<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
NATCO Group Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and O-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule O-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
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<PAGE> 2
[NATCOGROUP LOGO]
NATCO GROUP INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 25, 2000
To the Stockholders of
NATCO Group Inc.:
NOTICE IS HEREBY GIVEN THAT the 2000 Annual Meeting of Stockholders of
NATCO Group Inc., a Delaware corporation (the "Company"), will be held at the
Sheraton Houston Brookhollow Hotel, 3000 North Loop West, Houston, Texas on the
25th day of May 2000 at 10:00 a.m., local time (the "Annual Meeting") for the
following purposes:
(1) To elect three (3) Class II members of the Board of Directors;
(2) To ratify the appointment of KPMG LLP as independent accountants
for the year ended December 31, 2000; and
(3) To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
The Company has fixed the close of business on April 14, 2000 as the record
date for determining stockholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournments thereof. Stockholders who execute proxies
solicited by the Board of Directors of the Company retain the right to revoke
them at any time; unless so revoked, the shares of common stock represented by
such proxies will be voted at the Annual Meeting in accordance with the
directions given therein. If a stockholder does not specify a choice on such
stockholder's proxy, the proxy will be voted FOR the nominees for director named
in the attached Proxy Statement and FOR the ratification of the appointment of
the independent certified public accountants for the Company named in such Proxy
Statement. The list of stockholders of the Company may be examined at the
offices of the Company beginning on May 15, 2000 and at the Annual Meeting.
Further information regarding the Annual Meeting is set forth in the
attached Proxy Statement.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING. HOWEVER, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE, SIGN
AND MAIL PROMPTLY THE ENCLOSED PROXY IN THE ENCLOSED POSTPAID ENVELOPE. THE
PROXY IS REVOCABLE AND WILL NOT BE USED IF YOU ARE PRESENT AT THE ANNUAL MEETING
AND PREFER TO VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Sincerely,
/s/ J. Michael Mayer
------------------------------------
J. Michael Mayer
Senior Vice President and
Chief Financial Officer
April 17, 2000
<PAGE> 3
NATCO GROUP INC.
2950 NORTH LOOP WEST, SUITE 700
HOUSTON, TEXAS 77027
PROXY STATEMENT
for the
ANNUAL MEETING OF STOCKHOLDERS
The following information is furnished in connection with the solicitation
of proxies on behalf of the Board of Directors of NATCO Group Inc. (the
"Company") to be voted at the annual meeting of stockholders of the Company (the
"Annual Meeting"), which will be held at the Sheraton Houston Brookhollow Hotel,
3000 North Loop West, Houston, Texas on the 25th day of May 2000, at 10:00 a.m.
local time, for the following purposes:
1. To elect three (3) Class II members of the Board of Directors;
2. To ratify the appointment of KPMG LLP as independent accountants
for the year ended December 31, 2000; and
3. To consider and act upon other such business as may properly come
before the meeting or any adjournment thereof.
You may revoke your proxy at any time before it is exercised by: (1)
sending a written statement revoking your proxy to the Secretary of the Company;
(2) submitting a properly signed proxy with a later date; or (3) voting in
person at the Annual Meeting. If you return your signed proxy to us before the
Annual Meeting, we will vote your shares as you direct. If you do not specify on
your proxy card how you want to vote your shares, we will vote them "for" the
election of all nominees for director as set forth under "Proposal 1: Election
of Directors" and "for the ratification of the appointment of KPMG LLP as
independent accountants" as set forth under "Proposal 2: Appointment of
Auditors". If any other business is brought before the meeting, any unspecified
proxies will be voted in accordance with the judgment of the persons voting
those shares.
The cost of soliciting proxies will be paid by the Company. In addition to
the use of the mails, proxies may be solicited by the directors, officers and
employees of the Company without additional compensation, by personal interview,
telephone, telegram, or other means of electronic communication. Arrangements
also may be made with brokerage firms and other custodians, dealers, banks and
trustees, or their nominees who hold the voting securities of record, for
sending proxy materials to beneficial owners. Upon request, the Company will
reimburse the brokers, custodians, dealers, banks, or their nominees for their
reasonable out-of-pocket expenses. In addition, the Company has retained
ChaseMellon Shareholder Services LLC to assist in the solicitation of proxies,
for which the Company will pay an estimated fee of $4,000.
NATCO Group Inc.'s Form 10-K for the year ended December 31, 1999, is being
mailed with this Proxy Statement to all stockholders entitled to vote at the
Annual Meeting. This form does not constitute a part of the proxy soliciting
material.
This proxy statement and the enclosed form of proxy was mailed to
stockholders beginning April 24, 2000.
