<PAGE> 1
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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 77002-4486
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 650-6200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- -------------------
Common Stock, par value $1.25 per share New York Stock Exchange, Inc.
Preferred Stock Purchase Rights New York Stock Exchange, Inc.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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 period 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
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
-----
As of January 31, 2000, the number of shares of common stock
outstanding was approximately 35.9 million. As of such date, the aggregate
market value of voting stock held by nonaffiliates, based upon the closing price
of these shares on the New York Stock Exchange, Inc. was approximately $1.8
billion.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's definitive annual proxy statement to be
filed within 120 days of the Registrant's fiscal year ended December 31, 1999
are incorporated by reference into Part III of this report.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I
Item 1. Business
General........................................................................................3
Company Operations
Cement Segment...............................................................................3
Aggregates Segment..........................................................................11
Concrete Products Segment...................................................................12
Environmental Matters.........................................................................14
Employees.....................................................................................18
Segment Information...........................................................................18
Item 2. Properties.......................................................................................18
Item 3. Legal Proceedings................................................................................19
Item 4. Submission of Matters to a Vote of Security Holders..............................................19
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters............................19
Item 6. Selected Financial Data..........................................................................20
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.........................................................................21
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.......................................31
Item 8. Financial Statements and Supplementary Data......................................................32
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..........................................................................66
PART III
Item 10. Directors and Executive Officers of the Registrant...............................................66
Item 11. Executive Compensation...........................................................................66
Item 12. Security Ownership of Certain Beneficial Owners and Management...................................66
Item 13. Certain Relationships and Related Transactions...................................................66
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................66
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS.
GENERAL
Southdown, Inc. was organized in Louisiana in 1930 and maintains its
principal executive offices at 1200 Smith Street, Suite 2400, Houston, Texas
77002-4486, telephone (713) 650-6200. The terms "Southdown" and the "Company,"
as used in this report, include subsidiaries of Southdown and also predecessor
corporations.
The Company operates in three business segments. Southdown is one of
the largest producers of cement in the U.S. The Company operates twelve portland
cement manufacturing plants located in Alabama, California, Colorado, Florida,
Georgia, Kentucky, Michigan, Ohio, Pennsylvania, Tennessee and Texas, plus an
extensive network of cement distribution terminals. The Company also mines,
processes and sells construction aggregates and specialty mineral products in
the eastern half of the U.S., in Florida and in California and installs highway
safety systems such as guardrails, traffic signals, highway signage and
lighting. In addition, the Company markets ready-mixed concrete products in two
of its largest cement markets, California and Florida.
COMPANY OPERATIONS
Information concerning the Company's net sales, operating profit,
assets employed and additional information attributable to each business segment
for each year in the three year period ended December 31, 1999 is included in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and in Note 4 of Notes to Consolidated Financial Statements, which
information is incorporated by reference.
On June 30, 1998, the Company concluded a merger transaction with
Medusa Corporation. The Company issued approximately 14.7 million shares of its
common stock for all of the outstanding common stock of Medusa. The tax-free
transaction was treated as a "pooling of interests" rather than a purchase of
one company by another. A pooling of interests accounts for a business
combination as the uniting of the ownership interests of companies by an
exchange of stock. All consolidated financial information presented prior to the
merger provides the combined results of operations, financial position and cash
flows of the Company and Medusa.
CEMENT SEGMENT
Cement is the basic binding agent for concrete, a primary construction
material. The Company's cement products are produced primarily from raw
materials found at or near the Company's plant locations. Depending upon the
process at individual plants, production of one ton of finished product consumes
approximately 1.7 tons of raw material. The principal raw material used in the
production of portland cement is calcium carbonate found in the form of
limestone. The Company's total estimated recoverable reserves of limestone are
approximately 973 million tons located on approximately 26,000 acres, most of
which are owned by the Company in fee. Other raw materials, used in
substantially smaller portions than limestone, include sand, iron ore or other
iron bearing materials, clay and gypsum. When
3
<PAGE> 4
not found in adequate amounts in the Company's quarries, these materials are
purchased from outside suppliers.
The manufacture of portland cement primarily involves the crushing,
grinding and blending of limestone and other raw materials into a chemically
proportioned mixture which is then processed in a rotary kiln at extremely high
temperatures to produce an intermediate product known as clinker. The clinker is
cooled and interground with a small amount of gypsum to produce finished cement.
As fuel is a major component in the cost of producing clinker, the
pyroprocessing systems of most modern cement plants incorporate some form of the
more fuel efficient "dry process" technology. In preheater/precalciner kilns,
the most modern application of this technology, the raw materials are initially
introduced into a preheater tower that utilizes hot exhaust gases from the kiln
to effect partial calcination of the raw materials before they enter the rotary
kiln. At present, eleven of the twelve plants operated by the Company,
representing approximately 96% of the Company's clinker capacity, utilize some
variation of the dry process manufacturing technology. In contrast, based on
1998 data, the most current information available, the Portland Cement
Association, the industry's primary trade organization, estimates that
approximately 74% of the domestic cement industry's capacity utilizes dry
process technology.
Demand for cement is derived from the demand for ready-mixed concrete
and concrete products which, in turn, is dependent on the demand for
construction. According to estimates of the Portland Cement Association, the
three construction sectors that are the major components of cement consumption
are (1) public works construction, (2) commercial and industrial construction,
and (3) residential construction. Public works construction, which includes
public buildings and infrastructure projects, comprised 52% of U.S. cement
consumption in 1998, the most recent period for which such data is available.
The U.S. Congress passed legislation in 1998 known as the Transportation and
Equity Act for the 21st Century. This legislation authorized $218 billion in
federal expenditures for highways, bridges and mass transit projects from 1998
through 2003, which represents a 44% increase over the previous six-year period,
which ended in 1997.
Commercial and industrial construction comprised 20% of U.S. cement
consumption in 1998, while residential construction comprised 23% and other
miscellaneous usage comprised 5%. Construction spending and cement consumption
has historically fluctuated widely. The construction sector, and hence demand
for cement and concrete, is affected by the general condition of the economy and
prevailing interest rates, and can exhibit substantial variations in activity
across the country as a result of the differing cycles and structures of
regional economies. The impact on the Company of regional construction cycles
may be mitigated to some degree by its geographic diversification. Because of
the high fixed-cost nature of the business, however, the overall profitability
of cement manufacturers, including the Company, is sensitive to variations in
sales volumes and shifts in the balance between supply and demand. The Company's
business is seasonal to the extent that construction activity tends to diminish
during the winter months in many areas of the country and during other periods
of inclement weather.
The Company's cement production facilities are located principally in
the eastern half of the U.S. and in certain key western and southwestern states.
These plants have a combined cement manufacturing capacity of approximately 11.7
million tons. All of the facilities are wholly owned except for the Kosmosdale,
Kentucky and Pittsburgh, Pennsylvania plants. These two plants are owned by
Kosmos Cement Company, a joint venture owned 75% by the Company and 25% by a
subsidiary of Dyckerhoff AG. The Company is the operator of all twelve plants,
including the two joint venture plants.
4
<PAGE> 5
The following table shows certain information regarding the Company's
cement plants at December 31, 1999 based on clinker capacity at December 31,
1999 converted to cement at each plant's product mix. All references to "tons"
in this table and throughout this document are to U.S. short tons (2,000
pounds).
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
ANNUAL ESTIMATED
NO. CLINKER CEMENT LIFE OF
OF MANUFACTURING CAPACITY LIMESTONE RESERVES
PLANT LOCATION KILNS PROCESS (IN 000 TONS) AT CURRENT CAPACITY
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Victorville, California 2 Preheater/precalciner 2,050 90+ years
Long dry
Charlevoix, Michigan 1 Preheater/precalciner 1,540 90+ years
Brooksville, Florida 2 Preheater 1,460 80+ years
Demopolis, Alabama 1 Preheater 990 100+ years
Kosmosdale, Kentucky (1) 1 Preheater 875 100 years
Clinchfield, Georgia 1 Preheater/precalciner 835 30+ years (2)
Knoxville, Tennessee 1 Preheater/precalciner 830 65+ years
Fairborn, Ohio 1 Preheater 750 30 years
Wampum, Pennsylvania 3 Long dry 750 70+ years
Odessa, Texas 2 Preheater 600 75 years
Long dry
Lyons, Colorado 1 Preheater/precalciner 575 20+ years
Pittsburgh, Pennsylvania (1) 1 Wet 408 (3)
-------------------------
11,663
====================================================================================================================
</TABLE>
(1) Owned by Kosmos Cement Company, a joint venture. The Company owns 75% of
the joint venture and operates the joint venture's plants, sales offices
and terminals.
(2) Contiguous property available with significant additional limestone
reserves.
(3) The Company has a long-term supply agreement with an independent third
party to provide limestone for this plant.
As a result of continued high uptime and demand, actual clinker
production was at or near rated kiln capacity during each of the last three
years ended 1999. During each of the past three years, the Company has also
purchased cement from others for resale. In 1999, 6% of the cement sold by the
Company was acquired from third parties compared with 5% in 1998 and 1997,
respectively.
During 1999, the Company sold approximately 11.9 million tons of cement
compared with 11.4 million tons in 1998 and 11.1 million tons in 1997. High
levels of construction activity in most regions of the country during the last
several years resulted in a more favorable balance in the supply and demand for
cement which, in turn, allowed sales prices to rise. During 1999, the industry
continued to benefit from demand growth and higher sales prices. As a
consequence of these improvements in market conditions, the Company's Cement
segment revenues and earnings have followed a pattern of continued growth for
the last several years.
5
<PAGE> 6
Continued strength in all three construction sectors in 1999 resulted
in the sixth consecutive year of record setting cement consumption in the U.S.
The Portland Cement Association has estimated that total U.S. cement plant
capacity utilization was 97% for 1998, the most recent data available. Even at
this high rate of capacity utilization, the cement industry was required to rely
on foreign cement imports to supplement domestic production. The Portland Cement
Association has estimated 1998 U.S. clinker production capacity at 86 million
tons (equivalent to approximately 90 million tons of cement production capacity)
while domestic cement consumption was estimated at approximately 114 million
tons. Several years of demand-supply relationships favorable to cement producers
have resulted in cement prices increasing to a level where the domestic cement
industry has undertaken the capital investment necessary to expand production
capability.
The Portland Cement Association reports that approximately 26 plant
modernizations and expansion projects, including six new cement plants, have
been announced or are underway in the United States. These projects, if
completed, could add approximately 22 million tons of new domestic cement
manufacturing capacity. For a variety of reasons, the Company does not
anticipate that all of the industry's announced expansions will actually be
constructed. Also, because of the long lead times associated with adding
additional capacity, any increased production capability is expected to be
gradual over the next several years. The Portland Cement Association has
predicted U.S. cement use will grow to 132 million tons by 2004, compared with
an estimated 118 million tons of cement consumption in 1999. Even if all
announced expansions are completed, a capacity deficit of approximately 21
million tons would still exist in 2004 if the PCA consumption projections are
valid. In addition, the Company does not know how much, if any, old, inefficient
cement production capacity may be retired during this period.
Business Strategy - To enhance profitability and return on investment,
the Company intends to continue to focus on its core business through internal
and external growth opportunities, improving productivity and enhancing the
Company's market position. The Company plans to continue to take advantage of
opportunities for internal growth by modernizing and expanding certain of its
existing cement plants through innovation, incorporation of latest generation
process equipment and operational improvements. The Company has announced or
undertaken several capital projects to enhance the productivity and
incrementally expand the capacity of existing cement manufacturing facilities.
The following table compares the Company's annual cement capacity at the end of
1996, prior to the undertaking of these various expansion projects, with the end
of 1999 and pro forma at the end of announced expansions in 2001, assuming
completion of all Board approved and in-progress projects. Comparisons are based
on annual clinker production capacity converted to annual cement production
capacity at each plant's product mix.
6
<PAGE> 7
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
ANNUAL CEMENT PLANNED
PRODUCTION CAPACITY EXPANSIONS
---------------------------------------------------------------------------------------
(IN THOUSANDS OF TONS)
---------------------------------------------------------------------------------------
PLANT LOCATION 12/31/96 12/31/99 PRO FORMA 2001
---------------------------------------------------------------------------------------
<S> <C> <C> <C>
Victorville, CA 1,666 2,050 3,100
Charlevoix, MI 1,400 1,540 1,690
Kosmosdale, KY * 791 875 1,575
Brooksville, FL 1,304 1,460 1,460
Demopolis, AL 840 990 990
Wampum, PA 720 750 910
Clinchfield, GA 660 835 835
Knoxville, TN 729 830 830
Fairborn, OH 650 750 750
Odessa, TX 538 600 600
Lyons, CO 448 575 575
Pittsburgh, PA * 408 408 408
---------------------------------------------------------------------------------------
10,154 11,663 13,723
=======================================================================================
</TABLE>
- --------------
* Owned by Kosmos Cement Company, a joint venture. The Company owns 75% of
the joint venture and operates the joint venture's plants, sales offices
and terminals.
The Company will continue to evaluate other internal and external
opportunities to expand and improve its competitive position and increase
profitability. Further, in an effort to increase the demand for cement and
concrete, the Company has taken a leadership role in the industry's development
of new promotional programs to increase concrete's market share in certain
applications relative to other building products.
COMPETITION
Domestic Competition - On the basis of statistics published by the
Portland Cement Association, as of the end of 1998, the most recent period for
which such data is available, the Company believes that it ranks second in total
active cement manufacturing capacity among the 42 cement producers (including
joint ventures) in the U.S.
7
<PAGE> 8
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
U.S. CLINKER
CAPACITY PERCENT OF
RANK (000 TONS) U.S. INDUSTRY COMPANY NAME
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1 11,484 13.4% Holnam, Inc.
2 10,034 11.7 Southdown, Inc.
3 7,120 8.3 Lafarge Corporation
4 5,791 6.7 CBR-HCI Construction Materials Corporation
5 5,646 6.6 Ash Grove Cement Company
6 4,815 5.6 Blue Circle, Inc.
7 4,378 5.1 Essroc Corporation
8 4,287 5.0 Dyckerhoff AG
9 3,413 4.0 Texas Industries, Inc.
10 3,268 3.8 California Portland Cement Company
---------- ---------
60,236 70.2 Total Top Ten
25,649 29.8 Others
---------- ---------
85,885 100.0% Total Industry
====================================================================================================================
</TABLE>
- ---------------
Source: Portland Cement Association. Clinker capacity for joint venture
operations is based on each company's ownership interest. In general,
one ton of clinker will produce approximately 1.05 tons of cement,
although this conversion varies depending on the type of cement being
produced and other factors.
The cost of transporting cement is high relative to the value of the
product and, therefore, cement markets are generally regional. The market served
by a cement plant may be extended through the use of distribution terminals to
which cement is transferred in bulk and inventoried for sale to customers in
surrounding areas. The majority of the Company's cement sales are made directly
to users of portland and masonry cements, generally within a radius of
approximately 200 miles of each plant. However, access to water transport, which
is less expensive than truck or rail shipment, can effectively expand the market
area of a particular production facility.
The Company's Charlevoix, Michigan plant's location on one of the Great
Lakes and water-based terminals in Chicago, Illinois, Cleveland and Toledo,
Ohio, Detroit and Ferrysburg, Michigan, Manitowoc and Milwaukee, Wisconsin and
Owen Sound, Ontario enable about 90% of cement produced at the Charlevoix plant
to be shipped by water. The Company's Demopolis, Alabama plant serves
river-based terminals in Nashville and Chattanooga, Tennessee, Decatur, Alabama
and Freeport, Florida. The Kosmosdale, Kentucky plant serves river-based
terminals in Cincinnati, Ohio and Huntington, West Virginia. The Company's
Pittsburgh, Pennsylvania plant serves a river-based terminal in Charleston, West
Virginia. The Company also operates deep-water terminals in Riviera Beach and
Tampa, Florida, Wilmington, North Carolina and Brunswick, Georgia. The balance
of the Company's distribution terminals is served by rail.
The following table presents information regarding the market area
served by each of the Company's plants and the Company's estimate of the number
of major producers and import facilities in competition with the Company. The
column entitled "Principal Market Area Served" includes markets served by the
Company's network of cement distribution terminals.
8
<PAGE> 9
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
PLANT LOCATION PRINCIPAL MARKET AREA SERVED NUMBER OF MAJOR COMPETITORS
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Victorville, California Southern California, Arizona, southern Six cement producers and four deepwater
Nevada and Utah import facilities
Charlevoix, Michigan Eastern Wisconsin, northeastern Illinois, Nine cement producers
Michigan, northern Ohio and southwestern
Ontario
Kosmosdale, Kentucky Kentucky, West Virginia and portions of Eight cement producers
Ohio and Indiana
Brooksville, Florida Florida Four cement producers and eleven
deepwater import facilities
Demopolis, Alabama Primarily Alabama, Georgia, Mississippi Five cement producers and one deepwater
and Tennessee import facility
Nine cement producers
Wampum, Pennsylvania Western Pennsylvania and northern Ohio
Clinchfield, Georgia Georgia Seven cement producers and one import
facility
Knoxville, Tennessee Eastern Tennessee, North Carolina, and Nine cement producers and one deepwater
portions of Kentucky, Virginia, and South import terminal
Carolina
Central and southern Ohio, eastern and Eight cement producers
Fairborn, Ohio southern Indiana
Odessa, Texas West Texas and Texas Panhandle, eastern Eleven cement producers
New Mexico, western Oklahoma, southeastern
Colorado and southwestern Kansas
Lyons, Colorado Colorado and southeastern Wyoming Three cement producers
Pittsburgh, Pennsylvania Western Pennsylvania and portions of West Four cement producers
Virginia and Ohio
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
Cement is a homogeneous commodity that is manufactured to meet
standardized technical specifications and is marketed primarily in bulk
quantities without special packaging or labeling. The Company's bagged cement
products have historically represented approximately 4 to 5% of the Company's
total sales volume. Although previously marketed under regional brand names,
bagged cement products are also marketed under the "Southdown" label. The
Company also manufactures limited amounts of premium priced, specialty cement
products. Because of the commodity nature of the product, competition among
suppliers of cement is based primarily on price, with consistency of quality and
service to customers being of lesser significance. The overall demand for cement
is relatively price inelastic, however, since cement represents only a small
portion of total construction costs and cement has few substitutes in many
applications.
The primary purchasers of cement in each of the Company's regional
markets are ready-mixed concrete companies. Except with respect to certain major
construction projects, it is not common in the industry to enter into long-term
sales contracts. From time-to-time, the Company has entered into annual sales
contracts with other cement manufacturers or distributors, but no one customer
represents 10% or
9
<PAGE> 10
more of the Company's consolidated revenues. Because long-term contracts
generally comprise only a small portion of total sales, the Company does not
believe that the concept of "backlog" is relevant for an understanding of the
cement industry.
As a result of the Company's vertical integration, approximately 36% in
1999, 36% in 1998 and 38% in 1997, of the cement sold by the Company's
Brooksville, Florida plant was sold to the Company's Florida ready-mixed
concrete products operations. Approximately 16%, 17% and 19%, respectively, of
the cement sold by the Company's California plant in 1999, 1998 and 1997 was
sold to the Company's California ready-mixed concrete operations. Other
principal customers are manufacturers of concrete products such as blocks, roof
tiles, pipes and prefabricated building components. Sales are also made to
building materials dealers, other cement manufacturers, highway and other public
works project construction contractors and, in some regions, oil well cementing
companies.
The Company's sales efforts are concentrated in its 13 sales offices.
In addition, the Company utilizes a network of cement distribution terminals,
which serves to broaden the Company's marketing area. These cement distribution
terminals and sales offices are located as follows:
<TABLE>
<CAPTION>
CEMENT DISTRIBUTION TERMINALS
- ------------------------------------------------------------------------------------------------------------------------
STATE CITY STATE CITY STATE CITY
- ----------------- --------------- -------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Alabama Birmingham Georgia Atlanta Ohio Cincinnati (1)
Alabama Decatur Georgia Bainbridge Ohio Cleveland
Alabama Mobile Georgia Brunswick Ohio Columbus
Alabama Montgomery Georgia Buford Ohio Toledo
Arizona Phoenix Georgia Forest Park Tennessee Chattanooga
California La Mirada Georgia Rockmart Tennessee Gray Station
California Sacramento (2) Illinois Chicago Tennessee Kingsport
Colorado Florence Indiana Mt. Vernon (1)(2) Tennessee Nashville
Florida Freeport Indiana Indianapolis (1) Texas Amarillo
Florida Jacksonville Kentucky Lexington (1) West Virginia Charleston (1)
Florida Hallendale Michigan Detroit West Virginia Huntington (1)
Florida Riviera Beach Michigan Ferrysburg Wisconsin Green Bay
Florida Pensacola North Carolina Castle Hayne Wisconsin Manitowoc
Florida Tallahassee North Carolina Statesville Wisconsin Milwaukee
Florida Tampa North Carolina Wilmington Ontario, Canada Owen Sound
</TABLE>
<TABLE>
<CAPTION>
CEMENT SALES OFFICES
- --------------------------------------------------------------------------------------------------------------------
STATE CITY STATE CITY
- -------------------------- ------------------------ ------------------------ ------------------------
<S> <C> <C> <C>
Alabama Birmingham Michigan Detroit
California Brea Ohio Cleveland
Colorado Denver Ohio Fairborn
Florida Brooksville Pennsylvania Pittsburgh (1)
Georgia Clinchfield Tennessee Knoxville
Kentucky Kosmosdale (1) Texas Odessa
Wisconsin Milwaukee
</TABLE>
- --------------
(1) Owned by Kosmos Cement Company, a joint venture. The Company operates
the joint venture's plants, sales offices and terminals.
(2) Under construction with scheduled opening in 2000.
10
<PAGE> 11
Import Competition - In addition to competition from the rest of the
domestic cement industry, Southdown faces competition from the importation of
foreign cement. U.S. imports of foreign cement began to increase in the
mid-1990's as the consumption of cement in the U.S. began to increase beyond the
domestic cement industry's production capacity. The Portland Cement Association
has estimated that imports represented approximately 31% of cement used in the
U.S. during 1999 as compared with approximately 23% in 1998 and 18% in 1997.
During the 1980's there was a surge of unfairly priced cement and
clinker imports into the U.S. In response, U.S. industry participants, including
the Company, filed antidumping petitions against imports from Mexico, Japan and
Venezuela. After investigations into the matter, the International Trade
Commission and the Department of Commerce decided in favor of the petitioners
and issued an antidumping order against Mexican cement and clinker in 1990 and
against Japanese cement and clinker in 1991 and entered into a suspension
agreement against Venezuela cement and clinker in 1992.
As a result of legislation passed by the U.S. Congress in 1994,
Commerce and the ITC began conducting "sunset" reviews in 1999 of the
antidumping orders and suspension agreements to determine whether they should be
revoked or remain in effect for another five years. In October 1999, the Company
decided to withdraw its support from the committees that are pursing the
continuation of antidumping duties or suspension agreement against Mexico, Japan
and Venezuela. This decision recognizes the current robust financial health of
the U.S. cement industry and the fact that imported cement over the past several
years has played a largely supplemental role in the market. Still, changes in
competitive pressure from imported foreign cement into the U.S. could have a
negative impact on Southdown's results of operations. If the present conditions
change, Southdown would not hesitate to reinstate proceedings seeking relief
from unfair trade practices.
AGGREGATES SEGMENT
The Aggregates segment includes mining, processing, packaging and
selling construction and specialty aggregates and also fabricating and
installing highway safety systems. Several aggregates acquisitions by Medusa in
1997 and early 1998, the merger of Medusa and Southdown in mid-1998 and the
acquisition of an aggregates quarry in Florida in 1999 greatly expanded the
Company's market presence in this business.
Construction Aggregates - These operations mine, crush, screen, wash
and sell various sizes of aggregates to the construction industry, primarily for
use in the manufacture of asphalt and concrete, as well as in such construction
applications as road base, drainage blankets, erosion control and other
applications. The Company estimates its annual capacity at about 12 million
tons. Construction aggregates are marketed as commodities and as such pricing is
the principal method of competition. Most aggregates are sold within a 35-mile
radius of the plant and are shipped to the customer by truck.
Specialty aggregates - Specialty aggregates operations include two
types of mineral products: (1) industrial limestone products and (2) lawn and
garden products. For industrial limestone products, white, high calcium
limestone is sold for use in the manufacture of white cement, as a calcium
supplement for animal feed, to neutralize acidic soil and water conditions and
to scrub sulfur emissions in coal burning electrical generating plants.
Limestone is also pulverized to a fine powder and used to produce joint and
caulking compounds, carpet backing, vinyl floor tile, paints, plastics, PVC
pipe, asphalt shingles and other roofing products.
11
<PAGE> 12
The Company's lawn and garden operations mine, process, package and
distribute numerous products to both consumer and commercial markets throughout
the eastern half of the U.S. Lawn and garden products, which have a peak selling
season in the spring of each year, are marketed under both the Southdown(R) and
Yardright(R) brand names at numerous retail garden centers and home improvement
outlets. Lawn and garden products marketed by the Company include pelleted
limestone, pelleted gypsum, white marble chips, natural colored landscaping
stone, play sands, packaged concrete and hydrated lime.
Aggregates Reserves - At current production levels, 95% of the
Company's construction aggregates reserves will last from at least 10 years to
over 50 years and almost 100% of the Company's various other mineral reserves
will last from 30 years to over 100 years. The following table indicates the
location of the Company's construction and specialty aggregates operations:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
LOCATION LOCATION
----------------------------------------------------------------------------------------------
Coarse and Fine Construction Aggregates Specialty Aggregates (Minerals)
--------------------------------------- -------------------------------
<S> <C>
Azusa, California Lee, Massachusetts
Moorpark, California Sparta, New Jersey
Ingles, Florida Thomasville, Pennsylvania
Bardstown, Kentucky Paradise, Pennsylvania
Bowling Green, Kentucky Castlewood, Virginia
Butler, Kentucky
Hartford, Kentucky
Columbia, Missouri
Sparta, New Jersey
West Pittsburg, Pennsylvania
Castlewood, Virginia
----------------------------------------------------------------------------------------------
</TABLE>
Competition in the Aggregates segment includes numerous small and
several large aggregates quarry operators. Competition for sales volume is
strong and is based primarily on price with consistency of quality and service
to customers being of importance, but somewhat lesser significance. The
Company's major competitors are Global Stone, Georgia Marble, J.M. Huber and
English China Clay in specialty aggregates, and Hanson Boone Quarries, Vulcan
Materials Company, Martin Marietta Materials, Inc., Sterling Ventures, and East
Fairfield Coal in the construction aggregates market.
Highway Safety Construction - Through the James H. Drew Corporation, a
wholly-owned subsidiary of the Company based in Indianapolis, Indiana, the
Aggregates segment also operates generally in the mid-western states installing
highway safety systems such as guardrails, traffic signals, signs, and highway
lighting. Although Drew functions primarily as a subcontractor to paving and
bridge contractors, approximately 30% of its work is bid directly to state
highway departments and municipalities.
CONCRETE PRODUCTS SEGMENT
Ready-mixed concrete is a versatile, low-cost building material used in
almost all construction applications. Concrete is produced in batch plants by
mixing stone, sand, water and chemical admixtures
12
<PAGE> 13
with cement, the basic binding agent, and is transported to the customer's job
site in mixer trucks. The Company has vertically integrated its operations in
the regional vicinity of two of its largest cement plants, which are located in
Florida and in California. During the last three years, the Florida concrete
products operations have consumed approximately 36% to 38% of the cement sold by
the Company's Florida cement plant, while the California concrete products
operations have purchased between 16% and 19% of the cement sold by the
Company's California cement plant. The Company believes that this vertical
integration into ready-mixed concrete and concrete products operations enhances
its overall competitive position in these markets, where most cement producers
are vertically integrated.
The Company, doing business in both California and in Florida as
Southdown Concrete Products, Inc., is a producer of ready-mixed concrete in each
area. The California operation sells primarily to commercial and industrial
builders, as well as contractors on public construction projects. Southdown
Concrete Products in Florida is a major producer and supplier of ready-mixed
concrete and concrete masonry. Florida sales include a high percentage of sales
to residential builders.
In the third quarter of 1999, Southdown acquired SMI Holdings, Inc.,
which operated eight ready-mixed concrete batch plants and four concrete block
and resale operations. This acquisition increased the concrete capacity of the
Florida Concrete operations by approximately 10%.
The Company's Concrete Products segment operates a combined total of
approximately 616 ready-mixed concrete trucks, approximately 66 batch plants and
12 concrete block plants. The Company's estimate of its combined annual
practical capacity as of December 31, 1999 is in excess of 4.2 million cubic
yards. The Company's concrete products operations in California and Florida each
purchase most of their cement from the Company's cement plants in California and
Florida, respectively. The California concrete products operations extract their
sand and gravel primarily from the two California aggregate quarries. For its
Florida ready-mixed concrete operations, the Company purchases a portion of its
sand and gravel requirements under a long-term aggregates supply contract and
extracts the remainder from its recently acquired Florida aggregates quarry.
Alternative supplies of cement and aggregates are readily available from other
sources.
MARKET CONDITIONS
The demand for concrete products is derived from the demand for
construction. The construction sector is subject to the vagaries of weather
conditions, the availability of financing at reasonable interest rates and
cyclical fluctuations in regional economies. The burden of relatively high fixed
costs results in a disproportionate impact on profits from only minor variations
in sales volume. Seasonal factors are not as significant in the market areas
served by the Company's concrete products businesses as in some markets, but
construction activity tends to diminish during prolonged periods of inclement
weather. In 1999, Company sales volumes were 3.8 million cubic yards of
ready-mixed concrete. Ready-mixed concrete sales volumes totaled approximately
3.6 million cubic yards and 3.7 million cubic yards in 1998 and 1997,
respectively.
Competition within each market includes numerous small and several
large ready-mixed concrete operators. Competition for sales volume is strong,
and is based primarily on price, with consistency of quality and service to
customers being of lesser significance. In Florida, the Company's principal
competitors include Tarmac Florida, Inc., Rinker Materials Corp. and Florida
Rock Industries, Inc. In
13
<PAGE> 14
California, the Company's principal competitors include United Ready-Mixed
Concrete Co. Inc., A&A Ready-Mixed Concrete, Inc., Robertson's Ready Mix, Inc.
and Catalina Pacific Concrete, Inc.
ENVIRONMENTAL MATTERS
The Company is subject to a wide range of federal, state and local
laws, regulations and ordinances dealing with the protection of human health and
the environment. These laws regulate water discharges, noise, air emissions
including dust, as well as the handling, use and disposal of hazardous and
non-hazardous waste materials. These laws also create a shared liability by
responsible parties for the cost of cleaning up or correcting releases to the
environment of designated hazardous substances. The Company, therefore, may have
to remove or mitigate the environmental effects of the disposal or release of
certain substances at the Company's various operating facilities or elsewhere.
The Company or its predecessors have conducted industrial operations at
the Company's manufacturing facilities for many years. As was common in the
industry, the Company in the past disposed of various materials used in or
generated by its cement manufacturing, concrete products and aggregates
operations in onsite and offsite facilities. Today, some of these materials may
be classified as hazardous substances. In addition, revisions to air quality
standards may result in increased capital and operational expenses for a broad
range of industrial sectors, including portland cement manufacturing.
Several of the Company's previously and currently owned facilities have
become the subject of various local, state or federal environmental proceedings
and inquiries. While some of these matters have been settled, others are in
their preliminary stages and may not be resolved for years. The information
developed to date on these matters is not complete. Based on what it knows
currently, however, the Company does not believe it will be required to spend
significantly more on these matters than the amounts already recorded in the
Company's financial statements. However, until all (1) environmental studies and
investigations, (2) remediation work, (3) negotiations with other parties that
may be responsible, or (4) litigation against other potential sources of
recovery have been completed, it is impossible for the Company to determine the
ultimate cost that it might incur to resolve these environmental matters.
Cement Kiln Dust - Cement manufacturing plants, depending on their
process design, raw materials characteristics, product specifications and other
factors, may generate a low toxicity by-product known as cement kiln dust or
CKD. Most manufacturing plants in the industry typically disposed of CKD in and
around their plant sites since the inception of cement manufacturing operations.
If CKD comes into contact with water, liquid that leaches out may have an
alkalinity level high enough to be classified as hazardous waste, if discarded.
CKD in contact with water may also leach out trace amounts of certain hazardous
metals if they are present. CKD is currently not regulated as a hazardous waste,
but the U.S. Environmental Protection Agency decided in 1995 that some further
regulation of CKD was necessary. At the same time, the U.S. EPA stated that it
(1) found no evidence of risks associated with the use of cement products and
(2) believes most secondary uses of CKD do not present significant risks to
people or the environment. The U.S. EPA began a rulemaking process in order to
develop specially tailored CKD management standards. On August 20, 1999, U.S.
EPA published its proposed rule addressing CKD management. If finalized, these
CKD standards may require the cement industry to adopt more stringent management
and record-keeping practices for this material.
Southdown has been investigating potential contamination from nine
separate CKD piles at its cement plant in Michigan. In 1997 and 1998, the
Company accrued $5.2 million related to various non-
14
<PAGE> 15
capital costs associated with these CKD piles. A new on-site CKD landfill has
been built, which is expected to remedy the problems with three existing CKD
piles. This new landfill is expected to be large enough for the disposal of CKD
generated for the next 30 years. A remediation proposal for the remaining
unresolved six CKD piles was submitted to the Michigan Department of
Environmental Quality on September 1, 1999. On December 1, 1999, that department
initially denied approval of the remediation proposal, but has proposed to
extend the deadline for further consideration of that proposal to March 1, 2000.
Management believes, based on current information, that the reserves previously
accrued on the books of Southdown are adequate to cover the estimated cost of
remediation and penalty payments, if any. However, it is possible that the
ultimate cost to resolve these issues will be greater than current estimates.
The California Regional Water Quality Control Board required Southdown
to investigate the status of two CKD disposal sites at its Victorville,
California cement plant. The initial phase of the investigation showed no
harmful impacts to groundwater at one site at Southdown's river plant, although
Southdown is continuing to monitor the groundwater at this location. Southdown
has also investigated the other site, which is located at the plant's quarry,
and has determined that groundwater there has not been impacted. Southdown has
recommended closure of this CKD disposal site and a final closure plan has been
submitted and is awaiting approval by the California authorities.
Discharges of pollutants have been alleged from two CKD sites in the
vicinity of the Company's Ohio cement plant. For one of the Ohio sites, the
Company has previously recorded remediation charges totaling approximately $13
million, which are believed to be adequate. The Company has submitted a final
corrective action plan to the Ohio EPA for this site and is awaiting agency
approval. The Company is involved in a lawsuit with a private party over the
other Ohio site, but the Company believes it has no liability in the matter
since the Company did not deposit CKD on the property and no longer owns the
property.
Approximately 40 CKD disposal sites are located on land owned by the
Company. Except as otherwise noted, the Company has not had reason to conduct
meaningful investigation at any of its other CKD disposal sites.
Air Quality Issues - Regulations issued under the Clean Air Act
Amendments of 1990 may result in increased capital and operational expenses in
the future for a broad range of industrial sectors, including portland cement
manufacturing. Southdown does not know the precise amount of these costs but,
because of the age, condition and design of its plants, management does not
believe Southdown would be at a disadvantage as a result of these regulations
with respect to its competitors. These developments are significant, however,
and the air quality issues are still evolving. Some of the more significant
regulatory developments pertaining to air quality issues are as follows:
o In July 1997, the U.S. EPA promulgated revisions to two National
Ambient Air Quality Standards under the Clean Air Act - particulate
matter and photochemical oxidants (ozone). There will be no immediate
impact from these rules on Southdown's operations because a federal
appeals court in May 1999 sent the matter back to the U.S. EPA.
Nevertheless, because of the nature of Southdown's operations, the
proposed addition of a particulate matter standard that would regulate
particles 2.5 microns or less in diameter and the more stringent ozone
standard would be of potential concern.
15
<PAGE> 16
o In October 1998, the U.S. EPA issued regulations requiring 22 states
and the District of Columbia to adopt new measures by September 1999 to
reduce emissions of various nitrogen oxides by specific percentages.
While the states are free to adopt whatever measures state officials
believe will meet the targets, cement kilns were specifically mentioned
in the U.S. EPA rule as potential sources for further nitrogen oxides
emissions reductions. While the September 1999 submittal date has been
postponed pending resolution of legal challenges, if the courts reject
the challenges, the cement industry could be obligated to make
substantial capital expenditures in order to meet these additional
emissions controls.
o In June 1999, the U.S. EPA issued air toxics standards for portland
cement plants that apply to all companies with cement manufacturing
facilities in the United States. Southdown is in the process of
evaluating the impact of these air toxics standards.
o Global warming and the international accord to move toward greenhouse
gas stabilization or reduction are also issues of potential
significance to Southdown. The consequences of greenhouse gas reduction
measures for cement producers are potentially significant because
carbon dioxide is generated from combustion of fuels and from the
calcination of limestone to make cement clinker. Any imposition of raw
material or production limitations or fuel-use or carbon taxes could
have a significant impact on the cement manufacturing industry. It will
not be possible to determine the impact on Southdown until governmental
requirements are defined and/or Southdown can determine whether
emission offsets and/or credits are obtainable, and whether alternative
cementitious products or alternative fuels can be substituted.
During 1997 and 1998, Southdown's Wampum, Pennsylvania cement plant
received five Notices of Violation from the U.S. EPA alleging certain air
emission violations. The Commonwealth of Pennsylvania, the U.S. Department of
Justice and Southdown finalized a consent decree in December 1999, which
resolves the violations alleged in the Notices of Violation. The consent decree
contains certain penalty payments, which have been paid, as well as future
compliance obligations.
Waste-Derived Liquid Fuels - The Company operates two cement plants
(Wampum, Pennsylvania and Demopolis, Alabama) that previously used waste-derived
liquid fuels as a supplemental fuel source and have not completed closure.
The use of waste-derived liquid fuels is subject to emission limits and other
requirements under the Resource Conservation and Recovery Act and regulations
issued under that act.
Following the merger with Medusa Corporation, the Company thoroughly
evaluated the use of waste-derived liquid fuel at these two plants and decided
to stop burning waste-derived liquid fuel at both plants in early 1999.
Environmental regulations require plants that have used waste-derived liquid
fuel to go through "closure procedures" once the use of these fuels ceases,
which the Company completed at both plants by the end of the second quarter of
1999. At the Demopolis plant, the regulatory agency has approved the closure
certification submitted by the Company. The Company is awaiting agency action on
the closure certification for the Wampum plant.
In April 1998, the Company entered into a Consent Order with the U.S.
EPA that requires the Company to submit a sampling and analysis plan for six
areas that the U.S. EPA has identified as "solid waste management units" at the
Kosmosdale cement plant. The Consent Order itself does not (1) require
remediation, (2) provide a mechanism for remediation, or (3) require any payment
by the Company to the U.S. EPA. The Company has submitted the sampling and
analysis plan and is awaiting agency approval.
16
<PAGE> 17
Should results from the sampling and analysis indicate a release from the units
has occurred at levels of concern, the Company would be required to take
corrective action. At this time, the Company does not know the cost, if any, to
resolve this matter. In a similar situation, the Company received notice in
February 1999 that no further action was required at the 25 solid waste
management units at the Company's Knoxville, Tennessee cement plant.
Concrete Products - As with the cement operations, the concrete
products operations are presently the subject of extensive local, state or
federal environmental laws and regulations.
Aggregates Acquisitions - During 1997, Medusa assumed certain
environmental liabilities related to three aggregates acquisitions.
Environmental matters related to the acquired properties include (1)
environmental cleanup, (2) containment and compliance matters including waste
lime, coal ash and kiln brick issues, (3) wetland considerations, and (4)
underground and above ground storage tank removal. Although the Company believes
the reserve on its books is adequate to remedy these environmental problems, it
is impossible to know with certainty until all work is complete.
The Company, along with other entities with operations in the San
Gabriel basin in the vicinity of Azusa, California, has received notices of
potential responsibility and requests for information by the U.S. EPA. The
Company presently leases and operates a quarry in the vicinity of Azusa, which
the Company sold, together with a related landfill, to a subsidiary of
Browning-Ferris Industries, Inc. in 1987. Browning-Ferris is contractually
obligated to indemnify the Company for any environmental liability arising from
the Company's prior ownership of the land comprising its current aggregate and
ready-mixed plant and the landfill site. Browning-Ferris is also contractually
obligated to indemnify the Company for any environmental liability arising from
the Company's operation of the Azusa landfill prior to the sale of the property
to Browning-Ferris in 1987. The Company has formally requested that
Browning-Ferris indemnify and defend the Company with respect to these matters,
but is unable to quantify the amount of indemnification being sought.
Recurring Costs of Environmental Compliance - Management believes that
the Company's current procedures and practices for handling and managing
materials are generally consistent with industry standards and legal and
regulatory requirements and that the Company takes appropriate precautions to
protect employees and others from harmful exposure to hazardous materials.
However, because of the complexity of operations and legal and regulatory
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.
The Company's firm commitment to compliance with the exacting
requirements and varying interpretations of applicable laws and regulations
related to the protection of human health and the environment requires
substantial expenditures and significant amounts of management time and energy.
Although the Company does not maintain records that segregate such costs from
the other costs of ongoing operations, management believes recurring
environmental compliance costs are a material component of total costs. In
addition to current period expenses, the Company typically spends several
million dollars a year on capital projects related to environmental compliance.
Approximately $10 million of the budgeted 2000 capital expenditures is related
to compliance with environmental regulations.
17
<PAGE> 18
While the Company commits substantial resources to complying with the
laws and regulations concerning the protection of human health and the
environment, the Company considers this to be an integral part of its business.
As a consequence, management does not believe that environmental compliance
expenditures place the Company at a competitive disadvantage with respect to
other companies engaged in similar lines of business operating in the U.S.
However, because of the complexity and uncertainty of existing and future
environmental requirements, permit conditions, costs of new and existing
technology, potential remedial costs and insurance coverages, and/or
enforcement-related activities and costs, it is difficult for management to
estimate the ultimate level of Company expenditures related to environmental
matters. The Company's capital expenditures and operational expenses for
environmental matters have increased and are likely to increase in the future.
Regulatory changes, enforcement activities or other factors could alter
environmental compliance costs at any time. In addition, future changes in
regulatory requirements related to the protection of human health and the
environment may require the Company and others engaged in industrial operations
to modify various facilities and alter methods of operations at costs that may
be substantial. The Company cannot determine at this time whether capital
expenditures and other remedial action that the Company may be required to
undertake to comply with the changing environmental laws will materially affect
its capital expenditures or earnings. With respect to known environmental
contingencies, the Company has recorded provisions for estimated probable
liabilities and does not believe that the ultimate resolution of such matters
will have a material adverse effect on the Company's Consolidated Financial
Statements.
EMPLOYEES
As of December 31, 1999, the Company employed approximately 4,100
persons, including approximately 1,800 in the cement manufacturing operations,
1,300 in the concrete products operations, 800 in the aggregates operations and
the remainder in the corporate office. Approximately 33% of the employees are
represented by collective bargaining units, primarily the International
Brotherhood of Boilermakers. Collective bargaining agreements are in effect at
all the Company's cement plants, except for the non-union facility located in
Florida. Labor agreements expire at various dates between March 1, 2000 and May
1, 2004.
SEGMENT INFORMATION
Revenues and earnings before interest expense and income taxes
contributed by each of the Company's industry segments during the periods
indicated as well as identifiable assets, depreciation, depletion and
amortization and capital expenditures by segment are presented in Note 4 of
Notes to Consolidated Financial Statements, which is incorporated by reference.
ITEM 2. PROPERTIES.
The material appearing under Item 1 is incorporated hereunder by
reference, pursuant to Rule 12b-23.
18
<PAGE> 19
ITEM 3. LEGAL PROCEEDINGS.
In the ordinary course of business, the Company may from time-to-time
be a named defendant in lawsuits related to various matters including personal
injury, contractual indemnifications, environmental remediation, product
liability, employment matters and commercial disputes and litigation. Other than
those disclosed elsewhere in this document, based on the information developed
to date and advice of outside counsel, the Company is of the opinion that any
liability related to these lawsuits, individually or in the aggregate, if any,
will not result in losses that would materially affect the Company's
consolidated balance sheet as of December 31, 1999. However, the Company's
results of operations vary considerably with construction activity and other
factors. It is, therefore, at least reasonably possible that charges for
contingencies in the future, depending on when they occur and how large they are
relative to results of operations or cash flows for a particular period, may
have a material negative impact on the Company's results of operations or cash
flows for that period.
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 by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the quarter ended December 31, 1999.
PART II
ITEM 5: MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The Company's common stock trades on the New York Stock Exchange
(Symbol: SDW). The following table shows the high and low sales prices of the
stock for the indicated periods as reported by the NYSE.
<TABLE>
<CAPTION>
FISCAL YEAR 1999 HIGH LOW DIVIDEND
----------------------------------------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
First Quarter, ended March 1999 $ 59.25 $ 45.88 $ 0.15
Second Quarter, ended June 1999 69.94 53.63 0.15
Third Quarter, ended September 1999 65.88 48.56 0.15
Fourth Quarter, ended December 1999 58.00 45.38 0.15
</TABLE>
<TABLE>
<CAPTION>
FISCAL YEAR 1998 HIGH LOW DIVIDEND
----------------------------------------- ---------------- ---------------- -----------------
<S> <C> <C> <C>
First Quarter, ended March 1998 $ 72.50 $ 55.31 $ 0.10
Second Quarter, ended June 1998 74.00 63.06 0.10
Third Quarter, ended September 1998 73.75 42.25 0.10
Fourth Quarter, ended December 1998 61.06 36.44 0.15
</TABLE>
For information describing the Company's capital stock, rights plan and
change in control provisions, see Note 18 of Notes to Consolidated Financial
Statements.
On January 31, 2000, there were approximately 4,092 holders of record
of the Company's common stock. On January 31, 2000, the closing price of the
stock was $50.06.
19
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
-----------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ 1,271.8 $ 1,184.7 $ 1,095.2 $ 987.8 $ 889.4
========== ========== ========== ========== ==========
Acquisition charge (credit) (1) $ (1.5) $ 75.2 $ -- $ -- $ --
========== ========== ========== ========== ==========
Earnings from continuing operations $ 213.4 $ 125.0 $ 153.7 $ 125.5 $ 90.7
Loss from discontinued environmental services
operations, net of income taxes (1.0) (1.6) -- -- --
Extraordinary charge, net of income taxes (2) (9.2) -- -- (13.3) --
---------- ---------- ---------- ---------- ----------
Net earnings $ 203.2 $ 123.4 $ 153.7 $ 112.2 $ 90.7
========== ========== ========== ========== ==========
Basic earnings (loss) per share -
Earnings from continuing operations $ 5.68 $ 3.27 $ 4.10 $ 3.65 $ 2.58
Loss from discontinued environmental services
operations, net of income taxes (0.03) (0.04) -- -- --
Extraordinary charge, net of income taxes (2) (0.24) -- -- (0.41) --
---------- ---------- ---------- ---------- ----------
Net earnings $ 5.41 $ 3.23 $ 4.10 $ 3.24 $ 2.58
========== ========== ========== ========== ==========
Diluted earnings (loss) per share -
Earnings from continuing operations $ 5.63 $ 3.22 $ 3.94 $ 3.21 $ 2.37
Loss from discontinued environmental services
operations, net of income taxes (0.03) (0.04) -- -- --
Extraordinary charge, net of income taxes (2) (0.24) -- -- (0.33) --
---------- ---------- ---------- ---------- ----------
Net earnings $ 5.36 $ 3.18 $ 3.94 $ 2.88 $ 2.37
========== ========== ========== ========== ==========
Total assets $ 1,430.7 $ 1,400.4 $ 1,267.0 $ 1,150.2 $ 1,095.1
========== ========== ========== ========== ==========
Capital expenditures (3) $ 152.4 $ 116.4 $ 94.6 $ 78.8 $ 58.2
========== ========== ========== ========== ==========
Depreciation, depletion and amortization (4) $ 75.4 $ 71.9 $ 65.1 $ 58.5 $ 57.7
========== ========== ========== ========== ==========
Total debt $ 166.1 $ 167.9 $ 200.6 $ 169.7 $ 236.9
========== ========== ========== ========== ==========
Shareholders' equity $ 833.1 $ 804.2 $ 674.9 $ 593.3 $ 470.5
========== ========== ========== ========== ==========
Ratio of debt to total capitalization (5) 16.6% 17.3% 22.9% 22.2% 33.5%
========== ========== ========== ========== ==========
Cash dividends paid per share of
common stock $ 0.60 $ 0.45 $ 0.40 $ 0.40 $ --
========== ========== ========== ========== ==========
</TABLE>
- ------------------
(1) On June 30, 1998, the Company acquired Medusa Corporation in a merger
accounted for as a pooling of interests. (See Note 3 of Notes to
Consolidated Financial Statements.)
(2) Premium on early extinguishment of debt.
(3) Excluding acquisition expenditures of $69.4 million, $6 million, $30.2
million, $6.2 million and $12.6 million in 1999, 1998, 1997, 1996, and
1995, respectively.
(4) Includes amortization of debt issuance costs.
(5) Total capitalization is the sum of total debt and shareholders'
equity.
20
<PAGE> 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
RESULTS OF OPERATIONS
Southdown is one of the largest producers of cement in the U.S. The
Company operates twelve portland cement manufacturing plants located in Alabama,
southern California, Colorado, Florida, Georgia, Kentucky, Michigan, Ohio,
Pennsylvania, Tennessee and Texas, plus an extensive network of cement
distribution terminals. The Company also mines, processes and sells construction
aggregates and specialty mineral products in the eastern half of the U.S. and in
southern California. In addition, the Company markets ready-mixed concrete
products in two of its largest cement markets, southern California and Florida.
The discussion and analysis that follows reflects management's assessment of the
financial condition and results of operations of Southdown and subsidiary
companies and should be read in conjunction with the audited consolidated
financial statements.
1999 Compared With 1998 - Net earnings for 1999 were $203.2 million,
$5.36 per diluted share, compared with $123.4 million, $3.18 per diluted share.
Results for 1999 included a $9.2 million after-tax charge, $0.24 per diluted
share, reflecting prepayment costs incurred on the early retirement of $123.2
million of 10% Senior Subordinated Notes. The prior year included a $61.9
million, or $1.59 per diluted share, after-tax charge related to the Medusa
merger.
A 7% improvement in consolidated revenues primarily resulted from
higher sales volumes and to a lesser extent improved sales prices from all three
operating segments. The year-over-year improvement in earnings primarily
resulted from record cement segment operating earnings, which surpassed the
previous year by $21.8 million or 7%. An $8.4 million improvement in operating
results reported by the Aggregates segment, a 9% increase in Concrete Products
operating earnings, an 8% reduction in Corporate overhead and a 17% reduction in
interest expense also contributed significantly to the year-over-year
improvement.
1998 Compared With 1997 - Earnings from continuing operations for 1998
increased 22% to $186.9 million, or $4.81 per diluted share, excluding a
one-time, after tax charge of $61.9 million, or $1.59 per share, related to the
merger with Medusa Corporation. The Company produced 1998 revenues and operating
earnings, before acquisition charges, of $1.18 billion and $301.6 million,
respectively, which represent increases of 8% and 21% compared with 1997
results. Net earnings for 1998 were $123.4 million, or $3.18 per share, on a
diluted basis. Net earnings included a loss of $1.6 million, $.04 per share,
from discontinued operations, net of income taxes. For 1997, the Company
reported net earnings of $153.7 million or $3.94 per share, diluted. Results for
1997 have been restated to include the results of Medusa's operations.
All three of the Company's operating segments showed improvements. In
absolute dollars, the Cement segment showed the largest improvement, rising
$43.7 million or 16% to $311 million in operating earnings for 1998 compared
with $267.3 million in 1997. Even excluding the $3.7 million gain realized in
1998 on the sale of certain Florida west coast facilities, the Concrete Products
segment showed the largest percentage improvement, increasing 77% to $16.8
million in operating earnings compared with $9.5 million for 1997. The
Aggregates segment rose 21% to $25 million in operating earnings for 1998
compared with $20.6 million for 1997.
21
<PAGE> 22
SEGMENT OPERATING EARNINGS
Cement - Cement segment earnings for the year ended December 31, 1999
were $332.8 million compared with $311.0 in the prior year. Cement segment sales
volumes rose 5%, and cement sales prices were slightly higher than the prior
year. Higher sales volumes reflected strong demand in most market areas. The
Company expects cement demand to remain strong in 2000, primarily because of
anticipated increases in federal and state infrastructure spending. Despite an
8% increase in clinker production in 1999, unit costs of sales were only
slightly lower than the prior year, primarily because of a 178,000 ton increase
in outside purchases of higher cost finished cement.
Operating earnings for the Cement segment in 1998 improved 16% over
1997 primarily because average selling prices increased 5%, or $3.42 per ton.
Average cement sales prices were up at all of the Company's plants in 1998. The
Company's largest plant, located in Victorville, California, led the cement
group in both pricing and demand growth as robust construction activity was
apparent in all of the plant's principal marketing regions of southern
California, Arizona and Nevada. Overall, demand was strong in the Company's
principal markets as total cement sales volumes increased approximately 3% for
the year. Average cement unit costs of sales in 1998 increased only $.18 per ton
as a result of a 447,000 ton or 5% increase in clinker production levels and
lower fuel and raw materials costs, partially offset by increased power and
maintenance costs.
The table below shows sales volumes and average unit sales prices,
costs and unit margins relating to cement plant operations for the past three
years. Manufacturing and other costs include manufacturing costs, freight to
terminals, purchased cement, selling expenses, plant general and administrative
costs and other plant overhead costs.
Cement Segment Operating Summary
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Tons of cement sold (thousands) 11,948 11,381 11,051
============ ============ ============
Weighted average per ton data:
Sales price (net of freight) $ 72.32 $ 72.04 $ 68.62
Manufacturing and other costs 44.84 45.08 44.86
------------ ------------ ------------
Margin $ 27.48 $ 26.96 $ 23.76
============ ============ ============
</TABLE>
Aggregates - Operating earnings from the Aggregates segment were $27.4
million, excluding a $6 million pre-tax gain realized on the sale of a North
Carolina quarry in 1999, compared with $25 million in 1998. Aggregates sales
volumes and prices both increased approximately 4% from last year, but were
partially offset by higher labor and maintenance costs.
Operating earnings for the Aggregates segment increased to $25 million
in 1998, up 21% compared with 1997. Revenues for the segment increased 24% for
1998 compared with 1997 as both sales volumes and average sales prices improved.
The Company sold approximately 1.2 million more tons of aggregates in 1998 than
in 1997. The improvement resulted primarily from higher sales volumes at both
the Mideast and the southern California construction aggregates operations.
Specialty minerals volumes increased because of the full year contribution of
two operations acquired in late 1997, but poor weather
22
<PAGE> 23
during the 1998 peak Spring gardening season adversely impacted lawn and garden
products sales volumes. Average sales prices increased 15% due, in part, to a
favorable mix of aggregate products sold during 1998 compared with 1997.
Year-over-year operating costs for the segment increased an average of $0.89 per
ton resulting in a net 9% margin improvement for 1998.
The table below shows sales volumes, average unit sales price and cost
data and unit margins relating to the Company's aggregates operations. Operating
and other costs include plant costs, delivery, selling and general and
administrative costs.
Aggregates Segment Operating Summary
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Tons of aggregates sold (thousands) 13,078 12,521 11,347
============ ============ ============
Weighted average per ton data:
Sales price $ 8.54 $ 8.18 $ 7.14
Operating and other costs (1) 6.61 6.37 5.48
------------ ------------ ------------
Margin $ 1.93 $ 1.81 $ 1.66
============ ============ ============
</TABLE>
- -------------
(1) Excludes $6 million gain on sale of North Carolina quarry in January 1999.
Concrete Products - Operating earnings for Concrete Products improved
to $22.4 million, 9% higher than the $20.5 million in 1998. Results for 1999
include $2.4 million in gains on asset sales compared with $5.7 million in gains
from such sales in 1998. Ready-mixed concrete sales prices improved 3% for the
year ended December 31, 1999. Both the Florida and California market areas
realized improved pricing. Ready-mixed concrete volumes increased by 7% because
of a strong Florida market and contributions from the recently acquired Sunshine
Materials operation.
Concrete Products earnings improved to $20.5 million in 1998 from the
$9.5 million earned in 1997. Results for 1998 include $5.7 million in gains on
asset sales compared with $2 million in gains from such sales in 1997. Concrete
Products revenues for 1998 were essentially unchanged from the prior year as a
5% improvement in average selling prices offset a weather-impacted decline in
sales volumes in the Florida operations. Both the southern California and
Florida operations benefited from a management reorganization in 1998, which has
reduced overhead costs and improved operating efficiencies.
The table below shows sales volumes and average unit sales prices, unit
costs and unit margins relating to the Company's ready-mixed concrete operations
for the past three years. Operating and other costs include plant costs,
delivery, selling and general and administrative costs.
23
<PAGE> 24
Concrete Products Segment Operating Summary
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cubic yards of ready-mixed concrete sold (thousands) 3,803 3,560 3,656
============ ============ ============
Weighted average per cubic yard data:
Sales price $ 59.28 $ 57.64 $ 54.99
Operating and other costs (1) 55.27 54.59 53.95
------------ ------------ ------------
Margin (2) $ 4.01 $ 3.05 $ 1.04
============ ============ ============
</TABLE>
- ---------------
(1) Excludes $2.4 million, $5.7 million and $2 million in gains from asset
sales for 1999, 1998 and 1997, respectively.
(2) Does not include concrete block and other related products, which totaled
$4.7 million, $4 million and $3.5 million of operating earnings for 1999,
1998 and 1997, respectively.
Corporate Overhead, Interest Income, Interest Expense and Income Tax
Expense - Corporate overhead consists primarily of costs attributable to the
Company's Houston, Texas office and miscellaneous other income and expense
items. These costs are generally not allocated to the business segments.
Corporate overhead was lower in 1999 because of (1) the closing of the Medusa
Cleveland corporate office in early 1999 and (2) higher capitalized salaries
related to the significant level of ongoing construction activity. These
reductions were partially offset by a $1 million charge related to the
termination of the Board of Directors' retirement plan and certain expenses
related to the Medusa operations, which could not be charged against the
acquisition reserve.
Corporate overhead expenses increased in 1998 by $6.7 million, or 14%
compared with 1997, primarily because of the transfer of various operating
segment administrative functions to the Corporate office and because of merger
related transition costs, higher consulting fees for special marketing and tax
studies and increased incentive compensation resulting from the Company's record
performance.
The decline in interest income in 1999 reflects lower levels of
investable cash during the latter part of 1999. Interest income in 1998 was $5.9
million compared with $3.3 million in 1997 as a result of the significantly
higher levels of invested cash maintained throughout 1998, particularly in the
fourth quarter.
Interest expense in 1999 decreased compared with the prior year period
primarily because of higher capitalized interest on construction projects and no
borrowings on the Medusa revolving credit facility in the current year. Interest
expense in 1998 increased compared with 1997 because of borrowings on the Medusa
revolving credit facility during the first half of 1998.
The 1999 effective tax rate, which includes state taxes, was favorably
impacted by additional benefits from a structural reorganization of the
Company's subsidiaries and higher than anticipated realization of an investment
tax credit in California. The 1998 effective tax rate was higher than the
federal statutory rate because a significant portion of the Medusa merger
related costs was non-deductible.
24
<PAGE> 25
LIQUIDITY AND CAPITAL RESOURCES
"Liquidity" relates to the ability of Southdown to pay its short-term
liabilities in the near future. "Capital Resources" relates to the ability of
Southdown to pay bills and raise capital in the long term in order to meet
Southdown's stated long-term goals and objectives.
The Company's business segments require a large amount of capital,
particularly the Cement segment, which has been expanding its production
capacity. When these capital requirements cannot be met internally, the Company
borrows under its outstanding credit facilities or sells debt or equity
securities. The Company has a $200 million revolving credit facility that
matures in June 2002 and a second $250 million revolving credit facility that
matures in December 2001. The $200 million revolving facility permits standby
letters of credit up to a maximum of $95 million in lieu of borrowings. At
December 31, 1999, there were $122 million in borrowings and $56.9 million in
letters of credit outstanding under the revolving credit facilities, leaving
$271.1 million of unused capacity. The Company is in compliance with the
financial ratios and other covenants in the revolving credit agreements.
During 1999, the Company amended its $200 million revolving credit
facility to (1) beneficially modify and/or delete certain financial covenants
and other provisions and (2) permit the Company to enter into the $250 million
revolving credit facility. The Company also offered to repurchase the 10% Senior
Subordinated Notes during the latter part of 1999. The Company repurchased
$123.2 million of the 10% Notes in December 1999 and paid the related prepayment
premium and other costs using borrowings under its revolving credit facilities
and outstanding cash balances.
CASH FLOWS
Cash provided by operating activities in 1999 was $258.8 million or
$46.2 million higher than 1998. The improvement resulted from a significant
increase in earnings from continuing operations partially offset by an increase
in cement and clinker inventory levels and the timing of payments on normal
trade and other obligations. In 1998, the Company generated $212.6 million in
cash provided by operating activities. This was only 10% less than the $237
million generated in 1997, despite the payment of approximately $59.3 million of
Medusa acquisition costs during 1998. At the end of 1998, the balance of cash
and cash equivalents was $143.8 million, an increase of almost $45 million from
the 1997 balance.
Net investing activities for 1999 of $191 million included $152.4
million of capital additions and the acquisition of a ready-mix and aggregates
operation in Florida and a cement terminal in Georgia for $69.4 million. These
expenditures were offset by $16.2 million in proceeds from asset sales and $14.8
million in net proceeds from short-term investments. Net cash used for investing
activities in 1998 was $119.4 million. Expenditures in 1998 included $116.4
million of additions to property, plant and equipment, offset by $13.9 million
in proceeds from miscellaneous asset sales and $7.9 million in proceeds from the
maturity of short-term investments. Investing activities in 1997 of $108.4
million included approximately $94.6 million of capital additions and the
acquisition of two specialty minerals operations for $30.2 million.
Borrowings on the Company's $200 million revolving credit facility
combined with outstanding cash balances were utilized in 1999 to repurchase
$123.2 million of the 10% Notes and pay the related prepayment premium and other
costs. Cash was also used in financing activities to repurchase $159 million of
common stock and pay dividends on common stock. Net cash used in financing
activities in 1998 was
25
<PAGE> 26
$48.3 million, primarily utilized to reduce long-term debt by $33.6 million and
pay dividends of $19.4 million on capital stock. In 1997, net cash used in
financing activities was $100.1 million, primarily related to the repurchase of
$59.9 million of common stock and the payment of $22.9 million of dividends on
capital stock.
CHANGES IN FINANCIAL CONDITION
The change in the financial condition of the Company between December
31, 1998 and December 31, 1999 reflected the utilization of short-term
investments plus internally generated cash flow to repurchase common stock and
the majority of the 10% Notes, to fund capital expenditures, business
acquisitions, working capital requirements and capital stock dividends. Accounts
and notes receivable increased reflecting the additional sales activity
occurring in late 1999 relative to the prior year. The increase in inventories
was a result of an increase in manufacturing performance relative to the
increased sales volume, which are expected to accommodate production outages and
to support higher sales levels in connection with the Company's major capacity
expansion projects at Kosmosdale and Victorville. The increase in goodwill
reflects the acquisition of ready-mixed concrete and aggregate operations in
Florida and a cement terminal in Georgia. Accounts payable and accrued
liabilities increased because of the timing of payments on normal trade and
other obligations. The decrease in deferred income taxes reflects expected
realization of certain acquired net operating loss carryforwards. Minority
interest in the consolidated joint venture increased primarily because of
contributions made by the minority partner to fund the expansion of the
Kosmosdale plant. The decrease in the long-term portion of postretirement
benefit obligation reflects the continuing amortization of the Company's
unrecognized prior service credit and unrecognized net gain related to the
benefit plan.
CAPITAL EXPENDITURES
The Company invested approximately $152 million in property, plant and
equipment in 1999 including approximately $133 million for the Cement
operations, $8 million for Concrete Products and $7 million for Aggregates. It
is projected that the Company's capital expenditures in 2000 will increase to
approximately $277 million, net of contributions from a joint venture partner.
Capital expenditures for the Cement segment will be approximately $249 million
in 2000 as a result of several capacity expansion projects in progress at the
Company's Victorville, California, Kosmosdale, Kentucky, and Charlevoix,
Michigan plants. Capital expenditures for the Concrete Products and Aggregates
segments in 2000 are budgeted primarily for projects relating to replacement and
modernization of equipment, quarry development and expansion, and for
environmental compliance projects. Budgeted 2000 capital expenditures include
approximately $10 million related to compliance with environmental regulations.
The Company believes its expected cash flow from operating activities will be
sufficient to fund these capital expenditures. If necessary, the Company has
sufficient borrowing capacity available under its revolving credit facilities to
supplement these expected future operating cash flows.
KNOWN EVENTS, TRENDS AND UNCERTAINTIES
ENVIRONMENTAL MATTERS
The Company is subject to a wide range of federal, state and local
laws, regulations and ordinances dealing with the protection of human health and
the environment. These laws regulate water discharges,
26
<PAGE> 27
noise, air emissions including dust, as well as the handling, use and disposal
of hazardous and non-hazardous waste materials. These laws also create a shared
liability by responsible parties for the cost of cleaning up or correcting
releases to the environment of designated hazardous substances. The Company,
therefore, may have to remove or mitigate the environmental effects of the
disposal or release of certain substances at the Company's various operating
facilities or elsewhere.
Several of the Company's previously and currently owned facilities have
become the subject of various local, state or federal environmental proceedings
and inquiries. While some of these matters have been settled, others are in
their preliminary stages and may not be resolved for years. The information
developed to date on these matters is not complete. Based on what it knows
currently, however, the Company does not believe it will be required to spend
significantly more on these matters than the amounts already recorded in the
Company's financial statements. However, until all (1) environmental studies and
investigations, (2) remediation work, (3) negotiations with other parties that
may be responsible, or (4) litigation against other potential sources of
recovery have been completed, it is impossible for the Company to determine the
ultimate cost that it might incur to resolve these environmental matters.
The Company or its predecessors have conducted industrial operations at
the Company's manufacturing facilities for many years. As was common in the
industry, the Company in the past disposed of various materials used in or
generated by its cement manufacturing, concrete products and aggregates
operations in onsite and offsite facilities. Today, some of these materials may
be classified as hazardous substances. In addition, revisions to air quality
standards may result in increased capital and operational expenses for a broad
range of industrial sectors, including portland cement manufacturing.
While the Company commits substantial resources to complying with the
laws and regulations concerning the protection of human health and the
environment, the Company considers this to be an integral part of its business.
As a consequence, management does not believe that environmental compliance
expenditures place the Company at a competitive disadvantage with respect to
other companies engaged in similar lines of business operating in the U.S.
However, because of the complexity and uncertainty of existing and future
environmental requirements, permit conditions, costs of new and existing
technology, potential remedial costs and insurance coverages, and/or
enforcement-related activities and costs, it is difficult for management to
estimate the ultimate level of Company expenditures related to environmental
matters. The Company's capital expenditures and operational expenses for
environmental matters have increased and are likely to increase in the future.
Regulatory changes, enforcement activities or other factors could alter
environmental compliance costs at any time. In addition, future changes in
regulatory requirements related to the protection of human health and the
environment may require the Company and others engaged in industrial operations
to modify various facilities and alter methods of operations at costs that may
be substantial. The Company cannot determine at this time whether capital
expenditures and other remedial action that the Company may be required to
undertake to comply with the changing environmental laws will materially affect
its capital expenditures or earnings. With respect to known environmental
contingencies, the Company has recorded provisions for estimated probable
liabilities and does not believe that the ultimate resolution of such matters
will have a material adverse effect on the Company's Consolidated Financial
Statements.
OTHER CONTINGENCIES
Import Competition - In addition to competition from the rest of the
domestic cement industry, Southdown faces competition from the importation of
foreign cement. U.S. imports of foreign cement
27
<PAGE> 28
began to increase in the mid-1990's as the consumption of cement in the U.S.
began to increase beyond the domestic cement industry's production capacity. The
Portland Cement Association has estimated that imports represented approximately
31% of cement used in the U.S. during 1999 as compared with approximately 23% in
1998 and 18% in 1997.
During the 1980's, there was a surge of unfairly priced cement and
clinker imports into the U.S. In response, U.S. industry participants, including
the Company, filed antidumping petitions against imports from Mexico, Japan and
Venezuela. After investigations into the matter, the International Trade
Commission and the Department of Commerce issued an antidumping order against
Mexican cement and clinker in 1990 and against Japanese cement and clinker in
1991 and entered into a suspension agreement against Venezuelan cement and
clinker in 1992.
As a result of legislation passed by the U.S. Congress in 1994,
Commerce and the ITC began conducting "sunset" reviews in 1999 of the
antidumping orders and suspension agreements to determine whether they should be
revoked or remain in effect for another five years. In October 1999, the Company
decided to withdraw its support from the committees that are pursing the
continuation of antidumping duties or suspension agreement against Mexico, Japan
and Venezuela. This decision recognizes the current robust financial health of
the U.S. cement industry and the fact that imported cement over the past several
years has played a largely supplemental role in the market. Still, changes in
competitive pressure from imported foreign cement into the U.S. could have a
negative impact on Southdown's results of operations. If the present conditions
change, Southdown would not hesitate to reinstate proceedings seeking relief
from unfair trade practices.
Year 2000 Compliance - Southdown was faced with the task of assuring
that its automated data processing and other microprocessor controlled equipment
were capable of distinguishing 21st century dates. Southdown believes that its
financial and other business applications are Year 2000 compliant as well as its
manufacturing plant control systems, its mobile equipment and its other field
equipment and devices with embedded microprocessor controls. During the first
part of 2000, only minor Year 2000 problems have been encountered, which caused
virtually no impact to business operations. However, final resolution of the
Company's Year 2000 compliance cannot be fully evaluated until all possible
computer applications and processes have been exercised and Year 2000 readiness
of key third party suppliers, service providers and customers has been
completely validated.
Costs incurred relating to making Southdown Year 2000 compliant were
expensed in the period in which they were incurred. The estimated cost to comply
with Year 2000 requirements was approximately $1.5 million, including the cost
of outside consultants, accelerated software replacement beyond the normal
upgrade cycle and the replacement or modification of equipment with embedded
microprocessor controls.
Kosmos Cement Joint Venture Severance Tax Audit - Kosmos Cement Company
is a joint venture operated and 75% owned by the Company. In late 1997, the
State of Kentucky proposed a deficiency assessment against Kosmos for severance
tax payments related to limestone mined at its Battletown, Kentucky quarry. The
total assessment is approximately $4.2 million, including penalties and interest
for the period under audit, 1991 through 1996. A major portion of the Kentucky
severance tax assessment relates to limestone mined by Kosmos specifically for
use by a local electric utility company. Southdown believes that, under the
terms of a supply agreement, the utility company is responsible for severance
taxes on limestone provided to it, but the utility company has denied any
liability related to the deficiency.
28
<PAGE> 29
Kosmos is contesting the assessment and entered into discussions with
the Kentucky Revenue Cabinet over a year ago. Discussions are ongoing and the
Company is, at present, unable to evaluate whether an unfavorable outcome is
either probable or remote. A hearing before the Kentucky Board of Tax Appeals is
scheduled for April 2000. For amounts agreed to in any settlement and amounts
not paid by the local electric utility, the Company would indirectly bear 75% of
any settlement and legal costs through its ownership interest in Kosmos. Kosmos
could then pursue legal recourse against the utility company.
Claims for Indemnification - The Mineral Management Service of the
Department of the Interior claimed that the Company's former oil and gas
subsidiary, Pelto Oil Company, owed royalties on two separate gas contract
settlement payments that Pelto received. When the Company sold Pelto in 1989,
the Company agreed to protect the purchaser from any future claims related to
these two payments. In a 1998 letter, the MMS advised that it was withdrawing
its royalty claim in the amount of $1.35 million on one of the settlement
payments because of a 1997 court ruling, which prohibited further claims against
the current owner of Pelto and that owner's affiliates. The MMS, however,
reserved its right to possibly reassert the claim at a later date.
The Company also disagrees with MMS' claim that an unspecified amount
of royalties are owed on the second gas contract settlement payment of $5.9
million. If one or both of MMS' claims against Pelto are ultimately successful,
the Company could have liability for royalties, plus late payment charges, in
amounts, which are not currently determinable. Such expenditures would result in
a charge to discontinued operations.
Discontinued Environmental Services Segment - The Company has both
given and received environmental and other indemnifications related to
properties the Company previously owned. At present, the Company is not able to
estimate the extent of contamination, remediation cost or recoverability of cost
from prior owners, if any, regarding these discontinued operations.
In late 1994 and the first quarter of 1995, the Company learned of some
soil and groundwater contamination at or near a subsidiary's former Alabama
hazardous waste processing facility. Although the Company sold the facility in
April 1995, the Company agreed to keep some liability for soil and groundwater
contamination at the facility prior to that time. Southdown hired a qualified
consultant to conduct the investigation of the contamination at the facility and
as a result of the consultant's preliminary report, Southdown increased the
amount reserved to resolve this matter by recording an additional $2.4 million
expense ($1.6 million, after-tax) in 1998.
Additional information gathered during preliminary work at the site
caused Southdown to increase the estimate of the total cost to resolve this
matter. Accordingly, Southdown recorded a $1.5 million charge ($1 million,
after-tax) in 1999. Southdown's investigation has not definitively determined
the scope of the contamination or the extent of any cleanup that may be
required. It is too early to determine the amount of Southdown's exposure to
loss with any degree of certainty. Southdown has agreed to remediate the soil
and groundwater contamination at the Alabama facility to the extent required by
law, and it has filed lawsuits against the former owner and former customers of
the facility. The claims against the former owner and other potentially
responsible parties could significantly reduce or eliminate Southdown's loss
exposure.
29
<PAGE> 30
Other - In addition to those matters separately disclosed above, the
Company has incurred in the regular course of business certain other commitments
and contingent liabilities including, among other things, (1) personal injury
lawsuits, (2) indemnity and other hold harmless agreements, (3) environmental
remediation liabilities, (4) product liability claims, (5) commercial disputes
and litigation, and (6) claims by disgruntled employees. These various
commitments and contingent liabilities, in the judgment of management will not
result in losses that would materially affect the Company's consolidated balance
sheet. However, because the Company's results of operations vary considerably
with construction activity and other factors, it is at least reasonably possible
that charges for contingencies in the future could, depending on when they occur
and how large they are relative to results of operations or cash flows for a
particular period, have a material negative impact on the Company's results of
operations or cash flows for that period.
INFLATION AND CHANGING PRICES
Inflation has become less of a factor in the U. S. economy as the rate
of increase has moderated during the last several years. The impact of inflation
and changing prices on the Company's net sales and revenues and on net earnings,
however, has been significant as a general firming of cement, concrete and
aggregates prices throughout the industry during the three years ended December
31, 1999 has enabled the Company to increase its per unit profit margin in each
of the Company's operating segments for the last three years.
DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS
This document includes forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company based these statements
on current expectations, estimates and projections about the general economy and
the Company's lines of business. These statements are generally identifiable by
phrases containing words such as "expects," "believes," "anticipates,"
"estimates," "will," "should," or similar expressions. Statements related to
future performance involve certain assumptions, risks and uncertainties, many of
which are beyond the control of the Company, and cannot be guaranteed.
Although the Company believes that the expectations reflected in such
forward looking statements are based upon reasonable assumptions, it can not say
with certainty that what it expects will actually happen. Important factors that
could cause actual results to differ materially from the Company's expectations
include, among others, (1) excess cement production capacity in other parts of
the world, (2) foreign and domestic price competition, (3) cost effectiveness,
(4) environmental problems or changes in environmental regulation, (5) abnormal
periods of inclement weather, and (6) general economic and market conditions
such as interest rates, the availability of capital and the cyclical nature of
the construction industry. The Company cautions the reader to consider these
disclosures when reading the forward-looking statements included in this report.
Subsequent written and oral forward looking statements made by the Company or by
persons acting on behalf of the Company are completely qualified by these
cautionary disclosures.
30
<PAGE> 31
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
MARKET RISK
The Company does not enter into derivatives or other financial
instruments for trading or speculative purposes. Because of the short duration
of the Company's investments, changes in market interest rates would not have a
significant impact on their fair value. For expected maturity dates and average
interest rates of long-term debt, see Note 12 of Notes to Consolidated Financial
Statements, "Long-term Debt - Annual Total Maturities of Long-term Debt". See
also Note 2 of Notes to Consolidated Financial Statements for the impact of the
new accounting standard for derivative instruments and hedging activities.
31
<PAGE> 32
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Statements of Consolidated Earnings for the years ended December 31, 1999, 1998 and 1997....................33
Consolidated Balance Sheets as of December 31, 1999 and 1998................................................34
Statements of Consolidated Cash Flows for the years ended December 31, 1999, 1998 and 1997..................35
Statements of Consolidated Shareholders' Equity for the years ended December 31, 1999, 1998 and 1997........36
Statements of Consolidated Comprehensive Income for the years ended December 31, 1999, 1998 and 1997........37
Notes to Consolidated Financial Statements:
Note 1 - The Company and Basis of Presentation.......................................................38
Note 2 - Summary of Significant Accounting Policies..................................................38
Note 3 - Acquisitions................................................................................41
Note 4 - Business Segment Information................................................................42
Note 5 - Cash and Cash Equivalents...................................................................44
Note 6 - Accounts and Notes Receivable...............................................................44
Note 7 - Inventories.................................................................................45
Note 8 - Property, Plant and Equipment...............................................................45
Note 9 - Other Long-Term Assets......................................................................46
Note 10 - Accounts Payable and Accrued Liabilities....................................................46
Note 11 - Disclosures About Fair Value of Financial Instruments.......................................46
Note 12 - Long-Term Debt..............................................................................47
Note 13 - Income Taxes................................................................................48
Note 14 - Minority Interest in Consolidated Joint Venture.............................................50
Note 15 - Other Long-Term Liabilities and Deferred Credits............................................50
Note 16 - Pension and Other Postretirement Benefit Plans..............................................50
Note 17 - Commitments and Contingent Liabilities......................................................54
Note 18 - Capital Stock...............................................................................57
Note 19 - Stock Option Plans..........................................................................60
Note 20 - Selected Quarterly Financial Data (Unaudited)...............................................62
Independent Auditors' Report................................................................................65
</TABLE>
32
<PAGE> 33
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED EARNINGS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
------------------------------------------------
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ 1,271.8 $ 1,184.7 $ 1,095.2
------------ ------------ ------------
Costs and expenses:
Operating 774.7 717.6 698.3
Depreciation, depletion and amortization 74.6 71.1 64.1
Selling and marketing 29.4 27.8 24.7
General and administrative 65.8 71.4 65.6
Acquisition charge (credit) (Note 3) (1.5) 75.2 --
Other income, net (11.0) (4.8) (6.7)
------------ ------------ ------------
932.0 958.3 846.0
Earnings from continuing operations before interest,
income taxes and minority interest 339.8 226.4 249.2
Interest income 4.1 5.9 3.3
Interest expense, net of amounts capitalized (13.7) (16.5) (15.5)
------------ ------------ ------------
Earnings from continuing operations before income taxes
and minority interest 330.2 215.8 237.0
Income tax expense (112.0) (86.2) (78.3)
------------ ------------ ------------
Earnings from continuing operations before
minority interest 218.2 129.6 158.7
Minority interest, net of income taxes (4.8) (4.6) (5.0)
------------ ------------ ------------
Earnings from continuing operations 213.4 125.0 153.7
Loss from discontinued operations, net of
income taxes (Note 17) (1.0) (1.6) --
Extraordinary charge, net of income taxes (Note 12) (9.2) -- --
------------ ------------ ------------
Net earnings 203.2 123.4 153.7
Dividends on preferred stock (Note 18) -- -- (2.5)
------------ ------------ ------------
Earnings attributable to common stock $ 203.2 $ 123.4 $ 151.2
============ ============ ============
Earnings (loss) per common share:
Basic
Earnings from continuing operations $ 5.68 $ 3.27 $ 4.10
Loss from discontinued operations,
net of income taxes (Note 17) (0.03) (0.04) --
Extraordinary charge, net of income taxes (Note 12) (0.24) -- --
------------ ------------ ------------
$ 5.41 $ 3.23 $ 4.10
============ ============ ============
Diluted
Earnings from continuing operations $ 5.63 $ 3.22 $ 3.94
Loss from discontinued operations,
net of income taxes (Note 17) (0.03) (0.04) --
Extraordinary charge, net of income taxes (Note 12) (0.24) -- --
------------ ------------ ------------
$ 5.36 $ 3.18 $ 3.94
============ ============ ============
Weighted average shares outstanding:
Basic 37.6 38.2 36.9
============ ============ ============
Diluted 37.9 38.9 39.0
============ ============ ============
</TABLE>
33
<PAGE> 34
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (Note 5) $ 21.8 $ 143.8
Short-term investments -- 14.8
Accounts and notes receivable, net (Note 6) 129.4 120.0
Inventories (Note 7) 135.4 107.7
Prepaid expenses and other 20.0 18.4
------------ ------------
Total current assets 306.6 404.7
Property, plant and equipment, less accumulated depreciation,
depletion and amortization (Note 8) 920.3 819.9
Goodwill 134.2 105.5
Other long-term assets (Notes 9 and 16) 69.6 70.3
------------ ------------
$ 1,430.7 $ 1,400.4
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt (Notes 11 and 12) $ 0.4 $ 0.6
Accounts payable and accrued liabilities (Note 10) 146.8 139.3
------------ ------------
Total current liabilities 147.2 139.9
Long-term debt (Notes 11 and 12) 165.7 167.3
Deferred income taxes (Note 13) 131.1 139.4
Minority interest in consolidated joint venture (Note 14) 35.9 27.7
Long-term portion of postretirement benefit obligation (Note 16) 87.7 91.5
Other long-term liabilities and deferred credits (Note 15) 30.0 30.4
------------ ------------
597.6 596.2
------------ ------------
Commitments and contingent liabilities (Notes 15, 16 and 17)
Shareholders' equity (Notes 18 and 19):
Common stock, $1.25 par value, 200,000,000 shares authorized, 39,987,000 and
35,904,000 shares issued and outstanding, respectively, in 1999 and
39,849,000 and 38,683,000 shares
issued and outstanding, respectively, in 1998 50.0 49.8
Capital in excess of par value 376.3 370.6
Reinvested earnings 612.2 431.6
Currency translation adjustment (1.2) (1.5)
Treasury stock, at cost (204.2) (46.3)
------------ ------------
833.1 804.2
------------ ------------
$ 1,430.7 $ 1,400.4
============ ============
</TABLE>
34
<PAGE> 35
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS)
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Earnings from continuing operations $ 213.4 $ 125.0 $ 153.7
Adjustments to reconcile earnings from continuing
operations to cash provided by
operating activities:
Depreciation, depletion and amortization 74.6 71.1 64.1
Deferred income tax expense 1.9 6.2 14.5
Other non-cash charges 0.8 9.7 3.0
Changes in operating assets and liabilities:
(Increase) decrease in accounts and notes receivable (4.0) (11.1) 6.1
Increase in inventories (22.6) (10.2) (1.9)
(Increase) decrease in prepaid expenses and other (2.6) 2.6 --
Increase in other long-term assets (4.7) (11.2) (6.1)
Increase in accounts payable and accrued liabilities 8.6 33.4 0.5
Decrease in other liabilities and deferred credits (4.2) (5.1) (0.6)
Other adjustments (1.0) 2.6 4.7
Net cash used in discontinued operations (1.4) (0.4) (1.0)
---------- ---------- ----------
Net cash provided by operating activities 258.8 212.6 237.0
---------- ---------- ----------
INVESTING ACTIVITIES:
Additions to property, plant and equipment (152.4) (116.4) (94.6)
Acquisitions, net of cash acquired (69.4) (6.0) (30.2)
Purchase of short-term investments (14.8) (18.7) (6.9)
Maturity of short-term investments 29.6 7.9 14.7
Proceeds from asset sales 16.2 13.9 8.6
Other investing activities (0.2) (0.1) --
---------- ---------- ----------
Net cash used in investing activities (191.0) (119.4) (108.4)
---------- ---------- ----------
FINANCING ACTIVITIES:
Additions to long-term debt 122.0 30.0 --
Reductions in long-term debt (123.6) (63.6) (7.2)
Purchase of treasury stock (159.0) -- (59.9)
Dividends (22.6) (19.4) (22.9)
Contributions from minority partner 10.0 -- --
Distributions to minority partner (9.3) (7.0) (7.8)
Premium on early extinguishment of debt (11.5) -- --
Other financing activities 4.2 11.7 (2.3)
---------- ---------- ----------
Net cash used in financing activities (189.8) (48.3) (100.1)
---------- ---------- ----------
Net increase (decrease) in cash and cash equivalents (122.0) 44.9 28.5
Cash and cash equivalents at the beginning of the year 143.8 98.9 70.4
---------- ---------- ----------
CASH AND CASH EQUIVALENTS AT THE END OF THE YEAR $ 21.8 $ 143.8 $ 98.9
========== ========== ==========
</TABLE>
35
<PAGE> 36
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN MILLIONS)
--------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK CAPITAL
---------------------- ---------------------- IN EXCESS OF
SHARES AMOUNT SHARES AMOUNT PAR VALUE
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1996 1.7 $ 86.3 38.0 $ 47.5 $ 250.4
Net earnings -- -- -- -- --
Dividends on preferred stock -- -- -- -- --
Dividends paid on common stock -- -- -- -- --
Issuance of restricted stock -- -- 0.1 0.1 3.9
Exercise of stock options -- -- 0.4 0.5 5.6
Conversion of Series D Preferred
stock into common stock (1.7) (86.3) 2.6 3.3 83.0
Tax benefit from exercise of
stock options -- -- -- -- 9.8
Forfeiture of restricted common shares -- -- -- -- (0.7)
Amortization of restricted stock vesting -- -- -- -- --
Purchase of treasury stock -- -- -- -- --
Foreign currency translation adjustment -- -- -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1997 -- $ -- 41.1 $ 51.4 $ 352.0
Net earnings -- -- -- -- --
Dividends paid on common stock -- -- -- -- --
Retirement of Medusa treasury stock
at combination date -- -- (1.7) (2.2) --
Lapse of restrictions on restricted
common stock -- -- -- -- --
Exercise of stock options -- -- 0.4 0.6 13.8
Tax benefit from exercise of
stock options -- -- -- -- 4.8
Foreign currency translation adjustment -- -- -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1998 -- $ -- 39.8 $ 49.8 $ 370.6
Net earnings -- -- -- -- --
Dividends paid on common stock -- -- -- -- --
Exercise of stock options -- -- 0.2 0.2 3.8
Purchase of treasury stock -- -- -- -- --
Issuance of treasury stock -- -- -- -- 0.2
Tax benefit from exercise of stock options -- -- -- -- 1.7
Foreign currency translation adjustment -- -- -- -- --
-------- -------- -------- -------- --------
Balance at December 31, 1999 -- $ -- 40.0 $ 50.0 $ 376.3
======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(IN MILLIONS)
---------------------------------------------------
UNEARNED CURRENCY
REINVESTED RESTRICTED TRANSLATION TREASURY
EARNINGS COMMON STOCK ADJUSTMENT STOCK
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance at December 31, 1996 $ 258.0 $ (7.5) $ (0.9) $ (40.4)
Net earnings 153.7 -- -- --
Dividends on preferred stock (2.5) -- -- --
Dividends paid on common stock (19.2) -- -- --
Issuance of restricted stock -- (4.0) -- --
Exercise of stock options (3.9) -- -- (4.3)
Conversion of Series D Preferred
stock into common stock -- -- -- --
Tax benefit from exercise of
stock options -- -- -- --
Forfeiture of restricted common shares -- 0.7 -- --
Amortization of restricted stock vesting -- 2.0 -- --
Purchase of treasury stock -- -- -- (59.9)
Foreign currency translation adjustment -- -- (0.3) --
-------- -------- -------- --------
Balance at December 31, 1997 $ 386.1 $ (8.8) $ (1.2) $ (104.6)
Net earnings 123.4 -- -- --
Dividends paid on common stock (19.4) -- -- --
Retirement of Medusa treasury stock
at combination date (57.0) -- -- 59.2
Lapse of restrictions on restricted
common stock -- 8.8 -- --
Exercise of stock options (1.5) -- -- (0.9)
Tax benefit from exercise of
stock options -- -- -- --
Foreign currency translation adjustment -- -- (0.3) --
-------- -------- -------- --------
Balance at December 31, 1998 $ 431.6 $ -- $ (1.5) $ (46.3)
Net earnings 203.2 -- -- --
Dividends paid on common stock (22.6) -- -- --
Exercise of stock options -- -- -- --
Purchase of treasury stock -- -- -- (159.0)
Issuance of treasury stock -- -- -- 1.1
Tax benefit from exercise of stock options -- -- -- --
Foreign currency translation adjustment -- -- 0.3 --
-------- -------- -------- --------
Balance at December 31, 1999 $ 612.2 $ -- $ (1.2) $ (204.2)
======== ======== ======== ========
</TABLE>
36
<PAGE> 37
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS)
-----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net earnings $ 203.2 $ 123.4 $ 153.7
Foreign currency translation
adjustments, net of income taxes 0.3 (0.3) (0.3)
---------- ---------- ----------
Comprehensive income $ 203.5 $ 123.1 $ 153.4
========== ========== ==========
</TABLE>
37
<PAGE> 38
SOUTHDOWN, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - THE COMPANY AND BASIS OF PRESENTATION:
Southdown, Inc. is one of the largest producers of cement in the U.S.
The Company operates twelve portland cement manufacturing plants located in
Alabama, southern California, Colorado, Florida, Georgia, Kentucky, Michigan,
Ohio, Pennsylvania, Tennessee and Texas, plus an extensive network of cement
distribution terminals. The Company also mines, processes, and sells
construction aggregates and specialty mineral products in the eastern half of
the U.S., in Florida and in southern California. In addition, the Company
markets ready-mixed concrete products in two of its largest cement markets,
southern California and Florida.
Southdown was organized in Louisiana in 1930 and maintains its
principal executive offices at 1200 Smith Street, Suite 2400, Houston, Texas
77002-4486, telephone (713) 650-6200. On June 30, 1998, the Company concluded a
merger transaction with Medusa Corporation. Medusa became a 100% owned
subsidiary of the Company at that time. The Company reorganized its corporate
structure at the end of 1998 by merging most of its recently acquired Medusa
entities into Southdown and contributing the Company's California cement,
concrete products and aggregates operations to certain existing and newly
created wholly-owned subsidiaries of the Company. The terms "Southdown" and the
"Company" as used in this report include subsidiaries of Southdown and also
predecessor corporations.
The consolidated balance sheets of Southdown as of December 31, 1999
and 1998 and the related statements of consolidated earnings, shareholders'
equity, cash flows and comprehensive income for each of the three years in the
period ended December 31, 1999 are presented on the basis of generally accepted
accounting principles.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements. These estimates and assumptions also affect the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Consolidation - The consolidated financial statements of the Company
include the accounts of its divisions, its wholly-owned subsidiaries and its
majority-owned joint venture after elimination of significant intercompany
transactions and balances. All prior period consolidated financial statements
presented provide the combined results of operations, financial position and
cash flows of the Company and Medusa. Certain data for prior years have been
reclassified for purposes of comparison.
Cash and Statement of Consolidated Cash Flows Supplemental Disclosures
- - The Company considers short-term investments, which have an original maturity
of three months or less, to be cash equivalents for purposes of Statement of
Consolidated Cash Flows. Cash payments for income taxes totaled $99.1 million in
1999, $71.7 million in 1998 and $57.1 million in 1997. Interest paid, net of
38
<PAGE> 39
amounts capitalized, was $16.4 million, $16.4 million and $14.3 million in 1999,
1998 and 1997, respectively. Interest capitalized was $2.6 million in 1999, $1.7
million in 1998 and $2.9 million in 1997.
There were no material non-cash financing activities in 1999 and 1998.
Non-cash financing activities in 1997 included the conversion of 1.7 million
shares of preferred stock with a carrying value of $86.3 million into 2.6
million shares of common stock.
Non-cash investing activities in 1999 included the assumption of $8.2
million in liabilities in connection with the Company's acquisition of eight
ready-mixed concrete plants, an aggregates quarry and four concrete block and
resale operations located in Florida and a cement terminal in Georgia. In 1998,
non-cash investing activities included the assumption of $1.4 million in
liabilities in connection with Medusa's acquisition of an aggregate operation
and a highway safety systems company. Non-cash investing activities in 1997
included the assumption of liabilities in Medusa's various acquisitions as
discussed in Note 3 of Notes to Consolidated Financial Statements.
Investments - In addition to cash equivalents, from time to time the
Company has investments in debt securities such as commercial paper, time
deposits and certificates of deposit that mature in more than three months but
no more than one year. The Company expects to hold all such investments to
maturity and, therefore, carries these investments at amortized cost. The
Company does not recognize gains or losses on these investments, which the
Company deems to be temporary, because the Company has both the intent and the
ability to hold these investments until they mature. As of December 31, 1998,
the Company's investments consist primarily of commercial paper maturing within
one year. The fair value of these investments approximated their amortized cost.
Inventories - The Company values inventories at the lower of cost or
market. Cost includes material, labor and manufacturing overhead. The Company
values cement and construction aggregates inventories on the last-in, first-out
method. The valuation of the remaining inventories, primarily parts and
supplies, is determined on the first-in, first-out or average cost method.
Property, Plant and Equipment - The Company capitalizes all direct and
certain indirect expenditures incurred in conjunction with the acquisition or
construction of major facilities. Depreciation and amortization of these
capitalized costs commence when the completed facility is placed in service.
Depreciation and amortization of property, plant and equipment are computed
primarily on a straight-line basis over estimated useful lives of the related
assets, ranging from three to 50 years. On average, the Company depreciates
buildings and improvements based on a 50 year life; machinery and equipment over
lives ranging from 10 to 35 years; office furniture, fixtures and equipment over
lives ranging from five to ten years and mobile equipment over lives ranging
from four to 25 years. The Company computes depletion of mineral rights on the
units-of-production method.
The Company reviews long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of those assets may
not be recoverable. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the asset, a loss is recognized for the
difference between the fair value and the carrying value of the asset. Gain or
loss is generally reflected in earnings upon the retirement or sale of property,
plant and equipment.
Environmental Expenditures - The Company bases its estimates of
environmental liabilities on the nature or extent of contamination, methods of
remediation required, existing technology, presently enacted
39
<PAGE> 40
laws and regulations and prior Company experience in remediation of contaminated
sites. The Company capitalizes environmental expenditures that extend the life,
increase the capacity, or improve the safety or efficiency of property owned by
the Company, mitigate or prevent environmental contamination that has yet to
occur, or that are incurred in anticipation of a sale of property. Expenditures
that relate to an existing condition caused by past operations, and which do not
contribute to current or future revenue generation, are expensed. The Company's
policy is to accrue environmental and clean-up related costs of a non-capital
nature when it is both probable that a liability has been incurred and the
amount can be reasonably estimated, whether or not a claim has been asserted or
this coincides with the completion of a remediation investigation/feasibility
study or the Company's commitment to a formal plan of action. The Company
revises such estimates as additional information becomes known.
Goodwill - The Company amortizes the excess of cost over the fair value
of net assets of businesses acquired, on a straight-line basis, over periods
ranging from 15 to 40 years. Such amortization amounted to $4.3 million in 1999,
$3.7 million in 1998 and $3.5 million in 1997. Accumulated amortization of
goodwill was $42.9 million and $38.6 million as of December 31, 1999 and 1998.
The Company utilizes estimates of undiscounted future cash flows of the acquired
operations to evaluate any possible impairment of the related goodwill.
Revenue Recognition - The Company generally recognizes revenue on the
sale of products or services when the products are shipped or the services
delivered, all significant contractual obligations have been satisfied and the
collection of the resulting receivable is reasonably assured.
Stock-Based Compensation - The Company accounts for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees."
Accordingly, no compensation expense has been recognized for the Company's stock
option plans because the option's exercise price equals the stock's fair market
value on the date the option is granted.
Income Taxes - In computing its federal and state income tax
liabilities, the Company uses accelerated depreciation and deducts currently
certain expenditures that are capitalized for financial reporting purposes.
Deferred income taxes are provided on these and other temporary differences
between the tax basis of assets and liabilities and their basis for financial
statement purposes. Investment tax credit carryforwards are accounted for under
the flow-through method and, accordingly, reduce federal income taxes in the
years in which their utilization is assured.
Earnings Per Share - The Company computed basic earnings per share
using the weighted average number of common shares outstanding in each of the
three years ended 1999. Earnings used to compute basic per share earnings in
1997 were net of preferred stock dividends of approximately $2.5 million.
Diluted earnings for 1999 and 1998 assume the dilutive impact of stock options.
Diluted earnings for 1997 assume the dilutive impact of stock options and the
conversion of all shares of preferred stock to common stock.
New Accounting Standards - In June 1998, the FASB issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities." A
derivative is a financial instrument that takes or "derives" its value from the
value of some other financial instrument. SFAS No. 133 requires that a company
recognize all derivatives as either assets or liabilities on its balance sheet
and measure those instruments at fair value. Fair value is the amount for which
an object would currently change hands
40
<PAGE> 41
between a willing buyer and an independent willing seller. SFAS No. 133, as
amended by SFAS No. 137, is effective for years beginning after June 15, 2000
and management is currently evaluating what, if any, impact this new accounting
standard may have on the Company's consolidated financial statements. The
Company does not believe that it held any derivative financial instruments
during the three year period ending December 31, 1999.
NOTE 3 - ACQUISITIONS:
SMI Acquisition - In August 1999, the Company acquired all of the
common stock of SMI Holdings, Inc. at a cost of $60.3 million, net of cash and
liabilities assumed of $8.1 million. The acquisition was accounted for by the
purchase method and was funded from the cash balances of the Company. SMI
operated eight ready-mixed concrete batch plants, an aggregates quarry and four
concrete block and resale operations located in the proximity of the Company's
Brooksville, Florida cement plant. Pro forma financial information has not been
provided because of immateriality.
Medusa Merger - On June 30, 1998, Southdown concluded a merger
transaction with Medusa Corporation. Medusa became a wholly-owned subsidiary of
the Company at that time. The Medusa merger converted each outstanding Medusa
common share into the right to receive .88 shares of Company common stock. The
Company issued approximately 14.7 million shares of its common stock for all of
the outstanding common stock of Medusa. This tax-free transaction was treated as
a "pooling of interest," rather than a purchase of one company by another. A
pooling of interest accounts for a business combination as the uniting of the
ownership interests of companies by an exchange of stock.
The Company recorded 1998 charges totaling $75.2 million ($61.9 million
after taxes, or $1.59 per common share, diluted) for direct and other merger
related transaction costs. These transaction costs include severance related
costs for approximately 150 former employees at the Medusa corporate office,
professional fees, financial printing, and anticipated closure of duplicate
corporate office facilities and incompatible business practices, processes and
activities. In 1999, the acquisition liability recorded in the prior year was
reduced by $1.5 million. The only remaining liability is the ongoing lease
obligation associated with the closing of Medusa's former corporate headquarters
in Cleveland, Ohio.
Remaining merger transaction liabilities at December 31, 1999 were $1
million. These liabilities relate to ongoing lease payment obligations
associated with the closure of the Medusa corporate office, which was closed at
the end of the first quarter of 1999. Details of the merger related costs are as
follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
----------------------------------------------------------------
ORIGINAL
MERGER AMOUNTS BALANCE
COSTS PAID ADJUSTMENTS AT 12/31/99
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Merger transaction costs and
professional fees $ 18.4 $ 18.9 $ 0.5 $ --
Severance costs 54.3 47.2 (7.1) --
Closure costs 10.2 6.7 (2.5) 1.0
------------ ------------ ------------ ------------
Total $ 82.9 $ 72.8 $ (9.1) $ 1.0
============ ============ ============ ============
</TABLE>
41
<PAGE> 42
The revenues and results of operations for the separate companies and
the combined amounts for the six months ended June 30, 1998 and the year ended
December 31, 1997 are presented below:
<TABLE>
<CAPTION>
(IN MILLIONS)
--------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
(UNAUDITED)
NET NET
REVENUES EARNINGS REVENUES EARNINGS
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Southdown $ 357.9 $ 39.2 $ 719.2 $ 96.7
Medusa 184.7 (46.6) 376.0 57.0
---------- ---------- ---------- ----------
Combined $ 542.6 $ (7.4) $ 1,095.2 $ 153.7
========== ========== ========== ==========
</TABLE>
Aggregates Acquisitions - During 1997, Medusa completed two cash
acquisitions at a cost of $30.2 million, net of cash and liabilities assumed of
$19.4 million. In January 1997, Medusa acquired Lime Crest Corporation, a
leading producer of home and garden products, industrial limestone and
construction aggregates based in Sparta, New Jersey. In October 1997, Medusa
acquired Lee Lime Corporation, a producer of limestone, quicklime, hydrated
lime, packaged cement mixes and a leading producer of home and garden products
based in Lee, Massachusetts.
In August 1997, Medusa also purchased all of the capital stock of White
Stone Company of Southwest Virginia. This company is a producer of industrial
limestone and aggregates in Castlewood, Virginia with a limestone pelletizing
plant in Paradise, Pennsylvania. In consideration of the purchase price of $34.7
million as well as an election by Medusa to step up the basis of the assets
acquired for income tax purposes, Medusa assumed liabilities of $3.2 million and
issued notes to the selling shareholders for $31.5 million. The notes to the
selling shareholders were paid in full prior to Medusa's merger with the
Company.
Medusa accounted for all three 1997 acquisitions by the purchase
method. Medusa allocated the purchase prices to assets acquired and liabilities
assumed based on fair market value at the dates of acquisition. Medusa included
the results of operations for all three acquisitions in the financial statements
from their respective dates of purchase. On an unaudited proforma basis,
assuming Medusa had completed the three acquisitions as of the beginning of
1997, net sales for 1997 would have increased $20.3 million, whereas net income
and net income per common share would not have been significantly different from
the reported amounts.
NOTE 4 - BUSINESS SEGMENT INFORMATION:
While all operations of the Company are related to some degree and
share certain internal services, the Company has identified three business
segments. The Cement segment includes the operations of eleven quarrying sites,
twelve manufacturing facilities and a network of 43 cement storage and
distribution terminals for the production, importation and distribution of
portland and masonry cement. The Concrete Products segment includes primarily
the production and sale of ready-mixed concrete in two of the Company's largest
cement markets, southern California and Florida, and to a lesser extent, the
production and sale of concrete block in Florida. The Aggregates segment mines,
processes and sells construction aggregates in the eastern half of the U.S., in
Florida and in southern California and specialty mineral products in the eastern
half of the U.S. It also operates a subsidiary that installs highway safety
systems such as guardrails, traffic signals, highway signage and lighting.
Operating results and certain other financial data for the Company's principal
business segments for and at the end of each year presented are as follows:
42
<PAGE> 43
<TABLE>
<CAPTION>
(IN MILLIONS)
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Contributions to revenues:
Cement
Sales to customers $ 864.1 $ 819.9 $ 758.5
Freight to customers and other 49.1 41.9 43.6
---------- ---------- ----------
Total cement revenues 913.2 861.8 802.1
Concrete Products 266.5 240.8 238.6
Aggregates 163.9 147.9 119.0
Intersegment sales (71.8) (65.8) (64.5)
---------- ---------- ----------
$ 1,271.8 $ 1,184.7 $ 1,095.2
========== ========== ==========
Contributions to earnings before interest,
income taxes and minority
interest:
Operating profit
Cement $ 332.8 $ 311.0 $ 267.3
Concrete Products 22.4 20.5 9.5
Aggregates 33.4 25.0 20.6
---------- ---------- ----------
388.6 356.5 297.4
Corporate overhead (50.3) (54.9) (48.2)
Acquisition credit (charge) 1.5 (75.2) --
---------- ---------- ----------
$ 339.8 $ 226.4 $ 249.2
========== ========== ==========
Identifiable assets, end of year:
Cement $ 982.6 $ 878.9 $ 810.0
Concrete Products 142.6 104.7 119.3
Aggregates 174.4 149.3 137.1
Other, unallocated corporate assets 131.1 267.5 200.6
---------- ---------- ----------
$ 1,430.7 $ 1,400.4 $ 1,267.0
========== ========== ==========
Depreciation, depletion and amortization:
Cement $ 53.2 $ 49.7 $ 44.5
Concrete Products 8.2 8.3 8.7
Aggregates 9.0 7.9 5.5
Other 5.0 6.0 6.4
---------- ---------- ----------
$ 75.4 $ 71.9 $ 65.1
========== ========== ==========
Capital expenditures:
Cement $ 132.5 $ 102.1 $ 77.6
Concrete Products 8.3 2.1 4.8
Aggregates 6.8 8.3 8.0
Other 4.8 3.9 4.2
---------- ---------- ----------
$ 152.4 $ 116.4 $ 94.6
========== ========== ==========
</TABLE>
Corporate overhead is generally not allocated to the operating
segments. Other unallocated corporate assets consist primarily of cash,
goodwill, prepaid pension costs and office furniture, fixtures and equipment.
