Consent to Use Centex Trademarks between Centex Corporation and Cavco Industries, Inc.
             
   
10.19
  Amendment No. 1 to Distribution Agreement between Centex Corporation, Cavco Industries L.L.C. and Cavco Industries, Inc.
             
   
31.1
  Certification of the Chief Executive Officer of Centex Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.2
  Certification of the Chief Financial Officer of Centex Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.3
  Certification of the Chief Executive Officer of 3333 Holding Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.4
  Certification of the Chief Financial Officer of 3333 Holding Corporation pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.5
  Certification of the Chief Executive Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
31.6
  Certification of the Chief Financial Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to Rules 13a-14 and 15d-14 promulgated under the Securities Exchange Act of 1934, as amended.
             
   
32.1
  Certification of the Chief Executive Officer of Centex Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.2
  Certification of the Chief Financial Officer of Centex Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.3
  Certification of the Chief Executive Officer of 3333 Holding Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.4
  Certification of the Chief Financial Officer of 3333 Holding Corporation pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.5
  Certification of the Chief Executive Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
             
   
32.6
  Certification of the Chief Financial Officer of 3333 Development Corporation, as the general partner of Centex Development Company, L.P., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

 EX-3.2 3 d08056exv3w2.txt EX-3.2 AMENDED AND RESTATED BY-LAWS EXHIBIT 3.2 CENTEX CORPORATION BY-LAWS As Amended and Restated MAY 15, 2003 TABLE OF CONTENTS
Page No. -------- ARTICLE I Offices .......................................... 1 ARTICLE II Meetings of Stockholders ......................... 1 ARTICLE III Directors ........................................ 6 Meetings of the Board of Directors ............... 8 Committees of Directors ..........................10 Compensation of Directors ........................11 ARTICLE IV Notices ..........................................11 ARTICLE V Officers .........................................13 The Chairman of the Board ........................14 The Vice Chairman of the Board ...................14 The Chief Executive Officer ......................15 The President ....................................15 The Vice Presidents ..............................16 The Secretary and Assistant Secretary ............16 The Treasurer and Assistant Treasurers ...........17
(i) Table of Contents (continued)
Page No. -------- ARTICLE VI Elimination of Director and Officer Liability and Indemnification of Officers, Directors and Others..........................................18 ARTICLE VII Certificates for Shares.............................22 Lost Certificates...................................23 Closing of Transfer Books and Fixing Record Date.........................................23 Registered Stockholders.............................24 ARTICLE VIII General Provisions..................................24 Report to Stockholders..............................25 Checks..............................................25 Fiscal Year.........................................25 Seal................................................26 ARTICLE IX Amendments..........................................26
(ii) CENTEX CORPORATION (A NEVADA CORPORATION) (THE "CORPORATION") BY-LAWS ("By-Laws") *** ARTICLE I OFFICES Section 1. The registered office of the Corporation shall be located in Carson City, County of Washoe, State of Nevada. Section 2. The Corporation may also have its executive offices and other offices at such other places, within and without the State of Nevada, as the Board of Directors may from time to time determine or as the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All annual meetings of stockholders shall be held at the offices of the Corporation in the City of Dallas, State of Texas, or at such other place, within or without the State of Texas, as may be designated by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Special meetings of stockholders may be held at such place, within or without the State of Texas, and at such time as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. -1- Section 2. Annual meetings of stockholders, commencing with the year 1999, shall be held on such business day in July at 10:00 a.m. as may be designated by the Board of Directors, or if the Board of Directors does not so designate an annual meeting date for any year then the annual meeting for that year shall be held on the last Thursday of July if not a legal holiday, and if a legal holiday, then on the next secular day following at 10:00 a.m. At such annual meeting, the stockholders shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Special meetings of the stockholders may be called only by the Chairman of the Board or a majority of the directors of the Board of Directors. Section 4. Written or printed notice signed by the Chairman of the Board, the President, a Vice President, the Secretary, or an Assistant Secretary and stating the place, day and hour of the meeting of the stockholders and the purpose or purposes for which the meeting is called shall be given to each stockholder of record entitled to vote at such meeting either by delivering such notice personally to such stockholder or by depositing such notice in the United States mail addressed to the stockholder at his, her or its address as it appears on the stock transfer books of the Corporation, with proper postage prepaid, not less than ten (10) nor more than sixty (60) days before the day of the meeting, by or at the direction of the Chairman of the Board, the President, the Secretary, or the officer or person calling the meeting. Section 5. Business transacted at any special meeting shall be confined to the purposes stated in the notice thereof. Section 6. The holders of a majority of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at meetings of stockholders except as otherwise provided in the Restated Articles of Incorporation, as amended, of the Corporation (the "Articles of Incorporation"). If, however, a quorum shall not be present or represented at any meeting of the stockholders, the stockholders present in person or represented by proxy shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned -2- meeting at which a quorum shall be present or represented, any business may be transacted that might have been transacted at the meeting as originally notified and called. The stockholders present at a duly organized meeting may continue to transact business until adjournment notwithstanding the withdrawal of some stockholders prior to adjournment. Section 7. If a quorum is present, unless the Articles of Incorporation provide for a different proportion, action by the stockholders entitled to vote on a matter other than the election of directors, is approved by and is the act of the stockholders, if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless voting by classes is required for any action of the stockholders by the laws of the State of Nevada, the Articles of Incorporation or these By-Laws, in which case the number of votes cast in favor of the action by the voting power of each such class must exceed the number of votes cast in opposition to the action by the voting power of each such class. Section 8. Each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter submitted to a vote at a meeting of stockholders, except to the extent that the voting rights of the shares of any class or series within a class are limited or denied by the Articles of Incorporation or by the resolutions of the Board of Directors establishing such class or series pursuant to the Articles of Incorporation. At any election for directors, every stockholder entitled to vote at any such election shall have the right to vote, in person or by proxy, the number of shares owned by him, her or it for as many persons as there are directors to be elected and for whose election such stockholder has a right to vote. Stockholders of the Corporation are expressly prohibited from cumulating their votes in any election for directors of the Corporation. Section 9. A stockholder may vote in person or may be represented and vote by a proxy or proxies appointed by such stockholder by an instrument in writing. In the event that any such instrument in writing shall designate two (2) or more persons to act as proxies, and such instrument does not specify the -3- manner in which such proxies may exercise the powers conferred by such instrument, then a majority of such persons present at the meeting, or, if only one shall be present, then that one shall have and may exercise all of the powers conferred by such written instrument upon all of the persons so designated. No such appointment of proxy shall be valid except for the meeting (including all adjourned sessions thereof) for which it was given. No such appointment of proxy shall be valid after the expiration of six (6) months following the date of its execution, unless coupled with an interest, or unless the person executing it specifies therein the length of time for which it is to continue in force, which in no case shall exceed the earlier of eleven (11) months following the date of its execution or the conclusion of the meeting (including all adjourned sessions thereof) for which such appointment of proxy was given. Subject to the above, any appointment of proxy duly executed is not revoked and continues in full force and effect until an instrument revoking it or a duly executed appointment of proxy bearing a later date is filed with the Secretary of the Corporation. Each appointment of proxy shall be revocable unless expressly provided therein to be irrevocable. Section 10. The officer or agent having charge of the stock transfer books shall make, at least ten (10) days before each meeting of stockholders, a complete list of the stockholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of and number of shares held by each. For a period of ten (10) days prior to such meeting, such list shall be kept on file at the registered office of the Corporation and shall be subject to inspection by any stockholder at any time during the usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any stockholder during the entire meeting. The original stock transfer books shall be prima facie evidence as to who are the stockholders entitled to examine such list or transfer book or to vote at any such meeting of stockholders. Section 11. Subject to the rights of the holders of the preferred stock or any other class or series of stock that may have a preference over the common stock as to dividends or upon liquidation, any action -4- required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders of the Corporation and may not be effected by any consent in writing by such stockholders. Section 12. Voting at meetings of stockholders may be oral or by ballot at the discretion of the Chairman of the meeting, except that such voting shall be by written ballot if a vote by written ballot is demanded by a majority of the stockholders present at such meeting. Section 13. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or by any stockholder entitled to vote for the election or directors. Any stockholder entitled to vote for the election of directors at a meeting may nominate persons for election as directors only if written notice of such stockholder's intent to make such nomination is given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than (a) with respect to an election to be held at an annual meeting of stockholders, ninety (90) days in advance of such meeting, and (b) with respect to an election to be held at a special meeting of stockholders for the election of directors, the close of business on the seventh (7th) day following the date on which notice of such meeting is first given to stockholders. Each such notice shall set forth: (a) the name and address of the stockholder who intends to make the nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would have been required to be included in a proxy statement filed -5- pursuant to the proxy rules of the Securities and Exchange Commission had each nominee been nominated, or intended to be nominated by the Board of Directors; and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The Chairman of the meeting may refuse to acknowledge the nomination of any person not made in accordance with the foregoing procedure. Section 14. The Chairman of the Board shall have the power and authority to limit attendance at any meeting of the stockholders to (a) the Corporation's stockholders and (b) their validly appointed proxies. Section 15. The Chairman of the Board, or in his or her absence, the Vice Chairman of the Board, shall be the chairman of any meeting of the stockholders and shall determine the order of business and rules for the conduct of any such meeting. ARTICLE III DIRECTORS Section 1. The number of directors of the Corporation shall be not fewer than three (3) nor more than thirteen (13) as shall be established from time to time by resolution of the Board of Directors of the Corporation. Commencing with the election of directors at the annual meeting of stockholders held in 1988, the directors, other than those who may be elected by the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, shall be divided, with respect to the time for which they severally hold office, into three (3) classes, as nearly equal in number as possible, as determined by the Board of Directors, one class originally elected for a term expiring at the annual meeting of stockholders held in 1989, another class originally elected for a term expiring at the annual meeting of stockholders held in 1990, and another class originally elected for a term expiring at the annual meeting of stockholders held in 1991, with the members of each class holding office for the term for which such -6- members are elected and until their successors are elected and qualified. At each annual meeting of the stockholders of the Corporation, commencing with the successors of the class of directors whose term expires at that meeting, directors shall be elected to hold office for a term expiring at the annual meeting of stockholders held in the third (3rd) year following the year of their election. Directors need not be residents of the State of Nevada nor stockholders of the Corporation. Section 2. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum, or by the sole remaining director. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the class of directors in which the new directorship was created or the vacancy occurred and until such director's successor shall have been elected and qualified. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. Section 3. The business and affairs of the Corporation shall be managed by its Board of Directors. The Board of Directors may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-laws directed or required to be exercised and done by the stockholders. Section 4. Subject to the rights of the holders of any class or series of stock having a preference over the common stock as to dividends or upon liquidation, any director may be removed from office at any time, but only by the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class. -7- MEETINGS OF THE BOARD OF DIRECTORS Section 5. Meetings of the Board of Directors, regular or special, may be held either within or without the State of Nevada. Section 6. The first meeting of each newly elected Board of Directors shall be at such time and place as shall be fixed by the vote of the stockholders at the annual meeting of stockholders and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time and place of such first meeting of the newly elected Board of Directors, or in the event such meeting of the newly elected Board of Directors is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the Board of Directors, or as shall be specified in a written waiver signed by all of the directors. Section 7. Regular meetings of the Board of Directors, commencing in July 1998, shall be held on the third Thursday of February, May, July and October in each year, if not a legal holiday, and if a legal holiday, then on the next secular day following, and in addition a fifth flexible meeting date shall be determined from time to time by the Board of Directors. Each such meeting shall be held at such time as shall be designated by the Chairman of the Board. At such meetings, the Board of Directors may transact such business as may properly come before the meetings; provided, however, that the Chairman of the Board may designate a day in each such month other than the third Thursday as the date for any such regular meeting. Section 8. Special meetings of the Board of Directors may be called by the Chairman of the Board and shall be called by the Secretary on the written request of two (2) of the directors. Written notice of special meetings of the Board of Directors shall be given to each director at least twenty-four (24) hours -8- before the day of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. Section 9. A majority of the directors shall constitute a quorum for the transaction of business. The act of at least a majority of the directors present at a meeting at which a quorum is present shall be required to constitute the act of the Board of Directors, unless a greater number is required or a lesser number is permitted by the Articles of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. At such adjourned meeting at which a quorum shall be present, any business may be transacted that might have been transacted at the meeting as originally notified and called. Section 10. Any director may resign at any time by mailing or delivering or by transmitting by telegram, cable, written notice or other such electronic transmission of his or her resignation to the Board of Directors, the Chairman of the Board, the President, or to the Secretary of the Corporation. Any such resignation shall take effect at the time specified therein or, if no time is specified therein, then such resignation shall take effect immediately upon the receipt thereof. Section 11. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the Board of Directors or of such committee, as the case may be, and such consent shall have the same force and effect as a unanimous vote at a duly called and constituted meeting of the Board of Directors or such committee. All such unanimous written consents shall be filed with the minutes of the proceedings of the Board of Directors or such committee. -9- COMMITTEES OF DIRECTORS Section 12. The Board of Directors may, by resolution adopted by a majority of the Board of Directors, designate one or more directors to constitute an Executive Committee that, to the extent provided in such resolution (if not expressly denied by applicable law or the Articles of Incorporation) shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may have power to authorize the seal of the Corporation to be affixed to all papers that may require it. Vacancies in the membership of the Executive Committee shall be filled by resolution adopted by a majority of the Board of Directors at a regular or special meeting of the Board of Directors. The Executive Committee shall keep regular minutes of its proceedings and report such minutes to the Board of Directors when required. The designation of such committee and the delegation of authority thereto shall not operate to relieve the Board of Directors or any member thereof of any responsibility imposed on it, him or her by law. Section 13. The Board of Directors may, by resolution adopted by a majority of the Board of Directors, designate one or more committees in addition to the Executive Committee, each such other committee to consist of one or more directors of the Corporation, which committee or committees, to the extent provided in such resolution or resolutions (if not theretofore granted to the Executive Committee and if not expressly denied by applicable law or the Articles of Incorporation), shall have and may exercise all of the authority of the Board of Directors in the business and affairs of the Corporation, and may have power to authorize the seal of the Corporation to be affixed to all papers which may require it. Vacancies in the membership of any such committees shall be filled by resolution adopted by a majority of the Board of Directors at a regular or special meeting of the Board of Directors. Each committee shall keep regular minutes of its proceedings and report such minutes to the Board of Directors when required. The designation of such committees and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, or any responsibility imposed upon it, him or her by law. -10- COMPENSATION OF DIRECTORS Section 14. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as director or may be awarded stock options in lieu of cash payments or receive a combination of stock options and cash payments, as the same may be determined from time to time by the Board. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed similar compensation for attending committee meetings. ARTICLE IV NOTICES Section 1. Notices to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their respective addresses appearing on the books of the Corporation. Notice by mail shall be deemed to be given at the time when such notice shall be mailed. Notice to directors may also be given by telegram, facsimile or other similar electronic transmission, and shall be deemed delivered when such notice shall be deposited at a telegraph office for transmission and all appropriate fees therefor have been paid or upon receipt of confirmation of such similar transmission. Section 2. Whenever any notice is required to be given to any stockholder or director under the provisions of applicable law or of the Articles of Incorporation or of these By-laws, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. -11- Section 3. Attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. -12- ARTICLE V OFFICERS Section 1. The officers of the Corporation shall consist of a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (one or more of which may be designated Executive Vice President or Senior Vice President), a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Any two (2) or more offices may be held by the same person, except that one person shall not hold the offices of Chairman of the Board and Secretary, Chief Executive Officer and Secretary or President and Secretary. Section 2. The Board of Directors, at its first meeting after each annual meeting of stockholders, shall elect a Chairman of the Board, a Chief Executive Officer, a President, one or more Vice Presidents (one or more of which may be designated Executive Vice President or Senior Vice President), a Secretary and a Treasurer, none of whom need be a member of the Board of Directors, except the Chairman of the Board. Section 3. The Board of Directors or the Chairman of the Board may from time to time elect or appoint a Controller and such assistant officers as the Board of Directors or the Chairman of the Board, as the case may be, may deem necessary or desirable. Any such elections or appointments made by the Chairman of the Board shall be reported to the Board of Directors at its next succeeding regular meeting. Section 4. The salaries of all officers of the Corporation shall be fixed by the Board of Directors. Section 5. Each officer and assistant officer of the Corporation shall hold office until the next annual meeting of the Board of Directors or until his or her successor is duly elected or appointed, or until his or her earliest death, resignation or removal from such office. Any officer or member of any committee elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any vacancy occurring in any office of the Corporation by death, resignation, removal or otherwise shall be filled by the Board of Directors. -13- THE CHAIRMAN OF THE BOARD Section 6. The Chairman of the Board shall be selected from the members of the Board of Directors of the Corporation. The Chairman of the Board shall preside at meetings of the stockholders and the Board of Directors and shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chairman of the Board shall have authority, without additional authorization from the Board of Directors, to execute and deliver on behalf of the Corporation all bonds, deeds, mortgages, contracts and other instruments and documents (and if any such instrument requires the seal of the Corporation, then under such seal) relating to the usual and ordinary business of the Corporation, except where required by law to be otherwise executed, and except where the execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. During the absence or disability of the Chairman of the Board, the Vice Chairman of the Board shall perform the duties of the Chairman of the Board. THE VICE CHAIRMAN OF THE BOARD Section 7. The Vice Chairman of the Board shall be selected from the members of the Board of Directors of the Corporation. The Vice Chairman of the Board shall have authority, without additional authorization from the Board of Directors, to execute and deliver on behalf of the Corporation all bonds, deeds, mortgages, contracts and other instruments and documents (and if any such instrument requires the seal of the Corporation, then under such seal) relating to the usual and ordinary business of the Corporation, except where required by law to be otherwise executed, and except where the execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the Corporation. During the -14- absence or disability of the Vice Chairman of the Board, the Chief Executive Officer (if a different person) shall perform the duties of the Vice Chairman of the Board. THE CHIEF EXECUTIVE OFFICER Section 8. The Chief Executive Officer of the Corporation shall have general and active management of the business of the Corporation and, subject to the Chairman of the Board if a different person holds such office, shall see that all orders and resolutions of the Board of Directors are carried into effect. The Chief Executive Officer shall have such additional duties as may be assigned to him or her from time to time by the Board of Directors or the Chairman of the Board. The Chief Executive Officer shall have the same authority as the Chairman of the Board to execute on behalf of the Corporation bonds, deeds, mortgages and other instruments requiring a seal and contracts and other documents. THE PRESIDENT Section 9. The President shall be the Chief Operating Officer of the Corporation and shall assist the Chief Executive Officer in the general and active management of the operations of the Corporation. The President shall have such additional duties as may be assigned to him or her from time to time by the Board of Directors, the Chairman of the Board or the Chief Executive Officer. The President shall have the same authority as the Chairman of the Board and the Chief Executive Officer to execute on behalf of the Corporation bonds, deeds, mortgages and other instruments requiring a seal and contracts and other documents. During any absence or disability of the Chief Executive Officer, the President shall perform the duties of the Chief Executive Officer. -15- THE VICE PRESIDENTS Section 10. The Vice Presidents, in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the President, perform the duties and exercise the powers of the President. Executive Vice Presidents shall be senior to Senior Vice Presidents and Vice Presidents. Senior Vice Presidents shall be senior to Vice Presidents. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the Chief Executive Officer and the President shall from time to time prescribe. The Vice Presidents shall have the same authority as the Chairman of the Board, the Chief Executive Officer and the President to execute on behalf of the Corporation bonds, deeds, mortgages and other instruments requiring a seal and contracts and other documents. THE SECRETARY AND ASSISTANT SECRETARY Section 11. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the stockholders of the Corporation and of the Board of Directors in a book or books to be kept for that purpose and shall perform similar duties for any committees of the Board of Directors when required. He or she shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer or the President. He or she shall keep in safe custody the seal of the Corporation and, when authorized by the Board of Directors, affix such seal to any instrument requiring -16- it and, when so affixed, it may be attested by his or her signature or by the signature of the Treasurer or an Assistant Secretary. Section 12. The Assistant Secretaries in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President or the Secretary may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 13. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 14. The Treasurer shall disburse the funds of the Corporation as may be ordered or authorized by the Board of Directors, taking proper vouchers of such disbursements, and shall render to the Chairman of the Board, the Chief Executive Officer, the President and the Board of Directors at its regular meetings or when the Board of Directors so requires an account of all of his or her transactions as Treasurer and of the financial condition of the Corporation. He or she shall have such other duties as may be prescribed from time to time by the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer and the President. Section 15. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful -17- performance of the duties of his or her office and for the restoration to the Corporation, in case of death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his or her possession or under his or her control belonging to the Corporation. Section 16. The Assistant Treasurers in the order of their seniority, unless otherwise determined by the Board of Directors, shall, in the absence or disability of the Treasurer, perform the duties and exercise the powers of the Treasurer. They shall perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, the Chief Executive Officer, the President or the Treasurer may from time to time prescribe. ARTICLE VI ELIMINATION OF DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION OF OFFICERS, DIRECTORS AND OTHERS Section 1. Elimination of Director or Officer Liability. No director or officer of the Corporation shall be personally liable to the Corporation or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer occurring on or after July 15, 1987; provided, however, that the foregoing provision shall not eliminate or limit the liability of a director or officer (a) for acts or omissions that involve intentional misconduct, fraud or a knowing violation of law or (b) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes. Section 2. Indemnification. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the -18- Corporation), by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, or by reason of the fact that he or she is or was a director, officer or employee of the Corporation serving in any fiduciary capacity with respect to any profit sharing, pension or other type of welfare plan or trust for the benefit of employees of the Corporation or any subsidiary of the Corporation, against expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding, if he or she acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation or of such employee benefit plan or trust, and, with respect to any criminal action or proceeding had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, or of such employee benefit plan or trust, and that, with respect to any criminal action or proceeding, he or she had reasonable cause to believe that his or her conduct was unlawful. Section 3. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation or by or in the right of any employee benefit plan or trust to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or by reason of the fact that he or she is or was a director, officer or employee of the Corporation serving in any fiduciary capacity with respect to any profit sharing, pension or other type of welfare plan or trust for the benefit of employees of the Corporation or any subsidiary of the -19- Corporation, against expenses, including amounts paid in settlement and attorneys' fees, actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation or of such employee benefit plan or trust. Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or of such employee benefit plan or trust, or for amounts paid in settlement to the Corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper. Section 4. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Sections 2 and 3 of this Article VI, or in defense of any claim, issue or matter therein, he or she must be indemnified by the Corporation against expenses (including attorneys' fees) actually and reasonably incurred by him or her in connection with the defense. Section 5. Any indemnification under Sections 2 and 3 of this Article VI, unless ordered by a court or advanced pursuant to Section 6 of this Article VI, must be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances. The determination must be made: (a) by the Board of Directors by majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding; (b) if a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so orders, by independent legal counsel in a written opinion; (c) if a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by independent legal counsel in a written opinion; or (d) by the stockholders. -20- Section 6. The expenses of officers and directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the Corporation as they are incurred and in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it shall be determined by a court of competent jurisdiction that he or she is not entitled to be indemnified by the Corporation. The provisions of this Section 6 do not affect any rights to advancement of expenses to which corporate personnel other than directors or officers may be entitled under any contract or otherwise. Section 7. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this Article VI: (a) shall not be deemed exclusive of any other rights to which a person seeking indemnification or advancement of expenses may be entitled under any By-law, agreement, vote of stockholders, disinterested directors, or otherwise, for either an action in his or her official capacity or an action in another capacity while holding his or her office, except that indemnification, unless ordered by a court pursuant to Section 3 of this Article VI, or for the advancement of expenses made pursuant to Section 6 of this Article VI, may not be made to or on behalf of any director or officer if a final adjudication establishes that his or her acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and was material to the cause of action; and (b) continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of the heirs, executors and administrators of such a person. Section 8. The Corporation shall have power to purchase and maintain insurance or make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise or is or was a director, officer or employee of the Corporation serving in any fiduciary capacity with respect to any profit sharing, pension or -21- other type of welfare plan or trust for the benefit of employees of the Corporation or any subsidiary of the Corporation, for any liability asserted against him or her and any liability and expenses incurred by him or her in any such capacity or arising out of his or her status as such. ARTICLE VII CERTIFICATES FOR SHARES Section 1. The Corporation shall deliver certificates representing all shares to which stockholders are entitled; such certificates shall be signed by the Chairman of the Board, or the President, or a Vice President, and the Secretary or an Assistant Secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. No certificate shall be issued for any share until the consideration therefor has been fully paid. Such certificate representing shares shall state upon the face thereof that the Corporation is organized under the laws of the State of Nevada, the name of the person to whom issued, the number and class and the designation of the series, if any, which such certificate represents, and may, in addition, state upon the face thereof the par value of each share represented by such certificate or that the shares are without par value. Section 2. The signatures of the Chairman of the Board, the President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles, if the certificate is countersigned by a transfer agent and registered by a registrar, other than the Corporation itself or an employee of the Corporation. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer at the date of issuance. -22- LOST CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued or empower the Corporation's transfer agent to issue a new certificate or certificates in place of any certificate or certificates theretofore issued by the Corporation that are alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost or destroyed. Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. CLOSING OF TRANSFER BOOKS AND FIXING RECORD DATE Section 5. For the purpose of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period not to exceed, in any case, sixty (60) days. If the stock transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in -23- advance a date as the record date for any such determination of stockholders, such date in any case to be not more than sixty (60) days, and, in case of a meeting of stockholders, not less than ten (10) days, prior to the date on which the particular action requiring such determination of stockholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the date on which the notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders. When a determination of stockholders entitled to vote at any meeting of stockholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except where the determination has been made through the closing of stock transfer books and the stated period of closing has expired. REGISTERED STOCKHOLDERS Section 6. The Corporation shall be entitled to recognize the exclusive rights of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Nevada. ARTICLE VIII GENERAL PROVISIONS Section 1. The Board of Directors may declare and the Corporation may pay dividends on its outstanding shares in cash, property, or its own shares pursuant to law and subject to the provisions of its Articles of Incorporation. -24- Section 2. The Board of Directors may by resolution create a reserve or reserves out of earned surplus for any proper purpose or purposes, and may abolish any such reserve in the same manner. REPORT TO STOCKHOLDERS Section 3. The Board of Directors must, when required by the holders of at least one-third (1/3) of the outstanding shares of the Corporation, present written reports of the situation and amount of business of the Corporation. CHECKS Section 4. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as may from time to time be designated by the Board of Directors or by such officers of the Corporation who may be authorized by the Board of Directors to make such designations. FISCAL YEAR Section 5. The fiscal year of the Corporation shall be fixed by the resolution of the Board of Directors. -25- SEAL Section 6. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Nevada". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. ARTICLE IX AMENDMENTS Section 1. These By-laws may be altered, amended or repealed or rescinded, or new by-laws may be adopted, by the vote of a majority of the entire Board of Directors at any meeting thereof, provided that such proposed action in respect thereof shall be stated in the notice of such meeting. The stockholders of the Corporation shall have the power to alter, amend, repeal or rescind any provision of these By-laws, or adopt new by-laws, only to the extent and in the manner provided in the following sentence. In addition to any requirements of law and any other provision of these By-laws or the Corporation's Articles of Incorporation or any resolution or resolutions of the Board of Directors adopted pursuant to Article VIII of the Corporation's Articles of Incorporation (and notwithstanding the fact that a lesser percentage may be specified by law, these By-laws, the Corporation's Articles of Incorporation or any such resolution or resolutions), the affirmative vote of the holders of sixty-six and two-thirds percent (66 2/3%) or more of the combined voting power of the then outstanding shares of stock entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, repeal or rescind any provision of these By-laws, or adopt new by-laws. -26- EX-4.3.2 4 d08056exv4w3w2.txt EX-4.3.2 SECOND SUPPLEMENT TO NOMINEE AGREEMENT EXHIBIT 4.3.2 SECOND SUPPLEMENT TO NOMINEE AGREEMENT This SECOND SUPPLEMENT TO NOMINEE AGREEMENT, executed and delivered this ______ day of June, 2003 (this "Second Supplement"), by and between CENTEX CORPORATION, a Nevada corporation ("Centex"), 3333 HOLDING CORPORATION, a Nevada corporation ("Holding"), CENTEX DEVELOPMENT COMPANY, L.P., a Delaware limited partnership ("CDC"), of which 3333 Development Corporation, a Nevada corporation that is a wholly-owned subsidiary of Holding, is the sole general partner, and MELLON INVESTOR SERVICES LLC ("Mellon") f/k/a CHASEMELLON SHAREHOLDER SERVICES L.L.C., a New Jersey limited liability company. WITNESSETH: WHEREAS, Centex, Holding, CDC and First RepublicBank Dallas, National Association ("First RepublicBank") entered into a Nominee Agreement as of November 30, 1987 (the "Nominee Agreement"), pursuant to which Centex effected a distribution to First RepublicBank, for the benefit of those persons who are from time to time holders of the common stock of Centex, of certain securities, as more fully described therein; and WHEREAS, Centex, Holding, CDC, ChaseMellon Shareholder Services L.L.C. ("ChaseMellon") and The Chase Manhattan Bank ("Chase") entered into a Supplement to Nominee Agreement as of July 27, 2000 (the "First Supplement"), pursuant to which Chase was appointed as successor Nominee under the Nominee Agreement, ChaseMellon was appointed as successor Transfer Agent under the Nominee Agreement, and the termination date of the Nominee Agreement was extended from November 30, 1997 to November 30, 2007, as more fully described therein; and WHEREAS, Chase has tendered its resignation as successor Nominee and Centex desires to appoint a replacement; and WHEREAS, ChaseMellon has changed its corporate name to Mellon Investor Services LLC and is continuing in its appointment as successor Transfer Agent; and WHEREAS, the parties hereto are executing this Second Supplement to formally recognize the appointment of a successor Nominee and to acknowledge the successor Transfer Agent's change of name to clarify the rights and obligations of the parties hereto and the respective parties to the Nominee Agreement. NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Centex, Holding, CDC and Mellon do hereby agree as follows: 1. Definitions. a) Except as expressly defined otherwise in this Second Supplement, capitalized terms used and otherwise defined herein shall have the respective meanings assigned to them in the Nominee Agreement. b) The following defined terms in the Nominee Agreement are hereby amended: "Corporate Office" means (a) as to the Nominee, the corporate office of the Nominee, located at c/o Mellon Investor Services LLC, 600 North Pearl Street, Dallas, Texas 75201, and (b) as to the Transfer Agent, the principal corporate office of the Transfer Agent, which at the date hereof is located at 85 Challenger Road, Ridgefield Park, New Jersey 07660. 2. Appointment of Successor Nominee. Centex hereby accepts the resignation of Chase as Nominee and appoints Mellon Investor Services LLC ("Mellon") as Successor Nominee pursuant to Section 8.1 of the Nominee Agreement. Mellon hereby accepts such appointment for all purposes. Each reference in the Nominee Agreement to the Nominee or to the Bank (each as defined in the Nominee Agreement), in its capacity as Nominee, shall be deemed after the effective date of this Second Supplement to be a reference to Mellon, unless the context otherwise plainly requires. 3. Appointment of Successor Transfer Agent in the First Supplement. In the First Supplement, Centex appointed ChaseMellon as successor Transfer Agent pursuant to Section 8.1 of the Nominee Agreement, and ChaseMellon accepted such appointment. ChaseMellon Shareholder Services, L.L.C. has since changed its name to Mellon Investor Services LLC. Accordingly, each reference in the Nominee Agreement to the Transfer Agent or the Bank (each as defined in the Nominee Agreement), in its capacity as Transfer Agent, shall be deemed after the effective date of this Second Supplement to be a reference to Mellon, unless the context otherwise plainly requires. 4. Addresses for Notices. The addresses listed in Section 9.4(a) of the Nominee Agreement are hereby replaced with the following: To Centex or Holding, at 2728 North Harwood Street Dallas, Texas 75201 Attention: President To CDC, at: Centex Development Company, L.P. c/o 3333 Development Corporation 2728 North Harwood Street Dallas, Texas 75201 Attention: President To the Nominee, at: c/o Mellon Investor Services LLC 600 North Pearl, Suite 1010 Dallas, Texas 75201 Attention: Centex Relationship Manager To the Transfer Agent, at: c/o Mellon Investor Services LLC 600 North Pearl, Suite 1010 Dallas, Texas 75201 Attention: Centex Relationship Manager 5. Fees. The fees for services provided by Mellon in its capacity as Nominee are set forth in the Fee Schedule attached hereto as Exhibit A. The fees for services provided by Mellon in its capacity as Transfer Agent shall be in accordance with the Service Agreement for Transfer Services then in effect between Centex, Holding, CDC and Mellon. Except as otherwise expressly contemplated or amended by this Second Supplement, the terms and provisions of the Nominee Agreement and the First Supplement shall continue in full force and effect. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Centex, Holding, CDC, and Mellon have duly executed this Second Supplement as of the day and year first set forth above. CENTEX CORPORATION By: ----------------------------------------------- Name: Raymond G. Smerge Title: Executive Vice President 3333 HOLDING CORPORATION By: ----------------------------------------------- Name: Stephen M. Weinberg Title: President and Chief Executive Officer CENTEX DEVELOPMENT COMPANY, L.P. By: 3333 DEVELOPMENT CORPORATION, General Partner By: ------------------------------------------ Name: Stephen M. Weinberg Title:President and Chief Executive Officer MELLON INVESTOR SERVICES LLC By: ----------------------------------------------- Name: David M. Cary Title: Vice President EXHIBIT A Initial Set-up Fee $2,500.00 Annual Administration and Safekeeping of Deposited Securities under Section 2.1 of the Nominee Agreement $2,500.00
