SOUTHDOWN, INC.
1200 SMITH STREET
SUITE 2400
HOUSTON, TEXAS 77002
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD THURSDAY, MAY 15, 1997
To the Shareholders of Southdown, Inc.:
An Annual Meeting of Shareholders of Southdown, Inc. (the "Company") will
be held at the Doubletree Hotel at Allen Center, 400 Dallas Street, Houston,
Texas at 8:30 A.M., Houston time, on Thursday, May 15, 1997 for the following
purposes:
1. To elect three directors as members of Class III of the Board of
Directors to serve until the 2000 annual meeting of shareholders and until
their successors are duly elected and have qualified;
2. To approve the Board of Directors' proposed amendments to the
1991 Nonqualified Stock Option Plan for Non-Employee Directors of the
Company;
3. To approve for federal income tax law purposes the Company's
Annual Incentive Plan;
4. To approve the Company's Phantom Stock and Deferred Compensation
Plan for Non-Employee Directors;
5. To approve the appointment of Deloitte & Touche LLP as the
independent auditors of the books and accounts of the Company for the year
ending December 31, 1997; and
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 26, 1997 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
You are cordially invited to attend the meeting. Whether or not you are
planning to attend the meeting, you are urged to complete, date and sign the
enclosed proxy card and return it promptly.
By Order of the Board of Directors
Patrick S. Bullard
VICE PRESIDENT - GENERAL COUNSEL
AND SECRETARY
Houston, Texas
April 10, 1997
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YOUR VOTE IS IMPORTANT
TO ENSURE YOUR REPRESENTATION AT THE MEETING, PLEASE COMPLETE, DATE, SIGN AND
PROMPTLY RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE. NO ADDITIONAL
POSTAGE IS NECESSARY IF MAILED IN THE UNITED STATES.
- --------------------------------------------------------------------------------
<PAGE>
SOUTHDOWN, INC.
1200 SMITH STREET
SUITE 2400
HOUSTON, TEXAS 77002
(713) 650-6200
------------------------
April 10, 1997
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
------------------------
INTRODUCTION
This Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Southdown, Inc. (the
"Company") for use at the Annual Meeting of Shareholders of the Company to be
held on Thursday, May 15, 1997, and at any adjournment thereof (the "Annual
Meeting"). The Proxy Statement and the enclosed form of proxy will first be sent
to shareholders on or about April 10, 1997.
PROXIES
The shares represented by any proxy in the enclosed form, if such proxy is
properly executed and is received by the Company prior to or at the Annual
Meeting, will be voted in accordance with the specifications made thereon.
Proxies on which no specification has been made by the shareholder will be voted
(I) for the election to the Board of Directors of the nominees named herein,
(II) for the approval of the Board of Directors' proposed amendments to the 1991
Nonqualified Stock Option Plan for Non-Employee Directors, (III) for the
approval for federal income tax law purposes of the Company's Annual Incentive
Plan, (IV) for the approval of the Company's Phantom Stock and Deferred
Compensation Plan for Non-Employee Directors, and (V) for the approval of the
appointment of Deloitte & Touche LLP as independent auditors of the books and
accounts of the Company for the year ending December 31, 1997. Proxies are
revocable by written notice received by the Secretary of the Company at any time
prior to their exercise or by executing a later dated proxy. Proxies will be
deemed revoked by voting in person at the Annual Meeting.
VOTING SECURITIES
Shareholders of record at the close of business on March 26, 1997 are
entitled to notice of and to vote at the Annual Meeting. As of March 26, 1997,
the issued and outstanding voting securities of the Company consisted of (I)
21,389,500 shares of common stock, par value $1.25 per share (the "Common
Stock") and (II) 1,724,850 shares of Preferred Stock, $2.875 Cumulative
Convertible Series D (the "Series D Preferred Stock"). The Common Stock and the
Series D Preferred Stock vote together as one class on all matters that may
properly come before the Annual Meeting and each such share is entitled to one
vote on all such matters. The Common Stock and the Series D Preferred Stock are
referred to collectively herein as the "Capital Stock."
QUORUM AND OTHER MATTERS
The presence at the Annual Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of Capital Stock entitled to vote at the
Annual Meeting is necessary to constitute a quorum. The Board of Directors is
not aware of any matters that are expected to come before the Annual Meeting
other than those referred to in this Proxy Statement. If any other matter should
come before the Annual Meeting, the persons named in the accompanying proxy
intend to vote such proxies in accordance with their best judgment.
Shares of Capital Stock represented by a properly dated, signed and
returned proxy will be counted as present at the Annual Meeting for purposes of
determining a quorum, without regard to whether the proxy is marked as casting a
vote or abstaining. Directors will be elected by a plurality of the votes cast
at the Annual Meeting. All other matters scheduled to come before the Annual
Meeting require the affirmative vote of a majority of the votes cast at the
Annual Meeting, in person or by proxy. Any shareholder giving a proxy has the
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right to withhold authority to vote for any individual nominee to the Board of
Directors by writing that nominee's name in the space provided on the proxy.
Votes that are withheld will be excluded entirely from the vote. Abstentions may
be specified on all proposals and will be counted as present for purposes of
determining a quorum. Under applicable Louisiana law, a broker non-vote will not
count as a vote for or against the proposals, and will not be included in
calculating the number of votes necessary for approval of such matters.
The Board of Directors, any committee of the Board designated by it for
that purpose, or the chairman of any meeting of shareholders may prescribe such
rules, regulations and procedures for the conduct of any meeting of
shareholders, including the Annual Meeting, as they deem appropriate or
convenient.
Under the laws of the State of Louisiana, dissenters rights are not
available to shareholders of the Company with respect to any matter scheduled to
be brought before the Annual Meeting.
ELECTION OF DIRECTORS
The Restated Articles of Incorporation, as amended, of the Company
classify the Board of Directors into three classes (Class I, Class II and Class
III) having staggered terms of three years each. The present term of office of
the directors in Class III will expire at the Annual Meeting, and the nominees
listed below, if elected as Class III directors, will serve for a three-year
term expiring at the annual meeting of shareholders in 2000 and until their
successors are duly elected and have qualified. Mr. W. J. Conway, a Class III
director since 1982 and a member of the Nominating and Conflict of Interest
Committees, will retire from the Board of Directors at the Annual Meeting, at
which time the size of the Board of Directors will be reduced to ten members.
The present terms of office of Class I and Class II directors of the Company
expire at the annual meeting of shareholders in 1998 and 1999, respectively. The
election of directors requires the favorable vote of the holders of a plurality
of the shares of Capital Stock present and voting, in person or by proxy, at the
Annual Meeting.
NOMINEES FOR ELECTION
The following table sets forth certain information with respect to each
nominee for election as a director. The information as to age, principal
occupation and directorships held has been furnished by each such nominee.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
PRINCIPAL CONTINUOUSLY COMMITTEE
NAME AND AGE OCCUPATION(1) SINCE MEMBERSHIPS
------------ ------------- ------- -----------
<S> <C> <C> <C>
CLASS III (term expires 2000)
Clarence C. Comer [49] ............President and Chief Executive 1986
Officer of the Company (2)
Robert G. Potter [58] .............Executive Vice President and 1996 Compensation & Benefits
Advisory Director of Monsanto Nominating
Company, a diversified chemical and
manufacturing company in St. Louis,
Missouri (3)
Robert J. Slater [59] .............President, Jackson Consulting, Inc.
a private consulting and investment
company specializing in advising
basic industries, New Canaan, Compensation & Benefits
Connecticut (4) 1993 Finance & Audit
</TABLE>
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(1) Unless indicated otherwise in the table, the individuals named in the
table have held their positions for more than five years.