Substantially all of the Company's operations are conducted in the U.S.
Intersegment sales occur primarily between the Company's Florida cement
manufacturing plant and the related Florida concrete products operations and the
Company's southern California cement manufacturing plant and the related
California concrete products operations. The Company accounts for intersegment
sales at prices, which approximate market prices, but eliminates these sales for
purposes of preparing consolidated financial statements. Depreciation, depletion
and amortization shown above includes $0.8 million of amortization of debt
issuance costs in 1999 compared with $0.8 million of such amortization in 1998
and $1 million of amortization of debt issuance costs in 1997. Capital
expenditures shown above exclude capital acquisitions of $69.4 million in 1999,
$6 million in 1998 and $30.2 million in 1997.
43
<PAGE> 44
NOTE 5 - CASH AND CASH EQUIVALENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Cash on hand and demand deposits $ 16.0 $ 16.0
Commercial paper, certificates of deposit, and auction market
preferreds - at cost, which approximates market value 5.8 127.8
---------- ----------
$ 21.8 $ 143.8
========== ==========
</TABLE>
There is no requirement for the Company to maintain compensating
balances under any of the agreements with the Company's lending banks.
NOTE 6 - ACCOUNTS AND NOTES RECEIVABLE:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Trade accounts and notes receivable $ 131.3 $ 122.5
Allowance for doubtful accounts (5.4) (4.9)
---------- ----------
125.9 117.6
Other receivables 3.5 2.4
---------- ----------
$ 129.4 $ 120.0
========== ==========
</TABLE>
Significant Group Concentrations of Credit Risk - A majority of the
Company's receivables are from users of portland cement, such as ready-mixed
concrete producers and manufacturers of concrete products such as blocks, roof
tile, pipe and prefabricated building components. Sales are also made to
building materials dealers, other cement manufacturers, construction contractors
and, particularly from the Texas plant, oil well cementing companies. The
Company is a major producer of ready-mixed concrete in southern California, and
a major producer and supplier of such products throughout Florida. The Company's
California plant made approximately 16%, 17% and 19% of its cement sales in the
three years ended December 31, 1999 to the Company's ready-mixed concrete
operations in California. Approximately 36%, 36% and 38% of the cement sold by
the Company's Florida plant in the three years ended December 31, 1999 was sold
to the Company's Florida concrete products operations. Aggregates sales, both
construction and specialty aggregates, are to a wide spectrum of customers
including national home improvement warehouse chains, large industrial concerns
and individual local small businesses. Construction aggregates are sold to the
construction industry primarily for use in the manufacture of concrete and
asphalt as well as a variety of construction applications such as road bases,
drainage blankets, erosion control and other applications. Specialty aggregates
sells over 200 products with many different uses including, among others, lawn
care, gardening, landscaping, grounds maintenance, water conditioning,
agriculture and in the manufacture of joint compounds, caulk, paints, plastics
and paper. There were no sales to any single third-party customer in any of the
Company's business lines, which totaled in excess of 10% of consolidated
revenues for 1999, 1998 or 1997.
44
<PAGE> 45
An analysis of the activity in the allowance for doubtful accounts
follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS)
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Beginning balance $ 4.9 $ 5.0 $ 7.8
Additions charged to expense 1.3 0.1 1.3
Accounts written off (0.9) (0.4) (3.2)
Recoveries 0.1 0.2 (0.9)
---------- ---------- ----------
Ending balance $ 5.4 $ 4.9 $ 5.0
========== ========== ==========
</TABLE>
In the opinion of management, the Company is adequately reserved 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 as additional information regarding the
collectibility of these and other accounts becomes available.
NOTE 7 - INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Finished goods $ 45.7 $ 36.1
Work in process 22.7 14.7
Raw materials 10.4 7.1
Parts and supplies 56.6 49.8
---------- ----------
$ 135.4 $ 107.7
========== ==========
</TABLE>
Inventories valued on the "Last In, First Out" method were $60 million
at December 31, 1999 and $46.3 million at December 31, 1998 compared with
current costs of $76.9 million and $63.2 million, respectively.
NOTE 8 - PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Land (at cost):
Cement $ 37.4 $ 36.0
Concrete Products 15.7 16.1
Aggregates 8.8 8.9
Corporate and other -- 0.2
---------- ----------
61.9 61.2
---------- ----------
Plant and Equipment (at cost):
Cement 1,307.9 1,228.1
Concrete Products 86.1 72.3
Aggregates 117.8 107.6
Corporate and other 26.0 29.7
---------- ----------
1,537.8 1,437.7
---------- ----------
Less accumulated depreciation, depletion
and amortization (679.4) (679.0)
---------- ----------
$ 920.3 $ 819.9
========== ==========
</TABLE>
45
<PAGE> 46
NOTE 9 - OTHER LONG-TERM ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Prepaid pension costs (Note 16) $ 48.4 $ 42.5
Land held for sale 7.3 9.8
Unamortized debt issuance costs 1.2 3.7
Other 12.7 14.3
---------- ----------
$ 69.6 $ 70.3
========== ==========
</TABLE>
Land held for sale includes various non-income producing real estate
parcels offered for sale. Unamortized debt issuance costs are costs and expenses
associated with the issuance of certain of the Company's senior debt and senior
subordinated notes. Debt issuance costs are being amortized over the respective
terms of the debt.
NOTE 10 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-------------------------
1999 1998
---------- ----------
<S> <C> <C>
Trade accounts payable $ 54.8 $ 46.9
Accrued compensation and benefits 32.1 30.0
Accrued liabilities, trade 19.5 20.5
Accrued taxes, other 5.4 5.1
Current portion of postretirement benefit obligation 4.0 4.0
Accrued environmental remediation costs 2.1 2.8
Acquisition charge liabilities 1.0 7.4
Other accrued liabilities 27.9 22.6
---------- ----------
$ 146.8 $ 139.3
========== ==========
</TABLE>
NOTE 11 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of the Company's assets and liabilities, which are
considered to be financial instruments, approximate their value, except for
long-term debt. The Company determined the estimated fair value amounts for the
Company's long-term debt as of December 31, 1999 and 1998 by using appropriate
valuation methodologies and information currently available to management.
Considerable judgment is required in developing these estimates and,
accordingly, the Company can not guarantee that the estimated values shown
indicate the amounts that would be realized if the Company were to replace its
long-term debt in a free market exchange. The fair value of the Company's
long-term debt was estimated based on the quoted market prices for similar
issues or on the current rates available to the Company for debt with similar
terms and remaining maturities.
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-----------------------------------------------
1999 1998
---------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- --------- ---------- --------
<S> <C> <C> <C> <C>
Long-term debt $ 166.1 $ 166.3 $ 167.9 $ 183.7
========== ========= ========== ========
</TABLE>
The Company held no derivative financial instruments as of December 31,
1999 or 1998.
46
<PAGE> 47
NOTE 12 - LONG-TERM DEBT:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
--------------------------
1999 1998
---------- ----------
<S> <C> <C>
Senior debt:
Revolving credit facilities $ 122.0 $ --
Industrial development and pollution control bonds 41.3 41.3
Other 1.0 1.6
Subordinated debt:
10% senior subordinated notes 1.8 125.0
---------- ----------
166.1 167.9
Less current maturities (0.4) (0.6)
---------- ----------
$ 165.7 $ 167.3
========== ==========
</TABLE>
Revolving Credit Facilities - During 1999, the Company amended its $200
million revolving credit facility to (1) beneficially modify or delete certain
financial covenants and other provisions and (2) permit the Company to enter
into a $250 million revolving credit facility. At December 31, 1999, the Company
has a $200 million revolving credit facility maturing June 2002 and a $250
million revolving credit facility maturing December 2001. Borrowings under these
credit facilities are unsecured. The $200 million revolving credit facility
permits the issuance of up to $95 million in standby letters of credit in lieu
of borrowings. Borrowings under the credit facilities bear interest at margins
either at or above a prime rate or above the London Interbank Offered Rate as
selected by the Company. The interest rate was 7% at December 31, 1999. As of
December 31, 1999, the Company had $56.9 million in letters of credit
outstanding and $122 million in borrowings outstanding under the facilities,
leaving $271.1 million available.
Under the revolving credit facilities, the Company must maintain the
following financial ratios: (1) leverage ratio (funded debt compared with
consolidated earnings before interest, tax and depreciation) and (2) interest
coverage ratio (consolidated earnings before interest, tax, depreciation and
amortization of intangibles compared with interest expense). In addition, the
Company must maintain a minimum consolidated net worth (shareholders' equity).
The Company is in compliance with the ratios and other covenants under these
credit facilities.
Industrial Development and Pollution Control Bonds - The industrial
development and pollution control bonds were issued by various state or local
financing authorities and are due on various dates through the year 2017. The
obligations bear interest, which is nontaxable to the payees, at varying rates
that approximate 50% of the prevailing prime rate. The obligations are secured
by irrevocable letters of credit issued under the Company's $200 million
revolving credit facility. During the first quarter of 1998, the Company
negotiated an extension of $17.8 million of the pollution control bonds until
2013.
10% Senior Subordinated Notes - In late 1999, the Company offered to
repurchase the 10% Senior Subordinated Notes. The Company repurchased $123.2
million of the 10% Notes in December 1999 using borrowings on its $200 million
revolving credit facility and outstanding cash balances. Most of the restrictive
covenants were deleted at the same time. The Company recorded a $9.2 million net
of tax extraordinary charge in 1999 to reflect prepayment premium and other
costs incurred in the repurchase. At December 31, 1999, $1.8 million of the 10%
Senior Subordinated Notes remain outstanding. The 10% Notes pay interest
semiannually and mature on March 1, 2006.
47
<PAGE> 48
Annual Total Maturities of Long-term Debt - The expected maturity
dates, the approximate total principal payments due in future years and the
average interest rate on long-term debt as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
PRINCIPAL AVERAGE
EXPECTED PAYMENTS INTEREST
MATURITY DATE (IN MILLIONS) RATE
------------- ------------ ------
<S> <C> <C>
2000 $ 0.4 5.7%
2001 0.3 6.5%
2002 122.1 7.0%
2003 -- --
2004 5.9 5.8%
Thereafter 37.4 5.0%
--------- ----
Total $ 166.1 6.5%
=========
</TABLE>
NOTE 13 - INCOME TAXES:
The following table provides a breakdown of the current and deferred
components of the provisions for federal and state income taxes attributable to
the earnings before income taxes and extraordinary charge.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS)
----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Federal income tax expense:
Current $ 103.1 $ 68.5 $ 55.8
Deferred 1.7 6.2 13.8
State income tax expense:
Current 7.0 11.5 8.0
Deferred 0.2 -- 0.7
---------- ---------- ----------
$ 112.0 $ 86.2 $ 78.3
========== ========== ==========
</TABLE>
The tax benefit allocated to the extraordinary charge was $5.0 million.
The tax benefits allocated to the 1999 and 1998 losses from discontinued
operation were $0.5 million and $0.8 million. The tax benefits allocated to
minority interest earnings for 1999, 1998 and 1997 were $2.6, $2.5 and $2.5
million, respectively.
A reconciliation between the income tax expense recognized in the
Company's Statements of Consolidated Earnings and the income tax expense
computed by applying the statutory federal income tax rate to the earnings from
continuing operations before income taxes, minority interest and extraordinary
charge follows:
48
<PAGE> 49
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(DOLLARS IN MILLIONS)
--------------------------------------------------------------
1999 1998 1997
------------------ ------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Earnings from continuing operations
before income taxes, minority
interest and extraordinary charge $330.2 $215.8 $237.0
====== ====== ======
Income tax expense
computed at statutory rate $115.6 35.0% $ 75.5 35.0% $ 83.0 35.0%
Benefit of statutory depletion (11.1) (3.4) (11.9) (5.5) (10.8) (4.6)
Effect of non-deductible goodwill 1.0 .3 .9 .4 .7 .3
Effect of state income tax
expense 4.7 1.4 7.4 3.4 5.7 2.4
Non-deductible merger costs -- -- 14.5 6.7 -- --
Other 1.8 .6 (.2) (.1) (.3) (.1)
------ ------ ------ ------ ------ ------
$112.0 33.9% $ 86.2 39.9% $ 78.3 33.0%
====== ====== ====== ====== ====== ======
</TABLE>
The provision for deferred income taxes represents the change in the
Company's deferred income tax liability during each year, including the effect
of any enacted tax rate changes. The Company recognizes a deferred income tax
liability or asset for the net effect of: (1) temporary differences between the
tax basis of assets and liabilities and their reported amounts in the financial
statements after applying enacted statutory tax rates and laws in effect for the
year in which the differences are expected to reverse and, (2) in certain
instances, the deferred tax effects of net operating loss and tax credit
carryforwards.
Significant components of the Company's net deferred tax liability as
of December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Differences between book and tax basis of
property, plant and equipment $ 157.8 $ 167.8
Assets of overfunded pension plan 18.9 16.6
Other 13.3 9.1
------------ ------------
190.0 193.5
------------ ------------
Deferred tax assets:
Postretirement benefit obligation 36.2 37.9
Reserves not currently deductible 19.9 22.9
Deferred state income taxes 4.8 4.8
Operating loss carryforwards 11.5 --
------------ ------------
72.4 65.6
Valuation allowance (3.0) --
------------ ------------
69.4 65.6
------------ ------------
Net deferred tax liability $ 120.6 $ 127.9
============ ============
</TABLE>
The Company has provided a valuation allowance of $3.0 million against
net operating loss carryforwards of $32.8 million that were acquired in a
business combination in 1999. If these operating losses, which expire between
2005 and 2019, are fully utilized on the Company's federal tax returns; this
49
<PAGE> 50
valuation allowance will be used to reduce goodwill. Various federal and state
income tax returns are currently under examination. In the opinion of
management, the Company has made adequate provision at December 31, 1999 for
income taxes that might be due as a result of these audits and any resulting
assessments are not expected to have a material effect on the Company's
consolidated earnings.
NOTE 14 - MINORITY INTEREST IN CONSOLIDATED JOINT VENTURE:
Kosmos Cement Company is a joint venture, which owns a cement plant
located in Kosmosdale, Kentucky and a cement plant located near Pittsburgh,
Pennsylvania along with related terminals and facilities. The joint venture is
25% owned by a subsidiary of Dyckerhoff AG and operated and 75% owned by the
Company. The Company's Consolidated Balance Sheets include 100% of the assets
and liabilities of Kosmos. Dyckerhoff's 25% interest in Kosmos and the earnings
therefrom have been reflected as "Minority interest in consolidated joint
venture" and "Minority interest, net of income taxes" on the Company's
Consolidated Balance Sheets and Statements of Consolidated Earnings,
respectively.
NOTE 15 - OTHER LONG-TERM LIABILITIES AND DEFERRED CREDITS:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS)
-----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Environmental liabilities (Note 17) $ 9.1 $ 10.9
Deferred payment obligation 8.1 8.1
Supplemental pension liabilities (Note 16) 7.1 5.3
Estimated liabilities on discontinued operations 4.9 4.9
Other 0.8 1.2
------------ ------------
$ 30.0 $ 30.4
============ ============
</TABLE>
Deferred Payment Obligation - In connection with the July 1990 purchase
of a hazardous waste processing facility from an affiliate of Browning-Ferris
Industries, Inc., the Company assumed a conditional payment obligation payable
to the former shareholders of the Browning-Ferris subsidiary. The expected
timing of payments related to the estimated liabilities on discontinued
operations and the deferred payment obligation is uncertain.
Discontinued Operations - The Company has accrued loss provisions for
certain environmental issues under the indemnification provisions of sales
agreements associated with the environmental services operations discontinued in
1994 and for which the Company remains contingently liable. In addition, as part
of the acquisition of Moore McCormack in 1988, the Company assumed certain fixed
and contingent liabilities pursuant to certain guarantees and undertakings
related to operations that had been previously discontinued by Moore McCormack.
NOTE 16 - PENSION AND OTHER POSTRETIREMENT BENEFIT PLANS:
Pension - The Company has a defined benefit pension plan covering
substantially all employees. The benefits are based on years of service and the
employee's compensation and are integrated with Social Security. The Company's
policy is to fund its pension plan in accordance with sound actuarial
principles.
50
<PAGE> 51
To determine the funded status of the Company's pension plan, the
Company's actuaries compare the market value of the plan's assets at the end of
the year with actuarial estimates of the projected benefit obligation.
Differences in estimates used and actual experience along with changes in
assumptions from year-to-year are included in net deferred gains or losses. The
Company amortizes the unrecognized net gains or losses whenever such amount
exceeds 10% of the greater of the projected benefit obligation or the market
value of plan assets. The unrecognized net obligation or net asset, unrecognized
net gain or loss and prior service costs were amortized over periods of 4 to 11
years for 1999, over periods of 5 to 13 years for 1998 and over periods of 5 to
12 years for 1997, which approximated the estimated average remaining service
periods of employees expected to receive benefits under the plan.
The Company recognized pension income of approximately $5.9 million, $6
million and $3.1 million in 1999, 1998 and 1997, respectively, under such
Company-sponsored plans. The 1998 amount excludes the $3.7 million curtailment
gain on the Medusa pension and postretirement benefits. In addition to the
Company-sponsored plan, certain union employees of the Company's Colorado cement
operations, the Great Lakes shipping company, the Butler, Kentucky aggregates
operation and the highway safety systems company are covered under a
multi-employer defined benefit plan administered by its union. Amounts
contributed to the multi-employer plans and included in pension expense were
$1.6 million in 1999, $1.5 million in 1998 and $0.8 million in 1997.
As a result of the closing of the Medusa corporate office, the expected
years of future service under the Medusa pension and postretirement plans was
reduced for a significant number of employees. As a result, the curtailment of
the Medusa plans resulted in the recognition of $3.7 million in gains in 1998.
Because the curtailment is directly related to the merger transaction, the
Company recognized the gain as a reduction in estimated transaction costs.
Directors Retirement Plan - The Company also has an unfunded defined
benefit pension plan covering the members of its Board of Directors who have
five years of service and are not participants in any of the Company's qualified
pension plans. At the May 1999 Annual Meeting, all benefits under this plan were
frozen. Directors who had retired prior to the May 1999 meeting are entitled to
a monthly benefit equal to two-thirds of their average monthly fee. The benefit
is payable over a number of months equal to such director's service on the
Board. The current non-employee members of the Board of Directors accepted the
alternative of foregoing their benefits under the Directors' Retirement Plan in
exchange for phantom stock equivalent units. During 1999, 1998 and 1997, the
Company included in expense $1 million, $535,000 and $151,000, respectively, to
provide for benefits accrued under the plan.
Retirement Savings Plan - The Company maintains a retirement savings
plan in which substantially all employees are eligible to participate. The
savings plan is designed to qualify under Sections 401(a) and 401(k) of the
Internal Revenue Code. Under the savings plan, a participating employee may
elect to defer taxation on a portion of his or her eligible earnings up to a
maximum amount defined by the Code, by directing the Company to contribute such
earnings to the savings plan on the employee's behalf. A participating employee
may also make after-tax contributions to the savings plan. The Company
contributed an amount to the savings plan equal to 50% of an employee's
contributions, subject to certain limitations. The Company's contribution was
increased to 75% of an employee's contribution, effective January 1, 2000. The
Company's matching contributions are invested solely in its common stock
acquired in open market purchases. All employee contributions are fully vested
when made. Through December 31, 1999, Company matching contributions were fully
vested when made. Thereafter, Company's matching contributions will not vest
until the employee's fifth anniversary with the Company. Amounts
51
<PAGE> 52
held by the savings plan for the account of a participating employee are
distributable as a lump sum upon termination of employment for any reason.
Subject to certain conditions and restrictions, a participating employee may
receive a distribution or a loan of a portion of his account balance while
employed by the Company. The Company contributed $3.4 million in 1999, $3
million in 1998 and $2.7 million in 1997, in matching contributions that were
charged to compensation expense and invested in the Company's common stock.
Supplemental Executive Retirement Plan - Effective October 1, 1997, the
Company adopted a non-qualified supplemental retirement plan for a group of
senior line and staff management personnel. Under this plan, participants will
receive an additional monthly retirement benefit. The additional benefit is
equal to the difference between the amount calculated under the Company's
qualified defined pension benefit plan discussed above and the amount that would
be calculated assuming there were no limitations imposed by the Internal Revenue
Code on compensation, including incentive compensation.
The plan is unfunded. The annual amount charged to pension expense and
accrued as a pension liability under the plan for financial reporting purposes
is the sum of (1) the present value of the actuarially determined projected
benefit obligation, using an assumed weighted average discount rate of 7.25% at
December 31, 1999 and 6.875% at December 31, 1998 and an assumed rate of
increase in future compensation levels of 4.5%, and (2) the amortization of the
unrecognized prior service cost over a period of 8 years, which approximates the
estimated average remaining service period of those certain senior employees
expected to receive benefits under the plan. The Company recognized pension
expense under this plan of $675,000, $612,000 and $146,000 during 1999, 1998 and
1997. As of December 31, 1999, the unrecognized prior service cost and the
projected benefit obligation for the plan were $1.6 million and $2.5 million,
respectively. As of December 31, 1998, the unrecognized prior service cost and
the projected benefit obligation for the plan were $1.8 million and $3 million,
respectively.
Supplemental Pension Liabilities - A small number of former employees
and retirees of the Company are eligible for payments under non-qualified
supplemental pension agreements. Under such arrangements, the Company accrued
the present value of probable future cash outlays during the expected service
life of the employee and charged that amount against earnings for financial
reporting purposes.
Health Care and Life Insurance Benefits - The Company offers health
care benefits to active employees and their dependents. Certain retirees under
the age of sixty-five and their dependents are also offered health care
benefits, which consist primarily of medical and life insurance benefits.
However, the Company reduces benefit payments for covered retirees sixty-five
years of age or older by benefits paid by Medicare.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation for general health care and
prescription drugs was approximately 7%, 8% and 8.5% as of December 31, 1999,
1998 and 1997, respectively. For all three years, the Company assumed rates
would decrease each successive year until it reaches rates ranging from 5% to 6%
in 2002 and thereafter. The health care cost trend rate assumption has a
significant effect on the amount of the obligation and periodic cost reported.
For example, a one-percentage-point change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
1-Percentage- 1-Percentage-
Point Increase Point Decrease
-------------- --------------
<S> <C> <C>
Effect on total of service and interest cost components 8.1% 7.2%
Effect on postretirement benefit obligation 7.9% 6.4%
</TABLE>
52
<PAGE> 53
Most of the Company's health care benefits are self-insured and
administered on cost plus fee arrangements with a major insurance company or
provided through health maintenance organizations. The Company also provides
life insurance benefits to its active and retired employees. Generally, life
insurance benefits for retired employees are reduced over a number of years from
the date of retirement to a minimum level.
The pension plan's assets exceeded the accumulated benefit obligation
as of both December 31, 1999 and 1998. None of the Company's accumulated
postretirement benefit obligation has been funded. The following table provides
a reconciliation of benefit obligations, plan assets, funded status of the plans
and amounts recognized in the Company's Consolidated Balance Sheets at December
31, 1999 and 1998:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------------------------------------------------------
PENSION BENEFITS OTHER BENEFITS
--------------------------- ---------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ (185.4) $ (181.8) $ (50.8) $ (52.9)
Service cost (4.6) (4.7) (0.9) (0.9)
Interest cost (12.6) (12.2) (3.1) (3.5)
Curtailment gain -- 2.6 -- 1.3
Actuarial gain (loss) 4.1 (0.4) 4.1 1.5
Benefits paid 11.2 11.1 3.5 3.7
---------- ---------- ---------- ----------
Benefit obligation at end of year (187.3) (185.4) (47.2) (50.8)
---------- ---------- ---------- ----------
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year 267.7 254.4 -- --
Actual return on plan assets 37.4 23.7 -- --
Employer contribution -- 0.7 -- --
Benefits paid (11.2) (11.1) -- --
---------- ---------- ---------- ----------
Fair value of plan assets at end of year 293.9 267.7 -- --
---------- ---------- ---------- ----------
Funded status 106.6 82.3 (47.2) (50.8)
Unrecognized net actuarial gain (61.0) (43.0) (22.8) (20.5)
Unrecognized prior service cost 2.8 3.2 (21.7) (24.2)
---------- ---------- ---------- ----------
Prepaid (accrued) benefit cost $ 48.4 $ 42.5 $ (91.7) $ (95.5)
========== ========== ========== ==========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF
DECEMBER 31
Discount rate 7.25% 6.875% 7.25% 6.875%
Expected return on plan assets 8.5% 8.5% N/A N/A
Rate of compensation increase 4.5% 4.5 to 5% N/A N/A
</TABLE>
<TABLE>
<CAPTION>
(IN MILLIONS)
--------------------------------------------------------------------------------
PENSION BENEFITS OTHER BENEFITS
-------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC BENEFIT INCOME
Service cost $ 4.6 $ 4.7 $ 3.9 $ 0.8 $ 0.9 $ 0.8
Interest cost 12.6 12.2 11.8 3.3 3.5 3.7
Actual return on plan assets (37.4) (23.7) (41.6) -- -- --
Asset gain deferred 15.0 2.4 23.5 -- -- --
Amortization of prior service cost 0.5 0.5 0.6 (2.4) (2.4) (2.4)
Recognized net actuarial gain (1.2) (2.1) (1.3) (2.1) (2.0) (2.3)
---------- ---------- ---------- ---------- ---------- ----------
Net periodic benefit income $ (5.9) $ (6.0) $ (3.1) $ (0.4) $ -- $ (0.2)
========== ========== ========== ========== ========== ==========
</TABLE>
53
<PAGE> 54
NOTE 17 - COMMITMENTS AND CONTINGENT LIABILITIES:
Operating Leases - Rental expense covering manufacturing, transportation
and certain other facilities and equipment for the years 1999, 1998 and 1997
totaled $26.9 million, $23.7 million and $21.9 million, respectively. Minimum
annual rental commitments as of December 31, 1999 under noncancellable leases
are set forth as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
AMOUNT
------------
<S> <C>
2000 $ 21.1
2001 17.1
2002 14.2
2003 10.7
2004 9.4
Thereafter 21.9
------------
$ 94.4
============
</TABLE>
Environmental Matters - The Company or its predecessors have conducted
industrial operations at some of the Company's 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, concrete products, or aggregates, contain chemical elements or compounds
that are designated as hazardous substances. The Company's operations involving
such materials are regulated by federal, state and local laws and regulations
pertaining to the protection of human health and the environment. In the past,
in accordance with industry practice, the Company disposed of various materials,
both onsite and offsite, in a manner, which in some cases would not be permitted
under current environmental regulations. Certain of these materials, if
discarded today, might be categorized as hazardous substances or wastes.
Remediation under environmental cleanup rules can be costly. Federal
environmental laws, as well as analogous laws in certain states, create joint
and several liability for the cost of cleaning up or correcting releases into
the environment of designated hazardous substances. Among those who may be held
jointly and severally liable are those who generated the hazardous substances,
those who arranged for disposal of the hazardous substances, those who owned or
operated the disposal site or facility at the time of disposal, and subsequent
owners and operators. With regard to the discontinued environmental services
business, the Company has both given indemnification to and received
indemnification from others for properties previously owned, although a few
courts have held that indemnification for such environmental liabilities is
unenforceable. No estimate of the extent of contamination, remediation cost or
recoverability of cost from prior owners, if any, is presently available
regarding these discontinued operations except as noted below.
While several of the Company's facilities are the subject of various
local, state or federal environmental proceedings and inquiries, most of these
investigations are in their preliminary stages and final results may not be
determined for years. In certain instances, the Company has been named as one of
several potentially responsible parties charged with cleanup liability pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act of
1980. The mere designation of an entity as a potentially responsible party does
not necessarily imply that it is probable that an asset has been impaired or a
liability has been incurred. In fact, management considers all of the current
Superfund sites in which
54
<PAGE> 55
the Company has been identified as a potentially responsible party to be of de
minimis consequence to the Company.
Despite the fact that current law imposes joint and several liability
on all parties at any Superfund site, the Company's accrual for estimated
liability in these instances reflects only the Company's expected share based on
the Company's assessment of (1) its proportionate volumetric contribution to the
waste material, (2) whether responsibility is being disputed, (3) the terms of
any existing agreements, (4) the solvency of other parties and (5) experience
regarding similar matters. While some of these matters have been, or are
expected to be, settled for de minimis amounts, others are in their preliminary
stages and final results may not be determined for years. The Company accrues a
charge for an environmental reserve when it is probable that a liability has
been incurred and the amount of the liability is reasonably estimable, whether
or not claims have been asserted. All environmental accruals have been recorded
without giving effect to any possible future recoveries from insurance or other
third parties. It is often difficult to estimate the future impact of
environmental matters and accruals are adjusted as further information develops
or circumstances change.
Accrued liabilities specifically related to environmental matters from
continuing operations were, in total, $11.2 million, $13.7 million and $13.6
million at December 31, 1999, 1998 and 1997. Additional amounts related to
closure, remediation and other environmental related liabilities were included
in the charge accrued in conjunction with the 1994 loss on disposal of the
discontinued environmental services operations. Cash expenditures often lag by a
number of years the period in which an accrual is recorded. Based on the
information developed to date, the Company does not believe it will be required
to spend significant sums on these matters in excess of the amounts already
provided for in the Company's financial statements. Until all environmental
studies, investigations, remediation work and negotiations with or litigation
against potential sources of recovery have been completed, however, the ultimate
cost that might be incurred by the Company to resolve these environmental issues
cannot be assured.
Additions to and expenditures charged against the Company's
environmental accruals related to continuing operations during the past three
years were as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
(IN MILLIONS)
------------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Beginning balance $ 13.7 $ 13.6 $ 3.4
Expense provisions 0.8 2.2 5.1
Assumed in Aggregates acquisitions -- -- 8.1
Expenditures (3.3) (2.1) (3.0)
---------- ---------- ----------
Ending balance $ 11.2 $ 13.7 $ 13.6
========== ========== ==========
</TABLE>
Based solely upon the information developed to date, which is subject
to change as additional information becomes available, management of the Company
believes that known matters can be successfully resolved in cooperation with
local, state and federal regulating agencies. However, because the Company's
results of operations vary considerably with construction activity and other
factors, it is at least reasonably possible that future charges for
environmental contingencies could, depending on their timing and magnitude, have
a material adverse impact on the Company's results of operations in a particular
period.
55
<PAGE> 56
Air Quality Issues - Regulations issued under the Clean Air Act
Amendments of 1990 may result in increased capital and operational expenses in
the future for a broad range of industrial sectors, including portland cement
manufacturing. Southdown does not know the precise amount of these costs but,
because of the age, condition and design of its plants, management does not
believe Southdown would be at a disadvantage with respect to its competitors as
a result of these regulations. These developments are significant, however, and
the air quality issues are still evolving. Some of the more significant
regulatory developments pertaining to air quality issues are as follows: (i)
promulgated regulations to more stringently regulate particulate matter and
photochemical oxidants, (ii) regulations to reduce emissions of various nitrogen
oxides, (iii) issuance of air toxics standards by the U.S. EPA and (iv) global
warming and the international accord to move toward greenhouse gas stabilization
or reduction after the turn of the century.
During 1997 and 1998, Southdown's Wampum, Pennsylvania cement plant
received five Notices of Violation from the U.S. EPA alleging certain air
emission violations. The Commonwealth of Pennsylvania, the U.S. Department of
Justice and Southdown finalized a consent decree, which resolves the violations
alleged in the Notices of Violation. The consent decree contains certain penalty
payments, which have been paid, as well as future compliance obligations.
Claims for Indemnification - The Mineral Management Service of the
Department of the Interior claimed that the Company's former oil and gas
subsidiary, Pelto Oil Company, owed royalties on two separate gas contract
settlement payments that Pelto received. When the Company sold Pelto in 1989,
the Company agreed to protect the purchaser from any future claims related to
these two payments. In a 1998 letter, the MMS advised that it was withdrawing
its royalty claim in the amount of $1.35 million on one of the settlement
payments because of a 1997 court ruling, which prohibited further claims against
the current owner of Pelto and that owner's affiliates. The MMS, however,
reserved its right to possibly reassert the claim at a later date.
The Company also disagrees with MMS' claim that an unspecified amount
of royalties are owed on the second gas contract settlement payment of $5.9
million. If one or both of MMS claims against Pelto are ultimately successful,
the Company could have liability for royalties, plus late payment charges, in
amounts, which are not currently determinable. Such expenditures would result in
a charge to discontinued operations.
Kosmos Cement Joint Venture Severance Tax Audit - In late 1997, the
State of Kentucky proposed a deficiency assessment against Kosmos Cement Company
for severance tax payments related to limestone mined at its Battletown,
Kentucky quarry. The total assessment is approximately $4.2 million, including
penalty and interest for the period under audit, 1991 through 1996. A major
portion of the Kentucky severance tax assessment relates to limestone mined by
Kosmos specifically for use by a local electric utility company. Southdown
believes that, under the terms of a supply agreement, the utility company is
responsible for severance taxes on limestone provided to it, but the utility
company has denied any liability related to the deficiency.
Kosmos is contesting the assessment and entered into discussions with
the Kentucky Revenue Cabinet over a year ago. Discussions are ongoing and the
Company is, at present, unable to evaluate whether an unfavorable outcome is
either probable or remote. A hearing before the Kentucky Board of Tax Appeals is
scheduled for April 2000. For amounts agreed to in any settlement and amounts
not paid by the local electric utility, the Company would indirectly bear 75% of
any settlement and legal costs
56
<PAGE> 57
through its ownership interest in Kosmos. Kosmos could then pursue legal
recourse against the utility company.
Discontinued Environmental Services Segment - The Company has both
given and received environmental and other indemnifications related to
properties the Company previously owned. At present, the Company is not able to
estimate the extent of contamination, remediation cost or recoverability of cost
from prior owners, if any, regarding these discontinued operations.
In late 1994 and the first quarter of 1995, the Company learned of some
soil and groundwater contamination at or near a subsidiary's former Alabama
hazardous waste processing facility. Although the Company sold the facility in
April 1995, the Company agreed to keep some liability for soil and groundwater
contamination at the facility prior to that time. Southdown hired a qualified
consultant to conduct the investigation of the contamination at the facility and
as a result of the consultant's preliminary report, Southdown increased the
amount reserved to resolve this matter by recording an additional $2.4 million
expense ($1.6 million, after-tax) in 1998.
Additional information gathered during preliminary work at the site
caused Southdown to increase the estimate of the total cost to resolve this
matter. Accordingly, Southdown recorded a $1.5 million charge ($1 million,
after-tax) in 1999. Because Southdown discontinued its hazardous waste disposal
business in 1994, the charge is reflected as a "loss from discontinued
operations, net of income taxes." Southdown's investigation has not definitively
determined the scope of the contamination or the extent of any cleanup that may
be required. It is too early to determine the amount of Southdown's exposure to
loss with any degree of certainty. Southdown has agreed to remediate the soil
and groundwater contamination at the Alabama facility to the extent required by
law, and it has filed lawsuits against the former owner and former customers of
the facility. The claims against that former owner and other potentially
responsible parties could significantly reduce or eliminate Southdown's loss
exposure.
Other - In addition to those matters separately disclosed above, the
Company has incurred in the regular course of business certain other commitments
and contingent liabilities including, among other things, (1) personal injury
lawsuits, (2) indemnity and other hold harmless agreements, (3) environmental
remediation liabilities, (4) product liability claims, (5) commercial disputes
and litigation, and (6) claims by disgruntled employees. These various
commitments and contingent liabilities, in the judgment of management, will not
result in losses that would materially affect the Company's consolidated balance
sheet. However, because the Company's results of operations vary considerably
with construction activity and other factors, it is at least reasonably possible
that charges for contingencies in the future could, depending on when they occur
and how large they are relative to results of operations or cash flows for a
particular period, have a material negative impact on the Company's results of
operations or cash flows for that period.
NOTE 18 - CAPITAL STOCK:
The authorized capital stock of the Company comprises 200,000,000
shares of common stock, $1.25 par value and 10,000,000 shares of preferred
stock, $.05 par value. American Stock Transfer & Trust Company, serves as the
registrar and transfer agent for the common stock.
57
<PAGE> 58
COMMON STOCK
At December 31, 1999, there were approximately 39,987,000 shares of
common stock issued and approximately 35,904,000 shares of common stock
outstanding and approximately 4.9 million shares were reserved for future
issuance upon exercise of options granted under employee benefit plans and stock
issued under phantom stock plans. The Company paid a quarterly dividend of $.10
per share of common stock from March 1997 to September 1998. In December 1998,
the quarterly dividend was increased to $.15 per share of common stock.
A reconciliation of the income available to common shareholders and
share amounts used in the computation of basic and diluted earnings per share
follows:
<TABLE>
<CAPTION>
(IN MILLIONS EXCEPT PER SHARE AMOUNTS)
----------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Earnings from continuing operations
before preferred stock dividends $ 213.4 $ 125.0 $ 153.7
Less: preferred stock dividends -- -- (2.5)
---------- ---------- ----------
Earnings available to common shareholders
for basic earnings per share 213.4 125.0 151.2
Effect of dilutive securities:
Convertible preferred stock -- -- 2.5
---------- ---------- ----------
Earnings available to common shareholders
for diluted earnings per share $ 213.4 $ 125.0 $ 153.7
========== ========== ==========
Average outstanding common shares for basic
earnings per share 37.6 38.2 36.9
Effect of dilutive securities:
Stock options 0.3 0.7 0.5
Convertible preferred stock -- -- 1.6
---------- ---------- ----------
Total outstanding shares for diluted earnings
per share 37.9 38.9 39.0
========== ========== ==========
Earnings per share from continuing operations
Basic $ 5.68 $ 3.27 $ 4.10
========== ========== ==========
Diluted $ 5.63 $ 3.22 $ 3.94
========== ========== ==========
</TABLE>
COMMON STOCK REPURCHASE PROGRAM
In 1997, 1,166,000 shares of common stock were purchased in open market
transactions at a cost of $46.3 million, pursuant to a common stock repurchase
program approved by the Company's Board of Directors. Medusa's Board of
Directors also previously authorized the purchase of outstanding common shares
under which Medusa, in its discretion, made open market purchases from time to
time. Medusa purchased approximately 500,000 shares of its then outstanding
common stock for $19.2 million in 1997. In 1998, both companies' Board of
Directors cancelled their respective common stock repurchase program and neither
company repurchased shares of common stock in 1998.
58
<PAGE> 59
On March 25, 1999, the Board of Directors approved a common stock
repurchase program under which Southdown was authorized to repurchase up to 2
million shares of its common stock. On September 16, 1999, the Board of
Directors expanded the repurchase program to include an additional 2 million
shares of common stock. During 1999, Southdown has made open market purchases of
2.9 million shares of common stock at a cost of $159 million.
SHAREHOLDER RIGHTS PLAN
The Company has a shareholder rights plan pursuant to which each holder
of common stock has one Right per share to purchase initially a Unit consisting
of one one-hundredth of a share of Preferred Stock, Junior Participating Series
C, at a purchase price of $60 per Unit, subject to adjustment. The Rights are
not exercisable generally until the earlier of (1) ten days following a public
announcement that a person or group has acquired, or obtained the right to
acquire, beneficial ownership of 15% or more of the outstanding shares of common
stock or (2) ten business days following the commencement of a tender offer or
exchange offer that would result in a person's becoming an acquiring person.
With certain exceptions, in the event a person becomes an acquiring
person, each Right (except those held by the acquiring person or certain related
persons, which become void) will then entitle the holder to purchase a number of
shares of common stock of the Company having a current market price of twice the
purchase price. In the event that any time on or after the stock acquisition
date, (1) the Company is acquired in a merger or other business combination,
with certain exceptions, or (2) 50% or more of the Company's assets or earning
power is sold or transferred, each Right (except those held by the acquiring
person or certain related persons, which become void) will then entitle the
holder to purchase a number of shares of common stock of the acquiring company
(or in certain cases its controlling person) having a current market price of
twice the purchase price.
The Rights expire at the close of business on March 14, 2001. At any
time until ten days following a stock acquisition date, the Company may redeem
the Rights in whole, but not in part, at a price of $.01 per Right, payable, at
the option of the Company, in cash, shares of common stock, or other
consideration. The provisions of the shareholder rights plan are intended to
discourage, or may have the effect of discouraging, partial tender offers,
front-end loaded two-tier tender offers and certain other types of coercive
takeover tactics and inadequate takeover bids and to encourage persons seeking
to acquire control of the Company first to negotiate with the Company. The
Company believes that these provisions on balance provide benefits to the
Company's shareholders by enhancing the Company's potential ability to negotiate
an improvement in terms with the proponent of an unfriendly or unsolicited
proposal to take over or restructure the Company.
PREFERRED STOCK
The Board of Directors is authorized to designate series of preferred
stock and fix the powers, preferences and rights of the shares of such series
and the qualifications, limitations or restrictions on these powers, preferences
and rights.
Series C Preferred Stock - In connection with the distribution of the
Rights on March 14, 1991, the Board of Directors of the Company authorized
400,000 shares of Series C Preferred Stock, none of which are outstanding. The
Series C Preferred Stock would be issued only upon the exercise of Rights and
59
<PAGE> 60
only if the Rights were exercised. The Rights are not exercisable as of the date
of this annual report. See "Shareholder Rights Plan."
Series D Preferred Stock - In 1994, the Company issued 1,725,000 shares
of Preferred Stock, $2.875 Cumulative Convertible Series D. Dividends paid on
the Series D Preferred Stock were approximately $2.5 million during 1997. In the
third quarter of 1997, all of the outstanding shares of the Series D Preferred
Stock were converted into approximately 2.6 million shares of common stock.
NOTE 19 - STOCK OPTION PLANS:
Employee Stock Option Plans - As of December 31, 1999, approximately
4.2 million options had been awarded under the stock option plans for officers
and certain key employees of the Company. The Employee Compensation and Benefits
Committee of the Board of Directors may determine to permit any option granted
under the plans to be exercisable immediately upon the date of grant or at any
time thereafter. However, no option granted under the plans may be exercised
within the first six months after the date of grant except in the event of the
death or disability of the optionee. Generally, options granted have typically
become exercisable over four equal annual installments at the end of each year
after the date of grant of continued employment with the Company. Options
granted are exercisable at the fair market value of the stock at the date of
grant and typically expire ten years from the date of grant. Unoptioned shares
available for grant as of December 31, 1999 were approximately 2.8 million.
Medusa Long-term Incentive Plan - In conjunction with the Medusa
merger, options granted under the Medusa long-term incentive plan were converted
into options to purchase approximately 522,000 shares of Company common stock.
The options are exercisable at the fair market value of the stock at the date of
grant, adjusted for the merger conversion ratio, and expire ten years from the
date of grant. Approximately 142,000, all of which are exercisable, remain
outstanding as of December 31, 1999.
Non-Employee Directors' Plan - Under the Nonqualified Stock Option Plan
for Non-Employee Directors, options for shares of the Company's common stock are
available for grant to directors of the Company who are not employed by the
Company or any of the Company's subsidiaries. At the May 1999 Annual Meeting,
the shareholders approved certain amendments to non-employee directors'
compensation arrangements. In place of previously existing compensation
arrangements, the amended Non-Employee Directors' Plan provides each director,
who is not an employee, a 10,000 option grant when first elected to the Board
and 7,500 options at each annual meeting after his first election. Chairmen of
each of the Board committees annually receive an additional 500 options. The
Chairman of the Board of Directors annually receives an additional 18,500
options. The Director's Plan also provides that: (1) options granted are
exercisable at the fair market value of the common stock at the date of grant
and expire ten years from the date of grant and (2) all options granted are
exercisable six months after the date of the grant. As of December 31, 1999, a
total of 311,500 options had been awarded under the Director's Plan. Unoptioned
shares available for grant as of December 31, 1999 under the Director's Plan
were 413,500.
60
<PAGE> 61
Summary information with respect to all of the Company's stock option
plans is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------------- ---------------------------- ----------------------------
NUMBER WEIGHTED NUMBER WEIGHTED NUMBER WEIGHTED
OF AVERAGE OF AVERAGE OF AVERAGE
SHARES PRICE SHARES PRICE SHARES PRICE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1: 1,003,743 $ 36.02 1,338,892 $ 29.28 1,682,288 $ 23.95
Granted 671,020 57.40 275,280 62.06 508,440 37.46
Exercised (138,212) 28.74 (514,174) 32.46 (805,776) 22.84
Canceled (52,443) 49.78 (96,255) 35.74 (46,060) 35.70
------------ ------------ ------------ ------------ ------------ ------------
Outstanding at December 31: 1,484,108 $ 45.93 1,003,743 $ 36.02 1,338,892 $ 29.28
============ ============ ============ ============ ============ ============
Options Exercisable at
December 31: 648,855 479,913 388,547
============ ============ ============
</TABLE>
The following table summarizes information about stock options
outstanding as of December 31, 1999:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------- -------------------------------
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------------------- -------------------------------
WEIGHTED-
AVERAGE
NUMBER REMAINING NUMBER WEIGHTED-
OUTSTANDING AT CONTRACTUAL WEIGHTED-AVERAGE EXERCISABLE AVERAGE
RANGE OF EXERCISE PRICES 12/31/99 LIFE EXERCISE PRICE AT 12/31/99 EXERCISE PRICE
----------------------------------------------------------------------------- -------------------------------
<S> <C> <C> <C> <C> <C>
$11.00 to 24.00 286,026 5.1 $ 20.17 234,176 $ 19.50
26.00 to 45.00 324,125 6.7 33.90 237,675 34.23
47.00 to 72.00 873,957 8.9 58.82 177,004 64.52
----------------------------------------------------------------------------- -------------------------------
$11.00 to 72.00 1,484,108 $ 45.93 648,855 $ 37.18
============================================================================= ===============================
</TABLE>
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" and continues to account for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Accordingly, because the exercise
price of stock-based compensation equals the market price of the underlying
stock on the date of grant, no compensation expense has been recognized for the
Company's stock plans.
The Company has estimated the pro forma fair value of its stock-based
compensation for disclosure purposes by using the Black-Scholes model, a
generally recognized option pricing model. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair value
at the grant date for awards consistent with the provisions of SFAS No. 123, the
Company's net earnings and diluted earnings per share would have been reduced by
$5.3 million or $0.14 per share, $3 million or $.08 per share and $3 million or
$.08 per share in 1999, 1998 and 1997, respectively. The pro forma fair value of
options at date of grant was estimated using the following assumptions:
61
<PAGE> 62
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected life (years) 7 5 5
Interest rate (U.S. Treasury 5 year notes) 6.63% 5.70% 6.20%
Volatility 30.72% 30.901% 30.341%
Dividend yield 1.04% .99% 1.27%
- ----------------------------------------------------------------------------------------------------------
Weighted average fair value at grant date $ 19.06 $ 17.09 $ 8.88
==========================================================================================================
</TABLE>
The computed pro forma impact only includes the effects of grants since
January 1, 1994 and may not be representative of cost to be expected in future
years.
Phantom Stock Plan - Effective January 1, 1997, the Board of Directors
adopted the Phantom Stock and Deferred Compensation Plan for Non-Employee
Directors. This plan called for the non-employee directors to receive on a
deferred basis, in lieu of cash, at least 50% of their monthly directors' fees
in fair market value of Common Stock. At the May 1999 Annual Meeting, all
benefits were frozen under the Phantom Stock Plan; and the amended stock option
plan for non-employee directors became the source of all compensation for future
service as directors. As of December 31, 1999, approximately 40,000 stock
equivalent units have been issued.
Medusa Restricted Stock Award Plans - Prior to the merger, Medusa had
restricted stock award plans, which provided for awards of common stock to
officers and non-employee directors of Medusa. These awards were subject to
resale restrictions. The terms of the plans provided the resale restrictions
would lapse in the event of a change in control of Medusa and, accordingly, the
recipients of these restricted stock awards were allowed to sell their shares in
conjunction with the merger transaction. Compensation expense of $8.5 million
related to these plans has been included in estimated merger related transaction
costs.
NOTE 20 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The Company's businesses are seasonal to the extent that construction
activity and hence, the demand for cement, concrete products, and construction
aggregates, tends to diminish during the winter months and other periods of
inclement weather. Specialty aggregates such as lawn and garden products have a
peak selling season in the Spring of the year. The following tables show certain
unaudited selected quarterly financial data for each of the last two years.
Gross profit shown is revenues less operating expense and depreciation expense
relating to cost of sales. Depreciation expense relating to cost of sales was
$16.4 million, $16.8 million, $18.1 million and $19.1 million in each of the
quarterly periods of 1999. Depreciation expense relating to 1998 cost of sales
was $15.9 million, $18 million, $15.2 million and $16.9 million in each of the
quarterly periods. Because of the dilutive effect of the extraordinary charge in
1999 and the acquisition charge in 1998, the sum of the earnings per share for
the four quarters of 1999 and 1998 does not equal the earnings per share for the
years ended December 31, 1999 and 1998.
62
<PAGE> 63
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 244.9 $ 333.4 $ 362.5 $ 331.0
========== ========== ========== ==========
Gross profit $ 65.0 $ 116.9 $ 129.8 $ 115.0
========== ========== ========== ==========
Earnings before interest and income taxes $ 45.9 $ 97.3 $ 108.9 $ 87.7
========== ========== ========== ==========
Earnings from continuing operations $ 29.5 $ 61.5 $ 67.4 $ 55.0
Loss from discontinued operations,
net of income taxes -- (1.0) -- --
Extraordinary charge, net of income taxes -- -- -- (9.2)
---------- ---------- ---------- ----------
Net earnings $ 29.5 $ 60.5 $ 67.4 $ 45.8
========== ========== ========== ==========
Earnings (loss) per share:
Basic
Earnings from continuing operations $ 0.76 $ 1.62 $ 1.80 $ 1.53
Loss from discontinued operations,
net of income taxes -- (0.03) -- --
Extraordinary charge, net of income taxes -- -- -- (0.26)
---------- ---------- ---------- ----------
$ 0.76 $ 1.59 $ 1.80 $ 1.27
========== ========== ========== ==========
Diluted
Earnings from continuing operations $ 0.75 $ 1.60 $ 1.78 $ 1.51
Loss from discontinued operations,
net of income taxes -- (0.03) -- --
Extraordinary charge, net of income taxes -- -- -- (0.25)
---------- ---------- ---------- ----------
$ 0.75 $ 1.57 $ 1.78 $ 1.26
========== ========== ========== ==========
</TABLE>
63
<PAGE> 64
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
--------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 224.9 $ 317.7 $ 341.4 $ 300.7
========== ========== ========== ==========
Gross profit $ 52.8 $ 107.4 $ 128.0 $ 111.3
========== ========== ========== ==========
Acquisition charge (credit) $ -- $ 82.9 $ (4.0) $ (3.7)
========== ========== ========== ==========
Earnings (loss) before interest and income taxes $ 28.1 $ (0.5) $ 110.0 $ 88.8
========== ========== ========== ==========
Earnings (loss) from continuing operations $ 15.7 $ (23.1) $ 73.1 $ 59.3
Loss from discontinued operations,
net of income taxes -- -- (1.6) --
---------- ---------- ---------- ----------
Net earnings (loss) $ 15.7 $ (23.1) $ 71.5 $ 59.3
========== ========== ========== ==========
Earnings (loss) per share:
Basic
Earnings (loss) from continuing operations $ 0.41 $ (0.60) $ 1.90 $ 1.54
Loss from discontinued operations,
net of income taxes -- -- (0.04) --
---------- ---------- ---------- ----------
$ 0.41 $ (0.60) $ 1.86 $ 1.54
========== ========== ========== ==========
Diluted
Earnings (loss) from continuing operations $ 0.41 $ (0.60) $ 1.88 $ 1.52
Loss from discontinued operations,
net of income taxes -- -- (0.04) --
---------- ---------- ---------- ----------
$ 0.41 $ (0.60) $ 1.84 $ 1.52
========== ========== ========== ==========
</TABLE>
64
<PAGE> 65
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF SOUTHDOWN, INC.
We have audited the accompanying consolidated balance sheets of Southdown, Inc.
and subsidiary companies as of December 31, 1999 and 1998, and the related
statements of consolidated earnings, shareholders' equity, cash flows and
comprehensive income for each of the three years in the period ended December
31, 1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Southdown, Inc. and subsidiary
companies as of December 31, 1999 and 1998, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1999 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Houston, Texas
January 26, 2000
65
<PAGE> 66
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item will be included in a definitive
proxy statement, pursuant to Regulation 14A, to be filed not later than 120 days
after the close of the Company's fiscal year. Such information is incorporated
by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item will be included in a definitive
proxy statement, pursuant to Regulation 14A, to be filed not later than 120 days
after the close of the Company's fiscal year. Such information is incorporated
by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item will be included in a definitive
proxy statement, pursuant to Regulation 14A, to be filed not later than 120 days
after the close of the Company's fiscal year. Such information is incorporated
by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item will be included in a definitive
proxy statement, pursuant to Regulation 14A, to be filed not later than 120 days
after the close of the Company's fiscal year. Such information is incorporated
by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. FINANCIAL STATEMENTS
Item 8 of this report lists certain consolidated financial
statements and supplementary data of the Company and its
subsidiaries.
2. FINANCIAL STATEMENT SCHEDULES
No schedules are included because they are not applicable or
the required information is shown in the financial statements
or notes thereto.
66
<PAGE> 67
3. EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of March 17, 1998,
as amended, among Medusa Corporation, the Company and
Bedrock Merger Corp. - incorporated by reference from
Exhibit 2.1 to the Company's Registration Statement on
Form S-4 (Registration Statement No. 333-49161) filed
April 2, 1998 ............................................
*3.1 Restated Articles of Incorporation of the Company, as
amended through July 16, 1998 ............................
*3.2 Bylaws of the Company amended as of January 27, 2000 .....
4.1 Certain instruments defining the rights of holders of
long-term debt instruments representing less than 10% of
the consolidated assets of the Company have not been filed
as exhibits to this report. The Company agrees to furnish
a copy of any such instrument to the Commission upon
request ..................................................
4.2 Rights Agreement dated as of March 4, 1991 between the
Company and American Stock Transfer and Trust Company, as
successor Rights Agent - incorporated by reference from
Exhibit 4.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended 1996 ...........................
+10.1 1987 Stock Option Plan of Southdown, Inc. - incorporated
by reference from Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1992
(Commission File No. 001-6117) ...........................
+10.2 Form of Nonqualified Stock Option Agreement - incorporated
by reference from Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1997 .......
+10.3 1989 Stock Option Plan of Southdown, Inc. - incorporated
by reference from Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1998 .......
+10.4 Forms of Nonqualified Stock Option Agreement -
incorporated by reference from Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1997 ...............................................
</TABLE>
67
<PAGE> 68
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
*+10.5 Special Severance Plan for Salaried Employees, as amended
and restated effective January 31, 2000 ..................
*+10.6 Form of Employment Agreements between the Company and
certain executive officers, as more specifically described
below:
Date of
Name of Officer Employment Agreement
--------------- --------------------
(a) Clarence C. Comer January 31, 2000
(b) J. Bruce Tompkins January 31, 2000
(c) Dennis M. Thies January 31, 2000
*+10.7 Form of Employment Agreements between the Company and
certain executive officers, as more specifically described
below:
Date of
Name of Officer Employment Agreement
--------------- --------------------
(a) Patrick S. Bullard January 31, 2000
(b) R. Frank Craddock, Jr. January 31, 2000
(c) Stephen R. Miley January 31, 2000
(d) David J. Repasz January 31, 2000
*+10.8 Form of Indemnification Agreement between the Company and
certain executive officers dated January 31, 2000 ........
*+10.9 Form of Tax Protection Agreement between the Company and
certain executive officers dated January 31, 2000 ........
*+10.10 Southdown, Inc. Executive Severance Plan, as amended and
restated effective January 31, 2000, by and among the
Company and the persons named therein ....................
+10.11 Southdown, Inc. 1991 Nonqualified Stock Option Plan for
Non-employee Directors - as amended November 21, 1996 -
incorporated by reference from Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1996 ...............................................
* +10.12 Amendment to the Southdown, Inc. 1991 Non-qualified Stock
Option Plan for Non-employee Directors
* +10.13 Amendment to Directors' Stock Option Plan ................
+10.14 Southdown, Inc. Annual Incentive Plan dated April 11, 1996
- incorporated by reference from Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1996 ...............................................
</TABLE>
68
<PAGE> 69
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
+10.15 Southdown, Inc. Key Employee Security Option Plan
effective December 30, 1997 - incorporated by reference
from Exhibit 10.15 to the Company's Annual Report on Form
10-K for the fiscal year ended 1997 ......................
*+10.16 Supplemental Executive Retirement Plan, as amended
effective January 31, 2000 ...............................
*+10.17 Form of Supplemental Executive Retirement Plan, Agreement
Outlining Supplemental Benefits Upon a Change in Control
between the Company and certain executive officers, dated
January 31, 2000 .........................................
+10.18 Southdown, Inc. 1999 Phantom Stock Plan for Non-Employee
Directors - incorporated by reference from Exhibit 99.1 to
the Company's Registration Statement on Form S-8
(Registration Statement No. 333-78887) filed
May 20, 1999 .............................................
+10.19 Southdown, Inc. Phantom Stock and Deferred Compensation
Plan for Non-Employee Directors, dated November 30, 1996,
as amended on March 25, 1999 - incorporated by reference
from Exhibit 99.3 to the Company's Current Report on Form
8-K dated May 20, 1999 ...................................
+10.20 Southdown, Inc. Directors' Retirement Plan effective
February 14, 1995, as amended through March 25, 1999 -
incorporated by reference from Exhibit 99.4 to the
Company's Current Report on Form 8-K dated
May 20, 1999 .............................................
+10.21 Southdown, Inc. 1999 Restricted Stock Grants Plan dated
January 1999 and Form of Restricted Stock Agreement
effective as of January 21, 1999 - incorporated by
reference from Exhibit 99.5 to the Company's Current
Report on Form 8-K dated May 20, 1999 ....................
10.22 Third Amended and Restated Credit Agreement as of November
3, 1995 among the Company; Wells Fargo Bank, N.A.; Societe
Generale, Southwest Agency; Credit Suisse; Caisse
Nationale De Credit Agricole; Banque Paribas; CIBC Inc.;
The Bank of Nova Scotia; and The First National Bank of
Boston - incorporated by reference to Exhibit 99.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995 .................................
</TABLE>
69
<PAGE> 70
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
10.23 Letter Agreement dated February 29, 1996, amending the
Third Amended and Restated Credit Agreement as of November
3, 1995, among the Company and the banks party thereto -
incorporated by reference from Exhibit 99.2 to the
Company's Registration Statement on Form S-4 (Registration
No. 333-02585) filed April 17, 1996 ......................
10.24 Amendment Number Two to Third Amended and Restated Credit
Agreement, dated as of September 30, 1996, among the
Company; Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse; Caisse Nationale De
Credit Agricole; Banque Paribas; CIBC Inc.; The Bank of
Nova Scotia; and The First National Bank of Boston -
incorporated by reference from Exhibit 99.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 ......................................
10.25 Amendment Number Three to the Third Amended and Restated
Credit Agreement, dated as of August 6, 1997, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse First Boston; Caisse
Nationale De Credit Agricole; Banque Paribas; CIBC Inc.;
The Bank of Nova Scotia; and BankBoston, N.A. -
incorporated by reference from Exhibit 99.3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997 ......................................
10.26 Amendment Number Four to the Third Amended and Restated
Credit Agreement, dated as of May 14, 1998, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; The Bank of Nova Scotia; Credit Suisse
First Boston; Credit Agricole Indosuez; CIBC Inc.; Banque
Paribas and BankBoston, N.A. - incorporated by reference
from Exhibit 99.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 ............
10.27 Amendment Number Five to the Third Amended and Restated
Credit Agreement, dated as of December 18, 1998, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; The Bank of Nova Scotia; Credit Suisse
First Boston; Credit Agricole Indosuez; PNC Bank, N.A.;
Paribas and BankBoston, N.A - incorporated by reference
from Exhibit 10.21 to the Company's Annual Report on Form
10-K for the fiscal year ended 1998 ......................
*10.28 Amendment Number Six to Third Amended and Restated Credit
Agreement, dated as of December 17, 1999, among the
Company; Wells Fargo Bank, N.A.; Credit Suisse
FirstBoston; Credit Agricole Indosuez; Suntrust Bank,
Atlanta; Paribas and The Bank of Nova Scotia .............
</TABLE>
70
<PAGE> 71
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
*10.29 Revolving Credit Agreement, dated as of December 17, 1999,
among the Company; Wells Fargo Bank, N.A.; Suntrust Bank,
Atlanta; The Bank of Nova Scotia; Bank One, Texas, N.A.;
Credit Agricole Indosuez; and Paribas ....................
10.30 Agreement dated May 1, 1998 by and between the Company and
the Cement, Lime, Gypsum and Allied Workers Division,
International Brotherhood of Boilermakers, Iron Builders,
Blacksmiths, Forgers and Helpers, AFL-CIO, Local Union
D-23 - incorporated by reference from Exhibit 99.2 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998 ......................................
10.31 Agreement dated May 1, 1998 by and between the Company and
the Cement, Lime, Gypsum and Allied Workers Division,
International Brotherhood of Boilermakers, Iron Builders,
Blacksmiths, Forgers and Helpers, AFL-CIO, Local Union
D-480 - incorporated by reference from Exhibit 99.3 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998 ......................................
10.32 Agreement dated March 1, 1998 by and between the Company
and the International Brotherhood of Boilermakers, Cement,
Lime, Gypsum and Allied Workers Division, Lodge D-357 -
incorporated by reference from Exhibit 99.4 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998 ......................................
*10.33 Agreement dated May 1, 1999 by and between Kosmos Cement
Company and the International Brotherhood of Boilermakers,
Cement, Lime, Gypsum and Allied Workers Division, Lodge
D-595 ....................................................
10.34 Agreement dated August 16, 1993, as amended November 16,
1995, by and between the Company and the United
Paperworkers International Union, Local 30049 -
incorporated by reference from Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1995 ...............................................
10.35 Agreement dated as of December 15, 1997 between Kosmos
Cement Company and International Brotherhood of
Boilermakers, Cement, Lime, Gypsum and Allied Workers
Division, Lodge D-592 - incorporated by reference from
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended 1997 ...........................
</TABLE>
71
<PAGE> 72
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBIT PAGE
------ ---------------------- ----
<S> <C> <C>
10.36 Agreement dated May 1, 1996 by and between Medusa
Corporation and the International Brotherhood of
Boilermakers, Cement, Lime, Gypsum and Allied Workers
Division, Local Lodge D-79 - incorporated by reference
from Exhibit 10.28 to the Company's Annual Report on Form
10-K for the fiscal year ended 1998 ......................
10.37 Agreement dated July 31, 1998 by and between the Company
and the United Cement, Lime, Gypsum and Allied Workers
Division, Boilermakers International Union, A.F.L.-C.I.O.,
Local D-476 - incorporated by reference from Exhibit 10.29
to the Company's Annual Report on Form 10-K for the fiscal
year ended 1998 ..........................................
10.38 Agreement dated March 1, 1995 by and between the Company
and Cement, Lime and Gypsum Worker's Division
Boilermaker's Union, Lodge D-140 - incorporated by
reference from Exhibit 99.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1995 ............................................
10.39 Agreement dated June 21, 1995 by and between the Company
and the International Union of Operating Engineers, Local
Union No. 9 - incorporated by reference from Exhibit 99.2
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995 .........................
*10.40 Agreement dated August 29, 1999 by and between the Company
and the International Brotherhood of Boilermakers, the
United Cement, Lime, Gypsum and Allied Workers Division,
Local Union No. D-173 ....................................
*11 Statement of computation of per share earnings ...........
*21 Significant Subsidiaries of Southdown, Inc. as of
December 31, 1999 ........................................
*23 Consent of independent auditors ..........................
*27 Financial Data Schedule
</TABLE>
--------------------
* Filed herewith
+ Compensatory plan or management agreement.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter ended
December 31, 1999.
72
<PAGE> 73
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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)
By CLARENCE C. COMER
---------------------------------------
Clarence C. Comer
President and Chief Executive Officer
Date: February 25, 2000
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURES POSITIONS DATE
---------- --------- ----
<S> <C> <C>
CLARENCE C. COMER President, Chief Executive Officer February 25, 2000
- -------------------------------------------- and Director (Principal Executive
Clarence C. Comer Officer)
DENNIS M. THIES Executive Vice President and Chief February 25, 2000
- -------------------------------------------- Financial Officer
Dennis M. Thies (Principal Financial Officer)
RICARDO ARREDONDO Vice President and Controller February 25, 2000
- -------------------------------------------- (Principal Accounting Officer)
Ricardo Arredondo
ROBERT S. EVANS Director February 25, 2000
- --------------------------------------------
Robert S. Evans
ROBERT G. POTTER Director February 25, 2000
- --------------------------------------------
Robert G. Potter
FRANK J. RYAN Director February 25, 2000
- --------------------------------------------
Frank J. Ryan
WHITSON SADLER Director February 25, 2000
- --------------------------------------------
Whitson Sadler
ROBERT J. SLATER Director February 25, 2000
- --------------------------------------------
Robert J. Slater
DAVID J. TIPPECONNIC Director February 25, 2000
- --------------------------------------------
David J. Tippeconnic
J. BRUCE TOMPKINS Director February 25, 2000
- --------------------------------------------
J. Bruce Tompkins
GEORGE E. UDING, JR. Director February 25, 2000
- --------------------------------------------
George E. Uding, Jr.
V. H. VAN HORN, III Director February 25, 2000
- --------------------------------------------
V. H. Van Horn, III
STEVEN B. WOLITZER Director February 25, 2000
- --------------------------------------------
Steven B. Wolitzer
</TABLE>
73
<PAGE> 74
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
2.1 Agreement and Plan of Merger dated as of March 17, 1998,
as amended, among Medusa Corporation, the Company and
Bedrock Merger Corp. - incorporated by reference from
Exhibit 2.1 to the Company's Registration Statement on
Form S-4 (Registration Statement No. 333-49161) filed
April 2, 1998
*3.1 Restated Articles of Incorporation of the Company, as
amended through July 16, 1998
*3.2 Bylaws of the Company amended as of January 27, 2000
4.1 Certain instruments defining the rights of holders of
long-term debt instruments representing less than 10% of
the consolidated assets of the Company have not been filed
as exhibits to this report. The Company agrees to furnish
a copy of any such instrument to the Commission upon
request
4.2 Rights Agreement dated as of March 4, 1991 between the
Company and American Stock Transfer and Trust Company, as
successor Rights Agent - incorporated by reference from
Exhibit 4.3 to the Company's Annual Report on Form 10-K
for the fiscal year ended 1996
+10.1 1987 Stock Option Plan of Southdown, Inc. - incorporated
by reference from Exhibit 10.3 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1992
(Commission File No. 001-6117)
+10.2 Form of Nonqualified Stock Option Agreement - incorporated
by reference from Exhibit 10.1 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1997
+10.3 1989 Stock Option Plan of Southdown, Inc. - incorporated
by reference from Exhibit 10.2 to the Company's Annual
Report on Form 10-K for the fiscal year ended 1998
+10.4 Forms of Nonqualified Stock Option Agreement -
incorporated by reference from Exhibit 10.3 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1997
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
*+10.5 Special Severance Plan for Salaried Employees, as amended
and restated effective January 31, 2000
*+10.6 Form of Employment Agreements between the Company and
certain executive officers, as more specifically described
below:
Date of
Name of Officer Employment Agreement
--------------- --------------------
(a) Clarence C. Comer January 31, 2000
(b) J. Bruce Tompkins January 31, 2000
(c) Dennis M. Thies January 31, 2000
*+10.7 Form of Employment Agreements between the Company and
certain executive officers, as more specifically described
below:
Date of
Name of Officer Employment Agreement
--------------- --------------------
(a) Patrick S. Bullard January 31, 2000
(b) R. Frank Craddock, Jr. January 31, 2000
(c) Stephen R. Miley January 31, 2000
(d) David J. Repasz January 31, 2000
*+10.8 Form of Indemnification Agreement between the Company and
certain executive officers dated January 31, 2000
*+10.9 Form of Tax Protection Agreement between the Company and
certain executive officers dated January 31, 2000
*+10.10 Southdown, Inc. Executive Severance Plan, as amended and
restated effective January 31, 2000, by and among the
Company and the persons named therein
+10.11 Southdown, Inc. 1991 Nonqualified Stock Option Plan for
Non-employee Directors - as amended November 21, 1996 -
incorporated by reference from Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1996
* +10.12 Amendment to the Southdown, Inc. 1991 Non-qualified Stock
Option Plan for Non-employee Directors
* +10.13 Amendment to Directors' Stock Option Plan
+10.14 Southdown, Inc. Annual Incentive Plan dated April 11, 1996
- incorporated by reference from Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1996
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
+10.15 Southdown, Inc. Key Employee Security Option Plan
effective December 30, 1997 - incorporated by reference
from Exhibit 10.15 to the Company's Annual Report on Form
10-K for the fiscal year ended 1997
*+10.16 Supplemental Executive Retirement Plan, as amended
effective January 31, 2000
*+10.17 Form of Supplemental Executive Retirement Plan, Agreement
Outlining Supplemental Benefits Upon a Change in Control
between the Company and certain executive officers, dated
January 31, 2000
+10.18 Southdown, Inc. 1999 Phantom Stock Plan for Non-Employee
Directors - incorporated by reference from Exhibit 99.1 to
the Company's Registration Statement on Form S-8
(Registration Statement No. 333-78887) filed
May 20, 1999
+10.19 Southdown, Inc. Phantom Stock and Deferred Compensation
Plan for Non-Employee Directors, dated November 30, 1996,
as amended on March 25, 1999 - incorporated by reference
from Exhibit 99.3 to the Company's Current Report on Form
8-K dated May 20, 1999
+10.20 Southdown, Inc. Directors' Retirement Plan effective
February 14, 1995, as amended through March 25, 1999 -
incorporated by reference from Exhibit 99.4 to the
Company's Current Report on Form 8-K dated
May 20, 1999
+10.21 Southdown, Inc. 1999 Restricted Stock Grants Plan dated
January 1999 and Form of Restricted Stock Agreement
effective as of January 21, 1999 - incorporated by
reference from Exhibit 99.5 to the Company's Current
Report on Form 8-K dated May 20, 1999
10.22 Third Amended and Restated Credit Agreement as of November
3, 1995 among the Company; Wells Fargo Bank, N.A.; Societe
Generale, Southwest Agency; Credit Suisse; Caisse
Nationale De Credit Agricole; Banque Paribas; CIBC Inc.;
The Bank of Nova Scotia; and The First National Bank of
Boston - incorporated by reference to Exhibit 99.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.23 Letter Agreement dated February 29, 1996, amending the
Third Amended and Restated Credit Agreement as of November
3, 1995, among the Company and the banks party thereto -
incorporated by reference from Exhibit 99.2 to the
Company's Registration Statement on Form S-4 (Registration
No. 333-02585) filed April 17, 1996
10.24 Amendment Number Two to Third Amended and Restated Credit
Agreement, dated as of September 30, 1996, among the
Company; Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse; Caisse Nationale De
Credit Agricole; Banque Paribas; CIBC Inc.; The Bank of
Nova Scotia; and The First National Bank of Boston -
incorporated by reference from Exhibit 99.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997
10.25 Amendment Number Three to the Third Amended and Restated
Credit Agreement, dated as of August 6, 1997, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; Credit Suisse First Boston; Caisse
Nationale De Credit Agricole; Banque Paribas; CIBC Inc.;
The Bank of Nova Scotia; and BankBoston, N.A. -
incorporated by reference from Exhibit 99.3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997
10.26 Amendment Number Four to the Third Amended and Restated
Credit Agreement, dated as of May 14, 1998, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; The Bank of Nova Scotia; Credit Suisse
First Boston; Credit Agricole Indosuez; CIBC Inc.; Banque
Paribas and BankBoston, N.A. - incorporated by reference
from Exhibit 99.1 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998
10.27 Amendment Number Five to the Third Amended and Restated
Credit Agreement, dated as of December 18, 1998, among the
Company, Wells Fargo Bank, N.A.; Societe Generale,
Southwest Agency; The Bank of Nova Scotia; Credit Suisse
First Boston; Credit Agricole Indosuez; PNC Bank, N.A.;
Paribas and BankBoston, N.A - incorporated by reference
from Exhibit 10.21 to the Company's Annual Report on Form
10-K for the fiscal year ended 1998
*10.28 Amendment Number Six to Third Amended and Restated Credit
Agreement, dated as of December 17, 1999, among the
Company; Wells Fargo Bank, N.A.; Credit Suisse
FirstBoston; Credit Agricole Indosuez; Suntrust Bank,
Atlanta; Paribas and The Bank of Nova Scotia
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
*10.29 Revolving Credit Agreement, dated as of December 17, 1999,
among the Company; Wells Fargo Bank, N.A.; Suntrust Bank,
Atlanta; The Bank of Nova Scotia; Bank One, Texas, N.A.;
Credit Agricole Indosuez; and Paribas
10.30 Agreement dated May 1, 1998 by and between the Company and
the Cement, Lime, Gypsum and Allied Workers Division,
International Brotherhood of Boilermakers, Iron Builders,
Blacksmiths, Forgers and Helpers, AFL-CIO, Local Union
D-23 - incorporated by reference from Exhibit 99.2 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998
10.31 Agreement dated May 1, 1998 by and between the Company and
the Cement, Lime, Gypsum and Allied Workers Division,
International Brotherhood of Boilermakers, Iron Builders,
Blacksmiths, Forgers and Helpers, AFL-CIO, Local Union
D-480 - incorporated by reference from Exhibit 99.3 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998
10.32 Agreement dated March 1, 1998 by and between the Company
and the International Brotherhood of Boilermakers, Cement,
Lime, Gypsum and Allied Workers Division, Lodge D-357 -
incorporated by reference from Exhibit 99.4 to the
Company's Quarterly Report on Form 10-Q for the Quarter
ended June 30, 1998
*10.33 Agreement dated May 1, 1999 by and between Kosmos Cement
Company and the International Brotherhood of Boilermakers,
Cement, Lime, Gypsum and Allied Workers Division, Lodge
D-595
10.34 Agreement dated August 16, 1993, as amended November 16,
1995, by and between the Company and the United
Paperworkers International Union, Local 30049 -
incorporated by reference from Exhibit 10.14 to the
Company's Annual Report on Form 10-K for the fiscal year
ended 1995
10.35 Agreement dated as of December 15, 1997 between Kosmos
Cement Company and International Brotherhood of
Boilermakers, Cement, Lime, Gypsum and Allied Workers
Division, Lodge D-592 - incorporated by reference from
Exhibit 10.23 to the Company's Annual Report on Form 10-K
for the fiscal year ended 1997
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
------ ----------------------
<S> <C>
10.36 Agreement dated May 1, 1996 by and between Medusa
Corporation and the International Brotherhood of
Boilermakers, Cement, Lime, Gypsum and Allied Workers
Division, Local Lodge D-79 - incorporated by reference
from Exhibit 10.28 to the Company's Annual Report on Form
10-K for the fiscal year ended 1998
10.37 Agreement dated July 31, 1998 by and between the Company
and the United Cement, Lime, Gypsum and Allied Workers
Division, Boilermakers International Union, A.F.L.-C.I.O.,
Local D-476 - incorporated by reference from Exhibit 10.29
to the Company's Annual Report on Form 10-K for the fiscal
year ended 1998
10.38 Agreement dated March 1, 1995 by and between the Company
and Cement, Lime and Gypsum Worker's Division
Boilermaker's Union, Lodge D-140 - incorporated by
reference from Exhibit 99.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended
June 30, 1995
10.39 Agreement dated June 21, 1995 by and between the Company
and the International Union of Operating Engineers, Local
Union No. 9 - incorporated by reference from Exhibit 99.2
to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995
*10.40 Agreement dated August 29, 1999 by and between the Company
and the International Brotherhood of Boilermakers, the
United Cement, Lime, Gypsum and Allied Workers Division,
Local Union No. D-173
*11 Statement of computation of per share earnings
*21 Significant Subsidiaries of Southdown, Inc. as of
December 31, 1999
*23 Consent of independent auditors
*27 Financial Data Schedule
</TABLE>
--------------------
* Filed herewith
+ Compensatory plan or management agreement.
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF AMENDMENT TO ) STATE OF TEXAS
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 16th day of July, 1998,
BEFORE ME, Linda F. Harrell, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
PATRICK S. BULLARD and THOMAS E. DAMAN, appearing herein and acting for
Southdown, Inc. (of which corporation they are, respectively, Vice President --
General Counsel & Secretary and Vice President -- Treasurer), a corporation
organized and existing under the laws of the State of Louisiana, domiciled in
the Parish of Orleans, State of Louisiana, organized by Articles of
Incorporation effective April 4, 1930, which Articles, as amended, were restated
pursuant to Restated Articles of Incorporation effective September 15, 1983, and
further amended as of April 10, 1987, December 2, 1987, April 23, 1988, May 23,
1988, March 4, 1991, January 25, 1994 and June 26, 1998 (the "Corporation"), who
declared that pursuant to Sections 24B(6) and 33A of the Louisiana Business
Corporation Law, Article IIIB of the Restated Articles of Incorporation of the
Corporation and resolutions of the Board of Directors of the Corporation adopted
at a special meeting of the Board of Directors of the Corporation held on March
17, 1998, they now appear for the purpose of executing this act of amendment and
putting into authentic form the amendment so adopted by the Board of Directors
of the Corporation.
AND THE SAID APPEARERS further declare that by a unanimous vote of the
Board of Directors of said Corporation, it was:
RESOLVED, that Article III of the Restated Articles of Incorporation of
Southdown, Inc. be amended so that:
1. The first sentence of Article III, Paragraph E. is hereby deleted
and there is substituted in its place the following:
E. Of the aforesaid 10,000,000 shares of Preferred Stock, 2,000,000
shares shall constitute a separate series of preferred shares designated
"Preferred Stock, Cumulative Junior Participating Series C" (the "Series C
Preferred Stock").
APPEARERS further stated that all of the shares of the Corporation have
par value; that the Corporation is authorized to issue 210,000,000 shares, of
which 200,000,000 are common shares of the par value of $1.25 and 10,000,000 are
preferred shares of the par value of $0.05 per share; that of the preferred
shares, 2,000,000 have been designated as the Series C Preferred Stock; and that
the
<PAGE> 2
Board of Directors of the Corporation has the authority to amend the Articles to
fix the preferences, limitations, and relative rights of the preferred shares,
and to establish, and fix variations and relative rights and preferences as
between, series of preferred shares, all as more fully set out in Article III of
the Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment
in authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By:
----------------------------------------
Patrick S. Bullard, Vice President -
General Counsel and Secretary
By:
----------------------------------------
Thomas E. Daman
Vice President - Treasurer
WITNESSES:
- --------------------------------
Margaret Nunez
- --------------------------------
John Randall Thompson
--------------------------------
NOTARY PUBLIC
-2-
<PAGE> 3
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
OF SOUTHDOWN, INC.
DATED JUNE 25,1998
<PAGE> 4
ARTICLES OF AMENDMENT TO ) STATE OF TEXAS
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 25th day of June, 1998
BEFORE ME, Linda F. Harrell, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
CLARENCE C. COMER and PATRICK S. BULLARD, appearing herein and acting for
Southdown, Inc. (of which Corporation they are, respectively, President and
Secretary), a corporation organized and existing under the laws of the State of
Louisiana, domiciled in the Parish of Orleans, State of Louisiana, organized by
Articles of Incorporation effective April 4, 1930, which Articles, as amended,
were restated pursuant to Restated Articles of Incorporation effective September
15, 1983, and further amended as of April 10, 1987, December 2, 1987, April 23,
1988, May 23, 1988, March 4, 1991 and January 25, 1994 ("the Corporation"), who
declared that pursuant to Sections 24B(6) and 33A of the Louisiana Business
Corporation Law, Article IIIB of the Restated Articles of Incorporation of the
Corporation, resolutions of the Board of Directors of the Corporation adopted at
regular and special meetings of the Board of Directors of the Corporation held
on March 17, 1998 and March 26, 1998, and resolutions of its duly authorized
Special Committee unanimously adopted at a special meeting of such committee
held on May 5, 1998, they now appear for the purpose of executing this act of
amendment and putting into authentic form the amendment so adopted by the
Special Committee of the Board of Directors of the Corporation.
AND THE SAID APPEARERS further declare that by a vote of the shareholders
of said Corporation, it was:
RESOLVED, that Article III of the Restated Articles of Incorporation of
Southdown, Inc. be amended so that:
1. Paragraph A. is amended to read in its entirety as follows:
A. The Corporation has authority to issue 200,000,000 shares of Common
Stock of the par value of $1.25 per share (the "Common Stock") and 10,000,000
shares of Preferred Stock of the par value of $.05 per share (the "Preferred
Stock").
- - -1-
<PAGE> 5
AND SAID APPEARERS further declare that of the outstanding shares of
capital stock of the Corporation 20,816,924 were represented at said meeting and
that 17,195,420 shares were voted for the said amendment and that 1,034,005
shares were voted against the said amendment or abstained from voting thereon.
APPEARERS FURTHER stated that all of the shares of the Corporation have par
value; that the Corporation is authorized to issue 210,000,000 shares, of which
200,000,000 are common shares of the par value of $1.25 per share and 10,000,000
are preferred shares of the par value of $0.05 per share; and that the Board of
Directors of the Corporation and the Special Committee thereof each has the
authority to amend the articles to fix the preferences, limitations and relative
rights of the preferred shares, and to establish, and fix variations and
relative rights and preferences as between series of preferred shares, all as
more fully set out in Article III of the Restated Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ CLARENCE C. COMER
------------------------------------
Clarence C. Comer
President and Chief Executive Officer
By: /s/ [ILLEGIBLE]
------------------------------------
Vice President - General Counsel
and Secretary
- - -2-
<PAGE> 6
WITNESSES:
/s/ [ILLEGIBLE]
- ---------------------------------
/s/ MICHELLE RAYMOND
- ---------------------------------
/s/ LINDA F. HARRELL
------------------------------
NOTARY PUBLIC
[SEAL]
- - -3-
<PAGE> 7
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED JANUARY 25, 1994
<PAGE> 8
ARTICLES OF AMENDMENT ) STATE OF TEXAS
TO )
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION )
OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 25th day of January, 1994
BEFORE ME, Michelle Raymond, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
EDGAR J. MARSTON III and WENDELL E. PHILLIPS, II, appearing herein and
acting for Southdown, Inc. (of which Corporation they are, respectively,
Executive Vice President and General Counsel and Secretary), a corporation
organized and existing under the laws of the State of Louisiana, domiciled in
the Parish of Orleans, State of Louisiana, organized by Articles of
Incorporation effective April 4, 1930, which Articles, as amended, were restated
pursuant to Restated Articles of Incorporation effective September 15, 1983, and
further amended as of April 10, 1987, December 2, 1987, April 23, 1988 and March
4, 1991 ("the Corporation"), who declared that pursuant to Sections 24B(6) and
33A of the Louisiana Business Corporation Law, Article IIIB of the Restated
Articles of Incorporation of the Corporation, resolutions of the Board of
Directors of the Corporation adopted at special meetings of the Board of
Directors of the Corporation held on November 22, 1993 and January 20, 1994, and
resolutions of its duly authorized Special Committee unanimously adopted at a
special meeting of such committee held on January 20, 1994, they now appear for
the purpose of executing this act of amendment and putting into authentic form
the amendment so adopted by the Special Committee of the Board of Directors of
the Corporation.
AND THE SAID APPEARERS further declare that by unanimous vote of the duly
authorized Special Committee of the Board of Directors of the Corporation, it
was resolved that Article III of the Restated Articles of Incorporation of the
Corporation be further amended as follows:
1. There is added as a new paragraph F of Article III the following:
F. Of the aforesaid 10,000,000 shares of Preferred Stock, 1,725,000
shares shall constitute a separate series of preferred shares designated
"Preferred Stock, $2.875 Cumulative Convertible Series D" (hereinafter called
the
<PAGE> 9
"Series D Preferred Stock"), which shall have a stated value of $50.00 per
share. The preferences, limitations and relative rights of the Series D
Preferred Stock are as follows:
PREFERRED STOCK, $2.875 CUMULATIVE CONVERTIBLE SERIES D
(1) Dividends. The holders of the Series D Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors, out of the
funds of the Corporation legally available therefor, subject to the prior and
superior rights of the holders of the Corporation's Preferred Stock, $.70
Cumulative Convertible Series A (the "Series A Preferred Stock") and any other
shares of any series or class of stock of the Corporation ranking senior to the
Series D Preferred Stock as to dividends, but pari passu with the Corporation's
Preferred Stock, $3.75 Convertible Exchangeable Series B (the "Series B
Preferred Stock") and any other shares of any series or class of stock of the
Corporation ranking senior to the Series D Preferred Stock as to dividends, but
pari passu with the Corporation's Preferred Stock, $3.75 Convertible
Exchangeable Series B (the "Series B Preferred Stock") and any other shares of
any series or class of stock of the Corporation ranking pari passu with the
Series D Preferred Stock as to dividends, and in preference to the holders of
the Corporation's Preferred Stock, Cumulative Junior Participating Series C (the
"Series C Preferred Stock") that may be issued and the holders of the Common
Stock of the Corporation and any other stock of the Corporation ranking junior
to the Series D Preferred Stock as to dividends, cumulative preferential
dividends per share of Series D Preferred Stock in cash at the rate per annum of
$2.875, and no more, until conversion or redemption. Dividends on the Series D
Preferred Stock will be cumulative, will accrue from the date of original
issuance and will be paid (when and as declared by the Board of Directors of the
Corporation) in cash quarterly, in arrears, on the first day of each April,
July, October and January, commencing on April 1, 1994. Each such regular
dividend on the Series D Preferred Stock shall be paid to the holders of record
of shares of the Series D Preferred Stock as they appear on the stock register
of the Corporation on such record date, not exceeding 30 days preceding the
payment date thereof, as shall be fixed by the Board of Directors of the
Corporation. Dividends on account of arrears for any past dividend periods may
be declared and paid at any time, without reference to any regular dividend
payment date, to the holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors of
the Corporation. No dividend may be declared on any other series or class of
stock ranking on a parity with the Series D Preferred Stock as to dividends in
respect of any dividend period, unless there shall also be or have been on the
Series D Preferred Stock like dividends for all periods at the dividend rates
fixed therefor. In the event that full cumulative dividends on the Series D
Preferred Stock have not been paid or declared and
-2-
<PAGE> 10
set apart for payment, the Corporation may not declare or pay or set apart for
payment any dividends or make any other distributions on, or make any payment
on account of the purchase, redemption or retirement of, the Common Stock or
any other stock of the Corporation ranking as to dividends or distributions of
assets on liquidation, dissolution or winding up of the Corporation junior to
the Series D Preferred Stock (other than, in the case of dividends or
distributions, dividends or distributions paid in shares of Common Stock or
such other junior ranking stock), until full cumulative dividends on the Series
D Preferred Stock are paid or declared and set apart for payment.
(2) Redemption. (a) Shares of Series D Preferred Stock shall be
redeemable for cash, at the option of the Corporation, in whole or in part at
any time or from time to time on or after January 27, 2001, at a redemption
price of $50 per share of Series D Preferred Stock, plus an amount equal to
accrued and unpaid dividends (whether or not declared) to the date fixed for
redemption. If the date of redemption falls after a dividend payment record
date but before the related payment date, the record holders of the Series D
Preferred Stock on that record date shall be entitled to receive the dividend
payable on the Series D Preferred Stock notwithstanding the redemption thereof.
Except as provided in this subparagraph (2)(a), no payment or allowance shall
be made for accrued dividends on any shares of Series D Preferred Stock called
for redemption.
(b) In case of the redemption of only part of the Series D Preferred
Stock at the time outstanding, such redemption shall be made pro rata or by lot
or in such other manner as the Board of Directors of the Corporation may
determine; provided, however, that the Corporation shall not be required to
effect the redemption in any manner that results in additional fractional
shares being outstanding. If full cumulative dividends on the outstanding
shares of Series D Preferred Stock shall not have been paid or declared and set
apart for payment for all regular dividend payment dates to and including the
last dividend payment date prior to the date fixed for redemption, the
Corporation shall not call for redemption any shares of Series D Preferred
Stock unless all such shares then outstanding are called for simultaneous
redemption.
(c) Notice of any proposed redemption of Series D Preferred Stock shall
be given by the Corporation not less than 30 days nor more than 60 days prior
to the date fixed for such redemption to each holder of record of the shares to
be redeemed at the address appearing on the books of the Corporation. Notice of
redemption shall be deemed to have
-3-
<PAGE> 11
been given when deposited in the United States mails, first class mail, postage
prepaid, whether or not such notice is actually received. If on or before the
redemption date specified in such notice all funds necessary for such
redemption shall have been made available at the office of the transfer agent,
in trust for the pro rata benefit of the holders of the shares so called for
redemption, so as to be and continue to be available therefor, then from and
after the date of redemption so designated, notwithstanding that any
certificate representing shares of Series D Preferred Stock so called for
redemption shall not have been surrendered for cancellation, the shares
represented thereby shall no longer be deemed outstanding, the right to receive
dividends thereon shall cease to accrue and all rights with respect to such
shares of Series D Preferred Stock so called for redemption shall forthwith at
the close of business on such redemption date cease and terminate, except only
the right of the holders thereof to receive the redemption price of such shares
so to be redeemed plus an amount equal to accrued and unpaid dividends (whether
or not declared) to the date fixed for redemption, but without interest thereon.
(d) Any monies so set aside by the Corporation and unclaimed at the end
of three years from the date fixed for redemption shall revert to the general
funds of the Corporation.
(e) The Corporation may, however, prior to the redemption date
specified in the notice of redemption, deposit in trust for the account of
the holders of the shares of Series D Preferred Stock to be redeemed, with a
bank or trust company in good standing organized under the laws of the United
States of America or of any state thereof, having its principal office located
in the continental United States, and having a capital, surplus and undivided
profits aggregating at least $50 million, designated in such notice of
redemption, all funds necessary for such redemption (including accrued and
unpaid dividends up to the date fixed for redemption), together with
irrevocable written instructions authorizing such bank or trust company, on
behalf and at the expense of the Corporation, to cause the notice of redemption
to be mailed as herein provided at least 30 days but not more than 60 days prior
to the redemption date and to include in said notice of redemption a statement
that all funds necessary for such redemption have been so deposited in trust and
are immediately available, and from and after the redemption date,
notwithstanding that any certificate representing shares of Series D Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding and all
rights with respect to such shares of Series D Preferred Stock shall
-4-
<PAGE> 12
forthwith at the close of business on such redemption date cease and terminate,
except only the right of the holders thereof to receive from such bank or trust
company, at any time after the redemption date, the redemption price of such
shares so to be redeemed plus accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption, but without interest thereon. In the
event the holder of any such shares of Series D Preferred Stock shall not,
within three years after the redemption date, claim the amount deposited for the
redemption thereof, the depositary shall, upon the request of the Corporation
expressed in a resolution of its Board of Directors, pay over to the Corporation
such unclaimed amount after which time the holders of the shares so called for
redemption shall look only to the Corporation for the payment thereof.
(f) If any shares of Series D Preferred Stock called for redemption are
not issued and outstanding as of the date fixed for redemption, the amount set
aside or deposited for the redemption thereof shall revert to or be paid over to
the Corporation.
(g) Any shares of Series D Preferred Stock which are redeemed or otherwise
purchased or acquired by the Corporation or any subsidiary thereof shall be
cancelled. The number of shares of Series D Preferred Stock shall be reduced by
the number of shares so cancelled and such cancelled shares shall be restored to
the status of authorized but unissued shares of Preferred Stock, without
designation as to series, and may thereafter be issued but not as shares of
Series D Preferred Stock. For the purposes of this paragraph, a subsidiary means
a corporation of which a majority of the capital stock having voting power under
ordinary circumstances to elect a majority of the board of directors is owned by
(a) the Corporation, (b) the Corporation and one or more of its subsidiaries or
(c) one or more of the Corporation's subsidiaries.
(3) Regarding Voting Rights. (a) Each share of Series D Preferred Stock
shall entitle the holder thereof to one vote and, except as provided herein or
as required by law, the Series D Preferred Stock and the Common Stock (and any
other capital stock of the Corporation at any time entitled to vote) shall vote
together as a single class.
(b) In addition to any provisions herein and any requirement of law, the
Series D Preferred Stock shall vote as a single class with respect to any
proposal (i) to change the dividend rate, liquidation preference, redemption
price, voting rights or conversion rights of the shares of Series D Preferred
Stock or to increase the number of authorized shares of Series D Preferred
Stock; (ii) to increase the authorized
-5-
<PAGE> 13
amount of any series or class of capital stock of the Corporation that ranks
senior to the Series D Preferred Stock as to dividends or distribution of
assets on liquidation; (iii) to authorize, create, issue or sell any shares of
any series or any class of capital stock of the Corporation that ranks senior
to the Series D Preferred Stock as to dividends or assets upon liquidation;
(iv) to change or modify the voting rights of the Series D Preferred Stock and
(v) for the alteration, change or modification of the rights set forth in this
subparagraph (3)(b). The affirmative vote of the holders of at least two-thirds
of the outstanding shares of Series D Preferred Stock shall be required to take
any action on the matters specified in clauses (i) through (v) of this
subparagraph (3)(b).
(c) Unless the vote of a larger percentage is required by law or the
Articles of Incorporation, the affirmative vote of the holders of a majority of
the outstanding shares of Series D Preferred Stock entitled to vote on the
matter shall be sufficient to take any action as to which a class vote of the
holders of the Series D Preferred Stock is required by law or the Articles of
Incorporation.
(d) Whenever, at any time, dividends payable on the Series D Preferred
Stock shall be in arrears for six quarterly dividend periods, the holders of
all classes or series of preferred stock which rank pari passu with the Series
D Preferred Stock as to dividends and which shall specifically state that they
shall vote with the Series D Preferred Stock for the election of two directors
in such a case (specifically excluding the Series A Preferred Stock, the Series
B Preferred stock and the Series C Preferred Stock) (the "Voting Preferred
Stock"), shall have the exclusive right, voting separately as a class,
irrespective of class or series, to elect by a plurality of the votes cast two
directors of the Corporation, who shall be a Class I director and a Class II
director, respectively, (i) at the Corporation's next annual meeting of
shareholders, (ii) at a special meeting held in place thereof, (iii) at a
special meeting of the holders of shares of the Voting Preferred Stock called
by the Secretary of the Corporation upon the written request of the holders of
record of 25% or more of the total number of shares of Voting Preferred Stock
then outstanding, to be held within 30 days after delivery of such request, or
(iv) by written consent of the holders of a majority of the issued and
outstanding shares of Voting Preferred Stock in lieu thereof, and at each
succeeding meeting of shareholders thereafter at which directors shall be
elected until such rights shall terminate as hereinafter provided. The Board of
Directors of the Corporation hereby unanimously directs the Secretary of the
Corporation to give notice of any special meeting of the
-6-
<PAGE> 14
shareholders of the Corporation required from time to time by the provisions of
this paragraph (3), in the manner prescribed by the Bylaws of the Corporation.
At elections for such directors, each holder of the Voting Preferred Stock shall
be entitled to one vote for each share held. Upon the vesting of such voting
right in the holders of the Voting Preferred Stock, the maximum authorized
number of members of the Board of Directors shall automatically be increased by
two and the two vacancies so created shall be filled by vote of the holders of
the Voting Preferred Stock as hereinabove set forth. The right of the holders of
the Voting Preferred Stock, voting separately as a class, to elect members of
the Board of Directors of the Corporation as aforesaid shall continue until such
time as all dividends accumulated on the voting Preferred Stock shall have been
paid in full, at which time such right shall terminate, except as by law
expressly provided, subject to revesting in the event of each and every
subsequent default of the character above mentioned. Upon any termination of the
right of the holders of the Voting Preferred Stock to vote for directors as
herein provided, the term of office of all directors then in office elected by
such Voting Preferred Stock voting as a class shall terminate immediately. If
the office of any director elected by the holders of the Voting Preferred Stock
becomes vacant by reason of death, resignation, retirement, disqualification,
removal from office or otherwise, the remaining director elected by the holders
of Voting Preferred Stock voting as a class may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred.
Whenever the special voting powers vested in the holders of the Voting Preferred
Stock shall have expired, the number of directors shall become such number as
may be provided for in the By-Laws, or resolution of the Board of Directors
thereunder, irrespective of any increase made pursuant to the provisions of this
subparagraph (3)(d).
(4) Priority in Event of Dissolution. In the event of any liquidation,
dissolution, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation
(including any liquidation preferences payable in respect of the Series A
Preferred Stock and any other capital stock of the Corporation ranking senior
to the Series D Preferred Stock as to assets), the holders of the Series D
Preferred Stock shall be entitled to receive, out of the remaining net assets
of the Corporation, $50.00 in cash for each share of Series D Preferred Stock,
plus an amount equal to all dividends accrued and unpaid on each such share
(whether or not declared) up to the date fixed for distribution, before any
distribution shall be made to the holders of the Common Stock of the
Corporation, the Series C Preferred Stock or any other stock of the
-7-
<PAGE> 15
Corporation ranking junior to the Series D Preferred Stock as to assets. If
upon any liquidation, dissolution or winding up of the affairs of the
Corporation, the assets distributable among the holders of the Series D
Preferred Stock, the Series B Preferred Stock and any other capital stock of
the Corporation ranking on a parity with the Series D Preferred Stock as to
assets shall be insufficient to permit the payment in full to the holders of
all shares of such Series D Preferred Stock, the Series B Preferred Stock and
any other capital stock of the Corporation ranking on a parity with the Series
D Preferred Stock as to assets of all preferential amounts payable to all such
holders, then the entire assets of the Corporation thus distributable shall be
distributed ratably among the holders of the Series D Preferred Stock, the
Series B Preferred Stock and any other capital stock of the Corporation ranking
on a parity with the Series D Preferred Stock as to assets in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
(5) Conversion at Option of Holder. (a) Subject to and upon compliance with
the provisions herein, at the option of the holder, shares of Series D Preferred
Stock may at any time be converted into fully paid and nonassessable shares of
common stock at the rate of 1.511 shares of Common Stock for each share of
Series D Preferred Stock to be converted (subject to adjustment as hereinafter
provided) (the "Conversion Rate"); provided, however, that if the Corporation
shall have given notice of redemption of any shares of Series D Preferred Stock
pursuant to paragraph (2) above or notice of conversion at the option of the
Corporation pursuant to paragraph (6) below, such right to convert such shares
shall terminate at 5:00 p.m., New York City time, on the date fixed for
redemption or such conversion, respectively (unless the Corporation shall
default in the payment due upon redemption in which case such conversion rights
shall not expire). The result obtained by dividing $50.00 by the Conversion Rate
in effect from time to time is herein referred to as the "Conversion Price." The
initial conversion Price shall be $33.092. Whenever the Conversion Price is
adjusted pursuant to the provisions of subparagraph (7)(c) below, the Conversion
Rate shall be redetermined by dividing $50.00 by the then adjusted Conversion
Price. The Conversion Rate and the Conversion Price in effect from time to time
shall be calculated to four decimal places and rounded to the nearer
thousandths.
(b) In order to exercise the right to convert, the holder of any shares of
Series D Preferred Stock to be converted shall surrender the certificate
representing such shares of Series D Preferred Stock, accompanied (if so
-8-
<PAGE> 16
required by the Corporation) by the proper instrument or instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
registered holder thereof or by his attorney duly authorized in writing, to the
transfer agent of the Series D Preferred Stock or at such other office or
offices, if any, as the Board of Directors shall designate and shall give
written notice to the Corporation at such office that the holder elects to
convert such Series D Preferred Stock. Such shares of Series D Preferred Stock
surrendered for conversion shall be deemed to have been converted immediately
prior to the close of business on the date of the giving of such notice and of
the surrender of such certificates for conversion in accordance with the
foregoing provisions, and at such time the rights of the holder of such Series D
Preferred Stock as such holder shall cease, and the holder thereof shall be
treated for all purposes as the record holder of Common Stock from and after
such time. As promptly as practicable after receipt of such notice and the
surrender of such certificates as aforesaid, the Corporation shall issue and
deliver at such office a certificate or certificates for the number of full
shares of Common Stock issuable upon conversion.
(6) Conversion at Option of Corporation. (a) On and after January 27, 1997
and until January 27, 2001, shares of Series D Preferred Stock outstanding are
convertible, at the option of the Corporation, in whole but not in part, at any
time, into fully paid and non-assessable shares of Common Stock. The Corporation
may exercise this option only if for at least 20 trading days within any period
of 30 consecutive trading days, including the last trading day of such period,
the Market Price (as defined below) of the Common Stock exceeds 130 percent of
the Conversion Price on such respective dates and only if all dividends on the
Series D Preferred Stock for all dividend periods ending on or prior to the
dividend payment date next preceding the Conversion Date (as defined herein)
have been paid or set aside for payment.
(b) In order to exercise its option to convert shares of the Series D
Preferred Stock, the Corporation must, not fewer than 15 nor more than 60 days
before the date of such conversion (the "Conversion Date"), issue a press
release announcing the conversion and specifying the Conversion Date, which
announcement shall be made prior to 9:00 A.M., New York City time, of the second
trading day after the end of any such 30-day trading period. The Corporation
shall also give notice of such conversion to the holders of record of shares of
Series D Preferred Stock to be converted at the holders' addresses shown on the
books of the Corporation. Notice of such conversion must be given by first class
mail, postage per-paid, not fewer than 15 or more than 60 days before the
-9-
<PAGE> 17
Conversion Date and must state: (i) the Conversion Date; (ii) the Conversion
Rate and the Conversion Price as of the date immediately preceding the date of
the notice; (iii) the place or places where certificates for the shares of
Series D Preferred Stock may be surrendered in exchange for certificates for
shares of the Common Stock; and (iv) that dividends on the shares of the Series
D Preferred Stock to be converted will cease to accrue on the Conversion Date.
Notice is given when deposited in the United States mail, by first class mail,
postage prepaid, whether or not actually received. The Corporation's failure to
mail such notice to a shareholder shall not affect the validity or effectiveness
of the conversion of the shares of Series D Preferred Stock into shares of
Common Stock.
(c) On the date fixed by the Corporation as of the Conversion Date,
the rights of the holders of the shares of Series D Preferred Stock as such
shall cease, the shares of Series D Preferred Stock to be converted shall no
longer be deemed outstanding, dividends thereon shall cease to accrue and
certificates for such shares shall represent (i) the shares of Common Stock
issuable on conversion of the Series D Preferred Stock evidenced thereby and
(ii) the right to receive the amounts payable under Section 7(b) in lieu of the
issuance of any fractional share.
(d) The number of shares of Common Stock issuable for each share of
Series D Preferred Stock so converted shall be equal to the product of the
number of shares of Series D Preferred Stock being converted and the Conversion
Rate in effect as of the Conversion Date.
(7) General Provisions Regarding Conversion. The following provisions
shall be applicable to all conversions of Series D Preferred Stock pursuant to
paragraphs (5) and (6):
(a) If the Conversion Date falls after a dividend payment record
date but before the related payment date, the record holder of the Series D
Preferred Stock on that record date shall be entitled to receive the dividend
payable on the Series D Preferred Stock notwithstanding the conversion
thereof. Except as provided in this subparagraph (a), no payment or allowance
shall be made for accrued dividends on any shares of Series D Preferred
Stock converted or surrendered for conversion.
(b) No fractional share of Common Stock shall be issued upon
conversion of Series D Preferred Stock. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any Series D
Preferred Stock, the Corporation shall pay a cash adjustment equal to such
-10-
<PAGE> 18
fraction multiplied by the Market Price per share of the Common Stock (as
defined below) on the trading day next preceding the date of conversion. In
determining the number of shares of Common Stock and the payment, if any, in
lieu of fractional shares that a holder of Series D Preferred Stock shall
receive, the total number of shares of Series D Preferred Stock surrendered for
conversion by such holder shall be aggregated.