EX-10.1 5 d08056exv10w1.txt EX-10.1 AMENDED/RESTATED 1987 STOCK OPTION PLAN EXHIBIT 10.1 CENTEX CORPORATION AMENDED AND RESTATED 1987 STOCK OPTION PLAN 1. PURPOSE The purpose of this Plan is to assist Centex Corporation, a Nevada corporation, in attracting and retaining as officers and key employees of the Company and its Affiliates, and as non-employee directors of the Company, individuals of training, experience and ability and to furnish additional incentive to such individuals by encouraging them to become owners of Shares of the Company's capital stock, by granting to such individuals Incentive Options, Nonqualified Options, Restricted Stock, or any combination of the foregoing. 2. DEFINITIONS Unless the context otherwise requires, the following words as used herein shall have the following meanings: "Act" -- The Securities Exchange Act of 1934, as amended. "Affiliates" -- Any corporation or other entity which is a direct or indirect parent or subsidiary (including, without limitation, partnerships and limited liability companies) of the Company. "Agreement" -- The written agreement between the Company and the Optionee evidencing the Option granted by the Company and the understanding of the parties with respect thereto. "Board" -- The Board of Directors of the Company as the same may be constituted from time to time. "Code" -- The Internal Revenue Code of 1986, as amended from time to time. "Committee" -- The Committee provided for in Section 3 of this Plan, as such Committee may be constituted from time to time. "Company" -- Centex Corporation, a Nevada corporation. "Fair Market Value" -- If a Share is traded on one or more established market or exchanges, the closing price of the Share in the primary market or exchange on which the Share is traded, and if the Share is not so traded or the Share does not trade on the relevant date, the value determined in good faith by the Board. For purposes of valuing Shares to be made subject to Incentive Options, the Fair Market Value of stock shall be determined without regard to any restriction other than one which, by its terms, will never lapse. "Incentive Option" -- Stock Options that are intended to satisfy the requirements of Section 422 of the Code and Section 16 of this Plan. 1 "Non-employee Director" -- An individual who satisfies the requirements of Rule 16b-3 promulgated under the Act. "Nonqualified Options" -- Stock Options which do not satisfy the requirements of Section 422 of the Code. "Option" -- An option to purchase one or more Shares of the Company granted under and pursuant to the Plan. Such Option may be either an Incentive Option or a Nonqualified Option. "Optionee" -- An individual who has been granted an Option under this Plan and who has executed a written option Agreement with the Company. "Plan" -- This Centex Corporation 1987 Stock Option Plan. "Permitted Transferees" -- (i) members of the Optionee's immediate family, (ii) one or more trusts for the benefit of such members of the Optionee's immediate family, (iii) partnerships in which such immediate family members are the only partners and (iv) limited liability companies in which such immediate family members are the only members. "Restricted Stock" -- Shares issued pursuant to Section 19 of the Plan. "Senior Management" -- Members of the senior management group of the Company and its Affiliates, such senior managers to be identified by the Chairman and Vice Chairman of the Board of the Company. "Share" -- A share of the Company's present twenty-five cents ($0.25) par value common stock and any share or shares of capital stock or other securities of the Company hereafter issued or issuable upon, in respect of or in substitution or in exchange for each present share. Such Shares may be unissued or reacquired Shares, as the Board, in its sole and absolute discretion, shall from time to time determine. 3. ADMINISTRATION The Plan shall be administered by a committee (the "Committee") comprised of two or more Non-employee Directors appointed by the Board from time to time. The Committee shall (a) select the eligible employees or directors who are to receive Options or awards of Restricted Stock under the Plan, (b) determine the type, number, vesting requirements and other features and conditions of Options or awards of Restricted Stock, (c) interpret the Plan, and (d) make all other determinations necessary or advisable for the administration of the Plan. The Committee may adopt such rules or guidelines as it deems appropriate to implement the Plan. The Committee's determinations under the Plan shall be final and binding on all persons. 4. SHARES SUBJECT TO PLAN (a) A maximum of 7,065,139 Shares shall be subject to grants of Options and awards of Restricted Stock under the Plan; provided that such maximum shall be increased or decreased as provided below in Section 12. 2 (b) At any time and from time to time after the Plan takes effect, the Committee, pursuant to the provisions herein set forth, may grant Options and award Restricted Stock until the maximum number of Shares shall be exhausted or the Plan shall be sooner terminated; provided, however, that no Option shall be granted and no Restricted Stock shall be awarded after May 19, 2001. (c) Should any Option expire or be cancelled without being fully exercised, or should any Restricted Stock previously awarded be reacquired by the Company, the number of Shares with respect to which such Option shall not have been exercised prior to its expiration or cancellation and the number of Shares of such Restricted Stock so reacquired may again be optioned or awarded pursuant to the provisions hereof. (d) Any Shares withheld pursuant to subsection 18(c) shall not be available after such withholding for being optioned or awarded pursuant to the provisions hereof. 5. ELIGIBILITY Eligibility for the receipt of the grant of Options under the Plan shall be confined to (a) a limited number of persons who are employed by the Company, or one or more of its Affiliates and who are officers of or who, in the opinion of the Committee, hold other key positions in or for the Company or one or more of its Affiliates and (b) directors of the Company, including directors who are not employees of the Company or its Affiliates; provided that only employees of the Company or its Affiliates shall be eligible for the grant of Incentive Options. In addition, an individual who becomes a director of the Company, but who is not at the time he becomes a director also an employee of the Company, shall not be eligible for a grant of Options or an award of Restricted Stock, and shall not be eligible for the grant of an option, stock allocation, or stock appreciation right under any other plan of the Company or its affiliates (within the meaning of Rule 12b-2 promulgated under the Act) until the Board expressly declares such person eligible by resolution. In no event may an Option be granted to an individual who is not an employee of the Company or an Affiliate or a director of the Company. 6. GRANTING OF OPTIONS (a) From time to time while the Plan is in effect, the Committee may in its absolute discretion, select from among the persons eligible to receive a grant of Options under the Plan (including persons who have already received such grants of Options) such one or more of them as in the opinion of the Committee should be granted Options. The Committee shall thereupon, likewise in its absolute discretion, determine the number of Shares to be allotted for option to each person so selected; provided, however, that the total number of Shares subject to Options granted to any one person, including directors of the Company, when aggregated with the number of Shares of Restricted Stock awarded to such person, shall not exceed 706,513 Shares. (b) Each person so selected shall be offered an Option to purchase the number of Shares so allotted to him, upon such terms and conditions, consistent with the provisions of the Plan, as the Committee may specify. Each such person shall have a reasonable period of time, to be fixed by the Committee, within which to accept or reject the proffered Option. Failure to accept within the period so fixed may be treated as a rejection. 3 (c) Each person who accepts an Option offered to him shall enter into an Agreement with the Company, in such form as the Committee may prescribe, setting forth the terms and conditions of the Option, whereupon such person shall become a participant in the Plan. In the event an individual is granted both one or more Incentive Options and one or more Nonqualified Options, such grants shall be evidenced by separate Agreements, one each for the Incentive Option grants and one each for the Nonqualified Options grants. The date which the Committee specifies to be the grant date of an Option to an individual shall constitute the date on which the Option covered by such Agreement is granted. In no event, however, shall an Optionee gain any rights in addition to those specified by the Committee in its grant, regardless of the time that may pass between the grant of the Option and the actual signing of the Agreement by the Company and the Optionee. 7. OPTION PRICE The option price for each Share covered by each Incentive Option shall not be less than the greater of (a) the par value of each such Share or (b) the Fair Market Value of the Share at the time such Option is granted, except as provided hereinafter. The option price for each Share covered by each Nonqualified Option shall not be less than the greater of (a) the par value of each such Share or (b) 85% of the Fair Market Value of the Share at the time the Option is granted; provided, however, that the number of Shares covered by Nonqualified Options granted under this Plan that have an option price less than the Fair Market Value of a Share at the time the respective Option is granted shall not exceed 10% of the total number of Shares authorized to be issued under this Plan. If the Company or an Affiliate agrees to substitute a new Option under the Plan for an old Option, or to assume an old Option, by reason of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization, or liquidation (any of such events being referred to herein as a "Corporate Transaction"), the option price of the Shares covered by each such new Option or assumed Option may be other than the Fair Market Value of the stock at the time the Option is granted as determined by reference to a formula, established at the time of the Corporate Transaction, which will give effect to such substitution or assumption; provided, however, in no event shall -- (a) the excess of the aggregate Fair Market Value of the Share subject to the Option immediately after the substitution or assumption over the aggregate option price of such Shares be more than the excess of the aggregate Fair Market Value of all Shares subject to the Option immediately prior to the substitution or assumption over the aggregate option price of such Shares (b) in the case of an Incentive Option, the new Option or the assumption of the old Option give the Optionee additional benefits which he would not have under the old Option; or (c) the ratio of the option price to the Fair Market Value of the stock subject to the Option immediately after the substitution or assumption be more favorable to the Optionee than the ratio of the option price to the Fair Market Value of the stock subject to the old Option immediately prior such substitution or assumption, on a Share by Share basis. Notwithstanding the above, the provisions of this Section 7 with respect to the Option price in the event of a Corporate Transaction shall, in case of an Incentive Option, be subject to 4 the requirements of Section 424(a) of the Code and the Treasury regulations and revenue rulings promulgated thereunder. In the case of an Incentive Option, in the event of a conflict between the terms of this Section 7 and the above cited statute, regulations, and rulings, or in the event of an omission in this Section 7 of a provision required by said laws, the latter shall control in all respects and are hereby incorporated herein by reference as if set out at length. 8. OPTION PERIOD (a) Each Option shall run for such period of time as the Committee may specify, but in no event for longer than ten (10) years from the date when the Option is granted, including the period of time provided in subsections (i) and (ii) of this subsection (a); and subject to such limits, and the further condition that, unless designated otherwise by the Committee, no Incentive Option shall become exercisable prior to one year from the date of its grant, (i) Except as provided below in this subsection (i), all rights to exercise an Option shall terminate within three months after the date the Optionee ceases to be an employee of at least one of the employers in the group of employers consisting of the Company and its Affiliates, or after the date the Optionee ceases to be a director of the Company, whichever may occur later, for any reason other than death, except that, (x) in the case of a Nonqualified Option which is held by an Optionee who is, on the date of cessation referred to in this clause, an officer or director of the Company (within the meanings thereof under Section 16b) of the Act), all rights to exercise such Option shall terminate within seven months after the date the Optionee ceases to be an employee of at least one of the employers in the group of employers consisting of the Company and its Affiliates, or, if later, after the date the Optionee ceases to be a director of the Company, for any reason other than death; and, except that, (y) the Committee, in its discretion, may provide in new Option grants or amend outstanding Options to provide an extended period of time during which an Optionee can exercise a Nonqualified Option to the maximum permissible period for which such Optionee's Option would have been exercisable in the absence of the Optionee's ceasing to be an employee of the Company and its Affiliates or ceasing to be a director of the Company; and, except that (z) in case the employment of the Optionee is terminated for cause, the Option shall thereafter be null and void for all purposes. (ii) If the Optionee ceases to be employed by at least one of the employers in the group of employers consisting of the Company and its Affiliates, or ceases to be a director of the Company, whichever may occur later, by reason of his death, all rights to exercise such Option shall terminate fifteen (15) months thereafter. (iii) If an Option is granted with a term shorter than ten (10) years, the Committee may extend the term of the Option, but for not more than ten (10) years from the date when the Option was originally granted. 9. OPTIONS NOT TRANSFERABLE No Option or interest therein shall be transferable by the person to whom it is granted otherwise than by will or by the applicable laws of descent and distribution. Notwithstanding the 5 foregoing, the Committee may, in its sole discretion, provide in the Agreement relating to the grant of an Option that the Optionee may transfer such Option, without consideration, to members of the Optionee's immediate family or to one or more trusts for the benefit of such immediate family members or partnerships in which such immediate family members are the only partners. For purposes of this Section 9, "immediate family" shall mean the Optionee's spouse, parents, children (including adopted children) and grandchildren. Further, notwithstanding the foregoing, the Committee may, in its sole discretion, provide in each of those Agreements relating to the grant of an Option whose term will expire in 2000, 2001, 2003, 2004, 2005, 2006 or 2007 that a Director or Senior Management Optionee may transfer such Option to one or more Permitted Transferees with or without consideration to the Optionee provided that the following conditions are satisfied with respect to such transfer: (i) such transfer is made pursuant to the program that the Company has created to facilitate the reduction of its stock option overhang and is accomplished on or before March 5, 2000; (ii) the Permitted Transferee exercises the Option not more than 30 days following such transfer; (iii) all fees and expenses charged by accounting firms, law firms and all other third party consultants in connection with such transfer are paid by the Optionee, and such fees and expenses are not otherwise paid or reimbursed by the Company or any of its Affiliates; (iv) the Permitted Transferee agrees to be bound by all of the terms of the Agreement, except that once transferred by the Optionee to such Permitted Transferee, the Option may not be subsequently transferred except back to the Optionee; (v) if the consideration tendered by the Permitted Transferee for the Option is a term obligation, the principal amount under such term obligation will be due in full no later than the fifth anniversary of the Option's expiration date; and (vi) the Permitted Transferee agrees to inform the Company's Stock Plan Administrator upon (a) the sale or other transfer of the shares underlying the Option and (b) any other event or action taken by the Permitted Transferee with respect to the Option, the shares underlying the Option or the consideration for the Option, where such event or action will give rise to a recognizable event for the Company. 10. EXERCISE OF OPTIONS (a) During the lifetime of an Optionee only he or his guardian or legal representative or transferee may exercise an Option granted to him. In the event of his death, any then exercisable portion of his Option may, within fifteen (15) months thereafter, or earlier date of termination of the Option, be exercised in whole or in part by any person empowered to do so under the deceased Optionee's will or under the applicable laws of descent and distribution. (b) At any time, and from time to time, during the period when any Option, or a portion thereof, is exercisable, such Option, or portion thereof, may be exercised in whole or in part; provided, however, that the Committee may require any Option which is partially exercised to be so exercised with respect to at least a stated minimum number of Shares. (c) The option price of the Shares for which an Option is exercised must be paid prior to issuance of the Shares. Such purchase price shall be payable (i) in cash, certified or cashiers' check, or wire transfer; (ii) at the option of the holder of such Option, in Stock theretofore owned by such holder for at least six (6) months by either actual delivery of shares or by attestation; (iii) by a combination of cash and such Stock; or (iv) delivery of a properly executed exercise 6 notice together with irrevocable instructions to a broker satisfactory to the Company to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price and applicable withholding taxes. For purposes of determining the amount, if any, of the purchase price satisfied by payment in Stock, such Stock shall be valued at its Fair Market Value on the date of exercise. Any Stock delivered in satisfaction of all or a portion of the purchase price shall be appropriately endorsed for transfer and assignment to the Company. No holder of an Option shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any Shares unless and until certificates representing such Shares shall have been delivered by the Company to such holder or such holder's interest in such Shares shall have been evidenced by an entry on the Company's books and records. (d) No Shares shall be issued until full payment therefor has been made, and an Optionee shall have none of the rights of a stockholder until Shares are issued to him. (e) Nothing herein or in any Agreement executed or Option granted hereunder shall require the Company to issue any Shares upon exercise of an Option if such issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. Upon the exercise of an Option or portion or part thereof, the Optionee shall give to the Company satisfactory evidence that he is acquiring such Shares for the purpose of investment only and not with a view to their distribution; provided, however, if or to the extent that the Shares subject to the Option shall be included in a registration statement filed by the Company, or one of its Affiliates, such investment representation shall be abrogated. 11. DELIVERY OF STOCK CERTIFICATES As promptly as may be practicable after an Option, or a portion or part thereof, has been exercised as hereinabove provided, the Company shall make delivery of one or more certificates for the appropriate number of Shares. In the event that an Optionee exercises both an Incentive Option, or a portion thereof, and a Nonqualified Option, or a portion thereof, separate stock certificates shall be issued, one for the Shares subject to the Incentive Option and one for the Shares subject to the Nonqualified Option. 12. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE TRANSACTIONS (a) In the event of any subdivision or consolidation of outstanding Shares of the Company, declaration of a dividend payable in Shares of the Company or other stock split, then (i) the maximum number of Shares then available for option or award as Restricted Stock under the Plan, (ii) the number of Shares of the Company covered by outstanding Options and awards of Restricted Stock, and (iii) the option price in respect of outstanding Options, and (iv) the total Options and shares of Restricted Stock that may be awarded to any one person shall each be proportionately adjusted by the Board as appropriate to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Corporation, any consolidation or merger of the Corporation with another corporation or entity, the adoption by the Corporation of any plan of exchange affecting Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the maximum number of Shares then 7 available for option or award as Restricted Stock under the Plan, (ii) the number of Shares of the Company covered by outstanding Options and awards of Restricted Stock, and (iii) the option price in respect of outstanding Options, and (iv) the total Options and shares of Restricted Stock that may be awarded to any one person to reflect such transaction; provided that such adjustments under (ii) and (iii) shall only be such as are necessary to maintain the proportionate interest of the holders of the Options and awards of Restricted Stock and preserve, without increasing, the value of such Options and awards of Restricted Stock. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized (x) to assume under the Plan previously issued compensatory awards, or to substitute new Awards for previously issued compensatory awards, including Awards, as part of such adjustment or (y) to cancel Awards that are Options or SARs and give the Participants who are the holders of such Awards notice and opportunity to exercise for 30 days prior to such cancellation. Section 7 of the Plan shall not apply to any transaction covered in this Section 12 (a). Except as is otherwise expressly provided herein, the issue by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or option price of Shares then subject to outstanding Options granted under the Plan. Furthermore, the presence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities or preferred or preference stock which would rank above the Shares subject to outstanding Options granted under the Plan; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. (b) Notwithstanding anything to the contrary above, a dissolution or liquidation of the Company, a merger (other than a merger effecting a reincorporation of the Company in another state) or consolidation in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Company and their proportionate interests therein immediately prior to the transaction), a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Company, or a change in control (as specified below), shall cause every Option then outstanding to become exercisable in full, subject to the limitation on the aggregate Fair Market Value of Shares that may become first exercisable during any calendar year set forth in Section 16, immediately prior to such dissolution, liquidation, merger, consolidation, transaction, or change in control, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of exercisability contained in the Agreements if (and only if) such Options have not at that time expired or been terminated. For purposes of this paragraph, a change in control shall be deemed to have taken place if: (i) a third person, including a "group" 8 as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of Shares of the Company having 50% or more of the total number of votes that may be cast for the election of directors of the Company; or (ii) as a result of, or in connection with, a contested election for directors, the persons who were directors of the Company immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph, in the event of any such dissolution, merger, consolidation, transaction, or change in control, the Board may completely satisfy all obligations of the Company and its Affiliates with respect to any Option outstanding on the date of such event by delivering to the Optionee cash in an amount equal to the difference between the aggregate exercise price for Shares under the Option and the Fair Market Value of such Shares on the date of such event, such payment to be made within a reasonable time after such event. 13. EFFECTIVE DATE The Plan shall be effective on May 20, 1987, the date of its adoption by the Board, but shall be submitted to the stockholders of the Company for ratification at the next regular or special meeting thereof to be held within twelve (12) months after the Board shall have adopted the Plan. If at such a meeting of the stockholders of the Company a quorum is present, the Plan shall be presented for ratification, and unless at such a meeting the Plan is ratified by the affirmative vote of a majority of the outstanding $0.25 par value common stock of the Company, then and in such event, the Plan and all Options granted under the Plan and all awards of Restricted Stock under the Plan shall become null and void and of no further force or effect. 14. AMENDMENT, SUSPENSION OR TERMINATION (a) Subject to the other terms and condition of this Plan and the limitations set forth in subsection 14(b) below, the Board may at any time amend, suspend or terminate the Plan; provided, however, that after the stockholders have ratified the Plan, the Board may not, without approval of the stockholders of the Company, amend the Plan so as to: (i) Increase the maximum number of Shares subject thereto, as specified above in Sections 4(a) and 12; or (ii) Increase the proportionate number of Shares which may be purchased pursuant to Option by any one person or awarded as Restricted Stock to any one person, as specified above in Section 6(a) or below in Section 19(a). (b) Neither the Board nor the Committee may amend the Plan or any Agreement to reduce the option price of an outstanding Option or modify, impair or cancel any existing Option without the consent of the holder thereof. 15. REQUIREMENTS OF LAW Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue Shares under any Option if the issuance thereof would constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange; and as a condition of any sale or issuance of Shares under Option the Company may require such agreements or undertakings, if 9 any, as the Company may deem necessary or advisable to assure compliance with any such law or regulation. 16. INCENTIVE STOCK OPTIONS The Committee, in its discretion, may designate any Option granted under the Plan as an Incentive Option intended to qualify under Section 422 of the Code. Any provision of the Plan to the contrary notwithstanding, (i) no Incentive Option shall be granted to any person who, at the time such Incentive Option is granted, owns stock possessing more than 10 percent of the total combined voting power of all classes of stock of the Company or any Affiliate unless the purchase price under such Incentive Option is at least 110 percent of the Fair Market Value of the Shares subject to an Incentive Option at the date of its grant and such Incentive Option is not exercisable after the expiration of five years from the date of its grant, and (ii) the aggregate Fair Market Value of the Shares subject to such Incentive Option and the aggregate Fair Market Value of the shares of stock of any Affiliate (or a predecessor of the Company or an Affiliate) subject to any other incentive stock option (within the meaning of Section 422 of the Code) of the Company and its Affiliates (or a predecessor corporation of any such corporation), that may become first exercisable in any calendar year, shall not (with respect to any Optionee) exceed $100,000, determined as of the date the Incentive Option is granted. For purposes of this Section 16, "predecessor corporation" means a corporation that was a party to a transaction described in Section 424(a) of the Code (or which would be so described if a substitution or assumption under such section had been effected) with the Company, or a corporation which, at the time the new incentive stock option (within the meaning of Section 422 of the Code) is granted, is an Affiliate of the Company or a predecessor corporation of any such corporations. 17. MODIFICATION OF OPTIONS Subject to the terms and conditions of and within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options granted under the Plan, or accept the surrender of Options outstanding hereunder (to the extent not theretofore exercised) and authorize the granting of new Options hereunder in substitution therefor (to the extent not theretofore exercised). Notwithstanding the foregoing provisions of this Section 17, no modification of an Option granted hereunder shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted hereunder to such Optionee under the Plan, except as may be necessary, with respect to Incentive Options, to satisfy the requirements of Section 422 of the Code. 18. AGREEMENT PROVISIONS (a) Each Agreement shall contain such provisions (including, without limitation, restrictions or the removal of restrictions upon the exercise of the Option and the transfer of shares thereby acquired) as the Committee shall deem advisable. Each Agreement shall identify the Option evidenced thereby as an Incentive Option or Nonqualified Option, as the case may be. Incentive Options and Nonqualified Options may not both be covered by a single Agreement. Each such Agreement relating to Incentive Options granted hereunder shall contain such limitations and restrictions upon the exercise of the Incentive Option as shall be necessary for the 10 Incentive Option to which such Agreement related to constitute an incentive stock option, as defined in Section 422 of the Code. (b) The Plan shall be annexed to each Agreement and each Agreement shall recite that it is subject to the Plan and that the Plan shall govern where there is any inconsistency between the Plan and the Agreement. (c) Each Agreement shall contain an agreement and covenant by the Optionee, in such form as the Committee may require in its discretion, that he consents to and will take whatever affirmative actions are required, in the opinion of the Board or Committee, to enable the Company or appropriate Affiliate to satisfy its Federal income tax and FICA withholding obligations. An Agreement may contain such provisions as the Committee deems appropriate to enable the Company or its Affiliates to satisfy such withholding obligations, including provisions permitting the Company, on exercise of an Option, to withhold Shares otherwise issuable to the Optionee exercising the Option to satisfy the applicable withholding obligations. (d) Each Agreement relating to an Incentive Option shall contain a covenant by the Optionee immediately to notify the Company in writing of any disqualifying disposition (within the meaning of section 421(b) of the Code) of an Incentive Option. 19. RESTRICTED STOCK (a) Shares of Restricted Stock may be awarded by the Committee to such individuals as are eligible for grants of Options, as the Committee may determine at any time and from time to time before the termination of the Plan. The total number of Shares of Restricted Stock awarded to any one person, including directors of the Company, when aggregated with the number of Shares subject to Options in favor of such person, shall not exceed shall not exceed 706,513 Shares. (b) A Share of Restricted Stock is a Share that does not irrevocably vest in the holder or that may not be sold, exchanged, pledged, transferred, assigned or otherwise encumbered or disposed of until the terms and conditions set by the Committee at the time of the award of the Restricted Stock have been satisfied. A Share of Restricted Stock shall be subject to a minimum three-year vesting period and shall contain such other restrictions, terms and conditions as the Committee may establish, which may include, without limitation, the rendition of services to the Company or its Affiliates for a specified time or the achievement of specific goals. The Committee may, when it deems it appropriate, require the recipient of an award of Restricted Stock to enter into an agreement with the Company evidencing the understanding of the parties with respect to such award. If an individual receives Shares of Restricted Stock, whether or not escrowed as provided below, the individual shall be the record owner of such Shares and shall have all the rights of a stockholder with respect to such Shares (unless the escrow agreement, if any, specifically provides otherwise), including the right to vote and the right to receive dividends or other distributions made or paid with respect to such Shares. Any certificate or certificates representing Shares of Restricted Stock shall bear a legend similar to the following: 11 THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THE TERMS OF THE CENTEX CORPORATION 1987 STOCK OPTION PLAN AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED, ASSIGNED OR OTHERWISE ENCUMBERED IN ANY MANNER EXCEPT AS SET FORTH IN THE TERMS OF SUCH AWARD DATED ___________, 19 . In order to enforce the restrictions, terms and conditions that may be applicable to an individual's Shares of Restricted Stock, the Committee may require the individual, upon the receipt of a certificate or certificates representing such Shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement in such form as shall be determined by the Committee. After the satisfaction of the terms and conditions set by the Committee at the time of an award of Restricted Stock to an individual, which award is not subject to a non-lapse feature, a new certificate, without the legend set forth above, for the number of Shares that are no longer subject to such restrictions, terms and conditions shall be delivered to the individual. If an individual to whom Restricted Stock has been awarded dies after satisfaction of the terms and conditions for the payment of all or a portion of the award but prior to the actual payment of all or such portion thereof, such payment shall be made to the individual's beneficiary or beneficiaries at the time and in the same manner that such payment would have been made to the individual. The Committee may cancel all or any portion of any outstanding restrictions prior to the expiration of such restrictions with respect to any or all of the Shares of Restricted Stock awarded to an individual hereunder only upon the individual's death, disability or retirement on or after the earlier of (i) age 65 or (ii) such time as the sum of the individual's age and years of service equals 70, provided such individual is at least 55. With respect to the occurrence of any event specified in the last paragraph of Section 12, the restrictions, if any, applicable to any outstanding Shares awarded as Restricted Stock shall lapse immediately prior to the occurrence of the event. (c) Subject to the provisions of subsection 19(b) above, if an individual to whom Restricted Stock has been awarded ceases to be employed by at least one of the employers in the group of employers consisting of the Company and its Affiliates, or ceases to be a director of the Company, whichever may occur later, for any reason prior to the satisfaction of any terms and conditions of an award, any Restricted Stock remaining subject to restrictions shall thereupon be forfeited by the individual and transferred to, and reacquired by, the Company or an Affiliate at no cost to the Company or the Affiliate. In such event, the individual, or in the event of his death, his personal representative, shall forthwith deliver to the Secretary of the Company the certificates for the Shares of Restricted Stock remaining subject to such restrictions, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Company. (d) In case of any consolidation or merger of another corporation into the Company in which the Company is the surviving corporation and in which there is a reclassification or change (including a change to the right to receive cash or other property) of the Shares (other 12 than a change in par value, or from par value to no par value, or as a result of a subdivision or combination, but including any change in such shares into two or more classes or series of shares), the Committee may provide that payment of Restricted Stock shall take the form of the kind and amount of shares of stock and other securities (including those of any new direct or indirect parent of the Company), property, cash or any combination thereof receivable upon such reclassification, change, consolidation or merger. 20. GENERAL (a) The proceeds received by the Company from the sale of Shares pursuant to Options shall be used for general corporate purposes. (b) Nothing contained in the Plan, or in any Agreement, shall confer upon any Optionee or recipient of Restricted Stock the right to continue in the employ of the Company or any Affiliate, or interfere in any way with the rights of the Company or any Affiliate to terminate his employment at any time. (c) Neither the members of the Board nor any member of the Committee shall be liable for any act, omission, or determination taken or made in good faith with respect to the Plan or any Option or Restricted Stock granted under it; and the members of the Board and the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may be in effect from time to time. (d) As partial consideration for the granting of each Option or award of Restricted Stock hereunder, the Optionee or recipient shall agree with the Company that he will keep confidential all information and knowledge which he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law or given in confidence to the individual's spouse, tax or financial advisors, or to a financial institution to the extent that such information is necessary to secure a loan. In the event any breach of this promise comes to the attention of the Committee, it shall take into consideration such breach, in determining whether to grant any future Option or award any future Restricted Stock to such individual, as a factor militating against the advisability of granting any such future Option or awarding any such future Restricted Stock to such individual. (e) Participation in the Plan shall not preclude an individual from eligibility in any other stock option plan of the Company or any Affiliate or any old age benefit, insurance, pension, profit sharing, retirement, bonus, or other extra compensation plans which the Company or any Affiliate has adopted, or may, at any time, adopt for the benefit of its employees or directors. (f) Any payment of cash or any issuance or transfer of Shares to the Optionee, or to his legal representative, heir, legatee, or distributee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board or Committee may require any Optionee, legal representative, heir, legatee, or distributee, 13 as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. (g) Neither the Committee nor the Board nor the Company guarantees the Shares from loss or depreciation. (h) All expenses incident to the administration, termination, or protection of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Company or its Affiliates. (i) Records of the Company and its Affiliates regarding an individual's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment, tenure as a director and other matters shall be conclusive for all purposes hereunder, unless determined by the Board or Committee to be incorrect. (j) The Company and its Affiliates shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished, all of the information or documentation which is necessary or required by the Board or Committee to perform its duties and functions under the Plan. (k) The Company assumes no obligation or responsibility to an Optionee or recipient of Restricted Stock or his personal representatives, heirs, legatees, or distributees for any act of, or failure to act on the part of, the Board or Committee. (l) Any action required of the Company shall be by resolution of its Board or by a person authorized to act by resolution of the Board. Any action required of the Committee shall be by resolution of the Committee or by a person authorized to act by resolution of the Committee. (m) If any provision of this Plan or any Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan or the Agreement, as the case may be, but such provision shall be fully severable and the Plan or the Agreement, as the case may be, shall be construed and enforced as if the illegal or invalid provision had never been included herein or therein. (n) Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered, or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith. The Company, an Optionee or a recipient of Restricted Stock may change, at any time and from time to time, by written notice to the other, the address which it or he had theretofore specified for receiving notices. Until changed in accordance herewith, the Company and each Optionee and recipient of Restricted Stock shall specify as its and his address for receiving notices the address set forth in the Agreement pertaining to the shares of Stock to which such notice relates. 14 (o) Any person entitled to notice hereunder may waive such notice. (p) The Plan shall be binding upon the Optionee or recipient of Restricted Stock, his heirs, legatees, and legal representatives, upon the Company, its successors, and assigns, and upon the Board and Committee, and their successors. (q) The titles and headings of Sections and paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (r) All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. The obligation of the Company to sell and deliver Shares hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Shares. (s) Words used in the masculine shall apply to the feminine where applicable, and wherever the context of this Plan dictates, the plural shall be read as the singular and the singular as the plural. 21. WITHHOLDING TAXES Federal, state, or local law may require the withholding of taxes applicable to gains resulting from the exercise of Nonqualified Options granted hereunder. Unless otherwise prohibited by the Committee, each participant may satisfy any such withholding tax obligation by electing (i) to tender a cash payment to the Company, (ii) to authorize the Company to withhold from the shares of stock of the Company otherwise issuable to the participant as a result of the exercise of the Nonqualified Option a number of shares having a fair market value, as of the date the withholding tax obligation arises, equal to the withholding obligations, or, at the election of the participant, up to the maximum of taxes due (the "Share Withholding Alternative"), (iii) to deliver to the Company previously acquired shares of common stock of the Company having a fair market value, as of the date the withholding tax obligation arises, equal to the amount to be withheld, or at the election of the participant, up to the maximum of taxes due, or (iv) any combination of the foregoing, provided the combination permits the payment of all withholding taxes attributable to the exercise of the Nonqualified Option. A Participant's election to pay the withholding tax obligation must be made in writing delivered to the Company before the time of exercise, or simultaneously with the exercise, of such Participant's Nonqualified Option. A valid and binding written election of the Share Withholding Alternative shall be irrevocable. A participant's failure to elect a withholding alternative prior to the time such election is required to be made shall be deemed to be an election to pay the withholding tax by tendering a cash payment to the Company. For purposes of this Section 21, the fair market value of the shares used to pay withholding taxes is the mean between the highest and lowest price quoted on the New York Stock Exchange for one share of common stock of the Company on the Tax Date. Also, as used in this Section 21, "Tax Date" shall mean the date on which a withholding tax obligation arises in connection with an exercise of a nonqualified stock option, which date shall be presumed to be the date of exercise, unless shares subject to a substantial risk of forfeiture (as defined in section 83(c)(1) or (c)(3) of the Code) are issuable on exercise of the option and the participant does not make a timely election under section 83(b) of the Code with 15 respect thereto, in which case the Tax Date for such shares is the date on which the substantial risk of forfeiture lapses. Fractional shares remaining after payment of the withholding taxes shall be paid to the participant in cash. 16 EX-10.2 6 d08056exv10w2.txt EX-10.2 SEVENTH AMENDED/RESTATED 1998 STOCK PLAN EXHIBIT 10.2 SEVENTH AMENDED AND RESTATED 1998 CENTEX CORPORATION EMPLOYEE NON-QUALIFIED STOCK OPTION PLAN 1. PURPOSE OF THE PLAN. This 1998 Centex Corporation Employee Non-Qualified Stock Option Plan (the "PLAN") is intended as an employment incentive to retain in the employ of Centex Corporation (the "COMPANY"), and any Affiliate (including any entity that becomes an Affiliate), persons of training, experience and ability, to attract new employees whose services are considered valuable, to encourage the sense of proprietorship of such persons, and to stimulate the active interest of such persons in the development and financial success of the Company. For purposes of the Plan, "AFFILIATE" shall mean any direct or indirect subsidiary or parent of the Company and any partnership, joint venture, limited liability company or other business venture or entity in which the Company owns at least 50% of the ownership interest in such entity, as determined by the Committee in its sole and absolute discretion (such determination by the Committee to be conclusively established by the grant of options by the Committee to an officer or employee of such an entity). It is further intended each option granted pursuant to the Plan (herein, an "OPTION") shall constitute non-qualified stock options within the meaning of Section 83 of the Code. 2. ADMINISTRATION OF THE PLAN. The Board of Directors shall appoint and maintain a Compensation and Stock Option Committee (hereinafter called the "COMMITTEE") of the Board of Directors to administer the Plan. Subject to the terms and conditions of the Plan, the Committee shall have full power and authority to designate persons to whom Options will be granted, to determine the terms and provisions of respective option agreements (which need not be identical), and to interpret the provisions and supervise the administration of the Plan. The Committee shall have the authority, exercisable in its sole discretion, to grant Options containing such terms and conditions, consistent with the provisions of the Plan, as the Committee shall determine. 3. DESIGNATION OF PARTICIPANTS. The persons eligible for participation in the Plan as recipients of Options shall include all employees of the Company or of any Affiliate, including employees of any entity that becomes an Affiliate after the date that the Plan is adopted, other than any of the following persons (herein, an "INELIGIBLE PERSON"): (a) any person who is an executive officer, as defined by Rule 3b-7 promulgated under the Securities Exchange Act of 1934, as amended, or director of the Company; (b) any "officer" of the Company as defined by Rule 16a-1(f) promulgated under the Securities Exchange Act of 1934, as amended; or 1 (c) any "covered employee" of the Company as defined by Section 162(m)(3) of the Internal Revenue Code. Each Option granted hereunder shall be evidenced by an agreement between the Company and the Optionee, which shall contain such terms and conditions as the Committee shall determine in its sole and absolute discretion. Any person who has been granted an Option hereunder (herein, an "OPTIONEE") may be granted an additional Option or Options, if the Committee shall so determine. Participation in the Plan shall not preclude an Optionee from participating in any other stock option, benefit, bonus, or other compensation plan which the Company or any Affiliate has adopted, or may, from time to time, adopt for the benefit of its employees. 4. STOCK RESERVED FOR THE PLAN. Subject to any adjustment provided in Paragraph 9 hereof, a total of 5,500,000 shares of common stock, $0.25 par value, of the Company (the "STOCK") shall be subject to the Plan. The shares of Stock subject to the Plan shall consist of unissued shares or previously issued shares reacquired and held by the Company, or any Affiliate, and such amount of shares shall be and hereby is reserved for delivery under the Plan. Any of such shares which may remain unsold and which are not subject to outstanding Options at the termination of the Plan shall cease to be reserved for the purpose of the Plan, but until termination of the Plan the Company shall at all times reserve a sufficient number of shares of Stock to meet the requirements of the Plan. Should any Option expire or be canceled prior to its exercise or relinquishment in full, the shares theretofore subject to such Option may again be subjected to an Option under the Plan. If the purchase price or tax withholding is permitted to be satisfied by the tender or withholding of shares of Stock to the Company (by either actual delivery or attestation), the number of shares of Stock tendered or withheld shall be eligible for reissuance under the Plan. 5. PURCHASE PRICE. (a) The purchase price of each share placed under option pursuant to the Plan (a "Share") shall be determined by the Committee, but in no event shall be less than 100% of the Fair Market Value of such Share on the date the Option is granted. If an Option is granted as part of an Optionee's compensation package at the commencement of an Optionee's employment by the Company or an Affiliate, the Option shall be deemed to have been granted on the date of commencement of such Optionee's employment by the Company or any Affiliate (the "Commencement Date") and the purchase price of a Share shall be equal to the Fair Market Value of such Share on the Commencement Date, so long as such Option is not granted more than ninety (90) days following the Commencement Date. (b) "FAIR MARKET VALUE" of a share of Stock means, as of a particular date, the closing price per share of Stock reported on the consolidated transaction reporting system for the New York Stock Exchange, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported. 