SCHNITZER STEEL INDUSTRIES, INC.
December 6, 1996
Dear Shareholder:
You are invited to attend the Annual Meeting of Shareholders of your Company,
which will be held on Monday, January 6, 1997 at 8 A.M., local time, at the
Multnomah Athletic Club, 1849 SW Salmon Street, Portland, Oregon 97205.
The formal notice of the meeting and the proxy statement appear on the following
pages and describe the matters to be acted upon. Time will be provided during
the meeting for discussion and you will have an opportunity to ask questions
about your Company.
Whether or not you plan to attend the meeting in person, it is important that
your shares be represented and voted. After reading the enclosed notice of the
meeting and proxy statement, please sign, date and return the enclosed proxy at
your earliest convenience. Return of the signed and dated proxy card will not
prevent you from voting in person at the meeting should you later decide to do
so.
Sincerely,
/S/Robert W. Philip
Robert W. Philip
President
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 6, 1997
The Annual Meeting of Shareholders of Schnitzer Steel Industries, Inc. (the
Company) will be held at the Multnomah Athletic Club, 1849 SW Salmon Street,
Portland, Oregon 97205 on Monday, January 6, 1997 at 8 A.M., local time, for the
following purposes:
(1) To elect eleven directors each to serve until the next Annual
Meeting of Shareholders and until a successor has been elected
and qualified;
(2) To approve the proposed Amendments to the 1993 Stock Incentive
Plan;
(3) To approve and ratify the selection of Price Waterhouse LLP as
the independent auditors for the Company and its subsidiaries
for the fiscal year ending August 31, 1997; and
(4) To transact such other business as may properly be brought
before the meeting or any adjournment or postponement thereof.
Only shareholders of record at the close of business on November 15, 1996 are
entitled to notice of and to vote at the meeting or any adjournments thereof.
Please sign and date the enclosed proxy and return it promptly in the enclosed
reply envelope. If you are able to attend the meeting, you may, if you wish,
revoke the proxy and vote personally on all matters brought before the meeting.
By Order of the Board of Directors,
/S/Dori Schnitzer
Dori Schnitzer
Secretary
Portland, Oregon
December 6, 1996
<PAGE>
SCHNITZER STEEL INDUSTRIES, INC.
PROXY STATEMENT
This proxy statement is furnished in connection with the solicitation of proxies
by the Board of Directors of Schnitzer Steel Industries, Inc., an Oregon
corporation (the Company), to be voted at the Annual Meeting of Shareholders to
be held at the time and place and for the purposes set forth in the accompanying
Notice of Annual Meeting.
All proxies in the enclosed form that are properly executed and received by the
Company prior to or at the Annual Meeting and not revoked will be voted at the
Annual Meeting or any adjournments thereof in accordance with the instructions
thereon. Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before it is voted. Proxies may be revoked by (i)
filing with the Secretary of the Company, at or before the taking of the vote at
the Annual Meeting, a written notice of revocation bearing a later date than the
proxy, (ii) duly executing a subsequent proxy relating to the same shares and
delivering it to the Secretary of the Company before the Annual Meeting, or
(iii) attending the Annual Meeting and voting in person (although attendance at
the Annual Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice revoking a proxy should be sent to Schnitzer Steel
Industries, Inc., P.O. Box 10047, Portland, Oregon 97296-0047, Attention: Dori
Schnitzer, Secretary, or hand-delivered to the Secretary at or before the taking
of the vote at the Annual Meeting.
The mailing address of the principal executive offices of the Company is P.O.
Box 10047, Portland, Oregon 97296-0047. This Proxy Statement and the
accompanying Notice of Annual Meeting and Proxy Card are first being mailed to
shareholders on or about December 6, 1996.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The record date for determination of shareholders entitled to receive notice of
and to vote at the Annual Meeting is November 15, 1996. At the close of business
on November 15, 1996, 5,772,699 shares of Class A Common Stock (Class A), par
value $1.00 per share, and 4,575,255 shares of Class B Common Stock (Class B),
par value $1.00 per share, of the Company (collectively, the Common Stock) were
outstanding and entitled to vote at the Annual Meeting. Each share of Class A
Common Stock is entitled to one vote and each share of Class B Common Stock is
entitled to ten votes with respect to each matter to be voted on at the Annual
Meeting.
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock, as of August 31, 1996, by (i) persons known to
the Company to be the beneficial owner of more than 5% of either class of the
Company's Common Stock, (ii) each of the Company's directors and nominees for
director, (iii) each executive officer of the Company named in the Summary
Compensation Table, and (iv) all directors and executive officers of the Company
as a group. Unless otherwise noted in the footnotes to the table, the persons
named in the table have sole voting and investment power with respect to all
outstanding shares of Common Stock shown as beneficially owned by them. Except
as noted below, the address of each shareholder in the table is Schnitzer Steel
Industries, Inc., P.O. Box 10047, Portland, Oregon 97296-0047.
<TABLE>
<CAPTION>
Name of Beneficial Owner or Class A Shares Class B Shares
Number of Persons in Group Beneficially Owned (1) Beneficially Owned (1)
- ------------------------------------------------------- ---------------------------- ------------------------------
Number Percent Number Percent
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Schnitzer Steel Industries, Inc. Voting Trust
<S> <C> <C> <C> <C>
(the Schnitzer Trust) 4,550,878 99.5%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Manuel and Edith Schnitzer (2) 15,000 * 303,950 6.6%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Marilyn S. Easly (2) 6,300 * 325,814 7.1%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Carol S. Lewis (2) 1,000 * 195,812 4.3%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
MANUEL SCHNITZER FAMILY GROUP,
Carol S. Lewis, Trustee (3) 1,150,827 25.2%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Dori Schnitzer (2) 331,541 7.2%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Susan Schnitzer (2) 331,542 7.2%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Jean S. Reynolds (2) 298,542 6.5%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
MORRIS SCHNITZER FAMILY GROUP,
Dori Schnitzer, Trustee (3) 1,175,314 25.7%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Gilbert and Thelma S. Schnitzer (2) 518,179 11.3%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Kenneth M. and Deborah S. Novack (2) 3,100 (4) * 305,111 6.7%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Gary Schnitzer (2) 11,283 (5) * 214,597 4.7%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
GILBERT SCHNITZER FAMILY GROUP,
Gary Schnitzer, Trustee (3) 1,044,638 22.8%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Leonard and Lois T. Schnitzer (2) 23,083 (6) * 258,523 5.7%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Robert W. and Rita S. Philip (2) 24,608 (7) * 144,957 3.2%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
LEONARD SCHNITZER FAMILY GROUP,
Rita S. Philip, Trustee (3) 1,180,099 25.8%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Columbia Management Co. 562,500 (8) 9.7%
1300 SW Sixth Avenue, P.O. Box 1350
Portland, OR 97207
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Capital Guardian Trust 290,000 (8) 5.0%
4 Embarcadero Center #1800
San Francisco, CA 94111
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Olympic Capital Management 383,300 (8) 6.6%
1301 Fifth Avenue, Suite 3320
Seattle, WA 98101
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Neumeier Investment Counsel 443,500 (8) 7.7%
26435 Carmel Rancho Blvd.
Carmel, CA 93923
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Robert S. Ball 5,000 *
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
William A. Furman 3,500 *
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Ralph R. Shaw 5,000 *
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Barry A. Rosen 12,654 (9) *
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
Kurt C. Zetzsche 10,577 (10) *
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
All directors and executive officers as a group
(15 persons) (2) 115,305 (11) 1.9% 2,053,033 44.9%
- ------------------------------------------------------- ---------------- ----------- ---------------- -------------
* Less than 1%
(1) Includes, in all cases, shares held by either spouse, either directly
or as trustee or custodian. For purposes of this table, Class A shares
beneficially owned does not include Class A shares issuable upon
conversion of Class B shares.
(2) Class B shares owned by these shareholders are deposited in the
Schnitzer Trust and represented by voting trust certificates
beneficially owned by the shareholders.
(3) Class B shares shown in the table as owned by a family group represent
the total number of shares deposited in the Schnitzer Trust by members
of the family group. The trustee for each family group has certain
voting powers with respect to the family group's shares as described
below under "Schnitzer Steel Industries, Inc. Voting Trust and Buy-Sell
Agreement."
(4) Includes 3,000 shares subject to options exercisable prior to October
30, 1996.
(5) Includes 11,183 shares subject to options exercisable prior to October
30, 1996.
(6) Includes 13,083 shares subject to options exercisable prior to October
30, 1996.
(7) Includes 14,558 shares subject to options exercisable prior to October
30, 1996.
(8) Beneficial ownership as of June 30, 1996 as reported by the investment
manager on Form 13F. Data was obtained from Corporate Record published
by The NASDAQ Stock Market, Inc.
(9) Includes 8,654 shares subject to options exercisable prior to October
30, 1996.
(10) Includes 10,477 shares subject to options exercisable prior to October
30, 1996.
(11) Includes 60,955 shares subject to options exercisable prior to October
30, 1996.
</TABLE>
SCHNITZER STEEL INDUSTRIES, INC. VOTING TRUST AND BUY-SELL AGREEMENT
VOTING TRUST PROVISIONS. Pursuant to the terms of the Schnitzer Steel
Industries, Inc. Voting Trust and Buy-Sell Agreement dated March 31, 1991 (the
Schnitzer Trust Agreement), the beneficial owners of substantially all
outstanding shares of Class B Common Stock have contributed their shares to the
Schnitzer Steel Industries, Inc. Voting Trust (the Schnitzer Trust). The
Schnitzer Trust is divided into four separate groups, one for each branch of the
Schnitzer family. Carol S. Lewis, Dori Schnitzer, Gary Schnitzer, and Rita S.
Philip are the four trustees of the Schnitzer Trust and each is also the
separate trustee for his or her separate family group. Pursuant to the Schnitzer
Trust Agreement, the trustees as a group have the power to vote the shares held
in the Schnitzer Trust and, in determining how the trust shares will be voted,
each trustee separately has the number of votes equal to the number of shares
held in trust for his or her family group. Any action by the trustees requires
the approval of trustees with votes equal to at least 52.5% of the number of
shares held by the Schnitzer Trust. Before voting with respect to the following
actions, each trustee is required to obtain the approval of holders of a
majority of the voting trust certificates held by his or her family group: (a)
any merger or consolidation of the Company with any other corporation, (b) the
sale of all or substantially all the Company's assets or any other sale of
assets requiring approval of the Company's shareholders, (c) any reorganization
of the Company requiring approval of the Company's shareholders, (d) any partial
liquidation or dissolution requiring approval of the Company's shareholders, and
(e) dissolution of the Company. The Schnitzer Trust will terminate on March 31,
2001 unless terminated prior thereto by agreement of the holders of trust
certificates representing two-thirds of the shares held by the trust for each
family group.
