Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On June 21, 2017, Commercial Metals Company (the
Company
) announced that (i) effective August 31, 2017, Joe Alvarado would retire as Chief Executive Officer; (ii) effective September 1, 2017, Barbara Smith would assume the role of Chief Executive
Officer (in addition to continuing in her role as President); and (iii) Mr. Alvarado would continue to serve as Chairman of the Board through the Companys annual meeting of stockholders on January 10, 2018.
Amendment of Terms and Conditions of Employment
In connection with Ms. Smiths appointment as Chief Executive Officer of the Company, Ms. Smith and the Company entered into
that certain Fourth Amendment to Terms and Conditions of Employment, dated as of August 31, 2017 (the
Fourth
Amendment
), which amends the Terms and Conditions of Employment, dated as of May 3, 2011,
by and between Ms. Smith and the Company, as previously amended as of May 29, 2015, January 18, 2016 and November 28, 2016. The Fourth Amendment, which becomes effective on September 1, 2017, provides for, among other
things, the following: (i) Ms. Smiths new title, (ii) Ms. Smiths duties and responsibilities as President and Chief Executive Officer, (iii) the appointment of Ms. Smith to the Companys Board of
Directors effective September 1, 2017 and (iv) an increase in Ms. Smiths minimum annual base salary to $950,000.
The
foregoing description of the Fourth Amendment does not purport to be complete and is qualified in its entirety by reference to the full text of the Fourth Amendment, which is attached hereto as Exhibit 10.1 and incorporated herein by reference.
Equity Grants
In addition, in connection
with Ms. Smiths appointment as Chief Executive Officer of the Company, a
one-time
grant will be made to Ms. Smith under the Companys 2013 Long-Term Equity Incentive Plan (the
Plan
), effective September 1, 2017, to reflect an increase in Ms. Smiths long-term incentive opportunity that is commensurate with her new position. As part of the
one-time
grant, Ms. Smith will receive a restricted stock unit (
RSU
) award valued at $618,750.00 as of the grant date of September 1, 2017 (the
Grant
Date
) and a
one-time
performance stock unit (
PSU
) award with a target value of $618,750.00 as of the Grant Date.
One-third
of the
RSUs will vest on each of September 1, 2018, September 1, 2019 and September 1, 2020, so long as Ms. Smith remains employed by the Company on such date and certain other conditions are satisfied, and such RSUs will be settled in
shares of Company common stock. The PSUs will vest at the end of a multi-year performance period, which will begin on September 1, 2017 and end on August 31, 2020, to the extent the applicable performance and other conditions are satisfied
and Ms. Smith remains employed by the Company through such date, and the PSUs will be settled in shares of Company common stock.
Retirement
Agreement
In connection with his retirement, Mr. Alvarado and the Company entered into that certain Retirement Agreement, dated
August 31, 2017 (the
Retirement Agreement
), pursuant to which Mr. Alvarado retired effective August 31, 2017 (the
Retirement Date
). Except as provided in the Retirement Agreement,
the Retirement Agreement supersedes that certain Employment Agreement, dated April 16, 2010, by and between Mr. Alvarado and the Company, as amended from time to time, and that certain Executive Employment Continuity Agreement, dated
April 19, 2010, by and between Mr. Alvarado and the Company.
2
The Retirement Agreement provides that, in consideration of Mr. Alvarados release and
waiver of claims and his agreement to comply with the restrictive covenants, including confidentiality,
non-competition,
non-solicitation
and other obligations
referenced in the Retirement Agreement, the Company agreed, among other things, that Mr. Alvarado will be entitled to: (i) a lump sum payment in the gross amount of $326,923; (ii) Mr. Alvarados annual performance bonus for the
2017 fiscal year based on the formulaic calculation in the Companys Annual Performance Bonus Program, as approved by the Compensation Committee of the Companys Board of Directors (the
Compensation Committee
);
and (iii) a grant of RSUs pursuant to the terms of the Plan with respect to shares of Company common stock having a Fair Market Value (as defined in the Plan) of $4,750,000, which shall become vested and settled on the third anniversary of
their grant date, provided that Mr. Alvarado satisfies his obligations under the Retirement Agreement in all material respects.
Also
in consideration of Mr. Alvarados release and waiver of claims and his agreement to comply with the restrictive covenants and other obligations referenced in the Retirement Agreement, and as approved by the Compensation Committee, the
equity awards held by Mr. Alvarado became vested and payable as follows: (i) 295,157 outstanding time-vested RSUs granted on October 27, 2014, October 26, 2015 and October 24, 2016 became fully vested on the Retirement Date and
the related shares of Company common stock shall be issued to Mr. Alvarado and (ii) 263,773 PSUs, which is a prorated portion of the 447,596 outstanding PSUs granted on October 27, 2014, October 26, 2015 and October 24, 2016
became vested on the Retirement Date, determined by calculating the number of PSUs that are earned based solely on the Companys performance through August 31, 2017, as certified by the Compensation Committee, and multiplying the number of
such earned PSUs by a ratio, the numerator of which is the number days in the applicable performance period prior to and including the Retirement Date and the denominator of which is the total number of days in the applicable performance period.
Shares of Company common stock relating to such vested PSUs shall be issued to Mr. Alvarado within 60 days after the Retirement Date.
The foregoing description of the Retirement Agreement does not purport to be complete and is qualified in its entirety by reference to the
full text of the Retirement Agreement, which is attached hereto as Exhibit 10.2 and incorporated herein by reference.