(c) The number and kind of securities issuable upon the conversion of
the Series D Preferred Stock shall be subject to adjustment from time to time
upon the happening of certain events occurring on or after the date of original
issue of the shares of the Series D Preferred Stock as follows:
(i) In case of any reclassification or change of Common Stock
issuable upon exercise of these conversion rights (other than a change in
par value, or from par value to no par value, or from no par value to par
value or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Corporation with or into another corporation
(other than a merger with another corporation in which the Corporation is
the surviving Corporation and which does not result in any reclassification
or change -- other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision
or combination -- of Common Stock issuable upon exercise of these
conversion rights), or in the case of a sale or conveyance in a single
transaction or in a series of related transactions with the same purchaser
or affiliates thereof of all or substantially all the assets of the
Corporation as an entirety, or a statutory share exchange in which all
shares of Common Stock are exchanged for shares of another corporation or
entity, the holders of the Series D Preferred Stock shall have, and the
Corporation, or such successor entity or purchaser, shall covenant in the
constituent documents effecting any of the foregoing transactions that the
holders of the Series D Preferred Stock do have, the right to obtain upon
the exercise of these conversion rights, in lieu of each share of Common
Stock theretofore issuable upon exercise of these conversion rights, the
kind and amount of shares of stock, other securities, money and property
receivable upon such reclassification, change, consolidation or merger,
conveyance or sale of assets or share exchange by a holder of one share of
Common Stock issuable upon exercise of these conversion rights as if they
had been exercised immediately prior to such reclassification,
-11-
<PAGE> 19
change, consolidation or merger, conveyance or sale of assets or share
exchange. The constituent documents effecting any reclassification, change,
consolidation or merger, or share exchange shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided in this subparagraph (c). The provisions of this
subparagraph (c)(i) shall similarly apply to successive reclassifications,
changes, consolidations or mergers, conveyances or sales of assets or share
exchanges.
(ii) If the Corporation at any time while any of the Series D
Preferred Stock is outstanding shall subdivide or combine its Common Stock,
the Conversion Price shall be proportionately reduced, in case of
subdivision of shares, as at the effective date of such subdivision, or if
the Corporation shall take a record of holders of its Common Stock for the
purpose of so subdividing, as at such record date, whichever is earlier, or
shall be proportionately increased, in the case of combination of shares,
as at the effective date of such combination or, if the Corporation shall
take a record of holders of its Common Stock for the purpose of so
combining, as at such record date, whichever is earlier.
(iii) If the Corporation at any time while any of the Series D
Preferred Stock is outstanding shall pay to any holders of stock of the
Corporation a dividend payable in, or make any other distribution of,
Common Stock, the Conversion Price shall be adjusted, as of the date the
Corporation shall take a record of the holders of such stock for the
purpose of determining the holders entitled to receive such dividend or
other distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by multiplying the
Conversion Price in effect immediately prior to such record date (or if no
such record is taken, then immediately prior to such payment or other
distribution) by a fraction (1) the numerator of which shall be the total
number of shares of Common Stock outstanding immediately prior to such
dividend or distribution, and (2) the denominator of which shall be the
total number of shares of Common Stock outstanding immediately after such
dividend or distribution (plus in the event that the Corporation paid cash
for fractional shares, the number of additional shares which would have
been outstanding had the Corporation issued fractional shares in connection
with said dividend, except to the extent such payment of cash is treated as
a dividend payable out of earnings or surplus legally available for
-12-
<PAGE> 20
the payment of dividends under the laws of the State of Louisiana).
(iv) If the Corporation shall issue to all holders of its Common Stock
any warrant, option or other right to subscribe for or purchase shares of
Common Stock at a price per share less than the Market Price of the Common
Stock, the Conversion Price shall be adjusted, as of the date the
Corporation shall take a record of the holders of its Common Stock for the
purpose of receiving such issuance or distribution, to that price
determined by multiplying the Conversion Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding on the
date of issuance of such warrants, options or rights plus the number of
shares which the aggregate offering price of the total number of shares so
offered would purchase at such Market Price per share, and the denominator
of which shall be the number of shares of Common Stock outstanding on the
date of issuance of such warrants, options or rights plus the number of
additional shares of Common Stock offered for subscription or purchase.
(v) If the Corporation shall distribute to all holders of its Common
Stock evidences of indebtedness of the Company, shares of capital stock of
the Corporation (other than Common Stock) or assets or rights or warrants
to subscribe for or purchase any of its securities (excluding those
dividends, warrants, options and rights referred to in subparagraph (iv)
above and dividends and other distributions paid in cash out of the profits
or surplus of the Corporation legally available therefor under the laws of
the State of Louisiana) then in each case the Conversion Price shall be
adjusted, as of the date the Corporation shall take a record of the holders
of its Common Stock for the purpose of determining the holders entitled to
receive such issuance or distribution, to that price determined by
multiplying the Conversion Price by a fraction the numerator of which shall
be Market Price per share of the Common Stock less the fair market value
(as determined by the Board of Directors of the Corporation, whose
determination shall be conclusive) of the portion of the assets, evidences
of indebtedness for subscription rights so distributed in respect of one
share of Common Stock and the denominator of which is the Market Price per
share of Common Stock on the record date for such distribution.
(vi) No adjustment of the Conversion Price shall be made in an amount
less than $.05 per share, but any such lesser adjustment shall be carried
forward and shall be
-13-
<PAGE> 21
made at the time together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to $.05 per
share or more.
(vii) The Market Price per share of Common Stock on any day means the
closing price for such shares as reported in The Wall Street Journal's
NYSE-Composite Transactions listing for such day (corrected for obvious
typographical errors), or if such shares are not reported in such listing,
then the closing price for such shares on the largest national securities
exchange (based on the aggregate dollar value of securities listed) on
which such shares are listed or traded, or if such shares are not listed or
traded on any national securities exchange, then the closing price for such
shares in the over-the-counter market, as reported on the National
Association of Securities Dealers Automated Quotations System, or, if such
price shall not be reported thereon, the average between the closing bid
and asked prices so reported, or, if such prices shall not be reported,
then the average closing bid and asked prices reported by the National
Quotation Bureau Incorporated, or, in all other cases, the value
established by the Board of Directors of the Corporation in good faith.
(d) Whenever the Conversion Price and the Conversion Rate are required to
be adjusted as provided herein, the Corporation shall forthwith compute the
adjusted Conversion Price and the adjusted Conversion Rate and shall prepare a
certificate setting forth such adjusted Conversion Price and adjusted Conversion
Rate showing in detail the facts upon which such adjustment is based. A copy of
such certificate shall forthwith be filed with the transfer agent or agents for
the Series D Preferred Stock (if any) and for the Common Stock; and thereafter,
until further adjusted; the adjusted Conversion Price and the adjusted
Conversion Rate shall be as set forth in such certificate, provided that the
computation of such adjusted Conversion Price and such adjusted Conversion Rate
shall be reviewed at least annually by the independent public accountants
regularly employed by the Corporation and said accountants shall file a
corrected certificate, if shall mail or cause to be mailed to the holders of
Series D Preferred Stock at the time of each quarterly dividend payment, a
statement setting forth the adjustments, if any, made in the applicable
Conversion Price and Conversion Rate and not theretofore reported to such
holders, and the reasons for such adjustment.
(e) The Corporation will at all times reserve and keep available, out of
its authorized and unissued Common Stock
-14-
<PAGE> 22
solely for the purpose of issuance upon the conversion of the Series D
Preferred Stock as herein provided, free from preemptive and other subscription
rights, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding Series D Preferred Stock. The Corporation
shall ensure that all shares of Common Stock which shall be so issuable shall
upon issue be duly and validly issued and fully paid and nonassessable.
(f) If any shares of Common Stock required to be reserved for the purposes
of conversion of Series D Preferred Stock hereunder require registration with or
approval of any governmental authority under any federal or state law, or
listing upon any national securities exchange, before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered, approved or
listed, as the case may be.
(g) The issuance of certificates for shares of Common Stock upon the
conversion of Series D Preferred Stock shall be made without charge to the
holders thereof for any transfer or similar taxes that may be payable in respect
of the issue, delivery or acquisition of such certificates. Such certificates
shall be issued in the respective names of the holders of the Series D Preferred
Stock converted.
(8) Sinking Fund. The Series D Preferred Stock shall not be entitled to
any mandatory redemption or prepayment (except on liquidation, dissolution or
winding up of the affairs of the Corporation) or to the benefit of any sinking
fund.
(9) Definition. If the day upon which any payment is to be made or any
other action is to be taken or any event is scheduled to occur pursuant to the
terms of Articles of Amendment is not a business day, the payment shall be made
or the other action shall be taken on the next succeeding business day. A
"business day" is defined as a day in the City of Houston, County of Harris,
Texas, that is not a legal holiday or a day on which banking institutions are
authorized or obligated by law to close.
2. Existing Paragraph F of Article III is relettered as Paragraph G.
APPEARERS further stated that all of the shares of the Corporation have par
value; that the Corporation is authorized to issue 50,000,000 shares, of which
40,000,000 are common shares of the par value of $1.25 per share and 10,000,000
are preferred shares of the par value of $0.05 per share; and that
-15-
<PAGE> 23
the Board of Directors of the Corporation and the Special Committee thereof each
has the authority to amend the articles to fix the preferences, limitations and
relative rights of the preferred shares, and to establish, and fix variations
and relative rights and preferences as between series of preferred shares, all
as more fully set out in Article III of the Restated Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ EDGAR J. MARSTON III
---------------------------------
Edgar J. Marston III
Executive Vice President
and General Counsel
By: /s/ WENDELL E. PHILLIPS, II
---------------------------------
Wendell E. Phillips, II
Secretary
WITNESSES:
/s/ LINDA F. HARRELL
- -----------------------------------
/s/ [ILLEGIBLE]
- -----------------------------------
/s/ MICHELLE RAYMOND
-----------------------------------
NOTARY PUBLIC
[NOTARY SEAL]
<PAGE> 24
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED MARCH 4, 1991
<PAGE> 25
ARTICLES OF AMENDMENT
TO RESTATED ARTICLES OF
INCORPORATION OF SOUTHDOWN, INC.
ARTICLES OF AMENDMENT ) STATE OF TEXAS
TO )
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION )
OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 4th day of March, 1991,
BEFORE ME, JoAnn M. Pavlock, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
CLARENCE C. COMER and WENDELL E. PHILLIPS, II, appearing herein and acting
for Southdown, Inc., (of which Corporation they are, respectively, President
and Secretary), a corporation organized and existing under the laws of the State
of Louisiana, domiciled in the Parish of Orleans, State of Louisiana, organized
by Articles of Incorporation effective April 4, 1930, which Articles, as
amended, were restated pursuant to Restated Articles of Incorporation effective
September 15, 1983, who declared that pursuant to Section 24B(6) and 33A of the
Louisiana Business Corporation Law, Article IIIB of the Restated Articles of
Incorporation of the Corporation, and resolutions of the Board of Directors of
the Corporation adopted at a special meeting of the Board of Directors of the
Corporation held on March 4, 1991, they now appear for the purpose of executing
this act of amendment and putting into authentic form the amendment so adopted
by the Board of Directors of said Corporation.
AND THE SAID APPEARERS further declare that by vote of the Board of
Directors of said Corporation, it was resolved that Article III of the Restated
Articles of Incorporation of Southdown, Inc. be further amended as follows:
1. There is added as a new paragraph E of Article III the following:
E. Of the aforesaid 10,000,000 shares of Preferred Stock, 400,000 shares
shall constitute a separate series of preferred shares designated
<PAGE> 26
"Preferred Stock, Cumulative Junior Participating Series C" (the "Series C
Preferred Stock"). The preferences, limitations and relative rights of the
Series C Preferred Stock are as follows:
PREFERRED STOCK,
CUMULATIVE JUNIOR PARTICIPATING SERIES C
1. Dividends. (A) The holders of the Series C Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of the
funds of the Corporation legally available therefor, subject to the prior and
superior rights of the holders of the Corporation's Preferred Stock, $.70
Cumulative Convertible Series A ("Series A Preferred Stock"), the Corporation's
Preferred Stock, $3.75 Convertible Exchangeable Series B ("Series B Preferred
Stock") and any other shares of any series of Preferred Stock ranking senior to
the shares of Series C Preferred Stock as to dividends, but in preference to the
holders of the Common Stock, par value $1.25 per share, of the Corporation (the
"Common Stock") and any other capital stock of the Corporation ranking junior to
the Series C Preferred Stock as to dividends, cumulative preferential dividends
per share of Series C Preferred Stock payable in cash on the last day of March,
June, September and December in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series C Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $2.00 or (b) subject to the provision
for adjustment hereinafter set forth, the Adjustment Number (as defined below)
times the aggregate per share amount of all cash dividends, and the Adjustment
Number times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions other than a dividend or distribution payable
in shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series C Preferred Stock. The "Adjustment Number" shall
initially be 100. In the event the Corporation shall at any time after March 4,
1991 (i) declare any dividend on Common Stock payable in shares of Common Stock,
(ii) subdivide the outstanding Common Stock or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case the
Adjustment Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(B) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series C Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series C Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such
-2-
<PAGE> 27
shares shall accrue and be cumulative from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series C
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
(C) Each dividend on the Series C Preferred Stock shall be paid to the
holders of record of shares of the Series C Preferred Stock as they appear on
the stock register of the Corporation on such record date, not exceeding 30 days
preceding the payment date thereof, as shall be fixed by the Board of Directors
of the Corporation. Dividends on account of arrears for any past dividend
periods may be declared and paid at any time, without reference to any regular
dividend payment date, to holders of record on such date, not exceeding 45 days
preceding the payment date thereof, as may be fixed by the Board of Directors of
the Corporation. No dividend may be declared on any other series or class of
stock ranking on a parity with the Series C Preferred Stock as to dividends in
respect of any dividend period, unless there shall also be or have been declared
on the Series C Preferred Stock like dividends for all periods in the amounts
provided therefor in paragraph 1(A) above. In the event that full cumulative
dividends on the Series C Preferred Stock have not been declared and paid or set
apart for payment, the Corporation may not declare or pay or set apart for
payment any dividends or make any other distributions on, or make any payment on
account of the purchase, redemption or retirement of, the Common Stock or any
other stock of the Corporation ranking junior to the Series C Preferred Stock as
to dividends or distributions of assets on liquidation, dissolution or winding
up of the Corporation (other than, in the case of dividends or distributions,
dividends or distributions paid in shares of Common Stock or such other junior
ranking stock), until full cumulative dividends on the Series C Preferred Stock
are declared and paid or set apart for payment. Further, the Corporation shall
not declare a dividend or distribution on the Common Stock unless it also
declares a dividend or distribution on the Series C Preferred Stock as provided
in paragraph (A) above immediately after it declares a dividend or distribution
on the Common Stock (other than a dividend or distribution payable in shares of
Common Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $2.00 per share on the Series C Preferred Stock shall nevertheless
be payable on such subsequent Quarterly Dividend Payment Date.
2. Redemption (A) The Corporation, at its option, may redeem shares of
Series C Preferred Stock in whole at any time and in part from time to time, at
a redemption price equal to the Adjustment Number times the current per share
market price (as such term is hereinafter defined) of the Common Stock on the
date of the mailing of the notice of redemption, together with accrued and
unpaid dividends to the date of such redemption. The "current per share market
price" on any date shall be deemed to be the average of the closing price per
share of such Common Stock for the ten consecutive Trading Days (as such term
-3-
<PAGE> 28
is hereinafter defined) immediately prior to such date; provided, however, that
in the event that the current per share market price of the Common Stock is
determined during a period following the announcement of (A) a dividend or
distribution on the Common Stock other than a regular quarterly cash dividend or
(B) any subdivision, combination or reclassification of such Common Stock and
the ex-dividend date for such dividend or distribution, or the record date for
such subdivision, combination or reclassification, shall not have occurred prior
to the commencement of such ten Trading Day period, then, and in each such case,
the current per share market price shall be properly adjusted to take into
account ex-dividend or ex-distribution trading. The closing price for each day
shall be the last sales price, regular way, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices, regular way, in
either case as reported in the principal consolidated transaction reporting
system with respect to securities listed or admitted to trading on the New York
Stock Exchange, or, if the Common Stock is not listed or admitted to trading on
the New York Stock Exchange, as reported in the principal transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Common Stock is listed or admitted to trading or, if the
Common Stock is not listed Or admitted to trading on any national securities
exchange, the last quoted sales price or, if not so quoted, the average of the
high bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System or
such other self regulatory organization or registered securities information
processor (as such terms are used under the Securities Exchange Act of 1934, as
amended) that then reports information concerning the Common Stock or, if on any
such date the Common Stock is not quoted by any such entity, the average of the
closing bid and asked prices as furnished by a professional market maker making
a market in the Common Stock selected by the Board of Directors of the
Corporation. If on any such date no such market maker is making a market in the
Common Stock, the fair value of the Common Stock on such date as determined in
good faith by the Board of Directors of the Corporation shall be used. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a business day.
(B) In case of the redemption of only part of the Series C Preferred Stock
at the time outstanding, such redemption shall be made pro rata, provided,
however, that the Corporation shall not be required to effect the redemption in
any manner that results in fractional shares being outstanding (unless
immediately prior to such time fractional shares were outstanding, in which case
the Corporation shall not be required to effect the redemption in any manner
that results in fractions of shares, other than one-hundredths of shares, being
outstanding); if full cumulative dividends shall not have been paid or declared
and set apart for payment for all quarterly dividends to and including the last
Quarterly Dividend Payment Date prior to the date fixed for redemption, the
Corporation shall not:
-4-
<PAGE> 29
(i) call for redemption (except for redemptions in accordance with
subparagraph 2(B)(iii) below) any shares of Series C Preferred Stock unless
all such shares then outstanding are called for simultaneous redemption; or
(ii) redeem or purchase or otherwise acquire (except for redemptions,
purchases or acquisitions in accordance with subparagraph 2(B)(iii) below)
for consideration shares of any stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with Series C
Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock in exchange
for shares of any stock of the Corporation ranking junior (both as to
dividends and upon dissolution, liquidation or winding up) to Series C
Preferred Stock; or
(iii) redeem or purchase or otherwise acquire (except for redemptions,
purchases or acquisitions in accordance with subparagraphs, 2(B)(i) and
2(B)(ii) above) for consideration any shares of Series C Preferred Stock,
or any shares of stock ranking on a parity with Series C Preferred Stock,
except in accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all holders of
such shares of parity stock and Series C Preferred Stock upon such terms as
the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.
(C) Notice of any proposed redemption of Series C Preferred Stock shall be
given by the Corporation not less than 15 days nor more than 60 days prior to
the date fixed for such redemption to each holder of record of the shares to be
redeemed at his address appearing on the books of the Corporation. Notice of
redemption shall be deemed to have been given when deposited in the United
States mails, by first class mail, whether or not such notice is actually
received. If on or before the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for redemption, so as to be and continue to
be available therefor, then from and after the date of redemption so designated,
notwithstanding that any certificate representing shares of Series C Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding, the right
to receive dividends thereon shall cease to accrue and all rights with respect
to such shares of Series C Preferred Stock so called for redemption shall
forthwith at the close of business on such redemption date cease and terminate,
except only the right of the holders thereof to receive the redemption price of
such shares so to be redeemed plus an amount equal to accrued and unpaid
dividends (whether or not declared) up to the date fixed for redemption, but
without interest thereon.
-5-
<PAGE> 30
(D) The Corporation may, however, prior to the redemption date specified in
the notice of redemption, deposit in trust for the account of the holders of the
shares of Series C Preferred Stock to be redeemed, with a bank or trust company
in good standing organized under the laws of the United States of America or of
any state thereof, having its principal office located in the continental United
States, and having a capital, surplus and undivided profits aggregating at least
$50 million, designated in such notice of redemption, all funds necessary for
such redemption (including accrued and unpaid dividends up to the date fixed for
redemption), together with irrevocable written instructions authorizing such
bank or trust company, on behalf and at the expense of the Corporation, to cause
the notice of redemption to be mailed as herein provided at least 15 days but
not more than 60 days prior to the redemption date and to include in said notice
of redemption a statement that all funds necessary for such redemption have been
so deposited in trust and are immediately available, and on the redemption date,
notwithstanding that any certificate representing shares of Series C Preferred
Stock called for redemption shall not have been surrendered for cancellation,
all shares of Series C Preferred Stock with respect to which such deposit shall
have been made and which are outstanding on such redemption date shall no longer
be deemed to be outstanding and all rights with respect to such shares of Series
C Preferred Stock shall forthwith at the close of business on such redemption
date cease and terminate, except only the right of the holders thereof to
receive from such bank or trust company, at any time after the redemption date,
the redemption price of such shares so to be redeemed plus accrued and unpaid
dividends up to the date fixed for redemption.
(E) If any shares of Series C Preferred Stock called for redemption are not
issued and outstanding as of the date fixed for redemption, the amount set aside
or deposited for the redemption thereof shall revert to or be paid over to the
Corporation.
(F) Any shares of Series C Preferred Stock which are redeemed or otherwise
purchased or acquired by the Corporation or any subsidiary thereof shall be
cancelled. The number of shares of Series C Preferred Stock shall be reduced by
the number of shares so cancelled and such cancelled shares shall be restored to
the status of authorized but unissued shares of Preferred Stock that are
undesignated as to series. For the purposes of this paragraph, a subsidiary
means a corporation of which a majority of the capital stock having voting power
under ordinary circumstances to elect a majority of the board of directors is
owned by (a) the Corporation, (b) the Corporation and one or more of its
subsidiaries or (c) one or more of the Corporation's subsidiaries.
3. Regarding Voting Rights. The holders of shares of Series C Preferred
Stock shall have the following voting rights:
(A) Each share of Series C Preferred Stock shall entitle the holder thereof
to a number of votes equal to the Adjustment Number for each share held and,
except as otherwise provided herein or by law, the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock and the
-6-
<PAGE> 31
Common Stock (and any other capital stock of the Corporation entitled to vote)
shall vote together as a single class.
(B) Unless the vote of a larger percentage is required by law or the
Restated Articles of Incorporation, the affirmative vote of the holders of a
majority of the outstanding shares of Series C Preferred Stock shall be
sufficient to take any action as to which a class vote of the holders of the
Series C Preferred Stock is required by law or the Restated Articles of
Incorporation.
(C) Whenever, at any time, dividends payable on the Series C Preferred
Stock shall be in arrears for such number of dividend payments as shall include
not less than 540 calendar days, the holders of all Preferred Stock (including
holders of the Series C Preferred Stock) upon which these or like voting rights
have been conferred (without limiting the generality of the foregoing, not
including the Series A Preferred Stock and the Series B Preferred Stock) and are
exercisable (the "Voting Preferred Stock") with dividends in arrears for such
number of dividend payments as shall include not less than 540 calendar days,
shall have the exclusive right, voting separately as a class, irrespective of
series, to elect by a majority of the votes cast two directors of the
Corporation, (i) at the Corporation's next annual meeting of shareholders, (ii)
at a special meeting held in place thereof, (iii) at a special meeting of the
holders of shares of the Voting Preferred Stock called by the Secretary of the
Corporation upon the written request of the holders of record of 25% or more of
the total number of shares of Voting Preferred Stock then outstanding, to be
held within 30 days after delivery of such request, or (iv) by written consent
of the holders of a majority of the issued and outstanding shares of Voting
Preferred Stock in lieu thereof, and at each meeting of shareholders thereafter
at which directors shall be elected until such rights shall terminate as
hereinafter provided. The Board of Directors of the Corporation hereby
unanimously directs the Secretary of the Corporation to give notice of any
special meeting of the shareholders of the Corporation required from time to
time by the provisions of this paragraph, in the manner prescribed by the Bylaws
of the Corporation. Upon the vesting of such voting right in the holders of the
Voting Preferred Stock, the maximum authorized number of members of the Board of
Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the Voting Preferred Stock as
hereinabove set forth. The right of the holders of the Voting Preferred Stock,
voting separately as a class, to elect members of the Board of Directors of the
Corporation as aforesaid shall continue until such time as all dividends
accumulated on the Series C Preferred Stock shall have been paid in full, at
which time such right shall terminate, except as by law expressly provided,
subject to revesting in the event of each and every subsequent default of the
character above mentioned. Upon any termination of the right of the holders of
the Voting Preferred Stock to vote for directors as herein provided, the term of
office of all directors then in office elected by such Voting Preferred Stock
voting as a class shall terminate immediately. If the office of any director
elected by the holders of the Voting Preferred Stock becomes vacant by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, the remaining director elected by the holders of Voting Preferred
Stock voting as a class may choose a successor who shall hold office for the
unexpired
-7-
<PAGE> 32
term in respect of which such vacancy occurred. Whenever the special voting
powers vested in the holders of the Voting Preferred Stock shall have expired,
the number of directors shall become such number as may be provided for in the
Bylaws, or resolution of the Board of Directors thereunder, irrespective of any
increase made pursuant to the provisions of this paragraph 3.
(D) At any time that any shares of Series C Preferred Stock are
outstanding, the Restated Articles of Incorporation, as amended, of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of Series C Preferred Stock so
as to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series C Preferred Stock, voting
separately as a class.
4. Priority in Event of Dissolution. (A) Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall
be made to the holders of shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series C Preferred Stock
unless, prior thereto, the holders of shares of Series C Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared, to the date of
such payment (the "Series C Liquidation Preference"). Following the payment of
the full amount of the Series C Liquidation Preference, no additional
distributions shall be made to the holders of shares of Series C Preferred Stock
unless, prior thereto, the holders of shares of Common Stock shall have received
an amount per share (the "Common Adjustment") equal to the quotient obtained by
dividing (i) the Series C Liquidation Preference by (ii) the Adjustment Number.
Following the payment of the full amount of the Series C Liquidation Preference
and the Common Adjustment in respect of all outstanding shares of Series C
Preferred Stock and Common Stock, respectively, holders of Series C Preferred
Stock and holders of shares of Common Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in the ratio of
the Adjustment Number to 1 with respect to such Series C Preferred Stock and
Common Stock, on a per share basis, respectively.
(B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series C Liquidation Preference and the
liquidation preferences of all other series of Preferred Stock, if any, that
rank on a parity with Series C Preferred Stock, then such remaining assets shall
be distributed ratably to the holders of such parity shares (including the
Series C Preferred Stock) in proportion to their respective liquidation
preferences.
5. Consolidation, Merger, etc. In case the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series C
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share equal to the Adjustment Number times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
-8-
<PAGE> 33
may be, into which or for which each share of Common Stock is changed or
exchanged.
6. Ranking. The Series C Preferred Stock shall rank junior to the Series A
Preferred Stock and Series B Preferred Stock as to the payment of dividends and
distribution of assets, and shall also rank junior to all other series of the
Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, unless the terms of any such series shall provide
otherwise.
7. Fractional Shares. The Series C Preferred Stock may be issued in
fractions of a share that shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series C Preferred Stock.
8. Sinking Fund. The Series C Preferred Stock shall not be entitled to any
mandatory redemption or prepayment (except on liquidation, dissolution or
winding up of the affairs of the Corporation) or to the benefit of any sinking
fund.
9. Amount. The number of shares of Series C Preferred Stock may be
increased or decreased by resolution of the Board of Directors; provided,
however, that no decrease shall reduce the number of shares of Series C
Preferred Stock to less than the number of shares then issued and outstanding
plus the number of shares issuable upon exercise of outstanding rights, options
or warrants or upon conversion of outstanding securities issued by the
Corporation.
10. Definition. If the day upon which any payment is to be made or any
other action is to be taken or any event is scheduled to occur pursuant to the
terms of these Articles of Amendment is not a business day, the payment shall be
made or the other action shall be taken on the next succeeding business day. A
"business day" is defined as a day in the City of Houston, County of Harris,
Texas, that is not a legal holiday or a day on which banking institutions are
authorized or obligated by law to close.
11. Notice. Except as otherwise provided herein, any notice, demand or
other communication shall be deemed given and received as of the date of
delivery in person or receipt set forth on the return receipt. The inability to
deliver because of rejection or other refusal to accept any notice, demand or
other communication, shall be deemed to be receipt of such notice, demand or
other communication as of the date of such inability to deliver or rejection or
refusal to accept.
2. Paragraph E of Article III is relettered as paragraph F.
APPEARERS further stated that all of the shares of the Corporation have par
value; that the Corporation is authorized to issue 50,000,000 shares, of which
40,000,000 are common shares of the par value of $1.25 per share and 10,000,000
are preferred shares of the par value of $0.05 per share; that of the
-9-
<PAGE> 34
preferred shares, 1,999,998 shares have been designated as the Series A
Preferred Stock, 960,000 have been designated as the Series B Preferred Stock,
and 400,000 have been designated as the Series C Preferred Stock; and that the
Board of Directors of the Corporation has the authority to amend the Articles to
fix the preferences, limitations, and relative rights of the preferred shares,
and to establish, and fix variations and relative rights and preferences as
between series of preferred shares, all as more fully set out in Article III of
the Restated Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendment in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ CLARENCE C. COMER
------------------------------------
Clarence C. Comer
President
By: /s/ WENDELL E. PHILLIPS, II
------------------------------------
Wendell E. Phillips, II
Secretary
WITNESSES:
/s/ [ILLEGIBLE]
- --------------------------------
/s/ LINDA F. HARRELL
- --------------------------------
/s/ JOANN M. PAVLOCK
----------------------------------------
NOTARY PUBLIC
[SEAL]
-10-
<PAGE> 35
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED MAY 23,1988
<PAGE> 36
ARTICLES OF AMENDMENT ) STATE OF TEXAS
TO )
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION )
OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 23rd day of May, 1988, BEFORE ME, Shawna
Chisnell, a Notary Public, duly commissioned and qualified in and for the County
of Harris, State of Texas, and in the presence of the witnesses hereinafter
named and undersigned:
PERSONALLY CAME AND APPEARED:
EDGAR J. MARSTON III and WENDELL E. PHILLIPS, II, appearing herein and
acting for Southdown, Inc. (of which Corporation they are, respectively,
Executive Vice President and Secretary), a corporation organized and existing
under the laws of the State of Louisiana, domiciled in the Parish of Orleans,
State of Louisiana, organized by Articles of Incorporation effective April 4,
1930, which Articles, as amended, were restated pursuant to Restated Articles
of Incorporation effective September 15, 1983, who declared that pursuant to
resolutions of the shareholders of the Corporation adopted at an annual meeting
of the shareholders of the Corporation held on May 19, 1988 at 10:15 a.m., at
the Doubletree Hotel, 400 Dallas Street, Houston, Texas 77002, they now appear
for the purpose of executing this act of amendment and putting into authentic
form the amendment so agreed to by the shareholders of said Corporation, which
amendment shall become effective at 5:00 p.m., Central Daylight Savings Time, on
May 27, 1988.
AND THE SAID APPEARERS further declare that by vote of the shareholders of
said Corporation, it was:
RESOLVED, that Article III of the Restated Articles of Incorporation of
Southdown, Inc. be amended so that:
(1) Paragraph A. is amended to read in its entirety as follows:
The Corporation has authority to issue 40,000,000 shares of
Common Stock of the par value of $1.25 per share (the "Common Stock")
and
<PAGE> 37
10,000,000 shares of Preferred Stock of the par value of $.05 per
share (the "Preferred Stock"). Upon the effectiveness of the
amendments contained in these Articles of Amendment (the "Effective
Date") each share of common stock of the Corporation issued at the
close of business on the Effective Date shall be changed and split-up
into two shares of Common Stock without change in the aggregate amount
of capital represented by the issued shares, such two-for-one split to
be accomplished by issuing to each holder of the Corporation's common
stock of record at the close of business on the Effective Date a
certificate or certificates at the rate of one additional share of
Common Stock for each share of the common stock held of record on the
stock transfer records of the Corporation at the close of business on
the Effective Date.
(2) The first sentence of Paragraph C. is deleted and there is substituted
in its place the following:
Of the aforesaid 10,000,000 shares of Preferred Stock, 1,999,998
shares shall constitute a separate series of preferred shares
designated "Preferred Stock, $.70 Cumulative Convertible Series A"
(hereinafter called the "Series A Preferred Stock"), which shall have
a stated value of $10.00 per share. Upon the Effective Date, in lieu
of any adjustment of the conversion price or conversion rate
applicable to the Corporation's Preferred Stock, $1.40 Cumulative
Convertible Series A (the "Old Series A Preferred Stock") that would
otherwise result from the foregoing two-for-one stock split of the
Corporation's common stock under Article III C. of the Restated
Articles of Incorporation, each share of the Old Series A Preferred
Stock issued at the close of business on the Effective Date shall be
changed and split-up into two shares of Series A Preferred Stock
without change in the aggregate amount of capital represented by the
issued shares, such two-for-one split to be accomplished by issuing to
each holder of Old Series A Preferred Stock of record at the close of
business on the Effective Date a certificate or certificates at the
rate of one additional share of Series A Preferred Stock
-2-
<PAGE> 38
for each share of Old Series A Preferred Stock held of record on the
stock transfer records of the Corporation at the close of business on
the Effective Date.
(3) The first sentence of Subparagraph (1) of Paragraph C. is amended to
read in its entirety as follows:
The holders of the Series A Preferred stock shall be entitled to
receive, when and as declared by the Board of Directors out of the
funds of the Corporation legally available therefor and in preference
to the holders of the Common Stock of the Corporation and any other
capital stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends, cumulative preferential dividends per
share of Series A Preferred Stock in cash at the rate per annum of
$.70 and no more.
(4) The first sentence of Subparagraph (4) of Paragraph C. is amended to
read in its entirety as follows:
In the event of any liquidation, dissolution or winding up of the
affairs of the Corporation, after payment or provision for payment of
the debts and other liabilities of the Corporation (including any
liquidation preferences payable in respect of capital stock of the
Corporation ranking senior to the Series A Preferred Stock as to
assets), the holders of the Series A Preferred Stock shall be entitled
to receive, out of the remaining net assets of the Corporation, $10.00
in cash for each share of Series A Preferred Stock, plus an amount
equal to all dividends accrued and unpaid on each such share (whether
or not declared) up to the date fixed for distribution, before any
distribution shall be made to the holders of the Common Stock of the
Corporation or any other stock of the Corporation ranking junior to
the Series A Preferred stock as to assets.
-3-
<PAGE> 39
(5) The second and third sentences of Subparagraph (5) of Paragraph C. are
amended to read in their entirety as follows:
The result obtained by dividing $5.00 by the conversion rate in effect
from time to time is herein referred to as the "conversion price."
Whenever the conversion price is adjusted pursuant to the provisions
of Subparagraph (d) below, the conversion rate shall be redetermined
by dividing $5.00 by the then adjusted conversion price.
(6) Wherever the phrase "$20.00 stated value" appears in Article III C.,
such phrase be and it hereby is amended to read "$10.00 stated value."
(7) Wherever the term "Preferred Stock, $1.40 Cumulative Convertible
Series A" appears in Article III C., such term shall be and it hereby
is amended to read "Preferred Stock, $.70 Cumulative Convertible
Series A."
AND SAID APPEARERS further declared that of the outstanding shares of
capital stock of the Corporation 5,353,803 were represented at said meeting and
that 4,913,251 shares were voted for the said amendment and that 440,522 shares
were voted against the said amendment or abstained from voting thereon.
AND SAID APPEARERS further declared that 712,000 shares of the Series A
Preferred Stock of the Corporation were represented at said meeting, and that
712,000 shares were voted for the said amendment and that no shares were voted
against the said amendment.
APPEARERS FURTHER stated that all of the shares of the Corporation have
par value; that the Corporation is authorized to issue 50,000,000 shares, of
which 40,000,000 are common shares of the par value of $1.25 per share and
10,000,000 are preferred shares of the par value of $0.05 per share; that of the
preferred shares, 1,999,998 shares have been designated as the Series A
Preferred Stock and 960,000 shares have been designated as the Series B
Preferred Stock; and that the Board of Directors of the Corporation has the
authority to amend the Articles to fix the preferences, limitations, and
relative rights of the preferred shares, and to establish, and fix variations
and
-4-
<PAGE> 40
relative rights and preferences as between, series of preferred shares, all as
more fully set out in Article III of the Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ EDGAR J. MARSTON III
------------------------------------
Edgar J. Marston III
Executive Vice President
By: /s/ WENDELL E. PHILLIPS, II
------------------------------------
Wendell E. Phillips, II
Secretary
WITNESSES:
/s/ JOANN PAVLOCK
- ---------------------------------
/s/ MICHELLE RAYMOND
- ---------------------------------
/s/ SHAWNA CHISNELL
-----------------------------
NOTARY PUBLIC
[SEAL]
-5-
<PAGE> 41
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED APRIL 23, 1988
<PAGE> 42
ARTICLES OF AMENDMENT } STATE OF TEXAS
TO }
RESTATED ARTICLES OF } COUNTY OF HARRIS
INCORPORATION }
OF } CITY OF HOUSTON
SOUTHDOWN, INC. }
BE IT KNOWN, That on this 23rd day of April, 1988,
BEFORE ME, W. Cleland Dade, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
CLARENCE C. COMER and WENDELL E. PHILLIPS, II, appearing herein and
acting for Southdown, Inc. (of which Corporation they are, respectively,
President and Secretary), a corporation organized and existing under the laws
of the State of Louisiana, domiciled in the Parish of Orleans, State of
Louisiana, organized by Articles of Incorporation effective April 4, 1930,
which Articles, as amended, were restated pursuant to Restated Articles of
Incorporation effective September 15, 1983, who declared that pursuant to
Sections 24B(6) and 33A of the Louisiana Business Corporation Law, Article IIIB
of the Restated Articles of Incorporation of the Corporation, and resolutions
of the Board of Directors of the Corporation adopted at a special meeting of
the Board of Directors of the Corporation held on April 22, 1988, they now
appear for the purpose of executing this act of amendment and putting into
authentic form the amendment so adopted by the Board of Directors of said
Corporation.
AND THE SAID APPEARERS further declare that by unanimous vote of the
Board of Directors of said Corporation, it was resolved that Article III of the
Restated Articles of Incorporation of Southdown, Inc. be further amended as
follows:
1. There is added as a new paragraph D. of Article III the following:
D. Of the aforesaid 5,000,000 shares of Preferred Stock, 960,000
shares shall constitute a separate series of preferred shares designated
"Preferred Stock, $3.75 Convertible Exchangeable series B" (hereinafter called
the "Series B Preferred Stock"), which shall have a stated value of $50.00 per
share. The Corporation has fixed April 7,
<PAGE> 43
1988 as the record date for the annual meeting of shareholders scheduled for May
19, 1988 ("Annual Meeting"). The Board of Directors of the Corporation has
approved and has submitted to the shareholders for their approval at the Annual
Meeting a proposal to split up the Corporation's authorized and issued common
stock and preferred stock on a two-for-one basis. If the stock split is approved
by the shareholders it is expected to become effective on May 27, 1988
("Effective Date"). The shares of Series B Preferred Stock will not be split up
on the Effective Date; however, on the Effective Date, the par value of the
Series B Preferred Stock will be reduced from $.10 per share to $.05 per share
and the number of shares of Common Stock issuable upon the conversion thereof
will be increased pursuant to the provisions of paragraph 5(d)(ii) of these
Articles of Amendment. The preferences, limitations and relative rights of the
Series B Preferred Stock are as follows:
PREFERRED STOCK
$3.75 CONVERTIBLE EXCHANGEABLE SERIES B
(1) Dividends. The holders of the Series B Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of the
funds of the Corporation legally available therefor, subject to the prior and
superior rights of the holders of the Corporation's Preferred Stock, $1.40
Cumulative Convertible Series A ("Series A Preferred Stock") to the payment of
dividends, but in preference to the holders of the Common Stock of the
Corporation and any other capital stock of the Corporation ranking junior to the
Series B Preferred Stock as to dividends, cumulative preferential dividends per
share of Series B Preferred Stock in cash at the rate per annum of $3.75 and no
more. The Series B Preferred Stock is issuable upon the conversion of the
Corporation's 7 1/2% Special Convertible Subordinated Debentures Due 2013
("Special Debentures"). Dividends on the Series B Preferred Stock will be
cumulative, will accrue from the last date on which interest is paid on the
Special Debentures and will be paid (when and as declared by the Board of
Directors of the Corporation) in cash semiannually, in arrears, on the last day
of each June and December, commencing on the first such date to occur after the
date of original issuance of the Series B Preferred Stock. Each dividend on the
Series B Preferred Stock shall be paid to the holders of record of shares of the
Series B Preferred Stock as they appear on the stock register of the Corporation
on such record date, not exceeding 30 days preceding the payment date thereof,
as shall be fixed by the Board of Directors of the Corporation. Dividends on
-2-
<PAGE> 44
account of arrears for any past dividend periods may be declared and paid at any
time, without reference to any regular dividend payment date, to holders of
record on such date, not exceeding 45 days preceding the payment date thereof,
as may be fixed by the Board of Directors of the Corporation. No dividend may be
declared on any other series or class of stock ranking on a parity with
the Series B Preferred Stock as to dividends in respect of any dividend period,
unless there shall also be or have been declared on the Series B Preferred
Stock like dividends for all periods at the dividend rates fixed therefor. In
the event that full cumulative dividends on the Series B Preferred Stock have
not been declared and paid or set apart for payment, the Corporation may not
declare or pay or set apart for payment any dividends or make any other
distributions on, or make any payment on account of the purchase, redemption or
retirement of, the Common Stock or any other stock of the Corporation ranking
junior to the Series B Preferred Stock as to dividends or distributions of
assets on liquidation, dissolution or winding up of the Corporation (other than,
in the case of dividends or distributions, dividends or distributions paid in
shares of Common Stock or such other junior ranking stock), until full
cumulative dividends on the Series B Preferred Stock are declared and paid or
set apart for payment.
(2) Redemption. Shares of Series B Preferred Stock shall be redeemable, at
the option of the Corporation, in whole or in part at any time or from time to
time after June 30, 1993 at the stated value per share of Series B Preferred
Stock, plus an amount equal to accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption.
In case of the redemption of only part of the Series B Preferred Stock at
the time outstanding, such redemption shall be made pro rata, provided, however,
that the corporation shall not be required to effect the redemption in any
manner that results in additional fractional shares being outstanding; if full
cumulative dividends shall not have been paid or declared and set apart for
payment for all semiannual dividends to and including the last dividend payment
date prior to the date fixed for redemption, the Corporation shall not call for
redemption any shares of Series B Preferred Stock unless all such shares then
outstanding are called for simultaneous redemption.
Notice of any proposed redemption of Series B Preferred Stock shall be
given by the Corporation not less than 30
-3-
<PAGE> 45
days nor more than 60 days prior to the date fixed for such redemption to each
holder of record of the shares to be redeemed at his address appearing on the
books of the Corporation. Notice of redemption shall be deemed to have been
given when deposited in the United States mails, by registered or certified mail
or delivered to a courier service, whether or not such notice is actually
received. If on or before the redemption date specified in such notice all funds
necessary for such redemption shall have been set aside by the Corporation,
separate and apart from its other funds, in trust for the pro rata benefit of
the holders of the shares so called for redemption, so as to be and continue to
be available therefor, then from and after the date of redemption so designated,
notwithstanding that any certificate representing shares of Series B Preferred
Stock so called for redemption shall not have been surrendered for cancellation,
the shares represented thereby shall no longer be deemed outstanding, the right
to receive dividends thereon shall cease to accrue and all rights with respect
to such shares of Series B Preferred Stock so called for redemption shall
forthwith at the close of business on such redemption date cease and terminate,
except only the right of the holders thereof to receive the redemption price of
such shares so to be redeemed plus an amount equal to accrued and unpaid
dividends (whether or not declared) up to the date fixed for redemption, but
without interest thereon.
Any moneys so set aside by the Corporation and unclaimed at the end of
three years form the date fixed for redemption shall revert to the general funds
of the Corporation.
The Corporation may, however, prior to the redemption date specified in the
notice of redemption, deposit in trust for the account of the holders of the
shares of Series B Preferred Stock to be redeemed, with a bank or trust company
in good standing organized under the laws of the United States of America or of
any state thereof, having its principal office located in the continental United
States, and having a capital, surplus and undivided profits aggregating at least
$50 million, designated in such notice of redemption, all funds necessary for
such redemption (including accrued and unpaid dividends up to the date fixed for
redemption), together with irrevocable written instructions authorizing such
bank or trust company, on behalf and at the expense of the Corporation, to cause
the notice of redemption to be mailed as herein provided at least 30 days but
not more than 60 days prior to the redemption date and to include in said notice
of redemption a statement that all
-4-
<PAGE> 46
funds necessary for such redemption have been so deposited in trust and are
immediately available, and on the redemption date, notwithstanding that any
certificate representing shares of Series B Preferred Stock called for
redemption shall not have been surrendered for cancellation, all shares of
Series B Preferred Stock with respect to which such deposit shall have been
made and which are outstanding on such redemption date shall no longer be
deemed to be outstanding and all rights with respect to such shares of Series B
Preferred Stock shall forthwith at the close of business on such redemption date
cease and terminate, except only the right of the holders thereof to receive
from such bank or trust company, at any time after the redemption date, the
redemption price of such shares so to be redeemed plus accrued and unpaid
dividends up to the date fixed for redemption. In the event the holder of any
such shares of Series B Preferred Stock shall not, within three years after the
redemption date, claim the amount deposited for the redemption thereof, the
depositary shall, upon the request of the Corporation expressed in a resolution
of its Board of Directors, pay over to the Corporation such unclaimed amount
after which time the holders of the shares so called for redemption shall look
only to the Corporation for the payment thereof.
If any shares of Series B Preferred Stock called for redemption are not
issued and outstanding as of the date fixed for redemption, the amount set
aside or deposited for the redemption thereof shall revert to or be paid over
to the Corporation.
Any shares of Series B Preferred Stock which are redeemed or otherwise
purchased or acquired by the Corporation or any subsidiary thereof shall be
cancelled. The number of shares of Series B Preferred Stock shall be reduced by
the number of shares so cancelled and such cancelled shares shall be restored
to the status of authorized but unissued shares of Preferred Stock that are
undesignated as to series. For the purposes of this paragraph, a subsidiary
means a corporation of which a majority of the capital stock having voting
power under ordinary circumstances to elect a majority of the board of
directors is owned by (a) the Corporation, (b) the Corporation and one or more
of its subsidiaries or (c) one or more of the Corporation's subsidiaries.
(3) Regarding Voting Rights. Each share of Series B Preferred Stock shall
entitle the holder thereof to one vote for each share held and, except as
provided herein or by
-5-
<PAGE> 47
law, the Series B Preferred Stock and the Common Stock (and any other capital
stock of the Corporation at any time entitled to vote) shall vote together as a
single class.
In addition to any provisions herein and any requirement of law, the
Series B Preferred Stock shall vote as a single class with respect to any
proposal (a) to change the dividend rate, liquidation preference, redemption
price, voting rights or conversion rights of the shares of the Series B
Preferred Stock or to increase the number of authorized shares of Series B
Preferred Stock; (b) to increase the authorized amount, or authorize, issue,
create or sell any shares of any class (or any series of any class) of capital
stock of the Corporation that ranks prior to the Series B Preferred Stock as to
dividends or distribution of assets upon liquidation; and (c) for the
alteration, change or modification of the rights set forth in this paragraph.
The affirmative vote of the holders of two-thirds of the outstanding shares of
Series B Preferred Stock shall be required to take action with respect to any
matter described in clauses (a) through (c) of the foregoing sentence.
Unless the vote of a larger percentage is required by law or the Restated
Articles of Incorporation, the affirmative vote of the holders of a majority of
the outstanding shares of Series B Preferred Stock shall be sufficient to take
any action as to which a class vote of the holders of the Series B Preferred
Stock is required by law or the Restated Articles of Incorporation.
Whenever, at any time, dividends payable on the Series B Preferred Stock
shall be in arrears for more than 180 calendar days, the holders of the Series
B Preferred Stock shall have the exclusive right, voting separately as a class,
to elect by a majority of the votes cast two directors of the Corporation, who
shall be a Class II director and a Class III director, respectively, (i) at the
Corporation's next annual meeting of shareholders, (ii) at a special meeting
held in place thereof, (iii) at a special meeting of the holders of shares of
the Series B Preferred Stock called by the Secretary of the Corporation upon
the written request of the holders of record of 25% or more of the total number
of shares of Series B Preferred Stock then outstanding, to be held within 30
days after delivery of such request, or (iv) by written consent of the holders
of a majority of the issued and outstanding shares of Series B Preferred Stock
in lieu thereof, and at each meeting of shareholders thereafter at which
directors shall be elected until such rights shall terminate as hereinafter
provided.
-6-
<PAGE> 48
The Board of Directors of the Corporation hereby unanimously directs the
Secretary of the Corporation to give notice of any special meeting of the
shareholders of the Corporation required from time to time by the provisions of
this Paragraph (3), in the manner prescribed by the Bylaws of the Corporation.
At elections for such directors, each holder of the Series B Preferred Stock
shall be entitled to one vote for each share held. Upon the vesting of such
voting right in the holders of the Series B Preferred Stock, the maximum
authorized number of members of the Board of Directors shall automatically be
increased by two and the two vacancies so created shall be filled by vote of the
holders of the Series B Preferred Stock as hereinabove set forth. The right of
the holders of the Series B Preferred Stock, voting separately as a class, to
elect members of the Board of Directors of the Corporation as aforesaid shall
continue until such time as all dividends accumulated on the Series B Preferred
Stock shall have been paid in full, at which time such right shall terminate,
except as by law expressly provided, subject to revesting in the event of each
and every subsequent default of the character above mentioned. Upon any
termination of the right of the holders of the Series B Preferred Stock to vote
for directors as herein provided, the term of office of all directors then in
office elected by such series voting as a class shall terminate immediately. If
the office of any director elected by the holders of the Series B Preferred
Stock becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, the remaining director
elected by the holders of Series B Preferred Stock voting as a class may choose
a successor who shall hold office for the unexpired term in respect of which
such vacancy occurred. Whenever the special voting powers vested in the holders
of the Series B Preferred Stock shall have expired, the number of directors
shall become such number as may be provided for in the ByLaws, or resolution of
the Board of Directors thereunder, irrespective of any increase made pursuant to
the provisions of this Paragraph (3).
(4) Priority in Event of Dissolution. In the event of any liquidation,
dissolution or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation
(including any liquidation preferences payable in respect of the Corporation's
Series A Preferred Stock and any other capital stock of the Corporation
ranking senior to the Series B Preferred Stock as to assets), the holders of
the Series B Preferred Stock shall be entitled to receive, out of the remaining
net assets of the Corporation, $50.00 in
-7-
<PAGE> 49
cash for each share of Series B Preferred Stock, plus an amount equal to all
dividends accrued and unpaid on each such share (whether or not declared) up to
the date fixed for distribution, before any distribution shall be made to the
holders of the Common Stock of the Corporation or any other stock of the
Corporation ranking junior to the Series B Preferred Stock as to assets. If
upon any liquidation, dissolution or winding up of the affairs of the
Corporation, the assets distributable among the holders of the Series B
Preferred Stock (and any other capital stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to assets) shall be insufficient to
permit the payment in full to the holders of all shares of such Series B
Preferred Stock (and any other capital stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to assets) of all preferential
amounts payable to all such holders, then the entire assets of the Corporation
thus distributable shall be distributed ratably among the holders of the Series
B Preferred Stock (and any other capital stock of the Corporation ranking on a
parity with the Series B Preferred Stock as to assets) in proportion to the
respective amounts that would be payable per share if such assets were
sufficient to permit payment in full.
(5) Conversion. (a) Subject to and upon compliance with the
provisions herein, at the option of the holder, shares of Series B Preferred
Stock may, at any time be converted into fully paid and nonassessable shares of
Common Stock at the rate of 1.25 shares of Common Stock for each share of
Series B Preferred Stock to be converted (subject to adjustment as hereinafter
provided) ("conversion rate"); provided, however, that if the Corporation shall
have given notice of redemption of any shares of Series B Preferred Stock
pursuant to Paragraph (2) above, the right to convert such shares shall
terminate at 5:00 p.m., Houston, Texas time, on the date fixed for redemption
(unless the Corporation shall default in the payment due upon redemption in
which case such conversion rights shall not expire). The result obtained by
dividing $50.00 by the conversion rate in effect from time to time is herein
referred to as the "conversion price." Whenever the conversion price is
adjusted pursuant to the provisions of Subparagraph (d) below, the conversion
rate shall be redetermined by dividing $50.00 by the then adjusted conversion
price. The conversion rate and the conversion price in effect from time to time
shall be calculated to four decimal places and rounded to the nearer thousandth.
(b) In order to exercise the right to convert, the holder of any shares
of Series B Preferred Stock to be
-8-
<PAGE> 50
converted shall surrender the certificate representing such Series B Preferred
Stock, accompanied (if so required by the Corporation) by the proper instrument
or instruments of transfer, in form satisfactory to the Corporation, duly
executed by the registered holder thereof or by his attorney duly authorized in
writing, to the Corporation at its principal executive office, and shall give
written notice to the Corporation at such office that the holder elects to
convert such Series B Preferred Stock. No payment or adjustment shall be made
upon any conversion on account of regular cash dividends declared or accrued on
the Common Stock or the Series B Preferred Stock surrendered for conversion.
Series B Preferred Stock shall be deemed to have been converted immediately
prior to the close of business on the later of (i) the date on which all
applicable waiting periods, if any, under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 and the rules and regulations thereunder have expired
or been terminated and (ii) the date of the giving of such notice and of the
surrender of such certificates for conversion in accordance with the foregoing
provisions, and at such time the rights of the holder of such Series B Preferred
Stock as such holder shall cease, and the holder thereof shall be treated for
all purposes as the record holder of Common Stock from and after such time. As
promptly as practicable after receipt of such notice, the surrender of such
certificates and expiration or termination of any applicable waiting period as
aforesaid, the Corporation shall issue and deliver at such office a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion.
(c) No fractional share of Common Stock shall be issued upon conversion
of Series B Preferred Stock. Instead of any fractional share of Common Stock
which would otherwise be issuable upon conversion of any Series B Preferred
Stock, the Corporation shall pay a cash adjustment equal to such fraction
multiplied by the Price per share of the Common Stock on the trading day next
preceding the date of conversion. In determining the number of shares of Common
Stock and the payment, if any, in lieu of fractional shares that a holder of
Series B Preferred Stock shall receive, the total number of shares of Series B
Preferred Stock surrendered for conversion by such holder shall be aggregated.
(d) The number and kind of securities issuable upon the conversion of the
Series B Preferred Stock shall be subject to adjustment from time to time, upon
the happening of certain events occurring after the date of these Articles of
Amendment as follows:
-9-
<PAGE> 51
(i) In case of any reclassification or change of outstanding securities
issuable upon exercise of the conversion rights (other than a change in par
value, or from par value to no par value, or from no par value (to par value to
par value or as a result of a subdivision or combination) or in case of any
consolidation or as a result of a subdivision or combination), or in case of any
consolidation or merger of the Corporation with or into another corporation
(other than a merger with another corporation in which the Corporation is the
surviving Corporation and which does not result in any reclassification or
change -- other than a change in par value, or from par value to no par value,
or from no par value to par value, or as a result of a subdivision or
combination -- of outstanding securities issuable upon exercise of these
conversion rights) or in the case of a sale or conveyance in a single
transaction or in a series of related transactions with the same purchaser of
all or substantially all the assets of the Corporation as an entirety, the
holders of the Series B Preferred Stock shall have, and the Corporation, or such
successor corporation or purchaser, shall covenant in the constituent documents
effecting any of the foregoing transactions that the holders of the Series B
Preferred Stock do have, the right to obtain upon the exercise of these
conversion rights, in lieu of each share of Common Stock theretofore issuable
upon exercise of these conversion rights, the kind and amount of shares of
stock, other securities, money and property receivable upon such
reclassification, change, consolidation, merger, or conveyance or sale of assets
by a holder of one share of Common Stock issuable upon exercise of these
conversion rights as if they had been exercised immediately prior to such
reclassification, change, consolidation, merger, or conveyance or sale of
assets. The constituent documents effecting any reclassification, change,
consolidation, merger or conveyance or sale of assets shall provide for any
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided in this Subparagraph (d). The provisions of this
Subparagraph (d)(i) shall similarly apply to successive reclassifications,
changes, consolidations, mergers or conveyances or sales of assets.
(ii) If the Corporation at any time shall subdivide or combine its Common
Stock, the conversion price shall be proportionately reduced, in case of
subdivision of shares, as at the effective date of such subdivision, or if the
Corporation shall take a record of holders of its Common Stock for the purpose
of so
-10-
<PAGE> 52
subdividing, as at such record date, whichever is earlier, or shall be
proportionately increased, in the case of combination of shares, as at the
effective date of such combination or, if the Corporation shall take a record of
holders of its Common Stock for the purpose of so combining, as at such record
date, whichever is earlier.
(iii) If the Corporation shall:
(A) Pay to any holders of securities of the Corporation a dividend
payable in, or make any other distribution of, Common Stock, the conversion
price shall be adjusted, as at the date the Corporation shall take a record
of the holders of its Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at the
date of such payment or other distribution), to that price determined by
multiplying the conversion price in effect immediately prior to such record
date (or if no such record is taken, then immediately prior to such payment
or other distribution) by a fraction (1) the numerator of which shall be
the total number of shares of Common Stock outstanding immediately prior to
such dividend or distribution, and (2) the denominator of which shall be
the total number of shares of Common Stock outstanding immediately after
such dividend or distribution (plus in the event that the Corporation paid
cash for fractional shares, the number of additional shares which would
have been outstanding had the Corporation issued fractional shares in
connection with said dividend, except to the extent such payment of cash is
treated as a dividend payable out of earnings or surplus legally available
for the payment of dividends under the laws of the State of Louisiana); or
(B) Make a distribution of its securities (other than Common Stock
Equivalents as defined below) or assets to the holders of its Common Stock
other than dividends payable in Common Stock or cash dividends from
retained earnings of the Corporation, the Corporation shall reserve and
shall deposit in trust, with a bank or trust company in good standing
organized under the laws of the United States of America or any state
thereof, having it principal office located in
-11-
<PAGE> 53
the United States, and having capital, surplus and undivided profits
aggregating at least $50 million, for distribution to the holders of the
Series B Preferred Stock who shall thereafter elect to convert shares of
Series B Preferred Stock into Common Stock (or for release to the
Corporation, as provided below) the amount and kind of securities or assets
which such holders would have received if all such holders had, immediately
prior to the record date for the distribution of securities or assets,
converted such shares of Series B Preferred Stock into Common Stock. Any
such holder converting shares of Series B Preferred Stock into Common Stock
will receive from such trust upon such conversion, in addition to the
shares of Common Stock to which such holder is entitled, a pro rata portion
of the assets and securities then held in such trust. If after any such
assets are placed in trust the shares of Series B Preferred Stock are
exchanged for Debentures pursuant to Paragraph (6), (such assets shall then
be held by the trustee for distribution to the holders of the Debentures
(as defined in Paragraph (6)) who shall thereafter elect to convert such
Debentures into Common Stock (or for release to the Corporation, as
provided below). To the extent that any shares of Series B Preferred Stock
are redeemed or cancelled, a proportionate portion of such assets held in
trust shall be released to the Corporation and shall no longer be subject
to distribution to the holders of Series B Preferred Stock upon conversion
thereof into Common Stock. Any taxes or expenses related to the assets so
held in trust, the income therefrom, the creation or administration of the
trust, the reasonable compensation of the trustee, or related matters shall
be paid by the trustee from the trust estate.
(iv) If the Corporation shall issue any additional shares of Common Stock
(otherwise than as provided in the foregoing Subparagraphs (i) through (iii)
above) at a price per share less than the average Price per share of Common
Stock for the 20 trading days immediately preceding the date of the
authorization of such issuance by the Corporation's Board of Directors (the
"Market Price") then the conversion price upon each such issuance shall be
adjusted to that price
-12-
<PAGE> 54
determined by multiplying the conversion price by a fraction:
(A) the numerator of which shall be (1) the sum of (i) the number of
shares of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock multiplied by the Market Price, and
(ii) the consideration, if any, received and deemed received by the
Corporation upon the issuance of such additional shares of Common Stock;
divided by (2) the total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of Common Stock,
and
(B) the denominator of which shall be the Market Price.
No adjustment of the conversion price shall be made in an amount less than
$.05 per share, but any such lesser adjustment shall be carried forward and
shall be made at the time together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to $.05 per share
or more. Further, no adjustments of the conversion price shall be made under
this Subparagraph (d)(iv) upon the issuance of any additional shares of Common
Stock that (x) are issued pursuant to thrift plans, stock purchase plans, stock
bonus plans, stock option plans, employee stock ownership plans and other
incentive or profit sharing arrangements for the benefit of employees, provided
such plans or arrangements have been approved by a majority of either the
disinterested members of the Board of Directors of the Corporation or the
Corporation's shareholders ("Employee Benefit Plans") or (y) are issued pursuant
to any Common Stock Equivalent (as defined in Subparagraph (d)(v) below), if
upon the issuance of any such Common Stock Equivalent, any such adjustments
shall previously have been made pursuant to Subparagraph (d)(v) hereof or if no
adjustment was required pursuant to Subparagraph (d)(v)hereof.
The Price per share of Common Stock on any day means the average (mean) of
the reported "high" and "low" sales prices for such shares as reported in The
Wall Street Journal's NYSE-Composite Transactions listing for such day
(corrected for obvious typographical errors), or if such shares are not reported
in such
-13-
<PAGE> 55
listing, then the average of the reported "high" and "low" sales prices on the
largest national securities exchange (based on the aggregate dollar value of
securities listed) on which such shares are listed or traded, or if such shares
are not listed or traded on any national securities exchange, then the average
of the reported "high" and "low" sales prices for such shares in the
over-the-counter market, as reported on the National Association of Securities
Dealers Automated Quotations System, or, if such prices shall not be reported
thereon, the average of the closing bid and asked prices so reported, or, if
such prices shall not be reported, then the average closing bid and asked prices
reported by the National Quotation Bureau Incorporated, or, in all other cases,
the value established by the Board of Directors of the Corporation in good
faith. The "average" Price per share of the Common Stock for any period shall be
determined by dividing the sum of the Prices determined for the individual days
in such period by the number of days in such period.
(v) In case the Corporation shall issue any security or evidence of
indebtedness which is convertible into or exchangeable for Common Stock
("Convertible Security"), or any warrant, option or other right to subscribe for
or purchase Common Stock or any Convertible Security, other than pursuant to
Employee Benefit Plans, (together with Convertible Securities, "Common Stock
Equivalent"), or if, after any such issuance, the price per share for which
additional shares of Common Stock may be issuable thereunder is amended, then
the conversion price upon each such issuance or amendment shall be adjusted as
provided in Subparagraph (d)(iv) hereof on the basis that (i) the maximum number
of additional shares of Common Stock issuable pursuant to all such Common Stock
Equivalents shall be deemed to have been issued as of the earlier of (a) the
date on which the Corporation shall enter into a firm contract for the issuance
of such Common Stock Equivalent, or (b) the date of actual issuance of such
Common Stock Equivalent; and (ii) the aggregate consideration for such maximum
number of additional shares of Common Stock shall be deemed to be the minimum
consideration received and receivable by the Corporation for the issuance of
such additional shares of Common Stock pursuant to such Common Stock Equivalent;
provided, however, that no adjustment shall be made pursuant to this
Subparagraph (d)(v) unless the consideration
-14-
<PAGE> 56
received and receivable by the Corporation per share of Common Stock for the
issuance of such additional shares of Common Stock pursuant to such Common Stock
Equivalent is less than the Market Price. No adjustment of the conversion price
shall be made under this Subparagraph upon the issuance of any Convertible
Security which is issued pursuant to the exercise of any warrants or other
subscription or purchase rights therefor, if any adjustment shall previously
have been made in the conversion price then in effect upon the issuance of such
warrants or other rights pursuant to this Subparagraph (d)(v).
(vi) The following provisions shall be applicable to making of adjustments
in the conversion price hereinbefore provided in this Subparagraph (d):
(A) The consideration received by the Corporation shall be deemed to
be the following: to the extent that any additional shares of Common Stock
or any Common Stock Equivalents shall be issued for cash consideration, the
consideration received by the Corporation therefor, or, if such additional
shares of Common Stock or Common Stock Equivalents are offered by the
Corporation for subscription, the subscription price, or, if such
additional shares of Common Stock or Common Stock Equivalents are sold to
underwriters or dealers for public offering without a subscription
offering, the initial public offering price, in any such case excluding any
amounts paid or receivable for accrued interest or accrued dividends and
without deduction of any compensation, discounts, commissions or expenses
paid or incurred by the Corporation for and in the underwriting of, or
otherwise in connection with, the issue thereof; to the extent that such
issuance shall be for a consideration other than cash, then, except as
herein otherwise expressly provided, the fair market value of such
consideration at the time of such issuance as determined in good faith by
the Corporation's Board of Directors. The consideration for any additional
shares of Common Stock issuable pursuant to any Common Stock Equivalents
shall be the consideration received by the Corporation for issuing such
Common Stock Equivalents, plus the additional consideration payable to the
Corporation upon the exercise,
<PAGE> 57
conversion or exchange of such Common Stock Equivalents. In case of the
issuance at any time of any additional shares of Common Stock or Common Stock
Equivalents in payment or satisfaction of any dividend upon any class of stock
other than Common Stock, the Corporation shall be deemed to have received for
such additional shares of Common Stock or Common Stock Equivalents a
consideration equal to the amount of such dividend so paid or satisfied. In any
case in which the consideration to be received or paid shall be other than
cash, the Board of Directors of the Corporation shall notify promptly each
holder of the Series B Preferred Stock of its determination of the fair market
value of such consideration.
(B) Upon the expiration of the right to convert, exchange or exercise any
Common Stock Equivalent the issuance of which effected an adjustment in the
conversion price, if any such Common Stock Equivalent shall not have been
converted, exercised or exchanged, the number of shares of Common Stock deemed
to be issued and outstanding by reason of the fact that they were issuable upon
conversion, exchange or exercise of any such Common Stock Equivalent shall no
longer be computed as set forth above, and the conversion price shall forthwith
be readjusted and thereafter be the price which it would have been (but
reflecting any other adjustments in the conversion price made pursuant to the
provisions of Subparagraph (d)(iv) after the issuance of such Common Stock
Equivalent) had the adjustment of the conversion price made upon the issuance
or sale of such Common Stock Equivalent been made on the basis of the issuance
only of the number of additional shares of Common Stock actually issued upon
exercise, conversion or exchange of such Common Stock Equivalent and thereupon
only the number of additional shares of Common Stock actually so issued shall
be deemed to have been issued and only the consideration actually received by
the Corporation (computed as in Subparagraph (A) of this Subparagraph (d)(vi))
shall be deemed to have been received by the Corporation.
(C) The number of shares of Common Stock at any time outstanding shall not
include any shares thereof then directly or indirectly owned or held
-16-
<PAGE> 58
by or for the account of the Corporation or its subsidiaries.
(e) Whenever the conversion price and the conversion rate are required to
be adjusted as provided herein, the Corporation shall forthwith compute the
adjusted conversion price and the adjusted conversion rate and shall prepare a
certificate setting forth such adjusted conversion price and adjusted
conversion rate and showing in detail the facts upon which such adjustment is
based. A copy of such certificate shall forthwith be filed with the transfer
agent or agents for the Series B Preferred Stock (if any) and for the Common
Stock; and thereafter, until further adjusted, the adjusted conversion price
and the adjusted conversion rate shall be as set forth in such certificate,
provided that the computation of such adjusted conversion price and such
adjusted conversion rate shall be reviewed at least annually by the independent
public accountants regularly employed by the Corporation and said accountants
shall file a corrected certificate, if required, with such transfer agent or
agents. The Corporation shall mail or cause to be mailed to the holders of
Series B Preferred Stock at the time of each semiannual dividend payment, a
statement setting forth the adjustments, if any, made in the applicable
conversion price and conversion rate and not theretofore reported to such
holders, and the reasons for such adjustment.
(f) The Corporation will at all times reserve and keep available, out of
its authorized and unissued Common Stock solely for the purpose of issuance
upon the conversion of the Series B Preferred Stock as herein provided, free
from preemptive and other subscription rights, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding Series B
Preferred Stock. The Corporation shall ensure that all shares of Common Stock
which shall be so issuable shall upon issue be duly and validly issued and
fully paid and nonassessable.
(g) If any shares of Common Stock required to be reserved for the purposes
of conversion of Series B Preferred Stock hereunder require registration with or
approval of any governmental authority under any federal or state law, or
listing upon any national securities exchange, before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered, approved or
listed, as the case may be.
-17-
<PAGE> 59
(h) The issuance of certificates for shares of Common Stock upon the
conversion of Series B Preferred Stock shall be made without charge to the
holders thereof for any transfer or similar taxes that may be payable in
respect of the issue, delivery or acquisition of such certificates. Such
certificates shall be issued in the respective names of the holders of the
Series B Preferred Stock converted.
(6) Exchange. The Series B Preferred Stock outstanding is exchangeable in
whole at the option of the Corporation at any time after July 25, 1990 for the
Corporation's 7 1/3% Convertible Subordinated Debentures due 2013 (the
"Debentures"). Holders of outstanding shares of Series B Preferred Stock will
be entitled to receive $50.00 principal amount of Debentures plus an amount in
cash equal to accrued and unpaid dividends (whether or not declared) to the
date fixed for exchange, in exchange for each share of Series B Preferred Stock
held by them at the time of exchange; provided that the Debentures will be
issuable in denominations of $1,000 and integral multiples thereof and an
amount in cash shall be paid to such holders for any excess principal amount
otherwise issuable. The Corporation will mail to each record holder of the
Series B Preferred Stock written notice of its intention to exchange not less
than 30 nor more than 60 days prior to the date fixed for exchange. The notice
shall specify the effective date of the exchange, the place where certificates
for shares of Series B Preferred Stock are to be surrendered for Debentures and
state that dividends on Series B Preferred Stock will cease to accrue on such
date fixed for exchange. Prior to giving notice of intention to exchange, the
Corporation shall execute and deliver with a bank or trust company selected by
the Corporation an Indenture substantially in the form attached as an exhibit
to the Securities Purchase Agreement dated as of April 18, 1988 among the
Corporation and the purchasers named therein, with such changes as may be
required by law, stock exchange rule or as may be necessary to qualify such
Indenture under the Trust Indenture Act of 1939. The Corporation will cause the
Debentures to be authenticated and such accrued and unpaid dividends to be set
aside, separate and apart from the other funds of the Corporation, in trust for
the benefit of the holders of the Series B Preferred Stock, for payment on the
date on which the exchange is effective; at such time the rights of the holders
of the Series B Preferred stock as shareholders of the Company shall cease and
the shares of Series B Preferred Stock shall no longer be deemed outstanding and
shall represent only the right to receive the Debentures and such accrued and
unpaid dividends but without interest thereon.
-18-
<PAGE> 60
Any moneys set aside by the Corporation and unclaimed at the end of three years
from the date fixed for exchange shall revert to the general funds of the
Corporation. Notwithstanding the foregoing, if notice of exchange has been
given pursuant to this Paragraph (6) and any holder of shares of Series B
Preferred Stock shall, prior to the close of business on the date fixed for
exchange, give written notice to the Corporation pursuant to Paragraph (5) of
the conversion of any or all of the shares to be exchanged held by such holder
(accompanied by a certificate or certificates for such shares, duly endorsed or
assigned to the Corporation), then such exchange shall not become effective as
to such shares to be converted and such conversion shall become effective as
provided in Paragraph (5). The Debentures and such accrued and unpaid dividends
will be delivered to the persons entitled thereto upon surrender to the
Corporation or its agent appointed for that purpose of the certificates for the
share of Series B Preferred Stock being exchanged therefor.
(7) Sinking Fund. The Series B Preferred Stock shall not be entitled to
any mandatory redemption or prepayment (except on liquidation, dissolution or
winding up of the affairs of the Corporation) or to the benefit of any sinking
fund.
(8) Definition. If the day upon which any payment is to be made or any
other action is to be taken or any event is scheduled to occur pursuant to the
terms of these Articles of Amendment is not a business day, the payment shall
be made or the other action shall be taken on the next succeeding business day.
A "business day" is defined as a day in the City of Houston, County of Harris,
Texas, that is not a legal holiday or a day on which banking institutions are
authorized or obligated by law to close.
(9) Notice. Except as otherwise provided herein, any notice, demand or
other communication shall be deemed given and received as of the date of
delivery in person or receipt set forth on the return receipt. The inability to
deliver because of rejection or other refusal to accept any notice, demand or
other communication, shall be deemed to be receipt of such notice, demand or
other communication as of the date of such inability to deliver or rejection or
refusal to accept.
2. Paragraph D. of Article III of the Restated Articles of Incorporation
is designated as paragraph E.
-19-
<PAGE> 61
APPEARERS further stated that all of the shares of the Corporation have par
value; that the Corporation is authorized to issue 25,000,000 shares, of which
20,000,000 are common shares of the par value of $2.50 per share and 5,000,000
are preferred shares of the par value of $0.10 per share; and that the Board of
Directors of the Corporation has the authority to amend the articles to fix the
preferences, limitations, and relative rights of the preferred shares, and to
establish, and fix variations and relative rights and preferences as between
series of preferred shares, all as more fully set out in Article III of the
Restated Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ CLARENCE C. COMER
--------------------------------------
Clarence C. Comer
President
By: /s/ WENDELL E. PHILLIPS, II
--------------------------------------
Wendell E. Phillips, II
Secretary
-20-
<PAGE> 62
WITNESSES:
/s/ [ILLEGIBLE]
- -----------------------------------
/s/ [ILLEGIBLE]
- -----------------------------------
/s/ W. CLELAND DADE
-----------------------------------
NOTARY PUBLIC
[NOTARY SEAL]
-21-
<PAGE> 63
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED DECEMBER 2, 1987
<PAGE> 64
ARTICLES OF AMENDMENT )
TO ) UNITED STATES OF AMERICA
RESTATED ) STATE OF TEXAS
ARTICLES OF INCORPORATION ) COUNTY OF HARRIS
OF )
SOUTHDOWN, INC. )
BE IT KNOWN, that on this 2nd day of December, 1987,
BEFORE ME, Margaret Bassett, a Notary Public, duly commissioned and
qualified, in and for the County of Harris, and in the presence of the witnesses
hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
Clarence C. Comer and Wendell E. Phillips, II, appearing herein and acting
for Southdown, Inc. (of which corporation they are, respectively, President and
Secretary), a corporation organized and existing under the laws of the State of
Louisiana, domiciled in the Parish of Orleans, State of Louisiana, organized by
Articles of Incorporation executed and acknowledged on April 4, 1930, and
recorded on April 5, 1930 in the records of the Recorder of the Parish of
Orleans and on April 7, 1930, in the Record of Charters Book 130, who declared
that pursuant to resolution of the shareholders of the corporation, adopted at a
special meeting of shareholders of the corporation held on December 2, 1987, at
2:00 p.m., at the offices of the corporation, 1200 Smith Street, Suite 2200,
Houston, Texas, they now appear for the purpose of executing this act of
amendment and putting into authentic form the amendment so agreed to by the
vote of the shareholders of said corporation.
AND THE SAID APPEARERS further declared that by vote of the shareholders of
the corporation, it was resolved that the Articles of Incorporated of the
corporation be amended by adding a new Article XIII as follows:
"No director or officer of this corporation shall be personally liable
to this corporation or its shareholders for monetary damages for breach of
fiduciary duty as a director or officer, except for liability (i) for
breach of the director's or officer's duty of loyalty to this corporation
or its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 92(D) of the Louisiana Business Corporation Law, or (iv) for any
transaction from which the director or officer derived an improper personal
benefit. If the Louisiana
<PAGE> 65
Business Corporation Law is hereafter amended to authorize corporate action
further limiting or eliminating the personal liability of directors or
officers, then the liability of each director and officer of this
corporation shall be limited or eliminated to the full extent permitted by
the Louisiana Business Corporation Law as so amended from time to time.
Neither the amendment nor repeal of this Article, nor the adoption of any
provision of this corporation's Articles of Incorporation inconsistent with
this Article, shall eliminate or reduce the effect of this Article, in
respect of any matter occurring, or any cause of action, suit or claim
that, but for this Article, would accrue or arise, prior to such amendment,
repeal or adoption of any inconsistent provision."
AND THE SAID APPEARERS further declared that 5,615,745 of the shares of the
corporation were represented at said meeting and that 5,214,882 shares voted for
the said amendment and that 400,863 shares voted against the said amendment.
AND THE SAID APPEARERS having requested me, Notary, to note said amendment
in authentic form, I do by these presents receive said amendment in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the original Restated Articles of Incorporation of
Southdown, Inc., as hereinabove set forth.
THUS DONE AND PASSED, in my office at Houston, Texas, on the day, month and
year first above written, in the presence of the undersigned competent
witnesses, who here unto sign their names with the said appearers and me,
Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ CLARENCE C. COMER
-------------------------------------
Clarence C. Comer
President
-2-
<PAGE> 66
By: /s/ WENDELL E. PHILLIPS, II
-------------------------------------
Wendell E. Phillips, II
Secretary
WITNESSES:
/s/ EDGAR J. MARSTON III
- -------------------------------
Edgar J. Marston III
/s/ DENNIS M. THIES
- -------------------------------
Dennis M. Thies
/s/ MARGARET BASSETT
--------------------------------------------
NOTARY PUBLIC
[SEAL]
-3-
<PAGE> 67
ARTICLES OF AMENDMENT TO
RESTATED ARTICLES OF INCORPORATION
DATED APRIL 10, 1987
<PAGE> 68
ARTICLES OF AMENDMENT ) STATE OF TEXAS
TO )
RESTATED ARTICLES OF ) COUNTY OF HARRIS
INCORPORATION )
OF ) CITY OF HOUSTON
SOUTHDOWN, INC. )
BE IT KNOWN, That on this 10th day of April, 1987,
BEFORE ME, Shawna Chisnell, a Notary Public, duly commissioned and
qualified in and for the County of Harris, State of Texas, and in the presence
of the witnesses hereinafter named and undersigned:
PERSONALLY CAME AND APPEARED:
CLARENCE C. COMER and WENDELL E. PHILLIPS, II, appearing herein and acting
for Southdown, Inc. (of which Corporation they are, respectively, President and
Secretary), a corporation organized and existing under the laws of the State of
Louisiana, domiciled in the Parish of Orleans, State of Louisiana, organized by
Articles of Incorporation effective April 4, 1930, which Articles, as amended,
were restated pursuant to Restated Articles of Incorporation effective September
15, 1983, who declared that pursuant to Sections 24B(6) and 33A of the Louisiana
Business Corporation Law, Article IIIB of the Restated Articles of Incorporation
of the Corporation, and resolutions of the Board of Directors of the Corporation
adopted at a special meeting of the Board of Directors of the Corporation held
on April 7, 1987, they now appear for the purpose of executing this act of
amendment and putting into authentic form the amendment so adopted by the Board
of Directors of said Corporation.
AND THE SAID APPEARERS further declare that by unanimous vote of the Board
of Directors of said Corporation, it was resolved that Article III of the
Restated Articles of Incorporation of Southdown, Inc. be further amended as
follows:
1. There is added as a new paragraph C of Article III the following:
C. Of the aforesaid 5,000,000 shares of Preferred Stock, 999,999
shares shall constitute a separate series of preferred shares designated
"Preferred Stock, $1.40 Cumulative Convertible Series A" (hereinafter called
the "Series A
<PAGE> 69
Preferred Stock"), which shall have a stated value of $20.00 per share. The
preferences, limitations and relative rights of the Series A Preferred Stock are
as follows:
PREFERRED STOCK,
$1.40 CUMULATIVE CONVERTIBLE SERIES A
(1) Dividends. The holders of the Series A Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors out of the
funds of the Corporation legally available therefor and in preference to the
holders of the Common Stock of the Corporation and any other capital stock of
the Corporation ranking junior to the Series A Preferred Stock as to dividends,
cumulative preferential dividends per share of Series A Preferred Stock in cash
at the rate per annum of $1.40 and no more. Dividends on the Series A Preferred
Stock will be cumulative, will accrue from the date of original issuance and
will be paid (when and as declared by the Board of Directors of the Corporation)
in cash quarterly, in arrears, on the last day of each March, June, September
and December, commencing on the first such date to occur after the date of
original issuance of the Series A Preferred Stock. Each dividend on the Series A
Preferred Stock shall be paid to the holders of record of shares of the Series A
Preferred Stock as they appear on the stock register of the Corporation on such
record date, not exceeding 30 days preceding the payment date thereof, as shall
be fixed by the Board of Directors of the Corporation. Dividends on account of
arrears for any past dividend periods may be declared and paid at any time,
without reference to any regular dividend payment date, to holders of record on
such date, not exceeding 45 days preceding the payment date thereof, as may be
fixed by the Board of Directors of the Corporation. No dividend may be declared
on any other series or class of stock ranking on a parity with the Series A
Preferred Stock as to dividends in respect of any quarterly dividend period,
unless there shall also be or have been declared on the Series A Preferred Stock
like dividends for all quarters at the dividend rates fixed therefor. In the
event that full cumulative dividends on the Series A Preferred Stock have not
been declared and paid or set apart for payment, the Corporation may not declare
or pay or set apart for payment any dividends or make any other distributions
on, or make any payment on account of the purchase, redemption or retirement of,
the Common Stock or any other stock of the Corporation ranking as to dividends
or distributions of assets on liquidation, dissolution or winding up of the
Corporation junior to the Series A Preferred Stock (other than, in the case of
dividends or
-2-
<PAGE> 70
distributions, dividends or distributions paid in shares of Common Stock or such
other junior ranking stock), until full cumulative dividends on the Series A
Preferred Stock are declared and paid or set apart for payment.
(2) Redemption. Shares of Series A Preferred Stock shall be redeemable, at
the option of the Corporation, in whole or part at any time or from time to time
after April 30, 1989 at the redemption prices set forth below (expressed as
percentages of the $20.00 stated value of each share of Series A Preferred
Stock), plus an amount equal to accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption; provided that shares of Series A
Preferred Stock may also be redeemed by the Corporation prior to May 1, 1989 in
connection with the receipt of a Disapproval Notice (as defined in Paragraph (3)
below) as provided in the third paragraph of this Paragraph (2). After April 30,
1997, the Series A Preferred Stock may be redeemed at 100% of its stated value.
If redeemed during the twelve-month period ending April 30,
<TABLE>
<CAPTION>
YEAR PERCENTAGE YEAR PERCENTAGE
- ---- ---------- ---- ----------
<S> <C> <C> <C>
1990 140.00 1994 120.00
1991 135.00 1995 115.00
1992 130.00 1996 110.00
1993 125.00 1997 105.00
</TABLE>
In the event that the Corporation receives a Disapproval Notice, the
Corporation shall be entitled to give notice of redemption and to redeem all
shares of Series A Preferred Stock held by the holder giving or deemed to have
given such Disapproval Notice at 100% of the stated value of each share of
Series A Preferred Stock, plus an amount equal to accrued and unpaid dividends
(whether or not declared) to the date fixed for redemption. Notice of redemption
in response to a Disapproval Notice must be sent prior to the date of the
meeting to which such Disapproval Notice relates. The Corporation must deposit
the funds necessary to effect such redemption in response to a Disapproval
Notice in a bank or trust company pursuant to the terms of the seventh paragraph
of this Paragraph (2) contemporaneously with the giving of such notice of
redemption and all such funds shall be paid or available for payment at such
bank or trust company to
-3-
<PAGE> 71
holders of the Series A Preferred Stock prior to the consummation of the
transaction to which the Disapproval Notice relates.
In case of the redemption of only part of the Series A Preferred Stock at
the time outstanding (other than a redemption in response to a Disapproval
Notice), such redemption shall be made pro rata; provided, however, that,
except in the case of a redemption in response to a Disapproval Notice, if full
cumulative dividends shall not have been paid or declared and set apart for
payment for all quarterly dividends to and including the last dividend payment
date, the Corporation shall not call for redemption any shares of Series A
Preferred Stock unless all such shares then outstanding are called for
simultaneous redemption.
Notice of any proposed redemption of Series A Preferred Stock shall be
given by the Corporation by mailing by first class mail a copy of such notice
at least 10 days prior to the date fixed for such redemption to each holder of
record of the shares to be redeemed at his address appearing on the books of
the Corporation. Notice of redemption shall be deemed to have been given when
deposited in the United States mails, first class postage prepaid, whether or
not such notice is actually received. If on or before the redemption date
specified in such notice all funds necessary for such redemption shall have been
set aside by the Corporation, separate and apart from its other funds, in trust
for the pro rata benefit of the holders of the shares so called for redemption,
so as to be and continue to be available therefor, then from and after the date
of redemption so designated, notwithstanding that any certificate representing
shares of Series A Preferred Stock so called for redemption shall not have been
surrendered for cancellation, the shares represented thereby shall no longer be
deemed outstanding, the right to receive dividends thereon shall cease to accrue
and all rights with respect to such shares of Series A Preferred Stock so called
for redemption shall forthwith at the close of business on such redemption date
cease and terminate, except only the right of the holders thereof to receive the
redemption price of such shares so to be redeemed plus an amount equal to
accrued and unpaid dividends (whether or not declared) up to the date fixed for
redemption, but without interest thereon.
Any moneys so set aside by the Corporation and unclaimed at the end of
three years from the date fixed for
-4-
<PAGE> 72
redemption shall revert to the general funds of the Corporation.
The Corporation may, however, prior to the redemption date specified in
the notice of redemption, deposit in trust for the account of the holders of the
shares of Series A Preferred Stock to be redeemed, with a bank or trust company
in good standing organized under the laws of the United States of America or of
any state thereof, having its principal office located in the continental United
States, and having a capital, surplus and undivided profits aggregating at least
$50 million, designated in such notice of redemption, all funds necessary for
such redemption (including accrued and unpaid dividends up to the date fixed for
redemption), together with irrevocable written instructions authorizing such
bank or trust company, on behalf and at the expense of the Corporation, to cause
the notice of redemption to be mailed as herein provided at least 10 days prior
to the redemption date and to include in said notice of redemption a statement
that all funds necessary for such redemption have been so deposited in trust and
are immediately available, and on the redemption date, notwithstanding that any
certificate representing shares of Series A Preferred Stock called for
redemption shall not have been surrendered for cancellation, all shares of
Series A Preferred Stock with respect to which such deposit shall have been made
and which are outstanding on such redemption date shall no longer be deemed to
be outstanding and all rights with respect to such shares of Series A Preferred
Stock shall forthwith at the close of business on such redemption date cease and
terminate, except only the right of the holders thereof to receive from such
bank or trust company, at any time after the redemption date, the redemption
price of such shares so to be redeemed plus accrued and unpaid dividends up to
the date fixed for redemption. In the event the holder of any such shares of
Series A Preferred Stock shall not, within three years after the redemption
date, claim the amount deposited for the redemption thereof, the depositary
shall, upon the request of the Corporation expressed in a resolution of its
Board of Directors, pay over to the Corporation such unclaimed amount.
If any shares of Series A Preferred Stock called for redemption are not
issued and outstanding as of the date fixed for redemption, the amount set
aside or deposited for the redemption thereof shall revert to or be paid over
to the Corporation.
-5-
<PAGE> 73
Any shares of Series A Preferred Stock which are redeemed or otherwise
purchased or acquired by the Corporation or any subsidiary thereof shall be
cancelled. The number of shares of Series A Preferred Stock shall be reduced by
the number of shares so cancelled and such cancelled shares shall be restored to
the status of authorized but unissued shares of Preferred Stock that are
undesignated as to series. For the purposes of this paragraph, a subsidiary
means a corporation of which a majority of the capital stock having voting power
under ordinary circumstances to elect a majority of the board of directors is
owned by (a) the Corporation, (b) the Corporation and one or more of its
subsidiaries or (c) one or more of the Corporation's subsidiaries.
(3) Regarding Voting Rights. Each share of Series A Preferred Stock shall
entitle the holder thereof to one vote for each share held and, except as
provided herein, or by law, the Series A Preferred Stock and the Common Stock
(and any other capital stock of the Corporation at any time entitled to vote)
shall vote together as one class.
In addition to any provisions herein and any requirement of law, the Series
A Preferred Stock shall vote as a single class with respect to any proposal (a)
to change the dividend rate, liquidation preference, redemption price, voting
rights or conversion rights of the shares of the Series A Preferred Stock or to
increase the number of authorized shares of Series A Preferred Stock; (b) to
increase the authorized amount of any class of capital stock of the Corporation
unless the same ranks junior to the Series A Preferred Stock as to dividends and
assets; (c) to authorize, create, issue or sell any shares of any class (or any
series of any class) of capital stock of the Corporation that ranks pari passu
with or prior to the Series A Preferred Stock as to dividends or distribution of
assets upon liquidation (collectively, the "Priority Stock"); (d) for the merger
or consolidation of the Corporation with or into, or the sale of substantially
all of the assets of the Corporation to, any other entity; and (e) for the
alteration, change or modification of the rights set forth in this paragraph.
Unless the vote of a larger percentage is required by law or the Restated
Articles of Incorporation, the affirmative vote of the holders of a majority of
the outstanding shares of Series A Preferred Stock shall be sufficient to take
any action as to which a class vote of the holders of the Series A Preferred
Stock is required by law or the
-6-
<PAGE> 74
Restated Articles of Incorporation. In the event that the holders of the Series
A Preferred Stock are entitled to vote as a class with respect to any matter
referred to in clause (d) of the preceding paragraph ("Clause (d) Matter"), the
Corporation shall give the holders of the Series A Preferred Stock at least 30
days' notice of any meeting at which a Clause (d) Matter shall be submitted to
shareholders, and each holder of Series A Preferred Stock shall be obligated to
notify the Corporation in writing (by execution of a proxy or otherwise), by
delivery of such notice to the Corporation, at least ten days prior to the date
of any such meeting whether such holder intends to vote in support of or in
opposition to the Clause (d) Matter. Simultaneously with the delivery of such
notice and if the holder indicates that it intends to vote in support of the
Clause (d) Matter, the holder shall deliver a legally binding and irrevocable
proxy authorizing the Corporation or officers thereof to so vote such holder's
shares of Series A Preferred Stock. Any holder who actually receives the
Corporation's notice of meeting with respect to a Clause (d) Matter and who
indicates that it intends to vote in opposition to the Clause (d) Matter or who
fails to deliver such notice together with such proxy within the required time
period shall be deemed to have given a "Disapproval Notice" to the Corporation.
If the Corporation elects to give notice of redemption and to redeem the Series
A Preferred Stock held by a holder giving a Disapproval Notice as provided in
the third paragraph of Paragraph (2) above, the holder of any such shares of
Series A Preferred Stock shall, effective upon the deposit by the Corporation of
the funds necessary to effect such redemption, be deemed to have granted an
irrevocable proxy to the Corporation to vote all such shares of Series A
Preferred Stock registered in the name of such holder in support of the Clause
(d) Matter and to vote on all other matters in the manner determined by the
Board of Directors of the Corporation at the meeting.
Whenever, at any time, dividends payable on the Series A Preferred Stock
shall be in arrears for such number of dividend periods as shall in the
aggregate contain not less than 540 calendar days, the holders of the Series A
Preferred Stock shall have the exclusive right, voting separately as a class to
elect by a majority of the votes cast two directors of the Corporation, who
shall be a Class I director and a Class II director, respectively, (i) at the
Corporation's next annual meeting of shareholders, (ii) at a special meeting
held in place thereof, (iii) at a special
-7-
<PAGE> 75
meeting of the holders of shares of the Series A Preferred Stock called by the
Secretary of the Corporation upon the written request of the holders of record
of 25% or more of the total number of shares of Series A Preferred Stock then
outstanding, to be held within 30 days after delivery of such request, or (iv)
by written consent of the holders of a majority of the issued and outstanding
shares of Series A Stock in lieu thereof, and at each succeeding meeting of
shareholders thereafter at which directors shall be elected until such rights
shall terminate as hereinafter provided. The Board of Directors of the
Corporation hereby unanimously directs the Secretary of the Corporation to give
notice of any special meeting of the shareholders of the Corporation required
from time to time by the provisions of this Paragraph (3), in the manner
prescribed by the Bylaws of the Corporation. At elections for such directors,
each holder of the Series A Preferred Stock shall be entitled to one vote for
each share held. Upon the vesting of such voting right in the holders of the
Series A Preferred Stock, the maximum authorized number of members of the Board
of Directors shall automatically be increased by two and the two vacancies so
created shall be filled by vote of the holders of the Series A Preferred Stock
as hereinabove set forth. The right of the holders of the Series A Preferred
Stock, voting separately as a class, to elect members of the Board of Directors
of the Corporation as aforesaid shall continue until such time as all dividends
accumulated on the Series A Preferred Stock shall have been paid in full, at
which time such right shall terminate, except as by law expressly provided,
subject to revesting in the event of each and every subsequent default of the
character above mentioned. Upon any termination of the right of the holders of
the Series A Preferred Stock to vote for directors as herein provided, the term
of office of all directors then in office elected by such series voting as a
class shall terminate immediately. If the office of any director elected by the
holders of the Series A Preferred Stock becomes vacant by reason of death,
resignation, retirement, disqualification, removal from office, or otherwise,
the remaining director elected by the holders of Series A Preferred Stock voting
as a class may choose a successor who shall hold office for the unexpired term
in respect of which such vacancy occurred. Whenever the special voting powers
vested in the holders of the Series A Preferred Stock shall have expired, the
number of directors shall become such number as may be provided for in the
By-Laws, or resolution of the Board of Directors
-8-
<PAGE> 76
thereunder, irrespective of any increase made pursuant to the provisions of this
Paragraph (3).
(4) Priority in Event of Dissolution. In the event of any liquidation,
dissolution, or winding up of the affairs of the Corporation, after payment or
provision for payment of the debts and other liabilities of the Corporation
(including any liquidation preferences payable in respect of capital stock of
the Corporation ranking senior to the Series A Preferred Stock as to assets),
the holders of the Series A Preferred Stock shall be entitled to receive, out of
the remaining net assets of the Corporation, $20.00 in cash for each share of
Series A Preferred Stock, plus an amount equal to all dividends accrued and
unpaid on each such share (whether or not declared) up to the date fixed for
distribution, before any distribution shall be made to the holders of the Common
Stock of the Corporation or any other stock of the Corporation ranking junior to
the Series A Preferred Stock as to assets. If upon any liquidation, dissolution
or winding up of the affairs of the Corporation, the assets distributable among
the holders of Series A Preferred Stock (and any other capital stock of the
Corporation ranking on a parity with the Series A Preferred Stock as to assets)
shall be insufficient to permit the payment in full to the holders of all shares
of such Series A Preferred Stock (and any other capital stock of the Corporation
ranking on a parity with the Series A Preferred Stock as to assets) of all
preferential amounts payable to all such holders, then the entire assets of the
Corporation thus distributable shall be distributed ratably among the holders of
the Series A Preferred Stock (and any other capital stock of the Corporation
ranking on a parity with the Series A Preferred Stock as to assets) in
proportion to the respective amounts that would be payable per share if such
assets were sufficient to permit payment in full.
(5) Conversion. (a) Subject to and upon compliance with the provisions
herein, at the option of the holder, shares of Series A Preferred Stock may, at
any time on and after September 1, 1987, be converted into fully paid and
nonassessable shares of Common Stock at the rate of .500 of a share of Common
Stock for each share of Series A Preferred Stock to be converted (subject to the
adjustment as hereinafter provided) ("conversion rate"); provided, however, that
if the Corporation shall have given notice of redemption of any shares of Series
A Preferred Stock pursuant to Paragraph (2) above, the right to convert such
shares shall terminate at 5:00 p.m., Houston, Texas time, on the date fixed for
redemption (unless the Corporation shall default
-9-
<PAGE> 77
in the payment due upon redemption in which case such conversion rights shall
not expire). the result obtained by dividing $10.00 by the conversion rate in
effect from time to time is herein referred to as the "conversion price."
Whenever the conversion price is adjusted pursuant to the provisions of
Subparagraph (d) below, the conversion rate shall be redetermined by dividing
$10.00 by the then adjusted conversion price. The conversion rate and the
conversion price in effect from time to time shall be calculated to four decimal
places and rounded to the nearer thousandths.
(b) In order to exercise the right to convert, the holder of any shares of
Series A Preferred Stock to be converted shall surrender the certificate
representing such Series A Preferred Stock, accompanied (if so required by the
Corporation) by the proper instrument or instruments of transfer, in form
satisfactory to the Corporation, duly executed by the registered holder thereof
or by his attorney duly authorized in writing, to the Corporation at its
principal executive office, and shall give written notice to the Corporation at
such office that the holder elects to convert such Series A Preferred Stock. No
payment or adjustment shall be made upon any conversion on account of regular
cash dividends declared or accrued on the Common Stock or the Series A Preferred
Stock surrendered for conversion. Series A Preferred Stock shall be deemed to
have been converted immediately prior to the close of business on the date of
the giving of such notice and of the surrender of such certificates for
conversion in accordance with the foregoing provisions, and at such time the
rights of the holder of such Series A Preferred Stock as such holder shall
cease, and the holder thereof shall be treated for all purposes as the record
holder of Common Stock from and after such time. As promptly as practicable
after receipt of such notice and the surrender of such certificates as
aforesaid, the Corporation shall issue and deliver at such office a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion.
(c) No fractional share of Common Stock shall be issued upon conversion of
Series A Preferred Stock. Instead of any fractional share of Common Stock which
would otherwise be issuable upon conversion of any Series A Preferred Stock, the
Corporation shall pay a cash adjustment equal to such fraction multiplied by the
Price per share of the Common Stock on the trading day next preceding the date
of conversion. In determining the number of shares of Common
-10-
<PAGE> 78
Stock and the payment, if any, in lieu of fractional shares that a holder of
Series A Preferred Stock shall receive, the total number of shares of Series A
Preferred Stock surrendered for conversion by such holder shall be aggregated.
(d) The number and kind of securities issuable upon the conversion of the
Series A Preferred Stock shall be subject to adjustment from time to time upon
the happening of certain events occurring on or after the date of original
issue of the shares of the Series A Preferred Stock as follows:
(i) In case of any reclassification or change of outstanding
securities issuable upon exercise of the conversion rights (other than a
change in par value, or from par value to no par value, or from no par
value to par value or as a result of a subdivision or combination), or in
the case of any consolidation or merger of the Corporation with or into
another corporation (other than a merger with another corporation in which
the Corporation is the surviving Corporation and which does not result in
any reclassification or change -- other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination -- of outstanding securities
issuable upon exercise of these conversion rights), the holders of the
Series A Preferred Stock shall have, and the Corporation, or such successor
corporation, shall covenant in the constituent documents effecting any of
the foregoing transactions that the holders of the Series A Preferred Stock
do have, the right to obtain upon the exercise of these conversion rights,
in lieu of each share of Common Stock theretofore issuable upon exercise of
these conversion rights, the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification,
change, consolidation or merger by a holder of one share of Common Stock
issuable upon exercise of these conversion rights as if they had been
exercised immediately prior to such reclassification, change, consolidation
or merger. The constituent documents effecting any reclassification,
change, consolidation or merger shall provide for any adjustments which
shall be as nearly equivalent as may be practicable to the adjustments
provided in this Subparagraph (d). The provisions of this Subparagraph
-11-
<PAGE> 79
(d)(i) shall similarly apply to successive reclassifications, changes,
consolidations or mergers.
(ii) If the Corporation at any time while any of the Series A
Preferred Stock is outstanding, shall subdivide or combine its Common
Stock, the conversion price shall be proportionately reduced, in case of
subdivision of shares, as at the effective date of such subdivision, or if
the Corporation shall take a record of holders of its Common Stock for the
purpose of so subdividing, as at such record date, whichever is earlier, or
shall be proportionately increased, in the case of combination of shares,
as at the effective date of such combination or, if the Corporation shall
take a record of holders of its Common Stock for the purpose of so
combining, as at such record date, whichever is earlier.
(iii) If the Corporation at any time while any of the Series A
Preferred Stock is outstanding shall:
(A) Pay a dividend payable in, or make any other
distribution of, Common Stock, the conversion price shall be adjusted,
as at the date the Corporation shall take a record of the holders of
its Common Stock for the purpose of receiving such dividend or other
distribution (or if no such record is taken, as at the date of such
payment or other distribution), to that price determined by
multiplying the conversion price in effect immediately prior to such
record date (or if no such record is taken, then immediately prior to
such payment or other distribution) by a fraction (1) the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to such dividend or distribution, and (2) the
denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution
(plus in the event that the Corporation paid cash for fractional
shares, the number of additional shares which would have been
outstanding had the Corporation issued fractional shares in connection
with said dividend, except to the extent such payment of cash is
treated as a dividend payable out of earnings or surplus legally
available for the payment of dividends under the laws of the State of
Louisiana); or
-12-
<PAGE> 80
(B) Make a distribution of its assets to the holders of its Common
Stock as a dividend in liquidation or partial liquidation or by way of
return of capital or other than as a dividend payable out of earnings or
surplus legally available for dividends under the laws of the State of
Louisiana, the holders of the Series A Preferred Stock shall, upon exercise
of these conversion rights, be entitled to receive, in addition to the
number of shares of Common Stock receivable thereupon, and without payment
of any consideration therefor, a sum equal to the amount of such assets as
would have been deliverable to them as owners of that number of shares of
Common Stock of the Corporation receivable by exercise of these conversion
rights, had they been the holders of record of such Common Stock on the
record date for such distribution (or if no such record is taken, as of the
date of such distribution); and an appropriate provision therefore shall be
made a part of any such distribution.
(iv) If the Corporation at any time while any of the Series A Preferred
Stock is outstanding shall issue any additional shares of Common Stock
(otherwise than as provided in the foregoing Subparagraphs (i) through (iii)
above) at a price per share less than the average Price per share of Common
Stock for the 20 trading days immediately preceding the date of the
authorization of such issuance by the Corporation's Board of Directors (the
"Market Price") then the conversion price on each such issuance shall be
adjusted to that price determined by multiplying the conversion price by a
fraction:
(A) the numerator of which shall be the sum of (1) the number of
shares of Common Stock outstanding immediately prior to the issuance of
such additional shares of Common Stock multiplied by the Market Price, and
(2) the consideration, if any, received and deemed received by the
Corporation upon the issuance of such additional shares of Common Stock,
divided by (3) the total number of shares of Common Stock outstanding
immediately after the issuance of such additional shares of Common Stock,
and
(B) the denominator of which shall be the Market Price.
-13-
<PAGE> 81
No adjustment of the conversion price shall be made in an amount less than
$.05 per share, but any such lesser adjustment shall be carried forward and
shall be made at the time together with the next subsequent adjustment which,
together with any adjustments so carried forward, shall amount to $.05 per
share or more. Further, no adjustments of the conversion price shall be made
under this Subparagraph (d)(iv) upon the issuance of any additional shares of
Common Stock that (x) are issued pursuant to thrift plans, stock purchase
plans, stock bonus plans, stock option plans, employee stock ownership plans
and other incentive or profit sharing arrangements for the benefit of
employees, provided such plans or arrangements have been approved by a majority
of either the disinterested members of the Board of Directors of the
Corporation or the Corporation's stockholders ("Employee Benefit Plans") or (y)
are issued pursuant to any Common Stock Equivalent (as defined in
Subparagraph (d)(v) below), if upon the issuance of any such Common Stock
Equivalent, any such adjustments shall previously have been made pursuant to
Subparagraph (d)(v) hereof or if no adjustment was required pursuant to
Subparagraph (d)(v) hereof.
The Price per share of Common Stock on any day means the average (mean) of
the reported "high" and "low" sales prices for such shares as reported in The
Wall Street Journal's NYSE-Composite Transactions listing for such day
(corrected for obvious typographical errors), or if such shares are not
reported in such listing, then the average of the reported "high" and "low"
sales prices on the largest national securities exchange (based on the
aggregate dollar value of securities listed) on which such shares are listed or
traded, or if such shares are not listed or traded on any national securities
exchange, then the average of the reported "high" and "low" sales prices for
such shares in the over-the-counter market, as reported on the National
Association of Securities Dealers Automated Quotations System, or, if such
prices shall not be reported thereon, the average between the closing bid and
asked prices so reported, or, if such prices shall not be reported, then the
average closing bid and asked prices reported by the National Quotation Bureau
Incorporated, or, in all other cases, the value established by the Board of
Directors of the Corporation in good faith. The "average" Price per share of
the Common Stock for any period shall be determined by
-14-
<PAGE> 82
dividing the sum of the Prices determined for the individual days in such period
by the number of days in such period.
(v) In case the Corporation shall issue any security or evidence of
indebtedness which is convertible into or exchangeable for Common Stock
("Convertible Security"), or any warrant, option or other right to subscribe for
or purchase Common Stock or any Convertible Security, other than pursuant to
Employee Benefit Plans, ("Common Stock Equivalent"), or if, after any such
issuance, the price per share for which additional shares of Common Stock may be
issuable thereunder is amended, then the conversion price upon each such
issuance or amendment shall be adjusted as provided in Subparagraph (d)(iv)
hereof on the basis that (i) the maximum number of additional shares of Common
Stock issuable pursuant to all such Common Stock Equivalents shall be deemed to
have been issued as of the earlier of (a) the date on which the Corporation
shall enter into a firm contract for the issuance of such Common Stock
Equivalent, or (b) the date of actual issuance of such Common Stock Equivalent;
and (ii) the aggregate consideration for such maximum number of additional
shares of Common Stock shall be deemed to be the minimum consideration received
and receivable by the Corporation for the issuance of such additional shares of
Common Stock pursuant to such Common Stock Equivalent; provided, however, that
no adjustment shall be made pursuant to this Subparagraph (d)(v) unless the
consideration received and receivable by the Corporation per share of Common
Stock for the issuance of such additional shares of Common Stock pursuant to
such Common Stock Equivalent is less than the Market Price. No adjustment of
the conversion price shall be made under this Subparagraph upon the issuance of
any Convertible Security which is issued pursuant to the exercise of any
warrants or other subscription or purchase rights therefor, if any adjustment
shall previously have been made in the conversion price than in effect upon the
issuance of such warrants or other rights pursuant to this Subparagraph (d)(v).
