<PAGE>
METALCLAD CORPORATION
3737 Birch Street, Suite 300
Newport Beach, California 92660
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 17, 1996
(Approximate Mailing Date: September 17, 1996)
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
Meeting ) of METALCLAD CORPORATION, a Delaware corporation (the Company ),
will be held at 3737 Birch Street, Suite 300, Newport Beach, California
92660, on Thursday, October 17, 1996 at 10:00 A.M. local time, for the
following purposes:
1. To authorize a minimum of five and a maximum of seven members of the
Board of Directors and to elect five members of the Board of Directors to
serve until the next Annual Meeting of Stockholders;
2. To approve the amendment of the Certificate of Incorporation to
provide that the number of authorized shares of Common Stock, par value $.10,
shall be 80,000,000;
3. To ratify the adoption of the Metalclad Corporation 1996 Omnibus
Stock Option and Incentive Plan and to approve the grant of stock options to
certain individuals;
4. To consider and act upon the ratification of the appointment of
Arthur Andersen LLP as the independent public accountants of the Company for
the fiscal year ending May 31, 1997; and
5. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on August 19, 1996
as the record date for the determination of stockholders entitled to notice of
and to vote at the Meeting. Only holders of the Company's Common Stock at the
close of business on the record date are entitled to vote at the Meeting.
You are cordially invited to attend the Meeting in person. However,
whether you plan to attend or not, we urge you to complete, date, sign, and
return the enclosed proxy promptly in the envelope provided, to which no
postage need be affixed if mailed in the United States, in order that as many
shares as possible may be represented at the Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
____________________________
Bruce H. Haglund, Secretary
Newport Beach, California
September 20, 1996<PAGE>
METALCLAD CORPORATION
3737 Birch Street, Suite 300
Newport Beach, California 92660
PRELIMINARY PROXY STATEMENT
September __, 1996
____________________________
SOLICITATION OF PROXY, REVOCABILITY, AND VOTING
General
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Metalclad Corporation, a Delaware
corporation (the Company ), to be used at the Annual Meeting of Stockholders
(the Meeting ) of the Company to be held at the principal offices of the
Company located at 3737 Birch Street, Suite 300, Newport Beach, California
92660, on Thursday, October 17, 1996 at 10:00 A.M. local time, or any
adjournment thereof. This Proxy Statement and accompanying form of proxy are
first being mailed to stockholders on or about the date shown above.
Revocability
Any proxy given pursuant to this solicitation may be revoked by the
person giving it at any time before its exercise by notice in writing to the
Secretary of the Company prior to the Meeting. Unless the proxy is revoked,
the shares represented thereby will be voted as specified at the Meeting or
any adjournment thereof.
Solicitation
This Proxy Statement is being mailed on or about September 20, 1996 in
connection with the solicitation of proxies by the Board of Directors of the
Company. The entire cost of soliciting proxies will be borne by the Company.
Proxies may be solicited by mail or telegraph, or by the directors, officers
or regular employees of the Company in person or by telephone.
Voting and Record Date
Only stockholders of record of the Company's $.10 par value common stock
( Common Stock ) at the close of business on August 31, 1996 will be entitled
to notice of and to vote at the Meeting. As of that date, the total number of
shares issued and outstanding of Common Stock was 28,734,229.
In voting on matters other than the election of directors, each share of
Common Stock entitles the holder thereof on the record date to one vote at the
Meeting and all matters voted on other than the election of directors will
require an affirmative vote of a majority of the shares present at the Meeting
in order to be valid and binding.
With respect to the election of directors of the Company, the
stockholders have cumulative voting rights, whereby any stockholder may
1<PAGE>
multiply the number of shares he is entitled to vote by the number of
directors to be elected and allocate his votes among the candidates in any
manner he chooses. The five nominees receiving the highest number of votes
shall be duly elected. There are no conditions precedent to the exercise of
the right to cumulate votes in the election of directors of the Company;
stockholders may exercise such cumulative voting rights, either in person or
by proxy, with or without advance notice to the Company.
QUORUM AND PRINCIPAL SHAREHOLDERS
The presence in person or by proxy of the holders of a majority of the
total outstanding voting shares is necessary to constitute a quorum at the
Meeting. Approval of the proposals to be presented at the Meeting, except for
the election of directors (as discussed above), will require the affirmative
vote of the holders of a majority of the shares present at the Meeting.
The following table sets forth certain information as of August 31, 1996
relating to the beneficial ownership of the Company's Common Stock by (i) all
person known by the Company to beneficially own more than 5% of the
outstanding shares of the Company's Common Stock, (ii) each director, director
nominee, and officer of the Company, and (iii) all officers and directors of
the Company as a group.
<TABLE><S> <C> <C>
Name and Address of Amount and Nature of Percent
Beneficial Owner (1)(2)(3) Beneficial Ownership of Class (4)
-------------------------- -------------------- -----------
Grant S. Kesler 1,601,281 (5)(6) 5.2%
T. Daniel Neveau 1,253,000 (7) 4.1%
Javier Guerra Cisneros 976,867 (8) 3.2%
Gordon M. Liddle 217,500 (9) 0.7%
4100 South 4400 West
West Valley City, Utah 84120
Douglas S. Land 400,000 (10) 1.3%
598 Madison Avenue, 6th Floor
New York, New York 10022
Bruce H. Haglund 233,040 (11) 0.8%
2010 Main Street, Suite 400
Irvine, California 92614
Anthony C. Dabbene -0- 0.0%
All Officers and Directors 4,681,688 (12) 15.2%
as a Group (7 persons)
</TABLE>
------------------------
(1) Unless otherwise noted, the Company believes that all persons named in
the table have sole voting and investment power with respect to all shares of
2<PAGE>
Common Stock owned by them.
(2) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from the date of this Proxy Statement
upon the exercise of warrants or options. Each beneficial owner's percentage
ownership is determined by assuming that options or warrants that are held by
such person (but not those held by any other person) and which are exercisable
within 60 days from the date of this Prospectus have been exercised.
(3) Unless otherwise indicated, the address of each stockholder listed is
3737 Birch Street, Suite 300, Newport Beach, California 92660.
(4) Assumes 30,849,229 shares outstanding, including 28,734,229 shares
currently outstanding and 2,115,000 issuable upon exercise of presently
exercisable stock options held by the above-listed stockholders.
(5) Includes 595,000 shares issuable upon exercise of presently exercisable
stock options exercisable at $2.25 per share.
(6) Includes 506,281 shares subject to a Voting Agreement and Irrevocable
Proxy (the Voting Agreement ) which expires in May 1997 with the former
stockholders of Quimica Omega, S.A. de C.V. ( Quimica Omega ) granting Messrs.
Kesler and Neveau an irrevocable proxy to vote certain shares held by the
former stockholders of Quimica Omega, S.A. de C.V. ( Quimica Omega ), a
wholly-owned subsidiary of the Company acquired in May 1994 pursuant to the
Plan of Reorganization between the Company and Quimica Omega, except with
respect to a vote concerning (i) the change of ownership of the Company, (ii)
a matter which could be dilutive to the former Quimica Omega stockholders
ownership interest in the Company, except for increases in employee stock
plans which have been approved by the Board of Directors, and (iii) the
election of three members of a seven-member Board of Directors, two of whom
are nominated by former Quimica Omega stockholders and one of whom is
designated by mutual consent of the former Quimica Omega stockholders and
Messrs. Kesler and Neveau. For purposes of the table above, the shares owned
beneficially by Mr. Guerra (see Note 5) are excluded from Mr. Kesler s
beneficial ownership calculation. If the shares owned beneficially by Mr.
Guerra were included in Mr. Kesler s beneficial ownership calculation, he
would beneficially own 2,578,148 shares (8.4%). Neither Mr. Kesler nor Mr.
Neveau has dispositive power over the shares subject to the Voting Agreement.
Mr. Kesler has shared voting power with Mr. Neveau over the shares subject to
the Voting Agreement. See Note 7 below.
(7) Includes 635,000 shares issuable upon exercise of presently exercisable
stock options, of which 40,000 are exercisable at $1.375 and 595,000 are
exercisable at $2.25 per share. For purposes of the above table, Mr. Neveau s
beneficial ownership does not include any of the shares subject to the Voting
Agreement, which shares are included in the calculations for Mr. Kesler and
Mr. Guerra (see Notes 6 and 8), over which Mr. Neveau has shared voting power
with Mr. Kesler.
(8) Includes 630,772 shares held of record by Alba Duran Barbaray, Mr.
Guerra's wife, and 50,000 shares issuable upon exercise of presently
exercisable nonstatutory stock options at $2.25 per share. The shares owned
of record by Mr. and Mrs. Guerra are subject to the terms of a Voting
Agreement and Irrevocable Proxy with Messrs. Kesler and Neveau. See Notes 6
and 7 above.
(9) Represents 217,500 shares issuable upon exercise of presently exercisable
stock options, of which 40,000 are exercisable at $1.375 per share and 177,500
are exercisable at $2.25 per share.
(10) Represents 400,000 shares issuable to an affiliate of Mr. Land upon
exercise of presently exercisable stock options of which 150,000 are
3<PAGE>
exercisable at $2.25 and 250,000 are exercisable at $3.00 per share.
(11) Includes 217,500 shares issuable upon exercise of presently exercisable
nonstatutory stock options, of which 40,000 are exercisable at $1.375 per
share and 177,500 are exercisable at $2.25 per share.
(12) Includes 2,115,000 shares issuable upon exercise of presently
exercisable stock options at prices ranging from $1.375 to $3.00 per share.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of directors shall be
determined by the stockholders. Management is proposing that the stockholders
approve a proposal to provide for a minimum of five and a maximum of seven
directors for the ensuing year. Five members of the Board of Directors are to
be elected at the Meeting. Vacancies on the Board during the year may be
filled by the majority vote of the directors in office at the time of the
vacancy without further action by the stockholders.
The Board of Directors has nominated Javier Guerra Cisneros, Grant S.
Kesler, Douglas S. Land, Gordon M. Liddle, and Bruce H. Haglund for election
as directors for the ensuing year.
It is the intention of the persons named in the enclosed form of proxy to
vote such proxies for the election of the nominees listed herein. The
proposed nominees are willing to serve for the ensuing year, but in the event
any nominee at the time of election is unable to serve or is otherwise
unavailable for election, it is intended that votes will be cast pursuant to
the accompanying proxy for substitute nominees designed by the Board of
Directors.
Information about Nominees and Directors
The following sets forth certain information for each person who is
nominated for election to the Board of Directors:
Director
or Officer Current Position
Name Age Since with the Company
-----------------------------------------------------------------
Grant S. Kesler 53 1991 President, Chief Executive
Officer, Director
Javier Guerra
Cisneros 49 1994 Director, Vice President -
Mexican Operation,
Director General of
Quimica Omega, S.A. de
C.V. and Ecosistemas
Nacionales, S.A. de C.V.
Douglas S. Land 39 1994 Director
Gordon M. Liddle 55 1991 Director
Bruce H. Haglund 45 1991 Secretary, Director Nominee
4<PAGE>
Grant S. Kesler has served as a Director of the Company since February
1991 and has been Chief Executive Officer since May 1991. From 1982 to May
1991, he was employed by Paradigm Securities, Inc., a company he formed in
1982. In 1975, he was General Counsel to Development Associates, a real
estate development firm. Earlier, he was engaged in the private practice of
law, served as an assistant attorney general for the State of Utah, and served
as an intern to the Chief Justice of the Utah Supreme Court. Mr. Kesler is a
graduate of the University of Utah College of Law and a member of the Utah
State Bar Association.
Javier Guerra Cisneros has been a director of the Company since May 1994,
the Vice President - Mexican Operations since June 1996, the Director General
of Quimica Omega, S.A. de C.V. since its formation in 1981, and the , the
Director General of Ecosistemas Nacionales, S.A. de C.V. since its formation
in April 1996 (both of which are wholly-owned subsidiaries of the Company).
He also founded and was the President of the Institute on Industrial Hazardous
Waste, a non-profit organization that promotes public awareness of the Mexican
environmental regulations through its publication DIP. Since 1990, Mr. Guerra
has been one of the pioneers in the implementation in Mexico of the program to
use hazardous wastes as supplemental fuel in cement kilns. He has more than
10 years of experience on environmental regulations and handling of hazardous
wastes in Mexico and the United States as well as in the compliance of Mexican
environmental legislation. He has participated in multiple conferences on
ecological matters, including seminars sponsored by governmental agencies in
the United States and Mexico. Mr. Guerra is a business administration
graduate from the Universidad Iberoamericana in Mexico City, with studies in
international marketing at the St. Gallen University in Switzerland. He has
also made specialized engineering studies in the areas of combustion equipment
and chemicals.
Gordon M. Liddle has been a Director of the Company since July 1991. He
has been the owner and Chief Executive Officer of Winder Dairy Inc. since
1983. From 1982 to 1983, Mr. Liddle was Senior Vice President of Christensen
Inc. From 1980 to 1982, Mr. Liddle was a Director and Chief Operating Officer
of the contracting and mining division of Christensen Inc. From 1970 to 1980,
Mr. Liddle was Chief Financial Officer of Christensen Inc. From 1967 to 1970,
Mr. Liddle was a Director and Chief Executive Officer of Transportation Safety
Systems. Mr. Liddle presently serves a member of the Board of Directors of
Trustco Inc. and QSI Corporation. Mr. Liddle received a B.S. from Utah State
University in 1966 and an M.B.A. degree from the University of Utah in 1967.
Douglas S. Land has been a Director of the Company since November 1994.
He has been the President of Economic Analysis Group, Ltd. ( EAG ), a
Washington, D.C.-based economic consulting firm, since its formation in 1983.
Mr. Land manages EAG's New York office. He is also a founder of Chesapeake
Capital Corporation, an affiliate of EAG formed in 1988, which provides
merchant banking services to new ventures and middle-market companies with
specific emphasis on environmental projects. Mr. Land specializes in
developing and implementing financing strategies for new and intermediate-
stage projects. He received an M.B.A. degree from the Wharton Graduate School
and an M.A. in International Relations from the University of Pennsylvania.
