COMMERCIAL METALS COMPANY KEY EMPLOYEE
ANNUAL INCENTIVE PLAN
The objectives for the Annual Incentive Plan are to:
o Pay for short-term results which help drive longer term shareholder value
creation for Commercial Metals Company including achieving annual business
and financial performance targets;
o Encourage senior management to promote the interests of the Company and
subsidiaries by linking compensation to the Company's consolidated
o Maintain an entrepreneurial culture among key management employees by
linking compensation to results for their business unit or area of
o Communicate expectations, results, and incentive payouts in a clear,
o Provide total cash compensation levels that are competitive with or above
the market, especially with high performance; and
o Fund the incentive payouts from results achieved consistent with acceptable
returns for shareholders.
Those executive officers of the Company and selected other senior managers as
approved by the compensation committee.
Each eligible plan participant has a target award opportunity, expressed as a
percentage of base salary. The target award represents the level of bonus
payment the participant may earn in the event financial performance is achieved
at targeted levels and acceptable organizational standards are met.
In addition, a threshold and superior award level will be established bounding
payouts for performance levels that exceed or fall below the target level. Total
bonus awards by segment for all eligible employees (including those bonuses paid
to participants in the annual incentive plan) are subject to a 20% ceiling
limitation of operating profit.
At the beginning of each fiscal year, senior management will establish and
communicate the specific range of performance objectives for the Company and
business units/individuals. The objective will reflect the key strategic goals
of the Company and will be aligned and supportive of higher level plans, and be
realistic and attainable stretch goals. The goals will be reviewed and the key
performance factors approved by the compensation committee; the review process
will consider the goals in light of the external environment and shareholder
return and are subject to modification by the committee.
At the end of the fiscal year, actual relative performance against these goals
will be measured, and the resulting incentive amounts will be calculated. The
compensation committee will approve final awards and may consider factors other
than financial performance and unforeseen issues.
The primary performance measure of the Annual Incentive Plan is operating profit
defined as FIFO operating profit before taxes but after interest expense
WEIGHTING OF CORPORATE, BUSINESS UNIT, AND INDIVIDUAL PERFORMANCE
Based on a participant's function and position level, the award opportunity is
proportionally weighted by the results of Commercial Metals Company's
consolidated performance and its underlying segments. For instance, the CEO's
award performance is based entirely on the consolidated performance of the
Company. The President of the Marketing and Trading division's award performance
is based 70% on the Marketing and Trading segment performance and 30% on