OUTSTANDING VOTING SECURITIES AND VOTING RIGHTS
Only holders of record of Class A common stock, par value $.01 ("Class A
Common Stock"), and Class B common stock, par value $.01 ("Class B Common Stock"
and, together with the Class A Common Stock, the "Common Stock"), of the Company
on April 14, 2000 are entitled to notice of and to vote at the Annual Meeting
and any adjournments or postponements thereof. On April 14, 2000 there were
14,197,374 shares of Class A Common Stock and 421,739 shares of Class B Common
Stock issued and
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<PAGE> 4
outstanding, which constituted the only outstanding voting securities. Each
share of Common Stock has one vote. The presence, in person or by proxy, of the
holders of a majority of all the outstanding shares of Common Stock entitled to
vote at the meeting is necessary to constitute a quorum at the Annual Meeting or
any adjournment or postponement thereof. Abstentions and broker non-votes will
be counted in determining whether or not there is a quorum at the Annual
Meeting.
The Company amended its charter in connection with the acquisition of The
Cynara Company ("Cynara") to divide the Company's common stock into two classes.
The shares issued to the former Cynara stockholders were shares of Class B
Common Stock. The only differences between the Class A Common Stock and the
Class B Common Stock are the rights of the holders of Class B Common Stock:
- to elect a director to the Company's board; and
- to vote as a class with respect to any charter amendment that would
authorize additional Class B Common Stock or would adversely affect the
Class B security holder's right to elect a director.
The rights attaching to the Class B Common Stock are personal to the
initial holders of shares of that class and will not, with express exceptions,
continue to attach to shares transferred to others. Each share of Class B Common
Stock may be converted at any time into one share of Class A Common Stock. On
January 1, 2002, the Class B Common Stock converts automatically into Class A
Common Stock to constitute a single class of common stock. Prior to that date,
any shares of Class B Common Stock will convert automatically into Class A
Common Stock upon their disposition by the holders of such shares.
REQUIRED VOTES
A plurality of the shares of Common Stock present in person or represented
by proxy and entitled to vote at the Annual Meeting is required for the election
of directors. Accordingly, the three nominees for election as directors at the
Annual Meeting who receive the greatest number of votes cast for election by the
holders of record of Common Stock on April 14, 2000 shall be duly elected
directors upon completion of the vote tabulation at the Annual Meeting. The
affirmative vote of the holders of a majority of the shares of Common Stock
present in person or represented by proxy and entitled to vote at the Annual
Meeting is required for approval of all other items being submitted to the
stockholders for their consideration. Abstentions will be considered present for
purposes of calculating the vote, but will not be considered to have been voted
in favor of the matter voted upon, and broker non-votes will not be considered
present for purposes of calculating the vote.
STOCKHOLDER LIST
A copy of the list of stockholders entitled to vote at the Annual Meeting
will be available for inspection by qualified stockholders for proper purposes
at the offices of the Company during normal business hours beginning on May 15,
2000 and at the Annual Meeting.
PROPOSAL 1: ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors will be
comprised of seven members. The seven members are divided into three classes
having two members in Class I, three members in Class II and two members in
Class III. Each class is elected for a term of three years, so that the term of
one class of directors expires at each annual meeting of stockholders.
NOMINEES
Three directors are to be elected at the Annual Meeting. The Board of
Directors has nominated Keith A. Allan, Howard I. Bull, and George A. Hickox,
Jr. to fill the three expiring Class II positions on the Board of Directors, to
hold office for three-year terms expiring at the annual meeting of stockholders
in 2003, and until their respective successors have been duly elected and
qualified, or until their earlier resignation or removal.
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<PAGE> 5
The enclosed proxy (unless otherwise directed, revoked or suspended) will be
voted for the election of the three nominees for director.
Although the Company knows of no reason why any of the nominees might be
unable or refuse to accept nomination or election, if any nominee should be
unable to serve as a director, the shares represented by proxies will be voted
for the election of a substitute nominated by the Board of Directors. Set forth
below are the names of, and certain information with respect to, the Company's
executive officers and directors, including the three nominees for election to
the Class II positions on the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S) COMMITTEE(S)
- ---- --- ----------- ------------
<S> <C> <C> <C>
Nathaniel A. Gregory............ 51 Chairman of the Board and Chief Executive
Executive Officer (Class III -- (Chairman)
term expiring in 2001)
Patrick M. McCarthy............. 55 Director and President (Class I -- Executive
term expiring in 2002)
Keith K. Allan *................ 60 Director (Class II -- term expiring Audit (Chairman)
in 2000)
Howard I. Bull *................ 59 Director (Class II -- term expiring Compensation
in 2000)
John U. Clarke.................. 47 Director (Class I -- term expiring Audit
in 2002)
George K. Hickox, Jr. *......... 41 Director (Class II -- term expiring Audit
in 2000)
Herbert S. Winokur, Jr. ........ 56 Director (Class III -- term expiring Compensation
in 2001) (Chairman);
Executive
James Crittall.................. 56 President of NATCO Canada
Robert A. Curcio................ 43 Senior Vice President -- Technology
and Product Development
J. Michael Mayer................ 43 Senior Vice President and Chief
Financial Officer
Richard D. Peters............... 40 President of Cynara
C. Frank Smith.................. 48 President of NATCO -- U.S.
David R. Volz, Jr. ............. 46 President of TEST
Joseph H. Wilson................ 47 Senior Vice President -- Marketing
</TABLE>
- ---------------
* Nominee for election at the Annual Meeting.
