<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
<TABLE>
<C> <S>
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
_____________________________CHAPARRAL STEEL COMPANY____________________________
(Name of Registrant as Specified In Its Charter)
___________________________ROBERT C. MOORE, SECRETARY___________________________
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
<TABLE>
<C> <S>
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
- - - ----------------------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - - ----------------------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
- - - ----------------------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - - ----------------------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or the
form or schedule and the date of its filing.
(1) Amount previously paid:
- - - ----------------------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- - - ----------------------------------------------------------------------------------------------
(3) Filing party:
- - - ----------------------------------------------------------------------------------------------
(4) Date filed:
- - - ----------------------------------------------------------------------------------------------
<FN>
- - - ------------------------
(1) Set forth the amount of which the filing fee is calculated and state how it
was determined.
</TABLE>
<PAGE>
[LOGO]
August 29, 1994
DEAR STOCKHOLDER:
You are cordially invited to attend the Annual Meeting of the Stockholders
of Chaparral Steel Company, to be held at 9:30 A.M. Central Daylight Time, on
Wednesday, October 19, 1994, at The Ballpark in Arlington, 1000 Ballpark Way,
Arlington, Texas.
The following Notice of Annual Meeting and Proxy Statement describe the
formal business to be transacted at the Meeting. During the Meeting, we will
also report on the operations of the Company. Our 1994 Annual Report accompanies
this Proxy Statement.
It is important that your shares be represented at the Meeting regardless of
the size of your holdings. If you are unable to attend in person, we urge you to
participate by voting your shares by proxy. You may do so by filling out and
returning the enclosed proxy card.
If you arrive early, you are invited to have coffee and meet informally with
the Directors.
Sincerely,
GORDON E. FORWARD
PRESIDENT
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 19, 1994
The Annual Meeting of Stockholders of Chaparral Steel Company (the
"Company") will be held at The Ballpark in Arlington, 1000 Ballpark Way,
Arlington, Texas, on Wednesday, October 19, 1994, at 9:30 A.M. (C.D.T.) for the
following purposes:
1. To elect seven (7) Directors.
2. To amend the Chaparral Steel Company Stock Option Plan to provide for
automatic grants of stock options to non-employee Directors.
3. To transact such other business that may properly come before the
Meeting or any adjournment thereof.
Only Stockholders of record at the close of business on August 22, 1994,
will be entitled to vote at the meeting. A list of Stockholders will be open to
the examination of any Stockholder during ordinary business hours for a period
of ten days prior to the meeting at 7610 Stemmons Freeway, Dallas, Texas.
While you are encouraged to attend the meeting, you are requested to date,
sign and return promptly the accompanying proxy in the enclosed envelope
provided for that purpose.
By Order of the Board of Directors,
ROBERT C. MOORE
SECRETARY
Dallas, Texas
August 29, 1994
<PAGE>
[LOGO]
CHAPARRAL STEEL COMPANY
300 WARD ROAD
MIDLOTHIAN, TEXAS 76065
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD OCTOBER 19, 1994
SOLICITATION OF PROXIES
This Proxy Statement is furnished in connection with the solicitation by and
on behalf of the Board of Directors of Chaparral Steel Company, a Delaware
corporation (the "Company"), of proxies in the accompanying form for exercise at
the Annual Meeting of Stockholders of the Company to be held on October 19,
1994, and at any adjournment thereof. The approximate date on which this Proxy
Statement and accompanying proxy were first sent to Stockholders is August 29,
1994.
The cost of soliciting proxies in the accompanying form has been, or will
be, borne by the Company. In addition to solicitation by mail, the Company will
request banks, brokers and other custodians, nominees, and fiduciaries to send
proxy material to the beneficial owners and to secure their voting instructions,
if necessary. The Company will reimburse them for their expenses in so doing.
Officers and regular employees of the Company may solicit proxies personally, by
telephone or telegrams from some Stockholders, if proxies are not promptly
received. In addition, the Company has retained Chemical Banking Corporation to
assist in the solicitation of proxies at a cost of $1,500 plus reasonable
out-of-pocket expenses.
