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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________
Commission File Number 1-6117
SOUTHDOWN, INC.
(Exact name of registrant as specified in its charter)
Louisiana 72-0296500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1200 Smith Street
Suite 2400
Houston, Texas 77002
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 650-6200
Indicate by check mark whether the registrant (1) has 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 (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
At April 28, 1995 there were 17.3 million common shares outstanding.
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SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
INDEX
Page
No.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Consolidated Balance Sheet
March 31, 1995 and December 31, 1994 1
Statement of Consolidated Earnings
Three months ended March 31, 1995 and 1994 2
Statement of Consolidated Cash Flows
Three months ended March 31, 1995 and 1994 3
Statement of Consolidated Revenues and
Operating Earnings by Business Segment
Three months ended March 31, 1995 and 1994 4
Statement of Shareholders' Equity
Three months ended March 31, 1995 4
Notes to Consolidated Financial Statements 5
Independent Accountants' Review Report 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 15
Item 6. Exhibits and Reports on Form 8-K 17<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Southdown, Inc. and Subsidiary Companies
Consolidated Balance Sheet
(Unaudited)
<TABLE>
<CAPTION>
(in millions)
--------------------------
March 31, December 31,
1995 1994
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 7.2 $ 7.4
Accounts and notes receivable, less allowance
for doubtful accounts of $8.0 and $7.2 70.5 73.0
Inventories (Note 3) 73.8 54.0
Deferred income taxes 28.8 26.5
Assets held for sale 11.8 13.2
Prepaid expenses and other 3.1 3.5
---------- ------------
Total current assets 195.2 177.6
Property, plant and equipment, less accumulated
depreciation, depletion and amortization
of $313.9 and $306.0 559.9 560.2
Goodwill 77.9 78.6
Other long-term assets:
Long-term receivables 18.1 15.3
Other 49.2 49.3
---------- ------------
$ 900.3 $ 881.0
---------- ------------
---------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 1.0 $ 0.3
Accounts payable and accrued liabilities 96.4 103.2
---------- ------------
Total current liabilities 97.4 103.5
Long-term debt 212.3 185.8
Deferred income taxes 118.9 122.7
Minority interest in consolidated joint venture 29.3 28.9<PAGE>
Long-term portion of postretirement benefit
obligation 81.6 82.0
Other long-term liabilities and deferred credits 20.1 21.0
---------- ------------
559.6 543.9
---------- ------------
Shareholders' equity:
Preferred stock redeemable at issuer's
option (Note 4) 151.9 152.0
Common stock, $1.25 par value 21.6 21.6
Capital in excess of par value 126.7 126.6
Reinvested earnings 40.5 36.9
---------- ------------
340.7 337.1
---------- ------------
$ 900.3 $ 881.0
---------- ------------
---------- ------------
/TABLE
<PAGE>
Southdown, Inc. and Subsidiary Companies
Statement of Consolidated Earnings
(Unaudited)
<TABLE>
<CAPTION>
(in millions,
except per share data)
----------------------------
Three Months Ended
March 31,
----------------------------
1995 1994
---------- -----------
<S> <C> <C>
Revenues $ 119.1 $ 111.3
---------- -----------
Costs and expenses:
Operating 81.2 80.7
Depreciation, depletion and amortization 9.9 9.9
Selling and marketing 3.6 3.1
General and administrative 9.4 9.9
Other (income) expense, net (0.9) 0.8
---------- -----------
103.2 104.4
Minority interest in earnings of consolidated
joint venture 0.4 -
---------- -----------
103.6 104.4
---------- -----------
Operating earnings 15.5 6.9
Interest, net of amounts capitalized (6.6) (8.7)
---------- -----------
Earnings (loss) from continuing operations
before income taxes 8.9 (1.8)
Federal and state income tax (expense) benefit (2.8) 0.5
---------- -----------
Earnings (loss) from continuing operations 6.1 (1.3)
Loss from discontinued operations, net of <PAGE>
income taxes (Note 2) - (0.9)
---------- -----------
Net earnings (loss) $ 6.1 $(2.2)
---------- -----------
---------- -----------
Dividends on preferred stock (Note 4) $(2.4) $(2.1)
---------- -----------
---------- -----------
Earnings (loss) per common share
(Note 4 and Exhibit 11):
Earnings (loss) from continuing operations $ 0.21 $ (0.20)
Loss from discontinued operations, net of
income taxes - (0.05)
---------- -----------
$ 0.21 $(0.25)
---------- -----------
---------- -----------
Average shares outstanding (Exhibit 11)
Primary 17.3 17.1
---------- -----------
---------- -----------
Fully diluted 17.4 17.1
---------- -----------
---------- -----------
/TABLE
<PAGE>
Southdown, Inc. and Subsidiary Companies
Statement of Consolidated Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
(in millions)
--------------------
Three Months Ended
March 31,
--------------------
1995 1994
------- --------
<S> <C> <C>
Operating activities:
Earnings (loss) from continuing operations $ 6.1 $ (1.3)
Adjustments to reconcile earnings (loss) from
continuing operations to net cash provided by
(used in)operating activities:
Depreciation, depletion and amortization 9.9 9.9
Deferred income tax expense (benefit) 1.4 (0.1)
Amortization of debt issuance costs 0.6 1.2
Changes in operating assets and liabilities (29.4) (12.6)
Net cash used in discontinued operations (3.2) (0.2)
------- --------
Net cash used in operating activities (14.4) (3.1)
------- --------
Investing activities:
Additions to property, plant and equipment (6.8) (6.2)
Acquisitions, net of cash acquired (2.0) -
Other 0.1 (1.1)
Net cash used in discontinued operations (0.9) (0.3)
------- --------
Net cash used in investing activities (9.6) (7.6)
------- --------
Financing activities:
Additions to long-term debt 27.2 -
Reductions in long-term debt (0.1) (70.0)
Dividends (3.3) (0.4)<PAGE>
Proceeds from sale of preferred stock - 86.3
Securities issuance costs - (4.2)
------- --------
Net cash provided by financing activities 23.8 11.7
------- --------
Net increase (decrease) in cash and cash equivalents (0.2) 1.0
Cash and cash equivalents at beginning of period 7.4 7.4
------- --------
Cash and cash equivalents at end of period $ 7.2 $ 8.4
------- --------
------- --------
</TABLE>
Cash payments for income taxes totaled $4.3 million and $115,000 in the first
quarters of 1995 and 1994, respectively. In order not to incur additional
interest charges, in early January 1995 the Company also paid a $7.6 million
tax assessment, including interest, proposed by the Internal Revenue Service in
a preliminary audit report issued in late 1994. Interest paid, net of amounts
capitalized, was $1.9 million and $3.2 million in 1995 and 1994, respectively. <PAGE>
Southdown, Inc. and Subsidiary Companies
Statement Of Consolidated Revenues And Operating Earnings
By Business Segment
(Unaudited)
<TABLE>
<CAPTION>
(in millions)
-----------------------
Three Months Ended
March 31,
-----------------------
1995 1994
--------- --------
<S> <C> <C>
Contributions to revenues:
Cement $ 80.1 $ 73.4
Concrete products 49.7 49.6
Intersegment sales (10.7) (11.7)
--------- --------
$ 119.1 $ 111.3
--------- --------
--------- --------
Contributions to operating earnings (loss) before
interest expense and income taxes:
Cement $ 21.6 $ 16.9
Concrete products 1.2 (0.8)
Corporate
General and administrative (6.4) (6.9)
Depreciation, depletion and amortization (1.0) (1.2)
Miscellaneous income (expense) 0.1 (1.1)
--------- --------
$ 15.5 $ 6.9
--------- --------
--------- --------
/TABLE
<PAGE>
Southdown, Inc. and Subsidiary Companies
Statement Of Shareholders' Equity
(Unaudited)
<TABLE>
<CAPTION>
(in millions)
-------------------------------------------------------
Capital
in excess
Preferred Stock Common Stock of par Reinvested
Shares Amount Shares Amount value earnings
------ ------- ------- ----- ------ ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1994 4.6 $152.0 17.3 $ 21.6 $126.6 $ 36.9
Net earnings - - - - - 6.1
Dividends on
preferred
stock
(Note 4) - - - - - (2.4)
Other - (0.1) - - 0.1 (0.1)
------ ------- ------- ----- ------ ----------
Balance at
March 31,
1995 4.6 $151.9 17.3 $ 21.6 $126.7 $ 40.5
------ ------- ------- ----- ------ ----------
------ ------- ------- ----- ------ ----------
/TABLE
<PAGE>
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1 - Unaudited Consolidated Financial Statements:
The Consolidated Balance Sheet of Southdown, Inc. and subsidiary
companies (the Company) at March 31, 1995 and the Statements of Consolidated
Earnings, Consolidated Cash Flows, Consolidated Revenues and Operating
Earnings by Business Segment and Shareholders' Equity for the periods
indicated herein have been prepared by the Company without audit. The
Consolidated Balance Sheet at December 31, 1994 is derived from the December
31, 1994 audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. It is assumed that
these financial statements will be read in conjunction with the audited
financial statements and notes thereto included in the Company's 1994 Annual
Report on Form 10-K.
In the opinion of management, the statements reflect all adjustments
necessary for a fair presentation of the financial position, results of
operations and cash flows of the Company on a consolidated basis and all such
adjustments are of a normal recurring nature. The interim statements for the
period ended March 31, 1995 are not necessarily indicative of results to be
expected for the full year. Certain data from the prior year has been
reclassified for purposes of comparison.