Nathaniel A. Gregory. Chairman of the Board and Chief Executive Officer of
the Company since April 1993. Prior to joining the Company, Mr. Gregory held a
number of positions in both the engineering and construction industries and in
investment banking. Mr. Gregory also serves as a director of Mrs. Fields'
Holding Company, Inc.
Patrick M. McCarthy. Director of the Company since February 1998 and
President since December 1997. Mr. McCarthy served as Executive Vice President,
with marketing and operations responsibilities for the Company, from November
1996 to December 1997 and as Senior Vice President -- Marketing from June 1994
to November 1996. Prior to joining the Company in June 1994, Mr. McCarthy was
Vice President -- Worldwide Oil and Gas at ABB Lummus Crest, an engineering and
construction company.
Keith K. Allan. Chairman of the Company's Audit Committee and Director
since February 1998. Mr. Allan was a director of NATCO (U.K.) Ltd. from October
1996 to January 1998. From February 1993 to August 1996, he was Technical
Director in the North Sea for Shell U.K. Exploration and Production. Prior
thereto, he served in a number of positions for Royal Dutch/Shell Group, which
he joined in 1965.
3
<PAGE> 6
Howard I. Bull. Director of the Company since February 1998. From April
1994 to June 1997, Mr. Bull was President, Chief Executive Officer and a
director of Dal-Tile International, Inc., a manufacturer and distributor of
ceramic tile. From May 1992 to February 1993, Mr. Bull was President of the Air
Conditioning Group of York International Corporation, a producer of heating, air
conditioning and refrigeration systems and equipment, and was President of its
Applied Systems Division from November 1990 to May 1992. From February 1979 to
November 1990, Mr. Bull was employed by Baker Hughes, Inc. in several executive
positions. Mr. Bull is a director of Marine Drilling Companies, Inc. and
National-Oilwell, Inc.
John U. Clarke. Director of the Company since February 2000. Mr. Clarke is
Executive Vice President of Dynegy Inc. Mr. Clarke joined NGC Corporation, the
predecessor of Dynegy Inc., in April 1997, as Senior Vice President and Chief
Financial Officer. Mr. Clarke is also an Advisory Director of the Company. Prior
to joining Dynegy, Mr. Clarke was a managing director and co-head of a specialty
energy-practice group with Simmons & Company International, an
investment-banking firm. He previously had served as President of Concept
Capital Group, Inc., a financial advisory firm formed by Mr. Clarke in May 1995.
Mr. Clarke was Executive Vice President and Chief Financial and Administrative
Officer with Cabot Oil & Gas Corporation from August 1993 to February 1995, and
worked for Transco Energy Company from April 1981 to May 1993, last serving as
Senior Vice President and Chief Financial Officer. Mr. Clarke began his
professional career with Tenneco Inc. in January 1977.
George K. Hickox, Jr. Director of the Company since November 1998. Since
September 1991, Mr. Hickox has served as a general partner of Heller Hickox
Dimeling Schreiber and Park, a partnership specializing in energy investments.
Mr. Hickox also served as a director of Cynara prior to its acquisition by the
Company in November 1998. He presently serves as an officer and director of
several privately held companies.
Herbert S. Winokur, Jr. Director of the Company since its formation in
1989. Since 1987, Mr. Winokur has served as Chairman and Chief Executive Officer
of Capricorn Holdings, Inc., a private investment company, and Managing General
Partner of Capricorn Investors, L.P. ("Capricorn I") and Capricorn Investors II,
L.P. ("Capricorn II"), private investment partnerships concentrating on
investments in restructure situations, organized by Mr. Winokur in 1987 and
1994, respectively. Prior to his current appointment, he was Senior Executive
Vice President and director of Penn Central Corporation. Mr. Winokur is also a
director of Enron Corp., Azurix Corp., The WMF Group, Ltd., Mrs. Fields' Holding
Company, Inc., CCC Information Services Group, Inc. and DynCorp.