PROVISIONS RESTRICTING TRANSFER. The trustees are prohibited from selling or
encumbering any shares held in the Schnitzer Trust. The Schnitzer Trust
Agreement prohibits shareholders who are parties from selling or otherwise
transferring their voting trust certificates or their shares of Class B Common
Stock except to other persons in their family group or to entities controlled by
such persons. Such transfers are also restricted by the Company's Restated
Articles of Incorporation. A holder of voting trust certificates is permitted to
sell the shares of Class B Common Stock represented by his or her certificates
by first directing the trustees to convert the shares into Class A Common Stock
which will then be distributed to the holder free from restrictions under the
agreement. However, before causing any shares to be converted, a holder must
offer the shares (or the voting trust certificates representing the shares) to
the other voting trust certificate holders who may purchase the shares at the
current market price for the Class A Common Stock. After the expiration of the
voting trust, these transfer restrictions will continue to apply to the Class B
Common Stock formerly held by the trust unless terminated by agreement of the
holders of two-thirds of the Class B Common Stock held by each family group.
<PAGE>
ELECTION OF DIRECTORS
Eleven directors are to be elected at the Annual Meeting, each to hold office
until the next Annual Meeting and until his or her successor has been duly
elected and qualified. Proxies received from shareholders, unless directed
otherwise, will be voted FOR the election of the following nominees: Leonard
Schnitzer, Robert W. Philip, Kenneth M. Novack, Gary Schnitzer, Dori Schnitzer,
Carol S. Lewis, Jean S. Reynolds, Manuel Schnitzer, Robert S. Ball, William A.
Furman, and Ralph R. Shaw. If any nominee is unable to stand for election, the
persons named in the proxy will vote the same for a substitute nominee. All of
the nominees are currently directors of the Company. The Company is not aware
that any nominee is or will be unable to stand for reelection. Directors shall
be elected by a plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote on the election of
directors. Abstentions and broker non-votes will have no effect on the results
of the vote.
Set forth below is the name, age, position with the Company, present principal
occupation or employment and five-year employment history of each of the
nominees for director of the Company.
<TABLE>
<CAPTION>
Name and Year First Became
Director Business Experience Age
- ---------------------------- -------------------------------------------------------------- ---
<S> <C> <C>
Leonard Schnitzer Chief Executive Officer since August 1973; became Chairman of 72
1948 the Board in March 1991.
Robert W. Philip President and a director since March 1991. Became director 49
1991 in March 1991. He had been a Vice President of the Company
since 1984 with responsibility for the Company's Metra steel
distribution division from 1984 to the time of its sale in
July 1990. Mr. Philip is Leonard Schnitzer's son-in-law.
Kenneth M. Novack Executive Vice-President of the Company and President of 50
1991 Schnitzer Investment Corp. and certain other Schnitzer Group
Companies. From 1975 to 1980, he worked for the Company as
Vice President and then Executive Vice President. Mr. Novack
was also President of SIC from 1978 to 1980. From 1981 until
April 1991, he was a partner in the law firm of Ball, Janik &
Novack. Mr. Novack is the son-in-law of Gilbert Schnitzer, a
brother of Leonard Schnitzer.
Gary Schnitzer Executive Vice President in charge of the Company's 54
1993 California scrap operations since 1980 and a director since
September 1993. Gary Schnitzer is the son of Gilbert
Schnitzer.
Dori Schnitzer Secretary of the Company since June 1987 and became a 42
1991 director in March 1991. She also served as corporate counsel
of the Company from October 1987 to May 1991 when she became
Vice President of Lasco Shipping Co. Dori Schnitzer is a
daughter of Morris Schnitzer, a deceased brother of Leonard
Schnitzer.
Carol S. Lewis Director of the Company since December 1987. She is 59
1987 currently proprietor of Virginia Jacobs, a linen and home
accessories store. From 1991 until 1995 she worked as a
marketing and fund- raising consultant. From 1981 until 1991
she worked for Oregon Public Broadcasting, the nonprofit
operator of public television and radio in Oregon, most
recently as President of the Oregon Public Broadcasting
Foundation. Carol Lewis is the daughter of Manuel Schnitzer, a
brother of Leonard Schnitzer.
Jean S. Reynolds Director of the Company since September 1993. Jean S. 47
1993 Reynolds is employed as a consultant for FTA, a marketing and
special events coordinator. She is a daughter of Morris
Schnitzer, a deceased brother of Leonard Schnitzer.
Manuel Schnitzer Director of the Company until December 1987. He became a 89
1991 director again in March 1991. Manuel Schnitzer is a brother
of Leonard Schnitzer.
Robert S. Ball Director of the Company since September 1993. Since 1982, he 55
1993 has been a partner in the Portland, Oregon law firm of Ball
Janik LLP.
William A. Furman Director of the Company since September 1993. Since 1981, he 51
1993 has been the President and Chief Executive Officer and a
director of The Greenbrier Companies of Portland, Oregon, a
publicly held company with subsidiaries, including Gunderson,
Inc., engaged in manufacturing, marketing and leasing of
railcars and other equipment.
Ralph R. Shaw Director of the Company since September 1993. Mr. Shaw is 56
1993 Co-Chairman of Shaw, Glasgow & Co., L.L.C., a financial
services and venture capital firm which in March 1995
succeeded to the business of Shaw Management, Inc., of which
Mr. Shaw had been President since September 1980. He is also a
director of TRM Copy Centers Corporation. During 1992, Mr.
Shaw entered into a settlement agreement with the Securities
and Exchange Commission relating to alleged violations of
Section 16(a) of the Securities Exchange Act of 1934 due to
failure to report on a timely basis transactions in the Common
Stock of two public companies for which he served as a
director. As part of the settlement agreement, Mr. Shaw agreed
to the entry of an order by the Commission requiring him to
permanently cease and desist from any further violations of
Section 16(a).
</TABLE>
The Board of Directors held five meetings during the fiscal year ended August
31, 1996. During fiscal 1996 incumbent directors Manuel Schnitzer and William A.
Furman did not attend 75% of the aggregate number of meetings of the Board and
of committees of the Board on which they served.
The Company has Compensation and Audit Committees of the Board of Directors.
Messrs. Ball, Furman, and Shaw are members of the Compensation and Audit
Committees. The principal function of the Audit Committee is to make
recommendations to the Board as to the engagement of independent auditors, to
review the scope of the audit and audit fees and to discuss the results of the
audit with the independent auditors. The Compensation Committee administers the
Company's 1993 Stock Incentive Plan and makes recommendations to the Board of
Directors regarding compensation for executive officers of the Company. During
fiscal 1996, the Audit Committee held two meetings and the Compensation
Committee held one meeting. The Company does not have a nominating committee of
the Board of Directors. Shareholders who wish to submit names for consideration
for Board membership should do so in writing addressed to the Board of
Directors, c/o Dori Schnitzer, Secretary, Schnitzer Steel Industries, Inc., P.O.
Box 10047, Portland, Oregon 97296-0047.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE ELECTION OF THE
NOMINEES NAMED IN THIS PROXY STATEMENT.
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table provides certain summary information concerning compensation
paid or accrued by the Company to or on behalf of the Company's Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company (hereinafter referred to as the Named Executive Officers) for the
fiscal years ended August 31, 1996, 1995 and 1994:
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
------------------------------------- ----------------
Awards All
Securities Other
Name and Fiscal Underlying Compensa-
Principal Position Year Salary(1) Bonus Other Options tion 1,2
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Schnitzer 1996 $275,187 $207,200 18,948 $ 6,750
---------- -------------- ------------ --------- ---------------- ------------
Chief Executive Officer 1995 $262,214 $207,200 22,176 $ 4,275
---------- -------------- ------------ --------- ---------------- ------------
1994 $315,949 $125,000 21,622 $ 6,993
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
Robert W. Philip 1996 $340,269 $375,000 21,043 $ 6,750
---------- -------------- ------------ --------- ---------------- ------------
President 1995 $239,460 $375,000 22,781 $ 6,080
---------- -------------- ------------ --------- ---------------- ------------
1994 $183,224 $120,000 22,506 $ 5,964
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
Gary Schnitzer 1996 $250,651 $150,000 11,843 $ 6,750
---------- -------------- ------------ --------- ---------------- ------------
Executive Vice President 1995 $228,882 $150,000 13,807 $ 8,358
---------- -------------- ------------ --------- ---------------- ------------
1994 $221,688 $ 75,000 18,557 $ 8,804
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
Kurt C. Zetzsche 1996 $227,142 $100,000 10,649 $15,000
---------- -------------- ------------ --------- ---------------- ------------
President of Steel Operations 1995 $222,416 $100,000 12,416 $15,920
---------- -------------- ------------ --------- ---------------- ------------
1994 $210,690 $ 65,000 17,486
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
Barry A. Rosen 1996 $188,110 $ 90,000 9,405 $ 6,750
---------- -------------- ------------ --------- ---------------- ------------
Vice President - Finance 1995 $141,908 $100,000 10,280 $ 6,340
---------- -------------- ------------ --------- ---------------- ------------
1994 $123,629 $ 50,000 13,996 $ 4,848
- ----------------------------------- ---------- -------------- ------------ --------- ---------------- ------------
(1) Certain executive officers of the Company fulfill similar executive
functions for other companies in the Schnitzer Group. A portion of the
salary expense for these officers is reimbursed to the Company pursuant to
the Shared Services Agreement. Until September 1, 1994, this reimbursement
was based on the time spent by each officer for the other companies. All
salary amounts for fiscal 1994 in the table above represent the net
compensation paid by the Company after reimbursement by the other
Schnitzer Group companies for time spent on their business. Accordingly,
the amounts in the table represent 24%, 64%, and 54% of the total
compensation paid by the Schnitzer Group in fiscal 1994 to Leonard
Schnitzer, Robert W. Philip and Barry A. Rosen, respectively. The
Compensation Committee determined that effective September 1, 1994 all
executive officers will receive salaries from the Company that are wholly
independent from salaries paid to them by other Schnitzer Group companies
and not subject to retroactive allocation based on relative time spent on
the business of the Company and other Schnitzer Group companies. The
salary amounts for fiscal 1995 and 1996 in the table above were determined
under the new arrangement. Bonuses paid by the Company for all years
presented were determined independently of the other Schnitzer Group
companies.
(2) For fiscal years 1994, 1995 and 1996, All Other Compensation consists
entirely of Company contributions, net of reimbursement from other
Schnitzer Group companies, to the Company's Supplemental Retirement Plan
and Salary Deferral Retirement Plan, except that for Mr. Zetzsche for
fiscal 1995 and 1996, All Other Compensation consists of Company
contributions to the Cascade Steel Rolling Mills Employees' Retirement
Plan.
