<PAGE> 1
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 23, 1997
The Annual Meeting of Stockholders of Commercial Metals Company, a Delaware
corporation ("Company"), will be held in the Thompson Auditorium, on the ground
floor at Cityplace Center, 2711 North Haskell Avenue, Dallas, Texas, on January
23, 1997 at 10:00 a.m., Central Standard Time. If you are planning to attend the
meeting in person, please check the appropriate space on the enclosed proxy
card. A map of Cityplace is included on the back cover of the attached Proxy
Statement showing entrances to parking areas. The meeting will be held for the
following purposes:
(1) To elect three persons to serve as Class II directors until the
2000 Annual Meeting of Stockholders and until their successors are elected;
(2) To approve the Company's 1996 Long-Term Incentive Plan;
(3) To approve the appointment of Deloitte & Touche LLP as independent
auditors of the Company for the fiscal year ending August 31, 1997; and
(4) To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record on November 25, 1996 are entitled to notice of
and to vote at the meeting or any adjournment or adjournments thereof.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
FILL OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ACCOMPANYING ENVELOPE
ON WHICH NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. PROXIES
FORWARDED BY OR FOR BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY
THEM. THE PROMPT RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER
COMMUNICATION.
By Order of the Board of Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
Dallas, Texas
December 11, 1996
<PAGE> 2
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
TELEPHONE (214) 689-4300
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JANUARY 23, 1997
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Commercial Metals Company ("Company") for
use at the Annual Meeting of Stockholders of the Company to be held on January
23, 1997 and at any and all adjournments thereof. The approximate date on which
this Proxy Statement and accompanying proxy card are first being sent or given
to stockholders is December 11, 1996.
Shares represented by each proxy, if properly executed and returned to the
Company prior to the meeting, will be voted as directed, but if not otherwise
specified, will be voted for the election of the three Class II directors, to
approve the Company's 1996 Long-Term Incentive Plan and to ratify the
appointment of Deloitte & Touche LLP as independent auditors, all as recommended
by the Board of Directors. A stockholder executing the proxy may revoke it at
any time before it is voted by giving written notice to the Secretary of the
Company, by subsequently executing and delivering a proxy or by voting in person
at the meeting (although attending the meeting without executing a ballot or
executing a subsequent proxy will not constitute revocation of a proxy).
OUTSTANDING VOTING SECURITIES OF THE COMPANY
On November 25, 1996, the record date for determining stockholders entitled
to vote at the Annual Meeting, there were outstanding 15,116,662 shares of
Common Stock, par value $5.00 per share, not including 1,015,921 treasury
shares. Each share of such stock is entitled to one vote for each director to be
elected and upon all other matters to be brought to a vote by the stockholders
at the forthcoming Annual Meeting of Stockholders. The affirmative vote of a
plurality of the shares of Common Stock present or represented at the meeting is
required to elect the Class II directors, and the affirmative vote of a majority
of the shares of common stock present or represented at the meeting is required
to approve the 1996 Long-Term Incentive Plan and to ratify the appointment of
Deloitte & Touche LLP. Abstentions and broker non-votes are counted for purposes
of determining the quorum and have the effect of a negative vote on the
proposals to approve the 1996 Long-Term Incentive Plan and to ratify the
appointment of Deloitte & Touche LLP. Broker non-votes have no effect on
determining plurality.
<PAGE> 3
PRINCIPAL STOCKHOLDERS
As of November 25, 1996, the only persons, or groups of persons, known to
the Company's management believed to own beneficially 5% or more of the
Company's outstanding Common Stock were:
<TABLE>
<CAPTION>
TYPE OF OWNED PERCENT
NAME AND ADDRESS OWNERSHIP SHARES OF CLASS
-------------------------------------------------- ------------- -------- --------
<S> <C> <C> <C>
J. P. Morgan & Co. Incorporated Beneficially 1,113,366(1) 7.2%
60 Wall Street
New York, NY 10260
</TABLE>
- ---------------
(1) Based on Amendment 7 to Schedule 13G dated December 29, 1995 which indicates
that J. P. Morgan & Co. Incorporated has sole voting power over 700,300
shares and sole dispositive power over 1,113,366 shares.
PROPOSAL I
ELECTION OF DIRECTORS
The Company's Restated Certificate of Incorporation divides the Board of
Directors into three classes. The term of office of the Class II directors
expires at this Annual Meeting of Stockholders. The Class III directors will
serve until the 1998 Annual Meeting of Stockholders, and the Class I directors
will serve until the 1999 Annual Meeting of Stockholders. Albert A. Eisenstat,
Walter F. Kammann and Charles B. Peterson are currently directors and will stand
for election as Class II directors for three-year terms of office expiring at
the 2000 Annual Meeting and until their successors are duly elected. Messrs.
Eisenstat, Kammann and Peterson were previously elected by the stockholders.
Proxies cannot be voted for the election of more than three persons to the Board
at the meeting.
The proxies named in the accompanying form of proxy have been designated by
management. All nominees listed above are currently members of the Board of
Directors. Each nominee has consented to being named in this Proxy Statement and
to serve if elected. If any nominee becomes unavailable for any reason, the
shares represented by the proxies will be voted for such person, if any, as may
be designated by the Board of Directors. However, management has no reason to
believe that any nominee will be unavailable.
2
<PAGE> 4
The following table sets forth certain information about the directors. All
directors have been employed in substantially the same positions set forth for
at least the past five years except for Albert A. Eisenstat, Walter F. Kammann
and Dorothy G. Owen. Mr. Eisenstat had been a director of and Executive Vice
President and Secretary of Apple Computer, Inc. until his retirement in
September 1993. From June 1996 until present Mr. Eisenstat has been a partner in
Discovery Ventures LLC, a venture capital fund. Mr. Kammann retired September 1,
1993 following thirty five years of service to the Company culminating with his
position as Vice President of the Company in charge of international operations
and Managing Director of Commercial Metals Holding AG, a subsidiary of the
Company. Mr. Kammann currently is a consultant to the Company. For more than
five years prior to November, 1994, Ms. Owen had been Chairman of the Board of
Owen Steel Company, Inc. and affiliates which were acquired by merger with a
subsidiary of the Company in November, 1994.
NOMINEES
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY
OWNED PERCENT OF
SERVED AS DIRECTLY OR OUTSTANDING
NAME, PRINCIPAL DIRECTOR INDIRECTLY AS OF COMMON
OCCUPATION AND BUSINESS AGE SINCE NOVEMBER 25, 1996 STOCK
- ----------------------------------------------- --- --------- ----------------- -----------
<S> <C> <C> <C> <C>
CLASS II -- TERM TO EXPIRE IN 2000
Albert A. Eisenstat 66 1982 3,333 *
Partner, Discovery Ventures LLC
Walter F. Kammann 71 1969 41,825(1) *
Consultant
Charles B. Peterson 83 1979 12,000 *
Investments
</TABLE>
DIRECTORS CONTINUING IN OFFICE
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK
BENEFICIALLY
OWNED PERCENT OF
SERVED AS DIRECTLY OR OUTSTANDING
NAME, PRINCIPAL DIRECTOR INDIRECTLY AS OF COMMON
OCCUPATION AND BUSINESS AGE SINCE NOVEMBER 25, 1996 STOCK
- ----------------------------------------------- --- --------- ----------------- -----------
<S> <C> <C> <C> <C>
CLASS III -- TERM EXPIRES IN 1998
Moses Feldman 56 1976 206,399(2) 1.3%
President, AeroMed, Inc.
Ralph E. Loewenberg 57 1971 --(3)
President, R. E. Loewenberg Capital
Management Corporation
Stanley A. Rabin 58 1979 212,567(1) 1.4%
President and Chief Executive Officer,
Commercial Metals Company
Marvin Selig 73 1964 107,666(1) *
President, CMC Steel Group
CLASS I -- TERM TO EXPIRE IN 1999
Laurence E. Hirsch 50 1991 1,333 *
Chairman of the Board
and Chief Executive Officer,
Centex Corporation
A. Leo Howell 75 1977 93,784(1) *
Vice President, Commercial Metals Company;
President and Treasurer, Howell Metal Company
(subsidiary)
Dorothy G. Owen 61 1995 369,244 2.4%
Former Chairman of the
Board of Directors
Owen Steel Company, Inc.
</TABLE>
- ---------------
* Less than one percent.
3
<PAGE> 5
(1) Includes shares subject to options exercisable within sixty days by Mr.
Kammann of 2,500 shares, Mr. Rabin of 44,000 shares, Mr. Selig of 34,832
shares and Mr. Howell of 26,166 shares.
(2) Excluding 745,641 shares owned of record by the Feldman Foundation, of which
Moses Feldman is one of three voting trustees and 724,691 shares owned by
the Marital Trust under the Jacob Feldman Revocable Trust Indenture of which
Moses Feldman is one of four trustees.
(3) Ralph E. Loewenberg is one of two trustees of The Jacob Feldman and Sara B.
Feldman Grantor Trust which owns 37,040 shares and is one of four trustees
of the Marital Trust under the Jacob Feldman Revocable Trust Indenture which
owns 724,691 shares. Ralph E. Loewenberg disclaims any beneficial interest
as to such shares.
As of November 25, 1996, all directors and officers as a group beneficially
own 1,562,917 shares or 10.3% of outstanding Common Stock including 310,303
shares subject to options exercisable within sixty days but excluding shares
owned by the Feldman Foundation, Marital Trust and Grantor Trust discussed in
footnotes 2 and 3 above.
Marvin Selig is the brother of Clyde P. Selig, an executive officer. There
are no other family relationships among the directors, nominees and executive
officers.
None of the directors or nominees other than Messrs. Eisenstat and Hirsch
are directors of another public company. Mr. Eisenstat is a director of SunGard
Data Systems Inc., Business Objects S.A. and the Benham Group of Funds (part of
Twentieth Century Funds). Mr. Hirsch is also a director of Centex Corporation,
Centex Construction Products, Inc., Envoy Corporation and is a trustee of
Blackrock Assets Investors, a registered investment company.
ADDITIONAL INFORMATION RELATING TO THE BOARD OF DIRECTORS
Audit Committee. The Board of Directors has a standing Audit Committee
which provides the opportunity for direct communications between the independent
certified public accountants, the internal audit staff and the Board. The Audit
Committee meets with the certified public accountants and internal auditors
periodically to review their effectiveness during the annual audit program and
to discuss the Company's internal control policies and procedures. The members
of the Audit Committee are Eisenstat (Chairman), Feldman, Loewenberg, Peterson
and, since January 1996, Owen. During the fiscal year ended August 31, 1996, the
Audit Committee met four times to review the scope and results of the annual
audit, to consider the engagement of the Company's auditors for the fiscal year
ending August 31, 1997, and to review various matters with regard to financial
controls and procedures.
Compensation Committee. The Board of Directors also has a standing
Compensation Committee that provides recommendations to the Board regarding
compensation for executive officers of the Company including issuance of stock
options. The Compensation Committee consists of Loewenberg (Chairman),
Eisenstat, Feldman, Peterson and, since January 1996, Hirsch. The Compensation
Committee may periodically retain a consulting firm specializing in compensation
matters to advise the Compensation Committee. The Compensation Committee met
five times during the fiscal year ended August 31, 1996 to establish salaries
and bonuses for executive officers, to authorize the issuance of stock options,
to review retirement plans, compensation policies, and to review the
Compensation Committee's report on executive compensation for the prior fiscal
year.
Executive Committee. The Executive Committee consists of Messrs. Howell
(Chairman), Rabin and Selig. Under the Company's Bylaws, the Executive Committee
is endowed, during the intervals between the meetings of the directors, with all
of the powers of the directors in the management and control of the business.
The Executive Committee meets periodically between meetings of the Board of
Directors.
The Board of Directors does not have a nominating committee because the
Board as a whole functions in this capacity. During the fiscal year ended August
31, 1996 the entire Board of Directors met eight times, of which six were
regularly scheduled meetings and two were special meetings. All directors
attended at least seventy-five percent or more of the meetings of the Board of
Directors of the Company and of the committees of the Board on which they
served.