(vi) The following provisions shall be applicable to making of adjustments
in the conversion price hereinbefore provided in this Subparagraph (d):
-15-
<PAGE> 83
(A) The consideration received by the Corporation shall be deemed to be
the following: to the extent that any additional shares of Common Stock or any
Common stock Equivalents shall be issued for cash consideration, the
consideration received by the Corporation therefor, or, if such additional
shares of Common Stock or Common Stock Equivalents are offered by the
Corporation for subscription, the subscription price, or, if such additional
shares of Common stock or Common Stock Equivalents are sold to underwriters or
dealers for public offering without a subscription offering, the initial public
offering price, in any such case excluding any amounts paid or receivable for
accrued interest or accrued dividends and without deduction of any compensation,
discounts or expenses paid or incurred by the Corporation for and in the
underwriting of, or otherwise in connection with, the issue thereof; to the
extent that such issuance shall be for a consideration other than cash, then,
except as herein otherwise expressly provided, the fair market value of such
consideration at the time of such issuance as determined in good faith by the
Corporation's Board of Directors. The consideration for any additional shares of
Common Stock issuable pursuant to any Common stock Equivalents shall be the
consideration received by the Corporation for issuing such Common Stock
Equivalents, plus the additional consideration payable to the corporation upon
the exercise, conversion or exchange of such Common Stock Equivalents. In case
of the issuance at any time of any additional shares of Common Stock or Common
Stock Equivalents in payment or satisfaction of any dividend upon any class of
stock other than Common Stock, the Corporation shall be deemed to have received
for such additional shares of Common Stock or Common stock Equivalents a
consideration equal to the amount of such dividend so paid or satisfied. In any
case in which the consideration to be received or paid shall be other than cash,
the Board of Directors of the Corporation shall notify promptly each holder of
the Series A Preferred Stock of its determination of the fair market value of
such consideration.
-16-
<PAGE> 84
(B) Upon the expiration of the right to convert, exchange or
exercise any Common Stock Equivalent the issuance of which effected an
adjustment in the conversion price, if any such Common Stock
Equivalent shall not have been converted, exercised or exchanged, the
number of shares of Common Stock deemed to be issued and outstanding
by reason of the fact that they were issuable upon conversion,
exchange or exercise of any such Common Stock Equivalent shall no
longer be computed as set forth above, and the conversion price shall
forthwith be readjusted and thereafter be the price which it would
have been (but reflecting any other adjustments in the conversion
price made pursuant to the provisions of Subparagraph (d)(iv) after
the issuance of such Common Stock Equivalent) had the adjustment of
the conversion price made upon the issuance or sale of such Common
Stock Equivalent been made on the basis of the issuance only of the
number of additional shares of Common Stock actually issued upon
exercise, conversion or exchange of such Common Stock Equivalents and
thereupon only the number of additional shares of Common Stock
actually so issued shall be deemed to have been issued and only the
consideration actually received by the Corporation (computed as in
Subparagraph (A) of this Subparagraph (d)(vi)) shall be deemed to have
been received by the Corporation.
(C) The number of shares of Common Stock at any time outstanding
shall not include any shares thereof then directly or indirectly owned
or held by or for the account of the Corporation or its subsidiaries.
(e) Whenever the conversion price and the conversion rate are required to
be adjusted as provided herein, the Corporation shall forthwith compute the
adjusted conversion price and the adjusted conversion rate and shall prepare a
certificate setting forth such adjusted conversion price and adjusted conversion
rate and showing in detail the facts upon which such adjustment is based. A copy
of such certificate shall forthwith be filed with the transfer agent or agents
for the Series A Preferred Stock (if any) and for the Common Stock; and
thereafter, until further adjusted, the
-17-
<PAGE> 85
adjusted conversion price and the adjusted conversion rate shall be as set forth
in such certificate, provided that the computation of such adjusted conversion
price and such adjusted conversion rate shall be reviewed at least annually by
the independent public accountants regularly employed by the Corporation and
said accountants shall file a corrected certificate, if required, with such
transfer agent or agents. The Corporation shall mail or cause to be mailed to
the holders of Series A Preferred Stock at the time of each quarterly dividend
payment, a statement setting forth the adjustments, if any, made in the
applicable conversion price and conversion rate and not theretofore reported to
such holders, and the reasons for such adjustment.
(f) The Corporation will at all times reserve and keep available, out of
its authorized and unissued Common Stock solely for the purpose of issuance
upon the conversion of the Series A Preferred Stock as herein provided, free
from preemptive and other subscription rights, such number of shares of Common
Stock as shall then be issuable upon the conversion of all outstanding Series
A Preferred Stock. The Corporation shall ensure that all shares of Common Stock
which shall be so issuable shall upon issue be duly and validly issued and
fully paid and nonassessable.
(g) If any shares of Common Stock required to be reserved for the purposes
of conversion of Series A Preferred Stock hereunder require registration with
or approval of any governmental authority under any federal or state law, or
listing upon any national securities exchange, before such shares may be issued
upon conversion, the Corporation will in good faith and as expeditiously as
possible endeavor to cause such shares to be duly registered, approved or
listed, as the case may be.
(h) The issuance of certificates for shares of Common Stock upon the
conversion of Series A Preferred Stock shall be made without charge to the
holders thereof for any transfer or similar taxes that may be payable in
respect of the issue, delivery or acquisition of such certificates. Such
certificates shall be issued in the respective names of the holders of the
Series A Preference Stock converted.
(6) Sinking Fund. The Series A Preferred Stock shall not be entitled to any
mandatory redemption or prepayment (except on liquidation, dissolution or
winding up of the
-18-
<PAGE> 86
affairs of the Corporation) or to the benefit of any sinking fund.
(7) Definition. If the day upon which any payment is to be made or any
other action is to be taken or any event is scheduled to occur pursuant to the
terms of Articles of Amendment is not a business day, the payment shall be made
or the other action shall be taken on the next succeeding business day. A
"business day" is defined as a day in the City of Houston, County of Harris,
Texas, that is not a legal holiday or a day on which banking institutions are
authorized or obligated by law to close.
(8) Notice. Any notice, demand or other communication shall be deemed
given and received as of the date of delivery in person or receipt set forth on
the return receipt. The inability to deliver because of rejection or other
refusal to accept any notice, demand or other communication, shall be deemed to
be receipt of such notice, demand or other communication as of the date of such
inability to deliver or rejection or refusal to accept.
2. Paragraph C of Article III is relettered as paragraph D.
APPEARERS further stated that all of the shares of the Corporation have
par value; that the Corporation is authorized to issue 25,000,000 shares, of
which 20,000,000 are common shares of the par value of $2.50 per share and
5,000,000 are preferred shares of the par value of $0.10 per share; and that the
Board of Directors of the Corporation has the authority to amend the articles to
fix the preferences, limitations, and relative rights of the preferred shares,
and to establish, and fix variations and relative rights and preferences as
between series of preferred shares, all as more fully set out in Article III of
the Restated Articles of Incorporation.
AND SAID APPEARERS having requested me, Notary, to note said amendment in
authentic form, I do by these presents receive said amendments in the form of
this public act to the end that said amendment may be promulgated and recorded
and thus be read into the Restated Articles of Incorporation of Southdown, Inc.,
as hereinabove set forth.
-19-
<PAGE> 87
THUS DONE AND PASSED, in my office at Houston, Harris County, State of
Texas, on the day, month and year first above written, in the presence of the
undersigned competent witnesses, who hereunto sign their names with the said
appearers and me, Notary, after a due reading of the whole.
SOUTHDOWN, INC.
By: /s/ CLARENCE C. COMER
-----------------------------
Clarence C. Comer
President
By: /s/ WENDELL E. PHILLIPS, II
-----------------------------
Wendell E. Phillips, II
Secretary
WITNESSES
/s/ WILLIAM CLELAND DADE
- -------------------------
William Cleland Dade
/s/ L. CRAIG CARLETON
- -------------------------
L. Craig Carleton
/s/ SHAWNA CHISNELL
--------------------
NOTARY PUBLIC
[NOTARY SEAL]
-20-
<PAGE> 88
RESTATED ARTICLES OF INCORPORATION
OF SOUTHDOWN, INC.
DATED SEPTEMBER 15, 1983
<PAGE> 89
RESTATED ARTICLES OF INCORPORATION
DATED SEPTEMBER 15, 1983
<PAGE> 90
RESTATED ARTICLES OF INCORPORATION
of
SOUTHDOWN, INC.
Southdown, Inc., a Louisiana corporation (the "corporation"), through its
undersigned President and Secretary and by authority of its Board of Directors,
does hereby certify that:
FIRST: The Restated Articles of Incorporation set forth in Paragraph Fourth
below accurately copies the articles and all amendments and corrections thereto
in effect at the date hereof without any substantive changes.
SECOND: Each amendment and correction has been effected in conformity with
law.
THIRD: The date of incorporation of the corporation was April 4, 1930, and
the date of these Restated Articles is September 15, 1983.
FOURTH: The Restated Articles of Incorporation of the corporation are as
follows:
ARTICLE I
The name of this corporation shall be Southdown, Inc.
ARTICLE II
The corporation's purpose is to engage in any lawful activity for which
corporations may be formed under the Business Corporation Law of Louisiana.
ARTICLE III
A. The Corporation has authority to issue 20,000,000 shares of Common
Stock of the par value of $2.50 per share (the "Common Stock") and 5,000,000
shares of Preferred Stock of the par value of $.10 per share (the "Preferred
Stock").
B. Shares of the Preferred Stock may be issued from time to time in one
or more classes or series, each of which shall have such distinctive designation
or title and such voting rights, preferences and relative, optional or other
special rights (including, without limitation, pre-emptive rights) and
qualifications, limitations or restrictions as shall be fixed by the board of
directors of the corporation prior to the issuance of any shares thereof by
amendment to these Articles of Incorporation adopted by the board of directors.
C. Except to the extent otherwise provided by an amendment adopted by the
board of directors in accordance with the provisions of Article III(B) hereof,
no shareholder of this corporation shall by reason of his holding shares of any
class have any
<PAGE> 91
pre-emptive or preferential right to purchase or subscribe to any shares of any
class of this corporation now or hereafter authorized or any notes, debentures,
bonds, or other securities convertible into or carrying options or warrants to
purchase shares of any class now or hereafter to be authorized, whether or not
the issuance of any shares, or such notes, debentures, bonds or other securities
would adversely affect dividend or voting rights of such shareholder, other than
such rights, if any, as the board of directors in its discretion may fix; and
the board of directors may issue shares of any class of this corporation, or any
notes, debentures, bonds or other securities convertible into or carrying
options or warrants to purchase shares of any class, without offering any such
shares of any class, either in whole or in part, to the existing shareholders of
any class.
ARTICLE IV
All of the corporate powers of this corporation shall be vested in and
exercised by a board of directors consisting of the number of directors
specified in the by-laws of the corporation or determined in the manner
prescribed herein.
The Board of Directors shall be divided into three classes as nearly equal
in number as may be, with the initial term of office of Class I expiring at the
annual meeting of shareholders in 1971, of Class II expiring at the annual
meeting of shareholders in 1972, and of Class III expiring at the annual meeting
of shareholders in 1973.
At each annual meeting of shareholders, directors chosen to succeed those
whose terms then expire shall be elected for a full term of office expiring at
the third succeeding annual meeting of shareholders after their election. When
the number of directors is increased by amendment to the by-laws of the
corporation, and any newly created directorships are filled by the Board of
Directors, there shall be no classification of such additional directors until
the next annual meeting of shareholders. Subject to the foregoing, directors
elected to fill a vacancy shall hold office for a term expiring at the annual
meeting at which the term of the class to which they shall have been elected
expires.
The shareholders, by the affirmative vote or consent of the holders of 80%
of all classes of stock of this corporation entitled to vote in elections of
directors, at any special meeting called for the purpose may remove from office
any one or more of the directors, notwithstanding that his or their terms of
office may not have expired, and may forthwith at such meeting proceed to elect
a successor for the unexpired term.
ARTICLE V
Any director absent from the meeting of the board of directors or any
committee thereof may be represented by any other director or shareholder, who
may cast the absent director's vote according to his written instructions,
general or special.
-2-
<PAGE> 92
ARTICLE VI
The board of directors may make and alter by-laws containing any provisions
with respect to the government of the corporation, subject to the power of the
shareholders to change or repeal any by-laws so made. The by-laws may contain
any provision relating to the business of the corporation, the conduct of its
affairs, its rights or powers, or the rights or powers of its shareholders,
directors or officers, not inconsistent with law or these articles.
ARTICLE VII
No shareholder shall ever be held liable for the contracts, faults or debts
of the corporation in any further sum than the unpaid balance, if any, remaining
due on the stock for which he has subscribed, nor shall any informality in
organization have the effect of rendering any subscriber or shareholder liable
beyond the said unpaid amount, if any, remaining due on his stock.
ARTICLE VIII
Notwithstanding any other provision of this certificate of incorporation or
the by-laws of this corporation (and in addition to any other vote that may be
required by law, the Articles of Incorporation or the by-laws of this
corporation), the affirmative vote of the holders of 80% of all classes of stock
of this Corporation entitled to vote in elections of directors (considered for
this purpose as one class) shall be required to amend, alter, change, or repeal
Articles IV, VIII, VI, IX, X or XI of the Articles of Incorporation.
Except as provided in the Articles of Incorporation, or as required by
statute, the Articles of Incorporation may be amended by the affirmative vote or
consent of the holders of a majority of all classes of stock of this corporation
entitled to vote in elections of directors, taken at an annual or special
meeting of shareholders, the notice of which set forth the proposed amendment or
a summary of the changes to be made thereby. If such an amendment would
adversely affect the holders of shares of any class or series, then in addition
to the vote required by the sentence immediately preceding, the holders of each
class or series of shares so affected by the amendment shall be entitled to vote
as a class upon such amendment, and a majority of the issued and outstanding
shares of each class or series so affected by the amendment shall be necessary
to the adoption thereof.
ARTICLE IX
(A) Except as set forth in Paragraph (D) of this Article IX, the
affirmative vote or consent of the holders of 80% of all classes of stock of
this corporation entitled to vote in elections of directors, considered for the
purposes of this Article IX as one class, shall be required:
-3-
<PAGE> 93
(i) for a merger or consolidation with or into any other corporation,
or
(ii) for any sale or lease of all or any substantial part of the assets
of this corporation to any other corporation, person or other entity, or
(iii) any sale or lease to this corporation or any subsidiary thereof
of any assets (except assets having an aggregate fair market value of less
than $2,000,000) in exchange for voting securities (or securities
convertible into voting securities or options, warrants, or rights to
purchase voting securities or securities convertible into voting
securities) of this corporation or any subsidiary by any other corporation,
person or entity,
if as of the record date for the determination of shareholders entitled to
notice thereof and to vote thereon or consent thereto such other corporation,
person or entity which is party to such a transaction is the beneficial owner,
directly or indirectly, of 5% or more of the outstanding shares of stock of this
corporation entitled to vote in elections of directors, considered for the
purpose of the Article IX as one class. Such affirmative vote or consent shall
be in addition to the vote or consent of the holders of the stock of this
corporation otherwise required by law or any agreement between this corporation
and any national securities exchange.
(B) For purposes of this Article IX any corporation, person or other
entity shall be deemed to be the beneficial owner of any share of stock of this
corporation,
(i) which it owns directly, whether or not of record, or
(ii) which it has the right to acquire pursuant to any agreement or
understanding or upon exercise of conversion rights, warrants or options or
otherwise, or
(iii) which are beneficially owned, directly or indirectly (including
shares deemed to be owned through application of clause (ii) above), by any
"affiliate" or "associate" as those terms are defined in Rule 12b-2 of the
General Rules and Regulations under the Securities Exchange Act of 1934 as
in effect on July 1, 1970, or
(iv) which are beneficially owned, directly or indirectly (including
shares deemed owned through application of clause (ii) above), by any other
corporation, person or entity with which it or its "affiliate" or
"associate" has any agreement or arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of stock of this
corporation.
-4-
<PAGE> 94
For the purposes of this Article IX, the outstanding shares of any class of
stock of this corporation shall include shares deemed owned through the
application of clauses (B)(ii), (iii) and (iv) above, but shall not include any
other shares which may be issuable pursuant to any agreement or upon exercise of
conversion rights, warrants, options or otherwise.
(C) The Board of Directors shall have the power and duty to determine for
the purposes of this Article IX on the basis of information known to this
corporation, whether
(i) such other corporation, person or other entity beneficially owns
more than 5% of the outstanding shares of stock of this corporation
entitled to vote in elections of directors,
(ii) a corporation, person, or entity is an "affiliate" or "associate"
(as defined in Paragraph (B) above) of another,
(iii) the assets being acquired by this corporation, or any subsidiary
thereof, have an aggregate fair market value of less than $2,000,000, and
(iv) the memorandum of understanding referred to in paragraph (D)
below is substantially consistent with the transaction covered thereby.
Any such determination shall be conclusive and binding for all purposes of
this Article IX.
(D) The provisions of this Article IX shall not apply to,
(i) any merger or similar transaction with any corporation if the
Board of Directors of this corporation has approved a memorandum of
understanding with such other corporation with respect to such transaction
prior to the time that such other corporation shall have become a
beneficial owner of more than 5% of the outstanding shares of stock of this
corporation entitled to vote in elections of directors; or
(ii) any merger or consolidation of this corporation with, or any sale
or lease to this corporation or any subsidiary thereof of any assets of or
sale or lease by this corporation or any subsidiary thereof of any its
assets to (a) any corporation of which a majority of the outstanding shares
of all classes of stock entitled to vote in elections of directors is owned
of record or beneficially by this corporation and its subsidiaries or (b)
Zapata Norness Incorporated, a Delaware corporation, or any successor,
affiliate, associate or subsidiary.
(E) Except as may be otherwise provided by this Article IX or required by
statute, an agreement of merger or consolidation
-5-
<PAGE> 95
may be approved by a majority vote of the shares issued and outstanding, taken
at a meeting called for the purpose of such approval.
ARTICLE X
Special meetings of shareholders may be called by 80% or more of the Board
of Directors or of the Executive Committee thereof or the President of this
corporation and shall be called upon the written request of the holders of 80%
or more of this corporation's stock outstanding and entitled to vote for
directors as of the date of such request.
ARTICLE XI
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter or repeal the
by-laws of the corporation by the affirmative vote of 80% of the entire Board of
Directors. Such by-laws may be adopted, amended or repealed by the affirmative
vote of the holders of 80% of this corporation's stock outstanding and entitled
to vote at the meeting at which any by-law is adopted, amended or repealed. To
the extent not determined by the Articles of Incorporation, the number,
qualification, term of office, manner of election, time and place of meeting,
compensation and powers and duties of the directors may be prescribed from time
to time by the by-laws. The by-laws may contain any other provisions for the
regulation and management of the affairs of the corporation not inconsistent
with statute or the Articles of Incorporation.
ARTICLE XII
Cash, property or share dividends, shares issuable to shareholders in
connection with a reclassification of stock, and the redemption price of
redeemed shares of Preferred Stock, which are not claimed by the shareholders
entitled thereto within one year after the dividend or redemption price became
payable or the shares became issuable, despite reasonable efforts by the
corporation to pay the dividend or redemption price or deliver the certificates
for the shares to such shareholders within such time, shall, at the expiration
of such time, revert to full ownership to the corporation, and the corporation's
obligation to pay such dividend or redemption price or issue such shares, as the
case may be, shall thereupon cease; provided that the board of directors may, at
any time, for any reason satisfactory to it, but need not, authorize (a) payment
of the amount of any cash or property dividend or redemption price, or (b)
issuance of any shares, ownership of which has reverted to the corporation
-6-
<PAGE> 96
pursuant to this Article XII, to the person or entity who or which would be
entitled thereto had such reversion not occurred.
Dated: September 15th, 1983
SOUTHDOWN, INC.
By:/s/ LAWRENCE E. HIRSCH
----------------------------
Lawrence E. Hirsch,
President
By:/s/ E.B. SCHERICH
----------------------------
E.B. Scherich,
Secretary
-7-
<PAGE> 97
ACKNOWLEDGMENT
STATE OF TEXAS
COUNTY OF HARRIS
BEFORE ME, the undersigned authority, personally came and appeared Laurence
E. Hirsch and E. B. Scherich to me known to be the President and Secretary of
Southdown, Inc. and the persons who executed the foregoing instrument in such
capacities, and who, being duly sworn, acknowledged in my presence and in the
presence of the undersigned witnesses that they were authorized to and did
execute the foregoing instrument in such capacities for the said corporation, as
its and their free act and deed.
IN WITNESS WHEREOF, the appearers and witnesses and I have hereunto affixed
our signatures on this 15th day of September, 1983.
WITNESSES:
/s/ MICHELLE RAYMOND /s/ LAURENCE E. HIRSCH
- ----------------------------------- ------------------------------------
Laurence E. Hirsch,
President
/s/ MARIE KALISEK
- -----------------------------------
/s/ MICHELLE RAYMOND /s/ E. B. SCHERICH
- ----------------------------------- ------------------------------------
E. B. Scherich,
Secretary
/s/ MARIE KALISEK
- -----------------------------------
/s/ DANA LLOYD
---------------------------
NOTARY PUBLIC
[NOTARY SEAL]
-8-
<PAGE> 1
EXHIBIT 3.2
- As Amended January 27, 2000
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 meeting, 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 it may deem appropriate or
convenient. Except to the extent inconsistent
<PAGE> 2
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 prohibited 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.
2
<PAGE> 3
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
Subject to the provisions of the Restated Articles of Incorporation, as amended,
the number of directors is twelve (12).
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
3
<PAGE> 4
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 purpose, 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, 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
4
<PAGE> 5
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.
(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. The Board
of Directors may remove a director and declare vacant the office of such
director who:
5
<PAGE> 6
(a) has been interdicted or adjudicated an incompetent,
(b) has become incapacitated by illness or other infirmity so that, in the
sole opinion of the Board of Directors, he is unable to perform his
duties for a period of six months or longer, or
(c) has ceased at any time to have the qualifications required by law, the
Restated Articles of Incorporation or these Bylaws.
The remaining directors may fill any vacancy on the Board of Directors for an
unexpired term (including any vacancy resulting from an increase in the
authorized number of directors, or from the failure of the shareholders to elect
the full number of authorized directors).
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 - Qualifications for Office
(a) 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. 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's seventieth birthday, at which meeting the shareholders
of the corporation shall elect such director's successor in accordance
with Article I of these bylaws.
6
<PAGE> 7
(b) To be eligible for nomination or election or to continue to hold office
as a director, a person must during each immediately preceding 12 month
period during his term of office have attended at least two-thirds of
the aggregate number of meetings of the Board of Directors and
Committees of which he was a member, unless the failure to attend
resulted from illness or other reason determined by the Board of
Directors to excuse the failure to attend. A director who ceases to
meet this attendance qualification shall continue in office until the
expiration of his then current term or unless his office is declared
vacant by the Board of Directors under the preceding Section 11.
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> 8
ARTICLE IV
Officers
Section 1 - Titles
The officers of the corporation shall be a president, one or more
vice-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 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.
8
<PAGE> 9
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.
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.
9
<PAGE> 10
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 transfer 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
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.
10
<PAGE> 11
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 and Insurance.
(a) Except as prohibited by law as the same exists or may hereafter be
amended (but, in the case of any amendment, only to the extent that such
amendment permits the corporation to provide broader indemnification rights than
said law permitted the corporation to provide prior to such amendment), the
corporation shall indemnify each person who was or is made a party or is
threatened to be made a party to or is involved in any action, suit, or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the corporation) (hereinafter a "Proceeding"),
by reason of the fact that he or she or a person of whom he or she is the legal
representative is or was a director or officer of the corporation or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans maintained
or sponsored by the corporation, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or agent,
against all expense, liability and loss (including attorneys' fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by such person in connection
therewith and such indemnification 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 or her heirs, executors and administrators; provided, however, that except
as provided in paragraph (c) of this Bylaw, the corporation shall indemnify any
such person seeking indemnification in connection with a Proceeding (or part
thereof) initiated by such person only if such Proceeding (or part thereof) was
authorized by the Board of Directors. The
11
<PAGE> 12
right to indemnification conferred in this Bylaw shall be a contract right and
shall include the right to be paid by the corporation the expenses incurred in
defending any such Proceeding in advance of its final disposition upon receipt
of an undertaking by or on behalf of the Indemnitee to repay such amount if it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the corporation as authorized in this Bylaw or otherwise, such advances to be
paid by the corporation within 20 days after the receipt by the corporation of a
statement or statements from the Indemnitee requesting such advance or advances
from time to time.
(b) To obtain indemnification under this Bylaw, a claimant shall submit
to the corporation a written request, including therein or therewith such
documentation and information as is reasonably available to the claimant and is
reasonably necessary to determine whether and to what extent the claimant is
entitled to indemnification. Upon written request by a claimant for
indemnification pursuant to the first sentence of this paragraph (b), a
determination, if required by applicable law, with respect to the claimant's
entitlement thereto shall be made as follows: (i) if requested by the claimant,
by Independent Counsel (as hereinafter defined), or (ii) if no request is made
by the claimant for a determination by Independent Counsel, (A) by the Board of
Directors by a majority vote of a quorum consisting of Disinterested Directors
(as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
the claimant, or (C) if a quorum of Disinterested Directors so directs, by the
shareholders of the corporation. In the event the determination of entitlement
to indemnification is to be made by Independent Counsel at the request of the
claimant, the Independent Counsel shall be selected by the Board of Directors
unless there shall have occurred within two years prior to the date of the
commencement of the action, suit or proceeding for which indemnification is
claimed a Change in Control in which case the Independent Counsel shall be
selected by the claimant unless the claimant shall request that such selection
be made by the Board of Directors. If it is so determined that the claimant is
entitled to indemnification, payment to the claimant shall be made within 10
days after such determination.
(c) If a claim under paragraph (a) of this Bylaw is not paid in full by
the corporation within 30 days after a written claim pursuant to paragraph (b)
of this Bylaw has been received by the corporation, the claimant may at any time
thereafter bring suit against the corporation to recover the unpaid amount of
the claim and, if successful in whole or in part, the claimant shall be entitled
to be paid also the expense of prosecuting such claim. It shall be a defense to
any such action (other than an action brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking has been tendered to the corporation) that the claimant
has not met the standard of conduct (limited only by the last clause of Section
83E of the Louisiana Business Corporation Law) which makes it permissible under
Louisiana Law to indemnify the claimant for the amount claimed, but the burden
of proving such defense shall be on the corporation. Neither the failure of the
corporation (including its Board of Directors, Independent Counsel or
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth under
Louisiana Law, nor an actual determination by the
12
<PAGE> 13
corporation (including its Board of Directors, Independent Counsel or
shareholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
(d) If a determination shall have been made pursuant to paragraph (b)
of this Bylaw that the claimant is entitled to indemnification, the corporation
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (c) of this Bylaw.
(e) The corporation shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (c) of this Bylaw that the procedures
and presumptions of this Bylaw are not valid, binding and enforceable and shall
stipulate in such proceeding that the corporation is bound by all the provisions
of this Bylaw.
(f) The right to indemnification and the payment of expenses incurred
in defending a proceeding in advance of its final disposition conferred in this
Bylaw shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Articles Of Incorporation,
Bylaws, agreement, vote of shareholders or Disinterested Directors or otherwise.
No repeal or modification of this Bylaw shall in any way diminish or adversely
affect the rights of any director, officer, employee or agent of the corporation
hereunder in respect of any occurrence or matter arising prior to any such
repeal or modification.
(g) The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any expense, liability or loss, whether or not the corporation would
have the power to indemnify such person against such expense, liability or loss
under Louisiana Law. To the extent that the corporation maintains any policy or
policies providing such insurance, each such director or officer, and each such
agent or employee to which rights to indemnification have been granted as
provided in paragraph (h) of this Bylaw, shall be covered by such policy or
policies in accordance with its or their terms to the maximum extent of the
coverage thereunder for any such director, officer, employee or agent.
(h) The corporation may, to the extent authorized from time to time by
the Board of Directors, grant rights to indemnification, and rights to be paid
by the corporation the expenses incurred in defending any proceeding in advance
of its final disposition, to any employee or agent of the corporation to the
fullest extent of the provisions of this Bylaw with respect to the
indemnification and advancement of expenses of directors and officers of the
corporation.
(i) If any provision or provisions of this Bylaw shall be held to be
invalid, illegal or unenforceable for any reason whatsoever: (i) the validity,
legality and enforceability of the remaining provisions of this Bylaw
(including, without limitation, each portion of any paragraph of this Bylaw
containing any such provision held to be invalid, illegal or unenforceable, that
is not itself held to be invalid, illegal or unenforceable) shall not in any way
be affected or impaired thereby; and (ii) to the fullest extent possible, the
provisions of this Bylaw (including, without limitation, each
13
<PAGE> 14
such portion of any paragraph of this Bylaw containing any such provision held
to be invalid, illegal or unenforceable) shall be construed so as to give effect
to the intent manifested by the provision held invalid, illegal or
unenforceable.
(j) For purposes of this Bylaw:
(1) A "Change in Control" shall be conclusively deemed to have
occurred if (and only if) any of the following shall have taken place: (i) a
change in control is reported by the corporation in response to either Item 5(f)
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act
of 1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under
the Exchange Act; (ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
corporation representing forty percent or more of the combined voting power of
the corporation's then outstanding securities; or (iii) following the election
or removal of directors, a majority of the Board of Directors consists of
individuals who were not members of the Board of Directors 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.
(2) "Disinterested Director" means a director of the
corporation who is not and was not a party to the matter in respect of which
indemnification is sought by the claimant.
(3) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner, that is experienced in matters of
corporation law and shall include any person who, under the applicable standards
of professional conduct then prevailing, would not have a conflict of interest
in representing either the corporation or the claimant in an action to determine
the claimant's rights under this Bylaw.
(k) Any notice, request or other communication required or permitted to
be given to the corporation under this Bylaw shall be in writing and either
delivered in person or sent by telecopy, telex, telegram, overnight mail or
courier service, or certified or registered mail, postage prepaid, return
receipt requested, to the Secretary of the corporation and shall be effective
only upon receipt by the Secretary.
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
14
<PAGE> 15
(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
Amendments
The Board of Directors is expressly authorized to make, alter or repeal
the bylaws of the corporation by the affirmative vote of 80% of the entire Board
of Directors. Such bylaws may be adopted, amended or repealed by the affirmative
vote of the holders of 80% of the corporation's stock outstanding and entitled
to vote at the meeting at which any bylaw is adopted, amended or repealed.
ARTICLE VIII
La. R.S. 12:132 et. seq.
Any business combination (as that term is defined in Section
132 of the Louisiana Business Corporation Law ("LBCL") (La. R.S. 12:132))
involving the corporation shall be subject to the restrictions and other
provisions of Section 133 of the LBCL (La. R.S. 12:133) and the related
provisions of Sections 132 and 134 of the LBCL (La. R.S. 12:132 and 134),
notwithstanding that the corporation may have had on January 1, 1985, an
interested shareholder (as that term is defined in Section 132 of the LBCL (La.
R.S. 12:132)), and any such business combination shall be made only if it does
not violate the terms and provisions of Sections 132, 133 and 134 of the LBCL;
provided, however, that nothing contained herein shall prevent the board of
directors of the corporation from making any election or granting any exemption
permitted under the provisions of Sections 132 through 134 of the LBCL,
including exempting by resolution one or more business combinations
specifically, generally or generally by type, from the requirements of Section
133 of the LBCL as is permitted under Section 134C(1).
15
<PAGE> 1
EXHIBIT 10.5
SOUTHDOWN, INC.
SPECIAL SEVERANCE PLAN FOR SALARIED EMPLOYEES
As Amended and Restated Effective as of January 31, 2000
1. Employees Covered. The Special Severance Plan for Salaried Employees (the
"Plan"), formerly known as the Company's Special Severance Program, shall
cover all salaried employees of SOUTHDOWN, INC. (the "Company"), and its
subsidiaries employed in the corporate headquarters of the Company, other
than employees covered by individual severance or employment agreements, or
who, prior to a Change in Control, are designated as participants in
another severance plan of the Company. For purposes of this Plan, the term
"salaried employees" shall mean those employees who are permanent full-time
employees and who are compensated with a salary of a set amount for a
standard number of hours per pay period rather than hourly. Individuals in
this category will include all individuals designated "exempt" from
provisions of the Fair Labor Standards Act as well as those individuals
designated "non-exempt" under that Act who are paid on a salaried basis,
even though eligible for overtime payments.
2. Condition to Benefits Being Payable. No benefits shall be payable under the
Plan unless (i) there shall have been a Change in Control and (ii) the
salaried employee's employment with the Company and its subsidiaries is
terminated within twelve months after the date of the Change in Control
under the circumstances described in Section 3. For purposes of this Plan,
a Change in Control shall be conclusively deemed to have occurred if (and
only if) any of the following shall have taken place: (i) a change in
control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated
under the Exchange Act, or any similar reporting requirement hereafter
promulgated by the Securities and Exchange Commission; (ii) any person,
entity or group (as such terms are used in Sections 13(d) and 14(d)(2) of
the Exchange Act) other than an employee benefit plan sponsored by the
Company is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing forty percent or more of the combined voting power of
the Company's then outstanding securities (as determined under paragraph
(d) of Rule 13d-3 promulgated under the Exchange Act, in the case of rights
to acquire common stock); 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.
-1-
<PAGE> 2
3. Benefits. A salaried employee whose employment with the Company and its
subsidiaries is terminated within twelve months after the date of a Change
in Control and who satisfies the requirements of Paragraph A or B below
shall receive the following benefits:
A. A salaried employee (i) who immediately prior to the Change in Control
of the Company was employed at a salary grade of 13, 14 or 15 or
equivalent grades under a successor salary grade system and (ii) whose
employment with the Company and its subsidiaries is terminated by the
Company for reasons other than death, Retirement, Disability, or Cause,
or by the employee for Good Reason, shall be entitled to receive from
the Company or its subsidiaries a lump sum payment equal to the greater
of (x) two weeks of base salary (as in effect immediately prior to the
Change in Control of the Company) for each year of service with the
Company or any subsidiary or (y) six months of base salary (as in effect
immediately prior to the Change in Control of the Company), as well as
periodic amounts equal to his or her base salary (as in effect
immediately prior to the Change in Control of the Company) for up to six
months from the date of termination of employment or until the employee
begins new employment, whichever is sooner. An employee eligible for
benefits under this Paragraph A shall continue to be covered under the
medical, dental, life insurance and disability insurance programs in
effect and applicable to the employee immediately prior to the time of
the Change in Control of the Company for twelve months from the date of
termination of employment or until the employee begins new employment,
whichever occurs first. The Company or its subsidiaries will pay the
employee his or her base salary (as in effect immediately prior to the
Change in Control) until the date six months after termination of
employment with the Company and its subsidiaries less any amounts the
employee earns from subsequent employment during this period.
B. A salaried employee (i) who is not covered by clause (i) of the first
sentence of Paragraph A above and (ii) whose employment with the Company
and its subsidiaries is terminated by the Company for reasons other than
death, Retirement, Disability, or Cause shall be entitled to receive
from the Company or its subsidiaries a lump sum payment equal to the
lesser of (x) one year of base salary (as in effect immediately prior to
the Change in Control of the Company) or (y) the greater of (A) two
weeks of base salary (as in effect immediately prior to the Change in
Control of the Company) for each year of service with the Company or any
subsidiary or (B) twelve weeks of base salary (as in effect immediately
prior to the Change in Control of the Company), as well as periodic
amounts equal to his or her base salary (as in effect immediately
-2-
<PAGE> 3
prior to the Change in Control of the Company) for up to three months
from the date of termination of employment or until the employee begins
new employment, whichever occurs first. An employee eligible for
benefits under this Paragraph B shall continue to be covered under the
medical, dental, life insurance and accident benefit programs in effect
and applicable to the employee immediately prior to the time of the
Change in Control of the Company for up to three months from the date of
termination of employment or until the employee begins new employment,
whichever occurs first.
C. (i) A salaried employee qualifying under Paragraph A shall also be
entitled to individual outplacement services for one year following
termination at Company expense in an amount not to exceed $5,000.
(ii) A salaried employee not covered by (i) above shall be entitled to
group outplacement services according to the Company's established
and customary practices as in effect prior to the Change in
Control.
D. Benefits provided to any employee under this Section 3 shall be reduced
by any severance payments made by the Company or its subsidiaries to
such employee otherwise than pursuant to this Plan but only if such
payments are denominated as severance payments and are essentially
salary continuation, whether paid on a lump sum or periodic basis.
Unemployment compensation benefits are not deemed to be payments made by
the Company or is subsidiaries.
E. For purposes of this Plan, "Retirement" shall mean termination of
employment in accordance with the retirement policy of the Company or
the subsidiary for which the employee works as in effect immediately
prior to a Change in Control; "Disability" shall mean the absence of an
employee from his or her duties with the Company or its subsidiaries on
a full-time basis for six consecutive months and the failure of the
employee to return to the full-time performance of his or her duties
within thirty days after written notice of termination is given to the
employee; and "Cause" shall mean the willful and continued failure by an
employee to substantially perform his or her duties with the Company or
its subsidiaries (other than any such failure resulting from the
employee's incapacity due to physical or mental illness) after a demand
for substantial performance is delivered to the employee by his or her
appropriate supervisor, the willful engaging by the employee in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise or the employee's failure to
comply with the Company's Code of Business Conduct.
-3-
<PAGE> 4
For purposes of this Plan, "Good Reason" shall mean a material reduction
of an employee's total compensation or benefits below the level in
effect immediately prior to a Change in Control.
4. Administration. The general administration of the Plan, and the
responsibility for carrying out the provisions hereof, shall be placed in
an Administrative Committee appointed by the Board of Directors of the
Company, which committee shall initially be the Compensation and
Development Committee of the Company's Board of Directors. The
Administrative Committee shall have complete control of the administration
of the Plan, with all powers necessary to enable it to properly carry out
its duties in that respect. Subject to the limitations of this Section 4,
the Administrative Committee from time to time may establish such
supplemental rules and regulations for the administration of the Plan and
the transaction of its business as it deems necessary.
5. Claims Procedure
A. All claims for benefits shall be in writing and shall be filed with the
Administrative Committee or its designee.
B. If the Administrative Committee or its designee wholly or partially
denies a former employee's claim for benefits, the Administrative
Committee shall give the claimant written notice within sixty (60) days
after the Plan's receipt of the claim setting forth:
(i) the specific reason(s) for the denial;
(ii) specific reference to pertinent Plan provisions on which the
denial is based;
(iii) a description of any additional material or information which must
be submitted to perfect the claim, and an explanation of why such
material or information is necessary; and
(iv) an explanation of the Plan's review procedure.
C. In the event of a benefit claim denial, the Company shall appoint a
person who is not a member of the Administrative Committee to serve as
Claim Reviewer. The person designated as the Claim Reviewer shall be
reasonably acceptable to the claimant. The claimant shall have sixty
(60) days after the day on which such written notice of denial is handed
or mailed to him or her by the Administrative Committee in which to
apply (in person or by authorized representative) in writing to the
Claim Reviewer for a full and fair review of the denial of his or her
claim. In
-4-
<PAGE> 5
connection with such review, the claimant (or his or her representative)
shall be afforded a reasonable opportunity to review pertinent
documents, and may submit issues and comments in writing. The Claim
Reviewer shall arrange to meet personally with the claimant and/or
representative within thirty (30) days after the Claim Reviewer's
receipt of such written request for review for the purpose of hearing
the claimant's contentions and receiving such relevant evidence as the
claimant may wish to offer.
D. The Claim Reviewer shall issue his decision on review within sixty (60)
days after meeting with the claimant or claimant's personal
representative, unless in the sole discretion of the Claim Reviewer
special circumstances require an extension to not later than one hundred
twenty (120) days after such meeting. The decision shall be in writing
and shall set forth specific reasons for the decision and specific
references to pertinent Plan provisions on which the decision is based.
E. The Company or its subsidiary shall pay the costs and expenses,
including without limitation, reasonable attorneys' fees, incurred by an
employee in seeking to enforce his or her rights under the Plan.
6. Employment of Professional Assistance. The Administrative Committee is
empowered, on behalf of the Plan, to engage accountants, legal counsel and
such other personnel as it deems necessary or advisable to assist it in the
performance of its duties under the Plan. The functions of any such persons
engaged by the Administrative Committee shall be limited to the specific
services and duties for which they are engaged, and such persons shall have
no other duties, obligation or responsibilities under the Plan. Such
persons shall exercise no discretionary authority or discretionary control
respecting the management of the Plan. All reasonable expenses thereof
shall be borne by the Company.
7. Indemnification of Members of Administrative Committee. To the extent not
insured against by an insurance company pursuant to the provisions of any
applicable insurance policy and to the extent permitted by law, the Company
shall indemnify and hold harmless each member of the Administrative
Committee against any personal liability or expense incurred by him as a
result of any act or omission in his capacity as a member of the
Administrative Committee, except for his own gross negligence or willful
misconduct.
8. Controlling Law. This Plan shall be construed and enforced according to the
internal laws of the State of Texas to the extent not preempted by federal
law, which shall otherwise control.
9. Employment Status. This Plan does not constitute a contract of employment
or impose on the Company any obligation to retain any individual as an
employee, to change or not change the status of the Participant's
employment, or to change the Company's policies or those of its
subsidiaries regarding termination of employment.
-5-
<PAGE> 6
10. Amendment/Termination. This Plan can be amended or terminated, in whole or
in part, by the Company at any time prior to the occurrence of a Change in
Control. Thereafter, this Plan cannot be terminated or amended in any way
which adversely affects the rights of any salaried employee.
11. Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of
any other provision of the Plan, which shall remain in full force and
effect, and any prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
SOUTHDOWN, INC.
-6-
<PAGE> 1
EXHIBIT 10.6
FORM OF
EMPLOYMENT AGREEMENT
This [AMENDED AND RESTATED] Employment Agreement ("Agreement") is entered
into between Southdown, Inc., a Louisiana corporation ("Company"), and
_________________, a resident of __________________________, Texas
("Executive"), effective as of January ___, 2000. The Company and the Executive
are sometimes referred to herein as the "Parties."
1. Introduction. In connection with the revision of existing employment
agreements, the Company believes that the assurance of the Executive's continued
employment by the Company and the benefit of his business experience are of
material importance. Therefore, the Company and the Executive intend by this
Agreement to rescind any existing employment agreement and to specify the terms
and conditions of the Executive's continuing employment relationship with the
Company.
2. Employment. The Company hereby employs the Executive and the Executive
hereby accepts continuing employment with the Company upon the terms and
conditions set forth herein.
3. Duties and Responsibilities.
3.1. Extent of Service. The Executive shall, during the term of this
Agreement, devote such of his entire time, attention, energies and business
efforts to his duties as an executive of the Company as are reasonably necessary
to carry out his duties specified in Paragraph 3.2 below. The Executive shall
not, during the term of this Agreement, engage in any other business activity
(whether or not such business activity is pursued for gain, profit or other
pecuniary advantage) if such business activity would impair the Executive's
ability to carry out his duties hereunder. This Paragraph 3.1, however, shall
not be construed to prevent the Executive from investing his personal assets as
a passive investor in such form or manner as will not contravene the Company's
Statement of Policy Regarding Corporate Ethics and Conflicts of Interest
("Policy Statement").
3.2. Position and Duties. Subject to the power of the Board of
Directors [(OR SHAREHOLDERS, AS THE CASE MAY BE)] of the Company to elect and
remove officers [(OR DIRECTORS)], the Executive shall serve the Company as [A
DIRECTOR AND] [STATE POSITION] (or in such other office of comparable or greater
responsibility as the Board of Directors of the Company may determine) and shall
perform, faithfully and diligently, the services and functions relating to such
office or otherwise reasonably incident to such office as may be designated from
time to time by the Board of Directors of the Company; provided that all such
services and functions shall be reasonable and within the Executive's area of
expertise; and provided further that the Executive shall be physically capable
of performing the essential requirements of the job with or without reasonable
accommodation.
3.3. Place of Employment. During the term of this Agreement, the
Company shall maintain its principal executive offices in the greater Houston,
Texas area, and the Executive's primary place of employment shall be at such
principal executive offices. During the term of this Agreement, the Company will
provide the Executive with a private office, an
<PAGE> 2
executive secretary and other customary staff support services, all as are
commensurate with the services and functions to be performed by him hereunder.
4. Salary and Other Benefits. Subject to the terms and conditions of this
Agreement:
4.1. Salary. As compensation for his services under and during the
term of his employment under this Agreement, the Executive shall be paid an
annual salary of not less than $_______, payable in accordance with the then
current payroll policies of the Company. Such salary shall be subject to
increase by the Board of Directors of the Company (or the appropriate committee
thereof) from time to time. The annual salary payable from time to time by the
Company to the Executive pursuant to this Paragraph 4.1 is herein sometimes
referred to as his "Base Salary."
4.2. Other Benefits. As long as the Executive is employed by the
Company, the Executive shall be entitled to receive the following benefits in
addition to his Base Salary:
(a) The Executive shall be entitled to participate in the
Company's discretionary bonus plan (the "Bonus Plan") for senior management of
the Company and its consolidated subsidiaries, pursuant to which he shall be
paid each year such additional compensation by way of bonus as the Board of
Directors of the Company (or the appropriate committee thereof) in its sole
discretion shall authorize or agree to pay, payable on such terms and conditions
as it shall determine.
(b) The Executive shall have the right to participate in all
group benefit and applicable retirement plans of the Company (including without
limitation, disability, accident, medical, life insurance, hospitalization and
pension), all in accordance with the Company's regular practices with respect to
its senior officers.
(c) The Executive shall be entitled to reimbursement from the
Company for reasonable out-of-pocket expenses incurred by him in the course of
the performance of his duties hereunder.
(d) The Company shall provide the Executive with an automobile
allowance in the amount of $1,000 per month, subject to statutory withholdings.
Executive shall bear all expenses incurred in connection with owning or
operating his personal automobile.
(e) In order to promote the interests of the Company, the Company
shall reimburse the Executive for the initiation fees and all annual dues
incurred by him in connection with his membership in one luncheon club and one
country club as may be agreed upon by the Executive and the Company (and the
Company agrees to post any bond required by such clubs and each such bond will
remain the property of the Company).
(f) The Company shall reimburse Executive an amount up to $5,000
per year for personal financial, tax and estate planning.
(g) The Executive shall be entitled to such vacation, holidays
and other paid or unpaid leaves of absence as are consistent with the Company's
normal policies or
2
<PAGE> 3
as are otherwise approved by the Company's Board of Directors (or the
appropriate committee thereof).
5. Term. The term of this Agreement shall be for one year and shall be
automatically extended one day each day, from the effective date hereof;
provided, however, that upon a Change in Control, the term of this Agreement
shall be for two years from the date of the Change in Control.
6. Termination and Resignation. The Company shall have the right to
terminate the Executive's employment hereunder at any time and for any reason,
and upon any such termination the Executive shall be entitled to receive from
the Company prompt payment of the amount determined pursuant to the applicable
subparagraph of Paragraph 7 below. The Executive shall have the right to
terminate his employment hereunder at any time by resignation, and he shall
thereupon be entitled to receive from the Company prompt payment of the amount
determined pursuant to the applicable subparagraph of Paragraph 7 below.
7. Payments Upon Termination or After Change in Control.
7.1. Pro Rata Payment. In the event of the following:
(i) the Company terminates the Executive's employment for Cause
(as defined below),
(ii) the Executive dies or becomes disabled (being the inability
of the Executive to perform the essential requirements of the job with
or without reasonable accommodation),
(iii) the Executive resigns prior to the occurrence of a Change
in Control (as defined below) of the Company at a time when there is
no uncured breach by the Company of any term of this Agreement, or
(iv) the Executive resigns after the occurrence of a Change in
Control for any reason other than for Good Reason (as defined below);
then in each case the Executive shall be entitled to receive only his Base
Salary on a pro rata basis to the date of termination or resignation.
7.2. Payments Upon Termination Prior to Change in Control. If prior to
the occurrence of a Change in Control (i) the Company terminates the Executive's
employment for any reason other than for Cause or the Executive's death or
disability or (ii) the Executive resigns because of the breach by the Company of
any term of this Agreement (but only if such breach is not remedied by the
Company promptly after it receives notice thereof from Executive), then in each
case the Executive shall be entitled to receive a lump sum payment equal to two
times his Base Salary.
7.3. Payments Upon Termination After Change in Control. If after the
occurrence of a Change in Control of the Company, (i) the Company terminates the
Executive's employment hereunder for any reason other than for Cause, or (ii)
the Executive voluntarily
3
<PAGE> 4
resigns his employment hereunder for Good Reason (as defined below), in each
case within two years of the Change in Control, then in each case the Company
will:
(a) pay to the Executive within 10 days a lump sum termination
payment equal to 2.99 times the sum of his Base Salary and the greater of (i)
the most recent annual bonus paid to the Executive pursuant to the Company's
Bonus Plan (as defined in Paragraph 4.2(a)) prior to the Change in Control or
(ii) his Target Bonus (as defined below) (collectively, the "Lump Sum Payment"),
subject to adjustment as provided in Paragraph 9 below;
(b) continue to provide the Executive with medical, dental, life
insurance and disability insurance benefits for a period of three years
following the Executive's termination of employment with benefits and employee
contributions no less favorable to the Executive than those provided immediately
prior to the Change in Control; and
(c) provide individual outplacement services for one year
following termination of employment at Company expense in an amount not to
exceed $20,000.
7.4. Certain Definitions.
(a) "Target Bonus" shall mean the target bonus for Executive
specified under the Company's Bonus Plan (as defined in Paragraph 4.2(a)) for
the year in which a Change in Control of the Company occurs.
(b) Termination by the Company of the Executive's employment for
"Cause" shall mean termination upon the willful misappropriation of funds or
properties of the Company or the willful contravention of the standards referred
to in the last sentence of Paragraph 10 below. For purposes of this definition,
no act, or failure to act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission was in the
best interest of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the entire membership of the
Board of Directors of the Company at a meeting of the Board duly called and held
(after reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before the Board) finding that in the
good faith opinion of the Board the Executive was guilty of the conduct set
forth above and specifying the particulars thereof in detail.
(c) A "Change in Control" shall be conclusively deemed to have
occurred if (and only if) any of the following shall have taken place: (i) a
change in control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under the
Exchange Act, or any similar reporting requirement hereafter promulgated by the
Securities and Exchange Commission; (ii) any person, entity or group (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than any
employee benefit plan sponsored by the Company, is or becomes the beneficial
owner (as
4
<PAGE> 5
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing forty percent or more of the combined
voting power of the Company's then outstanding securities (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of
rights to acquire common stock); 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.
(d) "Good Reason" shall mean, in any case only if an action or
event described in this Paragraph 7.4(d) is not remedied by the Company promptly
after it receives notice thereof from Executive,
(i) the assignment to the Executive of any duties substantially
inconsistent with the Executive's position (including offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Paragraph 3.2 hereof, or the reduction or elimination
of any duties or responsibilities previously assigned to the
Executive;
(ii) the failure of the Company to comply with any of the
provisions of Section 4 hereof or to maintain competitive total
compensation for the Executive, including base pay, annual incentive
and long-term incentive pay based on then-current practices of
comparable publicly-traded U.S. companies; or
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Paragraph 3.3 hereof.
7.5. Payments Upon a Change in Control. Within ten days following a
Change in Control, the Company shall pay the Executive a lump sum cash payment
equal to most recent annual bonus paid to the Executive pursuant to the
Company's Bonus Plan (as defined in Paragraph 4.2(a)) prior to the Change in
Control, prorated based on the number of days in the calendar year that have
elapsed prior to the Change in Control.
8. Acceleration of Options. Contemporaneously with the occurrence of a
Change in Control of the Company, the Board of Directors of the Company (or the
appropriate committee thereof) will accelerate all outstanding options
previously granted to the Executive under any then existing Company stock
option, stock appreciation or other employee incentive plan that are not
otherwise exercisable by the Executive at the time the Change in Control of the
Company occurs.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company or any of its affiliates to or for the benefit of Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (any such payments or distributions being individually
referred to herein as a "Payment," and any two or more of such payments or
5
<PAGE> 6
distributions being referred to herein as "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended ("Code") (such excise tax, together with any interest thereon, any
penalties, additions to tax, or additional amounts with respect to such excise
tax, and any interest in respect of such penalties, additions to tax or
additional amounts, being collectively referred herein to as the "Excise Tax"),
then Executive shall be entitled to receive and the Company shall make an
additional payment or payments (individually referred to herein as a "Gross-Up
Payment," and any two or more of such additional payments being referred to
herein as "Gross-Up Payments") in an amount such that after payment by Executive
of all taxes (as defined in Paragraph 9(k) imposed upon the Gross-Up Payment,
Executive retains an amount of such Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of Paragraph 9(c) through (i), any
determination (individually, a "Determination") required to be made under
Paragraphs 9(a) or 9(b), including whether a Gross-Up Payment is required and
the amount of such Gross-Up Payment, shall initially be made, at the Company's
expense, by nationally recognized tax counsel mutually acceptable to the Company
and Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting
legal authorities, calculations, and documentation both to the Company and
Executive within 15 business days of the termination of Executive's employment,
if applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion that no Excise Tax will be imposed with
respect to any such Payment or Payments. Executive shall have the right to
dispute any Determination (a "Dispute") within 15 business days after delivery
of Tax Counsel's opinion with respect to such Determination. The Gross-Up
Payment, if any, as determined pursuant to such Determination shall, at the
Company's expense, be paid by the Company to Executive within five business days
of Executive's receipt of such Determination. The existence of a Dispute shall
not in any way affect Executive's right to receive the Gross-Up Payment in
accordance with such Determination. If there is no Dispute, such Determination
shall be binding, final and conclusive upon the Company and Executive, subject
in all respects, however, to the provisions of Paragraph 9(c) through (i) below.
As a result of the uncertainty in the application of Sections 4999 and 280G of
the Code, it is possible that Gross-Up Payments (or portions thereof) which will
not have been made by the Company should have been made ("Underpayment"), and if
upon any reasonable written request from Executive or the Company to Tax
Counsel, or upon Tax Counsel's own initiative, Tax Counsel, at the Company's
expense, thereafter determines that Executive is required to make a payment of
any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel
shall, at the Company's expense, determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to
Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgments, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined in
Paragraph 9(j)) that any Payment is subject to the Excise Tax.
6
<PAGE> 7
(d) If a party hereto receives any written or oral communication
with respect to any question, adjustment, assessment or pending or threatened
audit, examination, investigation or administrative, court or other proceeding
which, if pursued successfully, could result in or give rise to a claim by
Executive against the Company under this Paragraph 9(d) ("Claim"), including,
but not limited to, a claim for indemnification of Executive by the Company
under Paragraph 9(c), then such party shall promptly notify the other party
hereto in writing of such Claim ("Tax Claim Notice").
(e) If a Claim is asserted against Executive ("Executive Claim"),
Executive shall take or cause to be taken such action in connection with
contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as are
reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide that
the Company shall be solely responsible for the payment of any and all fees and
disbursements of such counsel and any experts) and the execution of powers of
attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its obligations
(including, but not limited to, its indemnity obligations) under this
Agreement and that the Company elects to contest, and to control the
defense or prosecution of, such Executive Claim at the Company's sole
risk and sole cost and expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order for
Executive, at the Company's request, to pay or cause to be paid the
tax claimed, file a claim for refund of such tax and, subject to the
provisions of the last sentence of Paragraph 9(g), sue for a refund of
such tax if such claim for refund is disallowed by the appropriate
taxing authority (it being understood and agreed by the parties hereto
that the Company shall only be entitled to sue for a refund and the
Company shall not be entitled to initiate any proceeding in, for
example, United States Tax Court) and shall indemnify and hold
Executive harmless, on a fully grossed-up after tax basis, from any
tax imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and
(iii) the Company shall reimburse Executive for any and all costs
and expenses resulting from any such request by the Company and shall
indemnify and hold Executive harmless, on fully grossed-up after-tax
basis, from any tax imposed as a result of such reimbursement.
(f) Subject to the provisions of Paragraph 9(e), hereof, the
Company shall have the right to defend or prosecute, at the sole cost, expense
and risk of the Company, such Executive Claim by all appropriate proceedings,
which proceedings shall be defended or
7
<PAGE> 8
prosecuted diligently by the Company to a Final Determination; provided,
however, that (i) the Company shall not, without Executive's prior written
consent, enter into any compromise or settlement of such Executive Claim that
would adversely affect Executive, (ii) any request from the Company to Executive
regarding any extension of the statute of limitations relating to assessment,
payment, or collection of taxes for the taxable year of Executive with respect
to which the contested issues involved in, and amount of, the Executive Claim
relate is limited solely to such contested issues and amount, and (iii) the
Company's control of any contest or proceeding shall be limited to issues with
respect to the Executive Claim and Executive shall be entitled to settle or
contest, in his sole and absolute discretion, any other issue raised by the
Internal Revenue Service or any other taxing authority. So long as the Company
is diligently defending or prosecuting such Executive Claim, Executive shall
provide or cause to be provided to the Company any information reasonably
requested by the Company that relates to such Executive Claim, and shall
otherwise cooperate with the Company and its representatives in good faith in
order to contest effectively such Executive Claim. The Company shall keep
Executive informed of all developments and events relating to any such Executive
Claim (including, without limitation, providing to Executive copies of all
written materials pertaining to any such Executive Claim), and Executive or his
authorized representatives shall be entitled, at Executive's expense, to
participate in all conferences, meetings and proceedings relating to any such
Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Paragraph 9(e)(ii), hereof, the extent of the liability of the
Company hereunder with respect to such tax claimed has been established by a
Final Determination, Executive shall promptly pay or cause to be paid to the
Company any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and payable
by the Company to Executive, whether under the provisions of this Agreement or
otherwise. If, after the receipt by Executive of an amount advanced by the
Company pursuant to Paragraph 9(e)(ii), a determination is made by the Internal
Revenue Service or other appropriate taxing authority that Executive shall not
be entitled to any refund with respect to such tax claimed and the Company does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of any Gross-Up
Payments and other payments required to be paid hereunder.
(h) With respect to any Executive Claim, if the Company fails to
deliver an Election Notice to Executive within the period provided in Paragraph
9(e)(i), hereof or, after delivery of such Election Notice, the Company fails to
comply with the provisions of Paragraph 9(e)(ii), and (iii) and (f) hereof, then
Executive shall at any time thereafter have the right (but not the obligation),
at his election and in his sole and absolute discretion, to defend or prosecute,
at the sole cost, expense and risk of the Company, such Executive Claim.
Executive shall have full control of such defense or prosecution and such
proceedings, including any settlement or compromise thereof. If requested by
Executive, the Company shall cooperate, and shall cause its affiliates to
cooperate, in good faith with Executive and his authorized representatives in
order to contest effectively such Executive Claim. The Company may attend,
8
<PAGE> 9
but not participate in or control, any defense, prosecution, settlement or
compromise of any Executive Claim controlled by Executive pursuant to this
Paragraph 9(h) and shall bear its own costs and expenses with respect thereto.
In the case of any Executive Claim that is defended or prosecuted by Executive,
Executive shall, from time to time, be entitled to current payment, on a fully
grossed-up after tax basis, from the Company with respect to costs and expenses
incurred by Executive in connection with such defense or prosecution.
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Paragraph
9(i), the Company shall pay, on a fully grossed-up after tax basis, to Executive
in immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay, on
a fully grossed-up after tax basis, to Executive in immediately available funds
the full amount of any taxes arising or resulting from or incurred in connection
with such Executive Claim at least ten calendar days before the date payment of
such taxes is due from Executive, except where payment of such taxes is sooner
required under the provisions of this Paragraph 9(i), in which case payment of
such taxes (and payment, on a fully grossed-up after tax basis, of any costs and
expenses required to be paid under this Paragraph 9(i) shall be made within the
time and in the manner otherwise provided in this Paragraph 9(i).
(j) For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment, decree or other order by a
court or other tribunal with appropriate jurisdiction, which has become final
and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with any
interest thereon, any penalties, additions to tax, or additional amounts with
respect to such taxes and any interest in respect of such penalties, additions
to tax, or additional amounts.
(l) For purposes of this Agreement, the terms "affiliate" and
"affiliates" mean, when used with respect to any entity, individual, or other
person, any other entity, individual, or other person which, directly or
indirectly, through one or more intermediaries controls, or is controlled by, or
is under common control with such entity, individual or person. The term
"control" and derivations thereof when used in the immediately preceding
sentence means the ownership, directly or indirectly, of 50% or more of the
voting securities of an entity or other person or possessing the power to direct
or cause the direction of the management and policies of such entity or other
person, whether through the ownership of voting securities, by contract or
otherwise.
9
<PAGE> 10
10. Preservation of Business; Fiduciary Responsibility. The Executive shall
use his best efforts to preserve the business and organization of the Company
and the Company's consolidated subsidiaries (collectively, the "Consolidated
Company"), to keep available to the Consolidated Company the services of present
employees and to preserve the business relations of the Consolidated Company
with suppliers, distributors, customers and others. The Executive shall not
commit any act, or in any way assist others to commit any act, which would
injure the Consolidated Company. So long as the Executive is employed by the
Company, the Executive shall observe and fulfill proper standards of fiduciary
responsibility attendant upon his service and office and shall comply with the
terms of the Company's Code of Business Conduct, as may be amended from time to
time.
11. Competitive Activities.
11.1. As an independent covenant, Executive agrees to refrain for one
(1) year after the termination of his employment for any reason, without written
permission from the Company, from becoming involved in any way, within the
boundaries of the United States, in the business of manufacturing or selling any
cement or ready-mix concrete products, or other products or services competitive
at the time of the termination with those sold and furnished by the Consolidated
Company as an employee, director, officer, shareholder, consultant, partner,
proprietor, or in any other capacity, except as a shareholder owning less than
five percent of the shares of a corporation whose shares are publicly traded.
11.2. As an independent covenant, Executive agrees to refrain during
his employment by the Company, and in the event of the termination of his
employment for any reason, for one (1) year thereafter, without written
permission from the Company, from diverting, taking, soliciting and/or accepting
on his own behalf or on the behalf of another person, firm, or company, the
business of any customer of the Consolidated Company or any potential customer
of the Consolidated Company whose identity became known to Executive through his
employment by the Company.
11.3. As an independent covenant, Executive agrees to refrain during
his employment by the Company, and in the event of the termination of his
employment for any reason for a period of one (1) year, thereafter, from
inducing or attempting to influence any employee of the Consolidated Company to
terminate his employment.
11.4. Executive further agrees that these covenants are made to
protect the legitimate business interests of the Company, including interests in
the Company's "confidential information" as defined in Paragraph 12, and not to
restrict his mobility or to prevent him from utilizing his general technical
skills. Executive understands as a part of these covenants that the Company
intends to exercise whatever legal recourse against him for any breach of this
Agreement and in particular for any breach of these covenants.
12. Non-Disclosure of Confidential Information. Executive agrees not to
make any unauthorized use, publication, or disclosure, during or subsequent to
his employment by the Company, of any confidential information, generated or
acquired by him during the course of his employment, except to the extent that
the disclosure of confidential information is necessary to fulfill his
responsibilities as an employee of the Company. Executive understands that
10
<PAGE> 11
"confidential information" includes confidential or trade information not
generally known by or available to the public about or belonging to the
Consolidated Company or belonging to other companies to whom the Consolidated
Company may have an obligation to maintain information in confidence, and that
authorization for public disclosure may only be obtained through the Company's
written consent. Executive also understands and agrees that the information
protected by this provision includes, but is not limited to, information of a
technical and a business nature such as ideas, discoveries, designs, inventions,
improvements, trade secrets, know-how, manufacturing processes, product
formulae, design specifications, writings and other works of authorship,
computer programs, financial figures, marketing plans, customer lists and data,
business plans or methods and the like, which relate in any manner to the actual
or anticipated business of the Consolidated Company or related to its actual or
anticipated areas of research and development.
13. Notice. All notices, requests, demands and other communications given
under or by reason of this Agreement shall be in writing and shall be deemed
given when delivered in person or when mailed, by certified mail (return receipt
requested), postage prepaid, addressed as follows (or to such other address as a
party may specify by notice pursuant to this provision):
(a) To the Company:
Southdown, Inc.
Attention: Secretary
1200 Smith Street, Suite 2400
Houston, Texas 77002
(b) To the Executive:
----------------------------------
----------------------------------
----------------------------------
14. Controlling Law and Performability. The execution, validity,
interpretation and performance of this Agreement shall be governed by the law of
the State of Texas.
15. Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by binding arbitration in Houston, Texas by
one arbitrator appointed in the manner set forth by the American Arbitration
Association. Any arbitration proceeding pursuant to this Paragraph 15 shall be
conducted in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association. Judgment may be entered on the arbitrators'
award in any court having jurisdiction.
16. Expenses. The Company will pay or reimburse the Executive for all costs
and expenses (including arbitration and court costs and attorneys' fees)
incurred by the Executive as a result of any claim, action or proceeding arising
out of, or challenging the validity, advisability or enforceability of, this
Agreement or any provision thereof.
17. No Obligation to Mitigate. The Executive shall not be required to
mitigate the amount of any payment provided for in Paragraph 7 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Paragraph 7 be reduced by any
11
<PAGE> 12
compensation earned by the Executive as a result of employment by another
employer or otherwise.
18. Additional Instruments. The Parties shall execute and deliver any and
all additional instruments and agreements that may be necessary or proper to
carry out the purposes of this Agreement.
19. Entire Agreement and Amendments. This Agreement contains the entire
agreement of the Parties relating to the matters contained herein and supersedes
all prior agreements and understandings, oral or written, between the Parties
with respect to the subject matter hereof [INCLUDING, BUT NOT LIMITED TO, THE
PRIOR EMPLOYMENT AGREEMENT BETWEEN THE PARTIES, EFFECTIVE AS OF MARCH 24, 1998];
provided, however, that nothing herein shall affect in any respect the rights
and obligations of the Company and the Executive under any Incentive Agreements
implemented prior to the date of this Agreement and not expressly referred to
herein or under any Indemnity Agreement entered into between the Company and
Executive. This Agreement may be changed only by an agreement in writing signed
by the Party against whom enforcement of any waiver, change, modification,
extension or discharge is sought.
20. Separability. If any provision of the Agreement is rendered or declared
illegal or unenforceable by reason of any existing or subsequently enacted
legislation or by the decision of any arbitrator or by decree of a court of last
resort, the Parties shall promptly meet and negotiate substitute provisions for
those rendered or declared illegal or unenforceable to preserve the original
intent of this Agreement to the extent legally possible, but all other
provisions of this Agreement shall remain in full force and effect.
21. Assignments. The Company may assign (whether by operation of law or
otherwise) this Agreement only with the written consent of the Executive, which
consent shall not be withheld unreasonably, and in the event of an assignment of
this Agreement, all covenants, conditions and provisions hereunder shall inure
to the benefit of and be enforceable against the Company's successors and
assigns. The rights and obligations of Executive under this Agreement are
personal to him, and no such rights, benefits or obligations shall be subject to
voluntary or involuntary alienation, assignment or transfer.
22. Effect of Agreement. Subject to the provisions of Paragraph 21 with
respect to assignments, this Agreement shall be binding upon the Executive and
his heirs, executors, administrators, legal representatives and assigns and upon
the Company and its respective successors and assigns (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
23. Execution. This Agreement may be executed in multiple counterparts each
of which shall be deemed an original and all of which shall constitute one and
the same instrument.
24. Waiver of Breach. The waiver by either Party of a breach of any
provision of the Agreement by the other Party shall not operate or be construed
as a waiver by such Party of any subsequent breach by such other Party.
12
<PAGE> 13
IN WITNESS WHEREOF, the Parties have executed this Agreement effective as
of the date first above written.
"COMPANY"
SOUTHDOWN, INC.
By:
-----------------------------------------
Name: Clarence C. Comer
Title: President and Chief Executive Officer
"EXECUTIVE"
--------------------------------------------
Name:
------------------------
Title:
------------------------
13
<PAGE> 1
EXHIBIT 10.7
VERSION B
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into between
Southdown, Inc., a Louisiana corporation ("Company"), and _________________, a
resident of __________________________, Texas ("Executive"), effective as of
January ___, 2000. The Company and the Executive are sometimes referred to
herein as the "Parties."
1. Introduction. The Company believes that the assurance of the
Executive's continued employment by the Company and the benefit of his business
experience are of material importance. Therefore, the Company and the Executive
intend by this Agreement to specify the terms and conditions of the Executive's
continuing employment relationship with the Company.
2. Employment. The Company hereby employs the Executive and the
Executive hereby accepts continuing employment with the Company upon the terms
and conditions set forth herein.
3. Duties and Responsibilities.
3.1. Extent of Service. The Executive shall, during the term of this
Agreement, devote such of his entire time, attention, energies and business
efforts to his duties as an executive of the Company as are reasonably necessary
to carry out his duties specified in Paragraph 3.2 below. The Executive shall
not, during the term of this Agreement, engage in any other business activity
(whether or not such business activity is pursued for gain, profit or other
pecuniary advantage) if such business activity would impair the Executive's
ability to carry out his duties hereunder. This Paragraph 3.1, however, shall
not be construed to prevent the Executive from investing his personal assets as
a passive investor in such form or manner as will not contravene the Company's
Code of Business Conduct ("Policy Statement").
3.2. Position and Duties. Subject to the power of the Board of
Directors of the Company to elect and remove officers, the Executive shall serve
the Company as [STATE POSITION] (or in such other office of comparable or
greater responsibility as the Board of Directors of the Company may determine)
and shall perform, faithfully and diligently, the services and functions
relating to such office or otherwise reasonably incident to such office as may
be designated from time to time by the Board of Directors of the Company;
provided that all such services and functions shall be reasonable and within the
Executive's area of expertise; and provided further that the Executive shall be
physically capable of performing the essential requirements of the job with or
without reasonable accommodation.
3.3. Place of Employment. During the term of this Agreement, the
Company shall maintain its principal executive offices in the greater Houston,
Texas area, and the Executive's primary place of employment shall be at such
principal executive offices. During the term of this Agreement, the Company will
provide the Executive with a private office, an executive secretary and other
customary staff support services, all as are commensurate with the services and
functions to be performed by him hereunder.
4. Salary and Other Benefits. Subject to the terms and conditions of
this Agreement:
<PAGE> 2
4.1. Salary. As compensation for his services under and during the
term of his employment under this Agreement, the Executive shall be paid an
annual salary of not less than $_______, payable in accordance with the then
current payroll policies of the Company. Such salary shall be subject to
increase by the Board of Directors of the Company (or the appropriate committee
thereof) from time to time. The annual salary payable from time to time by the
Company to the Executive pursuant to this Paragraph 4.1 is herein sometimes
referred to as his "Base Salary."
4.2. Other Benefits. As long as the Executive is employed by the
Company, the Executive shall be entitled to receive the following benefits in
addition to his Base Salary:
(a) The Executive shall be entitled to participate in the
Company's discretionary bonus plan (the "Bonus Plan") for senior management of
the Company and its consolidated subsidiaries, pursuant to which he shall be
paid each year such additional compensation by way of bonus as the Board of
Directors of the Company (or the appropriate committee thereof) in its sole
discretion shall authorize or agree to pay, payable on such terms and conditions
as it shall determine.
(b) The Executive shall have the right to participate in all
group benefit and applicable retirement plans of the Company (including without
limitation, disability, accident, medical, life insurance, hospitalization and
pension), all in accordance with the Company's regular practices with respect to
its senior officers.
(c) The Executive shall be entitled to reimbursement from the
Company for reasonable out-of-pocket expenses incurred by him in the course of
the performance of his duties hereunder.
(d) The Company shall provide the Executive with an automobile
allowance in the amount of $1,000 per month, subject to statutory withholdings.
Executive shall bear all expenses incurred in connection with owning or
operating his personal automobile.
(e) In order to promote the interests of the Company, the
Company shall reimburse the Executive for the initiation fees and all annual
dues incurred by him in connection with his membership in one luncheon club and
one country club as may be agreed upon by the Executive and the Company (and the
Company agrees to post any bond required by such clubs and each such bond will
remain the property of the Company).
(f) The Company shall reimburse Executive an amount up to
$5,000 per year for personal financial, tax and estate planning.
(g) The Executive shall be entitled to such vacation, holidays
and other paid or unpaid leaves of absence as are consistent with the Company's
normal policies or as are otherwise approved by the Company's Board of Directors
(or the appropriate committee thereof).
5. Term. The term of this Agreement shall be for one year and shall be
automatically extended one day each day, from the effective date hereof;
provided, however, that
2
<PAGE> 3
upon a Change in Control, the term of this Agreement shall be for two years from
the date of the Change in Control.
6. Termination and Resignation. The Company shall have the right to
terminate the Executive's employment hereunder at any time and for any reason,
and upon any such termination the Executive shall be entitled to receive from
the Company prompt payment of the amount determined pursuant to the applicable
subparagraph of Paragraph 7 below. The Executive shall have the right to
terminate his employment hereunder at any time by resignation, and he shall
thereupon be entitled to receive from the Company prompt payment of the amount
determined pursuant to the applicable subparagraph of Paragraph 7 below.
7. Payments Upon Termination or After Change in Control.
7.1. Pro Rata Payment. In the event of the following:
(i) the Company terminates the Executive's employment for Cause
(as defined below),
(ii) the Executive dies or becomes disabled (being the
inability of the Executive to perform the essential requirements of
the job with or without reasonable accommodation),
(iii) the Executive resigns prior to the occurrence of a Change
in Control (as defined below) of the Company at a time when there is
no uncured breach by the Company of any term of this Agreement, or
(iv) the Executive resigns after the occurrence of a Change in
Control for any reason other than for Good Reason (as defined
below);
then in each case the Executive shall be entitled to receive only his Base
Salary on a pro rata basis to the date of termination or resignation.
7.2. Payments Upon Termination Prior to Change in Control. If prior
to the occurrence of a Change in Control (i) the Company terminates the
Executive's employment for any reason other than for Cause or the Executive's
death or disability or (ii) the Executive resigns because of the breach by the
Company of any term of this Agreement (but only if such breach is not remedied
by the Company promptly after it receives notice thereof from Executive), then
in each case the Executive shall be entitled to receive a lump sum payment equal
to his Base Salary.
7.3. Payments Upon Termination After Change in Control. If after the
occurrence of a Change in Control of the Company, (i) the Company terminates the
Executive's employment hereunder for any reason other than for Cause, or (ii)
the Executive voluntarily resigns his employment hereunder for Good Reason (as
defined below), in each case within two years of the Change in Control, then in
each case the Company will:
(a) pay to the Executive within 10 days a lump sum termination
payment equal to 2.99 times the sum of his Base Salary and the greater of (i)
the most recent
3
<PAGE> 4
annual bonus paid to the Executive pursuant to the Company's Bonus Plan (as
defined in Paragraph 4.2(a)) prior to the Change in Control or (ii) his Target
Bonus (as defined below) (collectively, the "Lump Sum Payment"), subject to
adjustment as provided in Paragraph 9 below;
(b) continue to provide the Executive with medical, dental,
life insurance and disability insurance benefits for a period of three years
following the Executive's termination of employment with benefits and employee
contributions no less favorable to the Executive than those provided immediately
prior to the Change in Control; and
(c) provide individual outplacement services for one year
following termination of employment at Company expense in an amount not to
exceed $20,000.
7.4. Certain Definitions.
(a) "Target Bonus" shall mean the target bonus for Executive
specified under the Company's Bonus Plan (as defined in Paragraph 4.2(a)) for
the year in which a Change in Control of the Company occurs.
(b) Termination by the Company of the Executive's employment
for "Cause" shall mean termination upon the willful misappropriation of funds or
properties of the Company or the willful contravention of the standards referred
to in the last sentence of Paragraph 10 below. For purposes of this definition,
no act, or failure to act, on the Executive's part shall be considered "willful"
unless done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that the Executive's action or omission was in the
best interest of the Company.
(c) A "Change in Control" shall be conclusively deemed to have
occurred if (and only if) any of the following shall have taken place: (i) a
change in control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under the
Exchange Act, or any similar reporting requirement hereafter promulgated by the
Securities and Exchange Commission; (ii) any person, entity or group (as such
term is used in Sections 13(d) and 14(d) of the Exchange Act), other than any
employee benefit plan sponsored by the Company, is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly,
of securities of the Company representing forty percent or more of the combined
voting power of the Company's then outstanding securities (as determined under
paragraph (d) of Rule 13d-3 promulgated under the Exchange Act, in the case of
rights to acquire common stock); 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.
4
<PAGE> 5
(d) "Good Reason" shall mean, in any case only if an action or
event described in this Paragraph 7.4(d) is not remedied by the Company promptly
after it receives notice thereof from Executive,
(i) the assignment to the Executive of any duties substantially
inconsistent with the Executive's position (including offices,
titles and reporting requirements), authority, duties or
responsibilities as contemplated by Paragraph 3.2 hereof, or the
reduction or elimination of any duties or responsibilities
previously assigned to the Executive;
(ii) the failure of the Company to comply with any of the
provisions of Section 4 hereof or to maintain competitive total
compensation for the Executive, including base pay, annual incentive
and long-term incentive pay based on then-current practices of
comparable publicly-traded U.S. companies; or
(iii) the Company's requiring the Executive to be based at any
office or location other than as provided in Paragraph 3.3 hereof.
7.5. Payments Upon a Change in Control. Within ten days following a
Change in Control, the Company shall pay the Executive a lump sum cash payment
equal to most recent annual bonus paid to the Executive pursuant to the
Company's Bonus Plan (as defined in Paragraph 4.2(a)) prior to the Change in
Control, prorated based on the number of days in the calendar year that have
elapsed prior to the Change in Control.
8. Acceleration of Options. Contemporaneously with the occurrence of a
Change in Control of the Company, the Board of Directors of the Company (or the
appropriate committee thereof) will accelerate all outstanding options
previously granted to the Executive under any then existing Company stock
option, stock appreciation or other employee incentive plan that are not
otherwise exercisable by the Executive at the time the Change in Control of the
Company occurs.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company or any of its affiliates to or for the benefit of Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (any such payments or distributions being individually
referred to herein as a "Payment," and any two or more of such payments or
distributions being referred to herein as "Payments"), would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended ("Code") (such excise tax, together with any interest thereon, any
penalties, additions to tax, or additional amounts with respect to such excise
tax, and any interest in respect of such penalties, additions to tax or
additional amounts, being collectively referred herein to as the "Excise Tax"),
then Executive shall be entitled to receive and the Company shall make an
additional payment or payments (individually referred to herein as a "Gross-Up
Payment," and any two or more of such additional payments being referred to
herein as "Gross-Up Payments") in an amount such that after payment by Executive
of all taxes (as defined in Paragraph 9(k) imposed upon the Gross-Up
5
<PAGE> 6
Payment, Executive retains an amount of such Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Paragraph 9(c) through (i),
any determination (individually, a "Determination") required to be made under
Paragraphs 9(a) or 9(b), including whether a Gross-Up Payment is required and
the amount of such Gross-Up Payment, shall initially be made, at the Company's
expense, by nationally recognized tax counsel mutually acceptable to the Company
and Executive ("Tax Counsel"). Tax Counsel shall provide detailed supporting
legal authorities, calculations, and documentation both to the Company and
Executive within 15 business days of the termination of Executive's employment,
if applicable, or such other time or times as is reasonably requested by the
Company or Executive. If Tax Counsel makes the initial Determination that no
Excise Tax is payable by Executive with respect to a Payment or Payments, it
shall furnish Executive with an opinion that no Excise Tax will be imposed with
respect to any such Payment or Payments. Executive shall have the right to
dispute any Determination (a "Dispute") within 15 business days after delivery
of Tax Counsel's opinion with respect to such Determination. The Gross-Up
Payment, if any, as determined pursuant to such Determination shall, at the
Company's expense, be paid by the Company to Executive within five business days
of Executive's receipt of such Determination. The existence of a Dispute shall
not in any way affect Executive's right to receive the Gross-Up Payment in
accordance with such Determination. If there is no Dispute, such Determination
shall be binding, final and conclusive upon the Company and Executive, subject
in all respects, however, to the provisions of Paragraph 9(c) through (i) below.
As a result of the uncertainty in the application of Sections 4999 and 280G of
the Code, it is possible that Gross-Up Payments (or portions thereof) which will
not have been made by the Company should have been made ("Underpayment"), and if
upon any reasonable written request from Executive or the Company to Tax
Counsel, or upon Tax Counsel's own initiative, Tax Counsel, at the Company's
expense, thereafter determines that Executive is required to make a payment of
any Excise Tax or any additional Excise Tax, as the case may be, Tax Counsel
shall, at the Company's expense, determine the amount of the Underpayment that
has occurred and any such Underpayment shall be promptly paid by the Company to
Executive.
(c) The Company shall defend, hold harmless, and indemnify
Executive on a fully grossed-up after tax basis from and against any and all
claims, losses, liabilities, obligations, damages, impositions, assessments,
demands, judgments, settlements, costs and expenses (including reasonable
attorneys', accountants', and experts' fees and expenses) with respect to any
tax liability of Executive resulting from any Final Determination (as defined in
Paragraph 9(j)) that any Payment is subject to the Excise Tax.
(d) If a party hereto receives any written or oral
communication with respect to any question, adjustment, assessment or pending or
threatened audit, examination, investigation or administrative, court or other
proceeding which, if pursued successfully, could result in or give rise to a
claim by Executive against the Company under this Paragraph 9(d) ("Claim"),
including, but not limited to, a claim for indemnification of Executive by the
Company under Paragraph 9(c), then such party shall promptly notify the other
party hereto in writing of such Claim ("Tax Claim Notice").
6
<PAGE> 7
(e) If a Claim is asserted against Executive ("Executive
Claim"), Executive shall take or cause to be taken such action in connection
with contesting such Executive Claim as the Company shall reasonably request in
writing from time to time, including the retention of counsel and experts as are
reasonably designated by the Company (it being understood and agreed by the
parties hereto that the terms of any such retention shall expressly provide that
the Company shall be solely responsible for the payment of any and all fees and
disbursements of such counsel and any experts) and the execution of powers of
attorney, provided that:
(i) within 30 calendar days after the Company receives or
delivers, as the case may be, the Tax Claim Notice relating to such
Executive Claim (or such earlier date that any payment of the taxes
claimed is due from Executive, but in no event sooner than five
calendar days after the Company receives or delivers such Tax Claim
Notice), the Company shall have notified Executive in writing
("Election Notice") that the Company does not dispute its
obligations (including, but not limited to, its indemnity
obligations) under this Agreement and that the Company elects to
contest, and to control the defense or prosecution of, such
Executive Claim at the Company's sole risk and sole cost and
expense; and
(ii) the Company shall have advanced to Executive on an
interest-free basis, the total amount of the tax claimed in order
for Executive, at the Company's request, to pay or cause to be paid
the tax claimed, file a claim for refund of such tax and, subject to
the provisions of the last sentence of Paragraph 9(g), sue for a
refund of such tax if such claim for refund is disallowed by the
appropriate taxing authority (it being understood and agreed by the
parties hereto that the Company shall only be entitled to sue for a
refund and the Company shall not be entitled to initiate any
proceeding in, for example, United States Tax Court) and shall
indemnify and hold Executive harmless, on a fully grossed-up after
tax basis, from any tax imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and
(iii) the Company shall reimburse Executive for any and all
costs and expenses resulting from any such request by the Company
and shall indemnify and hold Executive harmless, on fully grossed-up
after-tax basis, from any tax imposed as a result of such
reimbursement.
(f) Subject to the provisions of Paragraph 9(e), hereof, the
Company shall have the right to defend or prosecute, at the sole cost, expense
and risk of the Company, such Executive Claim by all appropriate proceedings,
which proceedings shall be defended or prosecuted diligently by the Company to a
Final Determination; provided, however, that (i) the Company shall not, without
Executive's prior written consent, enter into any compromise or settlement of
such Executive Claim that would adversely affect Executive, (ii) any request
from the Company to Executive regarding any extension of the statute of
limitations relating to assessment, payment, or collection of taxes for the
taxable year of Executive with respect to which the contested issues involved
in, and amount of, the Executive Claim relate is limited solely to such
contested issues and amount, and (iii) the Company's control of any contest or
proceeding shall be limited to issues with respect to the Executive Claim and
Executive shall be
7
<PAGE> 8
entitled to settle or contest, in his sole and absolute discretion, any other
issue raised by the Internal Revenue Service or any other taxing authority. So
long as the Company is diligently defending or prosecuting such Executive Claim,
Executive shall provide or cause to be provided to the Company any information
reasonably requested by the Company that relates to such Executive Claim, and
shall otherwise cooperate with the Company and its representatives in good faith
in order to contest effectively such Executive Claim. The Company shall keep
Executive informed of all developments and events relating to any such Executive
Claim (including, without limitation, providing to Executive copies of all
written materials pertaining to any such Executive Claim), and Executive or his
authorized representatives shall be entitled, at Executive's expense, to
participate in all conferences, meetings and proceedings relating to any such
Executive Claim.
(g) If, after actual receipt by Executive of an amount of a tax
claimed (pursuant to an Executive Claim) that has been advanced by the Company
pursuant to Paragraph 9(e)(ii), hereof, the extent of the liability of the
Company hereunder with respect to such tax claimed has been established by a
Final Determination, Executive shall promptly pay or cause to be paid to the
Company any refund actually received by, or actually credited to, Executive with
respect to such tax (together with any interest paid or credited thereon by the
taxing authority and any recovery of legal fees from such taxing authority
related thereto), except to the extent that any amounts are then due and payable
by the Company to Executive, whether under the provisions of this Agreement or
otherwise. If, after the receipt by Executive of an amount advanced by the
Company pursuant to Paragraph 9(e)(ii), a determination is made by the Internal
Revenue Service or other appropriate taxing authority that Executive shall not
be entitled to any refund with respect to such tax claimed and the Company does
not notify Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of any Gross-Up
Payments and other payments required to be paid hereunder.
(h) With respect to any Executive Claim, if the Company fails
to deliver an Election Notice to Executive within the period provided in
Paragraph 9(e)(i), hereof or, after delivery of such Election Notice, the
Company fails to comply with the provisions of Paragraph 9(e)(ii), and (iii) and
(f) hereof, then Executive shall at any time thereafter have the right (but not
the obligation), at his election and in his sole and absolute discretion, to
defend or prosecute, at the sole cost, expense and risk of the Company, such
Executive Claim. Executive shall have full control of such defense or
prosecution and such proceedings, including any settlement or compromise
thereof. If requested by Executive, the Company shall cooperate, and shall cause
its affiliates to cooperate, in good faith with Executive and his authorized
representatives in order to contest effectively such Executive Claim. The
Company may attend, but not participate in or control, any defense, prosecution,
settlement or compromise of any Executive Claim controlled by Executive pursuant
to this Paragraph 9(h) and shall bear its own costs and expenses with respect
thereto. In the case of any Executive Claim that is defended or prosecuted by
Executive, Executive shall, from time to time, be entitled to current payment,
on a fully grossed-up after tax basis, from the Company with respect to costs
and expenses incurred by Executive in connection with such defense or
prosecution.
8
<PAGE> 9
(i) In the case of any Executive Claim that is defended or
prosecuted to a Final Determination pursuant to the terms of this Paragraph
9(i), the Company shall pay, on a fully grossed-up after tax basis, to Executive
in immediately available funds the full amount of any taxes arising or resulting
from or incurred in connection with such Executive Claim that have not
theretofore been paid by the Company to Executive, together with the costs and
expenses, on a fully grossed-up after tax basis, incurred in connection
therewith that have not theretofore been paid by the Company to Executive,
within ten calendar days after such Final Determination. In the case of any
Executive Claim not covered by the preceding sentence, the Company shall pay, on
a fully grossed-up after tax basis, to Executive in immediately available funds
the full amount of any taxes arising or resulting from or incurred in connection
with such Executive Claim at least ten calendar days before the date payment of
such taxes is due from Executive, except where payment of such taxes is sooner
required under the provisions of this Paragraph 9(i), in which case payment of
such taxes (and payment, on a fully grossed-up after tax basis, of any costs and
expenses required to be paid under this Paragraph 9(i) shall be made within the
time and in the manner otherwise provided in this Paragraph 9(i).
(j) For purposes of this Agreement, the term "Final
Determination" shall mean (A) a decision, judgment, decree or other order by a
court or other tribunal with appropriate jurisdiction, which has become final
and non-appealable; (B) a final and binding settlement or compromise with an
administrative agency with appropriate jurisdiction, including, but not limited
to, a closing agreement under Section 7121 of the Code; (C) any disallowance of
a claim for refund or credit in respect to an overpayment of tax unless a suit
is filed on a timely basis; or (D) any final disposition by reason of the
expiration of all applicable statutes of limitations.
(k) For purposes of this Agreement, the terms "tax" and "taxes"
mean any and all taxes of any kind whatsoever (including, but not limited to,
any and all Excise Taxes, income taxes, and employment taxes), together with any
interest thereon, any penalties, additions to tax, or additional amounts with
respect to such taxes and any interest in respect of such penalties, additions
to tax, or additional amounts.
(l) For purposes of this Agreement, the terms "affiliate" and
"affiliates" mean, when used with respect to any entity, individual, or other
person, any other entity, individual, or other person which, directly or
indirectly, through one or more intermediaries controls, or is controlled by, or
is under common control with such entity, individual or person. The term
"control" and derivations thereof when used in the immediately preceding
sentence means the ownership, directly or indirectly, of 50% or more of the
voting securities of an entity or other person or possessing the power to direct
or cause the direction of the management and policies of such entity or other
person, whether through the ownership of voting securities, by contract or
otherwise.
10. Preservation of Business; Fiduciary Responsibility. The Executive
shall use his best efforts to preserve the business and organization of the
Company and the Company's consolidated subsidiaries (collectively, the
"Consolidated Company"), to keep available to the Consolidated Company the
services of present employees and to preserve the business relations of the
Consolidated Company with suppliers, distributors, customers and others. The
Executive shall not commit any act, or in any way assist others to commit any
act, which would injure the
9
<PAGE> 10
Consolidated Company. So long as the Executive is employed by the Company, the
Executive shall observe and fulfill proper standards of fiduciary responsibility
attendant upon his service and office and shall comply with the terms of the
Company's Code of Business Conduct, as may be amended from time to time.
11. Competitive Activities.
11.1. As an independent covenant, Executive agrees to refrain for
one (1) year after the termination of his employment for any reason, without
written permission from the Company, from becoming involved in any way, within
the boundaries of the United States, in the business of manufacturing or selling
any cement or ready-mix concrete products, or other products or services
competitive at the time of the termination with those sold and furnished by the
Consolidated Company as an employee, director, officer, shareholder, consultant,
partner, proprietor, or in any other capacity, except as a shareholder owning
less than five percent of the shares of a corporation whose shares are publicly
traded.
11.2. As an independent covenant, Executive agrees to refrain
during his employment by the Company, and in the event of the termination of his
employment for any reason, for one (1) year thereafter, without written
permission from the Company, from diverting, taking, soliciting and/or accepting
on his own behalf or on the behalf of another person, firm, or company, the
business of any customer of the Consolidated Company or any potential customer
of the Consolidated Company whose identity became known to Executive through his
employment by the Company.
11.3. As an independent covenant, Executive agrees to refrain
during his employment by the Company, and in the event of the termination of his
employment for any reason for a period of one (1) year, thereafter, from
inducing or attempting to influence any employee of the Consolidated Company to
terminate his employment.
11.4. Executive further agrees that these covenants are made to
protect the legitimate business interests of the Company, including interests in
the Company's "confidential information" as defined in Paragraph 12, and not to
restrict his mobility or to prevent him from utilizing his general technical
skills. Executive understands as a part of these covenants that the Company
intends to exercise whatever legal recourse against him for any breach of this
Agreement and in particular for any breach of these covenants.
12. Non-Disclosure of Confidential Information. Executive agrees not to
make any unauthorized use, publication, or disclosure, during or subsequent to
his employment by the Company, of any confidential information, generated or
acquired by him during the course of his employment, except to the extent that
the disclosure of confidential information is necessary to fulfill his
responsibilities as an employee of the Company. Executive understands that
"confidential information" includes confidential or trade information not
generally known by or available to the public about or belonging to the
Consolidated Company or belonging to other companies to whom the Consolidated
Company may have an obligation to maintain information in confidence, and that
authorization for public disclosure may only be obtained through the Company's
written consent. Executive also understands and agrees that the information
protected by this provision includes, but is not limited to, information of a
technical and a
10
<PAGE> 11
business nature such as ideas, discoveries, designs, inventions, improvements,
trade secrets, know-how, manufacturing processes, product formulae, design
specifications, writings and other works of authorship, computer programs,
financial figures, marketing plans, customer lists and data, business plans or
methods and the like, which relate in any manner to the actual or anticipated
business of the Consolidated Company or related to its actual or anticipated
areas of research and development.
13. Notice. All notices, requests, demands and other communications
given under or by reason of this Agreement shall be in writing and shall be
deemed given when delivered in person or when mailed, by certified mail (return
receipt requested), postage prepaid, addressed as follows (or to such other
address as a party may specify by notice pursuant to this provision):
(a) To the Company:
Southdown, Inc.
Attention: Secretary
1200 Smith Street, Suite 2400
Houston, Texas 77002
(b) To the Executive:
------------------------------
------------------------------
------------------------------
14. Controlling Law and Performability. The execution, validity,
interpretation and performance of this Agreement shall be governed by the law of
the State of Texas.
15. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled by binding arbitration in
Houston, Texas by one arbitrator appointed in the manner set forth by the
American Arbitration Association. Any arbitration proceeding pursuant to this
Paragraph 15 shall be conducted in accordance with the Employment Dispute
Resolution Rules of the American Arbitration Association. Judgment may be
entered on the arbitrators' award in any court having jurisdiction.
16. Expenses. The Company will pay or reimburse the Executive for all
costs and expenses (including arbitration and court costs and attorneys' fees)
incurred by the Executive as a result of any claim, action or proceeding arising
out of, or challenging the validity, advisability or enforceability of, this
Agreement or any provision thereof.
17. No Obligation to Mitigate. The Executive shall not be required to
mitigate the amount of any payment provided for in Paragraph 7 by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
Paragraph 7 be reduced by any compensation earned by the Executive as a result
of employment by another employer or otherwise.
18. Additional Instruments. The Parties shall execute and deliver any
and all additional instruments and agreements that may be necessary or proper to
carry out the purposes of this Agreement.
11
<PAGE> 12
19. Entire Agreement and Amendments. This Agreement contains the entire
agreement of the Parties relating to the matters contained herein and supersedes
all prior agreements and understandings, oral or written, between the Parties
with respect to the subject matter hereof; provided, however, that nothing
herein shall affect in any respect the rights and obligations of the Company and
the Executive under any Incentive Agreements implemented prior to the date of
this Agreement and not expressly referred to herein or under any Indemnity
Agreement entered into between the Company and Executive. This Agreement may be
changed only by an agreement in writing signed by the Party against whom
enforcement of any waiver, change, modification, extension or discharge is
sought.
20. Separability. If any provision of the Agreement is rendered or
declared illegal or unenforceable by reason of any existing or subsequently
enacted legislation or by the decision of any arbitrator or by decree of a court
of last resort, the Parties shall promptly meet and negotiate substitute
provisions for those rendered or declared illegal or unenforceable to preserve
the original intent of this Agreement to the extent legally possible, but all
other provisions of this Agreement shall remain in full force and effect.
21. Assignments. The Company may assign (whether by operation of law or
otherwise) this Agreement only with the written consent of the Executive, which
consent shall not be withheld unreasonably, and in the event of an assignment of
this Agreement, all covenants, conditions and provisions hereunder shall inure
to the benefit of and be enforceable against the Company's successors and
assigns. The rights and obligations of Executive under this Agreement are
personal to him, and no such rights, benefits or obligations shall be subject to
voluntary or involuntary alienation, assignment or transfer.
22. Effect of Agreement. Subject to the provisions of Paragraph 21 with
respect to assignments, this Agreement shall be binding upon the Executive and
his heirs, executors, administrators, legal representatives and assigns and upon
the Company and its respective successors and assigns (whether direct or
indirect, by purchase, merger, consolidation or otherwise).
23. Execution. This Agreement may be executed in multiple counterparts
each of which shall be deemed an original and all of which shall constitute one
and the same instrument.
24. Waiver of Breach. The waiver by either Party of a breach of any
provision of the Agreement by the other Party shall not operate or be construed
as a waiver by such Party of any subsequent breach by such other Party.
12
<PAGE> 13
IN WITNESS WHEREOF, the Parties have executed this Agreement effective
as of the date first above written.
"COMPANY"
SOUTHDOWN, INC.
By:
-------------------------------------------
Name: Clarence C. Comer
Title: President and Chief Executive Officer
"EXECUTIVE"
----------------------------------------------
Name:
-----------------------
Title:
-----------------------
13
<PAGE> 1
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this 31st day of January, 2000
("Agreement"), by and between Southdown, Inc., a Louisiana corporation
("Company"), and _____________________________ ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's shareholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional services for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1. Indemnitee agrees to serve as a director [AN OFFICER] of the
Company. Indemnitee may at any time and for any reason resign from such position
(subject to any other contractual obligation or any obligation imposed by
operation of law), in which event the Company shall have no obligation under
this Agreement to continue Indemnitee in such position.
Section 2. The Company shall indemnify, and advance expenses to,
Indemnitee (a) as provided in this Agreement and (b) to the fullest extent
permitted by applicable law in effect on the date hereof and, as hereinafter
provided, as amended from time to time. The rights of Indemnitee provided under
the preceding sentence shall include, but shall not be limited to, the rights
set forth in the other Sections of this Agreement.
<PAGE> 2
Section 3. (a) Except as prohibited by law as the same exists or may
hereafter be amended (but, in the case of any amendment, only to the extent that
such amendment permits the Company to provide broader indemnification rights
than said law permitted the Company to provide prior to such amendment), the
Company shall indemnify Indemnitee if Indemnitee is made a party or is
threatened to be made a party to or is involved in any action, suit, or
proceeding, whether civil, criminal, administrative or investigative (including
any action by or in the right of the Company) (hereinafter a "Proceeding"), by
reason of the fact that Indemnitee is or was a director or officer of the
Company or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans maintained or sponsored by the Company, whether the basis of such
proceeding is alleged action in an official capacity as a director, officer,
employee or agent or in any other capacity while serving as a director, officer,
employee or agent, against all expense, liability and loss (including attorneys'
fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to
be paid in settlement) reasonably incurred or suffered by Indemnitee in
connection therewith and such indemnification shall continue as to Indemnitee
after Indemnitee has ceased to be a director, officer, employee or agent and
shall inure to the benefit of Indemnitee's heirs, executors and administrators;
provided, however, that except as provided in paragraph (c) of this Section 3,
the Company shall indemnify any such person seeking indemnification in
connection with a Proceeding (or part thereof) initiated by such person only if
such Proceeding (or part thereof) was authorized by the Board of Directors. The
right to indemnification conferred in this Agreement shall include the right to
be paid by the Company the expenses incurred in defending any such Proceeding in
advance of its final disposition upon receipt of an undertaking by or on behalf
of the Indemnitee to repay such amount if it shall ultimately be determined that
Indemnitee is not entitled to be indemnified by the Company as authorized in
this Agreement or otherwise, such advances to be paid by the Company within 20
days after the receipt by the Company of a statement or statements from the
Indemnitee requesting such advance or advances from time to time.
Notwithstanding any other provision of this Agreement, to the extent that
Indemnitee is, by reason of his Corporate Status, a witness in any Proceeding to
which Indemnitee is not a party, he shall be indemnified against all expenses
actually and reasonably incurred by him or on his behalf in connection therewith
("Witness Expenses").
(b) To obtain indemnification under this Agreement, a Indemnitee shall
submit to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to determine whether and to what extent the Indemnitee
is entitled to indemnification. Upon written request by a Indemnitee for
indemnification pursuant to the first sentence of this paragraph (b), a
determination, if required by applicable law, with respect to the Indemnitee's
entitlement thereto shall be made as follows: (a) if requested by the
Indemnitee, by Independent Counsel (as hereinafter defined), or (b) if no
request is made by the Indemnitee for a determination by Independent Counsel,
(i) by the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors (as hereinafter defined), or (ii) if a quorum of the
Board of Directors consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to the Indemnitee, or (iii) if a quorum of
Disinterested Directors so directs, by the shareholders of the Company. In the
event the determination of entitlement to indemnification is to be made by
Independent Counsel at the request
2
<PAGE> 3
of the Indemnitee, the Independent Counsel shall be selected by the Board of
Directors unless there shall have occurred within two years prior to the date of
the commencement of the action, suit or proceeding for which indemnification is
claimed a Change in Control, in which case the Independent Counsel shall be
selected by the Indemnitee unless the Indemnitee shall request that such
selection be made by the Board of Directors. If it is so determined that the
Indemnitee is entitled to indemnification, payment to the Indemnitee shall be
made within 10 days after such determination.
(c) If a claim under paragraph (a) of this Section 3 is not paid in full by
the Company within 30 days after a written claim pursuant to Section 3(b) or
pursuant to either of the last two sentences of Section 3(a) has been received
by the Company, the Indemnitee may at any time thereafter bring suit against the
Company to recover the unpaid amount of the claim and, if successful in whole or
in part, the Indemnitee shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for [i] Witness Expenses or [ii] expenses
incurred in defending any Proceeding in advance of its final disposition where
the required undertaking has been tendered to the Company) that the Indemnitee
has not met the standard of conduct (limited only by the last clause of Section
83E of the Louisiana Business Company Law) which makes it permissible under
Louisiana Law to indemnify the Indemnitee for the amount claimed, but the burden
of proving such defense shall be on the Company. Neither the failure of the
Company (including its Board of Directors, Independent Counsel or shareholders)
to have made a determination prior to the commencement of such action that
indemnification of the Indemnitee is proper in the circumstances because he or
she has met the applicable standard of conduct set forth under Louisiana Law,
nor an actual determination by the Company (including its Board of Directors,
Independent Counsel or shareholders) that the Indemnitee has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the Indemnitee has not met any applicable standard of conduct.
(d) If a determination shall have been made pursuant to paragraph (b) of
this Section 3 that the Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding commenced
pursuant to paragraph (c) of this Section 3.
(e) The Company shall be precluded from asserting in any judicial
proceeding commenced pursuant to paragraph (c) of this Section 3 that the
procedures and presumptions of this Agreement are not valid, binding and
enforceable and shall stipulate in such proceeding that the Company is bound by
all the provisions of this Agreement.
(f) The right to indemnification (including the payment of expenses)
conferred in this Agreement shall not be exclusive of any other right which
Indemnitee may have or hereafter acquire under any statute, provision of the
Articles of Incorporation, Bylaws, agreement, vote of shareholders or
Disinterested Directors or otherwise
Section 4. The termination of any Proceeding or of any claim, issue or
matter therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not of itself adversely affect the
right of Indemnitee to indemnification or create a presumption that Indemnitee
did not act in the manner required to entitle Indemnitee to indemnification
under this Agreement or otherwise.
3
<PAGE> 4
Section 5. (a) No amendment of this Agreement or of any provision
hereof shall limit or restrict any right of Indemnitee under this Agreement in
respect of any action taken or omitted by such Indemnitee prior to such
amendment.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability for directors, officers, employees, or agents of
the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company shall be
subrogated to the extent of such payment to all of the rights of recovery of
Indemnitee, who shall execute all papers required and take all action necessary
to secure such rights, including execution of such documents as are necessary to
enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extent that
Indemnitee has otherwise actually received such payment under any insurance
policy, contract, agreement or otherwise.
Section 6. This Agreement shall continue until and terminate upon the
later of: (a) 10 years after the date that Indemnitee shall have ceased to serve
as a director, officer, employee, or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which Indemnitee served at the request of the Company; or (b) the
final termination of any Proceeding then pending in respect of which Indemnitee
is granted rights of indemnification hereunder and of any proceeding commenced
by Indemnitee pursuant to Section 3 of this Agreement relating thereto. This
Agreement shall be binding upon the Company and its successors and assigns and
shall inure to the benefit of Indemnitee and Indemnitee's heirs, executors and
administrators.