</TABLE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information regarding stock options for Class A
Common Stock granted to the Named Executive Officers in the fiscal year ended
August 31, 1996.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- -------------------------------------------------------------------------------------
Potential Realizable Value
Number of Percent of at Assumed Annual Rates of
Securities Total Options Stock Price Appreciation for
Underlying Granted to Exercise Option Term (2)
Options Employees in Price Per Expiration ------------------------------
Name Granted (1) Fiscal Year Share Date 5% 10%
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Schnitzer 18,948 16.6% $24.25 6/14/06 $288,970 $732,307
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
Robert W. Philip 21,043 18.5% 24.25 6/14/06 320,920 813,275
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
Gary Schnitzer 11,843 10.4% 24.25 6/14/06 180,614 457,711
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
Kurt C. Zetzsche 10,649 9.4% 24.25 6/14/06 162,405 411,565
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
Barry A. Rosen 9,405 8.3% 24.25 6/14/06 143,433 363,487
- ------------------------ -------------- --------------- --------------- ------------- --------------- --------------
(1) Each option was granted on the date 10 years prior to the expiration date
shown in the table. Options become exercisable for 20% of the shares on
each of the first five anniversaries of the grant date.
(2) In accordance with rules of the Securities and Exchange Commission, these
amounts are the hypothetical gains or "option spreads" that would exist
for the respective options based on assumed rates of annual compound stock
price appreciation of 5% and 10% from the date the options were granted
over the full option term.
</TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table provides certain information concerning exercises of stock
options during the fiscal year ended August 31, 1996 by each of the Named
Executive Officers as well as the number and value of unexercised options held
by such persons at August 31, 1996.
<TABLE>
<CAPTION>
Shares Value of Unexercised in the
Acquired on Value Number of Unexercised Money Options at Fiscal
Name Exercise Realized Options at Fiscal Year-End Year-End (1)
------------------------------ ------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Leonard Schnitzer 13,083 49,663 $ 94,741 $249,326
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
Robert W. Philip 13,558 52,772 99,241 262,148
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
Gary Schnitzer 10,183 34,024 75,777 180,520
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
Kurt C. Zetzsche 9,477 31,074 70,722 166,192
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
Barry A. Rosen 7,654 26,027 57,235 136,795
- ------------------------- ------------- ------------- ------------- ---------------- ------------ -----------------
(1) Aggregate value of shares covered by the options at August 31, 1996, less the aggregate exercise price of
such options.
</TABLE>
DEFINED BENEFIT RETIREMENT PLANS
PENSION RETIREMENT PLAN. The Company's Pension Retirement Plan is a defined
benefit plan qualified under Section 401(a) of the Internal Revenue Code of 1986
(the Code). All employees (except Leonard Schnitzer and certain union and
on-call employees) of the Company and certain other Schnitzer Group companies
are eligible to participate in the plan after meeting certain service
requirements. Generally, pension benefits become fully vested after five years
of service and are paid in monthly installments beginning when the employee
retires at age 65. Annual benefits equal 2% of qualifying compensation for each
plan year of service after August 31, 1986. Upon their retirement, assuming
retirement at age 65 and no increase in annual compensation from current levels,
Messrs. Gary Schnitzer, Robert W. Philip, and Barry A. Rosen would receive
annual benefits for life of $75,975, $89,808, and $86,113, respectively.
SUPPLEMENTAL EXECUTIVE RETIREMENT BONUS PLAN. The Supplemental Executive
Retirement Bonus Plan was adopted to provide a competitive level of retirement
income for key executives selected by the Board of Directors. The plan
establishes an annual target benefit for each participant based on continuous
years of service (up to a maximum of 25 years) and the average of the
participant's five highest consecutive calendar years of compensation, with the
target benefit subject to an inflation-adjusted limit equal to $159,208 in 1996.
The target benefit is reduced by 100% of primary social security benefits and
the Company-paid portion of all benefits payable under the Company's qualified
retirement plans to determine the actual benefit payable under the plan. The
actual benefit shall be paid as a straight life annuity or in other actuarially
equivalent forms. Benefits are payable under the plan only to participants who
terminate employment after age 55 with 10 credited years of service or after age
60. The following table shows the estimated annual target benefits under the
plan, before the reductions based on social security and Company-paid retirement
benefits, for executives who retire at age 60 (the normal retirement age under
the plan) with various levels of pay and service, based on the 1996 value for
the inflation-adjusted cap.
<TABLE>
<CAPTION>
Highest Five-Year Average
Qualifying Compensation Credited Years of Service
----------------------------------------------------------
10 15 20 25
- ------------------------------------- ------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$200,000 $52,000 $78,000 $104,000 $130,000
- ------------------------------------- ------------- -------------- -------------- --------------
$250,000 $63,683 $95,525 $127,366 $159,208
- ------------------------------------- ------------- -------------- -------------- --------------
$300,000 $63,683 $95,525 $127,366 $159,208
- ------------------------------------- ------------- -------------- -------------- --------------
$350,000 $63,683 $95,525 $127,366 $159,208
- ------------------------------------- ------------- -------------- -------------- --------------
$400,000 $63,683 $95,525 $127,366 $159,208
- ------------------------------------- ------------- -------------- -------------- --------------
</TABLE>
As of December 31, 1995, Messrs. Gary Schnitzer, Robert W. Philip and Barry A.
Rosen had 31, 24 and 14 years of service, respectively, and highest five-year
average qualifying compensation of $277,395, $382,233 and $292,436,
respectively. For Mr. Philip and Mr. Rosen, the compensation differs
significantly from that shown in the Summary Compensation Table because benefits
under the plan are based on total qualifying compensation before allocation to
other Schnitzer Group companies.
EMPLOYMENT AGREEMENTS
The Company has entered into a deferred bonus agreement with Kurt C. Zetzsche
pursuant to which 40% of Mr. Zetzsche's bonus each year beginning with 1995 will
be deferred and credited to a deferred compensation account maintained on the
books of the Company. The Company will credit interest to the deferred
compensation account based on a rate equal to 120% of the average annual
applicable federal long-term rate published by the Internal Revenue Service. The
deferred compensation account will be paid to Mr. Zetzsche after his retirement
in accordance with the agreement.
DIRECTOR COMPENSATION
Directors who are not employees of the Schnitzer Group receive an annual fee of
$10,000 plus $500 for attending each Board meeting or committee meeting held
other than on the same day as a Board meeting, and are reimbursed for expenses
of attending Board and committee meetings.
<PAGE>
CERTAIN TRANSACTIONS
The Company is part of the Schnitzer Group of companies, all of which are
controlled by members of the Schnitzer family. Other companies in the group
include: Schnitzer Investment Corp. (SIC), engaged in the real estate, cold
storage and shipping agency businesses; Pacific Coast Shipping Co. (PCS) and its
wholly-owned subsidiary, Trans-Pacific Shipping Co. (TPS), and Liberty Shipping
Group Limited Partnership (LSGLP) and Liberty Belle Limited Partnership (LBLP)
and their general partner LSGGP Corp. (LSGGP), all engaged in the ocean shipping
business; Island Equipment Company, Inc. (IECO), engaged in various businesses
in Guam and other South Pacific islands; and Isla Insurance Company (Isla), an
issuer of surety bonds and builder's risk insurance in Guam.
Certain executive officers of the Company fulfill similar executive functions
for other companies in the Schnitzer Group. Leonard Schnitzer, Robert W. Philip
and Kenneth M. Novack, the members of the Company's Office of the President,
also make up the Office of the President of SIC. Robert W. Philip has the
principal operating responsibility for the Company, but he also spends time on
the businesses of other Schnitzer Group companies. Leonard Schnitzer serves as
Chairman of the Schnitzer Group's shipping companies and spends substantial
amounts of his time on their businesses. Kenneth M. Novack spends substantial
amounts of his time on the businesses of SIC, IECO, Isla, and other Schnitzer
Group companies. Barry A. Rosen serves as Chief Financial Officer for all of the
Schnitzer Group companies. The Company believes that the sharing of top
management and other resources (such as data processing, accounting, legal,
financial, tax, treasury, risk management and human resources) provides benefits
to the Company and the other Schnitzer Group companies by giving each of them
access to a level of experience and expertise that can only be supported by a
larger organization.
The Company leases certain properties used in its business from SIC. These
properties and certain lease terms are set forth in the following table:
EXPIRATION
PROPERTY ANNUAL RENT OF LEASE
- ------------------------------------------- --------------- ------------
Corporate Headquarters $ 166,000 2006
- ------------------------------------------- --------------- ------------
Scrap Operations:
Portland facility and marine terminal 1,056,000 2063
Sacramento facility 80,000 2003
- ------------------------------------------- --------------- ------------
Total $1,302,000
===============
The rent for the Portland scrap operations will adjust on September 1, 1998 and
every five years thereafter. The adjustments made on September 1, 2003 and every
fifteen years thereafter will be to appraised fair market rent. Intervening rent
adjustments will be based on the average of the percentage increases or
decreases in two inflation indexes over the five years prior to the adjustment.
The Sacramento facility rent also adjusts on September 1, 1998 based on the same
inflation indexes. The Company subleases a portion of the Portland facility to a
third party for $38,000 per year until 2000.
The Company ships steel scrap on vessels chartered from PCS and TPS. In fiscal
1996, the Company incurred a total of $7,742,000 in charter expense to PCS and
TPS for shipments of steel scrap. SIC acts as managing agent for PCS and TPS and
was paid $201,000 in agency fees by the Company during fiscal 1996. In May 1993,
the Company entered into a five-year time charter of a ship from TPS. Under this
charter, the Company pays to TPS the actual cost of operating the ship plus
approximately $130,000 per quarter, and pays to SIC agency fees of $185,000 per
year. At the end of the charter, the Company guarantees that TPS will be able to
sell the ship for TPS's remaining capital investment at that time of $2,500,000,
and the Company is entitled to either purchase the ship or receive any proceeds
in excess of $2,500,000. In May 1995, the Company entered into two additional
seven-year time charters with TPS. In August 1996, these two time charters were
re-negotiated due to the condition of the vessels and lower charter rates
experienced in the shipping industry resulting in a $769,000 refund of time
charter expenses. Under each of these re-negotiated charters, the Company pays
to TPS the actual cost of operating the ship plus approximately $200,000 per
quarter. Additionally, the vessels discussed above are periodically
sub-chartered to third parties. In this case, SIC acts as the company's agent in
the collection of income and payment of expenses related to sub-charter
activities. Charter expense to PCS and TPS incurred for these vessels while
sub-chartered totalled $3,135,000 in 1996, net of a $163,000 refund, resulting
from the re-negotiation of the time charter contracts. These charter expenses
were offset by sub-charter income of $3,157,000 in 1996.