OUTSTANDING VOTING STOCK AND QUORUM
The outstanding voting securities of the Company as of August 22, 1994, was
29,679,900 shares of Common Stock of the Company. Each share is entitled to one
vote. The presence at the Meeting, in person or by proxy, of the holders of a
majority of the issued and outstanding Common Stock is necessary to constitute a
quorum to transact business.
VOTING OF PROXY
The proxy enclosed is designed to permit each Stockholder of record at the
close of business on August 22, 1994, to vote at the Annual Meeting and at any
adjournments thereof. Shares cannot be voted at the meeting unless the owner is
present or represented by proxy. Any proxy may be revoked prior to the voting by
notice in writing to the Secretary of the Company at 7610 Stemmons Freeway,
Dallas, TX, 75247. The shares represented by any unrevoked proxy in the
accompanying form, if such proxy is properly executed and returned, will be
voted in accordance with the specifications made thereon, or in the absence of
such specifications, in accordance with the Board of Directors' recommendations.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of August 5, 1994, information with
respect to Texas Industries, Inc. ("TXI"), the only stockholder who is known to
the Company to be the beneficial owner of more than five percent of the
outstanding shares of Common Stock of the Company.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT OF
OF BENEFICIAL OWNER OWNED CLASS
- - - ----------------------------------------------------- ----------------- -------------
<S> <C> <C>
Texas Industries, Inc. 24,000,000 80.9%
7610 Stemmons Freeway
Dallas, Texas 75247
</TABLE>
ELECTION OF DIRECTORS
The bylaws of the Company provide for a board of not less than three nor
more than twenty-one directors with the actual number to serve at any time to be
determined by resolution of the Board. The Board has fixed as seven the number
of directors which will constitute the Board of Directors for the ensuing year
and the proxies solicited hereby cannot be voted for a greater number. Directors
hold office until the next annual meeting of stockholders or until their
successors are elected and qualified. Directors are elected by plurality vote.
Unless otherwise indicated, all proxies that authorize the persons named therein
to vote for the election of directors will be voted for the election of the
nominees listed below. Each nominee is presently a Director of the Company. If
any nominee should not be available for election as a result of unforeseen
circumstances, it is the intention of the persons named in the proxy to vote for
the election of such substitute nominee, if any, as the Board of Directors may
propose.
<TABLE>
<CAPTION>
SERVED
AS
PRINCIPAL OCCUPATION DIRECTOR
NAME AGE DURING PAST FIVE YEARS SINCE
- - - ------------------------------ --- ------------------------------------------------------------------------------------- --------
<S> <C> <C> <C>
Robert D. Rogers.............. 58 Chairman of the Board of the Company, President and Chief Executive Officer and 1973
Director of Texas Industries, Inc.; Director of Consolidated Freightways, Inc.(b)(c)
Gordon E. Forward............. 58 President and Chief Executive Officer of the Company; Director of Texas Industries, 1982
Inc.(b)
Robert Alpert................. 62 Chairman of the Board of Alpert Investment Corporation, a financial services, real 1989
estate investment and development firm, Dallas, Texas; Director of Texas Industries,
Inc. and Consolidated Freightways, Inc.(c)
John M. Belk.................. 74 Chairman of the Board of Belk Stores Services, Inc.; Director of Lowe's Companies, 1987
Inc. and Coca-Cola Bottling Co. Consolidated(c)
Gerald R. Heffernan........... 75 President, G.R. Heffernan & Associates, Ltd.; Director of Texas Industries, Inc.; 1973
Chairman of the Board of Co-Steel, Inc. from January 1987 to April 1990(a)(b)
Gerhard Liener................ 62 Chief Financial Officer of Daimler-Benz AG; Director of Consolidated Freightways, 1987
Inc.(a)
Eugenio Clariond Reyes........ 51 Director General and Chief Executive Officer, Grupo IMSA, S.A.; President, Mexico -- 1993
U.S. Chamber of Commerce; Director, Instituto Tecnologico y de Estudias Superiores
de Monterrey, A.C.(a)
<FN>
- - - --------------------------
(a) Member of the Audit Committee.