Note 2 - Discontinued Environmental Services Segment:
During the fourth quarter of 1994, the Company adopted a formal plan to
exit the environmental services business and recorded a $21.6 million charge
to earnings to reflect (i) the difference between the book value of the
environmental services assets and the estimated proceeds from the disposal of
these assets and (ii) the estimated losses to be incurred prior to the sale of
assets and other direct costs of exiting the business. During April 1995, the
Company sold all the outstanding shares of stock of its remaining hazardous
waste processing facilities for a combination of $11.8 million in cash and
notes plus certain working capital items. The Company remains contingently
liable for certain environmental remediation issues, known and unknown, under
the indemnification provisions of the sales agreements.
As of March 31, 1995, balance sheet amounts associated with the
discontinued environmental services operations reflect management s estimates
of the amounts expected to be realized on the sale of the Company's
environmental services business and the estimated amount of liabilities
r e tained and the operating losses expected to be incurred prior to
disposition. The amounts the Company may ultimately realize and the
liabilities for which the Company may ultimately be held responsible related
to the disposition of the environmental services business may differ
materially, based on subsequent events or future information, from the amounts
assumed in arriving at the loss on disposal of the discontinued operations.<PAGE>
As a result of the decision to exit the environmental services business,
prior periods have been restated to present the results from the Environmental
Services segment as discontinued operations. Summary operating results of the
discontinued Environmental Services segment and reconciliation to amounts
previously reported are as follows:
(in millions)
------------------
Three Months Ended
March 31, 1994
------------------
Revenue:
Continuing operations $ 111.3
Discontinued operations 8.1
---------
$ 119.4
---------
---------
Pre-tax operating loss from
discontinued operations $ (1.4)
---------
---------
Note 3 - Inventories:
(unaudited, in millions)
-----------------------
March 31, December 31,
1995 1994
--------- -----------
Finished goods $ 24.6 $ 15.1
Work in progress 16.1 6.5
Raw materials 4.8 4.6
Supplies 28.3 27.8
------ -------
$ 73.8 $ 54.0
------ -------
------ -------
Inventories stated on the LIFO method were $32.5 million of total
inventories at March 31, 1995 and $19.2 million of total inventories at
December 31, 1994 compared with current costs of $40.8 million and $27.5
million, respectively.
Note 4 - Capital Stock:
Common Stock
At March 31, 1995 17,266,000 shares of common stock were issued and
outstanding.
Preferred Stock Redeemable at Issuer's Option
Series A Preferred Stock - The Company had 1,994,000 shares of
Preferred Stock, $0.70 Cumulative Convertible Series A (Series A Preferred
Stock) outstanding at March 31, 1995 and December 31, 1994 and 1,999,000<PAGE>
shares outstanding at March 31, 1994. Dividends paid on the Series A
Preferred Stock were approximately $350,000 during each of the three-month
periods ended March 31, 1995 and 1994.
Series B Preferred Stock - The Company had 914,360 shares of
Preferred Stock, $3.75 Convertible Exchangeable Series B (Series B Preferred
Stock) outstanding at March 31, 1995, 917,160 shares outstanding at December
31, 1994, and 957,000 shares outstanding at March 31, 1994. Dividends accrued
on the Series B Preferred Stock were approximately $860,000 and $900,000,
respectively, during the three months ended March 31, 1995 and 1994.
Series D Preferred Stock - On January 27, 1994, the Company issued
1,725,000 shares of Preferred Stock, $2.875 Cumulative Convertible Series D
(Series D Preferred Stock) all of which were outstanding at March 31, 1995,
December 31, 1994, and March 31, 1994. Dividends accrued on the Series D
Preferred Stock were approximately $1.2 million and $900,000, respectively,
during the three month periods ended March 31, 1995 and 1994.
Note 5 - Contingencies:
See Item 2. "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources - Known
Events, Trends and Uncertainties" for discussion of certain contingencies.
Note 6 - Review by Independent Accountants:
The unaudited financial information presented in this report has
been reviewed by the Company's independent public accountants. The review was
limited in scope and did not constitute an audit of the financial information
in accordance with generally accepted auditing standards such as is performed
in the year-end audit of financial statements. The report of Deloitte &
Touche LLP relating to its limited review of the financial information as of
March 31, 1995 and for the three-month periods ended March 31, 1995 and 1994
follows.<PAGE>
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and
Board of Directors of
Southdown, Inc.
Houston, Texas
We have reviewed the accompanying consolidated balance sheet of
Southdown, Inc. and subsidiary companies as of March 31, 1995, and the related
consolidated statements of earnings and cash flows for the three months ended
March 31, 1995 and 1994 and the statement of shareholders' equity for the
three months ended March 31, 1995. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by
the American Institute of Certified Public Accountants. A review of the
interim financial information consists principally of applying analytical
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications
that should be made to such financial statements for them to be in conformity
with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheet of Southdown, Inc. and
subsidiary companies as of December 31, 1994 and the related consolidated
statements of earnings, shareholders' equity and cash flows for the year then
ended (not presented herein); and in our report dated January 27, 1995, we
expressed an unqualified opinion on those consolidated financial statements.
In our opinion, the information set forth in the accompanying consolidated
balance sheet as of December 31, 1994 is fairly stated, in all material
respects, in relation to the consolidated balance sheet from which it has been
derived.
Deloitte & Touche LLP
Houston, Texas
April 26, 1995<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Consolidated First Quarter Earnings
Operating earnings for the first quarter of 1995 were $15.5
million compared with $6.9 million in the prior year quarter. Net earnings
for the three months ended March 31, 1995 were $6.1 million, $0.21 per share.
The net loss for the prior year quarter was $2.2 million, $0.25 per share,
including a loss from the discontinued environmental services operations of
$0.9 million, $0.05 per share.
Consolidated revenues in the first quarter of 1995 increased 7%
over the same period of the prior year primarily because of improved sales
prices in both the Cement and Concrete Products segments. First quarter 1995
operating earnings improved $8.6 million over the same quarter of the prior
year. The Cement segment benefited from an improvement in sales prices,
partially offset by marginally lower sales volumes and higher per unit cost of
sales. The Concrete Products segment s continued improvement resulted
primarily from higher ready-mixed concrete sales prices also partially offset
by lower sales volumes and higher per unit operating costs. Included in the
results of the prior year quarter were miscellaneous charges totaling $1.7
million in conjunction with the disposition of certain lawsuits.
Interest expense for the three months ended March 31, 1995 was
$2.1 million lower than the comparable 1994 quarter because of lower debt
levels. The decline in debt levels is primarily the result of the issuance of
approximately $86 million of preferred stock and the application of the
proceeds towards early retirement of $90 million of 12% notes in the first
half of 1994.
Segment Operating Earnings
Cement
Operating earnings of the Cement segment for the three month
period ended March 31, 1995 were $21.6 million compared with $16.9 million in
the prior year quarter. Cement sales prices improved an average of $6.16 per
ton for the quarter, reflecting price increases implemented at all locations.
Even though manufacturing costs per ton were lower in the current year, cost
of sales were higher primarily because of increased purchases of imported
finished cement to supplement the Company s production capacity. The slight
decline in sales volume reflects primarily the adverse impact of the unusually
severe rainy weather in California during the first quarter of 1995.
Sales volumes, average unit price and cost data and unit
operating profit margins relating to the Company's cement plant operations
appear in the following table:
Three Months Ended
March 31,
---------------
1995 1994
------ ------
Tons of cement sold (thousands) 1,216 1,240
------- -------
------- -------<PAGE>
Weighted average per ton data:
Sales price (net of freight) $58.16 $52.00
Cost of sales (1) 44.60 41.84
------- -------
Margin $13.56 $10.16
------- -------
------- -------
______________
(1) Includes fixed and variable manufacturing costs,
cost of purchased cement, selling expenses,
plant general and administrative costs, other
plant overhead and miscellaneous costs.
Concrete Products
The Concrete Products segment s operating earnings for the
quarter ended March 31, 1995 were $1.2 million compared with a $0.8 million
operating loss reported in the prior year period. Revenues increased
marginally over the prior year quarter because improved sales prices more than
offset lower sales volumes. Higher prices in both the Florida and southern
California ready-mix concrete operations were offset to some extent by an 11%
decline in ready-mix concrete sales volumes and, primarily in Florida, higher
operating costs. The decrease in segment sales volumes reflects the unusually
rainy weather in California during the first quarter of 1995 and, in Florida,
a decline in residential construction compared with the prior year period.
T h e segment s operating results also reflect continuing
improvement from the block, resale and fly ash operations in Florida and from
aggregate operations in southern California which combined totalled $1.8
million of operating earnings in the 1995 period compared with $900,000 in the
1994 period.
Sales volumes, unit price and cost data and unit operating
margins relating to the Company's sales of ready-mixed concrete appear in the
following table:
Three Months Ended
March 31,
--------------------
1995 1994
-------- --------
Yards of ready-mixed concrete
sold (thousands) 791 893
-------- --------
-------- --------
Weighted average per cubic
yard data:
Sales price $ 50.03 $ 45.18
Operating costs (1) 50.58 47.04
-------- --------
Margins (2) $ (0.55) $ (1.86)
--------- --------
--------- --------<PAGE>
-----------
(1) I n c ludes variable and fixed plant costs,
delivery, selling, general and administrative
and miscellaneous operating costs.
(2) Does not include profits from sale of aggregates, concrete
block and other related products.
The increase in the weighted average sales price per cubic yard
for the three months ended March 31, 1995 compared with the 1994 period
reflects price increases implemented in the Company's Florida and southern
California markets. The increase in weighted average operating costs per
cubic yard for the three months ended March 31, 1995 compared with 1994 is
primarily attributable to higher raw material, payroll and lease costs of the
Florida operations.
Corporate
Corporate general and administrative expenses were $6.4 million
in the first quarter of 1995 compared with $6.9 million in the prior year
quarter. The current quarter included a $0.5 million credit to pension
expense. The pension credit represents the extent to which the investment
return on pension assets exceeded the computed increase in the projected
pension benefit obligation.
Miscellaneous expense in the first quarter of 1994 included
charges totaling $1.7 million in conjunction with the disposition of certain
lawsuits.