James Crittall. President of NATCO Canada since November 1996. Mr. Crittall
was also Vice President of Technical Operations for NATCO Canada from December
1992 to October 1996. Mr. Crittall joined National Tank Company in 1971 and has
served in several managerial positions, including Manager of Engineering and
Sales and Manager of Engineering for NATCO Canada, Ltd.
Robert A. Curcio. Senior Vice President -- Technology and Product
Development of the Company since May 1998. Prior to joining the Company, Mr.
Curcio spent 20 years at Exxon Corporation and its affiliates. Mr. Curcio was
Global Markets Manager -- Heavy Duty Diesel Additives of Exxon Chemical Co.'s
PARAMINS division from February 1996 to May 1998. From January 1995 to February
1996, Mr. Curcio served as Global Markets Manager -- Specialty and Niche
Additives of PARAMINS. From July 1992 to January 1995, Mr. Curcio served as
PARAMINS' Product Manager -- Large Engine Additives. Prior to July 1992, Mr.
Curcio held a number of other positions in marketing, management and
engineering.
J. Michael Mayer. Senior Vice President and Chief Financial Officer since
September 1999. Prior to joining the Company, Mr. Mayer served as Chief
Financial Officer of Cardinal Services, Inc., an oil-field service company, from
July 1998 to July 1999. From July 1997 to June 1998, Mr. Mayer served as Chief
Financial Officer of Phoenix Energy Services, LLC, a manufacturer of drilling
equipment and a provider of directional drilling services. From April 1994 to
July 1997, Mr. Mayer served as Chief Financial Officer of Haltermann, Ltd., a
custom chemical manufacturer. From December 1984 to April 1994, Mr. Mayer was
employed by Baker Hughes Inc. in several senior financial positions within its
operations.
4
<PAGE> 7
Richard D. Peters. President of Cynara since November 1997. Mr. Peters
served as Chief Financial Officer of Cynara from June 1996 to October 1997 and
as Project Manager and Accounting Coordinator from February 1991 to May 1996.
C. Frank Smith. President of NATCO-U.S. since January 1998. Mr. Smith
served as Senior Vice President -- Sales and Service from September 1993 to
December 1997 and as the Northern Region Director of the Sales and Service
Centers from April 1992 to September 1993.
David R. Volz, Jr. President of TEST since the Company acquired TEST in
June 1997. Mr. Volz joined TEST in 1976 as a Technical Specialist and has held a
number of positions of increasing responsibility prior to serving as President.
Joseph H. Wilson. Senior Vice President -- Marketing of the Company since
April 1999. Prior to joining the Company, Mr. Wilson served as Strategic
Accounts Manager of Baker Hughes Inc., with responsibilities for strategic
business development, from January 1999 to April 1999. From January 1997 to
January 1999, Mr. Wilson served as Gulf Coast Region Manager of Baker Hughes
INTEQ's fluids, directional drilling and MWD business. From January 1994 to
January 1997, Mr. Wilson was Director of Sales and Systems Marketing for all of
INTEQ. Prior to January 1994, Mr. Wilson held a number of positions in sales,
operations and marketing with Baker Hughes INTEQ, Baker Sand Control and BJ
Services.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE DIRECTOR
NOMINEES.
COMMITMENTS TO ELECT DIRECTORS
The Company has entered into an agreement with Capricorn I and Capricorn II
regarding the election of Class III directors. This agreement states that, so
long as Capricorn I and Capricorn II together own 20% or more of the Company's
outstanding common stock, the individuals designated by Capricorn I and
Capricorn II for election as the Class III directors will be nominated when that
class stands for election. If the class should be enlarged, the Company will be
obligated to nominate only the two individuals so designated. If it should be
reduced to one, the obligation will be to nominate one individual so designated
as a Class III director and one as a Class II director. If a vacancy should
arise in Class III, the Company has agreed to elect an individual designated by
Capricorn I and Capricorn II to fill the vacancy.
The holders of the Class B Common Stock have the right, voting separately
as a class, to elect, by majority vote, one person to the Company's Board of
Directors. The person so elected may be removed only by the affirmative vote of
the holders of a majority of the Class B Common Stock. The individual currently
elected to that position on the Company's board is George K. Hickox, Jr. The
Class B Common Stock converts to Class A Common Stock constituting a single
class of common stock on January 1, 2002. The class of directors of which Mr.
Hickox is a member stands for reelection at the annual stockholders meeting to
be held during 2000. Accordingly, it is likely that Mr. Hickox will continue to
serve on the Company's board until at least 2003 when his class will again stand
for election.
COMMITTEES AND BOARD MEETINGS
The Board of Directors has established three standing committees: the Audit
Committee, the Compensation Committee, and the Executive and Nominating
Committee. The Audit and Compensation Committees are comprised of directors who
are not officers or employees of the Company.