Bruce H. Haglund has served as Secretary of the Company since August 1983
and previously served as a Director of the Company from June 1983 to July
5<PAGE>
1991. Since April 1994, Mr. Haglund has been a partner in the law firm of
Gibson, Haglund & Johnson. From February 1991 to April 1994, Mr. Haglund was
a principal in the law firm of Phillips, Haglund, Haddan & Jeffers. From 1984
to February 1991, he was a partner in the law firm of Gibson & Haglund. Mr.
Haglund is also the Secretary and a member of the Board of Directors of GB
Foods Corporation and the Secretary of Renaissance Golf Products, Inc., public
companies whose stock is traded on the Nasdaq Small Cap Market. He is a
graduate of the University of Utah College of Law.
Committees and Compensation of the Board of Directors
The Board of Directors held six meetings during the fiscal year ended May
31, 1996. Each director attended at least 75% of the total number of Board
Meetings held during the year ended May 31, 1996. Board members who are not
employees or consultants to the Company are presently entitled to receive
$1,000 for their attendance at Board meetings and members of the Board of
Directors have received nonstatutory stock options pursuant to the Company's
Non-Qualified Stock Option Plan, nonstatutory stock options granted other than
pursuant to a plan, the Company's 1992 Omnibus Stock Option and Incentive
Plan, and the 1993 Omnibus Stock Option and Incentive Plan.
In February 1988, the Board approved the creation of an Audit Committee
on which Mr. Land and Mr. Liddle presently serve. Mr. Haglund has been
nominated to serve on the Audit Committee conditioned upon his election to the
Board. The duties of the Audit Committee are to review with the Company's
independent auditors the results of the audit engagement, review the adequacy
of the Company's system of accounting controls, approve the services rendered
by the independent auditors, and examine the range of audit and non-audit
fees. The Audit Committee met three times during the year ended May 31, 1996.
In November 1992, the Board established a standing Compensation Committee
whose members as of the date of this Proxy Statement are Mr. Land and Mr.
Liddle. Mr. Haglund, Secretary and legal counsel to the Company, is an ex
officio member of the Compensation Committee and is a nominee as a committee
member conditioned upon his election to the Board.
Executive Officers
The following lists the names, ages, and position of the Company's
current executive officers:
<TABLE>
<S> <C> <C> <C>
Officer
Name Age Since Current Position with the Company
-----------------------------------------------------------------------------
Grant S. Kesler 53 1991 President, Chief Executive Officer,
Director
Javier Guerra Cisneros 49 1994 Director, Vice President - Mexican
Operation, Director General of
Quimica Omega, S.A. de C.V. and
Ecosistemas Nacionales, S.A. de C.V.
Anthony C. Dabbene 45 1996 Chief Financial Officer
Bruce H. Haglund 45 1991 Secretary, Director Nominee
6<PAGE>
Glenn W. Meyer 46 1990 President, Metalclad Insulation
Corporation and Metalclad
Environmental Contractors
Wayne M. May 50 1989 Vice President - Power Division,
David Duclett 46 1989 Vice President - Marketing and Sales,
Metalclad Insulation Corporation and
Metalclad Environmental Contractors
</TABLE>
Grant S. Kesler. See Information about Nominees and Directors.
Javier Guerra Cisneros. See Information about Nominees and Directors.
Anthony C. Dabbene has been the Chief Financial Officer for the Company
since January 1996. Prior to his employment with the Company, Mr. Dabbene was
employed by LG & E Energy Corp. for 10 years, including service as Vice
President and Controller to the Energy Services Group. From 1973 to 1985, he
was employed by EBASCO Services Incorporated, where he was Manager - Finance
and Administration for the Western region from 1981 to 1985. He received a
B.B.A. degree in Accounting from St. Francis College and an M.B.A. degree
from Long Island University.
Bruce H. Haglund. See Information about Nominees and Directors.
Glenn W. Meyer has been employed by the Company since October 1983 and
has been the President of Metalclad Insulation Corporation since June 1990.
He was Vice President of Metalclad Insulation Corporation from 1981 to June
1990. From 1976 to 1981, he was employed as a Contract Administrator by
Metalclad Products Corporation. Mr. Meyer received a B.S. degree in maritime
engineering from California Maritime Academy.
Wayne M. May has been the Vice President - Power Division of Metalclad
Insulation Corporation since November 1989. He has been employed by the
Company in various capacities since 1968, including Contract Administrator,
Estimator, Material Sales Manager, and Warehouse Supervisor.
David Duclett has been employed by the Company since 1977 and has been
Vice President - Marketing and Sales of Metalclad Insulation Corporation and
Metalclad Environmental Contractors since 1989. Mr. Duclett received a B.A.
degree in communication from California State University, Fullerton.
Executive Compensation for the Fiscal Year ended May 31, 1996
The following table sets forth for the fiscal years ended May 31, 1996,
1995, and 1994, information with respect to compensation paid by the Company
to the Chief Executive Officer, the Chairman of the Board (who resigned
effective September 1, 1996 but will continue in a consulting capacity with
the Company through April 1997) and each of the other highly compensated
executive officers of the Company for fiscal 1996.
7<PAGE>
Summary Compensation Table
<TABLE>
<S><C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND OTHER AWARDS PAYOUTS ALL
PRINCIPAL YEAR SALARY BONUS ANNUAL
POSITION (1) (1) ($) ($) COMPEN- RESTRICTED OPTIONS/ LTIP OTHER
SATION STOCK SARS PAYOUTS (2)
($) ($) (#) ($)
---------------------------------------------------------------------------------------------------
Grant S. Kesler, 1996 200,004 50,000 37,583
C.E.O. 1995 200,016 28,194 40,000 (3)
1994 177,176 210,000 (3)
----------------------------------------------------------------------------------------------------
T. Daniel Neveau, 1996 200,004 50,000 22,834
Chairman 1995 200,016 13,184 40,000 (3)
1994 170,840 210,000 (3)
----------------------------------------------------------------------------------------------------
Javier Guerra 1996 137,000 10,000
Cisneros, 1995 164,000
Director General, 1994 N/A
Q.O.
----------------------------------------------------------------------------------------------------
Glenn W. Meyer, 1996 125,040
President, MIC & 1995 110,040
MEC 1994 104,808
----------------------------------------------------------------------------------------------------
David G. Duclett, 1996 117,977
V.P. Marketing, 1995 115,736
MIC & MEC 1994 110,396
----------------------------------------------------------------------------------------------------
</TABLE>
(1) Does not include information for 1994 in the case of Mr. Cisneros because
he was not employed by the Company during 1994.
(2) The remuneration described in the table does not include the cost to the
Company of benefits furnished to the named executive officers, including
premiums for health insurance and other personal benefits provided to such
individual that are extended to all employees of the Company in connection
with their employment.
(3) Reflects amounts paid in consideration for the waiver of certain income
rights otherwise payable to Messrs. Kesler and Neveau under a management
services contract with the Company. As a condition to the acquisition of Eco-
Metalclad, Inc. ( ECO-MTLC ) in November 1991, the Company agreed to enter
into a management services contract for the supervision of the design,
construction, and management of the facilities with a consulting firm (the
Consulting Company ) owned by the former stockholders of ECO-MTLC, including
Messrs. Kesler and Neveau and other non-affiliates of the Company, pursuant to
which the Consulting Company would receive 4% of the project cost, 5% of gross
revenues, and 25% of net operating profits of the facilities (the Consulting
Contract ). In August 1992, a disinterested majority of the Board of
8<PAGE>
Directors of the Company agreed to pay Messrs. Kesler and Neveau $250,000 each
in consideration of their waiver of their interests in the Consulting
Contract, $60,000 of which was conditioned upon the Company obtaining the
Construction Permit for the San Luis Potosi facility and was paid in March
1993, and the balance of which was conditioned upon the commencement of
construction of the facility at San Luis Potosi.
In June 1996, the Company entered into an employment agreement with Mr.
Dabbene, the Company s Chief Financial Officer. The effective date of the
agreement is January 1996 and term of the agreement is 18 months, renewing
automatically each year unless Mr. Dabbene is notified 60 days prior to the
anniversary of the effective date. The agreement provides for an annual
salary of $120,000 and a bonus equal to ten percent of base salary in effect
each December. The agreement also provided for the grant of 50,000 stock
options to Mr. Dabbene at an exercise price of $3.625 per share, vesting upon
stockholder approval of the option grant. The agreement also provides for
severance compensation at the annual rate for the remainder of the term of the
agreement if Mr. Dabbene is terminated by the Company for other than cause or
following a change in control of the Company.
In June 1996, the Company agreed to enter into a three-year employment
agreement with Javier Guerra Cisneros for an annual salary of $200,000.
In March 1994, the Company entered into employment agreements with Grant
S. Kesler, President and Chief Executive Officer, and T. Daniel Neveau,
Chairman. The employment agreements provide for annual salaries of $200,000
to each of Mr. Kesler and Mr. Neveau. The agreements also provide for
Christmas bonuses equal to 20% of the annual salary. The agreements also
provide for compensation at the annual rate of compensation for a three-year
period (i) after termination of the employee by the Company, other than for
cause; (ii) after the death of the employee, the compensation to be paid to
his spouse or his estate; (iii) following resignation after a change in the
ownership of over 40% of the outstanding stock of the Company, (iv) following
resignation after a change of over 50% of the Board of Directors in one fiscal
year; or (v) after the loss of ability to perform his duties as a result of
health or disability, in which case, after six months of such a condition, the
Board of Director may cancel the agreement. The agreements also provide for
compensation for six months if terminated by the Company for (a) engaging in
serious misconduct which after ten days notice has not been cured or altered,
(b) being in material breach under the agreement, or (c) habitually failing to
perform the duties of his employment. In March 1996, the Company extended the
existing employment agreement with Mr. Kesler for an additional three years
ending March 7, 1999, with an optional one-year extension to March 7, 2000.
In July 1996, the Company entered into an agreement with Mr. Neveau revising
his employment agreement to provide for compensation at the rate of $16,667
per month from April 1, 1996 to September 30, 1996, $12,500 per month from
October 1, 1996 to March 31, 1997, $8,333 per month from April 1, 1997 to
September 30, 1997, and $4,167 per month from October 1, 1997 to March 31,
1998. Mr. Neveau resigned as a member of the Board of Directors and as
Chairman of the Board and Senior Vice President effective September 1, 1996.
The Company has retained Mr. Neveau as a consultant through March 31, 1998 at
the rate of $16,667 per month from April 1, 1996 to September 30, 1996,
$12,500 per month from October 1, 1996 to March 31, 1997, $8,333 per month
from April 1, 1997 to September 30, 1997, and $4,167 per month from October 1,
9<PAGE>
1997 to March 31, 1998.
In January 1994, the Company entered into employment agreements with
Glenn W. Meyer, President and Chief Executive Officer, Wayne May, Vice
president - Power Division and David G. Duclett, Vice President - Marketing,
of Metalclad Insulation Corporation ( MIC ) and Metalclad Environmental
Corporation ( MEC ), each wholly-owned subsidiaries of the Company. The
employment agreements provided for initial annual salaries of $110,040 to Mr.
Meyer, $89,040 to Mr. May and $80,328 to Mr. Duclett. Mr. Duclett's agreement
also provides for commission payments to Mr. Duclett of one-half of one
percent of total revenues for each of six specified accounts. The agreements
also provide for bonuses to be paid to each of Messrs. Meyer, May and Duclett
equal to three percent of the combined annual net operating income of MIC and
MEC before interest and taxes ( EBIT ) that exceeds $500,000 up to $750,000
and five percent of EBIT that exceeds $750,000. The agreements also provide
for compensation for six months if terminated because of the death or
permanent disability of the employee.
Options Granted in Fiscal Year 1996
In January 1996, the Board of Directors of the Company adopted a
resolution to grant additional non-statutory stock options at an exercise
price of $3.625 (the fair market value of the Company s Common Stock on the
date of grant) to the following officers and directors of the Company, subject
to approval by the Compensation Committee of the Board of Directors and the
stockholders at the next annual stockholders meeting and contingent upon
increasing the authorized number of shares of Common Stock of the Company.
Number of Options
Name Granted
---------------------------------------------
Grant S. Kesler 1,500,000
T. Daniel Neveau 1,300,000
Javier Guerra Cisneros 600,000
Douglas S. Land 400,000
Gordon M. Liddle 300,000
Bruce H. Haglund 300,000
Anthony Dabbene 50,000
Glenn W. Meyer 20,000
Wayne M. May 20,000
David G. Duclett 20,000
The terms and conditions of the proposed options to be approved by the
stockholders include (i) vesting in accordance with a schedule to be
determined by the Compensation Committee, (ii) an expiration date of January
3, 2006, and (iii) transferability limited to transfers to a trust established
for the benefit of the optionee, by will, or by the laws of descent.
Aggregated Option/SAR Exercises in the year ended May 31, 1996, and Option
Values at May 31, 1996
The following table sets forth the number of options, both exercisable
and unexercisable, held by each of the named executive officers of the Company
and the value of any in-the-money options at May 31, 1996 (assuming a market
10<PAGE>
value of $3.1875 per share on May 31, 1996):
<TABLE>
<S> <C> <C> <C> <C>
Number of
Unexercised Value of
Options at in-the-Money
May 31, May 31,
Shares 1996 1996
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
-------------------------------------------------------------------------------------------------------------
Grant S. Kesler 425,000 $636,250 595,000/-0- $557,991/$0
T. Daniel Neveau 425,000 $636,250 635,000/-0- $595,313/$0
Javier Guerra Cisneros 100,000 $135,000 150,000/50,000 $140,625/$46,875
Glenn W. Meyer 50,500 $114,572 15,000/15,000 $14,062/$14,062
David G. Duclett 29,500 $78,575 40,000/15,000 $37,500/$14,062
</TABLE>
Stock Option Plans
Incentive Stock Option Plan. On May 12, 1989, the stockholders adopted
the Metalclad Corporation 1988 Incentive Stock Option Plan (referred to
collectively as the ISOP ). The purpose of the ISOP is to provide full-time
employees of the Company with an added incentive to continue their service to
the Company and to induce them to exert maximum efforts toward the Company's
success.
