<PAGE> 1
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. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
Chaparral Steel
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $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 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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:
- --------------------------------------------------------------------------------
<PAGE> 2
[CHAPARRAL STEEL LOGO]
August 29, 1996
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 16, 1996, at the Dallas Public Schools Environmental
Education Center, 1600 Bowers Road, Seagoville, 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 1996 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,
/s/ GORDON E. FORWARD
-----------------------------------
GORDON E. FORWARD
President
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 16, 1996
The Annual Meeting of Stockholders of Chaparral Steel Company (the
"Company") will be held at the Dallas Public Schools Environmental Education
Center, 1600 Bowers Road, Seagoville, Texas, on Wednesday, October 16, 1996, at
9:30 A.M. (C.D.T.) for the following purposes:
1. To elect six (6) Directors.
2. 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 19, 1996,
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 the office of the Company's Secretary at
1341 W. Mockingbird Lane, 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,
/s/ ROBERT C. MOORE
-----------------------------------
ROBERT C. MOORE
Secretary
Dallas, Texas
August 29, 1996
<PAGE> 3
[CHAPARRAL STEEL LOGO]
300 Ward Road
Midlothian, Texas 76065-9651
PROXY STATEMENT
For
ANNUAL MEETING OF STOCKHOLDERS
To Be Held October 16, 1996
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 16,
1996, and at any adjournment thereof. The approximate date on which this Proxy
Statement and accompanying proxy were first sent to Stockholders is August 29,
1996.
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 ChaseMellon Shareholder Services
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 19, 1996,
were 28,358,300 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 19, 1996, to vote at the Annual Meeting and at any
adjournment 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 1341 W. Mockingbird Lane,
Dallas, Texas 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.
1
<PAGE> 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of June 30, 1996, 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>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF
OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------- ------------------ ----------
<S> <C> <C>
Texas Industries, Inc. 24,000,000 83.6%
1341 W. Mockingbird Lane
Dallas, Texas 75247
</TABLE>
ELECTION OF DIRECTORS
The bylaws of the Company provide for a board of not fewer 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 six 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......... 60 Chairman of the Board of the Company, President and 1973
Chief Executive Officer of Texas Industries,
Inc.(a)(b)
Gordon E. Forward........ 60 President and Chief Executive Officer of the 1982
Company(a)(c)
Robert Alpert............ 64 Chairman of the Board of Alpert Companies 1989
(investments), Dallas, Texas(a)(b)
John M. Belk............. 76 Chairman of the Board of Belk Stores Services, 1987
Inc.(d)
Gerald R. Heffernan...... 76 President of G.R. Heffernan & Associates, Ltd., 1973
Toronto, Ontario, Canada(a)
Eugenio Clariond Reyes... 53 Director General and Chief Executive Officer of 1993
Grupo IMSA, S.A.; President, Mexico -- U.S.
Chamber of Commerce; Director, Instituto
Tecnologico y de Estudias Superiores de Monterrey,
A.C.
</TABLE>
- ---------------
* Based upon information provided by the Directors to the Company as of June
30, 1996.
(a) Messrs. Rogers, Forward, Alpert and Heffernan are members of the Board of
Directors of Texas Industries, Inc.
(b) Messrs. Rogers and Alpert are members of the Board of Directors of
Consolidated Freightways, Inc.
(c) Mr. Forward is a member of the Board of Directors of Noranda Forest Inc.
(d) Mr. Belk is a member of the Board of Directors of Lowe's Companies, Inc. and
Coca-Cola Bottling Co. Consolidated.
2
<PAGE> 5
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
attended at least 75% of all Board meetings.
The Audit Committee, composed during the last fiscal year of Directors
Heffernan, Alpert and Clariond Reyes, 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 both meetings.
The Company's Compensation Committee, composed during the last fiscal year
of Directors Rogers, Alpert and Belk, 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 one time
during the year, and all members attended such meeting.
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 1341 W.
Mockingbird Lane, Dallas, Texas 75247.
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 (June 1,
1995).