(b) Member of the Executive Committee.
(c) Member of the Compensation Committee.
</TABLE>
2
<PAGE>
BOARD COMMITTEES, MEETINGS, ATTENDANCE AND FEES
The Board of Directors of the Company has established Audit and Compensation
Committees which perform the functions described below. The Board of Directors
held four regular meetings during the fiscal year. All Directors, except for Mr.
Liener, who attended two meetings, attended at least 75% of all Board meetings.
The Audit Committee, composed entirely of outside Directors of the Company,
reviews the scope, plan and results of the annual audit with the independent
auditors; approves and ratifies each professional service provided by the
independent auditors; considers the independence of the auditors; and reviews
and approves all non-audit fees paid to the independent auditors. The Audit
Committee met two times during the year. All members attended at least 75% of
the meetings.
The Company's Compensation Committee recommends and approves the salaries of
the top management of the Company and all awards to employees of the Company
under the Company's compensation plans. Its actions are subject to the review
and approval of the Board of Directors. The Compensation Committee met twice
during the year. All members attended at least 75% of the meetings.
The Board of Directors, acting in lieu of a Nominating Committee, will
consider nominees for directors recommended by Stockholders. Communications to
the Board may be addressed in care of the Company's Secretary at the Company's
Executive Offices.
OTHER TRANSACTIONS
No reportable transaction occurred between the Company and any director,
nominee for director, officer or any affiliate of, or a person related to, any
of the foregoing since the beginning of the Company's last fiscal year.
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company currently receive $15,000 per
year plus $1,000 for each day that a Board and/or a Committee Meeting is
attended. Under a deferred compensation arrangement, such amount may be deferred
in whole or in part at the election of the Director. Compensation so deferred is
denominated in shares of the Company's Common Stock determined by reference to
the average market price during the thirty (30) trading days prior to the date
of the arrangement. Dividends are credited to the account in the form of common
stock at a value equal to the fair market value of the stock on the date of
payment of such dividend. The Company also reimburses Directors for travel,
lodging and related expenses they may incur in attending Board and Committee
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is comprised exclusively of Directors who are not
officers or employees of the Company. Mr. Robert D. Rogers is the President and
Chief Executive Officer of TXI, the parent of the Company. The President of the
Company serves on the Compensation Committee of TXI. No other executive officer
of the Company serves or has served on the Compensation Committee or as a
director of another company, one of whose executive officers serves as a member
of the Compensation Committee or as a director of the Company.
3
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of August 5, 1994, the approximate number
of shares of Common Stock of the Company and common stock of TXI beneficially
owned by each Director, by each Executive Officer named in the Summary
Compensation Table and by all Directors and Executive Officers of the Company as
a group.
<TABLE>
<CAPTION>
COMPANY TXI
COMMON SHARES COMMON SHARES
----------------------------- -----------------------------
BENEFICIALLY OWNED** % (1) BENEFICIALLY OWNED** % (2)
-------------------- ------ -------------------- ------
<S> <C> <C> <C> <C>
Robert Alpert....................................................... 1,000 * 3,555 *
Dennis B. Beach..................................................... 30,755(3) * None *
John M. Belk........................................................ 7,000 * None *
Gordon E. Forward................................................... 89,100(3) * 52,974(4) *
David A. Fournie.................................................... 31,500(3) * None *
Gerald R. Heffernan(5)(6)........................................... None * 111,000 *
Gerhard Liener...................................................... None * None *
Robert D. Rogers(7)................................................. 106,800(3) * 149,320(4) 1.2%
Libor F. Rostik..................................................... 34,000 * 150 *
Jeffry A. Werner.................................................... 36,570(3) * None *
All Directors and Executive Officers as a Group (17 Persons)........ 469,056(3) 1.6% 373,569(4) 3.0%
<FN>
- - - ------------------------
* Represents less than one percent (1%) of the total number of shares
outstanding.