The Company provides management and administrative services to, and in some
cases receives services from, SIC, LSGLP, LBLP, LSGGP, IECO and Isla, pursuant
to a Second Amended Shared Services Agreement, as amended as of September 1,
1994. The agreement provides that all service providing employees, except
executive officers, are charged out at rates based on the actual hourly
compensation expense to the Company for such employees (including fringe
benefits but excluding bonuses) plus an hourly charge for reimbursement of space
costs associated with such employees, all increased by 15% as a margin for
additional overhead and profit. The Company independently determines the
salaries to pay its executive officers, and the other companies reimburse the
Company fully for salaries and related benefits the other companies decide to
pay, plus the hourly space charge and the 15% overhead and profit margin. Under
the agreement, the Company independently determines the amount of bonus to pay
to each of its employees, and the other companies reimburse the Company fully
for any bonuses the other companies decide to pay. The agreement also provides
for the monthly payment by these related parties to the Company of amounts
intended to reimburse the Company for their proportionate use of the Company's
telephone and computer systems. Charges by the Company under the agreement in
fiscal 1996 totaled $816,000.
From time to time, the law firm of Ball Janik LLP, of which director Robert S.
Ball is a partner, provides legal services to the Company. Ball Janik LLP
provides legal services on a more regular basis to other companies in the
Schnitzer Group. Additionally, Mr. Ball is a director, significant shareholder
and the secretary of Electrical Construction Company (ECC), an electrical
contractor, which has provided electrical construction services on the Company's
new rolling mill. The Company paid ECC $7,301,000 in fiscal 1996.
On February 27, 1996, the Company sold a parcel of land to SIC. The Company
received $585,000, recognizing no gain or loss on the transaction.
Pursuant to a policy adopted by the Board of Directors, all transactions with
other Schnitzer Group companies require the approval of a majority of the
independent directors or must be within guidelines established by them.
REPORT OF COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the Committee) is composed
of three outside directors. The Committee is responsible for developing and
making recommendations to the Board with respect to the Company's compensation
policies and the levels of compensation to be paid to executive officers. In
addition, the Committee has the sole responsibility for the administration of,
and the grant of stock options and other awards under, the Company's 1993 Stock
Incentive Plan. The Company has engaged a nationally recognized compensation and
benefits consulting firm to assist the Committee and the Company in gathering
information on competitive compensation practices and in reviewing executive
compensation.
The objectives of the Company's executive compensation program are to attract
and retain highly qualified executives, and to motivate them to maximize
shareholder returns by achieving both short-term and long-term strategic Company
goals. The three basic components of the executive compensation program are base
salary, annual bonus dependent on corporate performance, and stock options.
BASE SALARY
For purposes of determining fiscal 1996 salaries, the Committee considered
market analyses prepared by the Company's compensation consultant. The salary
data consisted of a broad survey of durable goods manufacturing companies and
steel companies. Using trend line analysis on the broad survey data, the
consultant estimated average salary levels for a durable goods company with $300
million in annual revenues, and these estimated averages were reasonably
confirmed by the steel industry data. The Committee used these estimated
averages as the basis for establishing salaries for executive officers, with
modifications in certain cases to reflect historical salary levels or reduced
time commitments to the Company's business.
Certain executives of the Company provide services to other Schnitzer Group
companies. Prior to fiscal 1995, pursuant to the Shared Services Agreement, a
portion of each officer's salary was reimbursed to the Company by the other
Schnitzer Group companies based on the portion of the officer's time spent on
their businesses. Beginning in fiscal 1995, the Committee determined that the
Company should establish fixed, base salaries for its executives as a means of
emphasizing achievement of results rather than the expenditure of time as the
basis for executive officer compensation. The Committee believes that this
change facilitates the comparison of compensation paid by the Company with
compensation paid by other public companies and the establishment of total
compensation packages appropriate for the company's size and business.
ANNUAL BONUSES
Executive officers are eligible to receive annual bonuses, based on Company
performance, which provide them a direct financial incentive to achieve
corporate objectives each year. Bonuses for 1996 for all named executive
officers, except for the president, were determined with reference to target
bonus amounts expressed as a percentage of salary. Target bonuses are higher as
a percentage of salary for more senior officers. Actual bonuses may be more or
less than target bonuses. The determination of actual bonuses is discretionary
for the Committee and is based generally on overall Company profitability,
business unit profitability, achievement of nonfinancial objectives and
subjective judgements as to individual performance. No specific weight is
accorded to any single factor and different factors may be accorded greater or
lesser weight in particular years or for particular officers. For 1996, as a
result of the Company's overall performance, successful secondary stock offering
and achievement of other objectives, all named executive officers except for the
president, received bonuses within the target range. In determining the bonus
granted to the Company's president, the Committee considered the Company's
performance for fiscal 1996 relative to other companies in the steel industry
and to the budgeted results. The Committee also considered the overall
compensation paid to executives in similar positions in other companies.
STOCK OPTIONS
The stock option program is the Company's principal long-term incentive plan for
executive officers. The objectives of the stock option program are to align
executive and shareholder long-term interest by creating a strong and direct
link between executive compensation and shareholder return, and to create
incentives for executives to remain with the Company for the long term through
standard five-year vesting of options. Options are awarded with an exercise
price equal to the market price of Class A Common Stock on the date of grant and
have a term of 10 years. Prior to 1996, options had been granted only to six
executives officers of the Company. In June 1996, the Committee granted
non-statutory stock options under the plan to an additional 18 employees of the
Company, each of whom has significant management responsibilities.
The Committee has implemented an annual option grant program. Annual awards to
the top five executive officers are made based on grant guidelines expressed as
a percentage of salary, with such guidelines generally set at the median for
companies in the broad market survey provided by the consultants.
Section 162(m) of the Internal Revenue Code of 1986 limits to $1,000,000 per
person the amount that the Company may deduct for compensation paid to any of
its most highly compensated officers in any year. The levels of salary and bonus
generally paid by the Company do not exceed this limit. Under IRS regulations,
the $1,000,000 cap on deductibility will not apply to compensation received
through the exercise of a nonqualified stock option that meets certain
requirements. This option exercise compensation is equal to the excess of the
market price at the time of exercise over the option price and, unless limited
by Section 162(m), is generally deductible by the Company. It is the Company's
current policy generally to grant options that meet the requirements of the IRS
regulations. The 1993 Stock Incentive Plan is proposed to be amended to meet one
of these requirements. See "Amendment of the 1993 Stock Incentive Plan."
CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Schnitzer's base salary for fiscal 1996 was fixed at $275,000, which is
approximately 75% of the average salary level for his position estimated by the
Company's compensation consultant based on survey data as discussed above. The
Committee believes that a lower than average salary level is appropriate since
Dr. Schnitzer devotes time to the businesses of other companies in the Schnitzer
Group to a greater extent than other executive officers of the Company.
Dr. Schnitzer received a bonus for 1996 of $207,200 which is 75% of the salary
established for him for fiscal 1996. This is within the range of target bonuses
payable under the annual bonus program and was awarded for the reasons discussed
above.
During fiscal 1996, Dr. Schnitzer received an option for 18,948 shares of Class
A Common Stock as part of the Company's annual option grant program. The size of
the award was determined using the median grant guideline percentage for chief
executive officers determined from survey data and applying that guideline
percentage to Dr. Schnitzer's 1996 base salary.
COMPENSATION COMMITTEE
Ralph R. Shaw, Chair
Robert S. Ball
William A. Furman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of directors Robert S. Ball, William A.
Furman and Ralph R. Shaw. From time to time, the law firm of Ball Janik LLP, of
which director Robert S. Ball is a partner, provides legal services to the
Company. Ball Janik LLP provides legal services on a more regular basis to other
companies in the Schnitzer Group. Additionally, Mr. Ball is a director,
significant shareholder and the secretary of Electrical Construction Company
(ECC), an electrical contractor, which has provided electrical construction
services on the Company's new rolling mill. The Company paid ECC $7,301,000 in
fiscal 1996.
SHAREHOLDER RETURN PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock with the cumulative total return of the
Standard & Poor's 500 Stock Index and the Standard & Poor's Steel Industry Group
Index for the period commencing on November 16, 1993 (the date of the Company's
initial public offering) and ending on August 31, 1996. The graph assumes that
$100 was invested in the Company's Common Stock and each index on November 16,
1993, and that all dividends were reinvested.
EDGAR PRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
11/16/93 2/28/94 8/31/94 2/28/95 8/31/95 2/29/96 8/31/96
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Schnitzer Steel Industries, Inc. 100.00 152.90 136.38 103.82 143.03 154.26 141.36
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Standatd & Poors 500 100.00 100.73 104.02 108.15 126.33 145.67 149.99
- --------------------------------- -------- -------- -------- -------- -------- -------- --------
Standard & Poors Steel Index 100.00 111.92 125.88 101.41 95.19 97.64 82.08
</TABLE>
<PAGE>
AMENDMENT OF THE 1993 STOCK INCENTIVE PLAN
The Company maintains the 1993 Stock Incentive Plan (the Plan) for the benefit
of its employees and others who provide services to the Company. The Board of
Directors believes the availability of stock incentives is an important factor
in the Company's ability to attract and retain experienced and competent
employees and to provide an incentive for them to exert their best efforts on
behalf of the Company. As of August 31, 1996, out of a total of 375,000 shares
reserved for issuance under the Plan, only 80,485 shares remained available for
grant. The Board of Directors believes additional shares will be needed under
the Plan to provide appropriate incentives to key employees. Accordingly, on
October 7, 1996 the Board of Directors approved an amendment to the Plan,
subject to shareholder approval, to reserve an additional 825,000 shares for the
Plan, thereby increasing the total number of shares reserved for issuance under
the Plan from 375,000 to 1,200,000 shares. In addition, to comply with
regulations under Section 162(m) of the Internal Revenue Code of 1986, as
amended (the Code), the Board of Directors approved an amendment to the Plan,
subject to shareholder approval, to establish a per-employee limit on grants of
options and stock appreciation rights under the Plan of 100,000 shares annually.
See "Tax Consequences." Other amendments approved by the Board of Directors and
submitted to the shareholders for approval principally relate to the elimination
of certain restrictions in the Plan that are no longer necessary or appropriate
based on recent changes to the rules under Section 16 of the Securities Exchange
Act of 1934.
Certain provisions of the Plan are described below. The complete text of the
Plan, marked to show the proposed amendments, is attached to this proxy
statement as Appendix A.
DESCRIPTION OF THE PLAN
ELIGIBILITY. All employees, officers and directors of the Company and its
subsidiaries other than members of the Committee (as defined below) are eligible
to participate in the Plan. Also eligible are nonemployee consultants and
advisors to the Company.
ADMINISTRATION. The Plan is administered by the Compensation Committee of the
Board of Directors (the Committee), which designates from time to time the
individuals to whom awards are made under the Plan, the amount of any such award
and the price and other terms and conditions of any such award. Subject to the
provisions of the Plan, the Committee may adopt and amend rules and regulations
relating to the administration of the Plan.
Only the Board of Directors may amend, modify or terminate the Plan.
TERM OF PLAN. The Plan will continue until all shares available for issuance
under the Plan have been issued and all restrictions on such shares have lapsed.