Section 7. If any provision or provisions of this Agreement shall be
held to be invalid, illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining provisions of this
Agreement (including, without limitation, each portion of any Section of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable that is not itself invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (b) to the fullest extent possible,
the provisions of this Agreement (including, without limitation, each portion of
any Section of this Agreement containing any such provision held to be invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested thereby.
Section 8. This Agreement may be executed in one or more counterparts,
each of which shall for all purposes be deemed to be an original but all of
which together shall constitute one and the same Agreement. Only one such
counterpart signed by the party against whom
4
<PAGE> 5
enforceability is sought needs to be produced to evidence the existence of this
Agreement.
Section 9. For purposes of this Agreement:
(a) A "Change in Control" shall be conclusively deemed to have
occurred if (and only if) any of the following shall have taken place: (i) a
change in control is reported by the Company in response to either Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of
1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated under the
Exchange Act or any successor provisions thereto; (ii) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing forty percent 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 of
Directors consists of individuals who were not members of the Board of Directors
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..
(b) "Corporate Status" describes the status of a person who is or
was a director, officer, employee or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who
is not and was not a party to the matter in respect of which indemnification is
sought by Indemnitee.
(d) "Independent Counsel" means a law firm, a member of a law
firm, or an independent practitioner that is experienced in matters of
corporation law and who, under the applicable standards of professional conduct
then prevailing, would not have a conflict of interest in representing either
the Company or Indemnitee in an action to determine Indemnitee's rights under
this Agreement.
Section 10. No supplement, modification or amendment of this Agreement
shall be binding unless executed in writing by both of the parties hereto. No
waiver of any of the provisions of this Agreement shall be deemed or shall
constitute a waiver of any other provisions hereof (whether or not similar) nor
shall such waiver constitute a continuing waiver.
Section 11. Indemnitee agrees promptly to notify the Company in writing
upon being served with any summons, citation, subpoena, complaint, indictment,
information or other document relating to any Proceeding or matter which may be
subject to indemnification covered hereunder.
Section 12. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given if (i)
delivered by hand and receipted for by the party to whom said notice or other
communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid, on the third business day after the date
on which
5
<PAGE> 6
it is so mailed:
(a) If to Indemnitee, to:
---------------------
---------------------
---------------------
(b) If to the Company, to:
Southdown, Inc.
1200 Smith Street, Suite 2400
Houston, TX 77002-446
Attn: General Counsel
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
Section 13. The parties agree that this Agreement shall be governed by,
and construed and enforced in accordance with, the laws of the State of
Louisiana.
Section 14. Use of the masculine pronoun shall be deemed to include
usage of the feminine pronoun where appropriate.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
INDEMNITEE
---------------------------------------------
Name:
ATTEST: SOUTHDOWN, INC.
By: By:
--------------------------- -------------------------------------------
Name: Patrick S. Bullard
Title: Senior Vice President-General Counsel
and Secretary
7
<PAGE> 1
EXHIBIT 10.9
TAX PROTECTION AGREEMENT
This AGREEMENT (the "Agreement") by and between Southdown,
Inc., a Louisiana corporation (the "Company"), and ____________________ (the
"Executive"), dated as of the ____ day of _______________________, 1999 and to
be effective as of the date hereof (as defined herein).
In entering into this Agreement, the Company intends that the
compensation and benefits payable or provided to or in respect of Executive not
be adversely impacted by certain excise taxes imposed under the Internal Revenue
Code in connection with any change in control of the Company, the Company has
determined to enter into the following Agreement providing for tax protection
payments to be made to or in respect of Executive.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Additional Payments by the Company.
(1) In the event it shall be determined that any payment or
distribution to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to
the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this
Section 1 (a "Payment")) is subject to the excise tax imposed
by Section 4999 of the Code or any interest or penalties are
incurred by the Executive with respect to such excise tax
(such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive
an additional payment (a "Gross-Up Payment") from the Company
in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments. For
purposes of computing the Gross-Up Payment, all amounts paid
as Gross-Up Payments shall be presumed to be taxable to
Executive at the maximum marginal rates.
(2) Subject to the provisions of Section 1(c), all determinations
required to be made under this Section 1, including whether
and when Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in
arriving at such determination, shall be made by Deloitte &
Touche LLP (the "Accounting Firm"); provided, however, that
the Accounting Firm shall not determine that no Excise Tax is
payable by the Executive unless it delivers to the Executive a
written opinion (the "Accounting Opinion") that it is more
likely than not that no Excise Tax is so payable or unless the
Company provides an opinion to such effect from another "big
five" accounting firm reasonably acceptable to the Executive
and the Company (the "Alternate Firm"). In the event that the
Accounting Firm (or any affiliate thereto) has served, at any
time during the two years immediately preceding a change
1
<PAGE> 2
in control of the Company, as accountant or auditor or
consultant for the individual, entity or group that is
involved in effecting or has any material interest in the
change in control of the Company, the Executive shall appoint
another nationally recognized accounting firm to make the
determinations and perform the other functions specified in
this Section 1 (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne equally by the Company and
the Executive. Within 15 business days of the receipt of
notice from the Executive that there has been a Payment, or
such earlier time as is requested by the Company, the
Accounting Firm shall make all determinations required under
this Section 1, shall provide to the Company and the Executive
a written report setting forth such determinations, together
with detailed supporting calculations, and, if the Accounting
Firm determines that no Excise Tax is payable, shall deliver
the Accounting Opinion to the Executive and the Company. In
the event the Accounting Firm is unable to provide the
Accounting Opinion within such 15-day period, the Alternate
Firm shall have 15 days from the date such Firm is selected to
deliver its opinion to Executive and the Company. Any Gross-Up
Payment, as determined pursuant to this Section 1, shall be
paid by the Company to the Executive within five days of the
receipt of the Accounting Firm's determination, provided that,
if the Company requests an opinion from an Alternate Firm, the
Gross-Up Payment shall be made five days after the expiration
of the period permitted for delivery, if no such opinion is
delivered. Subject to the remainder of this Section 1, any
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that it is ultimately determined in
accordance with the procedures set forth in Section 1(c) that
the Executive is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the
Executive.
(3) The Executive shall notify the Company in writing of any
claims by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than 30 days after the Executive
actually receives notice in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid; provided,
however, that the failure of the Executive to notify the
Company of such claim (or to provide any required information
with respect thereto) shall not affect any rights granted to
the Executive under this Section 1 except to the extent that
the Company is materially prejudiced in the defense of such
claim as a direct result of such failure. The Executive shall
not pay such claim prior to the expiration of the 30-day
period following the date on which he gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies
2
<PAGE> 3
the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim;
(2) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney selected by the Company and
reasonably acceptable to the Executive;
(3) cooperate with the Company in good faith in order
effectively to contest such claim; and
(4) if the Company elects not to assume and control the
defense of such claim, permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 1(c), the Company shall have the right, at its sole option, to
assume the defense of and control all proceedings in connection with such
contest, in which case it may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim, and may either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any permissible manner, and
the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further
provided, that any extension of the statute of limitations relating to payment
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's right to assume the defense of and control
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(4) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 1(c) the Executive becomes
entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the
requirements of Section 1(c)) promptly pay to the Company the
amount of such refund (together with an amount, including any
interest paid or credited thereon, after
3
<PAGE> 4
taxes applicable thereto in order to place Executive in the
appropriate after tax position). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to
Section 1(c) a determination is made that the Executive shall
not be entitled to any refund with respect to such claim, and
the Company does not notify the Executive in writing of its
intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
2. Successors.
(1) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable
by the Executive otherwise than by will or the laws of descent
and distribution. This Agreement shall inure to the benefit of
and be enforceable by the Executive's heirs, executors and
other legal representatives.
(2) This Agreement shall inure to the benefit of and be binding
upon the Company and may only be assigned to a successor
described in Section 2(c).
(3) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall
mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and
agrees to perform this Agreement by operation of law, or
otherwise.
3. Miscellaneous.
(1) This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without
reference to principles of conflict of laws that would require
the application of the laws of any other state or
jurisdiction.
(2) The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect.
(3) This Agreement may not be amended or modified otherwise than
by a written agreement executed by the parties hereto or their
respective successors and heirs, executors and other legal
representatives.
(4) All notices and other communications hereunder shall be in
writing and shall be given, if by the Executive to the
Company, by telecopy or facsimile transmission at the
telecommunications number set forth below and, if by either
the Company or the Executive, either by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
4
<PAGE> 5
If to the Executive:
-----------------------
-----------------------
-----------------------
If to the Company:
Southdown, Inc.
1200 Smith Street
Suite 2400
Houston, TX 77002
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(5) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(6) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of
this Agreement or the failure to assert any right the
Executive or the Company may have hereunder shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.
SOUTHDOWN, INC.
By:
---------------------------------
---------------------------------
---------------------------------
------------------------------------
5
<PAGE> 1
EXHIBIT 10.10
SOUTHDOWN, INC. EXECUTIVE SEVERANCE PLAN
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 31, 2000)
I. PURPOSES OF PLAN AND DEFINITIONS
1.1 Purposes. This Southdown, Inc. Executive Severance Plan, as adopted
effective January 31, 2000 (the "Plan"), for selected senior management
employees is intended to provide greater incentives to attain and maintain the
high standards of performance, to retain executives of outstanding competence
and ability, to reward such executives for outstanding performance and to
provide protection for loss of salary in the event of certain changes in control
of the Company (as defined herein).
1.2 Definitions.
(a) "Company" means Southdown, Inc., a Louisiana corporation,
or any successor.
(b) "Subsidiary" means any corporation in which the Company
owns, directly or indirectly, stock possessing 50% or more of the total
combined voting power of all classes of stock or any affiliated company
which is controlled by the Company by reason of a management contract
and stock ownership.
(c) "Board" means the Board of Directors of the Company.
(d) "Compensation Committee" means the Compensation and
Development Committee of the Board.
(e) "Employee" means any employee of the Company or any
Subsidiary (whether or not he is also a director thereof), who is
compensated for employment of the Company or any Subsidiary by a
regular salary and who is considered by the Compensation Committee to
be a senior management employee.
(f) "Participant" means an Employee who has been selected by
the Compensation Committee to participate in the Plan.
II. ADMINISTRATION OF THE PLAN - COMPENSATION COMMITTEE
2.1 Interpretations. The Compensation Committee shall have full
power and authority to interpret, construe and administer this Plan.
2.2 Compensation Committee Determinations Conclusive. All
determinations by the Compensation Committee as to which Employees shall be
offered the opportunity to participate herein shall be final, binding and
conclusive upon all persons. The interpretation adopted by the Compensation
Committee with respect to any provision of the Plan and the effect thereof shall
be final, binding and conclusive upon all persons.
-1-
<PAGE> 2
III. ELIGIBILITY OF EMPLOYEES
3.1 Eligibility Requirements. The Compensation Committee shall in
its sole discretion from time to time designate those Employees who are to
participate herein. The initial Participants are set forth in Exhibit "A"
attached hereto.
3.2 Notification of Participation. Each Employee who is
denominated a Participant herein by the Compensation Committee shall be provided
an agreement in writing specifying that the Employee is a Participant in this
Plan together with a copy of the Plan.
3.3 Termination of Participation. An Employee's status as a
Participant shall terminate at such time as may be determined by the
Compensation Committee; provided, however, that (i) in the case of an Employee
whose employment is terminated prior to a Change in Control, such individual
shall cease participation immediately upon such termination and (ii) in the case
of an Employee who is a Participant immediately prior to a Change in Control (as
defined herein) such Participant's coverage by this Plan may not be terminated
without the consent of the Participant within two years after the Effective Date
of such Change in Control.
IV. EXECUTIVE SEVERANCE BENEFITS
4.1 Cash Severance Payment. In the event of the termination of a
Participant's employment with the Company and any Subsidiary within two years
following a Change in Control (as herein defined) for any reason other than
Cause (as herein defined), or by resignation by a Participant under
circumstances constituting Good Reason (as herein defined) within two years
following a Change in Control), the Company shall pay to such a Participant
forthwith an amount in cash equal to the sum of (i) the Participant's annual
salary (at a rate equal to the higher of the rate of salary in effect on the
date immediately prior to the Change in Control or the annual rate of salary in
effect on the date of termination of employment) and (ii) the greater of the
Participant's highest annual incentive bonus earned during the 12 months
preceding termination of employment, the Participant's target annual bonus for
the year in which termination occurs, or the Participant's target annual bonus
for the year immediately prior to the Change in Control.
4.2 Change in Control. For purposes of this Plan, a "Change in
Control" shall be conclusively deemed to have occurred if (and only if) any of
the following shall have taken place: (i) a change in control is reported by the
Company in response to either Item 6(e) of Schedule 14A of Regulation 14A
promulgated under the Securities Exchange Act of 1934, as amended ("Exchange
Act"), or Item 1 of Form 8-K promulgated under the Exchange Act, or any
-2-
<PAGE> 3
similar reporting requirement hereafter promulgated by the Securities and
Exchange Commission; (ii) any person, entity or group (as such terms are used in
Sections 13(d) and 14(d) of the Exchange Act), other than any employee benefit
plan sponsored by the Company, is or becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing forty percent or more of the combined voting power of the
Company's then outstanding securities (as determined under paragraph (d) of Rule
13d-3 promulgated under the Exchange Act, in the case of rights to acquire
common stock); 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.
4.3 Termination for Cause. For purposes of this Plan, a
termination of employment for Cause shall mean termination upon the willful
misappropriation of funds or properties of the Company, the willful
contravention of proper standards of fiduciary responsibility attendant upon his
service and office, or failure to comply with the terms of the Company's Code of
Business Conduct. For purposes of this definition, no act, or failure to act, on
the Participant's part shall be considered "willful" unless done, or omitted to
be done, by the Participant not in good faith and without reasonable belief that
the Participant's action or omission was in the best interest of the Company.
4.4 Resignation for Good Reason. For purposes of this Plan, a
resignation shall be considered under circumstances constituting Good Reason if
a Participant's salary is materially reduced below the level in effect
immediately prior to a Change in Control.
4.5 Welfare Benefits Continuation. Any Participant entitled to
benefits under Section 4.1 shall be entitled to receive for the 12 months
following termination of employment continued coverage under the Company's
medical, dental, long-term disability and life insurance plans with benefits and
participant contributions no less favorable to the Participant than those in
effect immediately prior to the Change in Control.
4.6 Outplacement Services. Any Participant entitled to benefits
under Section 4.1 shall be entitled to receive individual outplacement services
for one year following termination at Company expense in an amount not to exceed
$10,000.
V. RIGHTS OF PARTICIPANTS
5.1 Limitation of Rights. Nothing in this Plan shall be construed
to:
(a) Give any Employee of the Company or a Subsidiary any
right to participate in this Plan;
-3-
<PAGE> 4
(b) Limit in any way the right of the Company or any
Subsidiary to terminate a Participant's
employment with the Company or any Subsidiary at any time;
(c) Give a Participant or any spouse of a deceased
Participant any interest in any fund or any specific asset or assets
of the Company or any Subsidiary; or
(d) Be evidence of any agreement or understanding, express
or implied, that the Company or any Subsidiary will employ a
participant in any particular position or at any particular rate of
remuneration.
5.2 Non-alienation of Benefits. No right or benefit under this
Plan shall be subject to anticipation, alienation, sale, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate, sell, assign,
pledge, encumber or charge the same will be void. No right or benefit hereunder
shall in any manner be liable for or subject to any debts, contracts,
liabilities or torts of the person entitled to such benefits.
5.3 Prerequisites to Benefits. No Participant, or any person
claiming through a Participant shall have any right or interest in the Plan, or
any benefits hereunder unless and until all of the terms, conditions and
provisions of the Plan which affect such Participant or such other person shall
have been complied with as specified herein.
5.4 Relation to Other Plans and Agreements. Participation in this
Plan is in lieu of, and not in addition to, participation in or the receipt of
benefits under any other service plan of the Company or any Subsidiary,
including, but not limited to, the Company's Special Severance Plan for Salaried
Employees.
5.5 Expenses. The Company shall pay the costs and expenses,
including, without limitation, reasonable attorneys' fees, incurred by a
Participant in seeking to enforce his or her rights under the Plan.
VI. MISCELLANEOUS
6.1 Amendment or Termination of the Plan. The Board may amend or
terminate this Plan at any time; provided, however, that the terms of the Plan
as in effect upon a Change in Control may not be changed in a manner which would
adversely affect the rights of any Employee who, as of the date immediately
prior to the Change in Control, is a Participant in the Plan.
6.2 Employment Status. This Plan does not constitute a contract of
employment or impose on the Company or any subsidiary any obligation to retain
the Participant as an employee, to change or not change the status of the
Participant's employment, or to change the Company's policies or those of its
subsidiaries regarding termination of employment.
-4-
<PAGE> 5
6.3 Claims Procedure.
(a) All claims for benefits shall be in writing and shall be
filed with the Compensation Committee.
(b) If the Compensation Committee wholly or partially denies
a former employee's claim for benefits, the Compensation Committee
shall give the claimant written notice within sixty (60) days after the
Plan's receipt of the claim setting forth (i) the specific reason(s)
for the denial, (ii) specific reference to pertinent Plan provisions on
which the denial is based, (iii) a description of any additional
material or information which must be submitted to perfect the claim,
and an explanation of why such material or information is necessary,
and (iv) an explanation of the Plan's review procedure.
(c) In the event of a benefit claim denial, the Company
shall appoint a person who is not a member of the Compensation
Committee to serve as Claim Reviewer. The person designated as the
Claim Reviewer shall be reasonably acceptable to the claimant. The
claimant shall have sixty (60) days after the day on which such written
notice of denial is handed or mailed to him or her by the Compensation
Committee in which to apply (in person or by authorized representative)
in writing to the Claim Reviewer for a full and fair review of the
denial of his or her claim. In connection with such review, the
claimant (or his or her representative) shall be afforded a reasonable
opportunity to review pertinent documents, and may submit issues and
comments in writing. The Claim Reviewer shall arrange to meet
personally with the claimant and/or representative within thirty (30)
days after the Claim Reviewer's receipt of such written request for
review for the purpose of hearing the claimant's contentions and
receiving such relevant evidence as the claimant may wish to offer.
(d) The Claim Reviewer shall issue his decision on review
within sixty (60) days after meeting with the claimant or claimant's
personal representative, unless in the sole discretion of the Claim
Reviewer special circumstances require an extension to not later than
one hundred twenty (120) days after such meeting. The decision shall be
in writing and shall set forth specific reasons for the decision and
specific references to pertinent Plan provisions on which the decision
is based.
(e) The Company or its subsidiary shall pay the costs and
expenses, including without limitation, reasonable attorneys' fees,
incurred by an employee in seeking to enforce his or her rights under
the Plan.
6.4 Applicable Laws. This Plan shall be construed, administered
and governed in all respects under the laws of the State of Texas.
6.5 Validity and Severability. The invalidity or unenforceability
of any provision of the Plan shall not affect the validity or enforceability of
any other provision of the Plan, which
-5-
<PAGE> 6
shall remain in full force and effect, and any prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.
SOUTHDOWN, INC.
-6-
<PAGE> 7
EXHIBIT A
PARTICIPANTS IN THE SOUTHDOWN, INC.
EXECUTIVE SEVERANCE PLAN
P. Alsop
R. Arredondo
J. Bloom
S. Bryan
T. Daman
S. Davis
L. Hoffis
R. Johns
P. Miller
D. Newquist
W. Vines
-7-
<PAGE> 8
SOUTHDOWN, INC. EXECUTIVE SEVERANCE PLAN
PARTICIPATION CERTIFICATE
This Participation Certificate given this ___ day of
____________________, ____, by Southdown, Inc., a Louisiana corporation
("Company"), to __________ ("Employee") with terms herein having the meaning
assigned to such terms in the Southdown, Inc. Executive Severance Plan, as
established effective January 31, 2000 (the "Plan"), unless otherwise stated.
1. The Compensation Committee hereby designates Employee as a
Participant in the Plan effective as of Effective Date.
2. Upon Employee's termination of employment following a
Change in Control under the circumstances and subject to the terms and
conditions described Article IV of the Plan, Employee will be entitled
to the benefits specified in Sections 4.1, 4.5 and 4.6 of the Plan.
3. Employee's status as a Participant in the Plan may be
terminated by action of the Compensation Committee but only after
formal notice in writing to the Employee; provided, however, that
Employee's status as a Participant may not be terminated after a Change
in Control.
COMPENSATION COMMITTEE
By:
---------------------
-8-
<PAGE> 1
EXHIBIT 10.12
ANNEX A
AMENDMENTS TO 1991 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
<PAGE> 2
AMENDMENT TO THE SOUTHDOWN, INC.
1991 NONQUALIFIED STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
W I T N E S S E T H:
WHEREAS, Southdown, Inc. (the "Company") presently maintains the Southdown,
Inc. 1991 Nonqualified Stock Option Plan for Non-Employee Directors which became
effective on February 14, 1991 and was amended and restated as of November 21,
1996 (the "Plan"); and
WHEREAS, the Company, pursuant to paragraph 15 of the Plan, has the right
to amend the Plan from time to time subject to certain limitations.
NOW, THEREFORE, in order to increase the number of shares of Common Stock
(as defined in the Plan) which may be acquired under a Subsequent Option (as
defined in the Plan), and to make certain other amendments, the Plan is hereby
amended in the following manner:
1. The first sentence of paragraph 3 of the Plan is hereby amended in its
entirety to read as follows:
3. STOCK RESERVED FOR THE PLAN.
Subject to adjustment as provided in paragraph 11, the shares subject
to the Plan shall consist of 725,000 unissued shares of Common Stock or
previously issued shares reacquired and held by the Company and such amount
of shares shall be and is hereby reserved for issuance pursuant to this
Plan.
2. The first paragraph of paragraph 4 of the Plan is hereby amended in its
entirety to read as follows:
4. GRANT OF OPTIONS.
Each director of the Company who is not otherwise an employee of the
Company or any of the Company's subsidiaries (as defined in Section 424(f)
of the Internal Revenue Code of 1986) (hereinafter referred to as an
"Eligible Director", which term shall include any transferee permitted
pursuant to paragraph 9 below) shall be granted one option to acquire
10,000 shares of Common Stock ("Initial Option"), in the case of an
Eligible Director serving on the Board on the date of adoption of the Plan
by the Board, on such date of adoption and in all other cases on the date
of such director's first election to the Board. Beginning on the Annual
Meeting of Shareholders held in 1999, and on the date of each Annual
Meeting of Shareholders thereafter where an Eligible Director continues to
serve as a Director of the Company after such meeting, (i) each Eligible
Director who is neither a chairman of one of the committees of the Board
nor the Chairman of the Board shall automatically be granted an additional
option to acquire
2
<PAGE> 3
7,500 shares of Common Stock, (ii) each Eligible Director who is a chairman
of one of the committees of the Board, but is not Chairman of the Board,
shall automatically be granted an additional option to acquire 8,000 shares
of Common Stock, and (iii) the Chairman of the Board of Directors shall
automatically be granted an additional option to acquire 26,000 shares of
Common Stock (each annual grant under (i), (ii) and (iii) for an Eligible
Director is referred to hereinafter as a "Subsequent Option"). The options
granted to Eligible Directors shall be automatic, nondiscretionary, and
subject to the following conditions and limitations in addition to those
set forth elsewhere in this Plan: (x) the exercise price of each option
shall be equal to the greater of the par value of the Common Stock or 100%
of the fair market value of the Common Stock on the Date of Grant; (y) each
option shall become exercisable six months after the Date of Grant; (z)
notwithstanding clause (y) above, each option shall be fully exercisable
upon the death or disability of the Eligible Director while serving as a
Director of the Company or upon a Change in Control of the Company while
serving as a Director of the Company.
3. This Amendment shall be effective upon the date of its adoption by the
Board of Directors of the Company (the "Board"), provided that this Amendment is
approved within twelve months thereafter by a majority of the votes cast by the
stockholders of the Company on the proposal, as long as at least 50% of the
outstanding shares vote on the proposal.
4. This Amendment to the Plan was approved by the Board on March 25, 1999.
Except as provided herein, the Plan remains unchanged and in full force and
effect.
Approved: Date:
----------------------------- ----------------------------
3
<PAGE> 1
EXHIBIT 10.13
ANNEX "A"
AMENDMENT TO DIRECTORS' STOCK OPTION PLAN
WHEREAS, the Company previously adopted the "Southdown, Inc. 1991
Nonqualified Stock Option Plan for Non-Employee Directors" (the "Plan"); and
WHEREAS, the Company desires to amend the Plan to allow gifts of
options to certain persons or entities.
NOW, THEREFORE, BE IT RESOLVED, that Section 9 of the Plan be and
hereby is amended and restated in its entirety to read as follows:
9. Assignability.
The options granted under this Plan shall be nontransferable by the
Eligible Director other than by will or the laws of descent and distribution, or
pursuant to a qualified domestic relations order as that term is defined by the
Internal Revenue Code of 1986, as amended, or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, or by gift to, or in trust for the
benefit of, the Eligible Director, or the Eligible Director's spouse, parent or
parents, any descendant or descendants, or any charitable organization described
in Internal Revenue Code Section 170(c). In case of any such transfer by gift,
the donee or donees shall receive and hold such options subject to the
restrictions on encumbrances and disposition set forth in the Plan and the Stock
Option Agreement; and further
RESOLVED, that each executive officer of the Company be, and hereby is,
authorized in the name and on behalf of the Company to take any and all such
further actions and to make, execute and deliver any and all such documents,
agreements, instruments, certificates and undertakings as such officer may deem
necessary or advisable to carry into effect the purposes and intents of the
foregoing resolutions and the transactions contemplated thereby, and to perform
or cause to be performed the obligations of the Company under any agreement
related thereto.
<PAGE> 1
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
(As Amended Effective January 31, 2000)
PREAMBLE
Southdown, Inc. has adopted this Supplemental Executive Retirement Plan,
effective October 1, 1997, for a group of senior line and staff management
personnel to ensure that the overall effectiveness of the Company's executive
compensation program will attract, retain and motivate qualified senior
management personnel. The Plan has been amended effective January 31, 2000 to
modify certain plan provisions and provide enhanced benefits to designated
Participants upon a Change in Control.
SECTION I
DEFINITIONS
When used herein, the following words shall have the meanings below unless
the context clearly indicates otherwise:
1.1. "Beneficiary" means (1), subject to (2) below, with respect to the
Participant, the Participant's Spouse or Surviving Spouse as defined in Section
1.48 of the Pension Plan or, with respect to the Surviving Spouse, the
contingent annuitant as described in Section 1.10 of the Pension Plan, or (2)
any natural person or persons requested by the Participant and approved by the
Retirement Committee to be a Beneficiary with respect to the Participant's
benefit under this plan or to be a contingent annuitant (as described in Section
1.10 of the Pension Plan) with respect to the 10-years certain option described
in the Pension Plan.
1.2. "Company" means Southdown, Inc. and any successor thereto.
1.3. "Compensation" means, with respect to any Participant, the sum of (a)
the basic cash remuneration paid to a Participant by the Company for personal
services rendered during the Calendar year, (i) without regard to hours of work
or units produced, and is exclusive of any remuneration paid on account of
overtime, overtime premium, extended workweek, shift differentials, or other
penalties, or premium rates, or bonuses or all other forms of special pay, but
including (ii) any amount contributed by the Company pursuant to a salary
reduction agreement and which is not included in the gross income of the
Participant, pursuant to IRC Section 125, 402(a)(8), 402(h) or 403(b); and (b)
the incentive compensation received pursuant to the Company's Annual Incentive
Plan, whether paid in cash or another form of compensation (including restricted
stock). The total dollar amount of incentive compensation received within a
calendar year shall be allocated in equal amounts to each month of such calendar
year.
1.4. "Early Retirement Supplemental Benefit" shall have the meaning set
forth in Section 3.3 hereof.
<PAGE> 2
1.5. "Internal Revenue Code" or "IRC" means the Internal Revenue Code of
1986 as amended.
1.6. "Late Retirement Supplemental Benefit" shall have the meaning set
forth in Section 3.4 hereof.
1.7. "Normal Retirement Supplemental Benefit" shall have the meaning set
forth in Section 3.2 hereof.
1.8. "Participant" means any employee of the Company who meets the
eligibility requirements of Section II.
1.9. "Pension Plan" means the Southdown, Inc. Pension Plan, adopted May 19,
1994, as heretofore and hereafter amended from time to time or any successor
thereto.
1.10. "Plan" means the Supplemental Executive Retirement Plan.
1.11. "Plan Average Monthly Compensation" means monthly Compensation of a
Participant averaged over the five (5) consecutive calendar years from his date
of employment which produces the highest monthly average. If a Participant has
less than five (5) consecutive calendar years of employment at his date of
termination, his Plan Average Monthly Compensation will be based on his monthly
Compensation during his months of service from his date of employment to his
date of termination. Compensation subsequent to termination of participation
shall not be recognized.
1.12. "Retirement Committee" means the Employee Compensation and Benefits
Committee of the Company's Board of Directors.
1.13. "Supplemental Plan Benefit" means the monthly retirement benefit
payable in accordance with the Plan.
1.14. As used herein, the terms "Accrued Benefit", "Actuarial Equivalent",
"Administrators", "Normal Retirement Date", "Early Retirement Date", "ERISA",
"Late Retirement Date", and "Vested" shall have the same meanings as provided in
the Pension Plan.
SECTION II
ELIGIBILITY TO PARTICIPATE
A senior management employee of the Company is eligible to become a
Participant in the Plan provided such employee is designated as a Participant by
the Retirement Committee in writing; and provided further that at the time of
such designation and approval the employee:
a. Is a vested participant in the Pension Plan, and
2
<PAGE> 3
b. Has Plan Average Monthly Compensation in excess of the limitations set
forth in IRC Section 401(a)(17).
Once an employee becomes a Participant, he shall remain a Participant until
his termination of employment with the Company and thereafter until all benefits
to which he or his Beneficiary is entitled under the Plan have been paid or
until such benefits are forfeited pursuant to Section 6.1.
SECTION III
ELIGIBILITY FOR AND AMOUNT OF BENEFITS
3.1. Benefit Eligibility. Each Participant is eligible to receive a
Supplemental Plan Benefit under the Plan beginning on one of the following
dates:
a. Normal Retirement Date;
b. Early Retirement Date; or
c. Late Retirement Date.
3.2. Normal Retirement Supplemental Benefit. The Normal Retirement
Supplemental Benefit of a Participant who attains his Normal Retirement Date
shall be equal to (i) the monthly retirement benefit such person would have
received under Section 5.1(a) of the Pension Plan if such Section 5.1(a) monthly
retirement benefit had been calculated on the basis of Plan Average Monthly
Compensation without regard to the limitations and rules set forth under Section
401(a)(17), 415 and 414(q)(6) of the Internal Revenue Code; less (ii) the
monthly retirement benefit payable to such person under the Pension Plan at his
Normal Retirement Date.
3.3. Early Retirement Supplemental Benefit. The Early Retirement
Supplemental Benefit of a Participant who attains his Early Retirement Date
shall be equal to his Normal Retirement Supplemental Benefit reduced for early
commencement by the factors set forth in Section 5.1(b) of the Pension Plan.
3.4. Late Retirement Supplemental Benefit. The Late Retirement Supplemental
Benefit of a Participant who delays retirement pursuant to Section 5.1(d) of the
Pension Plan shall be equal to (i) the monthly retirement benefit such person
would have received under Section 5.1(d) of the Pension Plan if such Section
5.1(d) monthly retirement benefit had been calculated on the basis of Plan
Average Monthly Compensation without regard to the limitations and rules set
forth under Section 401(a)(17), 415 and 414(q)(6) of the Internal Revenue Code;
less (ii) the monthly retirement benefit payable to such person under the
Pension Plan at his Late Retirement Date. In the determination of the Late
Retirement Supplemental Benefit, the definition of "Accrued Benefit" in Section
5.1(d) of the Pension Plan shall have the same meaning as provided in Section
1.1(f) of the Pension Plan, but substituting "Plan Average Monthly Compensation"
for "Average Monthly Compensation" in such Section 1.1(f).
3.5. Pension Benefit Offset by Other Plans. In the event a monthly
retirement benefit payable to the Participant by the Pension Plan is subject to
reduction by monthly retirement
3
<PAGE> 4
benefits provided by any other defined benefit plan to which the Company
contributes on behalf of the Participant as provided in Section 1.1(b)(vii)
of the Pension Plan, in the calculation of the benefit payable under this
Plan the benefit payable under the Pension Plan will be determined as if
such offsets under the Pension Plan do not exist, to preserve the effect of
the offset in the Pension Plan.
3.6. Re-employment. If a Participant's employment with the Company is
terminated for any reason, and the Participant is re-employed and once
again becomes a Participant, such renewed participation shall not result in
duplication of benefits. Accordingly, if a Participant has received a
distribution of any Supplemental Plan Benefit under the Plan, his
Supplemental Plan Benefit upon any subsequent termination of employment
shall be reduced by the Actuarial Equivalent of the present value of such
distribution as of the date of distribution. If a former Participant who is
receiving benefits payments from the Plan is re-employed by the Company,
the payment of benefits will be suspended during his period of
re-employment under the same terms and in the same manner as applies to
benefits payable under the Pension Plan.
SECTION IV
FORM AND COMMENCEMENT OF BENEFITS
4.1. Form of Distribution of Benefits. Supplemental Plan Benefits
payable to a Participant or Beneficiary pursuant to Section III will be
payable in a lump sum amount or in any other form permitted by Section
5.7(a) of the Pension Plan and shall be the Actuarial Equivalent of a
single life annuity. The Participant may elect a permitted form of
distribution of benefits at a time no later than 30 days after commencement
of participation in the Plan. If the Participant fails to elect a permitted
form of distribution of benefits, such benefits will be payable as a lump
sum. The election of a form of distribution of Supplemental Plan Benefits
shall not require spousal consent.
4.2. Commencement of Benefits. A Supplemental Plan Benefit payable to
a Participant pursuant to Plan Sections 3.2, 3.3 or 3.4 will commence on
the same date of commencement of the benefit provided by the Pension Plan.
A Supplemental Plan Benefit payable to a Beneficiary will commence on the
first day of the month coincident with or next following the Participant's
death. Payment of a Supplemental Plan Benefit to a Participant will
terminate with the payment made on the first day of the month in which the
Participant dies, unless the form of payment to the Participant provides
for continuation of payments following his death, in which event payments
will continue in accordance with such form. Payment of a Supplemental Plan
Benefit to any Beneficiary will terminate with the payment made on the
first day of the month in which such Beneficiary dies. After payment of the
Supplemental Plan Benefit in a lump sum, the Plan shall have no further
obligation to the Participant or to Participant's Beneficiaries.
4
<PAGE> 5
SECTION V
AMENDMENT AND TERMINATION
5.1. Amendment or Termination. The Company 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 or such later date as the resolution
may expressly state. No amendment or termination of the Plan shall directly or
indirectly deprive any Participant or Beneficiary of all or any portion of any
Supplemental Plan Benefit accrued to the effective date of the resolution
amending or terminating the Plan. If a Plan amendment has the effect of reducing
future accruals of a Supplemental Plan Benefit, the Company shall cause the
trust contemplated in Section 7.1 to be established, if not previously
established, and transfer a sufficient amount of assets to the trust in order
that trust assets immediately after such amendment equal the aggregate of
Supplemental Plan Benefits of all Participants.
5.2. Termination Benefit. In the case of a Plan termination, each
Participant on the termination date shall become vested in his accrued
Supplemental Plan Benefit as of the termination date. Such accrued Supplemental
Plan Benefit shall be based on service and compensation factors as of the Plan
termination date. Upon Plan termination, the Company shall cause the trust
contemplated in Section 7.1 to be established, if not previously established,
and transfer a sufficient amount of assets to such trust in order that trust
assets immediately after termination equal the aggregate of Supplemental Plan
Benefits of all Participants.
5.3. Corporate Successors. 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. 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 Plan Sections 5.1 and 5.2.
SECTION VI
MISCELLANEOUS
6.1. Forfeitures of Benefits. Notwithstanding any other provision of the
Plan, future payment of a Supplemental Plan Benefit hereunder to a Participant
or a Beneficiary will, at the sole discretion of the Retirement Committee, be
discontinued and forfeited, and the Company will have no further obligation
hereunder to such Participant or Beneficiary, if any of the following
circumstances occur:
a. The Participant is discharged from employment with the Company for
cause. For purposes of this Plan, cause shall mean: (A) the
Participant's conviction (including a plea of guilty or nolo
contendere) of a felony or any crime or theft, dishonesty or moral
turpitude; or (B) the willful or grossly negligent contravention of
(i) the standards of fiduciary responsibility attendant upon the
Participant's service and office or (ii) the terms of the Company's
Statement of Policy Concerning Corporate Ethics and Conflicts of
Interest as amended from time to time; or
5
<PAGE> 6
b. The Participant engages in competition with the Company, as
determined by the Retirement Committee, within two years following
his termination of employment with the Company and prior to
attaining the age of 65 years, without written consent of the
Company. "Competition" shall exist if the Participant directly or
indirectly owns, operates, manages, controls or participates in the
ownership, management, operation or control of or is employed by,
or paid as a consultant or independent contractor by a business
which competes or at any time did compete with the Company in a
trade area served by the Company at the time distributions are
being made or are to be made or within two years following his
termination of employment with the Company and in which the
Participant has represented the Company while employed by it, if
the Participant continues to be so engaged 60 days after written
notice has been given to him.
The portion of the benefit subject to forfeiture under the conditions
described in this Section 6.1 are as follows:
a. The total benefit, or if the Participant is in pay status, any
benefit unpaid as of the date such Competition commenced, is
subject to forfeiture, except as provided in b. below.
b. In the case of a Participant who is retiring at his Mandatory
Retirement Age, as defined in the Age Discrimination in Employment
Act of 1967, as amended from time to time, the provisions of
paragraph a. above shall not apply to that portion of the benefits
computed under this Plan which, when added to the retirement
payments under the Pension Plan (prior to any reduction for the
cost of a survivor annuity) does not exceed the nonforfeitable
retirement income requirement of ADEA Section 12(c)(i).
6.2. No Effect on Employment 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 the
Participant without regard to the existence of the Plan.
6.3. Spendthrift Provision. No benefit under the Plan or any right or
interest in such benefit shall be assignable or subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or
charge of any kind, including, but not limited to, pursuant to any domestic
relations order (within the meaning of ERISA Section 206(d)(3) and IRC Section
414(p)(1)(B)) or judgment or claims for alimony, support, separate maintenance,
and claims in bankruptcy proceedings, 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, contracts,
liabilities, engagements or torts of any person entitled to any benefit under
the Plan.
6
<PAGE> 7
6.4. Administration. The Retirement Committee shall be responsible for the
general operation and administration of the Plan and for carrying out the
provisions thereof. All provisions set forth in the Pension Plan with respect to
the administrative powers and duties of the Pension Plan's Administrators,
expenses of administration and procedures for filing claims shall also be
applicable with respect to the Plan. The Retirement Committee shall be entitled
to rely conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel or other
person employed or engaged by the Company with respect to the Plan.
6.5. Disclosure. Each Participant shall receive a copy of the Plan and the
Retirement Committee will make available for inspection by any Participant or
Beneficiary a copy of the rules and regulations used by the Retirement Committee
in administering the Plan.
6.6. State Law. The Plan is established under and will be construed
according to the laws of the State of Texas, to the extent that such laws are
not preempted by the Employee Retirement Income Security Act and valid
regulations published thereunder.
6.7. Incapacity of Recipient. In the event a Participant or Beneficiary 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 Participant or Beneficiary is entitled shall be paid to such
conservator or other person legally charged with the care of his person or his
estate. Except as provided above in this Plan Section, when the Retirement
Committee in its sole discretion determines that a Participant or Beneficiary is
unable to manage his financial affairs, the Retirement Committee may direct the
Company to make distributions to any person for the benefit of such Participant
or Beneficiary.
6.8. Unclaimed Benefit. If any payment to which a Participant or
Beneficiary is entitled is unclaimed, such payments shall be forfeited after a
period of two years from the date the first such payment was payable and shall
not escheat to any state or revert to any party; provided, however, that any
such payment or payments shall be restored if any person otherwise entitled to
such payment or payments makes a valid claim.
6.9. Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, no individual acting as an employee or agent of the
Company or as a member of the Retirement Committee shall be liable to any
Participant, former Participant, Beneficiary or any other person solely by
reason of acting in such capacity.
6.10. Termination of Employment. Upon termination of a Participant's
employment by the Company for any reason other than as set forth in Section 6.1,
the Company shall cause the trust contemplated in Section 7.1 to be established,
if not previously established, and transfer a sufficient amount of assets to
such trust in order that trust assets immediately after termination of
employment equal such Participant's Supplemental Plan Benefit and such amount so
transferred shall be reserved by the trust for the benefit of the Participant.
7
<PAGE> 8
SECTION VII
SOURCE OF PAYMENT
7.1. Source of Payments. Benefits arising under this Plan and all costs,
charges, and expenses relating thereto will be payable from the Company's
general assets. The Company may, however, establish a trust to pay such benefits
and related expenses, provided such trust does not cause the Plan to be "funded"
within the meaning of ERISA. Any trust so established shall conform to the terms
of the model trust set forth in Rev. Proc. 92-64. To the extent trust assets are
available, they may be used to pay benefits arising under this Plan and all
costs, charges, and expenses relating thereto. To the extent that the funds held
in the trust, if any, are insufficient to pay such benefits, costs, charges and
expenses, the Company shall pay such benefits, costs, charges, and expenses from
its general assets. In addition, the Company may, in its sole discretion,
purchase and distribute one or more commercial annuity contracts, or cause the
trustee of the trust to purchase and distribute one or more commercial annuity
contracts, to make benefit payments required under this Plan, provided, however,
that the purchase and distribution of any such annuity contracts shall be no
sooner than the expiration of any forfeiture provisions applicable under the
Company's non-competition guidelines. Such annuity contracts may be purchased
from a commercial insurer acceptable to the Retirement Committee. Further, the
Retirement Committee, in its sole discretion, may determine to pay additional
sums to the Participant, from the Company's general assets or from the trust, if
any, to reimburse the Participant for additional federal and state income taxes
estimated to be incurred by reason of the distribution of any such annuity
contracts. The Retirement Committee shall establish a methodology or
methodologies for determining the amount of such additional sums. The
methodology or methodologies selected shall be those that the Retirement
Committee, in its sole discretion, determines to be the most effective and
administratively feasible for the purpose of producing after-tax periodic
benefit payments that approximate the after-tax periodic benefit payments that
would have been received by the Participant in the absence of the distribution
of the annuity contract.
7.2. Unfunded Status. The Plan at all times shall be entirely unfunded for
purposes of the IRC and ERISA and no provision shall at any time be made with
respect to segregating any assets of the Company for payment of any benefits
hereunder. Funds that may be invested through a trust described in Section 7.1
shall continue for all purposes to be part of the general assets of the Company.
The Plan constitutes a mere promise by the Company to make benefit payments
under this Plan in the future. 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 to the extent the Participant acquires a right to receive
benefits under this Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
8
<PAGE> 9
SECTION VIII
CHANGE IN CONTROL PROVISIONS
8.1. Amount and Distribution of Benefit. Any provision of the Plan to the
contrary notwithstanding, with respect to any Participant who is accruing
benefits under the Plan on or after January 31, in the event of a Change in
Control (as defined below), any benefit accrued as of and through the Change of
Control, shall not be subject to forfeiture or suspension and shall be
distributed in a single lump sum (i) on the last day of the month following the
month in which the Change in Control occurred, for such Participants receiving
payments under the Plan on the date of such Change in Control, and (ii) on the
last day of the month following the month in which occurs the event giving rise
to the obligations of the Company to pay such benefit, for such Participants not
currently receiving payments under the Plan on the date of such Change in
Control. For this purpose, the accrued benefits shall be calculated based on the
provisions of the Plan in effect immediately prior to the Change of Control as
if the event giving rise to the obligation of the Company to pay such benefit
pursuant to the preceding sentence had occurred on the date of the Change of
Control and shall not be adversely affected because of any subsequent events,
including, without limitation, termination or amendment of the Plan or of the
Pension Plan, or lack of continued status. With respect to those Participants
designated by the Retirement Committee as being eligible for a benefit
enhancement in the event of a Change in Control, benefits payable hereunder
shall be in accordance with the written agreement between the Company and the
individual Participant regarding this Plan.
A "Change in Control" shall be conclusively deemed to have occurred if
(and only if) any of the following shall have taken place: (i) a change in
control is reported by the Company in response to either item 6(e) of
Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934, as amended ("Exchange Act"), or Item 1 of Form 8-K promulgated
under the Exchange Act, or any similar reporting requirement hereafter
promulgated by the Securities and Exchange Commission; (ii) any person,
entity or group (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than any employee benefit plan sponsored by the Company,
is or becomes the beneficial owner (as defined in rule 13d-3 of the Exchange
Act), directly or indirectly, of securities of the Company representing forty
percent or more of the combined voting power of the Company's then outstanding
securities (as determined under paragraph (d) of Rule 13d-3 promulgated under
the Exchange Act, in the case of rights to acquire common stock); 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.
8.2. Certain Plan Provisions Modified. Any provision of the Plan to the
contrary notwithstanding, in the event of a Change in Control as defined above,
benefits under this Plan will be determined in accordance with the terms of the
Plan in effect immediately prior to such Change in Control, subject only to the
modifications set forth in this Section VIII. By way of illustration, but
without limitation, this provision shall mean (i) Section 6.1 regarding
forfeiture of benefits shall apply to limit competition only with respect to the
Company as such entity is identified prior to the Change in Control; and (ii)
all Plan terms shall have their meaning as such meaning existed immediately
prior to the Change in Control.
9
<PAGE> 1
EXHIBIT 10.17
SOUTHDOWN, INC. SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
AGREEMENT OUTLINING SUPPLEMENTAL BENEFITS UPON A
CHANGE IN CONTROL
WHEREAS, pursuant to the Southdown, Inc. Supplemental Executive
Retirement Plan (the "Plan"), Southdown, Inc. (the "Company") has previously
notified _____("Executive") of the terms of Executive's participation in the
Plan; and
WHEREAS, pursuant to Section 8.1 of the Plan, the Retirement Committee,
as defined in the Plan, has designated Executive as the recipient of a benefit
enhancement upon the occurrence of a Change in Control, as defined in the Plan.
NOW, THEREFORE, the Company and the Executive hereby agree to amend the
terms of Executive's participation in the Plan as follows (the "Amendment"):
1. Upon a Change in Control, for purposes of computing Executive's lump
sum benefit under Section 8.1 of the Plan, Executive shall be credited
with additional Years of Service as if Executive had continued to work
for the Company until age 65, and Executive's age for purposes of
calculating Executive's lump sum benefit shall be deemed to be 65
years. Executive's lump sum benefit shall be calculated without any
reduction for early payment and shall be paid within 10 days following
the Change in Control regardless of any retirement or other termination
of employment of Executive.
2. After a Change in Control and upon the expiration of Executive's
participation in the medical plan(s) of the Company as an active
employee, either through actual employment or an extension of coverage
under an employment agreement, Executive shall be entitled to medical
benefits as a retiree under the Company's medical plan(s) on terms no
less favorable to Executive with respect to benefits and participant
contributions as is provided in the Company's medical plan(s) in effect
on the date immediately prior to a Change in Control.
3. The effective date of this Agreement is January 31, 2000.
SOUTHDOWN, INC.
By:
------------------------------------
EXECUTIVE
------------------------------
<PAGE> 1
EXHIBIT 10.28
AMENDMENT NUMBER SIX TO THIRD
AMENDED AND RESTATED CREDIT AGREEMENT
This AMENDMENT NUMBER SIX TO THIRD AMENDED AND RESTATED CREDIT AGREEMENT
(this "SIXTH AMENDMENT"), dated as of December 17, 1999 (the "EFFECTIVE DATE"),
is entered into among SOUTHDOWN, INC., a Louisiana corporation ("BORROWER"), the
banks and financial institutions parties hereto that are signatories to the
Credit Agreement (as defined below) (collectively, the "BANKS," and WELLS FARGO
BANK, N.A., a national banking association, as agent for the Banks hereunder
("AGENT").
WHEREAS, Borrower, the Banks, and Wells Fargo Bank, N.A., as agent,
heretofore have entered into that certain Third Amended and Restated Credit
Agreement, dated as of November 3, 1995, as amended by (a) that certain Letter
Agreement, dated as of February 29, 1996, (b) that certain Amendment Number Two
to Third Amended and Restated Credit Agreement, dated as of September 30, 1996,
(c) that certain Amendment Number Three to Third Amended and Restated Credit
Agreement, dated as of August 6, 1997, (d) that certain Amendment Number Four to
Third Amended and Restated Credit Agreement dated as of May 14, 1998 and (e)
that certain Amendment Number Five to Third Amended and Restated Credit
Agreement dated as of December 18, 1998 (as amended, the "CREDIT AGREEMENT");
WHEREAS, Borrower has requested, among other things, that the Credit
Agreement be amended to (a) permit the Borrower to enter into a $250,000,000
revolving credit facility and revise certain provisions of Articles 1, 4, 5, 6
and 7, (b) and (c) make other amendments to the terms and conditions of the
Credit Agreement as set forth herein; and
WHEREAS, subject to the terms and conditions contained herein, the Banks
are willing to so amend such provisions of the Credit Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, conditions, and
provisions hereinafter set forth, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS FOR THIS SIXTH AMENDMENT. Any and all initially capitalized
terms used herein shall have the meanings ascribed thereto in the Credit
Agreement, as amended hereby, unless specifically defined herein.
1 SIXTH AMENDMENT
<PAGE> 2
ARTICLE 2
AMENDMENTS TO THE CREDIT AGREEMENT
2.1 Section 1.1 of the Credit Agreement hereby is amended by deleting in
their entirety each of the defined terms on EXHIBIT A hereto attached.
2.2 Section 1.1 of the Credit Agreement hereby is amended by adding each of
the defined terms on EXHIBIT B hereto attached in alphabetical order.
2.3 Section 1.1 of the Credit Agreement hereby is amended by amending and
restating each of the following defined terms to read as set forth below:
"'AGENT' or 'ADMINISTRATIVE AGENT' means Wells Fargo Bank, N.A., and
its permitted successor or successors as administrative agent for the
Banks."
"'BANK' and 'BANKS' means any of the financial institutions which
either now or in the future are parties to this Agreement."
"'ISSUING BANK' means Wells Fargo Bank, N.A. or any other Bank that,
on behalf of all Banks having a share of the Revolving Credit Facility
Commitments, issues a Letter of Credit requested by Borrower hereunder."
"'MATERIAL ADVERSE CHANGE' means and refers to a material adverse
change in the business, Assets, operations, business property, or
conditions (financial or otherwise) of Borrower and its Subsidiaries, taken
as a whole, as compared with the business, Assets, operations, business
property, or conditions (financial or otherwise) of Borrower and its
Subsidiaries, taken as a whole as of December 31, 1998."
"'UCC' means the Texas Uniform Commercial Code, as amended or
supplemented from time to time, and any successor statute."
"'WELLS FARGO' means and refers to Wells Fargo Bank, N.A., a national
banking association."
2.4 The Credit Agreement hereby is amended by deleting Subsections 2.5(e)
therefrom and substituting the following Subsections 2.5(e), (f), and (g) in
lieu thereof and Subsection 2.5(f) of the Credit Agreement is hereby renumbered
Subsection 2.5(h):
"(e) It is the intention of the parties hereto to comply with
applicable usury laws, if any; accordingly, notwithstanding any provision
to the contrary in this Agreement, the Notes or in any of the other Loan
Documents securing the payment hereof or otherwise relating hereto, in no
event shall this Agreement, the Notes or such other Loan Documents require
or permit the payment, taking, reserving, receiving, collection, or
charging of any sums constituting interest under applicable laws which
exceed the maximum amount permitted by such laws. If any such excess
interest is called for, contracted for, charged, taken, reserved, or
received in connection with the Loans evidenced by the Notes or in any of
the Loan Documents,
2 SIXTH AMENDMENT
<PAGE> 3
or in any communication by the Agent, any Issuing Bank or the Banks or any other
Person to Borrower or any other Person, or in the event all or part of the
principal or interest thereof shall be prepaid or accelerated, so that under any
of such circumstances or under any other circumstance whatsoever the amount of
interest contracted for, charged, taken, reserved, or received on the amount of
principal actually outstanding from time to time under the Notes or any other
Loan Document shall exceed the maximum amount of interest permitted by
applicable usury laws, then in any such event it is agreed as follows: (i) the
provisions of this paragraph shall govern and control, (ii) neither Borrower nor
any other Person now or hereafter liable for the payment of the Notes or any
obligation arising under this Agreement shall be obligated to pay the amount of
such interest to the extent such interest is in excess of the maximum amount of
interest permitted by applicable usury laws, (iii) any such excess which is or
has been received notwithstanding this paragraph shall be credited against the
then unpaid principal balance of the Notes or other obligations arising under
this Agreement, as applicable, or, if the Notes or other obligations arising
under this Agreement, as applicable, have been or would be paid in full,
refunded to Borrower, and (iv) the provisions of this Agreement, the Notes and
the other Loan Documents, and any communication to Borrower, shall immediately
be deemed reformed and such excess interest reduced, without the necessity of
executing any other document, to the maximum lawful rate allowed under
applicable laws as now or hereafter construed by courts having jurisdiction
hereof or thereof. Without limiting the foregoing, all calculations of the rate
of the interest contracted for, charged, collected, taken, reserved, or received
in connection with the Notes, this Agreement or any other Loan Document which
are made for the purpose of determining whether such rate exceeds the maximum
lawful rate shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period of the full
term of the Loans or other obligations arising under this Agreement, as
applicable, including all prior and subsequent renewals and extensions, all
interest at any time contracted for, charged, taken, collected, reserved, or
received. The terms of this paragraph shall be deemed to be incorporated in
every document and communication relating to the Notes, the Loans or any other
Loan Document.
(f) Texas Finance Code, Chapter 346 (formerly Tex. Rev. Civ. Stat., Title
79, Chapter 15), which regulates certain revolving loan accounts and revolving
triparty accounts, shall not apply to any revolving loan accounts created under
the Notes, this Agreement or the other Loan Documents or maintained in
connection therewith.
(g) To the extent that the interest rate laws of the State of Texas are
applicable to the Loans or any other obligations arising under this Agreement,
the applicable interest rate ceiling is the weekly ceiling (formerly the
indicated rate ceiling) determined in accordance with Tex. Rev. Civ. Stat.,
Title 79, Article 5069- 1D.003, also codified at Texas Finance Code, Section
303.301 (formerly Article 5069-1.01(a)(1)), and, to the extent that this
Agreement, the Notes or any other Loan Document is deemed an open end account as
such term is defined in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14),
also codified at Texas Finance Code Section 3.01.001(3) (formerly Article
5069-1.01(f)), the Agent and the Banks retain the right to modify the interest
rate in accordance with applicable law."
3 SIXTH AMENDMENT
<PAGE> 4
2.5 The Credit Agreement hereby is amended by deleting Article 4
(Representations and Warranties of Borrower) therefrom and substituting the
Article 4 (Representations and Warranties) set forth on EXHIBIT C hereto
attached in lieu thereof.
2.6 The Credit Agreement hereby is amended by deleting Article 5
(Affirmative Covenants of Borrower) therefrom and substituting the Article 5
(Covenants) set forth on Exhibit D hereto attached in lieu thereof.
2.7 The Credit Agreement hereby is amended by deleting Article 6 (Negative
Covenants of Borrower) therefrom and substituting the following Article 6 in
lieu thereof:
"ARTICLE 6. Intentionally omitted."
2.8 The Credit Agreement hereby is amended by deleting Section 7.1 (Events
of Default) therefrom and substituting the Section 7.1 (Events of Default) set
forth on Exhibit E hereto attached in lieu thereof.
2.9 Section 10.2 of the Credit Agreement hereby is amended by deleting the
phrase "(the "Indemnified Liabilities")" and replacing such phrase with the
following:
"(the "Indemnified Liabilities," WHICH TERM SHALL INCLUDE ANY INDEMNIFIED
LIABILITIES RESULTING FROM ANY IDEMNITEE'S NEGLIGENCE)."
2.10 Each reference to "CALIFORNIA" in Sections 11.9 and 11.10 of the
Credit Agreement hereby is amended to read "TEXAS."
2.11 Each reference to "LOS ANGELES" in Sections 11.9 and 11.10 of the
Credit Agreement hereby is amended to read "HARRIS."
2.12 The Credit Agreement hereby is amended by deleting Section 11.13
(Changes in Accounting Principles) therefrom and substituting the following
Section 11.13 in lieu thereof:
"11.3 Intentionally Omitted."
2.13 Section 11.17 of the Credit Agreement hereby is amended by adding the
following paragraph at the end thereof:
"NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT, TOGETHER WITH THE
NOTES AND THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES."
4 SIXTH AMENDMENT
<PAGE> 5
ARTICLE 3
AMENDMENTS TO THE NOTES
3.1 Each reference to "CALIFORNIA" in Sections 14 and 15 of the Notes
hereby is amended to read "TEXAS."
3.2 Each reference to "LOS ANGELES" in Section 15 of the Notes hereby is amended
to read "HARRIS."
ARTICLE 4
CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS SIXTH AMENDMENT.
The effectiveness of the provisions of this Sixth Amendment is subject to the
fulfillment, to the satisfaction of Agent, of each of the following conditions:
4.1.1 The Agent shall have received a certificate from a
Secretary or Assistant Secretary of Borrower attesting to the
resolutions of Borrower's board of directors or an authorized
committee authorizing the execution and delivery of this Sixth
Amendment.
4.1.2 The Agent shall have received counterparts of signature
pages of this Sixth Amendment duly executed and delivered by Borrower
and Banks constituting Majority Banks.
4.1.3 The Agent shall have received a certificate from a
Responsible Officer certifying that:
(a) the representations and warranties, as amended hereby,
of Borrower contained in the Credit Agreement and the Loan
Documents, to the extent that it is a party thereto, are true and
correct in all material respects at and as of the date of the
effectiveness of this Sixth Amendment, as though made on and as
of such date (except to the extent that such representations and
warranties expressly relate solely to an earlier date);
(b) neither an Event of Default, as amended hereby, nor an
Unmatured Event of Default, as amended hereby, has occurred and
is continuing on the date of the effectiveness of this Sixth
Amendment;
(c) on the date of the effectiveness of this Sixth
Amendment, no Material Adverse Change has occurred, as a result
of one or more acts or occurrences; and
(d) the Credit Agreement and each of the Loan Documents to
which Borrower is a party are in full force and effect.
5 SIXTH AMENDMENT
<PAGE> 6
4.1.4 The Agent shall have received the written opinions, dated
as of the Effective Date, of counsel to Borrower, in form and substance
satisfactory to Agent and its counsel.
ARTICLE 5
MISCELLANEOUS
5.1 EXECUTION IN COUNTERPARTS. This Sixth Amendment may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original. All of such counterparts shall constitute but one and the
same instrument. Delivery of an executed counterpart of the signature pages of
this Sixth Amendment by telecopier shall be equally effective as delivery of a
manually executed counterpart. Any party delivering an executed counterpart of
the signature pages of this Sixth Amendment by telecopier thereafter also shall
deliver promptly a manually executed counterpart, but the failure to deliver
such manually executed counterpart shall not affect the validity,
enforceability, or binding effect of this Sixth Amendment.
5.2 NO OTHER AMENDMENT. Except as expressly amended hereby, the Credit
Agreement shall remain unchanged and in full force and effect. To the extent any
terms or provisions of this Sixth Amendment conflict with those of the Credit
Agreement, the terms and provisions of this Sixth Amendment shall control. This
Sixth Amendment shall be deemed a part of and hereby is incorporated in the
Credit Agreement.
5.3 SEVERABILITY AND INTERPRETATION OF AMENDMENTS. It is the intention of
the parties hereto to comply with Section 11.1 of the Credit Agreement. Whenever
possible, each provision of the amendments contained in this Sixth Amendment
shall be interpreted in such manner as to be effective and valid in accordance
with Section 11.1 of the Credit Agreement. If any term or provision of any
amendment contained in this Sixth Amendment is held not be effective because
such term or provision required the consent of all Banks pursuant to Section
11.1 of the Credit Agreement, such term or provision shall be fully severable
and shall not affect the enforceability of the remaining terms and provisions.
5.4 GOVERNING LAW. This Sixth Amendment shall be governed by, and construed
and enforced in accordance with, the laws of the State of Texas and applicable
federal law.
5.5 NO ORAL AGREEMENTS. THIS WRITTEN AGREEMENT, TOGETHER WITH THE NOTES AND
THE OTHER LOAN DOCUMENTS EXECUTED IN CONNECTION HEREWITH, REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY
6 SIXTH AMENDMENT
<PAGE> 7
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[SIGNATURE PAGES FOLLOW]
7 SIXTH AMENDMENT
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this Sixth Amendment to
be executed and delivered as of the date first set forth above.
SOUTHDOWN, INC.
a Louisiana Corporation
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 9
WELLS FARGO BANK, N.A.,
in its individual capacity and as Agent
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 10
SOCIETE GENERALE, SOUTHWEST
AGENCY, as an Issuing Bank
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 11
CREDIT SUISSE FIRST BOSTON
(formerly known as Credit Suisse)
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 12
CREDIT AGRICOLE INDOSUEZ
(formerly known as Caisse Nationale De
Credit Agricole)
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 13
SUNTRUST BANK, ATLANTA
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 14
PARIBAS
(formerly known as Banque Paribas)
By
-------------------------------------
Name:
Title:
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 15
PNC BANK NATIONAL ASSOCIATION
By
------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 16
THE BANK OF NOVA SCOTIA
By
-------------------------------------
Name:
Title:
[SIGNATURES CONTINUE ON THE FOLLOWING PAGE]
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 17
BANKBOSTON, N.A.
By
-------------------------------------
Name:
Title:
[THIS IS A SIGNATURE PAGE TO AMENDMENT NUMBER SIX
TO THE THIRD AMENDED AND RESTATED CREDIT AGREEMENT]
SIXTH AMENDMENT
<PAGE> 18
EXHIBIT A
DEFINED TERMS TO BE DELETED
"BROOKSVILLE PLANT"
"CAPITAL EXPENDITURES"
"CAPITALIZED LEASE"
"CAPITALIZED LEASE OBLIGATIONS"
"CEMENT PLANTS"
"CHANGE OF CONTROL"
"CONSOLIDATED CURRENT ASSETS"
"CONSOLIDATED CURRENT LIABILITIES"
"CONSOLIDATED NET INCOME"
"CONSOLIDATED TANGIBLE NET WORTH"
"CONTINGENT OBLIGATION"
"CONTINUING DIRECTORS"
"CONTRACTUAL OBLIGATION"
"CONTRIBUTED CALIFORNIA ASSETS"
"DAMAGES"
"DEBT"
"DISQUALIFIED STOCK"
"ENVIRONMENT"
"ENVIRONMENTAL PROTECTION STATUTE"
"EPA"
"ERISA AFFILIATE"
"EXCHANGE SUBORDINATED DEBT"
A-1 SIXTH AMENDMENT
<PAGE> 19
"EXISTING SUBORDINATED DEBT"
"FAIRBORN PLANT"
"FIFTH AMENDMENT"
"FIFTH AMENDMENT CLOSING DATE"
"FOURTH AMENDMENT CLOSING DATE"
"FREE CASH FLOW RATIO"
"FUND," "TRUST FUND" OR "SUPER FUND"
"FUNDED DEBT"
"HAZARDOUS SUBSTANCE"
"HAZARDOUS WASTE"
"HEDGE AGREEMENTS"
"INDENTURE"
"INTANGIBLE ASSETS"
"INTEREST EXPENSE"
"INVESTMENT"
"JUNIOR PAYMENT AMOUNT"
"KCC"
"KNOXVILLE PLANT"
"LEVERAGE RATIO"
"LIEN"
"LYONS PLANT"
"MEDUSA"
"MEDUSA ENTITIES"
"MERGER"
A-2 SIXTH AMENDMENT
<PAGE> 20
"MERGER AGREEMENT"
"MMRI"
"MOODY'S"
"MULTIEMPLOYER PLAN"
"NET ISSUANCE PROCEEDS"
"NONCANCELLABLE LEASE"
"ODESSA PLANT"
"OPERATING LEASE"
"PBGC"
"PENSION PLAN" OR "PLAN"
"PENSION PROTECTION ACT"
"PERMITTED ACQUISITIONS"
"PERMITTED JUNIOR PAYMENTS"
"PERMITTED LIENS"
"PERMITTED PAYMENT MEASUREMENT PERIOD"
"PERMITTED PREFERRED STOCK"
"PERMITTED TRANSACTIONS"
"POLLUTION CONTROL BONDS"
"PREFERRED STOCK"
"PROHIBITED PREFERRED STOCK"
"QUALIFIED OFFERINGS"
"RELATED TERMINALS"
"REMEDIAL ACTION"
"REPORTABLE EVENT"
A-3 SIXTH AMENDMENT
<PAGE> 21
"SARA"
"S&P"
"SDW AGGREGATES"
"SDW CALIFORNIA SUBSIDIARIES"
"SDW CEMENT"
"SDW CONCRETE"
"SDW FINANCE"
"SDW FINANCE SUBORDINATED DEBT"
"SDW FINANCE SUBORDINATED NOTE"
"SENIOR SUBORDINATED NOTES"
"SERIES A PREFERRED STOCK"
"SERIES B PREFERRED STOCK"
"SERIES C PREFERRED STOCK"
"SERIES D PREFERRED STOCK"
"SPECIFIED SUBSIDIARIES"
"SUBORDINATED DEBT"
"SUBORDINATED INDENTURE"
"TERMINATION EVENT"
"THIRD AMENDMENT"
"THIRD AMENDMENT CLOSING DATE"
"VICTORVILLE PLANT"
A-4 SIXTH AMENDMENT
<PAGE> 22
EXHIBIT B
DEFINED TERMS TO BE ADDED
"ADJUSTED CONSOLIDATED EBITDA" means, for the relevant period, the sum of:
(a) the Consolidated Net Income for such period, (b) Consolidated Interest
Expense, (c) all taxes measured by income to the extent included in the
determination of such Consolidated Net Income and (d) all amounts treated as
expenses for depreciation and the amortization of intangibles of any kind for
such period to the extent included in the determination of such Consolidated Net
Income for the relevant period; provided, however, that Consolidated Net Income
shall be computed for the purposes of this definition (i) without regard to
non-recurring costs incurred in connection with any acquisition or non-cash
write-ups and write-downs, and (ii) without giving effect to extraordinary
losses or extraordinary gains for such period.
"BUSINESS DAY" means (a) for all purposes, any day other than Saturday,
Sunday, and any other day on which commercial banking institutions are required
or authorized by Law to be closed in Houston, Texas, San Francisco, California
or New York, New York, and (b) in addition to the foregoing, in respect of any
LIBOR Rate Borrowing, a day on which dealings in United States dollars are
conducted in the London interbank market and commercial banks are open for
international business in London.
"CHANGE OF CONTROL" means and refers to the occurrence of one or more of
the following events: (a) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Borrower to any Person or related group for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof, (b)
the shareholders of Borrower shall approve any plan or proposal for the
liquidation or dissolution of Borrower (other than a liquidation or dissolution
pursuant to a Reincorporation Merger), (c) any Person or Group, together with
any Affiliates thereof, shall, as a result of a tender or exchange offer, a
merger, consolidation or similar transaction, open market purchases, privately
negotiated purchases, or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Borrower representing at least thirty percent (30%) of the Voting
Stock of Borrower, or (d) a majority of the members of the Board of Directors
shall not constitute Continuing Directors. For purposes of this definition,
"Board of Directors" does not include any committee thereof.
"COMPANIES" means, at any date of determination thereof, Borrower and each
of its Subsidiaries, and "Company" means any of the Companies.
"CONSOLIDATED INTEREST EXPENSE" means, for the relevant period, for
Borrower and its Subsidiaries, without duplication, the amount of all costs,
fees and expenses paid by Borrower and its Subsidiaries in such period which are
classified as interest expense on the consolidated financial statements of
Borrower and its Subsidiaries, all determined in accordance with GAAP.
"CONSOLIDATED NET INCOME" means, for any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period taken as a single
accounting period determined in accordance with GAAP.
B-1 SIXTH AMENDMENT
<PAGE> 23
"CONSOLIDATED NET WORTH" means, on any date of determination, all amounts
that would be included under shareholders' equity on a consolidated balance
sheet of Borrower as determined in accordance with GAAP.
"CONSOLIDATED SUBSIDIARY" means, at any date any Subsidiary or other entity
the accounts of which are consolidated with Borrower in its consolidated
financial statements prepared in accordance with GAAP.
"CONTINUING DIRECTOR" means and refers to (a) any member of Borrower's
board of directors who was a director of Borrower on the Closing Date, and (b)
any person who becomes a member of the board of directors after the Closing Date
if such person was appointed or nominated for election to the board of directors
by a majority of the Continuing Directors, but excluding any such person
originally proposed for election in opposition to the Continuing Directors in an
actual or threatened election contest relating to the election of the directors
of Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument, or undertaking
to which such Person is a party or by which it or any of its property is bound.
"CURRENT FINANCIALS" means, at the time of any determination thereof, the
more recently delivered to Banks of either (a) the consolidated Financial
Statements of Borrower and its consolidated Subsidiaries for the fiscal year
ended December 31, 1998, and the nine-month period ended September 30, 1999; or
(b) the Financial Statements required to be delivered under SECTIONS 5.1(a) or
5.1(b), as the case may be.
"DEBT" means (without duplication), for any Person, the sum of the
following: (a) all liabilities, obligations, and indebtedness of such Person
which in accordance with GAAP should be classified upon such Person's balance
sheet as liabilities in respect of (i) money borrowed, including, without
limitation, the Principal Debt, (ii) obligations of such Person under Capital
Leases, (iii) obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations, and obligations
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business and deferred federal and state income
taxes), and (iv) all non-contingent obligations (and, for purposes of SECTIONS
8.10 and 9.4 and letters of credit, banker's acceptances and other similar
instruments issued to support Debt, all contingent obligations) of such Person
to reimburse any bank or other Person in respect of letters of credit, banker's
acceptances and similar instruments; (b) all obligations of the type referred to
in CLAUSES (a)(i) through (a)(iv) preceding of other Persons for the payment of
which such Person is responsible or liable as obligor, guarantor, or otherwise;
and (c) all obligations of the type referred to in CLAUSES (a)(i) through CLAUSE
(a)(iv) and CLAUSE (b) preceding of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured. For
all purposes of this Agreement, Debt of any Person shall include the Debt of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, unless such Debt is expressly made non-recourse to such Person.
B-2 SIXTH AMENDMENT
<PAGE> 24
"DEBTOR RELIEF LAWS" means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent
transfer or conveyance, suspension of payments or similar Laws from time to time
in effect affecting the Rights of creditors generally.
"DISTRIBUTION" for any Person means, with respect to any shares of any
capital stock or other equity securities issued by such Person, (a) the
retirement, redemption, purchase, or other acquisition for value of any such
securities, (b) the declaration or payment of any dividend on or with respect to
any such securities, and (c) any other payment by such Person with respect to
such securities.
"ENVIRONMENTAL CLAIM" means any written notice, claim, demand, action,
suit, complaint, proceeding or other communication by any person alleging
liability or potential liability arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit. "Environmental Law" means any applicable Law that
relates to (a) the condition or protection of air, groundwater, surface water,
soil, or other environmental media, (b) the environment, including natural
resources or any activity which affects the environment, (c) the regulation of
any pollutants, contaminants, wastes, substances, and Hazardous Substances,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the
Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the
Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.)
("RCRA"), the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air
Act (42 U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. Section 2601 et seq.), the Federal Insecticide, Fungicide, and
Rodenticide Act (7 U.S.C. Section 136 et seq.), the Safe Drinking Water Act (42
U.S.C. Section 201 and Section 300f et seq.) and the Rivers and Harbors Act (33
U.S.C. Section 401 et seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et
seq.) and analogous state and local Laws, as any of the foregoing may have been
and may be amended or supplemented from time to time, and any analogous future
enacted or adopted Law, or (d) the Release or threatened Release of Hazardous
Substances.
"ENVIRONMENTAL LIABILITIES" means all liabilities in connection with or
relating to the business, assets, presently or previously owned, leased or
operated property, activities (including, without limitation, off-site disposal)
or operations of the Borrower and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
"ENVIRONMENTAL PERMITS" means all permits, licenses, registrations, and
other governmental authorizations required for any of the Companies to conduct
its business and operations under Environmental Laws.
"ERISA AFFILIATE" means any Person or trade or business (whether or not
incorporated) which is a member of Borrower's or any Company's controlled group
or affiliated service group with Borrower or any Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
"FINANCIAL STATEMENTS" means balance sheets, statements of operations,
statements of shareholders' investments, and statements of cash flows prepared
in accordance with GAAP, which
B-3 SIXTH AMENDMENT
<PAGE> 25
statements of operations and statements of cash flows shall be in comparative
form to the corresponding period of the preceding fiscal year, and which balance
sheets and statements of shareholders' investments shall be in comparative form
to the prior fiscal year-end figures.
"FOREIGN PENSION PLAN" shall mean any plan that (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States by Borrower or any Company primarily for
the benefit of employees of Borrower or any Company residing outside the United
States, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or
payments to be made upon termination of employment, and which plan is not
subject to ERISA or the Code.
"HAZARDOUS SUBSTANCE" means (a) any substance that is designated, defined
or classified as a hazardous waste, hazardous material, pollutant, contaminant
or toxic or hazardous substance under any Environmental Law, including without
limitation, any hazardous substance within the meaning of Section 101(14) of
CERCLA, (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste
oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (c) regulated
asbestos and asbestos-containing materials in any form, (d) polychlorinated
biphenyls, or (e) urea formaldehyde foam.
"LAWS" means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
"LEVERAGE RATIO" means and refers to, as of the last day of any fiscal
quarter of the Borrower, the ratio of (a) the aggregate amount of Consolidated
Debt as of such day, to (b) Consolidated EBITDA for the four immediately
preceding fiscal quarters (including such quarter).
"LIEN" means and refers to any lien, mortgage, pledge, security interest,
charge, or encumbrance of any kind or any other type of preferential arrangement
that has the practical effect of creating a security interest (including any
conditional sale or other title retention agreement or any lease in the nature
thereof).
"LITIGATION" means any action by or before any Governmental Authority.
"MATERIAL ADVERSE EVENT" means any set of one or more circumstances or
events which, individually or collectively, result in any (a) material
impairment of the ability of the Borrower to perform any of its payment or other
material obligations under the Loan Documents or the ability of Administrative
Agent or any Bank to enforce any such obligations or any of their respective
Rights under the Loan Documents, or (b) material and adverse effect on the
business, properties, condition (financial or otherwise) or results of
operations of the Companies, in each case considered as a whole.
"MOODY'S" means Moody's Investors Service, Inc. or any successor thereto.
"MULTIEMPLOYER PLAN" means and refers to a "multiemployer plan" as defined
in Section 4001(a)(3) of ERISA or a "multiemployer pension plan" as defined in
Section 3(37) of ERISA or Section 414 of the Code, or any similar type of plan
established and regulated under the laws of any
B-4 SIXTH AMENDMENT
<PAGE> 26
foreign country, that is maintained for employees of the Companies or any ERISA
Affiliate of any Company.
"NON-RECOURSE DEBT" means (a) Debt (other than Capital Lease Obligations)
of a special purpose Subsidiary created or acquired after the Closing Date
incurred in connection with the acquisition or construction by such Subsidiary
in the ordinary course of business of fixed assets used in the manufacture and
distribution of building products and (b) any renewals and refinancings of such
Debt; provided that (i) the holders of such Debt described in clauses (a) and
(b) agree that they will look solely to the fixed assets so acquired with such
Debt, (ii) any Liens securing such Debt are permitted pursuant to SECTION 5.10,
(iii) such Debt is not Debt, in whole or part, of any other Company, (iv) such
Debt is not secured by any Lien upon any property or assets of any other
Company, and (v) such Debt is not supported in any way by any other Company,
including any undertakings or guarantees, and provided further that no such Debt
of such Subsidiary shall be considered "Non-Recourse Debt" if (y) any default
with respect to such Debt would allow or require any other Debt which is owed by
such Subsidiary or one or more of the other Companies to be accelerated or
otherwise made payable in advance of its stated maturity, and (z) any other
Company owes Debt to such Subsidiary.
"OBLIGATION" means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed by Borrower to Administrative Agent, or any Bank arising from,
by virtue of, or pursuant to any Loan Document, together with all interest
accruing thereon, fees, costs, and reasonable expenses (including, without
limitation, all reasonable attorneys' fees and expenses incurred in the
enforcement or collection thereof) payable under the Loan Documents.
"OTHER CREDIT AGREEMENT" means the Revolving Credit Agreement dated as of
December 17, 1999 among Borrower, various lenders, and Wells Fargo Bank (Texas),
National Association, as administrative agent and various lenders and as may be
amended, extended, modified, or restated.
"PLAN" means any pension plan as defined in Section 3(2) of ERISA, which is
maintained or contributed to by (or to which there is an obligation to
contribute of) the Companies or an ERISA Affiliate, and each such plan for the
five year period immediately following the latest date on which Companies or an
ERISA Affiliate maintained, contributed to or had an obligation to contribute to
such plan.
"PRINCIPAL DEBT" means, on any date of determination, the aggregate unpaid
principal balance of all Borrowings under the Revolving Credit Facility.
"REGULATION D" means Regulation D of the Board of Governors of the Federal
Reserve System, as amended.
"REGULATION U" means Regulation U of the Board of Governors of the Federal
Reserve System, as amended.
"REINCORPORATION MERGER" is defined in SECTION 5.11.
B-5 SIXTH AMENDMENT
<PAGE> 27
"RELEASE" means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposal,
deposit, dispersal, migrating, or other movement into the air, ground, or
surface water, or soil.
"REPORTABLE EVENT" shall have the meaning specified in Section 4043 of
ERISA or the regulations issued thereunder in connection with a Plan that is
subject to Title IV of ERISA, excluding events for which the notice requirement
is waived under subsections .22, .23, .25 and .27 of PBGC Regulation 4043.
"REPRESENTATIVES" means representatives, officers, directors, employees,
attorneys, and agents.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
"S&P" means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., a New York corporation.
"SCHEDULE" means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Documents.
"SIGNIFICANT SUBSIDIARY" means, at any time, any Subsidiary that, together
with its Subsidiaries, (a) accounted for more than 5% of the revenue of the
Companies determined on a consolidated basis for the then most recently
completed fiscal year of the Borrower, or (b) was the owner of more than 5% of
the assets of the Companies determined on a consolidated basis at the end of
such fiscal year of the Borrower, all as shown in the case of (a) and (b) on the
consolidated financial statements of the Borrower and its Subsidiaries for such
fiscal year.
"SUBORDINATED INDENTURE" means the Indenture dated as of March 19, 1996,
among the Borrower, as issuer, and State Street Bank and Trust Company, as
Trustee, as amended, pursuant to which the Borrower's Subordinated Notes were
issued.
"SUBORDINATED NOTES" means the Borrower's Series B 10% Senior Subordinated
Notes, due in 2006.
"SUCCESSOR CORPORATION" is defined in SECTION 5.11.
"UNFUNDED CURRENT LIABILITY" means with respect to any Plan, the amount, if
any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial assumptions
at such time consistent with those prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contribution).
"WHOLLY-OWNED" when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by Borrower or
one or more of its Wholly-owned Subsidiaries.
B-6 SIXTH AMENDMENT
<PAGE> 28
EXHIBIT C
ARTICLE 4
ARTICLE 4 REPRESENTATIONS AND WARRANTIES. To induce Banks to enter into this
Agreement and to make the loans herein provided for, Borrower hereby represents
and warrants to the Administrative Agent and to each Bank that:
4.1 FINANCIAL CONDITION. The Current Financials present fairly the
consolidated financial condition of Borrower and its consolidated Subsidiaries,
and the consolidated results of their operations and cash flows, as of and for
the portion of the fiscal year ending on the date or dates thereof (subject only
to year-end audit adjustments). All such Financial Statements including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein) Neither Borrower nor any of its consolidated Subsidiaries had, as of
the dates of the consolidated balance sheets referred to above, any Contingent
Obligation, contingent liabilities, or liability for Taxes, long-term leases, or
unusual forward or long-term commitments, which are material to Borrower and its
consolidated Subsidiaries taken as a whole and are not reflected in the
foregoing statements or in the notes thereto and are required by GAAP to be so
reflected.
4.2 NO CHANGE. Since September 30, 1999, there has been no material adverse
change in the business, operations, assets, or financial or other condition of
the Companies taken as a whole.
4.3 CORPORATE EXISTENCE; COMPLIANCE WITH LAW. Each of (a) the Borrower and
its Significant Subsidiaries (i) is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation or
formation, as the case may be, and (ii) has the corporate, company or
partnership power, as the case may be, and authority and the legal right to own
and operate its property, to lease the property it operates, and to conduct the
business in which it is currently engaged, and (b) the Companies (i) is duly
qualified as a foreign corporation and in good standing under the Laws of each
jurisdiction where its ownership, lease, or operation of property or the conduct
of its business requires such qualification, except to the extent that failure
to be so qualified is not reasonably likely, in the aggregate, to be a Material
Adverse Event, and (ii) is in compliance with all Laws except to the extent that
the failure to comply therewith is not reasonably likely, in the aggregate, to
be a Material Adverse Event.
4.4 CORPORATE POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS. Borrower has
the corporate power and authority and the legal right to make, deliver, and
perform the Loan Documents and to borrow hereunder and has taken all necessary
corporate action to authorize the Borrowings on the terms and conditions of the
Loan Documents and to authorize the execution, delivery, and performance of the
Loan Documents. The execution, delivery, and performance of the Loan Documents
will not contravene any provision of the charter or bylaws. No approval,
consent, exemption or authorization of, filing with, or other act by, or in
respect of, any Governmental Authority, is necessary or required in connection
with the Borrowings hereunder or with the execution, delivery, performance,
validity, or enforceability of the Loan Documents. The Loan Documents have been
duly executed and delivered on behalf of Borrower and constitute legal, valid,
and binding obligations of Borrower enforceable against Borrower in accordance
with their
C-1 SIXTH AMENDMENT
<PAGE> 29
respective terms, except as enforceability may be limited by applicable Debtor
Relief Laws and by equitable principles regardless of whether considered in a
proceeding in equity or at law.
4.5 No Legal Bar; No Contravention. The execution, delivery, and
performance of the Loan Documents, the Borrowings hereunder, and the use of the
proceeds thereof, will not (a) violate any Laws (including, without limitation,
Regulation U, the Securities Act of 1933 and the Securities Exchange Act of
1934), or any Contractual Obligation of any Company, or (b) conflict with or
result in a default under, any Contractual Obligation, judgment, injunction,
order, decree or other instrument binding upon any Company or result in or
require the creation or imposition of any Lien (other than Liens permitted in
accordance with SECTION 5.10) on any of its or their respective properties or
revenues pursuant to any Laws or Contractual Obligation.
4.6 No Material Litigation. No Litigation, investigation, or proceeding of
or before any arbitrator or Governmental Authority is pending or, to the
knowledge of Borrower, threatened by or against any Company or against any of
its or their respective properties or revenues (a) with respect to the Loan
Documents or any of the transactions contemplated hereby or (b) which is
reasonably likely to constitute a Material Adverse Event.
4.7 No Default. No Company is in default under or with respect to any
Contractual Obligation in any respect which could be a Material Adverse Event.
No Event of Default or Unmatured Event of Default has occurred and is
continuing.
4.8 Ownership of Property; Liens. The Companies taken, as a whole, have
good and indefeasible title to all their material assets reflected in the
Current Financials as being owned by them (except as sold or otherwise disposed
of in the ordinary course of business after the date of such Current Financials)
free of any Lien, except Liens permitted in accordance with SECTION 5.10.
4.9 Taxes. Each of the Companies has filed or caused to be filed all Tax
returns which to the knowledge of Borrower are required to be filed (except for
state and local Tax returns where such failure to qualify and such failure to
file is not reasonably likely, in the aggregate for all such jurisdictions, to
be a Material Adverse Event), and has paid all Taxes shown to be due and payable
on said returns or on any assessments made against it or any of its property and
all other Taxes, fees or other charges imposed on it or any of its property by
any Governmental Authority (other than those the amount or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which reserves in conformity with GAAP have been provided on the
books of the appropriate Companies, as the case may be, and those that could not
reasonably be expected to be a Material Adverse Event); and no Tax liens have
been filed and, to the knowledge of Borrower, no claims are being asserted with
respect to any such Taxes, fees or other charges which, in either case, is
reasonably likely to be a Material Adverse Event.
4.10 Federal Regulations. No Company is engaged or will engage, principally
or as one of its important activities, in the business of extending credit for
the purpose of "purchasing" or "carrying" any "margin stock" within the
respective meanings of each of the quoted terms under Regulation U as now and
from time to time hereafter in effect. No part of the proceeds of any Borrowings
hereunder will be used for any purpose which violates, or results in a violation
of, the provisions of the Regulations of such Board of Governors. "Margin Stock"
(as defined in Regulation U) constitutes less than 25% of those assets of the
Companies which are subject to any limitation on sale, pledge, or other
restriction hereunder.
C-2 SIXTH AMENDMENT
<PAGE> 30
4.11 Compliance with ERISA.
(i) Each Plan (and each related trust, insurance contract or fund) is
in substantial compliance with its terms and with all applicable laws,
including ERISA and the Code; each Plan (and each related trust, if any)
which is intended to be qualified under Section 401(a) of the Code has
received a determination letter from the Internal Revenue Service to the
effect that it meets the requirements of Sections 401(a) and 501(a) of the
Code; no Reportable Event has occurred; no Plan which is Multiemployer Plan
is insolvent or in reorganization; no Plan has an Unfunded Current
Liability; no Plan (which is not a Multiemployer Plan) which is subject to
Section 412 of the Code or Section 302 of ERISA has an accumulated funding
deficiency, within the meaning of such sections of the Code or ERISA, or
has applied for or received a waiver of an accumulated funding deficiency
or an extension of any amortization period, within the meaning of Section
412 of the Code or Section 303 or 304 of ERISA; all contributions required
to be made with respect to a Plan have been timely made; neither any
Company nor any ERISA Affiliate has incurred any material liability to, or
on account of, a Plan pursuant to Sections 406, 409, 502(i), 502(l), 515,
4062, 4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Sections 401(a)(29),
4971 or 4975 of the Code or expects to incur any such material liability
under any of the foregoing sections with respect to any Plan; no condition
exists which presents a material risk to any Company or any ERISA Affiliate
of incurring a material liability to or on account of a Plan pursuant to
the foregoing provisions of ERISA and the Code; no proceedings have been
instituted to terminate or appoint a trustee or administer any Plan which
is subject to Title IV of ERISA; no action, suit, proceeding, hearing,
audit or investigation with respect to the administration, operation or the
investment of assets of any Plan (other than routine claims for benefits)
is pending, expected or threatened that could reasonably be expected to be
a Material Adverse Event; using actuarial assumptions and computation
methods consistent with Part 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of any Company and its ERISA Affiliates to all Plans
which are Multiemployer Plans in the event of a complete withdrawal
therefrom, as of the close of the most recent fiscal year of each Plan,
would not exceed $25,000,000; each group health plan (as defined by Section
607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has
covered employees or former employees of Companies or any ERISA Affiliate
has at all times been operated in material compliance with the provisions
of Part 6 of subtitle B of Title I of ERISA and Section 4980B of the Code;
no lien imposed under the Code or ERISA on the assets of any Company or any
ERISA Affiliate exists or is likely to arise on account of any Plan and
neither any Company nor any ERISA Affiliate maintains or contributes to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) which
provides benefits to retired employees or other former employees (other
than as required by Section 601 of ERISA) or any Plan the obligations with
respect to which could reasonably be expected, either individually or in
the aggregate, to cause a Material Adverse Event.
(ii) Each Foreign Pension Plan, if any, has been maintained in
substantial compliance with its terms and with the requirements of any and
all applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities, except where failure to do so could not reasonably be expected
to be a Material Adverse Event. All contributions required to be made with
respect to a Foreign Pension Plan have been timely made, except the failure
of which to make could not reasonably be expected to be a Material Adverse
Event. Neither any Company nor its subsidiaries has incurred any obligation
in connection with the termination of or withdrawal from any Foreign
Pension Plan, except such obligation that could not reasonably be expected
to be a Material Adverse Event. The present value of the accrued benefit
liabilities (whether or not vested) under each Foreign Pension Plan,
determined as of the end of the
C-3 SIXTH AMENDMENT
<PAGE> 31
Borrower's most recently ended fiscal year on the basis of actuarial
assumptions, each of which is reasonable, did not exceed the current value of
the assets of such Foreign Pension Plan allocable to such benefit liabilities,
except if any such excess could not reasonably be expected to be a Material
Adverse Event.
4.12 Investment Company Act, etc. None of the Borrower, any Person
controlling the Borrower, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. None of the Companies is
subject to regulation under (i) the Public Utility Holding Company Act of 1935,
(ii) the Federal Power Act, (iii) the Interstate Commerce Act, (iv) any state
public utilities code, or (v) any Federal or state statute or regulation,
limiting, in the case of CLAUSES (iii), (iv) AND (v), its ability to incur Debt
for borrowed money.
4.13 Environmental Matters. Except as to matters which, individually, or in
the aggregate, are not reasonably likely to result in a Material Adverse Event,
(a) The Companies have obtained all Environmental Permits with respect
to the business in which they are engaged (the "BUSINESS") and with respect
to the facilities and properties owned, leased, or operated by the
Companies (the "PROPERTIES"), and the Business and all operations at the
Properties are in compliance with all Environmental Permits and are
otherwise in compliance with all Environmental Laws;
(b) No Company has received any Environmental Claim with respect to
any of the Properties or the Business or otherwise, nor does Borrower have
knowledge or reason to believe that any such Environmental Claim will be
received or is threatened; and
(c) There are no past or present actions, activities, events,
conditions, or circumstances, including, without limitation, the Release,
threatened Release, emission, discharge, generation, treatment, storage, or
disposal of Hazardous Substances at any location, that could reasonably be
expected to give rise to liability of any Company under any Environmental
Law or any contract or agreement.
4.14 Year 2000 Compliance. Borrower has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by suppliers and vendors) that could be
materially adversely affected by the "Year 2000 Problem" (that is, the risk that
computer applications used by the Borrower or any of its Subsidiaries (or its
suppliers and vendors) may be unable to recognize and perform properly
date-sensitive functions involving certain dates prior to and any date after
December 31, 1999), (ii) developed a plan and time line for addressing the Year
2000 Problem on a timely basis, and (iii) to date, implemented in all material
respects that plan in accordance with that timetable.
4.15 Purpose of Facility. Borrower will use all proceeds of Borrowings for
one or more of the following purposes: (i) to repurchase Borrower's Subordinated
Notes, (ii) to repurchase Borrower's common stock, and (iii) for working capital
and for general corporate purposes.
4.16 Pari Passu Obligations; Senior Indebtedness. The claims and rights of
the Banks and the Administrative Agent against Borrower under this Agreement and
the Notes will not be subordinate to, and will rank at least pari passu with,
the claims and rights of any other unsecured creditors of Borrower with respect
to indebtedness which is not in any manner subordinated in right
C-4 SIXTH AMENDMENT
<PAGE> 32
of payment or security in any respect to the Obligation. The Obligation is
permitted in accordance with the terms of the Subordinated Indenture and
constitutes "Designated Senior Indebtedness" and "Senior Indebtedness" as such
terms are defined in the Subordinated Indenture. The Borrower hereby
specifically designates the Obligation as "Designated Senior Indebtedness" for
purposes of the Subordinated Indenture. This Agreement and the other Loan
Documents represent a "Bank Credit Facility" for purposes of the Subordinated
Indenture. So long as the Subordinated Indenture is in full force and effect,
all Borrowings are and will be made in compliance with the restrictions
contained in the Subordinated Indenture.
4.17 Full Disclosure. All information furnished to the Banks in writing
prior to the date hereof in connection with the transactions contemplated hereby
does not, collectively, contain any misstatement of a material fact or omit to
state a fact necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading in any material
respect on and as of the date hereof.
C-5 SIXTH AMENDMENT
<PAGE> 33
EXHIBIT D
ARTICLE 5
ARTICLE 5 COVENANTS. Borrower covenants and agrees (and agrees to cause each
other Company to the extent any covenant is applicable to such Company) to
perform, observe, and comply with each of the following covenants, from the
Closing Date and so long thereafter as Banks are committed to fund Borrowings
under this Agreement and thereafter until the payment in full of the Principal
Debt and payment in full of all interest, fees, and other amounts of the
Obligation then due and owing, unless Borrower receives a prior written consent
to the contrary by Administrative Agent as authorized by Majority Banks:
5.1 Financial Statements. Borrower shall furnish to the Administrative
Agent in Sufficient Quantity for each Bank:
(a) As soon as available, but in any event within 95 days after the
end of each fiscal year of Borrower, Financial Statements, showing the
consolidated financial condition and results of operation calculated for
Borrower and its consolidated Subsidiaries as at the end of such year,
certified without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by independent
certified public accountants of a nationally recognized standing; and
(b) As soon as available, but in any event not later than 50 days
after the end of each of the first three quarterly-periods of each fiscal
year of Borrower, the unaudited Financial Statements showing the
consolidated financial condition and results of operation calculated for
Borrower and its consolidated Subsidiaries as at the end of each such
quarter and the portion of the fiscal year through such date, certified by
a Responsible Officer (subject to year-end audit adjustments);
all such Financial Statements to be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or Responsible Officer, as the case may be, and disclosed
therein).
5.2 Certificates; Other Information. Borrower shall furnish to the
Administrative Agent in sufficient quantity for each Bank:
(a) Concurrently with the delivery of the Financial Statements
referred to in SECTION 5.1(a) and (b), a certificate of a Responsible
Officer (i) stating that, to the best of such officer's knowledge, the
Companies during such period have observed or performed all of the
covenants and other agreements applicable to such Companies, and that such
officer has obtained no knowledge of any Event of Default or Unmatured
Event of Default, except as specified in such certificate, and (ii) showing
in reasonable detail the calculations supporting such statement in respect
of SECTION 5.16;
(b) Within five Business Days after the same are sent, copies of all
Financial Statements and annual reports which Borrower sends to its
stockholders, and within five days
D-1 SIXTH AMENDMENT
<PAGE> 34
after the same are filed, copies of all Financial Statements and reports which
Borrower may make to, or file with, the Securities and Exchange Commission or
any successor; and
(c) Promptly, such additional financial and other information as any
Bank may from time to time reasonably request.
5.3 Payment of Obligations. Each Company shall pay, discharge, or otherwise
satisfy all material taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits, or upon any property belonging to
it, prior to the date on which penalties attach thereto, and all lawful material
claims which, if unpaid, might become a Lien upon the property of such Company;
provided that none of the Companies shall be required to pay any such tax,
assessment, charge, levy or claim (i) the payment of which is being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the applicable Companies, as
the case may be, (ii) not yet delinquent or (iii) the non-payment of which, if
taken in the aggregate, could not reasonably be expected to be a Material
Adverse Event.
5.4 Conduct of Business and Maintenance of Existence. None of the Companies
shall engage in any business if, as a result thereof, the business of the
Companies, taken as a whole, would not be substantially the same as that
conducted on the Closing Date. For purposes of this Section 5.4, the business of
the manufacture and distribution of building products shall be deemed to be
within the types of business conducted by the Companies on the Closing Date.
Each Company shall preserve, renew and keep in full force and effect its
corporate or partnership existence, as the case may be, and take all reasonable
action to maintain all rights, privileges, and franchises necessary or desirable
in the normal conduct of its business (other than those rights, privileges, and
franchises the failure of which to maintain could not reasonably be expected to
be a Material Adverse Event); provided that nothing in this Section shall
prohibit (i) the merger of a Subsidiary into the Borrower or the merger or
consolidation of a Subsidiary with or into another Person, (ii) the sale or
other disposition (whether by merger or otherwise) of the capital stock or
assets of any Subsidiary, if such transaction complies with the provisions of
SECTION 5.11 or (iii) the termination of the corporate existence of any
Subsidiary if the Borrower in good faith determines that such termination is in
the best interest of the Borrower and is not materially disadvantageous to the
Banks and if, with respect to each of the foregoing CLAUSES (i), (ii) and (iii),
after giving effect thereto, no Event of Default or Unmatured Event of Default
shall have occurred and be continuing. Company shall comply with all Contractual
Obligations and Laws, except to the extent that the failure to comply therewith
would not, in the aggregate, be a Material Adverse Event.
5.5 Maintenance of Property; Insurance. Each Company shall (i) keep all
property useful and necessary in its business in good working order and
condition, except when failure to do so could reasonably be expected to be a
Material Adverse Event; (ii) maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and (iii) furnish
to each Bank, upon written request, full information as to the insurance
carried.
5.6 Inspection of Property; Books and Records; Discussions. Each Company
shall (i) keep proper books of record and account in which full, true, and
correct entries in conformity with GAAP and all Laws shall be made of all
dealings and transactions in relation to its business and
D-2 SIXTH AMENDMENT
<PAGE> 35
activities; and (ii) permit representatives of any Bank to visit and inspect any
of its properties at any reasonable time and as often as may reasonably be
desired, and to discuss the business, operations, properties, and financial and
other condition of Borrower and its Subsidiaries with officers and employees of
the Companies and with its independent certified public accountants.
5.7 Notices. Borrower shall promptly give notice to Administrative Agent
and each bank of:
(a) The occurrence of any Event of Default or Unmatured Event of
Default;
(b) Any (i) default or event of default under any Contractual
Obligation of any Company or (ii) Litigation, investigation, or proceeding
which may exist at any time between any Company and any Governmental
Authority, which in either case, is reasonably likely to be a Material
Adverse Event;
(c) Any Litigation or proceeding affecting any Company (i) in which
the potential loss not covered by insurance could reasonably be expected to
be $50,000,000 or more or (ii) in which injunctive or similar relief is
sought which is reasonably likely to be a Material Adverse Event;
(d) The occurrence of a Material Adverse Event.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible officer setting forth details of the occurrence referred to therein
and stating what action Borrower proposes to take with respect thereto.
5.8 Year 2000 Compliance. Borrower will promptly notify the Administrative
Agent in the event Borrower discovers or determines that any computer
application (including those of its suppliers and vendors) that is material to
its or any of its Subsidiaries' business and operations will not be Year 2000
compliant on a timely basis, except to the extent that such failure is not
reasonably expected to be a Material Adverse Event.
5.9 Compliance with Laws. The Companies will comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
it may be subject, including laws relating to pension funds and Environmental
Laws, which, if violated, could reasonably be expected to be a Material Adverse
Event.
5.10 Limitation on Liens. The Companies shall not, directly or indirectly,
create, incur, assume, or suffer to exist any Lien upon any of its property,
assets, or revenues, whether now owned or hereafter acquired, except:
(a) Liens for Taxes not yet due or which are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the appropriate Companies in
accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
or other like Liens arising in the ordinary course of business which are
not overdue for a period of
D-3 SIXTH AMENDMENT
<PAGE> 36
more than 30 days or which are being contested in good faith and for which
adequate reserves in accordance with GAAP, if any, have been set aside;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance, and other social security legislation;
(d) easements, rights-of-way, mineral reservations, restrictions, and
other similar encumbrances, defects or irregularities of title which do not
in any case (i) secure Debt or (ii) materially detract from the value of
the property subject thereto or interfere with the ordinary conduct of the
business of the Companies;
(e) Liens (other than any Lien imposed by ERISA) incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance, and other types of social security;
(f) statutory or common law banker's liens in the nature of rights of
setoff arising in the ordinary and usual course of business of the
Companies;
(g) any Lien upon assets existing at the time of acquisition thereof
or to secure the payment of all or any part of the purchase price thereof
or to secure any Debt incurred prior to, at the time of, or within 90 days
after, the acquisition of such assets for the purpose of financing all or
any part of the purchase price thereof, so long as such Lien is limited to
the assets so acquired;
(h) Liens securing Acquired Indebtedness if such Liens secured such
Acquired Indebtedness at the time such Acquired Indebtedness becomes an
obligation of any Company and such Liens were not incurred in connection
with, or in anticipation of, such Acquired Indebtedness becoming an
obligation of a Company; provided, however, that such Liens shall not
extend to or cover any assets of any Company other than the assets that
secured the Acquired Indebtedness prior to such Acquired Indebtedness
becoming an obligation of a Company;
(i) Liens arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by the foregoing
CLAUSES (g) and (h), provided that such Debt is not increased and is not
secured by any additional assets;
(j) Liens in the nature of deposits with a trustee or other depository
in connection with a redemption, payment, acquisition, repurchase or
retirement for value of the Subordinated Notes; and
(k) Liens, in addition to those otherwise specified in this Section,
which in the aggregate do not secure obligations in excess of 10% of
Consolidated Net Worth.
5.11 Prohibition of Fundamental Changes. No Company shall, directly or
indirectly, enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, transfer, lease or otherwise dispose of,
whether in one transaction or a series of transactions, all or substantially all
of its assets, whether now owned or hereafter acquired, to or in favor of any
Person, except that:
D-4 SIXTH AMENDMENT
<PAGE> 37
(a) Any corporation (including any Subsidiary of Borrower) may be
merged or consolidated with or into Borrower (provided that, Borrower shall
be the continuing or surviving corporation) or with any one or more
Subsidiaries of Borrower (provided that, (i) if any such transaction shall
be between a corporation (including any Subsidiary of Borrower) and a
Wholly-owned Subsidiary of Borrower, the continuing or surviving
corporation shall be a Wholly-owned Subsidiary of Borrower and (ii)
immediately after each such transaction and after giving effect thereto,
Borrower is in compliance with this Agreement and no Event of Default or
Unmatured Event of Default shall have occurred and be continuing);
(b) Borrower may be merged into a corporation ( the "SUCCESSOR
CORPORATION") solely for the purpose of changing the Borrower's domicile (a
"REINCORPORATION MERGER") as provided in Rule 145 (a) (2) of the Securities
Act of 1933, as amended from time to time, and such Successor Corporation
shall:
(i) immediately after giving effect to such merger
have-then-effective ratings (or implied ratings) published by Moody's
and S&P applicable to such Successor Corporation's senior, unsecured,
non-credit-enhanced, long term indebtedness for borrowed money, which
ratings shall be Baa3 or higher (if assigned by Moody's) or BBB- or
higher (if assigned by S&P);
(ii) be a corporation organized and existing under the laws of
the United States of America, any state thereof or the District of
Columbia, and shall expressly assume, by amendment to this Agreement
acceptable to the Majority Banks executed by the Borrower and such
Successor Corporation and delivered to the Administrative Agent, the
due and punctual payment of the principal of, and interest on, the
Borrowings made hereunder and other amounts payable under this
Agreement and the performance and observance of every covenant hereof
on the part of the Borrower to be performed or observed and this
Agreement shall remain in full force and effect;
(iii) immediately after giving effect to such merger, no Event of
Default and no Unmatured Event of Default, shall have occurred and be
continuing;
(iv) immediately after giving effect to such merger, all of the
representations and warranties of the Borrower set forth in the Loan
Documents shall be true and correct in all material respects as if
made by such Successor Corporation; and
(v) the Borrower shall have delivered to the Administrative Agent
a certificate signed by a Responsible Officer and a written opinion of
counsel satisfactory to the Administrative Agent (who may be counsel
to the Borrower), each stating that such transaction and such
amendment to this Agreement comply with this Section and that all
conditions precedent herein provided for relating to such transaction
have been satisfied; and
(c) any Subsidiary may enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up, or dissolve itself
(or suffer any liquidation or dissolution), or convey, transfer, lease or
otherwise dispose of, whether in one transaction or a series of
transactions, all or substantially all of its assets, whether now owned or
D-5 SIXTH AMENDMENT
<PAGE> 38
hereafter acquired, to or in favor of any Person; provided that,
immediately after each such transaction and after giving effect thereto,
Borrower is in compliance with this Agreement and no Event of Default and
no Unmatured Event of Default shall have occurred and be continuing.
5.12 Subsidiary Debt. No Subsidiary of Borrower will incur or at any time
be liable with respect to any Debt, or to issue or have outstanding any
preferred stock, except: (i) Debt or preferred stock outstanding on the date
hereof; (ii) Debt or preferred stock of a Subsidiary issued to and held by the
Company or a Wholly-Owned Subsidiary; (iii) Debt or preferred stock of any
Person existing at the time such Person becomes a Subsidiary of the Company and
not created in contemplation of such event; (iv) refinancing, extension, renewal
or refunding of any Debt or preferred stock permitted by the foregoing clauses
(i) through (iii); (v) Non-Recourse Debt; and (vi) Debt or preferred stock in
addition to that set forth in clauses (i) through (v), if, after giving effect
thereto, the aggregate outstanding principal amount of Debt of all Subsidiaries
pursuant to this clause (vi) does not exceed 10% of Consolidated Net Worth.