COMPENSATION OF DIRECTORS
Directors who are not employees of the Company or its affiliates 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. Each non-employee director is
automatically granted an option to purchase 10,000 shares of Common Stock when
first elected either by the Board, or by the Stockholders at an annual meeting,
and every third year thereafter that such director is reelected at an annual
meeting. The Company also reimburses directors for travel, lodging and related
expenses they may incur in attending Board and/or 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. No executive officer of the Company
serves or has served during the year 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> 6
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of June 30, 1996, 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(1) COMMON SHARES(1)
---------------------------- ----------------------------
BENEFICIALLY OWNED** %(2) BENEFICIALLY OWNED** %(3)
-------------------- ---- -------------------- ----
<S> <C> <C> <C> <C>
Robert Alpert........................ 1,000 * 7,555(5) *
Dennis E. Beach...................... 11,957(4) * 189 *
John M. Belk(6)...................... 1,000 * 3,000(5) *
Eugenio Clariond Reyes............... None * None *
Gordon E. Forward.................... 113,100(4) * 20,570 *
David A. Fournie..................... 38,000(4) * 610 *
Gerald R. Heffernan(7)............... None * 123,000(5) 1.1%
Robert D. Rogers(8).................. 122,800(4) * 199,320(5) 1.8%
Libor F. Rostik...................... 45,000(4) * 14 *
Peter H. Wright...................... 36,000(4) * None *
All Directors and Executive Officers
as a Group (15 Persons)............ 528,766(4) 1.8% 430,254(5) 3.8%
</TABLE>
- ---------------
* 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) TXI common stock is listed for trading on the New York Stock Exchange.
(2) Based on the sum of (i) 28,707,400 shares of Common Stock, which on June 30,
1996, 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) Based on the sum of (i) 11,120,531 shares of common stock, which on June 30,
1996, 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.
(4) Includes, with respect to such person(s) shares of Common Stock subject to
options exercisable within 60 days of June 30, 1996, as follows: Dennis E.
Beach, 9,200 shares; Gordon E. Forward, 98,000 shares; David A. Fournie,
37,500 shares; Robert D. Rogers, 82,000 shares; Libor F. Rostik, 40,000
shares; Peter H. Wright, 36,000 shares; and all Directors and Executive
Officers as a Group, 459,700 shares.
(5) Includes, with respect to such person(s) shares of common stock subject to
options exercisable within 60 days of June 30, 1996, as follows: Robert
Alpert, 5,000 shares; John M. Belk, 3,000 shares; Gerald R. Heffernan, 3,000
shares; Robert D. Rogers, 70,000 shares; and all Directors and Executive
Officers as a Group, 106,400 shares.
(6) Mr. Belk has sole voting power over 7,000 shares of Common Stock as trustee
under the John M. Belk Grantor Trust.
(7) The wife of Mr. Heffernan owns 971 shares of TXI common stock as to which he
disclaims beneficial ownership.
(8) The wife of Mr. Rogers owns 4,000 shares of Common Stock as to which he
disclaims beneficial ownership.
4
<PAGE> 7
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 years
ended May 31, 1996, 1995 and 1994, of those persons who were, at May 31, 1996,
(i) the Chief Executive Officer and (ii) the other four highly compensated
executive officers of the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
------------------------
AWARDS PAYOUTS
ANNUAL ---------- ----------
COMPENSATION SECURITIES
--------------------- UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($) OPTIONS(#) PAYOUTS($) COMPENSATION($)
- ------------------------------- ---- --------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Gordon E. Forward.............. 1996 300,000 88,389 -- 15,356 4,963(1)
President and 1995 300,000 43,628 60,000 7,580 3,945
Chief Executive Officer 1994 300,000 30,060 -- 4,262 3,442
David A. Fournie............... 1996 180,000 53,033 -- 5,386 2,809(1)
Vice President 1995 175,000 25,450 19,000 2,659 2,376
Structural Products 1994 140,000 14,028 -- 1,495 1,496
Business Unit
Libor F. Rostik................ 1996 160,000 47,141 -- 1,510 2,601(1)
Vice President 1995 156,250 22,723 19,000 746 2,261
Engineering 1994 130,000 13,026 -- 12,838 8,092
Peter H. Wright................ 1996 155,000 45,668 -- 5,270 2,592(1)
Vice President 1995 151,250 21,996 19,000 2,602 2,259
Bar Products 1994 125,000 12,525 -- 1,463 1,506
Business Unit
Dennis E. Beach................ 1996 155,000 45,668 -- 3,940 2,584(1)
Vice President 1995 151,250 21,996 19,000 1,945 2,251
Administration 1994 125,000 12,525 -- 33,500 8,609
</TABLE>
- ---------------
(1) Includes (i) 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, $4,521, $48 and $394; David A.