** Except as indicated in the notes below, each person has the sole voting and
investment authority with respect to the shares set forth in the above
table.
(1) Based on the sum of (i) 29,679,900 shares of Common Stock, which on August
5, 1994, was the approximate number of shares outstanding, and (ii) the
number of shares subject to options exercisable by such person(s) within 60
days of such date.
(2) Based on the sum of (i) 12,490,749 shares of common stock, which on August
5, 1994, was the approximate number of shares outstanding, and (ii) the
number of shares subject to options exercisable by such person(s) within 60
days of such date.
(3) Includes, with respect to such person(s), shares of Common Stock subject to
options exercisable within 60 days of August 5, 1994, as follows: Dennis E.
Beach, 28,000 shares; Gordon E. Forward, 74,000 shares; David A. Fournie,
26,000 shares; Libor F. Rostik, 30,000 shares; Robert D. Rogers, 66,000
shares; Jeffry A. Werner, 35,000 shares; and all Directors and Executive
Officers as a Group, 388,000 shares.
(4) Includes, with respect to such person(s), shares of common stock subject to
options exercisable within 60 days of August 5, 1994, as follows: Robert
Alpert, 1,000 shares; Gordon E. Forward, 5,490 shares; Robert D. Rogers,
20,000 shares; and all Directors and Officers as a Group, 46,990 shares.
(5) The wife of Mr. Heffernan owns 971 shares of TXI common stock as to which
he disclaims beneficial ownership.
(6) Mr. Heffernan also owns 2,500 shares of the $5 Preferred Stock of TXI,
approximately 41.8% of the class outstanding.
(7) The wife of Mr. Rogers owns 4,000 shares of Common Stock, as to which he
disclaims beneficial ownership.
</TABLE>
4
<PAGE>
EXECUTIVE COMPENSATION
There is shown below information concerning the annual and long-term
compensation for services in all capacities to the Company for the fiscal year
ended May 31, 1994, of those persons who were, at May 31, 1994, (i) the chief
executive officer, and (ii) the other four highly compensated executive officer
employees of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
-----------------------------
PAYOUTS
ANNUAL COMPENSATION AWARDS ----------
-------------------- ---------------- LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) STOCK OPTIONS(#) PAYOUTS($) COMPENSATION($)
- - - ----------------------------------------------------- ---- --------- -------- ---------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Forward ................................... 1994 300,000 30,060 -- 4,262 3,442(2)
President and 1993 300,000 -- -- -- 24,017
Chief Executive Officer 1992 300,000 16,996 60,000 708,629 5,448
Jeffry A. Werner .................................... 1994 155,000 15,531 -- 3,394 1,860(2)
Senior Vice President 1993 155,000 -- -- 162,589 8,762
Commercial 1992 155,000 8,781 25,000 4,371 3,398
David A. Fournie .................................... 1994 140,000 14,028 -- 1,495 1,496(2)
Vice President 1993 140,000 -- -- 48,463 1,794
Operations 1992 121,250 2,771 25,000 1,316 1,859
Libor F. Rostik ..................................... 1994 130,000 13,026 -- 12,838 8,092(2)
Senior Vice President 1993 130,000 -- -- -- 1,909
Engineering 1992 120,625 6,834 25,000 554 2,572
Dennis E. Beach ..................................... 1994 125,000 12,525 -- 33,500 8,609(2)
Vice President 1993 125,000 -- -- -- 1,920
Administration 1992 125,000 7,082 20,000 1,444 2,772
<FN>
- - - ------------------------------
(1) Includes (i) value of vested and non-vested portions of employer
contributions and allocations to Retirement Savings Plan account, (ii)
Company matching portion of Stock Purchase Plan purchases, and (iii)
payment of imputed dividends on deferred profit sharing, respectively, for
the named executive officers as follows: Gordon E. Forward, $3,000, $48 and
$394; Jeffry A. Werner, $1,550, $48 and $262; David A. Fournie, $1,400, $96
and none; Libor F. Rostik, $1,300, $48 and $6,744; and Dennis E. Beach
$1,250, $96 and $7,263.