The Board of Directors may suspend or terminate the Plan at any time.
STOCK OPTIONS. The Committee determines the persons to whom options are granted,
the option price, the number of shares subject to each option, the period of
each option and the times at which options may be exercised and whether the
option is an Incentive Stock Option (ISO), as defined in Section 422 of the
Code, or an option other than an ISO (a Non-Statutory Stock Option or NSO). If
the option is an ISO, the option price cannot be less than the fair market value
of the Class A Common Stock on the date of grant. If an optionee of an ISO at
the time of grant owns stock possessing more than 10% of the combined voting
power of the Company, the option price may not be less than 110% of the fair
market value of the Class A Common Stock on the date of grant. If the option is
an NSO, the option price may be any price determined by the Committee. The
aggregate fair market value, on the date of the grant, of the stock for which
ISOs are exercisable for the first time by an employee during any calendar year
may not exceed $100,000. No monetary consideration is paid to the Company upon
the granting of options.
Options granted under the Plan generally continue in effect for the period fixed
by the Committee, except that ISOs are not exercisable after the expiration of
10 years from the date of grant or five years in the case of 10% shareholders.
Options are exercisable in accordance with the terms of an option agreement
entered into at the time of grant and, except as otherwise determined by the
Committee with respect to a NSO, are nontransferable except on death of a holder
or pursuant to a qualified domestic relations order. Options may be exercised
only while an optionee is employed by or in the service of the Company or a
subsidiary or within 12 months following termination of employment by reason of
death or disability or 30 days following termination for any other reason. The
Plan provides that the Committee may extend the exercise period for any period
up to the expiration date of the option and may increase the number of shares
for which the option may be exercised up to the total number underlying the
option. The purchase price for each share purchased pursuant to exercise of
options must be paid in cash, including cash which may be the proceeds of a loan
from the Company, or, with the consent of the Committee, in whole or in part, in
shares of Class A Common Stock valued at fair market value, in restricted stock,
in performance units or other contingent awards denominated in either stock or
cash, in deferred compensation credits, in promissory notes, or in other forms
of consideration. Upon the exercise of an option, the number of shares subject
to the option and the number of shares available under the Plan for future
option grants are reduced by the number of shares with respect to which the
option is exercised.
STOCK APPRECIATION RIGHTS. Stock appreciation rights (SARs) may be granted under
the Plan. SARs may, but need not, be granted in connection with an option grant
or an outstanding option previously granted under the Plan. A SAR gives the
holder the right to payment from the Company of an amount equal in value to the
excess of fair market value on the date of exercise of a share of Class A Common
Stock of the Company over its fair market value on the date of grant, or if
granted in connection with an option, the option price per share under the
option to which the SAR relates. A SAR is exercisable only at the time or times
established by the Committee. If a SAR is granted in connection with an option
it is exercisable only to the extent and on the same conditions that the related
option is exercisable. Payment by the Company upon exercise of a SAR may be made
in Class A Common Stock of the Company valued at its fair market value, in cash,
or partly in stock and partly in cash, as determined by the Committee. The
Committee may withdraw any SAR granted under the Plan at any time and may impose
any condition upon the exercise of a SAR or adopt rules and regulations from
time to time affecting the rights of holders of SARs. The existence of SARs, as
well as certain bonus rights described below, would require charges to income
over the life of the right based upon the amount of appreciation, if any, in the
market value of the Class A Common Stock of the Company over the exercise price
of shares subject to exercisable SARs or bonus rights. No SARs have been granted
under the Plan.
STOCK BONUS AWARDS. The Committee may award Class A Common Stock of the Company
as a stock bonus under the Plan. The Committee may determine the recipients of
the awards, the number of shares to be awarded and the time of the award. Stock
received as a stock bonus is subject to the terms, conditions and restrictions
determined by the Committee at the time the stock is awarded. No stock bonuses
have been granted under the Plan.
RESTRICTED STOCK. The Plan provides that the Company may issue restricted stock
in such amounts, for such consideration, subject to such restrictions and on
such terms as the Committee may determine. No restricted stock has been granted
under the Plan.
CASH BONUS RIGHTS. The Committee may grant cash bonus rights under the Plan in
connection with (i) options granted or previously granted, (ii) SARs granted or
previously granted, (iii) stock bonuses awarded or previously awarded, and (iv)
shares sold or previously sold under the Plan. Bonus rights granted in
connection with options entitle the optionee to a cash bonus if and when the
related option is exercised. The amount of the bonus is determined by
multiplying the excess of the total fair market value of the shares acquired
upon the exercise over the total option price for the shares by the applicable
bonus percentage. The bonus percentage applicable to any bonus right is
determined by the Committee but may in no event exceed 75%. Bonus rights granted
in connection with stock bonuses or restricted stock purchases entitle the
recipient to a cash bonus, in an amount determined by the Committee, at the time
the stock is awarded or purchased, or at such time as any restrictions to which
the stock is subject lapse. No bonus rights have been granted under the Plan.
PERFORMANCE UNITS. The Committee may grant performance units consisting of
monetary units which may be earned in whole or in part if the Company achieves
goals established by the Committee over a designated period of time, but in any
event not more than 10 years. Payment of an award earned may be in cash or stock
or both, and may be made when earned, or vested and deferred, as the Committee
determines. No performance units have been granted under the Plan.
CHANGES IN CAPITAL STRUCTURE. The Plan provides that if the outstanding Class A
Common Stock of the Company is increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any recapitalization, stock split
or certain other transactions, appropriate adjustment will be made by the
Committee in the number and kind of shares available for awards under the Plan.
In addition, the Committee will make appropriate adjustments in outstanding
options and SARs. In the event of dissolution of the Company or a merger,
consolidation or plan of exchange affecting the Company, in lieu of the
foregoing treatment for options and SARs, the Committee may, in its sole
discretion, provide a 30-day period prior to such event during which optionees
shall have the right to exercise options and SARs in whole or in part without
any limitation on exercisability and upon the expiration of which 30-day period
all unexercised options and SARs shall immediately terminate.
TAX CONSEQUENCES
Certain options authorized to be granted under the Plan are intended to qualify
as ISOs for federal income tax purposes. Under federal income tax law currently
in effect, the optionee will recognize no income upon grant or exercise of the
ISO. If an employee exercises an ISO and does not dispose of any of the option
shares within two years following the date of grant and within one year
following the date of exercise, then any gain realized upon subsequent
disposition of the shares will be treated as income from the sale or exchange of
a capital asset. If an employee disposes of shares acquired upon exercise of an
ISO before the expiration of either the one-year holding period or the two-year
waiting period, any amount realized will be taxable as ordinary compensation
income in the year of such disqualifying disposition to the extent that the
lesser of the fair market value of the shares on the exercise date or the fair
market value of the shares on the date of disposition exceeds the exercise
price. The Company will not be allowed any deduction for federal income tax
purposes at either the time of the grant or exercise of an ISO. Upon any
disqualifying disposition by an employee, the Company will generally be entitled
to a deduction to the extent the employee realized ordinary income.
Certain options authorized to be granted under the Plan will be treated as NSOs
for federal income tax purposes. Under federal income tax law presently in
effect, no income is realized by the grantee of an NSO until the option is
exercised. At the time of exercise of an NSO, the optionee will realize ordinary
compensation income, and the Company will generally be entitled to a deduction,
in the amount by which the market value of the shares subject to the option at
the time of exercise exceeds the exercise price. The Company is required to
withhold on the income amount. Upon the sale of shares acquired upon exercise of
an NSO, the excess of the amount realized from the sale over the market value of
the shares on the date of exercise will be taxable.
An employee who receives stock in connection with the performance of services
will generally realize taxable income at the time of receipt unless the shares
are not substantially vested for purposes of Section 83 of the Code and no
Section 83(b) election is made. If the shares are not vested at the time of
receipt, the employee will realize taxable income in each year in which a
portion of the shares substantially vest, unless the employee elects under
Section 83(b) of the Code within 30 days after the original transfer. The
Company generally will be entitled to a tax deduction in the amount includable
as income by the employee at the same time or times as the employee recognizes
income with respect to the shares. The Company is required to withhold on the
income amount. A participant who receives a cash bonus right under the Plan
generally will recognize income equal to the amount of any cash bonus paid at
the time of receipt of that bonus, and the Company generally will be entitled to
a deduction equal to the income recognized by the participant.
Section 162(m) of the Code, as adopted in 1993, limits to $1,000,000 per person
the amount that the Company may deduct for compensation paid to any of its most
highly compensated officers in any year. Under IRS regulations, compensation
received through the exercise of an option or stock appreciation right will not
be subject to the $1,000,000 limit if the option or stock appreciation right and
the plan pursuant to which it is granted meet certain requirements. One
requirement is shareholder approval of a per-employee limit on the number of
shares as to which options and stock appreciation rights may be granted, as
proposed in this proposal. Other requirements are that the option or stock
appreciation right be granted by a committee of at least two outside directors
and that the exercise price of the option or stock appreciation right be not
less than fair market value of the Class A Common Stock on the date of grant.
Accordingly, the Company believes that if this proposal is approved by
shareholders, compensation received on exercise of options and stock
appreciation rights granted under the Plan in compliance with all of the above
requirements will be exempt from the $1,000,000 deduction limit.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE AMENDMENTS TO THE PLAN BE APPROVED.
The affirmative vote of the holders of shares of Class A Common Stock and Class
B Common Stock with a majority of the votes of the holders present in person or
represented by proxy and entitled to vote on the matter is required to approve
this proposal. Abstentions have the same effect as "no" votes in determining
whether the amendment is approved. Broker non-votes are counted for purposes of
determining whether a quorum exists at the Annual Meeting but are not counted
and have no effect on the results of the vote on the proposal. The proxies will
be voted for or against the proposal or as an abstention, in accordance with the
instructions specified on the proxy form. If no instructions are given, proxies
will be voted for approval of the amendments to the Plan.
APPROVAL AND RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors of the Company has, subject to approval and ratification
by the shareholders, selected Price Waterhouse LLP as independent auditors for
the Company for the fiscal year ending August 31, 1997.
A representative of Price Waterhouse LLP is expected to be present at the
meeting. Such representative will have the opportunity to make a statement if he
desires to do so and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL
AND RATIFICATION OF THE SELECTION OF PRICE WATERHOUSE LLP AS THE COMPANY'S
INDEPENDENT AUDITORS.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than 10% of the
outstanding Common Stock of the Company, to file with the Securities and
Exchange Commission reports of changes in ownership of the Common Stock of the
Company held by such persons. Officers, directors and greater than 10%
shareholders are also required to furnish the Company with copies of all forms
they file under this regulation. To the Company's knowledge, based solely on a
review of the copies of such reports furnished to the Company and
representations that no other reports were required, during fiscal 1996 its
officers and directors complied with all applicable Section 16(a) filing
requirements.