Liquidity and Capital Resources
The discussion of liquidity and capital resources included on pages
30 through 38 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 should be read in conjunction with the discussion of
liquidity and capital resources contained herein.
The Company's Revolving Credit Facility totals $200 million and
matures in November 1996. The Revolving Credit Facility includes $18.5
million of borrowing capacity that is restricted solely for potential funding
of obligations under an agreement between the Company and the U.S. Maritime
Administration related to certain shipping operations owned previously by
Moore McCormack Resources, Inc. (Moore McCormack), an entity acquired by the
Company in 1988. The terms of the facility also permit the issuance of
standby letters of credit up to a maximum of $95 million in lieu of
borrowings. Substantially all of the Company's assets are pledged to secure
this facility. At March 31, 1995, $49.8 million of borrowings and $51.2
million of letters of credit were outstanding under the Revolving Credit
Facility, leaving $80.5 million of unused and unrestricted capacity.
In the first quarter of 1995, borrowings under the Company's
R e volving Credit Facility were utilized to (i) fund working capital
requirements, (ii) invest approximately $8.8 million in plant, property and
equipment and (iii) pay dividends on preferred stock.<PAGE>
In the first quarter of 1994, the Company realized approximately $82
million in net proceeds from the sale of 1,725,000 shares of a new issue of
preferred stock. The net proceeds were used to prepay an $18 million
promissory note due in March 1994 and to reduce borrowings under the Company's
Revolving Credit Facility, some of which had been utilized in early 1994 to
redeem $45 million of the $90 million outstanding principal amount of the
Company's 12% Senior Subordinated Notes Due 1997. Other borrowings under the
Company s Revolving Credit Facility were utilized to finance the seasonal
build-up of inventories and make investments of approximately $6.2 million in
property, plant and equipment.
Changes in Financial Condition
The change in the financial condition of the Company between
December 31, 1994 and March 31, 1995 reflects borrowings under the Company's
Revolving Credit Facility to fund working capital requirements, capital
expenditures and preferred stock dividends. The increase in inventories
reflects the typical seasonal build-up in cement inventories in preparation
for the peak selling months in the second and third quarters. Accounts
payable and accrued liabilities decreased because of the timing of payments on
normal trade and other obligations.
Known Events, Trends and Uncertainties
Environmental Matters
The Company is subject to extensive Federal, state and local
air, water and other environmental laws and regulations. These constantly
changing laws regulate the discharge of materials into the environment and may
require the Company to remove or mitigate the environmental effects of the
disposal or release of certain substances at the Company s various operating
facilities.
The Federal Water Pollution Control Act, commonly known as the
Clean Water Act, provides comprehensive federal regulation of various sources
of water pollution. The Clean Air Act Amendments of 1990 provided
comprehensive federal regulation of various sources of air pollution, and
established a new federal operating permit program for virtually all
manufacturing operations. The Clean Air Act Amendments will likely result in
increased capital and operational expenses for the Company in the future, the
amounts of which are not presently determinable. Beginning in mid-1995, the
C o m p any must, on a pre-determined phase-in schedule, submit permit
applications and pay annual permit fees. In addition, the U.S. Environmental
Protection Agency (U.S. EPA) is developing air toxics regulations for a broad
spectrum of industrial sectors, including portland cement manufacturing. U.S.
EPA has indicated that the new maximum available control technology standards
could require significant reduction of air pollutants below existing levels
prevalent in the industry. Management has no reason to believe, however, that
these new standards would place the Company at a disadvantage with respect to
its competitors. To the contrary, given the age, condition, design and other
features of the Company s cement manufacturing facilities, these more
stringent standards may enhance the Company s competitive position. <PAGE>
The Comprehensive Environmental Response, Compensation, and
Liability Act of 1980 (CERCLA), as amended by the Superfund Amendments and
Reauthorization Act of 1986 (SARA), as well as analogous laws in certain
states, create joint and several liability for the cost of cleaning up or
correcting releases to the environment of designated hazardous substances.
The failure to observe the exacting requirements of these laws and regulations
may expose the Company to significant liabilities and costs of cleaning up
releases into the environment or claims by employees or others alleging
exposure to toxic or hazardous substances. Management believes that the
Company s current procedures and practices for handling and management of
m a terials are generally consistent with industry standards and legal
requirements and that appropriate precautions are taken to protect employees
and others from harmful exposure to hazardous materials. However, because of
the complexity of operations and legal requirements, there can be no assurance
that past or future operations will not result in operational errors,
violations, remediation liabilities or claims by employees or others alleging
exposure to toxic or hazardous materials. Owners and operators of industrial
facilities may be subject to fines or other actions imposed by the U.S. EPA
and corresponding state regulatory agencies for violations of laws or
regulations relating to hazardous substances. The Company has incurred fines
imposed by various environmental regulatory agencies in the past.
Although several of the Company s previously and currently
owned facilities at several locations are presently the subject of various
local, state and federal environmental proceedings and inquiries, including
being named a potentially responsible party with regard to Superfund sites,
primarily at several locations to which they are alleged to have shipped
materials for disposal, most of these matters are in their preliminary stages
and final results may not be determined for years. Based on the information
the Company has developed to date, the Company has no reason to believe it
will be required to spend significant sums with regard to these locations
either individually or in the aggregate. However, until it is determined
what, if any, contribution the Company made to these locations and until all
environmental studies, investigations, remediation work and negotiations with
potential sources of recovery have been completed, it is impossible to
determine the ultimate cost of resolving these environmental matters.
Cement kiln dust - Industrial operations have been conducted at
some of the Company s cement manufacturing facilities for almost 100 years.
Many of the raw materials, products and by-products associated with the
operation of any industrial facility, including those for the production of
cement or concrete products, may contain chemical elements or compounds that
are designated as hazardous substances. One such by-product of the cement
manufacturing process at many of the Company s cement plants is cement kiln
dust (CKD). Under the Bevill amendment to the Resource Conservation and
Recovery Act (RCRA), CKD is exempt from management as a hazardous waste,
except CKD which is produced by kilns burning hazardous waste derived fuel and
which fails to meet certain criteria. On January 31, 1995, the U.S. EPA
issued its decision on the regulatory status of CKD stating that although the
agency found no evidence of risks to human health or the environment, the U.S.
EPA had determined further regulation of CKD was necessary. CKD will not be
regulated as a RCRA hazardous waste and the Bevill amendment exemption will
remain in effect until the issuance of new CKD management standards. The U.S.
EPA will initiate a rule-making process, which is estimated to take at least<PAGE>
two years, in order to develop specially tailored CKD management standards.
This change in the status of CKD may require the cement industry to develop
new methods for handling this high volume, low toxicity waste.
CKD that is infused with water may produce a leachate with an
alkalinity high enough to be classified as hazardous and may also leach
certain hazardous trace metals present therein. The Company has recorded
charges totaling $11.7 million as the estimated remediation cost for one site
in Ohio where such leaching has occurred. Approximately $10.5 million of the
reserved amount had been expended through March 31, 1995 with most of the
balance to be spent during the remainder of 1995.
On a voluntary basis, the Company is also investigating two
other inactive Ohio CKD disposal sites. The two additional sites in question
were part of a cement manufacturing facility that was owned and operated by a
now dissolved cement company from 1924 to 1945 and by a division of USX
Corporation (USX) from 1945 to 1975. The Company believes that USX is a
responsible party because it owned and operated the larger of the two sites
(USX Site) at the time of disposal of the hazardous substances, arranged for
the disposal of the hazardous substances and transported the hazardous
substances to the USX Site. Therefore, based on the advice of counsel, the
Company believes there is a reasonable basis for the apportionment of cleanup
costs relating to the USX Site between the Company and USX with USX
shouldering substantially all of the cleanup costs because, based on the facts
known at this time, the Company itself disposed of no CKD at the USX Site and
is potentially liable under CERCLA only because of its current ownership of
the USX Site.
On September 24, 1993, the Company filed a complaint against USX,
alleging that USX is a potentially responsible party under CERCLA and under
applicable Ohio law, and therefore jointly and severally liable for costs
associated with cleanup of the USX Site. Based on the limited information
available, the Company has received two preliminary estimates of the potential
magnitude of the remediation costs of the USX Site, $8 million and $32
million, depending on the assumptions used. The Company and USX have held
settlement discussions with respect to this matter. In this regard, in March
1995, the Company and USX reached an agreement in principle whereby USX would
reimburse the Company for half of certain costs already incurred by the
Company at the USX Site and the Company and USX would jointly fund the initial
project of a phased approach to investigating and remediating the problems at
the USX Site. The court has granted a jointly requested stay of litigation
until October 6, 1995.
Under CERCLA and applicable Ohio law, a court generally applies
equitable principles in determining the amount of contribution which a
potentially responsible party must provide with respect to a cleanup of
hazardous substances and such determination is within the sole discretion of
the court. In addition, no regulatory agency has directly asserted a claim
against the Company as the owner of the USX Site requiring it to remediate the
property, and no cleanup of the USX Site has yet been initiated.
No substantial investigative work has been undertaken at other
CKD sites in Ohio or elsewhere. Although data necessary to enable the Company
to estimate total remediation costs is not available, the Company acknowledges<PAGE>
that it is at least reasonably possible the ultimate cost to remediate the CKD
disposal problem could be significantly more than the amounts reserved.
Other Contingencies
Discontinued Moore McCormack Operations - In conjunction with
the acquisition of Moore McCormack in 1988, the Company assumed certain
liabilities for operations that Moore McCormack had previously discontinued.