(2) Mr. Comer is also a director of Consolidated Graphics, Inc., a company
engaged in commercial and financial printing.
2
<PAGE>
(3) Mr. Potter was elected to the Board in November 1996. Mr. Potter is also a
director of Stepan Co., a manufacturer of specialty and intermediate
chemicals.
(4) Mr. Slater is also a director of First Industrial Realty Trust, Inc., an
owner and operator of industrial real estate.
Unless authority to vote for the election of directors is withheld as to
any or all nominees, all shares represented by proxies will be voted for the
election of the nominees listed. If authority to vote for the election of
directors is withheld as to any but not all of the nominees listed, all shares
represented by such proxies will be voted for the election of the nominees as to
whom authority is not withheld. If a nominee becomes unavailable for any reason
before the election, the shares represented by proxies will be voted for such
person, if any, as may be designated by the Board of Directors. However, the
Board of Directors has no reason to believe that any nominee will be
unavailable. Any vacancy occurring between meetings may be filled by the Board
of Directors. A director elected to fill a vacancy shall hold office for a term
expiring at the annual meeting of shareholders at which the term of the class to
which he was elected expires. Vacancies resulting from an increase in the number
of directors may be filled by the Board of Directors. Any such director would
serve for a term expiring at the next annual meeting of shareholders of the
Company and would not be designated as a member of any class of directors unless
elected by the shareholders at such annual meeting.
CONTINUING DIRECTORS
The following table sets forth certain information about those directors
whose terms of office continue after the Annual Meeting. The information as to
age, principal occupation and directorships held has been furnished by each such
director.
<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
PRINCIPAL CONTINUOUSLY COMMITTEE
NAME AND AGE OCCUPATION(1) SINCE MEMBERSHIPS
------------ ------------- ------- -----------
<S> <C> <C> <C>
CLASS I (term expires 1998)
K. L. Huger, Jr. [68] ...............Vice President of Canal Barge 1977 Conflict of Interest
Company, Inc., a marine towing Finance & Audit
company, New Orleans,
Louisiana
David J. Tippeconnic [57] ...........President and Chief Executive 1996 Compensation & Benefits
Officer of UNO-VEN Company Nominating
Arlington Heights, Illinois(2)
V. H. Van Horn III [58] .............Retired, Houston, Texas(3) 1988 Compensation & Benefits
Nominating
Steven B. Wolitzer [44] .............Managing Director, Lehman 1993 Finance & Audit
Brothers Inc., an investment Nominating
banking firm, New York,
New York
CLASS II (term expires 1999)
Frank J. Ryan [65] ..................Private Investor, Allentown, 1993 Compensation & Benefits
Pennsylvania(4) Nominating
Whitson Sadler [56] .................President and Chief Executive 1996 Compensation & Benefits
Officer of Solvay America, Inc., Finance & Audit
Houston, Texas(5)
</TABLE>
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<TABLE>
<CAPTION>
SERVED AS
DIRECTOR
PRINCIPAL CONTINUOUSLY COMMITTEE
NAME AND AGE OCCUPATION(1) SINCE MEMBERSHIPS
------------ ------------- ------- -----------
<S> <C> <C> <C>
Ronald N. Tutor [57] ................President and Chief Executive 1992 Finance & Audit
Officer of Tutor-Saliba Nominating
Corporation, a construction
company, Sylmar, California(6)
</TABLE>
- --------------
(1) Unless indicated otherwise in this table or in the section of this Proxy
Statement captioned "Executive Officers of the Company," the individuals
named in the table have held their positions for more than five years.
(2) Mr. Tippeconnic has been President and Chief Executive Officer of UNO-VEN
Company since February 1995. UNO-VEN is a joint venture between Unocal
Corp. and Petroleos de Venezuela S.A. that refines petroleum crude oil and
produces and markets petroleum products. For more than five years prior to
his retirement in 1994, Mr. Tippeconnic served in various executive
positions with the Phillips Petroleum Company.
(3) For more than five years prior to his retirement in January 1996, Mr. Van
Horn was President, Chief Executive Officer and a director of National
Convenience Stores Incorporated, an operator of convenience stores.
(4) Since 1990 Mr. Ryan has been a private investor, and prior to that time
was President and Chief Operating Officer of Air Products and Chemicals,
Inc., a manufacturer of industrial gases and chemicals. Mr. Ryan was
elected Chairman of the Board of the Company effective March 16, 1995.
(5) Solvay America, Inc. is a United States subsidiary of Solvay S.A., a major
European chemical company headquartered in Brussels, Belgium.
(6) Mr. Tutor is also a director of Perini Corporation, a company engaged in
general construction and real estate development.
INFORMATION CONCERNING OPERATION OF THE BOARD OF DIRECTORS
In order to facilitate the various functions of the Board of Directors,
the Board has created several standing committees, which include a Finance and
Audit Committee, an Employee Compensation and Benefits Committee, a Nominating
Committee and a Conflict of Interest Committee.
The members of the Finance and Audit Committee are Mr. Wolitzer, Chairman,
Mr. Huger, Mr. Sadler Mr. Slater, and Mr. Tutor. The functions of the Company's
Finance and Audit Committee are to review the financial statements with the
Company's independent accountants prior to publication; determine the
effectiveness of the audit effort through regular periodic meetings with the
Company's independent accountants and Director of Internal Audit; determine
through discussion with the Company's independent accountants and Director of
Internal Audit that no unreasonable restrictions were placed on the scope or
implementation of their examinations; inquire into the effectiveness of the
Company's financial and accounting functions and internal controls through
discussion with the Company's independent accountants, Director of Internal
Audit and officers of the Company; recommend to the full Board of Directors the
engagement or discharge of the Company's independent auditors; review with the
independent auditors the plans and results of the auditing engagement as well as
each professional service provided by the independent auditors; periodically
review the financial performance of the Company- sponsored defined benefit
employee retirement plan ("Pension Plan"); engage or discharge Pension Plan fund
managers and make recommendations to the Board of Directors regarding the
portfolio asset allocation; review and make recommendations to the Board of
Directors regarding investment objectives of the Pension Plan in light of
financial risks and potential returns; make recommendations to the Board with
respect to dividend and other distribution policies and the issuance, sale,
repurchase or redemption of Company securities; make recommendations regarding
current and proposed financing strategies, indebtedness and lease obligations;
and review the Company's capital and maintenance appropriations, taxes and
budgets.
4
<PAGE>
The members of the Employee Compensation and Benefits Committee are Mr.
Van Horn, Chairman, Mr. Potter, Mr. Ryan, Mr. Sadler, Mr. Slater and Mr.
Tippeconnic. The functions of the Employee Compensation and Benefits Committee
include reviewing the existing compensation arrangements with officers and
employees; periodically reviewing the overall compensation program of the
Company and recommending to the Board modifications of such program which, in
the view of the development of the Company and its business, the Committee
believes are appropriate; and administer the stock option plans of the Company
(except the 1991 Nonqualified Stock Option Plan for Non-Employee Directors which
is administered by the full Board) as set forth in such plans.
The members of the Nominating Committee are Mr. Ryan, Chairman, Mr.
Conway, Mr. Potter, Mr. Tippeconnic, Mr. Tutor, Mr. Van Horn and Mr. Wolitzer.
The function of the Nominating Committee is to research, interview and recommend
candidates to fill vacancies in the membership of the Board of Directors. In
addition, the Nominating Committee will review shareholders' suggestions for
nominees for director that are submitted to the Nominating Committee, at the
address of the Company's principal executive offices, not less than 60 days in
advance of the anniversary date of this Proxy Statement.