4
<PAGE> 6
Compensation of Non-employee Directors. Until January, 1996, directors
Eisenstat, Feldman, Hirsch, Kammann, Owen and Peterson were paid a fee of
$18,000 per year and $1,000 for each board meeting or $500 for each committee
meeting they attended. Chairmen of the Audit and Compensation Committees
received an additional payment of $1,000 per year. Mr. Loewenberg waived his
right to receive fees and expense reimbursement customarily paid by the Company
to non-employee directors prior to January 1, 1996. Effective January 1, 1996,
the annual fee paid non-employee directors, including Mr. Loewenberg, was set at
$22,000, the board meeting fee $1,200 per meeting, the board committee fee $600
per committee meeting and chairmen of the Audit and Compensation Committees
receive an additional payment of $1,500 per year. The directors are also
reimbursed for reasonable expenses of attending meetings. No employees of the
Company receive additional compensation for serving as a director. Upon his
retirement from employment by the Company and subsidiary on September 1, 1993,
Mr. Kammann and the Company entered into a consulting agreement, providing for
payment of 84,000 Swiss Francs (approximately $64,000) per year plus
reimbursement of expenses incurred in the performance of consulting work for the
Company.
Legal Proceedings. On April 30, 1996, the Company and its subsidiary
SMI-Owen Steel Company, Inc. (SMI-Owen) filed a lawsuit seeking to recover
approximately $2.4 million from an escrow fund created with a portion of the
purchase price in connection with the Company's November, 1994, acquisition of
Owen Steel Company, Inc. and affiliates (Owen Steel). The lawsuit seeks recovery
of part of a payment made by SMI-Owen to settle a claim in connection with a
steel supply and erection contract entered into prior to the acquisition by the
predecessor of SMI-Owen. The Company contends the claim was based on events
which occurred prior to the acquisition, and the Company is entitled to
reimbursement from the former Owen Steel stockholders for the claim settlement
under the terms of the escrow agreement. The Complaint alleges breach of
contract, breach of the covenant of good faith and fair dealing and seeks a
declaratory judgment and damages. Dorothy G. Owen, a director of the Company and
former stockholder of Owen Steel is one of four designated representatives of
former Owen Steel stockholders. The four representatives have filed an Answer
and Counterclaim denying the material allegations of the Company, alleging
various defenses and setting forth counterclaims for specific performance,
breach of contract, breach of fiduciary duty, breach of the covenant of good
faith and fair dealing and seeking a declaratory judgment and unspecified actual
and punitive damages. The Company has notified the representatives of the former
Owen Steel stockholders and the escrow agent of additional claims against the
escrow fund totaling approximately $3 million. Based on responses received to
date, the Company believes the representatives of the former Owen Steel
stockholders intend to dispute liability as to most or all of these claims. Ms.
Owen has not attended or participated in that portion of Board of Directors
meetings during which these matters were considered.
SECTION 16 BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and beneficial owners of more than
10% of the Company's Common Stock to file with the SEC initial reports of
ownership and reports of changes in ownership of Common Stock and other equity
securities of the Company. Based solely upon its review of the copies of such
forms received by it and written representations that no Form 5's were required
from reporting persons, the Company believes that all such reports were
submitted on a timely basis during the year ended August 31, 1996 with the
exception of reports by director Moses Feldman on Form 3 and Form 4 filed
September 27, 1996 in his capacity as a trustee of the Marital Trust under the
Jacob Feldman Revocable Trust and individually as a director to report the
transfer in July, 1996, of 724,691 shares from the Jacob Feldman and Sara B.
Feldman Grantor Trust to the Marital Trust as required under the terms of the
Grantor Trust upon the death of Jacob Feldman. No payment or other consideration
was made or received as a result of this change of record ownership.
5
<PAGE> 7
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
paid during each of the last three fiscal years to the Company's Chief Executive
Officer and the four remaining most highly compensated executive officers of the
Company, based on salary and bonus earned during fiscal year 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------------
FISCAL SALARY BONUS AWARDS OF STOCK ALL OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTION/SARS(#)(1) COMPENSATION($)
- ------------------------------ ------ ------- ------- ------------------ ---------------
<S> <C> <C> <C> <C> <C>
Stanley A. Rabin 1996 405,000 545,000 50,000 91,444(2)
President and 1995 395,000 515,000 12,000 12,805
Chief Executive Officer 1994 395,000 415,000 12,000 17,610
Marvin Selig 1996 355,000 580,000 11,875 92,177(3)
President -- CMC 1995 345,000 550,000 9,500 0
Steel Group 1994 345,000 450,000 9,500 0
A. Leo Howell 1996 305,000 335,000 9,375 61,495(2)
Vice President; 1995 295,000 305,000 7,500 12,805
President and Treasurer 1994 295,000 300,000 7,500 17,610
Howell Metal Company
(Subsidiary)
Clyde P. Selig(3) 1996 281,335 397,523 11,491 65,481(3)
Executive Vice President 1995 273,141 379,142 8,400 7,500
CMC Steel Group 1994 265,186 324,873 8,311 4,653
Hugh M. Ghormley(4) 1996 275,708 386,190 10,600 64,373(2)
Executive Vice President 1995 267,678 353,268 7,800 12,805
CMC Steel Group 1994 259,882 293,756 7,820 17,610
</TABLE>
- ---------------
(1) These awards are made under the Company's 1986 Stock Incentive Plan. The
exercise price for each share subject to these options is 100% of the
market value of such share on the date granted. Although the Plan provides
for the granting of stock appreciation rights (SARs), performance awards
and incentive stock options qualified under sec.422A of the Internal
Revenue Code, none have been made and each of the awards shown represent
stock options which do not qualify under sec.422A. The options are
exercisable two years from date of grant until the end of their ten-year
term or earlier upon a change of control of the Company as defined in the
Plan with the exception of options for 35,000 of the 50,000 awarded Mr.
Rabin during 1996. Those 35,000 share options vest seven years from date of
grant subject to accelerated vesting of 10,000 shares two years from grant
date, 10,000 shares three years from grant date and 15,000 shares four
years from grant date if the total return on the Company's stock exceeds
the Standard and Poor's Steel Industry Group Index cumulative return for
related fiscal years.
(2) The compensation reported represents Company contributions to and
forfeitures allocated to the account of the recipient under the Commercial
Metals Companies Profit Sharing and 401(k) Plan or, in the case of Marvin
Selig and Clyde P. Selig, the Structural Metals, Inc. Profit Sharing and
401(k) Plan and contributions to the account of the recipient pursuant to
the Company's Benefit Restoration Plan (the "BRP"), a non-qualified plan
for certain executives of the Company and subsidiaries which was
implemented in fiscal year 1996 (see "Compensation Committee Report on
Executive Compensation"). All of the amounts reported are fully vested in
the recipient. The compensation for the named executive officers for fiscal
year 1996 includes contributions pursuant to the BRP by the Company into a
trust for the benefit of the recipients in the following amounts: Mr.
Rabin -- $76,940; Mr. Marvin Selig -- $92,177; Mr. Howell -- $46,991; Mr.
Clyde Selig -- $57,981; and Mr. Ghormley -- $49,869.
(3) Clyde P. Selig is the beneficial owner of 91,292 shares of Common Stock
including 71,925 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
(4) Hugh M. Ghormley is the beneficial owner of 130,252 shares of Common Stock
including 34,313 subject to options exercisable within sixty days, or less
than 1% of the outstanding Common Stock.
6
<PAGE> 8
The following table provides information on option grants in fiscal 1996 to
the executive officers included in the Summary Compensation Table.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
% OF TOTAL ASSUMED ANNUAL RATES
OPTIONS/SARS OF STOCK PRICE
GRANTED TO EXERCISE APPRECIATION FOR
EMPLOYEES OR BASE OPTION TERM($)(3)
OPTIONS/SARS IN FISCAL PRICE EXPIRATION --------------------
NAME GRANTED(#)(1) YEAR ($/SH)(2) DATE 5% 10%
- ------------------------ ------------- ------------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Stanley A. Rabin........ 50,000 11.49 27.3125 03/13/06 858,834 2,176,455
Marvin Selig............ 11,815 2.73 27.3125 03/13/06 203,973 516,908
A. Leo Howell........... 9,375 2.15 27.3125 03/13/06 161,032 408,086
Clyde P. Selig.......... 11,491 2.64 27.3125 03/13/06 197,377 500,093
Hugh M. Ghormley........ 10,600 2.44 27.3125 03/13/06 182,073 461,408
Potential Future Commercial Metals Company Stock Price............................ $44.39 $70.84
</TABLE>
- ---------------
(1) All options in the above table become exercisable March 13, 1998 or earlier
upon a change of control of the Company as defined in the 1986 Stock
Incentive Plan, with the exception of options to purchase 35,000 shares
awarded to Mr. Rabin. Those 35,000 share options vest seven years from date
of grant subject to the possibility of accelerated vesting of 10,000 shares
March 13, 1998, 10,000 shares March 13, 1999, and 15,000 shares March 13,
2000, if the total return on the Company's stock exceeds the Standard &
Poor's Steel Industry Group Index cumulative return for related fiscal
years.
(2) The exercise price is the fair market value (mean of high and low sales
price) on the date of grant.
(3) The dollar amounts in the last two columns are the result of calculations at
the 5% or 10% compound annual rates set by the SEC and are not intended to
forecast future appreciation of Commercial Metals Company stock.
The following table provides information concerning the exercise of options
during fiscal 1996 and unexercised options held as of August 31, 1996 for the
executive officers included in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS AT
SHARES AT FY-END(#)(1) FY-END($)(1)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stanley A. Rabin............ 0 0 44,000 62,000 376,180 208,125
Marvin Selig................ 0 0 34,832 21,375 297,795 86,836
A. Leo Howell............... 0 0 26,166 16,875 279,501 68,555
Clyde P. Selig.............. 0 0 71,925 19,891 1,009,138 79,568
Hugh M. Ghormley............ 0 0 34,313 18,400 327,993 73,688
</TABLE>
- ---------------
(1) Amounts set forth in the table reflect the number and value of shares and
options only as no stock appreciation rights (SARs) have been awarded under
the Company's 1986 Stock Incentive Plan.
(2) The amounts shown represent the difference between the market value of
Company Common Stock on August 31, 1996 of $30.125, and the exercise price
of such options.
7
<PAGE> 9
PENSION BENEFITS
Substantially all employees of the Company and its domestic subsidiaries
with the exception of employees of Structural Metals, Inc., (SMI), participate
in either the Commercial Metals Companies Profit Sharing and 401(k) Plan or the
SMI-Owen Steel Company, Inc. Savings and Deferred Cash Plan, both defined
contribution plans. The Company has no pension plan for the employees who
participate in those two plans. SMI maintains both a defined contribution profit
sharing plan (the SMI Profit Sharing and 401(k) Plan) and a defined benefit
pension plan (the SMI Retirement Plan). Substantially all of the approximately
850 employees of SMI participate in the two SMI plans. The SMI Retirement Plan
is a trusteed, non-contributory plan qualified under the Internal Revenue Code.
An employee is 100% vested under the plan after five years of service with no
vesting prior to that time. Normal retirement age is 65 with benefits payable at
55 through 64 on a reduced basis. Benefit payments are based on a formula using
the monthly average of all compensation earned by the participant during the ten
years prior to retirement multiplied by 1.5%, multiplied by the number of years
of credited service. There is no offset for social security benefits. Employees
may receive a lump-sum distribution upon retirement or while employed after the
attainment of certain age and service requirements. Although Marvin Selig and
Clyde Selig participate in the SMI Retirement Plan, their benefit levels are
limited as required by Internal Revenue Code sec.415. The Company has no
supplemental benefit plan to pay amounts in excess of such limits under the SMI
Retirement Plan. Effective for the 1996 year the Company did adopt a Benefit
Restoration Plan, a non-qualified plan for certain executives whose benefits are
limited under the SMI Profit Sharing and 401(k) Plan or Commercial Metals
Companies Profit Sharing and 401(k) Plan.
For 1996 the maximum benefit permitted by Code sec.415 under the SMI
Retirement Plan is $120,000 per year payable at age 65. In addition for purposes
of calculating benefits under the plan, compensation considered must be limited
as required by Internal Revenue Code sec.401(a)(17). For fiscal 1996 the
compensation limitation is $150,000. The following table shows estimated annual
benefit amounts which would be payable to participants in the SMI Retirement
Plan at normal retirement (age 65) on a straight life annuity basis without
consideration of the Code limitations. The amounts shown in the table below may
not reflect the actual benefits payable under the SMI Retirement Plan because of
the current Internal Revenue Code limits.