</TABLE>
None of the Company's executive officers are employed under contract and all
are employed as employees at will. They participate on the same basis as other
employees in the Company's broad-based employee benefits program which includes
a retirement savings plan, group medical coverage and life insurance. The
President of the Company is also covered by a Financial Security Plan that
includes disability benefits under certain circumstances and death benefits
payable to beneficiaries for a period of ten years or until he will have reached
the age of 65, whichever last occurs. If he retires at or after attaining age
60, he will be entitled to a supplemental retirement benefit. In the event of
termination of employment under certain circumstances following a change of
control (as defined in the Plan), he will be deemed to be fully vested in any
supplemental retirement benefit, without reduction, provided by the Plan.
5
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information concerning each option exercised
during the 1994 fiscal year ended May 31, 1994 by each of the named executive
officers and the value of unexercised options held by such executive officer at
May 31, 1994.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
SHARES END FISCAL YEAR END (1)
ACQUIRED VALUE ------------------------- -------------------------
NAME CLASS OF STOCK ON EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- - - ------------------------------- -------------- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Gordon E. Forward.............. Company -0- -- 74,000/36,000 --
TXI -0- -- 38,745/20,000 --
Jeffry A. Werner............... Company -0- -- 35,000/15,000 --
TXI -0- -- --/-- --
David A. Fournie............... Company -0- -- 26,000/16,500 1,470/368
TXI -0- -- --/-- --
Libor F. Rostik................ Company -0- -- 30,000/15,000 --
TXI -0- -- --/-- --
Dennis E. Beach................ Company -0- -- 28,000/12,000 --
TXI -0- -- --/-- --
<FN>
- - - ------------------------------
(1) Computed based upon the difference between aggregate fair market value and
aggregate purchase price.
</TABLE>
PERFORMANCE GRAPH
The following chart compares the Company's cumulative total stockholder
return for the five-year period ended May 31, 1994, with the cumulative total
return of the Standard & Poor's 500 Composite Stock Index (the "S&P 500") and
the Standard & Poor's Steel Index (the "S&P Steel Group"). These comparisons
assume the investment of $100 on May 31, 1989 and the reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
Chaparral Steel S&P 500 S&P Steel Group
<S> <C> <C> <C>
1989 100 100 100
1990 83 117 95
1991 88 130 86
1992 101 143 99
1993 89 160 149
1994 83 166 168
</TABLE>
6
<PAGE>
REPORT OF THE COMPENSATION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is composed of three
non-employee directors. It is the goal of the Committee to insure that policies
and processes exist so that all of the Company's employees will be fairly and
competitively compensated. The Committee evaluates the performance of the senior
executive group against predetermined goals with the guidance of the President
and evaluates the performance of the President. The Committee also evaluates
human resource development, and succession planning within the Company.
GENERAL. The role of the Company's compensation program is to aid the
Company in the attraction and retention of the most productive employees in the
marketplace. The compensation program's guidelines are such that if individuals
are performing in the top ten percent of effectiveness compared to others that
might be available in the marketplace to fill similar positions, their total
compensation should be in the upper twenty-five percent of those with whom the
Company competes for equivalent talent. The makeup of an executive's total
compensation should provide adequate direct compensation, high incentive
compensation and modest indirect or fringe compensation. A significant portion
of the executive officer's compensation is linked to the financial performance
of the Company.
While the criteria for the compensation program for executive officers are
subjective in nature, to insure that the compensation program is competitive,
the Committee takes into account factors relevant to the specific compensation
component being considered, such as comparisons to industry and geographic
salary surveys.
COMPENSATION ELEMENTS. The executive officers' total compensation
opportunities, which are established over a five year span of time, consist of
three basic elements -- salaries, annual incentives and long-term incentives.
Annual and long-term incentives are a significant portion of the total
compensation and are strongly linked to financial performance and thereby align
the interests of the Company's executives and its stockholders to build
long-term value and improve the return to the Company's stockholders.