2 6. OPTION PERIOD. The Options granted under the Plan shall be for any term set by the Committee, but not more than ten (10) years from the date of granting of each Option. All rights to exercise an Option shall terminate within three (3) months after the date the Optionee ceases to be an employee of the Company or any Affiliate, except that (a) the Committee, in its discretion, may provide in new option grants or amend outstanding Options to provide an extended period of time during which an Optionee can exercise an Option up to the maximum permissible period which such Optionee's Option would have been exercisable in the absence of the Optionee ceasing to be an employee of the Company or an Affiliate; (b) if an Optionee ceases to be employed by the Company or an Affiliate by reason of such Optionee's death, all rights to exercise such Option shall terminate fifteen (15) months after such death; and (c) if the Optionee is terminated for cause, as determined by the Committee in its sole and absolute discretion, any Option granted to such Optionee hereunder shall terminate on the date of such termination. 7. EXERCISE OF OPTIONS. (a) Any Option granted hereunder shall be exercisable from time to time under the terms specified in the Plan, by the Committee, or in the agreement relating to the grant of such Option. (b) Each exercise of an Option or a portion of an Option shall be evidenced by a notice in writing by or on behalf of the Optionee to the Company, stating the number of shares with respect to which the Option is being exercised. (c) Options may be exercised solely by the Optionee or a Permitted Transferee (hereafter defined). (d) The purchase price of the Shares for which an Option is exercised must be paid prior to issuance of the Shares. Such purchase price shall be payable (i) in cash, certified or cashiers' check, or wire transfer, (ii) at the option of the holder of such Option, in Stock theretofore owned by such holder for at least six (6) months by either actual delivery of shares or by attestation, (iii) by a combination of cash and such Stock; or (iv) by delivery of a properly executed exercise notice together with irrevocable instructions to a broker satisfactory to the Company to promptly deliver to the Company the amount of sale or loan proceeds required to pay the exercise price and applicable withholding taxes. For purposes of determining the amount, if any, of the purchase price satisfied by payment in Stock, such Stock shall be valued at its Fair Market Value on the date of exercise. Any Stock delivered in satisfaction of all or a portion of the purchase price shall be appropriately endorsed for transfer and assignment to the Company. No holder of an Option shall be, or have any of the rights or privileges of, a shareholder of the Company in respect of any Shares unless and until certificates representing such Shares shall have been delivered by the Company to such holder or such holder's interest in such shares shall have been evidenced by an entry on the Company's books and records. 3 (e) If any law or regulation requires the Company to take any action with respect to the Shares specified in such notice, the time for delivery thereof, which would otherwise be as promptly as possible, shall be postponed for the period of time necessary to take such action. 8. ASSIGNABILITY. Unless otherwise permitted by the Committee, no Option or interest therein shall be transferable by the Optionee otherwise than by will or by the applicable laws of descent and distribution. Any person to whom an Option is transferred in accordance with this Section 8 is referred to herein as a "PERMITTED TRANSFEREE". 9. ADJUSTMENTS. (a) In the event of any subdivision or consolidation of outstanding Stock of the Company, declaration of a dividend payable in shares of Stock of the Company or other stock split, then (i) the number of Shares reserved under this Plan, (ii) the number of Shares covered by outstanding Options, and (iii) the purchase price per share in respect of such Options shall each be proportionately adjusted by the Board as appropriate to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting shares of Stock of the Company or any distribution to holders of shares of Stock of the Company of securities or property (other than normal cash dividends or dividends payable in shares of Stock of the Company), the Board shall make appropriate adjustments to (i) the number of Shares reserved under this Plan, (ii) the number of Shares covered by outstanding Options, and (iii) the purchase price per share in respect of such Options to reflect such transaction; provided that such adjustments under (ii) and (iii) shall only be such as are necessary to maintain the proportionate interest of the holders of the Options and preserve, without increasing, the value of such Options. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized (x) to assume under the Plan previously issued compensatory options, or to substitute new Options for previously issued compensatory Options as part of such adjustment or (y) to cancel Options and give the Participants who are the holders of such Options notice and opportunity to exercise for 30 days prior to such cancellation. (b) Except as is otherwise expressly provided herein, the issue by the Company of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or purchase price of Shares. Furthermore, the presence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issue by the Company of debt securities or preferred or preference stock (whether or not such issue is prior to, on a party with or junior to the Stock); (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. 4 (c) Notwithstanding anything to the contrary above, a dissolution or liquidation of the Company, a merger (other than a merger effecting a reincorporation of the Company in another state) or consolidation in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Company and their proportionate interests therein immediately prior to the transaction), a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of the Company, or a change in control (as specified below), shall cause every Option then outstanding to become exercisable in full immediately prior to such dissolution, liquidation, merger, consolidation, transaction, or change in control, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of exercisability contained in the Agreements if (and only if) such Options have not at that time expired or been terminated. For purposes of this paragraph, a change in control shall be deemed to have taken place if: a third person, including a "group" as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of shares of the Company having fifty percent (50%) or more of the total number of votes that may be cast for the election of directors of the Company; or as a result of, or in connection with, a contested election for directors, the persons who were directors of the Company immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph: (i) an event, transaction, or corporate action shall not have the effect of accelerating the exercisability of Options if: (A) persons who were the directors of the Company and persons who were the executive officers of the Company as of six months prior to such event immediately after such event constitute a majority of the directors and constitute a majority of executive officers, respectively, for, and own in the aggregate at least ten percent of the voting securities or equity interests of, the Company or the surviving or resulting corporation or the parent of such surviving or resulting corporation; and (B) if the Company is not the surviving or resulting corporation, such surviving or resulting corporation or parent of such surviving or resulting corporation substitutes substantially identical options for any outstanding Options; and (ii) in the event of any dissolution, merger, consolidation, transaction, or change in control, the Board may completely satisfy and extinguish all obligations of the Company and its Affiliates with respect to any Option outstanding on the date of such event by delivering to the Optionee cash in an amount equal to the difference between the aggregate purchase price for Shares under the Option and the Fair Market Value of such Shares on the date of such event, such payment to be made within a reasonable time after such event. 10. TAX WITHHOLDING. The Company shall have the right to deduct applicable taxes from any Option and withhold, at the time of delivery of Shares under the Plan, an appropriate number of Shares for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of Stock theretofore owned by the holder of the Option 5 with respect to which withholding is required. If Shares or Stock are used to satisfy tax withholding, such Shares or Stock shall be valued based on the Fair Market Value when the tax withholding is required to be made. 11. EFFECTIVE DATE OF PLAN. The effective date of the Plan shall be February 19, 1998. No Option shall be granted pursuant to the Plan after February 19, 2005. 12. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION. The Board may amend, modify, suspend or terminate the Plan at any time for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment, modification, suspension or termination shall be made (i) that would impair the rights of any Optionee under any Option previously granted to such Optionee without such Optionee's written consent, (ii) prior to approval by the Company's shareholders if such approval is then required thereby, or (iii) that would reduce the purchase price of any outstanding Option, other than as provided by Section 9(a)(ii). 13. REQUIREMENTS OF LAW. (a) The Plan, and the granting and exercise of Options hereunder, and the obligation of the Company to sell and deliver shares under such Options, shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. (b) Nothing herein or in any Agreement executed or Option granted hereunder shall require the Company to deliver any Shares upon exercise of an Option if such delivery would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. Upon the exercise of an Option or portion or part thereof, the Optionee may be required to give to the Company satisfactory evidence that he is acquiring such Shares for the purpose of investment only and not with a view to their distribution; provided, however, if or to the extent that the Shares subject to the Option shall be included in a registration statement filed by the Company, or one of its Affiliates, such investment representation shall be abrogated. 14. MISCELLANEOUS. (a) Nothing contained in the Plan shall confer upon any Optionee the right to continue in the employ of the Company or any Affiliate, or interfere in any way with the rights of the Company or any Affiliate to terminate his employment at any time. (b) Any payment of cash or any delivery of Shares to the Optionee, or to an Optionee's Permitted Transferee, in accordance with the provisions hereof, shall, to the extent thereof, be in full satisfaction of all claims of such person with respect to the Option being exercised (or portion thereof). The Committee may require any Optionee, or Permitted Transferee, as a condition 6 precedent to such payment or delivery, to execute a release and receipt therefor in such form as it shall determine. (c) Neither the Committee nor the Company guarantees the Shares from loss or depreciation. (d) Records of the Company and its Affiliates regarding an individual's period of employment, termination of employment and the reason therefor, leaves of absence, re-employment and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect in its sole and absolute discretion. (e) The Company assumes no obligation or responsibility to an Optionee or any Permitted Transferee for any act of, or failure to act on the part of, the Committee. (f) If any provision of the Plan is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan, but such provision shall be fully severable and the Plan shall be construed and enforced as if the illegal or invalid provision had never been included herein. (g) The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (h) All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada except to the extent Nevada law is preempted by federal law. The obligation of the Company to sell and deliver Shares hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale, or delivery of such Shares. Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural. 7 EX-10.3 7 d08056exv10w3.txt EX-10.3 AMENDED/RESTATED 2001 STOCK OPTION PLAN EXHIBIT 10.3 AMENDED AND RESTATED CENTEX CORPORATION 2001 STOCK PLAN 1. PURPOSE The purpose of the Plan is to assist the Company in attracting and retaining as officers and key employees of the Company and its Affiliates, and as Directors of the Company, individuals of training, experience and ability, and to furnish additional incentive to such individuals by encouraging them to become owners of Shares, by granting to such individuals Options or Restricted Stock. 2. DEFINITIONS Unless the context otherwise requires, the following words as used herein shall have the following meanings: "AFFILIATE" -- Any corporation or other entity that is a direct or indirect parent or subsidiary (including, without limitation, partnerships and limited liability companies) of the Company. "AGREEMENT" -- The written agreement, whether delivered on paper or by electronic medium, between the Company and the Optionee or holder of Restricted Stock evidencing the Option or Restricted Stock granted by the Company, which shall be in such form and contain such provisions as the Committee may prescribe. "BOARD" -- The Board of Directors of the Company, as the same may be constituted from time to time. "CODE" -- The Internal Revenue Code of 1986, as amended from time to time. "COMMITTEE" -- The Compensation and Stock Option Committee of the Board, composed solely of two or more Directors who are appointed by the Board from time to time and who satisfy the requirements of Rule 16b-3(b)(3) promulgated under the Securities Exchange Act of 1934, or any successor provision. "COMPANY" -- Centex Corporation, a Nevada corporation. "DIRECTOR" -- An individual who is a member of the Board. "DISABILITY" -- Total and permanent disability as set forth in Section 22(e)(3) of the Code, or any successor provision. "FAIR MARKET VALUE" -- The closing price per Share reported on the consolidated 1 transaction reporting system for the New York Stock Exchange as of a particular date or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was reported. "OPTION" -- A nonqualified option to purchase one or more Shares granted under and pursuant to the Plan. A nonqualified option does not satisfy the requirements of Section 422 of the Code, or any successor provision. "OPTIONEE" -- An individual who has been granted an Option under the Plan. "PLAN" -- This Centex Corporation 2001 Stock Plan. "RESTRICTED STOCK" -- Shares issued pursuant to Section 17 of the Plan. "SHARE" -- A share of the Company's present twenty-five cents ($0.25) par value common stock and any share or shares of capital stock or other securities of the Company hereafter issued or issuable upon, in respect of or in substitution or in exchange for each present share. Such Shares may be unissued or reacquired Shares, as the Board, in its sole and absolute discretion, shall from time to time determine. 3. ADMINISTRATION Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its discretion, provide for the extension of the exercisability of an Option, accelerate the vesting or exercisability of an Option or Restricted Stock award, eliminate or make less restrictive any restrictions applicable to an Option or Restricted Stock award, waive any restriction or other provision of this Plan or an Option or Restricted Stock award or otherwise amend or modify an Option or Restricted Stock award in any manner that is either (i) not adverse to the Optionee or holder of Restricted Stock to whom such Option or Restricted Stock was granted or (ii) consented to by the Optionee or holder of Restricted Stock. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. 4. SHARES SUBJECT TO PLAN (a) A maximum of 1,750,000 Shares shall be subject to grants of Options or awards of Restricted Stock under the Plan; provided, however, that of such number of Shares, no more than 175,000 Shares shall be subject to awards of Restricted Stock; and provided further, that such maximum shall be increased or decreased as provided in Section 12 hereof. The Shares 2 subject to the Plan shall consist of unissued Shares or previously issued Shares reacquired and held by the Company or any Affiliate. (b) At any time and from time to time after the Plan takes effect, the Committee, pursuant to the provisions herein set forth, may grant Options and award Restricted Stock until the maximum number of Shares shall be exhausted or the Plan shall be sooner terminated. (c) If any Option expires or is canceled without being fully exercised or is settled in cash, or if any Restricted Stock previously awarded is reacquired by the Company, the number of Shares with respect to which such Option shall not have been exercised prior to its expiration or cancellation and the number of Shares of such Restricted Stock so reacquired may again be optioned or awarded pursuant to the provisions hereof. (d) If the option price or any applicable tax withholding obligation payable upon exercise of an Option is satisfied by the tender or withholding of Shares to or by the Company (by either actual delivery or attestation), the number of Shares so tendered or withheld shall be eligible for reissuance under the Plan. 5. ELIGIBILITY Eligibility for receipt of a grant of Options under the Plan shall be confined to (a) a limited number of persons who are employed by the Company or an Affiliate and hold key positions in and for the Company or an Affiliate and (b) Directors. 6. GRANTING OF OPTIONS (a) From time to time while the Plan is in effect, the Committee may in its absolute discretion select from among the persons eligible to receive a grant of Options under the Plan (including persons who have already received such grants of Options) such one or more of them as in the opinion of the Committee should be granted Options. The Committee shall thereupon, likewise in its absolute discretion, determine the number of Shares to be allotted for option to each person so selected. (b) Each person so selected shall be granted an Option to purchase the number of Shares so allotted to him, upon such terms and conditions, consistent with the provisions of the Plan, as the Committee may specify. (c) Each Option granted under the Plan shall be evidenced by an Agreement setting forth the terms and conditions of the Option. The date that the Committee specifies to be the grant date of an Option to an individual shall constitute the date on which the Option covered by such Agreement is granted. In no event, however, shall an Optionee gain any rights in addition to those specified by the Committee in its grant, regardless of the time that may pass between the grant of the Option and the actual execution of the Agreement by the Company and the Optionee. (d) No person may be granted Options under this Plan for more than 250,000 Shares in any one-year period. 3 7. OPTION PRICE The option price for each Share covered by each Option shall not be less than 100% of the Fair Market Value of the Share at the time the Option is granted. Notwithstanding the foregoing, if there occurs any transaction of a type described in Section 12(a), (b) or (c) hereof, the option price of the Shares subject to each existing Option adjusted pursuant to such provisions or any new Option or assumed option issued pursuant to such provisions may be different than the Fair Market Value of the Shares at the time the Option is granted; provided, however, in no event shall - (a) the excess of the aggregate Fair Market Value of the Shares subject to the Option immediately after the transaction over the aggregate option price of such Shares be more than the excess of the aggregate Fair Market Value of all shares subject to the other option immediately prior to the transaction over the aggregate option price of shares subject to the other option; and (b) the ratio of the option price to the Fair Market Value of the Shares subject to the Option immediately after the transaction be more favorable to the Optionee than the ratio of the option price to the Fair Market Value of the shares subject to the other option immediately prior to such transaction, determined on a share-by-share basis. 8. OPTION PERIOD Each Option shall run for such period of time as the Committee may specify, but in no event for longer than seven (7) years from the date when the Option is granted, including the period of time provided in the subsections of this Section 8; and subject to the following limits: (a) Except as provided below in this subsection (a), all rights to exercise an Option shall terminate within four (4) months after the date the Optionee ceases to be an employee of the Company or an Affiliate, or after the date the Optionee ceases to be a Director, whichever may occur later, for any reason other than death or Disability (but in no event later than the end of the original period of the Option); except that (i) in the case of an Optionee who is a Director and, on the date the Optionee ceases to be a Director (and if also an employee ceases to be an employee), has (A) at least ten (10) years of service as a Director, all Shares subject to such Option will vest on such date and all rights to exercise such Option shall terminate three (3) years after the date the Optionee ceases to be a Director (but in no event later than the end of the original period of the Option), or (B) less than ten (10) years of service as a Director, all Shares subject to such Option will continue to vest in accordance with its terms for a period of three (3) years following such date, and all rights to exercise such Option shall terminate three (3) years after such date; and (ii) if the Optionee's employment or service as a Director is terminated for cause, the entire Option, including both exercisable and unexercisable Shares, shall immediately terminate and thereafter be null and void for all purposes. (b) If the Optionee ceases to be employed by the Company and its Affiliates, or ceases to be a Director, whichever may occur later, by reason of his death, all rights to exercise any Option held by such Optionee shall terminate fifteen (15) months after his death (but in no event later than the end of the original period of the Option). 4 (c) If the employment of the Optionee with the Company or any of its Affiliates shall terminate as a result of a Disability, he may, within six (6) months following such date (but in no event later than the end of the original period of the Option), exercise any Option held by such Optionee, in each case, to the extent he was entitled to exercise such Option on the date of termination of employment. To the extent that the Shares covered by his Option were unexercisable as of such termination of employment, the Option shall terminate. If the Optionee does not exercise such Option (which he was entitled to exercise as of such termination) within the time specified herein, the Option shall thereupon terminate. (d) If an Option is granted with a term shorter than seven (7) years, the Committee may extend the term of the Option, but for not more than seven (7) years from the date when the Option was originally granted. 9. OPTIONS NOT TRANSFERABLE Unless otherwise determined by the Committee and provided in the Agreement, no Option or interest therein shall be transferable by an Optionee otherwise than by will or by the applicable laws of descent and distribution. The Committee may prescribe and include in an Agreement any applicable restrictions or conditions on transfer of Options. Any attempted assignment in violation of this Section 9 shall be null and void. 10. EXERCISE OF OPTIONS (a) During the lifetime of an Optionee, only he or his guardian or legal representative or transferee may exercise an Option granted to him. In the event of his death, any then exercisable portion of his Option may, within fifteen (15) months thereafter or earlier date of termination of the original period of Option, be exercised in whole or in part by any person empowered to do so under the deceased Optionee's will or under the applicable laws of descent and distribution. (b) At any time, and from time to time, during the period when any Option, or a portion thereof, is exercisable, such Option, or portion thereof, may be exercised in whole or in part; provided, however, that the Committee may require in the Agreement that any Option which is partially exercised be so exercised with respect to at least a stated minimum number of Shares. (c) Each exercise of an Option or portion or part thereof shall be evidenced by a notice in writing by or on behalf of the Optionee to the Company. The purchase price of the Shares for which an option is exercised must be paid prior to issuance of the Shares. The Exercise price of an Option must be paid by cash, certified or cashiers' check, wire transfer, delivery (either actually or by attestation) of whole Shares that have been acquired or held by the Optionee for at least six months prior to the date the option is exercised, or any combination of the aforementioned methods of payment, prior to issuance of the Shares. For purposes of determining the amount, if any, of the option price satisfied by in Shares, such Shares shall be valued at their Fair Market Value on the date of exercise. Any Shares actually delivered in 5 satisfaction of all or a portion of the option price shall be appropriately endorsed for transfer and assignment to the Company. (d) No Shares shall be issued until full payment therefor has been made, and an Optionee shall have none of the rights of a stockholder until Shares are issued to him. (e) Nothing herein or in any Agreement evidencing an Option granted hereunder shall require the Company to issue any Shares upon exercise of an Option if such issuance would, in the opinion of counsel for the Company, constitute a violation of the Securities Act of 1933, as amended, or any similar or superseding statute or statutes, or any other applicable statute or regulation, as then in effect. Upon the exercise of an Option or portion or part thereof, the Optionee shall give to the Company satisfactory evidence that he is acquiring such Shares for the purpose of investment only and not with a view to their distribution; provided, however, if or to the extent that the Shares subject to the Option shall be included in a registration statement filed by the Company or an Affiliate, such investment representation shall not be required. 11. DELIVERY OF SHARES UPON EXERCISE As promptly as may be practicable after an Option, or a portion or part thereof, has been exercised as hereinabove provided, the Company shall make delivery of the Shares acquired upon exercise of such Option to the Optionee or shall cause such Optionee's interest in such Shares to be evidenced by an entry on the Company's books and records. 12. CHANGES IN COMPANY'S SHARES AND CERTAIN CORPORATE TRANSACTIONS (a) If at any time while the Plan is in effect there shall occur any subdivision or consolidation of outstanding Shares, declaration of a dividend payable in Shares or other stock split, then, and in each such event, the Committee shall make proportionate adjustments to: (i) the maximum number of Shares then subject to being optioned or awarded as Restricted Stock under the Plan, to the end that the same proportion of the Company's issued and outstanding Shares shall continue to be subject to being so optioned and awarded; (ii) the number of Shares and the option price per Share thereof then subject to purchase pursuant to each Option previously granted, to the end that the same proportion of the Company's issued and outstanding Shares shall remain subject to purchase at the same aggregate option price; (iii) the number of Shares of Restricted Stock previously awarded under the Plan, to the end that each award represents the same proportion of the Company's issued and outstanding Shares; and (iv) the number of Shares subject to Options that may be granted to any person in any one-year period pursuant to the limitation set forth in Section 6(d), to the end that each such limitation represents the same proportion of the Company's issued and outstanding Shares. 6 (b) If at any time while the Plan is in effect there shall occur any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Shares or any distribution to holders of Shares of securities or property (other than normal cash dividends or dividends payable in Shares), the Committee may make proportionate adjustments to: (i) the number of Shares and the option price per Share thereof then subject to purchase pursuant to each Option previously granted; (ii) the number of Shares of Restricted Stock previously awarded under the Plan; (iii) the number of Shares subject to Options that may be granted to any person in any one-year period pursuant to the limitation set forth in Section 6(d); and (iv) the maximum number of Shares then subject to being optioned or awarded as Restricted Stock under the Plan; in each case, in order to reflect the transaction and (in the case of clauses (i) and (ii) above) to the end of maintaining the proportionate interest of the holders of Options and Shares of Restricted Stock; provided, however, that such adjustments shall only be made to the extent necessary to preserve, without exceeding, the value of such Options and Shares of Restricted Stock. (c) In the event of a merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Committee shall be authorized to issue or assume new Options or Shares of Restricted Stock as it determines is appropriate in substitution for, or to reflect the assumption of, any other option, restricted stock grant or other award, whether or not awarded under this Plan. (d) Except as is otherwise expressly provided herein, the issuance by the Company of shares of its capital stock of any class or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Company convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of or option price of Shares then subject to outstanding Options granted under the Plan. Furthermore, the presence of outstanding Options granted under the Plan shall not affect in any manner the right or power of the Company to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business; (ii) any merger or consolidation of the Company; (iii) any issuance by the Company of debt securities or preferred or preference stock that would rank above the Shares subject to outstanding Options or Shares of Restricted Stock granted under the Plan; (iv) the dissolution or liquidation of the Company; (v) any sale, transfer or assignment of all or any part of the assets or business of the Company; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. 7 (e) Notwithstanding anything to the contrary above, a dissolution or liquidation of the Company, a merger (other than a merger effecting a reincorporation of the Company in another state) or consolidation in which the Company is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of the Company and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of the Company and their proportionate interests therein immediately prior to the transaction) or a change in control (as specified below) shall cause every Option then outstanding to become exercisable in full and shall cause every restriction with respect to any Shares of Restricted Stock to terminate immediately prior to such dissolution, liquidation, merger, consolidation or change in control, to the extent not theretofore exercisable or free of restrictions, without regard to the determination as to the periods and installments of exercisability or termination of restrictions contained in the Agreements if, and only if, such Options have not at that time theretofore expired or been terminated or such Shares of Restricted Stock have not at that time theretofore been cancelled or forfeited. For purposes of this Section 12(c), a change in control shall be deemed to have taken place if (i) a third person, including a "group" as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, becomes the beneficial owner of Shares of the Company having 50% or more of the total number of votes that may be cast for the election of directors of the Company or (ii) as a result of, or in connection with, a contested election for directors, the persons who were directors of the Company immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph, in the event of any such dissolution, merger, consolidation or change in control, the Board may completely satisfy all obligations of the Company and its Affiliates with respect to any Options or Shares of Restricted Stock outstanding on the date of such event and cancel such Options or Shares of Restricted Stock by (A) in the case of Options, delivering to the Optionee cash in an amount equal to the difference between the aggregate option price for Shares under the Options and the Fair Market Value of such Shares on the date of such event and (B) in the case of Shares of Restricted Stock, delivering to the holder of such Shares cash in an amount equal to the Fair Market Value of such Shares on the date of such event, which payment shall in either case be made within a reasonable time after such event. 13. EFFECTIVE DATE The Plan shall be effective on May 17, 2001, the date of its adoption by the Board, but shall be submitted to the stockholders of the Company for approval at the next regular or special meeting thereof to be held within twelve (12) months after the Board shall have adopted the Plan. If, at such a meeting of the stockholders of the Company, the Plan is not approved by the affirmative vote of a majority of the $0.25 par value common stock of the Company present and entitled to vote at such meeting, then, and in such event, the Plan and all Options granted under the Plan and all awards of Restricted Stock under the Plan shall become null and void and of no further force or effect. 14. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN The Board may amend, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except 8 that (a) no amendment or alteration that would adversely affect the rights of any holder under any award previously granted to such person shall be made without the consent of such person and (b) after the stockholders of the Company have ratified the Plan, no amendment or alteration that would increase the maximum number of Shares subject to the Plan (as provided in Section 4(a)) or decrease the option price of an Option below 100% of the Fair Market Value as of the date such Option was granted (as provided in Section 7) may be made without obtaining approval of the stockholders. 15. REQUIREMENTS OF LAW Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue Shares under any Option if the issuance thereof would constitute a violation by the Optionee or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange. As a condition of any sale or issuance of Shares under an Option, the Company may require such agreements or undertakings, if any, as the Company may deem necessary or advisable to ensure compliance with any such law or regulation. 16. MODIFICATION OF OPTIONS Except as provided in Section 12, notwithstanding any other provision of this Plan to the contrary, (i) after an Option has been awarded, the price at which Shares may be purchased upon exercise of such Option shall not be amended and (ii) no Option shall be granted in exchange for a previously granted Option if the option price of such previously granted Option is greater than the option price of such replacement Option. Notwithstanding the foregoing provisions of this Section 16, no modification or cancellation of an Option granted hereunder shall, without the consent of the Optionee, alter or impair any rights or obligations under any Option theretofore granted hereunder to such Optionee under the Plan. 17. RESTRICTED STOCK (a) Subject to the terms and conditions of, and within the limitations of, the Plan, Shares of Restricted Stock may be awarded by the Committee to such individuals as are eligible for grants of Options, as the Committee may determine at any time and from time to time before the termination of the Plan. Each award of Restricted Stock shall be evidenced by an Agreement setting forth the terms and conditions of the award. (b) A Share of Restricted Stock is a Share that does not irrevocably vest in the holder or that may not be sold, exchanged, pledged, transferred, assigned or otherwise encumbered or disposed of until the terms and conditions set by the Committee at the time of the award of the Restricted Stock have been satisfied. A Share of Restricted Stock shall be subject to such other restrictions, terms and conditions as the Committee may establish, which may include, without limitation, the rendition of services to the Company or its Affiliates for a specified time or the achievement of specific goals. 9 (c) If an individual receives Shares of Restricted Stock, whether or not escrowed as provided below, the individual shall be the record owner of such Shares and shall have all the rights of a stockholder with respect to such Shares (unless the escrow agreement, if any, specifically provides otherwise), including the right to vote and the right to receive dividends or other distributions made or paid with respect to such Shares. Any certificate or certificates representing Shares of Restricted Stock may bear a legend similar to the following: The shares represented by this certificate have been issued pursuant to the terms of the Centex Corporation 2001 Stock Plan and may not be sold, pledged, transferred, assigned or otherwise encumbered in any manner except as set forth in the terms of such award dated ________________, 20___. (d) In order to enforce the restrictions, terms and conditions that may be applicable to an individual's Shares of Restricted Stock, the Committee may require the individual, upon the receipt of a certificate or certificates representing such Shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement in such form as shall be determined by the Committee. (e) After the satisfaction of the terms and conditions set by the Committee at the time of an award of Restricted Stock to an individual, if the original certificate was legended, a new certificate, without the legend set forth above, for the number of Shares that are no longer subject to such restrictions, terms and conditions shall be delivered to the individual, either by delivery of a physical certificate or an electronic transfer to a broker. (f) The Committee may cancel all or any portion of any outstanding restrictions prior to the expiration of such restrictions with respect to any or all of the Shares of Restricted Stock awarded to an individual hereunder on such terms as the Committee may deem appropriate. (g) Subject to the other provisions of this Section 17 and unless otherwise determined by the Committee, if an individual to whom Restricted Stock has been awarded ceases to be employed by the Company or an Affiliate, or ceases to be a director of the Company, whichever may occur later, for any reason prior to the satisfaction of any terms and conditions of an award, any Restricted Stock remaining subject to restrictions shall thereupon be forfeited by the individual and transferred to, and reacquired by, the Company or an Affiliate at no cost to the Company or the Affiliate. In such event, the individual, or in the event of his death, his personal representative, shall forthwith deliver to the Secretary of the Company the certificates for the Shares of Restricted Stock remaining subject to such restrictions, accompanied by such instruments of transfer, if any, as may reasonably be required by the Secretary of the Company. (h) The Committee may determine that an award of Restricted Stock will be subject to restriction until one or more performance goals established by the Committee have been achieved. With respect to such an award, the restrictions shall lapse and the award shall vest only upon achievement of the attainment of one or more pre-established, objective performance goals established by the Committee prior to the earlier to occur of (x) 90 days after the 10 commencement of the period of service to which the performance goal relates and (y) the lapse of 25% of the period of service (as established in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A performance goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a performance goal may be based on one or more business criteria that apply to the individual, one or more business units of the Company, or the Company as a whole, and may include one or more of the following: operating income, operating margin, earnings before interest, taxes, depreciation and amortization (EBITDA), pre-tax income, net income, net earnings per share, net earnings per share growth, return on beginning stockholder's equity, return on average net assets, total shareholder return relative to other companies in Centex Corporation's industry group, debt/capitalization ratio and customer satisfaction. Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to performance goals, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation Section 1.162-27(e)(2)(i), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of performance goals, the Committee must certify in writing that applicable performance goals and any of the material terms thereof were, in fact, satisfied. No individual may be granted Restricted Stock awards subject to performance goals designed to comply with Section 162(m) of the Code having a value of more than $6,000,000 in any given one-year period. 18. TAX WITHHOLDING The Company shall have the right to take whatever affirmative actions are required, in the opinion of the Committee, to enable the Company or appropriate Affiliate to satisfy any applicable payroll tax withholding requirements in connection with the exercise of Options granted or Restricted Stock awarded under the Plan. Without limiting the generality of the foregoing provision, the Company shall have the right to (a) withhold cash from a same-day-sale exercise of an Option, (b) deduct applicable taxes from any Option or Restricted Stock award by withholding, at the time of delivery and/or vesting of Shares under the Plan, an appropriate number of Shares for payment of taxes required by law, (c) permit its withholding obligations to be satisfied by the transfer to the Company of Shares theretofore owned by the holder of the Option or recipient of Restricted Stock with respect to which withholding is required, in which case such Shares shall be valued based on the Fair Market Value thereof when the tax withholding is required to be made, or (d) take such other action as may be necessary in the opinion of the Company to satisfy all applicable tax withholding obligations. 19. GENERAL (a) The proceeds received by the Company from the sale of Shares pursuant to Options shall be used for general corporate purposes. 11 (b) Nothing contained in the Plan or in any Agreement shall confer upon any Optionee or recipient of Restricted Stock the right to continue in the employ of the Company or any Affiliate or interfere in any way with the rights of the Company or any Affiliate to terminate such Optionee's or recipient's employment at any time. (c) Neither the members of the Board nor any member of the Committee shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Option or award of Restricted Stock granted under it, and the members of the Board and the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may be in effect from time to time. (d) As partial consideration for the granting of each Option or award of Restricted Stock hereunder, the Optionee or recipient shall agree with the Company that he will keep confidential all information and knowledge that he has relating to the manner and amount of his participation in the Plan; provided, however, that such information may be disclosed as required by law or given in confidence to the individual's spouse, tax or financial advisors or to a financial institution to the extent that such information is necessary to secure a loan. (e) Participation in the Plan shall not preclude an individual from eligibility in any other stock option plan of the Company or any Affiliate or any old-age benefit, insurance, pension, profit sharing, retirement, bonus or other extra compensation plans that the Company or any Affiliate has adopted or may, at any time, adopt for the benefit of its employees or directors. (f) Any payment of cash or any issuance or transfer of Shares to the Optionee or to his legal representative, heir, legatee or distributee in accordance with the provisions hereof shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board or Committee may require any Optionee or recipient of an award of Restricted Stock, legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. (g) Neither the Committee, the Board nor the Company guarantees the Shares from loss or depreciation. (h) All expenses incident to the administration of the Plan, including, but not limited to, legal and accounting fees, shall be paid by the Company or its Affiliates. (i) Records of the Company and its Affiliates regarding an individual's period of employment, termination of employment and the reason therefor, leaves of absence, reemployment, tenure as a Director and other matters shall be conclusive for all purposes hereunder, unless determined by the Board or Committee to be incorrect. (j) The Company and its Affiliates shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished all of the information or documentation that 12 is necessary or required by the Board or Committee to perform their duties and functions under the Plan. (k) The Company assumes no obligation or responsibility to an Optionee or recipient of Restricted Stock, or to such Optionee's or recipient's personal representatives, heirs, legatees or distributees, for any act of, or failure to act on the part of, the Board or Committee. (l) Any action required of the Company shall be by resolution of the Board or by a person authorized to act by resolution of the Board. Any action required of the Committee shall be by resolution of the Committee or by a person authorized to act by resolution of the Committee. (m) If any provision of the Plan or any Agreement is held to be illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining provisions of the Plan or the Agreement, as the case may be, but such provision shall be fully severable and the Plan or the Agreement, as the case may be, shall be construed and enforced as if the illegal or invalid provision had never been included herein or therein. (n) Whenever any notice is required or permitted hereunder, such notice must be in writing and personally delivered or sent by mail. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered on the date on which it is personally delivered or, whether actually received or not, on the third business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person who is to receive it at the address that such person has theretofore specified by written notice delivered in accordance herewith. The Company, an Optionee or a recipient of Restricted Stock may change, at any time and from time to time, by written notice to the other, the address that it, he or she had theretofore specified for receiving notices. Until changed in accordance herewith, the Company and each Optionee and recipient of Restricted Stock shall specify as its and his address for receiving notices the address set forth in the Agreement pertaining to the shares of Stock to which such notice relates or otherwise provided to the other in accordance with the Company's policies for maintaining such information. (o) Any person entitled to notice hereunder may waive such notice. (p) The Plan shall be binding upon the Optionee or recipient of Restricted Stock, his heirs, legatees and legal representatives, upon the Company, its successors and assigns, and upon the Board and Committee and their successors. (q) The titles and headings of Sections and paragraphs are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (r) All questions arising with respect to the provisions of the Plan shall be determined by application of the laws of the State of Nevada, except to the extent Nevada law is preempted by federal law. The obligation of the Company to sell and deliver Shares hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Shares. 13 (s) Words used in the masculine shall apply to the feminine where applicable, and wherever the context of the Plan dictates, the plural shall be read as the singular and the singular as the plural. (t) Transactions related to the Plan, including but not limited to the delivery and acceptance of any Agreement and the exercise of any Option, whether in whole or in part, may be evidenced by either signed documentation or on-line transactions through the Corporate Stock Benefit Services web site of the Company's designated broker, UBS PaineWebber Inc., or the successor thereof. 14 EX-10.10 8 d08056exv10w10.txt EX-10.10 AMENDED/RESTATED LONG TERM INCENTIVE PLAN EXHIBIT 10.10 AMENDED AND RESTATED CENTEX CORPORATION LONG TERM INCENTIVE PLAN EFFECTIVE October 1, 2001 1. OBJECTIVES The Centex Corporation Long Term Incentive Plan (the "Plan") is designed to retain selected employees of Centex Corporation and all subsidiaries, partnerships and affiliates of Centex Corporation with regard to which Centex Corporation owns, directly or indirectly, at least 80% of the ownership interest therein, and reward them for making significant contributions to the success of Centex Corporation. These objectives are to be accomplished by making awards under the Plan and thereby providing Participants with a financial interest in the growth and performance of Centex Corporation. The Plan shall not constitute a "qualified plan" subject to the limitations of Section 401(a) of the Code, nor shall it constitute a "funded plan" for purposes of such requirements. This Plan shall be exempt from the participation and vesting requirements of Part 2 of Title I of ERISA, the funding requirements of Part 3 of Title I of ERISA, and the fiduciary requirements of Part 4 of Title I of ERISA by reason of the exclusions afforded to plans which are unfunded and maintained by an employer primarily for the purpose of providing deferred compensation for a select group of highly compensated employees. 2. DEFINITIONS As used herein, the terms set forth below shall have the following respective meanings: "ACT" means the Securities Exchange Act of 1934, as amended. "ADMINISTRATOR" means the Compensation and Stock Option Committee of the Board. "AFFILIATE" means any direct or indirect subsidiary or parent of Centex Corporation and any partnership, joint venture, limited liability company or other business venture or entity in which Centex Corporation owns directly or indirectly at least 80% of the ownership interest in such entity, as determined by the Administrator in its sole and absolute discretion (such determination by the Administrator to be conclusively established by the grant of an Award by the Administrator to an officer or employee of such an entity). "AWARD" means an award of Deferred Stock granted to a Participant pursuant to any applicable terms, conditions and limitations as the Administrator may establish in order to fulfill the objectives of the Plan. "AWARD AGREEMENT" means a written agreement between Centex Corporation and a Participant that sets forth the terms, conditions and limitations applicable to an Award. "BENEFICIARY" means such person or persons, or the trustee of an inter vivos trust for the benefit of natural persons, designated by the Participant in a written election filed with the 1 Administrator as entitled to receive the Participant's Award(s) in the event of the Participant's death, or if no such election shall have been so filed, or if no designated Beneficiary survives the Participant or can be located by the Administrator, the person or persons entitled thereto under the last will of such deceased Participant, or if such decedent left no will, to the legal heirs of such decedent determined in accordance with the laws of intestate succession of the state of the decedent's domicile. "BOARD" means the Board of Directors of Centex Corporation as the same may be constituted from time to time. "CENTEX CORPORATION" means Centex Corporation, a Nevada corporation, or any successor thereto. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY" means each of Centex Corporation and every Affiliate. "DEFERRED STOCK" means a right to receive at Payout the number of Shares covered by an Award, subject to the terms of this Plan and the Award Agreement. Deferred Stock does not represent any actual legal or beneficial interest in Centex Corporation. "DISABILITY" means a disability that entitles the Participant to benefits under the long-term disability plan sponsored by Centex Corporation which covers the Participant. "EMPLOYMENT" means employment with a Company. "EXPIRATION DATE" means, as to an Award, that date which is seven years past the Grant Date of such Award or such other period (not beyond ten years) as the Administrator may determine. "FAIR MARKET VALUE" means the closing price per Share as of a particular date reported on the consolidated transaction reporting system for the New York Stock Exchange or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was reported. "GRANT DATE" means the date an Award is made to a Participant hereunder, which will be April 1 of the year in which such Award is made, or any other date selected by the Administrator. "PARTICIPANT" means an employee of a Company to whom an Award has been made under this Plan. "PAYOUT" means the distribution of vested Deferred Stock under the Plan. "PAYOUT DATE" means the date an Award becomes payable pursuant to Section 8. 2 "PLAN" means this Centex Corporation Long Term Incentive Plan, as set forth herein and as may be amended from time to time. "RETIREMENT" means the termination of a Participant's Employment due to retirement on or after age 62 provided that the Participant has at least ten years of service with one or more Companies. "SHARE" means a share of Centex Corporation's present twenty-five cents ($0.25) par value common stock and any share or shares of capital stock or other securities of Centex Corporation hereafter issued or issuable upon, in respect of or in substitution or in exchange for each present share. Such Shares may be unissued or reacquired Shares, as the Board, in its sole and absolute discretion, shall from time to time determine. "TERMINATION DATE" means the last date on which the Participant is carried on a Company's payroll as an employee. 3. ELIGIBILITY Only highly compensated employees of a Company are eligible for Awards under this Plan, as determined in the sole discretion of the Administrator. The Administrator shall select the Participants in the Plan from time to time as evidenced by the grant of Awards under the Plan. 4. PLAN ADMINISTRATION The Plan shall be administered by the Administrator, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or appropriate in its sole discretion. The Administrator shall determine all terms and conditions of the Awards. The Administrator may, in its discretion, accelerate the vesting or Payout of an Award, eliminate or make less restrictive any restrictions contained in an Award Agreement, waive any restriction or other provision of this Plan or an Award Agreement or otherwise amend or modify an Award in any manner that is either (i) not materially adverse to the Participant holding the Award or (ii) consented to by such Participant. The Administrator may delegate to one or more employees of Centex Corporation the performance of non-discretionary functions under this Plan, including distributions of Payouts. 5. AWARDS (a) The granting of Awards under this Plan shall be entirely discretionary, and nothing in this Plan shall be deemed to give any employee of a Company any right to participate in this Plan or to be granted an Award. (b) Awards shall be granted to Participants at such times, and subject to paragraph 5.(d) below, in such amounts as the Administrator, in its sole and absolute discretion, shall determine. No credit for cash dividends on Deferred Stock will be allowed (or accrued) prior to Payout. 3 (c) The term of an Award shall run from the Grant Date to the Expiration Date, subject to early Payout as described in Section 8 below or forfeiture as described in Section 7 below. (d) The maximum number of Shares that may be awarded under this Plan, subject to Section 13 below, is 500,000. (e) If an Award is forfeited, the number of Shares with respect to which such Award shall not have been exercised prior to its forfeiture may again be awarded pursuant to the provisions hereof. 6. VESTING OF AWARDS (a) Unless different terms are set by the Administrator, an Award shall be immediately 25% vested on its Grant Date and shall become vested in cumulative 25% increments on each of the first through third anniversaries of such Grant Date, so that on the third anniversary of the Grant Date the Award will be 100% vested; provided, however, that the Participant must be in continuous Employment from the Grant Date through the date of the applicable anniversary in order for the Award to vest. (b) A Participant's Award shall be fully vested, irrespective of the limitations set forth in subparagraph (a) above, in the event of (i) a change in control, as provided for in Section 13 below, provided that the Participant has been in continuous Employment from the Grant Date until the date of such change in control or (ii) Retirement of the Participant. 7. FORFEITURE OF AWARDS If a Participant's Employment is terminated, the Participant shall forfeit his or her Award(s) with respect to any portion that is not vested as of such Participant's Termination Date. 8. PAYOUTS OF AWARDS Payouts will occur as follows: (a) Automatic Payout on Expiration Date. To the extent that a Participant's Award has vested, such Award shall have an automatic Payout on the Expiration Date of such Award. (b) Early Payouts. In addition to automatic Payout on the Expiration Date, there may be an early Payout of the vested portion of an Award as follows: (i) Termination of Employment (whether voluntary or involuntary). The vested portion of each Award shall have an automatic Payout on the Participant's Termination Date. 4 (ii) Death. If a Participant dies prior to the Expiration Date, such Participant's Award, to the extent vested, shall have an automatic Payout as of the date of the Participant's death and be made to the Participant's Beneficiary. (iii) Disability. Prior to the Expiration Date, an Award, with the approval of the Administrator, shall both be fully vested and have an automatic Payout on the date the Participant satisfies the definition of Disability. (iv) Early Payout Request. A Participant may request that the Administrator consider an early Payout to him or her with respect to any vested portion of an Award. Such a request will be considered at the next semi-annual meeting of the Administrator (held in May and October of each calendar year). Such request shall be in writing and will set forth, in sufficient detail, the reasons for such early Payout. The Administrator will consider such request during said meeting and will, within thirty (30) days following said meeting, determine in its sole and absolute discretion whether to allow such early Payout, and then notify the Participant of its decision. 9. FORM OF PAYOUT As soon as practicable following a determination that Payout of a Participant's Award shall be made as described in Section 8, but not later than five business days after the required Payout Date, Centex Corporation shall make a Payout to the Participant. All Payouts shall be made in Shares except that no fractional shares will be issued and in lieu thereof cash will be paid to the Participant. 10. DELIVERY OF SHARE CERTIFICATES As promptly as may be practicable following a Payout, Centex Corporation shall make delivery of one or more Share certificates, either by delivery of a physical certificate or an electronic transfer to a broker, for the appropriate number of Shares. 11. TAX WITHHOLDING Centex Corporation shall deduct applicable taxes with respect to any Award or Payout and withhold, at the time of Award or Payout, as appropriate, a number of Shares, based on the Fair Market Value on such date, for payment of taxes required by law. 12. NON-ASSIGNABILITY Unless otherwise determined by the Administrator, no Award or Payout or any other benefit under this Plan shall be assignable or otherwise transferable except to a Beneficiary or by will, the laws of descent and distribution or a domestic relations order. The Administrator may prescribe other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this Section 12 shall be null and void. 5 13. CHANGES IN SHARES AND CERTAIN CORPORATE TRANSACTIONS (a) In the event of any subdivision or consolidation of outstanding Shares, declaration of a dividend payable in Shares or other stock split, then (i) the number of Shares available for Awards under this Plan, and (ii) the number of Shares covered by outstanding Awards, shall each be proportionately adjusted by the Board as appropriate to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Centex Corporation, any consolidation or merger of the Centex Corporation with another corporation or entity, the adoption by the Centex Corporation of any plan of exchange affecting Shares or any distribution to holders of Shares of securities or property (other than normal cash dividends or dividends payable in Shares), the Board shall make appropriate adjustments to (i) the number of Shares available for Awards under this Plan, and (ii) the number of Shares covered by outstanding Deferred Awards, to reflect such transaction; provided that such adjustment under (ii) shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without increasing, the value of such Awards. Except as is otherwise expressly provided herein, the issuance by Centex Corporation of shares of its capital stock of any class, or securities convertible into shares of capital stock of any class, either in connection with a direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of Centex Corporation convertible into such shares or other securities, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares then subject to outstanding Awards granted under the Plan. Furthermore, the presence of outstanding Awards granted under the Plan shall not affect in any manner the right or power of Centex Corporation to make, authorize or consummate (i) any or all adjustments, recapitalizations, reorganizations or other changes in Centex Corporation's capital structure or its business, including the issuance of capital stock; (ii) any merger or consolidation of Centex Corporation; (iii) any issuance by Centex Corporation of debt securities or preferred or preference stock which would rank above the Shares subject to outstanding Awards granted under the Plan; (iv) the dissolution or liquidation of Centex Corporation; (v) any sale, transfer or assignment of all or any part of the assets or business of Centex Corporation; or (vi) any other corporate act or proceeding, whether of a similar character or otherwise. (b) Notwithstanding anything to the contrary above, a dissolution or liquidation of Centex Corporation, a merger (other than a merger effecting a reincorporation of Centex Corporation in another state) or consolidation in which Centex Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of Centex Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of Centex Corporation and their proportionate interests therein immediately prior to the transaction), a transaction in which another corporation becomes the owner of 50% or more of the total combined voting power of all classes of stock of Centex Corporation, or a change in control (as specified below), shall cause every Award then outstanding to become fully vested immediately prior to such dissolution, liquidation, merger, consolidation, transaction, or change in control, to the extent not theretofore exercised, without regard to the determination as to the periods and installments of vesting contained in the Agreements if (and only if) such Awards have not at that 6 time expired or been terminated. For purposes of this Section 13, a change in control shall be deemed to have taken place if: (i) a third person, including a "Group" as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of Shares of Centex Corporation having 50% or more of total number of votes that may be cast for the election of Directors of Centex Corporation; or (ii) as a result of, or in connection with, a contested election for Directors, persons who were Directors of Centex Corporation immediately before such election shall cease to constitute a majority of the Board. Notwithstanding the foregoing provisions of this paragraph, in the event of any such dissolution, merger, consolidation, transaction or change in control, the Board may completely satisfy all obligations of Centex Corporation and its Affiliates with respect to any Award outstanding on the date of such event by delivering to the Participant cash in an amount equal to the Fair Market Value of such Shares on the date of such event, such payment to be made within reasonable time after such event. 14. PLAN YEAR The Plan shall be effective as of October 1, 2001 and will continue in effect until the Administrator terminates the same. The Plan year will be April 1 through March 31 while this Plan is in effect. 15. REQUIREMENTS OF LAW Notwithstanding anything herein to the contrary, Centex Corporation shall not be required to issue Shares under any Award if the issuance thereof would constitute a violation by the Participant or Centex Corporation of any provisions of any law or regulation of any governmental authority or any national securities exchange; and as a condition of any issuance of Shares under any Award, Centex Corporation may require such agreements or undertakings, if any, as Centex Corporation may deem necessary or advisable to ensure compliance with any such law or regulation. 16. AMENDMENT, SUSPENSION OR TERMINATION The Board may amend, suspend or terminate the Plan at any time for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that no amendment, suspension or termination shall be made that would impair the rights of any Participant as to a vested Award previously granted to such Participant without his or her written consent. 7 17. UNFUNDED PLAN This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants representing Awards, any such accounts shall be used merely as a bookkeeping convenience. Centex Corporation shall not be required to segregate any assets that may at any time be represented by Awards, nor shall this Plan be construed as providing for such segregation, nor shall Centex Corporation, the Board or the Administrator be deemed to be a trustee of any Awards to be granted under this Plan. Any liability or obligation of Centex Corporation to any Participant with respect to a grant of Awards under this Plan shall be based solely upon any contractual obligations that may be created under this Plan, and no such liability or obligation of Centex Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of Centex Corporation. None of Centex Corporation or any other Company, the Board or the Administrator shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. Notwithstanding the foregoing, upon the occurrence of a change in control, as described in Section 13(b), each Company whose employees are Participants shall, as soon as possible, but in no event longer than 15 days following the change in control, make an irrevocable contribution to a trust established by Centex Corporation in an amount sufficient to fully pay the entire benefit to which each Participant employed by such Company would be entitled pursuant to the terms of this Plan as of the date on which such change in control occurs. In its sole discretion, Centex Corporation may establish such a trust at any time prior to a change in control and may make contributions to such trust in Shares or in cash which would be used to acquire Shares to transfer to Participant. Any such trust shall be designed to assist Centex Corporation in satisfying its obligations under this Plan; but it shall remain subject to the claims of its creditors. 18. NO EMPLOYMENT GUARANTEED No provision of this Plan or any Award Agreement hereunder shall confer any right upon any employee to continued employment with a Company. 19. NO STOCKHOLDER RIGHTS A Participant shall have no rights as a holder of Shares with respect to Awards granted hereunder. In particular, no Award shall entitle a Participant to be considered a holder of Shares or to have any rights to dividends or other distributions made to holders of Shares prior to the Payout of such Award. 20. GOVERNING LAW This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Act or other securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas, without reference to any conflicts of law principles thereof that would require the application of the laws of another jurisdiction. 8 21. INDEMNIFICATION Neither the members of the Board nor any member of the Compensation and Stock Option Committee, acting in the capacity of Administrator, shall be liable for any act, omission or determination taken or made in good faith with respect to the Plan or any Award granted under it, and the members of the Board and the Compensation and Stock Option Committee shall be entitled to indemnification and reimbursement by Centex Corporation in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law and under any directors and officers liability or similar insurance coverage that may be in effect from time to time. 22. RELEASE Any issuance or transfer of Shares to a Participant or to his legal representative, heir, legatee or distributee in accordance with the provisions hereof shall, to the extent thereof, be in full satisfaction of all claims of such persons hereunder. The Board or Administrator may require any Participant or legal representative, heir, legatee or distributee, as a condition precedent to such payment, to execute a release and receipt therefor in such form as it shall determine. 9 EX-10.13 9 d08056exv10w13.txt EX-10.13 2003 ANNUAL INCENTIVE COMPENSATION PLAN EXHIBIT 10.13 CENTEX CORPORATION 2003 ANNUAL INCENTIVE COMPENSATION PLAN 1. OBJECTIVE. The Centex Corporation Annual Incentive Compensation Plan (the "Plan") is designed to retain selected executive officers of Centex Corporation, and reward them for making significant contributions to the success of Centex Corporation. These objectives are to be accomplished by making annual awards under the Plan and thereby providing Participants with a financial interest in the overall performance and growth of Centex Corporation. 2. DEFINITIONS. As used herein, the terms set forth below shall have the following respective meanings: "ACT" means the Securities Exchange Act of 1934, as amended. "AFFILIATE" means any direct or indirect subsidiary or parent of Centex Corporation and any partnership, joint venture, limited liability company or other business venture or entity in which Centex Corporation owns directly or indirectly at least 80% of the ownership interest in such entity, as determined by the Committee in its sole and absolute discretion (such determination by the Committee to be conclusively established by the grant of an Award by the Committee to an officer or employee of such an entity). "AWARD" means cash or other forms of incentive granted to a Participant pursuant to any applicable terms, conditions and limitations as the Committee may establish in order to fulfill the objectives of the Plan. "AWARD AGREEMENT" means a written agreement between Centex Corporation and a Participant that sets forth the terms, conditions and limitations applicable to an Award. "BENEFICIARY" means such person or persons, or the trustee of an inter vivos trust for the benefit of natural persons, designated by the Participant in a written election form filed with the Committee as entitled to receive the Participant's Award(s) in the event of the Participant's death, or if no such election form shall have been so filed, or if no designated Beneficiary survives the Participant or can be located by the Committee, the person or persons entitled thereto under the last will of such deceased Participant, or if such decedent left no will, to the legal heirs of such decedent determined in accordance with the laws of intestate succession of the state of the decedent's domicile. "BOARD" means the Board of Directors of Centex Corporation as the same may be constituted from time to time. "CENTEX CORPORATION" means Centex Corporation, a Nevada corporation, or any successor thereto. "CODE" means the Internal Revenue Code of 1986, as amended. 1 "COMMITTEE" means the Compensation and Stock Option Committee of the Board. "DISABILITY" means TOTAL AND PERMANENT DISABILITY AS SET FORTH IN SECTION 22(e)(3) OF THE CODE, OR ANY SUCCESSOR PROVISION. "EMPLOYMENT" means employment with Centex Corporation or an Affiliate. "FISCAL YEAR" means April 1 through March 31. "PARTICIPANT" means an executive officer of Centex Corporation who signs an Award Agreement. "PLAN" means this Centex Corporation 2003 Annual Incentive Compensation Plan, as set forth herein and as may be amended from time to time. "RETIREMENT" means the termination of a Participant's Employment due to retirement on or after (i) age 65 or (ii) age plus years of Employment equal at least 70, provided the Participant is at least 55 years old. 3. ELIGIBILITY. Only executive officers of Centex Corporation are eligible to participate in this Plan. The Committee shall select the Participants in the Plan from time to time as evidenced by the execution of Award Agreements under the Plan. 4. PLAN ADMINISTRATION. The Plan shall be administered by the Committee, which shall have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or appropriate in its sole discretion. The Committee shall determine all terms and conditions of the Awards. 5. AWARDS AND LIMITATIONS THEREON. An Award will be paid only if specified performance goals set forth in an Award Agreement have been achieved during the course of the relevant Fiscal Year (or such shorter period as may be determined by the Committee) by an individual, Centex Corporation, an Affiliate, or one or more business units of Centex Corporation or an Affiliate, as applicable. The amount of the Award will be determined by reference to the formula contained in the relevant Award Agreement, which will describe the performance goal or goals and the percentage of the potential Award to be paid depending upon what level of the performance goal(s) is achieved. By way of example, and not limitation, if the performance goal is return on beginning stockholders equity of Centex Corporation, the formula will set forth different levels of return and the Award to be paid depending upon the level of return achieved. Performance goals will be established no later than the earlier to occur of (x) 90 days after the commencement of the period of service to which the performance goal relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is still substantially uncertain. Performance goals may include operating income, operating margin, earnings before interest, taxes, depreciation and amortization (EBITDA), pre-tax income, net income, net earnings per share, net earnings per share growth, return on beginning stockholders equity, return on average net assets, total shareholder return relative to other companies in Centex 2 Corporation's industry group, debt/capitalization ratio and customer satisfaction. Unless otherwise stated, such a performance goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to performance goals, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation Section 1.162-27(e)(2)(i), and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. The maximum Award that may be paid to any Participant under this Plan for a Fiscal Year is an amount equal to two percent (2%) of the reported net income of Centex Corporation and subsidiaries for such Fiscal Year. Payment of an Award will be made to the Participant following the conclusion of a Fiscal Year upon the conditions that (a) the performance goal or goals specified in the relevant Award Agreement have been achieved and (b) the Committee has reviewed and approved the Award. If during the course of a Fiscal Year the Participant takes a position with Centex Corporation or an Affiliate which is materially different from the position which he or she occupied at the commencement of such Fiscal Year, and the Committee determines that such new position does not involve comparable or greater executive responsibilities than were enjoyed by such Participant at the beginning of such Fiscal Year, then the relevant Award Agreement will automatically be terminated. The Committee will decide, in its sole and absolute discretion, whether the Participant will receive a prorated Award for such Fiscal Year or will forfeit any interest in any Award for such Fiscal Year. Such a prorated Award will only be paid if the Committee determines that the relevant performance goals have been achieved. 6. TAX WITHHOLDING. Centex Corporation shall deduct applicable taxes with respect to the payment of any Award. 7. NON-ASSIGNABILITY. Unless otherwise determined by the Committee, no Award or any other benefit under this Plan shall be assignable or otherwise transferable except to a Beneficiary or by will, the laws of descent and distribution or a domestic relations order. The Committee may prescribe OTHER restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this Section 7 shall be null and void. 8. CHANGE IN CONTROL AND CERTAIN CORPORATE TRANSACTIONS. Notwithstanding anything to the contrary above, a dissolution or liquidation of Centex Corporation, a merger (other than a merger effecting a REINCORPORATION of Centex Corporation in another state) or consolidation in which Centex Corporation is not the surviving corporation (or survives only as a subsidiary of another corporation in a transaction in which the stockholders of the parent of Centex Corporation and their proportionate interests therein immediately after the transaction are not substantially identical to the stockholders of Centex Corporation and their proportionate interests therein immediately prior to the transaction) or a change in control (as specified below), shall cause the maximum Award to each Participant for the then current fiscal year to be paid to the Participant, immediately prior to such dissolution, liquidation, merger, consolidation or change in control, without regard to the 3 determination as to the periods or achievement of the objective performance goals. For purposes of this Section 8, a change in control shall be deemed to have taken place if: (a) a third person, including a "Group" as defined in Section 13(d)(3) of the Act, becomes the beneficial owner of shares of the twenty-five cents ($0.25) par value common stock of Centex Corporation having 50% or more of total number of votes that may be cast for the election of Directors of Centex Corporation; or (b) as a result of, or in connection with, a contested election for Directors, persons who were Directors of Centex Corporation immediately before such election shall cease to constitute a majority of the Board. 9. PLAN YEAR. The plan year will be coterminous with the Fiscal Year, while this Plan is in effect. This Plan will govern annual cash incentive compensation payments following March 31, 2003. 10. AMENDMENT, SUSPENSION OR TERMINATION. The Board may amend or suspend the Plan at any time for the purpose of meeting or addressing any changes in legal requirements or terminate the Plan at any time, except that no amendment, suspension or termination shall be made that would impair the rights of any Participant as to an earned Award. 11. NO EMPLOYMENT GUARANTEED. No provision of this Plan or any Award Agreement hereunder shall confer any right upon any executive officer to continued employment with Centex Corporation or an Affiliate. 12. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Act or other securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas, without reference to any conflicts of law principles thereof that would require the application of the laws of another jurisdiction. 4 EX-10.14 10 d08056exv10w14.txt EX-10.14 2003 EQUITY INCENTIVE PLAN EXHIBIT 10.14 CENTEX CORPORATION 2003 EQUITY INCENTIVE PLAN 1. PLAN. The Centex Corporation 2003 Equity Incentive Plan (the "Plan") was adopted by the Corporation to reward certain key Employees of the Corporation and its Affiliates and Non-employee Directors of the Corporation by providing for certain cash benefits and by enabling them to acquire shares of Common Stock of the Corporation. 2. OBJECTIVES. The purpose of this Centex Corporation 2003 Equity Incentive Plan is to further the interests of the Corporation and its shareholders by providing incentives in the form of Awards to key Employees and Non-employee Directors who can contribute materially to the success and profitability of the Corporation and its Affiliates. Such Awards will recognize and reward outstanding performances and individual contributions and give Participants in the Plan an interest in the Corporation parallel to that of the shareholders, thus enhancing the proprietary and personal interest of such Participants in the Corporation's continued success and progress. This Plan will also enable the Corporation and its Affiliates to attract and retain such Employees and Non-employee Directors. 3. DEFINITIONS. As used herein, the terms set forth below shall have the following respective meanings: "AFFILIATE" means a Subsidiary or Joint Venture. "AUTHORIZED OFFICER" means the Chief Executive Officer of the Corporation (or any other senior officer of the Corporation to whom he or she shall delegate the authority to execute any Award Agreement, where applicable). "AWARD" means an Employee Award or a Director Award. "AWARD AGREEMENT" means a written agreement setting forth the terms, conditions and limitations applicable to an Award, to the extent the Committee determines such agreement is necessary. "BOARD" means the Board of Directors of the Corporation. "BLACK-SCHOLES VALUE" means the formula given by the option pricing model of such name used to calculate the theoretical fair value of a stock option at any given time. "CHANGE IN CONTROL" unless otherwise defined by the Committee, means a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended, whether or not the Corporation is then subject to such reporting requirement; provided, that, without limitation, such a change in control shall be deemed to have occurred if: 1 (i) a third person, including a "Group" as defined in Section 13(d)(3) of the Exchange Act, becomes the beneficial owner of Common Stock having fifty (50) percent or more of total number of votes that may be cast for the election of Directors; or (ii) as a result of, or in connection with, a contested election for Directors, persons who were Directors immediately before such election shall cease to constitute a majority of the Board. "CODE" means the Internal Revenue Code of 1986, as amended from time to time. "COMMITTEE" means the independent Compensation Committee of the Board as is designated by the Board to administer the Plan. "COMMON STOCK" means Centex Corporation common stock, par value $.25 per share. "CORPORATION" means Centex Corporation, a Nevada corporation, or any successor thereto. "DIRECTOR" means an individual who is a member of the Board. "DIRECTOR AWARD" means any Option, Stock Award or Performance Award granted, whether singly, in combination or in tandem, to a Participant who is a Non-employee Director pursuant to such applicable terms, conditions and limitations (including treatment as a Performance Award) as the Committee may establish in order to fulfill the objectives of the Plan. "DISABILITY" means a disability that renders the Participant unable to engage in any occupation in accordance with the terms of the Long Term Disability Plan of Centex Corporation. "DIVIDEND EQUIVALENTS" means, with respect to Stock Units or shares of Restricted Stock that are to be issued at the end of the Restriction Period, an amount equal to all dividends and other distributions (or the economic equivalent thereof) that are payable to stockholders of record during the Restriction Period on a like number of shares of Common Stock. "EMPLOYEE" means an employee of the Corporation or any of its Affiliates. "EMPLOYEE AWARD" means any Option, Stock Award, or Performance Award granted, whether singly, in combination or in tandem, to a Participant who is an Employee pursuant to such applicable terms, conditions and limitations (including treatment as a Performance Award) as the Committee may establish in order to fulfill the objectives of the Plan. 2 "EMPLOYEE DIRECTOR" means an individual serving as a member of the Board who is an Employee of the Corporation or any of its Affiliates. "EQUITY AWARD" means any Option, Stock Award, or Performance Award (other than a Performance Award denominated in cash) granted to a Participant under the Plan. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "FAIR MARKET VALUE" of a share of Common Stock means, as of a particular date, (i) (A) if Common Stock is listed on a national securities exchange, the mean between the highest and lowest sales price per share of such Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sale so reported on that date, on the next succeeding date on which such a sale was so reported, or, at the discretion of the Committee, the price prevailing on the exchange at the time of exercise, (B) if Common Stock is not so listed but is quoted on the NASDAQ National Market, the mean between the highest and lowest sales price per share of Common Stock reported by the NASDAQ National Market on that date, or, if there shall have been no such sale so reported on that date, on the next succeeding date on which such a sale was so reported or, at the discretion of the Committee, the price prevailing on the NASDAQ National Market at the time of exercise, (C) if Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the next succeeding date on which such quotations shall be available, as reported by the NASDAQ Stock Market, or, if not reported by the NASDAQ Stock Market, by the National Quotation Bureau Incorporated or (D) if Common Stock is not publicly traded, the most recent value determined by an independent appraiser appointed by the Corporation for such purpose, or (ii) if applicable, the price per share as determined in accordance with the procedures of a third party administrator retained by the Corporation to administer the Plan. "GRANT DATE" means the date an Award is granted to a Participant pursuant to the Plan. The Grant Date for a substituted award is the Grant Date of the original award. "GRANT PRICE" means the price at which a Participant may exercise his or her right to receive cash or Common Stock, as applicable, under the terms of an Award. "JOINT VENTURE" means any joint venture, partnership, limited liability company or other non-corporate entity in which the Corporation has at least 50% ownership, voting, capital or profit interests (in whatever form). "NON-EMPLOYEE DIRECTOR" means an individual serving as a member of the Board who is not an Employee of the Corporation or any of its Affiliates. 3 "OPTION" means a right to purchase a specified number of shares of Common Stock at a specified Grant Price, which is not intended to comply with the requirements set forth in Section 422 of the Code. "PARTICIPANT" means an Employee or Non-employee Director to whom an Award has been granted under this Plan. "PERFORMANCE AWARD" means an Award made pursuant to this Plan that is subject to the attainment in the future of one or more Performance Goals. "PERFORMANCE Goal" means a standard established by the Committee, to determine in whole or in part whether a Qualified Performance Award shall be earned. "QUALIFIED PERFORMANCE AWARD" means a Performance Award made to a Participant who is an Employee that is intended to qualify as qualified performance-based compensation under Section 162(m) of the Code, as described in Section 8(a)(iii)(B) of the Plan. "RESTRICTED STOCK" means Common Stock that is restricted or subject to forfeiture provisions. "RESTRICTION PERIOD" means a period of time beginning as of the Grant Date of an Award of Restricted Stock and ending as of the date upon which the Common Stock subject to such Award is no longer restricted or subject to forfeiture provisions. "RETIREMENT" means termination from employment at age 62 or later with at least 10 years of service. "STOCK AWARD" means an Award in the form of shares of Common Stock or Stock Units, including an award of Restricted Stock. "STOCK UNIT" means a unit equal to one share of Common Stock (as determined by the Committee) granted to either an Employee or a Non-employee Director. "SUBSIDIARY" means any corporation of which the Corporation directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the stockholders of such corporation. 4. ELIGIBILITY. (a) Employees. Employees eligible for the grant of Employee Awards under this Plan are those Employee Directors and Employees who hold positions of 4 responsibility and whose performance, in the judgment of the Committee, can have a significant effect on the success of the Corporation and its Affiliates. (b) Directors. Members of the Board eligible for the grant of Director Awards under this Plan are those who are Non-employee Directors. 5. COMMON STOCK AVAILABLE FOR AWARDS. Subject to the provisions of paragraph 15 hereof, no Award shall be granted if it shall result in the aggregate number of shares of Common Stock issued under the Plan plus the number of shares of Common Stock covered by or subject to Awards then outstanding (after giving effect to the grant of the Award in question) to exceed 3,000,000 shares. No more than 1,000,000 shares of Common Stock shall be available for Stock Awards, other than Options or Performance Awards. The number of shares of Common Stock that are the subject of Awards under this Plan that are forfeited or terminated, expire unexercised, are settled in cash in lieu of Common Stock or in a manner such that all or some of the shares covered by an Award are not issued to a Participant or are exchanged for Awards that do not involve Common Stock, shall again immediately become available for Awards hereunder. If the Grant Price or other purchase price of any Option or other Award granted under the Plan is satisfied by tendering shares of Common Stock to the Corporation by either actual delivery or by attestation, or if the tax withholding obligation resulting from the settlement of any such Option or other Award is satisfied by tendering or withholding shares of Common Stock, only the number of shares of Common Stock issued net of the shares of Common Stock tendered or withheld shall be deemed delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. Shares of Common Stock delivered under the Plan in settlement, assumption or substitution of outstanding awards or obligations to grant future awards under the plans or arrangements of another entity shall not reduce the maximum number of shares of Common Stock available for delivery under the Plan, to the extent that such settlement, assumption or substitution is a result of the Corporation or an Affiliate acquiring another entity or an interest in another entity. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum as it may deem appropriate. The Board and the appropriate officers of the Corporation shall from time to time take whatever actions are necessary to file any required documents with governmental authorities, stock exchanges and transaction reporting systems to ensure that shares of Common Stock are available for issuance pursuant to Awards. 6. ADMINISTRATION. (a) This Plan shall be administered by the Committee except as otherwise provided herein. (b) Subject to the provisions hereof, the Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Corporation and in keeping with the objectives of this Plan. The Committee may, in its discretion, provide for the extension of the exercisability of an Award, accelerate the vesting or exercisability of an 5 Award, eliminate or make less restrictive any restrictions applicable to an Award, waive any restriction or other provision of this Plan (insofar as such provision relates to Awards) or an Award or otherwise amend or modify an Award in any manner that is either (i) not adverse to the Participant to whom such Award was granted or (ii) consented to by such Participant. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee, with respect to Awards, in the interpretation and administration of this Plan shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned. (c) No member of the Committee or officer of the Corporation to whom the Committee has delegated authority in accordance with the provisions of paragraph 7 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Corporation in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute. 7. DELEGATION OF AUTHORITY. Following the authorization of a pool of cash or shares of Common Stock to be available for Awards, the Committee may authorize the Chief Executive Officer of the Corporation or a committee consisting solely of members of the Board to grant individual Employee Awards from such pool pursuant to such conditions or limitations as the Committee may establish. The Committee may also delegate to the Chief Executive Officer and to other executive officers of the Corporation its administrative duties under this Plan (excluding its granting authority) pursuant to such conditions or limitations as the Committee may establish. The Committee may engage or authorize the engagement of a third party administrator to carry out administrative functions under the Plan. 8. AWARDS. (a) The Committee shall determine the type or types of Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Awards. Each Award may, in the discretion of the Committee, be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and, if required by the Committee, shall be signed by the Participant to whom the Award is granted and by an Authorized Officer for and on behalf of the Corporation. Awards may consist of those listed in this paragraph 8(a) and may be granted singly, in combination or in tandem. Awards may also be granted in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other plan of the Corporation or any of its Affiliates, including the plan of any acquired entity. An Award may provide for the grant or issuance of additional, replacement or alternative Awards upon the occurrence of specified events. All or part of an Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Corporation and its Affiliates, achievement of specific 6 business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. (i) Option. An Employee Award or Director Award may be in the form of an Option. The Grant Price of an Option shall be not less than the Fair Market Value of the Common Stock subject to such Option on the Grant Date. Notwithstanding anything contrary contained in this Plan including Sections 8(a)(i)(A) and (B), in no event shall the term of the Option extend more than ten (10) years after the Grant Date. Options may not include provisions that "reload" the option upon exercise. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded to Participants pursuant to this Plan, including the Grant Price, the term of the Options, the number of shares subject to the Option and the date or dates upon which they become exercisable, shall be determined by the Committee. (A) Except as is otherwise provided in the Award Agreement and subject to Committee discretion as provided in Section 6(b): (1) all rights to exercise an Option shall terminate within four (4) months after the date the Participant ceases to be an Employee, or ceases to be a Director, whichever may occur later, for any reason other than death or Disability (but in no event later than the end of the original period of the Option). (2) In the event of a Participant's death, an Option will terminate fifteen (15) months thereafter. (3) In the event of a Participant's Disability and resulting termination of employment, an Option will terminate six (6) months after such Participant's employment termination date. (4) In the event the employment of the Participant is terminated for cause (as determined by the Committee), all Options whether or not vested shall terminate immediately. (5) All unvested Options are cancelled upon termination of employment; except that all non-qualified options shall immediately vest upon Retirement. (B) However, if an Option is held by a Director who, on the date he or she ceases to be a Director (and, if also an Employee, ceases to be an Employee), is at least 62 years old and has at least ten (10) years of service as a Director, then all Common Stock subject to such Option will vest on the date the Director ceases to be a Director, and all rights to exercise such Option will terminate three (3) years thereafter. Also, if an Option is held by a Director who, on the date he or she ceases to be a Director (and, if also an Employee, ceases to be an Employee), is less than 62 years old or has less than ten (10) years of service as a Director, then 7 all Common Stock subject to such Option will continue to vest in accordance with its terms for a period of three (3) years following such date, and all rights to exercise such Option will terminate three (3) years after such date. If Options are awarded in the final two (2) years of the term of a Director who is approaching age 70, or an Employee Director who is at least age 55 with at least ten (10) years of service and his or her age plus years of service equal at least 70, the outside exercise date is the one provided in the Option or seven (7) years from the grant date, whichever occurs earlier. This paragraph 8(a)(i)(B) shall not apply to a Participant who is terminated for cause (as determined by the Committee). (ii) Stock Award. An Employee Award or Director Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any Stock Awards granted to Participants pursuant to this Plan shall be determined by the Committee; provided that any Stock Award which is not a Performance Award shall have a minimum Restriction Period of three years from the Grant Date, provided that (i) the Committee may provide for earlier vesting upon a termination of employment by reason of death, Disability or Retirement, (ii) such three-year minimum Restriction Period shall not apply to a Stock Award that is granted in lieu of salary or bonus, and (iii) vesting of a Stock Award may occur incrementally over the three-year minimum Restricted Period. (iii) Performance Award. Without limiting the type or number of Employee Awards or Director Awards that may be made under the other provisions of this Plan, an Employee Award or Director Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to any Performance Awards granted to Participants pursuant to this Plan shall be determined by the Committee; provided that any Stock Award which is a Performance Award shall have a minimum Restriction Period of one year from the Grant Date, provided that the Committee may provide for earlier vesting upon a termination of employment by reason of death, Disability or Retirement. The Committee shall set Performance Goals in its discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Participant. (A) Nonqualified Performance Awards. Performance Awards granted to Employees or Directors that are not intended to qualify as qualified performance-based compensation under Section 162(m) of the Code shall be based on achievement of such goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine. (B) Qualified Performance Awards. Performance Awards granted to Employees under the Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) of the Code shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance 8 Goals established by the Committee prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to the Employee, one or more business units or divisions of the Corporation or the applicable sector, or the Corporation as a whole, and if so desired by the Committee, by comparison with a peer group of companies. A Performance Goal may include one or more of the following: (a) earnings, either in the aggregate or on a per-share basis, reflecting such dilution of shares as the Committee deems appropriate, including operating earnings, pre-tax earnings, earnings before interest and taxes, and earnings before interest, taxes, depreciation and amortization; (b) gross or net revenue; (c) operating or net cash flow; (d) financial return ratios (e.g., return or net return on one or more of the following: assets, net assets, equity, invested capital, revenue); (e) margins, including net, operating or pre-tax margins; (f) total shareholder return; (g) financial ratios (e.g., debt to capitalization or debt to equity); (h) growth in financial measures or ratios (e.g., revenue, earnings, cash flow, stockholders' equity, margins); or (i) customer satisfaction, based on specified objective goals, or a customer survey sponsored by the Corporation or one or more business units or divisions of the Corporation. (C) Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and Qualified Performance Awards, it is the intent of the Plan to conform with the standards of Section 162(m) of the Code and Treasury Regulation Section 1.162-27(e)(2)(i), as to grants to those Employees whose compensation is, or is likely to be, subject to Section 162(m) of the Code, and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Qualified Performance Awards made pursuant to this Plan shall be determined by the Committee. (b) Notwithstanding anything to the contrary contained in this Plan, the following limitations shall apply to any Employee Awards made hereunder: 9 (i) no Participant may be granted, during any fiscal year, Employee Awards consisting of Options (including Options that are granted as Performance Awards) that are exercisable for more than 500,000 shares of Common Stock; (ii) no Participant may be granted, during any fiscal year, Employee Awards consisting of Stock Awards (including Stock Awards that are granted as Performance Awards) covering or relating to more than 250,000 shares of Common Stock (the limitation set forth in this clause (ii), together with the limitation set forth in clause (i) above and (c)(i) and (ii) below, being hereinafter collectively referred to as the "Stock Based Awards Limitations"); and (iii) no Participant may be granted Employee Awards under this Plan consisting of cash (including Awards that are granted as Performance Awards) in respect of any fiscal year having a value determined on the Grant Date in excess of an amount equal to 2% of the consolidated net income of the Corporation and its subsidiaries for such fiscal year plus the Black-Scholes Value, determined as of the Option Grant Date, of Options on 100,000 shares of Common Stock determined as if such Options had an Option Grant Date on the effective date of the Employee Award. (c) Notwithstanding anything to the contrary contained in this Plan the following limitations shall apply to any Director Awards made hereunder: (A) no Participant may be granted, during any fiscal year, Director Awards consisting of Options (including Options that are granted as Performance Awards) that are exercisable for more than 25,000 shares of Common Stock and (B) no Participant may be granted, during any fiscal year, Director Awards consisting of Stock Awards (including Stock Awards that are granted as Performance Awards) covering or relating to more than 15,000 shares of Common Stock. 9. CHANGE IN CONTROL. Notwithstanding the provisions of paragraph 8 hereof, unless otherwise expressly provided in the applicable Award Agreement, or as otherwise specified in the terms of an Equity Award, in the event of a Change in Control during a Participant's employment (or service as a Non-employee Director) with the Corporation or one of its Affiliates, each Equity Award granted under this Plan to the Participant shall become immediately vested and fully exercisable, with performance-based equity awards vested at target level (regardless of the otherwise applicable vesting or exercise schedules or Performance Goals provided for under the Award Agreement or the terms of the Equity Award). 10. PAYMENT OF AWARDS. (a) General. Payment made to a Participant pursuant to an Award may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If such payment is made in the 10 form of Restricted Stock, the Committee shall specify whether the underlying shares are to be issued at the beginning or end of the Restriction Period. In the event that shares of Restricted Stock are to be issued at the beginning of the Restriction Period, the certificates evidencing such shares (to the extent that such shares are so evidenced) shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto. In the event that shares of Restricted Stock are to be issued at the end of the Restricted Period, the right to receive such shares shall be evidenced by book entry registration or in such other manner as the Committee may determine. (b) Deferral. With the approval of the Committee, amounts payable in respect of Awards may be deferred and paid either in the form of installments or as a lump-sum payment. The Committee may permit selected Participants to elect to defer payments of some or all types of Awards or any other compensation otherwise payable by the Corporation in accordance with procedures established by the Committee and may provide that such deferred compensation may be payable in shares of Common Stock. Any deferred payment pursuant to an Award, whether elected by the Participant or specified by the Award Agreement or the terms of the Award or by the Committee, may be forfeited if and to the extent that the Award Agreement or the terms of the Award so provide. (c) Dividends, Earnings and Interest. Rights to dividends or Dividend Equivalents may be extended to and made part of any Stock Award, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest or other earnings on deferred cash payments and Dividend Equivalents for Stock Awards. (d) Substitution of Awards. Subject to paragraphs 13 and 15, at the discretion of the Committee, a Participant who is an Employee may be offered an election to substitute an Employee Award for another Employee Award or Employee Awards of the same or different type. 11. OPTION EXERCISE. Following exercise the Grant Price shall be paid in full in cash at the time of delivery of the stock or, if permitted by the Committee and elected by the optionee, the optionee may purchase such shares by means of tendering Common Stock valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee shall determine acceptable methods for Participants to tender Common Stock or other Awards. The Committee may provide for procedures to permit the exercise or purchase of such Awards by use of the proceeds to be received from the sale of Common Stock issuable pursuant to an Award. The Committee may adopt additional rules and procedures regarding the exercise of Options from time to time, provided that such rules and procedures are not inconsistent with the provisions of this paragraph. An optionee desiring to pay the Grant Price of an Option by tendering Common Stock using the method of attestation may, subject to any such conditions and in compliance with any such procedures as the Committee may adopt, do so by attesting to the ownership of Common Stock of the requisite value in which case the Corporation shall issue or otherwise deliver to the optionee upon such exercise a number of shares of Common Stock subject to the Option equal to 11 the result obtained by dividing (a) the excess of the aggregate Fair Market Value of the shares of Common Stock subject to the Option for which the Option (or portion thereof) is being exercised over the Grant Price payable in respect of such exercise by (b) the Fair Market Value per share of Common Stock subject to the Option, and the optionee may retain the shares of Common Stock the ownership of which is attested. 12. TAXES. The Corporation or its designated third party administrator shall have the right to deduct applicable taxes from any Employee Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes or other amounts required by law or to take such other action as may be necessary in the opinion of the Corporation to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Corporation of shares of Common Stock theretofore owned by the holder of the Employee Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made. The Committee may provide for loans, on either a short term or demand basis, from the Corporation to a Participant who is an Employee to permit the payment of taxes required by law. 13. AMENDMENT, MODIFICATION, SUSPENSION OR TERMINATION OF THE PLAN. The Board may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the stockholders of the Corporation to the extent such approval is required by applicable legal requirements or the requirements of the securities exchange on which the Corporation's stock is listed. Notwithstanding anything herein to the contrary, without the prior approval of the Corporation's stockholders, Options issued under the Plan will not be repriced, replaced, or regranted through cancellation or by decreasing the exercise price of a previously granted Option. 14. ASSIGNABILITY. Unless otherwise determined by the Committee and provided in the Award Agreement or the terms of the Award or to a family limited partnership, trust or similar entity pre-approved by the Committee, no Award or any other benefit under this Plan shall be assignable or otherwise transferable except by will, beneficiary designation or the laws of descent and distribution. In the event that a beneficiary designation conflicts with an assignment by will, the beneficiary designation will prevail. The Committee may prescribe and include in applicable Award Agreements or the terms of the Award other restrictions on transfer. Any attempted assignment of an Award or any other benefit under this Plan in violation of this paragraph 14 shall be null and void. 15. ADJUSTMENTS. (a) The existence of outstanding Awards shall not affect in any manner the right or power of the Corporation or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the 12 Corporation or its business or any merger or consolidation of the Corporation, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the existing Common Stock) or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above. (b) In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by outstanding Awards, (iii) the Grant Price or other price in respect of such Awards, (iv) the appropriate Fair Market Value and other price determinations for such Awards, and (v) the Stock Based Awards Limitations shall each be proportionately adjusted by the Board as appropriate to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Corporation, any consolidation or merger of the Corporation with another corporation or entity, the adoption by the Corporation of any plan of exchange affecting Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board may make appropriate adjustments to (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by Awards, (iii) the Grant Price or other price in respect of such Awards, (iv) the appropriate Fair Market Value and other price determinations for such Awards, and (v) the Stock Based Awards Limitations to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without increasing, the value of such Awards. In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board shall be authorized (x) to assume under the Plan previously issued compensatory awards, or to substitute new Awards for previously issued compensatory awards, including Awards, as part of such adjustment or (y) to cancel Awards that are Options and give the Participants who are the holders of such Awards notice and opportunity to exercise for 30 days prior to such cancellation. 16. RESTRICTIONS. No Common Stock or other form of payment shall be issued with respect to any Award unless the Corporation shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. Certificates evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions. 17. UNFUNDED PLAN. This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants under this Plan, any such accounts shall be used merely as a bookkeeping convenience, including bookkeeping accounts established by a third 13 party administrator retained by the Corporation to administer the Plan. The Corporation shall not be required to segregate any assets for purposes of this Plan or Awards hereunder, nor shall the Corporation, the Board or the Committee be deemed to be a trustee of any benefit to be granted under this Plan. Any liability or obligation of the Corporation to any Participant with respect to an Award under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement or the terms of the Award, and no such liability or obligation of the Corporation shall be deemed to be secured by any pledge or other encumbrance on any property of the Corporation. Neither the Corporation nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan. 18. RIGHT TO EMPLOYMENT. Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Corporation to terminate any Participant's employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Corporation. 19. SUCCESSORS. All obligations of the Corporation under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Corporation, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Corporation. 20. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Texas. 21. EFFECTIVENESS. The Plan will be submitted to the stockholders of the Corporation for approval at the 2003 annual meeting of shareholders and, if approved, will become retroactively effective as of April 1, 2003. 14 EX-10.15 11 d08056exv10w15.txt EX-10.15 DISTRIBUTION AGREEMENT EXHIBIT 10.15 ================================================================================ DISTRIBUTION AGREEMENT AMONG CENTEX CORPORATION, CAVCO INDUSTRIES, LLC AND CAVCO INDUSTRIES, INC. DATED AS OF May 30, 2003 ================================================================================ TABLE OF CONTENTS
PAGE ARTICLE I. DEFINITIONS.................................................................................2 SECTION 1.1. Certain Definitions.............................................................2 SECTION 1.2. Other Defined Terms.............................................................6 ARTICLE II. PRELIMINARY TRANSACTIONS...................................................................7 SECTION 2.1. Regulatory Filings and Related Actions..........................................7 SECTION 2.2. Nasdaq National Market Application..............................................8 SECTION 2.3. Business Separation.............................................................8 SECTION 2.4. Internal Distributions..........................................................9 SECTION 2.5. Resignations....................................................................9 SECTION 2.6. Ancillary Agreements...........................................................10 SECTION 2.7. Restated Cavco Charter and Restated Cavco Bylaws...............................10 ARTICLE III. THE DISTRIBUTION.........................................................................10 SECTION 3.1. Record Date and Distribution Date..............................................10 SECTION 3.2. Distribution Agent.............................................................10 SECTION 3.3. Delivery of Certificates.......................................................10 SECTION 3.4. The Distribution...............................................................10 SECTION 3.5. Fractional Shares..............................................................11 ARTICLE IV. ACCESS TO INFORMATION.....................................................................11 SECTION 4.1. Provision of Corporate Records.................................................11 SECTION 4.2. Access to Information..........................................................11 SECTION 4.3. Litigation Cooperation.........................................................12 SECTION 4.4. Reimbursement..................................................................12 SECTION 4.5. Treatment of Records...........................................................13 SECTION 4.6. Confidentiality................................................................13 ARTICLE V. CERTAIN OTHER AGREEMENTS...................................................................13 SECTION 5.1. Intercompany Accounts..........................................................13 SECTION 5.2. Further Assurances and Consents................................................14 ARTICLE VI. INDEMNIFICATION AND OTHER MATTERS.........................................................14 SECTION 6.1. Assumed Liabilities, Exculpation and Indemnification by Cavco..................14 SECTION 6.2. Exculpation and Indemnification by Centex......................................15 SECTION 6.3. Specific Indemnification Issues................................................15 SECTION 6.4. Notice and Payment of Claims...................................................16 SECTION 6.5. Defense of Third-Party Claims..................................................17
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ARTICLE VII...........................................................................................18 SECTION 7.1. Conditions.....................................................................18 ARTICLE VIII. DISPUTE RESOLUTION......................................................................19 SECTION 8.1. Application....................................................................19 SECTION 8.2. Initial Discussions............................................................19 SECTION 8.3. Appeal to Higher Management....................................................19 SECTION 8.4. Mediation......................................................................20 SECTION 8.5. Arbitration....................................................................20 ARTICLE IX. MISCELLANEOUS.............................................................................21 SECTION 9.1. Notices........................................................................22 SECTION 9.2. Interpretation.................................................................22 SECTION 9.3. Amendments; No Waivers.........................................................22 SECTION 9.4. Successors and Assigns.........................................................22 SECTION 9.5. Governing Law..................................................................23 SECTION 9.6. Counterparts; Effectiveness....................................................23 SECTION 9.7. Entire Agreement...............................................................23 SECTION 9.8. Severability...................................................................23 SECTION 9.9. Termination....................................................................23 SECTION 9.10. Survival......................................................................23 SECTION 9.11. Expenses......................................................................23 EXHIBITS Exhibit A -- Form of Administrative Services Agreement Exhibit B -- Form of Agreement to Assign Trademark Rights and Limited Consent to Use Centex Trademarks Exhibit C -- Form of Tax Sharing Agreement
ii DISTRIBUTION AGREEMENT This DISTRIBUTION AGREEMENT, dated as of May 30, 2003 (this "Agreement") is entered into by and among CENTEX CORPORATION, a Nevada corporation ("Centex"), CAVCO INDUSTRIES, LLC, a Delaware limited liability company ("Cavco LLC"), and CAVCO INDUSTRIES, INC., a Delaware corporation ("Cavco" and, together with Cavco LLC, the "Cavco Parties"); WITNESSETH: WHEREAS, the Board of Directors of Centex has determined that it is in the best interests of Centex and its shareholders to separate the businesses currently conducted by Cavco LLC from the other businesses conducted by Centex and its Subsidiaries (as hereinafter defined); WHEREAS, in furtherance of the foregoing, Centex intends to cause (i) certain intellectual property held in the name of Centex to be transferred to Cavco and (ii) Cavco LLC to be merged with and into Cavco; WHEREAS, upon the consummation of the transactions described above and subject to the fulfillment of the conditions set forth herein, Centex intends to effect the distribution (the "Distribution") of all of the outstanding shares of common stock, par value $.01 per share, of Cavco (the "Cavco Common Stock") on a pro rata basis to the holders of shares of common stock, par value $.25 per share, of Centex (the "Centex Common Stock") as of the Record Date (as hereinafter defined); WHEREAS, Centex and Cavco intend for the Distribution to qualify as a tax-free transaction under the Internal Revenue Code of 1986, as amended (the "Code"); WHEREAS, Centex and Cavco desire to set forth herein certain terms and provisions governing the principal transactions to be effected in connection with the Distribution; and WHEREAS, Centex and Cavco propose to enter into the Ancillary Agreements (as hereinafter defined) in order to set forth certain terms and provisions governing the relationship between the parties in connection with and after the Distribution; -1- NOW, THEREFORE, in consideration of the premises, the terms and conditions set forth herein, the mutual benefits to be gained from the performance thereof, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I. DEFINITIONS SECTION 1.1. Certain Definitions. The following terms, as used herein, have the following meanings: "AAA Holdings" means AAA Holdings, Inc., a Delaware corporation and an indirect wholly owned Subsidiary of Centex. "AAA Sub" means a Delaware limited liability company to be formed as a wholly owned Subsidiary of AAA. "Action" means any suit, action, arbitration, inquiry, investigation or other proceeding of any nature (whether criminal, civil, legislative, administrative, regulatory, prosecutorial or otherwise) by or before any arbitrator or Governmental Entity or similar Person or body. "Administrative Services Agreement" means the Administrative Services Agreement to be entered into on or before the Distribution Date between Cavco and Centex Service Company, which shall be substantially in the form of Exhibit A hereto, with such changes therein as Cavco and Centex Service Company shall mutually agree. "Affiliate" has the meaning assigned to such term in Rule 12b-2 of the Exchange Act; provided, however, that Centex and Cavco shall not be deemed to be Affiliates of each other for purposes of this Agreement. "Ancillary Agreements" means all agreements, certificates, deeds, instruments, assignments and other written arrangements (other than this Agreement) entered into between Centex and Cavco in connection with the transactions contemplated hereby, including the Administrative Services Agreement, the Intellectual Property Agreement and the Tax Sharing Agreement. "Business Day" means any day other than a Saturday, Sunday or one on which banks are authorized or required by law to close in New York, New York. "Cavco Business" means the businesses of manufacturing and selling manufactured homes, park model homes and commercial structures as conducted by -2- Cavco LLC and its Subsidiaries prior to the Merger and as the same is to be conducted by Cavco and its Subsidiaries after the Merger. "Cavco Group" means (i) prior to the Merger Date, Cavco LLC and its Subsidiaries and their respective successors and (ii) after the Merger Date, Cavco and its Subsidiaries and their respective successors, but in each case excludes Centex and its Subsidiaries. "Cavco Group Liabilities" means the following Liabilities (including Liabilities arising out of any litigation): (a) the Liabilities arising from or related to the ownership, operation or conduct of the Cavco Business or the use, possession or enjoyment of the assets used in connection therewith at any time prior to or on the Distribution Date, (b) all other Liabilities of the Cavco Group expressly contemplated by the Transaction Agreements as Liabilities of or to be assumed by Cavco or any member of the Cavco Group and (c) all other Liabilities that would be reflected as liabilities or obligations on a balance sheet dated as of the Distribution Date relating solely to the Cavco Business. Notwithstanding the foregoing, (i) Liabilities arising from or relating to the Transferred Intellectual Property shall be deemed "Cavco Group Liabilities" and (ii) Liabilities arising from or relating to the Excluded Plants shall not be deemed "Cavco Group Liabilities." "Centex Business" means the businesses of home building, investment real estate, financial services, construction products and construction services and all other businesses conducted by the Centex Group. "Centex Group" means Centex and its Subsidiaries and their respective successors, but excludes any members of the Cavco Group. "Centex Group Liabilities" means all Liabilities of Centex or any other member of the Centex Group (including Liabilities arising out of any litigation), except for the Cavco Group Liabilities. "Centex Service Company" means Centex Service Company, a Nevada corporation and an indirect wholly owned Subsidiary of Centex. "Commission" means the Securities and Exchange Commission. "Contract" means any agreement, lease, license, contract, treaty, note, mortgage, indenture, franchise, permit, concession, arrangement or other obligation. "CREC" means Centex Real Estate Corporation, a Nevada corporation and an indirect wholly owned Subsidiary of Centex. -3- "Damages" means, with respect to any Person, any and all damages (including punitive and consequential damages if not otherwise expressly excluded), losses, Liabilities, fines, costs and expenses incurred or suffered by such Person (including all expenses of investigation, all reasonable attorneys' and expert witnesses' fees and all other out-of-pocket expenses incurred in connection with any Action or threatened Action). "Distribution Agent" means Mellon Investor Services L.L.C. "Distribution Date" means the date and time as of which the Distribution shall be effected, which shall be determined by, or under the authority of, the Board of Directors of Centex. "Distribution Ratio" means .05 shares of Cavco Common Stock for each share of Centex Common Stock outstanding as of the Record Date. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Excluded Plants" means (i) the manufacturing plant previously owned by Cavco LLC located in Seguin, Texas and (ii) the manufacturing facility previously leased by Cavco LLC located in Belen, New Mexico, which in each case have been transferred and distributed to a wholly owned indirect Subsidiary of Centex. "Finally Determined" means, with respect to any Action, threatened Action or other matter, that the outcome or resolution of that Action, threatened Action or other matter either (i) has been decided through binding arbitration or by a Governmental Entity of competent jurisdiction by judgment, order, award or other ruling or (ii) has been settled or voluntarily dismissed by the parties pursuant to the dispute resolution procedure set forth in Article VIII or otherwise and, in the case of each of clauses (i) and (ii), the claimants' rights to maintain that Action, threatened Action or other matter have been finally adjudicated, waived, released, discharged, barred or extinguished or the judgment, order, ruling, award, settlement or dismissal (whether mandatory or voluntary, but if voluntary the dismissal must be final, binding and with prejudice as to all claims specifically pleaded in that Action, threatened Action or other matter) resolving the same is subject to no further appeal, vacatur proceeding or discretionary review. "Form 10" means the registration statement on Form 10 filed by Cavco with the Commission in order to effect the registration of Cavco Common Stock pursuant to Section 12(g) of the Exchange Act, as the same may be supplemented and amended from time to time. -4- "Governmental Entity" means any federal, state, local or foreign government or any court, tribunal, administrative agency or commission or other governmental or regulatory authority or agency, domestic, foreign or supranational. "Group" means the Cavco Group or the Centex Group, as the context requires. "Information Statement" means the information statement to be mailed to each holder of record of Centex Common Stock as of the Record Date in connection with the Distribution. "Intellectual Property Agreement" means the Agreement to Assign Trademark Rights and Limited Consent to Use Centex Trademarks to be entered into on or before the Distribution Date between Centex and Cavco, which shall be substantially in the form of Exhibit B hereto, with such changes thereto as Centex and Cavco shall mutually agree. "International" means Centex International, Inc., a Nevada corporation and a direct wholly owned Subsidiary of Centex. "IRS" means the Internal Revenue Service. "Law" means any applicable federal, state, local or foreign law, statute, ordinance, directive, rule, regulation, judgment, order, injunction, decree, arbitration award, agency requirement, license or permit of any Governmental Entity. "Liability" or "Liabilities" means any and all claims, debts, liabilities, assessments, costs, deficiencies, charges, demands, fines, penalties, damages, losses, disgorgements and obligations of any kind, character or description (whether absolute, contingent, matured, not matured, liquidated, unliquidated, accrued, known, unknown, direct, indirect, derivative or otherwise) whenever arising, including all costs, interest and expenses relating thereto (including all expenses of investigation, all reasonable attorneys' and expert witnesses' fees and all other out-of-pocket expenses in connection with any Action or threatened Action) and expressly including any of the foregoing arising from the negligence or other misconduct of an Indemnified Party. "Person" means any individual, corporation, general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, Governmental Entity or other entity of any kind or nature. "Record Date" means the close of business on the date determined by the Board of Directors of Centex (or by a committee of such Board of Directors or any other Person acting under authority duly delegated to that committee or Person by the Board of Directors of Centex or a committee of such Board of Directors) as the record -5- date for determining the holders of record of Centex Common Stock entitled to receive the Distribution. "Restated Cavco Bylaws" means the restated Bylaws of Cavco, which shall be in such form as the Board of Directors of Cavco reasonably determines with the approval of Centex. "Restated Cavco Charter" means the restated Certificate of Incorporation of Cavco, which shall be in such form as the Board of Directors of Cavco reasonably determines with the approval of Centex. "Subsidiary" means, with respect to any Person, (i) any corporation of which at least a majority of the securities or other ownership interests having by their terms ordinary voting power to elect a majority of the board of directors are directly or indirectly owned or controlled by such Person and its Subsidiaries, (ii) any partnership of which such Person or one of its Subsidiaries is a general partner or as to which such Person and its Subsidiaries are entitled to receive at least a majority of the assets upon the liquidation thereof or (iii) any limited liability company of which such Person or one of its Subsidiaries is a manager (or is entitled as a member to exercise management rights over the conduct of the business of such limited liability company) or as to which such Person and its Subsidiaries are entitled to receive at least a majority of the assets upon the liquidation thereof. "Tax Returns" has the meaning set forth in the Tax Sharing Agreement. "Tax Sharing Agreement" means the Tax Sharing Agreement to be entered into on or before the Distribution Date between Centex and its Affiliates and Cavco, which shall be substantially in the form attached as Exhibit C hereto, with such changes thereto as Centex and Cavco shall mutually agree. "Taxes" has the meaning set forth in the Tax Sharing Agreement. "Transaction Agreements" means this Agreement and the Ancillary Agreements. SECTION 1.2. Other Defined Terms. Each of the terms set forth below has the meaning set forth in the provision set forth opposite such term:
TERM SECTION ---- ------- AAA Section 8.5(b) Agreement Preamble Cavco Preamble Cavco Common Stock Recitals Cavco Damages Section 6.2(b)
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TERM SECTION ---- ------- Cavco Indemnifiable Liabilities Section 6.1(a) Cavco Indemnitees Section 6.2(a) Cavco Licenses Section 2.3(c) Cavco LLC Preamble Cavco Parties Preamble Centex Preamble Centex Common Stock Recitals Centex Damages Section 6.1(b) Centex Indemnifiable Liabilities Section 6.2(a) Centex Indemnitees Section 6.1(a) Code Recitals Corporate Records Section 4.1 Distribution Recitals Indemnified Party Section 6.4(a) Indemnifying Party Section 6.4(a) Merger Section 2.3(b) Merger Date Section 2.3(a) Transferred Intellectual Property Section 2.3(a)
ARTICLE II. PRELIMINARY TRANSACTIONS SECTION 2.1. Regulatory Filings and Related Actions. (a) Centex and Cavco have prepared, and Cavco has filed with the Commission, the Form 10, which includes the Information Statement as an exhibit thereto. Each of Centex and Cavco shall use commercially reasonable efforts to cause the Form 10 to become effective under the Exchange Act as promptly as reasonably practicable after the date upon which it is filed with the Commission. (b) Centex and Cavco have prepared the Information Statement. Centex shall, if required by law, file the Information Statement with the Commission. As promptly as practicable after the Form 10 has become effective, Centex shall mail the Information Statement to the holders of record of Centex Common Stock as of the Record Date. (c) Each of Centex and Cavco shall take all such actions as may be necessary or appropriate under the securities or blue sky laws of states or other jurisdictions within the United States in connection with the Distribution and the other transactions contemplated hereby. -7- SECTION 2.2. Nasdaq National Market Application. Centex and Cavco have prepared and filed with the National Association of Securities Dealers, Inc., an application for the Cavco Common Stock to be admitted for quotation on the Nasdaq National Market. Each of Centex and Cavco shall use commercially reasonable efforts to cause such application to be approved so that the Cavco Common Stock is admitted for quotation on the Nasdaq National Market prior to the Distribution Date. SECTION 2.3. Business Separation. (a) Prior to the date and time at which the Merger is consummated (the "Merger Date"), Centex shall grant, assign, contribute, convey, transfer and deliver to Cavco all intellectual property rights that are identified in the Intellectual Property Agreement as being transferred to Cavco (the "Transferred Intellectual Property"). (b) Prior to the Distribution Date, Centex shall cause Cavco LLC to be merged with and into Cavco, with Cavco being the sole surviving entity in the merger (the "Merger"). As a result of the Merger, (i) Cavco LLC shall cease to exist, (ii) Cavco shall succeed to all of the properties, assets, rights and entitlements of Cavco LLC and shall be subject to all of its Liabilities and (iii) the total number of outstanding shares of Cavco Common Stock shall be increased to equal the product of the Distribution Ratio and the number of shares of Centex Common Stock outstanding on the Record Date. (c) Centex and the Cavco Parties shall use commercially reasonable efforts to cooperate in transferring to Cavco all licenses, permits and authorizations that relate to the Cavco Business (the "Cavco Licenses") but that are held in the name of Centex or any other member of the Centex Group or any of their respective employees, officers, directors, stockholders, agents or otherwise (or, in the case of any Cavco Licenses that are held in the name of Centex or any other member of the Centex Group or any of their respective employees, officers, directors, stockholders, agents or otherwise that are not transferable under applicable Law, obtaining new licenses, permits and authorizations from the relevant Governmental Entities in the name of Cavco to replace such Cavco Licenses). In the event any such transfer of the Cavco Licenses (or the grant of any new licenses, permits and authorizations to replace such Cavco Licenses) cannot be effected prior to the Distribution Date, Centex shall, except as prohibited by applicable Law, allow Cavco to operate the Cavco Business under such Cavco Licenses until such transfer can be effected (or new licenses, permits and authorizations are granted by the relevant Governmental Entities). (d) Centex and the Cavco Parties shall use commercially reasonable efforts to have Centex and any other member of the Centex Group released, on or prior to the Distribution Date or as soon as practicable thereafter, as a guarantor in respect of any guarantees of any Cavco Group Liabilities. -8- (e) It is the intention of the parties that all material transactions contemplated by this Section 2.3 shall be consummated prior to or on the Distribution Date; provided, however, that, to the extent that any such transactions shall not have been consummated prior to or on the Distribution Date, Centex and Cavco shall cooperate to effect such transactions as promptly as practicable after Distribution Date. Nothing contained in this Agreement shall be deemed to require the transfer of any properties, assets, rights or entitlements, the assumption of any Liabilities or the release of guarantees which, by their terms or by operation of Law, cannot be transferred, assumed or released; provided, however, that Centex and the Cavco Parties shall cooperate to seek to obtain any necessary consent or approval for any transfer, assumption or release contemplated by this Section 2.3. In the event that any such transfer, assumption or release has not been consummated as of the Distribution Date, then, from and after the Distribution Date, the party who retains the applicable asset or Liability or who is not able to obtain a release of the applicable guarantee shall hold such asset in trust for the use and benefit of the party entitled thereto (at the expense of the party entitled thereto), shall retain such Liability for the account of the party by whom such Liability is to be assumed or shall hold the other parties harmless against the guarantee to be released, as the case may be, and take such other action as may be reasonably requested by the party to whom such asset is to be transferred, from whom such liability is to be assumed or for the benefit of whom such guarantee is to be released, as the case may be, in order to place such party, insofar as is reasonably possible, in the same position as would have existed had such asset been transferred, such liability assumed or such guarantee released as contemplated hereby. As and when any such asset becomes transferable, such liability becomes assumable or such release is obtainable, the transfer, assumption or release thereof shall be effected forthwith by the parties hereto. SECTION 2.4. Internal Distributions. Immediately after the Merger Date, Centex shall cause (i) AAA Holdings to distribute all of the outstanding shares of Cavco Common Stock to CREC, (ii) CREC to distribute all of the outstanding shares of Cavco Common Stock to International and (iii) International to distribute all of the outstanding shares of Cavco Common Stock to the Corporation. SECTION 2.5. Resignations. Centex shall cause all of its directors, officers and employees who will be officers or employees of the Centex Group from and after the Distribution Date (as designated by Centex) to resign, effective as of the Distribution Date, from all positions as directors, officers or employees of Cavco or any its Subsidiaries; provided, however, that Mr. Laurence E. Hirsch, who is an executive officer and Chairman of the Board of Directors of Centex, shall not resign his position as a member of the Board of Directors of Cavco. Cavco shall cause all of its directors, officers and employees who will be officers and employees of Cavco or any of its Subsidiaries after the Distribution Date (as jointly designated by Centex and Cavco) to resign, effective as of the Distribution Date, from all positions as officers or employees of Centex or any member of the Centex Group in which they serve. -9- SECTION 2.6. Ancillary Agreements. Prior to or on the Distribution Date, (i) Centex shall cause Centex Service Company to, and Cavco shall, enter into the Administrative Services Agreement, (ii) Centex and Cavco shall enter into the Intellectual Property Agreement and (iii) Centex, on behalf of itself and its Affiliates, and Cavco shall enter into the Tax Sharing Agreement. SECTION 2.7. Restated Cavco Charter and Restated Cavco Bylaws. Prior to or on the Distribution Date, (i) Cavco and Centex shall take such action as is required to adopt the Restated Cavco Charter and (ii) Cavco shall take such action as is required to adopt the Restated Cavco Bylaws. ARTICLE III. THE DISTRIBUTION SECTION 3.1. Record Date and Distribution Date. Subject to the fulfillment of the conditions set forth in Section 7.1, the Board of Directors of Centex (or a duly authorized committee thereof) shall, in the manner provided for under applicable Law, declare the Distribution and establish the Record Date and the Distribution Date and any appropriate procedures in connection with the Distribution. SECTION 3.2. Distribution Agent. Prior to or on the Distribution Date, Centex shall enter into an agreement with the Distribution Agent providing for, among other things, the delivery to the holders of Centex Common Stock as of the Record Date of certificates evidencing the shares of Cavco Common Stock included in the Distribution. SECTION 3.3. Delivery of Certificates. Prior to the Distribution Date, Centex shall deliver to the Distribution Agent, for the benefit of the holders of Centex Common Stock as of the Record Date, a stock certificate or certificates, representing all of the outstanding shares of Cavco Common Stock to be owned by Centex as of the Distribution Date. After the Distribution Date, Cavco shall, upon request of the Distribution Agent, provide to the Distribution Agent any additional certificates representing shares of Cavco Common Stock that the Distribution Agent shall require to effect the Distribution. SECTION 3.4. The Distribution. Subject to the terms and conditions hereof, Centex shall instruct the Distribution Agent to distribute, on or as soon as practicable after the Distribution Date, to each holder of record of Centex Common Stock as of the Record Date a number of shares of Cavco Common Stock equal to the result obtained by multiplying the Distribution Ratio by the number of shares of Centex Common Stock held by such holder as of the Record Date. Such distribution shall be effected by the mailing of stock certificates to such holders or, if practicable, by book-entry -10- transfer. All of the shares of Cavco Common Stock issued in the Distribution shall have been duly authorized and shall be fully paid and nonassessable. SECTION 3.5. Fractional Shares. Notwithstanding anything to the contrary contained in this Article III, no fractional shares of Cavco Common Stock shall be distributed in the Distribution. The parties shall direct the Distribution Agent to determine the number of fractional shares of Cavco Common Stock allocable to each holder of record of Centex Common Stock as of the Record Date. After the Distribution Date, upon the determination by the Distribution Agent of such number of fractional shares, the Distribution Agent, acting on behalf of the holders thereof, shall sell such fractional shares for cash on the open market at the then-prevailing market prices and shall disburse to each holder entitled thereto, in lieu of any fractional share, without interest, that holder's ratable share of the proceeds of that sale, after making appropriate deductions of the amounts required, if any, to be withheld for United States federal income tax purposes, and to repay expenses of the Distribution Agent in connection with such sale. ARTICLE IV. ACCESS TO INFORMATION SECTION 4.1. Provision of Corporate Records. Except as otherwise specifically set forth in the Transaction Agreements, as soon as practicable after the Distribution Date, each Group shall deliver to the other Group all documents, Contracts, books, records and data (including minute books, stock registers, stock certificates and documents of title) (collectively, "Corporate Records") in its possession relating primarily to the