<TABLE>
<CAPTION>
AVERAGE ESTIMATED ANNUAL PENSION FOR
FINAL REPRESENTATIVE YEARS OF CREDITED SERVICE
TEN-YEAR -------------------------------------------------------------------------------
COMPENSATION 25 30 35 40 45 50 55
- ------------ ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$300,000........................ 112,500 135,000 157,500 180,000 202,500 225,000 247,500
$400,000........................ 150,000 180,000 210,000 240,000 270,000 300,000 330,000
$500,000........................ 187,500 225,000 262,500 300,000 337,500 375,000 402,500
$600,000........................ 225,000 270,000 315,000 360,000 405,000 450,000 495,000
$700,000........................ 262,500 315,000 367,500 420,000 472,500 525,000 577,500
$800,000........................ 300,000 360,000 420,000 480,000 540,000 600,000 660,000
</TABLE>
Based on Clyde Selig's 33 years of service and present compensation levels,
upon retirement he would receive the maximum benefit presently permitted to be
paid by defined benefit plans of $120,000 annually based on a straight life
annuity election. In fiscal 1993 Marvin Selig, who has 50 years of service,
received a distribution equal to the present value of his accrued plan benefit
calculated as of the date of distribution. Marvin Selig will continue to accrue
additional benefits each year that he is employed by SMI to the extent the
Internal Revenue Code sec.415 limitation increases. These additional benefits
will be paid from the plan at the time he retires or upon his death. No other
executive officers of the Company are eligible to participate in the SMI
Retirement Plan.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This report is submitted by the Compensation Committee with respect to
compensation policies applicable to the Company's eleven executive officers and
with respect to the basis for Mr. Rabin's compensation, as Chief Executive
Officer, for 1996. The Compensation Committee of the Board of Directors
8
<PAGE> 10
is comprised of non-employee directors, Messrs. Ralph E. Loewenberg (Chairman),
Albert A. Eisenstat, Moses Feldman, Charles B. Peterson and, effective January
25, 1996, Laurence E. Hirsch.
OVERALL OBJECTIVES AND STRATEGY
In determining total compensation levels for executive officers, the
Company's Compensation Committee evaluates, primarily on a subjective basis,
Company financial results (including profit before taxes, return on net assets
and cash flow), the potential for future earnings growth, individual performance
contributions, group and division operating performance. The Committee has also,
in the 1996 fiscal year with the assistance of a compensation consultant,
updated a report originally prepared in 1993 which reviewed officer compensation
levels and practices at comparable companies, particularly in the Company's core
steel processing and manufacturing businesses. The companies included in this
review include the S&P Steel Industry Group, as well as 10 additional companies
in the steel minimill or metals industry.
In 1980 the Company adopted an executive total compensation strategy that
places a significant portion of annual cash bonus at risk. This strategy
combines competitive base salaries, the opportunity for above average annual
cash bonuses, and long-term equity incentive opportunities. Because of the
relatively large number of employees receiving option grants, the number of
shares subject to options granted to executive officers has been limited and is
less than the levels at the comparable companies described above. The annual
focus of the Company's executive compensation strategy is consistent with the
highly cyclical nature of the Company's business, which is characterized by wide
periodic swings in steel and metal prices. The Compensation Committee reviews
information prepared or compiled by the Company, confers with independent
executive compensation consultants when it considers necessary, and makes
decisions based on the business experience of each Compensation Committee
member.
CASH COMPENSATION
Base Salary. Executive officers are compensated within salary ranges that
generally are competitive with ranges for similar positions in companies of
comparable size and complexity to the Company. The actual salary of each officer
is based on individual contribution and is in keeping with the Company's total
compensation strategy described above. Salaries of the nine employees serving as
executive officers for each of the last three fiscal years including the CEO
have, in the aggregate, increased approximately $120,000 from fiscal 1994
through fiscal 1996 or slightly less than 2.2% on average for each of the last
two years. Fiscal year 1996 salary increases for all eleven executive officers,
including the CEO, aggregated approximately 3.6%. Fiscal year 1997 salaries for
executive officers will increase, in the aggregate, approximately 3.1%.
Bonus. In addition the Compensation Committee recommends to the Board of
Directors annual cash bonuses for executive officers of the Company, based upon
the compensation strategy described above. For fiscal 1996 results, a second
straight record performance year for the Company, the total bonus paid executive
officers increased by approximately 1.1% over the 1995 bonus amount. The
Committee believes bonus levels have been consistent with earnings which
increased approximately 20% in 1996 compared to 1995 and 46% in 1995 compared to
1994.
LONG-TERM COMPENSATION
Equity-Based. Given the relatively large number of employees receiving
stock option grants, the number of shares subject to grants to executive
officers have been substantially below levels at the comparable companies
described above. Separate option share pools for corporate employees and each
operating group and division are established annually pursuant to a formula
based on total salaried employee counts for the previous year, and cash flow,
total assets and return on net assets for the preceding five years. An
additional option pool for Executive Committee members is also established,
which has been generally 10%-20% of the total shares set aside for all
participants. Annual grants are made from pools based on a subjective evaluation
of each executive's responsibilities, sustained performance contributions and
ability to influence long-term growth and profitability. Although stock
appreciation rights and performance awards were allowed under the Company's 1986
Stock Incentive Plan, no such awards were made. While restricted stock awards
were granted
9
<PAGE> 11
in the past to key employees including executive officers, the last awards being
made October 30, 1989, the Key Employee Restricted Stock Bonus Plan terminated
on January 30, 1990 and the last restricted stock awards vested on October 30,
1994. The Company's 1986 Stock Incentive Plan terminated, except as to awards
previously granted, in November 1996. The 1996 Long-Term Incentive Plan
submitted for stockholder approval in this proxy statement will permit continued
use of equity based long-term incentives.
Retirement Benefits. The Company has been concerned for several years about
limitations mandated by federal tax law and regulations which have adversely
impacted retirement benefits of more highly compensated employees, including
executive officers. These changes have substantially reduced or eliminated the
percentage of compensation paid by the Company and available to highly
compensated employees through the Company's profit sharing plans, the primary
retirement benefit for a majority of the Company's employees. In 1996 the Board
approved the Benefit Restoration Plan ("BRP") for certain employees
participating in the Commercial Metals Companies or Structural Metals, Inc.
Profit Sharing and 401(k) Plans. The Internal Revenue Code has set a limit
(currently $150,000) on the amount of annual compensation which may be
considered in determining, for the account of an eligible participant, the
Company's contribution to those plans. Further restrictions also reduce the
ability of certain employees to make voluntary payroll deduction contributions
to the 401(k) feature in those plans. The purpose of the BRP is to restore those
reductions beginning in fiscal year 1996. The BRP is a non-qualified plan in
which certain executives, including all executive officers who are residents of
the United Sates, participate. Following each year-end the Company contributes
to a trust created under the BRP an amount equal to the additional contribution
which the participant would have received under the applicable profit sharing
plan had 100% of the participant's compensation been eligible for a profit
sharing or 401(k) contribution. Payments made to the BRP for the benefit of
participants, including executive officers, vest under the same terms and
conditions as the relevant profit sharing plan.
CEO COMPENSATION
Mr. Rabin's salary is set annually within the range approved by the
Compensation Committee, which is based on similar positions in the comparable
companies described above. Mr. Rabin's annual bonus is based on the same factors
considered for other members of the executive officer group. Mr. Rabin's salary
was increased for fiscal 1996 by approximately 2.5% from 1995 to $405,000. Mr.
Rabin's salary, along with all Executive Committee member's salaries, will not
be increased for fiscal 1997. Given the Company's record 1996 profitability, Mr.
Rabin's 1996 cash bonus was increased $30,000 from 1995 to $545,000.
An option grant to purchase 50,000 shares at fair market value on grant
date was made to Mr. Rabin on March 13, 1996. During each of the prior two
years, Mr. Rabin had received options for 12,000 shares. The Committee
considered the relatively small amount of those prior grants when compared to
CEOs of comparable companies and determined to increase the 1996 grant. The
Committee determined that rather than the entire option vesting two years from
the date of grant, as was the case with all other option awards during the year,
35,000 of the 50,000 shares subject to option would vest seven years from the
date of grant subject to the possibility of accelerated vesting based on
continued superior performance of the Company's stock price. Thus, 10,000 shares
may vest two years from the grant date, 10,000 shares three years from the grant
date and 15,000 shares four years from the grant date, if the total return on
the Company's stock exceeds the Standard and Poor's Steel Industry Group Index
cumulative return for the relevant individual or cumulative fiscal years 1997,
1998 and 1999. The Committee believes this will align potential long term CEO
equity compensation with the market value of the Company's stock.
CONCLUSION
The Compensation Committee believes that current total compensation
arrangements are reasonable and competitive. The Compensation and Executive
Committee believe fiscal year 1996 compensation for executive officers is
consistent with current compensation philosophy and reflects corporate
performance. The Compensation Committee is continuing to study the anticipated
federal tax treatment to the Company and executive officers of various payments
and benefits, and in particular the limitations on deductibility of compensation
under Section 162(m) of the Internal Revenue Code. The Committee believes it
unlikely in the
10
<PAGE> 12
short term that the limitation will affect the Company but is considering
various alternatives to preserving the deductibility of compensation to the
extent reasonably practicable and consistent with overall objectives of the
compensation strategy; however, the Committee may not in all circumstances limit
executive compensation to that which is deductible under Section 162(m) of the
Internal Revenue Code. The Compensation Committee shall continue to monitor and
administer compensation programs for executive officers of the Company.
COMPENSATION COMMITTEE
Ralph E. Loewenberg (Chairman)
Albert A. Eisenstat
Moses Feldman
Laurence E. Hirsch
Charles B. Peterson
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
IN COMPENSATION DECISIONS
Messrs. Loewenberg, Eisenstat, Feldman, Hirsch and Peterson are the members
of the Compensation Committee.
The Company has historically made charitable contributions of a portion of
consolidated earnings, generally totalling 5% or less to various charitable
entities, including the Feldman Foundation, a private charitable foundation
exempt from federal income tax under Internal Revenue Code sec.501(c)(3). The
Feldman Foundation is the record and beneficial owner of 745,641 shares of the
Company's Common Stock. Director Moses Feldman and brothers, Robert L. Feldman
and Dr. Daniel E. Feldman, are trustees of the Feldman Foundation.
11
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares the cumulative total return of the Company's
Common Stock during the five year period beginning August 31, 1991 and ending
August 31, 1996, with the Standard & Poor's 500 Composite Stock Price Index (the
"S&P 500") and the Standard & Poor's Steel Industry Group Index (the "S&P Steel
Group"). Each index assumes $100 invested at the close of trading August 31,
1991 and reinvestment of dividends.
<TABLE>
<CAPTION>
Commercial
Measurement Period Metals Com- S&P Steel
(Fiscal Year Covered) pany S&P 500 Group
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 119.99 107.92 103.27
1993 200.59 124.34 146.53
1994 192.85 131.14 202.50
1995 207.35 159.27 153.13
1996 224.96 189.10 132.05
</TABLE>
12
<PAGE> 14
PROPOSAL II
PROPOSAL TO APPROVE THE COMMERCIAL METALS COMPANY
1996 LONG-TERM INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
GENERAL
The Board of Directors adopted the Commercial Metals Company 1996 Long-Term
Incentive Plan (the "1996 Plan") on December 9, 1996, subject to stockholder
approval. The 1996 Plan is being submitted for stockholder approval for three
reasons. First, under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the "Code"), stockholder approval is necessary in order for performance
payments under the 1996 Plan to certain executive officers to be deductible by
the Company for federal income tax purposes. Section 162(m) imposes a $1,000,000
limit on the deductibility of compensation paid to certain executive officers.
Stockholder approval of the 1996 Plan will enable awards made under the 1996
Plan to be excluded in calculating the $1,000,000 limit. Second, stockholder
approval is required under Section 422 of the Code for the inclusion of
incentive stock options in the 1996 Plan. Finally, New York Stock Exchange rules
require that listed companies obtain stockholder approval of equity compensation
plans such as the 1996 Plan.
The Company's 1986 Stock Incentive Plan (the "1986 Plan") expired on
November 23, 1996, and the 1996 Plan was adopted by the Board of Directors to
enable the Company to continue to provide equity incentives to its key
employees. An aggregate of 1,682,720 shares of Common Stock of the Company may
be purchased pursuant to options previously granted under the 1986 Plan that
were outstanding as of November 25, 1996.
The provisions of the 1996 Plan are summarized below. All such statements
are qualified in their entirety by reference to the full text of the 1996 Plan,
which is attached hereto as Appendix A.
The 1996 Plan is not subject to the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"). The 1996 Plan is not a "qualified plan"
within the meaning of Section 401 of the Code. The 1996 Plan will terminate on
December 9, 2006, and thereafter no incentive stock options, non-qualified stock
options, stock appreciation rights or restricted stock awards (collectively,
"awards") may be granted thereunder. The Board of Directors may amend or
discontinue the 1996 Plan without the approval of the stockholders, subject to
certain limitations. See "Amendment of the 1996 Plan" below.