The Company's audit committee consists of Messrs. Allan, Clarke and Hickox,
each of whom is a non-employee director. The audit committee, which is chaired
by Mr. Allan, meets separately with representatives of the Company's independent
auditors and with representatives of senior management in performing its
functions. The audit committee reviews the general scope of audit coverages, the
fees charged by the independent auditors, matters relating to internal control
systems and other matters related to accounting and reporting functions.
The Company's compensation committee consists of Messrs. Bull and Winokur,
each of whom is a non-employee director. The compensation committee, which is
chaired by Mr. Winokur, administers the stock
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<PAGE> 8
option plans, and in this capacity makes all option grants or awards to
employees, including executive officers, under the plans. In addition, the
compensation committee is responsible for making recommendations to the board of
directors with respect to the compensation of the Company's chief executive
officer and its other executive officers and for establishing compensation and
employee benefit policies.
The Company's executive and nominating committee consists of Messrs.
Gregory, McCarthy and Winokur. The executive and nominating committee, which is
chaired by Mr. Gregory, is authorized to exercise the powers of the board during
the intervals between the meetings of the board. The executive and nominating
committee also reviews the qualifications of potential candidates for the board,
evaluates the performance of incumbent directors and recommends to the board
nominees for election to the board at the annual meeting of stockholders. The
executive and nominating committee does not consider nominees recommended by
stockholders.
During 1999, the entire Board of Directors held 5 meetings, the audit
committee held 2 meetings, the compensation committee held 2 meetings, and the
executive and nominating committee held 2 meetings. Each of the directors
attended at least 80 percent of the meetings of the board and the committee of
the board on which they served.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
No compensation committee report is included in this report because the
Company was not publicly traded at any time during 1999.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1999, the Company's compensation committee consisted of Messrs. Bull
and Winokur, each of whom is a non-employee director. There were no compensation
committee interlock relationships or insider participation in compensation
arrangements for the year ended December 31, 1999.
See "Certain Relationships and Related Transactions" for information
regarding certain transactions between the Company and Mr. Winokur.
COMPENSATION OF DIRECTORS
Directors who are employees of the Company do not receive a retainer or
fees for service on the board or any committees. The Company pays non-employee
members of the board for their service as directors. Directors who are not
employees receive a quarterly fee of $6,500 and a fee of $500 for attendance at
each meeting of the board. In addition, pursuant to the 1998 Director Stock
Option Plan, each non-employee director who is re-elected as a director after
completing at least one year of service as a director will receive, on the date
of reelection, a stock option to purchase 2,667 shares of Common Stock at the
market price on the date of grant. Some non-employee directors have also been
awarded initial stock options, which vest over a period of two and one-half
years, to purchase 6,667 shares of Common Stock at a price of $8.81 per share.
Directors are reimbursed for reasonable out-of-pocket expenses incurred in
attending meetings of the board or committees and for other reasonable expenses
related to the performance of their duties as directors.
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<PAGE> 9
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of April 14, 2000 by (i) each person
known by the Company to be the beneficial owner of more than 5% of the Company's
Common Stock, (ii) each director, (iii) each of the Named Executive Officers (as
defined in "Executive Compensation" below), and (iv) all directors and executive
officers as a group. Unless otherwise indicated, each person has sole voting and
dispositive power over the shares indicated as owned by such person.
<TABLE>
<CAPTION>
PERCENTAGE
NUMBER OF BENEFICIALLY
CLASS NAME AND BENEFICIAL OWNER(1) SHARES OWNED
- ----- ---------------------------- --------- ------------
<S> <C> <C> <C>
A Capricorn II............................................ 3,087,021 21.1%
A Capricorn Holdings, Inc................................. 1,818,832 12.4%
A Capricorn I............................................. 50,000 *
A Nathaniel A. Gregory(2)................................. 4,207,308 27.2%
A Patrick M. McCarthy..................................... 151,501 1.0%
A C. Frank Smith.......................................... 50,502 *
A David R. Volz, Jr....................................... 34,334 *
A Robert A. Curcio........................................ 12,000 *
A Keith K. Allan.......................................... 6,668 *
A Howard I. Bull.......................................... 6,668 *
A John U. Clarke.......................................... 1,667 *
B George K. Hickox, Jr.................................... 138,924 *
A E. Hale Staley(3)....................................... 33,334 *
A Herbert S. Winokur, Jr.(4).............................. 4,956,520 33.9%
A, B All Directors and Executive Officers as a Group (15
persons).............................................. 6,557,256 41.4%
</TABLE>
- ---------------
* Indicates ownership of less than one percent of Common Stock outstanding
(1) Shares are considered "beneficially owned," for purposes of this table, if
the person directly or indirectly has sole or shared voting and investment
power with respect to such shares, and/or if a person has the right to
acquire shares within 60 days of the date of record, April 14, 2000. Shares
above which meet this 60 day criteria include: (1) Mr. Gregory, 880,104; (2)
Mr. McCarthy, 150,001; (3) Mr. Smith, 50,002; (4) Mr. Volz, 33,334; (5) Mr.