SALARIES. Approximately 45% of the total compensation opportunity of an
executive officer, other than the chief executive officer, is composed of
salary. Salaries are reviewed periodically and compared to industry and
geographic salary surveys to assure that the salary levels remain competitive.
The impact that the executive has on the Company, the skills and experience
required by the position and the performance of the executive are also
considerations in determining salary level.
ANNUAL INCENTIVES. Approximately 10% of the total compensation opportunity
of an executive officer is based on an annual incentive. The Board of Directors
annually considers employee profit sharing to provide additional incentives to
all employees, including the Company's executive officers. This short-term
incentive is totally dependent on measured financial performance of the Company.
An executive officer's profit share is not limited as a percentage of salary;
however, any portion over 20% is deferred into a phantom stock plan with
increments of phantom stock units being redeemed at five year intervals at a
price equal to the fair market value of the Company's Common Stock. Dividends
equivalent to the dividend declared and paid on the Company's Common Stock are
paid each year on each phantom stock unit. For the 1994 fiscal year, the
Directors approved a profit sharing distribution of 8% of the Company's pre-tax
income.
LONG-TERM STOCK INCENTIVES. Approximately 45% of the executive officer's
total compensation opportunity consists of long-term incentives, which is
provided primarily through the Company's stock option plan and a performance
share plan. When granted, options under the stock option plan have exercise
prices of not less than 100% of the then fair market value of the Company's
Common Stock and become exercisable 40% after two years, 60% after three years,
80% after four years and 100% five years after grant, and all expire not more
than ten years after grant. The value of the option ultimately realized will
depend on the continued success of the Company; thus, the option not only
7
<PAGE>
provides the executive an incentive for years after it has been awarded but ties
this incentive directly into increasing stockholder value. Long-term stock
options also strengthen the ability of the Company to attract, motivate and
retain executives of superior capability required to achieve the Company's
business objectives in an intensely competitive environment. An executive is
targeted to have between one and five times annual salary in accumulated options
as priced at the time of the grant.
The Company has maintained since 1976 a performance share plan under which
performance shares have been granted from time to time by the Board of Directors
acting in its discretion and upon recommendation of the Compensation Committee.
The value of a performance share is based upon the Company's annual financial
results averaged over the preceding five years and a cash dividend is paid on a
performance share at the end of each fiscal year equal to 10% of the Company's
earnings per share for such fiscal year, based on an assumed 4.5 million
performance shares. Performance shares are 40% vested after three years, 60%
vested after four years and 100% vested after 5 years. At five year intervals,
the plan requires, subject to several restrictions and conditions, that a
percentage of the vested portion be redeemed based on the age of the executive
such that 100% of vested shares are redeemed by the time the executive reaches
65 years of age. No performance shares have been granted under the plan since
1986 and it is not contemplated that there will be future grants under the plan.
CHIEF EXECUTIVE OFFICER COMPENSATION. The chief executive officer's salary
is established in the same manner as other executive officers and he
participates on the same basis as such executive officers in the Company's
incentive programs. However, approximately 50% of the chief executive officer's
total compensation opportunity is based on incentives linked to the financial
performance of the Company.
JOHN M. BELK, Chairman
ROBERT D. ROGERS, ROBERT ALPERT
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young were the Company's independent auditors for the last fiscal
year and will continue to be for the current year. A representative of Ernst &
Young will attend the Stockholders' Meeting; and although he does not intend to
make a statement to the Stockholders, he will be available to respond to any
relevant questions of the Stockholders.
ANNUAL REPORT
A copy of the Company's Annual Report for the fiscal year ended May 31,
1994, is being mailed to each Stockholder of record along with the proxy
materials, but is not to be considered a part of the proxy soliciting material.
1995 STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the next Annual
Meeting of Stockholders presently scheduled for October 18, 1995, must be
received by the Secretary of the Company not later than May 1, 1995, to be
eligible for inclusion in the proxy statement and form of proxy relating to that
meeting.