The ISOP, which is currently administered by the Board of Directors, also
provides for administration by a stock option committee which may be appointed
by the Board of Directors. Among other things, the Board of Directors or the
committee has the authority to determine the employees to be granted options
under the ISOP and the number of shares subject to each option. The exercise
price of any option granted under the ISOP, which shall be determined by the
Board of Directors, shall not be less than the fair market value of the shares
subject to the option on the date of grant; provided, however, that the
exercise price of any option granted to an eligible employee owning more than
10% of the Common Stock shall not be less than 110% of the fair market value
of the shares underlying such option on the date of grant. The term of each
option and the manner in which it may be exercised is determined by the Board
of Directors or committee, provided that no option may be exercisable more
than five years after the date of grant. The ISOP limits the value of Common
Stock with respect to which options may be granted to any one employee in a
calendar year. All options granted under the ISOP are non-transferable and
terminate within a specified period of time following termination of
employment with the Company. The aggregate fair market value of shares for
which options granted to any employee are exercisable for the first time by
such employee during any calendar year (under all stock option plans of the
Company and any related corporation) may not exceed $100,000.
The Board of Directors is authorized to modify, amend or terminate the
ISOP; provided, however, any amendment that would increase the aggregate
11<PAGE>
number of shares which may be issued, materially increase the benefits
accruing to participants or materially modify the requirements as to
eligibility for participation, is subject to the approval of the stockholders
of the Company. No termination, modification or amendment of the Plan may,
without consent of an optionee, adversely affect the optionee's rights under
an option previously granted.
Options for the purchase of 175,500 shares of Common Stock have been
granted pursuant to the ISOP as of the date of this Proxy Statement, of which
165,500 have been exercised, including 107,500 exercised during fiscal 1996.
As of the date of this Proxy Statement, 10,000 options granted pursuant to the
ISOP were exercisable. The exercise price of the outstanding options granted
pursuant to the ISOP is $2.25 per share.
Non-Qualified Stock Option Plan. In 1984, the Company adopted a
nonstatutory stock option plan (the NQSOP ) for individuals who acted as
consultants to the Company and who were actively involved in the development
of the business of the Company. The NQSOP provided for the issuance of a
maximum of 5% of the shares of Common Stock outstanding from time to time at
prices not less than the fair market value thereof on the date of grant. The
NQSOP terminated in 1989; however, outstanding options are exercisable over a
five-year period from the date of grant. Each option lapsed, if not
previously exercised, on the fifth anniversary of the date of grant or after
90 days after the optionee has terminated his continuous activity with the
Company.
No options under the NQSOP were outstanding as of the date of this Proxy
Statement. Options granted in 1989 for the purchase of 100,500 shares at an
exercise price of $2.25 per share were exercised during fiscal 1996.
1992 and 1993 Omnibus Stock Option and Incentive Plans. On August 18,
1992, the Board of Directors of the Company adopted the 1992 Omnibus Stock
Option Plan (the 1992 Plan ) which was approved by the stockholders on
November 13, 1992. On March 24, 1993, the Board of Directors of the Company
adopted the 1993 Omnibus Stock Option Plan (the 1993 Plan ). Both the 1992
Plan and the 1993 Plan (together hereinafter referred to the Plans ) are
intended to provide incentive to key employees and directors of, and key
consultants, vendors, customers, and others expected to provide significant
services to, the Company, to encourage proprietary interest in the Company, to
encourage such key employees to remain in the employ of the Company and its
subsidiaries, to attract new employees with outstanding qualifications, and to
afford additional incentive to consultants, vendors, customers, and others to
increase their efforts in providing significant services to the Company.
Pursuant to the terms of the Plans, the following types of incentives may from
time to time be granted on a discretionary basis by the Board or the
Committee: incentive stock options ( Incentive Stock Options ), nonstatutory
stock options ( Nonstatutory Stock Options ), purchase rights ( Purchase
Rights ), stock appreciation rights ( Stock Appreciation Rights ), performance
awards ( Performance Awards ), dividend rights ( Dividend Rights ), and stock
payments ( Stock Payments ), referred to hereinafter singly as Award and
collectively as Awards , as the context may require. The Plans also provide
for the grant of Incentive Stock Options and Nonstatutory Stock Options to
members of the Board of Directors on a formula award basis as provided in
Rule 16b-3 of the Securities Exchange Act of 1934 ( Rule 16b-3 ).
12<PAGE>
On March 7, 1995, the Board of Directors approved a reduction in the
exercise price of outstanding Nonstatutory Stock Options granted pursuant to
the Plans from $4.00 per share to $2.25 per share. As of the date of this
Proxy Statement, stock options for the purchase of 1,479,000 and 834,000
shares at $2.25 per share are outstanding pursuant to the 1992 Plan and the
1993 Plan, respectively, including options to the following directors and
director nominees:
Number of Number of
Options Granted Options Granted
Name 1992 Plan 1993 Plan
-----------------------------------------------------------------
Grant S. Kesler 109,000 36,000
Gordon M. Liddle 50,000 25,000
Douglas S. Land -0- -0-
Bruce H. Haglund 50,000 25,000
All stock options granted as set forth above, with the exception of
options granted Mr. Kesler, vest as follows: 10% of the Options granted vest
on each of the first, second, third, and fourth anniversaries of the effective
date of grant (August 18, 1992 with respect to the 1992 Plan and March 24,
1993 with respect to the 1993 Plan), and the balance of the options vest on
the fifth anniversary of the effective date of grant. Mr. Kesler s options
are fully vested as of the date of this Proxy Statement. As of the date of
this Proxy Statement, options granted pursuant to the 1992 Plan and the 1993
Plan for the purchase of 337,250 and 439,000 shares, respectively, were
vested.
The Plans provide for administration by the Board in compliance with Rule
16b-3, or by a Committee (the Committee ) appointed by the Board, which
Committee must be constituted to permit the Plans to comply with Rule 16b-3,
and which must consist of not less than two members, each of whom has not
participated in the Plans by way of receipt of any discretionary grant of an
Award, and who will not so participate while serving as a member of the
Committee, and each of whom has not participated under any other plan or have
received options of the Company during the year preceding adoption of the 1992
Plan or the 1993 Plan by the stockholders at the Meeting. A member of the
Board or a Committee member may in no event participate in any determination
relation to Awards held by or to be granted on a discretionary basis to such
Board or Committee member.
All employees of the Company or of a subsidiary of the Company, who may
be officers or directors of the Company, and consultants, vendors, customers,
and others expected to provide significant services to the Company or any of
its subsidiaries, are eligible to participate in the Plans. No Incentive
Stock Option may be granted to a non-employee director or non-employee
consultant, vendor, customer, or other provider of significant services to the
Company or a subsidiary, and except that no Nonstatutory Stock Option may be
granted to a non-employee director or non-employee consultant, vendor,
customer, or other provider of significant services to the Company or a
subsidiary other than upon a vote of a majority of disinterested directors
finding that the value of the services rendered or to be rendered to the
Company or a subsidiary by such non-employee director or non-employee
consultant, vendor, customer, or other provider of services is at least equal
13<PAGE>
to the value of the options granted.
The aggregate number of shares of the Company's authorized but unissued
Common Stock which may be issued as an Award or which may be issued upon
exercise of an Incentive Stock Option or Nonstatutory Stock Option under the
1992 Plan may not exceed 1,600,000 shares. The number of shares subject to
unexercised options, Stock Appreciation Rights or Purchase Rights granted
under the 1992 Plan (plus the number of shares previously issued under the
1992 Plan) may not at any time exceed the number of shares available for
issuance under the 1992 Plan. The aggregate number of shares of the Company's
authorized but unissued Common Stock which may be issued as an Award or which
may be issued upon exercise of an Incentive Stock Option or nonstatutory stock
option under the 1993 Plan may not exceed 1,000,000 shares. The number of
shares subject to unexercised options, Stock Appreciation Rights or Purchase
Rights granted under the 1993 Plan (plus the number of shares previously
issued under the 1993 Plan) may not at any time exceed the number of shares
available for issuance under the 1993 Plan.
In the event that any unexercised option, Stock Appreciation Right or
Purchase Right, or any portion thereof, for any reason expires or is
terminated, or if any shares subject to a restricted stock Award do not vest
or are not delivered, the unexercised or unvested shares allocable to such
Award may again be made subject to any Award.
Options. Incentive Stock Options and Nonstatutory Stock Options
(together hereinafter referred to as Option or Options , unless the context
otherwise requires) must be evidenced by written stock option agreements in
such form as the Committee may from time to time determine. Each Option must
state the number of Shares to which it pertains and must provide for the
adjustment thereof if the outstanding shares of Common Stock are changed into
or exchanged for cash or a different number or kind of shares or securities of
the Corporation, or if the outstanding shares of the Common Stock are
increased, decreased, exchanged for, or otherwise changed, or if additional
shares or new or different shares or securities are distributed with respect
to the outstanding shares of the Common Stock, through a reorganization or
merger in which the Corporation is the surviving entity or through a
combination, consolidation, recapitalization, reclassification, stock split,
stock dividend, reverse stock split, stock consolidation or other capital
change or adjustment. In addition, the Board or the Committee may grant such
additional rights in the foregoing circumstances as the Board or the Committee
deems to be in the best interest of any Participant and the Corporation in
order to preserve for the Participant the benefits of the Award.
The exercise price in the case of any Incentive Stock Option may not be
less than the fair market value on the date of grant and, in the case of any
Option granted to an optionee who owns more than ten percent (10%) of the
total combined voting power of all classes of outstanding stock of the
Company, may not be less than 110% of the fair market value on the date of
grant. The exercise price in the case of any Nonstatutory Stock Option may
not be less than 85% of the fair market value on the date of grant.
The purchase price is be payable in full in United States dollars upon
the exercise of the Option; provided, however, that if the applicable Option
agreement so provides, the purchase price may be paid (i) by the surrender of
14<PAGE>
Shares in good form for transfer, owned by the participant and having a fair
market value on the date of exercise equal to the purchase price, or in any
combination of cash and Shares, as long as the sum of the cash so paid and the
fair market value of the Shares so surrendered equals the purchase price, (ii)
by cancellation of indebtedness owed by the Company to the participant, (iii)
with a full recourse promissory note executed by the participant, or (iv) any
combination of the foregoing. The interest rate and other terms and
conditions of such note may be determined by the Board or the Committee. The
Board or Committee may require that the participant pledge his or her Shares
to the Company for the purpose of securing the payment of such note. In no
event may the stock certificate(s) representing such Shares by released to the
participant until such note shall be been paid in full.
Each Option must state the time or times which all or part thereof
becomes exercisable. No Option shall be exercisable after the expiration of
10 years from the date it was granted, and no Option granted to an optionee
who owns more than 10% of the total combined voting power of all classes of
outstanding stock of the Company may be exercisable after the expiration of
five years from the date it was granted. During the lifetime of a participant
in the Plans, the Option may be exercisable only by that participant and may
not be assignable or transferable. In the event of the participant's death,
the Option may not be transferable by the participant other than by will or
the laws of descent and distribution.
Within the limitations of the Plans, the Board or Committee may modify,
extend or renew outstanding Options or accept the cancellation of outstanding
Options (to the extent not previously exercised) for the granting of new
Options in substitution therefor. No modification of an Option may, without
the consent of the participant, alter or impair any rights or obligations
under any Option previously granted.
In the case of Incentive Stock Options granted under the Plans, the
aggregate fair market value (determined as of the date of the grant thereof)
of the Shares with respect to which Incentive Stock Options become exercisable
by any participant for the first time during any calendar year (under the
Plans and all other plans maintained by the Company may not exceed $100,000.
The Board or Committee may, however, with the participant's consent, authorize
an amendment to the Incentive Stock Option which renders it a Nonstatutory
Stock Option.
The stock option agreements authorized under the Plans may contain such
other provisions not inconsistent with the terms of the Plans (including,
without limitation, restrictions upon the exercise of the Option) as the Board
or the Committee shall deem advisable.
Restricted Stock Purchase Agreements. Restricted stock purchase rights
(hereinabove defined as Purchase Rights ) must be evidenced by written stock
purchase agreements in such form as the Committee must from time to time
determine. Each Purchase Right must state the number of Shares to which it
pertains and may provide for the adjustment thereof in the event that the
outstanding shares of Common Stock are changed into or exchanged for cash or a
different number or kind of shares or securities of the Corporation, or if the
outstanding shares of the Common Stock are increased, decreased, exchanged
15<PAGE>
for, or otherwise changed, or if additional shares or new or different shares
or securities are distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger in which the Corporation is
the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation or other capital change or adjustment. In
addition, the Board or the Committee may grant such additional rights in the
foregoing circumstances as the Board or the Committee deems to be in the best
interest of any Participant and the Corporation in order to preserve for the
Participant the benefits of the Award.
Each agreement must state the purchase price per Share at which the
Purchase Right may be exercised, which may not be less than the fair market
value of a Share on the date on which the Purchase Rights are granted. Unless
the Board or Committee otherwise determines, the purchase price per Share at
which any Purchase Right granted under the Plans may be exercised may not be
less than the fair market value of a Share as of the date on which the
Purchase Right is granted, less a discount equal to not more than 75% of such
value.
Purchase Rights must be exercised within 60 days after the later to occur
of (i) Board approval of the grant of the Purchase Right or (ii) delivery of
notice of such grant. Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner and must expire
immediately upon the death of the participant or the termination of such
participant's employment with the Company.
The purchase price must be payable in full in United States dollars upon
exercise of the Purchase Right; provided, however, that if the applicable
agreement so provides, the purchase price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the person exercising the Purchase
Right and having a fair market value on the date of exercise equal to the
purchase price, or in any combination of cash and Shares, as long as the sum
of the cash so paid and the fair market value of the Shares so surrendered
equal the Purchase Price, or (ii) with a full recourse promissory note
executed by the participant. The interest rate and other terms and conditions
of such note must be determined by the Board or the Committee. The Board or
Committee may require that the participant pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no event may
the stock certificate(s) representing such Shares be released to the
participant until such note has been paid in full. In the event the Company
determines that it is required to withhold state or Federal income tax as a
result of the exercise of a Purchase Right, as a condition to the exercise
thereof, a participant may be required to make arrangements satisfactory to
the Company to enable it to satisfy such withholding requirements. In
addition, the participant must agree to immediately notify the Company if he
or she files an election pursuant to Section 83(b) of the Internal Revenue
Code with respect to receipt of the Shares.