other Group or its business, assets and affairs; provided, however, that if any such documents, Contracts, books, records or data relate to both Groups or their businesses, assets and affairs, each such Group shall provide to the other Group true and complete copies of such documents, Contracts, books, records or data. Data stored in electronic form shall be provided in the format in which it existed at the Distribution Date, except as otherwise specifically set forth in the Transaction Agreements. SECTION 4.2. Access to Information. From and after the Distribution Date, each Group shall afford to the other Group and its accountants, counsel and other designated representatives reasonable access during normal business hours to all personnel, documents, Contracts, books, records, computer data and other data in such Group's possession relating to the other Group or the business and affairs of such other Group (other than data and information subject to an attorney-client or other privilege that is not specifically subject to the provisions of this Article IV), insofar as such access is reasonably required by such other Group for a reasonable and appropriate purpose, including for audit, accounting, regulatory compliance and disclosure and reporting purposes. -11- SECTION 4.3. Litigation Cooperation. From and after the Distribution Date: (a) Each Group shall use all reasonable efforts to make available to the other Group and its accountants, counsel and other designated representatives, upon written request, its current and former directors, officers, employees and representatives as witnesses, and shall otherwise cooperate with the other Group, to the extent reasonably required in connection with any Action or threatened Action arising out of either Group's business and operations in which the requesting party may from time to time be involved, except for any action in which one Group is asserting a claim against or seeking relief from the other Group and except to the extent that there is a conflict of interest in the Action or threatened Action between the requesting Group and itself. (b) Each Group shall promptly notify the other Group, upon its receipt or the receipt by any of its members, of a request or requirement (by written questions, interrogatories, requests for information or documents, subpoenas, civil investigative demands or other similar processes) that relates to the business and operations of the other Group that could reasonably be regarded as calling for the inspection or production of any documents or other information in its possession, custody or control. Each Group shall assert and maintain, or cause its members to assert and maintain, any applicable claim to privilege, immunity, confidentiality or protection in order to protect such documents and other information from disclosure, and shall seek to condition any disclosure that may be required on such protective terms as may be appropriate. No Group may voluntarily waive, undermine or fail to take any action reasonably necessary to preserve an applicable privilege without the prior written consent of the affected party (or any affected Group member or Affiliates of any such party) except, in the opinion of such party's counsel, as required by law. (c) Each Group shall enter into such joint defense agreements with the other Group, in customary form, as Centex and Cavco shall determine are necessary, appropriate or advisable. SECTION 4.4. Reimbursement. Except to the extent that any member of one Group is obligated to indemnify any member of the other Group under Article VI for such cost or expense, each Group providing information or witnesses to the other Group, or otherwise incurring any expense in connection with cooperating, under Sections 4.1, 4.2 or 4.3, shall be entitled to receive from the recipient thereof, upon the presentation of reasonably detailed invoices therefor, payment for all out-of-pocket costs and expenses that may reasonably be incurred in providing such information, witnesses or cooperation. -12- SECTION 4.5. Treatment of Records. Except as otherwise required by law or agreed to in writing, upon compliance with the requirements set forth in Section 4.1, each of Centex and Cavco shall, and shall cause the members of its respective Group to, destroy or otherwise dispose of any photocopies or similar reproductions of all Corporate Records provided to, or relating primarily to, the other Group or its business, assets and affairs; provided, however, that prior to any such destruction, the other party shall be provided the opportunity to take possession of such records if it so desires. Any Corporate Records received by any member of one Group after the Distribution Date and relating primarily to the other Group or its business, assets or affairs shall promptly be delivered to such other Group, and retained, in accordance with the procedures set forth in Section 4.1 and this Section 4.5. Notwithstanding the foregoing, there shall be no requirement for Centex or Cavco, or any members of their respective Groups, to destroy or otherwise dispose of any Corporate Records (or photocopies or similar reproductions thereof) to the extent that such Corporate Records relate to its business, assets and affairs. SECTION 4.6. Confidentiality. Except as may be more specifically addressed in any Transaction Agreement, each party shall hold, and shall cause its consultants and advisors to hold, in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of Law, all confidential or proprietary information concerning the other party hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (i) previously known by the party to which it was furnished, (ii) in the public domain through no fault of the party to which it was furnished or (iii) independently developed by the receiving party), and each party shall not release or disclose such information to any other Person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors who shall be advised of the provisions of this Section 4.6. ARTICLE V. CERTAIN OTHER AGREEMENTS SECTION 5.1. Intercompany Accounts. Except as otherwise specifically set forth in any of the Transaction Agreements, all intercompany loan balances, accounts receivable and accounts payable between any member of one Group and any member of another Group in existence at the Distribution Date shall be settled and paid in full, in cash or other immediately available funds, by the party or parties owing such obligations as soon as practicable (but in no event more than 60 calendar days) after the Distribution Date. If, at any time after the Distribution Date, either party receives payments belonging to the other party, the recipient shall promptly account for and remit said payment to the other party. -13- SECTION 5.2. Further Assurances and Consents. In addition to the actions specifically provided for elsewhere in the Transaction Agreements, each of Centex and Cavco shall use its reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things, reasonably necessary, proper or advisable under applicable Laws, regulations and agreements or otherwise to consummate and make effective the transactions contemplated by this Agreement, including using its reasonable efforts to obtain any consents and approvals and to make any filings and applications necessary or desirable in order to consummate the transactions contemplated by this Agreement. Centex and Cavco agree to enter into and execute such additional documents as may be reasonably necessary, proper or advisable to effect the transactions contemplated by the Transaction Agreements. ARTICLE VI. INDEMNIFICATION AND OTHER MATTERS SECTION 6.1. Assumed Liabilities, Exculpation and Indemnification by Cavco. (a) From and after the Distribution Date, Cavco shall, without any further responsibility or liability of, or recourse to, Centex or any Affiliate of Centex or any of their respective directors, stockholders, officers, employees, agents, consultants, representatives, successors, transferees or assignees (collectively, the "Centex Indemnitees"), absolutely and irrevocably assume and be solely liable and responsible for the Cavco Group Liabilities. Neither Centex nor any of the Centex Indemnitees shall be liable to Cavco or any Affiliate of Cavco or any of their respective directors, stockholders, officers, employees, agents, consultants, customers, representatives, successors, transferees or assignees for any reason whatsoever on account of (i) any Cavco Group Liabilities or (ii) any Liabilities arising from the breach by Cavco of any of its obligations under this Agreement; provided that Centex shall remain liable to Cavco for any breach by Centex of any of its obligations under this Agreement. The matters with respect to which Cavco assumes liability pursuant to clauses (i) and (ii) above are referred to herein as the "Cavco Indemnifiable Liabilities." (b) Cavco shall indemnify, save and hold harmless each of the Centex Indemnitees from and against all (i) all Cavco Indemnifiable Liabilities and (ii) except as otherwise provided in the Transaction Agreements, all Liabilities that are or are alleged to be related to, arising from, or associated with the ownership, operation or conduct of the Cavco Business or the use, possession or enjoyment of the assets used in connection therewith at any time after the Distribution Date (all of which are collectively called the "Centex Damages"). In addition, if Centex so elects in its sole discretion, Cavco shall defend any or all of the Centex Indemnities in any Action in which any Centex Damages are asserted against any Centex Indemnitees. -14- (c) Centex Damages with respect to which, but only to the extent that, any proceeds are received by Centex, or by any of its Affiliates, from any third party insurance policy (and are non-reimbursable by Centex under any self insurance policy), shall not be the subject of indemnification under this Agreement. SECTION 6.2. Exculpation and Indemnification by Centex. (a) Centex shall, without any further responsibility or liability of, or recourse to, Cavco or any Affiliate of Cavco or any of their respective directors, stockholders, officers, employees, agents, consultants, representatives, successors, transferees or assignees (collectively, the "Cavco Indemnitees"), absolutely and irrevocably be solely liable and responsible for the Centex Group Liabilities. Neither Cavco nor any of the other Cavco Indemnitees shall be liable to Centex or any Affiliate of Centex or any of their respective directors, stockholders, officers, employees, agents, consultants, customers, representatives, successors, transferees or assignees for any reason whatsoever on account of (i) any Centex Group Liabilities or (ii) any Liabilities arising from the breach by Centex of any of its obligations under this Agreement; provided that Cavco shall remain liable to Centex for any breach by Cavco of any of its obligations under this Agreement. The matters with respect to which Centex retains liability pursuant to clauses (i) and (ii) above are referred to herein as the "Centex Indemnifiable Liabilities." (b) Centex shall indemnify, save and hold harmless each of the Cavco Indemnitees from and against (i) all Centex Indemnifiable Liabilities and (ii) except as otherwise provided in the Transaction Agreements, all Liabilities that are or are alleged to be related to, arising from, or associated with the ownership, operation or conduct of the Centex Businesses or the use, possession or enjoyment of the assets used in connection therewith at any time after the Distribution Date, other than the Cavco Indemnifiable Liabilities (all of which are collectively called the "Cavco Damages"). In addition, if Cavco so elects in its sole discretion, Centex shall defend any or all of the Cavco Indemnities in any Action in which any Cavco Damages are asserted against any Cavco Indemnitees. (c) Cavco Damages with respect to which, but only to the extent that, any proceeds are received by, or on behalf of, Cavco or by any of its Affiliates, from any third party insurance policy (and are non-reimbursable under any self insurance policy), shall not be the subject of indemnification under this Agreement. SECTION 6.3. Specific Indemnification Issues. (a) It is the express intention of the parties hereto that each party to be indemnified pursuant to this Article VI shall be indemnified and held harmless from and against all Damages as to which indemnity is provided for hereunder, NOTWITHSTANDING THAT ANY SUCH DAMAGES ARISE OUT OF OR RESULT FROM THE ORDINARY, STRICT, SOLE, OR CONTRIBUTORY NEGLIGENCE, OR THE STRICT LIABILITY (OR OTHER LIABILITY WITHOUT FAULT) OF -15- SUCH PARTY AND REGARDLESS OF WHETHER ANY OTHER PARTY (INCLUDING ANOTHER PARTY TO THIS AGREEMENT) IS OR IS NOT ALSO NEGLIGENT OR OTHERWISE LIABLE WITH RESPECT TO THE MATTER IN QUESTION. (b) It is acknowledged that after the Distribution Date the parties will have negotiated business relationships, which relationships will be described in the Contracts, agreements and other documents entered into in the normal course of business. Such documents may include agreements by the parties and their Affiliates and Subsidiaries to supply, after the Distribution Date, materials, products and services and to lease facilities, tangible and intangible property. Such business relationships shall not be subject to the indemnity provisions hereof, unless the parties expressly agree to the contrary in the agreements governing such relationships. (c) Except as otherwise provided herein, in the event an Action is brought by a third party in which the liability as between Centex and Cavco is Finally Determined to be joint or in which the entitlement to indemnification hereunder is not determinable, the parties shall negotiate in good faith in an effort to agree, as between Centex and Cavco, on the proper allocation of liability or entitlement to indemnification, as well as the proper allocation of the costs of any joint defense or settlement pursuant to Section 6.5, all in accordance with the provisions of, and the principles set forth in, this Agreement. In the absence of any such agreement, such allocation of liability or entitlement to indemnification, and such allocation of costs, shall be subject to ultimate resolution between Centex and Cavco pursuant to Article IX. SECTION 6.4. Notice and Payment of Claims. (a) If any party to this Agreement or a person entitled to indemnification under this Agreement (an "Indemnified Party") determines that it is or may be entitled to a defense or indemnification by Centex or Cavco, as the case may be (the "Indemnifying Party"), under this Agreement, the Indemnified Party shall deliver promptly to the Indemnifying Party a written notice and demand for indemnification, specifying the basis for the claim for indemnification, the nature of the claim, and, if known, the amount for which the Indemnified Party reasonably believes it is entitled to be indemnified. The Indemnifying Party shall have 30 days from receipt of such notice in which to: (w) assume the defense of such litigation or claim; (x) pay the claim in immediately available funds; (y) reserve its rights pending negotiations under Section 6.5 or (z) object in accordance with Section 6.4(b). This 30-day period may be extended by express agreement of the parties. (b) An Indemnifying Party may object to, or reserve its rights with respect to, the claim for indemnification set forth in any notice delivered by the Indemnified Party pursuant to Section 6.4(a) so long as it acts in good faith and with a reasonable basis for its belief that it is not obligated to indemnify the Indemnified Party. -16- SECTION 6.5. Defense of Third-Party Claims. (a) If the Indemnified Party's claim for Indemnification is based, under this Agreement, on an Action, judicial or otherwise, brought by a third party, and the Indemnifying Party does not object under Section 6.4(b), the Indemnifying Party may, participate in the defense of such Action and may assume the defense of such Action with counsel satisfactory to the Indemnified Party if (i) the Indemnified Party agrees to assumption thereof by the Indemnifying Party or (ii) the Indemnifying Party shall have confirmed in writing (without reservation or qualification) its obligation to provide indemnification for the liability asserted in such action. If the Indemnified Party shall reasonably conclude that its interests in such Action are materially different from those of the Indemnifying Party or that it may have defenses that are different from or in addition to those available to the Indemnifying Party, the Indemnified Party may use separate counsel to protect such interests and assert such defenses and otherwise participate in the defense of such Action. If the Indemnifying Party shall assume the defense with counsel satisfactory to the Indemnified Party, the Indemnifying Party shall not be liable for any legal expenses (other than investigation expenses) subsequently incurred by the Indemnified Party, unless the Indemnified Party shall have employed separate counsel in accordance with the preceding sentence. (b) The Indemnifying Party shall pay to the Indemnified Party in immediately available funds the amounts for which the Indemnified Party is entitled to be indemnified within 30 days after such third party claim is Finally Determined (or within such longer period as agreed to by the parties). (c) In the event an Action is brought by a third party in which the liability as between Centex and Cavco is alleged to be joint or in which the entitlement to indemnification hereunder is not determinable or as to which there has been a reservation of rights, the parties shall cooperate in a joint defense. Such joint defense shall be under the general management and supervision of the party which is expected to bear the greater share of the liability; provided, however, that neither party shall settle or compromise any such joint defense matter without the consent of the other. The costs of such joint defense shall be borne as the parties may agree, or in the absence of such agreement, such costs shall be borne by the party incurring such costs, subject to ultimate resolution pursuant to Article IX hereof. -17- ARTICLE VII. CONDITIONS SECTION 7.1. Conditions. The obligations of Centex and Cavco to consummate the Distribution shall be subject to the fulfillment (or, if permissible under applicable law, the waiver by Centex) of the following conditions at or prior to the Distribution Date: (a) The Form 10 shall have become effective under the Exchange Act, and no stop order with respect thereto shall be in effect; (b) The Information Statement shall have been mailed to the holders of record of Centex Common Stock as of the Record Date; (c) The shares of Cavco Common Stock to be delivered in the Distribution shall have been approved for quotation on the Nasdaq National Market; (d) The transactions contemplated by Section 2.3 shall have been consummated on terms satisfactory to Centex in its sole discretion; (e) Each of the Ancillary Agreements shall have been executed and delivered by the Persons who are proposed to become parties thereto; (f) The Restated Cavco Charter and Restated Cavco Bylaws shall be in effect; (g) all consents, approvals and authorizations of any Governmental Entity required for the consummation of the Distribution and the other transactions contemplated hereby and by the Ancillary Agreements shall have been obtained and shall be in full force and effect, and such consents, approvals and authorizations shall be in form and substance satisfactory to Centex in its sole discretion; (h) no order, preliminary or permanent injunction or decree shall have been issued by any court or agency of competent jurisdiction or any other Governmental Entity and no other legal restraint or prohibition shall be in effect that prevents or makes unlawful the Distribution; (i) the Centex Board of Directors shall have received an opinion from a nationally recognized valuation firm, which opinion shall be in form and substance satisfactory to Centex in its sole discretion, and Centex shall otherwise be reasonably satisfied that, after giving effect to the Distribution, (i) the present fair saleable value and the fair value of the assets of Centex and Cavco will exceed their liabilities; (ii) Cavco and Centex will be able to pay their debts as such debts mature during the normal course of business; (iii) Cavco will not have unreasonably small capital for the business -18- in which it is and will be engaged; and (iv) the total assets of Centex will exceed its total liabilities, plus the amount that would be needed, if Centex were dissolved at the time of the distribution, to satisfy any preferential rights of stockholders whose preferential rights are superior to those receiving the distribution; and (j) Centex shall have received a ruling from the IRS to the effect that the Distribution will be a tax-free transaction for federal income tax purposes, and such ruling shall be in form and substance satisfactory to Centex in its sole discretion. ARTICLE VIII. DISPUTE RESOLUTION SECTION 8.1. Application. Any dispute arising out of or relating to this Agreement, including the breach or termination hereof, shall be resolved in accordance with the procedures specified in this Article VIII, which shall be the sole and exclusive procedure for the resolution of any such disputes; provided, however, that a party may file a complaint to seek a preliminary injunction or other provisional judicial relief, if in its sole judgment such action is necessary. Despite such action the parties will continue to participate in good faith in the procedures set forth in this Article VIII and each party is required to continue to perform its obligations under this Agreement pending final resolution of any dispute arising out of or relating to this Agreement, unless to do so would be impossible or impracticable under the circumstances. All negotiations between the parties pursuant to this Article VIII are confidential and shall be treated as compromise and settlement negotiations for purposes of applicable rules of evidence. The requirements of this Article VIII shall not be deemed a waiver of any right of termination under this Agreement. SECTION 8.2. Initial Discussions. Any dispute shall be first discussed by an appropriate senior executive officer of each of the parties or his or her designee. Any party may initiate such discussions by giving the other party written notice specifying in detail the nature of the dispute. Within 15 Business Days after delivery of the notice, the receiving party shall submit to the other a written response, including a statement of such party's position and a summary of arguments supporting such position. Within 10 Business Days (or such other period as agreed upon by the parties) after receipt of such response, the executives of both parties shall meet at a mutually acceptable time and place, and thereafter as often as they reasonably deem necessary, to attempt to resolve the dispute. All reasonable requests for information made by one party to the other shall be honored. SECTION 8.3. Appeal to Higher Management. If, in spite of such discussions, no mutually acceptable solution is reached within 30 Business Days after the delivery of one party's written request to the other party to discuss such dispute, any -19- such dispute shall be referred to the Chief Legal Officer of Centex and the Chief Executive Officer of Cavco. SECTION 8.4. Mediation. If the dispute is not resolved within 30 Business Days (or such other period as agreed upon by the parties) following the submission of the dispute to senior management pursuant to Section 8.3, the parties shall attempt to resolve the dispute employing non-binding mediation under the then-current CPR Mediation Procedure. If within 10 Business Days (or any other period agreed upon by the parties) after the commencement of such mediation the dispute still has not been resolved, each of the parties may commence arbitration proceedings pursuant to Section 8.5. SECTION 8.5. Arbitration. The parties hereto agree that all disputes, controversies or claims that may arise out of the transactions contemplated by this Agreement, or the breach, termination or invalidity thereof, shall be submitted to, and determined by, binding arbitration in accordance with the following procedures: (a) Either Centex or Cavco may submit a dispute, controversy or claim to arbitration by giving the other party written notice to such effect, which notice shall describe, in reasonable detail, the facts and legal grounds forming the basis for the filing party's request for relief. The arbitration shall be held before one neutral arbitrator in Dallas, Texas. (b) Within 30 days after the other party's receipt of such demand, Centex and Cavco shall mutually determine who the arbitrator will be. If the parties are unable to agree on the arbitrator within that time period, the arbitrator shall be selected by the American Arbitration Association ("AAA"). In any event, the arbitrator shall have a background in, and knowledge of, transactions in the homebuilding or manufactured housing industries and shall otherwise be an appropriate person based on the nature of the dispute. If a person with experience in such matters is not available, the arbitrator shall be chosen from the retired federal judges pool. (c) The arbitration shall be governed by the Commercial Arbitration Rules of the AAA, except as otherwise expressly provided in this Section 8.5. However, the arbitration shall be administered by any organization mutually agreed to in writing by the parties. If the parties are unable to agree on the organization to administer the arbitration, it shall be administered by the AAA. (d) Discovery shall be limited to the request for and production of documents, depositions and interrogatories. Interrogatories shall be allowed only as to the names, last known addresses and telephone numbers of all persons having knowledge of facts relevant to the dispute and a brief description of that person's knowledge and the names, addresses and telephone numbers of any experts who may be called as an expert witness or who have been used for consultation. All discovery shall be guided by the Federal Rules of Civil Procedure. All issues concerning discovery -20- upon which the parties cannot agree shall be submitted to the arbitrator for determination. (e) In rendering an award, the arbitrator shall determine the rights and obligations of the parties according to the substantive and procedural laws of the State of Delaware. (f) The decision of, and award rendered by, the arbitrator shall be determined no more than 30 days after the selection of the arbitrator and shall be final and binding on the parties and shall not be subject to appeal. Judgment on the award may be entered in and enforced by any court of competent jurisdiction. (g) Each party shall bear its own costs and expenses (including filing fees) with respect to the arbitration, including one-half of the fees and expenses of the arbitrator. ARTICLE IX. MISCELLANEOUS SECTION 9.1. Notices. Any and all notices or other communications required or permitted to be given under any of the provisions of this Agreement shall be in writing and may be delivered by hand, by certified mail, return receipt requested, postage prepaid, or by nationally recognized overnight courier service, or by facsimile transmission addressed as follows: If to Centex: Centex Corporation 2728 North Harwood Dallas, Texas 75201 Fax No.: (214) 981-6855 Attention: Chief Legal Officer If to Cavco: Cavco Industries, Inc. 1001 North Central Avenue Suite 800 Phoenix, Arizona 85004 Fax No.: (602) 256-6189 Attention: Chief Executive Officer -21- SECTION 9.2. Interpretation. (a) The article, section and paragraph headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said articles, sections or paragraphs. Whenever the words "include," "includes" and "including" are used in this Agreement, they shall be deemed followed by the words "without limitation." Whenever a reference is made in this Agreement to a "party" or "parties," such reference shall be to a party or parties to this Agreement unless otherwise indicated. Whenever the context requires, the use of any gender herein shall be deemed to be or include the other genders and the use of the singular herein shall be deemed to include the plural (and vice versa). The use of the words "hereof" and "herein" and words of similar import shall refer to this entire Agreement and not to any particular article, section, subsection, clause, paragraph or other subdivision of this Agreement, unless the context otherwise requires. (b) Each party hereto stipulates and agrees that the rule of construction to the effect that any ambiguities are to be or any be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor any party against the other, and that no party, including any drafting party, shall have the benefit of any legal presumption (including "meaning of the authors") or the detriment of any burden of proof by reason of any ambiguity or uncertain meaning contained in this Agreement. (c) If this Agreement contains any terms and provisions (including, but not limited to, the provisions of Article VI) that govern or otherwise apply, or could be construed to govern or otherwise apply, to the preparation or filing of Tax Returns, the allocation of liability for Taxes or any other matter relating to the obligations of the parties with respect to Taxes or any Action arising in connection therewith, to the extent that any such terms and provisions are inconsistent in any respect with the terms and provisions of the Tax Sharing Agreement, the terms and conditions of the Tax Sharing Agreement shall control and shall be deemed to supersede the terms and provisions hereof. SECTION 9.3. Amendments; No Waivers. Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by each party, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. SECTION 9.4. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing contained in this Agreement is intended to confer upon any Person other than the parties hereto and their respective successors and permitted assigns, any benefit, right or remedies under or by reason of this Agreement, -22- except that the provisions of Article VI shall inure to the benefit of the Centex Indemnitees and the Cavco Indemnitees. Neither party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other party hereto, which shall not be unreasonably withheld. SECTION 9.5. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the State of Texas, without regard to the conflict of laws rules thereof. SECTION 9.6. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. SECTION 9.7. Entire Agreement. This Agreement and other Transaction Agreements constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. No representation, inducement, promise, understanding, condition or warranty not set forth in the Transaction Documents has been made or relied upon by any party hereto. SECTION 9.8. Severability. If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such a declaration, the parties shall modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible. SECTION 9.9. Termination. Notwithstanding any provision in this Agreement to the contrary, this Agreement may be terminated and the Distribution amended, modified or abandoned at any time prior to the Distribution, without penalty or liability, by and in the sole discretion of Centex and without the approval of Cavco or of Centex's stockholders. SECTION 9.10. Survival. All covenants and agreements of the parties contained in this Agreement shall survive the Distribution Date. SECTION 9.11. Expenses. Except as otherwise set forth in the Transaction Agreements, all costs and expenses incurred prior to or on the Distribution Date in connection with the preparation, execution and delivery of the Transaction Agreements, -23- the preparation of the Information Statement (including any registration statement on Form 10 of which such Information Statement may be a part) and the consummation of the Distribution and the other transactions contemplated thereby shall be charged to and paid by AAA Holdings, CREC, International, Centex and Cavco on a pro rata basis in proportion to the net book value of their respective assets as of such date as Centex shall determine. [Signature page follows] -24- IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the date first above written. CENTEX CORPORATION By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CAVCO INDUSTRIES, LLC By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CAVCO INDUSTRIES, INC. By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- -25- EX-10.16 12 d08056exv10w16.txt EX-10.16 ADMINISTRATIVE SERVICES AGREEMENT EXHIBIT 10.16 ADMINISTRATIVE SERVICES AGREEMENT This ADMINISTRATIVE SERVICES AGREEMENT ("Agreement") is made and entered into as of June 30, 2003 by and between CAVCO INDUSTRIES, INC., an Arizona corporation ("Cavco"), and CENTEX SERVICE COMPANY, a Nevada corporation ("Service Company"). RECITALS Cavco desires to engage Service Company to perform certain services for Cavco as hereinafter set forth, and Service Company desires to accept such engagement, upon the terms and subject to the conditions set forth in this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Cavco and Service Company do hereby agree as follows. 1. Term of Agreement. The initial term of this Agreement shall extend from the date hereof to the close of business on the third anniversary of the date hereof; provided that this Agreement may be sooner terminated in accordance with the provisions of Section 8 hereof. 2. Services. Service Company shall provide to Cavco such services as are described in Exhibit A hereto. Following the conclusion of the first year of the three year term of this Agreement, the parties will implement a mutual plan to discontinue the Services provided hereunder by Service Company to Cavco incrementally over the remaining term of this Agreement so that by the end of the three-year term all of such services will be provided internally by Cavco, or to Cavco by third parties not affiliated with Service Company. 3. Insurance Coverage. At the commencement of this Agreement, Service Company will manage and monitor all of Cavco's insurance and bonding programs, and shall maintain joint insurance coverage, including general liability, primary and excess umbrella, automobile, liability, and workers' compensation, as well as joint bonding programs, for the benefit of Cavco. The amount, term and conditions of coverage to be maintained will be determined by Service Company in its sole and absolute discretion. The allocation of cost between Cavco and Service Company will be determined by Service Company and will be based on, among other things, revenues, number of employees, types of business and nature of risks. The parties intend that Cavco shall 1 develop its own broker relationships and transition to stand alone programs when such a transition is feasible at reasonable cost. Cavco will pay its allocated cost to Service Company within ten days following receipt of an invoice therefor. If payment is not made within said ten-day period, then the amount so owing by Cavco to Service Company shall bear interest from and after the date of such invoice until such amount has been paid in full, at a rate (the "Interest Rate") equal to the lesser of the prime rate announced or published by Bank of America, N.A. (or its successor) from time to time or the maximum rate of interest permitted under applicable law. Service Company shall have the right during the term of this Agreement, in the sole and absolute discretion of Service Company, to amend or eliminate any part or all of the insurance coverage described above, with a corresponding adjustment to the cost allocated to Cavco. Service Company will give Cavco at least ninety (90) days advance notice of any such action. 4. Liability of Service Company. Service Company shall not be liable, responsible or accountable in damages or otherwise to Cavco for any act performed by Service Company on behalf of Cavco in a manner reasonably believed by Service Company to be within the scope of the authority granted to it by this Agreement and in the interest of Cavco, provided that Service Company was not guilty of gross negligence or willful or wanton misconduct. 5. Indemnification. Cavco shall indemnify, save harmless and defend Service Company and each of Service Company's shareholders, directors, officers, employees, agents, attorneys and insurers (each individually, an "Indemnitee") against any and all losses, damages, liabilities, judgments, fines, penalties, amounts paid in settlement and expenses, including reasonable attorneys' fees, which are incurred, whether as the result of the negligence of any Indemnitee or otherwise, as a result of or in connection with anything done or omitted by such Indemnitee in connection with the performance by Service Company of its duties and obligations under this Agreement; provided that such Indemnitee's conduct did not constitute gross negligence or willful or wanton misconduct. Notwithstanding anything in this Agreement to the contrary, the obligation of Cavco to indemnify, save harmless and defend each Indemnitee will survive the expiration or termination of this Agreement, no matter what the reason thereof, and such obligation to indemnify, defend and hold harmless will remain binding upon Cavco thereafter. 6. Compensation. Service Company shall receive a fee for its services under this Agreement of $75,000 per year, which shall be paid by Cavco to Service Company in monthly installments of $6,250 within five (5) days after the end of each month. Such fee is intended to represent an agreed upon estimate of the fair market value of such services, and the parties hereto hereby agree that such amount represents such fair market value. If Cavco fails to make such monthly payment within ten (10) 2 days following the first day of any month, the amount so owing by Cavco shall bear interest from and after the first day of such month until such amount has been paid in full at a rate equal to the Interest Rate. Prior to March 31 of each year during the term of this Agreement, the parties will mutually determine, based on the fair market value of such services, the monthly fee to be paid to Service Company under this Agreement for the twelve month period commencing April 1 of the same year. In addition to the monthly compensation described above, Cavco will reimburse Service Company for all out-of-pocket expenses incurred by Service Company in connection with the performance of services described above in Section 2. Out-of-pocket expenses will not include general and administrative expenses. 7. Assignment and Delegation. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided, however, that this Agreement may not be assigned by either party without the prior written consent of the other party hereto. Any consent granted by either party to an assignment by the other party shall not be deemed a consent to any subsequent assignment. Notwithstanding the foregoing, Service Company may, without the consent of Cavco, assign and delegate the performance of and the responsibility for any duties and obligations of Service Company hereunder to any corporation, firm joint venture or partnership fifty percent (50%) or more of whose voting stock (or its equivalent) is owned directly or indirectly by, or which is otherwise controlled by, Centex Corporation. Upon execution of any such assignment and delegation, notice thereof in the form of an executed copy of the document or instrument effecting such assignment and delegation shall be delivered promptly by Service Company to Cavco and Service Company shall be released from any further obligation or responsibility under this Agreement for the performance of the duties and obligations so assigned and delegated. 8. Termination. This Agreement may be terminated by any of the following methods: (a) This Agreement may be terminated at any time by written agreement of the parties hereto. (b) If either party fails to make any payment due hereunder or breaches any of the other terms of this Agreement in any material respect, the other party hereto shall give the breaching party written notice of such breach. If the breaching party fails to remedy the breach within thirty (30) days after receiving such notice, the other party may terminate this Agreement; provided, however, that if at the expiration of such thirty (30) day period the breaching party is diligently using its best efforts to remedy the breach, the other party may not terminate this Agreement on account of such breach during the additional period, not to exceed sixty 3 (60) days, in which the breaching party continues without interruption to use its best efforts to remedy the breach. (c) If either party hereto shall be dissolved and its business terminated, this Agreement shall automatically terminate upon the effectiveness of such dissolution. (d) This Agreement may be terminated by notice of Cavco to Service Company delivered no less than thirty (30) days prior to the effective date of termination, and such notice may be delivered for any reason. No termination of this Agreement shall have the effect of terminating Service Company's right to collect any amounts owed to it under this Agreement. Within thirty (30) days following the termination of this Agreement, Service Company shall deliver to Cavco all instruments, documents, reports, books, accounts and records, and copies thereof, that Service Company has received from Cavco in connection with the rendering of services hereunder. 9. Confidentiality. Service Company agrees that any information regarding Cavco that Service Company obtains or is furnished in connection with the performance of its duties and obligations under this Agreement, including, but not limited to, information regarding Cavco's business and operations, is confidential and proprietary, and Service Company agrees to maintain the confidentiality of such information and not to disclose such information to any other party without prior written consent of Cavco, except to the extent that such disclosure is necessary to enable Service Company to perform its duties and obligations under this Agreement or to comply with its legal obligations. Information that is generally known in the industry or to the public or was known by Service Company prior to disclosure by Cavco pursuant to this Agreement shall not be deemed confidential or proprietary information for purposes of this Section 9. The terms of this Section 9 shall survive, and remain in effect following, the termination of this Agreement. 10. Notices. Any notice, statement or demand required or permitted to be given under this Agreement shall be in writing and shall be personally delivered, sent by mail, sent by nationally known overnight courier service or sent by facsimile transmission, confirmed by letter, addressed to the party in the manner and at the address shown below, or at such other address as the party shall have designated in writing to the other party: To Cavco: 1001 North Central, 8th floor Phoenix, Arizona 85004 Attention: President Fax: (602) 256-6176 4 To Service Company: 2728 North Harwood Dallas, Texas 75201 Attention: Secretary Fax: (214) 981-6855 11. Nature of Relationship. The parties hereto intend that Service Company's relationship to Cavco shall be that of an independent contractor. Nothing contained in this Agreement shall constitute or be construed to be or create a partnership or joint venture between Service Company and Cavco or their successors or assigns, and neither Service Company nor any officer or employee of Service Company shall be considered at any time to be an employee of Cavco. 12. Amendments. This Agreement cannot be amended, changed or modified except by another agreement in writing, duly signed by both parties hereto. 13. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. 14. Headings. The section headings contained herein are for convenience of reference only and are not intended to define, limit, or describe the scope or intent of any provision of this Agreement. 15. Governing Law. This Agreement shall be construed and interpreted in accordance with the laws of the State of Texas. 16. Severability. Any provision of this Agreement that is prohibited or unenforceable under the laws of any jurisdiction shall be ineffective in such jurisdiction to the extent necessary to render such provision valid and enforceable, and if such provision cannot be rendered valid and enforceable in such jurisdiction by limitation it shall be ineffective therein. The invalidity or unenforceability of any provision of this Agreement shall not render invalid or unenforceable any other provision of this Agreement, unless the Agreement without the invalid or unenforceable provisions would be manifestly unfair to either party. [Signature page follows.] 5 IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first set forth above. CAVCO INDUSTRIES, INC. By: -------------------- President CENTEX SERVICE COMPANY By: -------------------- Vice President 6 EXHIBIT A SERVICES TO BE PROVIDED BY CENTEX SERVICE COMPANY 1. LEGAL AND CORPORATE SECRETARY. a. Management of intellectual property rights in protected names and marks used by Cavco b. Assistance with paralegal management of customer litigation with consultation by Centex Law Department attorneys as requested c. Assistance with public company reporting issues and required filings with and reports to stock exchanges and the Securities and Exchange Commission, and assistance with corporate governance matters d. Keeping minute books, foreign qualifications and other corporate secretarial matters 2. PUBLIC AND INVESTOR RELATIONS. a. Review and distribution of press releases through existing resources and relationships. b. Advice on an as-needed basis 3. ACCOUNTING. Advice and assistance with technical questions on an as-needed basis 4. BENEFITS ADMINISTRATION. a. Assistance in management of Cavco's health and welfare and retirement benefit plans b. Assistance with negotiation and transition of health and welfare and retirement benefit plans into separate stand-alone plans. A-1 EX-10.17 13 d08056exv10w17.txt EX-10.17 TAX SHARING AGREEMENT EXHIBIT 10.17 (EXECUTION COPY) TAX SHARING AGREEMENT BY AND AMONG CENTEX CORPORATION AND ITS AFFILIATES AND CAVCO INDUSTRIES, INC. Dated June 30, 2003 This TAX SHARING AGREEMENT (the "Agreement") dated as of June 30, 2003, by and among Centex Corporation ("Centex"), a Nevada corporation and each Centex Affiliate (as defined below), and Cavco Industries, Inc. ("Cavco"), a newly formed Delaware corporation and indirect, wholly owned subsidiary of Centex, is entered into in connection with the Distribution (as defined below). RECITALS WHEREAS, the Centex Board of Directors has determined, subject to certain conditions, that it is appropriate and desirable to make a pro rata distribution of one hundred percent (100%) of the stock of Cavco to its common shareholders, with cash distributed in lieu of any fractional shares of Cavco, on the Distribution Date, as defined below (the "Public Distribution"); and WHEREAS, in order to consummate the Public Distribution, it is necessary and desirable for AAA Holdings, Inc. ("AAA"), a Delaware corporation and currently the direct parent of Cavco Industries, LLC ("Cavco LLC") to form Cavco and to then merge Cavco LLC with and into Cavco (the "Merger"); and WHEREAS, in order to consummate the Public Distribution, it is necessary and desirable for AAA to make a pro rata distribution of one hundred percent (100%) of the stock of Cavco to its sole shareholder, Centex Real Estate Corporation ("CREC") (the "Internal Distribution 1"); and WHEREAS, in order to consummate the Public Distribution, it is necessary and desirable for CREC to make a pro rata distribution of one hundred percent (100%) of the stock of Cavco to its sole shareholder, Centex International, Inc. ("International") (the "Internal Distribution 2"); and WHEREAS, in order to consummate the Public Distribution, it is necessary and desirable for International to make a pro rata distribution of one hundred percent (100%) of the stock of Cavco to its sole shareholder, Centex (the "Internal Distribution 3"); and WHEREAS, the Merger is intended to qualify as a reorganization under section 368(a)(1)(D) of the Internal Revenue Code of 1986, as amended (the "Code"), and the Public Distribution and Internal Distributions 1 through 3 (collectively the "Internal Distributions") are intended to qualify as tax free distributions under Code section 355; and WHEREAS, it is appropriate and desirable to set forth the principles and responsibilities of the parties to this Agreement regarding the allocation of Tax (as defined below) and other related liabilities and adjustments with respect to Taxes, Tax contests and other related Tax matters; and WHEREAS, to that end, the parties wish to enter into this Tax Sharing Agreement; AGREEMENT NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: ARTICLE 1 DEFINITIONS "Audit" includes any audit, assessment of Taxes, other examination by any Tax Authority, proceeding, or appeal of such a proceeding relating to Taxes, whether administrative or judicial. "Centex Affiliate" means any corporation or other entity directly or indirectly controlled by Centex, excluding Cavco. "Centex Group" means the affiliated group of corporations as defined in Section 1504 (a) of the Code, or similar group of entities as defined under corresponding provisions of the laws of other jurisdictions, of which Centex is the common parent, and any corporation or other entity which may be, may have been or may become a member of such group from time to time, but excluding Cavco. "Combined Group" means a group of corporations or other entities that files a Combined Return. "Combined Return" means any Tax Return with respect to Non-Federal Taxes filed on a consolidated, combined (including nexus combination, worldwide combination, domestic combination, line of business combination or any other form of combination) or unitary basis wherein Cavco joins in the filing of such Tax Return (for any taxable period or portion thereof) with Centex or one or more Centex Affiliates. "Consolidated Group" means an affiliated group of corporations within the meaning of Section 1504 (a) of the Code that files a Consolidated Return. 