Nothing in the 1996 Plan or in any award granted pursuant to the 1996 Plan
confers upon any employee any right to continue in the employ of the Company or
to interfere in any way with the right of the Company to terminate the
employment of any person at any time.
The proceeds from the sale of Common Stock pursuant to the exercise of or
payment for awards under the 1996 Plan will be added to the general funds of the
Company and used for general corporate purposes. The holder of an award granted
pursuant to the 1996 Plan other than restricted stock does not have any of the
rights or privileges of a stockholder, except with respect to shares that have
been actually issued. Holders of restricted stock have all the rights of a
stockholder of the Company, except for the right to transfer the restricted
stock. Holders of restricted stock will also forfeit the restricted stock upon
the occurrence of certain events. See "-- Termination and Forfeiture" below.
PURPOSE AND ELIGIBILITY
The purposes of the 1996 Plan are to attract and retain the services of key
employees and to encourage performance by providing such persons with a
proprietary interest in the Company through the granting of awards. The 1996
Plan is designed to help achieve those purposes through the use of compensation
strategies that will attract and retain those employees who are important to the
long-term success of the Company.
Any employee of the Company or a subsidiary (including officers or
directors who are employees) is eligible to receive awards under the 1996 Plan
at the discretion of the committee of the Board of Directors that administers
the 1996 Plan. See "Administration of the 1996 Plan" below.
13
<PAGE> 15
The Company had approximately 6,700 employees at December 1, 1996, all of
whom are eligible to participate in the 1996 Plan.
ADMINISTRATION OF THE 1996 PLAN
The 1996 Plan is administered by the Compensation Committee appointed by
the Company's Board of Directors. The current members of the Compensation
Committee are Ralph E. Loewenberg, Albert A. Eisenstat, Moses Feldman, Laurence
E. Hirsch and Charles B. Peterson. Members of the Compensation Committee serve
at the will of the Board and may be removed, with or without cause, from the
Compensation Committee at any time at the Board's discretion.
The Compensation Committee has full discretion to grant awards under the
1996 Plan, to interpret the 1996 Plan, to make such rules as it deems advisable
in the administration of the 1996 Plan and to take all other actions advisable
to administer the 1996 Plan. The Compensation Committee shall determine the
eligible persons to whom awards will be granted and will set forth the terms of
the awards in award agreements, so long as those terms are not inconsistent with
the 1996 Plan.
AWARDS
The Compensation Committee may grant or award incentive stock options,
non-qualified stock options, stock appreciation rights and restricted stock.
Awards may be granted singly, in combination or in tandem with other awards. A
tandem award dictates that the exercise of one type of award terminates the
award granted in tandem with the other award. For example, in the event a stock
appreciation right is granted in tandem with a stock option, the exercise of the
stock appreciation right will result in the termination of the related stock
option and vice versa.
Stock options which are intended to qualify for special tax treatment under
particular provisions of the Code, are considered "incentive stock options," and
options which are not intended to so qualify are considered "non-qualified stock
options." See "Certain Federal Income Tax Aspects" below.
Stock appreciation rights ("SARs") entitle the holder to receive cash or
Common Stock having a value equal to the appreciation in the market price of the
Common Stock underlying the SAR from the date of grant to the date of exercise.
Restricted stock awards give the recipient the right to receive a specified
number of shares of Common Stock, subject to such terms, conditions and
restrictions as the Compensation Committee deems appropriate. Restrictions may
include limitations on the right to transfer or pledge the restricted stock
until the expiration of a specified period of time and forfeiture of the
restricted stock upon the occurrence of certain events such as termination of
employment prior to the expiration of a specified period of time. See
"Restrictions" below.
If the requirements of the Code, the securities laws or other laws
applicable to the 1996 Plan are changed and the 1996 Plan contains restrictions
based on those legal requirements, the Compensation Committee has the authority
to grant awards that are not subject to those restrictions and to waive any such
restrictions with respect to outstanding awards made under the 1996 Plan.
The maximum number of shares of Common Stock presently authorized for
issuance under the 1996 Plan is 750,000, subject to adjustment for stock splits
and similar events affecting the Common Stock. See "Adjustments; Change of
Control" below. The number of shares of Common Stock that may be issued under
the Plan will be increased by (i) the number of shares of Common Stock
surrendered in payment of the exercise price of stock options, and (ii) the
number of shares of Common Stock otherwise repurchased by the Company during the
term of the 1996 Plan, so long as the aggregate repurchase price for such Common
Stock is not greater than the total amount of cash proceeds received by the
Company from the sale of Common Stock under the Plan. Shares to be issued may be
made available from authorized but unissued Common Stock, Common Stock held by
the Company in its treasury, or Common Stock purchased by the Company on the
open market or otherwise. Shares of Common Stock previously subject to awards
that are expired, terminated, forfeited, settled in cash in lieu of Common Stock
or exchanged for awards that do not involve Common Stock are available for
further grants of awards under the 1996 Plan.
14
<PAGE> 16
AWARD AGREEMENTS
Each award granted under the 1996 Plan is required to be evidenced by an
award agreement, which designates the type of award (or combination of awards)
being granted and sets forth the number of shares or the total cash amount
subject to each award (if applicable), the award or exercise price (if
applicable), the maximum term of the award, any rules related to forfeiture, the
vesting or restriction schedule or criteria (if applicable), the date of grant,
and any other terms, provisions, limitations and performance requirements of the
award.
The exercise period for an award may not extend longer than ten years from
the date the award is granted and, in the case of incentive stock options, is
limited to five years from the date of grant for certain employees owning more
than 10% of the outstanding shares of Common Stock.
If the Compensation Committee establishes a purchase price for an award,
the participant must accept the award within a period of 30 days (or such
shorter period as the Compensation Committee may specify) after the date of
grant by executing an award agreement and paying the purchase price, if any.
EXERCISE OF AWARDS
The exercise price for a stock option and the SAR price for any share of
Common Stock subject to an SAR will be at least 100% (or at least 110% in the
case of incentive stock options granted to certain employees owning more than
10% of the outstanding shares of Common Stock) of the fair market value of the
Common Stock on the date of grant.
On the date that the participant desires to exercise a stock option (the
"Exercise Date"), the participant must pay the total exercise price of the
shares to be purchased by delivering to the Company cash or a check, bank draft,
or money order in the amount of the exercise price, by delivering to the Company
shares of Common Stock (including restricted stock), with a fair market value
equal to the exercise price, or by delivering any other form of payment which is
acceptable to the Compensation Committee. If shares of restricted stock are
tendered to exercise a stock option, that number of shares of Common Stock
issued upon the exercise of the option equal to the number of shares of
restricted stock used as consideration to exercise the option will be subject to
the same restrictions as the restricted stock so tendered. If the participant
fails to pay the exercise price on the Exercise Date or fails to accept delivery
of the Common Stock to be issued upon exercise, the participant's option may be
terminated by the Company. The closing price of the Company's Common Stock on
December 5, 1996, as reported in New York Stock Exchange Composite Transactions
was $32.00.
On the date that the participant desires to exercise a SAR (the "SAR
Exercise Date"), the participant will receive from the Company cash in an amount
equal to the appreciation in the market price of the Common Stock attributable
to the portion of the SAR being exercised from the date of grant to the SAR
Exercise Date. The Committee may deliver shares of Common Stock in lieu of any
portion of the cash payment to be made to the participant, based on the fair
market value of the Common Stock on the SAR Exercise Date.
RESTRICTIONS
Under the 1996 Plan, the Compensation Committee determines the vesting
schedule, restrictions or conditions, if any, applicable to any award granted.
Once vested, awards may be exercised at any time during the award period.
Restricted stock may be subject to certain restrictions and conditions which may
include length of continuous service, achievement of specific business
objectives, increases in specified indices, attainment of specified growth rates
or other comparable measurements of Company performance. The Compensation
Committee may, in its discretion and in accordance with the terms of the 1996
Plan, accelerate any vesting schedule or otherwise remove any restrictions or
conditions applicable to an award.
No participant may receive during any fiscal year awards covering an
aggregate of more than 100,000 shares of Common Stock under the 1996 Plan.
15
<PAGE> 17
The grant of incentive stock options to each participant is subject to a
$100,000 calendar year limit. This limitation prohibits the grant of an
incentive stock option that would entitle the recipient to purchase, thereunder
and together with other incentive options, securities worth more than $100,000
(based upon the aggregate fair market value of the securities underlying such
options on the date of grant) in the year in which such options first become
exercisable. See "Certain Federal Income Tax Aspects" for additional limitations
on incentive stock options.
Incentive stock options may not be transferred or assigned other than by
will or the laws of descent and distribution and may be exercised during the
lifetime of the participant only by the participant or the participant's legally
authorized representative. The Compensation Committee may waive or modify this
limitation if it is not required for compliance with Section 422 of the Code.
Non-qualified stock options generally are subject to the same restrictions
on transfer as are incentive stock options. The Compensation Committee, however,
is entitled to allow all or a portion of a non-qualified stock option or SAR to
be transferable to the spouse, children or grandchildren of a participant, to
trusts for the benefit of such family members and partnerships owned by such
family members, and to certain charities, charitable trusts and charitable
foundations. Transfers of this nature are required to be subject to the
following conditions: (i) no consideration may be furnished for any such
transfer, and (ii) subsequent transfers of transferred non-qualified stock
options or SARs by the transferee cannot be made except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations order as
defined in the Code. Following transfer, non-qualified stock options and SARs
shall continue to be subject to the same terms and conditions as were applicable
immediately prior to the transfer.
The Company is not required to sell or issue shares of Common Stock under
any award if the issuance of Common Stock would violate any provisions of any
law or regulation of any governmental authority or any national securities
exchange or other forum on which shares of Common Stock are traded.
TERMINATION AND FORFEITURE
Upon termination of the participant's employment with the Company and its
subsidiaries, a participant's awards will be exercisable as specified in the
award agreement. If a participant forfeits non-vested shares of restricted stock
and has paid consideration to the Company for such forfeited restricted stock,
the Company is required to repay such consideration to the participant.
ADJUSTMENTS; CHANGE OF CONTROL
The 1996 Plan provides that the maximum number of shares issuable under the
1996 Plan as a whole and to each participant individually, the number of shares
issuable upon exercise of outstanding stock options and SARs, the exercise
prices of such awards and the number of shares subject to restricted stock
awards are subject to such adjustments as are appropriate to reflect any stock
dividend, stock split, share combination, exchange of shares, recapitalization
or increase or decrease in shares of Common Stock without receipt of
consideration of or by the Company.
If the Company merges or consolidates, transfers all or substantially all
of its assets to another entity or dissolves or liquidates, then under certain
circumstances a holder of an award will be entitled to purchase the equivalent
number of shares of stock, other securities, cash or property that the award
holder would have been entitled to receive had he or she exercised his or her
award immediately prior to such event. Notwithstanding these adjustment
provisions, all awards granted under the 1996 Plan may be canceled by the
Company upon a merger or consolidation of the Company in which the Company is
not the surviving or resulting corporation, or the reorganization, dissolution
or liquidation of the Company, subject to each participant's right to exercise
his or her award as to the shares of Common Stock covered by that award for a
period of 30 days immediately preceding the effective date of such event.
The 1996 Plan provides that in the event of a "Change of Control" of the
Company, all unmatured installments of awards will become fully accelerated and
exercisable in full. "Change of Control" is defined as the occurrence of the
following events: (i) a consolidation, merger or share exchange in which the
Company
16
<PAGE> 18
does not survive or in which shares of Common Stock would be converted into
cash, securities or other property, unless the Company's stockholders retain the
same proportionate common stock ownership in the surviving company after such
transaction, (ii) a sale, lease, exchange or other transfer of all or
substantially all of the Company's assets, (iii) the approval by the Company's
stockholders of a plan to dissolve or liquidate the Company, (iv) the
termination of control of the Company by directors in office as of the effective
date of the 1996 Plan and their successors approved in accordance with the terms
of the 1996 Plan, by virtue of their ceasing to constitute a majority of the
entire Board of Directors, (v) the acquisition of beneficial ownership of 20% of
the voting power of the Company's outstanding voting securities by any person or
group who beneficially owned less than 15% of such voting power on the date the
1996 Plan was approved by the Board of Directors or the acquisition of
beneficial ownership of an additional 5% of the voting power of the Company's
outstanding voting securities by any person or group who beneficially owned at
least 15% of such voting power as of such date, in each case subject to certain
exceptions, or (vi) the appointment of a trustee in a bankruptcy proceeding
involving the Company.
If the Company makes a partial distribution of its assets in the nature of
a partial liquidation (except for certain cash dividends) then the prices then
in effect with respect to each outstanding award will be reduced in proportion
to the percentage reduction in the tangible book value of the shares of the
Company's Common Stock as a result of such distribution.