Fournie, $2,713, $96 and none; Libor F. Rostik, $2,411, $48 and $142; Peter
H. Wright, $2,336, $48 and $208; and Dennis E. Beach, $2,336, $96 and $152.
None of the Company's executive officers are employed under contract. They
participate on the same basis as other employees in the Company's broad-based
employee benefits program which includes a retirement savings plan, group
medical coverage and life insurance. The Company's executive officers (except
the President) are also covered by a financial security plan that includes
disability benefits under certain circumstances and death benefits payable to
beneficiaries for a period of ten years or until the executive will have reached
the age of 65, whichever last occurs. In the event of termination of employment
under certain circumstances following a change of control (as defined in the
plan), the executive officer will be deemed to be fully vested in any
supplemental retirement benefit, without reduction, provided by the plan. The
President of the Company is covered by a separate financial security plan which
is substantially similar to the executive officers' financial security plan.
5
<PAGE> 8
OPTION EXERCISES AND YEAR-END VALUES
The following table provides information concerning each option exercised
during the 1996 fiscal year ended May 31, 1996, by each of the named executive
officers and the value of unexercised options held by such executive officer at
May 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
NUMBER OF OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES YEAR END FISCAL YEAR END($)(1)
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- --------------------- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Gordon E. Forward.... -0- -- 98,000/72,000 341,000/429,000
David A. Fournie..... -0- -- 37,500/24,000 158,088/141,250
Libor F. Rostik...... -0- -- 40,000/24,000 140,000/141,250
Peter H. Wright...... -0- -- 36,000/23,000 122,000/136,750
Dennis E. Beach...... 30,000 118,250 9,200/19,800 29,400/122,350
</TABLE>
- ---------------
(1) Computed based upon the difference between aggregate fair market value and
aggregate purchase price.
PERFORMANCE GRAPH
The following chart compares the Company's cumulative total stockholder
return for the five-year period ended May 31, 1996, 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 "Peer Group"). These comparisons assume
the investment of $100 on May 31, 1991 and the reinvestment of dividends.
<TABLE>
<CAPTION>
Measurement Period Chaparral
(Fiscal Year Covered) Steel S&P 500 Peer Group
<S> <C> <C> <C>
1991 100 100 100
1992 115.69 109.85 106.38
1993 101.41 122.61 158.08
1994 94.38 127.83 176.17
1995 101.96 153.64 143.70
1996 159.44 197.33 140.81
</TABLE>
6
<PAGE> 9
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 10% of effectiveness compared to others that might be
available in the marketplace to fill similar positions, their total compensation
should be in the upper 25% 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
objectives, 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 objective 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. During the last fiscal year, the
Compensation Committee reviewed and recommended salary increases for the Vice
President -- Structural Products Business Unit, the Vice
President -- Engineering, the Vice President -- Bar Products Business Unit and
the Vice President -- Administration.
Annual Incentives. Approximately 10% of the total compensation objective
of an executive officer is based on an annual incentive. For the 1996 fiscal
year, the Board of Directors approved a profit sharing distribution of 8% of the
Company's pre-tax income to provide additional incentives to all employees,
including the Company's executive officers. For fiscal year 1997, the Board of
Directors have adopted a cash incentive plan for all employees, including
executives, in lieu of the annual profit sharing distribution. Under this
incentive plan, which the Directors will annually consider adopting, a cash
bonus equal to a designated percentage of an eligible executive's annual salary
is earned if a consolidated tangible return on assets (as defined in the plan,
"ROA") threshold established by the Compensation Committee is achieved. If the
threshold level below which no incentive would be paid is exceeded, the
incentive increases based on specified ROA levels established by the Committee.
Target ROA thresholds and the designated percentage of an executive's salary are
not established for executives individually; rather, they are the same for all
executives in order to foster a team-based approach.
7
<PAGE> 10
Long-Term Incentives. Approximately 45% of the executive officer's total
compensation objective consists of long-term incentives, which is provided
primarily through the Company's stock option plan, a performance share plan and
a continuous rolling three-year cash incentive 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 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 shares.
Performance shares are 40% vested after three years, 60% vested after four years
and 100% vested after five 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.