Allan, 6,668; (6) Mr. Bull, 6,668; (7) Mr. Clarke, 667; (8) Mr. Hickox, 667;
(9) Mr. Winokur, 667; and (10) all Directors and executive officers as a
group, 1,210,863.
(2) Mr. Gregory's beneficial ownership includes 3,087,021 shares associated with
his affiliation with Capricorn II.
(3) Mr. Staley resigned as a Director in February 2000.
(4) Mr. Winokur's beneficial ownership includes 4,955,853 shares associated with
the following affiliations: Capricorn II (3,087,021 shares), Capricorn
Holdings, Inc. (1,818,832 shares) and Capricorn I (50,000 shares).
EXECUTIVE COMPENSATION
The following table presents information concerning compensation paid to,
or accrued for services by, the Chief Executive Officer and the four other most
highly compensated executive officers of the Company during fiscal year 1999,
(the "Named Executive Officers"):
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
NAME AND ------------------- UNDERLYING ALL OTHER
PRINCIPAL POSITION SALARY BONUS OPTIONS(#) COMPENSATION(1)
- ------------------ -------- -------- ------------ ---------------
<S> <C> <C> <C> <C>
Nathaniel A. Gregory, Chairman and Chief
Executive Officer......................... $363,468 $167,160 -- $556,900(2)
Patrick M. McCarthy, Director and
President................................. 223,273 97,352 16,667 6,400
C. Frank Smith, President of NATCO U.S. .... 182,404 59,110 -- 6,400
Robert A. Curcio, Senior Vice President --
Technology and Product Development........ 181,731 48,125 -- 6,400
David R. Volz Jr., President of TEST........ 125,385 93,969 -- 6,400
</TABLE>
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<PAGE> 10
- ---------------
(1) Includes contractual and discretionary contributions to the Named Executive
Officer's 401(k) plan account.
(2) The Company redeemed an option to purchase 75,000 shares of Common Stock
from Mr. Gregory for $550,500. The redemption price was determined by
multiplying the number of shares underlying the option (75,000) by the
difference between the fair market value of the Common Stock at the time
($8.81 per share) and the exercise price of the shares ($1.47 per share).
OPTION GRANTS DURING 1999
The following table presents information concerning the grant of options
during fiscal year 1999 to the Named Executive Officers to acquire the Company's
Common Stock under the Company's Long-Term Incentive Plan. No stock appreciation
rights were granted during 1999.
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION
UNDERLYING EMPLOYEES EXERCISE OR FOR OPTION TERM(1)
OPTIONS IN FISCAL BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#) YEAR ($/SHARE) DATE 5% 10%
- ---- ---------- ---------- ----------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nathaniel A. Gregory....... 50,000 26% $8.81 July 31, 2006 179,328 417,910
Patrick M. McCarthy........ 50,000 26% $8.81 May 1, 2009 277,028 702,044
</TABLE>
- ---------------
(1) The grant-date market value of the securities used for purposes of this
calculation is equivalent to the exercise price of the options.
AGGREGATED OPTION EXERCISES IN 1999 AND
FISCAL YEAR-END OPTION VALUES
The following table presents information concerning the unexercised stock
options held by the Named Executive Officers at the end of fiscal year 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1999 AT DECEMBER 31, 1999(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Nathaniel A. Gregory.................. 880,104 -- 6,164,412 --
Patrick M. McCarthy................... 137,501 62,500 1,142,298 74,375
C. Frank Smith........................ 50,002 31,666 367,179 82,830
Robert A. Curcio...................... 10,000 30,000 11,900 35,700
David R. Volz, Jr. ................... 33,334 33,333 165,670 165,665
</TABLE>
- ---------------
(1) The initial public offering price of $10.00 per share was used as the fair
market value of securities underlying options.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 27, 2000, the Company completed an initial public offering of
7,500,000 shares of its Class A Common Stock at a price of $10.00 per share
(4,053,807 shares sold by the Company and 3,446,193 shares sold by selling
stockholders). On February 3, 2000, the underwriters exercised their
over-allotment option and issued an additional 1,125,000 shares of Class A
Common Stock.