Stock options, SARs and restricted stock may also be granted under the 1996
Plan in substitution for similar instruments held by employees of a corporation
who become management employees of the Company or a subsidiary as a result of a
merger, consolidation or stock acquisition.
AMENDMENT OF THE 1996 PLAN
The 1996 Plan provides that the Board of Directors may from time to time
discontinue or amend the 1996 Plan without the consent of the participants or
stockholders, unless stockholder approval is required by Section 162(m) of the
Code. Subject to certain conditions, if an amendment to the 1996 Plan would
adversely affect an outstanding award, the consent of the participant holding
that award must be obtained.
NEW PLAN BENEFITS
As discussed above, awards under the 1996 Plan will be made in the complete
discretion of the Compensation Committee. As of the date of this Proxy
Statement, no awards had been made by the Compensation Committee under the 1996
Plan. Accordingly, the amount of benefits or amounts to be received under the
1996 Plan in the future by participants, including the Company's executive
officers included in the Summary Compensation Table, cannot be determined at
this time.
CERTAIN FEDERAL INCOME TAX ASPECTS
Withholding. Withholding of federal taxes at applicable rates will be
required in connection with any ordinary income realized by a participant by
reason of the exercise of awards granted pursuant to the 1996 Plan. In the event
of a participant's assignment of a non-qualified stock option or SAR, the
participant who assigns the non-qualified stock option or SAR will remain
subject to withholding taxes upon exercise of the non-qualified stock option or
SAR by the transferee to the extent required by the Code.
Non-qualified Stock Options. The granting of a non-qualified stock option
will not result in federal income tax consequences to either the Company or the
optionee. Upon exercise of a non-qualified stock option, the optionee will
recognize ordinary income in an amount equal to the difference between the fair
market value of the shares on the date of exercise and the exercise price, and
the Company will be entitled to a corresponding deduction.
For purposes of determining gain or loss realized upon a subsequent sale or
exchange of such shares, the optionee's tax basis will be the sum of the
exercise price paid and the amount of ordinary income, if any, recognized by the
optionee upon exercise of the option. Any gain or loss realized by an optionee
on disposition of such shares generally will be a long-term capital gain or loss
(if the shares are held as a capital asset for at
17
<PAGE> 19
least one year) and will not result in any tax deduction to the Company. The
holding period commences upon exercise of the non-qualified stock option. The
exercise of a non-qualified stock option will not trigger the alternative
minimum tax consequences described below that are applicable to incentive stock
options.
Incentive Stock Options. In general, no income will be recognized by an
optionee and no deduction will be allowed to the Company at the time of the
grant or exercise of an incentive stock option granted under the 1996 Plan. When
the stock received on exercise of the option is sold, provided that the stock is
held for more than two years from the date of grant of the option and more than
one year from the date of exercise, the optionee will recognize long-term
capital gain or loss equal to the difference between the amount realized and the
exercise price of the option related to such stock, and the Company will not be
entitled to take a corresponding deduction.
If these holding period requirements under the Code are not satisfied, the
sale of stock received upon exercise of an incentive stock option is treated as
a "disqualifying disposition", and the optionee must notify the Company in
writing of the date and terms of the disqualifying disposition. In general, the
optionee will recognize at the time of a disqualifying disposition ordinary
income in an amount equal to the amount by which the lesser of (i) the fair
market value of the Common Stock on the date the incentive stock option is
exercised or (ii) the amount realized on such disqualifying disposition, exceeds
the exercise price. The optionee will also recognize capital gain to the extent
of any excess of the amount realized on such disqualifying disposition over the
fair market value of the Common Stock on the date the incentive stock option is
exercised (or capital loss to the extent of any excess of the exercise price
over the amount realized on disposition). Any capital gain or loss recognized by
the optionee will be long-term or short-term depending upon the holding period
for the stock sold. The Company may claim a deduction at the time of the
disqualifying disposition equal to the amount of the ordinary income the
optionee recognizes. Certain special rules apply if an incentive stock option is
exercised by tendering stock.
Although an optionee will not realize ordinary income upon the exercise of
an incentive stock option, the excess of the fair market value of the shares
acquired at the time of exercise over the option price is included in
"alternative minimum taxable income" for purposes of calculating the optionee's
alternative minimum tax, if any, pursuant to Section 55 of the Code.
Stock Appreciation Rights. A participant who is granted an SAR will not
recognize any taxable income for Federal income tax purposes upon receipt of the
award. At the time of exercise, however, the participant will recognize
compensation income equal to any cash received and the fair market value on the
date of exercise of any Common Stock received. The Company will not receive a
deduction upon the grant of an SAR, but generally will be entitled to a
compensation deduction for the amount of compensation income the participant
recognizes upon the participant's exercise of the SAR. The participant's tax
basis in any shares of Common Stock received will be the fair market value on
the date of exercise and, if the shares received are held for more than one
year, the participant will recognize long-term capital gain or loss upon
disposition.
Restricted Stock. A participant who receives a grant of restricted stock
will not recognize any taxable income for Federal income tax purposes in the
year of the award, provided the shares are subject to restrictions (that is,
they are nontransferable and subject to a substantial risk of forfeiture). A
participant's rights in restricted stock awarded under the 1996 Plan are subject
to a substantial risk of forfeiture if the rights to full enjoyment of the
shares are conditioned, directly or indirectly, upon the future performance of
substantial services by the participant. However, the participant may elect
under Section 83(b) of the Code to recognize compensation income in the year of
the award in an amount equal to the fair market value of the shares on the date
of the award, determined without regard to the restrictions. If the participant
does not make a Section 83(b) election, the fair market value of the shares on
the date the restrictions lapse, less any amount paid by the participant for
such shares, will be treated as compensation income to the participant and will
be taxable in the year the restrictions lapse. The Company or one of its
subsidiaries generally will be entitled to a compensation deduction for the
amount of compensation income the participant recognizes.
The amount of taxable gain arising from a participant's sale of shares of
restricted stock acquired pursuant to the 1996 Plan is equal to the excess of
the amount realized on such sale over the sum of the amount paid, if any, for
the stock and the compensation element included by the participant in taxable
18
<PAGE> 20
income. For stock held for more than one year, the participant will realize
long-term capital gain or loss upon disposition.
Other Tax Matters. If unmatured installments of awards are accelerated as a
result of a Change of Control (see "Adjustments; Change of Control" above), any
amounts received from the exercise by a participant of a stock option or SAR,
the lapse of restrictions on restricted stock or the deemed satisfaction of
conditions of performance awards may be included in determining whether or not a
participant has received an "excess parachute payment" under Section 280G of the
Code, which could result in (i) the imposition of a 20% Federal excise tax (in
addition to Federal income tax) payable by the participant on certain payments
of Common Stock or cash resulting from such exercise or deemed satisfaction of
conditions of performance awards or, in the case of restricted stock, on all or
a portion of the fair market value of the shares on the date the restrictions
lapse and (ii) the loss by the Company of a compensation deduction.
VOTE REQUIRED
The affirmative vote of a majority of the shares present in person or
represented by proxy at the meeting and entitled to vote on the subject matter
is required to adopt the 1996 Plan.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO APPROVE THE
1996 PLAN.
PROPOSAL III
RATIFICATION OF APPOINTMENT OF AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL.
The Board of Directors has appointed Deloitte & Touche LLP as the
independent auditors of the Company for the fiscal year ending August 31, 1997,
subject to stockholder ratification. Representatives of Deloitte & Touche LLP
are expected to be present at the meeting with the opportunity to make a
statement if they so desire and to be available to respond to appropriate
questions.
GENERAL
The Annual Report to Stockholders covering fiscal year 1996 has been mailed
to stockholders with this mailing or previously. The Annual Report does not form
any part of the material for the solicitation of proxies.
Pursuant to the rules of the Securities and Exchange Commission, a proposal
to be presented by a stockholder at the Company's 1998 Annual Meeting must be
received by the Company at its principal executive offices no later than August
12, 1997.
The expense of solicitation of proxies will be borne by the Company. In
addition to solicitation by mail, directors, officers and employees of the
Company may solicit proxies personally or by telephone or telegram. The Company
will request brokers, dealers or other nominees to send proxy material to and
obtain proxies from their principals and the Company will, upon request,
reimburse such persons for their reasonable expenses.
19
<PAGE> 21
OTHER BUSINESS
Management knows of no other matter that will come before the meeting.
However, if other matters do come before the meeting, the proxy holders will
vote in accordance with their best judgment.
By Order of the Board of
Directors,
/s/ DAVID M. SUDBURY
DAVID M. SUDBURY
Vice President, Secretary
and General Counsel
December 11, 1996
20
<PAGE> 22
APPENDIX A
COMMERCIAL METALS COMPANY
1996 LONG-TERM INCENTIVE PLAN
The Commercial Metals Company 1996 Long-Term Incentive Plan (hereinafter
called the "Plan") was adopted by the Board of Directors of Commercial Metals
Company, a Delaware corporation (hereinafter called the "Company"), effective as
of December 9, 1996, and was approved by the Company's stockholders on
, 1997.
ARTICLE 1
PURPOSE
The purpose of the Plan is to attract and retain the services of key
management employees of the Company and its Subsidiaries and to provide such
persons with a proprietary interest in the Company through the granting of
incentive stock options, non-qualified stock options, stock appreciation rights,
or restricted stock, whether granted singly, or in combination, or in tandem,
that will
(a) increase the interest of such persons in the Company's welfare;
(b) furnish an incentive to such persons to continue their services
for the Company; and
(c) provide a means through which the Company may attract able persons
as employees.
With respect to Reporting Participants, the Plan and all transactions under
the Plan are intended to comply with all applicable conditions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934 (the "1934 Act"). To the
extent any provision of the Plan or action by the Committee fails to so comply,
it shall be deemed null and void ab initio, to the extent permitted by law and
deemed advisable by the Committee.
ARTICLE 2
DEFINITIONS
For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:
2.1 "Award" means the grant of any Incentive Stock Option, Non-qualified
Stock Option, Restricted Stock or SAR whether granted singly, in combination or
in tandem (each individually referred to herein as an "Incentive").
2.2 "Award Agreement" means a written agreement between a Participant and
the Company which sets out the terms of the grant of an Award.
2.3 "Award Period" means the period during which one or more Incentives
granted under an Award may be exercised.
2.4 "Board" means the board of directors of the Company.
2.5 "Change of Control" means any of the following: (i) any consolidation,
merger or share exchange of the Company in which the Company is not the
continuing or surviving corporation or pursuant to which shares of the Company's
Common Stock would be converted into cash, securities or other property, other
than a consolidation, merger or share exchange of the Company in which the
holders of the Company's Common Stock immediately prior to such transaction have
the same proportionate ownership of Common Stock of the surviving corporation
immediately after such transaction; (ii) any sale, lease, exchange or other
transfer (excluding transfer by way of pledge or hypothecation) in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company; (iii) the stockholders of the Company approve any
plan or proposal for the liquidation or dissolution of the Company; (iv) the
cessation of control (by virtue of their not
21
<PAGE> 23
constituting a majority of directors) of the Board by the individuals (the
"Continuing Directors") who (x) at the date of this Plan were directors or (y)
become directors after the date of this Plan and whose election or nomination
for election by the Company's stockholders, was approved by a vote of at least
two-thirds of the directors then in office who were directors at the date of
this Plan or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the 1934 Act) of an aggregate of 20% of the voting power of the
Company's outstanding voting securities by any person or group (as such term is
used in Rule 13d-5 under the 1934 Act) who beneficially owned less than 15% of
the voting power of the Company's outstanding voting securities on the date of
this Plan, or the acquisition of beneficial ownership of an additional 5% of the
voting power of the Company's outstanding voting securities by any person or
group who beneficially owned at least 15% of the voting power of the Company's
outstanding voting securities on the date of this Plan, provided, however, that
notwithstanding the foregoing, an acquisition shall not constitute a Change of
Control hereunder if the acquiror is (x) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company and acting in such
capacity, (y) a Subsidiary of the Company or a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of voting securities of the Company or (z) any
other person whose acquisition of shares of voting securities is approved in
advance by a majority of the Continuing Directors; or (vi) in a Title 11
bankruptcy proceeding, the appointment of a trustee or the conversion of a case
involving the Company to a case under Chapter 7.
2.6 "Code" means the Internal Revenue Code of 1986, as amended.
2.7 "Committee" means the committee appointed or designated by the Board to
administer the Plan in accordance with Article 3 of this Plan.
2.8 "Common Stock" means the common stock, par value $5.00 per share, which
the Company is currently authorized to issue or may in the future be authorized
to issue.