The members of the Conflict of Interest Committee are Mr. Huger, Chairman,
and Mr. Conway. The functions of the Conflict of Interest Committee are to
approve or disapprove transactions, other than compensation matters, between the
Company or its subsidiaries and any officer or director of the Company and to
consider violations by senior management of the Company's Statement of Policy
Regarding Corporate Ethics and Conflicts of Interest.
During the year ended December 31, 1996, the Board of Directors held six
meetings, the Finance and Audit Committee held six meetings, the Employee
Compensation and Benefits Committee held six meetings, the Nominating Committee
held three meetings and the Conflict of Interest Committee held one meeting.
During the year ended December 31, 1996, each Director, for the period he
served on the Board, attended 75% or more of the aggregate of (I) the total
number of meetings of the Board of Directors and (II) the total number of
meetings held by all committees of the Board on which he served, except for Mr.
Tutor.
EXECUTIVE COMPENSATION AND OTHER MATTERS
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning cash and non-cash
compensation paid or accrued for services in all capacities to the Company and
its subsidiaries during the year ended December 31, 1996 for the Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company ("Named Officers").
5
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<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------------ -------
Fiscal Other Annual Stock All Other
Name & Principal Position Year Salary Bonus Compensation(1) Options Compensation
------------------------- ---- ------ ----- --------------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer 1996 $546,000 $479,934 - 50,000 $ -0-
President & Chief 1995 533,000 170,000 - 38,000 -0-
Executive Officer 1994 520,000 125,000 - 37,000 -0-
J. Bruce Tompkins 1996 313,500 206,597 - 18,000 4,500 (2)
Executive Vice President- 1995 307,250 100,000 - 17,600 9,828 (2)
Cement Group 1994 301,000 50,000 - 17,000 9,378 (2)
Eugene P. Martineau 1996 262,500 172,988 - 18,000 10,920 (3)
Executive Vice President- 1995 256,250 73,500 - 14,600 15,593 (3)
Concrete Products Group 1994 250,000 50,000 - 15,000 7,841 (2)
James L. Persky 1996 262,500 172,988 - 14,000 4,500 (2)
Executive Vice President- 1995 256,250 73,500 - 14,600 9,548 (2)
Finance and Administration 1994 250,000 50,000 - 15,000 7,838 (2)
Dennis M. Thies 1996 233,000 136,538 - 6,000 4,500 (2)
Senior Vice President- 1995 229,500 35,000 - 11,000 7,906 (2)
Corporate Development 1994 226,000 22,000 - 11,000 4,620 (2)
</TABLE>
- --------------
(1) Although the officers receive certain perquisites such as a car allowance
and Company provided life insurance, the value of such perquisites did not
exceed the lesser of $50,000 or 10% of the officer's salary and bonus.
(2) These amounts represent the Company's contribution to the Company's
Retirement Savings Plan.
(3) At the time of his employment with the Company, Mr. Martineau was granted
an interest free loan of $75,000 from the Company. In addition to Company
contributions to the retirement savings plan, other compensation includes
$6,420 of imputed interest income from this loan in 1996 and 1995. The
current balance of this loan is $75,000.
EMPLOYEE COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Employee Compensation and Benefits Committee (the "Committee")
includes only directors who are not employees of the Company. The Committee is
responsible for recommending to the full Board of Directors the compensation
arrangements for senior management and directors, recommending to the full Board
of Directors the adoption of compensation plans in which senior management and
directors are eligible to participate and granting options or other benefits
under such plans.
COMPENSATION POLICIES AND PROGRAMS. The Committee believes that the
ultimate goal of the executive compensation program should be to align the
interests of management with those of the shareholders in maximizing shareholder
value over the long term. The Committee believes that the best way to do this is
by tying the financial interests of the Company's executives closely to the
interests of the Company's shareholders through a combination of annual cash
incentives and stock options. The Committee believes that the Company's
executive compensation program should: (I) motivate executives toward effective
long-term management through stock programs which focus executives' attention on
increasing shareholder value, as measured by stock price, (II) reward effective,
efficient ongoing management of Company operations through annual incentives
which are tied to Company and individual performance, and (III) provide the
ability to attract and retain executives through salary levels which are
competitive with other leading industrial companies.
The Company's executive compensation program includes base salary, annual
cash incentives, and stock options, each of which is tied to the Company's and
executive's performance.
6
<PAGE>
BASE SALARY: It is the policy of the Committee that salaries
should reflect Company and individual performance in meeting the goal of
maximizing shareholder value. Some Company performance measures that are
considered by the Committee are profitability, positive stock price trends
and effective cash flow and balance sheet management. Individual
performance measures considered by the Committee vary depending on the
executive's sphere of responsibility, but generally include revenue
growth, expense control, improvement of products and services and asset
management. No specific weighting is applied to any particular measure.
The Committee reviews annually the performance of each senior executive
officer other than the Chief Executive Officer ("CEO") who is reviewed
annually by the full Board of Directors. Salary increases are granted to
senior executive officers only in years during which both the Company's
and individual performance justify an increase and are limited to ranges
competitive with other industrial companies.
INCENTIVE PLAN: The Annual Incentive Plan or bonus plan is based
upon performance measures set by the Committee at the beginning of the
year. These performance measures are (I) a comparison of the Company's
earnings before interest, taxes, depreciation and amortization to a
targeted earnings projection and (II) the Company's return on equity as
compared to the average return on equity of a peer group. Each of these
measures is weighted at 35%. The remaining 30% of the award is
discretionary based upon individual performance. In the case of the Named
Officers the performance of the Common Stock as compared to the peer
group's stock performance is a major factor considered by the Committee in
setting the discretionary amount.
STOCK OPTIONS: The Committee believes that stock options are
critical in motivating the long-term creation of shareholder value because
stock options focus executive attention on stock price as the primary
measure of performance. The Committee considers the grant of options to
senior executive officers each year and bases the grants on Company and
individual performances and competitive practices within the industry. The
Committee has established several guidelines regarding the grant of
options to senior executive officers. These guidelines provide that (I)
all stock options will be granted at full market value on the date of
grant so that executives realize gain only to the extent that the
Company's stock price appreciates and (II) the quantity of options granted
will be tied to industry practice and the compensation level of the
executive. In addition, since the options vest over a period of years they
enhance the ability of the Company to retain senior executive officers
while encouraging such officers to take a long-term view in their
management decisions.
COMPENSATION AGREEMENTS. The Company has entered into employment
agreements with certain of its executives which specify the terms and conditions
of their employment. Central to these agreements are post-takeover employment
arrangements. The Committee believes that these change in control agreements are
an essential aspect of the terms of employment of senior executive officers and
recognizes the importance to the Company of retaining its senior executive
officers during and after the disruption typically provoked by a takeover offer
(whether or not ultimately successful). See "Employment and Other Agreements"
for a detailed discussion of the terms of these employment agreements.
The Company has, in the past, granted supplemental pensions to certain
employees. The grant of a supplemental pension is made only in special
employment situations and is not limited to executive officers.
COMPENSATION OF THE CEO. The CEO's salary, annual incentive payments and
stock option grants are determined in part based upon the same Company and
individual performance measures described above. Within this framework, the
CEO's compensation is based upon the Board of Directors' judgment concerning the
CEO's individual contribution to the business, level of responsibility and
career experience. Although none of these factors has a specific weight and no
particular formulas or procedures are used, primary consideration is given to
the CEO's individual contribution to the business. This type of evaluation along
with a periodic review of the compensation levels of other CEO's and executive
officers of other cement companies of similar size, are the main factors in
determining the CEO's total compensation package.