The Chief Executive Officer of the Company, Mr. Gregory, has an employment
agreement that, prior to amendment, entitled him to a bonus equal to 1.5% of the
value of the Company upon the occurrence of any sale or public offering of the
Company. In July 1999, the Company amended this agreement to eliminate the
8
<PAGE> 11
bonus and, instead, agreed to lend the officer $1,205,000, plus accrued interest
at 6% per annum, to purchase 136,832 shares of common stock. Furthermore, the
agreement stated that Mr. Gregory would receive a bonus equal to the outstanding
principal and interest of this borrowing upon sale or public offering of the
Company's stock. In February 2000, and in accordance with this agreement, the
Company paid a bonus to Mr. Gregory and recorded compensation expense in the
amount of $1,248,000, which represented the balance of principal and interest
accrued on the borrowing. Mr. Gregory used the proceeds from this bonus, net of
tax, to repay $665,0000 under this obligation. As of March 31, 2000, the balance
due to the Company by Mr. Gregory was $589,583.
During 1997, the Company loaned $1,524,571 to a director of the Company,
Mr. Winokur, who is an affiliate of Capricorn Holdings, Inc. During 1998, the
Company acquired an option to purchase 173,050 shares of the Company's Class A
Common Stock from Mr. Winokur at a price of $8.81 per share. At the Company's
option, this note could be repaid with shares of common stock of the Company.
During February 2000, the Company exercised its option to reacquire the 173,050
shares for $1,524,571 as partial settlement of Mr. Winokur's obligation. The
balance of the note, including related accrued interest, as of March 31, 2000,
was $391,401.
In December 1999, the Company entered into an agreement with affiliates, W.
S. Tyler, Incorporated and Capricorn Holding, Inc., whereby the Company assumed
responsibility for the retired employee health and life insurance obligations of
Tyler. This liability, as determined by an independent actuarial firm, was
$1,063,000 at December 31, 1999. In consideration of this agreement, Tyler paid
$400,000 in cash and assigned to the Company a portion of its federal income tax
refund due in the amount of $600,000. In February 2000, the Company received
$613,000, as settlement of principal and interest due from Tyler.
In April 2000, Mr. Gregory purchased an additional 50,000 shares of the
Company's Class A Common Stock in open market transactions. Mr. Gregory's
beneficial ownership of the Company at April 14, 2000 was 4,207,308 shares,
which includes 880,104 shares related to exercisable options.
The Company paid $75,000 in fees to Capricorn Management during the year
ended December 31, 1999, in exchange for certain advisory, research and
administrative services, including rental of office space and parking in
Connecticut for the Company's Chief Executive Officer, and reception, telephone,
computer services and other normal office support.
The Company received $84,000 during the year ended December 31, 1999, from
an affiliate, PTH, as reimbursement for tax consulting and analysis services.
EMPLOYMENT, TERMINATION AND CHANGE OF CONTROL ARRANGEMENTS
Mr. Gregory serves as the Company's chairman and chief executive officer
under an employment agreement. This agreement is renewed annually unless
terminated by Mr. Gregory or the Company. The agreement provides for an annual
base salary in the amount of $350,000, an annual bonus with a target award of
60% of Mr. Gregory's base salary based on such targeted performance criteria,
and additional discretionary bonuses as are determined annually by the Company's
Board of Directors.
If the Company terminates Mr. Gregory's employment for any reason other
than just cause, Mr. Gregory is entitled to severance pay in accordance with any
severance plan or policy that the Company may then have in effect. If Mr.
Gregory terminates his employment agreement for any reason, other than for a
material breach of the agreement by the Company, Mr. Gregory will not be
entitled to receive any bonus compensation or severance pay, and the Company
will have no further obligations except to pay base salary previously earned.
The Company has a change of control policy affecting certain senior
executive officers that provides these officers 150% of base salary plus accrued
bonuses upon a change of control of the Company. The percentage is 200% in the
case of Mr. McCarthy. A "change of control" means the acquisition by any party
unrelated to Capricorn I or Capricorn II, of 50% or more of the Company's
outstanding common stock or securities that
9
<PAGE> 12
may be converted to common stock or assets of the Company. If the acquiring
company agrees to employ the Company's executive officers on substantially
similar terms, no change of control will occur.
The Company's senior executive officers participate in an executive
severance plan that was adopted by the Company in September 1990. The purpose of
the plan is to provide severance pay to the executive if the Company should
terminate the executive's employment. The plan covers all senior executives, but
does not apply to voluntary separations, terminations for cause, a sale of the
Company or the death of the employee. Under this plan, a senior executive would
receive severance pay equal to one month's pay for each $10,000 of base salary,
up to a maximum of twelve months' pay. Senior executives also receive earned
vacation pay at the time of involuntary termination.
PROPOSAL 2: APPOINTMENT OF AUDITORS
Pursuant to the recommendation of the Audit Committee, the Board of
Directors appointed KPMG LLP, independent public accountants, to audit the
consolidated financial statements of the Company for the year ending December
31, 2000. KPMG LLP has audited the Company's consolidated financial statements
since 1989. The Company is advised that no member of KPMG LLP has any direct or
material indirect financial interest in the Company or, during the past three
years, has had any connection with the Company in the capacity of promoter,
underwriter, voting trustee, director, officer or employee.