SHAREHOLDER PROPOSALS FOR 1997 ANNUAL MEETING
Any proposal by a shareholder of the Company to be considered for inclusion in
proxy materials for the Company's 1998 Annual Meeting of Shareholders must be
received in proper form by the Company at its principal office no later than
August 8, 1997.
GENERAL
The Board of Directors of the Company is not aware of any matters other than the
aforementioned matters that will be presented for consideration at the Annual
Meeting. If other matters properly come before the Annual Meeting, it is the
intention of the persons named in the enclosed proxy to vote thereon in
accordance with their best judgement.
The cost of preparing, printing and mailing this Proxy Statement and of the
solicitation of proxies by the Company will be borne by the Company.
Solicitation will be made by mail and, in addition, may be made by directors,
officers and employees of the Company personally, or by telephone or telegram.
The Company will request brokers, custodians, nominees and other like parties to
forward copies of proxy materials to beneficial owners of stock and will
reimburse such parties for their reasonable and customary charges or expenses in
this connection.
The Company will provide to any person whose proxy is solicited by this proxy
statement, without charge, upon written request to its Corporate Secretary, a
copy of the Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1996.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, SHAREHOLDERS WHO
DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED TO EXECUTE AND RETURN
THE ENCLOSED PROXY IN THE REPLY ENVELOPE PROVIDED.
By Order of the Board of Directors,
/S/Dori Schnitzer
Dori Schnitzer
Secretary
December 6, 1996
<PAGE>
APPENDIX A
SCHNITZER STEEL INDUSTRIES, INC.
1993 STOCK INCENTIVE PLAN*
1. PURPOSE. The purpose of this 1993 Stock Incentive Plan (the "Plan")
is to enable Schnitzer Steel Industries, Inc. (the "Company") to attract and
retain the services of (1) selected employees, officers and directors of the
Company or of any subsidiary of the Company and (2) selected nonemployee
consultants and advisors to the Company.
2. SHARES SUBJECT TO THE PLAN. Subject to adjustment as provided below
and in paragraph 13, the shares to be offered under the Plan shall consist of
Class A Common Stock of the Company, and the total number of shares of Class A
Common Stock that may be issued under the Plan shall not exceed 1,200,000
[375,000] shares. The shares issued under the Plan may be authorized and
unissued shares or reacquired shares. If an option, stock appreciation right or
performance unit granted under the Plan expires, terminates or is cancelled, the
unissued shares subject to such option, stock appreciation right or performance
unit shall again be available under the Plan. If shares sold or awarded as a
bonus under the Plan are forfeited to the Company or repurchased by the Company,
the number of shares forfeited or repurchased shall again be available under the
Plan.
3. EFFECTIVE DATE AND DURATION OF PLAN.
(a) EFFECTIVE DATE. The Plan shall become effective when adopted by
the Board of Directors; provided, however, that prior to shareholder approval of
the Plan, any awards shall be subject to and conditioned on approval of the Plan
by a majority of the votes cast at a shareholders meeting at which a quorum is
present. Options, stock appreciation rights and performance units may be granted
and shares may be awarded as bonuses or sold under the Plan at any time after
the effective date and before termination of the Plan.
(b) DURATION. The Plan shall continue in effect until all shares
available for issuance under the Plan have been issued and all restrictions on
such shares have lapsed. The Board of Directors may suspend or terminate the
Plan at any time except with respect to options, performance units and shares
subject to restrictions then outstanding under the Plan. Termination shall not
affect any outstanding options, any right of the Company to repurchase shares or
the forfeitability of shares issued under the Plan.
4. ADMINISTRATION. The Plan shall be administered by a committee of the
Board of Directors of the Company (the "Committee"), which shall determine and
designate from time to time the individuals to whom awards shall be made, the
amount of the awards, and the other terms and conditions of the awards. Subject
to the provisions of the Plan, the Committee may from time to time adopt and
amend rules and regulations relating to administration of the Plan, advance the
lapse of any waiting period, accelerate any exercise date, waive or modify any
restriction applicable to shares (except those restrictions imposed by law) and
make all other determinations in the judgment of the Committee necessary or
desirable for the administration of the Plan. The interpretation and
construction of the provisions of the Plan and related agreements by the
Committee shall be final and conclusive. The Committee may correct any defect or
supply any omission or reconcile any inconsistency in the Plan or in any related
agreement in the manner and to the extent it shall deem expedient to carry the
Plan into effect, and it shall be the sole and final judge of such expediency.
5. TYPES OF AWARDS; ELIGIBILITY. The Committee may, from time to time,
take the following actions, separately or in combination, under the Plan: (i)
grant Incentive Stock Options, as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), as provided in paragraphs 6(a) and 6(b);
(ii) grant options other than Incentive Stock Options ("Non-Statutory Stock
Options") as provided in paragraphs 6(a) and 6(c); (iii) award stock bonuses as
provided in paragraph 7; (iv) sell shares subject to restrictions as provided in
paragraph 8; (v) grant stock appreciation rights as provided in paragraph 9;
(vi) grant cash bonus rights as provided in paragraph 10; (vii) grant
performance units as provided in paragraph 11 and (viii) grant foreign qualified
awards as provided in paragraph 12. Any such awards may be made to employees,
including employees who are officers or directors, and to other individuals
described in paragraph 1 who the Committee believes have made or will make an
important contribution to the Company or its subsidiaries; provided, however,
that only employees of the Company shall be eligible to receive Incentive Stock
Options under the Plan and members of the Committee shall not be eligible to
receive awards under the Plan. The Committee shall select the individuals to
whom awards shall be made and shall specify the action taken with respect to
each individual to whom an award is made. At the discretion of the Committee, an
individual may be given an election to surrender an award in exchange for the
grant of a new award. No employee may be granted options or stock appreciation
rights under the Plan for more than 100,000 shares of Class A Common Stock in
any calendar year.
6. OPTION GRANTS.
(a) GENERAL RULES RELATING TO OPTIONS.
(i) TERMS OF GRANT. The Committee may grant options under the
Plan. With respect to each option grant, the Committee shall determine the
number of shares subject to the option, the option price, the period of the
option, the time or times at which the option may be exercised and whether the
option is an Incentive Stock Option or a Non-Statutory Stock Option. At the time
of the grant of an option or at any time thereafter, the Committee may provide
that an optionee who exercised an option with Class A Common Stock of the
Company shall automatically receive a new option to purchase additional shares
equal to the number of shares surrendered and may specify the terms and
conditions of such new options.
(ii) EXERCISE OF OPTIONS. Except as provided in paragraph
6(a)(iv) or as determined by the Committee, no option granted under the Plan may
be exercised unless at the time of such exercise the optionee is employed by or
in the service of the Company or any subsidiary of the Company and shall have
been so employed or provided such service continuously since the date such
option was granted. Absence on leave or on account of illness or disability
under rules established by the Committee shall not, however, be deemed an
interruption of employment or service for this purpose. Unless otherwise
determined by the Committee, vesting of options shall not continue during an
absence on leave (including an extended illness) or on account of disability.
Except as provided in paragraphs 6(a)(iv) and 13, options granted under the Plan
may be exercised from time to time over the period stated in each option in such
amounts and at such times as shall be prescribed by the Committee, provided that
options shall not be exercised for fractional shares. Unless otherwise
determined by the Committee, if the optionee does not exercise an option in any
one year with respect to the full number of shares to which the optionee is
entitled in that year, the optionee's rights shall be cumulative and the
optionee may purchase those shares in any subsequent year during the term of the
option. [Unless otherwise determined by the Committee, if an officer subject to
Section 16 of the Securities Exchange Act of 1934 (an "Officer") or a director
exercises an option within six months of the grant of the option, the shares
acquired upon exercise of the option may not be sold until six months after the
date of grant of the option.]
(iii) NONTRANSFERABILITY. Each Incentive Stock Option and,
unless otherwise determined by the Committee [with respect to an option granted
to a person who is neither an Officer nor a director of the Company], each other
option granted under the Plan by its terms shall be nonassignable and
nontransferable by the optionee, either voluntarily or by operation of law,
except by will or by the laws of descent and distribution of the state or
country of the optionee's domicile at the time of death, and each option by its
terms shall be exercisable during the optionee's lifetime only by the optionee;
provided, however, that a Non-Statutory Stock Option shall also be transferable
pursuant to a qualified domestic relations order as defined under the Code or
Title I of the Employee Retirement Income Security Act.
(iv) TERMINATION OF EMPLOYMENT OR SERVICE.
(A) GENERAL RULE. Unless otherwise determined by the
Committee, in the event the employment or service of the optionee with the
Company or a subsidiary terminates for any reason other than because of physical
disability or death as provided in subparagraphs 6(a)(iv)(B) and (C), the option
may be exercised at any time prior to the expiration date of the option or the
expiration of 30 days after the date of such termination, whichever is the
shorter period, but only if and to the extent the optionee was entitled to
exercise the option at the date of such termination.
(B) TERMINATION BECAUSE OF TOTAL DISABILITY. Unless
otherwise determined by the Committee, in the event of the termination of
employment or service because of total disability, the option may be exercised
at any time prior to the expiration date of the option or the expiration of 12
months after the date of such termination, whichever is the shorter period, but
only if and to the extent the optionee was entitled to exercise the option at
the date of such termination. The term "total disability" means a mental or
physical impairment which is expected to result in death or which has lasted or
is expected to last for a continuous period of 12 months or more and which
causes the optionee to be unable, in the opinion of the Company and two
independent physicians, to perform his or her duties as an employee, director,
officer or consultant of the Company and to be engaged in any substantial
gainful activity. Total disability shall be deemed to have occurred on the first
day after the Company and the two independent physicians have furnished their
opinion of total disability to the Company.
(C) TERMINATION BECAUSE OF DEATH. Unless otherwise
determined by the Committee, in the event of the death of an optionee while
employed by or providing service to the Company or a subsidiary, the option may
be exercised at any time prior to the expiration date of the option or the
expiration of 12 months after the date of such death, whichever is the shorter
period, but only if and to the extent the optionee was entitled to exercise the
option at the date of such termination and only by the person or persons to whom
such optionee's rights under the option shall pass by the optionee's will or by
the laws of descent and distribution of the state or country of domicile at the
time of death.
(D) AMENDMENT OF EXERCISE PERIOD APPLICABLE TO
TERMINATION. The Committee, at the time of grant or at any time thereafter, may
extend the 30-day and 12-month exercise periods any length of time not later
than the original expiration date of the option, and may increase the portion of
an option that is exercisable, subject to such terms and conditions as the
Committee may determine.
(E) FAILURE TO EXERCISE OPTION. To the extent that the
option of any deceased optionee or of any optionee whose employment or service
terminates is not exercised within the applicable period, all further rights to
purchase shares pursuant to such option shall cease and terminate.