THE EMPLOYEE BENEFITS AND COMPENSATION COMMITTEE
V. H. Van Horn III, Chairman
Robert G. Potter
Frank J. Ryan
M. Whitson Sadler
Robert J. Slater
David J. Tippeconnic
7
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STOCK PERFORMANCE GRAPH
The following graph compares total return of the Company's Common Stock
against the S&P 500 Index and a peer group index consisting of public companies
in the cement industry.* The graph assumes that $100 was invested on December
31, 1991 in the Company's Common Stock, the S&P 500 Index and the peer group and
that dividends thereon were reinvested quarterly.
STOCK PERFORMANCE GRAPH
[LINEAR GRAPH PLOTTED FROM DATA IN TABLE BELOW]
1991 1992 1993 1994 1995 1996
Southdown ................ 100 71.56 179.82 106.42 143.11 232.13
Peer Group ............... 100 100.71 180.45 143.37 160.14 195.62
S & P 500 ................ 100 107.62 118.47 120.03 165.14 203.06
* The peer group includes Giant Group, Ltd., Giant Cement Holding, Inc.,
Holnam Inc., Lafarge Corporation, Lone Star Industries, Medusa Corporation
and Centex Construction Products, Inc. Giant Group Ltd. sold its cement
operation in October 1994 through a public offering of its subsidiary
Giant Cement Holding, Inc. The graph includes information for Giant Group,
Ltd. for years prior to 1995 and for Giant Cement Holding, Inc.
thereafter. Information for Holnam Inc. is included only for years prior
to 1994 when it ceased being a public company. Information for Centex
Construction Products, Inc. is included beginning in 1994, its first year
as a public company.
COMPENSATION ARRANGEMENTS FOR AND TRANSACTIONS WITH MEMBERS OF THE BOARD OF
DIRECTORS
Mr. Ryan receives a fee of $12,500 per month for his services as Chairman
of the Board. Members of the Board of Directors of the Company, other than the
Chairman of the Board and those directors who are employees of the Company or
its subsidiaries, receive a fee of $2,000 per month for their services as
directors. Members of the Finance and Audit, Employee Compensation and Benefits,
Nominating and Conflict of Interest Committees of the Board of Directors, other
than the Chairman of the Board and those members who are employees of the
Company or its subsidiaries, receive an additional fee of $500 per month for
their services on each such committee.
Effective January 1, 1997 the Board of Directors adopted, subject to
approval by the shareholders, the Phantom Stock and Deferred Compensation Plan
for Non-Employee Directors (the "Phantom Stock Plan"). This plan calls for the
non-
8
<PAGE>
employee directors to receive, in lieu of cash, at least 50% of their monthly
directors fees in fair market value of Common Stock. Please see the discussion
on page 14 for a description of the principal features of the Phantom Stock
Plan.
The 1991 Nonqualified Stock Option Plan for Non-Employee Directors of
Southdown, Inc. (the "1991 Plan") provides for the grant of stock options to
non-employee directors of the Company. The 1991 Plan is administered by the
Board of Directors and authorizes the grant of options to purchase up to 400,000
shares of Common Stock for issuance as nonqualified options. Each director of
the Company who is not an employee of the Company or any of the Company's
subsidiaries ("Eligible Director"), will be granted options to acquire 10,000
shares of Common Stock on the date of such director's first election to the
Board. Additional options to acquire 5,000 shares of Common Stock shall
thereafter be awarded to each Eligible Director on the date of the annual
meeting of shareholders at which he or she is reelected to serve an additional
three-year term as a Director of the Company. The Board of Directors has
proposed amendments to the 1991 Plan that would change the amount and timing of
the additional options granted, as well as the vesting schedule for such
options. Please see the discussion on page 12 for a description of these
amendments.
The Directors' Retirement Plan of the Company provides a retirement
benefit to all directors who are not covered by a qualified retirement plan of
the Company and who have served on the Board for a minimum of five years. In the
event of a change in control of the Company, the retirement benefits vest
immediately without regard to the five years of service requirement. The annual
benefit payable at the later of age 65 or the date of retirement is equal to
two-thirds of the total fees paid to the director during his last twelve months
of service on the Board and is payable for a period equal to the period of his
service on the Board. Should the director die before full payment of this
retirement benefit, his surviving spouse will be entitled to fifty percent of
the remaining obligation.
Mr. Conway, who retired as an employee of the Company in 1990, is paid a
supplemental pension pursuant to an agreement entered into at the time of his
employment with the Company. The pension is payable during his lifetime at an
annual rate equal to the amount by which 60% of his highest five year's average
base salary exceeds the aggregate benefits received under other pension plans of
the Company, other employer pension plans and social security. Mr. Conway was
paid $93,973 in 1996 under this supplemental pension agreement.
Mr. Wolitzer is a managing director of Lehman Brothers Inc., which has
provided from time to time investment banking services to the Company for which
it has received customary fees and commissions.
Mr. Tutor is President of Tutor-Saliba Corporation, which purchases
ready-mixed concrete from the Company on terms and conditions comparable to
those offered to other customers of the Company. According to Company records,
Tutor-Saliba Corporation and various affiliated entities purchased approximately
$600,000 of ready-mixed concrete from the Company in 1996.
EMPLOYMENT AND OTHER AGREEMENTS
The Company has entered into employment agreements (the "Employment
Agreements") with Messrs. Comer, Tompkins, Martineau, Persky and Thies. Under
the Employment Agreements, the Company employs Mr. Comer as President and Chief
Executive Officer at an annual salary of no less than $546,000, Mr. Tompkins as
Executive Vice President - Cement Group at an annual salary of no less than
$313,500, Mr. Martineau as Executive Vice President Concrete Products Group at
an annual salary of no less than $262,500, Mr. Persky as Executive Vice
President - Finance and Administration at an annual salary of no less than
$262,500 and Mr. Thies as Senior Vice President - Corporate Development at an
annual salary of no less than $233,000. Under the terms of the employment
agreements, the salaries of Messrs. Comer, Tompkins, Martineau, Persky and Thies
may be increased by the Board of Directors of the Company (or the appropriate
committee thereof) from time to time.
Under the Employment Agreements, each executive is entitled to receive, in
addition to his annual salary, bonuses pursuant to the Company's Annual
Incentive Plan and certain fringe benefits, including the right to participate
in group benefit plans of the Company. The Employment Agreements are
automatically extended for one-year periods unless there is notice of
termination from either the Company or the executive. In the event the
executive's employment is terminated because of his death, disability, voluntary
termination of employment prior to the occurrence of a "change in control event"
(as defined at the end of this paragraph) or misappropriation of funds or
properties of the Company (as determined by three-quarters of the Board of
Directors), the executive shall receive only his annual salary on a pro rata
basis to the date of termination. If, prior to a change in control event, the
executive's employment is terminated pursuant to resolution of the Board of
Directors that the executive is no longer discharging his duties in a manner
consistent with the effective administration of the Company's affairs, the
executive shall be entitled to a lump sum payment equal to his base annual
salary. Upon the occurrence of a change in control event, all outstanding
options previously granted by the Company to
9
<PAGE>
the executive under any stock option, stock appreciation or other employee plan
will be accelerated and if the executive's employment terminates following such
change in control event, the Company must pay the executive a lump sum
termination payment equal to 2.99 times the sum of his base annual salary and
the average annual bonus, if any, received during the two years preceding the
change in control event. Payments made to such executives under all incentive
agreements to which they are parties shall be limited, in the event of a change
in control by the provisions of Sections 280G and 4999 of the Internal Revenue
Code (the "Code"), only if the after-tax payments to each executive are greater
as a result of such limitation. As used in the Employment Agreements, a "change
in control event" is defined to be the acquisition by any person or entity of
(I) beneficial ownership of more than 40% of the Company's outstanding voting
securities or (II) all or substantially all of the Company's assets.