2.9 "Company" means Commercial Metals Company, a Delaware corporation, and
any successor entity.
2.10 "Date of Grant" means the effective date on which an Award is made to
a Participant as set forth in the applicable Award Agreement; provided, however,
that solely for purposes of Section 16 of the 1934 Act and the rules and
regulations promulgated thereunder, the Date of Grant of an Award shall be the
date of stockholder approval of the Plan if such date is later than the
effective date of such Award as set forth in the Award Agreement.
2.11 "Employee" means common law employee (as defined in accordance with
the Regulations and Revenue Rulings then applicable under Section 3401(c) of the
Code) of the Company or any Subsidiary of the Company.
2.12 "Fair Market Value" of a share of Common Stock is the mean of the
highest and lowest prices per share on the New York Stock Exchange Consolidated
Tape, or such reporting service as the Committee may select, on the appropriate
date, or in the absence of reported sales on such day, the most recent previous
day for which sales were reported.
2.13 "Incentive Stock Option" or "ISO" means an incentive stock option
within the meaning of Section 422 of the Code, granted pursuant to this Plan.
2.14 "Non-employee Director" means a member of the Board who is not an
Employee and who satisfies the requirements of Rule 16b-3(b)(3) promulgated
under the 1934 Act or any successor provision.
2.15 "Non-qualified Stock Option" or "NQSO" means a non-qualified stock
option, granted pursuant to this Plan.
2.16 "Option Price" means the price which must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.
2.17 "Participant" shall mean an Employee of the Company or a Subsidiary to
whom an Award is granted under this Plan.
22
<PAGE> 24
2.18 "Plan" means this Commercial Metals Company 1996 Long-Term Incentive
Plan, as amended from time to time.
2.19 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.
2.20 "Restricted Stock" means shares of Common Stock issued or transferred
to a Participant pursuant to Section 6.4 of this Plan which are subject to
restrictions or limitations set forth in this Plan and in the related Award
Agreement.
2.21 "Retirement" means any Termination of Service solely due to
retirement upon attainment of age 62, or permitted early retirement as
determined by the Committee.
2.22 "SAR" means the right to receive a payment, in cash and/or Common
Stock, equal to the excess of the Fair Market Value of a specified number of
shares of Common Stock on the date the SAR is exercised over the SAR Price for
such shares.
2.23 "SAR Price" means the Fair Market Value of each share of Common Stock
covered by an SAR, determined on the Date of Grant of the SAR.
2.24 "Stock Option" means a Non-qualified Stock Option or an Incentive
Stock Option.
2.25 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.
2.26 "Termination of Service" occurs when a Participant who is an Employee
of the Company or any Subsidiary shall cease to serve as an Employee of the
Company and its Subsidiaries, for any reason.
2.27 "Total and Permanent Disability" means a Participant is qualified for
long-term disability benefits under the Company's disability plan or insurance
policy; or, if no such plan or policy is then in existence, that the
Participant, because of ill health, physical or mental disability or any other
reason beyond his or her control, is unable to perform his or her duties of
employment for a period of six (6) continuous months, as determined in good
faith by the Committee; provided that, with respect to any Incentive Stock
Option, Total and Permanent Disability shall have the meaning given it under the
rules governing Incentive Stock Options under the Code.
ARTICLE 3
ADMINISTRATION
The Plan shall be administered by a committee appointed by the Board (the
"Committee"). The Committee shall consist of not fewer than two persons. Any
member of the Committee may be removed at any time, with or without cause, by
resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board.
Membership on the Committee shall be limited to those members of the Board
who are Non-employee Directors and who are "outside directors" under Section
162(m) of the Code. The Committee shall select one of its members to act as its
Chairman. A majority of the Committee shall constitute a quorum, and the act of
a majority of the members of the Committee present at a meeting at which a
quorum is present shall be the act of the Committee.
The Committee shall determine and designate from time to time the eligible
persons to whom Awards
23
<PAGE> 25
will be granted and shall set forth in each related Award Agreement the Award
Period, the Date of Grant, and such other terms, provisions, limitations, and
performance requirements, as are approved by the Committee, but not inconsistent
with the Plan. The Committee shall determine whether an Award shall include one
type of Incentive, two or more Incentives granted in combination, or two or more
Incentives granted in tandem (that is, a joint grant where exercise of one
Incentive results in cancellation of all or a portion of the other Incentive).
The Committee, in its discretion, shall (i) interpret the Plan, (ii)
prescribe, amend, and rescind any rules and regulations necessary or appropriate
for the administration of the Plan, and (iii) make such other determinations and
take such other action as it deems necessary or advisable in the administration
of the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
With respect to restrictions in the Plan that are based on the requirements
of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section
162(m) of the Code, the rules of any exchange or inter-dealer quotation system
upon which the Company's securities are listed or quoted, or any other
applicable law, rule or restriction (collectively, "applicable law"), to the
extent that any such restrictions are no longer required by applicable law, the
Committee shall have the sole discretion and authority to grant Awards that are
not subject to such mandated restrictions and/or to waive any such mandated
restrictions with respect to outstanding Awards.
ARTICLE 4
ELIGIBILITY
Any Employee (including an Employee who is also a director or an officer)
whose judgment, initiative, and efforts contributed or may be expected to
contribute to the successful performance of the Company is eligible to
participate in the Plan; provided that only Employees shall be eligible to
receive Incentive Stock Options. The Committee, upon its own action, may grant,
but shall not be required to grant, an Award to any Employee of the Company or
any Subsidiary. Awards may be granted by the Committee at any time and from time
to time to new Participants, or to then Participants, or to a greater or lesser
number of Participants, and may include or exclude previous Participants, as the
Committee shall determine. Except as required by this Plan, Awards granted at
different times need not contain similar provisions. The Committee's
determinations under the Plan (including without limitation determinations of
which Employees, if any, are to receive Awards, the form, amount and timing of
such Awards, the terms and provisions of such Awards and the agreements
evidencing same) need not be uniform and may be made by it selectively among
Employees who receive, or are eligible to receive, Awards under the Plan.
ARTICLE 5
SHARES SUBJECT TO PLAN
Subject to adjustment as provided in Articles 13 and 14, the maximum number
of shares of Common Stock that may be delivered pursuant to Awards granted under
the Plan is (a) Seven Hundred Fifty Thousand (750,000) shares; plus (b) shares
of Common Stock previously subject to Awards which are forfeited, terminated,
settled in cash in lieu of Common Stock, or exchanged for Awards that do not
involve Common Stock, or expired unexercised; plus (c) without duplication for
shares counted under the immediately preceding clause, a number of shares of
Common Stock equal to the number of shares repurchased by the Company in the
open market or otherwise and having an aggregate repurchase price no greater
than the amount of cash proceeds received by the Company from the sale of shares
of Common Stock under the Plan; plus (d) any shares of Common Stock surrendered
to the Company in payment of the exercise price of options issued under the
Plan.
Shares to be issued may be made available from authorized but unissued
Common Stock, Common Stock held by the Company in its treasury, or Common Stock
purchased by the Company on the open market or otherwise. During the term of
this Plan, the Company will at all times reserve and keep available the
24
<PAGE> 26
number of shares of Common Stock that shall be sufficient to satisfy the
requirements of this Plan.
ARTICLE 6
GRANT OF AWARDS
6.1 IN GENERAL. The grant of an Award shall be authorized by the Committee
and shall be evidenced by an Award Agreement setting forth the Incentive or
Incentives being granted, the total number of shares of Common Stock subject to
the Incentive(s), the Option Price (if applicable), the Award Period, the Date
of Grant, and such other terms, provisions, limitations, and performance
objectives, as are approved by the Committee, but not inconsistent with the
Plan. The Company shall execute an Award Agreement with a Participant after the
Committee approves the issuance of an Award. Any Award granted pursuant to this
Plan must be granted within ten (10) years of the date of adoption of this Plan.
The Plan shall be submitted to the Company's stockholders for approval; however,
the Committee may grant Awards under the Plan prior to the time of stockholder
approval. Any such Award granted prior to such stockholder approval shall be
made subject to such stockholder approval. The grant of an Award to a
Participant shall not be deemed either to entitle the Participant to, or to
disqualify the Participant from, receipt of any other Award under the Plan.
If the Committee establishes a purchase price for an Award, the Participant
must accept such Award within a period of 30 days (or such shorter period as the
Committee may specify) after the Date of Grant by executing the applicable Award
Agreement and paying such purchase price.
6.2 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an Incentive Stock Option exceeds this
limit or otherwise fails to qualify as an Incentive Stock Option, such Stock
Option shall be a Non-qualified Stock Option.
6.3 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any fiscal
year of the Company Awards covering an aggregate of more than One Hundred
Thousand (100,000) shares of Common Stock.
6.4 RESTRICTED STOCK. If Restricted Stock is granted to a Participant under
an Award, the Committee shall set forth in the related Award Agreement: (i) the
number of shares of Common Stock awarded, (ii) the price, if any, to be paid by
the Participant for such Restricted Stock, (iii) the time or times within which
such Award may be subject to forfeiture, (iv) specified performance goals of the
Company, a Subsidiary, any division thereof or any group of Employees of the
Company, or other criteria, which the Committee determines must be met in order
to remove any restrictions (including vesting) on such Award, and (v) all other
terms, limitations, restrictions, and conditions of the Restricted Stock, which
shall be consistent with this Plan. The provisions of Restricted Stock need not
be the same with respect to each Participant.
(A) LEGEND ON SHARES. Each Participant who is awarded Restricted Stock
shall be issued a stock certificate or certificates in respect of such shares of
Common Stock. Such certificate(s) shall be registered in the name of the
Participant, and shall bear an appropriate legend referring to the terms,
conditions, and restrictions applicable to such Restricted Stock, substantially
as provided in Section 17.9 of the Plan. The Committee may require that the
stock certificates evidencing shares of Restricted Stock be held in custody by
the Company until the restrictions thereon shall have lapsed, and that the
Participant deliver to the Committee a stock power or stock powers, endorsed in
blank, relating to the shares of Restricted Stock.
(B) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock shall be
subject to the following restrictions and conditions:
(i) Subject to the other provisions of this Plan and the terms of the
particular Award Agreements, during such period as may be determined by the
Committee commencing on the Date of Grant (the "Restriction Period"), the
Participant shall not be permitted to sell, transfer, pledge or assign
shares of Restricted Stock. Except for these limitations, the Committee may
in its sole discretion, remove any or
25
<PAGE> 27
all of the restrictions on such Restricted Stock whenever it may determine
that, by reason of changes in applicable laws or other changes in
circumstances arising after the date of the Award, such action is
appropriate.
(ii) Except as provided in sub-paragraph (i) above, the Participant
shall have, with respect to his or her Restricted Stock, all of the rights
of a stockholder of the Company, including the right to vote the shares,
and the right to receive any dividends thereon. Certificates for shares of
Common Stock free of restriction under this Plan shall be delivered to the
Participant promptly after, and only after, the Restriction Period shall
expire without forfeiture in respect of such shares of Common Stock.
Certificates for the shares of Common Stock forfeited under the provisions
of the Plan and the applicable Award Agreement shall be promptly returned
to the Company by the forfeiting Participant. Each Award Agreement shall
require that (x) each Participant, by his or her acceptance of Restricted
Stock, shall irrevocably grant to the Company a power of attorney to
transfer any shares so forfeited to the Company and agrees to execute any
documents requested by the Company in connection with such forfeiture and
transfer, and (y) such provisions regarding returns and transfers of stock
certificates with respect to forfeited shares of Common Stock shall be
specifically performable by the Company in a court of equity or law.
(iii) The Restriction Period of Restricted Stock shall commence on the
Date of Grant and, subject to Article 14 of the Plan, unless otherwise
established by the Committee in the Award Agreement setting forth the terms
of the Restricted Stock, shall expire upon satisfaction of the conditions
set forth in the Award Agreement; such conditions may provide for vesting
based on (i) length of continuous service, (ii) achievement of specific
business objectives, (iii) increases in specified indices, (iv) attainment
of specified growth rates, or (v) other comparable measurements of Company
performance, as may be determined by the Committee in its sole discretion.
(iv) Subject to the provisions of the particular Award Agreement, upon
Termination of Service for any reason during the Restriction Period, the
nonvested shares of Restricted Stock shall be forfeited by the Participant.
In the event a Participant has paid any consideration to the Company for
such forfeited Restricted Stock, the Company shall, as soon as practicable
after the event causing forfeiture (but in any event within 5 business
days), pay to the Participant, in cash, an amount equal to the total
consideration paid by the Participant for such forfeited shares. Upon any
forfeiture, all rights of a Participant with respect to the forfeited
shares of the Restricted Stock shall cease and terminate, without any
further obligation on the part of the Company.