Within the limitations of the Plans, the Board or the Committee may
modify, extend or renew outstanding Purchase Rights or accept the cancellation
of outstanding Purchase Rights (to the extent not previously exercised) for
the granting of new Purchase Rights in substitution therefor. The foregoing
notwithstanding, no modification of a Purchase Right may, without the consent
16<PAGE>
of the participant, alter or impair any rights or obligations under any
Purchase Right previously granted.
In the event of the voluntary or involuntary termination or cessation of
employment or association of a participant with the Company or any Subsidiary
for any reason whatsoever, with or without cause (including death or
disability), the Company may, upon the date of such termination, have an
irrevocable, exclusive option to repurchase (the Repurchase Option ) all or
any portion of the Shares held by the Employee that are subject to the
Repurchase Option as of such date at the original purchase price.
Initially, all of the Shares must be subject to the Repurchase Option.
Thereafter, the Repurchase Option must lapse and expire, or vest, as to a
specified number of the Shares in accordance with a schedule to be determined
by the Board or the Committee, as the case may be, which must be attached to
the stock purchase agreement to be entered into between the participant and
the Company. All Shares which continue to be subject to the Repurchase Option
are sometimes hereinafter referred to as Unvested Shares. Within 90 days
following the date of the Participant's termination of employment by the
Corporation, the Corporation shall notify the Employee as to whether it wishes
to repurchase the Unvested Shares pursuant to the exercise of the Repurchase
Option. If the Corporation elects to repurchase said Unvested Shares, it must
set a date for the closing of the transaction at the Executive Offices of the
Corporation, not later than 30 days from the date such notice.
Except for transfers to participant's descendants and spouses, the
participant may not transfer by sale, assignment, hypothecation, donation, or
otherwise any of the Shares or any interest therein prior to the release of
such Shares from the Repurchase Option. The Company's Repurchase Option may
be assigned in whole or in part to any stockholder or stockholders of the
Company or other persons or organizations. Each stock purchase agreement
entered into as provided herein must provide for a right of first refusal and
option on the part of the Company to purchase all or any part of any Shares
which are no longer subject to the Repurchase Option which the participant
purposes to sell, transfer or otherwise dispose of (except for transfers to
participant's descendants and spouses) on the condition that: (a) the
participant must notify the Company in writing of any proposed sale, transfer
or other disposition of any of the Shares, specifying the proposed transferee,
the number of Shares proposed to be transferred, and the price at which such
Shares are to be sold, transferred or otherwise disposed; (b) the Company must
have a period of 30 days from receipt of such notice to notify the participant
in writing as to whether or not the Company elects to purchase all or a
specified portion of such Shares at the lower of (i) price per share set forth
in the notice given by the participant, or (ii) the fair market value for a
share of the Company's Common Stock, without restrictions, on the date on
which the notice is given by participant to the Company, less in either case
an amount equal to the discount, if any; (c) if the Company elects not to
purchase all of the Shares specified in the notice, the participant may sell,
transfer or otherwise dispose of the remaining Shares in strict accordance
with the terms specified in the notice within 90 days following the date of
the notice. Any transferee of any of such Shares (other than the Company)
will take and acquire all of such Shares subject to the continuing right o
first refusal and option on the part of the Company to purchase all or any
portion of such Shares from the transferee on all of the same terms and
17<PAGE>
conditions as are set forth in the stock purchase agreement, unless the
participant shall have paid to the Company, out of the proceeds from the sale
of such Shares or otherwise, an amount equal to the lesser of (i) the discount
or (ii) the amount by which the fair market value for a share of the Company
Common Stock, without restrictions, on the date on which the notice is given
by participant to the Company exceeds the price per Share paid by the
participant for such Shares.
Stock Appreciation Rights. Stock Appreciation Rights related or
unrelated to Options or other Awards may be granted to eligible employees:
(i) at any time if unrelated to an Award or if related to an Award other than
an Incentive Stock Option; or (ii) only at the time of grant of an Incentive
Stock Option if related thereto. A Stock Appreciation Right may extend to all
or a portion of the shares covered by a related Award.
A Stock Appreciation Right granted in connection with an Award may be
exercisable only at such time or times, and to the extent, that a related
Award is exercisable. A Stock Appreciation Right granted in connection with
an Incentive Stock Option may be exercisable only when the fair market value
of the stock subject to the Incentive Stock Option exceeds the exercise price
of the Incentive Stock Option. Upon the exercise of a Stock Appreciation
Right, and if such Stock Appreciation Right is related to an Award surrender
of an exercisable portion of the related Award, the participant shall be
entitled to receive payment of a amount determined by multiplying the
difference obtained by subtracting the purchase price of a share of Common
Stock specified in the related Award, or if such Stock Appreciation Right is
unrelated to an Award, from the fair market value, book value or other measure
specified in the Award of such Stock Appreciation Right of a share of Common
Stock on the date of exercise of such Stock Appreciation Right, by the number
of shares as to which such Stock Appreciation Right has been exercised.
The Board or the Committee, as the case may be, in its sole discretion,
may require settlement of the amount determined under paragraph (i) above
solely in cash, solely in shares of Common Stock valued at fair market value,
or partly in such shares and partly in cash. Each Stock Appreciation Right
and all rights and obligations thereunder must expire on such date as shall be
determined by the Board or the Committee, but not later than 10 years after
the date of the Award thereof, and must be subject to earlier termination as
provided in the Plans.
Performance Awards. One or more Performance Awards may be granted to any
eligible employee. The value of such Awards may be linked to the market
value, book value or other measure of the value of the Common stock or other
specific performance criteria determined appropriate by the Board or the
Committee, in each case on a specified date or over any period determined by
the Board or the Committee, or may be based upon the appreciation in the
market value, book value or other measure of the value of a specified number
of shares of Common stock over a fixed period determined by the Board or the
Committee. In making such determinations, the Board or the Committee may
consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities, and other
compensation of the participant.
Dividend Equivalents. A participant may also be granted Dividend Rights
18<PAGE>
based on the dividends declared on the Common Stock, to be credited as of
dividend payment dates, during the period between the date of grant of the
Award and the date such Award is exercised, vests or expires, as determined by
the Board or the Committee. Such Dividend Rights may be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Board or the Committee.
Stock Payments. The Board or the Committee may approve Stock Payments to
eligible employees who elect to receive such payments in the manner determined
from time to time by the Board or the Committee. The number of shares must be
determined by the Board or the Committee and may be based upon the fair market
value, book value or other measure of the value of such shares on the date the
Award is granted or on any date thereafter.
Loans. The Company may, with the Board's or the Committee's approval,
extend one or more loans to participants in connection with the exercise or
receipt of outstanding Awards granted under the Plans. Such loans are subject
to the following conditions: (i) the principal of the loan may not exceed the
amount required to be paid to the Corporation upon the exercise or receipt of
one or more Awards under the Plans less the aggregate par value of any Common
Stock deliverable on such event, and the loan proceeds must be paid directly
to the Corporation in consideration of such exercise or receipt; (ii) the
initial term of the loan must be determined by the Board or the Committee;
provided that the term of the loan, including extensions, may not exceed a
period of ten years; (iii) the loan must be with full recourse to the
participant, must be evidenced by the participant's promissory note and must
bear interest at a rate determined by the Board or the Committee but not less
than the Company's average cost of funds as of a date within 31 days of the
date of such loan, as determined by the Board or the Committee; and iv) in the
event a participant terminates his or her employment at the request of the
Company, the unpaid principal balance of the note must become due and payable
on the tenth business day after such termination; provided, however, that if a
sale of such shares would cause such participant to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance may become due and
payable on the 10th business day after the first day on which a sale of such
shares could have been made without incurring such liability assuming for
these purposes that there are no other transactions by the participant
subsequent to such termination. In the event a participant terminates
employment other than at the request of the Company, the unpaid principal
balance of the note becomes due and payable six months after the date of such
termination.
Termination, Suspension and Amendment. The Board of Directors or the
Committee may, at any time, suspend, amend, modify of terminate the Plans (or
any part thereof) and may, with the consent of the recipient of an Award,
authorize such modifications of the terms and conditions of such participant's
Award as it shall deem advisable. However, no amendment or modification of
the Plans may be adopted without approval by a majority of the shares of the
Common Stock represented (in person or by proxy) at a meeting of stockholders
at which a quorum is present and entitled to vote thereat, if such amendment
or modification would materially increase the benefits accruing to
participants under the Plans within the meaning of Rule 16b-3 under the
Exchange Act or any successor provision; materially increase the aggregate
number of shares which may be delivered pursuant to Awards granted under the
19<PAGE>
Plans; or materially modify the requirements of eligibility for participation
in the Plans.
Other Non-Qualified Stock Options. In October 1991, the Company granted
nonstatutory stock options to purchase 40,000 shares of Common Stock at an
exercise price of $1.375 per share to each of Gordon M. Liddle and T. Daniel
Neveau, each directors of the Company at the time of the grant. Mr. Haglund,
a director nominee, was granted 40,000 shares of Common Stock at an exercise
price of $1.375 per share in October 1991. The options granted to such
individuals are fully vested and expire in October 1996.
In April 1994, the Company granted nonstatutory stock options to purchase
15,000 shares of Common Stock at an exercise price of $2.625 per share to each
of Leland E. Sweetser and Marvin E. Helsley, each former directors of the
Company. The options granted to such individuals vest 50% on each of the
first and second anniversaries of the effective date of the grant (April 14,
1994) and expire in April 1999.
On March 7, 1995, the Board of Directors approved the grant of
nonstatutory stock options exercisable at $2.25 per share expiring March 7,
2005 as follows: Grant S. Kesler received options to purchase 750,000 shares
(of which 261,000 options were exercised in February 1996), T. Daniel Neveau,
a former director, received options to purchase 750,000 shares (of which
261,000 options were exercised in February 1996), Javier Guerra Cisneros
received options to purchase 250,000 shares (of which 100,000 options were
exercised in February 1996) Doug Land received options to purchase 150,000
shares, and Gordon M. Liddle received options to purchase 150,000 shares. Mr.
Haglund, a director nominee was granted options to purchase 150,000 shares at
$2.25 per share at the same time. Except for 100,000 of the options granted
to Mr. Guerra, which vest upon the achievement of certain performance
standards established by the Compensation Committee, all of such options are
fully vested.
Compliance With Section 16 (a) of the Exchange Act
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the SEC ) and NASDAQ. Officers, directors, and greater than 10% beneficial
owners are required by SEC regulation to furnish the Company with copies of
all Section 16 (a) forms they file. The Company believes that all filing
requirements applicable to its officers, directors, and greater than 10%
beneficial owners were complied with.
Section 401 (k) Plan
In December 1989, the Company adopted a tax-qualified cash or deferred
profit sharing plan (the 401 (k) Plan ) covering all employees who have
completed six months of continuous service prior to a plan entry date.
Pursuant to the 401 (k) Plan, eligible employees may make salary deferral
(before tax) contributions of up to 15% of their total compensation per plan
year up to a specified maximum contribution as determined by the Internal
Revenue Service. The 401 (k) Plan also includes provisions which authorize
20<PAGE>
the Company to make discretionary contributions. Such contributions, if made,
are allocated among all eligible employees as determined under the 401 (k)
Plan. The trustees under the 401 (k) Plan invest the assets of each
participant's account attributable to the Company's contribution in an equity
fund or guaranteed income fund until the participant is fully vested. The
trustees invest the assets at the direction of such participant for the
portion attributable to the participant's contribution and the portion
attributable to the Company's contribution if the participant is fully vested.
No contributions were made to the 401 (k) Plan during the fiscal year ended
May 31, 1996.
Certain Relationships and Related Transactions
In October 1994, in consideration of extraordinary contributions to the
Company, including but not limited to the pledge of 755,000 shares of Common
Stock of the Company owned by them to facilitate necessary financing for the
Company, the Board of Directors approved the loan of $325,000 to each of Mr.
Kesler and Mr. Neveau. Such borrowings were due 30 days after demand and were
secured by a pledge of 300,000 shares of the Company s common stock from each.
Interest on such loans was the prime rate of interest plus 7% per annum. In
February 1996, Mr. Kesler and Mr. Neveau each repaid $150,000 of such loan.
In March 1996, the notes were amended to modify the loan principal between Mr.
Kesler ($490,000 principal balance at March 1, 1996) and Mr. Neveau ($160,000)
as well as to adjust the interest rate effective March 1, 1996 to a variable
rate based on the Company s quarterly investment rate. The amendment also
stipulates that the notes must be repaid by May 31, 1997.
During fiscal year 1996, the Company agreed to pay consulting fees of
$51,000 to Mr. Liddle for services in connection with management supervision
and consulting to the Company s insulation business. In June 1996, the
Company agreed to a 19-month consulting agreement with Mr. Liddle for on-
going consulting services at the rate of $5,000 per month.
During fiscal year 1996, the Company entered into an agreement with The
Chesapeake Group ( Chesapeake ), whose managing director is Mr. Land, pursuant
to which Chesapeake agreed to act as a financial consultant to the Company in
matters pertaining to its Mexican waste operations. Additionally, the Company
agreed to pay certain transaction fees associated with new business ventures,
merger, or acquisitions in Mexico for which Chesapeake performs consulting
services. During fiscal year 1996, the Company paid Chesapeake $100,000 for
past consulting services rendered and agreed to pay $8,000 per month for on-
going consulting services. Pursuant to the agreement, the Company also paid
Chesapeake a transaction fee for the successful closing of an agreement to
form BFI-Omega, S.A. de C.V., a joint venture in Mexico with Browning-Ferris
Industries, Inc.
Report of Compensation Committee
The following report of the Compensation Committee is provided solely to
the stockholders of the Company pursuant to the requirements of Schedule 14A
promulgated under the Securities Exchange Act of 1934, and shall not be deemed
to be filed with the Securities and Exchange Commission for the purpose of
establishing statutory liability. This Report shall not be deemed to be
incorporated by reference in any document previously or subsequently filed
21<PAGE>
with the Securities and Exchange Commission that incorporates by reference all
or any portion of this Proxy Statement.