These liabilities, some of which are contingent, represent guarantees and
undertakings related primarily to Moore McCormack's divestiture of certain
businesses in 1986 and 1987. Payments relating to liabilities from these
discontinued operations were $400,000 in the first quarter of 1995, $300,000
in first quarter of 1994 and $2.5 million in fiscal 1994. The Company is
either a guarantor or directly liable under certain charter hire debt
agreements totaling approximately $7 million at March 31, 1995, declining by
approximately $4 million per year thereafter through February 1997. Although
the estimated liability under these guaranties has been included in the
liability for discontinued Moore McCormack operations, enforcement of the
guaranty, while not resulting in a charge to earnings, would result in a
substantial cash outlay by the Company. However, the Company believes it
currently has sufficient borrowing capacity under its Revolving Credit
Facility to fund these guaranties, if required, as well as meet its other
borrowing needs for the foreseeable future.
Restructured Accounts Receivable - For many years, the Company
has from time-to-time offered extended credit terms to certain of its
customers, including converting trade receivables into longer term notes
receivable. This practice became more prevalent during recent years,
particularly in the southern California market area where many of the
Company's customers have been adversely affected by the prolonged recession in
the construction industry in that region. Four such customers were indebted
to the Company at March 31, 1995 in the amount of $16.4 million. In February
1995, one of the four customers filed for protection under Chapter 11 of the
United States Bankruptcy Code and the Company is presently evaluating its
options for collection of outstanding balances. In early February 1995, the
Company loaned another of the four customers $750,000 as part of a
comprehensive debt restructuring under which the Company became a secured
creditor.
The Company is presently in discussions with a third customer
included in the group to restructure its balance which matures in June 1995.
The fourth member of the group is in compliance with the terms of its
agreement with the Company.
In the opinion of management, the Company is adequately
r e s e rved for credit risks related to its potentially uncollectible
receivables. However, the Company continues to assess its allowance for
doubtful accounts and may increase or decrease its periodic provision for
doubtful accounts as additional information regarding the collectibility of
these and other accounts become available.
Claims for Indemnification - Prior to the sale of the Company s
then oil and gas subsidiary, Pelto Oil Company (Pelto) in 1989 to Energy
Development Corporation (EDC), Pelto entered into certain gas settlement
agreements, including one with Transcontinental Gas Pipe Line Corporation<PAGE>
(Transco). The Minerals Management Service (MMS) of the Department of the
Interior has reviewed the 1988 agreement Pelto entered into with Transco to
determine whether a payment to Pelto thereunder is associated with Federal or
Indian leases and whether, in its view, any additional royalties may be due as
a result of that payment. In late December 1993, the Company was notified by
EDC that EDC was exercising its indemnification rights under the 1989 stock
purchase agreement for Pelto with respect to this matter. By letter dated
September 30, 1994, the MMS s Houston Compliance Division advised the Company
that it had determined that a $5.9 million payment made by Transco to Pelto
was for a Contract Buy-Down and was royalty bearing. The letter directed
the Company to compute and pay royalties on the $5.9 million sum. It also
indicated that upon receipt of the Company s payment, late payment charges
would be computed and assessed from May 1, 1987. On October 30, 1994, the
Company timely filed its notice of appeal of the MMS directive, thereby
staying compliance with the letter. On December 30, 1994, the Company filed
with the MMS its statement of reasons supporting its appeal.
The Company disagrees with the MMS determination; however, if
the MMS determination as to the $5.9 million dollar payment to Pelto is
ultimately upheld, the Company could have liability for royalty on that sum,
plus late payment charges.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
(a) The information appearing under "Management's Discussion and
Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources - Known Events, Trends and
Uncertainties - Environmental Matters" is incorporated hereunder
by reference, pursuant to Rule 12b-23.
(b) The Company owns two inactive CKD disposal sites in Ohio that
were formerly owned by a division of USX Corporation (USX). In
September 1993, the Company filed a complaint against USX
alleging that with respect to the larger of these two sites (USX
Site), USX is a potentially responsible party and therefore
jointly and severally liable for costs associated with cleanup of
the USX Site. (Southdown, Inc. v. USX Corporation, Case No. C-3-
93-354, U.S. District Court, Southern District of Ohio Western
Division). On July 13, 1994, the Magistrate Judge issued a
Supplemental Report and Recommendation recommending that a USX
motion to dismiss be denied in its entirety, reconfirming his
previous recommendation. On February 27, 1995, the District
Judge affirmed the Magistrate Judge s recommendation that the USX
motion to dismiss be denied. USX and the Company are continuing
their settlement discussions. In this regard, in March 1995, the
Company and USX reached an agreement in principle whereby USX
would reimburse the Company for half of certain costs already
incurred by the Company at the USX Site and the Company and USX
would jointly fund the initial project of a phased approach to
investigating and remediating the problems at the USX Site. On
March 31, 1995, the court held a preliminary pretrial conference
wherein the parties informed the court as to the proposed Phase I<PAGE>
project and jointly requested a six-month stay of the litigation
to complete the project and achieve settlement. The court
granted this request, and this litigation has been stayed until
October 6, 1995.
(c) In late August 1993, the Company was notified by Energy
Development Corporation (EDC), the 1989 purchaser of the common
stock of the Company s then oil and gas subsidiary, Pelto Oil
Company (Pelto), that EDC was exercising its indemnification
rights under the 1989 stock purchase agreement with respect to a
Department of Energy (DOE) Remedial Order regarding the audit of
crude oil produced and sold during the period September 1973
through January 1981 from an offshore, federal waters field in
which the Company s oil and gas subsidiary owned an interest.
The DOE alleged certain price overcharges and sought to recover a
total of $68 million in principal and interest from Murphy Oil
Corporation (Murphy), as operator of the property. Murphy
estimated the Company s share of this total to be approximately
$4 million. On January 24, 1994, the presiding Administrative
Law Judge at the Federal Energy Regulatory Commission (FERC)
rendered a favorable decision for Murphy, materially reducing the
amount it potentially owed to the DOE. This decision also had
the effect of precluding the DOE from recovering from Murphy for
any alleged overcharges attributable to Pelto s in-kind
production. In late July 1994, Murphy notified the Company that
it had settled with the DOE by agreeing to pay $10.7 million and
that it would contact the Company later concerning the Company s
alleged share of this amount. The Company advised Murphy that it
does not accept liability for any portion of the settlement
amount paid to the DOE other than its pro rata share of
attorney s fees, which the Company has paid. On April 12, 1995,
Murphy filed a complaint against the Company in the U.S. District
Court for the Southern District of Texas, Houston Division
(Murphy Exploration & Production Company v. Southdown, Inc. -
Case No. H-95-1049) alleging that the Company is liable for the
Company s pro rata share of the $10.7 million payment made to the
DOE by Murphy in its capacity as operator of the property.
Murphy alleges this amount is at least $634,487.
(d) In late 1988, Southern Prestressed, Inc. (SPI), a wholly owned
subsidiary of Lohja, Inc., was designated the Buyer in an
Agreement for Sale of Properties (Agreement) whereby certain
prestressed concrete product plants owned and operated by the
Company were acquired. On March 31, 1995, SPI filed suit against
the Company (Southern Prestressed, Inc. v. Florida Mining &
Materials Concrete Corp. and Southdown, Inc., Case No. C95-2217,
Thirteenth Judicial Circuit Court, Hillsborough County, Florida)
alleging environmental contamination at certain of the facilities
SPI acquired from the Company and seeking compensation under the
indemnification provisions of the Agreement.
(e) In Jack Blair, et al. vs. Ideal Basic Industries, Inc., United
Cement, Lime, Gypsum and Allied Workers International Union, and
Dixie Cement Company (Chancery Court of Knox County, Tennessee,<PAGE>
No. 03A1-CH-00029), the plaintiffs are fifteen former employees
of Ideal Basic Industries, Inc. (Ideal), and the defendants are
Ideal, Dixie Cement Company (Dixie) (a subsidiary of Moore
McCormack Resources Inc. which was acquired by the Company in
1988), and the United Cement, Lime, Gypsum and Allied Workers
International Union (Union). The plaintiffs' claims arise out of
a December 1983 transaction in which Dixie purchased a cement
plant from Ideal. Among other things, the plaintiffs allege that
they were not hired by Dixie because of their ages, that their
retirements were not voluntary because they were induced to
r e t i re through factual misrepresentations made by Ideal
employees, allegedly acting as agents of Dixie, as to their
retirement benefits and Dixie's plans to rehire former Ideal
employees, and that Dixie induced Ideal to breach its collective
bargaining agreement with the Union. Dixie has assumed the
defense of Ideal with respect to the claim under Section 301 of
the National Labor Relations Act based on the indemnification
provision of the agreement pursuant to which the Knoxville plant
was acquired. The plaintiffs are seeking compensatory damages
(including back pay and benefits), liquidated damages (under the
federal age discrimination statute), punitive damages, treble
damages (under the same statute prohibiting interference with
contracts), interest and attorney's fees.
In December 1992, the trial court granted summary judgment in
favor of Dixie on all claims against Dixie. However, in November
1994, the Tennessee Court of Appeals reversed the summary
judgment order, and remanded the case to the trial court. In
January 1995, Dixie filed an application for an appeal by
permission to the Supreme Court of Tennessee. In early May 1995,
the Supreme Court of Tennessee denied Dixie's application and the
case will be returned to the Chancery Court of Knox County,
Tennessee for trial.<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Bylaws of the Company amended as of February 14, 1995
10.1 Southdown, Inc. Directors' Retirement Plan
11 Statement of Computation of Per Share Earnings.
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended March
31, 1995.<PAGE>
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.
SOUTHDOWN, INC.