(v) PURCHASE OF SHARES. Unless the Committee determines
otherwise, shares may be acquired pursuant to an option granted under the Plan
only upon receipt by the Company of notice in writing from the optionee of the
optionee's intention to exercise, specifying the number of shares as to which
the optionee desires to exercise the option and the date on which the optionee
desires to complete the transaction, and if required in order to comply with the
Securities Act of 1933, as amended, containing a representation that it is the
optionee's present intention to acquire the shares for investment and not with a
view to distribution. Unless the Committee determines otherwise, on or before
the date specified for completion of the purchase of shares pursuant to an
option, the optionee must have paid the Company the full purchase price of such
shares in cash (including, with the consent of the Committee, cash that may be
the proceeds of a loan from the Company) or, with the consent of the Committee,
in whole or in part, in Class A Common Stock of the Company valued at fair
market value, restricted stock, performance units or other contingent awards
denominated in either stock or cash, deferred compensation credits, promissory
notes and other forms of consideration. The fair market value of Class A Common
Stock provided in payment of the purchase price shall be the closing price of
the Class A Common Stock as reported in The Wall Street Journal on the trading
day preceding the date the option is exercised, or such other reported value of
the Class A Common Stock as shall be specified by the Committee. No shares shall
be issued until full payment therefor has been made. With the consent of the
Committee, an optionee may request the Company to apply automatically the shares
to be received upon the exercise of a portion of a stock option (even though
stock certificates have not yet been issued) to satisfy the purchase price for
additional portions of the option. Each optionee who has exercised an option
shall immediately upon notification of the amount due, if any, pay to the
Company in cash amounts necessary to satisfy any applicable federal, state and
local tax withholding requirements. If additional withholding is or becomes
required beyond any amount deposited before delivery of the certificates, the
optionee shall pay such amount to the Company on demand. If the optionee fails
to pay the amount demanded, the Company may withhold that amount from other
amounts payable by the Company to the optionee, including salary, subject to
applicable law. With the consent of the Committee an optionee may satisfy this
obligation, in whole or in part, by having the Company withhold from the shares
to be issued upon the exercise that number of shares that would satisfy the
withholding amount due or by delivering to the Company Class A Common Stock to
satisfy the withholding amount. Upon the exercise of an option, the number of
shares reserved for issuance under the Plan shall be reduced by the number of
shares issued upon exercise of the option.
(b) INCENTIVE STOCK OPTIONS. Incentive Stock Options shall be
subject to the following additional terms and conditions:
(i) LIMITATION ON AMOUNT OF GRANTS. No employee may be granted
Incentive Stock Options under the Plan if the aggregate fair market value, on
the date of grant, of the Class A Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by that employee during any
calendar year under the Plan and under any other incentive stock option plan
(within the meaning of Section 422 of the Code) of the Company or any parent or
subsidiary of the Company exceeds $100,000.
(ii) LIMITATIONS ON GRANTS TO 10 PERCENT SHAREHOLDERS. An
Incentive Stock Option may be granted under the Plan to an employee possessing
more than 10 percent of the total combined voting power of all classes of stock
of the Company or of any parent or subsidiary of the Company only if the option
price is at least 110 percent of the fair market value of the Class A Common
Stock subject to the option on the date it is granted, as described in paragraph
6(b)(iv), and the option by its terms is not exercisable after the expiration of
five years from the date it is granted.
(iii) DURATION OF OPTIONS. Subject to paragraphs 6 (a)(ii) and
6(b)(ii), Incentive Stock Options granted under the Plan shall continue in
effect for the period fixed by the Committee, except that no Incentive Stock
Option shall be exercisable after the expiration of 10 years from the date it is
granted.
(iv) OPTION PRICE. The option price per share shall be
determined by the Committee at the time of grant. Except as provided in
paragraph 6(b)(ii), the option price shall not be less than 100 percent of the
fair market value of the Class A Common Stock covered by the Incentive Stock
Option at the date the option is granted. The fair market value shall be deemed
to be the closing price of the Class A Common Stock as reported in The Wall
Street Journal on the day preceding the date the option is granted, or if there
has been no sale on that date, on the last preceding date on which a sale
occurred, or such other value of the Class A Common Stock as shall be specified
by the Committee.
(v) LIMITATION ON TIME OF GRANT. No Incentive Stock Option shall
be granted on or after the tenth anniversary of the last action [date the Plan
was adopted] by the Board of Directors approving an increase in the number of
shares available for issuance under the Plan, which action was subsequently
approved within 12 months by the shareholders.
(vi) CONVERSION OF INCENTIVE STOCK OPTIONS. The Committee may at
any time without the consent of the optionee convert an Incentive Stock Option
to a Non-Statutory Stock Option.
(c) NON-STATUTORY STOCK OPTIONS. Non-Statutory Stock Options shall
be subject to the following additional terms and conditions:
(i) OPTION PRICE. The option price for Non-Statutory Stock
Options shall be determined by the Committee at the time of grant and may be any
amount determined by the Committee.
(ii) DURATION OF OPTIONS. Non-Statutory Stock Options granted
under the Plan shall continue in effect for the period fixed by the Committee.
7. STOCK BONUSES. The Committee may award shares under the Plan as
stock bonuses. Shares awarded as a bonus shall be subject to the terms,
conditions, and restrictions determined by the Committee. The restrictions may
include restrictions concerning transferability and forfeiture of the shares
awarded, together with such other restrictions as may be determined by the
Committee. [If shares are subject to forfeiture, all dividends or other
distributions paid by the Company with respect to the shares shall be retained
by the Company until the shares are no longer subject to forfeiture, at which
time all accumulated amounts shall be paid to the recipient.] The Committee may
require the recipient to sign an agreement as a condition of the award, but may
not require the recipient to pay any monetary consideration other than amounts
necessary to satisfy tax withholding requirements. The agreement may contain any
terms, conditions, restrictions, representations and warranties required by the
Committee. The certificates representing the shares awarded shall bear any
legends required by the Committee. [Unless otherwise determined by the
Committee, shares awarded as a stock bonus to an Officer or director may not be
sold until six months after the date of the award.] The Company may require any
recipient of a stock bonus to pay to the Company in cash upon demand amounts
necessary to satisfy any applicable federal, state or local tax withholding
requirements. If the recipient fails to pay the amount demanded, the Company may
withhold that amount from other amounts payable by the Company to the recipient,
including salary or fees for services, subject to applicable law. With the
consent of the Committee, a recipient may deliver Class A Common Stock to the
Company to satisfy this withholding obligation. Upon the issuance of a stock
bonus, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued.
8. RESTRICTED STOCK. The Committee may issue shares under the Plan for
such consideration (including promissory notes and services) as determined by
the Committee. Shares issued under the Plan shall be subject to the terms,
conditions and restrictions determined by the Committee. The restrictions may
include restrictions concerning transferability, repurchase by the Company and
forfeiture of the shares issued, together with such other restrictions as may be
determined by the Committee. [If shares are subject to forfeiture or repurchase
by the Company, all dividends or other distributions paid by the Company with
respect to the shares shall be retained by the Company until the shares are no
longer subject to forfeiture or repurchase, at which time all accumulated
amounts shall be paid to the recipient.] All Class A Common Stock issued
pursuant to this paragraph 8 shall be subject to a purchase agreement, which
shall be executed by the Company and the prospective recipient of the shares
prior to the delivery of certificates representing such shares to the recipient.
The purchase agreement may contain any terms, conditions, restrictions,
representations and warranties required by the Committee. The certificates
representing the shares shall bear any legends required by the Committee.
[Unless otherwise determined by the Committee, shares issued under this
paragraph 8 to an Officer or director may not be sold until six months after the
shares are issued.] The Company may require any purchaser of restricted stock to
pay to the Company in cash upon demand amounts necessary to satisfy any
applicable federal, state or local tax withholding requirements. If the
purchaser fails to pay the amount demanded, the Company may withhold that amount
from other amounts payable by the Company to the purchaser, including salary,
subject to applicable law. With the consent of the Committee, a purchaser may
deliver Class A Common Stock to the Company to satisfy this withholding
obligation. Upon the issuance of restricted stock, the number of shares reserved
for issuance under the Plan shall be reduced by the number of shares issued.
9. STOCK APPRECIATION RIGHTS.
(a) GRANT. Stock appreciation rights may be granted under the Plan
by the Committee, subject to such rules, terms, and conditions as the Committee
prescribes.
(b) EXERCISE.
(i) Each stock appreciation right shall entitle the holder, upon
exercise, to receive from the Company in exchange therefor an amount equal in
value to the excess of the fair market value on the date of exercise of one
share of Class A Common Stock of the Company over its fair market value on the
date of grant (or, in the case of a stock appreciation right granted in
connection with an option, the excess of the fair market value of one share of
Class A Common Stock of the Company over the option price per share under the
option to which the stock appreciation right relates), multiplied by the number
of shares covered by the stock appreciation right or the option, or portion
thereof, that is surrendered. Payment by the Company upon exercise of a stock
appreciation right may be made in Class A Common Stock valued at fair market
value, in cash, or partly in Class A Common Stock and partly in cash, all as
determined by the Committee.
(ii) A stock appreciation right shall be exercisable only at the
time or times established by the Committee. If a stock appreciation right is
granted in connection with an option, the following rules shall apply: (1) the
stock appreciation right shall be exercisable only to the extent and on the same
conditions that the related option could be exercised; (2) upon exercise of the
stock appreciation right, the option or portion thereof to which the stock
appreciation right relates terminates; and (3) upon exercise of the option, the
related stock appreciation right or portion thereof terminates. [Unless
otherwise determined by the Committee, no stock appreciation right granted to an
Officer or director may be exercised during the first six months following the
date it is granted.]
(iii) The Committee may withdraw any stock appreciation right
granted under the Plan at any time and may impose any conditions upon the
exercise of a stock appreciation right or adopt rules and regulations from time
to time affecting the rights of holders of stock appreciation rights. Such rules
and regulations may govern the right to exercise stock appreciation rights
granted prior to adoption or amendment of such rules and regulations as well as
stock appreciation rights granted thereafter.
(iv) For purposes of this paragraph 9, the fair market value of
the Class A Common Stock shall be the closing price of the Class A Common Stock
as reported in The Wall Street Journal, or such other reported value of the
Class A Common Stock as shall be specified by the Committee, on the trading day
preceding the date the stock appreciation right is exercised.
(v) No fractional shares shall be issued upon exercise of a
stock appreciation right. In lieu thereof, cash may be paid in an amount equal
to the value of the fraction or, if the Committee shall determine, the number of
shares may be rounded downward to the next whole share.