September 1, 1996
Board of Directors
Metalclad Corporation
3737 Birch Street, Suite 300
Newport Beach, California
As the Compensation Committee of Metalclad Corporation (the Company ),
it is our duty to review and recommend the compensation levels for members of
the Company's management, evaluate the performance of management and the
administration of the Company's various incentive plans. This Committee has
reviewed in detail the compensation of the Company's executive officers for
the fiscal year ended May 31, 1996. In the opinion of the Committee, the
compensation of the executive officers of the Company is reasonable in view of
the Company's performance and the respective contributions of such officers to
that performance.
In determining the management compensation, this Committee evaluates the
compensation paid to management based on their performance, their experience,
and the stage of development of the Company. The Committee also takes into
account such relevant external factors as general economic conditions, stock
price performance, and stock market prices generally. In doing the foregoing,
the Committee has sought and obtained opinions from outside professional
advisors.
Management compensation is composed of salary, bonuses, and options to
purchase shares of Common Stock at the fair market value on the date of grant.
The number of options granted is scaled to the salary of each individual
officer. The executive compensation is not determined alone by reference to
any performance objectives of the Company. However, the Committee intends to
consider performance goals in the future. The Committee believes that the
compensation of the executive officers is reasonable in light of these
factors.
Compensation Committee
Gordon M. Liddle, Chairman
[Insert Chart]
[Comparison of Five-Year Cumulative Total Return]
22<PAGE>
APPROVAL OF AMENDMENT OF THE COMPANY'S
CERTIFICATE OF INCORPORATION TO
INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK
The Company's Certificate of Incorporation currently authorizes
40,000,000 shares of Common Stock. As of May 31, 1996, there were 28,733,229
issued and outstanding shares of Common Stock. Of the unissued shares of
Common Stock, the balance are reserved for issuance upon the exercise of
outstanding common stock purchase warrants, the conversion of convertible
subordinated debentures, and exercise of options for the purchase of common
stock pursuant to the Company's various stock option plans and other stock
option agreements. Consequently, the Company presently has no additional
shares available for issuance currently authorized under the Certificate of
Incorporation. The Company proposes to increase its authorized Common Stock
to 80,000,000, which will then be available for issuance from time to time,
for such purposes and such consideration, and on such terms, as the Board of
Directors may approve, and no further vote of the stockholders of the Company
will be required except in certain transactions as provided under the Delaware
General Corporation Law.
The Board of Directors believes that it is in the best interest of the
Company to increase the number of authorized shares of Common Stock to
80,000,000 at this time in light of the limited availability of shares. An
increase in the authorized shares will enable the Company to meet possible
contingencies and opportunities in which the issuance of shares of Common
Stock in amounts greater than would otherwise remain available for issuance
may be deemed advisable, such as in equity financings or in acquisition
transactions. By adopting the proposed amendment to the Certificate of
Incorporation at this time, consummation of issuances of any additional shares
of Common Stock would be facilitated, because the delay and expense incident
to the calling of a special meeting of the Company's stockholders, in cases
where such a meeting would not be otherwise be required, would be avoided.
The timing of the actual issuance of additional shares of Common Stock, if
any, will depend upon market conditions, the specific purpose for which the
stock is to be issued, and other factors. Any additional issuance of Common
Stock could have a dilutive effect on existing holders of Common Stock. Any
additional issuance of Common Stock would also have the effect of making a
takeover attempt more difficult because control over a greater number of
shares would be required. The Company currently has no plans for the issuance
of any unreserved shares of Common Stock for which authorization is sought.
The terms of the additional shares of Common Stock for which
authorization is sought will be identical to the terms of the shares of Common
Stock currently authorized and outstanding, and approval of the proposed
amendment will not affect the terms, or the rights of the holders, of such
shares.
Approval of the amendment to increase the authorized common Stock will
require the affirmative vote of the holders of at least a majority of the
outstanding shares of Common Stock.
If adopted by the stockholders, this proposed amendment to the
Certificate of Incorporation will become effective upon filing with the
Delaware Secretary of State.
23<PAGE>
The Board of Directors has approved the proposed amendment to the
Certificate of Incorporation and recommends that the Company's stockholders
vote FOR adoption of this proposal.
APPROVAL OF 1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
On January 3, 1996, the Board of Directors of the Company adopted the
1996 Omnibus Stock Option Plan (the "1996 Plan"). The 1996 Plan is intended to
provide incentive to key employees and directors of, and key consultants,
vendors, customers, and others expected to provide significant services to,
the Company, to encourage proprietary interest in the Company, to encourage
such key employees to remain in the employ of the Company and its
subsidiaries, to attract new employees with outstanding qualifications, and to
afford additional incentive to consultants, vendors, customers, and others to
increase their efforts in providing significant services to the Company.
Pursuant to the terms of the 1996 Plan, the following types of incentives may
from time to time be granted on a discretionary basis by the Board or the
Committee: incentive stock options ("Incentive Stock Options"), nonstatutory
stock options ("Nonstatutory Stock Options"), purchase rights ("Purchase
Rights"), stock appreciation rights ("Stock Appreciation Rights"), performance
awards ("Performance Awards"), dividend rights ("Dividend Rights"), and stock
payments ("Stock Payments"), referred to hereinafter singly as "Award" and
collectively as "Awards", as the context may require. The 1996 Plan also
provides for the grant of Incentive Stock Options and Nonstatutory Stock
Options to members of the Board of Directors on a "formula award" basis as
provided in Rule 16b-3 of the Securities Exchange Act of 1934 ("Rule 16b-3").
As of the date of this Proxy Statement, no Awards have been granted pursuant
to the 1996 Plan. The complete text of the 1996 Plan appears in the Appendix
to this Proxy Statement.
The 1996 Plan shall be administered by the Board in compliance with Rule
16b-3, or by a Committee (the "Committee") appointed by the Board, which
Committee shall be constituted to permit the Plan to comply with Rule 16b-3,
and which shall consist of not less than two members, each of whom has not
participated in the 1996 Plan by way of receipt of any discretionary grant of
an Award, and who will not so participate while serving as a member of the
Committee, and each of whom has not participated under any other plan or have
received options of the Company during the year preceding adoption of the 1996
Plan by the shareholders at the Meeting. A member of the Board or a Committee
member shall in no event participate in any determination relation to Awards
held by or to be granted on a discretionary basis to such Board or Committee
member.
All employees of the Company or of a subsidiary of the Company, who may
be officers or directors of the Company, and consultants, vendors, customers,
and others expected to provide significant services to the Company or any of
its subsidiaries, are eligible to participate in the 1996 Plan. No Incentive
Stock Option may be granted to a non-employee director or non-employee
consultant, vendor, customer, or other provider of significant services to the
Company or a subsidiary, and except that no Nonstatutory Stock Option may be
granted to a non-employee director or non-employee consultant, vendor,
customer, or other provider of significant services to the Company or a
subsidiary other than upon a vote of a majority of disinterested directors
24<PAGE>
finding that the value of the services rendered or to be rendered to the
Company or a subsidiary by such non-employee director or non-employee
consultant, vendor, customer, or other provider of services is at least equal
to the value of the options granted.
The aggregate number of shares of the Company's authorized but unissued
Common Stock which may issued as an Award or which may be issued upon exercise
of an Incentive Stock Option or nonstatutory Stock option under the 1996 Plan
shall not exceed 6,000,000 shares. The number of shares subject to
unexercised options, Stock Appreciation Rights or Purchase Rights granted
under the 1996 Plan (plus the number of shares previously issued under the
1996 Plan) shall not at any time exceed the number of shares available for
issuance under the 1996 Plan. In the event that any unexercised option, Stock
Appreciation Right or Purchase Right, or any portion thereof, for any reason
expires or is terminated, or if any shares subject to a restricted stock Award
do not vest or are not delivered, the unexercised or unvested shares allocable
to such Award may again be made subject to any Award.
Options. Incentive Stock Options and Nonstatutory Stock Options
(together hereinafter referred to as "Option" or "Options", unless the context
otherwise requires) shall be evidenced by written stock option agreements in
such form as the Committee shall from time to time determine. Each Option
shall state the number of Shares to which it pertains and shall provide for
the adjustment thereof in the event that the outstanding shares of Common
Stock are changed into or exchanged for cash or a different number or kind of
shares or securities of the Corporation, or if the outstanding shares of the
Common Stock are increased, decreased, exchanged for, or otherwise changed, or
if additional shares or new or different shares or securities are distributed
with respect to the outstanding shares of the Common Stock, through a
reorganization or merger in which the Corporation is the surviving entity or
through a combination, consolidation, recapitalization, reclassification,
stock split, stock dividend, reverse stock split, stock consolidation or other
capital change or adjustment. In addition, the Board or the Committee may
grant such additional rights in the foregoing circumstances as the Board or
the Committee deems to be in the best interest of any Participant and the
Corporation in order to preserve for the Participant the benefits of the
Award.
The exercise price in the case of any Incentive Stock Option shall not be
less than the fair market value on the date of grant and, in the case of any
Option granted to an optionee who owns more than 10% of the total combined
voting power of all classes of outstanding stock of the Company, shall not be
less than 110% of the fair market value on the date of grant. The exercise
price in the case of any Nonstatutory Stock Option shall not be less than 85%
of the fair market value on the date of grant.
The purchase price is be payable in full in United States dollars upon
the exercise of the Option; provided, however, that if the applicable Option
agreement so provides, the purchase price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the participant and having a fair
market value on the date of exercise equal to the purchase price, or in any
combination of cash and Shares, as long as the sum of the cash so paid and the
fair market value of the Shares so surrendered equals the purchase price, (ii)
by cancellation of indebtedness owed by the Company to the participant, (iii)
25<PAGE>
with a full recourse promissory note executed by the participant, or (iv) any
combination of the foregoing. The interest rate and other terms and
conditions of such note shall be determined by the Board or the Committee.
The Board or Committee may require that the participant pledge his or her
Shares to the Company for the purpose of securing the payment of such note.
In no event shall the stock certificate(s) representing such Shares by
released to the participant until such note shall be been paid in full.
Each Option shall state the time or times which all or part thereof
becomes exercisable. No Option shall be exercisable after the expiration of
10 years from the date it was granted, and no Option granted to an optionee
who owns more than 10 of the total combined voting power of all classes of
outstanding stock of the Company shall be exercisable after the expiration of
five years from the date it was granted. During the lifetime of a participant
in the 1996 Plan, the Option shall be exercisable only by that participant and
shall not be assignable or transferable. In the event of the participant's
death, the Option shall not be transferable by the participant other than by
will or the laws of descent and distribution.
Within the limitations of the 1996 Plan, the Board or Committee may
modify, extend or renew outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously exercised) for the granting
of new Options in substitution therefor. No modification of an Option shall,
without the consent of the participant, alter or impair any rights or
obligations under any Option previously granted.
In the case of Incentive Stock Options granted under the 1996 Plan, the
aggregate fair market value (determined as of the date of the grant thereof)
of the Shares with respect to which Incentive Stock Options become exercisable
by any participant for the first time during any calendar year (under the 1996
Plan and all other plans maintained by the Company shall not exceed $100,000.
The Board or Committee may, however, with the participant's consent, authorize
an amendment to the Incentive Stock Option which renders it a Nonstatutory
Stock Option.
The stock option agreements authorized under the 1996 Plan may contain
such other provisions not inconsistent with the terms of the 1996 Plan
(including, without limitation, restrictions upon the exercise of the Option)
as the Board or the Committee shall deem advisable.
Subject to the approval of the 1996 Plan by the vote of the Shareholders
at the Meeting to be held October 17, 1996, the individuals whose names are
set forth below shall be deemed granted Nonstatutory Stock Options, as of the
effective date of the 1996 Plan, at exercise prices of $3.625 and $4.50 per
share, for the amount of options and the exercise price indicated opposite
their respective names:
26<PAGE>
Number of Options Exercise
Name Granted Price
------------------------------------------------------------
Grant S. Kesler 1,500,000 $3.625
T. Daniel Neveau 1,300,000 $3.625
Javier Guerra Cisneros 600,000 $3.625
Douglas S. Land 400,000 $3.625
Gordon M. Liddle 300,000 $3.625
Bruce H. Haglund 300,000 $3.625
Anthony Dabbene 50,000 $3.625
Javier Guerra Duran 25,000 $4.50
Humberto C. Rodarte Ramon 25,000 $4.50
Glenn W. Meyer 20,000 $3.625
Wayne M. May 20,000 $3.625
David G. Duclett 20,000 $3.625
Elgin B. Williams 20,000 $3.625
H. Anthony Wood 20,000 $4.50
David Robinson 20,000 $4.50
Heather McGuigan 5,000 $3.625
Susan Schmidt 5,000 $3.625
Maria Flenker 5,000 $3.625
All Nonstatutory Stock Options granted as set forth above shall vest on the
effective date of grant.
Restricted Stock Purchase Agreements. Restricted stock purchase rights
(hereinabove defined as "Purchase Rights") shall be evidenced by written stock
purchase agreements in such form as the Committee shall from time to time
determine. Each Purchase Right shall state the number of Shares to which it
pertains and shall provide for the adjustment thereof in the event that the
outstanding shares of Common Stock are changed into or exchanged for cash or a
different number or kind of shares or securities of the Corporation, or if the
outstanding shares of the Common Stock are increased, decreased, exchanged
for, or otherwise changed, or if additional shares or new or different shares
or securities are distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger in which the Corporation is
the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation or other capital change or adjustment. In
addition, the Board or the Committee may grant such additional rights in the
foregoing circumstances as the Board or the Committee deems to be in the best
interest of any Participant and the Corporation in order to preserve for the
Participant the benefits of the Award.
Each agreement shall state the purchase price per Share at which the
Purchase Right may be exercised, which shall not be less than the fair market
value of a Share on the date on which the Purchase Rights are granted. Unless
the Board or Committee otherwise determines, the purchase price per Share at
which any Purchase Right granted under the 1996 Plan may be exercised shall
not be less than the fair market value of a Share as of the date on which the
Purchase Right is granted, less a discount equal to not more than 75% of such
value.
Purchase Rights must be exercised within 60 days after the later to occur
27<PAGE>
of (i) Board approval of the grant of the Purchase Right or (ii) delivery of
notice of such grant. Purchase Rights may not be sold, pledged, assigned,
hypothecated, transferred or disposed of in any manner and shall expire
immediately upon the death of the participant or the termination of such
participant's employment with the Company.