8
<PAGE>
PROPOSAL TO AMEND THE
CHAPARRAL STEEL COMPANY STOCK OPTION PLAN
DESCRIPTION OF AMENDMENT
Subject to the approval of the Company's Stockholders, the Board of
Directors has adopted and approved the amendment to the Company's Stock Option
Plan ("Plan") set forth in Exhibit A, which permits the Company to grant both
incentive and nonstatutory stock options under the Plan to non-employee
directors of the Company. The purpose of the amendment is to promote the
interests of the Company and its stockholders by encouraging non-employee
directors to have a direct and personal stake in the performance of the
Company's Common Stock. The amendment provides that options are automatically
granted under the Plan to each non-employee director of 10,000 shares of Common
Stock, effective as of the date each such non-employee director is first
appointed to the Board or first elected by the stockholders at an annual meeting
and every third year thereafter that such non-employee director is reelected at
an annual meeting. Each non-employee director elected at the upcoming Annual
Meeting will automatically be granted an option for 10,000 shares.
GENERAL
The Plan is administered by the Compensation Committee ("Committee") of the
Board of Directors ("Board") who also has the authority to adopt rules and
regulations relating to the Plan. The option price of a stock option must not be
less than 100% of the fair market value of the Common Stock on the day of grant,
which value is deemed to be the mean between the high and low sales price of a
share of Common Stock on the New York Stock Exchange on such date. The exercise
price must be paid in full in cash upon the exercise of the option or in cash
and/or by delivery of shares of Common Stock already owned by the optionee
having an aggregate fair market value equal to the option price.
The Board may terminate the Plan at any time and may amend the Plan from
time to time in such respects as the Board may deem advisable without the
approval of the stockholders of the Company unless such amendment would increase
the number of shares of Common Stock as to which incentive stock options may be
granted; or change the class of employees eligible to receive incentive stock
options; or disqualify an incentive stock option under the Code, in which case
approval of the stockholders is required. Further, approval of the stockholders
is required for any amendment to the Plan which could, as determined for the
purposes of Rule 16b-3 of the Securities and Exchange commission under the
Securities Exchange Act of 1934 (the "1934 Act"), materially increase the
benefits accruing to participants under the Plan; or materially increase the
number of shares of Common Stock which may be issued under the Plan; or
materially modify the requirements as to eligibility for participation in the
Plan.
FEDERAL INCOME TAX CONSEQUENCES
The grant of a stock option under the Plan will not, by itself, result in
the recognition of taxable income to the optionee or entitle the Company to a
deduction at the time of such grant. The exercise of an incentive stock option
generally will not give rise to taxable income to an optionee, or a deduction to
the Company. When Common Stock is received by an optionee pursuant to the
exercise of an incentive stock option, the excess of the fair market value of
the Common Stock at the time of exercise over the option price will be treated
as income for the purposes of computing the optionee's alternate minimum taxable
income.
Upon exercise of a nonstatutory stock option, an optionee must recognize
ordinary income in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the option price. The Company will be
entitled to a deduction in an amount equal to the ordinary income of the
optionee, provided the Company withholds appropriate federal income taxes. These
rules are modified, in certain respects, in the case of an optionee who is
subject to the insider trading provisions of Section 16 of the 1934 Act.
9
<PAGE>
REQUIRED AFFIRMATIVE VOTE
Adoption of the proposed amendment to automatically grant options under the
Plan to non-employee directors requires the affirmative vote of the holders of a
majority of the outstanding shares of Common Stock represented at the Annual
Meeting of Stockholders.
The Board of Directors recommends that the stockholders vote FOR the
adoption of the proposed amendment.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors was not aware
that any matters not referred to in this Proxy Statement would be presented for
action at the Meeting. If any other matters should come before the Meeting, the
persons named in the accompanying proxy will have discretionary authority to
vote all proxies in accordance with their best judgment.