-------------------------------
(Registrant)
Date: May 10 , 1995 By: JAMES L. PERSKY
-------------------------------
James L. Persky
Executive Vice President-Finance
and Administration
(Principal Financial Officer)
Date: May 10 , 1995 By: ALLAN KORSAKOV
-------------------------------
Allan Korsakov
Corporate Controller
(Principal Accounting Officer)<PAGE>
Exhibit 11
Southdown, Inc. and Subsidiary Companies
Statement of Computation of Per Share Earnings
(In millions, except per share amounts - Unaudited)
<TABLE>
<CAPTION>
Quarter Ended
March 31,
------------------------
1995 1994
-------- ----------
<S> <C> <C>
Earnings (loss) for primary
earnings per share:
Earnings (loss) from continuing
operations before
preferred stock dividends $ 6.1 $ (1.3)
Preferred stock dividends (2.4) (2.1)
---------- ----------
Earnings (loss) from continuing
operations 3.7 (3.4)
Loss from discontinued operations,
net of income taxes - (0.9)
---------- ----------
Net earnings (loss) for primary
earnings per share $ 3.7 $ (4.3)
---------- ----------
---------- ----------
Earnings (loss) for fully diluted
earnings per share:
Earnings (loss) from continuing
operations before
preferred stock dividends $ 6.1 $ (1.3)
Antidilutive preferred stock
dividends (2.4) (2.1)
---------- ----------
Earnings (loss) from continuing
operations 3.7 (3.4)
Loss from discontinued operations,
net of income taxes - (0.9)
---------- ----------
Net earnings (loss) for fully diluted
earnings per share $ 3.7 $ (4.3)
---------- ----------
---------- ---------- <PAGE>
Average shares outstanding:
Common stock 17.3 17.1
Common stock equivalents from
assumed exercise of stock options
and warrants (treasury stock
method) - 0.9
---------- ----------
Total for primary earnings per share 17.3 18.0
Other potentially dilutive securities:
- additional common stock
equivalent from assumed
exercise of stock options
and warrants at ending
market price 0.1 -
- assumed conversion of Series A
convertible preferred stock at
one-half share of common stock 1.0 1.0
- assumed conversion of Series B
convertible preferred stock at
2.5 shares of common stock 2.3 2.4
- assumed conversion of the
Series D convertible preferred
stock at 1.51 shares of common
stock 2.6 1.8
---------- ----------
Total for fully diluted earnings per
share 23.3 23.2
Less: Antidilutive securities
Stock options and warrants - (0.9)
Series A preferred stock (1.0) (1.0)
Series B preferred stock (2.3) (2.4)
Series D preferred stock (2.6) (1.8)
---------- ----------
17.4 17.1
---------- ----------
---------- ----------
Earnings (loss) per share:
Primary
Earnings (loss from continuing
operations) $ 0.21 $ (0.20)
Loss from discontinued operations,
net of income taxes - (0.05)
---------- ----------
$ 0.21 $ (0.25)
---------- ----------
---------- ----------
Fully diluted
Earnings (loss from continuing
operations) $ 0.21 $ (0.20)
Loss from discontinued operations,<PAGE>
net of income taxes - (0.05)
---------- ----------
$ 0.21 $ (0.25)
---------- ----------
---------- ----------
/TABLE
<PAGE>
- As Amended February 14, 1995 -
- Effective May 18, 1995 -
BYLAWS
OF
SOUTHDOWN, INC.
ARTICLE I
Shareholders
Section 1 - Place of Holding Meetings
All meetings of the shareholders shall be held at the principal
business office of the corporation in New Orleans, Louisiana, or
at such other place as may be specified in the notice of the
meeting.
Section 2 - Annual Election of Directors
An annual meeting of shareholders for the election of directors
shall be held in each calendar year on such date as the board of
directors may determine but not later than 18 months after the
date of the annual meeting held the preceding year, at such time
as may be specified in the notice of the meeting.
Section 3 - Voting
(a) On demand of any shareholder, the vote for directors, or on
any questions before a meeting, shall be by ballot. All
elections shall be had by plurality, and all questions
decided by majority, of the votes cast, except as otherwise
provided by the articles or by law.
(b) At each meeting of shareholders, a list of the shareholders
entitled to vote, arranged alphabetically and certified by
the transfer agent, showing the number and class of shares
held by each such shareholder on the record date for the
m e e t ing, shall be produced on the request of any
shareholder.
(c) The date and time of the opening and the closing of the
polls for each matter on which the shareholders will vote at
any meeting of the shareholders shall be announced at the
meeting by the chairman of the meeting. The Board of
Directors of the corporation (or any committee designated by
it for that purpose) may, to the extent not prohibited by
law, adopt by resolution such rules, regulations and
procedures for the conduct of any meeting of shareholders as<PAGE>
it may deem appropriate or convenient. Except to the extent
inconsistent with such rules, regulations and procedures as
adopted by the Board of Directors or any such committee, the
chairman of any meeting has the right and authority to
prescribe such rules, regulations and procedures and to do
all such acts as, in the judgment of the chairman, are
appropriate or convenient for the conduct of any meeting.
Such rules, regulations or procedures, whether adopted by
the Board of Directors or any such committee or prescribed
by the chairman of any meeting, may, to the extent not
p r o hibited by law, include, without limitation,
establishment of the following: (1) an agenda or order of
business for the meeting; (2) rules, regulations and
procedures for maintaining order at the meeting and the
safety of those present; (3) limitations on attendance at or
participation in the meeting to shareholders of record of
the corporation, their duly authorized and constituted
proxies or such other persons as the chairman of the meeting
shall determine; (4) restrictions on entry to the meeting
after the time fixed for the commencement thereof; and (5)
limitations on the time allotted to questions or comments by
participants at the meeting. Unless, and to the extent,
determined by the Board of Directors, by a duly appointed
committee or by the chairman of the meeting, meetings of
shareholders are not required to be held in accordance with
the rules of parliamentary procedure.
Section 4 - Quorum
Except as provided herein, any number of shareholders, together
holding at least a majority of the outstanding shares entitled to
vote thereat, who are present in person or represented by proxy
at the meeting, constitute a quorum for the transaction of
business despite the subsequent withdrawal or refusal to vote of
any shareholder. If notice of any meeting is mailed to the
shareholders entitled to vote at the meeting, stating the purpose
or purposes of the meeting and that the previous meeting failed
for lack of a quorum, then any number shareholders, present in
person or represented by proxy and together holding at least one-
fourth of the outstanding shares entitled to vote thereat,
constitute a quorum at such meeting.
Section 5 - Adjournment of Meeting
If less than a quorum is in attendance at any time for which a
meeting is called, the meeting may be adjourned by a majority in
interest of the shareholders present or represented and entitled
to vote thereat.
Section 6 - Special Meeting: How Called
Special Meetings of the shareholders for any purpose or purposes
may be called in the manner set forth in the Restated Articles of
Incorporation.<PAGE>
Section 7 - Notice of Shareholders' Meetings
Written or printed notice, stating the place and time of any
meeting, and, if a special meeting, the general nature of the
business to be considered, shall be given to each shareholder
entitled to vote thereat, at his last known address, at least ten
days before the meeting.
Section 8 - Form of Proxies
Without limiting the manner in which a shareholder may authorize
another person or persons to act for him as proxy, the following
shall constitute a valid means by which a shareholder may grant
such authority:
(a) A shareholder may execute a writing authorizing another
person or persons to act for him or her as proxy. Execution
may be accomplished by the shareholder or his or her
authorized officer, director, employee or agent signing such
writing or causing his or her signature to be affixed to
such writing by any reasonable means including, but not
limited to, by facsimile signature.
(b) Any copy, facsimile telecommunication or other reliable
reproduction of the writing created under subsection (a) of
this section 8 may be substituted or used in place of the
original writing for any and all purposes for which the
original writing could be used, including filing with the
secretary of the corporation at or before the meeting,
provided that such copy, facsimile telecommunication or
other reproduction shall be a complete reproduction of the
entire original writing.
ARTICLE II
Directors
Section 1 - Number of Directors
The number of directors is eleven (11); provided, that the number
of directors shall be increased automaticially (i) by two
directors for such period as the holders of Preferred Stock, $.70
Cumulation Convertible Series A shall be entitled to elect two
(2) directors of the corporation and (ii) by two (2) directors
for such period as the holders of Preferred Stock, $3.75
Convertible Exchangeable Series B shall be entitled to elect two
(2) directors of the corporation, in each case as set forth in
Article III of the Restated Articles of Incorporation, as
amended.
3<PAGE>
Section 2 - Place of Holding Meetings
Meetings of the directors, regular or special, may be held at any
place, within or outside Louisiana, as the board may determine.
Section 3 - Meeting After Annual Meeting
A meeting of the Board of Directors shall be held immediately
following the annual meeting of shareholders, and no notice of
such meeting shall be necessary to the directors, whether or not
newly elected, in order legally to constitute the meeting,
provided a quorum is present; or they may meet at such time and
place as fixed by the consent in writing of all of the directors,
or by notice given by the majority of the remaining directors.
At such meeting, or at any subsequent meeting called for the
p u r pose, the directors shall elect the officers of the
corporation.
Section 4 - Regular Directors' Meeting
Any regular meeting of the directors may be held without notice,
if a calendar of regular meeting dates including the date of such
meeting has been established by the directors at least two weeks
prior to such meeting, at the principal business office of the
corporation or at any other location specified in such calendar
of regular meeting dates. Any regular meeting of the directors
may be held in the absence of establishment of such calendar of
regular meeting dates, or at a location other than the principal
business office of the corporation or location specified in such
calendar, by the given notice as required for special directors'
meetings. Any proposed agenda for such regular meetings shall
not be exclusive of other matters properly brought before the
meeting.
Section 5 - Special Directors' Meeting: How Called
Special meetings of the directors may be called at any time by
the board of directors or by the executive committee, if one be
constituted, by the chairman of the board of directors, or by the
president, or in writing, with or without a meeting, by a
majority of the directors or of the members of the executive
committee. Special meetings may be held at such place or places
within or outside Louisiana as may be designated by the person or
persons calling the meeting.