5.13 Subsidiary Dividends. No Company shall be a party to or enter into any
agreement, instrument or other document which prohibits or restricts in any way,
or to otherwise, directly or indirectly, create or cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any Subsidiary
of Borrower to (i) pay dividends or make any other distributions in respect of
its capital stock or any other equity interest or participation in any
Subsidiary, or pay or repay any Debt owed to Borrower or any Subsidiary, (ii)
make loans or advances to Borrower or (iii) transfer any of its properties or
assets to Borrower or any Subsidiary (subject to the rights of any holder of a
Lien on any such properties or assets which Lien is a Permitted Lien) other than
(a) customary restrictions contained in purchase and sale agreements with
respect to the sale of assets or Capital Stock that relate to such assets or
Capital Stock for the period from and after the date of the execution and
delivery of such purchase and sale agreement until the date of the closing
thereunder, (b) restrictions on Subsidiaries not Wholly-owned by Borrower that
are acquired or created after the Closing Date, and (c) encumbrances or
restrictions binding upon any Person at the time such Person becomes a
Subsidiary (unless the agreement creating such encumbrance or restriction was
entered into in connection with, or in contemplation of, such Person becoming a
Subsidiary) provided that such encumbrances or restrictions shall not encumber
or restrict any assets of the Borrower or its other Subsidiaries other than such
Subsidiary.
5.14 Compliance with ERISA. As soon as possible and, in any event, within
ten (10) days after any Company or any ERISA Affiliate knows or has reason to
know of the occurrence of any of the following that will or could reasonably be
expected to be a Material Adverse Event, Borrower will deliver to each of the
Banks a certificate of the chief financial officer of the Borrower setting forth
the full details as to such occurrence and the action, if any, that a Company or
any ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given or filed by a Company, the Plan administrator
or any ERISA Affiliate to or with the PBGC or any other governmental agency, or
a Plan participant or any notices received by any Company or such ERISA
Affiliate from the PBGC or any other government agency, or a Plan participant
with respect thereto: that a Reportable Event has occurred (except to the extent
that Borrower has previously delivered to the Banks a certificate and notices
(if any) concerning such event); that a contributing sponsor (as defined in
Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA is subject
to the advance reporting requirement of PBGC Regulation Section 4043.61 (without
regard to subparagraph (b)(1) thereof), and an event described in subsection
.62, .63, .64, .65, .66, .66, .67
D-6 SIXTH AMENDMENT
<PAGE> 39
or .68 of PBGC Regulation Section 4043 is reasonably expected to occur with
respect to such Plan within the following 30 days; that an accumulated funding
deficiency, within the meaning of Section 412 of the Code or Section 302 of
ERISA, has been incurred or an application may be or has been made for a waiver
or modification of the minimum funding standard (including any required
installment payments) or an extension of any amortization period under Section
412 of the Code or Section 303 or 304 of ERISA with respect to a Plan; that any
contribution required to be made with respect to a Plan or Foreign Pension Plan
has not been timely made; that a Plan has been or may be terminated,
reorganized, partitioned or declared insolvent under Title IV of ERISA; that a
Plan has an Unfunded Current Liability; that proceedings may be or have been
instituted to terminate or appoint a trustee to administer a Plan which is
subject to Title IV of ERISA; that a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Plan; that any
Company or any ERISA Affiliate will or may incur any material liability with
respect to, or on account of, the termination of or withdrawal from a Plan under
Sections 4062, 4063, 4064, 4069, 4201, 4204, or 4212 of ERISA or with respect to
a Plan under Sections 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409,
502(i) or 502(l) of ERISA; or that Companies or an ERISA Affiliate will or may
incur a material liability with respect to a group health as defined in Section
607(1) of ERISA or under Section 4980B of the Code; or that a Company or an
ERISA Affiliate will or may incur any material liability pursuant to any
employee welfare benefit plan (as defined in Section 3(1) of ERISA) that
provides benefits to retired employees or other former employees (other than as
required by Section 601 of ERISA) or any Plan or any Foreign Pension Plan.
Companies will deliver to each of the Banks copies of any records, documents or
other information that must be furnished to the PBGC with respect to any Plan
pursuant to Section 4010 of ERISA. At the written request of any Bank, Companies
will also deliver to such Banker a complete copy of the annual report (and
related financial and actuarial statements and opinions and other supporting
statements, certifications, schedules and information) required to be filed with
the Internal Revenue Service on the Form 5500 series. In addition to any
certificates or notices delivered to the Banks pursuant to the first sentence
hereof, copies of any records, documents or other information required to be
furnished to the PBGC or any other governmental agency, and any material notices
received by Companies or any ERISA Affiliate with respect to any Plan shall be
delivered to the Banks no later than ten (10) days after the date such records,
documents and/or information has been furnished to the PBGC or any other
governmental agency or such notice has been received by Companies or the ERISA
Affiliate, as applicable. Each of the Companies shall insure that all Foreign
Pension Plans administered by it or into which it makes payments obtains or
retains (as applicable) registered status under and as required by applicable
law and is administered in a timely manner in all respects in compliance with
all applicable laws except where the failure to do any of the foregoing could
not, either individually or in the aggregate, reasonably be expected to cause a
Material Adverse Event.
No Company or ERISA Affiliate shall, directly or indirectly, (a) terminate
any Plan so as to result in any liability to PBGC; (b) engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975 of the Code)
involving any Plan which would result in a liability for an excise tax or civil
penalty in connection therewith; (c) incur or suffer to exist any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not waived,
involving any Plan; (d) allow or suffer to exist any event or condition, which
presents a risk of incurring a material liability to PBGC by reason of
termination of any such Plan; or (e) incur or likely incur withdrawal liability
under a Multiemployer Plan or incur liability respecting the insolvency or
reorganization of a Multiemployer Plan; and, in each of CLAUSES (a) through (e)
hereof, such liability, deficiency or risk, as the case may be, when taken
together with all other contingencies and facts relating to the Companies under
this Section, is a Material Adverse Event.
D-7 SIXTH AMENDMENT
<PAGE> 40
5.15 Assignment. Borrower shall not assign or transfer any of its Rights,
duties, or obligations under any of the Loan Documents except pursuant to a
Reincorporation Merger in accordance with SECTION 5.11(b).
5.16 Financial Covenants.
(a) Leverage Ratio. Borrower shall not permit, as of the final day of
any fiscal quarter of the Borrower, the ratio of: (i) the aggregate amount
of Consolidated Debt as of such day, to (ii) Adjusted Consolidated EBITDA
for the four (4) immediately preceding fiscal quarters, including the
quarter then ended, to be greater than 3.00:1.00.
(b) Consolidated Net Worth. Borrower shall not permit, at any time its
Consolidated Net Worth to be less than Six Hundred Million Dollars
($600,000,000).
(c) Interest Coverage Ratio. Borrower shall not permit, as of the last
day of any fiscal quarter of the Borrower, the ratio of: (i) Adjusted
Consolidated EBITDA for the twelve-month period ending on such date to (ii)
Consolidated Interest Expense for such period to be less than 3.00 to 1.00.
5.17 Transactions with Affiliates. No Company shall enter into any material
transaction with any of its Affiliates (other than transactions between or among
Companies), other than transactions in the ordinary course of business and upon
fair and reasonable terms not materially less favorable than such Company could
obtain or could become entitled to in an arm's-length transaction with a Person
that was not its Affiliate.
D-8 SIXTH AMENDMENT
<PAGE> 41
EXHIBIT E
SECTION 7.1
7.1 EVENTS OF DEFAULT. The term "EVENT OF DEFAULT" means the occurrence of
any one or more of the following events:
(a) Payment of Obligation. Borrower shall fail to pay all or any part
of the principal of the Obligation when the same becomes due (whether by
its terms, by acceleration, or as otherwise provided in the Loan Documents)
or shall fail to pay any other part of the Obligation (including, without
limitation, interest and fees) within three Business Days of when the same
becomes due (whether by its terms, by acceleration, or as otherwise
provided in the Loan Documents).
(b) Misrepresentation. Any representation or warranty made or deemed
made by any Company in any Loan Document shall prove to have been incorrect
in any respect material to the Companies taken as a whole on or as of the
date made or deemed made.
(c) Covenants. The failure or refusal of Borrower (and, if applicable,
any other Company) to punctually and properly perform, observe, and comply
with:
(i) Any covenant, agreement, or condition contained in SECTIONS
5.7 AND 5.10 through 5.17; and
(ii) Any other covenant, agreement, or condition contained in any
Loan Document (other than the covenant to pay the Obligations
addressed in SECTION 7.1(a) or the covenants addressed in SECTION
7.1(c)(i)) and such failure or refusal shall continue unremedied for a
period of 30 days after notice thereof shall have been given to the
Borrower by the Administrative Agent or any Bank.
(d) Default Under Other Debt. An Event of Default as defined in the
other Credit Agreement shall occur or the Companies shall (i) default in
any payment of principal of or interest on any Debt (other than the
Obligation), beyond the period of grace (not to exceed 30 days), if any,
provided in the instrument or agreement under which such Debt was created;
provided that, such Debt shall be in the amount of $50,000,000 or more; or
(ii) default in the observance or performance of any other agreement or
condition relating to any such Debt or contained in any instrument or
agreement evidencing, securing, or relating thereto, or any other event
shall occur or condition exist, the effect of which default or other event
or condition is to cause, or to permit the holder or holders of such Debt
(or a trustee or agent on behalf of such holder or holders) to cause, with
the giving of notice if required, such Debt or other indebtedness to become
due prior to its stated maturity.
(e) Debtor Relief. Any Company (a) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, other than as a
creditor or claimant, (b) becomes a party to or is made the subject of any
proceeding provided for by any Debtor Relief Law, other than as a creditor
or claimant, that could suspend or otherwise adversely affect the Rights of
Administrative Agent or any Bank granted in the Loan Documents (unless, in
the
E-1 SIXTH AMENDMENT
<PAGE> 42
event such proceeding is involuntary, such proceeding remains undismissed,
undischarged, or unbonded for a period of 60 days); and (c) any Company shall
generally not, or shall be unable to, or shall admit in writing its inability
to, pay its debts as they become due.
(f) Attachment. There shall be commenced against any Company any case,
proceeding, or other action seeking issuance of a warrant of attachment,
execution, distraint, or similar process against all or any substantial
part of its assets which results in the entry of an order for any such
relief which shall not have been vacated, discharged, stayed, or bonded
pending appeal within 60 days from the entry thereof; or any Company shall
take any action in furtherance of, or indicating its consent to, approval
of, or acquiescence in, any such proceedings.
(g) Employee Benefit Plans. The following shall occur: (a) Any Plan
shall fail to satisfy the minimum funding standard required for any plan
year or part thereof under Section 412 of the Code or Section 302 of ERISA
or a waiver of such standard or extension of any amortization period is
sought or granted under Section 412 of the Code or Section 303 or 304 of
ERISA, Reportable Event shall have occurred, a contributing sponsor ( as
defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of
ERISA shall be subject to the advance reporting requirement of PBGC
Regulation Section 4043.61 (without regard to subparagraph (b) (1) thereof)
and an event described in subsections .62, .63, .64, .65, .66, .67 or .68
of PBGC Regulations Section 4043 shall be reasonably expected to occur with
respect to such Plan within the following 30 days, any Plan which is
subject to Title IV of ERISA shall have had or is likely to have a trustee
appointed to administer such Plan, any Plan which is subject to Title IV of
ERISA is, shall have been or is likely to be terminated or to be the
subject of termination proceedings under ERISA, any Plan shall have an
Unfunded Current Liability, a contribution required to be made with respect
to a Plan or a Foreign Pension Plan has not been timely made, Company or
any ERISA Affiliate has incurred or is likely to incur any liability to or
on account of a Plan under Sections 406, 409, 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Sections 401(a)(29), 4971 or
4975 of the Code or on account of a group health plan (as defined in
Section 607(1) of ERISA or Section 4980B of the Code) under Section 4980B
of the Code, or any Company or ERISA Affiliate has incurred or is likely to
incur liabilities pursuant to one or more employee welfare benefit plan (as
defined in Section 3(1) of ERISA that provide benefits to retired employees
or other former employees (other than as required by Section 601 of ERISA)
or Plans or Foreign Pension Plans, a "default" within the meaning of
Section 4219(c)(5) of ERISA shall have occurred with respect to any Plan,
any applicable law, rule or regulation is adopted, changed or interpreted,
or the interpretation or administration thereof is changed, in each case
after the date hereof, by any governmental authority or agency or by any
court (a "Change of Law"), or, as a result of a Change in Law, an event
occurs following a Change in Law with respect to or otherwise affecting any
Plan, insolvency or reorganization of a Multiemployer Plan, or any other
event or condition shall occur or exist with respect to a Plan; (b) there
shall result from any such event or events the imposition of a lien, the
granting of a security interest, or liability or a material risk of
incurring a liability; and (c) such lien, security interest or liability,
either individually and/or in the aggregate, is, or could reasonably be
expected to cause, a Material Adverse Event.
(h) Judgments. One or more judgments or decrees shall be entered
against any of the Companies involving in the aggregate a liability (not
covered by insurance or not paid)
E-2 SIXTH AMENDMENT
<PAGE> 43
of $50,000,000 or more and all such judgments or decrees shall not have been
vacated, discharged, or stayed within 60 days from the entry thereof.
(i) Change of Control. A Change of Control shall occur.
E-3 SIXTH AMENDMENT
<PAGE> 1
EXHIBIT 10.29
REVOLVING CREDIT AGREEMENT
among
SOUTHDOWN, INC.,
Borrower
WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION
Administrative Agent and Lead Arranger
SUNTRUST BANK, ATLANTA
Syndication Agent
THE BANK OF NOVA SCOTIA
Documentation Agent
and
THE BANKS NAMED HEREIN,
Banks
$250,000,000
DATED AS OF DECEMBER 17, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 DEFINITIONS AND TERMS .......................................... 1
1.1 Definitions ..................................................... 1
1.2 Number and Gender of Words; Other References .................... 12
1.3 Accounting Principles ........................................... 12
SECTION 2 BORROWING PROVISIONS ............................................ 12
2.1 Commitment ...................................................... 12
2.2 Termination of Commitment ....................................... 12
2.3 Borrowing Procedure ............................................. 13
SECTION 3 TERMS OF PAYMENT ................................................ 13
3.1 Loan Accounts, Notes, and Payments .............................. 13
3.2 Interest and Principal Payments ................................. 14
3.3 Interest Options ................................................ 15
3.4 Quotation of Rates. ............................................. 15
3.5 Default Rate .................................................... 15
3.6 Interest Recapture .............................................. 15
3.7 Interest Calculations .......................................... 15
3.8 Maximum Rate ................................................... 16
3.9 Interest Periods ................................................ 17
3.10 Conversions .................................................... 17
3.11 Order of Application. ........................................... 18
3.12 Sharing of Payments, Etc. ....................................... 18
3.13 Offset .......................................................... 18
3.14 Booking Borrowings .............................................. 18
SECTION 4 CHANGE IN CIRCUMSTANCES ......................................... 19
4.1 Increased Cost and Reduced Return ............................... 19
4.2 Limitation on Types of Loans .................................... 20
4.3 Illegality ..................................................... 21
4.4 Treatment of Affected Loans .................................... 21
4.5 Replacement of Banks ............................................ 21
4.6 Taxes .......................................................... 22
4.7 Funding Losses .................................................. 23
4.8 Additional Interest on Eurodollar Rate Borrowings ............... 23
SECTION 5 FEES............................................................. 24
5.1 Treatment of Fees ............................................... 24
5.2 Fees of Administrative Agent .................................... 24
5.3 Commitment Fee ................................................. 24
SECTION 6 CONDITIONS PRECEDENT ........................................... 24
6.1 Conditions Precedent to Initial Borrowings ...................... 24
(a) The Agreement .............................................. 24
(b) Notes ...................................................... 24
(c) Articles of Incorporation .................................. 24
</TABLE>
REVOLVING CREDIT AGREEMENT
<PAGE> 3
<TABLE>
<S> <C>
(d) Bylaws. ..................................................... 25
(e) Good Standing and Authority ................................. 25
(f) Incumbency .................................................. 25
(g) Resolutions ................................................. 25
(h) Certificate Regarding Closing ............................... 25
(i) Opinion of Counsel to the Borrower .......................... 25
(j) Payment of Fees and Expenses ................................ 25
(k) Current Financials .......................................... 25
(l) Sixth Amendment to Existing Credit Agreement ................ 26
(m) Other. ...................................................... 26
6.2 Conditions Precedent to Each Borrowing .......................... 26
SECTION 7 REPRESENTATIONS AND WARRANTIES .................................. 26
7.1 Financial Condition ............................................. 26
7.2 No Change ....................................................... 26
7.3 Corporate Existence; Compliance with Law ........................ 26
7.4 Corporate Power; Authorization; Enforceable Obligations. ........ 27
7.5 No Legal Bar; No Contravention .................................. 27
7.6 No Material Litigation .......................................... 27
7.7 No Default....................................................... 27
7.8 Ownership of Property; Liens .................................... 27
7.9 Taxes ........................................................... 27
7.10 Federal Regulations ............................................. 28
7.11 Compliance with ERISA ........................................... 28
7.12 Investment Company Act, etc ..................................... 29
7.13 Environmental Matters ........................................... 29
7.14 Year 2000 Compliance ............................................ 29
7.15 Purpose of Facility ............................................. 30
7.16 Pari Passu Obligations; Senior Indebtedness ..................... 30
7.17 Full Disclosure ................................................. 30
SECTION 8 COVENANTS ....................................................... 30
8.1 Financial Statements ............................................ 30
8.2 Certificates; Other Information ................................. 31
8.3 Payment of Obligations .......................................... 31
8.4 Conduct of Business and Maintenance of Existence ................ 31
8.5 Maintenance of Property; Insurance .............................. 32
8.6 Inspection of Property; Books and Records; Discussions .......... 32
8.7 Notices ......................................................... 32
8.8 Year 2000 Compliance ............................................ 33
8.9 Compliance with Laws ............................................ 33
8.10 Limitation on Liens ............................................. 33
8.11 Prohibition of Fundamental Changes .............................. 34
8.12 Subsidiary Debt.................................................. 35
8.13 Subsidiary Dividends ............................................ 35
8.14 Compliance with ERISA. .......................................... 36
8.15 Assignment. ..................................................... 37
8.16 Financial Covenants. ............................................ 37
(a) Leverage Ratio .............................................. 37
</TABLE>
Revolving Credit Agreement
(ii)
<PAGE> 4
<TABLE>
<S> <C>
(b) Consolidated Net Worth ..................................... 37
(c) Interest Coverage Ratio .................................... 37
8.17 Transactions with Affiliates .................................. 37
SECTION 9 EVENT OF DEFAULT .............................................. 37
9.1 Payment of Obligation ......................................... 37
9.2 Misrepresentation ............................................. 38
9.3 Covenants ..................................................... 38
9.4 Default Under Other Debt ...................................... 38
9.5 Debtor Relief ................................................. 38
9.6 Attachment .................................................... 38
9.7 Employee Benefit Plans. ....................................... 38
9.8 Judgments ..................................................... 39
9.9 Change of Control ............................................. 39
SECTION 10 RIGHTS AND REMEDIES. .......................................... 39
10.1 Remedies Upon Event of Default. ............................... 39
10.2 Borrower Waivers. ............................................. 40
10.3 Performance by Administrative Agent ........................... 40
10.4 Delegation of Duties and Rights ............................... 40
10.5 Not in Control ................................................ 40
10.6 Course of Dealing ............................................. 41
10.7 Cumulative Rights ............................................. 41
10.8 Application of Proceeds ....................................... 41
10.9 Limitation of Rights .......................................... 41
10.10 Expenditures by Banks. ........................................ 41
10.11 Indemnification ............................................... 42
SECTION 11 AGREEMENT AMONG BANKS. ........................................ 42
11.1 Administrative Agent. ......................................... 42
11.2 Expenses ...................................................... 44
11.3 Proportionate Absorption of Losses ............................ 44
11.4 Delegation of Duties; Reliance ................................ 44
11.5 Limitation of Liability. ...................................... 44
11.6 Event of Default; Collateral .................................. 45
11.7 Limitation of Liability ....................................... 46
11.8 Relationship of Banks ......................................... 46
11.9 Benefits of Agreement. ........................................ 46
11.10 Agents; Arranger. ............................................. 46
11.11 Obligation Several ............................................ 46
SECTION 12 MISCELLANEOUS ................................................. 46
12.1 Headings ...................................................... 46
12.2 Nonbusiness Days .............................................. 46
12.3 Communications. ............................................... 46
12.4 Form and Number of Documents .................................. 47
12.5 Exceptions to Covenants ....................................... 47
12.6 Survival ...................................................... 47
12.7 Governing Law. ................................................ 47
</TABLE>
REVOLVING CREDIT AGREEMENT
(iii)
<PAGE> 5
<TABLE>
<S> <C>
12.8 Invalid Provisions ............................................. 47
12.9 Entirety. ...................................................... 47
12.10 Jurisdiction; Venue; Service of Process; Jury Trial ........... 48
12.11 Amendments, Consents, Conflicts, and Waivers. ................. 48
12.12 Multiple Counterparts ......................................... 49
12.13 Successors and Assigns; Assignments and Participations ........ 49
12.14 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances ................................................. 52
12.15 Confidentiality. .............................................. 52
12.16 Representations of Banks. ..................................... 52
</TABLE>
SCHEDULES
Schedule 2.1 - Banks and Committed Sums
EXHIBITS
Exhibit A - Form of Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Conversion
Exhibit C - Form of Compliance Certificate
Exhibit D - Form of Assignment and Acceptance Agreement
Exhibit E - Form of Opinion of Borrower's Counsel
REVOLVING CREDIT AGREEMENT
(iv)
<PAGE> 6
REVOLVING CREDIT AGREEMENT
THIS AGREEMENT is entered into as of December 17, 1999, among
SOUTHDOWN, INC., a Louisiana corporation ("BORROWER"), Banks (hereinafter
defined) and WELLS FARGO BANK (TEXAS), NATIONAL ASSOCIATION, as a Bank and as
Administrative Agent (hereinafter defined) for itself and the other Banks, as
hereinafter defined.
RECITALS
A. Borrower has requested that Banks extend credit to Borrower,
providing for a revolving loan facility in the aggregate principal amount of
$250,000,000, for working capital and general corporate purposes (including,
repurchasing Borrower's subordinated notes and Borrower's common stock).
B. Upon and subject to the terms and conditions of this Agreement,
Banks are willing to extend such credit to Borrower.
Accordingly, in consideration of the mutual covenants contained herein,
Borrower, Administrative Agent and Banks agree as follows:
SECTION 1 DEFINITIONS AND TERMS.
1.1 Definitions. As used herein:
ACQUIRED INDEBTEDNESS means Debt of a Person existing at the time such
Person becomes a Subsidiary or assumed in connection with the acquisition of
assets from such Person, and not incurred in connection with, or anticipation
of, such Person becoming a Subsidiary or such acquisition.
ADMINISTRATIVE AGENT means Wells Fargo Bank (Texas), National
Association, and its permitted successor or successors as administrative agent
for Banks under this Agreement.
AFFILIATE of any Person means any other individual or entity who
directly or indirectly controls, or is controlled by, or is under common control
with, such Person, and, for purposes of this definition only, "control,"
"controlled by," and "under common control with" mean possession, directly or
indirectly, of power to direct or cause the direction of management or policies
(whether through ownership of voting securities, by contract, or otherwise).
AGENTS means, collectively, the Administrative Agent and any other
agent that may now or hereafter be named as an agent for the Banks.
AGREEMENT means this Revolving Credit Agreement (as the same may
hereafter be amended, modified, supplemented, or restated from time to time).
APPLICABLE LENDING OFFICE means, for each Bank and for each Type of
Borrowing, the "Lending Office" of such Bank (or an affiliate of such Bank)
designated on Schedule 2.1 attached hereto or such other office that such Bank
(or an affiliate of such Bank) may from time to time specify to Administrative
Agent and Borrower by written notice in accordance with the terms hereof.
APPLICABLE MARGIN means the percentage set forth in the table below for
the Type of Borrowing or commitment fees (as the case may be) which corresponds
to Borrower's Leverage Ratio:
REVOLVING CREDIT AGREEMENT
<PAGE> 7
<TABLE>
<CAPTION>
APPLICABLE MARGIN
COMMITMENT EURODOLLAR BASE RATE
LEVERAGE RATIO FEE RATE BORROWINGS BORROWINGS
- ------------------------- --------------- --------------- ----------
<S> <C> <C> <C>
Category 1 .375% 1.50% .25%
greater than or equal to
2.5:1.0
Category 2 .30% 1.25% 0.00%
less than 2.5:1.0 but
greater than or equal to
1.75:1.0
Category 3 .25% 1.00% 0.00%
less than 1.75:1.0 but
greater than or equal to
1.0:1.0
Category 4 .25% .75% 0.00%
less than 1.0
</TABLE>
The Applicable Margin shall be based upon the Borrower's Leverage Ratio
which will be calculated quarterly as at the end of each fiscal quarter of the
Borrower based upon the four (4) immediately preceding fiscal quarters,
including the quarter then ended. The Applicable Margin shall be redetermined
quarterly as of the date Administrative Agent is scheduled to receive quarterly
financial statements pursuant to SECTION 8.1 hereof (or in the case of the
fourth fiscal quarter in each fiscal year, a certification by the chief
financial officer or treasurer of Borrower).
ARRANGER means Wells Fargo.
ASSIGNMENT AND ACCEPTANCE is defined in SECTION 12.13.
BANKS means, on any date of determination, the financial institutions
named on SCHEDULE 2.1 (as the same may be amended from time to time by
Administrative Agent to reflect the assignments made in accordance with Section
12.13(c) of this Agreement), and subject to the terms and conditions of this
Agreement, their respective successors and assigns, but not any Participant who
is not otherwise a party to this Agreement.
BASE LIBOR RATE means the average of the rate per annum at which Dollar
deposits are offered to the Administrative Agent in the London interbank
eurocurrency market on the second Business Day prior to the commencement of an
Interest Period at or about 11:00 A.M. (London time), for delivery on the first
day of such Interest Period, for a term comparable to the number of days in such
Interest Period and in an amount approximately equal to the principal amount to
which such Interest Period shall apply.
BASE RATE means, for any day, the rate per annum equal to the higher of
(a) the Federal Funds Rate for such day plus one-half of one percent (.5%) and
(b) the Prime Rate for such day. Any change in the Base Rate due to a change in
the Prime Rate or the Federal Funds Rate shall be effective on the effective
date of such change in the Prime Rate or Federal Funds Rate.
REVOLVING CREDIT AGREEMENT
2
<PAGE> 8
BASE RATE BORROWING means a Borrowing bearing interest at the sum of
the Base Rate plus the Applicable Margin for Base Rate Borrowings.
BORROWER is defined in the preamble to this Agreement and includes any
permitted successors of Borrower.
BORROWING means any amount disbursed by one or more Banks to Borrower
under the Loan Documents, whether such amount constitutes an original
disbursement of funds or the continuation of an amount outstanding.
BORROWING DATE is defined in SECTION 2.3(a).
BUSINESS DAY means (a) for all purposes, any day other than Saturday,
Sunday, and any other day on which commercial banking institutions are required
or authorized by Law to be closed in Houston, Texas, San Francisco, California
or New York, New York, and (b) in addition to the foregoing, in respect of any
Eurodollar Rate Borrowing, a day on which dealings in United States dollars are
conducted in the London interbank market and commercial banks are open for
international business in London.
CAPITAL LEASE means any capital lease or sublease which should be
capitalized on a balance sheet in accordance with GAAP.
CAPITAL STOCK of any Person means any and all shares, interests,
participations, or other equivalents (however designated) of, or rights,
warrants, or options to purchase, corporate stock or any other equity interest
(however designated) of or in such Person.
CHANGE OF CONTROL means and refers to the occurrence of one or more of
the following events: (a) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of Borrower to any Person or related group for purposes of Section
13(d) of the Exchange Act (a "Group"), together with any Affiliates thereof, (b)
the shareholders of Borrower shall approve any plan or proposal for the
liquidation or dissolution of Borrower (other than a liquidation or dissolution
pursuant to a Reincorporation Merger), (c) any Person or Group, together with
any Affiliates thereof, shall, as a result of a tender or exchange offer, a
merger, consolidation or similar transaction, open market purchases, privately
negotiated purchases, or otherwise, have become the beneficial owner (within the
meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of Borrower representing at least thirty percent (30%) of the Voting
Stock of Borrower, or (d) a majority of the members of the Board of Directors
shall not constitute Continuing Directors. For purposes of this definition,
"Board of Directors" does not include any committee thereof.
CLOSING DATE means the date upon which this Agreement has been executed
by Borrower, Banks, and Administrative Agent and all conditions precedent
specified in SECTION 6.1 have been satisfied or waived.
CODE means the Internal Revenue Code of 1986, as amended, together with
rules and regulations promulgated thereunder.
COMMITMENT means an amount (subject to reduction or cancellation as
herein provided) equal to $250,000,000.
COMMITMENT USAGE means, at the time of any determination thereof, the
aggregate Principal Debt.
REVOLVING CREDIT AGREEMENT
3
<PAGE> 9
COMMITTED SUM means, as the case may be, the amount stated beside each
Bank's name on the most-recently amended SCHEDULE 2.1 to the Agreement (which
amount is subject to increase, reduction, or cancellation in accordance with
this Agreement).
COMPANIES means, at any date of determination thereof, Borrower and
each of its Subsidiaries, and "COMPANY" means any of the Companies.
COMPLIANCE CERTIFICATE means a certificate signed by a Responsible
Officer, substantially in the form of EXHIBIT C.
CONSEQUENTIAL LOSS means any loss or expense (excluding loss of
profits) which any Bank may incur in respect of a Eurodollar Rate Borrowing as a
consequence of (a) any failure or refusal of Borrower to accept or utilize such
Borrowing after Borrower shall have requested it under this Agreement, or (b)
any prepayment or payment of such Borrowing or conversion of such Borrowing to a
Borrowing of another Type, in each case, prior to the last day of the Interest
Period therefor.
CONSOLIDATED DEBT means Debt of Borrower and its Consolidated
Subsidiaries.
CONSOLIDATED EBITDA means, for the relevant period, the sum of: (a) the
Consolidated Net Income for such period, (b) Consolidated Interest Expense, (c)
all taxes measured by income to the extent included in the determination of such
Consolidated Net Income and (d) all amounts treated as expenses for depreciation
and the amortization of intangibles of any kind for such period to the extent
included in the determination of such Consolidated Net Income for the relevant
period; provided, however, that Consolidated Net Income shall be computed for
the purposes of this definition (i) without regard to non-recurring costs
incurred in connection with any acquisition or non-cash write-ups and
write-downs, and (ii) without giving effect to extraordinary losses or
extraordinary gains for such period.
CONSOLIDATED INTEREST EXPENSE means, for the relevant period, for
Borrower and its Subsidiaries, without duplication, the amount of all costs,
fees and expenses paid by Borrower and its Subsidiaries in such period which are
classified as interest expense on the consolidated financial statements of
Borrower and its Subsidiaries, all determined in accordance with GAAP.
CONSOLIDATED NET INCOME means, for any period, the net income (or net
loss) of the Borrower and its Subsidiaries for such period taken as a single
accounting period determined in accordance with GAAP.
CONSOLIDATED NET WORTH means, on any date of determination, all amounts
that would be included under shareholders' equity on a consolidated balance
sheet of Borrower as determined in accordance with GAAP.
CONSOLIDATED SUBSIDIARY means, at any date any Subsidiary or other
entity the accounts of which are consolidated with Borrower in its consolidated
financial statements prepared in accordance with GAAP.
CONTINUING DIRECTOR means and refers to (a) any member of Borrower's
board of directors who was a director of Borrower on the Closing Date, and (b)
any person who becomes a member of the board of directors after the Closing Date
if such person was appointed or nominated for election to the board of directors
by a majority of the Continuing Directors, but excluding any such person
originally proposed for election in opposition to the Continuing Directors in an
actual or threatened election contest relating to the election of the directors
of Borrower (as such terms are used in Rule 14a-11 under the Exchange Act) and
whose initial assumption of office resulted from such contest or the settlement
thereof.
REVOLVING CREDIT AGREEMENT
4
<PAGE> 10
CONTRACTUAL OBLIGATION means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument, or undertaking
to which such Person is a party or by which it or any of its property is bound.
CURRENT FINANCIALS means, at the time of any determination thereof, the
more recently delivered to Banks of either (a) the consolidated Financial
Statements of Borrower and its consolidated Subsidiaries for the fiscal year
ended December 31, 1998, and the nine-month period ended September 30, 1999; or
(b) the Financial Statements required to be delivered under SECTIONS 8.1(a) or
8.1(b), as the case may be.
DEBT means (without duplication), for any Person, the sum of the
following: (a) all liabilities, obligations, and indebtedness of such Person
which in accordance with GAAP should be classified upon such Person's balance
sheet as liabilities in respect of (i) money borrowed, including, without
limitation, the Principal Debt, (ii) obligations of such Person under Capital
Leases, (iii) obligations of such Person issued or assumed as the deferred
purchase price of property, all conditional sale obligations, and obligations
under any title retention agreement (but excluding trade accounts payable
arising in the ordinary course of business and deferred federal and state income
taxes), and (iv) all non-contingent obligations (and, for purposes of SECTIONS
8.10 AND 9.4 and letters of credit, banker's acceptances and other similar
instruments issued to support Debt, all contingent obligations) of such Person
to reimburse any bank or other Person in respect of letters of credit, banker's
acceptances and similar instruments; (b) all obligations of the type referred to
in CLAUSES (a)(i) through (a)(iv) preceding of other Persons for the payment of
which such Person is responsible or liable as obligor, guarantor, or otherwise;
and (c) all obligations of the type referred to in CLAUSES (a)(i) through CLAUSE
(a)(iv) and CLAUSE (b) preceding of other Persons secured by any Lien on any
property or asset of such Person (whether or not such obligation is assumed by
such Person), the amount of such obligation being deemed to be the lesser of the
value of such property or assets or the amount of the obligation so secured. For
all purposes of this Agreement, Debt of any Person shall include the Debt of any
partnership or joint venture in which such Person is a general partner or a
joint venturer, unless such Debt is expressly made non-recourse to such Person.
DEBTOR RELIEF LAWS means the Bankruptcy Code of the United States of
America and all other applicable liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, receivership, insolvency, reorganization, fraudulent
transfer or conveyance, suspension of payments or similar Laws from time to time
in effect affecting the Rights of creditors generally.
DEFAULT RATE means rate of interest equal to the lesser of: (a) (i) for
all amounts not paid when due other than Eurodollar Rate Borrowings, at the Base
Rate plus the Applicable Margin plus two (2) percentage points; and (ii) as to
all Eurodollar Rate Borrowings, not paid when due, at the Base LIBOR Rate plus
the Applicable Margin plus two (2) percentage points; and (b) the Maximum Rate.
DISTRIBUTION for any Person means, with respect to any shares of any
capital stock or other equity securities issued by such Person, (a) the
retirement, redemption, purchase, or other acquisition for value of any such
securities, (b) the declaration or payment of any dividend on or with respect to
any such securities, and (c) any other payment by such Person with respect to
such securities.
DOCUMENTATION AGENT means The Bank of Nova Scotia and its permitted
successors or assigns as "Documentation Agent" under this Agreement.
DOLLARS and the symbol $ shall mean lawful money of the United States
of America.
REVOLVING CREDIT AGREEMENT
5
<PAGE> 11
ELIGIBLE ASSIGNEE means (a) a Bank or (b) a commercial bank or other
financial institution, insurance company, pension fund or mutual fund approved
by Administrative Agent (which approval will not be unreasonably withheld) and,
unless an Event of Default has occurred and is continuing at the time any
assignment is effected in accordance with SECTION 12.13, Borrower, such approval
not to be unreasonably withheld or delayed by Borrower; provided, however, that
neither Borrower nor any Affiliate of Borrower shall qualify as an Eligible
Assignee.
ENVIRONMENTAL CLAIM means any written notice, claim, demand, action,
suit, complaint, proceeding or other communication by any person alleging
liability or potential liability arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission, release or threatened
release of any Hazardous Materials at any location, or (ii) circumstances
forming the basis of any violation or alleged violation of any Environmental Law
or Environmental Permit.
ENVIRONMENTAL LAW means any applicable Law that relates to (a) the
condition or protection of air, groundwater, surface water, soil, or other
environmental media, (b) the environment, including natural resources or any
activity which affects the environment, (c) the regulation of any pollutants,
contaminants, wastes, substances, and Hazardous Substances, including, without
limitation, the Comprehensive Environmental Response, Compensation, and
Liability Act (42 U.S.C. Section 9601 et seq.) ("CERCLA"), the Hazardous
Materials Transportation Act (49 U.S.C. Section 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.) ("RCRA"), the
Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (42 U.S.C.
Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C. Section 2601
et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C.
Section 136 et seq.), the Safe Drinking Water Act (42 U.S.C. Section 201 and
Section 300f et seq.) and the Rivers and Harbors Act (33 U.S.C. Section 401 et
seq.), the Oil Pollution Act (33 U.S.C. Section 2701 et seq.) and analogous
state and local Laws, as any of the foregoing may have been and may be amended
or supplemented from time to time, and any analogous future enacted or adopted
Law, or (d) the Release or threatened Release of Hazardous Substances.
ENVIRONMENTAL LIABILITIES means all liabilities in connection with or
relating to the business, assets, presently or previously owned, leased or
operated property, activities (including, without limitation, off-site disposal)
or operations of the Borrower and each Subsidiary, whether vested or unvested,
contingent or fixed, actual or potential, known or unknown, which arise under or
relate to matters covered by Environmental Laws.
ENVIRONMENTAL PERMITS means all permits, licenses, registrations, and
other governmental authorizations required for any of the Companies to conduct
its business and operations under Environmental Laws.
ERISA means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations and rulings thereunder.
ERISA AFFILIATE means any Person or trade or business (whether or not
incorporated) which is a member of Borrower's or any Company's controlled group
or affiliated service group with Borrower or any Company within the meaning of
Section 414(b), (c), (m) or (o) of the Code.
EURODOLLAR RATE BORROWING means a Borrowing bearing interest at the sum
of the Base LIBOR Rate plus the Applicable Margin for Eurodollar Rate
Borrowings.
EVENT OF DEFAULT is defined in SECTION 9.
REVOLVING CREDIT AGREEMENT
6
<PAGE> 12
EXCHANGE ACT means and refers to the Securities Exchange Act of 1934,
as amended from time to time, and any successor statute, and the rules and
regulations thereunder.
EXHIBIT means an exhibit to this Agreement unless otherwise specified.
EXISTING CREDIT AGREEMENT means the Third Amended and Restated Credit
Agreement dated as of November 3, 1995 among Borrower, various lenders, and
Wells Fargo Bank, N.A., as Administrative Agent and various lenders as amended
and as may be further amended, extended, modified, or restated.
FEDERAL FUNDS RATE means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers on such day as
published by the Federal Reserve Bank of New York on the Business Day
immediately following such day; provided, however, that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the immediately
preceding Business Day as published on the immediately following Business Day,
and (b) if such rate is not published for any Business Day, then the Federal
Funds Rate shall be the average of the quotations for such day on such
transactions received by Administrative Agent from three (3) federal funds
brokers of recognized standing selected by Administrative Agent.
FEDERAL RESERVE BOARD means the Board of Governors of the Federal
Reserve System or any successor thereto.
FINANCIAL STATEMENTS means balance sheets, statements of operations,
statements of shareholders' investments, and statements of cash flows prepared
in accordance with GAAP, which statements of operations and statements of cash
flows shall be in comparative form to the corresponding period of the preceding
fiscal year, and which balance sheets and statements of shareholders'
investments shall be in comparative form to the prior fiscal year-end figures.
FOREIGN PENSION PLAN shall mean any plan that (including, without
limitation, any superannuation fund) or other similar program established or
maintained outside the United States by Borrower or any Company primarily for
the benefit of employees of Borrower or any Company residing outside the United
States, which plan, fund or other similar program provides, or results in,
retirement income, a deferral of income in contemplation of retirement or
payments to be made upon termination of employment, and which plan is not
subject to ERISA or the Code.
GAAP means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
the Financial Accounting Standards Board which are applicable from time to time.
GOVERNMENTAL AUTHORITY means any domestic or foreign (a) local, state,
municipal, or federal judicial, executive, or legislative instrumentality, (b)
private arbitration board or panel, or (c) central bank.
HAZARDOUS SUBSTANCE means (a) any substance that is designated, defined
or classified as a hazardous waste, hazardous material, pollutant, contaminant
or toxic or hazardous substance under any Environmental Law, including without
limitation, any hazardous substance within the meaning of Section 101(14) of
CERCLA, (b) petroleum, oil, gasoline, natural gas, fuel oil, motor oil, waste
oil, diesel fuel, jet fuel, and other petroleum hydrocarbons, (c) regulated
asbestos and asbestos-containing materials in any form, (d) polychlorinated
biphenyls, or (e) urea formaldehyde foam.
REVOLVING CREDIT AGREEMENT
7
<PAGE> 13
INTEREST PERIOD is determined in accordance with SECTION 3.9.
LAWS means all applicable statutes, laws, treaties, ordinances, tariff
requirements, rules, regulations, orders, writs, injunctions, decrees,
judgments, opinions, or interpretations of any Governmental Authority.
LEVERAGE RATIO means and refers to, as of the last day of any fiscal
quarter of the Borrower, the ratio of (a) the aggregate amount of Consolidated
Debt as of such day, to (b) Consolidated EBITDA for the four immediately
preceding fiscal quarters (including such quarter).
LIEN means and refers to any lien, mortgage, pledge, security interest,
charge, or encumbrance of any kind or any other type of preferential arrangement
that has the practical effect of creating a security interest (including any
conditional sale or other title retention agreement or any lease in the nature
thereof).
LITIGATION means any action by or before any Governmental Authority.
LOAN DOCUMENTS means (a) this Agreement, certificates delivered
pursuant to this Agreement, and Exhibits and Schedules hereto, (b) all
agreements, documents, or instruments in favor of Agents or Lenders (or
Administrative Agent on behalf of Banks) delivered pursuant to this Agreement or
otherwise delivered in connection with all or any part of the Obligation, and
(c) all renewals, extensions, or restatements of, or amendments or supplements
to, any of the foregoing.
MAJORITY BANKS means for all purposes under the Loan Documents, (i) on
any date of determination occurring prior to the date upon which the Commitment
has been terminated, those Banks with Committed Sums aggregating more than 50%
of the Commitment; and (ii) on any date of determination occurring on or after
the date upon which the Commitment has been terminated, those Banks who
collectively hold more than 50% of the Principal Debt.
MATERIAL ADVERSE EVENT means any set of one or more circumstances or
events which, individually or collectively, result in any (a) material
impairment of the ability of the Borrower to perform any of its payment or other
material obligations under the Loan Documents or the ability of Administrative
Agent or any Bank to enforce any such obligations or any of their respective
Rights under the Loan Documents, or (b) material and adverse effect on the
business, properties, condition (financial or otherwise) or results of
operations of the Companies, in each case considered as a whole.
MAXIMUM AMOUNT and MAXIMUM RATE respectively mean, for each Bank, the
maximum non-usurious amount and the maximum non-usurious rate of interest which,
under applicable Law, such Bank is permitted to contract for, charge, take,
reserve, or receive on the Obligation.
MOODY'S means Moody's Investors Service, Inc. or any successor thereto.
MULTIEMPLOYER PLAN means and refers to a "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA or a "multiemployer pension plan" as
defined in Section 3(37) of ERISA or Section 414 of the Code, or any similar
type of plan established and regulated under the laws of any foreign country,
that is maintained for employees of the Companies or any ERISA Affiliate of any
Company.
NON-RECOURSE DEBT means (a) Debt (other than Capital Lease Obligations)
of a special purpose Subsidiary created or acquired after the Closing Date
incurred in connection with the acquisition or construction by such Subsidiary
in the ordinary course of business of fixed assets used in the manufacture and
distribution of building products and (b) any renewals and refinancings of such
Debt; provided that (i)
REVOLVING CREDIT AGREEMENT
8
<PAGE> 14
the holders of such Debt described in clauses (a) and (b) agree that they will
look solely to the fixed assets so acquired with such Debt, (ii) any Liens
securing such Debt are permitted pursuant to Section 8.10, (iii) such Debt is
not Debt, in whole or part, of any other Company, (iv) such Debt is not secured
by any Lien upon any property or assets of any other Company, and (v) such Debt
is not supported in any way by any other Company, including any undertakings or
guarantees, and provided further that no such Debt of such Subsidiary shall be
considered "Non-Recourse Debt" if (y) any default with respect to such Debt
would allow or require any other Debt which is owed by such Subsidiary or one or
more of the other Companies to be accelerated or otherwise made payable in
advance of its stated maturity, and (z) any other Company owes Debt to such
Subsidiary.
NOTES means, at the time of any determination thereof, all outstanding
and unpaid Revolving Notes.
NOTICE OF BORROWING is defined in SECTION 2.3(a).
NOTICE OF CONVERSION is defined in SECTION 3.10.
OBLIGATION means all present and future indebtedness, liabilities, and
obligations, and all renewals and extensions thereof, or any part thereof, now
or hereafter owed by Borrower to Administrative Agent, any other Agent, or any
Bank arising from, by virtue of, or pursuant to any Loan Document, together with
all interest accruing thereon, fees, costs, and reasonable expenses (including,
without limitation, all reasonable attorneys' fees and expenses incurred in the
enforcement or collection thereof) payable under the Loan Documents.
PARTICIPANT is defined in SECTION 12.13(e).
PBGC means the Pension Benefit Guaranty Corporation, or any successor
thereof, established pursuant to ERISA.
PERMITTED LIENS means Liens permitted under SECTION 8.10 as described
in such Section.
PERSON means any individual, entity, or Governmental Authority.
PLAN means any pension plan as defined in Section 3(2) of ERISA, which
is maintained or contributed to by (or to which there is an obligation to
contribute of) the Companies or an ERISA Affiliate, and each such plan for the
five year period immediately following the latest date on which Companies or an
ERISA Affiliate maintained, contributed to or had an obligation to contribute to
such plan.
PRIME RATE means the rate of interest announced within Wells Fargo
Bank, N.A. at its principal office in San Francisco as its "prime rate", with
the understanding that the "prime rate" is one of Wells Fargo's base rates (not
necessarily the lowest of such rates) and serves as the basis upon which
effective rates of interest are calculated for those loans making reference
thereto and is evidenced by the recording thereof after its announcement in such
internal publication or publications as Wells Fargo may designate.
PRINCIPAL DEBT means, on any date of determination, the aggregate
unpaid principal balance of all Borrowings under the Revolving Facility.
PRO RATA or PRO RATA PART means on any date of determination for any
Bank, (a) at any time prior to the termination of the Commitment, the proportion
that such Bank's Committed Sum bears to the
REVOLVING CREDIT AGREEMENT
9
<PAGE> 15
Commitment, or (b) at any time on or after the termination of the Commitment,
the proportion that the sum of the Principal Debt owed to such Bank bears to the
sum of the Principal Debt.
REGISTER is defined in SECTION 12.13(c).
REGULATION D means Regulation D of the Board of Governors of the
Federal Reserve System, as amended.
REGULATION U means Regulation U of the Board of Governors of the
Federal Reserve System, as amended.
REINCORPORATION MERGER is defined in SECTION 8.11.
RELEASE means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposal,
deposit, dispersal, migrating, or other movement into the air, ground, or
surface water, or soil.
REPORTABLE EVENT shall have the meaning specified in Section 4043 of
ERISA or the regulations issued thereunder in connection with a Plan that is
subject to Title IV of ERISA, excluding events for which the notice requirement
is waived under subsections .22, .23, .25 and .27 of PBGC Regulation 4043.
REPRESENTATIVES means representatives, officers, directors, employees,
attorneys, and agents.
RESERVE PERCENTAGE means and refers to, as of the date of determination
thereof, for any Bank, the maximum percentage (rounded upward, if necessary to
the nearest one-hundredth (1/100th) of one percent (1%)), as determined by such
Bank in accordance with its usual procedures (which determination shall be
conclusive in the absence of manifest error), that is in effect on such date as
prescribed by the Federal Reserve Board for determining the reserve requirements
(including supplemental, marginal, and emergency reserve requirements) with
respect to eurocurrency funding (currently referred to as "eurocurrency
liabilities") of that Bank, but so long as such Bank shall not be required or
directed, under applicable regulations of the Federal Reserve Board, to maintain
such reserves, the Reserve Percentage shall be zero.
RESPONSIBLE OFFICER means the president, chief executive officer, chief
financial officer, treasurer, controller or chief operating officer of Borrower,
or such other officer of Borrower designated by a Responsible Officer in a
writing delivered to Administrative Agent.
REVOLVING FACILITY means the credit facility described in and subject
to the limitations of this Agreement.
REVOLVING NOTE means a promissory note in substantially the form of
EXHIBIT A, and all renewals and extensions of all or any part thereof.
RIGHTS means rights, remedies, powers, privileges, and benefits.
S&P means Standard & Poor's Ratings Services, a division of The McGraw
Hill Companies, Inc., a New York corporation.
SCHEDULE means, unless specified otherwise, a schedule attached to this
Agreement, as the same may be supplemented and modified from time to time in
accordance with the terms of the Loan Documents.
REVOLVING CREDIT AGREEMENT
10
<PAGE> 16
SIGNIFICANT SUBSIDIARY means, at any time, any Subsidiary that,
together with its Subsidiaries, (a) accounted for more than 5% of the revenue of
the Companies determined on a consolidated basis for the then most recently
completed fiscal year of the Borrower, or (b) was the owner of more than 5% of
the assets of the Companies determined on a consolidated basis at the end of
such fiscal year of the Borrower, all as shown in the case of (a) and (b) on the
consolidated financial statements of the Borrower and its Subsidiaries for such
fiscal year.
SUBORDINATED INDENTURE means the Indenture dated as of March 19, 1996,
among the Borrower, as issuer, and State Street Bank and Trust Company, as
Trustee, as amended, pursuant to which the Borrower's Subordinated Notes were
issued.
SUBORDINATED NOTES means the Borrower's Series B 10% Senior
Subordinated Notes, due in 2006.
SUBSIDIARY means, with respect to any Person: (a) any corporation in
which such Person, directly or indirectly through its Subsidiaries, owns more
than fifty percent (50%) of the stock of any class or classes having by the
terms thereof the ordinary voting power to elect a majority of the directors of
such corporation; and (b) any partnership, association, joint venture, or other
entity in which such Person, directly or indirectly through its Subsidiaries,
has more than fifty person (50%) equity interest at the time.
SUCCESSOR CORPORATION is defined in SECTION 8.11.
SYNDICATION AGENT means, collectively, Suntrust Bank and its respective
permitted successors or assigns as "SYNDICATION AGENT" under this Agreement.
TAXES means, for any Person, taxes, assessments, or other governmental
charges or levies imposed upon such Person, its income, or any of its
properties, franchises, or assets.
TERMINATION DATE means the earliest of (a) December 17, 2001, and (b)
the day on which the Obligation becomes due and payable in full under, and in
accordance with, this Agreement.
TYPE means any type of Borrowing determined with respect to the
interest option applicable thereto.
UNFUNDED CURRENT LIABILITY means with respect to any Plan, the amount,
if any, by which the value of the accumulated plan benefits under the Plan
determined on a plan termination basis in accordance with actuarial assumptions
at such time consistent with those prescribed by the PBGC for purposes of
Section 4044 of ERISA, exceeds the fair market value of all plan assets
allocable to such liabilities under Title IV of ERISA (excluding any accrued but
unpaid contribution).
UNMATURED EVENT OF DEFAULT means the occurrence of any event or
existence of any circumstance which, with the giving of notice or lapse of time
or both, would become a Event of Default.
VOTING STOCK means, with respect to any Person, Capital Stock of any
class or classes if the holders of such Capital Stock are ordinarily, in the
absence of contingencies, entitled to vote for the election of the directors (or
other persons performing similar functions) of such Person even if the right to
so vote has been suspended by the happening of such a contingency.
WELLS FARGO means Wells Fargo Bank (Texas), National Association in its
individual capacity as a Bank and its successors and assigns.
REVOLVING CREDIT AGREEMENT
11
<PAGE> 17
WHOLLY-OWNED when used in connection with any Subsidiary shall mean a
Subsidiary of which all of the issued and outstanding shares of stock (except
shares required as directors' qualifying shares) shall be owned by Borrower or
one or more of its Wholly-owned Subsidiaries.
1.2 Number and Gender of Words; Other References. Unless otherwise
specified, in the Loan Documents (a) where appropriate, the singular includes
the plural and vice versa, and words of any gender include each other gender,
(b) heading and caption references may not be construed in interpreting
provisions, (c) monetary references are to currency of the United States of
America, (d) section, paragraph, annex, schedule, exhibit, and similar
references are to the particular Loan Document in which they are used, (e)
references to "telecopy," "facsimile," "fax," or similar terms are to facsimile
or telecopy transmissions, (f) references to "including" mean including without
limiting the generality of any description preceding that word, (g) the rule of
construction that references to general items that follow references to specific
items are limited to the same type or character of those specific items is not
applicable in the Loan Documents, (h) references to any Person include that
Person's heirs, personal representatives, successors, trustees, receivers, and
permitted assigns, (i) references to any Law include every amendment or
supplement to it, rule and regulation adopted under it, and successor or
replacement for it, and (j) references to any Loan Document or other document
include every renewal and extension of it, amendment and supplement to it, and
replacement or substitution for it.
1.3 Accounting Principles. All accounting and financial terms used in
the Loan Documents and the compliance with each financial covenant therein shall
be determined in accordance with GAAP, and, all accounting principles shall be
applied on a consistent basis so that the accounting principles in a current
period are comparable in all material respects to those applied during the
preceding comparable period.
SECTION 2 BORROWING PROVISIONS.
2.1 Commitment. Subject to and in reliance upon the terms, conditions,
representations, and warranties in the Loan Documents, each Bank severally and
not jointly agrees to lend to Borrower such Bank's Pro Rata Part of one or more
Borrowings under the Revolving Facility not to exceed such Bank's Committed Sum
under the Revolving Facility, which, subject to the Loan Documents, Borrower may
borrow, repay, and reborrow under this Agreement; provided that (i) each such
Borrowing must occur on a Business Day and no later than the Business Day
immediately preceding the Termination Date; (ii) each such Borrowing shall be in
an amount not less than (A) $1,000,000 or a greater integral multiple of
$100,000 (if a Base Rate Borrowing) or (B) $5,000,000 or a greater integral
multiple of $1,000,000 (if a Eurodollar Rate Borrowing); and (iii) on any date
of determination, the Commitment Usage shall never exceed the Commitment.
2.2 Termination of Commitment. Without premium or penalty, and upon
giving not less than three Business Days prior written and irrevocable notice to
Administrative Agent, Borrower may terminate in whole or in part the unused
portion of the Commitment; provided that: (a) each partial termination shall be
in an aggregate amount of not less than $10,000,000 or a greater integral
multiple of $1,000,000; (b) the amount of the Commitment may not be reduced
below the Commitment Usage after giving effect to any loan repayments on the
date of such reduction; and (c) each reduction shall be allocated Pro Rata among
the Banks in accordance with their respective Pro Rata Parts. Promptly after
receipt of such notice of termination or reduction, Administrative Agent shall
notify each Bank of the proposed cancellation or reduction. Such termination or
partial reduction of the Commitment shall be effective on the Business Day
specified in Borrower's notice (which date must be at least three Business Days
after Borrower's delivery of such notice). In the event that the Commitment is
reduced to zero at a time when there shall be no Principal Debt, this Agreement
shall be terminated to the extent specified in SECTION 12.14, and all
REVOLVING CREDIT AGREEMENT
12
<PAGE> 18
commitment fees and other fees then earned and unpaid hereunder and all other
amounts of the Obligation relating to the Revolving Facility then due and owing
shall be immediately due and payable, without notice or demand by Administrative
Agent or any Bank.
2.3 Borrowing Procedure. The following procedures apply to Borrowings:
(a) Each Borrowing shall be made on Borrower's notice (a
"NOTICE OF BORROWING," substantially in the form of EXHIBIT B-1) to
Administrative Agent requesting that Banks fund a Borrowing on a
certain date (the "BORROWING DATE"), which notice (i) shall be
irrevocable and binding on Borrower, (ii) shall specify the Borrowing
Date, amount, Type, and (for a Borrowing comprised of Eurodollar Rate
Borrowings) Interest Period, and (iii) must be received by
Administrative Agent no later than 11:00 a.m. Houston, Texas time on
the third Business Day preceding the Borrowing Date for any Eurodollar
Rate Borrowing or no later than 11:00 a.m. Houston, Texas time on the
Borrowing Date for any Base Rate Borrowing. Administrative Agent shall
timely notify each Bank with respect to each Notice of Borrowing.
(b) Each Bank shall remit its Pro Rata Part of each requested
Borrowing to Administrative Agent's principal office in Houston, in
funds which are or will be available for immediate use by
Administrative Agent by 12:00 noon. Houston time on the Borrowing Date
therefor. Subject to receipt of such funds, Administrative Agent shall
(unless to its actual knowledge any of the conditions precedent
therefor have not been satisfied by Borrower or waived by Majority
Banks) make such funds available to Borrower by causing such funds to
be deposited to Borrower's account as designated to Administrative
Agent by Borrower. Notwithstanding the foregoing, unless Administrative
Agent shall have been notified by a Bank prior to a Borrowing Date that
such Bank does not intend to make available to Administrative Agent
such Bank's Pro Rata Part of the applicable Borrowing, Administrative
Agent may assume that such Bank has made such proceeds available to
Administrative Agent on such date, as required herein, and
Administrative Agent may (unless to its actual knowledge any of the
conditions precedent therefor have not been satisfied by Borrower or
waived by Majority Banks), in reliance upon such assumption (but shall
not be required to), make available to Borrower a corresponding amount
in accordance with the foregoing terms, but, if such corresponding
amount is not in fact made available to Administrative Agent by such
Bank on such Borrowing Date, Administrative Agent shall be entitled to
recover such corresponding amount on demand (i) from such Bank,
together with interest at the Federal Funds Rate during the period
commencing on the date such corresponding amount was made available to
Borrower and ending on (but excluding) the date Administrative Agent
recovers such corresponding amount from such Bank, or (ii) if such Bank
fails to pay such corresponding amount forthwith upon such demand, then
from Borrower, together with interest at a rate per annum equal to the
applicable rate for such Borrowing during the period commencing on such
Borrowing Date and ending on (but excluding) the date Administrative
Agent recovers such corresponding amount from Borrower. No Bank shall
be responsible for the failure of any other Bank to make its Pro Rata
Part of any Borrowing.
SECTION 3 TERMS OF PAYMENT.
3.1 Loan Accounts, Notes, and Payments.
(a) Principal Debt shall be evidenced by the Revolving Notes,
one payable to each Bank in the stated principal amount of its
Committed Sum.
REVOLVING CREDIT AGREEMENT
13
<PAGE> 19
(b) The Principal Debt owed to each Bank shall be further
evidenced by one or more loan accounts or records maintained by such
Bank in the ordinary course of business. The loan accounts or records
maintained by the Administrative Agent (including, without limitation,
the Register) and each Bank shall be conclusive evidence absent
manifest error of the amount of the Borrowings made by Borrower from
each Bank under the Revolving Facility and the interest and principal
payments thereon. Any failure to so record or any error in doing so
shall not, however, limit or otherwise affect the obligation of
Borrower under the Loan Documents to pay any amount owing with respect
to the Obligation.
(c) Each payment or prepayment on the Obligation is due and
must be paid at Administrative Agent's principal office in Houston in
funds which are or will be available for immediate use by
Administrative Agent by 11:00 a.m., Houston, Texas time on the day due.
Payments made after 11:00 a.m., Houston, Texas, time shall be deemed
made on the Business Day next following. Administrative Agent shall pay
to each Bank any payment or prepayment to which such Bank is entitled
hereunder on the same day Administrative Agent shall have received the
same from Borrower; provided such payment or prepayment is received by
Administrative Agent prior to 11:00 a.m. Houston, Texas time, and
otherwise before 12:00 noon Houston time on the Business Day next
following. If and to the extent Administrative Agent shall not make
such payments to Banks when due as set forth in the preceding sentence,
such unpaid amounts shall accrue interest, payable by Administrative
Agent, at the Federal Funds Rate from the due date until (but not
including) the date on which Administrative Agent makes such payments
to Banks.
3.2 Interest and Principal Payments.
(a) Interest on each Eurodollar Rate Borrowing shall be due
and payable as it accrues on the last day of its respective Interest
Period and on the Termination Date, as applicable; provided that if any
Interest Period is a period greater than three (3) months, then accrued
interest shall also be due and payable on the date three (3) months
after the commencement of such Interest Period. Interest on each Base
Rate Borrowing shall be due and payable as it accrues on the last
Business Day of each March, June, September, and December, and on the
Termination Date.
(b) The Commitment shall be permanently canceled and reduced
to $0 on the Termination Date, and Borrower shall pay on such
Termination Date all outstanding Principal Debt, together with all
accrued and unpaid interest and fees.
(c) On any date of determination, if the Commitment Usage
exceeds the Commitment then in effect then Borrower shall make a
mandatory prepayment of the Principal Debt in at least the amount of
such excess, together with (i) all accrued and unpaid interest on the
principal amount so prepaid and (ii) any Consequential Loss arising as
a result thereof.
(d) After giving Administrative Agent advance written notice
of the intent to prepay, Borrower may voluntarily prepay all or any
part of the Principal Debt from time to time and at any time, in whole
or in part, without premium or penalty; provided that: (i) such notice
must be received by Administrative Agent by 11:00 a.m. Houston, Texas
time on (A) the third Business Day preceding the date of prepayment of
a Eurodollar Rate Borrowing, and (B) on the date of prepayment in the
case of prepayment of a Base Rate Borrowing; (ii) each such partial
prepayment must be in a minimum amount of at least $1,000,000 or a
greater integral multiple of $100,000 thereof (if a Base Rate
Borrowing) and must be in a minimum of at least $5,000,000 or a greater
integral multiple of $1,000,000 thereof (if a Eurodollar Rate
Borrowing); (iii) all accrued interest
REVOLVING CREDIT AGREEMENT
14
<PAGE> 20
on the Obligation must also be paid in full, to the date of such
prepayment; and (iv) Borrower shall pay any related Consequential Loss
within ten (10) days after demand therefor. Each notice of prepayment
shall specify the prepayment date, the Type of Borrowing(s) and
amount(s) of such Borrowing(s) to be prepaid and shall constitute a
binding obligation of Borrower to make a prepayment on the date stated
therein.
3.3 Interest Options. Except where specifically otherwise provided,
Borrowings shall bear interest at a rate per annum equal to the lesser of (a) as
to the respective Type of Borrowing (as designated by Borrower in accordance
with this Agreement), (i) the Base Rate plus the Applicable Margin for Base Rate
Borrowings or (ii) the Base LIBOR Rate plus the Applicable Margin for Eurodollar
Rate Borrowings, as the case may be, and (b) the Maximum Rate. Each change in
the Base Rate or the Maximum Rate subject to the terms of this Agreement, will
become effective, without notice to Borrower or any other Person, upon the
effective date of such change.
3.4 Quotation of Rates. It is hereby acknowledged that a Responsible
Officer or other appropriately designated officer of Borrower may call
Administrative Agent on or before the date on which a Notice of Borrowing is to
be delivered by Borrower in order to receive an indication of the rates then in
effect, but such indicated rates shall neither be binding upon Administrative
Agent or Banks nor affect the rate of interest which thereafter is actually in
effect when the Notice of Borrowing is given.
3.5 Default Rate. At the option of Majority Banks and to the extent
permitted by Law, all past-due Principal Debt and accrued interest thereon shall
bear interest from maturity (whether stated or by acceleration) at the Default
Rate until paid, regardless whether such payment is made before or after entry
of a judgment.
3.6 Interest Recapture. If the designated rate applicable to any
Borrowing exceeds the Maximum Rate, the rate of interest on such Borrowing shall
be limited to the Maximum Rate, but any subsequent reductions in such designated
rate shall not reduce the rate of interest thereon below the Maximum Rate until
the total amount of interest accrued thereon equals the amount of interest which
would have accrued thereon if such designated rate had at all times been in
effect. In the event that at maturity (stated or by acceleration), or at final
payment of the Principal Debt, the total amount of interest paid or accrued is
less than the amount of interest which would have accrued if such designated
rates had at all times been in effect, then, at such time and to the extent
permitted by Law, Borrower shall pay an amount equal to the difference, if any,
by which (a) the lesser of the amount of interest which would have accrued if
such designated rates had at all times been in effect and the amount of interest
which would have accrued if the Maximum Rate had at all times been in effect,
exceeds (b) the amount of interest actually paid or accrued on the Principal
Debt.
3.7 Interest Calculations.
(a) All payments of interest shall be calculated on the basis
of actual number of days (including the first day but excluding the
last day) elapsed but computed as if each calendar year consisted of
(i) 360 days in the case of a Eurodollar Rate Borrowing or a Base Rate
Borrowing calculated with reference to the Federal Funds Rate (unless
such calculation would result in the interest on the Borrowings
exceeding the Maximum Rate in which event such interest shall be
calculated on the basis of a year of 365 or 366 days, as the case may
be) and (ii) 365 or 366 days, as the case may be, in the case of a Base
Rate Borrowing calculated with reference to the Prime Rate. All
interest rate determinations and calculations by Administrative Agent
shall be conclusive and binding absent manifest error.
REVOLVING CREDIT AGREEMENT
15
<PAGE> 21
(b) The provisions of this Agreement relating to calculation
of the Base Rate and the Base LIBOR Rate are included only for the
purpose of determining the rate of interest or other amounts to be paid
hereunder that are based upon such rate.
3.8 Maximum Rate.
(a) It is the intention of the parties hereto to comply with
applicable usury laws, if any; accordingly, notwithstanding any
provision to the contrary in this Agreement, the Notes or in any of the
other Loan Documents securing the payment hereof or otherwise relating
hereto, in no event shall this Agreement, the Notes or such other Loan
Documents require or permit the payment, taking, reserving, receiving,
collection, or charging of any sums constituting interest under
applicable laws which exceed the maximum amount permitted by such laws.
If any such excess interest is called for, contracted for, charged,
taken, reserved, or received in connection with the Loans evidenced by
the Notes or in any of the Loan Documents, or in any communication by
the Administrative Agent, or any Bank or any other Person to Borrower
or any other Person, or in the event all or part of the principal or
interest thereof shall be prepaid or accelerated, so that under any of
such circumstances or under any other circumstance whatsoever the
amount of interest contracted for, charged, taken, reserved, or
received on the amount of principal actually outstanding from time to
time under the Notes or any other Loan Document shall exceed the
maximum amount of interest permitted by applicable usury laws, then in
any such event it is agreed as follows: (i) the provisions of this
paragraph shall govern and control, (ii) neither Borrower nor any other
Person now or hereafter liable for the payment of the Notes or any
obligation arising under this Agreement shall be obligated to pay the
amount of such interest to the extent such interest is in excess of the
maximum amount of interest permitted by applicable usury laws, (iii)
any such excess which is or has been received notwithstanding this
paragraph shall be credited against the then unpaid principal balance
of the Notes or other obligations arising under this Agreement, as
applicable, or, if the Notes or other obligations arising under this
Agreement, as applicable, have been or would be paid in full, refunded
to Borrower, and (iv) the provisions of this Agreement, the Notes and
the other Loan Documents, and any communication to Borrower, shall
immediately be deemed reformed and such excess interest reduced,
without the necessity of executing any other document, to the maximum
lawful rate allowed under applicable laws as now or hereafter construed
by courts having jurisdiction hereof or thereof. Without limiting the
foregoing, all calculations of the rate of the interest contracted for,
charged, collected, taken, reserved, or received in connection with the
Notes, this Agreement or any other Loan Document which are made for the
purpose of determining whether such rate exceeds the maximum lawful
rate shall be made to the extent permitted by applicable laws by
amortizing, prorating, allocating and spreading during the period of
the full term of the Borrowings or other obligations arising under this
Agreement, as applicable, including all prior and subsequent renewals
and extensions, all interest at any time contracted for, charged,
taken, collected, reserved, or received. The terms of this paragraph
shall be deemed to be incorporated in every document and communication
relating to the Notes, the Borrowings or any other Loan Document.
(b) Texas Finance Code, Chapter 346 (formerly Tex. Rev. Civ.
Stat., Title 79, Chapter 15), which regulates certain revolving loan
accounts and revolving triparty accounts, shall not apply to any
revolving loan accounts created under the Notes, this Agreement or the
other Loan Documents or maintained in connection therewith.
REVOLVING CREDIT AGREEMENT
16
<PAGE> 22
(c) To the extent that the interest rate laws of the State of
Texas are applicable to the Borrowings or any other obligations arising
under this Agreement, the applicable interest rate ceiling is the
weekly ceiling (formerly the indicated rate ceiling) determined in
accordance with Tex. Rev. Civ. Stat., Title 79, Article 5069-1D.003,
also codified at Texas Finance Code, SECTION 303.301 (formerly Article
5069-1.01(a)(1)), and, to the extent that this Agreement, the Notes or
any other Loan Document is deemed an open end account as such term is
defined in Tex. Rev. Civ. Stat., Title 79, Article 5069-1B.002(14),
also codified at Texas Finance Code SECTION 3.01.001(3) (formerly
Article 5069-1.01(f)), the Administrative Agent and the Banks retain
the right to modify the interest rate in accordance with applicable
law.
3.9 Interest Periods. When Borrower requests any Eurodollar Rate
Borrowing, Borrower may elect the interest period (each an "INTEREST PERIOD")
applicable thereto, which shall be, at Borrower's option, in respect of any
Eurodollar Rate Borrowing, one, two, three, or six months; provided, however,
that: (a) the initial INTEREST PERIOD for a Eurodollar Rate Borrowing shall
commence on the date of such Borrowing (including the date of any conversion
thereto), and each Interest Period occurring thereafter in respect of such
Borrowing shall commence on the day on which the next preceding Interest Period
applicable thereto expires; (b) if any Interest Period for a Eurodollar Rate
Borrowing begins on a day for which there is no numerically corresponding
Business Day in the calendar month at the end of such Interest Period, such
Interest Period shall end on the next Business Day immediately following what
otherwise would have been such numerically corresponding day in the calendar
month at the end of such Interest Period (unless such date would be in a
different calendar month from what would have been the month at the end of such
Interest Period, or unless there is no numerically corresponding day in the
calendar month at the end of the Interest Period; whereupon, such Interest
Period shall end on the last Business Day in the calendar month at the end of
such Interest Period); (c) no Interest Period may be chosen with respect to any
portion of the Principal Debt which would extend beyond the scheduled repayment
date (including any dates on which mandatory prepayments are required to be
made) for such portion of the Principal Debt; and (d) no more than an aggregate
of ten Interest Periods shall be in effect at one time.
3.10 Conversions. Borrower may (a) convert all or part of any
Eurodollar Rate Borrowing on the last day of an Interest Period to a Base Rate
Borrowing, (b) convert all or part of any Base Rate Borrowing at any time to a
Eurodollar Rate Borrowing, and (c) elect a new Interest Period (in the case of a
Eurodollar Rate Borrowing), by giving notice (a "NOTICE OF CONVERSION,"
substantially in the form of EXHIBIT B-2) of such intent no later than 11:00
a.m. Houston, Texas time on the third Business Day prior to the date of
conversion or the last day of the Interest Period, as the case may be (in the
case of a conversion to a Eurodollar Rate Borrowing or an election of a new
Interest Period), and no later than 11:00 a.m. Houston, Texas time on the last
day of the Interest Period (in the case of a conversion to a Base Rate
Borrowing); provided that the principal amount converted to, or continued as, a
Eurodollar Rate Borrowing shall be in an amount not less than $5,000,000 or a
greater integral multiple of $1,000,000. Administrative Agent shall timely
notify each Bank with respect to each Notice of Conversion. Absent Borrower's
Notice of Conversion or election of a new Interest Period, a Eurodollar Rate
Borrowing shall be deemed converted to a Base Rate Borrowing effective as of the
expiration of the Interest Period applicable thereto. No Eurodollar Rate
Borrowing may be either made or continued as a Eurodollar Rate Borrowing, and no
Base Rate Borrowing may be converted to a Eurodollar Rate Borrowing, if the
interest rate for such Eurodollar Rate Borrowing would exceed the Maximum Rate.
REVOLVING CREDIT AGREEMENT
17
<PAGE> 23
3.11 Order of Application.
(a) So long as no Event of Default or Unmatured Event of
Default has occurred and is continuing, payments and prepayments of the
Obligation shall be applied in the order and manner as Borrower may
direct; provided that, each such payment or prepayment (other than
payments of fees payable solely to any Agent or a specific Bank) shall
be allocated among Banks in proportion to their respective Pro Rata
Parts appropriate for the Revolving Facility in respect of which such
payments were made.
(b) If a Event of Default or Unmatured Event of Default has
occurred and is continuing (or if Borrower fails to give directions as
permitted under SECTION 3.11(a)), any payment or prepayment (including
proceeds from the exercise of any Rights) shall be applied in the
following order: (i) to the ratable payment of all fees and expenses
for which the Administrative Agent or Banks have not been paid or
reimbursed in accordance with the Loan Documents (as used in this
SECTION 3.11(b), a "ratable payment" for any Bank or the Administrative
Agent shall be, on any date of determination, that proportion which the
portion of the total fees and indemnities owed to such Bank or the
Administrative Agent bears to the total aggregate fees and indemnities
owed to all Banks or Agents on such date of determination); (ii) to the
Pro Rata payment of all accrued and unpaid interest on the Principal
Debt; (iii) to the Pro Rata payment of the remaining Principal Debt in
such order as Majority Banks may elect (provided that, Majority Banks
will apply such proceeds in an order that will minimize any
Consequential Loss); and (iv) to the payment of the remaining
Obligation in the order and manner Majority Banks deem appropriate.
3.12 Sharing of Payments, Etc. If any Bank shall obtain any payment
(whether voluntary, involuntary, or otherwise, including, without limitation, as
a result of exercising its Rights under SECTION 3.13) which is in excess of its
ratable share of any such payment, such Bank shall purchase from the other Banks
such participations as shall be necessary to cause such purchasing Bank to share
the excess payment ratably with each of them; provided, however, that if all or
any portion of such excess payment is thereafter recovered from such purchasing
Bank, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery. Borrower agrees that any Bank so purchasing a
participation from another Bank pursuant to this Section may to the fullest
extent permitted by Law, exercise all of its Rights of payment (including the
Right of offset) with respect to such participation as fully as if such Bank
were the direct creditor of Borrower in the amount of such participation.
3.13 Offset. Upon the occurrence and during the continuance of an Event
of Default and (i) the making by the Majority Banks of the request specified in
SECTION 10.1 or (ii) the acceleration of the Obligation pursuant to SECTION
10.1, each Bank is hereby authorized at any time and from time to time, to the
fullest extent permitted by applicable law, to exercise (for the benefit of all
Banks in accordance with SECTION 3.12) the Rights of offset and/or banker's Lien
against each and every account and other property, or any interest therein,
which Borrower may now or hereafter have with, or which is now or hereafter in
the possession of, such Bank to the extent of the full amount of the Obligation
owed to such Bank.
3.14 Booking Borrowings. To the extent permitted by Law, any Bank may
make, carry, or transfer its Borrowings at, to, or for the account of any of its
branch offices or the office of any of its Affiliates; provided that no
Affiliate shall be entitled to receive any greater payment under
REVOLVING CREDIT AGREEMENT
18
<PAGE> 24
SECTION 4 than the transferor Bank would have been entitled to receive with
respect to such Borrowings.
SECTION 4 CHANGE IN CIRCUMSTANCES.
4.1 Increased Cost and Reduced Return.
(a) If, after the date hereof, the adoption of any applicable
law, rule, or regulation or any change in any applicable law, rule, or
regulation, or any change in the interpretation or administration
thereof by any Governmental Authority, or compliance by any Bank (or
its Applicable Lending Office) with any request or directive (whether
or not having the force of law) of any such Governmental Authority:
(i) shall subject such Bank (or its Applicable
Lending Office) to any Tax or other charge with respect to any
Eurodollar Rate Borrowing, its Notes, or its obligation to
loan Eurodollar Rate Borrowings, or change the basis of
taxation of any amounts payable to such Bank (or its
Applicable Lending Office) under this Agreement or its Notes
in respect of any Eurodollar Rate Borrowings (other than with
respect to taxes imposed on the overall net income of such
Bank by any jurisdiction within which such Bank is
incorporated or organized or has its principal office, or
within which such Applicable Lending Office is located, or by
any other jurisdiction in which such Bank is deemed to be
doing business that is unrelated this Agreement);
(ii) shall impose, modify, or deem applicable any
reserve, special deposit, assessment, or similar requirement
(other than the Reserve Percentage utilized in the
determination of additional interest in accordance with
SECTION 4.8) relating to any extensions of credit or other
assets of, or any deposits with or other liabilities or
commitments of, such Bank (or its Applicable Lending Office),
including the commitment of such Bank hereunder; or
(iii) shall impose on such Bank (or its Applicable
Lending Office) or the London interbank market any other
condition affecting this Agreement or its Notes or any of such
extensions of credit or liabilities or commitments;
and the result of any of the foregoing is to increase the cost to such
Bank (or its Applicable Lending Office) of making, converting into,
continuing, or maintaining any Eurodollar Rate Borrowings or to reduce
any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or its Notes with respect to any
Eurodollar Rate Borrowing, then Borrower shall pay to such Bank within
ten (10) days of demand such amount or amounts as will compensate such
Bank for such increased cost or reduction as provided in SECTION 4.1(c)
below. If any Bank requests compensation by Borrower under this SECTION
4.1(a), Borrower may, by notice to such Bank (with a copy to
Administrative Agent), suspend the obligation of such Bank to loan or
continue Borrowings of the Type with respect to which such compensation
is requested, or to convert Borrowings of any other Type into
Borrowings of such Type, until the event or condition giving rise to
such request ceases to be in effect (in which case the provisions of
SECTION 4.4 shall be applicable); provided, that such suspension shall
not affect the right of such Bank to receive the compensation so
requested.
REVOLVING CREDIT AGREEMENT
19
<PAGE> 25
(b) If, after the date hereof, any Bank shall have determined
that the adoption of any applicable Law regarding capital adequacy or
any change therein or in the interpretation or administration thereof
by any Governmental Authority charged with the interpretation or
administration thereof, or any request or directive regarding capital
adequacy (whether or not having the force of law) of any such
Governmental Authority has or would have the effect of reducing the
rate of return on the capital of such Bank or any corporation
controlling such Bank as a consequence of such Bank's obligations
hereunder to a level below that which such Bank or such corporation
could have achieved but for such adoption, change, request, or
directive (taking into consideration its policies with respect to
capital adequacy), then from time to time upon demand Borrower shall
pay to such Bank such additional amount or amounts as will compensate
such Bank for such reduction.
(c) Each Bank shall promptly notify Borrower and
Administrative Agent of any event of which it has knowledge, occurring
after the date hereof, which will entitle such Bank to compensation
pursuant to this SECTION 4.1 and will designate a different Applicable
Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such
Bank, be otherwise disadvantageous to it. Any Bank claiming
compensation under this Section shall furnish to Borrower and
Administrative Agent a statement setting forth in reasonable detail the
additional amount or amounts to be paid hereunder which shall be
presumed correct in the absence of manifest error. In determining such
amount, such Bank may use any reasonable averaging and attribution
methods. Notwithstanding the foregoing SUBSECTIONS (a) and (b) of this
SECTION 4.1 the Borrower shall only be obligated to compensate any Bank
for any amount arising or accruing during (i) any time or period
commencing not more than 90 days prior to the date on which such Bank
notifies the Administrative Agent and the Borrower that it proposes to
demand such compensation and (ii) any time or period during which,
because of the retroactive application of such statute, regulation or
other such basis, such Bank did not know that such amount would arise
or accrue.
4.2 Limitation on Types of Loans. If on or prior to the first day of
any Interest Period for any Eurodollar Rate Borrowing:
(a) Administrative Agent determines (which determination shall
be conclusive) that by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Base LIBOR Rate for such Interest Period; or
(b) Majority Banks determine (which determination shall be
conclusive) and notify Administrative Agent that the Base LIBOR Rate
will not adequately and fairly reflect the cost to the Banks of funding
Eurodollar Rate Borrowings for such Interest Period;
then Administrative Agent shall give Borrower prompt notice thereof specifying
the relevant amounts or periods, and so long as such condition remains in
effect, the Banks shall be under no obligation to fund additional Eurodollar
Rate Borrowings, continue Eurodollar Rate Borrowings, or to convert Base Rate
Borrowings into Eurodollar Rate Borrowings, and Borrower shall, on the last
day(s) of the then current Interest Period(s) for the outstanding Eurodollar
Rate Borrowings, either prepay such Borrowings or convert such Borrowings into
Base Rate Borrowings in accordance with the terms of this Agreement.
REVOLVING CREDIT AGREEMENT
20
<PAGE> 26
4.3 Illegality. Notwithstanding any other provision of this Agreement,
in the event that it becomes unlawful for any Bank or its Applicable Lending
Office to make, maintain, or fund Eurodollar Rate Borrowings hereunder, then
such Bank shall promptly notify Borrower thereof and such Bank's obligation to
make or continue Eurodollar Rate Borrowings and to convert other Base Rate
Borrowings into Eurodollar Rate Borrowings shall be suspended until such time as
such Bank may again make, maintain, and fund Eurodollar Rate Borrowings (in
which case the provisions of SECTION 4.4 shall be applicable).
4.4 Treatment of Affected Loans. If the obligation of any Bank to fund
Eurodollar Rate Borrowings or to continue, or to convert Base Rate Borrowings
into Eurodollar Rate Borrowings, shall be suspended pursuant to SECTIONS 4.1,
4.2, or 4.3 hereof, such Bank's Eurodollar Rate Borrowings shall be
automatically converted into Base Rate Borrowings on the last day(s) of the then
current Interest Period(s) for Eurodollar Rate Borrowings (or, in the case of a
conversion required by SECTION 4.3 hereof, on such earlier date as such Bank may
specify to Borrower with a copy to Administrative Agent) and, unless and until
such Bank gives notice as provided below that the circumstances specified in
SECTIONS 4.1, 4.2, or 4.3 hereof that gave rise to such conversion no longer
exist:
(a) to the extent that such Bank's Eurodollar Rate Borrowings
have been so converted, all payments and prepayments of principal that
would otherwise be applied to such Bank's Eurodollar Rate Borrowings
shall be applied instead to its Base Rate Borrowings; and
(b) all Borrowings that would otherwise be made or continued
by such Bank as Eurodollar Rate Borrowings shall be made or continued
instead as Base Rate Borrowings, and all Borrowings of such Bank that
would otherwise be converted into Eurodollar Rate Borrowings shall be
converted instead into (or shall remain as) Base Rate Borrowings.
If such Bank gives notice to Borrower (with a copy to Administrative Agent) that
the circumstances specified in SECTIONS 4.1, 4.2, or 4.3 hereof that gave rise
to the conversion of such Bank's Eurodollar Rate Borrowings pursuant to this
SECTION 4.4 no longer exist (which such Bank agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Rate Borrowings made
by other Banks are outstanding, such Bank's Base Rate Borrowings shall be
automatically converted, on the first day(s) of the next succeeding Interest
Period(s) for such outstanding Eurodollar Rate Borrowings, to the extent
necessary so that, after giving effect thereto, all Eurodollar Rate Borrowings
held by the Banks and by such Bank are held pro rata (as to principal amounts,
Types, and Interest Periods) in accordance with their respective Committed Sums.
4.5 Replacement of Banks. If any Bank requests compensation under
SECTIONS 4.1 or if Borrower is required to pay additional amounts to or for the
account of any Bank pursuant to SECTION 4.6 (collectively, "ADDITIONAL
AMOUNTS"), then Borrower may, at its sole expense and effort, upon written
notice to such Bank and Administrative Agent, require such Bank to assign and
delegate, without recourse, all its interests, Rights, and obligations under
this Agreement and the other Loan Documents to an Eligible Assignee that shall
assume such obligations; provided that, (i) Borrower shall have received the
prior written consent of Administrative Agent to any such assignment; (ii) such
Bank shall have received payment from Borrower of any Additional Amounts owed to
such Bank by Borrower for periods prior to the replacement of such Bank and any
costs incurred as a result of such replacement of a Bank; (iii) such assignment
will result in reduction or elimination of the Additional Amounts; and (iv) such
assignment and acceptance shall be made in accordance with, and subject to the
requirements and restrictions contained in, SECTION 12.13(b),
REVOLVING CREDIT AGREEMENT
21
<PAGE> 27
other than the restrictions imposed by SECTION 12.13(b)(iv). A Bank shall not be
required to make any such assignment and delegation if, prior thereto, as a
result of a waiver by such Bank or otherwise, the circumstances entitling such
Borrowing to require such assignment and delegation cease to apply.
4.6 Taxes.
(a) Any and all payments by Borrower to or for the account of
any Bank or Administrative Agent hereunder or under any other Loan
Document shall be made free and clear of and without deduction for any
and all present or future Taxes, excluding, in the case of each Bank
and Administrative Agent, Taxes imposed on its income or gross receipts
and franchise Taxes imposed on it by any jurisdiction within which such
Bank (or its Applicable Lending Office) or Administrative Agent (as the
case may be) is incorporated or organized, or any political subdivision
thereof, or by any other jurisdiction in which such Bank or
Administrative Agent, as the case may be, is deemed to be doing
business under the Tax Laws thereof (all such Non-Excluded Taxes
referred to as "NON-EXCLUDED TAXES"). If Borrower shall be required by
law to deduct any Non-Excluded Taxes from or in respect of any sum
payable under this Agreement or any other Loan Document to any Bank or
Administrative Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this SECTION
4.6) such Bank or Administrative Agent receives an amount equal to the
sum it would have received had no such deductions been made, (ii)
Borrower shall make such deductions, (iii) Borrower shall pay the full
amount deducted to the relevant taxation authority or other authority
in accordance with applicable law, and (iv) Borrower shall furnish to
Administrative Agent, at its address listed in SCHEDULE 2.1, the
original or a certified copy of a receipt evidencing payment thereof.
(b) In addition, Borrower agrees to pay any and all present or
future stamp or documentary taxes or charges or similar levies which
arise from any payment made under this Agreement or any other Loan
Document or from the execution or delivery of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter
referred to as "OTHER TAXES").
(c) BORROWER AGREES TO INDEMNIFY EACH BANK AND ADMINISTRATIVE
AGENT FOR THE FULL AMOUNT OF NON-EXCLUDED TAXES THAT SHOULD HAVE BEEN
WITHHELD BY BORROWER AND OTHER TAXES (INCLUDING, WITHOUT LIMITATION,
ANY NON-EXCLUDED TAXES THAT SHOULD HAVE BEEN WITHHELD BY BORROWER OR
OTHER TAXES IMPOSED OR ASSERTED BY ANY JURISDICTION ON AMOUNTS PAYABLE
UNDER THIS SECTION 4.6) PAID BY SUCH BANK OR ADMINISTRATIVE AGENT (AS
THE CASE MAY BE) AND ANY LIABILITY (INCLUDING PENALTIES, INTEREST, AND
EXPENSES) ARISING THEREFROM OR WITH RESPECT THERETO.
(d) Each Bank organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and
delivery of this Agreement in the case of each Bank listed on the
signature pages hereof and on or prior to the date on which it becomes
a Bank in the case of each other Bank, and from time to time thereafter
if requested in writing by Borrower or Administrative Agent (but only
so long as such Bank remains lawfully able to do so), shall provide
Borrower and Administrative Agent with (i) two duly completed,
accurate, and signed copies of Internal Revenue Service Form 1001 or
4224, as
REVOLVING CREDIT AGREEMENT
22
<PAGE> 28
appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Bank is entitled to benefits under an
income tax treaty to which the United States is a party which reduces
the rate of withholding tax on payments of interest or certifying that
the income receivable pursuant to this Agreement is effectively
connected with the conduct of a trade or business in the United States,
(ii) a duly completed, accurate and signed Internal Revenue Service
Form W-8 or W-9, as appropriate, or any successor form prescribed by
the Internal Revenue Service, and (iii) any other form or certificate
required by any taxing authority (including any certificate required by
Sections 871(h) and 881(c) of the Internal Revenue Code), certifying
that such Bank is entitled to an exemption from or a reduced rate of
tax on payments pursuant to this Agreement or any of the other Loan
Documents.
(e) For any period with respect to which a Bank has failed to
provide Borrower and Administrative Agent with the appropriate form
pursuant to SECTION 4.6(d) (unless such failure is due to a change in
Law, other than any change in the nature of an anti-treaty shopping or
limitation on benefits or similar provision, occurring subsequent to
the date on which a form originally was required to be provided), such
Bank shall not be entitled to indemnification under SECTION 4.6(a) or
4.6(b) with respect to Taxes imposed by the United States; provided,
however, that should a Bank, which is otherwise exempt from or subject
to a reduced rate of withholding tax, become subject to Taxes because
of its failure to deliver a form required hereunder, Borrower shall
take such steps as such Bank shall reasonably request to assist such
Bank to recover such Taxes.
(f) If Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this SECTION 4.6, then such
Bank will agree to use reasonable efforts to change the jurisdiction of
its Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
judgment of such Bank, is not otherwise disadvantageous to such Bank.
(g) Within thirty (30) days after the date of any payment of
Non-Excluded Taxes, Borrower shall furnish to Administrative Agent the
original or a certified copy of a receipt evidencing such payment.
(h) Without prejudice to the survival of any other agreement
of Borrower hereunder, the agreements and obligations of Borrower
contained in this SECTION 4.6 shall survive the termination of the
Commitment and the payment in full of the Notes.
4.7 Funding Losses. Upon the request of any Bank, Borrower shall pay to
such Bank such amount or amounts as shall be sufficient (in the reasonable
opinion of such Bank) to compensate it for any Consequential Loss; provided
that, in each case, the Person claiming such Consequential Loss has furnished
Borrower with a reasonably detailed statement of such loss, which statement
shall be conclusive in the absence of manifest error.
4.8 Additional Interest on Eurodollar Rate Borrowings. The Borrower
shall pay to the Administrative Agent for the account of each Bank any costs
which such Bank determines are attributable to such Bank's compliance with
regulations of the Federal Reserve Board requiring the maintenance of reserves
(including supplemental, marginal, and emergency reserves) with respect to
eurocurrency funding (currently referred to as "eurocurrency liabilities"). Such
costs shall be paid to the Administrative Agent for the account of such Bank in
the form of additional interest on the unpaid principal amount of each
Eurodollar Rate Borrowing of such Bank, from the date of such Borrowing until
such principal amount is paid in full, at an interest rate per annum (rounded
upwards,
REVOLVING CREDIT AGREEMENT
23
<PAGE> 29
if necessary, to the nearest 1/16th of 1%) equal at all times to the remainder
obtained by subtracting (i) the Base LIBOR Rate for the applicable period for
such Borrowing from (ii) the rate obtained by dividing such Base LIBOR Rate by a
percentage equal to one-hundred percent (100%) minus the Reserve Percentage of
such Bank for such period, payable on each date on which interest is payable on
such Borrowing. Such additional interest shall be determined by such Bank and
notified to the Borrower and the Administrative Agent. A certificate setting
forth the amount of such additional interest, submitted to the Borrower and the
Administrative Agent by such Bank, shall be conclusive and binding for all
purposes, absent manifest error.
SECTION 5 FEES.
5.1 Treatment of Fees. Except as otherwise provided by Law, the fees
described in this SECTION 5: (a) do not constitute compensation for the use,
detention, or forbearance of money, (b) are in addition to, and not in lieu of,
interest and expenses otherwise described in this Agreement, (c) shall be
payable in accordance with SECTION 3.1, (d) shall be non-refundable, (e) shall,
to the fullest extent permitted by Law, bear interest, if not paid when due, at
the Default Rate, and (f) shall be calculated on the basis of actual number of
days (including the first day but excluding the last day) elapsed, but computed
as if each calendar year consisted of 365 or 366 days, as the case may be.
5.2 Fees of Administrative Agent. Borrower shall pay to Administrative
Agent solely for its account, the fees described in the separate letter
agreement between Borrower and Administrative Agent which payments shall be made
on the dates specified, and in amounts calculated in accordance with, such
letter agreement.
5.3 Commitment Fee. Following the Closing Date, Borrower shall pay to
Administrative Agent, for the ratable account of Banks, a commitment fee,
payable in installments in arrears, on the last Business Day of each March,
June, September, and December and on the Termination Date, commencing December
31, 1999. Each installment shall be in an amount equal to the Applicable Margin
for the Commitment Fee multiplied by the amount of the average daily unused
Commitment, in each case during the period from and including the last payment
date to and excluding the payment date for such installment; provided that each
such installment shall be calculated in accordance with SECTION 5.1(f). Solely
for the purposes of this SECTION 5.3, "ratable" shall mean, for any period of
calculation, with respect to any Bank, that proportion which (x) the average
daily Committed Sum of such Bank during such period bears to (y) the amount of
the average daily Commitment during such period.
SECTION 6 CONDITIONS PRECEDENT.
6.1 Conditions Precedent to Initial Borrowings. The obligation of each
Bank to fund the initial Borrowing hereunder is subject to the condition that
the Administrative Agent shall have received all of the following, in form and
substance satisfactory to the Administrative Agent and each Bank:
(a) The Agreement. The Agreement (together with all Schedules
and Exhibits thereto) executed by Borrower, each Bank and
Administrative Agent.
(b) Notes. A Revolving Note in the form of EXHIBIT A payable
to each Bank.
(c) Articles of Incorporation. A copy of the Articles of
Incorporation of Borrower, accompanied by certificates that such copy
is correct and complete, one dated a
REVOLVING CREDIT AGREEMENT
24
<PAGE> 30
Current Date (as used herein, the term "CURRENT DATE" means any date
not more than 60 days prior to the Closing Date), issued by the
Secretary of State of Louisiana, and one dated the Closing Date, by the
Secretary or Assistant Secretary of Borrower.
(d) Bylaws. A copy of the Bylaws of Borrower and all
amendments thereto, accompanied by a certificate that such copy is
correct and complete, dated the Closing Date and executed by the
Secretary or Assistant Secretary of Borrower.
(e) Good Standing and Authority. Certificates of the Louisiana
Secretary of State, dated a Current Date, to the effect that Borrower
is in good standing with respect to the payment of franchise and
similar Taxes (to the extent such information is available) and is duly
qualified to transact business in such jurisdiction.
(f) Incumbency. Certificates of incumbency dated as of the
Closing Date with respect to officers of Borrower who execute or attest
any of the Loan Documents on behalf of Borrower, executed by the
Secretary or an Assistant Secretary of Borrower.
(g) Resolutions. Copies of resolutions duly adopted by the
Board of Directors of Borrower approving this Agreement and the other
Loan Documents and authorizing the transactions contemplated in such
Loan Documents, accompanied by a certificate of the Secretary or an
Assistant Secretary of Borrower dated as of the Closing Date certifying
that such copy is a true and correct copy of resolutions duly adopted
at a meeting of (which may be held by conference telephone or similar
communications equipment by means of which all Persons participating in
a meeting can hear each other if permitted by applicable Law and, if
required by such Law, by its Bylaws), or by the unanimous written
consent of (if permitted by applicable Law and, if required by such
Law, by its Bylaws), the Board of Directors of Borrower, and that such
resolutions constitute all the resolutions adopted with respect to such
transactions, have not been amended, modified, or revoked in any
respect (except as any such resolution may be modified by any such
other resolution), and are in full force and effect as of the Closing
Date.
(h) Certificate Regarding Closing. Certificate executed by a
Responsible Officer of Borrower regarding the absence of any Material
Adverse Effect as of the Closing Date.
(i) Opinion of Counsel to the Borrower. The opinion of counsel
to the Borrower, addressed to Administrative Agent and Banks,
substantially in the form of EXHIBIT E.
(j) Payment of Fees and Expenses. Payment of all fees and
other compensation required to be paid to each Agent or the Banks
pursuant to this Agreement or pursuant to any other written agreement
on or prior to the Closing Date; and payment of all fees payable on or
prior to the Closing Date to Administrative Agent as provided for in
SECTION 5 together with reimbursements to Administrative Agent for all
fees and expenses incurred in connection with the negotiation,
preparation, and closing of the transactions evidenced by the Loan
Documents (including reasonable attorneys' fees and expenses).
(k) Current Financials. True and correct copies of the Current
Financials have been delivered to Administrative Agent.
REVOLVING CREDIT AGREEMENT
25
<PAGE> 31
(l) Sixth Amendment to Existing Credit Agreement. Evidence
that the Sixth Amendment to the Existing Credit Agreement has been
executed by all required parties thereto and that all conditions
precedent to the effectiveness thereof have been satisfied.
(m) Other. Such other approvals, opinions or documents as the
Administrative Agent or Majority Banks may request.
6.2 Conditions Precedent to Each Borrowing. In addition to the
conditions stated in SECTION 6.1, Banks will not be obligated to fund any
Borrowing pursuant to SECTION 2.1, unless on the date of such Borrowing (and
after giving effect thereto): (a) Administrative Agent shall have timely
received therefor a Notice of Borrowing; (b) all of the representations and
warranties of the Borrower set forth in the Loan Documents are true and correct
in all material respects on and as of the date of Borrowing as if made on and as
of such date; (c) no Event of Default or Unmatured Event of Default shall have
occurred and be continuing on such date or after giving effect to the Borrowing
requested; and (d) the funding of such Borrowings is permitted by Law. Each
Notice of Borrowing delivered to Administrative Agent shall constitute the
representation and warranty by Borrower to Administrative Agent that the
statements in CLAUSES (b), (c) and (d) above are true and correct in all
respects. Each condition precedent in this Agreement is material to the
transactions contemplated in this Agreement, and time is of the essence in
respect of each thereof. Subject to the prior approval of Majority Banks, Banks
may fund any Borrowing without all conditions being satisfied, but, to the
extent permitted by Law, the same shall not be deemed to be a waiver of the
requirement that each such condition precedent be satisfied as a prerequisite
for any subsequent funding unless Majority Banks specifically waive each such
item in writing.
SECTION 7 REPRESENTATIONS AND WARRANTIES. To induce Banks to enter into this
Agreement and to make the loans herein provided for, Borrower hereby represents
and warrants to the Administrative Agent and to each Bank that:
7.1 Financial Condition. The Current Financials present fairly the
consolidated financial condition of Borrower and its consolidated Subsidiaries,
and the consolidated results of their operations and cash flows, as of and for
the portion of the fiscal year ending on the date or dates thereof (subject only
to year-end audit adjustments). All such Financial Statements including the
related schedules and notes thereto, have been prepared in accordance with GAAP
applied consistently throughout the periods involved (except as approved by such
accountants or Responsible Officer, as the case may be, and as disclosed
therein) Neither Borrower nor any of its consolidated Subsidiaries had, as of
the dates of the consolidated balance sheets referred to above, any Contingent
Obligation, contingent liabilities, or liability for Taxes, long-term leases, or
unusual forward or long-term commitments, which are material to Borrower and its
consolidated Subsidiaries taken as a whole and are not reflected in the
foregoing statements or in the notes thereto and are required by GAAP to be so
reflected.
7.2 No Change. Since September 30, 1999, there has been no material
adverse change in the business, operations, assets, or financial or other
condition of the Companies taken as a whole.
7.3 Corporate Existence; Compliance with Law. Each of (a) the Borrower
and its Significant Subsidiaries (i) is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation or
formation, as the case may be, and (ii) has the corporate, company or
partnership power, as the case may be, and authority and the legal right to own
and operate its property, to lease the property it operates, and to conduct the
business in which it is currently engaged, and (b) the Companies (i) is duly
qualified as a foreign corporation and in good
REVOLVING CREDIT AGREEMENT
26
<PAGE> 32
standing under the Laws of each jurisdiction where its ownership, lease, or
operation of property or the conduct of its business requires such
qualification, except to the extent that failure to be so qualified is not
reasonably likely, in the aggregate, to be a Material Adverse Event, and (ii) is
in compliance with all Laws except to the extent that the failure to comply
therewith is not reasonably likely, in the aggregate, to be a Material Adverse
Event.
7.4 Corporate Power; Authorization; Enforceable Obligations. Borrower
has the corporate power and authority and the legal right to make, deliver, and
perform the Loan Documents and to borrow hereunder and has taken all necessary
corporate action to authorize the Borrowings on the terms and conditions of the
Loan Documents and to authorize the execution, delivery, and performance of the
Loan Documents. The execution, delivery, and performance of the Loan Documents
will not contravene any provision of the charter or bylaws. No approval,
consent, exemption or authorization of, filing with, or other act by, or in
respect of, any Governmental Authority, is necessary or required in connection
with the Borrowings hereunder or with the execution, delivery, performance,
validity, or enforceability of the Loan Documents. The Loan Documents have been
duly executed and delivered on behalf of Borrower and constitute legal, valid,
and binding obligations of Borrower enforceable against Borrower in accordance
with their respective terms, except as enforceability may be limited by
applicable Debtor Relief Laws and by equitable principles regardless of whether
considered in a proceeding in equity or at law.
7.5 No Legal Bar; No Contravention. The execution, delivery, and
performance of the Loan Documents, the Borrowings hereunder, and the use of the
proceeds thereof, will not (a) violate any Laws (including, without limitation,
Regulation U, the Securities Act of 1933 and the Securities Exchange Act of
1934), or any Contractual Obligation of any Company, or (b) conflict with or
result in a default under, any Contractual Obligation, judgment, injunction,
order, decree or other instrument binding upon any Company or result in or
require the creation or imposition of any Lien (other than Liens permitted in
accordance with SECTION 8.10) on any of its or their respective properties or
revenues pursuant to any Laws or Contractual Obligation.
7.6 No Material Litigation. No Litigation, investigation, or proceeding
of or before any arbitrator or Governmental Authority is pending or, to the
knowledge of Borrower, threatened by or against any Company or against any of
its or their respective properties or revenues (a) with respect to the Loan
Documents or any of the transactions contemplated hereby or (b) which is
reasonably likely to constitute a Material Adverse Event.
7.7 No Default. No Company is in default under or with respect to any
Contractual Obligation in any respect which could be a Material Adverse Event.
No Event of Default or Unmatured Event of Default has occurred and is
continuing.
7.8 Ownership of Property; Liens. The Companies taken, as a whole, have
good and indefeasible title to all their material assets reflected in the
Current Financials as being owned by them (except as sold or otherwise disposed
of in the ordinary course of business after the date of such Current Financials)
free of any Lien, except Liens permitted in accordance with SECTION 8.10.
7.9 Taxes. Each of the Companies has filed or caused to be filed all
Tax returns which to the knowledge of Borrower are required to be filed (except
for state and local Tax returns where such failure to qualify and such failure
to file is not reasonably likely, in the aggregate for all such jurisdictions,
to be a Material Adverse Event), and has paid all Taxes shown to be due and
payable on said returns or on any assessments made against it or any of its
property and all other Taxes, fees
REVOLVING CREDIT AGREEMENT
27
<PAGE> 33
or other charges imposed on it or any of its property by any Governmental
Authority (other than those the amount or validity of which is currently being
contested in good faith by appropriate proceedings and with respect to which
reserves in conformity with GAAP have been provided on the books of the
appropriate Companies, as the case may be, and those that could not reasonably
be expected to be a Material Adverse Event); and no Tax liens have been filed
and, to the knowledge of Borrower, no claims are being asserted with respect to
any such Taxes, fees or other charges which, in either case, is reasonably
likely to be a Material Adverse Event.
7.10 Federal Regulations. No Company is engaged or will engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" any "margin stock" within
the respective meanings of each of the quoted terms under Regulation U as now
and from time to time hereafter in effect. No part of the proceeds of any
Borrowings hereunder will be used for any purpose which violates, or results in
a violation of, the provisions of the Regulations of such Board of Governors.
"Margin Stock" (as defined in Regulation U) constitutes less than 25% of those
assets of the Companies which are subject to any limitation on sale, pledge, or
other restriction hereunder.