6.5 SAR. An SAR shall entitle the Participant at his election to surrender
to the Company the SAR, or portion thereof, as the Participant shall choose, and
to receive from the Company in exchange therefor cash in an amount equal to the
excess (if any) of the Fair Market Value (as of the date of the exercise of the
SAR) per share over the SAR Price per share specified in such SAR, multiplied by
the total number of shares of the SAR being surrendered. In the discretion of
the Committee, the Company may satisfy its obligation upon exercise of an SAR by
the distribution of that number of shares of Common Stock having an aggregate
Fair Market Value (as of the date of the exercise of the SAR) equal to the
amount of cash otherwise payable to the Participant, with a cash settlement to
be made for any fractional share interests, or the Company may settle such
obligation in part with shares of Common Stock and in part with cash.
6.6 TANDEM AWARDS. The Committee may grant two or more Incentives in one
Award in the form of a "tandem award," so that the right of the Participant to
exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.
26
<PAGE> 28
ARTICLE 7
OPTION PRICE; SAR PRICE
The Option Price for any share of Common Stock which may be purchased under
a Stock Option and the SAR Price for any share of Common Stock subject to an SAR
shall be at least One Hundred Percent (100%) of the Fair Market Value of the
share on the Date of Grant. If an Incentive Stock Option is granted to an
Employee who owns or is deemed to own (by reason of the attribution rules of
Section 424(d) of the Code) more than 10% of the combined voting power of all
classes of stock of the Company (or any parent or Subsidiary), the Option Price
shall be at least 110% of the Fair Market Value of the Common Stock on the Date
of Grant.
ARTICLE 8
AWARD PERIOD; VESTING
8.1 AWARD PERIOD. Subject to the other provisions of this Plan, the
Committee may, in its discretion, provide that an Incentive may not be exercised
in whole or in part for any period or periods of time or beyond any date
specified in the Award Agreement. Except as provided in the Award Agreement, an
Incentive may be exercised in whole or in part at any time during its term. The
Award Period for an Incentive shall be reduced or terminated upon Termination of
Service in accordance with this Article 8 and Article 9. No Incentive granted
under the Plan may be exercised at any time after the end of its Award Period.
No portion of any Incentive may be exercised after the expiration of ten (10)
years from its Date of Grant. However, if an Employee owns or is deemed to own
(by reason of the attribution rules of Section 424(d) of the Code) more than 10%
of the combined voting power of all classes of stock of the Company (or any
parent or Subsidiary) and an Incentive Stock Option is granted to such Employee,
the term of such Incentive Stock Option (to the extent required by the Code at
the time of grant) shall be no more than five (5) years from the Date of Grant.
8.2 VESTING. The Committee, in its sole discretion, may determine that an
Incentive will be immediately exercisable, in whole or in part, or that all or
any portion may not be exercised until a date, or dates, subsequent to its Date
of Grant, or until the occurrence of one or more specified events, subject in
any case to the terms of the Plan. If the Committee imposes conditions upon
exercise, then subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be exercised.
ARTICLE 9
TERMINATION OF SERVICE
In the event of Termination of Service of a Participant, an Incentive may
only be exercised as determined by the Committee and provided in the Award
Agreement.
ARTICLE 10
EXERCISE OF INCENTIVE
10.1 IN GENERAL. A vested Incentive may be exercised during its Award
Period, subject to limitations and restrictions set forth therein and in Article
9. A vested Incentive may be exercised at such times and in such amounts as
provided in this Plan and the applicable Award Agreement, subject to the terms,
conditions, and restrictions of the Plan.
In no event may an Incentive be exercised or shares of Common Stock be
issued pursuant to an Award if a necessary listing or quotation of the shares of
Common Stock on a stock exchange or inter-dealer quotation system or any
registration under state or federal securities laws required under the
circumstances has not been accomplished. No Incentive may be exercised for a
fractional share of Common Stock. The granting of an Incentive shall impose no
obligation upon the Participant to exercise that Incentive.
(A) STOCK OPTIONS. Subject to such administrative regulations as the
Committee may from time to time adopt, a Stock Option may be exercised by the
delivery of written notice to the Committee setting forth the
27
<PAGE> 29
number of shares of Common Stock with respect to which the Stock Option is to be
exercised and the date of exercise thereof (the "Exercise Date") which shall be
at least three (3) days after giving such notice unless an earlier time shall
have been mutually agreed upon. On the Exercise Date, the Participant shall
deliver to the Company consideration with a value equal to the total Option
Price of the shares to be purchased, payable as follows: (a) cash, check, bank
draft, or money order payable to the order of the Company, (b) Common Stock
(including Restricted Stock) owned by the Participant on the Exercise Date,
valued at its Fair Market Value on the Exercise Date, (c) by delivery (including
by FAX) to the Company or its designated agent of an executed irrevocable option
exercise form together with irrevocable instructions from the Participant to a
broker or dealer, reasonably acceptable to the Company, to sell certain of the
shares of Common Stock purchased upon exercise of the Stock Option or to pledge
such shares as collateral for a loan and promptly deliver to the Company the
amount of sale or loan proceeds necessary to pay such purchase price, and/or (d)
in any other form of valid consideration that is acceptable to the Committee in
its sole discretion. In the event that shares of Restricted Stock are tendered
as consideration for the exercise of a Stock Option, a number of shares of
Common Stock issued upon the exercise of the Stock Option equal to the number of
shares of Restricted Stock used as consideration therefor shall be subject to
the same restrictions and provisions as the Restricted Stock so submitted.
Upon payment of all amounts due from the Participant, the Company shall
cause certificates for the Common Stock then being purchased to be delivered as
directed by the Participant (or the person exercising the Participant's Stock
Option in the event of his death) at its principal business office promptly
after the Exercise Date; provided that if the Participant has exercised an
Incentive Stock Option, the Company may at its option retain physical possession
of the certificate evidencing the shares acquired upon exercise until the
expiration of the holding periods described in Section 422(a)(1) of the Code.
The obligation of the Company to deliver shares of Common Stock shall, however,
be subject to the condition that if at any time the Committee shall determine in
its discretion that the listing, registration, or qualification of the Stock
Option or the Common Stock upon any securities exchange or inter-dealer
quotation system or under any state or federal law, or the consent or approval
of any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, the Stock Option or the issuance or purchase of
shares of Common Stock thereunder, the Stock Option may not be exercised in
whole or in part unless such listing, registration, qualification, consent, or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
If the Participant fails to pay for any of the Common Stock specified in
such notice or fails to accept delivery thereof, the Participant's right to
purchase such Common Stock may be terminated by the Company.
(B) SARS. Subject to the conditions of this Section 10.1(b) and such
administrative regulations as the Committee may from time to time adopt, an SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the "Exercise
Date") which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall receive from the Company in exchange therefor cash in an
amount equal to the excess (if any) of the Fair Market Value (as of the date of
the exercise of the SAR) per share of Common Stock over the SAR Price per share
specified in such SAR, multiplied by the total number of shares of Common Stock
of the SAR being surrendered. In the discretion of the Committee, the Company
may satisfy its obligation upon exercise of an SAR by the distribution of that
number of shares of Common Stock having an aggregate Fair Market Value (as of
the date of the exercise of the SAR) equal to the amount of cash otherwise
payable to the Participant, with a cash settlement to be made for any fractional
share interests, or the Company may settle such obligation in part with shares
of Common Stock and in part with cash.
10.2 DISQUALIFYING DISPOSITION OF ISO. If shares of Common Stock acquired
upon exercise of an Incentive Stock Option are disposed of by a Participant
prior to the expiration of either two (2) years from the Date of Grant of such
Stock Option or one (1) year from the transfer of shares of Common Stock to the
Participant pursuant to the exercise of such Stock Option, or in any other
disqualifying disposition within the meaning of Section 422 of the Code, such
Participant shall notify the Company in writing of the date and terms of such
disposition. A disqualifying disposition by a Participant shall not affect the
status of any other
28
<PAGE> 30
Stock Option granted under the Plan as an Incentive Stock Option within the
meaning of Section 422 of the Code.
ARTICLE 11
AMENDMENT OR DISCONTINUANCE
Subject to the limitations set forth in this Article 11, the Board may at
any time and from time to time, without the consent of the Participants, alter,
amend, revise, suspend, or discontinue the Plan in whole or in part; provided,
however, that no amendment which requires stockholder approval in order for the
Plan and Incentives awarded under the Plan to continue to comply with Section
162(m) of the Code, including any successors to such Section, shall be effective
unless such amendment shall be approved by the requisite vote of the
stockholders of the Company entitled to vote thereon. Any such amendment shall,
to the extent deemed necessary or advisable by the committee, be applicable to
any outstanding Incentives theretofore granted under the Plan, notwithstanding
any contrary provisions contained in any stock option agreement. In the event of
any such amendment to the Plan, the holder of any Incentive outstanding under
the Plan shall, upon request of the Committee and as a condition to the
exercisability thereof, execute a conforming amendment in the form prescribed by
the Committee to any Award Agreement relating thereto. Notwithstanding anything
contained in this Plan to the contrary, unless required by law, no action
contemplated or permitted by this Article 11 shall adversely affect any rights
of Participants or obligations of the Company to Participants with respect to
any Incentive theretofore granted under the Plan without the consent of the
affected Participant.
ARTICLE 12
TERM
The Plan shall be effective from the date that this Plan is approved by the
Board. Unless sooner terminated by action of the Board, the Plan will terminate
on December 9, 2006, but Incentives granted before that date will continue to be
effective in accordance with their terms and conditions.
ARTICLE 13
CAPITAL ADJUSTMENTS
If at any time while the Plan is in effect, or Incentives are outstanding,
there shall be any increase or decrease in the number of issued and outstanding
shares of Common Stock resulting from (1) the declaration or payment of a stock
dividend, (2) any recapitalization resulting in a stock split-up, combination,
or exchange of shares of Common Stock, or (3) other increase or decrease in such
shares of Common Stock effected without receipt of consideration by the Company,
then and in such event:
(i) An appropriate adjustment shall be made in the maximum number of
shares of Common Stock then subject to being awarded under the Plan and in
the maximum number of shares of Common Stock that may be awarded to a
Participant to the end that the same proportion of the Company's issued and
outstanding shares of Common Stock shall continue to be subject to being so
awarded.
(ii) Appropriate adjustments shall be made in the number of shares of
Common Stock and the Option Price thereof then subject to purchase pursuant
to each such Stock Option previously granted and unexercised, to the end
that the same proportion of the Company's issued and outstanding shares of
Common Stock in each such instance shall remain subject to purchase at the
same aggregate Option Price.
(iii) Appropriate adjustments shall be made in the number of SARs and
the SAR Price thereof then subject to exercise pursuant to each such SAR
previously granted and unexercised, to the end that the same proportion of
the Company's issued and outstanding shares of Common Stock in each
instance shall remain subject to exercise at the same aggregate SAR Price.
(iv) Appropriate adjustments shall be made in the number of
outstanding shares of Restricted Stock with respect to which restrictions
have not yet lapsed prior to any such change.
29
<PAGE> 31
Except as otherwise expressly provided herein, the issuance by the Company
of shares of its capital stock of any class, or securities convertible into
shares of capital stock of any class, either in connection with direct sale or
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to (i) the number of or Option Price of shares of Common
Stock then subject to outstanding Stock Options granted under the Plan, (ii) the
number of or SAR Price or SARs then subject to outstanding SARs granted under
the Plan, or (iii) the number of outstanding shares of Restricted Stock.
Upon the occurrence of each event requiring an adjustment with respect to
any Incentive, the Company shall mail to each affected Participant its
computation of such adjustment which shall be conclusive and shall be binding
upon each such Participant.
ARTICLE 14
RECAPITALIZATION, MERGER AND
CONSOLIDATION; CHANGE IN CONTROL
(a) The existence of this Plan and Incentives granted hereunder shall
not affect in any way the right or power of the Company or its stockholders
to make or authorize any or all adjustments, recapitalizations,
reorganizations, or other changes in the Company's capital structure and
its business, or any merger or consolidation of the Company, or any issue
of bonds, debentures, preferred or preference stocks ranking prior to or
otherwise affecting the Common Stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation
of the Company, or any sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether of a similar
character or otherwise.
(b) Subject to any required action by the stockholders, if the Company
shall be the surviving or resulting corporation in any merger,
consolidation or share exchange, any Incentive granted hereunder shall
pertain to and apply to the securities or rights (including cash, property,
or assets) to which a holder of the number of shares of Common Stock
subject to the Incentive would have been entitled.