2 "Consolidated Return" means any Tax Return with respect to Federal Income Taxes filed on a consolidated basis wherein Cavco joins in the filing of such Tax Return (for any taxable period or portion thereof) with Centex or one or more Centex Affiliates. "Distribution" means the Internal Distributions and/or the Public Distribution. "Distribution Date" means the close of business on the date on which the Public Distribution is effected. "Federal Income Tax" means any Tax imposed under Subtitle A of the Code (including the Taxes imposed by Sections 11, 55, 59A, and 1201(a) of the Code), and any interest, additions to Tax or penalties applicable or related thereto, and any other income-based United States federal Tax which is hereinafter imposed upon corporations. "Federal Tax" means any Tax imposed or required to be withheld by any Tax Authority of the United States. "Final Determination" means any of (a) the final resolution of any Tax (or other matter) for a taxable period, including related interest or penalties, that, under applicable law, is not subject to further appeal, review or modification through proceedings or otherwise, including (1) by the expiration of a statute of limitations or a period for the filing of claims for refunds, amending Tax Returns, appealing from adverse determinations, or recovering any refund (including by offset), (2) by a decision, judgment, decree, or other order by a court of competent jurisdiction, which has become final and unappealable, (3) by a closing agreement or an accepted offer in compromise under Section 7121 or 7122 of the Code, or comparable agreements under laws of other jurisdictions, (4) by execution of an Internal Revenue Service Form 870 or 870AD, or by a comparable form under the laws of other jurisdictions (excluding, however, with respect to a particular Tax Item for a particular taxable period any such form that reserves (whether by its terms or by operation of law) the right of the taxpayer to file a claim for refund and/or the right of the Tax Authority to assert a further deficiency with respect to such Tax Item for such period), or (5) by any allowance of a refund or credit, but only after the expiration of all periods during which such refund or credit may be recovered (including by way of offset), or (b) the payment of Tax by any member of the Consolidated Group or Combined Group with respect to any Tax Item disallowed or adjusted by a Tax Authority provided that Centex determines that no action should be taken to recoup such payment. "Income Taxes" means (a) any Tax based upon, measured by, or calculated with respect to (1) net income or profits (including any capital gains Tax, minimum Tax and any Tax on items of Tax preference, but not including sales, use, real or personal property, gross or net receipts, transfer or similar Taxes) or (2) multiple bases if one or more of the bases upon which such Tax may be based, measured by, or calculated with respect to, is described in clause (1) above, or (b) any U.S. state or local franchise Tax. "Interest Accrual Period" has the meaning set forth in Section 6.4 of this Agreement. 3 "Non-Federal Combined Tax" means any Non-Federal Tax with respect to which a Combined Return is filed. "Non-Federal Separate Tax" means any Non-Federal Tax other than a Non-Federal Combined Tax. "Non-Federal Tax" means any Tax other than a Federal Tax. "Payment Period" has the meaning set forth in Section 5.3 of this Agreement. "Post-Distribution Period" means a taxable period beginning after the Distribution Date. "Pre-Distribution Period" means a taxable period beginning on or before the Distribution Date. "Privilege" means any privilege that may be asserted under applicable law including, any privilege arising under or relating to the attorney-client relationship (including the attorney-client and work product privileges), the accountant-client privilege, and any privilege relating to internal evaluation processes. "Restructuring Tax" means any Tax imposed upon Centex or a Centex Affiliate and reasonable professional fees that are attributable to, or result from, the failure of the Distribution to qualify under Section 355 of the Code (including any Tax attributable to the application of Section 355(e) or Section 355(f) of the Code to the Distribution) or corresponding provisions of the laws of other jurisdictions. Each Tax referred to in the preceding sentence shall be determined using the highest marginal corporate Tax rate for the relevant taxable period (or any portion thereof). For the avoidance of doubt, Restructuring Tax does not include an amount described in this paragraph that is imposed upon a shareholder of Centex in its capacity as a shareholder of Centex. "Ruling Documents" means (a) the request for a ruling under Section 355 and various other sections of the Code, filed with the Service on November 5, 2002, together with any supplemental filings or ruling requests or other materials subsequently submitted on behalf of Centex, its subsidiaries and shareholders to the Service, the appendices and exhibits thereto, and any rulings issued by the Service to Centex (or any Centex Affiliate) in connection with the Distribution or (b) any similar filings submitted to, or rulings issued by, any other Tax Authority in connection with the Distribution. "Separate Return" means any Tax Return with respect to Non-Federal Separate Taxes filed by Centex, Cavco, or any of their respective affiliates. "Service" means the Internal Revenue Service. "Tax" means any charges, fees, levies, imposts, duties, or other assessments of a similar nature, including income, alternative or add-on minimum, gross receipts, profits, lease, service, service use, wage, wage withholding, employment, workers compensation, business occupation, 4 occupation, premiums, environmental, estimated, excise, employment, sales, use, transfer, license, payroll, franchise, severance, stamp, occupation, windfall profits, withholding, social security, unemployment, disability, ad valorem, estimated, highway use, commercial rent, capital stock, paid up capital, recording, registration, property, real property gains, value added, business license, custom duties, or other tax or governmental fee of any kind whatsoever, imposed or required to be withheld by any Tax Authority including any interest, additions to tax, or penalties applicable or related thereto. "Tax Authority" means governmental authority or any subdivision, agency, commission or authority thereof or any quasi-governmental or private body having jurisdiction over the assessment, determination, collection or imposition of any Tax (including the Service). "Tax Item" means any item of income, gain, loss, deduction or credit, or other attribute that may have the effect of increasing or decreasing any Tax. "Tax Return" means any return, report, certificate, form or similar statement or document (including, any related or supporting information or schedule attached thereto and any information return, amended tax return, claim for refund or declaration of estimated tax) required to be supplied to, or filed with, a Tax Authority in connection with the determination, assessment or collection of any Tax or the administration of any laws, regulations or administrative requirements relating to any Tax. ARTICLE 2 PREPARATION AND FILING OF TAX RETURNS 2.1 In General. (a) Centex shall have the sole and exclusive responsibility for the preparation and filing of the following Tax Returns: (1) all Consolidated Returns for any Pre-Distribution Period, (2) all Combined Returns for any Pre-Distribution Period, and (3) any Separate Return for any Pre-Distribution Period beginning before and ending on or before the Distribution Date (specifically including, but not limited to, any Texas franchise tax returns for the fiscal year ending March 31, 2003). (b) Except as provided in Section 2.1(a) of this Agreement, Cavco shall have the sole and exclusive responsibility for the preparation and filing of all other Tax Returns for Cavco (or which relate to its businesses, assets or activities) which are required to be filed for any Pre-Distribution Period (including (i) any Pre-Distribution Period beginning before and ending on or before the Distribution Date and (ii) any Pre-Distribution Period beginning before and ending after the Distribution Date) and any Post-Distribution Period. 2.2 Manner of Filing Tax Returns. (a) All Tax Returns filed after the date of this Agreement by Centex, any Centex Affiliate, or Cavco shall be 5 (1) prepared in a manner that is consistent with the Ruling Documents, and (2) filed on a timely basis (including extensions) by the party responsible for such filing under Section 2.1 of this Agreement. (b) Centex and Cavco agree to file all Tax Returns for any Pre-Distribution Period, as provided for in Section 2.1, and to take all other actions in a manner consistent with the position that Cavco is part of any Consolidated Group and any Combined Group for all days through and including the Distribution Date. (c) Except as otherwise provided in this Section 2.2, Centex shall have the exclusive right, in its sole discretion, with respect to any Tax Return described in Section 2.1(a) of this Agreement to determine: (1) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported; (2) whether any extensions maybe requested; (3) the elections that will be made by Centex, any Centex Affiliate, and Cavco in such Tax Return; (4) whether any amended Tax Returns shall be filed; (5) whether any claims for refund shall be made; (6) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax; and (7) whether to retain outside specialists to prepare such Tax Return, whom to retain for such purpose and the scope of any such retainer. (d) In the event that a Tax Item is includable in a Tax Return described in Section 2.1(a) of this Agreement and also in a Tax Return described in Section 2.1(b) of this Agreement that is filed after the date of this Agreement, Cavco preparing, or causing the preparation of, such Tax Return under Section 2.1(b) of this Agreement shall conform the treatment of such Tax Item in such Tax Return described in Section 2.1(b) of this Agreement to the treatment of such Tax Item in the applicable Tax Return described in Section 2.1(a) of this Agreement. (e) Any Tax Return described in (1) Section 2.1(a) of this Agreement (but only with respect to Tax Items of Cavco) or (2) Section 2.1(b) of this Agreement in either case which Tax Return is filed after the date of this Agreement, shall be prepared on 6 a basis consistent with the elections, methods of accounting, positions, conventions and principles of taxation and the manner in which any Tax Item or other information is reported as reflected on the most recently filed Tax Returns involving similar matters. The preceding sentence shall not apply (1) to the extent otherwise required by Section 2.2(a)(1) of this Agreement or (2) if (i) Cavco obtains Centex's prior written consent (which consent shall not be unreasonably withheld), (ii) there has been a controlling change in law or circumstances, or (iii) the failure to be consistent will not result in an increased Tax liability to, or reduction in a Tax Asset of, Centex or any Centex Affiliate with respect to a Pre-Distribution Period, not fully compensated by Cavco. For purposes of this Section 2.2(e), a controlling change in law or circumstances includes, with respect to Post-Distribution Periods (but not Pre-Distribution Periods), permission to change a method of accounting granted by the relevant Tax Authority. 2.3 Agent. Cavco hereby irrevocably designates Centex as its sole and exclusive agent and attorney-in-fact to take such action (including execution of documents) as Centex, in its sole discretion, may deem appropriate in any and all matters (including Audits) relating to any Tax Return described in Section 2.1(a) of this Agreement. 2.4 Provision of Tax Return Information. (a) Both Cavco and Centex agree to provide all documents and information, and to make available their employees and officers, as may be reasonably requested by either party to prepare any Tax Return described in Section 2.1 of this Agreement. (b) In the case of any Tax Return described in Section 2.1(a) that is filed after the date of this Agreement, Centex shall, upon request of Cavco, provide Cavco a copy of each such Tax Return and all related Tax accounting work papers to the extent that they relate to Cavco. (c) In the case of any Tax Return in Centex's possession that was filed before the date of this Agreement, Centex shall, upon request of Cavco, provide Cavco a copy of each such Tax Return and all related Tax accounting work papers to the extent that they relate to Cavco. (d) Notwithstanding any other provision of this Agreement, no member of the Centex Group shall be required to provide Cavco access to or copies of: (1) any information that relates to any member of the Centex Group, (2) any information as to which any member of the Centex Group is entitled to assert the protection of any Privilege, or (3) any information as to which any member of the Centex Group is subject to an obligation to maintain the confidentiality of such information. 7 Centex shall use reasonable efforts to separate any such information from any other information to which Cavco is entitled to access or to which Cavco is entitled to copy under this Agreement, to the extent consistent with preserving its rights under this Section 2.4(d). ARTICLE 3 TAX SHARING AND PAYMENT OF TAXES 3.1 Cavco Liability for Payment of Taxes. Cavco shall pay to the appropriate Tax Authorities all Taxes due and payable for all Pre-Distribution Periods and all Post-Distribution Periods for which it is responsible for filing any Tax Return pursuant to Section 2.1(b). Cavco shall also provide Centex a check made payable to the appropriate Tax Authority for all Taxes due and payable for any Pre-Distribution Period for which Centex is responsible for filing any Separate Return pursuant to Section 2.1(a)(3). Cavco shall deliver such check to Centex within 5 days of Centex's request for such payment. 3.2 Centex Liability for Payment of Taxes. Except as provided in Section 3.1 (with respect to Cavco's payment of any Tax that may be due of a Separate Return filed by Centex pursuant to Section 2.1 (a)(3)), Centex shall pay to the appropriate Tax Authorities all Taxes due and payable for all Pre-Distribution Periods for which it is responsible for filing any Tax Return pursuant to Section 2.1. 3.3 Additional Liability Allocation. Except with respect to any Restructuring Tax, Cavco shall have no further liability to Centex for any Taxes for any Pre-Distribution Period for which Centex is responsible for filing any Tax Return pursuant to Section 2.1(a)(1) and 2.1(a)(2). ARTICLE 4 DECONSOLIDATION 4.1 Distribution Related Items. (a) Restrictions on Certain Post-Distribution Actions. (1) Cavco Restrictions. Cavco covenants to Centex that it will not take or fail to take any action where such action or failure to act would cause the Merger and Distribution to fail to qualify under Sections 355(a) and 368(a)(1)(D) of the Code or any corresponding provisions of state or local law. Without limiting the foregoing, Cavco covenants to Centex that: (i) during the two-year period following the Distribution Date, Cavco will not liquidate, merge or consolidate with any other person; (ii) during the two-year period following the Distribution Date, Cavco will not sell, exchange, or distribute or otherwise dispose of all or a substantial portion of its assets except in the ordinary course of business; (iii) during the two-year period following the Distribution Date, Cavco will continue the active conduct of the historic business as transferred to it in the Merger; (iv) Cavco will not take any action inconsistent with the information and representations in the Ruling 8 Documents; (v) Cavco will not repurchase stock of Cavco in a manner contrary to the requirements of Section 4.05(1)(b) of Revenue Procedure 96-30 or in a manner contrary to the representations made in the Ruling Documents; and (vi) Cavco will not enter into any negotiations, agreements or arrangements with respect to any of the foregoing. (2) Centex Restrictions. Centex covenants to Cavco that it will not take or fail to take any action where such action or failure to act would cause the Merger and Distribution to fail to qualify under Sections 355(a) and 368(a)(1)(D) of the Code or any corresponding provisions of state or local law. (b) Liability for Undertaking Certain Actions. (1) Cavco Liability. Cavco shall be responsible for one hundred percent (100%) of any Restructuring Taxes that are attributable to, or result from, any act or failure to act described in Section 4.1(a)(1) of this Agreement by Cavco. Cavco shall indemnify Centex, each Centex Affiliate and their directors, officers and employees and hold them harmless from and against any such Restructuring Taxes. (2) Centex Liability. Centex and each Centex Affiliate shall be responsible for one hundred percent (100%) of any Restructuring Taxes that are attributable to, or result from, any act or failure to act described in Section 4.1(a)(2) of this Agreement by Centex or any Centex Affiliate. Centex and each Centex Affiliate shall jointly and severally indemnify Cavco and their directors, officers and employees and hold them harmless from and against any such Restructuring Tax. (c) Information. Centex has provided Cavco with copies of the Ruling Documents submitted on or prior to the date hereof, and shall provide Cavco with copies of any additional Ruling Documents prepared after the date hereof prior to the submission of such Ruling Documents to a Tax Authority. (d) Liability for Breach of Representation. Each of Centex and Cavco hereby represents that (1) it has read the Ruling Documents submitted on or prior to the date hereof, (2) all information contained in such Ruling Documents that concerns or relates to such party or any affiliate of such party, other than information which is provided by an external expert, is true, correct and complete in all material respects, and (3) except to the extent that such party shall have notified the other party in writing to the contrary and with reasonable specificity prior to the Distribution Date, all such information that concerns or relates to such party or any affiliate of such party, other than information which is provided by an external expert, is and will be true, correct and complete in all material respects as of the Distribution Date. 9 Cavco acknowledges and agrees that the term "Ruling Documents," whenever used in this Agreement, includes all filings or ruling requests or other materials, appendices and exhibits submitted after the date hereof to the Service or any Tax Authority in connection with the Distribution and provided by Centex to Cavco under Section 4.1 of this Agreement. If any Tax Authority withdraws any portion of a ruling issued to Centex in connection with the Distribution because of a breach by Cavco of a representation made in this Section 4.1, Cavco shall be responsible for one hundred percent (100%) of any Restructuring Taxes. In such event, Cavco shall indemnify Centex, each Centex Affiliate and their directors, officers and employees and hold them harmless from and against any Restructuring Taxes. If any Tax Authority withdraws any portion of a ruling issued to Centex in connection with the Distribution because of a breach by Centex or any Centex Affiliate of a representation made in this Section 4.1, Centex and each Centex Affiliate shall be responsible for one hundred percent (100%) of any Restructuring Taxes. In such event, Centex and each Centex Affiliate shall jointly and severally indemnify Cavco and its directors, officers and employees and hold them harmless from and against any Restructuring Taxes. (e) Payment. Cavco shall make or cause to be made all payments for which it may be liable under this Section 4.1. Such payments shall be made to Centex or to the appropriate Tax Authority as specified by Centex no later than five (5) days after delivery by Centex to Cavco of written notice of a payment by or liability of Centex (or a Centex Affiliate or a director, officer or employee) based on a Final Determination, together with a computation of the amounts due. 4.2 Information for Shareholders. Centex shall provide each shareholder that receives stock of Cavco pursuant to the Public Distribution with the information necessary for such shareholder to comply with the requirements of Section 355 of the Code and the Treasury regulations thereunder with respect to statements that such shareholders must file with their Federal Income Tax Returns demonstrating the applicability of Section 355 of the Code to the Public Distribution. 4.3 Special Indemnification. Centex expressly agrees to indemnify Cavco for any Federal Income Tax with respect to any Consolidated Return for which Centex is responsible for filing pursuant to Section 2.1(a)(l) in the event that Cavco is liable to the Service for any such Federal Income Tax pursuant to Treasury Regulation section 1.1502-6. ARTICLE 5 ADDITIONAL OBLIGATIONS 5.1 Provision of Information. (a) Cavco shall furnish to Centex in a timely manner such information and documents as Centex may reasonably request for purposes of (1) preparing any Tax Return for 10 which Centex has filing responsibility under this Agreement, (2) contesting or defending any Audit, and (3) making any determination or computation necessary or appropriate under this Agreement. (b) Cavco shall make its employees available to provide explanations of documents and other materials and such other information as Centex may reasonably request in connection with any of the foregoing. (c) Cavco shall cooperate in any Audit of any Consolidated Return or Combined Return. (d) Cavco shall retain and provide on demand books, records, documentation or other information relating to any Tax Return until the later of (1) the expiration of the applicable statute of limitations (giving effect to any extension, waiver, or mitigation thereof) and (2) in the event any claim is made under this Agreement for which such information is relevant, until a Final Determination with respect to such claim. (e) Cavco shall take such action as Centex may reasonably deem appropriate in connection with the provision of information under this Section 5.1. 5.2 Indemnification. (a) Failure to Pay. Centex and each Centex Affiliate shall jointly and severally indemnify Cavco and its respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage or expense, including reasonable attorneys' fees and costs, that is attributable to, or results from the failure of Centex, any Centex Affiliate or any director, officer or employee to make any payment required to be made under this Agreement. Cavco shall indemnify Centex, each Centex Affiliate and their respective directors, officers and employees, and hold them harmless from and against any loss, cost, damage or expense, including reasonable attorneys' fees and costs, that is attributable to, or results from, the failure of Cavco or any director, officer or employee to make any payment required to be made under this Agreement. (b) Inaccurate or Incomplete Information. Centex and each Centex Affiliate shall jointly and severally indemnify Cavco and their respective directors, officers and employees, and hold them harmless from and against any cost, fine, penalty, or other expense of any kind attributable to the negligence of Centex or any Centex Affiliate in supplying Cavco with inaccurate or incomplete information, in connection with the preparation of any Tax Return. Cavco shall indemnify Centex, each Centex Affiliate and their respective directors, officers and employees, and hold them harmless from and against any cost, fine, penalty, or other expenses of any kind attributable to the negligence of Cavco in supplying Centex or any Centex Affiliate with inaccurate or incomplete information, in connection with the preparation of any Tax Return. 11 5.3 Interest. Payments pursuant to this Agreement that are not made within the period prescribed in this Agreement or, if no period is prescribed, within thirty (30) days after demand for payment is made (the "Payment Period") shall bear interest for the period from and including the date immediately following the last date of the Payment Period through and including the date of payment (the "Interest Accrual Period") at a per annum rate equal to Cavco's weighted average interest rate for debt capital for each year, or part thereof, included in the Interest Accrual Period plus 50 basis points. Such interest will be payable at the same time as the payment to which it relates and shall be calculated on the basis of a year of 365 days and the actual number of days for which due. ARTICLE 6 AUDITS 6.1 In General. (a) Centex shall have the exclusive right, in its sole discretion, to control, contest, and represent the interests of Centex, any Centex Affiliate, or Cavco in any Audit relating to any Tax Return described in Section 2.1(a)(1) or 2.1(a)(2) of this Agreement and to resolve, settle or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit. (b) Cavco shall have the exclusive right, in its sole discretion, to control, contest, and represent the interests of Cavco in any Audit relating to any Tax Return described in Section 2.1(b) or Section 2.1(a)(3) of this Agreement and to resolve, settle, or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit (c) After the Distribution Date, Centex and Cavco shall cooperate in order to transfer to Cavco the exclusive right to control, contest and represent the interests of Cavco in any Audit and to resolve, settle, or agree to any deficiency, claim or adjustment proposed, asserted or assessed in connection with or as a result of any such Audit in each case relating to all Separate Returns of Cavco relating to Non-Federal Separate Taxes. 6.2 Notice. If after the Distribution Date, Centex or any member of the Centex Group receives written notice of, or relating to, an Audit from a Tax Authority that asserts, proposes or recommends a deficiency, claim or adjustment that, if sustained, would result in any Restructuring Taxes for which Cavco could be responsible under this Agreement, Centex shall notify Cavco in writing of such deficiency, claim or adjustment within ten (10) days of its receipt. If Cavco receives written notice of or relating to an audit from a Tax Authority with respect to a Tax Return described in Section 2.1(a)(1) or 2.1 (a)(2) of this Agreement, Cavco shall provide a copy of such notice to Centex within ten (10) days of receiving such notice of such Audit, but in no case later than thirty (30) days before a response is required to be provided to the relevant Tax Authority. 12 6.3 Participation Rights (a) If a Tax Authority asserts, proposes or recommends a deficiency, claim or adjustment that, if sustained, would result in Restructuring Taxes for which Cavco could be responsible under this Agreement, and Cavco acknowledges in writing to Centex that, as between Cavco and Centex, Cavco shall be responsible for one hundred percent (100%) of any such Restructuring Taxes that are determined pursuant to a Final Determination, then (1) Centex shall take all actions requested by Cavco to contest such deficiency, claim or adjustment, including administrative and judicial proceedings; (2) Cavco shall have the right to fully participate with respect to such deficiency, claim or adjustment and related proceedings and Centex shall accept all reasonable suggestions by Cavco in connection with the management and substance of such proceedings, and (3) in no event shall Centex settle or compromise any such deficiency, claim or adjustment without the written consent of Cavco. (b) If a Tax Authority asserts, proposes or recommends a deficiency, claim or adjustment that, if sustained, would result in Restructuring Taxes for which Cavco could be responsible under this Agreement and has not admitted liability for such Restructuring Taxes pursuant to Section 6.3(a): (1) Centex shall keep Cavco informed in a timely manner of all material actions taken or proposed to be taken by Centex in connection with such deficiency, claim or adjustment; (2) Centex shall reasonably consider any comments that Cavco makes with respect to the handling of the case and provide Cavco an opportunity to attend any meetings with the Tax Authority; and (3) Centex shall have no obligation to appeal a determination of any Tax Authority in any judicial forum. 6.4 Failure to Notify, Etc. The failure of Centex promptly to notify Cavco of any matter relating to a particular Tax for a taxable period or to take any action specified in Section 6.3 of this Agreement shall not relieve Cavco of any liability and/or obligation which it may have to Centex or any Centex Affiliate under this Agreement with respect to such Restructuring Taxes except to the extent that Cavco's rights hereunder are materially prejudiced by such failure and in no event shall such failure relieve Cavco of any other liability and/or obligation which it may have to Centex or any Centex Affiliate. 13 ARTICLE 7 DISPUTE RESOLUTION 7.1 Governed by Distribution Agreement. Any dispute arising out of or relating to this Agreement, including the breach or termination hereof, shall be resolved in accordance with the procedures specified in Article 8 of that certain Distribution Agreement between Centex and Cavco dated as of May 30, 2003 to which this Agreement is attached as an exhibit. ARTICLE 8 MISCELLANEOUS 8.1 Effectiveness. This Agreement shall become effective upon execution by both parties hereto. 8.2 Notices. Any notice, request, instruction or other document to be given or delivered under this Agreement by any party to another party shall be in writing and shall be deemed to have been duly given or delivered when (1) delivered in person, (2) sent by facsimile, (3) deposited in the United States mail, postage prepaid and sent certified mail, return receipt requested, or (4) delivered to Federal Express or similar service for overnight delivery to the address of the party set forth below. If to Centex or any Centex Affiliate, to: Centex Corporation 2728 North Harwood Dallas, Texas 75201 Fax No.: (214) 981-6080 Attention: Michael Albright With copy to: Centex Corporation 2728 North Harwood Dallas, TX 75201 Fax. No.: (214) 981-6855 Attention: General Counsel If to Cavco: Cavco Industries, Inc. 1001 North Central Avenue Suite 800 Phoenix, Arizona 85004 Fax No.: (602) 256-6189 Attention: Chief Executive Officer 14 Any party may, by written notice to the other parties, change the address or the party to which any notice, request, instruction or other document (or any copy thereof) is to be delivered. 8.3 Changes in Law. Any reference to a provision of the Code or a law of another jurisdiction shall include a reference to any applicable successor provision or law. 8.4 Confidentiality. Each party shall hold and cause its directors, officers, employees, advisors and consultants to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of law, all information (other than any such information relating solely to the business or affairs of such party) concerning the other parties hereto furnished it by such other party or its representatives pursuant to this Agreement (except to the extent that such information can be shown to have been (1) previously known by the party to which it was furnished, (2) in the public domain through no fault of such party, or (3) later lawfully acquired from other sources not under a duty of confidentiality by the party to which it was furnished), and each party shall not release or disclose such information to any other person, except its directors, officers, employees, auditors, attorneys, financial advisors, bankers and other consultants who shall be advised of and agree to be bound by the provisions of this Section 9.4. Each party shall be deemed to have satisfied its obligation to hold confidential information concerning or supplied by the other party if it exercises the same care as it takes to preserve confidentiality for its own similar information. 8.5 Successors. This Agreement shall be binding on and inure to the benefit of any successor, by merger, acquisition of assets or otherwise, to any of the parties hereto, to the same extent as if such successor had been an original party. 8.6 Affiliates. Centex shall cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by a Centex Affiliate; provided, however, that if a Centex Affiliate ceases to be a Centex Affiliate as a result of a transfer of its stock or other ownership interests to a third party in exchange for consideration in an amount approximately equal to the fair market value of the stock or other ownership interests transferred and such consideration is not distributed outside of the Centex Group to the shareholders of Centex then Cavco shall, upon request, execute a release of such Centex Affiliate from its obligations under this Agreement upon such transfer provided that such Centex Affiliate shall have executed a release of any rights it may have against Cavco or any Cavco Affiliate by reason of this Agreement. 8.7 Authorization, Etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of each such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding on such party. 15 8.8 Entire Agreement. This Agreement contains the entire agreement among the parties hereto with respect to the subject matter hereof and amends and restates all prior Tax sharing agreements between Centex or any Centex Affiliate and Cavco and such prior tax sharing agreements shall have no further force and effect. 8.9 Section Captions. Section captions used in this Agreement are for convenience and reference only and shall not affect the construction of this Agreement. 8.10 Governing Law. This Agreement shall be governed by and construed in accordance with laws of the State of Texas without giving effect to laws and principles relating to conflicts of law. 8.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same Agreement. 8.12 Severability. If any term, provision, covenant, or restriction of this Agreement is held by a court of competent jurisdiction (or an arbitrator or arbitration panel) to be invalid, void, or unenforceable, the remainder of the terms, provisions, covenants, and restrictions set forth herein shall remain in full force and effect, and shall in no way be affected, impaired, or invalidated. It is hereby stipulated and declared to be the intention of the parties that they would have executed the remaining terms, provisions, covenants, and restrictions without including any of such which may be hereafter declared invalid, void, or unenforceable. In the event that any such term, provision, covenant or restriction is held to be invalid, void or unenforceable, the parties hereto shall use their best efforts to find and employ an alternate means to achieve the same or substantially the same result as that contemplated by such terms, provisions, covenant, or restriction. 8.13 No Third Party Beneficiaries. This Agreement is solely for the benefit of Centex, the Centex Affiliates, and Cavco. This Agreement should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, cause of action or other rights in excess of those existing without this Agreement. 8.14 Waivers, Etc. No failure or delay on the part of the parties in exercising any power or right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right or power, or any abandonment or discontinuance of steps to enforce such right or power, preclude any other or further exercise thereof or the exercise of any other right or power. No modification or waiver of any provision of this Agreement nor consent to any departure by the parties therefrom shall in any event be effective unless the same shall be in writing, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. 8.15 Setoff. All payments to be made by any party under this Agreement shall be made without setoff, counterclaim, or withholding, all of which are expressly waived. 16 8.16 Change of Law. If, due to any change in applicable law or regulations or their interpretation by any court of law or other governing body having jurisdiction subsequent to the date of this Agreement, performance of any provision of this Agreement or any transaction contemplated thereby shall become impracticable or impossible, the parties hereto shall use their commercially reasonable efforts to find and employ an alternative means to achieve the same or substantially the same result as that contemplated by such provision. [Signature Page Follows.] 17 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by a duly authorized officer as of the date first above written. CENTEX CORPORATION, on behalf of itself and its affiliates By /s/ MICHAEL ALBRIGHT Name: Michael Albright --------------------------------- Title: Senior Vice President -------------------------------- CAVCO INDUSTRIES, INC. By /s/ JOSEPH H. STEGMAYER Name: Joseph H. Stegmayer --------------------------------- Title: President and C.E.O. -------------------------------- 18 EX-10.18 14 d08056exv10w18.txt EX-10.18 AGREEMENT TO ASSIGN TRADEMARK RIGHTS EXHIBIT 10.18 (EXECUTION COPY) AGREEMENT TO ASSIGN TRADEMARK RIGHTS AND LIMITED CONSENT TO USE CENTEX TRADEMARKS THIS AGREEMENT (this "Agreement") is entered into as of June 30, 2003 (the "Effective Date") by and between Centex Corporation, a corporation organized under the laws of the State of Nevada ("Centex"), and Cavco Industries, Inc., a corporation organized under the laws of the State of Delaware ("Cavco"). Centex and Cavco are hereinafter referred to as the "Parties." WHEREAS, the Parties have entered into a Distribution Agreement dated as of May 30, 2003 (the "Distribution Agreement"); and WHEREAS, as part of the consideration of the Distribution Agreement, Centex desires to assign, and Cavco desires to acquire, all right, title, and interest in and to a number of trademarks that are owned by Centex. NOW, THEREFORE, for and in consideration of the mutual covenants contained herein, and for other good and valuable consideration, receipt of which each party hereby acknowledges, the Parties hereby agree as follows: 1. DEFINITIONS 1.1 "Assigned Marks" means the trademarks listed in Exhibit 1 and all Intellectual Property Rights therein. 1.2 "Intellectual Property Rights" means copyrights, patents (including patent improvements), patent applications, trade secrets, trademarks, trade names or service marks, pending trademark applications or existing trademark registrations with the United States Patent and Trademark Office, or other intellectual property rights (including common law rights) under applicable law. 2. GRANT OF RIGHTS 2.1 Centex agrees to assign all of Centex's right, title and interest in the Assigned Marks to Cavco as set forth in this Agreement. In order to perfect such ownership transfer, contemporaneously with the execution of this Agreement, Centex has executed a separate assignment document to be recorded with the United States Patent and Trademark Office. Centex shall reasonably cooperate with Cavco in the filing and prosecution of the Assigned Marks if necessary. 2.2 Centex promptly shall deliver to Cavco all documentation pertaining to the Assigned Marks, including copies of all correspondence to or from examining authorities regarding such Assigned Marks, trademark searches pertaining to such Assigned Marks, and all correspondence with any attorney involved in the preparation and/or prosecution of the Assigned Marks. 3. LIMITED CONSENT TO USE CENTEX TRADEMARK 3.1 As soon as practicable, and in any event within six (6) months after the Effective Date, Cavco, at Cavco's expense, shall remove any and all exterior and interior signs and identifiers which refer or pertain to Centex. After such period, Cavco shall not use or display the name "Centex" or variations thereof, or other trademarks, tradenames, logos or identifiers using such name or otherwise owned by or licensed to Centex which have not been assigned or licensed to Cavco (collectively, the "Centex Trademarks"), without the prior written consent of Centex. However, nothing contained in this Agreement shall prevent Cavco from using the Centex name in public filings with governmental authorities, materials intended for distribution to Cavco stockholders, or any other communication in any medium which describes the relationship between the Parties. 3.2 Cavco shall have the right to use existing products, supplies and documents (including, but not limited to, purchase orders, forms, labels, shipping materials, catalogues, sales brochures, operating manuals, instructional documents and similar materials, and advertising material) being transferred to it which have imprinted thereon or otherwise use a Centex Trademark, for a period not to exceed six (6) months following the Effective Date. However, Cavco agrees (i) to use only such supplies and documents existing in inventory as of the Effective Date and (ii) not to order or utilize in any manner any additional supplies and documents which have imprinted thereon or otherwise use a Centex Trademark. 3.3 Cavco acknowledges and agrees that Centex does not consent to any use of the Centex Trademarks by Cavco other than as provided above, and that no license to use the Centex Trademarks has been granted to Cavco by Centex by this Section 3. The provisions of this Section 3 provide only a limited consent from Centex to Cavco to continue to display the Centex Trademarks on existing signage and other items until the earlier of (i) six months from the date of this Agreement; or (ii) the date Cavco fully complies with the provisions of Section 3.1, and for no other reason. 4. WARRANTIES 4.1 Centex represents and warrants that: (a) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and has full power and authority to enter into this Agreement and perform its obligations hereunder; (b) immediately prior to the execution of this Agreement, Centex owns all right, title and interest in and to the Assigned Marks; and (c) it has the legal right to grant all the rights it purports to grant and to convey all the rights it purports to convey pursuant to Section 2.1 above. 4.2 Cavco represents and warrants that: (a) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware and has full power and authority to enter into this Agreement and perform its obligations hereunder. 5. GENERAL 5.1 Entire Agreement. This Agreement constitutes the entire agreement of the Parties with respect to the subject matter hereof, and to the extent that this agreement is inconsistent with any prior agreement(s) between the Parties, the terms of this agreement are to control. 5.2 Amendment. This Agreement shall not be amended or otherwise modified except by a written agreement dated subsequent to the date of this Agreement and signed on behalf of Centex and Cavco by their respective duly authorized representatives. 5.3 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. 5.4 Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and the Parties' respective successors and assigns. 5.5 No Waiver. No waiver of any breach of any provision of this Agreement shall constitute a waiver of any prior, concurrent or subsequent breach of the same or any other provisions hereof, and no waiver shall be effective unless made in writing and signed by an authorized representative of the waiving party. 5.6 Savings Clause. If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable, the remaining provisions shall remain in full force and effect. 5.7 Further Assurances. The Parties agree to take such further action and execute, deliver and/or file such documents or instruments as are necessary to carry out the terms and purposes of this Agreement. 5.8 Section Headings. The section headings used in this Agreement are intended for convenience only and shall not be deemed to supersede or modify any provisions. IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date. CENTEX CORPORATION CAVCO INDUSTRIES, INC. By: By: ----------------------------- ----------------------------- Its Its ----------------------------- ----------------------------- EXHIBIT 1 ASSIGNED MARKS CAVCO CAVCO HOMES SUNBUILT VILLAGER SUN VILLA CEDAR COURT WESTCOURT WINROCK CATALINA CAVCO GOLD KEY GUARANTEE SAGUARA ELITE DESERT ROSE SUNBURST CAVCO CABINS AAA HOMES CAVCO HOME CENTER EX-10.19 15 d08056exv10w19.txt EX-10.19 AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT EXHIBIT 10.19 AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT This AMENDMENT NO. 1 TO DISTRIBUTION AGREEMENT, dated as of June 27, 2003 (this "Amendment") is entered into by and among CENTEX CORPORATION, a Nevada corporation ("Centex"), CAVCO INDUSTRIES, LLC, a Delaware limited liability company ("Cavco LLC"), and CAVCO INDUSTRIES, INC., a Delaware corporation ("Cavco" and, together with Cavco LLC, the "Cavco Parties"); WITNESSETH: WHEREAS, Centex and the Cavco Parties entered into that certain Distribution Agreement, dated as of May 30, 2003 (the "Distribution Agreement"), in order to provide for the separation of the businesses conducted by Cavco LLC from the other businesses conducted by Centex and its Subsidiaries; WHEREAS, pursuant to Section 9.3 of the Distribution Agreement, Centex and the Cavco Parties desire to amend the Distribution Agreement in certain respects as provided herein; and WHEREAS, all capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Distribution Agreement; NOW, THEREFORE, in consideration of the premises, the terms and provisions set forth herein, the mutual benefits to be gained by the performance thereof, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. The Distribution Agreement is hereby amended as follows: a. Section 2.3(a) of the Distribution Agreement is hereby amended by deleting the words "Prior to the date and time at which the Merger is consummated (the "Merger Date")" and replacing them with the following: "On the Distribution Date, but prior to the consummation of the Distribution," b. Section 2.4 of the Distribution Agreement is hereby amended by deleting the words "Merger Date" and replacing them with the following: "the date and time at which the Merger is consummated (the "Merger Date")" -1- c. The table contained in Section 1.2 of the Distribution Agreement is hereby amended to reflect that the term "Merger Date" is defined in Section 2.4. 2. This Amendment shall be construed in accordance with and governed by the laws of the State of Texas, without regard to the conflict of laws rules thereof. 3. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Amendment shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. 4. Except as amended or modified by this Amendment, the Distribution Agreement is hereby ratified by each of Centex and the Cavco Parties and shall remain in full force and effect in accordance with its terms. [Signature page follows] -2- IN WITNESS WHEREOF the parties hereto have caused this Amendment to be duly executed by their respective authorized officers as of the date first above written. CENTEX CORPORATION By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CAVCO INDUSTRIES, LLC By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- CAVCO INDUSTRIES, INC. By: ------------------------------------- Name: -------------------------------- Title: ------------------------------- -3- EX-31.1 16 d08056exv31w1.htm EX-31.1 CERTIFICATION OF CEO - RULE 13A-14(A) exv31w1
 