7.11 Compliance with ERISA.
(i) Each Plan (and each related trust, insurance contract or fund) is
in substantial compliance with its terms and with all applicable laws, including
ERISA and the Code; each Plan (and each related trust, if any) which is intended
to be qualified under Section 401(a) of the Code has received a determination
letter from the Internal Revenue Service to the effect that it meets the
requirements of Sections 401(a) and 501(a) of the Code; no Reportable Event has
occurred; no Plan which is Multiemployer Plan is insolvent or in reorganization;
no Plan has an Unfunded Current Liability; no Plan (which is not a Multiemployer
Plan) which is subject to Section 412 of the Code or Section 302 of ERISA has an
accumulated funding deficiency, within the meaning of such sections of the Code
or ERISA, or has applied for or received a waiver of an accumulated funding
deficiency or an extension of any amortization period, within the meaning of
Section 412 of the Code or Section 303 or 304 of ERISA; all contributions
required to be made with respect to a Plan have been timely made; neither any
Company nor any ERISA Affiliate has incurred any material liability to, or on
account of, a Plan pursuant to Sections 406, 409, 502(i), 502(l), 515, 4062,
4063, 4064, 4069, 4201, 4204 or 4212 of ERISA or Sections 401(a)(29), 4971 or
4975 of the Code or expects to incur any such material liability under any of
the foregoing sections with respect to any Plan; no condition exists which
presents a material risk to any Company or any ERISA Affiliate of incurring a
material liability to or on account of a Plan pursuant to the foregoing
provisions of ERISA and the Code; no proceedings have been instituted to
terminate or appoint a trustee or administer any Plan which is subject to Title
IV of ERISA; no action, suit, proceeding, hearing, audit or investigation with
respect to the administration, operation or the investment of assets of any Plan
(other than routine claims for benefits) is pending, expected or threatened that
could reasonably be expected to be a Material Adverse Event; using actuarial
assumptions and computation methods consistent with Part 1 of subtitle E of
Title IV of ERISA, the aggregate liabilities of any Company and its ERISA
Affiliates to all Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Plan, would not exceed $25,000,000; each group health plan (as defined by
Section 607(1) of ERISA or Section 4980B(g)(2) of the Code) which covers or has
covered employees or former employees of Companies or any ERISA Affiliate has at
all times been operated in material compliance with the provisions of Part 6 of
subtitle B of Title I of ERISA and Section 4980B of the Code; no lien imposed
under the Code or ERISA on the assets of any Company or any ERISA Affiliate
exists or is likely to arise on account of any Plan and neither
REVOLVING CREDIT AGREEMENT
28
<PAGE> 34
any Company nor any ERISA Affiliate maintains or contributes to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) which provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any Plan the obligations with respect to which could
reasonably be expected, either individually or in the aggregate, to cause a
Material Adverse Event.
(ii) Each Foreign Pension Plan, if any, has been maintained in
substantial compliance with its terms and with the requirements of any and all
applicable laws, statutes, rules, regulations and orders and has been
maintained, where required, in good standing with applicable regulatory
authorities, except where failure to do so could not reasonably be expected to
be a Material Adverse Event. All contributions required to be made with respect
to a Foreign Pension Plan have been timely made, except the failure of which to
make could not reasonably be expected to be a Material Adverse Event. Neither
any Company nor its subsidiaries has incurred any obligation in connection with
the termination of or withdrawal from any Foreign Pension Plan, except such
obligation that could not reasonably be expected to be a Material Adverse Event.
The present value of the accrued benefit liabilities (whether or not vested)
under each Foreign Pension Plan, determined as of the end of the Borrower's most
recently ended fiscal year on the basis of actuarial assumptions, each of which
is reasonable, did not exceed the current value of the assets of such Foreign
Pension Plan allocable to such benefit liabilities, except if any such excess
could not reasonably be expected to be a Material Adverse Event.
7.12 Investment Company Act, etc. None of the Borrower, any Person
controlling the Borrower, or any Subsidiary, is an "Investment Company" within
the meaning of the Investment Company Act of 1940. None of the Companies is
subject to regulation under (i) the Public Utility Holding Company Act of 1935,
(ii) the Federal Power Act, (iii) the Interstate Commerce Act, (iv) any state
public utilities code, or (v) any Federal or state statute or regulation,
limiting, in the case of CLAUSES (iii), (iv) and (v), its ability to incur Debt
for borrowed money.
7.13 Environmental Matters. Except as to matters which, individually,
or in the aggregate, are not reasonably likely to result in a Material Adverse
Event,
(a) The Companies have obtained all Environmental Permits with
respect to the business in which they are engaged (the "BUSINESS") and
with respect to the facilities and properties owned, leased, or
operated by the Companies (the "PROPERTIES"), and the Business and all
operations at the Properties are in compliance with all Environmental
Permits and are otherwise in compliance with all Environmental Laws;
(b) No Company has received any Environmental Claim with
respect to any of the Properties or the Business or otherwise, nor does
Borrower have knowledge or reason to believe that any such
Environmental Claim will be received or is threatened; and
(c) There are no past or present actions, activities, events,
conditions, or circumstances, including, without limitation, the
Release, threatened Release, emission, discharge, generation,
treatment, storage, or disposal of Hazardous Substances at any
location, that could reasonably be expected to give rise to liability
of any Company under any Environmental Law or any contract or
agreement.
7.14 Year 2000 Compliance. Borrower has (i) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by
REVOLVING CREDIT AGREEMENT
29
<PAGE> 35
suppliers and vendors) that could be materially adversely affected by the "Year
2000 Problem" (that is, the risk that computer applications used by the Borrower
or any of its Subsidiaries (or its suppliers and vendors) may be unable to
recognize and perform properly date-sensitive functions involving certain dates
prior to and any date after December 31, 1999), (ii) developed a plan and time
line for addressing the Year 2000 Problem on a timely basis, and (iii) to date,
implemented in all material respects that plan in accordance with that
timetable.
7.15 Purpose of Facility. Borrower will use all proceeds of Borrowings
for one or more of the following purposes: (i) to repurchase Borrower's
Subordinated Notes, (ii) to repurchase Borrower's common stock, and (iii) for
working capital and for general corporate purposes.
7.16 Pari Passu Obligations; Senior Indebtedness. The claims and rights
of the Banks and the Administrative Agent against Borrower under this Agreement
and the Notes will not be subordinate to, and will rank at least pari passu
with, the claims and rights of any other unsecured creditors of Borrower with
respect to indebtedness which is not in any manner subordinated in right of
payment or security in any respect to the Obligation. The Obligation is
permitted in accordance with the terms of the Subordinated Indenture and
constitutes "Designated Senior Indebtedness" and "Senior Indebtedness" as such
terms are defined in the Subordinated Indenture. The Borrower hereby
specifically designates the Obligation as "Designated Senior Indebtedness" for
purposes of the Subordinated Indenture. This Agreement and the other Loan
Documents represent a "Bank Credit Facility" for purposes of the Subordinated
Indenture. So long as the Subordinated Indenture is in full force and effect,
all Borrowings are and will be made in compliance with the restrictions
contained in the Subordinated Indenture.
7.17 Full Disclosure. All information furnished to the Banks in writing
prior to the date hereof in connection with the transactions contemplated hereby
does not, collectively, contain any misstatement of a material fact or omit to
state a fact necessary to make the statements contained therein, in the light of
the circumstances under which they were made, not misleading in any material
respect on and as of the date hereof.
SECTION 8 COVENANTS. Borrower covenants and agrees (and agrees to cause each
other Company to the extent any covenant is applicable to such Company) to
perform, observe, and comply with each of the following covenants, from the
Closing Date and so long thereafter as Banks are committed to fund Borrowings
under this Agreement and thereafter until the payment in full of the Principal
Debt and payment in full of all interest, fees, and other amounts of the
Obligation then due and owing, unless Borrower receives a prior written consent
to the contrary by Administrative Agent as authorized by Majority Banks:
8.1 Financial Statements. Borrower shall furnish to the Administrative
Agent in sufficient quantity for each Bank:
(a) As soon as available, but in any event within 95 days
after the end of each fiscal year of Borrower, Financial Statements,
showing the consolidated financial condition and results of operation
calculated for Borrower and its consolidated Subsidiaries as at the end
of such year, certified without a "going concern" or like qualification
or exception, or qualification arising out of the scope of the audit,
by independent certified public accountants of a nationally recognized
standing; and
REVOLVING CREDIT AGREEMENT
30
<PAGE> 36
(b) As soon as available, but in any event not later than 50
days after the end of each of the first three quarterly-periods of each
fiscal year of Borrower, the unaudited Financial Statements showing the
consolidated financial condition and results of operation calculated
for Borrower and its consolidated Subsidiaries as at the end of each
such quarter and the portion of the fiscal year through such date,
certified by a Responsible Officer (subject to year-end audit
adjustments);
all such Financial Statements to be prepared in accordance with GAAP applied
consistently throughout the periods reflected therein (except as approved by
such accountants or Responsible Officer, as the case may be, and disclosed
therein).
8.2 Certificates; Other Information. Borrower shall furnish to the
Administrative Agent in sufficient quantity for each Bank:
(a) Concurrently with the delivery of the Financial Statements
referred to in SECTION 8.1(a) and (b), a certificate of a Responsible
Officer (i) stating that, to the best of such officer's knowledge, the
Companies during such period have observed or performed all of the
covenants and other agreements applicable to such Companies, and that
such officer has obtained no knowledge of any Event of Default or
Unmatured Event of Default, except as specified in such certificate,
and (ii) showing in reasonable detail the calculations supporting such
statement in respect of SECTION 8.16;
(b) Within five Business Days after the same are sent, copies
of all Financial Statements and annual reports which Borrower sends to
its stockholders, and within five days after the same are filed, copies
of all Financial Statements and reports which Borrower may make to, or
file with, the Securities and Exchange Commission or any successor; and
(c) Promptly, such additional financial and other information
as any Bank may from time to time reasonably request.
8.3 Payment of Obligations. Each Company shall pay, discharge, or
otherwise satisfy all material taxes, assessments and governmental charges or
levies imposed upon it or upon its income or profits, or upon any property
belonging to it, prior to the date on which penalties attach thereto, and all
lawful material claims which, if unpaid, might become a Lien upon the property
of such Company; provided that none of the Companies shall be required to pay
any such tax, assessment, charge, levy or claim (i) the payment of which is
being contested in good faith by appropriate proceedings and reserves in
conformity with GAAP with respect thereto have been provided on the books of the
applicable Companies, as the case may be, (ii) not yet delinquent or (iii) the
non-payment of which, if taken in the aggregate, could not reasonably be
expected to be a Material Adverse Event.
8.4 Conduct of Business and Maintenance of Existence. None of the
Companies shall engage in any business if, as a result thereof, the business of
the Companies, taken as a whole, would not be substantially the same as that
conducted on the Closing Date. For purposes of this SECTION 8.4, the business of
the manufacture and distribution of building products shall be deemed to be
within the types of business conducted by the Companies on the Closing Date.
Each Company shall preserve, renew and keep in full force and effect its
corporate or partnership existence, as the case may be, and take all reasonable
action to maintain all rights, privileges, and franchises necessary or desirable
in the normal conduct of its business (other than those rights, privileges, and
franchises the
REVOLVING CREDIT AGREEMENT
31
<PAGE> 37
failure of which to maintain could not reasonably be expected to be a Material
Adverse Event); provided that nothing in this Section shall prohibit (i) the
merger of a Subsidiary into the Borrower or the merger or consolidation of a
Subsidiary with or into another Person, (ii) the sale or other disposition
(whether by merger or otherwise) of the capital stock or assets of any
Subsidiary, if such transaction complies with the provisions of SECTION 8.11 or
(iii) the termination of the corporate existence of any Subsidiary if the
Borrower in good faith determines that such termination is in the best interest
of the Borrower and is not materially disadvantageous to the Banks and if, with
respect to each of the foregoing CLAUSES (i), (ii) and (iii), after giving
effect thereto, no Event of Default or Unmatured Event of Default shall have
occurred and be continuing. Company shall comply with all Contractual
Obligations and Laws, except to the extent that the failure to comply therewith
would not, in the aggregate, be a Material Adverse Event.
8.5 Maintenance of Property; Insurance. Each Company shall (i) keep all
property useful and necessary in its business in good working order and
condition, except when failure to do so could reasonably be expected to be a
Material Adverse Event; (ii) maintain with financially sound and reputable
insurance companies insurance on all its property in at least such amounts and
against at least such risks as are usually insured against in the same general
area by companies engaged in the same or a similar business; and (iii) furnish
to each Bank, upon written request, full information as to the insurance
carried.
8.6 Inspection of Property; Books and Records; Discussions. Each
Company shall (i) keep proper books of record and account in which full, true,
and correct entries in conformity with GAAP and all Laws shall be made of all
dealings and transactions in relation to its business and activities; and (ii)
permit representatives of any Bank to visit and inspect any of its properties at
any reasonable time and as often as may reasonably be desired, and to discuss
the business, operations, properties, and financial and other condition of
Borrower and its Subsidiaries with officers and employees of the Companies and
with its independent certified public accountants.
8.7 Notices. Borrower shall promptly give notice to Administrative
Agent and each Bank of:
(a) The occurrence of any Event of Default or Unmatured Event
of Default;
(b) Any (i) default or event of default under any Contractual
Obligation of any Company or (ii) Litigation, investigation, or
proceeding which may exist at any time between any Company and any
Governmental Authority, which in either case, is reasonably likely to
be a Material Adverse Event;
(c) Any Litigation or proceeding affecting any Company (i) in
which the potential loss not covered by insurance could reasonably be
expected to be $50,000,000 or more or (ii) in which injunctive or
similar relief is sought which is reasonably likely to be a Material
Adverse Event;
(d) The occurrence of a Material Adverse Event.
Each notice pursuant to this Section shall be accompanied by a statement of a
Responsible Officer setting forth details of the occurrence referred to therein
and stating what action Borrower proposes to take with respect thereto.
REVOLVING CREDIT AGREEMENT
32
<PAGE> 38
8.8 Year 2000 Compliance. Borrower will promptly notify the
Administrative Agent in the event Borrower discovers or determines that any
computer application (including those of its suppliers and vendors) that is
material to its or any of its Subsidiaries' business and operations will not be
Year 2000 compliant on a timely basis, except to the extent that such failure is
not reasonably expected to be a Material Adverse Event.
8.9 Compliance with Laws. The Companies will comply with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject, including laws relating to pension funds and
Environmental Laws, which, if violated, could reasonably be expected to be a
Material Adverse Event.
8.10 Limitation on Liens. The Companies shall not, directly or
indirectly, create, incur, assume, or suffer to exist any Lien upon any of its
property, assets, or revenues, whether now owned or hereafter acquired, except:
(a) Liens for Taxes not yet due or which are being contested
in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the appropriate
Companies in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, or other like Liens arising in the ordinary course of
business which are not overdue for a period of more than 30 days or
which are being contested in good faith and for which adequate reserves
in accordance with GAAP, if any, have been set aside;
(c) pledges or deposits in connection with workmen's
compensation, unemployment insurance, and other social security
legislation;
(d) easements, rights-of-way, mineral reservations,
restrictions, and other similar encumbrances, defects or irregularities
of title which do not in any case (i) secure Debt or (ii) materially
detract from the value of the property subject thereto or interfere
with the ordinary conduct of the business of the Companies;
(e) Liens (other than any Lien imposed by ERISA) incurred or
deposits made in the ordinary course of business in connection with
workers' compensation, unemployment insurance, and other types of
social security;
(f) statutory or common law banker's liens in the nature of
rights of setoff arising in the ordinary and usual course of business
of the Companies;
(g) any Lien upon assets existing at the time of acquisition
thereof or to secure the payment of all or any part of the purchase
price thereof or to secure any Debt incurred prior to, at the time of,
or within 90 days after, the acquisition of such assets for the purpose
of financing all or any part of the purchase price thereof, so long as
such Lien is limited to the assets so acquired;
(h) Liens securing Acquired Indebtedness if such Liens secured
such Acquired Indebtedness at the time such Acquired Indebtedness
becomes an obligation of any Company and such Liens were not incurred
in connection with, or in anticipation of, such Acquired Indebtedness
becoming an obligation of a Company; provided, however, that such Liens
shall
REVOLVING CREDIT AGREEMENT
33
<PAGE> 39
not extend to or cover any assets of any Company other than the assets
that secured the Acquired Indebtedness prior to such Acquired
Indebtedness becoming an obligation of a Company;
(i) Liens arising out of the refinancing, extension, renewal
or refunding of any Debt secured by any Lien permitted by the foregoing
CLAUSES (g) and (h), provided that such Debt is not increased and is
not secured by any additional assets;
(j) Liens in the nature of deposits with a trustee or other
depository in connection with a redemption, payment, acquisition,
repurchase or retirement for value of the Subordinated Notes; and
(k) Liens, in addition to those otherwise specified in this
Section, which in the aggregate do not secure obligations in excess of
10% of Consolidated Net Worth.
8.11 Prohibition of Fundamental Changes. No Company shall, directly or
indirectly, enter into any transaction of merger or consolidation or
amalgamation, or liquidate, wind up, or dissolve itself (or suffer any
liquidation or dissolution), or convey, transfer, lease or otherwise dispose of,
whether in one transaction or a series of transactions, all or substantially all
of its assets, whether now owned or hereafter acquired, to or in favor of any
Person, except that:
(a) Any corporation (including any Subsidiary of Borrower) may
be merged or consolidated with or into Borrower (provided that,
Borrower shall be the continuing or surviving corporation) or with any
one or more Subsidiaries of Borrower (provided that, (i) if any such
transaction shall be between a corporation (including any Subsidiary of
Borrower) and a Wholly-owned Subsidiary of Borrower, the continuing or
surviving corporation shall be a Wholly-owned Subsidiary of Borrower
and (ii) immediately after each such transaction and after giving
effect thereto, Borrower is in compliance with this Agreement and no
Event of Default or Unmatured Event of Default shall have occurred and
be continuing);
(b) Borrower may be merged into a corporation ( the "SUCCESSOR
CORPORATION") solely for the purpose of changing the Borrower's
domicile (a "REINCORPORATION MERGER") as provided in Rule 145 (a) (2)
of the Securities Act of 1933, as amended from time to time, and such
Successor Corporation shall:
(i) immediately after giving effect to such merger
have-then-effective ratings (or implied ratings) published by
Moody's and S&P applicable to such Successor Corporation's
senior, unsecured, non-credit-enhanced, long term indebtedness
for borrowed money, which ratings shall be Baa3 or higher (if
assigned by Moody's) or BBB- or higher (if assigned by S&P);
(ii) be a corporation organized and existing under
the laws of the United States of America, any state thereof or
the District of Columbia, and shall expressly assume, by
amendment to this Agreement acceptable to the Majority Banks
executed by the Borrower and such Successor Corporation and
delivered to the Administrative Agent, the due and punctual
payment of the principal of, and interest on, the Borrowings
made hereunder and other amounts payable under this Agreement
and the performance and observance of every covenant hereof on
the part of the Borrower to be performed or observed and this
Agreement shall remain in full force and effect;
REVOLVING CREDIT AGREEMENT
34
<PAGE> 40
(iii) immediately after giving effect to such merger,
no Event of Default and no Unmatured Event of Default, shall
have occurred and be continuing;
(iv) immediately after giving effect to such merger,
all of the representations and warranties of the Borrower set
forth in the Loan Documents shall be true and correct in all
material respects as if made by such Successor Corporation;
and
(v) the Borrower shall have delivered to the
Administrative Agent a certificate signed by a Responsible
Officer and a written opinion of counsel satisfactory to the
Administrative Agent (who may be counsel to the Borrower),
each stating that such transaction and such amendment to this
Agreement comply with this Section and that all conditions
precedent herein provided for relating to such transaction
have been satisfied; and
(c) any Subsidiary may enter into any transaction of merger or
consolidation or amalgamation, or liquidate, wind up, or dissolve
itself (or suffer any liquidation or dissolution), or convey, transfer,
lease or otherwise dispose of, whether in one transaction or a series
of transactions, all or substantially all of its assets, whether now
owned or hereafter acquired, to or in favor of any Person; provided
that, immediately after each such transaction and after giving effect
thereto, Borrower is in compliance with this Agreement and no Event of
Default and no Unmatured Event of Default shall have occurred and be
continuing.
8.12 Subsidiary Debt. No Subsidiary of Borrower will incur or at any
time be liable with respect to any Debt, or to issue or have outstanding any
preferred stock, except: (i) Debt or preferred stock outstanding on the date
hereof; (ii) Debt or preferred stock of a Subsidiary issued to and held by the
Company or a Wholly-Owned Subsidiary; (iii) Debt or preferred stock of any
Person existing at the time such Person becomes a Subsidiary of the Company and
not created in contemplation of such event; (iv) refinancing, extension, renewal
or refunding of any Debt or preferred stock permitted by the foregoing clauses
(i) through (iii); (v) Non-Recourse Debt; and (vi) Debt or preferred stock in
addition to that set forth in clauses (i) through (v), if, after giving effect
thereto, the aggregate outstanding principal amount of Debt of all Subsidiaries
pursuant to this clause (vi) does not exceed 10% of Consolidated Net Worth.
8.13 Subsidiary Dividends. No Company shall be a party to or enter into
any agreement, instrument or other document which prohibits or restricts in any
way, or to otherwise, directly or indirectly, create or cause or suffer to exist
or become effective any encumbrance or restriction on the ability of any
Subsidiary of Borrower to (i) pay dividends or make any other distributions in
respect of its capital stock or any other equity interest or participation in
any Subsidiary, or pay or repay any Debt owed to Borrower or any Subsidiary,
(ii) make loans or advances to Borrower or (iii) transfer any of its properties
or assets to Borrower or any Subsidiary (subject to the rights of any holder of
a Lien on any such properties or assets which Lien is a Permitted Lien) other
than (a) customary restrictions contained in purchase and sale agreements with
respect to the sale of assets or Capital Stock that relate to such assets or
Capital Stock for the period from and after the date of the execution and
delivery of such purchase and sale agreement until the date of the closing
thereunder, (b) restrictions on Subsidiaries not Wholly-owned by Borrower that
are acquired or created after the Closing Date, and (c) encumbrances or
restrictions binding upon any Person at the time such Person becomes a
Subsidiary (unless the agreement creating such encumbrance or
REVOLVING CREDIT AGREEMENT
35
<PAGE> 41
restriction was entered into in connection with, or in contemplation of, such
Person becoming a Subsidiary) provided that such encumbrances or restrictions
shall not encumber or restrict any assets of the Borrower or its other
Subsidiaries other than such Subsidiary.
8.14 Compliance with ERISA. As soon as possible and, in any event,
within ten (10) days after any Company or any ERISA Affiliate knows or has
reason to know of the occurrence of any of the following that will or could
reasonably be expected to be a Material Adverse Event, Borrower will deliver to
each of the Banks a certificate of the chief financial officer of the Borrower
setting forth the full details as to such occurrence and the action, if any,
that a Company or any ERISA Affiliate is required or proposes to take, together
with any notices required or proposed to be given or filed by a Company, the
Plan administrator or any ERISA Affiliate to or with the PBGC or any other
governmental agency, or a Plan participant or any notices received by any
Company or such ERISA Affiliate from the PBGC or any other government agency, or
a Plan participant with respect thereto: that a Reportable Event has occurred
(except to the extent that Borrower has previously delivered to the Banks a
certificate and notices (if any) concerning such event); that a contributing
sponsor (as defined in Section 4001(a)(13) of ERISA) of a Plan subject to Title
IV of ERISA is subject to the advance reporting requirement of PBGC Regulation
Section 4043.61 (without regard to subparagraph (b)(1) thereof), and an event
described in subsection .62, .63, .64, .65, .66, .66, .67 or .68 of PBGC
Regulation Section 4043 is reasonably expected to occur with respect to such
Plan within the following 30 days; that an accumulated funding deficiency,
within the meaning of Section 412 of the Code or Section 302 of ERISA, has been
incurred or an application may be or has been made for a waiver or modification
of the minimum funding standard (including any required installment payments) or
an extension of any amortization period under Section 412 of the Code or Section
303 or 304of ERISA with respect to a Plan; that any contribution required to be
made with respect to a Plan or Foreign Pension Plan has not been timely made;
that a Plan has been or may be terminated, reorganized, partitioned or declared
insolvent under Title IV of ERISA; that a Plan has an Unfunded Current
Liability; that proceedings may be or have been instituted to terminate or
appoint a trustee to administer a Plan which is subject to Title IV of ERISA;
that a proceeding has been instituted pursuant to Section 515 of ERISA to
collect a delinquent contribution to a Plan; that any Company or any ERISA
Affiliate will or may incur any material liability with respect to, or on
account of, the termination of or withdrawal from a Plan under Sections 4062,
4063, 4064, 4069, 4201, 4204, or 4212 of ERISA or with respect to a Plan under
Sections 401(a)(29), 4971, 4975 or 4980 of the Code or Section 409, 502(i) or
502(l) of ERISA; or that Companies or an ERISA Affiliate will or may incur a
material liability with respect to a group health as defined in Section 607(1)
of ERISA or under Section 4980B of the Code; or that a Company or an ERISA
Affiliate will or may incur any material liability pursuant to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA) that provides
benefits to retired employees or other former employees (other than as required
by Section 601 of ERISA) or any Plan or any Foreign Pension Plan. Companies will
deliver to each of the Banks copies of any records, documents or other
information that must be furnished to the PBGC with respect to any Plan pursuant
to Section 4010 of ERISA. At the written request of any Bank, Companies will
also deliver to such Banker a complete copy of the annual report (and related
financial and actuarial statements and opinions and other supporting statements,
certifications, schedules and information) required to be filed with the
Internal Revenue Service on the Form 5500 series. In addition to any
certificates or notices delivered to the Banks pursuant to the first sentence
hereof, copies of any records, documents or other information required to be
furnished to the PBGC or any other governmental agency, and any material notices
received by Companies or any ERISA Affiliate with respect to any Plan shall be
delivered to the Banks no later than ten (10) days after the date such records,
documents and/or information has been furnished to the PBGC or any other
governmental agency or such notice has been received by Companies or the
REVOLVING CREDIT AGREEMENT
36
<PAGE> 42
ERISA Affiliate, as applicable. Each of the Companies shall insure that all
Foreign Pension Plans administered by it or into which it makes payments obtains
or retains (as applicable) registered status under and as required by applicable
law and is administered in a timely manner in all respects in compliance with
all applicable laws except where the failure to do any of the foregoing could
not, either individually or in the aggregate, reasonably be expected to cause a
Material Adverse Event.
No Company or ERISA Affiliate shall, directly or indirectly, (a)
terminate any Plan so as to result in any liability to PBGC; (b) engage in any
"prohibited transaction" (as defined in Section 406 of ERISA or Section 4975 of
the Code) involving any Plan which would result in a liability for an excise tax
or civil penalty in connection therewith; (c) incur or suffer to exist any
"accumulated funding deficiency" (as defined in Section 302 of ERISA), whether
or not waived, involving any Plan; (d) allow or suffer to exist any event or
condition, which presents a risk of incurring a material liability to PBGC by
reason of termination of any such Plan; or (e) incur or likely incur withdrawal
liability under a Multiemployer Plan or incur liability respecting the
insolvency or reorganization of a Multiemployer Plan; and, in each of CLAUSES
(a) through (e) hereof, such liability, deficiency or risk, as the case may be,
when taken together with all other contingencies and facts relating to the
Companies under this Section, is a Material Adverse Event.
8.15 Assignment. Borrower shall not assign or transfer any of its
Rights, duties, or obligations under any of the Loan Documents except pursuant
to a Reincorporation Merger in accordance with SECTION 8.11(b).
8.16 Financial Covenants.
(a) Leverage Ratio. Borrower shall not permit, as of the final
day of any fiscal quarter of the Borrower, its Leverage Ratio,
calculated based upon the four (4) immediately preceding fiscal
quarters, including the quarter then ended, to be greater than
3.00:1.00.
(b) Consolidated Net Worth. Borrower shall not permit, at any
time its Consolidated Net Worth to be less than Six Hundred Million
Dollars ($600,000,000).
(c) Interest Coverage Ratio. Borrower shall not permit, as of
the last day of any fiscal quarter of the Borrower, the ratio of: (i)
Consolidated EBITDA for the twelve-month period ending on such date to
(ii) Consolidated Interest Expense for such period to be less than 3.00
to 1.00.
8.17 Transactions with Affiliates. No Company shall enter into any
material transaction with any of its Affiliates (other than transactions between
or among Companies), other than transactions in the ordinary course of business
and upon fair and reasonable terms not materially less favorable than such
Company could obtain or could become entitled to in an arm's-length transaction
with a Person that was not its Affiliate.
SECTION 9 EVENT OF DEFAULT. The term "EVENT OF DEFAULT" means the occurrence of
any one or more of the following events:
9.1 Payment of Obligation. Borrower shall fail to pay all or any part
of the principal of the Obligation when the same becomes due (whether by its
terms, by acceleration, or as otherwise provided in the Loan Documents) or shall
fail to pay any other part of the Obligation (including,
REVOLVING CREDIT AGREEMENT
37
<PAGE> 43
without limitation, interest and fees) within three Business Days of when the
same becomes due (whether by its terms, by acceleration, or as otherwise
provided in the Loan Documents).
9.2 Misrepresentation. Any representation or warranty made or deemed
made by any Company in any Loan Document shall prove to have been incorrect in
any respect material to the Companies taken as a whole on or as of the date made
or deemed made.
9.3 Covenants. The failure or refusal of Borrower (and, if applicable,
any other Company) to punctually and properly perform, observe, and comply with:
(a) Any covenant, agreement, or condition contained in
SECTIONS 8.7 AND 8.10 through 8.17; and
(b) Any other covenant, agreement, or condition contained in
any Loan Document (other than the covenant to pay the Obligations
addressed in SECTION 9.1 or the covenants addressed in SECTION 9.3(a))
and such failure or refusal shall continue unremedied for a period of
30 days after notice thereof shall have been given to the Borrower by
the Administrative Agent or any Bank.
9.4 Default Under Other Debt. An Event of Default as defined in the
Existing Credit Agreement shall occur or the Companies shall (i) default in any
payment of principal of or interest on any Debt (other than the Obligation),
beyond the period of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Debt was created; provided that, such
Debt shall be in the amount of $50,000,000 or more; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Debt or contained in any instrument or agreement evidencing, securing, or
relating thereto, or any other event shall occur or condition exist, the effect
of which default or other event or condition is to cause, or to permit the
holder or holders of such Debt (or a trustee or agent on behalf of such holder
or holders) to cause, with the giving of notice if required, such Debt or other
indebtedness to become due prior to its stated maturity.
9.5 Debtor Relief. Any Company (a) voluntarily seeks, consents to, or
acquiesces in the benefit of any Debtor Relief Law, other than as a creditor or
claimant, (b) becomes a party to or is made the subject of any proceeding
provided for by any Debtor Relief Law, other than as a creditor or claimant,
that could suspend or otherwise adversely affect the Rights of Administrative
Agent or any Bank granted in the Loan Documents (unless, in the event such
proceeding is involuntary, such proceeding remains undismissed, undischarged, or
unbonded for a period of 60 days); and (c) any Company shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its debts as
they become due.
9.6 Attachment. There shall be commenced against any Company any case,
proceeding, or other action seeking issuance of a warrant of attachment,
execution, distraint, or similar process against all or any substantial part of
its assets which results in the entry of an order for any such relief which
shall not have been vacated, discharged, stayed, or bonded pending appeal within
60 days from the entry thereof; or any Company shall take any action in
furtherance of, or indicating its consent to, approval of, or acquiescence in,
any such proceedings.
9.7 Employee Benefit Plans. The following shall occur: (a) Any Plan
shall fail to satisfy the minimum funding standard required for any plan year or
part thereof under Section 412 of the Code or Section 302 of ERISA or a waiver
of such standard or extension of any amortization period
REVOLVING CREDIT AGREEMENT
38
<PAGE> 44
is sought or granted under Section 412 of the Code or Section 303 or 304 of
ERISA, Reportable Event shall have occurred, a contributing sponsor ( as defined
in Section 4001(a)(13) of ERISA) of a Plan subject to Title IV of ERISA shall be
subject to the advance reporting requirement of PBGC Regulation Section 4043.61
(without regard to subparagraph (b) (1) thereof) and an event described in
subsections .62, .63, .64, .65, .66, .67 or .68 of PBGC Regulations Section 4043
shall be reasonably expected to occur with respect to such Plan within the
following 30 days, any Plan which is subject to Title IV of ERISA shall have had
or is likely to have a trustee appointed to administer such Plan, any Plan which
is subject to Title IV of ERISA is, shall have been or is likely to be
terminated or to be the subject of termination proceedings under ERISA, any Plan
shall have an Unfunded Current Liability, a contribution required to be made
with respect to a Plan or a Foreign Pension Plan has not been timely made,
Company or any ERISA Affiliate has incurred or is likely to incur any liability
to or on account of a Plan under Sections 406, 409, 502(l), 515, 4062, 4063,
4064, 4069, 4201, 4204 or 4212 of ERISA or Sections 401(a)(29), 4971 or 4975 of
the Code or on account of a group health plan (as defined in Section 607(1) of
ERISA or Section 4980B of the Code) under Section 4980B of the Code, or any
Company or ERISA Affiliate has incurred or is likely to incur liabilities
pursuant to one or more employee welfare benefit plan (as defined in Section
3(1) of ERISA that provide benefits to retired employees or other former
employees (other than as required by Section 601 of ERISA) or Plans or Foreign
Pension Plans, a "default" within the meaning of Section 4219(c)(5) of ERISA
shall have occurred with respect to any Plan, any applicable law, rule or
regulation is adopted, changed or interpreted, or the interpretation or
administration thereof is changed, in each case after the date hereof, by any
governmental authority or agency or by any court (a "Change of Law"), or, as a
result of a Change in Law, an event occurs following a Change in Law with
respect to or otherwise affecting any Plan, insolvency or reorganization of a
Multiemployer Plan, or any other event or condition shall occur or exist with
respect to a Plan; (b) there shall result from any such event or events the
imposition of a lien, the granting of a security interest, or liability or a
material risk of incurring a liability; and (c) such lien, security interest or
liability, either individually and/or in the aggregate, is, or could reasonably
be expected to cause, a Material Adverse Event.
9.8 Judgments. One or more judgments or decrees shall be entered
against any of the Companies involving in the aggregate a liability (not covered
by insurance or not paid) of $50,000,000 or more and all such judgments or
decrees shall not have been vacated, discharged, or stayed within 60 days from
the entry thereof.
9.9 Change of Control. A Change of Control shall occur.
SECTION 10 RIGHTS AND REMEDIES.
10.1 Remedies Upon Event of Default.
(a) If an Event of Default exists under SECTION 9.5 or 9.6,
the commitment to extend credit hereunder shall automatically terminate
and the entire unpaid balance of the Obligation under the Revolving
Facility shall automatically become due and payable without any action
or notice of any kind whatsoever.
(b) If any Event of Default exists, Administrative Agent
(subject to the terms of SECTION 11) shall upon the request of Majority
Banks or Majority Banks may, do any one or more of the following: (i)
if the maturity of the Obligation under the Revolving Facility has not
already been accelerated under SECTION 10.1(a), declare the entire
unpaid balance of the
REVOLVING CREDIT AGREEMENT
39
<PAGE> 45
Obligation, or any part thereof, immediately due and payable, whereupon
it shall be due and payable; (ii) terminate the commitments of Banks to
extend credit hereunder; (iii) reduce any claim to judgment; (iv) to
the extent permitted by Law, exercise (or request each Bank to, and
each Bank shall be entitled to, exercise) the Rights of offset or
banker's Lien against the interest of Borrower in and to every account
and other property of Borrower which are in the possession of
Administrative Agent or any Bank to the extent of the full amount of
the Obligation (to the extent permitted by Law, Borrower being deemed
directly obligated to each Bank in the full amount of the Obligation
for such purposes); and (v) exercise any and all other legal or
equitable Rights afforded by the Loan Documents, the Laws of the State
of Texas, or any other applicable jurisdiction as Administrative Agent
shall deem appropriate, or otherwise, including, but not limited to,
the Right to bring suit or other proceedings before any Governmental
Authority either for specific performance of any covenant or condition
contained in any of the Loan Documents or in aid of the exercise of any
Right granted to Administrative Agent or any Bank in any of the Loan
Documents.
10.2 Borrower Waivers. To the extent permitted by Law, Borrower hereby
waives presentment and demand for payment, protest, notice of intention to
accelerate, notice of acceleration, and notice of protest and nonpayment, and
agrees that its liability with respect to the Obligation (or any part thereof),
shall not be affected by any renewal or extension in the time of payment of the
Obligation (or any part thereof), by any indulgence, or by any release or change
in any security for the payment of the Obligation (or any part thereof).
10.3 Performance by Administrative Agent. If any covenant, duty, or
agreement of any Company is not performed in accordance with the terms of the
Loan Documents, after the occurrence and during the continuance of an Event of
Default, Administrative Agent may, at its option (but subject to the approval of
Majority Banks), perform or attempt to perform such covenant, duty, or agreement
on behalf of such Company. In such event, any amount expended by Administrative
Agent in such performance or attempted performance shall be payable by the
Borrower, to Administrative Agent on demand, shall become part of the
Obligation, and shall bear interest at the Default Rate from the date of such
expenditure by Administrative Agent until paid. Notwithstanding the foregoing,
it is expressly understood that Administrative Agent does not assume and shall
never have, except by its express written consent, any liability or
responsibility for the performance of any covenant, duty, or agreement of any
Company.
10.4 Delegation of Duties and Rights. Banks may perform any of their
duties or exercise any of their Rights under the Loan Documents by or through
their respective Representatives (provided, that such delegation does not
release any Bank of any of its obligations hereunder).
10.5 Not in Control. Nothing in any Loan Document shall, or shall be
deemed to (a) give any Agent or any Bank the Right to exercise control over the
assets (including real property), affairs, or management of any Company, (b)
preclude or interfere with compliance by any Company with any Law, or (c)
require any act or omission by any Company that may be harmful to Persons or
property. Any "Material Adverse Event" or other materiality qualifier in any
representation, warranty, covenant, or other provision of any Loan Document is
included for credit documentation purposes only and shall not, and shall not be
deemed to, mean that any Agent or any Bank acquiesces in any non-compliance by
any Company with any Law or document, or that any Agent or any Bank does not
expect the Companies to promptly, diligently, and continuously carry out all
appropriate removal, remediation, and termination activities required or
appropriate in accordance with all Environmental Laws. No Agent or Bank has any
fiduciary relationship with or fiduciary duty to Borrower or any
REVOLVING CREDIT AGREEMENT
40
<PAGE> 46
Company arising out of or in connection with the Loan Documents, and the
relationship between Agents and Banks, on the one hand, and Borrower, on the
other hand, in connection with the Loan Documents is solely that of debtor and
creditor. The power of Agents and Banks under the Loan Documents is limited to
the Rights provided in the Loan Documents, which Rights exist solely to assure
payment and performance of the Obligation and may be exercised in a manner
calculated by Agents and Banks in their respective good faith business judgment.
10.6 Course of Dealing. The acceptance by Administrative Agent or Banks
at any time and from time to time of partial payment on the Obligation shall not
be deemed to be a waiver of any Event of Default then existing. No waiver by
Administrative Agent, Majority Banks, or Banks of any Event of Default shall be
deemed to be a waiver of any other then-existing or subsequent Event of Default.
No delay or omission by Administrative Agent, Majority Banks, or Banks in
exercising any Right under the Loan Documents shall impair such Right or be
construed as a waiver thereof or any acquiescence therein, nor shall any single
or partial exercise of any such Right preclude other or further exercise
thereof, or the exercise of any other Right under the Loan Documents or
otherwise.
10.7 Cumulative Rights. All Rights available to Administrative Agent
and Banks under the Loan Documents are cumulative of and in addition to all
other Rights granted to Administrative Agent and Banks at law or in equity,
whether or not the Obligation is due and payable and whether or not
Administrative Agent or Banks have instituted any suit for collection,
foreclosure, or other action in connection with the Loan Documents.
10.8 Application of Proceeds. Any and all proceeds ever received by
Administrative Agent or Banks from the exercise of any Rights pertaining to the
Obligation shall be applied to the Obligation in the order and manner set forth
in SECTION 3.11.
10.9 Limitation of Rights. Notwithstanding any other provision of this
Agreement or any other Loan Document, any action taken or proposed to be taken
by Administrative Agent or any Bank under any Loan Document which would affect
the operational, voting, or other control of any Company, shall be pursuant to
any applicable state Law, and the applicable rules and regulations thereunder.
10.10 Expenditures by Banks. Borrower shall promptly pay within fifteen
(15) Business Days after request therefor (a) all reasonable costs, fees, and
expenses paid or incurred by any Agent incident to any Loan Document (including,
but not limited to, the reasonable fees and expenses of counsel to
Administrative Agent and the allocated cost of internal counsel in connection
with the negotiation, preparation, delivery, execution, coordination, and
administration of the Loan Documents and any related amendment, waiver, or
consent) and (b) following the occurrence and continuation of a Event of
Default, all reasonable costs and expenses of Banks and Administrative Agent
incurred by Administrative Agent or any Bank in connection with the enforcement
of the obligations of any Company arising under the Loan Documents (including,
without limitation, costs and expenses incurred in connection with any workout
or bankruptcy) or the exercise of any Rights arising under the Loan Documents
(including, but not limited to, reasonable attorneys' fees including allocated
cost of internal counsel, court costs and other costs of collection), all of
which shall be a part of the Obligation and shall bear interest at the Default
Rate from the date due until the date repaid by Borrower.
REVOLVING CREDIT AGREEMENT
41
<PAGE> 47
10.11 Indemnification. Borrower agrees to indemnify and hold harmless
each Agent, Arranger, and each Bank and each of their respective Affiliates and
their respective officers, directors, employees, agents, attorneys, and advisors
(each, an "Indemnified Party") from and against any and all claims, damages,
losses, liabilities, costs, and expenses (including attorneys' fees) that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or by reason of (including in connection
with any investigation, litigation, or proceeding or preparation of defense in
connection therewith) the Loan Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Borrowings
(INCLUDING ANY OF THE FOREGOING ARISING FROM THE NEGLIGENCE OF THE INDEMNIFIED
PARTY), except to the extent such claim, damage, loss, liability, cost, or
expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct; provided, that the Borrower shall have no obligation
hereunder to any Agent or any Bank with respect to indemnified liabilities
arising from the gross negligence or willful misconduct of any Agent or any such
Bank. In the case of an investigation, litigation, or other proceeding to which
the indemnity in this SECTION 10.11 applies, except as provided above, such
indemnity shall be effective whether or not such investigation, litigation, or
proceeding is brought by Borrower, its directors, shareholders or creditors or
an Indemnified Party or any other person or any Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated. Borrower agrees not to assert any claim against any Indemnified
Party on any theory of liability, for special, indirect, consequential, or
punitive damages arising out of or otherwise relating to the Loan Documents, any
of the transactions contemplated herein or the actual or proposed use of the
proceeds of the Borrowings. Without prejudice to the survival of any other
agreement of Borrower hereunder, the agreements and obligations of Borrower
contained in this SECTION 10.11 shall survive the payment in full of the
Borrowings and all other amounts payable under this Agreement.
SECTION 11 AGREEMENT AMONG BANKS.
11.1 Administrative Agent.
(a) Each Bank hereby appoints Wells Fargo Bank (Texas),
National Association (and Wells Fargo Bank (Texas), National
Association hereby accepts such appointment) as its nominee and agent,
in its name and on its behalf: (i) to act as nominee for and on behalf
of such Bank in and under all Loan Documents; (ii) to arrange the means
whereby the funds of Banks are to be made available to Borrower under
the Loan Documents; (iii) to take such action as may be requested by
any Bank under the Loan Documents (when such Bank is entitled to make
such request under the Loan Documents and after such requesting Bank
has obtained the concurrence of such other Banks as may be required
under the Loan Documents); (iv) to receive all documents and items to
be furnished to Banks under the Loan Documents; (v) to be the secured
party, mortgagee, beneficiary, and similar party in respect of, and to
receive, as the case may be, any collateral for the benefit of Banks;
(vi) to timely distribute, and Administrative Agent agrees to so
distribute, to each Bank all material information, requests, documents,
and items received from Borrower under the Loan Documents; (vii) to
promptly distribute to each Bank its ratable part of each payment or
prepayment (whether voluntary, as proceeds of collateral upon or after
foreclosure, as proceeds of insurance thereon, or otherwise) in
accordance with the terms of the Loan Documents; (viii) to deliver to
the appropriate Persons requests, demands, approvals, and consents
received from Banks; and (ix) to execute, on behalf of Banks, such
releases or other documents or instruments as are permitted by the Loan
Documents or as directed by Banks
REVOLVING CREDIT AGREEMENT
42
<PAGE> 48
or Majority Banks (when entitled to so authorize) from time to time;
provided, however, Administrative Agent shall not be required to take
any action which exposes Administrative Agent to personal liability or
which is contrary to the Loan Documents or applicable Law.
(b) Administrative Agent may resign at any time as
Administrative Agent under the Loan Documents by giving written notice
thereof to Banks and Borrower. Should the initial or any successor
Administrative Agent ever cease to be a party hereto or should the
initial or any successor Administrative Agent ever resign as
Administrative Agent, then Majority Banks shall elect the successor
Administrative Agent from among the Banks (other than the resigning
Administrative Agent) with the consent of the Borrower (unless an Event
of Default has occurred and is continuing), which consent is not to be
unreasonably withheld or delayed by the Borrower. If no successor
Administrative Agent shall have been so appointed by Majority Banks,
within 30 days after the retiring Administrative Agent's giving of
notice of resignation, then the retiring Administrative Agent may, on
behalf of Banks, appoint a successor Administrative Agent with the
consent of the Borrower (unless an Event of Default has occurred and is
continuing), which consent is not to be unreasonably withheld or
delayed by the Borrower, which shall be a commercial bank having a
combined capital and surplus of at least $1,000,000,000. Upon the
acceptance of any appointment as Administrative Agent under the Loan
Documents by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with
all the Rights of the retiring Administrative Agent, and the retiring
Administrative Agent shall be discharged from its duties and
obligations of Administrative Agent under the Loan Documents and each
Bank shall execute such documents as any Bank may reasonably request to
reflect such change in and under the Loan Documents. After any retiring
Administrative Agent's resignation as Administrative Agent under the
Loan Documents, the provisions of this SECTION 11 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it
was Administrative Agent under the Loan Documents.
(c) Administrative Agent, in its capacity as a Bank, shall
have the same Rights under the Loan Documents as any other Bank and may
exercise the same as though it were not acting as Administrative Agent;
the term "Bank" shall, unless the context otherwise indicates, include
Administrative Agent; and any resignation by Administrative Agent
hereunder shall not impair or otherwise affect any Rights which it has
or may have in its capacity as an individual Bank. Each Bank and
Borrower agree that Administrative Agent is not a fiduciary for Banks
or for Borrower but simply is acting in the capacity described herein
to alleviate administrative burdens for both Borrower and Banks, that
Administrative Agent has no duties or responsibilities to Banks or
Borrower except those expressly set forth herein, and that
Administrative Agent in its capacity as a Bank has all Rights of any
other Bank.
(d) Administrative Agent and its Affiliates may now or
hereafter be engaged in one or more loan, letter of credit, leasing, or
other financing transactions with Borrower, act as trustee or
depositary for Borrower, or otherwise be engaged in other transactions
with Borrower (collectively, the "OTHER ACTIVITIES") not the subject of
the Loan Documents. Without limiting the Rights of Banks specifically
set forth in the Loan Documents, Administrative Agent and its
Affiliates shall not be responsible to account to Banks for such other
activities, and no Bank shall have any interest in any other
activities, any present or future guaranties by or for the account of
Borrower which are not contemplated or included in the Loan Documents,
any present or future offset exercised by Administrative Agent and
REVOLVING CREDIT AGREEMENT
43
<PAGE> 49
its Affiliates in respect of such other activities, any present or
future property taken as security for any such other activities, or any
property now or hereafter in the possession or control of
Administrative Agent or its Affiliates which may be or become security
for the obligations of Borrower arising under the Loan Documents by
reason of the general description of indebtedness secured or of
property contained in any other agreements, documents or instruments
related to any such other activities; provided that, if any payments in
respect of such guaranties or such property or the proceeds thereof
shall be applied to reduction of the obligations of Borrower arising
under the Loan Documents, then each Bank shall be entitled to share in
such application ratably.
11.2 Expenses. Upon demand by Administrative Agent, each Bank shall pay
its Pro Rata Part of any reasonable expenses (including, without limitation,
court costs, reasonable attorneys' fees and other costs of collection) incurred
by Administrative Agent in connection with any of the Loan Documents if and to
the extent Administrative Agent does not receive reimbursement therefor from
other sources within 60 days after incurred; provided that, each Bank shall be
entitled to receive its Pro Rata Part of any reimbursement for such expenses, or
part thereof, which Administrative Agent subsequently receives from such other
sources.
11.3 Proportionate Absorption of Losses. Except as otherwise provided
in the Loan Documents, nothing in the Loan Documents shall be deemed to give any
Bank any advantage over any other Bank insofar as the Obligation arising under
the Loan Documents is concerned, or to relieve any Bank from absorbing its Pro
Rata Part of any losses sustained with respect to the Obligation (except to the
extent such losses result from unilateral actions or inactions of any Bank that
are not made in accordance with the terms and provisions of the Loan Documents).
11.4 Delegation of Duties; Reliance. Administrative Agent may perform
any of its duties or exercise any of its Rights under the Loan Documents by or
through its Representatives. Administrative Agent and its Representatives shall
(a) be entitled to rely upon (and shall be protected in relying upon) any
writing, resolution, notice, consent, certificate, affidavit, letter, cablegram,
telecopy, telegram, telex or teletype message, statement, order, or other
documents or conversation believed by it or them to be genuine and correct and
to have been signed or made by the proper Person and, with respect to legal
matters, upon opinion of counsel selected by Administrative Agent, (b) be
entitled to deem and treat each Bank as the owner and holder of the Principal
Debt owed to such Bank for all purposes until, subject to SECTION 12.13, written
notice of the assignment or transfer thereof shall have been given to and
received by Administrative Agent (and any request, authorization, consent, or
approval of any Bank shall be conclusive and binding on each subsequent holder,
assignee, or transferee of the Principal Debt owed to such Bank or portion
thereof until such notice is given and received), (c) not be deemed to have
notice of the occurrence of a Event of Default unless a responsible officer of
Administrative Agent, who handles matters associated with the Loan Documents and
transactions thereunder, has actual knowledge thereof or Administrative Agent
has been notified thereof by a Bank or Borrower, and (d) be entitled to consult
with legal counsel (including counsel for Borrower), independent accountants and
other experts selected by Administrative Agent and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts.
11.5 Limitation of Liability.
(a) None of the Agents or any of their respective
Representatives shall be liable for any action taken or omitted to be
taken by it or them under the Loan Documents in good
REVOLVING CREDIT AGREEMENT
44
<PAGE> 50
faith and reasonably believed by it or them to be within the discretion
or power conferred upon it or them by the Loan Documents or be
responsible for the consequences of any error of judgment, except for
fraud, gross negligence, or willful misconduct; and none of the Agents,
or any of their respective Representatives has a fiduciary relationship
with any Bank by virtue of the Loan Documents (provided that nothing
herein shall negate the obligation of Administrative Agent to account
for funds received by it for the account of any Bank).
(b) Unless indemnified to its satisfaction against loss, cost,
liability, and expense, no Agent shall be compelled to do any act under
the Loan Documents or to take any action toward the execution or
enforcement of the powers thereby created or to prosecute or defend any
suit in respect of the Loan Documents. If Administrative Agent requests
instructions from Banks or Majority Banks, as the case may be, with
respect to any act or action (including, but not limited to, any
failure to act) in connection with any Loan Document, such Agent shall
be entitled (but shall not be required) to refrain (without incurring
any liability to any Person by so refraining) from such act or action
unless and until it has received such instructions. In no event,
however, shall any Agent or any of its respective Representatives be
required to take any action which it or they determine could incur for
it or them criminal or onerous civil liability. Without limiting the
generality of the foregoing, no Bank shall have any right of action
against any Agent as a result of such Agent's acting or refraining from
acting hereunder in accordance with the instructions of Majority Banks.
(c) No Agent shall be responsible in any manner to any Bank or
any Participant for, and each Bank represents and warrants that it has
not relied upon any Agent in respect of, (i) the creditworthiness of
any Company and the risks involved to such Bank, (ii) the
effectiveness, enforceability, genuineness, validity, or the due
execution of any Loan Document, (iii) any representation, warranty,
document, certificate, report, or statement made therein or furnished
thereunder or in connection therewith, (iv) the existence, priority, or
perfection of any Lien hereafter granted or purported to be granted
under any Loan Document, or (v) observation of or compliance with any
of the terms, covenants, or conditions of any Loan Document on the part
of any Company. Each Bank agrees to indemnify Agents and their
respective Representatives and hold them harmless from and against (but
limited to such Bank's Pro Rata Part of) any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits,
costs, reasonable expenses, and reasonable disbursements of any kind or
nature whatsoever which may be imposed on, asserted against, or
incurred by them in any way relating to or arising out of the Loan
Documents or any action taken or omitted by them under the Loan
Documents, to the extent such Agents and their respective
Representatives are not reimbursed for such amounts by any Company
(provided that, no Agent or its Representatives shall have the right to
be indemnified hereunder for its or their own fraud, gross negligence,
or willful misconduct).
11.6 Event of Default; Collateral. Upon the occurrence and continuance
of a Event of Default, Banks agree to promptly confer in order that Majority
Banks or Banks, as the case may be, may agree upon a course of action for the
enforcement of the Rights of Banks; and Administrative Agent shall be entitled
to refrain from taking any action (without incurring any liability to any Person
for so refraining) unless and until Administrative Agent shall have received
instructions from Majority Banks. In actions with respect to any property of
Borrower, Administrative Agent is acting for the ratable benefit of each Bank.
Any and all agreements to subordinate (whether made heretofore or hereafter)
other indebtedness or obligations of Borrower to the Obligation shall be
construed as being for the ratable benefit of each Bank. If Administrative Agent
acquires any
REVOLVING CREDIT AGREEMENT
45
<PAGE> 51
security for the Obligation or any guaranty of the Obligation upon or in lieu of
foreclosure, the same shall be held for the Pro Rata benefit of all Banks.
11.7 Limitation of Liability. To the extent permitted by Law (a) no
Agent (acting in their respective agent capacities) shall incur any liability to
any other Bank or Participant, including any liability caused by such Agent's
negligence, except for acts or omissions resulting from its own fraud, gross
negligence or wilful misconduct, and (b) no Agent, Bank, or Participant shall
incur any liability to any other Person for any act or omission of any other
Bank, Agent, or Participant.
11.8 Relationship of Banks. Nothing herein shall be construed as
creating a partnership or joint venture among Agents and Banks.
11.9 Benefits of Agreement. Except for the representations and
covenants in SECTION 11.1(c) in favor of Borrower, none of the provisions of
this SECTION 11 shall inure to the benefit of any Company or any other Person
other than Banks; consequently, neither any Company nor any other Person shall
be entitled to rely upon, or to raise as a defense, in any manner whatsoever,
the failure of any Agent or Bank to comply with such provisions.
11.10 Agents; Arranger. None of the Banks identified in this Agreement
or the cover page hereof as "Syndication Agent" or "Documentation Agent" or
"Arranger" shall have any rights, powers, obligations, liabilities,
responsibilities, or duties under this Agreement other than those applicable to
all Banks as such. Without limiting the foregoing, none of the Banks so
identified as a "Syndication Agent" or "Documentation Agent" or "Arranger" shall
have or be deemed to have any fiduciary relationship with any Bank.
11.11 Obligation Several. The obligations of Banks hereunder are
several, and each Bank hereunder shall not be responsible for the obligations of
the other Banks hereunder, nor will the failure of one Bank to perform any of
its obligations hereunder relieve the other Banks from the performance of their
respective obligations hereunder.
SECTION 12 MISCELLANEOUS.
12.1 Headings. The headings, captions, and arrangements used in any of
the Loan Documents are, unless specified otherwise, for convenience only and
shall not be deemed to limit, amplify, or modify the terms of the Loan
Documents, nor affect the meaning thereof.
12.2 Nonbusiness Days. In any case where any payment or action is due
under any Loan Document on a day which is not a Business Day, such payment or
action may be delayed until the next-succeeding Business Day, but interest and
fees shall continue to accrue in respect of any payment to which it is
applicable until such payment is in fact made; provided that, if in the case of
any such payment in respect of a Eurodollar Rate Borrowing the next-succeeding
Business Day is in the next calendar month, then such payment shall be made on
the next-preceding Business Day.
12.3 Communications. Unless specifically otherwise provided, whenever
any Loan Document requires or permits any consent, approval, notice, request, or
demand from one party to another, such communication must be in writing (which
may be by telecopy) to be effective and shall be deemed to have been given (a)
if by telex, when transmitted to the telex number, if any, for such party, and
the appropriate answer back is received, (b) if by telecopy, when transmitted to
the telecopy number for such party (and all such communications sent by telecopy
shall be confirmed
REVOLVING CREDIT AGREEMENT
46
<PAGE> 52
promptly thereafter by telephone or personal delivery or mailing in accordance
with the provisions of this section; provided, that any requirement in this
parenthetical shall not affect the date on which such telecopy shall be deemed
to have been delivered), (c) if by mail, on the third Business Day after it is
enclosed in an envelope, properly addressed to such party, properly stamped,
sealed, and deposited in the appropriate official postal service, or (d) if by
any other means, when actually delivered to such party. Until changed by notice
pursuant hereto, the address (and telex and telecopy numbers, if any) for
Administrative Agent and each Bank is set forth on SCHEDULE 2.1, and for
Borrower is the address set forth by Borrower's signature on the signature page
of this Agreement.
12.4 Form and Number of Documents. Each agreement, document,
instrument, or other writing to be furnished under any provision of this
Agreement must be in form and substance and in such number of counterparts as
may be reasonably satisfactory to Administrative Agent and its counsel.
12.5 Exceptions to Covenants. No Company shall take any action or fail
to take any action which is permitted as an exception to any of the covenants
contained in any Loan Document if such action or omission would result in the
breach of any other covenant contained in any of the Loan Documents.
12.6 Survival. All covenants, agreements, undertakings,
representations, and warranties made in any of the Loan Documents shall survive
all closings under the Loan Documents and, except as otherwise indicated, shall
not be affected by any investigation made by any party. All rights of, and
provisions relating to, reimbursement and indemnification of any Agent or any
Bank shall survive termination of this Agreement and payment in full of the
Obligation.
12.7 GOVERNING LAW. THE LAWS OF THE STATE OF TEXAS AND OF THE UNITED
STATES OF AMERICA SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES TO THE LOAN
DOCUMENTS AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE
LOAN DOCUMENTS.
12.8 Invalid Provisions. If any provision in any Loan Document is held
to be illegal, invalid, or unenforceable, such provision shall be fully
severable; the appropriate Loan Document shall be construed and enforced as if
such provision had never comprised a part thereof; and the remaining provisions
thereof shall remain in full force and effect and shall not be affected by such
provision or by its severance therefrom. Administrative Agent, Banks, and
Borrower agree to negotiate, in good faith, the terms of a replacement provision
as similar to the severed provision as may be possible and be legal, valid, and
enforceable.
12.9 Entirety. THE RIGHTS AND OBLIGATIONS OF THE COMPANIES, BANKS, AND
AGENTS SHALL BE DETERMINED SOLELY FROM WRITTEN AGREEMENTS, DOCUMENTS, AND
INSTRUMENTS, AND ANY PRIOR ORAL AGREEMENTS BETWEEN SUCH PARTIES ARE SUPERSEDED
BY AND MERGED INTO SUCH WRITINGS. THIS AGREEMENT (AS AMENDED IN WRITING FROM
TIME TO TIME) AND THE OTHER WRITTEN LOAN DOCUMENTS EXECUTED BY ANY COMPANY, ANY
BANK, OR ANY AGENT (TOGETHER WITH ALL COMMITMENT LETTERS AND FEE LETTERS AS THEY
RELATE TO THE PAYMENT OF FEES AFTER THE CLOSING DATE) REPRESENT THE FINAL
AGREEMENT BETWEEN THE COMPANIES, BANKS, AND AGENTS AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS BY SUCH
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN SUCH PARTIES.
REVOLVING CREDIT AGREEMENT
47
<PAGE> 53
12.10 Jurisdiction; Venue; Service of Process; Jury Trial. EACH PARTY
HERETO, IN EACH CASE FOR ITSELF, ITS SUCCESSORS AND ASSIGNS, HEREBY (A)
IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL
COURTS LOCATED IN THE SOUTHERN DISTRICT OF TEXAS, AND AGREES AND CONSENTS THAT
SERVICE OF PROCESS MAY BE MADE UPON IT IN ANY LEGAL PROCEEDING ARISING OUT OF OR
IN CONNECTION WITH THE LOAN DOCUMENTS AND THE OBLIGATION BY SERVICE OF PROCESS
AS PROVIDED BY TEXAS LAW, (B) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY LITIGATION ARISING OUT OF OR IN CONNECTION WITH THE LOAN
DOCUMENTS AND THE OBLIGATION BROUGHT IN ANY SUCH COURT, (C) IRREVOCABLY WAIVES
ANY CLAIMS THAT ANY LITIGATION BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM, (D) IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH LITIGATION BY THE MAILING OF COPIES
THEREOF BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, POSTAGE PREPAID, AT ITS
ADDRESS SET FORTH HEREIN, AND (E) IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF ANY LOAN DOCUMENT OR THE TRANSACTIONS
CONTEMPLATED THEREBY. The scope of each of the foregoing waivers is intended to
be all-encompassing of any and all disputes that may be filed in any court and
that relate to the subject matter of this transaction, including, without
limitation, contract claims, tort claims, breach of duty claims, and all other
common law and statutory claims. Borrower and each other party to this Agreement
acknowledge that this waiver is a material inducement to the agreement of each
party hereto to enter into a business relationship, that each has already relied
on this waiver in entering into this Agreement, and each will continue to rely
on each of such waivers in related future dealings. Borrower and each other
party to this Agreement warrant and represent that they have reviewed these
waivers with their legal counsel, and that they knowingly and voluntarily agree
to each such waiver following consultation with legal counsel. THE WAIVERS IN
THIS SECTION 12.10 ARE IRREVOCABLE, MEANING THAT THEY MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THESE WAIVERS SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, SUPPLEMENTS, AND REPLACEMENTS TO OR OF THIS OR ANY OTHER Loan
Document. In the event of Litigation, this Agreement may be filed as a written
consent to a trial by the court.
12.11 Amendments, Consents, Conflicts, and Waivers.
(a) Except as otherwise specifically provided, (i) this
Agreement may only be amended, modified or waived by an instrument in
writing executed jointly by Borrower and Majority Banks, and, in the
case of any matter affecting Administrative Agent, by Administrative
Agent, and may only be supplemented by documents delivered or to be
delivered in accordance with the express terms hereof, and (ii) the
other Loan Documents may only be the subject of an amendment,
modification, or waiver if Borrower and Majority Banks, and, in the
case of any matter affecting Administrative Agent, Administrative
Agent, have approved same. Without the consent of Administrative Agent
and Majority Banks, no provision of SECTION 11 may be amended,
modified, or waived.
(b) Any amendment to or consent or waiver under this Agreement
or any Loan Document which purports to accomplish any of the following
must be by an instrument in writing executed by Borrower and executed
(or approved, as the case may be) by each Bank, and, in the case of any
matter affecting Administrative Agent, by Administrative Agent: (i)
extends the due date or decreases the amount of any scheduled payment
of the Obligation arising under Loan Documents beyond the date
specified in the Loan Documents; (ii) reduces
REVOLVING CREDIT AGREEMENT
48
<PAGE> 54
the interest rate or decreases the amount of interest, fees, or other
sums payable to Administrative Agent or Banks hereunder (except such
reductions as are contemplated by this Agreement); (iii) reduces the
percentage specified in the definition of "MAJORITY BANKS"; (iv)
changes this CLAUSE (b) or any other matter specifically requiring the
consent of all Banks hereunder; or (v) consents to the assignment or
transfer by Borrower of any of its rights and obligations under this
Agreement (except pursuant to a Reincorporation Merger in accordance
with SECTION 8.11(b)). Without the consent of such Bank, no Bank's
"COMMITTED SUM" under the Revolving Facility may be increased.
(c) Any conflict or ambiguity between the terms and provisions
herein and terms and provisions in any other Loan Document shall be
controlled by the terms and provisions herein.
(d) No course of dealing nor any failure or delay by
Administrative Agent, any Bank, or any of their respective
Representatives with respect to exercising any Right of Administrative
Agent or any Bank hereunder shall operate as a waiver thereof. A waiver
must be in writing and signed by Administrative Agent and Majority
Banks (or by all Banks, if required hereunder) to be effective, and
such waiver will be effective only in the specific instance and for the
specific purpose for which it is given.
12.12 Multiple Counterparts. This Agreement may be executed in a number
of identical counterparts, each of which shall be deemed an original for all
purposes and all of which constitute, collectively, one agreement; but, in
making proof of this Agreement, it shall not be necessary to produce or account
for more than one such counterpart. It is not necessary that each Bank execute
the same counterpart so long as identical counterparts are executed by Borrower,
each Bank, and Administrative Agent. This Agreement shall become effective when
counterparts hereof shall have been executed and delivered to Administrative
Agent by each Bank, Administrative Agent, and Borrower, or, when Administrative
Agent shall have received telecopied, telexed, or other evidence satisfactory to
it that such party has executed and is delivering to Administrative Agent a
counterpart hereof.
12.13 Successors and Assigns; Assignments and Participations.
(a) This Agreement shall be binding upon, and inure to the
benefit of the parties hereto and their respective successors and
assigns, except that (i) Borrower may not, directly or indirectly,
assign or transfer, or attempt to assign or transfer, any of its
Rights, duties or obligations under any Loan Documents without the
express written consent of all Banks, and (ii) except as permitted
under this Section, no Bank may transfer, pledge, assign, sell any
participation in, or otherwise encumber its portion of the Obligation.
(b) Each Bank may assign to one or more Eligible Assignees all
or a portion of its Rights and obligations under this Agreement and the
other Loan Documents (including, without limitation, all or a portion
of its Borrowings and its Note); provided, however, that:
(i) each such assignment shall be to an Eligible
Assignee;
(ii) except in the case of an assignment to another
Bank or an assignment of all of a Bank's Rights and
obligations under this Agreement and the other Loan
REVOLVING CREDIT AGREEMENT
49
<PAGE> 55
Documents, any such partial assignment shall be in an amount
at least equal to $10,000,000;
(iii) each such assignment by a Bank shall be of a
constant, and not varying, percentage of all of its Rights and
obligations under this Agreement and its Note;
(iv) the parties to such assignment shall execute and
deliver to the Administrative Agent for its acceptance an
Assignment and Acceptance Agreement in the form of EXHIBIT D
(the "ASSIGNMENT AND ACCEPTANCE") hereto, together with any
Notes subject to such assignment and a processing fee of
$3,000; and
(v) no such assignment may be made to an Eligible
Assignee that is a pension or welfare plan as defined in
Section 3 of ERISA, or other entity that holds the assets of
any such plan, except that such an assignment to or on behalf
of a pension or welfare plan or other entity that holds the
assets of any such plan shall be permitted so long as the
acquisition and holding by the assignee of any Note or
interest in the Borrowings do not constitute a prohibited
transaction under ERISA or are exempt from the prohibited
transaction restrictions of ERISA and the Code pursuant to one
or more prohibited transaction statutory or administrative
exemptions.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, Rights, and benefits
of a Bank under the Loan Documents and the assigning Bank shall, to the
extent of such assignment, relinquish its rights and be released from
its obligations under the Loan Documents. Upon the consummation of any
assignment pursuant to this Section, Borrower shall issue appropriate
Notes to the assignor and the assignee, reflecting the transaction
evidenced by such Assignment and Acceptance. If the assignee is not
incorporated under the laws of the United States of America or a state
thereof, it shall deliver to Borrower and Administrative Agent
certification as to exemption from deduction or withholding of Taxes in
accordance with SECTION 4.6.
(c) Administrative Agent shall maintain at its address
referred to in SECTION 12.3 a copy of each Assignment and Acceptance
delivered to and accepted by it and a register for the recordation of
the names and addresses of the Banks and their respective Committed
Sums, and principal amount of the Borrowings owing to each Bank from
time to time (the "REGISTER"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and
Borrower, Administrative Agent and Banks may treat each Person whose
name is recorded in the Register as a Bank hereunder for all purposes
of the Loan Documents. The Register shall be available for inspection
by Borrower or any Bank at any reasonable time and from time to time
upon reasonable prior notice. Upon the consummation of any assignment
in accordance with this SECTION 12.13, SCHEDULE 2.1 shall automatically
be deemed amended (to the extent required) by Administrative Agent to
reflect the name, address, and respective Committed Sums of the
assignor and assignee.
(d) Upon its receipt of an Assignment and Acceptance executed
by the parties thereto, together with any Notes subject to such
assignment and payment of the processing fee, Administrative Agent
shall, if such Assignment and Acceptance has been completed and
REVOLVING CREDIT AGREEMENT
50
<PAGE> 56
is in substantially the form of EXHIBIT D hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the
parties thereto.
(e) Subject to the provisions of this Section and in
accordance with applicable Law, any Bank may, in the ordinary course of
its commercial banking business and in accordance with applicable Law,
at any time sell to one or more Persons (each a "PARTICIPANT")
participating interests in its portion of the Obligation. In the event
of any such sale to a Participant, (i) such Bank shall remain a "Bank"
under this Agreement and the Participant shall not constitute a "Bank"
hereunder, (ii) such Bank's obligations under this Agreement shall
remain unchanged, (iii) such Bank shall remain solely responsible for
the performance thereof, (iv) such Bank shall remain the holder of its
share of the Principal Debt for all purposes under this Agreement, (v)
Borrower and Administrative Agent shall continue to deal solely and
directly with such Bank in connection with such Bank's Rights and
obligations under the Loan Documents, and (vi) such Bank shall be
solely responsible for any withholding taxes or any filing or reporting
requirements relating to such participation and shall hold Borrower and
Administrative Agent and their respective successors, permitted
assigns, officers, directors, employees, agents, and representatives
harmless against the same. Participants shall have no Rights under the
Loan Documents, other than certain voting Rights as provided below.
Subject to the following, each Bank shall be entitled to obtain (on
behalf of its Participants) the benefits of SECTION 4 with respect to
all participations in its part of the Obligation outstanding from time
to time so long as Borrower shall not be obligated to pay any amount in
excess of the amount that would be due to such Bank under SECTION 4
calculated as though no participations have been made. No Bank shall
sell any participating interest under which the Participant shall have
any Rights to approve any amendment, modification, or waiver of any
Loan Document, except to the extent such amendment, modification, or
waiver extends the due date for payment of any amount in respect of
principal (other than mandatory prepayments), interest, or fees due
under the Loan Documents, or reduces the interest rate or the amount of
principal or fees applicable to the Obligation (except such reductions
as are contemplated by this Agreement), provided that, in those cases
where a Participant is entitled to the benefits of SECTION 4 or a Bank
grants Rights to its Participants to approve amendments to or waivers
of the Loan Documents respecting the matters previously described in
this sentence, such Bank must include a voting mechanism in the
relevant participation agreement or agreements, as the case may be,
whereby a majority of such Bank's portion of the Obligation (whether
held by such Bank or Participant) shall control the vote for all of
such Bank's portion of the Obligation. Except in the case of the sale
of a participating interest to another Bank, the relevant participation
agreement shall not permit the Participant to transfer, pledge, assign,
sell participations in, or otherwise encumber its portion of the
Obligation, unless the consent of the transferring Bank (which consent
will not be unreasonably withheld) has been obtained. No Bank shall
sell any participating interest to a Participant that is a pension or
welfare plan as defined in SECTION 3 of the ERISA or other entity that
holds the assets of any such plan, except that such a sale to or on
behalf of a pension or welfare plan or other entity that holds the
assets of any such plan shall be permitted so long as the acquisition
and holding by the Participant of its participating interest do not
constitute a prohibited transaction under ERISA or are exempt from the
prohibited transaction restrictions of ERISA and the Code pursuant to
one or more prohibited transaction statutory or administrative
exemptions.
REVOLVING CREDIT AGREEMENT
51
<PAGE> 57
(f) Notwithstanding any other provision set forth in this
Agreement, any Bank may at any time assign and pledge all or any
portion of its Borrowings and its Note to any Federal Reserve Bank as
collateral security pursuant to Regulation A and any Operating Circular
issued by such Federal Reserve Bank. No such assignment shall release
the assigning Bank from its obligations hereunder.
(g) Any Bank may furnish any information concerning the
Companies in the possession of such Bank from time to time to Eligible
Assignees and Participants (including prospective Eligible Assignees
and Participants), subject, however, to SECTION 12.15.
12.14 Discharge Only Upon Payment in Full; Reinstatement in Certain
Circumstances. Borrower's obligations under the Loan Documents shall remain in
full force and effect until termination of the Commitment and payment in full of
the Principal Debt and of all interest, fees, and other amounts of the
Obligation then due and owing, except that SECTION 4, SECTION 10, and SECTION
12, and any other provisions under the Loan Documents expressly intended to
survive by the terms hereof or by the terms of the applicable Loan Documents,
shall survive such termination. If at any time any payment of the principal of
or interest on any Note or any other amount payable by Borrower under any Loan
Document is rescinded or must be otherwise restored or returned upon the
insolvency, bankruptcy, or reorganization of Borrower or otherwise, the
obligations of Borrower under the Loan Documents with respect to such payment
shall be reinstated as though such payment had been due but not made at such
time.
12.15 Confidentiality. Administrative Agent and each Bank (each, a
"LENDING PARTY") agrees to keep confidential any material information furnished
or made available to it by the Borrower pursuant to this Agreement; provided
that nothing herein shall prevent any Lending Party from disclosing such
information (a) to any other Lending Party or any affiliate of any Lending
Party, or any officer, director, employee, agent, or advisor of any Lending
Party or affiliate of any Lending Party so long as such Persons are bound by the
confidentiality requirements of this Section, (b) to any other Person if
reasonably incidental to the administration of the credit facility provided
herein, (c) as required by any law, rule, or regulation, (d) upon the order of
any court or administrative agency, (e) upon the request or demand of any
regulatory agency or authority, (f) that is or becomes available to the public
or that is or becomes available to any Lending Party other than as a result of a
disclosure by any Lending Party prohibited by this Agreement, (g) in connection
with any litigation to which such Lending Party or any of its affiliates may be
a party, (h) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Loan Document, and (i) subject to
provisions substantially similar to those contained in this Section, agreed to
in writing by any actual or proposed participant or assignee; provided, however,
that before any disclosure is permitted under SUBSECTION (g), such Lending Party
or its affiliate shall, if not legally prohibited, notify and consult with the
Borrower concerning the information it proposes to disclose, to enable the
Borrower to take such action as may be appropriate under the circumstances to
protect the confidentiality of the information in question, provided further,
however, that such Lending Party or its affiliate shall not be required to
comply with the foregoing proviso, if doing so could adversely affect such
Lending Party or affiliate.
12.16 Representations of Banks. Each Bank represents that it, in good
faith, has not relied upon any assets of the Companies consisting of stock (as
such term is defined in Regulation U of the Board of Governors of the Federal
Reserve System) as collateral in the extension of or maintenance of this
Revolving Facility.
REVOLVING CREDIT AGREEMENT
52
<PAGE> 58
[REMAINDER OF PAGE INTENTIONALLY BLANK.
SIGNATURE PAGES FOLLOW.]
REVOLVING CREDIT AGREEMENT
53
<PAGE> 59
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered as of the date hereinabove set forth.
SOUTHDOWN, INC.
a Louisiana corporation
By: /s/ DENNIS M. THIES
-------------------------------------------------
Name: Dennis M. Thies
Title: Executive Vice President -
Finance and Chief Financial Officer
Address for Notices:
Southdown, Inc.
1200 Smith Street, Suite 2400
Houston, Texas 77002
Attn: Treasurer
Telephone: (713) 650-6200
Facsimile: (713) 653-6950
and with a copy to:
Southdown, Inc.
1200 Smith Street, Suite 2400
Houston, Texas 77002
Attn: General Counsel
Telephone: (713) 650-6200
Facsimile: (713) 650-8010
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 60
WELLS FARGO BANK (TEXAS),
NATIONAL ASSOCIATION, in its individual
capacity and as Administrative Agent
By: /s/ ANN RHOADS
-------------------------------------
Name: Ann Rhoads
Title: Vice President
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 61
SUNTRUST BANK, ATLANTA
By: /s/ JOHN A. FIELDS, JR.
-----------------------------------
Name: John A. Fields, Jr.
Title: Vice President
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 62
THE BANK OF NOVA SCOTIA
By: /s/ F.C.H. ASHBY
-----------------------------------
Name: F.C.H. Ashby
Title: Senior Manager Loan Operations
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 63
BANK ONE, TEXAS, N.A.
By: /s/ GREG SMOTHERS
-----------------------------------
Name: Greg Smothers
Title: Vice President
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 64
CREDIT AGRICOLE INDOSUEZ
By: /s/ PATRICK COCQUEREL
---------------------------------------------
Name: Patrick Cocquerel
Title: First Vice President, Managing Director
Head of Houston Representative Office
By: /s/ MICHAEL R. QUIRAY
---------------------------------------------
Name: Michael R. Quiray
Title: Vice President
Senior Relationship Manager
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 65
PARIBAS
By: /s/ ROSINE K. MATHEWS
--------------------------------
Name: Rosine K. Mathews
Title: Vice President
By: /s/ LARRY ROBINSON
--------------------------------
Name: Larry Robinson
Title: Vice President
[THIS IS A SIGNATURE PAGE TO THE REVOLVING CREDIT AGREEMENT]
<PAGE> 1
EXHIBIT 10.33
AGREEMENT
KOSMOS CEMENT COMPANY
- --------------------------------------------------------------------------------
KOSMOSDALE - BATTLETOWN, KENTUCKY
AGREEMENT
BETWEEN
KOSMOS CEMENT COMPANY
OPERATED BY SOUTHDOWN, INC.
AND
INTERNATIONAL BROTHERHOOD OF BOILERMAKERS,
CEMENT, LIME, GYPSUM & ALLIED WORKERS DIVISION
LODGE D-595
1999-2004
[KOSMOS CEMENT COMPANY LOGO]
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I - RECOGNITION ......................................................1
ARTICLE II - UNION AND COMPANY COOPERATION ....................................1
ARTICLE III - THE BASE CREW ....................................................2
ARTICLE IV - UNION SECURITY ...................................................2
ARTICLE V - MANAGEMENT RIGHTS ................................................5
ARTICLE VI - WAGES ............................................................5
ARTICLE VII - VACATIONS ........................................................6
ARTICLE VIII - JURY DUTY - WITNESS PAY ..........................................7
ARTICLE IX - COPIES ...........................................................8
ARTICLE X - GRIEVANCE PROCEDURE ..............................................8
ARTICLE XI - NON-BARGAINING UNIT EMPLOYEES ....................................9
ARTICLE XII - STRIKES AND LOCKOUTS ............................................10
ARTICLE XIII - HOLIDAYS ........................................................10
ARTICLE XIV - SENIORITY .......................................................11
ARTICLE XV - LAYOFF/RECALL ...................................................12
ARTICLE XVI - JOB BIDDING .....................................................13
ARTICLE XVII - INCAPACITATED EMPLOYEE ..........................................14
ARTICLE XVIII - WORKWEEK AND OVERTIME ...........................................15
ARTICLE XIX - BEREAVEMENT LEAVE ...............................................16
ARTICLE XX - ANNUAL RESERVE TRAINING LEAVE ...................................16
ARTICLE XXI - SAFETY AND HEALTH ...............................................17
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE XXII - BULLETIN BOARD ...............................................17
ARTICLE XXIII - FURNISHING OF TOOLS ..........................................17
ARTICLE XXIV - TRAINING COMMITTEE ...........................................17
ARTICLE XXV - OVERTIME LUNCH ALLOWANCE .....................................18
ARTICLE XXVI - BENEFIT PLANS ................................................18
ARTICLE XXVII - TERMS OF AGREEMENT ...........................................20
SCHEDULE A - PAY PROCEDURES ..................................................21
A1 - GAINSHARING ....................................................21
A2 - LEADPERSONS ....................................................21
A3 - JOB GROUPINGS ..................................................21
A4 - PROGRESSION SCHEDULES ..........................................23
LETTERS OF AGREEMENT .........................................................25
</TABLE>
<PAGE> 4
This Agreement, dated May 1, 1999 is made by and between the KOSMOS CEMENT
COMPANY, Louisville, Kentucky, and the INTERNATIONAL BROTHERHOOD OF
BOILERMAKERS, CEMENT, LIME, GYPSUM, AND ALLIED WORKERS DIVISION LOCAL LODGE NO.
D595, referred to respectively as the "Company" and the "Union."
ARTICLE I - RECOGNITION
1.1 The Company recognizes the Union as the sole bargaining agent for its
employees as is defined in paragraph 1.2 who work at the Company's operations at
Louisville and Battletown, Kentucky, for the purpose of collective bargaining
with respect to rates of pay, hours, and other conditions of employment.
1.2 The term "employee" as used in this Agreement shall include all permanent
production and maintenance employees including lead men, but excluding all
clerical employees, guards and supervisors as defined in the Act and all other
employees.
1.3 Union officers and members shall refrain from any union solicitation on
company time.
1.4 All provisions of this Agreement shall be applied to all employees without
regard to race, color, sex, religious creed, age, national origin, or veteran
status. The Company and the Union will comply with all Federal and State laws
concerning the rights of employees, including the Americans with Disability Act
and the Family and Medical Leave Act.
ARTICLE II - UNION AND COMPANY COOPERATION
2.1 The Union agrees that it will cooperate with the Company in all matters of
industrial relations including carrying out Equal Employment Opportunity
obligations and will support the Company's efforts to assure a fair day's work
on the part of its members and that it will actively strive to eliminate
absenteeism and other practices which restrict production. It further agrees
that its members will abide by the rules of the Company in its effort to prevent
accidents, to eliminate waste in production, conserve materials and supplies,
improve the quality of workmanship, and strengthen goodwill between the Company
and its employees.
2.2 The Union agrees that it will use its best efforts to assist the Company in
enhancing the competitiveness of the Company, and augmenting or increasing
revenue generation. For example, the Union will support, through community
involvement and pro-active measures, the efforts of the Company to obtain
permits and/or other necessary certifications to remain competitive in the
market place.
1
<PAGE> 5
2.3 The parties hereto intend by this Agreement to provide a stabilized and
mutually beneficial relationship between them and to insure the production of
quality products on schedule and at competitive costs during the life of this
Agreement. The Company and the Union will also establish an active Employee
Participation Program to facilitate ideas and develop and implement programs to
improve the overall operations and enhance employee involvement.
ARTICLE III - THE BASE CREW
3.1 The parties agree that due to business conditions and the need for effective
plant operations, it is necessary to utilize outside contract labor to perform
work in the operation. Base Crew employees will perform most of the work to be
done at the plant with the remainder to be performed by various numbers and
types of outside contractors. The parties recognize that the Company is in the
primary business of manufacturing cement and other products requiring similar
process (utilizing hazardous waste as fuel). The parties further recognize that
the business is limited in scope and that the Company should avoid, to the
extent possible, getting into other businesses such as special projects, special
maintenance other than routine preventive maintenance, laborer work, janitorial
work, trucking and the like, where other business concerns may have more
expertise, competence, economies of scale or other advantages. Therefore, the
Union agrees that the Company has the right to subcontract these and other types
of work. The base crew concept is intended to enhance the job security of our
permanent employees.
3.2 In an effort to provide the employees of Kosmos Cement Company with positive
labor relations and maximum job security, the parties agree that the Company
will operate the facility as efficiently and economically as possible, and it is
not the intention of the Company to permanently displace members of the
bargaining unit through the use of contract employees.
ARTICLE IV - UNION SECURITY
4.1 All employees covered by this Agreement, who as of May 1, 1991, are members
of the Union in good standing, and all employees who thereafter become members,
shall, as a condition of continued employment, remain members of the Union in
good standing for the duration of the Agreement. All new employees covered by
the Agreement shall, as a condition of employment, become members of the Union
on or immediately after successful completion of their probationary period. The
Company will notify the Union of all permanent new hires' addresses, telephone
numbers, and Social Security numbers.
2
<PAGE> 6
4.2 The Company agrees that during all reasonable times when the plant is
operating a duly accredited representative of the Union shall be entitled access
to the premises during the regular working hours for the purpose of assisting in
the adjustment of pending grievances, provided that the designated
representative of the Company is properly notified in advance and the Union
representative establishes proper identification. If it is necessary to go into
the work area of the plant (for example, to view a particular operation relative
to a pending grievance), then the appropriate Company official shall accompany
the Union representative so that both parties see the same thing so as to aid in
resolving the grievance.
4.3 The Union Grievance Committee representing the employees in matters other
than negotiations shall consist of not more than three (3) employees.
4.4 Any employee elected or appointed to a full time position with the
International Brotherhood of Boilermakers, Cement, Lime, Gypsum and Allied
Workers Division may be granted a leave of absence up to one (1) year provided
thirty (30) days written notice is given to the Company prior to the beginning
of such leave. During such leave, seniority shall accumulate. Insurance benefits
shall be suspended upon the commencement of such leave and will be in effect the
first day of returning to work with the Company. Upon returning to work such
employee shall be reinstated to his or her former job within the bargaining unit
by means of the then-existing bidding procedure. The Company agrees to consent
to the absence of no more than one (1) employee at any time under this
paragraph.
4.5 Up to two (2) employees may be excused from work for up to two (2) weeks in
a calendar year for the purpose of attending an International Union meeting or
convention. The leave shall be granted provided the Company receives fifteen
(15) days advance written notice.
4.6 Check-off: During the term of this Agreement, the Company will continue to
check off monthly dues, and initiation fees, each as designated by the Treasurer
of the Local Union, as membership dues in the Union on the basis of and for the
term of individually signed check-off authorization cards, a copy of which is
reproduced below, or hereafter submitted to the Company. The Company shall
promptly remit any and all amounts so deducted to the Treasurer of the Local
Union with a list of the employees from whom the deduction was checked off. On
or before the last Friday of each calendar month the Union shall submit to the
Company a summary list of cards transmitted in each month. Dues for a given
month shall be deducted weekly; deductions on the basis of authorization cards
submitted to the Company shall commence with respect to dues for the month in
which the Company receives such authorization cards. Unless the Company is
otherwise notified, the only Union membership dues to be deducted for payment to
the Union from the pay of the employee who has furnished an authorization shall
be the monthly Union dues. The Company will deduct initiation fees when notified
as designated by the Treasurer of the Local Union. The Union shall indemnify the
Company and hold it harmless against any and all suits, claims, demands and
liabilities that shall arise out of or by reason of any action that shall be
taken or not taken by the Company for the purpose of complying with the
foregoing provisions of this Article, or in reliance on any list or certificate
which shall have been furnished to the Company by the Union under any such
provisions.
3
<PAGE> 7
CHECK-OFF AUTHORIZATION
FOR INTERNATIONAL BROTHERHOOD OF
BOILERMAKERS, CEMENT DIVISION
I hereby authorize ______________________ (Name of Employer) to deduct from any
wages earned or to be earned by me, as your employee, and assign to Local Lodge
No. _______, of the International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers, the sum of money determined by the
Union in succeeding calendar weeks, beginning with the week next following
thereof, until such weekly deductions shall total the sum of my Initiation or
Reinstatement Fees, and thereafter the sum of money set by the Union per month
in payment of my Membership Dues, in accordance with its Constitution and
Bylaws, and became due to it as my Membership Dues in said Union.
This assignment, authorization and description shall be irrevocable for the
period of one (1) year, or until the termination of the current Agreement
between the Employer and the Union, whichever occurs sooner; and I agree and
direct that this assignment, authorization and direction shall be automatically
renewed and shall be irrevocable for successive periods of one (1) year each, or
for the period each succeeding applicable Agreement between the Employer and the
Union, whichever is shorter, unless written notice is given by me to the
Employer and the Union not more than twenty (20) days and not less than ten (10)
days prior to the expiration of each period of one (1) year, or of each
applicable collective agreement between the Employer and the Union, whichever
occurs sooner.
Executed as ___________ this _________ day of ________, 1991.
4
<PAGE> 8
ARTICLE V - MANAGEMENT RIGHTS
5.1 The Union recognizes that the management of the plant, river, and quarry
operations, the direction of the working forces, including the right to hire,
discipline for just cause, the right to make and change and enforce (after
posting) rules for the maintenance of discipline and safety; the exclusive
rights to determine partial or permanent discontinuance or shutdown of
operations (the Company's only obligation when exercising this right is to
bargain with the Union over the effects of that decision); the right to promote,
or transfer employees; the right to transfer and relieve employees from duty
because of lack of work or other legitimate reason, and the right to establish
and change the working schedules and duties of employees are vested in the
Company, except as otherwise provided in the Agreement. The listing of specific
rights in this Agreement is not intended to be nor shall be considered
restrictive of or a waiver of any of the rights of management not listed and not
specifically surrendered herein, whether or not such rights have been exercised
by the Company in the past.
ARTICLE VI - WAGES
6.1 It is agreed that for the duration of this Agreement, the wage groups and
the rates of pay shall be those set in Schedule "A".
6.2 (1) All scheduled work beginning between 5:00 A.M. and 12:59 P.M. inclusive,
shall be considered 1st shift work.
(2) All scheduled work beginning between 1:00 P.M. and 8:59 P.M. inclusive,
shall be considered 2nd shift work.
(3) All scheduled work beginning between 9:00 P.M. and 4:59 A.M. inclusive,
shall be considered 3rd shift work.
6.3 Each employee regularly scheduled to work on the 2nd shift shall be paid a
premium of sixty cents ($.60) for all hours worked by him or her on that shift.
Each employee regularly scheduled to work on the 3rd shift shall be paid
seventy-five ($.75) for all hours worked by him or her on that shift. These
premium rates do not apply to day workers even though they may work over into a
premium pay shift. If, however, the day worker is scheduled to take the place of
a regular scheduled shift worker, then the premium rate applies. Employees
called out will receive the appropriate shift premium for hours worked prior to
their normal shift.
6.4 All consecutive hours (exclusive of meal periods) worked by an employee who
normally begins work at a time specified in the preceding paragraphs, shall be
deemed to be worked by him or her on the shift on which he or she begins work.
6.5 All regular hours worked on Sunday, not compensated for by an overtime rate
shall be paid for at one and one-quarter (1 1/4) times the rate for work being
performed.
5
<PAGE> 9
ARTICLE VII - VACATIONS
7.1 Each employee meeting all the requirements of paragraph 7.2 of this Article
shall be eligible for vacation in accordance with the following schedule:
Continuous Service Vacation Weeks
------------------ --------------
1 Year of Service 2 Weeks
5 Years of Service 3 Weeks
10 Years of Service 4 Weeks
25 or more Years of Service 5 Weeks
7.2 An employee must have been actively employed at some time during the
calendar year to be eligible for vacation with pay during that calendar year. An
employee shall receive a full vacation provided that such employee has actually
worked at least one thousand two hundred (1,200) hours during the year preceding
his or her most recent anniversary date. Employees who work less than one
thousand two hundred (1,200) hours in the preceding year will receive their
vacation pay prorata with one/twelfth of their vacation entitlement paid for
every one hundred of hours of actual work performed. An employee shall be
considered as having worked for the purpose of vacation eligibility on the basis
of an eight (8) hour day and forty (40) hour week during absence from work
because of a work related illness or injury for a period not to exceed four
hundred (400) hours.
7.3 Vacations will not be cumulative, and the final right to allotment of
vacation period is exclusively reserved to the Company in order to ensure the
orderly operation of the plant. When requested vacation periods conflict,
preference shall be given to the employee with the most plant seniority. In the
event a paid holiday falls during an employee's vacation period, the employee
shall receive holiday pay in addition to vacation pay.
7.4 The Company determines the number of employees by classification allowed on
vacation on any given week. Management will schedule vacation in a fair and
equitable manner. Vacation scheduling will begin on November 15th of the
previous year and be concluded by December 15th. The final schedule will be
posted by the Company no later than January 1st.
7.5 Vacation must be scheduled by week or weeks (a week is seven (7) calendar
days). Employees may request vacation pay in lieu of the time off provided they
produce a good and sufficient reason to the Company and it is mutually agreed by
the Company and the Union.
7.6 Vacation pay will based on forty (40) hours for each week of entitlement at
the employee's highest rate held for at least thirty (30) weeks in the previous
calendar year.
7.7 Prime Months Vacation Scheduling.
(1) Prime months for vacation scheduling are June, July, and August.
6
<PAGE> 10
(2) Employees may request a vacation of up to two (2) consecutive weeks
during prime months in their classification based on plant seniority.
The Company will approve a vacation request provided there are openings
in the schedule and it does not adversely affect the efficient
operations of the plant or quarry.
(3) Once all employees in a job classification have had an opportunity to
request a prime month vacation provided there are openings and it does
not adversely impact operations, the Company will consider second
requests.
7.8 One (1) week of vacation can be taken one day at a time provided:
(1) The employee makes a request at least seventy-two (72) hours in advance,
and,
(2) The request is granted by the Company.
(3) Employee may use the above to cover a day of sickness provided the
Company is notified as soon as possible but no later than 30 minutes
before the start of the shift.
It is the intent to arrange absences so that the Company will not incur
penalties, and, as such, the Company reserves the right to disallow any
request for a one day vacation.
ARTICLE VIII - JURY DUTY - WITNESS PAY
8.1 It is agreed that the Company shall make up the wage loss incurred by a
regular employee (as distinguished from a probationary employee) because of jury
service by payment of the difference between the amount received for such jury
service on the day such employee would have been regularly scheduled to work and
his or her regular rate of pay computed on the same basis as vacation pay. Any
employee reporting for jury duty will not be required to work his or her regular
shift that calendar day. The employee will be excused for the entire day without
loss of pay. Hours spent on jury duty service and paid for hereunder shall be
considered as time actually worked for the 40 hour overtime requirements.
Further as outlined above, the Company shall make up the wage loss incurred by
an employee when subpoenaed as a witness in an action when the employee or the
Union or the Company are neither the plaintiff nor the defendant.
8.2 To receive pay from the Company under this provision, the employee must
provide the Company with a statement signed by an official of the court
certifying as to the employee's service as a juror or court witness or
appearance in court for such purposes, the date or dates of attendance, and the
compensation paid him or her exclusive of any transportation and/or subsistence
allowance.
7
<PAGE> 11
ARTICLE IX - COPIES
9.1 The Labor Agreement and Summary Plan Descriptions for the Pension Plan,
401K, and Insurance Plan will be printed at Company expense. The Company will
provide each member with a copy of the booklet.
ARTICLE X - GRIEVANCE PROCEDURE
10.1 Should differences arise during the term of this Agreement between the
Company and the Union, or an individual employed by the Company, as to the
meaning and application of the provisions of this Agreement, an earnest effort
shall be made by the parties to settle such differences promptly and in the
following manner:
(1) STEP I. The complaint, within three (3) days of its occurrence, or the
occurrence of the matter out of which the complaint arises, may be taken up by
the employee involved, with or without Union representation, with his or her
supervisor. The employee shall state the specific article(s) and paragraph(s) of
the Contract that is alleged to have been violated in order for the grievance to
be considered and processed.
(2) STEP II. If no satisfactory settlement is reached in Step I, the matter
shall be reduced to writing and presented to the Plant Manager within five (5)
days from the date of the meeting with the supervisor. The employee shall state
the specific article(s) and paragraph(s) of the Contract that is alleged to have
been violated in order for the grievance to be considered and processed. At the
time of presentation, or within five (5) days, the Plant Manager or his designee
will meet with the grievance committee to hear and discuss the grievance. The
Company shall answer the grievance in writing within five (5) days after said
meeting.
(3) STEP III. If no agreement is reached in Step II, the Committee may,
within five (5) days of the receipt of the above answer, refer the matter to
higher officials of the Company and the Union, who may attend a meeting to be
held at a time mutually agreed to by the parties.
(4) STEP IV. Any grievance not settled in Step III above may be referred to
the Dispute Resolution Panel. This panel will consist of one (1) official of the
International Union, one (1) official of the Corporate Human Resources
Department, and one (1) individual mutually agreed upon by these two (2)
officials. Notice to refer a grievance to the Dispute Resolution Panel shall be
given in writing within fifteen (15) days after being notified of the decision
rendered in Step III or the matter will be considered closed. Only one (1)
grievance may be submitted to or be under review by the Dispute Resolution Panel
at any one (1) time unless by prior mutual written consent of the parties. The
Dispute Resolution Panel shall have no power to add to or subtract from or
change, modify or amend any of the provisions of this Agreement. The decision
rendered by the Dispute Resolution Panel will be final and binding upon the
Union, the Company, the grievant, and all the
8
<PAGE> 12
employees covered by this Agreement. The Dispute Resolution Panel shall
interpret and apply the terms of this Agreement; they shall not substitute their
discretion and judgement for that of the Company. Disputes shall be settled by
majority vote. The actual vote cast by each party shall not be revealed. It is
expressly agreed that the Dispute Resolution Panel shall not have the authority
to decide any matter involving the exercise of a right reserved to management
under this Agreement. The expenses incident to the services of the third party,
including the cost of the meeting room, etc. shall be shared equally by the
Company and the Union.
10.2 Any grievance growing out of a discharge or suspension must be submitted in
writing by the aggrieved employee directly to the Union and from the Union to
the Director of Human Resources or Plant Manager within forty-eight (48) hours
from the time the Union is notified in writing of the discharge or suspension or
it will not be recognized and action taken shall be final.
10.3 The time limits referred to in the foregoing paragraphs exclude Saturdays,
Sundays and holidays.
10.4 Any grievance not presented or appealed within the time limits provided,
unless mutually agreed in writing to extend the time, shall be considered
settled on the basis of the decision which was not appealed and shall be final
and binding on the parties involved.
10.5 Grievances presented in any of the regular steps set forth and not answered
within the specified time shall be considered as having been appealed to the
next step of the grievance procedure.
10.6 The Company will schedule grievance meetings at mutually convenient times
and the Union Grievance Committee as defined in Article 4.3 will not lose
regularly scheduled pay for time spent in grievance meetings.
ARTICLE XI - NON-BARGAINING UNIT EMPLOYEES
11.1 It is understood and agreed that during the normal course of operations it
may be necessary for non-bargaining unit employees to perform some bargaining
unit work from time to time. Such work will be incidental to the normal duties
of said non-bargaining unit employees, as long as such work does not permanently
displace or replace a bargaining unit employee. Such work shall include work
involving corrective action which must be performed expeditiously; instruction
or training of employees; demonstration; inspection or testing of equipment;
work of an emergency nature; and development work for new processes and/or
procedures.
11.2 Temporary employees will be used to perform work that is incidental to the
manufacturing of cement. This will include but not be limited to clean-up,
janitorial duties, lawn and ground maintenance and short-term projects, etc. In
addition, the parties recognize that temporary employees may be used for other
assignments such as to address temporary surges in business, to
9
<PAGE> 13
facilitate the scheduling of permanent employees for training and development
opportunities, to enhance the job security of permanent employees, etc.
Temporary employees will not be permitted to work for the plant or the quarry
more than 180 consecutive calendar days.
11.3 The Company will not expand beyond three (3) temporary employees without
first notifying the Union committee in writing. Any new temporary employees
added cannot be utilized for longer than 180 calendar days without mutual
agreement between the parties.
ARTICLE XII - STRIKES AND LOCKOUTS
12.1 The Union agrees that there shall be no picketing or strikes by the Union
or by its members, of any kind or degree whatsoever, or walkout, suspension of
work, slowdowns, limiting of production, or any other interference or stoppage,
total or partial, of the Company's operations for any reason whatsoever, such
reasons including, but not limited to, unfair labor practices by the Company or
any other Employer. It is further agreed that neither the Union or its members
shall engage in the above prohibited conduct in support of picketing, strikes or
any labor dispute actions engaged in by any other organization or person. In
addition to any other recourse or remedy available to the Company for violation
of the terms of this Article by the Union and/or any Union member, the Company
may discharge or otherwise discipline any employee who authorizes, causes,
engages in, sanctions, recognizes, or assists in any violation of this Article.
The Company will not engage in any lockouts during the term of this Agreement.
ARTICLE XIII - HOLIDAYS
13.1 The Company recognizes the following nine (9) paid holidays per year: New
Year's Day, Good Friday, Memorial Day, 4th of July, Labor Day, Thanksgiving, Day
after Thanksgiving, Christmas Eve, and Christmas Day. Beginning with the
calendar year 2002 an additional holiday will be observed on President's Day.
13.2 Holiday pay will be equal to eight (8) hours pay at the employee's straight
time hourly rate. Such holiday pay will not be paid if the employee is absent
from work on the holiday if scheduled to work on the holiday or if the employee
is absent on the scheduled day preceding or following the holiday unless such
absences are excused by Management. In no event shall a holiday be paid for
unless an employee has also actually worked at least one (1) day during the
fifteen (15) day period immediately preceding or immediately following the
holiday. If a ten (10) hour shift employee is scheduled off for a holiday
falling during his or her regular four (4) days of work, he or she will receive
ten (10) hours of holiday pay.
13.3 If an employee is required to work on a holiday, he or she will receive
eight (8) hours pay for the holiday (holiday pay) plus one and one-half (1-1/2)
times the employee's regular hourly rate for the first eight (8) hours actually
worked on the holiday. The employee will receive two and one-half (2-1/2) times
the employee's regular hourly rate for hours worked in excess of eight (8) on
the holiday.
10
<PAGE> 14
13.4 The eight (8) hours holiday pay shall be counted toward the calculation of
overtime pay paid for working in excess of forty (40) hours per week.
13.5 Since the employee is receiving one and one-half (1-1/2) times the
employee's regular hourly rate for hours actually worked on the holiday, such
hours actually worked on the holiday shall not be counted toward the calculation
of overtime pay received for working in excess of forty (40) hours per week.
13.6 When a holiday falls on Sunday, it will normally be observed on the
following Monday.
ARTICLE XIV - SENIORITY
14.1 Seniority shall consist of an employee's length of continuous service with
the Company since the employee's last day of hire at its facility located at
Louisville and/or Battletown, Kentucky.
14.2 Each new employee shall be considered as a probationary employee for the
first ninety (90) calendar days of full time employment after which the
employee's seniority shall date back to his or her date of hire. There shall be
no seniority among probationary employees. Such employees shall not have
recourse to the grievance procedure of this Agreement and may be laid off or
discharged as exclusively determined by the Company.
14.3 Seniority and the employment relationship shall be automatically terminated
when an employee:
1. is discharged;
2. is terminated upon permanent shutdown of the Company's facilities;
3. is laid off for a period of twenty-four (24) months or the length of his
or her seniority as of his or her last day of work, whichever period is
shorter;
4. voluntarily quits which shall be deemed to include:
a) failure to notify the Company of the employee's intention to return
to work after layoff within three (3) working days, and to actually
report to work within seven (7) working days (unless this latter period
is extended in writing by the Company) after he or she has been notified
by certified mail (either by delivery or attempted delivery) at his or
her last address appearing on the Company's records to report to work;
11
<PAGE> 15
b) an absence for two (2) consecutive scheduled work days without
notifying the Company or reporting to work unless excused by Management
in advance;
c) the employee fails to return to work on the first regularly scheduled
work day following the termination of any leave of absence or any other
leave approved by the Company unless excused by Management.
5. retires.
14.4 When a vacancy occurs for which a laid off employee is qualified, he or she
will be given notice of recall at his or her last address as shown on Company
records. The employee must notify the Company of the employee's intention to
return to work after layoff within three (3) working days and must actually
report to work within seven (7) working days after he or she has been notified.
This may be extended for an additional seven (7) days if the employee has
another job which requires a two (2) week resignation notice.
14.5 An employee on continuous absence due to disability shall accrue seniority
and retain recall rights for a period not to exceed twenty-four (24) months. An
employee absent because of disability shall only be returned to work after he or
she is physically able to perform the job. However, should such an employee be
declared totally and permanently disabled prior to twenty-four (24) months, such
employee's name shall be removed from the payroll and a notice to this effect
will be sent to his or her last address as shown on Company records.
14.6 Seniority lists agreed to by and between the Company and the Union shall be
posted on the bulletin board as of May 1 and November 1 of each year.
Corrections shall be made in the seniority lists when it is proved an employee
is placed in the wrong position on said list, but all requests for corrections
must be made within thirty (30) days from date of posting or the list shall be
valid as posted. The Union will be given a copy of the seniority list.
14.7 All employees have the obligation to notify the Company of their current
address and telephone number and immediately advise the Company of any changes.