By Order of the Board of Directors,
ROBERT C. MOORE
SECRETARY
10
<PAGE>
EXHIBIT "A"
RESOLVED, that a paragraph 23 be added to the Chaparral Steel Company Stock
Option Plan to read as follows:
"23. GRANT OF OPTION TO NON-EMPLOYEE DIRECTORS. Effective on the date after
July 14, 1995 that each Non-employee Director is first elected by the Board of
Directors or at an annual meeting of stockholders (an "Annual Meeting") to the
Board of Directors and every third year thereafter that such Non-employee
Director is reelected to the Board of Directors at an Annual Meeting (provided
that such individual has continuously served as a Director during the interim
period), such Non-employee Director shall automatically be granted a stock
option under the Plan covering 10,000 shares of Common Stock. For the purpose of
this paragraph 23, a "Non-employee Director" is defined as person who has not
been an employee of the Company (or any subsidiary of the Company) for any part
of the preceding fiscal year. The per share exercise price of such option shall
be equal to the fair market value of the Common Stock (as determined in
accordance with paragraph 6) on the date of election or reelection to the Board
of Directors, as the case may be. In the event that a Non-employee Director to
whom an option has been granted under this Plan ceases to be a Director of the
Company otherwise than by reason of death, such option may, subject to the
provisions of this paragraph 23, be exercised (to the extent the number of
shares purchasable under the option by the Non-employee Director at the time
such individual ceases to be a Director of the Company) at any time within three
months after the date such individual ceases to be a Director. In the event of
the death, while serving as a Director of the Company, of a Non-employee
Director to whom an option has been granted under this Plan, such option may be
exercised (to the extent of the number of shares purchasable by the individual
at the time of death) by a legatee of legatees of such individual under his or
her last will, or by his or her personal representatives or distributees, at any
time within a period of one year after such individuals' death, but not after
the expiration of the option's stated term. Nothing in the Plan or in any option
granted pursuant thereto, shall confer on any Non-employee Director any right to
continue as a Director of the Company or interfere in any way with the right of
the Board of Directors to terminate an individual as a Director of the Company
at any time, with or without cause, notwithstanding the possibility that the
number of shares purchasable or exercisable by such Non-employee Director under
such individual's option may be reduced or eliminated."
11
<PAGE>
FOR SHARES OF COMMON STOCK
CHAPARRAL STEEL COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS OCTOBER 19, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Robert D. Rogers, John M. Belk and Gordon E.
Forward, or any of them, attorneys and proxies, with power of substitution and
revocation, to vote, as designated on the reverse side hereof, all shares of
stock which the undersigned is entitled to vote, with all powers which the
undersigned would possess if personally present, at the Annual Meeting
(including all adjournments thereof) of shareholders of Chaparral Steel
Company to be held on Wednesday, October 19, 1994 at 9:30 A.M. at The
Ballpark in Arlington, 1000 Ballpark Way, Arlington, Texas.
(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)
See Reverse Side
<PAGE>
TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST SIGN
BELOW: NO BOXES NEED TO BE CHECKED
X PLEASE MARK YOUR VOTES AS THIS
------------
COMMON
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1, 2 AND 3
Item 1 - Election of Directors (see reverse).
FOR all nominees (except as specified below) / /
WITHHOLD AUTHORITY to vote for all nominees listed at right / /
Robert Alpert, John M. Belk, Gordon E. Forward,
Gerald R. Heffernan, Gerhard Liener,
Eugenio Clariond Reyes and Robert D. Rogers
(Instruction: To withhold authority to vote for an individual nominee write that
nominee's name on the space provided below.)
- - - --------------------------------------------------------------------------------
Item 2 - Proposal FOR amendment to Chaparral Steel Company Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
Item 3 - To transact such other business that may properly come before the
meeting.
This proxy when properly executed will be voted in the manner directed herein by
the undersigned. In the absence of such instructions this proxy will be voted
FOR the nominees listed in Item 1, FOR the Proposal in Item 2 and FOR the
Proposal in Item 3.
Signature(s) Dated: , 1994
----------------------------------------------- ------
(Sign exactly as name(s) appear above. If shares are held jointly each holder
should sign. If signing for estate, trust or corporation, title or capacity
should be stated.)
Please date, sign and return this Proxy in the enclosed business envelope.