Beginning in fiscal year 1997, a continuous rolling three-year cash
incentive plan has been established for certain executives of the Company,
including the named executives. Under this plan, an average consolidated
tangible return on equity threshold (as defined in the plan, "ROE") is
established annually by the Compensation Committee for the next succeeding
three-year period. For an executive to earn an annual incentive under the plan,
the Company must reach or surpass the ROE threshold for the period ending in the
year in respect of which the incentive is earned. If the threshold level below
which no incentive would be paid is exceeded, the incentive increases based on
specified ROE levels established by the Committee. If the average ROE threshold
is reached or surpassed, an executive can earn a cash incentive award ranging
from 35% to 120% or more of the executive's annual salary, depending on the
average ROE achieved and the recommendation of the Chief Executive Officer of
the Company based upon his subjective evaluation of the executive's individual
performance. At the discretion of the Board of Directors, payment of an
incentive award may be deferred and may be in the form of cash, common stock or
a combination of cash and common stock. In the initial year of the plan, an
incentive will be paid based on the ROE achieved for fiscal year 1997 if the ROE
threshold for the year is equaled or surpassed. In fiscal year 1998, the
threshold will be the average ROE threshold established for the two-year period
ending with the 1998 fiscal year and in fiscal year 1999, the threshold will be
the average ROE threshold established for the three-year period ending with the
1999 fiscal year. The Committee believes that this plan focuses the
participating executives on growth and profitability for the Company further
aligning their interests to those of the Company's Stockholders.
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
8
<PAGE> 11
Chief Executive Officer's total compensation objective is based on incentives
linked to the financial performance of the Company.
Tax Deductibility of Executive Compensation. Section 162(m) of the
Internal Revenue Code generally limits the corporate deduction to $1 million for
compensation paid to a person who on the last day of fiscal years beginning on
or after January 1, 1994 is either the chief executive officer or among the four
most highly compensated officers other than the chief executive officer, except
for qualified performance-based compensation. At this time, it is not
anticipated that any Company executive will receive any compensation in fiscal
year 1997 in excess of the limit. Therefore, during fiscal year 1996, the
Company did not take action to comply with such limit. The Company generally
intends to structure the compensation with its executives to achieve maximum
deductibility under Section 162(m) with minimum sacrifices in flexibility and
corporate objectives.
JOHN M. BELK, Chairman
ROBERT D. ROGERS, ROBERT ALPERT
SECTION 16 COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934 generally requires
the Company's Directors and executive officers and persons who own more than 10%
of a registered class of the Company's equity securities ("10% owners") to file
with the Securities and Exchange Commission and the New York Stock Exchange
initial reports of ownership and reports of changes in ownership of common stock
and other equity securities of the Company. Directors, executive officers and
10% owners are required by the Securities and Exchange Commission regulations to
furnish the Company with copies of all Section 16(a) forms they file. To the
Company's knowledge, based solely on review of copies of such reports furnished
to the Company and written transaction reports of its Directors and executive
officers that no other reports were required to be filed during the 1996 fiscal
year, all Section 16(a) filing requirements applicable to its Directors,
executive officers and 10% owners were complied with, except (i) Dennis E.
Beach, David A. Fournie, Larry L. Clark, Libor F. Rostik and Peter H. Wright
each filed a late report on Form 5 reflecting an option grant during the 1995
fiscal year and (ii) David A. Fournie filed, six days late, one Form 4 report
covering two sales transactions.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP 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 LLP 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,
1996, 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.
1997 STOCKHOLDER PROPOSALS
Proposals of Stockholders intended to be presented at the next Annual
Meeting of Stockholders presently scheduled for October 15, 1997, must be
received by the Secretary of the Company not later than May 8, 1997, to be
eligible for inclusion in the proxy statement and form of proxy relating to that
meeting.
9
<PAGE> 12
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,
/s/ ROBERT C. MOORE
---------------------------------
ROBERT C. MOORE
Secretary
10
<PAGE> 13
FOR SHARES OF COMMON STOCK
CHAPARRAL STEEL COMPANY
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS OCTOBER 16, 1996
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, 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 stockholders of Chaparral Steel Company
to be held on Wednesday, October 16, 1996 at 9:30 A.M. at the Dallas Public
Schools Environmental Education Center, 1600 Bowers Road, Seagoville, Texas.
(THIS PROXY CONTINUES AND MUST BE SIGNED ON THE REVERSE SIDE)
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TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS JUST SIGN BELOW; Please mark / X /
NO BOXES NEED TO BE CHECKED your votes as
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2 indicated in
this example
Item 1 - Election of Directors (see reverse). Robert Alpert, John M. Belk, Gordon E. Forward, Gerald R. Heffernan, Eugenio
Clariond Reyes and Robert D. Rogers
FOR all nominees WITHHOLD
(except as AUTHORITY
specified hereon) to vote for all nominees (Instruction: To withhold authority to vote for an individual nominee write
listed at right that nominee's name on the space provided below.)
/ / / /
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Item 2 - 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 AND FOR THE PROPOSAL
IN ITEM 2.
(Sign exactly as name(s) appears hereon. 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.
Dated: , 1996
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