PENSION PLAN
Substantially all non-bargaining unit employees of the Company, including
the Named Officers, are covered by a defined benefit pension plan (the
"Southdown Plan") sponsored by the Company. The Southdown Plan is funded on an
actuarial basis. The formula used to determine the retirement benefits to which
an employee is entitled at age 65 under the Southdown Plan is dependent on,
among other things, the employee's length of service, his average salary level
for the five consecutive years during his participation in the plan yielding the
highest average and his social security covered compensation. The remuneration
used in the calculation of benefits under the Southdown Plan is a participant's
base salary, excluding any bonuses or other compensation. The maximum amount any
employee may receive under the Southdown Plan is subject to the limitations
described in the provisions of Section 415(d) of the Code.
The following table sets forth the annual retirement benefits to which a
salaried employee having attained age 65 with ten, fifteen, twenty, twenty-five,
thirty or thirty-five years of continuous service with the Company or one of its
subsidiaries at the indicated five-year average salary levels would be entitled
in 1996 under the Southdown Plan. The table takes into account the limitations
under Code Section 415.
YEARS OF SERVICE AT AGE 65
CONSECUTIVE FIVE YEAR ------------------------------------------------------
AVERAGE COMPENSATION 10 15 20 25 30 35
- ------------------------ ------- ------- ------- ------- -------- --------
$ 50,000 ............... $ 6,495 $ 9,743 $12,990 $16,238 $ 19,485 $ 22,733
100,000 ................ 14,745 22,118 29,490 36,863 44,235 51,608
150,000 ................ 22,194 33,291 44,388 55,485 66,582 77,679
200,000 ................ 26,348 39,522 52,696 65,870 79,045 92,219
250,000 and over ....... 33,374 50,061 66,748 83,435 100,122 116,809
Messrs. Comer, Tompkins, Martineau, Persky and Thies have been credited
with nineteen, eight, seven, eleven and sixteen years of service, respectively,
under the terms of the Southdown Plan described above and were paid base
salaries of $546,000, $313,500, $262,500, $262,500 and $233,000 respectively,
during the year ended December 31, 1996.
Assuming continual employment at their current base salary until age 65,
Messrs. Comer, Tompkins, Martineau, Persky and Thies will be entitled to an
annual retirement benefit of approximately $120,000, $96,300, $40,000, $91,900
and $105,100, respectively. In all cases, the computations of the Named
Officers' retirement benefit were limited by the Code Section 415 limitations in
effect at the beginning of 1996 and thus, were not based upon their current base
salaries.
STOCK OPTIONS
1987 PLAN AND 1989 PLAN. The Company's 1987 Stock Option Plan (the "1987
Plan") and 1989 Stock Option Plan (the "1989 Plan"), collectively referred to as
the "Plans," provide for the grant of stock options to key employees of the
Company and its affiliates. The Plans authorize the issuance of options to
purchase a total of 4,000,000 shares of Common Stock (2,000,000 shares under the
1987 Plan and 2,000,000 shares under the 1989 Plan). The Plans are administered
by the Employee Benefits and Compensation Committee (the "Committee"). Members
of the Committee are not eligible to participate in the Plans or any other plan
of the Company or its affiliates that the Committee administers at any time
within one year prior to appointment or while serving on the Committee. The
Committee is authorized to select key employees to whom stock options are
granted under the Plans and to determine the number of shares, exercise price
and terms of each option granted. Unoptioned shares available for grant as of
December 31, 1996 under the Plans were 661,278.
10
<PAGE>
OPTION/SAR GRANTS TO NAMED OFFICERS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/ ANNUAL RATES OF STOCK
UNDERLYING SARS PRICE APPRECIATION
OPTIONS/ GRANTED TO EXERCISE FOR OPTION TERM (3)
SARS EMPLOYEES IN PRICE PER EXPIRATION --------------------------------
NAME GRANTED (1) FISCAL YEAR SHARE(2) DATE 5% 10%
---- ----------- ----------- -------- ------------ ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer................50,000 14.09 $22.00 2/15/06 $691,784 $1,753,117
J. Bruce Tompkins................18,000 5.07 22.00 2/15/06 249,042 631,122
Eugene P. Martineau..............18,000 5.07 22.00 2/15/06 249,042 631,122
James L. Persky..................14,000 3.94 22.00 2/15/06 193,700 490,873
Dennis M. Thies...................6,000 1.69 22.00 2/15/06 83,014 210,374
</TABLE>
- -----------
(1) All options were granted under the Company's 1989 Plan and become
exercisable in annual increments of 25% beginning February 15, 1997.
(2) All options granted are exercisable at the market value (average of high
and low stock prices for the Company's Common Stock as reported in the
Wall Street Journal) of the Common Stock on the date of the grant.
(3) Potential realizable value was reported net of the option exercise price,
but before taxes associated with the exercise. These amounts represent
stated assumed rates of appreciation only. Actual values realized, if any,
on stock option exercises are dependent on the future performance of the
Common Stock and the officer's continued employment throughout the vesting
period. Accordingly, the amounts reflected in this table may not
necessarily be achieved.
NAMED OFFICERS'
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number Of Securities
Underlying Unexercised Value Of Unexercised
Options Held At Fiscal In-the-money Options
Shares Year End At Fiscal Year End*
Acquired On Value ----------------------------- ----------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Clarence C. Comer - - 128,000 47,000 $605,125 $479,625
J. Bruce Tompkins 22,900 $209,386 -0- 21,700 -0- 221,475
Eugene P. Martineau - - 86,150 18,450 940,000 188,100
James L. Persky 8,000 70,007 11,150 18,450 111,450 188,100
Dennis M. Thies 75,135 965,783 -0- 13,750 -0- 140,250
</TABLE>
- --------------
* Based upon the closing price on the New York Stock Exchange of the
Company's Common Stock on December 31, 1996.
11
<PAGE>
PROPOSAL TO AMEND
THE 1991 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
BACKGROUND
In 1991, the shareholders approved the 1991 Plan which provides for the
grant of stock options to non-employee directors of the Company. The purpose of
the 1991 Plan is to promote the interests of the Company and its shareholders by
attracting and retaining the services of experienced and knowledgeable
non-employee directors. The 1991 Plan is also intended to encourage the sense of
proprietorship of such persons and to stimulate their interest in the
development and financial success of the Company.
In November 1996, the Board of Directors voted to amend the 1991 Plan and
directed that such amendments be submitted for approval by the shareholders at
the 1997 Annual Meeting. The purpose of the amendments are to conform certain
features of the 1991 Plan to features and current practices employed in granting
employee stock options under the 1987 Plan and 1989 Plan.
DESCRIPTION OF PROPOSED AMENDMENTS
The amended 1991 Plan calls for the automatic grant of 2,000 options to
each non-employee director on the date of each annual meeting of shareholders
where he or she continues to serve as a director of the Company. This replaces
the automatic grant of 5,000 options to each non-employee director at the annual
meeting at which the director is re-elected to serve an additional three year
term. The amended 1991 Plan changes the vesting schedules of the options to
allow for options granted to be fully-exercisable six months after grant date.
Prior to this amendment all options granted become exercisable immediately to
the extent of 25% of the options and an additional 25% on each of the first
through third anniversaries of the date of grant. This amendment also changed
the vesting on all otherwise unvested options outstanding prior to the
amendment. These options will be fully-exercisable six months after the 1997
Annual Meeting date. The 1991 Plan was also amended to allow for a retiring
director to retain his options for the full ten year term. Prior to this
amendment the retiring director was required to exercise or relinquish his
outstanding options within 90 days of his retirement date.
SUMMARY DESCRIPTION OF THE 1991 PLAN AS AMENDED
ADMINISTRATION. The 1991 Plan is administered by the Board of Directors.