Exhibit 31.1

Certifications

I, Laurence E. Hirsch, certify that:

1.     I have reviewed this report on Form 10-Q of Centex Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ LAURENCE E. HIRSCH
Laurence E. Hirsch		    
Chief Executive Officer    

  EX-31.2 17 d08056exv31w2.htm EX-31.2 CERTIFICATION OF CFO - RULE 13A-14(A) exv31w2

 

Exhibit 31.2

Certifications

I, Leldon E. Echols, certify that:

1.     I have reviewed this report on Form 10-Q of Centex Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ LELDON E. ECHOLS
Leldon E. Echols		    
Chief Financial Officer    

  EX-31.3 18 d08056exv31w3.htm EX-31.3 CERTIFICATION OF CEO - RULE 13A-14(A) exv31w3

 

Exhibit 31.3

Certifications

I, Stephen M. Weinberg, certify that:

1.     I have reviewed this report on Form 10-Q of 3333 Holding Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ STEPHEN M. WEINBERG
Stephen M. Weinberg		    
Chief Executive Officer    

  EX-31.4 19 d08056exv31w4.htm EX-31.4 CERTIFICATION OF CFO - RULE 13A-14(A) exv31w4

 

Exhibit 31.4

Certifications

I, Todd D. Newman, certify that:

1.     I have reviewed this report on Form 10-Q of 3333 Holding Corporation;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ TODD D. NEWMAN
Todd D. Newman
Chief Financial Officer

  EX-31.5 20 d08056exv31w5.htm EX-31.5 CERTIFICATION OF CEO - RULE 13A-14(A) exv31w5

 

Exhibit 31.5

Certifications

I, Stephen M. Weinberg, certify that:

1.     I have reviewed this report on Form 10-Q of Centex Development Company, L.P.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ STEPHEN M. WEINBERG
Stephen M. Weinberg		    
Chief Executive Officer of 3333 Development Corporation,    
General Partner of Centex Development Company, L.P.    

  EX-31.6 21 d08056exv31w6.htm EX-31.6 CERTIFICATION OF CFO - RULE 13A-14(A) exv31w6

 

Exhibit 31.6

Certifications

I, Todd D. Newman, certify that:

1.     I have reviewed this report on Form 10-Q of Centex Development Company, L.P.;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.     The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.     The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

(a)  All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)  Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2003

     
/s/ TODD D. NEWMAN
Todd D. Newman		    
Chief Financial Officer of 3333 Development Corporation,    
General Partner of Centex Development Company, L.P.    

  EX-32.1 22 d08056exv32w1.htm EX-32.1 CERTIFICATION OF CEO - SECTION 906 exv32w1

 

EXHIBIT 32.1

CENTEX CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Centex Corporation and Subsidiaries (the “Company”) on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Laurence E. Hirsch, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

   
  /s/ LAURENCE E. HIRSCH
 
  Laurence E. Hirsch
  Chief Executive Officer
   
  Date: August 13, 2003

  EX-32.2 23 d08056exv32w2.htm EX-32.2 CERTIFICATION OF CFO - SECTION 906 exv32w2

 

EXHIBIT 32.2

CENTEX CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Centex Corporation and Subsidiaries (the “Company”) on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Leldon E. Echols, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
    /s/ LELDON E. ECHOLS
   
    Leldon E. Echols
    Chief Financial Officer
 
    Date: August 13, 2003

  EX-32.3 24 d08056exv32w3.htm EX-32.3 CERTIFICATION OF CEO - SECTION 906 exv32w3

 

EXHIBIT 32.3

3333 HOLDING CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen M. Weinberg, Chief Executive Officer of 3333 Holding Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of 3333 Holding Corporation and Subsidiary.

     
    /s/ STEPHEN M. WEINBERG
   
    Stephen M. Weinberg
    Chief Executive Officer
     
    Date: August 13, 2003

  EX-32.4 25 d08056exv32w4.htm EX-32.4 CERTIFICATION OF CFO - SECTION 906 exv32w4

 

EXHIBIT 32.4

3333 HOLDING CORPORATION

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd D. Newman, Chief Financial Officer of 3333 Holding Corporation, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of 3333 Holding Corporation and Subsidiary.

   
  /s/ TODD D. NEWMAN
 
  Todd D. Newman
  Chief Financial Officer
 
  Date: August 13, 2003

  EX-32.5 26 d08056exv32w5.htm EX-32.5 CERTIFICATION OF CEO - SECTION 906 exv32w5

 

EXHIBIT 32.5

CENTEX DEVELOPMENT COMPANY, L.P.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen M. Weinberg, Chief Executive Officer of 3333 Development Corporation, the general partner of Centex Development Company, L.P., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Centex Development Company, L.P. and Subsidiaries.

   
  /s/ STEPHEN M. WEINBERG
 
  Stephen M. Weinberg
  Chief Executive Officer
   
  Date: August 13, 2003

  EX-32.6 27 d08056exv32w6.htm EX-32.6 CERTIFICATION OF CFO - SECTION 906 exv32w6

 

EXHIBIT 32.6

CENTEX DEVELOPMENT COMPANY, L.P.

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of 3333 Holding Corporation and Subsidiary and Centex Development Company, L.P. and Subsidiaries on Form 10-Q for the period ending June 30, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd D. Newman, Chief Financial Officer of 3333 Development Corporation, the general partner of Centex Development Company, L.P., certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

     (1)  The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2)  The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Centex Development Company, L.P. and Subsidiaries.

   
  /s/ TODD D. NEWMAN
 
  Todd D. Newman
  Chief Financial Officer
 
  Date: August 13, 2003

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