Section 6 - Notice of Special Directors' Meetings
Notice of the place and time of every special meeting of the
board of directors (and of the first meeting of the newly-elected
board, if held on notice) (i) if given by telephone or telegraph
shall be delivered to each director at his residence or usual
place of business at least 3 days before the date of the meeting,
4<PAGE>
and (ii) if given by a means other than telephone or telegraph
shall be sent to each director at his residence or usual place of
business at least 5 days before the date of the meeting. Any
proposed agenda or statement of purpose or purposes for a special
meeting of directors shall not be exclusive of other matters
properly brought before the meeting.
Section 7 - Quorum
At all meetings of the board, a majority of the directors in
office constitute a quorum for the transaction of business, and
the act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of
Directors, unless the concurrence of a greater proportion is
required for such action by law, the articles of the bylaws. If
a quorum is not present at any meeting 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 is present. If a quorum be present, the directors
present may continue to act by vote of a majority of a quorum
until adjournment, notwithstanding the subsequent withdrawal of
enough directors to leave less than a quorum or the refusal of
any directors present to vote.
Section 8 - Remuneration to Directors
Directors, as such, shall not receive any stated salary for their
services, but by resolution of the Board, expenses of attendance,
if any, and except as to salaried officers or employees of the
corporation or an affiliated company, a fixed fee for the
performance of their duties as directors, as may be determined
from time to time by resolution of the Board, may be allowed to
directors, but this Section does not preclude any director from
serving the corporation in any other capacity and receiving
compensation therefor.
Section 9 - Powers of Directors
The board of directors has the management of the business of the
corporation, and subject to any restrictions imposed by law, the
articles or these bylaws, may exercise all the powers of the
corporation. Without prejudice to such general powers, the
directors have the following specific powers:
(a) From time to time, to devolve the powers and duties of any
officer upon any other person for the time being.
(b) To confer upon any officer the power to appoint, remove and
suspend, and fix and change the compensation of, subordinated
officers, agents and factors.
5<PAGE>
(c) To determine who shall be entitled to vote, or to assign and
transfer any shares of stock, bonds, debentures or other
securities of other corporations held by this corporation.
(d) To delegate any of the powers of the board to any standing
or special committee or to any officer or agent (with power to
sub-delegate) upon such terms as they deem fit.
Section 10 - Resignations
The resignation of a director shall take effect on receipt
thereof by the president or secretary, or on any later, date, not
more than thirty days after such receipt, specified therein.
Section 11 - Term of Office
Each director of the corporation shall hold office for the full
term of office to whom he shall have been elected and until his
successor shall have been elected and shall qualify, or until his
death, resignation or removal.
Section 12 - Participation in Meetings
Directors may participate in and be present at any meeting of the
board by means of conference telephone or similar communications
equipment if all persons participating in such meeting can hear
and communicate with each other.
Section 13 - Chairman of the Board
The board of directors shall elect one of its members to be
chairman of the board, to serve in such capacity at the pleasure
of the board. In his capacity as chairman of the board, he shall
not be an officer of the corporation. The chairman of the board
shall preside at meetings of the board of directors and
shareholders and perform such other duties as from time to time
may be assigned to him by the board.
Section 14 - Vice Chairman of the Board
The board of directors may elect one of its members to be vice
chairman of the board to serve in such capacity at the pleasure
of the board. In his capacity as vice chairman of the board, he
shall not be an officer of the corporation. In the absence of
the chairman of the board, the vice chairman of the board shall
preside at meetings of the board of directors and shareholders
and perform such other duties as from time to time may be
assigned to him by the board.
Section 15 - Eligibility
6<PAGE>
No person shall be eligible for election or reelection as a
director after having attained the age of seventy prior to or on
the day of election or reelection. Effective January 1, 1996, a
director who attains the age of seventy during his or her term of
office shall be eligible to serve only until the annual meeting
of shareholders of the corporation next following such director
seventieth birthday, at which meeting the shareholders of the
corporation shall elect such director's successor in accordance
with Article I of these bylaws.
ARTICLE III
Committees
Section 1 - Executive Committee
The board may appoint an executive committee, which, when the
board is not in session, to the full extent of the powers of the
board shall have and may exercise the powers of the board 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 documents, provided that the executive committee shall not
have the power to make or alter bylaws, fill vacancies on the
board or the executive committee, or change the membership of the
executive committee.
Section 2 - Minutes of Meeting of Committees
Any committees designated by the board shall keep regular minutes
of their proceedings, and shall report the same to the board when
required, but no approval by the board of any action properly
taken by a committee shall be required.
Section 3 - Procedure
If the Board fails to designate the chairman of a committee, the
Chairman of the Board, if a member, shall be Chairman. Each
committee shall meet at such times as it shall determine, and at
any time on call of the chairman. A majority of a committee
constitutes a quorum, and the committee may take action by vote
of a majority of the members present at any meeting at which
there is a quorum. The Board has power to change the members of
any committee at any time, to fill vacancies, and to discharge
any committee at any time.
Section 4 - Participation in Meetings
Members of a committee may participate in and be present at any
meeting of the committee by means of conference telephone or
similar communications equipment if all person participating in
such meeting can hear and communicate with each other.
7<PAGE>
ARTICLE IV
Officers
Section 1 - Titles
The officers of the corporation shall be a president, one or more
v i ce-presidents, a treasurer, a secretary and such other
officers, including a chief executive officer and chief operating
officer, as may, from time to time, be elected or appointed by
the board or appointed by the president. Any two offices may be
combined in the same person, provided that no person holding more
than one office may sign, in more than one capacity, any
certificate or other instrument required by law to be signed by
two officers. No officer need be a director.
Section 2 - President
The president shall be the chief executive officer of the
corporation. Subject to the direction of the board of directors,
he shall have the responsibility for the management and control
of the business and affairs of the corporation; he shall see that
all orders and resolutions of the board are carried into effect
and direct the other officers in the performance of their duties;
and he shall perform all duties and have all powers that are
commonly incident to the office of chief executive or that are
assigned to him by the board of directors. In the absence of the
chairman of the board and the vice chairman of the board, he
shall preside at shareholders' meetings and at directors'
meetings.
Section 3 - Vice Presidents
Each vice president shall have such powers, and shall perform
such duties, as shall be assigned to him by the directors, by the
chairman of the board, or by the president, and, in the order
determined by the board, shall, in the absence or disability of
the chairman and president, perform their duties and exercise
their powers.
Section 4 - Treasurer
The treasurer has custody of all funds, securities, evidences of
indebtedness and other valuable documents of the corporation. He
shall receive and give, or cause to be given, receipts and
acquittances of moneys paid in on account of the corporation, and
shall pay out of the funds on hand all just debts of the
corporation of whatever nature, when due. He shall enter, or
cause to be entered, in books of the corporation to be kept for
that purpose, full and accurate accounts of all moneys received
and paid out on account of the corporation, and, whenever
8<PAGE>
required by the president or the directors, he shall render a
statement of his accounts. He shall keep or cause to be kept
such books as will show a true record of the expenses, gains,
losses, assets and liabilities of the corporation; and he shall
perform all of the other duties incident to the office of
treasurer. If required by the board, he shall give the
corporation a bond for the faithful discharge of his duties and
for restoration to the corporation, upon termination of his
tenure, of all property of the corporation under his control.
Section 5 - Secretary
The secretary shall give, or cause to be given, notice of all
meetings of shareholders, directors and committees, and all other
notices required by law or by these bylaws, and in case of his
absence or refusal or neglect so to do, any such notice may be
given by the shareholders or directors upon whose request the
meeting is called as provided in these bylaws. He shall record
all of the proceedings of the meetings of the shareholders, of
the directors, and of committees in a book to be kept for that
purpose. Except as otherwise determined by the directors, he has
charge of the original stock books, transfer books and stock
ledgers, and shall act as transfer agent in respect of the stock
and other securities issued by the corporation. He has custody
of the seal of the corporation, and shall affix it to all
instruments requiring it; and he shall perform such other duties
as may be assigned to him by the directors, the chairman of the
board of directors, or the president.
Section 6 - Assistants
Assistant secretaries or treasurers shall have such duties as may
be assigned to them by the directors, by the chairman of the
board, or by the president, and as may be delegated to them by
the secretary and treasurer respectively.
ARTICLE V
Capital Stock
Section 1 - Certificates of Stock
Certificates of Stock, numbered and with the seal of the
corporation affixed or imprinted, signed by the Chairman of the
Board of Directors, or the President or Vice President, and the
Treasurer or Secretary, shall be issued to each shareholder,
certifying the number of shares owned by him in the corporation.
Where such certificate is countersigned (1) by a transfer agent
other than the corporation or its employee, or (2) by a registrar
other than the corporation or its employee, any other signature
on the certificate may be a facsimile.
9<PAGE>
Section 2 - Lost Certificates
A new certificate of stock may be issued in place of any
certificate theretofore issued by the corporation, alleged to
have been lost, stolen, mutilated or destroyed or mailed and not
received, and the directors may in their discretion require the
owner of the replaced certificate to give the corporation a bond,
unlimited as to stated amount, to indemnify the corporation
against any claim which may be made against it on account of the
replacement of the certificate or any payment made or other
action taken in respect thereof.
Section 3 - Transfer of Shares
Shares of stock of the corporation are transferrable only on its
books, by the holders thereof in person or by their duly
authorized attorneys or legal representatives, and upon such
transfer, the old certificate shall be surrendered to the person
in charge of the stock transfer records, by whom they shall be
cancelled, and new certificates shall thereupon be issued. A
record shall be made of each transfer, and whenever a transfer is
made for collateral security, and not absolutely, it shall be so
expressed in the entry of the transfer. The board may make
regulations concerning the transfer of shares, and may in their
discretion authorize the transfer of shares from the names of
deceased persons whose estates are not administered, upon receipt
of such indemnity as they may require.