Ratification of this appointment shall be effective upon receiving the
affirmative vote of the holders of a majority of the Common Stock present or
represented by proxy and entitled to vote at the Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THIS
APPOINTMENT.
In the event the appointment is not ratified, the Board of Directors will
consider the appointment of other independent auditors. Representatives of KPMG
LLP are expected to be present at the Annual Meeting and will be offered the
opportunity to make a statement if such representatives desire to do so. The
representatives of KPMG LLP will also be available to answer questions and
discuss matters pertaining to the Report of Independent Auditors contained in
the financial statements in the Company's Form 10-K.
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
executive officers and directors, and persons who own more than 10% of the
Company's Common Stock, to file initial reports of ownership and changes in
ownership with the Securities and Exchange Commission and the New York Stock
Exchange. No reports were filed during 1999 as the Company's stock did not begin
trading until January 28, 2000.
OTHER BUSINESS
The Company has no knowledge of any business to be presented for
consideration at the meeting other than that described above. If any other
business should properly come before the Annual Meeting or any adjournments
thereof, it is intended that the shares represented by proxies will be voted in
accordance with the judgment of the persons named in the proxies.
COPIES OF NATCO GROUP INC.'S FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, ARE AVAILABLE
WITHOUT CHARGE TO STOCKHOLDERS UPON REQUEST TO THE INVESTOR RELATIONS
DEPARTMENT, NATCO GROUP INC., 2950 NORTH LOOP WEST, HOUSTON, TEXAS 77027.
10
<PAGE> 13
STOCKHOLDER PROPOSALS
Proposals of stockholders intended to be presented at the 2001 annual
meeting of stockholders must be received by the Company at its principal
executive office by December 18, 2000, in order for such proposals to be
included in the Company's proxy statement and form of proxy for such meeting.
Shareholders submitting such proposals are requested to address them to the
Secretary, NATCO Group Inc., 2950 North Loop West, Suite 750, Houston, Texas
77092.
In addition, the Company's Bylaws provide that only such business as is
properly brought before the 2001 annual meeting of stockholders will be
conducted. For business to be properly brought before the meeting or nominations
of persons for election to the Board of Directors to be properly made at the
annual meeting by a stockholder, notice must be received by the Secretary at the
Company's offices not later than the close of business on the 40th day prior to
such annual meeting. The notice to the Company must also provide certain
information set forth in the Bylaws. A copy of the Bylaws may be obtained upon
written request to the Secretary.
ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.
By Order of the Board of Directors,
/s/ J. Michael Mayer
------------------------------------
J. Michael Mayer
Senior Vice President and
Chief Financial Officer
April 17, 2000
11
<PAGE> 14
________________________________________________________________________________
PROXY
NATCO GROUP INC.
2950 NORTH LOOP WEST, SUITE 700
HOUSTON, TEXAS 77027
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Daniel R. Carter and J. Michael Mayer, and each
of them, with full power of substitution to vote the shares of NATCO GROUP Inc.
Common Stock which the undersigned may be entitled to vote, and with all power
the undersigned would possess, if personally present at the annual meeting of
stockholders of NATCO GROUP Inc. to be held at the Sheraton Houston Brookhollow
Hotel, 3000 North Loop West, Houston, Texas on the 25th day of May 2000, at
10:00 a.m. local time, and any adjournment thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM. IF
YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTOR'S RECOMMENDATIONS,
PLEASE SIGN THE REVERSE SIDE, NO BOXES NEED TO BE CHECKED.
(TO BE DATED AND SIGNED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE> 15
Please mark [X]
your votes as
indicated in
this example
Item 1. Proposal to elect three (3) Class II members of the Board of Directors
to hold office for three-year terms expiring at the annual meeting of
the stockholders in 2003, and until their respective successors have
been duly elected and qualified.
FOR all nominees WITHHOLD AUTHORITY NOMINEES: Keith A. Allan, Howard
listed to the right to vote for all I. Bull and George A. Hickox, Jr.
(except as marked nominees listed
to the contrary) to the right
[ ] [ ]
(INSTRUCTION: To withhold authority to vote for individual nominee, write
that nominee's name in the space provided below.)
____________________________________________________________________________
Item 2. To ratify the Board of Director's appointment of KPMG LLP, as
independent accountants for the year ending December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Item 3. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before this meeting.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
DATED: _____________________________, 2000
__________________________________________
Signature
__________________________________________
Signature
(Please sign exactly and as fully as your
name appears on your stock certificate. If
shares are held jointly, each stockholder
should sign. When signing as attorney,
executor, administrator, trustee or
guardian, please give full title to such.)
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