(vi) Each stock appreciation right granted in connection with an
Incentive Stock Option and, unless otherwise determined by the Board of
Directors [with respect to a stock appreciation right granted to a person who is
neither an Officer nor a director of the Company], each other stock appreciation
right granted under the Plan by its terms shall be nonassignable and
nontransferable by the holder, either voluntarily or by operation of law, except
by will or by the laws of descent and distribution of the state or country of
the holder's domicile at the time of death, and each stock appreciation right by
its terms shall be exercisable during the holder's lifetime only by the holder;
provided, however, that a stock appreciation right not granted in connection
with an Incentive Stock Option shall also be transferable pursuant to a
qualified domestic relations order as defined under the Code or Title I of the
Employee Retirement Income Security Act.
(vii) Each participant who has exercised a stock appreciation
right shall, upon notification of the amount due, pay to the Company in cash
amounts necessary to satisfy any applicable federal, state and local tax
withholding requirements. If the participant fails to pay the amount demanded,
the Company may withhold that amount from other amounts payable by the Company
to the participant including salary, subject to applicable law. With the consent
of the Committee a participant may satisfy this obligation, in whole or in part,
by having the Company withhold from any shares to be issued upon the exercise
that number of shares that would satisfy the withholding amount due or by
delivering Class A Common Stock to the Company to satisfy the withholding
amount.
(viii) Upon the exercise of a stock appreciation right for
shares, the number of shares reserved for issuance under the Plan shall be
reduced by the number of shares issued. Cash payments of stock appreciation
rights shall not reduce the number of shares of Class A Common Stock reserved
for issuance under the Plan.
10. CASH BONUS RIGHTS.
(a) GRANT. The Committee may grant cash bonus rights under the Plan
in connection with (i) options granted or previously granted, (ii) stock
appreciation rights granted or previously granted, (iii) stock bonuses awarded
or previously awarded and (iv) shares sold or previously sold under the Plan.
Cash bonus rights will be subject to rules, terms and conditions as the
Committee may prescribe. Unless otherwise determined by the Committee [with
respect to a cash bonus right granted to a person who is neither an Officer nor
a director of the Company], each cash bonus right granted under the Plan by its
terms shall be nonassignable and nontransferable by the holder, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution of the state or country of the holder's domicile at the time of
death or pursuant to a qualified domestic relations order as defined under the
Code or Title I of the Employee Retirement Income Security Act. The payment of a
cash bonus shall not reduce the number of shares of Class A Common Stock
reserved for issuance under the Plan.
(b) CASH BONUS RIGHTS IN CONNECTION WITH OPTIONS. A cash bonus right
granted in connection with an option will entitle an optionee to a cash bonus
when the related option is exercised (or terminates in connection with the
exercise of a stock appreciation right related to the option) in whole or in
part. If an optionee purchases shares upon exercise of an option and does not
exercise a related stock appreciation right, the amount of the bonus shall be
determined by multiplying the excess of the total fair market value of the
shares to be acquired upon the exercise over the total option price for the
shares by the applicable bonus percentage. If the optionee exercises a related
stock appreciation right in connection with the termination of an option, the
amount of the bonus shall be determined by multiplying the total fair market
value of the shares and cash received pursuant to the exercise of the stock
appreciation right by the applicable bonus percentage. The bonus percentage
applicable to a bonus right shall be determined from time to time by the
Committee but shall in no event exceed 75 percent.
(c) CASH BONUS RIGHTS IN CONNECTION WITH STOCK BONUs. A cash bonus
right granted in connection with a stock bonus will entitle the recipient to a
cash bonus payable when the stock bonus is awarded or restrictions, if any, to
which the stock is subject lapse. If bonus stock awarded is subject to
restrictions and is repurchased by the Company or forfeited by the holder, the
cash bonus right granted in connection with the stock bonus shall terminate and
may not be exercised. The amount and timing of payment of a cash bonus shall be
determined by the Committee.
(d) CASH BONUS RIGHTS IN CONNECTION WITH STOCK PURCHASES. A cash
bonus right granted in connection with the purchase of stock pursuant to
paragraph 8 will entitle the recipient to a cash bonus when the shares are
purchased or restrictions, if any, to which the stock is subject lapse. Any cash
bonus right granted in connection with shares purchased pursuant to paragraph 8
shall terminate and may not be exercised in the event the shares are repurchased
by the Company or forfeited by the holder pursuant to applicable restrictions.
The amount and timing of payment of a cash bonus shall be determined by the
Committee.
(e) TAXES. The Company shall withhold from any cash bonus paid
pursuant to paragraph 10 the amount necessary to satisfy any applicable federal,
state and local withholding requirements.
11. PERFORMANCE UNITs. The Committee may grant performance units
consisting of monetary units which may be earned in whole or in part if the
Company achieves certain goals established by the Committee over a designated
period of time, but not in any event more than 10 years. The goals established
by the Committee may include earnings per share, return on shareholders' equity,
return on invested capital, and such other goals as may be established by the
Committee. In the event that the minimum performance goal established by the
Committee is not achieved at the conclusion of a period, no payment shall be
made to the participants. In the event the maximum corporate goal is achieved,
100 percent of the monetary value of the performance units shall be paid to or
vested in the participants. Partial achievement of the maximum goal may result
in a payment or vesting corresponding to the degree of achievement as determined
by the Committee. Payment of an award earned may be in cash or in Class A Common
Stock or in a combination of both, and may be made when earned, or vested and
deferred, as the Committee determines. Deferred awards shall earn interest on
the terms and at a rate determined by the Committee. Unless otherwise determined
by the Committee [with respect to a performance unit granted to a person who is
neither an Officer nor a director of the Company], each performance unit granted
under the Plan by its terms shall be nonassignable and nontransferable by the
holder, either voluntarily or by operation of law, except by will or by the laws
of descent and distribution of the state or country of the holder's domicile at
the time of death or pursuant to a qualified domestic relations order as defined
under the Code or Title I of the Employee Retirement Income Security Act. Each
participant who has been awarded a performance unit shall, upon notification of
the amount due, pay to the Company in cash amounts necessary to satisfy any
applicable federal, state and local tax withholding requirements. If the
participant fails to pay the amount demanded, the Company may withhold that
amount from other amounts payable by the Company to the participant, including
salary or fees for services, subject to applicable law. With the consent of the
Committee a participant may satisfy this obligation, in whole or in part, by
having the Company withhold from any shares to be issued that number of shares
that would satisfy the withholding amount due or by delivering Class A Common
Stock to the Company to satisfy the withholding amount. The payment of a
performance unit in cash shall not reduce the number of shares of Class A Common
Stock reserved for issuance under the Plan. The number of shares reserved for
issuance under the Plan shall be reduced by the number of shares issued upon
payment of an award.
12. FOREIGN QUALIFIED GRANTS. Awards under the Plan may be granted to
such officers and employees of the Company and its subsidiaries and such other
persons described in paragraph 1 residing in foreign jurisdictions as the
Committee may determine from time to time. The Committee may adopt such
supplements to the Plan as may be necessary to comply with the applicable laws
of such foreign jurisdictions and to afford participants favorable treatment
under such laws; provided, however, that no award shall be granted under any
such supplement with terms which are more beneficial to the participants than
the terms permitted by the Plan.
13. CHANGES IN CAPITAL STRUCTURE. If the outstanding Class A Common
Stock of the Company is hereafter increased or decreased or changed into or
exchanged for a different number or kind of shares or other securities of the
Company or of another corporation by reason of any reorganization, merger,
consolidation, plan of exchange, recapitalization, reclassification, stock
split-up, combination of shares or dividend payable in shares, appropriate
adjustment shall be made by the Committee in the number and kind of shares
available for awards under the Plan. In addition, the Committee shall make
appropriate adjustment in the number and kind of shares as to which outstanding
options and stock appreciation rights, or portions thereof then unexercised,
shall be exercisable, so that the optionee's proportionate interest before and
after the occurrence of the event is maintained. Notwithstanding the foregoing,
the Committee shall have no obligation to effect any adjustment that would or
might result in the issuance of fractional shares, and any fractional shares
resulting from any adjustment may be disregarded or provided for in any manner
determined by the Committee. Any such adjustments made by the Committee shall be
conclusive. In the event of dissolution of the Company or a merger,
consolidation or plan of exchange affecting the Company, in lieu of providing
for options and stock appreciation rights as provided above in this paragraph 13
or in lieu of having the options and stock appreciation rights continue
unchanged, the Committee may, in its sole discretion, provide a 30-day period
prior to such event during which optionees shall have the right to exercise
options and stock appreciation rights in whole or in part without any limitation
on exercisability and upon the expiration of which 30-day period all unexercised
options and stock appreciation rights shall immediately terminate.
14. CORPORATE MERGERS, ACQUISITIONS, ETC. The Committee may also grant
options, stock appreciation rights, performance units, stock bonuses and cash
bonuses and issue restricted stock under the Plan having terms, conditions and
provisions that vary from those specified in this Plan provided that any such
awards are granted in substitution for, or in connection with the assumption of,
existing options, stock appreciation rights, stock bonuses, cash bonuses,
restricted stock and performance units granted, awarded or issued by another
corporation and assumed or otherwise agreed to be provided for by the Company
pursuant to or by reason of a transaction involving a corporate merger,
consolidation, acquisition of property or stock, separation, reorganization or
liquidation to which the Company or a subsidiary is a party.
15. AMENDMENT OF PLAN. The Board of Directors may at any time, and from
time to time, modify or amend the Plan in such respects as it shall deem
advisable because of changes in the law while the Plan is in effect or for any
other reason. Except as provided in paragraphs 6(a)(iv), 9 and 13, however, no
change in an award already granted shall be made without the written consent of
the holder of such award.
16. APPROVALS. The obligations of the Company under the Plan are subject
to the approval of state and federal authorities or agencies with jurisdiction
in the matter. The Company will use its best efforts to take steps required by
state or federal law or applicable regulations, including rules and regulations
of the Securities and Exchange Commission and any stock exchange on which the
Company's shares may then be listed, in connection with the grants under the
Plan. The foregoing notwithstanding, the Company shall not be obligated to issue
or deliver Class A Common Stock under the Plan if such issuance or delivery
would violate applicable state or federal securities laws.
17. EMPLOYMENT AND SERVICE RIGHTS. Nothing in the Plan or any award
pursuant to the Plan shall (i) confer upon any employee any right to be
continued in the employment of the Company or any subsidiary or interfere in any
way with the right of the Company or any subsidiary by whom such employee is
employed to terminate such employee's employment at any time, for any reason,
with or without cause, or to decrease such employee's compensation or benefits,
or (ii) confer upon any person engaged by the Company any right to be retained
or employed by the Company or to the continuation, extension, renewal, or
modification of any compensation, contract, or arrangement with or by the
Company.
18. RIGHTS AS A SHAREHOLDER. The recipient of any award under the Plan
shall have no rights as a shareholder with respect to any Class A Common Stock
until the date of issue to the recipient of a stock certificate for such shares.
Except as otherwise expressly provided in the Plan, no adjustment shall be made
for dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
*NOTE: Matter in bold is new; matter in [brackets and italics] is to be deleted.