All decisions made by the Board pursuant to the provisions of the 1991 Plan
shall be made by a majority of its members at a duly held regular or special
meeting or by written consent in lieu of any such meeting.
AUTHORIZED SHARES AND ADJUSTMENTS. The 1991 Plan authorizes the grant of
options to purchase up to 400,000 shares of Common Stock for issuance as
nonqualified options within the meaning of the Internal Revenue Code of 1986
(the "Code"). Upon expiration of any option or its termination prior to
exercise, the unissued shares subject to option will again be available for
grant under the 1991 Plan. The number of shares authorized for issuance under
the 1991 Plan and the number of shares and exercise prices of outstanding
options are subject to adjustment in the event of stock splits, stock dividends,
and similar changes in the Company's capitalization.
ELIGIBILITY AND LIMITATIONS OF OPTIONS. Each director of the Company who
is not an employee of the Company or any of the Company's subsidiaries
("Eligible Director"), will be granted options to acquire 10,000 shares of
Common Stock on the date of such director's first election to the Board.
Additional options to acquire 2,000 shares of Common Stock shall thereafter be
awarded to each Eligible Director on the date of the annual meeting of
shareholders where he or she continues to serve as a Director of the Company.
Except as expressly provided in the preceding two sentences, an Eligible
Director shall not be granted any options to purchase Common Stock pursuant to
the 1991 Plan or otherwise.
The options granted to Eligible Directors are subject to the following
limitations: (I) the exercise price shall not be lower than the fair market
value of the Common Stock on the date of grant and (II) each option shall become
exercisable
12
<PAGE>
six months after the date of grant. In the event of the death or disability of
the optionee, all options outstanding in the name of the optionee become
exercisable in full without regard to any vesting restrictions.
Each option granted shall also become fully exercisable upon a Change in
Control of the Company. "Change in Control" of the Company shall be conclusively
deemed to have occurred if any of the following shall have taken place: (I) a
change in control is reported by the Company under the Exchange Act, (II) any
"person" becomes the beneficial owner, directly or indirectly, of securities of
the Company representing 40% or more of the combined voting power of the
Company's then outstanding securities, or (III) following the election or
removal of directors, a majority of the Board consists of individuals who were
not members of the Board two years before such election or removal, unless the
election of each director who was not a director at the beginning of such
two-year period has been approved in advance by directors representing at least
a majority of the directors then in office who were directors at the beginning
of the two-year period.
TERM OF OPTION. Each option granted shall provide that it shall terminate
and be of no force or effect with respect to any shares not previously purchased
by the Eligible Director upon the first to occur of the expiration of ten years
from the date the grant of the option or the expiration of ninety days after the
termination of the Eligible Director's service as a director of the Company for
any reason other than death, disability or retirement under a retirement plan of
the Company. If, following a Change in Control of the Company, the Eligible
Director's service as a director is terminated for any reason, each option may
be exercised during the remainder of its full ten-year term to the extent
unexercised.
EXERCISE. The 1991 Plan requires that the purchase price of the shares for
which an option is exercised be paid in full at the time of exercise. The
payment may be in the form of cash or by delivery to the Company of Common Stock
theretofore owned by the Eligible Director equal in value to the full amount of
the option price. Options may be exercised solely by the optionee during his
lifetime or after his death by the person or persons entitled thereto under his
will or by the laws of descent and distribution.
AMENDMENT AND TERMINATION. The Board of Directors may amend or terminate
the 1991 Plan at any time, provided that no amendment may impair the rights of
any optionee under the 1991 Plan without his or her consent and except that no
amendment or alteration may be made which, without the approval of the
shareholders, would increase the total number of shares reserved for issuance
under the 1991 Plan, extend the duration of options, materially increase the
benefits accruing to optionees under the 1991 Plan or materially modify the
requirements as to eligibility under the 1991 Plan.
REQUIRED VOTE FOR APPROVAL
The approval of the amendments to the 1991 Plan requires the affirmative
vote of a majority of the votes cast at the Annual Meeting.
The Board of Directors recommends a vote FOR the approval of the
amendments to the 1991 Plan.
APPROVAL OF THE COMPANY'S ANNUAL INCENTIVE PLAN
BACKGROUND
The Annual Incentive Plan is a cash bonus plan for key officers and
employees who directly impact the Company's success. The shareholders of the
Company must approve the Annual Incentive Plan in order to exclude incentive
compensation earned under the plan from the tax deductibility limitation of
Internal Revenue Code Section 162(m). Section 162(m) limits the tax
deductibility of compensation paid to each of the executive officers listed in
the Summary Compensation Table in excess of $1,000,000, except to the extent
that the compensation was paid pursuant to a plan that meets the
"performance-based" rules of the section and such plan has been approved by a
majority of votes cast by the shareholders.
DESCRIPTION OF THE ANNUAL INCENTIVE PLAN
13
<PAGE>
The Annual Incentive Plan is administered by the Employee Compensation and
Benefits Committee (the "Committee") and covers approximately 100 key officers
and employees of the Company. At the beginning of the year the Committee
establishes a maximum award for each participant and also establishes the
performance measures in accordance with the plan. The maximum award for 1996 for
the Chief Executive Officer and the four other Named Officers was 120 percent
and 90 percent of their annual base salaries, respectively. The performance
measures set by the Committee and used to determine the cash awards are (I) a
comparison of the Company's earnings before interest, taxes, depreciation and
amortization to a targeted earnings projection set at the beginning of the year
and (II) the Company's return on equity as compared to the average return on
equity of a peer group. Each of these measures is weighted at 35%. The remaining
30% of the award is discretionary based upon individual performance. In the case
of the Named Officers the performance of the Common Stock as compared to the
peer group's stock performance is a major factor considered by the Committee in
setting the discretionary amount.
REQUIRED VOTE FOR APPROVAL
Approval of the Annual Incentive Plan for purposes of Section 162(m) will
require the affirmative vote of a majority of the votes cast at the Annual
Meeting.
The Board of Directors recommends a vote FOR the approval of the Annual
Incentive Plan.
PROPOSAL TO APPROVE THE COMPANY'S PHANTOM STOCK AND
DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
BACKGROUND
In January 1997 the Board of Directors adopted, subject to the approval of
the shareholders, the Phantom Stock Plan which provides for the payment of a
portion of the directors fees in shares of Common Stock to non-employee
directors. The purpose of the Phantom Stock Plan is to promote the interests of
the Company and shareholders by providing non-employee directors a greater
financial stake in the Company through ownership of Common Stock in addition to
underscoring their common interest with shareholders in increasing the value of
the Common Stock over the long term.
DESCRIPTION OF THE PHANTOM STOCK PLAN
The Phantom Stock Plan became effective January 1, 1997 and calls for the
non-employee directors to receive on a deferred basis, in lieu of cash, 50% of
their monthly directors fees in fair market value of Common Stock. The fair
market value is determined based upon the average of the high and low prices of
the Common Stock on the last New York Stock Exchange trading day of the month
the fee is payable. The non-employee director may elect to receive on a deferred
basis his total monthly fee in fair market value of Common Stock. The plan
defers the recognition of compensation by the director by deferring the issuance
of Common Stock to the director until he or she leaves the Board. The director's
account will also be credited with fair market value of Common Stock equal to
cash dividends on Common Stock that would have been received had the Common
Stock been issued when earned. A total of 250,000 shares of Common Stock have
been reserved for issuance under this plan.
REQUIRED VOTE FOR APPROVAL
The approval of the Phantom Stock Plan requires the affirmative vote of a
majority of the votes cast at the Annual Meeting.
The Board of Directors recommends a vote FOR the approval of the Phantom
Stock Plan.