Section 4 - Record Dates
The board may fix a record date for determining shareholders of
record for any purpose, such date to be not more than sixty days
and, if fixed for the purpose of determining shareholders
entitled to notice of and to vote at a meeting, not less than ten
days, prior to the date of the action for which the date is
fixed.
Section 5 - Transfer Agents, Registrars
The board may appoint and remove one or more transfer agents and
registrars for any stock. If such appointments are made, the
t r ansfer agents shall effect original issuances of stock
certificate and transfers of shares, record and advise the
corporation and one another of such issuances and transfers,
countersign and deliver stock certificates, and keep the stock,
transfer and other pertinent records; and the registrars shall
prevent over-issues by registering and countersigning all stock
certificates issued. A transfer agent and registrar may be
identical.
ARTICLE VI
10<PAGE>
Miscellaneous Provisions
Section 1 - Corporation Seal
The Corporate seal is circular in form, and contains the name of
the corporation and the words "SEAL, LOUISIANA". The seal may be
used by causing it, or a facsimile thereof, to be impressed or
affixed or otherwise reproduced.
Section 2 - Checks, Drafts, Notes
All checks, drafts, other orders for the payment of money, and
notes or other evidences of indebtedness, issued in the name of
the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall,
from time to time, be determined by the board.
Section 3 - Fiscal Year
The fiscal year of the corporation begins on January 1.
Section 4 - Notice
Whenever any notice is required by these bylaws to be given,
personal notice is not meant unless expressly so stated; any
notice is sufficient if given by depositing the same in a mail
receptacle in a sealed post-paid envelope addressed to the person
entitled thereto at his last known address as it appears on the
records of the corporation; and such notice is deemed to have
been given on the day of such mailing.
Section 5 - Waiver of Notice
Whenever any notice of the time, place or purpose of any meeting
of shareholders, directors or committee is required by law, the
articles or these bylaws, a waiver thereof in writing, signed by
the person or persons entitled to such notice and filed with the
records of the meeting before or after the holding thereof, or
actual attendance at the meeting of shareholders in person or by
proxy or at the meeting of directors or committee in person, is
equivalent to the giving of such notice except as otherwise
provided by law.
Section 6 - Indemnification of officers, directors, employees,
and agents
(a) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any action,
suit or proceeding, whether civil, criminal, administrative
or investigative, including any action by or in the right of
the corporation by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or
11<PAGE>
is or was serving at the request of the corporation as a
director, officer, employee or agent of another business,
foreign or nonprofit corporation, partnership, joint venture
or other enterprise, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with
such action, suit or proceeding if he acted in good faith
and in a manner he reasonably believed to be in or not
opposed to the best interest of the corporation, and with
respect to any criminal action or proceeding, has no
reasonable cause to believe his conduct was unlawful.
However, in case of actions by or in the right of the
corporation, the indemnity shall be limited to expenses,
including attorneys' fees and amounts paid in settlement not
exceeding, in the judgment of the board of directors, the
estimated expense of litigating the action to conclusion,
actually and reasonably incurred in connection with the
defense or settlement of such action and no indemnification
shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged by a court of
competent jurisdiction, after exhaustion of all appeals
t h e refrom, to be liable for willful or intentional
misconduct in the performance of his duty to the corporation
unless and only to the extent that the court shall determine
upon application that, despite the adjudication of liability
but in view of all the circumstances of the case, he is
fairly and reasonably entitled to indemnity for such
expenses which the court shall deem proper. The termination
of any action, suit or proceeding by judgement, order,
settlement, conviction, or upon a plea of nolo contendere or
its equivalent, shall not, or itself, create a presumption
that the person did not act in good faith and in a manner
which he reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to
believe that his conduct was unlawful.
(b) In any event, a director, officer, employee or agent of the
corporation who has been successful on the merits or
otherwise in defense of any such action, suit or proceeding,
or in defense of any claim, issue or matter therein, shall
be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection
therewith.
(c) Any indemnification under subsection (a) of this Section,
unless ordered by the Court shall be made by the corporation
only as authorized in a specific case upon a determination
that the applicable standard of conduct has been met. Such
determination shall be made (1) by the board of directors by
a majority vote of a quorum consisting of directors who were
not parties to such action, suit or proceeding, or (2) if
12<PAGE>
such a quorum is not obtainable and the board of directors
so directs, by independent legal counsel or (3) by the
shareholders.
(d) Expenses incurred in defending such an action, suit or
proceeding may be paid by the corporation in advance of the
final disposition thereof if authorized by the board of
directors, without regard to whether participating members
thereof are parties to such action, suit, or proceeding,
upon receipt of an undertaking by or on behalf of the
director, officer, employee or agent to repay such amount if
it shall ultimately be determined that he is not entitled to
be indemnified by the corporation as authorized in this
Section.
(e) The indemnification and advancement of expenses provided by
or granted pursuant to the other subsections of this Section
shall not be deemed exclusive of any other rights to which
the person indemnified or obtaining advancement of expenses
i s e n titled under any agreement, authorization of
shareholders or directors, regardless of whether directors
authorizing such indemnification are beneficiaries thereof,
or otherwise, both as to action in his official capacity and
as to action in another capacity while holding such office,
and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of his heirs and legal representative; however, no
s u c h other indemnification measure shall permit
indemnification of any person for the results of such
person's willful or intentional misconduct.
(f) The corporation shall have power to procure or maintain
insurance or other similar arrangement 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
a n o t her business, nonprofit or foreign corporation,
partnership, joint venture or other enterprise against any
liability asserted against or incurred by him in any such
capacity, or arising out of his status as such, whether or
not the corporation would have the power to indemnify him
against such liability under the provisions of this Section.
Without limiting the power of the corporation to procure or
maintain any other kind of insurance or similar arrangement,
the corporation may create a trust fund or other form of
self-insurance arrangement for the benefit of persons
indemnified by the corporation and may procure or maintain
such insurance with any insurer deemed appropriate by the
board of directors regardless of whether all or part of the
stock or other securities thereof are owned in whole or part
by the corporation. In the absence of actual fraud, the
judgment of the board of directors as to the terms and
13<PAGE>
conditions of such insurance or self-insurance arrangement
a n d t he identity of the insurer or other person
participating in a self-insurance arrangement shall be
conclusive, and such arrangements for insurance shall not be
subject to voidability and shall not subject the directors
approving such arrangement to liability, on any ground,
regardless of whether directors participating in approving
such insurance arrangements shall be beneficiaries thereof.
The provisions of the Insurance Code (Title 22 of the
Revised Statutes) will not apply to any wholly-owned
subsidiary of this corporation if it issues contracts of
insurance only as permitted by this subsection for coverage
of a person who is or was a director, officer, employee, or
agent of this corporation, or who is or was serving at the
r e quest of this corporation as a director, officer,
employee, or agent of another business, nonprofit or foreign
corporation, partnership, joint venture, or other
enterprise, which contracts of insurance for such directors,
officers, employees, or agents may be issued by such wholly-
owned subsidiary without compliance with the provisions of
the Insurance Code.
Section 7 - Redemption of Control Shares
In accordance with Section 140.1 of the Louisiana Business
Corporation Law, the Company may redeem any or all control shares
acquired in a control share acquisition with respect to which
either:
(a) no acquiring person statement has been filed with
the Company in accordance with Section 137 of the
Louisiana Business Corporation Law; or
(b) the control shares are not accorded full voting
rights by the shareholders of the Company as provided
in Section 140 of the Louisiana Business Corporation
Law.
A redemption pursuant to subparagraph (a) hereof may be made at
any time during the period ending sixty (60) days after the last
acquisition of control shares by an acquiring person. A
redemption pursuant to subparagraph (b) hereof may be made at any
time during the period ending two (2) years after the shareholder
vote with respect to the voting rights of such control shares.
Any redemption pursuant to this Paragraph shall be made at the
fair value of the control shares and pursuant to such procedures
as may be adopted by resolution of the Board of Directors of the
Company.
ARTICLE VII
14<PAGE>
Amendments
Except as otherwise provided in the Restated Articles of
Incorporation, the shareholders or the directors, by affirmative
vote of a majority of those present or represented, may at any
meeting, amend or alter any of the bylaws; subject, however, to
the right of the shareholders to change or repeal any bylaws made
or amended by the directors.
15<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's consolidated balance sheet as of March 31, 1995 and the
related statement of consolidated earnings and is qualified in its
entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 78
<ALLOWANCES> 8
<INVENTORY> 74
<CURRENT-ASSETS> 195
<PP&E> 874
<DEPRECIATION> 314
<TOTAL-ASSETS> 900
<CURRENT-LIABILITIES> 97
<BONDS> 212
<COMMON> 22
0
152
<OTHER-SE> 167
<TOTAL-LIABILITY-AND-EQUITY> 900
<SALES> 119
<TOTAL-REVENUES> 119
<CGS> 90
<TOTAL-COSTS> 104
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 9
<INCOME-TAX> 3
<INCOME-CONTINUING> 6
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6
<EPS-PRIMARY> 0.21
<EPS-DILUTED> 0.21
</TABLE>
SOUTHDOWN, INC. DIRECTORS' RETIREMENT PLAN
Southdown, Inc. has adopted the Southdown, Inc. Directors'
Retirement Plan, effective February 14, 1995, for the members of
its Board of Directors to ensure that the overall effectiveness
of the Company's compensation program for directors will attract,
retain and motivate qualified directors.
1. Definitions. When used herein, the following words shall
have the meanings below unless the context clearly indicates
otherwise:
1.1 Committee means the Southdown, Inc. Employee Benefits
Committee as appointed by the Board of Directors to
administer the Qualified Retirement Plans.
1.2 C o m pany means Southdown, Inc., a Louisiana
corporation, and any successor thereto.
1.3 Months of Service means the Participant's aggregate
number (or any lesser number if the context clearly
indicates such) of full months of service on the
Company's Board of Directors immediately prior to such
Participant's termination of service on the Board of
Directors.