The purchase price shall be payable in full in United States dollars upon
exercise of the Purchase Right; provided, however, that if the applicable
agreement so provides, the purchase price may be paid (i) by the surrender of
Shares in good form for transfer, owned by the person exercising the Purchase
Right and having a fair market value on the date of exercise equal to the
purchase price, or in any combination of cash and Shares, as long as the sum
of the cash so paid and the fair market value of the Shares so surrendered
equal the Purchase Price, or (ii) with a full recourse promissory note
executed by the participant. The interest rate and other terms and conditions
of such note shall be determined by the Board or the Committee. The Board or
Committee may require that the participant pledge his or her Shares to the
Company for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Shares by released to the
participant until such note shall be been paid in full. In the event the
Company determines that it is required to withhold state or Federal income tax
as a result of the exercise of a Purchase Right, as a condition to the
exercise thereof, a participant may be required to make arrangements
satisfactory to the Company to enable it to satisfy such withholding
requirements. In addition, the participant shall agree to immediately notify
the Company if he or she files an election pursuant to Section 83(b) of the
Internal Revenue Code with respect to receipt of the Shares.
Within the limitations of the 1996 Plan, the Board or the Committee may
modify, extend or renew outstanding Purchase Rights or accept the cancellation
of outstanding Purchase Rights (to the extent not previously exercised) for
the granting of new Purchase Rights in substitution therefor. The foregoing
notwithstanding, no modification of a Purchase Right shall, without the
consent of the participant, alter or impair any rights or obligations under
any Purchase Right previously granted.
In the event of the voluntary or involuntary termination or cessation of
employment or association of a participant with the Company or any Subsidiary
for any reason whatsoever, with or without cause (including death or
disability), the Company shall, upon the date of such termination, have an
irrevocable, exclusive option to repurchase (the "Repurchase Option") all or
any portion of the Shares held by the Employee that are subject to the
Repurchase Option as of such date at the original purchase price.
Initially, all of the Shares shall be subject to the Repurchase Option.
Thereafter, the Repurchase Option shall lapse and expire, or "vest," as to a
specified number of the Shares in accordance with a schedule to be determined
by the Board or the Committee, as the case may be, which shall be attached to
the stock purchase agreement to be entered into between the participant and
the Company. All Shares which continue to be subject to the Repurchase Option
are sometimes hereinafter referred to as "Unvested Shares." Within 90 days
following the date of the Participant's termination of employment by the
Corporation, the Corporation shall notify the Employee as to whether it wishes
to repurchase the Unvested Shares pursuant to the exercise of the Repurchase
28<PAGE>
Option. If the Corporation elects to repurchase said Unvested Shares, it
shall set a date for the closing of the transaction at the Executive Offices
of the Corporation, not later than 30 days from the date such notice.
Except for transfers to participant's descendants and spouses, the
participant shall not transfer by sale, assignment, hypothecation donation or
otherwise any of the Shares or any interest therein prior to the release of
such Shares from the Repurchase Option. The Company's Repurchase Option may
be assigned in whole or in part to any stockholder or stockholders of the
Company or other persons or organizations. Each stock purchase agreement
entered into as provided herein shall provide for a right of first refusal and
option on the part of the Company to purchase all or any part of any Shares
which are no longer subject to the Repurchase Option which the participant
purposes to sell, transfer or otherwise dispose of (except for transfers to
participant's descendants and spouses) on the condition that: (a) the
participant must notify the Company in writing of any proposed sale, transfer
or other disposition of any of the Shares, specifying the proposed transferee,
the number of Shares proposed to be transferred, and the price at which such
Shares are to be sold, transferred or otherwise disposed; (b) the Company
shall have a period of 30 days from receipt of such notice to notify the
participant in writing as to whether or not the Company elects to purchase all
or a specified portion of such Shares at the lower of (i) price per share set
forth in the notice given by the participant, or (ii) the fair market value
for a share of the Company's Common Stock, without restrictions, on the date
on which the notice is given by participant to the Company, less in either
case an amount equal to the discount, if any; (c) if the Company elects not to
purchase all of the Shares specified in the notice, the participant may sell,
transfer or otherwise dispose of the remaining Shares in strict accordance
with the terms specified in the notice within 90 days following the date of
the notice. Any transferee of any of such Shares (other than the Company)
will take and acquire all of such Shares subject to the continuing rightof
first refusal and option on the part of the Company to purchase all or any
portion of such Shares from the transferee on all of the same terms and
conditions as are set forth in the stock purchase agreement, unless the
participant shall have paid to the Company, out of the proceeds from the sale
of such Shares or otherwise, an amount equal to the lesser of (i) the discount
or (ii) the amount by which the fair market value for a share of the Company
Common Stock, without restrictions, on the date on which the notice is given
by participant to the Company exceeds the price per Share paid by the
participant for such Shares.
Stock Appreciation Rights. Stock Appreciation Rights related or
unrelated to Options or other Awards may be granted to eligible employees:
(i) at any time if unrelated to an Award or if related to an Award other than
an Incentive Stock Option; or (ii) only at the time of grant of an Incentive
Stock Option if related thereto. A Stock Appreciation Right may extend to all
or a portion of the shares covered by a related Award.
A Stock Appreciation Right granted in connection with an Award shall be
exercisable only at such time or times, and to the extent, that a related
Award is exercisable. A Stock Appreciation Right granted in connection with
an Incentive Stock Option may be exercisable only when the fair market value
of the stock subject to the Incentive Stock Option exceeds the exercise price
of the Incentive Stock Option. Upon the exercise of a Stock Appreciation
29<PAGE>
Right, and if such Stock Appreciation Right is related to an Award surrender
of an exercisable portion of the related Award, the participant shall be
entitled to receive payment of a amount determined by multiplying the
difference obtained by subtracting the purchase price of a share of Common
Stock specified in the related Award, or if such Stock Appreciation Right is
unrelated to an Award, from the fair market value, book value or other measure
specified in the Award of such Stock Appreciation Right of a share of Common
Stock on the date of exercise of such Stock Appreciation Right, by the number
of shares as to which such Stock Appreciation Right has been exercised.
The Board or the Committee, as the case may be, in its sole discretion,
may require settlement of the amount determined under paragraph (i) above
solely in cash, solely in shares of Common Stock valued at fair market value,
or partly in such shares and partly in cash. Each Stock Appreciation Right
and all rights and obligations thereunder shall expire on such date as shall
be determined by the Board or the Committee, but not later than 10 years after
the date of the Award thereof, and shall be subject to earlier termination as
provided in the 1996 Plan.
Performance Awards. One or more Performance Awards may be granted to any
eligible employee. The value of such Awards may be linked to the market
value, book value or other measure of the value of the Common stock or other
specific performance criteria determined appropriate by the Board or the
Committee, in each case on a specified date or over any period determined by
the Board or the Committee, or may be based upon the appreciation in the
market value, book value or other measure of the value of a specified number
of shares of Common stock over a fixed period determined by the Board or the
Committee. In making such determinations, the Board or the Committee shall
consider (among such other factors as it deems relevant in light of the
specific type of award) the contributions, responsibilities and other
compensation of the participant.
Dividend Equivalents. A participant may also be granted Dividend Rights
based on the dividends declared on the Common Stock, to be credited as of
dividend payment dates, during the period between the date of grant of the
Award and the date such Award is exercised, vests or expires, as determined by
the Board or the Committee. Such Dividend Rights shall be converted to cash
or additional shares of Common Stock by such formula and at such time and
subject to such limitations as may be determined by the Board or the
Committee.
Stock Payments. The Board or the Committee may approve Stock Payments to
eligible employees who elect to receive such payments in the manner determined
from time to time by the Board or the Committee. The number of shares shall
be determined by the Board or the Committee and may be based upon the fair
market value, book value or other measure of the value of such shares on the
date the Award is granted or on any date thereafter.
Loans. The Company may, with the Board's or the Committee's approval,
extend one or more loans to participants in connection with the exercise or
receipt of outstanding Awards granted under the Plan. Such loans are subject
to the following conditions: (i) the principal of the loan shall not exceed
the amount required to be paid to the Corporation upon the exercise or receipt
of one or more Awards under the Plan less the aggregate par value of any
30<PAGE>
Common Stock deliverable on such event, and the loan proceeds shall be paid
directly to the Corporation in consideration of such exercise or receipt; (ii)
the initial term of the loan shall be determined by the Board or the
Committee; provided that the term of the loan, including extensions, shall not
exceed a period of ten years; (iii) the loan shall be with full recourse to
the participant, shall be evidenced by the participant's promissory note and
shall bear interest at a rate determined by the Board or the Committee but not
less than the Company's average cost of funds as of a date within 31 days of
the date of such loan, as determined by the Board or the Committee; and iv) in
the event a participant terminates his or her employment at the request of the
Company, the unpaid principal balance of the note hall become due and payable
on the tenth business day after such termination; provided, however, that if a
sale of such shares would cause such participant to incur liability under
Section 16(b) of the Exchange Act, the unpaid balance shall become due and
payable on the tenth business day after the first day on which a sale of such
shares could have been made without incurring such liability assuming for
these purposes that there are no other transactions by the participant
subsequent to such termination. In the event a participant terminates
employment other than at the request of the Company, the unpaid principal
balance of the note shall become due and payable six months after the date of
such termination.
Termination, Suspension and Amendment. The Board of Directors or the
Committee may, at any time, suspend, amend, modify of terminate the 1996 Plan
(or any part thereof) and may, with the consent of the recipient of an Award,
authorize such modifications of the terms and conditions of such participant's
Award as it shall deem advisable. However, no amendment or modification of
the 1996 Plan may be adopted without approval by a majority of the shares of
the Common Stock represented (in person or by proxy) at a meeting of
stockholders at which a quorum is present and entitled to vote thereat, if
such amendment or modification would materially increase the benefits accruing
to participants under the 1996 Plan within the meaning of Rule 16b-3 under the
Exchange Act or any successor provision; materially increase the aggregate
number of shares which may be delivered pursuant to Awards granted under the
1996 Plan; or materially modify the requirements of eligibility for
participation in the Plan.
Neither adoption of the 1996 Plan nor the provisions thereof shall limit
the authority of the Board of Directors to adopt other plans or to authorize
other payments of compensation and benefits under applicable law.
APPROVAL OF ENGAGEMENT OF AUDITORS
Effective May 1996, the Company's Board of Directors engaged Arthur
Andersen LLP as its independent auditors. The Board of Directors has selected
Arthur Andersen, LLP as independent public accountant for the Company for the
fiscal year ended May 31, 1996 and the fiscal year ending May 31, 1997,
subject to approval by the stockholders of the Company. Prior to such
engagement, neither the Company nor anyone on the Company's behalf consulted
Arthur Andersen, LLP regarding either the application of accounting principles
to a specified transaction, either completed or proposed; or the type of audit
opinion that might be rendered on the Company's financial statements; or any
matter that was the subject of a disagreement with Grant Thornton or a
31<PAGE>
reportable event. To the knowledge of the Company, at no time has Grant
Thornton had any direct or indirect financial interest in or any connection
with the Company other than as independent public accountants. It is
anticipated that a representative of Arthur Andersen is will be available at
the Meeting to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal intended for
consideration at the 1995 Annual Meeting must be received by the Company on or
before April 1, 1997 to be included in any proxy materials prepared for the
1997 Annual Meeting of Stockholders. It is recommended that stockholders
submitting proposals direct them to the Secretary of the Company and utilize
certified mail-return receipt requested to insure timely delivery of the
proposal.
MISCELLANEOUS AND OTHER MATTERS
Financial Statements
The Company's financial statements for the fiscal year ended May 31, 1996
appear on the pages following page 25 of its 1996 Annual Report on Form 10-K
which is being mailed to all stockholders along with this Proxy Statement.
Said pages are incorporated herein by reference.
Matters Not Determined at the Time of the Solicitation
Management knows of no matters to come before the Meeting other than as
specified herein. If any other matter should come before the Meeting, then
the persons named in the enclosed form of proxy will have discretionary
authority to vote all proxies with respect thereto in accordance with their
judgment.
Vote of Proxies
All shares represented by duly executed proxies will be voted for the
election of the nominees named above as directors unless authority to vote for
the proposed slate of directors or any individual director has been withheld.
With respect to the proposal to amend the Company's Certificate of
Incorporation, all such shares will be voted for or against, or not voted, as
specified on each proxy. If no choice is indicated, a proxy will be voted for
the proposal to approve the amendment. With respect to the proposal to
approve the appointment of Arthur Andersen, LLP as the Company's independent
accountants, all such shares will be voted for or against, or not voted, as
specified on each proxy. If no choice is indicated, a proxy will be voted for
the proposal to approve Arthur Andersen, LLP as the Company's independent
accountants.
32<PAGE>
A COPY OF THE COMPANY'S CURRENT ANNUAL REPORT ON FORM 10-K AS FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING THE FINANCIAL STATEMENTS AND
SCHEDULES THERETO, IS BEING MAILED TO EACH SHAREHOLDER TOGETHER WITH THIS
PROXY STATEMENT. ADDITIONAL COPIES OF THE ANNUAL REPORT MAY BE OBTAINED BY
SHAREHOLDERS WITHOUT CHARGE BY WRITING TO: METALCLAD CORPORATION, 3737 BIRCH
STREET, SUITE 300, NEWPORT BEACH, CALIFORNIA 92660.