(c) In the event of any merger, consolidation or share exchange
pursuant to which the Company is not the surviving or resulting
corporation, there shall be substituted for each share of Common Stock
subject to the unexercised portions of such outstanding Incentives, that
number of shares of each class of stock or other securities or that amount
of cash, property, or assets of the surviving, resulting or consolidated
company which were distributed or distributable to the stockholders of the
Company in respect to each share of Common Stock held by them, such
outstanding Incentives to be thereafter exercisable for such stock,
securities, cash, or property in accordance with their terms.
Notwithstanding the foregoing, however, all such Incentives may be canceled
by the Company as of the effective date of any such reorganization, merger,
consolidation, share exchange or any dissolution or liquidation of the
Company by giving notice to each holder thereof or his personal
representative of its intention to do so and by permitting the purchase
during the thirty (30) day period next preceding such effective date of all
of the shares of Common Stock subject to such outstanding Incentives.
(d) In the event of a Change of Control, then, notwithstanding any
other provision in this Plan to the contrary, all unmatured installments of
Incentives outstanding shall thereupon automatically be accelerated and
exercisable in full and all Restriction Periods applicable to Awards of
Restricted Stock shall automatically expire. The determination of the
Committee that any of the foregoing conditions has been met shall be
binding and conclusive on all parties.
ARTICLE 15
LIQUIDATION OR DISSOLUTION
In case the Company shall, at any time while any Incentive under this Plan
shall be in force and remain unexpired, (i) sell all or substantially all of its
property, or (ii) dissolve, liquidate, or wind up its affairs, then
30
<PAGE> 32
each Participant shall be thereafter entitled to receive, in lieu of each share
of Common Stock of the Company which such Participant would have been entitled
to receive under the Incentive, the same kind and amount of any securities or
assets as may be issuable, distributable, or payable upon any such sale,
dissolution, liquidation, or winding up with respect to each share of Common
Stock of the Company. If the Company shall, at any time prior to the expiration
of any Incentive, make any partial distribution of its assets, in the nature of
a partial liquidation, whether payable in cash or in kind (but excluding the
distribution of a cash dividend payable out of earned surplus and designated as
such) then in such event the Option Prices or SAR Prices then in effect with
respect to each Stock Option or SAR shall be reduced, on the payment date of
such distribution, in proportion to the percentage reduction in the tangible
book value of the shares of the Company's Common Stock (determined in accordance
with generally accepted accounting principles) resulting by reason of such
distribution.
ARTICLE 16
INCENTIVES IN SUBSTITUTION FOR
INCENTIVES GRANTED BY OTHER CORPORATIONS
Incentives may be granted under the Plan from time to time in substitution
for similar instruments held by employees of a corporation who become or are
about to become management Employees of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company or the acquisition by the Company of stock of the employing corporation.
The terms and conditions of the substitute Incentives so granted may vary from
the terms and conditions set forth in this Plan to such extent as the Board at
the time of grant may deem appropriate to conform, in whole or in part, to the
provisions of the Incentives stock appreciation right in substitution for which
they are granted.
ARTICLE 17
MISCELLANEOUS PROVISIONS
17.1 INVESTMENT INTENT. The Company may require that there be presented to
and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.
17.2 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any Incentive
granted under the Plan shall confer upon any Participant any right with respect
to continuance of employment by the Company or any Subsidiary.
17.3 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the
Committee, nor any officer or Employee of the Company acting on behalf of the
Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board or the Committee and each and any officer or
employee of the Company acting on their behalf shall, to the extent permitted by
law, be fully indemnified and protected by the Company in respect of any such
action, determination, or interpretation.
17.4 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action
of the Board or the Committee shall be deemed to give any person any right to be
granted an Award or any other rights except as may be evidenced by an Award
Agreement, or any amendment thereto, duly authorized by the Committee and
executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.
17.5 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding anything
contained herein to the contrary, the Company shall not be required to sell or
issue shares of Common Stock under any Incentive if the issuance thereof would
constitute a violation by the Participant or the Company of any provisions of
any law or regulation of any governmental authority or any national securities
exchange or inter-dealer quotation system or other forum in which shares of
Common Stock are quoted or traded (including without limitation Section 16 of
the 1934 Act and Section 162(m) of the Code); and, as a condition of any sale or
issuance of
31
<PAGE> 33
shares of Common Stock under an Incentive, the Committee may require such
agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Incentives hereunder, and the obligation of the Company to
sell and deliver shares of Common Stock, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.
17.6 TAX REQUIREMENTS. The Company shall have the right to deduct from all
amounts hereunder paid in cash or other form, any Federal, state, or local taxes
required by law to be withheld with respect to such payments. The Participant
receiving shares of Common Stock issued under the Plan shall be required to pay
the Company the amount of any taxes which the Company is required to withhold
with respect to such shares of Common Stock. Notwithstanding the foregoing, in
the event of an assignment of a Non-qualified Stock Option or SAR pursuant to
Section 17.7, the Participant who assigns the Non-qualified Stock Option or SAR
shall remain subject to withholding taxes upon exercise of the Non-qualified
Stock Option or SAR by the transferee to the extent required by the Code or the
rules and regulations promulgated thereunder. Such payments shall be required to
be made prior to the delivery of any certificate representing such shares of
Common Stock. Such payment may be made in cash, by check, or through the
delivery of shares of Common Stock owned by the Participant (which may be
effected by the actual delivery of shares of Common Stock by the Participant or
by the Company's withholding a number of shares to be issued upon the exercise
of a Stock Option, if applicable), which shares have an aggregate Fair Market
Value equal to the required minimum withholding payment, or any combination
thereof.
17.7 ASSIGNABILITY. Incentive Stock Options may not be transferred or
assigned other than by will or the laws of descent and distribution and may be
exercised during the lifetime of the Participant only by the Participant or the
Participant's legally authorized representative, and each Award Agreement in
respect of an Incentive Stock Option shall so provide. The designation by a
Participant of a beneficiary will not constitute a transfer of the Stock Option.
The Committee may waive or modify any limitation contained in the preceding
sentences of this Section 17.7 that is not required for compliance with Section
422 of the Code. The Committee may, in its discretion, authorize all or a
portion of a Non-qualified Stock Option or SAR to be granted to a Participant to
be on terms which permit transfer by such Participant to (i) the spouse,
children or grandchildren of the Participant ("Immediate Family Members"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members, or
(iii) a partnership in which such Immediate Family Members are the only
partners, (iv) an entity exempt from federal income tax pursuant to Section
501(c)(3) of the Code or any successor provision, or (v) a split interest trust
or pooled income fund described in Section 2522(c)(2) of the Code or any
successor provision, provided that (x) there shall be no consideration for any
such transfer, (y) the Award Agreement pursuant to which such Non-qualified
Stock Option or SAR is granted must be approved by the Committee and must
expressly provided for transferability in a manner consistent with this Section,
and (z) subsequent transfers of transferred Non-qualified Stock Options or SARs
shall be prohibited except those by will or the laws of descent and distribution
or pursuant to a qualified domestic relations order as defined in the Code or
Title I of the Employee Retirement Income Security Act of 1974, as amended.
Following transfer, any such Non-qualified Stock Option and SAR shall continue
to be subject to the same terms and conditions as were applicable immediately
prior to transfer, provided that for purposes of Articles 10, 11, 13, 15 and 17
hereof the term "Participant" shall be deemed to include the transferee. The
events of Termination of Service shall continue to be applied with respect to
the original Participant, following which the Non-qualified Stock Options and
SARs shall be exercisable by the transferee only to the extent and for the
periods specified in the Award Agreement. The Committee and the Company shall
have no obligation to inform any transferee of a Non-qualified Stock Option or
SAR of any expiration, termination, lapse or acceleration of such Option. The
Company shall have no obligation to register with any federal or state
securities commission or agency any Common Stock issuable or issued under a
Non-qualified Stock Option or SAR that has been transferred by a Participant
under this Section 17.7.
17.8 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.
17.9 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the
32
<PAGE> 34
provisions hereof (any such certificate not having such legend shall be
surrendered upon demand by the Company and so endorsed):
On the face of the certificate:
"Transfer of this stock is restricted in accordance with
conditions printed on the reverse of this certificate."
On the reverse:
"The shares of stock evidenced by this certificate are
subject to and transferrable only in accordance with that
certain Commercial Metals Company 1996 Long-Term Incentive
Plan, a copy of which is on file at the principal office
of the Company in Dallas, Texas. No transfer or pledge of
the shares evidenced hereby may be made except in
accordance with and subject to the provisions of said
Plan. By acceptance of this certificate, any holder,
transferee or pledgee hereof agrees to be bound by all of
the provisions of said Plan."
The following legend shall be inserted on a certificate evidencing Common
Stock issued under the Plan if the shares were not issued in a transaction
registered under the applicable federal and state securities laws:
"Shares of stock represented by this certificate have been
acquired by the holder for investment and not for resale,
transfer or distribution, have been issued pursuant to
exemptions from the registration requirements of
applicable state and federal securities laws, and may not
be offered for sale, sold or transferred other than
pursuant to effective registration under such laws, or in
transactions otherwise in compliance with such laws, and
upon evidence satisfactory to the Company of compliance
with such laws, as to which the Company may rely upon an
opinion of counsel satisfactory to the Company."
A copy of this Plan shall be kept on file in the principal office of the
Company in Dallas, Texas.
* * * * * * * * * * * * * * *
33
<PAGE> 35
Commercial Metals Company
7800 Stemmons
Dallas, Texas 75247
Notice of Annual Meeting
Proxy Statement
Directions to Commercial Metals Company Annual Meeting
of Stockholders, January 23, 1997, 10:00 a.m., Thompson
Auditorium Cityplace Center,
2711 N. Haskell at Central Expwy.
Dallas, Texas
From North Central [A MAP WITH DIRECTIONS TO THE
Expressway (U.S. LOCATION OF THE ANNUAL MEETING]
Highway 75) take the HASKELL
Exit East. Take the First
Right on WELDON and
enter Garage Ramp #5.
Park in Garage C and take
the garage elevator to Concourse
Level "C". Enter through
revolving door and take the
Lobby Elevator to Ground
Level to the Thompson
Auditorium.
[CMC LOGO]
<PAGE> 36
PROXY
COMMERCIAL METALS COMPANY
7800 STEMMONS FREEWAY
DALLAS, TEXAS 75247
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned Shareholder(s) of Commercial Metals Company hereby appoint(s)
A. Leo Howell, Stanley A. Rabin and Marvin Selig, or any of them as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote and act for the undersigned at the 1997 Annual Meeting of
Stockholders of Commercial Metals Company to be held on Thursday, January 23,
1997 at 10:00 a.m., Central Standard Time, in the Thompson Auditorium, on the
ground floor at Cityplace Center, 2711 North Haskell Avenue, Dallas, Texas, and
any adjournment, continuation, or postponement thereof, according to the number
of votes which the undersigned is now, or may then be, entitled to cast, hereby
revoking any proxies heretofore executed by the undersigned for such meeting.
All powers may be exercised by a majority of said proxy holders or substitutes
voting or acting or, if only one votes and acts, then by that one. The
undersigned instructs such proxy holders or their substitutes to vote as
specified below on the proposals set forth in the Proxy Statement.
PLEASE MARK, DATE AND SIGN THIS PROXY ON REVERSE SIDE
- FOLD AND DETACH HERE -
<PAGE> 37
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THE PROXY WILL BE
VOTED FOR PROPOSALS 1, 2, 3 AND 4.
NOMINEES: Albert A. Eisenstat, Walter F. Kammann, Charles B. Peterson
Instruction: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.
---------------------------------------------------------------
1. ELECTION OF DIRECTORS
FOR all nominees listed WITHHOLD AUTHORITY
except as marked to the to vote for all
contrary [ ] nominees listed [ ]
2. APPROVAL OF THE 1996 LONG-TERM INCENTIVE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP AS INDEPENDENT
AUDITORS FOR THE FISCAL YEAR ENDING AUGUST 31, 1997.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
I plan to attend the meeting - [ ]
Dated 19
------------------------------ -----
--------------------------------------------
Signature
--------------------------------------------
Second Signature If Held Jointly
When shares are held by joint tenants, both should sign. When signing as an
attorney, executor, administrator, trustee, or guardian, please give full title
as such. If a corporation, please sign in full corporate name by President or
other authorized officer. If a partnership, please sign in the partnership
name by authorized person.
PLEASE MARK, DATE, AND RETURN PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA
PROCESSING EQUIPMENT WILL RECORD YOUR VOTES"
- FOLD AND DETACH HERE -