14
<PAGE>
RATIFICATION OF INDEPENDENT AUDITORS
The shareholders will be asked to ratify the appointment of Deloitte &
Touche LLP as independent auditors of the books and accounts of the Company for
the year ending December 31, 1997. Such ratification will require the favorable
vote of the holders of a majority of the shares of Capital Stock present and
voting, in person or by proxy, at the Annual Meeting.
Representatives of Deloitte & Touche LLP will be present at the Annual
Meeting, will be given an opportunity to make a statement, if they desire to do
so, and will be available to respond to appropriate questions.
The Board of Directors recommends a vote FOR the reappointment of Deloitte
& Touche LLP as the Company's independent auditors for 1997.
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
The following table is furnished as of February 28, 1997, to indicate
beneficial ownership of shares of the Common Stock and Series D Preferred Stock
by each director, each nominee for director and each of the Named Officers,
individually, and all executive officers and directors of the Company as a
group. The information in the following table was provided by such persons.
<TABLE>
<CAPTION>
AMOUNT
AND PERCENT
NATURE OF TITLE OF OF
NAME OF INDIVIDUAL BENEFICIAL CLASS OR CLASS OR
OR GROUP OWNERSHIP(1) SERIES SERIES
---------- -------------- -------- -------
<S> <C> <C> <C>
Clarence C. Comer............................. 216,884(2) Common *
W. J. Conway.................................. 12,919(3) Common *
K. L. Huger, Jr............................... 52,864(4) Common *
Eugene P. Martineau........................... 96,842(5) Common *
James L. Persky............................... 9,789(6) Common *
Robert G. Potter.............................. 2,500(7) Common *
Frank J. Ryan................................. 31,250(8) Common *
Whitson Sadler................................ 3,500(9) Common *
Robert J. Slater.............................. 20,250(10) Common *
Dennis M. Thies............................... 11,833(11) Common *
David J. Tippeconnic.......................... 10,000(12) Common *
J. Bruce Tompkins............................. 1,440(13) Common *
Ronald N. Tutor............................... 16,250(14) Common *
V. H. Van Horn III............................ 17,500(15) Common *
Steven B. Wolitzer............................ 12,500(16) Common *
All executive officers and directors
as a group (Twenty persons)................ 549,621(17) Common 2.52
900 Series D
Preferred *
</TABLE>
- --------------
* Less than 1%.
(1) Except as otherwise noted, each person listed in the table has sole voting
and sole investment power with respect to the shares of Capital Stock
listed in the table.
(NOTES CONTINUED ON FOLLOWING PAGE)
15
<PAGE>
(2) Includes 149,750 shares of Common Stock as to which Mr. Comer holds stock
options that will be exercisable on April 30, 1997.
(3) Includes 3,750 shares of Common Stock as to which Mr. Conway holds stock
options that will be exercisable on April 30, 1997.
(4) Includes 26,456 shares of Common Stock owned by Mr. Huger's wife. Mr.
Huger has informed the Company that reference to such shares should not be
construed as an admission of his beneficial ownership thereof. Stock
ownership also includes 17,500 shares of Common Stock as to which Mr.
Huger holds stock options that will be exercisable on April 30, 1997.
(5) Includes 94,400 shares of Common Stock as to which Mr. Martineau holds
stock options that will be exercisable on April 30, 1997 and 2,442 shares
held in the Company's Retirement Savings Plan.
(6) Includes 7,250 shares of Common Stock as to which Mr. Persky holds stock
options that will be exercisable on April 30, 1997 and 2,539 shares held
in the Company's Retirement Savings Plan.
(7) Includes 2,500 shares of Common Stock as to which Mr. Potter holds stock
options that will be exercisable on April 30, 1997.
(8) Includes 11,250 shares of Common Stock as to which Mr. Ryan holds stock
options that will be exercisable on April 30, 1997.
(9) Includes 2,500 shares of Common Stock as to which Mr. Sadler holds stock
options that will be exercisable on April 30, 1997.
(10) Includes 13,750 shares of Common Stock as to which Mr. Slater holds stock
options that will be exercisable on April 30, 1997. Also includes 1,500
shares of Common Stock owned by a trust of which Mr. Slater is trustee.
Mr. Slater has informed the Company that reference to such shares should
not be construed as an admission of his beneficial ownership thereof.
(11) Includes 2,093 shares held in the Company's Retirement Savings Plan.
(12) Includes 5,000 shares of Common Stock as to which Mr. Tippeconnic holds
stock options that will be exercisable on April 30, 1997.
(13) Includes 1,440 shares held in the Company's Retirement Savings Plan.
(14) Includes 16,250 shares of Common Stock as to which Mr. Tutor holds stock
options that will be exercisable on April 30, 1997. Mr. Tutor has
disclaimed beneficial ownership of 15,000 of such stock options.
(15) Includes 17,500 shares of Common Stock as to which Mr. Van Horn holds
stock options that will be exercisable on April 30, 1997.
(16) Includes 12,500 shares of Common Stock as to which Mr. Wolitzer holds
stock options that will be exercisable on April 30, 1997.
(17) Includes 376,775 shares of Common Stock subject to stock options held by
the officers and directors that will be exercisable on April 30, 1997 and
13,055 shares held in the Company's Retirement Savings Plan. The table
does not include Common Stock that would be beneficially owned by
non-employee Directors upon approval by the shareholders of the Phantom
Stock Plan.
16
<PAGE>
The following table sets forth information with respect to each person
who, as of the dates indicated in the footnotes below, was known by the Company
to be the beneficial owner of more than 5% of the Common Stock or the Series D
Preferred Stock, as "beneficial ownership" is used in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
<TABLE>
<CAPTION>
Amount And Percent
Nature Of Of
Title Of Class Name And Address Of Beneficial Class Or
Or Series Beneficial Owner Ownership Series
--------- ---------------- --------- ------
<S> <C> <C> <C>
Common Stock NewSouth Capital Management, Inc. 1,753,811(1) 8.20
755 Crossover Lane, Suite 233
Memphis, Tennessee 38117
Common Stock FMR Corp. 2,242,500(2) 10.48
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock Capital Growth Management Limited Partnership 1,232,000(3) 5.76
One International Place
Boston, Massachusetts 02110
</TABLE>
(1) NewSouth Capital Management, Inc., an investment adviser, has filed with
the Securities Exchange Commission (the "SEC") a Schedule 13G and four
amendments dated through February 12, 1997 reporting that NewSouth is the
beneficial owner of these shares because it has sole power to dispose of
and vote 1,667,811 of such shares and has sole power to dispose of and
shared voting power with respect to 86,000 of such shares.
(2) FMR Corp. and various affiliates have filed with the SEC a Schedule 13G
and three amendments dated through February 14, 1997 reporting that FMR
Corp. is the beneficial owner of these shares because it has sole power to
vote 48,100 of such shares and sole power to dispose of all such shares.
(3) Capital Growth Management Limited Partnership ("CGM") has filed with the
SEC a Schedule 13G dated January 11, 1997 reporting an aggregate of
1,232,000 shares of Common Stock of which it claims sole voting and
dispositive power. According to the Schedule 13G, CGM disclaims any
beneficial interest in these shares which are held in various client
accounts under the theory that such client accounts are not acting as a
"group" for purposes of Section 13(d) under the Exchange Act and thus, are
not otherwise required to attribute to each other the "beneficial
ownership" of securities "beneficially owned" under Rule 13d-3 promulgated
under the Exchange Act.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Under the securities laws of the United States, the Company's directors,
its executive officers, and any persons holding more than ten percent of the
Company's Common Stock or Series D Preferred Stock are required to report their
initial ownership of the Company's Capital Stock and any subsequent changes in
that ownership to the SEC and the New York Stock Exchange, Inc. Specific due
dates for these reports have been established and the Company is required to
disclose in this proxy statement any failure to file by these dates. During
1996, Mr. Allan B. Korsakov filed late a Form 4 reporting the exercise of a
stock option, an exempt transaction, and Mr. Tutor filed late a Form 4 reporting
the purchase of Common Stock. All other required filings in 1996 were satisfied
on a timely basis. In making these disclosures, the Company has relied solely on
written statements of its directors, executive officers and shareholders and
copies of the reports that they have filed with the SEC.