33<PAGE>
METALCLAD CORPORATION
1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
Appendix A<PAGE>
METALCLAD CORPORATION
1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
PAGE
I. PURPOSE................................................ 1
II. DEFINITIONS............................................ 1
III. EFFECTIVE DATE......................................... 3
IV. ADMINISTRATION......................................... 4
V. PARTICIPATION.......................................... 4
5.1 Eligibility....................................... 4
5.2 Ten Percent Shareholders.......................... 4
5.3 Stock Ownership................................... 5
5.4 Outstanding Stock................................. 5
VI. STOCK SUBJECT TO THE PLAN.............................. 5
VII. OPTIONS................................................ 5
7.1 Stock Option Agreements........................... 5
7.2 Number of Shares.................................. 5
7.3 Exercise Price.................................... 5
7.4 Medium and Time of Payment........................ 5
7.5 Term and Transferability of Options............... 6
7.6 Modification, Extension and Renewal of Options.... 6
7.7 Limitation on Grant of Incentive Stock Options.... 6
7.8 Other Provisions.................................. 6
7.9 Specific Awards Approved by the Shareholders...... 6
VIII. RESTRICTED STOCK PURCHASE AGREEMENTS................... 7
8.1 Stock Purchase Agreements......................... 7
8.2 Number of Shares.................................. 7
8.3 Purchase Price.................................... 7
8.4 Exercisability and Nontransferability of Purchase
Rights........................................... 7
8.5 Medium and Time of Payment........................ 7
8.6 Consent of Spouse................................. 7
8.7 Modification, Extension and Renewal of Purchase
Rights........................................... 7
8.8 Repurchase Option as to Unvested Shares........... 8
8.9 Corporation's Right of First Refusal to Purchase
Vested Shares.................................... 8
8.10 Other Provisions.................................. 9
i<PAGE>
IX. STOCK APPRECIATION RIGHTS.............................. 9
9.1 Grant............................................. 9
9.2 Exercise of Stock Appreciation Rights............ 9
9.3 Payment........................................... 9
9.4 Maximum Stock Appreciation Right Term............. 9
X. PERFORMANCE AWARDS..................................... 10
XI. DIVIDEND EQUIVALENTS................................... 10
XII. STOCK PAYMENTS......................................... 10
XIII. LOANS.................................................. 10
XIV. RIGHTS OF PARTICIPANTS AND BENEFICIARIES............... 11
14.1 Employee Status.................................. 11
14.2 No Employment Contract........................... 11
14.3 No Transferability............................... 11
14.4 Plan Not Funded.................................. 11
14.5 Adjustments upon Recapitalizations and
Corporate Changes.............................. 12
14.6 Termination of Employment........................ 12
14.7 Death of Participant............................. 12
14.8 Disability of Participant........................ 12
14.9 Retirement of Participant........................ 12
14.10 Rights as a Stockholder.......................... 13
14.11 Deferral of Payments............................. 13
14.12 Acceleration of Awards........................... 13
XV. MISCELLANEOUS.......................................... 13
15.1 Termination, Suspension and Amendment............ 13
15.2 No Fractional Shares............................. 14
15.3 Tax Withholding and Tax Bonuses.................. 14
15.4 Restrictions of Elections Made by................ 14
15.5 Limitations on the Corporation's Obligations..... 14
15.6 Compliance with Laws............................. 14
15.7 Governing Law.................................... 15
15.8 Securities Law Requirements...................... 15
15.9 Execution........................................ 16
ii<PAGE>
METALCLAD CORPORATION
1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
I. PURPOSE
The Plan is intended to provide incentive to key employees and directors
of, and key consultants, vendors, customers, and others expected to provide
significant services to, the Corporation, to encourage proprietary interest in
the Corporation, to encourage such key employees to remain in the employ of
the Corporation and its Subsidiaries, to attract new employees with
outstanding qualifications, and to afford additional incentive to consultants,
vendors, customers, and others to increase their efforts in providing
significant services to the Corporation.
II. DEFINITIONS.
2.1 "Award" shall mean an Option, which may be designated an Incentive
Stock Option or a Nonstatutory Stock Option, a Purchase Right, a Stock
Appreciation Right, a Performance Award, a Dividend Right or a Stock Payment,
in each case as granted pursuant to the Plan.
2.2 "Award Agreement" shall mean a Stock Option Agreement, Restricted
Stock Agreement or a Purchase Right Agreement.
2.3 "Beneficiary" shall mean the person, persons, trust or trusts
entitled by will or the laws of descent and distribution to receive the
benefits specified under the Plan in the event of a Participant's death.
2.4 "Board" shall mean the Board of Directors of the Corporation.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended.
2.6 "Committee" shall mean the committee, if any, appointed by the Board
in accordance with Section 4 of the Plan.
2.7 "Common Stock" shall mean the Common Stock, without par value, of
the Corporation.
2.8 "Corporation" shall mean Metalclad Corporation, an Arizona
corporation, and its Subsidiaries.
2.9 "Disability" shall mean the condition of a Participant who is unable
to [perform his or her substantial and material job duties due to injury or
sickness or such other condition as the Board or Committee may determine in
its sole discretion/engage in any substantial gainful activity by reason of
any medically determinable physical or mental impairment which can be expected
to result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve (12) months].
2.10 "Discount" shall mean, with respect to the Purchase Price of
Purchase Rights, the discount from the Fair Market Value of a Share as set
1<PAGE>
forth in Section 8.3.
2.11 "Dividend Equivalent" shall mean a right to receive a number of
Shares or a cash amount, determined as provided in Article XII hereof.
2.12 "Eligible Employee" shall mean an individual who is employed
(within the meaning of Code Section 3401 and the regulations thereunder) by
the Corporation.
2.13 "Event" shall mean any of the following:
(a) Any person or entity (or group of affiliated persons or
entities) acquires in one or more transactions, whether before or after the
effective date of the Plan, ownership of more than 50 percent of the
outstanding shares of stock entitled to vote in the election of directors of
the Corporation; or
(b) The dissolution or liquidation of the Corporation or a
reorganization, merger or consolidation of the Corporation with one or more
entities, as a result of which the Corporation is not the surviving entity, or
a sale of all or substantially all of the assets of the Corporation as an
entirety to another entity.
For purposes of this definition, ownership does not include ownership (i) by a
person owning such shares merely of record (such as a member of a securities
exchange, a nominee or a securities depository system), (ii) by a person as a
bona fide pledgee of shares prior to a default and determination to exercise
powers as an owner of the shares, (iii) by a person who is not required to
file statements on Schedule 13D by virtue of Rule 13d-1(b) of the Securities
and Exchange Commission under the Exchange Act, or (iv) by a person who owns
or holds shares as an underwriter acquired in connection with an underwritten
offering pending and for purposes of resale.
2.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
2.15 "Exercise Price" shall mean the price per Share of Common Stock,
determined by the Board or the Committee, at which an Award may be exercised.
2.16 "Fair Market Value" shall mean the value of one (1) Share of Common
Stock, determined as follows:
(i) If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of valuation; or
(ii) If the Shares are traded over-the-counter on the NASDAQ
System, the closing price if one is available, or the mean between the bid and
asked prices on said System at the close of business on the date of valuation;
or
(iii) If neither (i) nor (ii) above applies, the fair market value
as determined by the Board or the Committee in good faith. Such determination
shall be conclusive and binding on all persons.
2<PAGE>
2.17 "Incentive Stock Option" shall mean an option described in Section
422A(b) of the Code.
2.18 "Nonstatutory Stock Option" shall mean an option not described in
Section 422(b), 422A(b), 423(b) or 424(b) of the Code.
2.19 "Option" shall mean either an Incentive Stock Option or a
Nonstatutory Stock Option granted pursuant to the Plan.
2.20 "Participant" shall mean an Eligible Employee who has received an
Award under the Plan.
2.21 "Performance Award" shall mean a cash bonus, stock bonus or other
performance or incentive award that is paid in cash, stock or a combination of
both.
2.22 "Plan" shall mean the Metalclad Corporation 1996 Omnibus Stock
Option and Incentive Plan, as it may be amended from time to time.
2.23 "Purchase Price" shall mean the Exercise Price times the number of
Shares with respect to which an Award is exercised.
2.24 "Purchase Right" shall mean the grant to an Employee of the right
to purchase Shares under the Plan.
2.25 "Restricted Stock" shall mean those Shares issued pursuant to a
Restricted Stock Award that are not free of the restrictions set forth in the
related Restricted Stock Agreement.
2.26 "Restricted Stock Award" shall mean an award of a fixed number of
shares subject to payment of such consideration, if any, and such forfeiture
provisions, as are set forth in the related Restricted Stock Agreement.
2.27 "Retirement" shall mean the voluntary termination of employment by
an Employee upon the attainment of age sixty-five (65) and the completion of
not less than twenty (20) years of service with the Corporation or a
Subsidiary.
2.28 "Share" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 15.4 of the Plan (if applicable).
2.29 "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
2.30 "Stock Appreciation Right" shall mean the right to receive a number
of Shares or a cash amount, or a combination of Shares and cash, based upon
the Fair Market Value, book value or other measure determined by the Board or
the Committee, as the case may be, pursuant to Section 10.1 of the Plan.
2.31 "Stock Payment" shall mean a payment in the form of Shares, or a
Purchase Right, as part of a deferred compensation arrangement, made in lieu
of all or any portion of the compensation, including without limitation the
salary, bonuses or commissions, that would otherwise become payable in cash to
an Eligible Employee.
3<PAGE>
2.32 "Subsidiary" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the Corporation
or by another Subsidiary.
2.33 "Tax Date" shall have the meaning set forth in Section 15.3 hereof.
III. EFFECTIVE DATE
The Plan was adopted by the Board on January 3, 1996, subject to the
approval by the Corporation's shareholders. The Plan is being submitted to
the shareholders of the Corporation for their approval at the Annual Meeting
thereof scheduled for October 17, 1996. The effective date of the Plan shall
be January 3, 1996 (the "Effective Date"), provided that the Plan is approved
by the shareholders of the Corporation at the Annual Meeting.
IV. ADMINISTRATION
The Plan shall be administered by the Board in compliance with Rule 16b-3
of the Securities Exchange Act of 1934 ("Rule 16b-3"), or by a Committee
appointed by the Board, which Committee shall be constituted to permit the
Plan to comply with Rule 16b-3, and which shall consist of not less than three
(3) members. The Board shall appoint one of the members of the Committee, if
there be one, as Chairman of the Committee. If a Committee has been
appointed, the Committee shall hold meetings at such times and places as it
may determine. Acts of a majority of the Committee at which a quorum is
present, or acts reduced to or approved in writing by a majority of the
members of the Committee, shall be the valid acts of the Committee. The
Board, or the Committee if there be one, shall from time to time at its
discretion select the Eligible Employees and consultants who are to be granted
Awards, determine the number of Shares or cash, or the combination thereof, to
be applicable to such Award, and designate any Options as Incentive Stock
Options or Nonstatutory Stock Options, except that no Incentive Stock Option
may be granted to a non-employee director or a non-employee consultant. A
member of the Board or a Committee member shall in no event participate in any
determination relating to Awards held by or to be granted to such Board or
Committee member; however, a member of the Board or a Committee member shall
be entitled to receive Awards approved by the shareholders in accordance with
the provisions of Rule 16b-3. The interpretation and construction by the
Board, or by the Committee if there be one, of any provision of the Plan or of
any Award granted thereunder shall be final. No member of the Board or of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Award granted thereunder. In addition to any
right of indemnification provided by the Articles of Incorporation or Bylaws
of the Corporation, such person shall be indemnified and held harmless by the
Corporation from any loss, cost, liability or expense that may be imposed upon
or reasonably incurred by him in connection with any claim, suit, action or
proceeding to which he may be a party by reason of any action or omission
under the Plan.
4<PAGE>
V. PARTICIPATION
5.1 Eligibility. Subject to the terms and conditions of Section 5.2
below, the Participants shall be such persons as the shareholders may approve
or as the Committee may select from among the following classes of persons:
(i) Employees of the Corporation or of a Subsidiary (who may be officers,
whether or not they are directors); and (ii) Consultants, vendors, customers,
and others expected to provide significant services to the Corporation or a
Subsidiary.
For purposes of this Plan, a Participant who is a director or a consultant,
vendor, customer, or other provider of significant services to the Corporation
or a Subsidiary shall be deemed to be an Eligible Employee, and service as a
director, consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary shall be deemed to be employment,
except that no Incentive Stock Option may be granted to a non-employee
director or non-employee consultant, vendor, customer, or other provider of
significant services to the Corporation or a Subsidiary, and except that no
Nonstatutory Stock Option may be granted to a non-employee director or non-
employee consultant, vendor, customer, or other provider of significant
services to the Corporation or a Subsidiary other than upon a vote of a
majority of disinterested directors finding that the value of the services
rendered or to be rendered to the Corporation or a Subsidiary by such non-
employee director or non-employee consultant, vendor, customer, or other
provider of services is at least equal to the value of the Awards granted.
5.2 Ten-Percent Shareholders. An Eligible Employee who owns more than
ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Corporation, its parent or any of its Subsidiaries
shall not be eligible to receive an Award for an Incentive Stock Option unless
(i) the Exercise Price of the Shares subject to such Award is at least one
hundred ten percent (110%) of the Fair Market Value of such Shares on the date
of grant; and (ii) such Award by its terms is not exercisable after the
expiration of five (5) years from the date of grant.
5.3 Stock Ownership. For purposes of Section 5.2 above, in determining
stock ownership an Eligible Employee shall be considered as owning the stock
owned, directly or indirectly, by of for his brothers, sisters, spouses,
ancestors and lineal descendants. Stock owned, directly or indirectly, by or
for a corporation, partnership, estate or trust shall be considered as being
owned proportionately by or for its shareholders, partners or beneficiaries.
Stock with respect to which such Eligible Employee holds an Award shall not be
counted.
5.4 Outstanding Stock. For purposes of Section 5.2 above, "outstanding
stock" shall include all stock actually issued and outstanding immediately
after the grant of the Award to the Participant. "Outstanding stock" shall
not include shares authorized for issue under outstanding Options or Purchase
Rights held by the Participant or by any other person.
VI. STOCK SUBJECT TO THE PLAN
The stock subject to Awards granted under the Plan shall be Shares of the
5<PAGE>
Corporation's authorized but unissued or reacquired Common Stock. The
aggregate number of Shares which may be issued as Awards or upon exercise of
Awards under the Plan shall not exceed Six Million (6,000,000) shares. The
number of Shares subject to unexercised Options, Stock Appreciation Rights or
Purchase Rights (plus the number of Shares previously issued under the Plan)
shall not at any time exceed the number of Shares available for issuance under
the Plan. In the event that any unexercised Option, Stock Appreciation Right
or Purchase Right, or any portion thereof, for any reason expires or is
terminated, or if any shares subject to a Restricted Stock Award do not vest
or are not delivered, the unexercised or unvested Shares allocable to such
Option, Stock Appreciation Right, Purchase Right or Restricted Stock Award may
again be made subject to any Award. Any Shares withheld by the Corporation
pursuant to Section 15.3 shall not be deemed to be issued. The number of
withheld Shares shall be deducted from the applicable Award and shall not
entitle the Participant to receive additional Shares. The limitations
established by this Article VI shall be subject to adjustment in the manner
provided in Section 14.5 hereof upon the occurrence of an event specified
therein.