1.4 Participant means any member of the Company's Board
of Directors who meets the eligibility requirements of
Paragraph 2.1.
1.5 Plan means the Southdown, Inc. Directors' Retirement
Plan.
1.6 Plan Benefit means the monthly benefit payable in
accordance with the Plan.
1.7 President means the President of the Company.
1.8 Qualified Retirement Plan means the Southdown, Inc.
Pension Plan or the Southdown, Inc. Retirement Savings
Plan as each may be amended from time to time or any
successor thereto.
1.9 Recipient means a Participant or a surviving Spouse
receiving or entitled to receive a Plan Benefit.
1.10 Retirement Date means the first of the month
immediately following a Participant's attainment of age
65 or the Participant's termination of service on the
Company's Board of Directors, whichever is later.
1.11 Spouse means the Participant's lawful spouse as of
the date of the Participant's death.
2.1 Eligibility to Participate. A member of the Company's
Board of Directors is eligible to become a Participant in the
Plan; provided such member (i) has accumulated sixty (60) Months
of Service, (ii) has not been removed from the Company's Board of
Directors for cause as permitted by applicable law, and (iii) is
not a participant in, eligible to participate in, nor entitled to
benefits from, a Qualified Retirement Plan.
2.2 T e rm of Participation. Once a member becomes a
-1-<PAGE>
Participant, he shall remain a Participant until the final and
complete payment of all Plan Benefits to which such Participant
is entitled under the Plan.
3.1 Eligibility for Benefits. Each Participant is eligible
to retire from the Company and receive a Plan Benefit under the
Plan beginning on the Participant's Retirement Date.
3.2 Term of Benefit Payments. Plan Benefits payable to a
Participant pursuant to Paragraph 4.1, or to a surviving Spouse
pursuant to Paragraph 4.2, shall be paid, until the earlier of
(i) the date of the last to occur of the Participant's death or
the surviving Spouse's death, or (ii) the date on which the
aggregate number of monthly payments made to the Participant and
surviving Spouse equals the Participant's Months of Service.
3.3 Death Benefits. If a married Participant dies prior to
age 65, such benefit due hereunder shall be payable to the Spouse
in accordance with Paragraph 4.2 for the term specified in
Paragraph 3.2 commencing on the Participant's Retirement Date
assuming the Participant had:
(i) separated from service on the Board on the earlier of
the actual date of separation or the date of death,
(ii) survived to age 65,
(iii) retired with an immediate joint and survivor annuity
based on Participant's Plan Benefit on date of death, and
(iv) died on the day after the day on which the Participant
would have attained age 65.
If a married Participant dies after age 65, but prior to his
or her Retirement Date, such benefit due hereunder shall be
payable to the Spouse in accordance with Paragraph 4.2 for the
term specified in Paragraph 3.2 commencing on the Participant's
Retirement Date assuming the Participant had retired with an
immediate joint and survivor annuity on the day before the
Participant's date of death.
4.1 A m o unt of Benefit. Plan Benefits payable to a
Participant pursuant to Paragraph 3.1 will be paid in an amount
equal to sixty-six and two-thirds percent (66 2/3%) of the per
month average of the combined board and committee fees received
by such Participant during the last twelve consecutive Months of
Service.
4.2 Form and Manner of Payment. The Plan Benefit payable
pursuant to Paragraph 4.1 shall be in the form of a joint and
survivor annuity. Such joint and survivor annuity following the
Participant's death shall be payable to the Spouse at a rate
equal to 50% of the rate at which benefits were payable to the
Participant. Plan Benefits shall be paid by a check mailed
directly to Recipient or a electronic funds transfer, as
Recipient shall direct, in accordance with the normal payment
cycle of the Company for making supplemental pension payments,
-2-<PAGE>
and shall be subject to all statutory tax withholdings.
5.1 Plan Amendments and Termination. The Company intends the
Plan to be permanent but reserves the right to amend or terminate
the Plan when, in the sole opinion of the Company, such amendment
or termination is advisable. Any such amendment or termination
shall be made pursuant to a resolution of the Board of Directors
of the Company and shall be effective as of the date of such
resolution. No amendment or termination of the Plan shall
directly or indirectly deprive any Participant of any Plan
Benefit, or the right to a Plan Benefit, which has been earned
prior to the effective date of the resolution amending or
terminating the Plan.
5.2 Benefits on Plan Termination. In the case of a Plan
termination, each Participant's Plan Benefit shall be calculated
and payable as set forth herein based on the Participant's Months
of Service immediately prior to the effective date of such Plan
termination.
5.3 Sale or Merger. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company or by
the merger or consolidation of the Company into or with any other
corporation or other entity, but the Plan shall be continued
after such sale, merger or consolidation only if and to the
extent that the transferee, purchaser or successor entity agrees
to continue the Plan. In the event the Plan is not continued by
the transferee, purchaser or successor entity, then the Plan
shall terminate subject to the provisions of Paragraphs 5.1 and
5.2.
6.1 No Effect on Rights. Nothing contained herein will confer
upon any Participant the right to be retained in the service of
the Company nor limit the right of the Company to discharge or
otherwise deal with Participants without regard to the existence
of the Plan.
6.2 Funding. The Plan at all times shall be entirely unfunded
and no provision shall at any time be made with respect to
segregating any assets of the Company for payment of any benefits
hereunder. No Participant shall have any interest in any
particular assets of the Company by reason of the right to
receive a benefit under the Plan and any such Participant shall
have only the rights of a general unsecured creditor of the
Company with respect to any rights under the Plan. Nothing
contained in the Plan shall constitute a guaranty by the Company
or any other entity or person that the assets of the Company will
be sufficient to pay any benefit hereunder.
6.3 Spendthrift Provision. No benefit payable under the Plan
shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, or charge prior to
actual receipt thereof by the payee; and any attempt so to
anticipate, alienate, sell, transfer, assign, pledge, encumber or
charge prior to such receipt shall be void; and the Company shall
not be liable in any manner for or subject to the debts,
-3-<PAGE>
contracts, liabilities, engagements or torts of any person
entitled to any benefit under the Plan.
6.4 Administration. The Committee shall be responsible for
the general operation and administration of the Plan and for
carrying out the provisions thereof. It has all powers necessary
to accomplish that purpose, including, but not by way of
limitation, the following:
a. To adopt and issue rules and regulations necessary
for the proper conduct and administration of the Plan,
a n d to change, alter, or amend such rules and
regulations;
b. To construe and enforce the Plan in accordance with
its terms and any rules and regulations it establishes;
and
c. T o resolve all questions arising in the
administration of the Plan, including those relating to
eligibility, participation under the Plan, and the rights
of Participants and surviving Spouses. The Committee's
decisions thereon shall be final and binding upon all
persons.
6.5 Disclosure. Each Participant shall receive a copy of the
Plan and the Committee will make available for inspection by any
Participant a copy of the rules and regulations used by the
Committee in administering the Plan.
6.6 State Law. The Plan is established under, and the
execution, validity, interpretation and performance of this Plan
shall be determined and governed exclusively by, the laws of the
State of Texas, without reference to the principles of conflict
of laws. Exclusive jurisdiction with respect to any legal
proceeding brought by a Participant, or any party representing
Participant or claiming to have an interest in Participant's Plan
Benefit ( claiming party ), shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, and judgment upon the award rendered by
the arbitrator may be entered in any court having jurisdiction.
In reaching his or her decision, the arbitrator shall have no
authority to change or modify any provision of this Plan. In
addition, any and all charges which may be made for the cost of
the arbitration and the fees and expenses of the arbitrator shall
be borne equally by the parties. Jurisdiction with respect to
any legal proceeding brought by Company, concerning any subject
matter contained in this Plan shall rest in state or federal
courts sitting in the State of Texas or in any jurisdiction where
Participant resides, does or has done business, or owns property.
Also, Company, at its election, may submit any dispute it has
with Participant or claiming party to arbitration in accordance
with the procedures set forth in this Paragraph.
6.7 Incapacity of Recipient. In the event a Recipient is
declared incompetent and a conservator or other person legally
charged with the care of his person or of his estate is
appointed, any benefits under the Plan to which such Recipient is
entitled shall be paid to such conservator or other person
-4-<PAGE>
legally charged with the care of his or her person or estate.
Except as provided above in this paragraph, when the Committee in
its sole discretion, determines that a Recipient is unable to
manage his or her financial affairs, the Committee may direct the
Company to make distributions to any person for the benefit of
such Recipient.
6.8 U n c laimed Benefit. Each Recipient shall keep the
Committee informed of his or her current address. The Committee
shall not be obligated to search for the whereabouts of any
person. If the location of a Recipient is not made known to the
Committee within two (2) years after the date on which any
payment of the Recipient's Plan Benefit may be made, then the
Company shall have no further obligation to pay any benefit
h e r eunder to such Recipient and such benefits shall be
irrevocably forfeited.
6.9 Limitations on Liability. Notwithstanding any of the
preceding provisions of the Plan, neither the Company nor any
individual acting as an employee or agent of the Company or as a
member of the Committee shall be liable to any Participant,
former Participant, Spouse, Recipient, or any other person for
any claim, loss, liability or expense incurred in connection with
the Plan.
7.1 Change in Control. In the event of a change in control of
the Company, as such term is defined in the Company's 1989 Stock
Plan, the following shall be substituted for Paragraph 2.1, but
only with respect to members then serving on the Company's Board
of Directors:
A member of the Company's Board of Directors is eligible
to become a Participant in the Plan; provided such member
(i) has not been removed from the Company's Board of
Directors for cause as permitted by applicable law, and
(i) is not a participant in, eligible to participate in,
nor entitled to benefits from, a Qualified Retirement
Plan.
Approved: Date:
-5-<PAGE>