EXECUTIVE OFFICERS OF THE COMPANY
The following list sets forth the names, ages and offices of the present
executive officers of the Company serving until the annual meeting of the Board
of Directors to be held in May 1997. The periods during which such persons have
served in such capacities are indicated in the description of business
experience of such persons below.
Clarence C. Comer (49).......... President, Chief Executive Officer
17
<PAGE>
and Director
J. Bruce Tompkins (47).......... Executive Vice President - Cement
Group
Eugene P. Martineau (57)........ Executive Vice President - Concrete
Products Group
James L. Persky (48)............ Executive Vice President - Finance
and Administration
Dennis M. Thies (48)............ Senior Vice President - Corporate
Development
Patrick S. Bullard (35)......... Vice President - General Counsel and
Secretary
Stephen R. Miley (49)........... Corporate Vice President - Sales
Thomas E. Daman (40)............ Treasurer
Allan B. Korsakov (54).......... Corporate Controller
Mr. Comer was elected President and Chief Executive Officer effective
February 4, 1987.
Mr. Tompkins was elected Executive Vice President - Cement Group effective
June 16, 1989.
Mr. Martineau was elected Executive Vice President - Concrete Products
Group effective April 16, 1992. From April 1990 to April 1992, Mr. Martineau was
Division Vice President and General Manager of Florida Mining & Materials
Concrete Corp., a division of the Company.
Mr. Persky was elected Executive Vice President - Finance and
Administration effective May 19, 1994. From July 16, 1989 to May 19, 1994, Mr.
Persky was Senior Vice President - Finance of the Company.
Mr. Thies was elected Senior Vice President - Corporate Development in May
1995. From April 1992 to May 1995, Mr. Thies was Senior Vice President -
Environmental Systems. From June 16, 1989 to April 1992, Mr. Thies was Senior
Vice President - Corporate Development of the Company.
Mr. Bullard was elected Vice President - General Counsel and Secretary
effective May 16, 1996. From August 21, 1995 to May 1996, Mr. Bullard was Vice
President and General Counsel. From May 1993 to that time Mr. Bullard was
associated with the law firm of Bracewell & Patterson, L.L.P., Houston, Texas,
and from September 1989 until May 1993 he was associated with the law firm of
Weil, Gotshal & Manges.
Mr. Miley was elected Corporate Vice President - Sales in September 1994.
From September 1990 to September 1994, Mr. Miley was Corporate Vice President -
Sales & Marketing of the Company.
Mr. Daman was elected Treasurer in February 1996. For more than five years
prior to that time he served as Assistant Treasurer of the Company.
Mr. Korsakov was elected Corporate Controller in June 1986.
DATE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
In order for shareholder proposals to be included in the Company's Proxy
Statement and proxy relating to the Company's 1998 Annual Meeting of
Shareholders, such proposals must be received by the Company at its principal
executive offices not later than December 11, 1997.
EXPENSES OF SOLICITATION
The cost of soliciting proxies will be borne by the Company. Solicitations
of proxies are being made by the Company through the mail, and may also be made
in person or by telephone. Employees and directors of the Company may be
utilized in connection with such solicitation. In addition, the Company has
retained Georgeson & Company, Inc. to assist in soliciting proxies for a fee of
$7,500 plus out-of-pocket expenses. The Company will also request brokers and
nominees to forward soliciting materials to the beneficial owners of the Capital
Stock held of record by such persons and will reimburse them for their
reasonable forwarding expenses.
18
<PAGE>
OTHER MATTERS
The Board of Directors does not intend to bring any other matters before
the Annual Meeting and has not been informed that any other matters are to be
presented by others. In the event any other matters properly come before the
Annual Meeting, the persons named in the enclosed form of proxy will vote all
proxies in accordance with their best judgment on such matters.
Whether or not you are planning to attend the Annual Meeting, you are
urged to complete, date and sign the enclosed proxy and return it in the
enclosed stamped envelope at your earliest convenience.
By Order of the Board of Directors
Patrick S. Bullard
VICE PRESIDENT - GENERAL COUNSEL
AND SECRETARY
19
<PAGE>
SOUTHDOWN, INC.
ANNUAL MEETING OF SHAREHOLDERS
TO BE HOLD THRUSDAY, MAY 15, 1997
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints W. J. Conway, V. H. Van
Horn III and Steven B. Wolitzer, and each of them, attorneys and agents, with
full power of substitution to vote as proxy all the shares of Common Stock and
Preferred Stock, $2.875 Cumulative Convertible Series D standing in the name of
the undersigned at the Annual Meeting of Shareholders of Southdown, Inc. (the
"Company") to be held at the Doubletree Hotel at Allen Center, 400 Dallas
Street, Houston, Texas at 8:30 A.M., Houston time, on Thursday, May 15, 1997,
and at any adjournment(s) thereof, in accordance with the instructions noted
below, and with discretionary authority with respect to such other matters, not
known or determined at the time of the solicitation of this proxy, as may
properly come before said meeting or any adjournment(s) thereof. Receipt of
notice of the meeting and Proxy Statement dated April 10, 1997 is hereby
acknowledged.
(PLEASE DATE AND SIGN OR REVERSE SIDE)
THIS PROXY IS SOLICIED BY THE BOARD OF DIRECTORS AND WILL BE VOTED IN
ACCORDANCE WITH THE SHAREHOLDER'S SPECIFICATIONS HEREON. IN THE ABSENCE OF SUCH
SPECIFICATIONS, THE PROXY WILL BE VOTED IN FAVOR OF EACH NOMINEE FOR DIRECTOR
AND FOR PROPOSALS 2,3,4 AND 5.
The undersigned hereby revokes any proxies heretofore given and directs said
attorneys to act or vote as follows:
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed (except as marked to the contrary)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
NOMINEES - CLARENCE C. COMER, ROBERT J. SLATER AND ROBERT G. POTTER
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.)
<PAGE>
2. PROPOSAL TO APPROVE THE BOARD OF DIRECTORS' AMENDMENTS OF THE 1991
NONQUALIFIED STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
3. PROPOSAL TO APPROVE FOR FEDERAL INCOME TAX PURPOSES THE COMPANY'S ANNUAL
INCENTIVE PLAN.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
4. PROPOSAL TO APPROVE THE COMPANY'S PHANTOM STOCK AND DEFERRED COMPENSATION
PLAN FOR NON-EMPLOYEE DIRECTORS.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
5. PROPOSAL TO APPROVE THE APPOINTMENT OF DELOITTED & TOUCHE LLP AS INDEPENDENT
AUDITORS OF THE BOOKS AND ACCOUNTS OF THE COMPANY FOR THE YEAR ENDING DECEMBER
31, 1997.
[ ] FOR
[ ] AGAINST
[ ] ABSTAIN
Dated _________________________________, 1997
_____________________________________________
_____________________________________________
Signature of Shareholder(s)*
* Please sign as name appears. Joint
owners each should sign. When signing as
attorney, trustee, administrator,
executor, etc., please indicate your
full title as such.
PLEASE DATE, SIGN, AND MAIL YOUR PROXY PROMPTLY. PLEASE DO NOT FOLD THIS PROXY.