ARTICLE XV - LAYOFF/RECALL
15.1 The Company recognizes that all employees shall retain the right to
seniority preference in cases of layoffs and recall. The last employee hired
shall be the first laid off and the last laid off the first rehired. Such
preferences in the cases of layoffs and recall shall take into consideration the
employee's ability to perform the available work and the efficient operations of
the operation. It is recognized that, in periods where business conditions
necessitate that the level of production be reduced to a point where only a
minimum of employees is required, it shall be necessary, in some cases, to
deviate from strict plant seniority in order that some positions be available to
service and adjust the equipment when production requirements increase. In the
event of a layoff which is scheduled to last five (5) or more days, the Company
will layoff employees in Job Groups one (1)
12
<PAGE> 16
through four (4) by plant seniority. Any such employee who displaces the least
senior person in a position must be qualified to perform in that position within
a reasonable period of time not to exceed five (5) days of being placed on the
job. If the Company does not layoff in accordance with seniority, the Company
will meet with the Union to explain the reasons prior to the layoff.
15.2 In the event that an employee is displaced by the installation of
mechanical equipment, change in production methods, the installation of new or
larger equipment, the combining of jobs, the elimination of jobs, or by a more
senior person, the employee may elect to exercise his or her plant seniority to
displace the least senior person in a position the employee is qualified to
perform within a reasonable period of time not to exceed thirty (30) days of
being placed on the job.
15.3 In the event the Company determines it is necessary to permanently change
the shift schedule or off days of an employee, the affected employee may
exercise seniority to displace a less senior employee within the same
classification.
ARTICLE XVI - JOB BIDDING
16.1 When the Company determines a permanent vacancy exists, other than a
minimum pay job and it cannot be filled from senior employees within the same
job classification, the Company will post a notice of such fact, such notice to
remain posted for a period of five (5) days, not including Saturdays, Sundays,
or holidays. Any employee on vacation during the posting period (not to exceed
two (2) weeks) will have forty-eight (48) hours from the time the employee was
scheduled to return from vacation to determine if any bids were posted during
the vacation and to submit a job bid for consideration. This notice shall state
rates of pay, hours, current shifts and off days, and job requirements.
Employees who wish the job shall be considered in the manner provided herein in
paragraph 16.2 and the successful applicant's name should the job be awarded,
will be posted within fourteen (14) days after the bid is removed from the
bulletin board, no more than thirty (30) days where testing is required. The
successful bidder will be placed on the job as needed. If a successful bidder is
not assigned to the job within ninety (90) days following the awarding of the
bid, and the Company still intends to fill the job, the employee shall receive
the applicable rate of the new job and any time accumulated after the awarding
of the job bid shall be credited towards the progression schedule. If there are
no qualified bidders, the Company may assign the least senior qualified employee
who does not hold a bid job to the vacancy.
16.2 The following factors shall apply in the awarding of all jobs:
(1) Qualifications of the Applicant (which shall include: ability to
perform the work, aptitude, skills, experience, training for the job,
score on the mechanical aptitude examination published by The
Psychological Corporation, and attendance);
(2) Physical ability to perform the essential functions of the job;
13
<PAGE> 17
(3) Experience gained through holding jobs under the bid system, outside
schooling, as well as skills, knowledge, training and ability acquired
by an employee prior to employment with the Company, will be given
consideration in awarding jobs. Experience gained through temporary
reassignments will not be given consideration in awarding jobs, except
to qualify the senior bidder
(4) In the event that the three previous criterion are equal the position
will be filled by the most senior applicant.
If the employee selected shall fail to qualify after a fair trial period, in
the exclusive judgement of the Company he or she shall be returned to his or her
former position and the next bidder shall be given consideration. No employee
with a formal disciplinary action in the record within the last 12 months may be
considered for promotion. A verbal warning shall not be considered a formal
disciplinary action for this purpose. Employees may bid for a job below their
current classification only once in a 36 month period.
16.3 Temporary Reassignment. An employee who is temporarily assigned by his or
her supervisor to perform work of a higher paid job classification will be paid
the rate of such higher job classification for time actually worked. An employee
temporarily assigned by his or her supervisor to perform work in an equal or
lower paid classification will be paid the base hourly wage rate of his or her
permanent classification. When making temporary assignments from the laborer
classification, the Company will upgrade the senior available employee who is
not already upgraded from the classification.
16.4 In no event shall the Company be requested or required to post any job
temporarily vacated by reason of vacations, illness, or injury. The Company, at
its discretion, may create temporary jobs not to exceed one hundred twenty (120)
work days, which may be extended by mutual agreement between the Company and the
Union. Should the Company determine that any temporary job become permanent, the
Company shall post the job as provided in this Article.
16.5 In the event that two (2) or more existing positions are combined, the
affected employees in the classification will be assigned, if needed, in the new
combined job by seniority and ability to perform the work. Any vacancies created
by this action will be bid in accordance with Article 16.1.
ARTICLE XVII - INCAPACITATED EMPLOYEE
17.1 Any employee who becomes incapacitated and, on the basis of competent
medical opinion, cannot perform the duties of his or her regular job may be
placed in a vacant or other job by mutual agreement between the Local Management
and the Local Union Committee providing the employee can perform the job within
a reasonable training program. In placing an incapacitated employee under this
provision, the Parties will take into consideration the fair placement of any
employee who may be displaced by such assignment.
14
<PAGE> 18
ARTICLE XVIII - WORKWEEK AND OVERTIME
18.1 During the life of this Agreement it is understood that the work day shall
be twenty-four (24) hours commencing with the beginning of the employee's
morning shift and the work week shall be seven (7) days beginning with the
beginning of the morning shift on Monday. One and one-half (1-1/2) times the
employee's regular hourly rate shall be paid for all hours worked in excess of
forty (40) hours per week.
18.2 One and one-half (1-1/2) times the employee's regular hourly rate shall be
paid for all hours worked in excess of eight (8) in a day and two (2) times the
employees regular hourly rate shall be paid for all hours worked in excess of
twelve (12) in a work day for employees scheduled to work a normal eight (8)
hour day. One and one-half (1-1/2) times the employee's regular hourly rate
shall be paid for all hours worked in excess of ten (10) in a day and two (2)
times the employee's regular hourly rate shall be paid for all hours worked in
excess of fourteen (14) in a work day for employees scheduled to work a normal
ten (10) hour day. Daily overtime shall not be counted toward the calculation of
overtime pay received for working in excess of forty (40) hours per week.
18.3 Callouts.
(1) If an employee is called out after his or her regular shift and after
leaving the plant, or on off days, he or she shall be paid a minimum of four (4)
hours pay at one and one-half (1-1/2) times the employee's regular rate.
However, such hours shall not be counted toward the calculation of overtime pay
paid for working in excess of forty (40) hours per week.
(2) If such employee is notified twelve (12) hours or more in advance of his
or her shift, the four (4) hour minimum will not apply.
(3) If an employee is called out within four (4) hours of his or her
scheduled shift start, he or she shall receive a minimum of four (4) hours pay
at one and one-half (1-1/2) times the employee's regular rate in addition to
regular pay for scheduled hours worked.
18.4 Weekly manning schedule shall be posted no later than 10:00 A.M. on Fridays
barring unforeseen circumstances outside the Company's control.
18.5 Employees who have not been notified of a schedule change after the Friday
posting and who report to work shall be guaranteed a minimum of four (4) hours
pay if no work is available. If an employee is assigned to work, he or she shall
be scheduled a minimum of eight (8) hours of work during the work day. This
provision shall not apply if failure to provide work is due to circumstances
outside the Company's control such as but not limited to fire, flood, storm,
major equipment failure, or utility failure. Every reasonable effort shall be
made to notify employees in advance of their reporting to work.
18.6 Report Pay. If an employee shows up for work at his or her scheduled time
and is not put to work (sent home for lack of available work) he or she shall
receive four (4) hours pay. An employee
15
<PAGE> 19
who works will be paid for hours worked but not less than four (4) hours pay if
sent home by the Company. This provision shall not apply if failure to provide
work is due to circumstances outside the Company's control such as, but not
limited to, fire, flood, storm, major equipment failure or utility failure.
18.7 The current Overtime Distribution Policy will be posted by the Company.
This policy may be amended by a mutual agreement between the parties. The
overtime list will be maintained by the Company. It is agreed that employees may
not refuse to work mandatory overtime unless a reasonable excuse is given as
determined by the company.
ARTICLE XIX - BEREAVEMENT LEAVE
19.1 When an employee who has completed the probationary period is absent from
work to arrange for and/or attend the funeral of his or her parent, stepfather,
stepmother, wife or husband, son or daughter, or stepchildren, brother, sister,
grandfather, grandmother, grandchildren, father-in-law, mother-in-law, spouse's
grandparents, spouse's brother, spouse's sister, the Company will pay up to the
next three (3) scheduled work days (up to the next four (4) scheduled days off
with pay if the employee is required to travel beyond a radius of five hundred
(500) miles), for eight (8) hours at the employee's regular hourly rate for each
scheduled workday the employee is absent.
19.2 Funeral leave will be granted within seven (7) days of the death or service
only for absences occurring on the employee's regularly scheduled workdays and
will not apply to employees on layoff or other non-working status. Hours paid
under this Article will be counted as hours worked for the purpose of computing
overtime. To be eligible for benefit under the Article, the employee must supply
reasonable documentary evidence of covered death, family relationship, and
attendance at the funeral or service.
19.3 Employees who normally work a ten (10) hour, four (4) day work week will be
compensated in accordance with paragraph 19.1 for up to ten (10) hours at the
employee's regular hourly rate for each scheduled workday absent provided the
employee would have worked ten (10) hours on those days of absence. The maximum
funeral leave allowance for ten (10) hour shift employees will be thirty (30)
hours of pay per bereavement.
ARTICLE XX - ANNUAL RESERVE TRAINING LEAVE
20.1 Employees who are members of organized reserve components of the Armed
Forces, including the National Guard, will be allowed leave of absence annually
for the purpose of attending required military training encampments or cruises.
The Company will pay any employee who goes on such leave of absence the
difference between the employee's straight time pay for up to (2) two weeks and
the employee's military pay including longevity pay but excluding all allowances
such as rent, subsistence, uniform and travel. Payment will be made when the
employee returns from
16
<PAGE> 20
reserve training on presentation of satisfactory proof of the amount of pay
received.
ARTICLE XXI - SAFETY AND HEALTH
21.1 A joint Safety and Health Committee shall be established consisting of
members, appointed by the Company and the Union. The committee will consist of
not more than four (4) members from the Union and four (4) members from the
Company plus the Plant Manager or his representative. Meetings will be held
regularly to address safety and health concerns and make recommendations to the
Plant Manager.
ARTICLE XXII - BULLETIN BOARD
22.1 The Union agrees to post only notices concerning elections, meetings,
reports and other official Union business and notices of social and recreational
activities on the Company bulletin board. A copy of each notice will be supplied
to the Plant Manager at the time of its posting. The Union agrees further that
it will post no matter which is in the disinterest of the Company. However,
notwithstanding the above, it is understood that the Company's decision
concerning the use of the bulletin board shall be final.
ARTICLE XXIII - FURNISHING OF TOOLS
23.1 The Company shall furnish all special tools and equipment. Maintenance
employees shall furnish their own tools; in case of breakage, loss, or worn out
tools, the Company will replace or repair such tools. All breakage or loss shall
be reported immediately to the Company.
ARTICLE XXIV - TRAINING COMMITTEE
24.1 A joint Union Management Training Committee will be established consisting
of an equal number of representatives from the Union and the Management. Other
representatives may be invited to participate in the meetings from time to time
by mutual agreement as needed.
24.2 The purpose of the Committee will be to assist management by making
recommendations as to the selections, evaluations and progression of employees
in training and the overall successful administration of the plant training
program. The Committee shall meet quarterly or otherwise as necessary to
accomplish this objective.
24.3 A trainee will not be disqualified from the program without first being
advised of and placed in a probationary status unless the trainee's conduct
requires immediate removal. The Parties recognize it may be necessary to rotate
shift assignments to enable employees to obtain the necessary work experience.
Employees placed on probationary status shall not advance in pay.
17
<PAGE> 21
ARTICLE XXV - OVERTIME LUNCH ALLOWANCE
25.1 Any employee who works more than ten (10) consecutive hours or twelve (12)
consecutive hours for employees on ten (10) hour shifts where such overtime
hours are unscheduled, shall be given a lunch allowance. Any employee called out
who works more than four (4) consecutive hours outside his or her normal shift
will receive a lunch allowance. No lunch allowance will be provided if such
overtime hours are scheduled with twelve (12) hours advance notice. The lunch
allowance will not exceed $7. Effective May 1, 2002 the lunch allowance will not
exceed $8.
ARTICLE XXVI - BENEFIT PLANS
26.1 During the term of this Agreement the Company will provide employees with
participation in the Southdown, Inc. Medical Plan, the Southdown, Inc. Group
Dental Benefit Plan, the Southdown, Inc. Life Insurance and Accidental Death and
Dismemberment Plan, the Southdown, Inc. Long Term Disability Plan, the
Southdown, Inc. Pension Plan, the Southdown, Inc. Retirement Savings Plan, and
the Southdown, Inc. Voluntary Life Insurance Plan, and continue said plans for
the life of this Agreement unless the parties agree mutually to modify the
provisions of these plans. Effective May 1, 1999, gainsharing earnings will be
included as part of base pay for pension calculation purposes.
26.2 During the life of and for the term of this Agreement dated May 1, 1999,
the Company will provide post retirement medical insurance coverage to all
eligible employees covered under this bargaining unit who retire after having
achieved age 62 with at least 15 years of company service. The provisions of
this coverage will be the same as the benefits and eligibility requirements
provided for in the Southdown Inc. Retiree Medical Insurance Plan which are
subject to modification.
26.3 SICKNESS AND ACCIDENT BENEFITS
If an employee with at least one (1) year of service is absent from work due to
disability, sickness and accident benefits are payable. The disability must
prevent the employee from performing the duties of the job because of a
non-occupational sickness or injury. This benefit is payable if confined to a
hospital or home.
After a waiting period of three (3) work days, disability benefits are payable
at a rate of twenty five dollars ($25) per day for the fourth and fifth work day
of absence, then at a rate of fifty-five dollars ($55) per day for a maximum of
five days per week. The waiting period will be waived if the employee is
hospitalized as an in-patient and the daily benefits will be paid immediately at
the fifty-five dollar ($55) rate. A disabled employee may receive weekly
sickness and accident benefits during the period of disability not to exceed
five (5) months. It is the employee's responsibility to make application for
this benefit and the attending physician must document the nature of the
disability and expected date of return to work.
18
<PAGE> 22
No benefits shall be payable for the following:
1. disability which you are not under the direct care of a licensed
physician.
2. sickness or injury which is purposefully self-inflicted while sane
or insane.
3. disability due to an injury arising out of the course of employment.
4. disability due to disease which benefits are payable under Worker's
Compensation, Occupational Disease or similar law.
This benefit terminates upon retirement or upon termination of employment.
Any employee currently not participating in the long term disability (LTD) plan
and who applies for LTD coverage no later than July 1, 1996 and is rejected or
shows evidence of prior rejection, will be eligible for up to fifty two (52)
weeks of sickness and accident benefits.
19
<PAGE> 23
ARTICLE XXVII - TERMS OF AGREEMENT
27.1 After ratification by the members of the Local Union, this Agreement shall
become effective and remain in force and effect and be binding upon the parties
hereto from May 1, 1999, to and including April 30, 2004, and it shall continue
to be in full force and effect thereafter from year to year until either party
on or before February 28 of any year, beginning February 28, 2004, gives written
notice to the other party of its desire or intention either to alter and modify
or terminate the same. If such notice is given, the parties hereto shall begin
negotiations not later than April 1 in such year.
IN WITNESS WHEREOF, the Union has caused this Agreement to be executed in
its name, after due authorization by a vote of a majority of its members, and
the Company has caused it to be executed in its name, by its duly authorized
representatives.
INTERNATIONAL BROTHERHOOD OF KOSMOS CEMENT COMPANY
BOILERMAKERS, CEMENT, LIME,
GYPSUM AND ALLIED WORKERS,
DIVISION LOCAL LODGE NO. D595
- ----------------------- ---------------------------------
By: J. C. Todd By: Bernard M. Reuland
- ----------------------- ---------------------------------
By: Timothy E. McCoy By: Stuart E. Tomlinson
- ----------------------- ---------------------------------
By: David L. Swarens By: Steven K. Martin
- ----------------------- ---------------------------------
By: Gary W. Killen By: Paul J. Anderson
- -----------------------
By: Patrick M. Granzow
- -----------------------
By: William G. Bennett
- -----------------------
By: Buddy Joe Singleton
- -----------------------
By: James E. Pack
Signed this 1st day of May, 1999. Signed this 1st day of May, 1999.
20
<PAGE> 24
SCHEDULE A - PAY PROCEDURES
A1 - GAINSHARING: The employees will participate in a gainsharing program
developed by the Company.
A2 - LEADPERSONS: Leadpersons may only be appointed at the sole discretion of
management. They shall be paid $1.25 per hour in addition to their normal rate
of pay while they are designated as leadpersons to perform certain
quasi-supervisory tasks incidental to their normal hands-on work.
A3 - JOB GROUPINGS: The following positions shall be grouped together for pay
purposes:
JOB GROUP ONE - GENERAL PLANT WORKER
Sweeper
Bobcat Operator
Laborer
*Not withstanding other provisions of this Agreement, this will be a bid job.
JOB GROUP TWO - UTILITY WORKER
River Watchman
Storeroom Attendant
Maintenance Lift Truck Driver
Shipper/Packer*/Loader
Root Catcher
*The Company will continue the current practice of providing an incentive to
packhouse employees of $3/1,000 bags of product packed per day.
JOB GROUP THREE - MATERIAL HANDLERS
Quarry Lube Serviceman
Crusher Operator
Clay Feeder
Clay Dryer Operator
Drill Operator
Quarry Driver
Quarry Barge Loader
Quarry Front-end Loader
Material Handler
Quarry Dozer Operator
Quarry Road Maintenance
21
<PAGE> 25
JOB GROUP FOUR - PROCESS/HEAVY EQUIPMENT
Process Attendant
Quarry Mobile Equipment Operator
Derrick Operator
Quarry Blaster
JOB GROUP FIVE - LABORATORY
Laboratory Technicians
JOB GROUP SIX - SKILLED REPAIRMAN
Mechanical Repairman*
Electrical Repairman*
Garage Mechanic
*Requires Department of Labor Journeyman's Certificate to achieve Journeyman's
rate.
JOB GROUP SEVEN - INSTRUMENTS & CONTROL
Instrument Technician**
Control Room Operator
Machinist/Tool & Die Maker ***
**Must be Journeyman Electrical Repairman.
***Must be Journeyman Mechanical Repairman and requires Machinist Journeyman's
Certificate to achieve Journeyman's rate.
22
<PAGE> 26
A4 - PROGRESSION SCHEDULES: The following wage schedules reflect a fifty cent
($.50) increase effective 5/1/99 a forty-five cent ($.45) increase effective
5/1/00, a forty-five cent ($.45) increase effective 5/1/01, a fifty cent ($.50)
increase effective 5/1/02, and a fifty cent ($.50) increase effective 5/1/03.
<TABLE>
<CAPTION>
5/1/99 5/1/00 5/1/01 5/1/02 5/1/03
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
JOB GROUP ONE
Starting Rate $ 11.20 $ 11.65 $ 12.10 $ 12.60 $ 13.10
End of 6 Months Worked $ 11.85 $ 12.30 $ 12.75 $ 13.25 $ 13.75
JOB GROUP TWO
Starting Rate $ 11.85 $ 12.30 $ 12.75 $ 13.25 $ 13.75
End of 6 Months Worked $ 12.75 $ 13.20 $ 13.65 $ 14.15 $ 14.65
End of 12 Months Worked $ 13.70 $ 14.15 $ 14.60 $ 15.10 $ 15.60
End of 18 Months Worked $ 14.00 $ 14.45 $ 14.90 $ 15.40 $ 15.90
JOB GROUP THREE
Starting Rate $ 13.55 $ 14.00 $ 14.45 $ 14.95 $ 15.45
End of 6 Months Worked $ 14.40 $ 14.85 $ 15.30 $ 15.80 $ 16.30
End of 12 Months Worked $ 14.90 $ 15.35 $ 15.80 $ 16.30 $ 16.80
End of 18 Months Worked $ 15.40 $ 15.85 $ 16.30 $ 16.80 $ 17.30
JOB GROUP FOUR
Starting Rate $ 14.10 $ 14.55 $ 15.00 $ 15.50 $ 16.00
End of 6 Months Worked $ 14.45 $ 14.90 $ 15.35 $ 15.85 $ 16.35
End of 12 Months Worked $ 14.85 $ 15.30 $ 15.75 $ 16.25 $ 16.75
End of 18 Months Worked $ 15.25 $ 15.70 $ 16.15 $ 16.65 $ 17.15
End of 24 Months Worked $ 15.65 $ 16.10 $ 16.55 $ 17.05 $ 17.55
End of 30 Months Worked $ 16.05 $ 16.50 $ 16.95 $ 17.45 $ 17.95
End of 36 Months Worked $ 16.55 $ 17.00 $ 17.45 $ 17.95 $ 18.45
JOB GROUP FIVE
Starting Rate $ 14.35 $ 14.80 $ 15.25 $ 15.75 $ 16.25
End of 6 Months Worked $ 14.75 $ 15.20 $ 15.65 $ 16.15 $ 16.65
End of 12 Months Worked $ 15.25 $ 15.70 $ 16.15 $ 16.65 $ 17.15
End of 18 Months Worked $ 15.75 $ 16.20 $ 16.65 $ 17.15 $ 17.65
End of 24 Months Worked $ 16.20 $ 16.65 $ 17.10 $ 17.60 $ 18.10
End of 30 Months Worked $ 16.50 $ 16.95 $ 17.40 $ 17.90 $ 18.40
End of 36 Months Worked $ 16.85 $ 17.30 $ 17.75 $ 18.25 $ 18.75
End of 42 Months Worked $ 17.20 $ 17.65 $ 18.10 $ 18.60 $ 19.10
</TABLE>
23
<PAGE> 27
<TABLE>
<CAPTION>
5/1/99 5/1/00 5/1/01 5/1/02 5/1/03
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
JOB GROUP SIX
Starting Rate $ 14.65 $ 15.10 $ 15.55 $ 16.05 $ 16.55
End of 6 Months Worked $ 14.95 $ 15.40 $ 15.85 $ 16.35 $ 16.85
End of 12 Months Worked $ 15.25 $ 15.70 $ 16.15 $ 16.65 $ 17.15
End of 18 Months Worked $ 15.55 $ 16.00 $ 16.45 $ 16.95 $ 17.45
End of 24 Months Worked $ 15.85 $ 16.30 $ 16.75 $ 17.25 $ 17.75
End of 30 Months Worked $ 16.15 $ 16.60 $ 17.05 $ 17.55 $ 18.05
End of 36 Months Worked $ 16.45 $ 16.90 $ 17.35 $ 17.85 $ 18.35
End of 42 Months Worked $ 16.75 $ 17.20 $ 17.65 $ 18.15 $ 18.65
End of 48 Months Worked $ 17.40 $ 17.85 $ 18.30 $ 18.80 $ 19.30
JOB GROUP SEVEN
Starting Rate $ 17.40 $ 17.85 $ 18.30 $ 18.80 $ 19.30
End of 6 Months Worked $ 17.60 $ 18.05 $ 18.50 $ 19.00 $ 19.50
End of 12 Months Worked $ 17.75 $ 18.20 $ 18.65 $ 19.15 $ 19.65
End of 18 Months Worked $ 17.90 $ 18.35 $ 18.80 $ 19.30 $ 19.80
End of 24 Months Worked $ 18.10 $ 18.55 $ 19.00 $ 19.50 $ 20.00
End of 30 Months Worked $ 18.25 $ 18.70 $ 19.15 $ 19.65 $ 20.15
End of 36 Months Worked $ 18.45 $ 18.90 $ 19.35 $ 19.85 $ 20.35
End of 42 Months Worked $ 18.60 $ 19.05 $ 19.50 $ 20.00 $ 20.50
End of 48 Months Worked $ 18.80 $ 19.25 $ 19.70 $ 20.20 $ 20.70
</TABLE>
Requires satisfactory progress in each 6 month period worked in above designated
classifications.
24
<PAGE> 28
November 22, 1999
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J. C.:
When bargaining unit employees are working side-by-side with outside contractors
and there is a need to work overtime to continue or complete the job, the
bargaining unit employees will be offered the overtime to work with the outside
contractors provided they are qualified to perform the work.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: S. E. Tomlinson
P. J. McIntyre
T. E. McCoy
25
<PAGE> 29
November 22, 1999
LETTER OF UNDERSTANDING
CURRENT PRACTICES
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J. C.:
This will confirm our discussions during 1999 contract negotiations. The Company
will continue our current policies regarding safety procedures, uniforms, and
employee travel expenses at our Louisville and Quarry operations during the life
of this Agreement for the following:
o Supply to employees personal protective safety equipment required by the
Company such as hard hats, safety shoes not to exceed two (2) pairs per year
up to $220 per year, hearing protection, safety glasses, and respirators.
Effective May 1, 2002 the safety shoe allowance will not exceed $230 per
year.
o License for reimbursement for blasting and welding certification as required
by the Company.
o Current uniform arrangements.
o Reasonable reimbursement for meals and other expenses while traveling on
Company business.
Sincerely,
B. M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
26
<PAGE> 30
November 22, 1999
SENIORITY PROVISIONS FOR SAME DATE
HIRE AND PROSPECTIVE EMPLOYEES
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J.C.:
Confirming our Agreement reached during the Kosmos negotiations in Louisville,
Kentucky, the initial plant seniority roster as referenced in Article 14.6 of
the Labor Agreement will be ranked in seniority order by the lottery system for
current employees hired on the same date. This seniority roster will be used for
prospective application of provisions in the Labor Agreement.
Prospective same date hires will be placed on the seniority list according to
the date and time of their initial employment application.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
27
<PAGE> 31
November 22, 1999
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J. C.:
This will confirm our discussion during 1999 negotiations covering Louisville
Operations regarding the Dispute Resolution Panel.
The Parties agree to select by mutual agreement three (3) impartial
representatives who will be available to serve for the term of this Agreement
for a reasonable fee when called upon to serve on the Panel. When necessary for
the Panel to meet to resolve a grievance in accordance with Article 10.1(4), the
Parties will mutually select one of these impartial representatives to serve on
the Panel.
It is understood that following the discussions and hearing of the grievance,
the Panel will determine the outcome of the grievance. The outcome of the
grievance will be determined by majority vote of the Panel and communicated by a
brief written description of the disposition of the grievance by the impartial
representative. The individual vote of the Panel will not be disclosed, only the
fact that a majority was reached. If additional information is needed prior to
making a determination on the result of the grievance, it must be gathered and
the decision will be made within three (3) working days. The Company or Union
representatives may call upon various witnesses to be present at the hearing and
the cost incurred or lost-time pay involved for the witness will be the
responsibility of the Party calling the witness.
The Company or Union Representative may cancel the use of any third party
representative with thirty (30) days notice to the other Party and another
impartial representative will be selected in accordance with the above.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. M. McIntyre
S. E. Tomlinson
28
<PAGE> 32
November 22, 1999
LETTER OF UNDERSTANDING
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J.C.:
At the request of either party, an employee discharge grievance may be
appealed to arbitration. In the event the parties are unable to agree upon an
Arbitrator within seven (7) days after arbitration is invoked, then they shall
jointly petition the Federal Mediation and Conciliation Service, which shall
submit a panel of seven (7) qualified arbitrators, and the parties shall select
a single arbitrator from such panel. The arbitrator shall be appointed by mutual
consent of the parties hereto. If the arbitrators included in this panel are
unacceptable to either party, a second panel shall be requested from the Federal
Mediation and Conciliation Service and a single arbitrator selected from this
panel.
Any grievance referred to arbitration shall be heard as soon as possibly and
a decision rendered within thirty (30) days of the hearing or the date of the
postmark of the post hearing briefs, provided the parties mutually agree to
submit post hearing brief. The Arbitrator shall have no power to add or subtract
from or change or modify or amend any provisions of this Agreement.
The decision rendered by the Arbitrator will be final and binding upon the
Union, the Company, the grievant, and all employees covered by this Agreement.
The arbitrator selected pursuant to this Article shall interpret and apply the
terms of this Agreement; he/she shall not substitute his/her discretion and
judgement for that of the Company.
It is expressly agreed that no arbitrator shall have the authority to decide
any matter involving the exercise of a right reserved to management under this
Agreement.
Each party hereto shall pay the expense incurred in the presentation of its
own case, and the expenses incident to the services of the Arbitrator, including
the cost of the transcript and hearing room, shall be paid by the party
requesting arbitration.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
29
<PAGE> 33
November 22, 1999
LETTER OF UNDERSTANDING - WORKING
SPOUSE
Mr. J. C. Todd
International Representative
Cement, Lime, Gypsum, and Allied Workers Division
International Brotherhood of Boilermakers
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J. C.:
Pursuant to our discussions during the 1999 Kosmosdale Labor Contract
negotiations, if an employee's spouse is eligible for health care coverage under
another employer's group health plan, that spouse will not be eligible to
participate in the Southdown Medical Plan. If the premium which the spouse is
required to pay exceeds $30.00 per month for individual coverage under that
plan, the Company will offset the cost in excess of $30.00 per month by reducing
the employee" monthly contribution to the Southdown Plan. The offset will not be
greater than the total monthly premium the employee is required to pay for the
Southdown Plan. Affected employees will provide reasonable documentation to
substantiate the cost of spousal coverage.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
30
<PAGE> 34
November 22, 1999
LETTER OF UNDERSTANDING -
LEADPERSONS
Mr. J. C. Todd
International Representative
Cement, Lime, Gypsum, and Allied Workers Division
International Brotherhood of Boilermakers
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J.C.:
LEADPERSONS
The term "leadperson" as used herein refers to a job on which the employee has
the responsibility of directing the work of a group of employees working side by
side of the group directed. The direction generally consists of activities such
as the following:
Plan work to be performed by the group.
Determine "on the job" working procedures.
1. Arrange for necessary tools, supplies, facilities and paperwork.
2. Relay instructions from the supervisor.
3. Report unsafe conditions to the supervisor.
Such activities do not include any disciplinary action nor mandatory overtime
scheduling.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
31
<PAGE> 35
November 22, 1999
LETTER OF UNDERSTANDING
TEMPORARY UPGRADES
Mr. J. C. Todd
International Representative
International Brotherhood of Boilermakers
Cement, Lime, Gypsum and Allied Workers Division
80 Sweetbriar Trail
Fayetteville, GA 30215
Dear J.C.:
This will confirm our discussions during 1999 contract negotiations.
Employees with Department of Labor Journeyman's Certificates that do not hold
permanent positions in job classifications covered by the Journeyman's
Certificate, shall receive the journeyman rate when temporarily upgraded to
these job classifications.
Skilled Repairmen in progression shall receive the 42 month rate when working on
outages for only the hours worked while employees outside the classification are
temporarily upgraded to the 42 month rate and are working side by side with the
outage crew. An outage for the purpose of this letter is defined as a period of
time when the kiln is not producing clinker.
Sincerely,
Bernard M. Reuland
Director, Employee Relations
BMR:lav
cc: T. E. McCoy
P. J. McIntyre
S. E. Tomlinson
32
<PAGE> 1
EXHIBIT 10.40
AGREEMENT BETWEEN
SOUTHDOWN, INC.
WAMPUM, PENNSYLVANIA PLANT
AND
THE UNITED CEMENT, LIME GYPSUM
AND ALLIED WORKERS
DIVISION
(INTERNATIONAL BROTHERHOOD OF BOILERMAKERS,
IRON SHIP BUILDERS, BLACKSMITHS, FORGERS,
AND HELPERS, AFL-CIO)
LOCAL UNION NO. D-173
EFFECTIVE DATE: AUGUST 29, 1999
<PAGE> 2
ARTICLE I - AGREEMENT AND PURPOSE
1.1 This agreement is entered into this 29 day of August, 1999 for the
purpose of maintaining the existing harmonious relationship and close
cooperation between Southdown, Inc., hereinafter called the "Company",
and members of the United Cement, Lime, Gypsum and Allied Workers
Division (International Brotherhood of Boilermakers, Iron Ship
Builders, Blacksmiths, Forgers and Helpers, AFL-CIO), hereinafter
called the "Union", who are employees of the Wampum Plant of Southdown,
Inc.
1.2 It is the continuing policy of the Company and the Union that the
provisions of this Agreement shall be applied to all employees without
regard to race, color, sex, religious creed, national origin, handicap
or Vietnam era veteran status.
1.3 It is agreed that all applicable mutually agreed upon agreements,
policies and practices have been incorporated in this Agreement, and
any additional agreements, policies or practices must be mutually
agreed upon by both parties from this date forward to become
applicable. The Appendix and Letters of Intent, included within this
booklet, are considered to be incorporated as a part of this Agreement.
ARTICLE II - UNION RECOGNITION AND SECURITY
2.1 The Company agrees to, recognize the Union as the sole bargaining agent
for the employees of the Company's Wampum Plant insofar as working
conditions, hours of work, and wages are concerned.
2.2 As a condition of employment, it is agreed that all eligible employees
at the Wampum Plant shall become members of and remain in good standing
with the Union within thirty (30) days after the signing of this
Agreement. Newly hired employees shall become members of and remain in
good standing with the Union within thirty (30) days from the date of
hiring.
2.3 The term "employee" as used in this Agreement shall include only those
employed in the job classifications attached in Appendix A.
2.4 The Company will deduct from the monthly earnings of any of its
employees their Initiation Fee and Union Membership Dues, and will pay
the same to the party to whom such employee directs the Company in
writing. Each such employee desiring such deduction to be made from
his/her earnings must present to the Company his signed order, which
shall be substantially as follows:
<PAGE> 3
"I hereby authorize and direct Southdown, Inc. to deduct and
pay from my earnings accumulated to my credit my Initiation
Fee and Union Membership Dues, and pay same to . . . I further
agree to hold the Southdown, Inc. harmless on account of the
deductions and payments herein authorized.
Wampum Facility (Southdown, Inc.)
Signed
------------------------------------
Timekeeper
--------------------------------
Employee Check No. "
------------------------
This authorization may be canceled by the Union member on any
anniversary date of this Agreement upon thirty (30) days prior
notice, in writing, to the Company and the Union.
2.5 The Company is willing at all times to meet its employees' committee
and representatives of the International Union for the purpose of
discussing wages, hours, and working conditions, with the object to
reach a satisfactory agreement.
2.6 The Union shall furnish in writing to the Plant Manager the names of
employees who will serve on the committee. The committee shall consist
of not more than seven (7) and not less than three (3) members. If a
vacancy occurs on the committee, the Plant Manager shall be informed,
in writing, of the name of the new member before a meeting is held. No
other members of the Union who are employees at the Wampum Plant are
eligible to attend these meetings unless previously agreed to between
the parties hereto.
2.7 Notwithstanding the provision of Article 2.2 above, any employee who is
a member of and adheres to established and traditional tenets or
teachings of a bona fide religion, body or sect which has historically
held conscientious objections to joining or financially supporting a
labor organization shall not be required to join or financially support
the Union as a condition of employment; provided, however, that each
such employee shall, as a condition of his or her employment, in lieu
of the payment of periodic dues and initiation fees to the Union, pay
sums equal to such dues and initiation fees to any one of the following
non-religious charitable funds, which are exempt from taxation under
Section 501 (c) (3) of the Internal Revenue Code:
1. City of Hope
2. American Cancer Society
3. American Heart Association
4. National Multiple Sclerosis Society
5. American Red Cross
<PAGE> 4
It is expressly understood that any such employee holding conscientious
objections and choosing not to join or financially support the Union,
who requests the Union to use the grievance - arbitration procedure on
the employee's behalf, shall be required to pay the Union the
reasonable costs of processing any grievance on his or her behalf,
including reasonable costs of arbitration, if any.
2.8 Upon receipt from an employee authorizing payroll deduction and
specifying the amount to be deducted, the Company will deduct voluntary
contributions to the City of Hope. All amounts so deducted shall be
remitted by the Company to the City of Hope. The Company shall be held
harmless from any claim demand or action arising out of such
deductions.
Employees contributing to the City of Hope cannot discontinue or change
such contribution for one year.
ARTICLE III - SUBCONTRACTING
3.1 The Company will not contract for production or maintenance work
customarily performed by its own employees unless it is more
economical, expeditious, and/or efficient to do otherwise.
3.2 The Company may enter into contract arrangements for obtaining raw
materials, semi-finished or finished products.
3.3 Notwithstanding the above, the Company will not contract or subcontract
work covered by Paragraphs (3.1) or (3.2) above if it will directly
result in the, (1) laying off of bargaining unit employees, or (2) the
reduction of hours of bargaining unit employees below 40 hours a week;
or (3) reduction of employees to a lower rated classification.
3.4 Further (3.1), (3.2) and (3.3) above does not apply to new construction
or to construction involved in major modification work. The Company may
subcontract any work in connection with or related to new construction
or major modification.
<PAGE> 5
3.5 The Company agrees to notify the Local Union in writing with a copy to
the International or District Representative who services the Local
Union, sent by registered mail, at least fourteen (14) days in advance
if reasonably possible, and to meet with the Union, upon request by the
Union, for explanation to the reasons causing the Company to decide to
contract any production and maintenance work.
The parties agree that while notification is an important part of
working relationship between the parties and should be adhered to in
order to reduce the number of disputes concerning sub-contracting the
parties also recognize and agree that this Section of the Contract does
not require any penalty when the Company fails to give proper written
notice of its intention to sub-contract.
ARTICLE IV - UNION ACTIVITY
4.1 The Union Grievance Committee, representing the employees in matters
including negotiations and consisting of not more than six (6)
employees and the recording secretary, shall meet with the Company once
a month as mutually agreed upon.
4.2 Insofar as practical, meetings will be conveniently scheduled so as to
complete all business within normal working day for day employees. Any
employee who is scheduled to work during the hours the meeting is held
and who attends the meeting will be compensated only by multiplying his
regular classified hourly wage rate by the straight time hours he
attends the meeting.
4.3 When a meeting is scheduled at which a representative of the
International Union or a representative of the Company from Corporate
Headquarters will attend, any member of the committee who is scheduled
to work the third shift immediately preceding the meeting will be
excused from working the third shift and will be compensated by
multiplying eight (8) hours at his regular classified hourly wage rate
plus shift differential if the employee has attended the meeting.
4.4 Any member of the committee who is scheduled to work the second shift
immediately following the meeting will be excused from working the
second shift if the employee has attended the meeting for six (6)
hours. In the event the employee is excused from working the second
shift, he will be compensated by multiplying eight (8) hours at his
regular classified hourly wage rate plus shift differential.
4.5 Any employee who is receiving sickness and accident benefits, or
Worker's Compensation Benefits for the day of the meeting or who is
absent due to disciplinary layoff shall not receive any compensation
under this article.
4.6 Where possible, a member of the Grievance Committee shall be notified
before any employee is suspended from work. If a member of the
Grievance Committee is not notified prior to suspension, he shall be
notified as soon as practical thereafter.
<PAGE> 6
4.7 The Company and the Union Grievance Committee shall meet prior to a
discharge of an employee to review the facts of the case.
4.8 (1) Where there is a discussion between an hourly employee and a
supervisor that is intended as a disciplinary measure resulting in
written warning, the employee may request that a grievance
committeeman, job steward or other designated employee be present.
(2) It shall be the responsibility of the Union to appoint and have
available on each shift a committeeman, job steward or other employee
designated for purposes of this Section who shall be identified to the
Company in writing.
(3) It is not the intent of this Section to expand the total number of
committeemen as provided for in Article 4.1.
4.9 Union activities shall not be conducted during working hours, except
that, with the consent of the Company, a member or members of the Union
Grievance Committee may try to adjust an existing problem between the
Union and the Company. There shall be one (1) steward on each rotating
shift who may, in the absence of a committee member, try to adjust an
existing problem. Such consent will not be unreasonably withheld or
delayed. Local Union officers and stewards off duty and representatives
of the International Union shall, upon permission from the Company, be
permitted on the Company's premises to investigate grievances. Such
permission shall come from the Plant Manager or his designee and will
not be unreasonably withheld or delayed.
4.10 An International Representative, upon permission from the Plant Manager
or his designee, may be present at any of the above -mentioned
meetings.
ARTICLE V - MANAGEMENT RIGHTS
5.1 The Union recognizes that the management of the plant, the direction of
the working forces, including the right to hire, discipline or
discharge for just cause, the right to make, change and enforce rules
and policies (after posting) for the maintenance of discipline, safety
and productivity; the exclusive rights to determine partial or
permanent discontinuance or shutdown of operations (the Company's only
obligation when exercising this right is to bargain with the Union over
the effects of that decision); the right to determine production
requirements and job content; the right to promote or to transfer
employees; the right to contract work; the right to transfer and
relieve employees from duty because of lack of work or other legitimate
reasons, and the right to establish and change work schedules and
duties of employees are vested in the Company, except as otherwise
provided in the Agreement. The listing of specific rights in this
Agreement is not intended to be nor shall be considered restrictive of
or a waiver of any of the rights of management not listed and not
specifically surrendered herein, whether or not such rights have been
exercised by the Company in the past.
<PAGE> 7
ARTICLE VI - WAGES
6.1 It is agreed that for the duration of this Agreement, the wage groups
and the rates of pay shall be those set in Appendix "A".
6.2 (1) All scheduled work beginning between 5:00 A.M. and 12:59 P.M.
inclusive, shall be considered 1st shift work.
(2) All scheduled work beginning between 1:00 P.M. and 8:59 P.M.
inclusive, shall be considered 2nd shift work.
(3) All scheduled work beginning between 9:00 P.M. and 4:59 A.M.
inclusive, shall be considered 3rd shift work.
6.3 Each employee regularly scheduled to work on the 2nd shift shall be
paid a premium of sixty cents ($.60) for all hours worked by him or her
on that shift. Each employee regularly scheduled to work on the 3rd
shift shall be paid eighty-five cents ($.85) for all hours worked by
him or her on that shift. These premium rates do not apply to day
workers even though they may work over into a premium pay shift. If,
however, the day worker is scheduled to take the place of a regular
scheduled shift worker, then the premium rate applies. Employees called
out will receive the appropriate shift premium for hours worked prior
to their normal shift.
6.4 All consecutive hours (exclusive of meal periods) worked by an employee
who normally begins work at a time specified in the preceding
paragraphs, shall be deemed to be worked by him or her on the shift on
which he or she begins work.
6.5 TIME CHANGES - STANDARD TIME AND DAY LIGHT SAVINGS TIME
When clocks are turned ahead one (1) hour and an employee's work
schedule is reduced one (1) hour by this change, she/he will be given
the option of working one (1) additional hour for a full shift's pay.
When the clocks are turned back one (1) hour affected employees shall
receive one (1) hour at the applicable overtime rate.
6.6 The Company may at its discretion increase wage in any class or to an
individual in any class without necessitating a change in the rate of
any individual or class.
6.7 The employees will participate in a gain-sharing program developed by
the Company, beginning August 1, 1999 and continuing through the term
of this Agreement.
<PAGE> 8
ARTICLE VII - VACATIONS WITH PAY
7.1 Any employee who works and receives earnings during at least thirteen
(13) weeks in each calendar year shall be granted a vacation off work
without loss of pay, according to the following schedule.
7.2 Notwithstanding Section 7.3 employees hired prior to May 1, 1996 will
continue to accrue vacation eligibility in accordance with the vacation
schedule in the 1996-1999 Agreement through December 31, 2001.
Effective January 1, 2002, employees eligible for 6 and 7 weeks
vacations shall be grand-fathered for that vacation for the duration of
their employment.
7.3 All employees who have completed one (1) or more anniversary years of
service, but less than five (5) years of service, will be entitled to
two (2) weeks of vacation, provided they meet all other requirements of
this Article. Employees who have completed five (5) or more anniversary
years of service, but less than fifteen (15) years of service will be
entitled to three (3) weeks of vacation, provided they meet all other
requirements of this Article. Employees who have completed fifteen (15)
or more anniversary years of service, but less than twenty (25) years
of service, will be entitled to four (4) weeks of vacation, provided
they meet all other requirements of this Article. Employees who have
completed twenty-five (25) or more anniversary years of service, will
be entitled to five (5) weeks of vacation. provided they meet all other
requirements of this Article.
7.4 Vacation pay will be based on a forty (40) hour week at the rate of the
permanently assigned classification on which an employee is working at
the time he takes his vacation. If an employee has held a single higher
rated classification for more than six (6) months during the year
preceding his vacation, he will receive vacation pay computed at the
higher rate. Vacation pay shall include appropriate shift differential
for those on fixed shifts. Employees working on rotating shifts shall
be paid an average of the rates for the rotating shifts involved. Upon
sufficient notice given to the Personnel Clerk, the Company will give
an employee his vacation pay on his last shift prior to the beginning
of his vacation.
7.5 Vacations will not be cumulative, but so far as practical, be granted
at times most desired by employees, but the final right to allotment of
vacation periods is exclusively reserved to the Company in order to
insure the orderly operation of the plant. In exercising its right to
allot vacation periods, the Company will not require any employee who
is on layoff to take his vacation during periods of plant shutdown or
curtailment of operation. Where requested vacation periods conflict,
preference shall be given to the older employee in point of service.
<PAGE> 9
7.6 It is further agreed that if any employees have previously selected
their vacation period so that it occurs during an unforeseen shut-down,
such vacation period shall not be changed. Vacations shall be taken by
the employee within the calendar year in which it is granted.
7.7 The Company shall submit appropriate application blanks to the
employees within the first week of November, and they are to be
returned to the Company within one (1) month. In the event an employee
fails to return this form to the Company, then, after this one (1)
month period, the Company shall designate the employee's vacation
period, and notify the employee who fails to return this application to
the Company and the Union of the vacation period designated for the
employee. All vacation blanks received from employees or issued by the
Company shall be returned to the employees not later than January 1st.
7.8 An employee with four (4) or more weeks of vacation can take pay in
lieu of vacation for a maximum of two (2) weeks of his total vacation
eligibility. The above employee may request his payment at any time
from January 1st till the date he turns in his application blank for
his vacation selection. He will receive payment the next pay period
following the date he makes the request.
However, if the above employee does not request two weeks pay in lieu
of time off, he may request up to two weeks pay in lieu of time off
during the calendar year during periods of plant shutdown or
curtailment of operations. Such payment will be made the next pay
period following the date he makes such request.
An employee with four or more weeks vacation, may change two of his
scheduled weeks of vacation and reschedule them during a plant shutdown
or production curtailment provided that the departmental vacation rules
will allow him to be absent from the department.
7.9 Any change in an employee's selected and designated vacation period
must be approved by the Company and the Union committee, except as
provided in paragraph 7.8 above.
7.10 Employees entitled to two (2) or more weeks of vacation may be
permitted to take such vacations in two (2) separate periods of not
less than one (1) week each. Seniority preference, however, can be
exercised in only (1) of such vacation periods.
7.11 In addition to the vacation general rules that are now in effect, the
following procedure, which indicates how paragraphs 7.5 through 7.10
will be applied, shall be followed:
<PAGE> 10
7.11.1 Step I. The most senior employee in a department will be asked
to choose his preference period which must be a period of one
or more consecutive weeks. After the aforementioned weeks have
been selected, each man in terms of descending seniority will
be asked to select his preference period until all employees
in the department have made their preference choice.
7.11.2 Step II. Next, the most senior employee in the department will
again be asked to make a selection for those weeks remaining
that have not been earmarked as a preference period. He will
now have made a selection for all weeks for which he is
eligible. After the aforementioned weeks have been selected,
each man in terms of descending seniority will be asked to
select his "other than preference" weeks until the least
senior man had made his selection. The procedure for this
department is now complete.
7.12 Employees who have one (1) or more years of service and who are
separated from service for any reason will receive vacation pay due
them on the following basis: One-twelfth (1/12) vacation credit for
each one hundred (100) hours worked in his current calendar year.
7.13 In the event the employment of any such employee is terminated for any
reason, the Company shall pay to the employee, or to his beneficiary in
the event of his death, all vacation pay due.
7.14 If an employee enters military service and is not expected to return
before the end of the calendar year, the Company shall pay to the
employee, all vacation pay due.
7.15 Employees who wish to have a separate vacation check issued must give
the Company two weeks notice and they will be only issued on payroll
weeks.
7.16 An employee will be allowed to take one (1) week of vacation on a day
to day basis for prearranged time off with at least seven (7) days
prior notice. The Company will maintain the corresponding percentage of
employees for vacation purposes at 14.5% plus two extra employees off
during May, June, July, August and September. Vacation taken on a day
to day basis, as noted in this paragraph, shall not be included in the
calculation of the percentage of employees permitted off for vacation
purposes.
7.17 The final right of allotment of vacation periods is exclusively
reserved to the Company in order to ensure the orderly operation of the
plant.
<PAGE> 11
ARTICLE VIII - LEAVES OF ABSENCE
8.1 JURY DUTY It is agreed that the Company shall make up the wage loss
incurred by a regular employee (as distinguished from a probationary
employee) because of jury service by payment of the difference between
the amount received for such jury service on the day such employee
would have been regularly scheduled to work and their regular rate of
pay. Any employee reporting for jury duty will not be required to work
their regular shift that calendar day or with management approval an
adjoining calendar day may be substituted for third shift employees.
The employee will be excused for the entire day without loss of pay.
Hours spent on jury service and paid for hereunder shall be considered
as time actually worked for all overtime purposes. Further as outlined
above, the Company shall make up the wage loss incurred by an employee
when subpoenaed as a witness in an action when the employee or the
Union or the Company are neither the plaintiff nor the defendant.
To receive pay from the Company under this provision, the employee must
provide the Company with a statement signed by an official of the court
certifying as to the employee's service as a juror or court witness or
appearance in court for such purposes, the date or dates of attendance,
and the compensation paid to the employee exclusive of any
transportation and/or subsistence allowance.
8.2 MILITARY LEAVE Employees with one (1) year seniority who are members of
organized reserve components of the Armed Forces, including the
National Guard, will be allowed leave of absence annually for the
purpose of attending required military training encampments or cruises.
The Company will pay any employee who goes on such leave of absence the
difference between the employee's straight time pay for up to two (2)
weeks (ten (10) working days) annually and the employee's military pay
including longevity pay but excluding all allowances such as rent,
subsistence, uniform, and travel. Payment will be made when the
employee returns from reserve training on presentation of satisfactory
proof of the amount of pay received.
8.3 FUNERAL LEAVE An employee upon the notification of the death of his or
her father, mother, spouse, son, son-in-law, daughter, daughter-in-law,
brother, sister, stepfather, stepmother, stepson, stepdaughter,
grandson, granddaughter, half-sister, half-brother, mother-in-law,
father-in-law, brother-in-law, sister-in-law, grandparents, and spouses
grandparents shall be granted his or her next three (3) scheduled
working days off with pay (four (4) days off with pay if the employee
is required to travel beyond a radius of 500 miles).
The foregoing to the contrary notwithstanding no bereavement payment
will be made unless the employee attends the funeral nor will payment
be made if there are more than fourteen calendar days between the date
of death and the next scheduled workday.
<PAGE> 12
Payment by the Company for such time lost shall be on the basis of
eight (8) hours per day at the employee's regular straight time hourly
rate, including shift differential.
As used herein, brother-in-law is defined to mean (1) the brother of
one's husband or wife, (2) the husband of ones sister, (3) the husband
of the sister of one's spouse: and sister-in-law is defined to mean (1)
the sister of one's husband or wife, (2) the wife of one's brother, (3)
the wife of the brother of one's spouse.
The above clause shall not apply to an employee who is laid off, except
that when an employee is notified to return to work on or before the
date of the funeral, he shall be granted full funeral leave with pay.
8.4 UNION LEAVE Any employee elected or appointed to a full time position
with the International Brotherhood of Boilermakers, Cement, Lime,
Gypsum, and Allied Workers, or Local Union or the AFL-CIO or any of its
subordinate bodies, shall be granted an indefinite leave of absence,
providing thirty (30) days notice is given the Company prior to the
beginning of such leave. During such leave seniority shall accumulate.
Insurance benefits shall be suspended after thirty (30) days of such
leave and will again be in effect the first day of returning to work
with the Company. Upon returning to work, such employee will be
reinstated on his former job, providing it is still in existence; if
not, he shall be eligible to apply for any job within the Bargaining
Unit by means of the existing bidding procedure, or by bumping. The
Company agrees to consent to the absence of no more than one (1)
employee at any time.
8.5 PAID MEDICAL LEAVE If an employee with at least one (1) year of service
is absent from work due to disability, sickness and accident benefits
are payable. The disability must prevent the employee from performing
the duties of the job because of a non-occupational sickness or injury.
This benefit is payable if confined to a hospital or home.
After a waiting period of one (1) week (waived if the employee is
hospitalized as an in-patient), the disability benefits are payable at
a rate of $49 per day for a maximum of five days per week. A disabled
employee may receive weekly sickness and accident benefits during the
period of disability not to exceed five (5) months. It is the
employee's responsibility to make application for this benefit and the
attending physician must document the nature of the disability and
expected date of return to work.
No benefits shall be payable for the following:
8.5.1 disability which you are not under the direct care of a licensed
physician.
8.5.2 sickness or injury which is purposefully self-inflicted while
sane or insane.
8.5.3 disability due to an injury arising out of the course of
employment.
<PAGE> 13
8.5.4 disability due to disease which benefits are payable under
Worker's Compensation, Occupational Disease or similar law.
This benefit terminates upon retirement or upon termination of
employment.
8.6 PERSONAL LEAVE Subject to the approval of the Company, employees
requesting a leave of absence in writing for personal reasons may be
granted leaves of absence not to exceed thirty (30) calendar days.
ARTICLE IX - GRIEVANCE PROCEDURE
9.1 Should differences arise between the Company and the Union, or an
individual employed by the Company, as to the meaning and application
of the provisions of this Agreement, an earnest effort shall be made by
the parties to settle such differences promptly and in the following
manner:
9.1.1 STEP I. The complaint, within fifteen (15) days of its
occurrence, or the occurrence of the matter out of which the
complaint arises, may be taken up by the employee involved,
with or without Union representation, with his Supervisor. If
the issue is not resolved verbally, the matter shall be
reduced to writing, stating specific article(s) and
paragraph(s) of the Contract that are alleged to have been
violated. This will be presented to the employee's Supervisor
within 10 days for the grievance to be considered and
processed. The grievance will be answered in writing within
five (5) days.
9.1.2 STEP II. If no satisfactory settlement is reached in Step I,
the matter shall be presented to the Plant Manager and/or
Designee within five (5) days from the date of answer by the
Supervisor. The Plant Manager and/or the Director of
Industrial Relations will meet with the Grievance Committee to
hear and discuss the grievance at the monthly grievance
meeting unless the matter requires immediate attention. The
Company shall answer the grievance in writing within five (5)
days after said meeting.
9.1.3 STEP III. If no agreement is reached in Step II, the Committee
may, within five (5) days of the receipt of the above answer,
refer the matter to higher officials of the Company and the
Union, who may attend a meeting to be held within thirty (30)
days upon request.
9.1.4 STEP IV.
(a) Any grievance not settled in Step III above may be
referred to arbitration. Notice to refer a grievance to
arbitration shall be given in writing within fifteen
(15) days after being notified of the decision rendered
in Step III or the matter will be considered closed.
Only one (1) grievance (Arbitrability and grievance to
be considered as a single grievance) may be submitted
to or under review by any one (1) Arbitrator at any one
(1) time unless by prior mutual written consent of the
parties.
<PAGE> 14
(b) In the event the parties are unable to agree upon an
Arbitrator within seven (7) days after arbitration is
invoked, then they shall jointly petition the Federal
Mediation and Conciliation Service, which shall submit
a panel of seven (7) qualified arbitrators, and the
parties shall select a single arbitrator from such
panel. The Arbitrator shall be appointed by mutual
consent of the parties hereto. If the arbitrators
included in this panel are unacceptable to either
party, a second panel shall be requested from the
Federal Mediation and Conciliation Service and a single
arbitrator selected from this panel.
(c) Any grievance referred to arbitration shall be heard as
soon as possible and a decision rendered within thirty
(30) days of the hearing or the date of postmark of the
post hearing briefs. The arbitrator shall have no power
to add to or subtract from or change, modify or amend
any of the provisions of this Agreement. The decision
rendered by the Arbitrator will be final and binding
upon the Union, the Company, the grievant, and all the
employees covered by this Agreement. The Arbitrator
selected pursuant to this Article shall interpret and
apply the terms of this Agreement; he/she shall not
substitute his/her discretion and judgement for that of
the Company. If the Arbitrator finds that a
dischargeable offense was committed by the employee,
he/she shall not substitute his/her judgement for that
of the Company as to whether discharge or a more
lenient penalty was appropriate in a particular case.
(d) It is expressly agreed that no Arbitrator shall have
the authority to decide any matter involving the
exercise of a right reserved to management under this
Agreement.
(e) Each party hereto shall pay the expense incurred in the
presentation of its own case, and the expenses incident
to the services of the Arbitrator, including the cost
of the transcript, shall be shared equally by the
Company and the Union.
9.2 Any grievance growing out of a discharge or suspension must be
submitted in writing by the aggrieved employee directly to the Union
and from the Union to the Plant Manager or his designee within
forty-eight (48) hours of the discharge or suspension or it will not be
recognized and action taken shall be final.
9.3 The time limits referred to in the foregoing paragraphs exclude
Saturdays, Sundays and holidays.
9.4 Any grievance not presented or appealed within the time limits
provided, unless mutually agreed to extend the time, shall be
considered settled on the basis of the decision which was not appealed
and shall be final and binding on the parties involved.
<PAGE> 15
9.5 Grievances presented in any of the regular steps set forth and not
answered within the time specified or as the same may be extended by
mutual agreement shall be considered appealed to the next step of the
grievance procedure.
9.6 Disciplinary letters issued to employees will remain in the Company's
employee file. At the end of the twelve (12) month period, the
disciplinary letters will not be held against the employee.
ARTICLE X - NON-BARGAINING UNIT EMPLOYEES
10.1 The Company will take immediate actions to ensure that non-bargaining
unit employees do not perform routine bargaining unit work, with the
following exceptions: work involving corrective action which must be
performed expeditiously; instruction or training of employees;
demonstration; inspection or testing of equipment; work of an emergency
nature; and development work for new process and/or procedures.
ARTICLE XI - STRIKES AND LOCKOUTS
11.1 The Union agrees that there shall be no picketing or strikes by the
Union or by its members, of any kind or degree whatsoever, or walkout,
suspension of work, slowdowns, limiting of production, or any other
interference or stoppage, total or partial, of the Company's operations
for any reason whatsoever, such reasons including, but not limited to,
unfair labor practices by the Company or any other Employer. It is
further agreed that neither the Union or its members shall engage in
the above prohibited conduct in support of picketing, strikes or any
labor dispute actions engaged in by any other organization or person.
In addition to any other recourse or remedy available to the Company
for violation of the terms of this Article by the Union and/or any
Union member, the Company may discharge or otherwise discipline any
employee who authorizes, causes, engages in, sanctions, recognizes, or
assists in any violation of this Article. The Company will not engage
in any lockouts during the term of this Agreement.
ARTICLE XII - HOLIDAYS
12.1 New Year's Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Veteran's Day, Thanksgiving Day, the first day of Pennsylvania Deer
Season, the day before Christmas, Christmas Day and one floating
holiday are recognized as "holidays".
12.2 If any such holiday falls on Sunday, the following Monday shall be the
recognized holiday. The holiday hours shall be those hours within the
24 hour period, commencing with the beginning of the first shift on the
morning of the holiday and ending at the beginning of the first shift
the following day.
12.3 If any holiday falls on Saturday, the preceding Friday shall be the
recognized holiday.
<PAGE> 16
12.4 Employees who are scheduled to work on a holiday shall be paid two and
one half (2.5) times the classified hourly rate.
12.5 Hours worked on a holiday in excess of eight (8) in a work day, in
excess of forty (40) in a work week, on off days, and on callouts shall
be paid for at the applicable overtime rate.
12.6 If no work is required of an employee on the above holidays, he will
receive eight (8) hours pay at his regular straight time rate, provided
he meets the following qualifications:
12.6.1 The employee shall have been employed by the Company for at least
thirty (30) Calendar days prior to the holiday.
12.6.2 The employee shall have worked his last scheduled working day
prior to and his next scheduled working day after such holiday
unless excused therefrom by the Plant Manager on account of
sickness, accident, death in the family, or other excused
absence. In no event shall a holiday be paid for unless an
employee has also worked during the thirty (30) day period
immediately preceding or immediately following the holiday except
that the thirty day limitation shall not apply if the employee
was temporarily absent from work because of sickness, accident,
or layoff. In any event, the employee must work at least one (1)
day in the calendar year in which the holiday is granted.
12.7 If an employee is scheduled to work on a holiday and fails to work, he
shall not receive holiday pay.
12.8 If an employee works on a holiday, the holiday shall be counted as a
day worked for computing his weekly overtime. Paid holiday is to count
as day worked for overtime purposes, provided holiday falls on one of
employee's scheduled work days and he would have worked that day except
for holiday observance.
12.9 Work schedules for each work week which include a holiday will be
posted prior to the end of the first shift on Thursday of the previous
week. If an employee is scheduled to work on a holiday, but then is
instructed by the Company not to work he shall receive for that holiday
eight (8) hours pay at two and one-half (2.5) times his regular
straight time hourly rate.
12.10 The phrase "straight time hourly wage rate" as used solely in Article
XII, Holidays, shall mean the higher of either the employee's regular
straight time hourly wage rate or the highest straight time hourly wage
rate for a job on which the employee works at least eight (8)
consecutive hours in the work week in which the holiday falls provided
(1) that the eight (8) hours had been previously scheduled or (2) the
hours are worked the day before or the day after the holiday whether
previously scheduled or not.
<PAGE> 17
12.11 The Company will consider the request by an employee to take his
"floating holiday" the day before or the day after a scheduled holiday.
This request must be designated when the employee turns in his annual
vacation request. The efficient operation of the plant and its
departments will be the first consideration and the Company reserves
the right to decline any individual request. If there is a scheduling
conflict between two or more employees, when the Company grants a
request which those employee have made for the same floating holiday,
seniority will govern.
ARTICLE XIII - SENIORITY
13.1 Seniority shall consist of an employee's length of continuous service
with the Company since the employee's last day of hire at its facility
located at Wampum, Pennsylvania, including the bargaining unit jobs at
the quarry.
13.2 Each new employee shall be considered as a probationary employee for
the first ninety (90) days of actual work after which the employee's
seniority shall date back to his or her date of hire. There shall be no
seniority among probationary employees. Such employees may be laid off
or discharged as exclusively determined by the Company.
13.3 Seniority and the employment relationship shall be automatically
terminated when an employee:
13.3.1 is discharged;
13.3.2 is terminated upon permanent shutdown of the Wampum
facilities;
13.3.3 is laid off for a period of thirty-six (36) months or the
length of his or her seniority as of his or her last day of
work, whichever period is shorter;
13.3.4 voluntarily quits which shall be deemed to include:
(a) failure to notify the Company of the employee's intention
to return to work after layoff within three (3) working
days, and to actually report to work within seven (7)
working days (unless this latter period is extended in
writing by the Company) after he or she has been notified by
certified mail (either by delivery or attempted delivery) at
his or her last address appearing on the Company's records
to report to work;
(b) an absence for three (3) consecutive scheduled work days
without notifying the Company or reporting to work unless
excused by Management in advance;
<PAGE> 18
(c) the employee fails to return to work on the first
regularly scheduled work day following the termination of
any leave of absence or any other leave approved by the
Company unless excused by Management.
13.3.5 retires.
13.4 When a vacancy occurs for which a laid off employee is qualified, he or
she will be given notice of recall at his or her last address as shown
on Company records. The employee must notify the Company of the
employee's intention to return to work after layoff within three (3)
working days and must actually report to work within seven (7) working
days after he or she has been notified. This may be extended for an
additional seven (7) days if the employee has another job which
requires a two (2) week resignation notice and the employee makes a
written request for such.
13.5 An employee on continuous absence due to disability shall accrue
seniority and retain recall rights for a period not to exceed
thirty-six (36) months, or sixty (60) months if the employee was
injured on the job. An employee absent because of disability shall only
be returned to work after he or she is physically able to perform the
job. However, should such an employee be declared totally and
permanently disabled prior to thirty-six (36) months or sixty (60)
months for work related injury, such employee's name shall be removed
from the payroll and a notice to this effect will be sent to his or her
last address as shown on Company records.
13.6 If an incapacitated employee is released to return to work and is not
physically able to perform the job that the employee was performing
before the disability occurred, the released employee shall be allowed,
subject to mutual agreement between the Company and the Union, to
displace a less senior employee in a job that the released employee is
physically capable of performing. The displaced employee shall be the
least senior person in the job classification. Qualification will be
handled as in the normal layoff procedure outlined in Article 14.2. If
a less senior employee is displaced from their job, the displaced
employee, with the ability and qualification to perform another job,
shall be allowed to also displace a less senior employee following the
same procedure.
13.7 Seniority lists agreed to by and between the Company and the Union
shall be posted on the bulletin board as of May 1 and November 1 of
each year. Corrections shall be made in the seniority lists when it is
proved an employee is placed in the wrong position on said list, but
all requests for corrections must be made within thirty (30) days from
date of posting or the list shall be valid as posted. The Union will be
given a copy of the seniority list.
13.8 All employees have the obligation to notify the Company of their
current address and telephone number and immediately advise the Company
of any changes.
<PAGE> 19
ARTICLE XIV - LAYOFF
14.1 The Company recognizes that all employees shall retain the right to
seniority preference in cases of layoffs, production curtailment,
temporary shutdown and recall. The last employee hired shall be the
first laid off and the last laid off the first rehired. Such
preferences in the cases of layoffs and recall shall take into
consideration the employee's ability to perform the available work and
the efficient operations of the operation. It is recognized that, in
periods where business conditions necessitate that the level of
production be reduced to a point where only a minimum of employees is
required, it shall be necessary, in some cases, to deviate from strict
plant seniority in order that some positions be available to service
and adjust the equipment when production requirements increase. When
deviating from strict plant seniority, the Company will keep the most
senior, qualified employees, as determined by the Company, in the
classification(s) needed to service and adjust such equipment. If the
Company does not layoff in accordance with seniority, the Company will
meet with the Union to explain the reasons prior to the layoff.
14.2 In the event that an employee is displaced for any reason, other than
disciplinary, the employee may elect to exercise plant seniority to
displace the least senior person in a position the senior employee is
qualified to perform after being placed on the job. To qualify, it must
be reasonable to expect that the senior employee can demonstrate the
ability to adequately perform a satisfactory amount of the primary
duties within a reasonable amount of time not to exceed (90) ninety
calendar days as determined by the Company.
14.3 When an employee has been laid off or displaced because of permanent
changes in the working force and/or in the event the Company constructs
a new cement manufacturing plant that will affect the employment status
of an employee in the Wampum plant bargaining unit, such employee may
make written application within fifteen (15) days of layoff for
employment in the new plant and be given preferential employment rights
for the next highest rated vacant job the employee is capable of
performing in that plant. Any such employee will maintain his last hire
date for employee benefit purposes. Seniority rights at the Wampum
plant shall terminate upon the completion of the employee's
probationary status at the new plant.
ARTICLE XV - JOB BIDDING
15.1 When the Company determines a vacancy exists, other than a minimum pay
job, the Company will post a notice of such fact. Said vacancies shall
be posted for seven (7) days to allow any employee in a classification
whose straight time hourly rate is less than the bid job to make
application in writing for such job. The Company will consider every
application in terms of:
<PAGE> 20
15.1.1 Seniority
15.1.2 The applicant's skill and ability measured against the
requirements of the job.
Where two or more applicant's qualifications in (15.1.2) are
relatively equal, seniority shall govern.
Knowledge, training, skill and ability gained while holding jobs under
the bid system and seniority will be given consideration in making
promotions, layoffs, or reductions in work force.
If an employee proves unsatisfactory, he/she shall be reinstated to
his/her previous job, and the Company will consider the remaining
applicants in accordance with the above.
This article does not require the Company to award a job to any
applicant if no applicants are qualified to perform the work.
The Company has the right to assign any employee to fill a new job or
to fill a vacancy until the job has been awarded.
The Company will meet with Local Union Committee to explain its
decision when the Company awards a job to a junior applicant. Any
senior applicant shall have the right to challenge the Company's award
by filing a grievance in a timely manner. Any employee reinstated to
his previous job shall have the right to challenge his
disqualification by filing a grievance in a timely manner.
15.2 Prior to the time that bids are removed from the bid box, an employee
may withdraw his bid by placing a withdrawal slip in the bid box. Bid
boxes will contain two (2) locks; one for the Company and one for the
Union.
15.3 Any employee can give the Company a letter which lists in order of
preference all jobs that the employee wishes to bid if such jobs
become vacant and are posted while the employee is absent form work
because of a scheduled vacation or due to an illness or an injury.
Furthermore, if the Company creates and post a new job during such
period that an employee is absent from work due to an illness or an
injury, the Company will use its best efforts to notify the employee
about such job no later than the last day such job is posted to learn
whether the employee wishes to bid on the job.
15.4 An employee who bid for and is awarded a permanent job can bid for the
same permanent job even though it is in the same bracket if the
employee's sole reason is to work different day and/or shifts.
An employee who bids and is awarded a job shall receive the rate of
the new job when he/she moves on the job.
<PAGE> 21
15.5 If there are no applicants or if there are no applicants qualified to
perform the work, the Company at it option (1) can hire a new employee
who if qualified to perform the work for the vacant or new job, or (2)
award the job to the least senior laborer and train her/him or train
the most senior applicant. This statement of intent shall not limit
the Company's right to disqualify the employee if the employee fails
to perform all the duties of the job within a reasonable period of
time.
15.6 Temporary Reassignment. An employee who is temporarily assigned by a
supervisor to perform work of a higher paid job classification will be
paid the rate of such higher job classification for time actually
worked, whichever is greater. An employee temporarily assigned by a
supervisor to perform work in an equal or lower paid classification
will be paid the base hourly wage rate of the employee's permanent
classification.
15.7 In no event shall the Company be requested or required to post any job
temporarily vacated by reason of vacations, illness, or injury.
15.8 SUMMER HELP PROGRAM
15.8.1 Temporary summer help employees may be employed between May 1
and September 30, or longer if there is a mutual agreement
between the Union and the Company.
15.8.2 Preference will be given to college students who are sons and
daughters of employees in applying for summer help positions.
15.8.3 The Company reserves the sole right to determine who will be
hired.
15.8.4 Summer help employees will be treated as "at will"
probationary employees and may be terminated by the Company
with or without cause or reason. Summer help employees will
not be entitled to participate in benefit plans found in
Article XX or paid leaves in Article VIII. Summer help
employees will not bid jobs but may be temporarily assigned to
various jobs by the Company.
15.8.5 No summer employee will be hired when any regular employee is
on layoff.
ARTICLE XVI - WORKWEEK AND OVERTIME
16.1 HOURS OF WORK
Eight (8) hours shall be the regular work day and forty (40) hours
shall be the regular work week. This shall not constitute a guarantee
of work. The work day shall commence with the beginning of the morning
shift and work week shall commence with the beginning of the morning
shift on Sunday.
<PAGE> 22
16.2 WORK SCHEDULES
16.2.1 Work schedules for each work week will be posted on Thursday
of the previous week prior to the end of the first shift. If
an employee's work schedule is changed after the end of the
first shift of the preceding Thursday a thirty-five dollar
($35.00) premium shall be paid in addition to whatever
compensation the employee is otherwise entitled to receive
under any other Section of the Agreement.
16.2.2 If any employee's schedule is changed after the Thursday
posting as a result of an employee who is absent from the
plant not notifying the Company by 9:00 A.M. on the date of
the posting that he will be available for work the following
week, no schedule penalty shall be paid to the employees so
affected including the employee returning to work.
16.2.3 The above exemption from the scheduling clause penalty shall
not apply to schedules changed as a result of an employee
returning from vacation, a floating holiday, bereavement leave
or jury duty.
16.2.4 The current practice of scheduling an employee so that the
employee has two consecutive days off work under normal
working conditions shall not be changed during the term of
this Agreement except by written agreement of the Company and
Union.
16.2.5 When the Company changes an employee's schedule, the Company
will explain to the employee the reason for the change and the
estimated duration of the change. The estimated duration of
the change is provided the employee solely to assist the
employee in personal planning and does not limit the Company's
right to increase or decrease the duration of the change.
16.2.6 If the Company decides that the work schedule for a job should
be permanently changed, the Company will eliminate the old job
and bid the new job.
16.2.7 Twenty (20) minutes prior to the end of the shift the whistle
will blow. This will provide ample time for employees to put
tools away and shower. As soon as employees' tools are put
away, they may immediately proceed to the showers. Employees
should stay on their job until this whistle blows.
16.3 RATE OF PAY - OVERTIME The applicable overtime rate shall be time and
one-half (1.5) the employee's straight time hourly rate for hours
worked over eight (8) in a day or over forty (40) in a week and double
time (2X) for all hours worked over twelve (12) except on a holiday,
in which case the applicable rate shall be:
<PAGE> 23
16.3.1 SUNDAY WORK All hours worked by an employee on Sunday which
are not paid for on a premium and/or overtime basis shall be
paid at the rate of one and one-half (1.5) times the
classified hourly rate, exclusive of shift differentials.
Callouts on Sunday will be paid at double (2X) time. There
shall be no duplication or pyramiding of premium pay and/or
overtime under this provision.
16.3.2 HOLIDAY WORKED Hours worked on a holiday will be paid at two
and half (2.5X) times in lieu of holiday pay.
If an employee does not work a regularly scheduled workday through
action of the Company, excused absence or because of a holiday, that
day shall be considered as actually a day worked for all overtime
purposes.
16.4 SEVENTH CONSECUTIVE DAY: If an employee actually works seven (7)
consecutive workdays in the plant workweek regardless of the number of
hours worked on any workday, the employee shall be compensated by
multiplying the classified hourly wage rate by one (1.0) for each and
every hour worked during the seventh consecutive workday, and this
premium shall be paid in addition to whatever compensation the
employee is otherwise entitled to receive under any other section of
the Agreement.
16.5 CALLOUTS AND OFF-DAYS. In case an employee is called for emergency
work during any hour in the day or week, in addition to his regular
schedule, he shall receive a minimum of four (4) hours pay for such
work, at the applicable overtime rate. However, if he is notified
before the end of his regular shift to report early, it shall not be
considered a callout. Callout hours and off-day hours are overtime
hours.
16.6 REPORTING PAY. Any employee who is required to report for work shall
be given at least four (4) hours pay at the classified hourly rate,
and shall receive full time pay for all time thereafter that he is
required to remain on the premises ready for work. Any employee put to
work on his regular working day shall receive a full day's pay at the
classified hourly rate.
The above does not apply to an employee who is returning to work from
a medical absence who has not given the company 24 hours advance
notice of his return.
16.7 After an employee has been engaged in work for twelve (12) consecutive
hours, he shall be paid for all consecutive hours worked immediately
succeeding and in excess of such twelve (12) hours at double (2X) his
regular straight time hourly rate. If an employee is being paid the
rate of double time under the foregoing paragraphs, his rate of pay
shall not be reduced when his work continues into or overlaps his
regular shift. However, the Company may exercise either of the
following options:
<PAGE> 24
16.7.1 The Company may instruct the employee to continue to the end
of the shift at the double time rate, or
16.7.2 The Company may send the employee home at any time during the
shift provided the remainder of the shift is paid for at
straight time.
16.8 Overtime paid for on a daily basis shall not be duplicated on a weekly
basis.
16.9 OVERTIME:
16.9.1 Every reasonable effort will be made by the Company to avoid
requesting any employee to work overtime and the Company will
consider under the circumstances involved any reasonable
excuse from an employee for not working the overtime. During
the extended period of scheduled overtime, the Company will
give special consideration to an employee's request to be
excused from overtime work because of fatigue as long as it is
consistent with the Labor Agreement and plant operational
requirements. However it is understood that each employee is
expected to work a reasonable amount of overtime.
16.9.2 Overtime in the various job classifications shall be equally
divided among the employees of the respective job
classifications insofar as it is practical to do so. When an
employee is not available for overtime in his classification,
the Company will make every effort to use another qualified
employee in the same department before going to another
department. This will not prevent the Company from going
outside the department where the overtime is required to avoid
the payment of a rate whether penalty or premium of greater
than time and one-half (1.5). The practice of posting overtime
will be continued.
16.9.3 After an employee is transferred or assigned to a
classification other than his own, he shall be eligible for
the same overtime within that classification as would the
employee he replaced.
16.9.4 Employees who are called upon to work overtime shall not be
laid off during their regular work time for the purpose of
equalizing said overtime.
16.9.5 The Company will pay overtime in fifteen (15) minute
increments during the first hour of overtime.
<PAGE> 25
16.10 OVERTIME LUNCH
16.10.1 Any employee who has not been notified of his overtime
assignment at least twelve (12) hours prior to the
commencement of the overtime assignment and who works more
than ten (10) consecutive hours, shall be provided with a hot
lunch. The Company will allow the employee thirty (30) minutes
away from his/her job to eat his/her lunch. Subsequent lunches
and (30) minute lunch breaks will be provided every four (4)
consecutive hours worked beyond the ten (10) consecutive
hours.
16.10.2 Any employee who is called out and works more than four (4)
consecutive hours shall be provided with a hot lunch which
shall be eaten at the end of said four (4) consecutive hours.
In addition, said employee shall be provided with a hot lunch
every four (4) consecutive hours worked thereafter.
There shall be no duplication of hot lunches under
provisions (1) and (2) above. The employee shall be given
reasonable time to eat his lunch without loss of pay.
16.11 EIGHT CONSECUTIVE HOURS OFF-DUTY
16.11.1 In the event an employee does not receive eight (8)
consecutive hours off work within the fourteen (14)
consecutive hours immediately preceding the start of his next
scheduled shift, the Company shall exercise one of the
following options:
(A) Instruct the employee to report late for his next
scheduled shift by the number of hours his longest
consecutive off-duty period falls below eight (8) hours
and pay the employee the appropriate straight time rate
for those hours not worked between the starting time of
his scheduled shift and the time he reports to work in
accordance with the Company's instructions. The
appropriate straight time rate on the workday Sunday
shall be one and one-half (1.5) and on a recognized
holiday, two and one-half (2.5).
(B) Instruct the employee to report to work at the starting
time of his scheduled shift. The employee shall receive
a premium for those hours worked which, if added to his
longest consecutive off-duty period, equal eight (8)
hours. The premium shall be determined by multiplying
the classified hourly wage rate by one (1.O). The
premium shall be in addition to whatever compensation
the employee is otherwise entitled to receive under any
other section of this Article.
<PAGE> 26
16.12 TEMPORARY JOB VACANCIES
16.12.1 The Company shall not be required to fill temporary job
vacancies whether scheduled or unscheduled, unless the
efficient operation of the plant requires that said
temporary job vacancies be filled.
16.12.2 When an employee is scheduled to work in a higher wage
classification, she/he shall receive the higher rate of
pay for a minimum of four (4) hours. If an employee has
been scheduled to work in a higher wage classification,
at any point in time in each week, within a six (6)
consecutive weeks time period , the Company will meet
with the Union to determine how to cover the higher wage
classification beyond the six (6) consecutive weeks.
16.12.3 The Company will post a list of all jobs that are to be
filled the following week. In addition, for the sole
purpose of facilitating the assignment of fill-ins for
the following week, the Company will post on Monday, a
list of the jobs that, to its knowledge, will be needed
to be filled the following week. If an employee wishes to be
considered for any fill-in for the following week he must notify
the Company which job he desires on a form provided by the
Company by 4:00 P.M. the Wednesday after the Monday posting or
she/he will not be considered for the fill-in. This Monday
posting does not replace the Thursday posting requirements nor
is the Company liable for any penalties for failure to make such
Monday posting. Laborers who wish to be considered for these
assignments must follow the above procedures. If there are not
enough employees signed up to meet the Company's requirements on
this posting, the Company will assign the junior laborer who is
broken in on that job (if it is a job that requires break-in
time).
16.12.4 The Company can assign laborers to fill temporary
vacancies, scheduled or unscheduled, according to the
seniority of the individual provided that he has the
skill and ability to perform the required work. If only
one (1) laborer is qualified, he must accept the assignment.
Once laborer assignments have been completed, no laborer may be
bumped out of his assigned job, for the week for which the
assignment has been made, by another laborer.
16.12.5 The Company will consider a request from a fixed shift
employee to replace an employee on the day shift in his
classification when the day shift employee is on vacation or
extended illness in excess of one week provided however, that
the laborer used to replace the offshift employee has been
previously trained in that classification. The Company retains
the right to decline these requests, but will not unreasonably
withhold such permission.
<PAGE> 27
16.13 PLANT SHUTDOWNS
During periods of plant shutdowns when employees are needed for
maintenance, repairs, or work on plant alternations, the wage rate
paid to employees who are retained for work during the first
forty-five (45) days of a plant shutdown shall not be less than the
employee's regular straight-time wage rate normally paid when the
plant is producing. After forty-five days, the wage rate paid shall be
the wage rate of the job performed.
16.14 The Company will not require an employee to clock out and then require
him to clock back in for the sole purpose of avoiding penalties.
16.15 REST BREAK
Any employee who does receive a paid lunch period shall be entitled to
fifteen (15) minutes to eat lunch. Lunch breaks for all employees in
this group shall be scheduled so that there is no interruption of
operations. (The Company shall have the right to stagger lunch
breaks.) Should the employee miss any part of or all of this 15 minute
lunch break, there is no penalty. However, if said employee is
regularly denied his lunch break, he may file a grievance in a timely
manner.
ARTICLE XVII - SAFETY AND HEALTH
17.1 A joint Safety and Health Committee will be established consisting of
members appointed by the Company and the Union. The "Committee" will
consist of two (2) members from the Union and two (2) members from the
Company plus the Plant Manager or designee. Meetings will be held
regularly to address safety and health concerns and make
recommendations to the plant management. The "Committee" will
establish an Accident Investigation Team. The Accident Investigation
Team will begin their investigation as soon as possible following an
accident. Safety issues, complaints and/or disputes may be
investigated by the "Committee". The Company will provide employees
with required safety equipment. Employees will be required to properly
use and maintain all personal protective equipment supplied by the
Company.
17.2 The Company will furnish approved basic prescription ground safety
glasses to active bargaining unit employees, including the cost of an
annual eye exam. Prescription safety glasses will not be replaced
unless the safety glasses were damaged or broken during the
performance of duties.
17.3 The Company will annually reimburse active bargaining unit employees
for the purchase of safety shoes. The total annual reimbursement for
this safety equipment may not exceed $180.
<PAGE> 28
17.4 All time spent by a bargaining unit employee as a member of the
committees in the Articles listed in this section, including all time
spent during Federal and State inspections and pre and post close-out
meetings, shall be compensated at the employee's regular straight time
rate. Any time spent during the hours the employee is scheduled to
work shall count toward the calculation of any penalty or premium pay
section of this Agreement including, but not limited to, daily or
weekly overtime.
17.5 Any employee who believes his job presents a hazard to his safety or
health may request an immediate review of his job by the Joint Safety
and Health Committee. No employee shall be disciplined or discharged
for refusing to work on a job if his refusal is a bona fide claim that
said job is not safe or might unduly endanger his health and safety.
17.6 In the event that an employee is required to clean silos under
conditions that follow confined space entry procedures with proper
training, the hours worked shall be compensated for by multiplying the
classified hourly wage rate by one-half (0.5).
ARTICLE XVIII - BULLETIN BOARD
18.1 The Company agrees to allow the proper officers of the Union who are
employees of the Wampum Plant of the Company to use one designated
section of the plant bulletin board for posting notices in the
interest of the Company and its employees.
ARTICLE XIX - MISCELLANEOUS
19.1 The Company will enter into a Union label agreement for the Company's
package products.
19.2 Any hand tool that the employee uses in the performance of his job
duties will be replaced in the event that the tool is rendered not
usable during the course of the employee's work. The tool must be
presented to the Company prior to replacement.
19.3 The normal time for distribution of pay checks to all employees shall
begin with the start of the day shift every other Friday, except that
Quarry employees and any employee starting the second shift will
receive his pay check on the Thursday preceding the normal pay day.
19.4 Gloves will be made available for purchases to employees at cost on a
cash basis.
19.5 When the Company decides that an interview between the Company and an
employee regarding job qualification is to be conducted, a
Committeeman chosen by the Company will attend the interview for the
purpose of affirming that said interviews are conducted with a
reasonable degree of uniformity.
<PAGE> 29
19.6 Printing of Agreement - The necessary Agreements will be printed at
Company expense and each copy will bear the Union label. The Company
will provide each local with a supply of the booklets.
ARTICLE XX - BENEFIT PLANS
20.1 During the term of this Agreement the Company will provide employees
with participation in Southdown, Inc. Medical Network Plan, the
Southdown, Inc. Group Dental Benefit Plan, the Southdown, Inc. Life
Insurance and Accidental Death and Dismemberment Plan, the Southdown,
Inc. Long Term Disability Plan, the Southdown, Inc. Pension Plan, the
Southdown Inc. Retirement Savings Plan and Southdown, Inc. Voluntary
Life Insurance Plan, including all amendments and modifications to
said plans during the life of this Agreement, on the same basis as the
benefits and eligibility requirements are provided to Southdown,
Inc.'s salaried employees.
20.1.1 The Wampum Hourly Pension Plan will be merged into the
Southdown, Inc. Pension Plan effective with the date of this
Agreement. Any employee retiring during the term of this
Agreement will have his pension benefit calculated under both
plan formulas and will receive the higher of the two amounts.
Employees will continue to accrue credited service at a flat
rate of $29.00 per year under the hourly plan through December
31, 2001 at which time the accrued benefit will be frozen. At
the time of retirement, should an employee have more than 30
years of credited service with the Company, the employee's
benefit under the hourly plan as of December 31, 2001, will be
unreduced for early retirement.
20.2 During the term of this agreement, the Company will provide post
retirement medical insurance coverage to all eligible employees
covered under this bargaining unit who retire after having achieved
the age of 62 with at least 15 years of company service. The
provisions of this coverage will be the same as the benefits and
eligibility requirements provided for in the Southdown Inc. Retiree
Medical Insurance Plan which are subject to modification.
20.3 SICKNESS AND ACCIDENT BENEFITS
If a permanent employee (non-probationary/non temporary) is absent
from work due to disability, sickness and accident benefits are
payable. The disability must prevent the employee from performing the
duties of the job because of a non-occupational sickness or injury.
After a waiting period of one (1) week (waived if the employee is
hospitalized as an in-patient), the disability benefits are payable at
a rate of forty-nine dollars ($49) per day for a maximum of five days
per week. A disabled employee may receive weekly sickness and accident
benefits during the period of disability not to exceed five (5)
months. It is the employee's responsibility to make application for
this benefit and the attending physician must document the nature of
the disability and expected date of return to work. No benefits shall
be payable for the following:
<PAGE> 30
20.3.1 disability which you are not under the direct care of a
licensed physician.
20.3.2 sickness or injury which is purposefully self-inflicted while
sane or insane.
20.3.3 disability due to an injury arising out of the course of
employment.
20.3.4 disability due to disease which benefits are payable under
Worker's Compensation, Occupational Disease or similar law.
This benefit terminates upon retirement or upon termination of
employment.
20.4 Health and Medical Plan Contribution Rates
During the term of this agreement, employee contributions for Health
and Medical Plans shall be as follows:
Employee Only $30/month
Employee and Children $50/month
Employee and Spouse $60/month
Employee and Family $70/month
ARTICLE XXI - WORK PRACTICES
21.1 The Company will provide training for one laborer when manning
requirements of the plant provide ample resources to man required
operational jobs.
21.2 The following rules shall govern the training of laborers for the
purpose of filling vacancies.
21.2.1 Management will, one week in advance, announce and post the
job for which training will be provided.
21.2.2 Laborers must notify the Company, starting with the senior
laborer, of their intent to accept the training in 21.1.1
above. If no one applies, the junior laborer may be required
to train.
21.2.3 Management will determine the number of laborers who will be
trained for each classification.
21.2.4 Management will determine the classifications for which
laborers will be trained for the purposes of filling
vacancies.
(a) Management will attempt to balance the number of jobs the
laborers are to be trained in.
<PAGE> 31
21.2.5 The Company shall, before offering training in any job higher
than bracket nine (9), to a laborer hired after 10/1/77, give
the laborers hired prior to 10/1/77 the opportunity to train
for a job higher than bracket nine (9) subject to the
following conditions:
(a) The opportunity must be offered in order of seniority.
(b) The laborer shall have the choice of accepting or
rejecting the training.
21.2.6 During the time when temporary summer laborers are working at
the plant, the following rules shall apply when training is
offered to the Labor Department for the purpose of filling
vacancies:
(a) Permanent laborers must accept training for purposes of
filling vacancies. They shall be selected by canvassing
the labor crew in order of seniority. If no permanent
laborers voluntarily accept the training, the least
senior one is compelled to do so.
(b) Temporary summer laborers can be used to fill vacancies
as long as all permanent laborers are already working in
that capacity.
21.2.7 During the transition period before an additional packing crew
is put on or taken off, it is recognized that a reasonable
amount of overtime will be required. The Company will secure
as much information from sales as possible so that this
overtime can be held to a minimum and the addition of or
removal of a shift is consistent with a continuing increase or
decrease in package business.
21.2.8 It is understood and agreed to by the Local Union No. 173 and
the Local Management at the Southdown Wampum Plant that the
amount of overtime that an employee has been charged is not a
factor that Management must consider when it is making a
choice as to who will be scheduled to work on a holiday or
premium hours other than overtime hours.
<PAGE> 32
(a) This means that the equalization of overtime is not
a controlling factor over, and has no connection
with, which employee is asked to work hours that
are to be paid for at a premium rate. Contractual
distribution of overtime requirements will be
followed in all overtime cases.
21.2.9 Production Utility shall be considered a classified
employee for overtime purposes on the day he fills each
classification. Once one of these classifications is
exhausted on any other day, than those where he fills in,
he would be eligible for overtime before going into the
department.
21.2.10 If an employee's job requires a drivers license and he
loses said license, said employee shall return to the
laborer crew at labor rate with all rights and privileges
of a Laborer.
21.2.11 The Company will maintain all Plant restrooms in a clean
and orderly condition. This work will be assigned to a
Mill Janitor and/or Laborer as required.
ARTICLE XXII - TERMS OF AGREEMENT
22.1 After ratification by the members of the Local Union, this Agreement
shall become effective and remain in force and effect and be binding
upon the parties hereto from August 29, 1999, to and including April
30, 2002, and it shall continue to be in full force and effect
thereafter from year to year until either party on or before March
1st, of any year, beginning March 1, 2002, gives written notice to the
other party of its desire or intention either to alter and modify or
terminate the same. If such notice is given, the parties hereto shall
begin negotiations not later than March 31st in such year.
<PAGE> 33
IN WITNESS WHEREOF, the Union has caused this Agreement to be executed in its
name, after due authorization by a vote of a majority of its members, and the
Company has caused it to be executed in its name, by its duly authorized
representatives.
INTERNATIONAL BROTHERHOOD SOUTHDOWN, INC.
OF BOILERMAKERS, CEMENT, LIME
GYPSUM AND ALLIED WORKERS,
DIVISION LOCAL BADGE NO. D-173
- -------------------------------- ----------------------------------
- -------------------------------- ----------------------------------
- -------------------------------- ----------------------------------
- -------------------------------- ----------------------------------
- -------------------------------- ----------------------------------
- --------------------------------
- --------------------------------
- --------------------------------
<PAGE> 34
APPENDIX "A"
JOB CLASSIFICATIONS AND WAGE RATES - WAMPUM PLANT
<TABLE>
<CAPTION>
BRACKET JOB TITLE 9-1-99 5-1-00 5-1-01
------- --------------------------- ------ ------ ------
<S> <C> <C> <C> <C>
1 Utility Janitor 15.41 15.87 16.35
2* Laborer 15.57 16.04 16.52
3 --- 15.74 16.21 16.70
4 --- 15.90 16.38 16.87
5 Unloading Attendant 16.07 16.55 17.05
6 --- 16.23 16.72 17.22
7 --- 16.40 16.89 17.40
8 Storekeeper 16.56 17.06 17.57
*10 Painting 16.89 17.40 17.92
11 Lubeman A 17.06 17.57 18.10
Maintenance
12 Physical Chemist 17.22 17.74 18.27
Pack & Load
13 Equipment Operator 17.39 17.91 18.45
14 Mix Chemist 17.55 18.08 18.62
Truck Mechanic A
Utility Chemist
Repairman A
Production Utility
Quarry Mechanic A
Quarry Specialist
Process Control/Maintenance
15 Rotating Repairman A 17.72 18.25 18.79
16 Machinist A 17.88 18.42 18.97
Instrumentman A
Electrician A
Mechanic Leader
17 --- 18.05 18.59 19.14
18 Electrical Leader 18.21 18.76 19.32
Instrument Leader
19 Control Room Operator 18.54 19.10 19.67
</TABLE>
*(1) Painting - Rate purposes only (Bracket 1O)
(2) The loader used to load stone into trucks at the quarry face will be
placed in Bracket 15 for pay purposes only and without precedence for
any other classification in the job evaluation program.
<PAGE> 35
* Laborer*
Laborers hired after the date of ratification shall be paid in accordance
with the following schedule:
<TABLE>
<CAPTION>
YEAR 1 YEAR 2 YEAR 3
------- ------- -------
<S> <C> <C> <C>
New Hire Rate $ 9.94 $ 10.24 $ 10.54
I 61st day worked $ 10.45 $ 10.77 $ 11.09
II 6 months after D.O.H. $ 10.97 $ 11.30 $ 11.64
III 1 year after D.O.H $ 12.18 $ 12.55 $ 12.93
IV 2 years after D.O.H Current Labor Rate
</TABLE>
<PAGE> 36
APPENDIX A (1)
SENIORITY LIST
WAMPUM AS OF 09/01/99
<TABLE>
<CAPTION>
NAME DATE HIRED
---- ----------
<S> <C>
ALTMAN, ROBERT J. 02/29/56
MILLER, ROBERT E. 05/27/63
EVERSOLE, ROBERT S. 06/11/65
DAVIS, JEFFREY 04/16/66
KOSIOR, CHARLES M. 05/10/66
STELTER, RICHARD L. 05/01/67
GENERAO, JOHN R. 08/30/67
LESLIE, CLARENCE T. 04/17/68
FERRUCCI, FRANK M. 04/29/68
DRUSCHEL, ROBERT L. 05/21/68
FRANUS, THOMAS 05/27/68
MCDONALD, GLENN E. 06/17/68
BUTERA, JAMES S. 03/10/69
LOUGHHEAD, JOHN W. 03/17/69
OLAYER, JOSEPH A. 05/01/69
KOSIOR, THEODORE S. 05/12/69
RADICH, RAYMOND R. 05/19/69
ARGIRO, DAVID P. 07/21/69
HOUSEHOLDER, HAROLD 03/30/70
CORY, JOHN L. JR. 04/13/71
REID, GERALD W. 04/13/71
PAVKOVICH, GEORGE A. 04/15/71
SCHOTSCH, DAVID L. 04/15/71
CILETTI, JOSEPH L. 04/16/71
CWYNAR, RAYMOND L. 04/16/71
VALENTINO, RUDOLPH JR. 04/16/71
CHANDLER. RUBIN 04/19/71
COOKE, DONALD 04/19/71
HAIRHOGER, CHARLES L. 04/19/71
JOHNSON, ERNEST F. 04/19/71
WRONA, WALTER J. 04/19/71
BAKER, THOMAS O. 05/05/71
ISABELLA, JOSEPH B. 05/17/71
</TABLE>
<TABLE>
<CAPTION>
NAME DATE HIRED
---- ----------
<S> <C>
FLUMER, DANIEL 06/07/71
KRAVOS, JOHN III 06/07/71
SENATORE, VERNON J. 08/23/71
DURBIN, FRANCIS B. 08/30/71
BORST, RICHARD P. 10/12/71
GUY, DAVID J. 10/13/71
MOORE, OVAL E. 09/18/72
PRESNAR, JOHN 09/25/72
BLACKWELL, ALVA C. 11/13/72
BABICK, STANLEY JR. 07/30/73
KINARD, PAUL W. 07/30/73
CURRY, FREDRICK 08/06/73
</TABLE>
<PAGE> 37
<TABLE>
<S> <C>
HALL, JAMES D. 09/17/73
YOHO, PHILLIP A. 09/17/73
PROCOPIO, SAMUEL A. 09/24/73
SMIALOWSKI, JOHN JR. 09/24/73
DAVIS, ROBERT J. 10/01/73
BABEL, GEORGE J. 04/29/74
BARBER, EUGENE I. 04/29/74
HUNTER, THEODORE E. 04/29/74
IPPOLITO, JOHN 04/29/74
RUSSO, DOMINICK 09/16/74
MICKLISH, SHEILA 10/11/77
ALLEN, JUDY 03/20/78
RUTTER, GARY 03/20/78
BOBER, RICHARD 03/27/78
NIEMI, RON 03/27/78
BATES DON 04/03/78
SHOUP, KARL 04/17/78
PEZZI, SAMUEL 05/22/78
CRANS, GREGORY 08/21/78
PATTERSON, RANDY 08/23/78
LEONHARDT, ROBERT 08/28/78
OSBORNE, DONALD 08/28/78
SCHLEMMER, DONALD 08/28/78
TUROK, CHARLES 08/28/78
MALLARY, GEORGE JR. 09/18/78
DIFRISCHIA, JOSEPH 09/L9/78
LUTZ, WILLIAM JR. 09/20/78
ALLISON, DENISE 03/12/79
BEKOSKI, FRANK 09/24/79
HERB, THOMAS 09/24/79
KRIEGISCH, RANDY 09/24/79
PALAGALLO, JAMES 09/24/79
HACKETT, JAMES 10/01/79
HACKETT, RANDY 10/01/79
HASWELL, LARRY 10/01/79
HIMES, DAVID 10/01/79
HOUK, WILLARD 10/01/79
HALULKO, MIKE 10/09/79
</TABLE>
<TABLE>
<CAPTION>
NAME DATE HIRED
---- ----------
<S> <C>
BELLISSIMO, BRUCE 12/17/79
HAIRHOGER, EUGENE 12/17/79
KINARD, PAUL W. 12/17/79
KROLL, PATTY 12/17/79
WILLIAMSON, RICK 12/17/79
CHAPPELL, BRUCE 01/02/80
MARTIN, WILLIAM 01/02/80
POLAND, ROBERT L. 09/03/85
BENNETT, ROBERT 06/02/86
HERMAN, LARRY 06/02/86
KING, RANDY 06/02/86
KIRKWOOD, GARY 06/02/86
KRUEGER, WILLIAM, J. 06/02/86
</TABLE>
<PAGE> 38
<TABLE>
<S> <C>
MARICH, STEVE 06/02/86
MOORE, DAN 06/02/86
STELTER, RANDY 06/02/86
FERRUCCI, FRANK JR. 06/18/87
ALLEN, JOHN D. 06/08/87
BARGER, RODNEY 06/08/87
RADER, WILLIAM JR. 06/08/87
STELTER, FREDERICK 06/08/87
COLUNDRELLO, SALVATORE JR. 08/12/87
GRYMES, RONALD A. 08/12/87
LUTZ, BRYAN D. 08/12/87
DUDA, MARK S. 03/13/88
CRACRAFT, EDWIN L. 06/13/88
SKLENCHAR, EDWARD J. 06/13/88
DOUTT, RICHARD J. 10/02/89
ROONEY, PATRICIA A. 10/02/89
STRICKLER, RICHARD C. 10/02/89
CAPALBO, JAMES M. 04/22/91
DAVIS, MATTHEW D. 04/22/9L
MCDONALD, RAYMOND G. 04/22/9L
MILLER, DOUGLAS E. 04/22/91
CHAPPELL, THOMAS M. 09/21/92
HUBER, REX C. 09/21/92
KRUEGER, ROBERT E. 09/21/92
SCHLEMMER, TIMOTHY J. 09/21/92
STRICKLER, DANIEL W. 09/21/92
BRIGHT, JAMES CL. 09/28/92
SYSMOSKO, KIRK 01/04/93
ALLEN, DARL J. 05/10/93
CAMINITI, JAMES 05/10/93
GRYMES, RODNEY 05/10/93
HARPER, DONALD L. 09/27/93
HERB, ROBERT E. 09/27/93
MICCO, ANTHONY 09/27/93
GIBBONS, MICHAEL K. 10/04/93
WELSH, MARK W. 10/04/93
TAYLOR, DEBORAH 08/25/97
</TABLE>
<PAGE> 39
APPENDIX B
1999 WAMPUM NEGOTIATION
In conjunction with the 1999 Wampum Plant negotiations, the parties agreed to
delete Appendix B, pages 54 through 57, of the Labor Agreement. The Company and
Union agree that the work schedules in Appendix B are the work schedules
currently in effect at the Wampum Plant. Further, the parties agree that he
Company may change these schedules or establish new schedules consistent with
the Labor Agreement. These pages will be filed for future reference.
Further, the parties agree to remove all appendixes, attachments and letters
contained in pages 58 through 91 of the existing Labor Agreement and file them
for reference purposes.
<PAGE> 1
EXHIBIT 11
SOUTHDOWN, INC. AND SUBSIDIARIES
STATEMENT OF COMPUTATION OF PER SHARE EARNINGS
(In millions, except per share amounts - Unaudited)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Earnings (loss) for basic earnings per share:
Earnings from continuing operations $ 213.4 $ 125.0
Loss from discontinued operations, net of income taxes (1.0) (1.6)
Extraordinary charge, net of income taxes (9.2) --
------------ ------------
Net earnings for basic earnings per share $ 203.2 $ 123.4
============ ============
Earnings (loss) for diluted earnings per share
Earnings from continuing operations $ 213.4 $ 125.0
Loss from discontinued operations, net of income taxes (1.0) (1.6)
Extraordinary charge, net of income taxes (9.2) --
------------ ------------
Net earnings for diluted earnings per share $ 203.2 $ 123.4
============ ============
Average common stock shares outstanding: 37.6 38.2
Other potentially dilutive securities:
- common stock equivalents from assumed
exercise of stock options 0.3 0.7
------------ ------------
Total for diluted earnings per share $ 37.9 $ 38.9
============ ============
Earnings (loss) per common share:
Basic
Earnings from continuing operations $ 5.68 $ 3.27
Loss from discontinued operations, net of income taxes (0.03) (0.04)
Extraordinary charge, net of income taxes (0.24) --
------------ ------------
$ 5.41 $ 3.23
============ ============
Diluted
Earnings from continuing operations $ 5.63 $ 3.22
Loss from discontinued operations, net of income taxes (0.03) (0.04)
Extraordinary charge, net of income taxes (0.24) --
------------ ------------
$ 5.36 $ 3.18
============ ============
</TABLE>
<PAGE> 1
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF SOUTHDOWN, INC.
AS OF DECEMBER 31, 1999
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY * ORGANIZATION
------------ ------------
<S> <C>
SOUTHDOWN FINANCE, INC.............................................................. DELAWARE
SOUTHDOWN CALIFORNIA CEMENT LLC (A SUBSIDIARY OF SOUTHDOWN FINANCE, INC.)........... DELAWARE
KOSMOS CEMENT COMPANY (A PARTNERSHIP)............................................... KENTUCKY
</TABLE>
- ---------------
* CONDUCTS BUSINESS UNDER ITS NAME.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-23328 on Form S-8, Registration Statement No. 33-35011 on Form S-8,
Registration Statement No. 33-45144 on Form S-8, Registration Statement No.
333-59349 on Form S-8, Registration Statement No. 333-26523 on Form S-8,
Registration Statement No. 333-26529 on Form S-8, Registration Statement No.
333-78955 on Form S-8, Registration Statement No. 333-78887 on Form S-8, and
Registration Statement No. 333-94097 on Form S-8, of our report dated January
26, 2000 appearing in this Annual Report on Form 10-K for the year ended
December 31, 1999.
/s/ DELOITTE & TOUCHE LLP
- ---------------------------------------
DELOITTE & TOUCHE LLP
Houston, Texas
February 25, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1999 AND THE RELATED
STATEMENT OF CONSOLIDATED EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE
TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 135
<ALLOWANCES> 5
<INVENTORY> 135
<CURRENT-ASSETS> 307
<PP&E> 1,600
<DEPRECIATION> 679
<TOTAL-ASSETS> 1,431
<CURRENT-LIABILITIES> 147
<BONDS> 166
50
0
<COMMON> 0
<OTHER-SE> 783
<TOTAL-LIABILITY-AND-EQUITY> 1,431
<SALES> 1,272
<TOTAL-REVENUES> 1,272
<CGS> 845
<TOTAL-COSTS> 932
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 330
<INCOME-TAX> 112
<INCOME-CONTINUING> 218
<DISCONTINUED> 1
<EXTRAORDINARY> 9
<CHANGES> 0
<NET-INCOME> 203
<EPS-BASIC> 5.41
<EPS-DILUTED> 5.36
</TABLE>