VII. OPTIONS
7.1 Stock Option Agreements. Options shall be evidenced by written
stock option agreements in such form as the Committee shall from time to time
determine. Such agreements shall comply with and be subject to the terms and
conditions set forth below.
7.2 Number of Shares. Each Option shall state the number of Shares to
which it pertains and shall provide for the adjustment thereof in accordance
with the provisions of Section 14.5 hereof.
7.3 Exercise Price. Each Option shall state the Exercise Price thereof.
The Exercise Price in the case of any Incentive Stock Option shall not be less
than the Fair Market Value on the date of grant and, in the case of any Option
granted to an Optionee described in Section 5.2 hereof, shall not be less than
one hundred ten percent (110%) of the Fair Market Value on the date of grant.
The Exercise Price in the case of any Nonstatutory Stock Option shall not be
less than eighty-five percent (85%) of the Fair Market Value on the date of
grant.
7.4 Medium and Time of Payment. The Purchase Price shall be payable in
full in United States dollars upon the exercise of the Option; provided,
however, that if the applicable Stock Option Agreement so provides the
Purchase Price may be paid (i) by the surrender of Shares in good form for
transfer, owned by the Participant and having a Fair Market Value on the date
of exercise equal to the Purchase Price, or in any combination of cash and
Shares, as long as the sum of the cash so paid and the Fair Market Value of
the Shares so surrendered equal the Purchase Price, (ii) by cancellation of
indebtedness owed by the Corporation to the Participant, (iii) with a full
recourse promissory note executed by the Participant, or (iv) any combination
of the foregoing. The interest rate and other terms and conditions of such
note shall be determined by the Committee. The Committee may require that the
Participant pledge his or her Shares to the Corporation for the purpose of
securing the payment of such note. In no event shall the stock certificate(s)
6<PAGE>
representing such Shares by released to the Participant until such note shall
be been paid in full.
7.5 Term and Nontransferability of Options. Each Option shall state
the time or times which all or part thereof becomes exercisable. No Option
shall be exercisable after the expiration of ten (10) years from the date it
was granted, and no Option granted to a Participant described in Section 5.2
hereof shall be exercisable after the expiration of five (5) years from the
date it was granted. During the lifetime of the Participant, the Option shall
be exercisable only by the Participant and shall not be assignable or
transferable. In the event of the Participant's death, the Option shall not
be transferable by the Participant other than by will or the laws of descent
and distribution.
7.6 Modification, Extension and Renewal of Option. Within the
limitations of the Plan, the Committee may modify, extend or renew outstanding
Options or accept the cancellation of outstanding Options (to the extent not
previously exercised) for the granting of new Options in substitution
therefor. The foregoing notwithstanding, no modification of an Option shall,
without the consent of the Participant, alter or impair any rights or
obligations under any Option previously granted.
7.7 Limitation on Grant of Incentive Stock Options. In the case of
Incentive Stock Options granted hereunder, the aggregate Fair Market Value
(determined as of the date of the grant thereof) of the Shares with respect to
which Incentive Stock Options become exercisable by any Participant for the
first time during any calendar year (under this Plan and all other plans
maintained by the Corporation, its parent or its Subsidiaries) shall not
exceed One Hundred Thousand Dollars ($100,000). The Board or Committee may,
however, with the Participant's consent authorize an amendment to the
Incentive Stock Option which renders it a Nonstatutory Stock Option.
7.8 Other Provisions. The Stock Option Agreements authorized under the
Plan may contain such other provisions not inconsistent with the terms of the
Plan (including, without limitation, restrictions upon the exercise of the
Option) as the Committee shall deem advisable.
7.9 Specific Awards Approved by the Shareholders. Subject to the
approval by the vote of the shareholders at the Annual Meeting of the
Shareholders on November 13, 1993, the individuals whose names are set forth
in Exhibit "A," a copy of which is attached hereto and incorporated herein by
this reference, shall be deemed granted Nonstatutory Stock Options as of the
Effective Date, in the amounts and for the amount indicated opposite their
respective names, and in accordance with the vesting schedule set forth
therein, all in accordance with the provisions set forth in this Article VII
of the Plan. The provisions of this Section 7.9 shall not be amended more
than once every six (6) months, other than to comport with changes in the
Internal Revenue Code, the Employee Retirement Income Security Act, or the
rules thereunder, and are intended to be construed in accordance with the
provisions pertaining to "formula awards" under Paragraph (c)(2)(ii) of Rule
16b-3.
7<PAGE>
VIII. RESTRICTED STOCK PURCHASE RIGHTS
8.1 Stock Purchase Agreements. Purchase Rights shall be evidenced by
written Stock Purchase Agreements in such form as the Committee shall from
time to time determine. Such agreements shall comply with and be subject to
the terms and conditions set forth below.
8.2 Number of Shares. Each Purchase Right shall state the number of
Shares to which it pertains and shall provide for the adjustment thereof in
accordance with the provisions of Section 14.5 hereof.
8.3 Purchase Price. Each Stock Purchase Agreement shall state the
Purchase Price per Share at which the Purchase Right may be exercised, which
shall not be less than the Fair Market Value of a Share on the date on which
the Purchase Rights are granted. Unless the Board or Committee otherwise
determines, the Purchase Price per Share at which any Purchase Right granted
under the Plan may be exercised shall not be less than the Fair Market Value
of a Share as of the date on which the Purchase Right is granted, less a
discount (the "Discount") equal to not more than seventy-five percent (75%) of
such value.
8.4 Exercisability and Non-Transferability of Purchase Rights. Purchase
Rights granted to an Eligible Employee pursuant to the Plan must be exercised
within sixty (60) days after the later to occur of (i) Board approval of the
grant of the Purchase Right or (ii) delivery of notice of such grant.
Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred
or disposed of in any manner and shall expire immediately upon the death of
the Participant or the termination of such Participant's employment with the
Corporation.
8.5 Medium and Time of Payment. The Purchase Price shall be payable in
full in United States dollars upon exercise of the Purchase Right; provided,
however, that if the applicable Stock Purchase Agreement so provides, the
Purchase Price may be paid (i) by the surrender of Shares in good form for
transfer, owned by the person exercising the Purchase Right and having a Fair
Market Value on the date of exercise equal to the Purchase Price, or in any
combination of cash and Shares, as long as the sum of the cash so paid and the
Fair Market Value of the Shares so surrendered equal the Purchase Price, or
(ii) with a full recourse promissory note executed by the Participant. The
interest rate and other terms and conditions of such note shall be determined
by the Committee. The Committee may require that the Participant pledge his
or her Shares to the Corporation for the purpose of securing the payment of
such note. In no event shall the stock certificate(s) representing such
Shares by released to the Participant until such note shall be been paid in
full. In the event the Corporation determines that it is required to withhold
state or Federal income tax as a result of the exercise of a Purchase Right,
as a condition to the exercise thereof, a Participant may be required to make
arrangements satisfactory to the Corporation to enable it to satisfy such
withholding requirements. In addition, the Participant shall agree to
immediately notify the Corporation if he or she files an election pursuant to
Section 83(b) of the Code with respect to receipt of the Shares.
8.6 Consent of Spouse. Each Participant who is married must cause his
or her spouse to sign and deliver the Stock Purchase Agreement to the
8<PAGE>
Corporation, in the place provided for such signature on the Stock Purchase
Agreement.
8.7 Modification, Extension and Renewal of Purchase Rights. Within the
limitations of the Plan, the Board or the Committee may modify, extend or
renew outstanding Purchase Rights or accept the cancellation of outstanding
Purchase Rights (to the extent not previously exercised) for the granting of
new Purchase Rights in substitution therefor. The foregoing notwithstanding,
no modification of a Purchase Right shall, without the consent of the
Employee, alter or impair any rights or obligations under any Purchase Right
previously granted.
8.8. Repurchase Option as to Unvested Shares.
(a) Termination of Employment. In the event of the voluntary or
involuntary termination or cessation of employment or association of the
Participant with the Corporation or any Subsidiary for any reason whatsoever,
with or without cause (including death or disability), the Corporation shall,
upon the date of such termination, have an irrevocable, exclusive option to
repurchase (the "Repurchase Option") all or any portion of the Shares held by
the Employee that are subject to the Repurchase Option as of such date at the
original Purchase Price.
(b) Vesting. Initially, all of the Shares shall be subject to the
Repurchase Option. Thereafter, the Repurchase Option shall lapse and expire,
or "vest," as to a specified number of the Shares in accordance with a
schedule to be determined by the Board or the Committee, as the case may be,
which shall be attached to the Stock Purchase Agreement to be entered into
between the Participant and the Corporation as provided in Section 8.1 above.
All Shares which continue to be subject to the Repurchase Option are sometimes
hereinafter referred to as "Unvested Shares."
(c) Notice. Within ninety (90) days following the date of the
Participant's termination of employment by the Corporation, the Corporation
shall notify the Employee as to whether it wishes to repurchase the Unvested
Shares pursuant to the exercise of the Repurchase Option. If the Corporation
elects to repurchase said Unvested Shares, it shall set a date for the closing
of the transaction at the Executive Offices of the Corporation, not later than
thirty (30) days from the date such notice.
(d) Transfers. Except for transfers to Participant's descendants
and spouses, the Participant shall not transfer by sale, assignment,
hypothecation donation or otherwise any of the Shares or any interest therein
prior to the release of such Shares from the Repurchase Option.
(e) Assignment. The Corporation's Repurchase Option may be
assigned in whole or in part to any stockholder or stockholders of the
Corporation or other persons or organizations.
8.9 Corporation's Right of First Refusal to Purchase Vested Shares.
Each Stock Purchase Agreement entered into as provided herein shall provide
for a right of first refusal and option on the part of the Corporation to
purchase all or any part of any Shares which are no longer subject to the
Repurchase Option which the Participant purposes to sell, transfer or
9<PAGE>
otherwise dispose of (except for transfers to Participant's descendants and
spouses) on the following terms and conditions:
(a) The Participant must notify the Corporation in writing of any
proposed sale, transfer or other disposition of any of the Shares, specifying
the proposed transferee, the number of Shares proposed to be transferred, and
the price at which such Shares are to be sold, transferred or otherwise
disposed.
(b) The Corporation shall have a period of thirty (30) days from
receipt of such notice to notify the Participant in writing as to whether or
not the Corporation elects to purchase all or a specified portion of such
Shares at the lower of (i) price per share set forth in the notice given by
the Participant, or (ii) the Fair Market Value for a share of the
Corporation's Common Stock, without restrictions, on the date on which the
notice is given by Participant to the Corporation (determined as provided in
Section 2.13 above), less in either case an amount equal to the Discount.
(c) If the Corporation elects not to purchase all of the Shares
specified in the notice, the Participant may sell, transfer or otherwise
dispose of the remaining Shares in strict accordance with the terms specified
in the notice within ninety (90) days following the date of the notice. It is
understood and agreed that any transferee of any of such Shares (other than
the Corporation) will take and acquire all of such Shares subject to the
continuing right of first refusal and option on the part of the Corporation to
purchase all or any portion of such Shares from the transferee on all of the
same terms and conditions as are set forth in the Stock Purchase Agreement,
unless the Participant shall have paid to the Corporation, out of the proceeds
from the sale of such Shares or otherwise, an amount equal to the lesser of
(i) the Discount or (ii) the amount by which the Fair Market Value for a share
of the Corporation's Common Stock, without restrictions, on the date on which
the notice is given by Participant to the Corporation (determined as provided
in Section 2.13 above) exceeds the price per Share paid by the Participant for
such Shares.
8.10 Other Provisions. The Stock Purchase Agreements authorized may
contain such other provisions not inconsistent with the terms of the Plan as
the Board or the Committee shall deem advisable.
IX. STOCK APPRECIATION RIGHTS
9.1 Grant. Stock Appreciation Rights related or unrelated to Options
or other Awards may be granted to Eligible Employees (i) at any time if
unrelated to an Award or if related to an Award other than an Incentive Stock
Option; or (ii) only at the time of grant of an Option if related thereto. A
Stock Appreciation Right may extend to all or a portion of the shares covered
by a related Award.
9.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right
granted in connection with an Award shall be exercisable only at such time or
times, and to the extent, that a related Award is exercisable. A Stock
Appreciation Right granted in connection with an Option may be exercisable
only when the Fair Market Value of the stock subject to the Option exceeds the
10<PAGE>
exercise price of the Incentive Stock Option.
9.3 Payment.
(a) Upon the exercise of a Stock Appreciation Right, and, if such
Stock Appreciation Right is related to an Award, surrender of an exercisable
portion of the related Award, the Participant shall be entitled to receive
payment of an amount determined by multiplying:
(i) the difference obtained by subtracting the purchase price
of a share of Common Stock specified in the related Award, or if such Stock
Appreciation Right is unrelated to an Award, from the Fair Market Value, book
value or other measure specified in the Award of such Stock Appreciation Right
of a share of Common Stock on the date of exercise of such Stock Appreciation
Right, by
(ii) the number of shares as to which such Stock Appreciation
Right has been exercised.
(b) The Board or the Committee, as the case may be, in its sole
discretion, may require settlement of the amount determined under paragraph
(b) above solely in cash, solely in shares of Common Stock (valued at Fair
Market Value on the business day next preceding the date of exercise of such
Stock Appreciation Right), or partly in such shares and partly in cash.
9.4 Maximum Stock Appreciation Right Term. Each Stock Appreciation
Right and all rights and obligations thereunder shall expire on such date as
shall be determined by the Board or the Committee, but not later than ten (10)
years after the date of the Award thereof, and shall be subject to earlier
termination as provided in the related Award Agreement and Sections 14.6,
14.7, 14.8, 14.9 and 15.1.
X. PERFORMANCE AWARDS
One or more Performance Awards may be granted to any Eligible Employee.
The value of such Awards may be linked to the market value, book value or
other measure of the value of the Common stock or other specific performance
criteria determined appropriate by the Board or the Committee, in each case on
a specified date or over any period determined by the Board or the Committee,
or may be based upon the appreciation in the market value, book value or other
measure of the value of a specified number of shares of Common stock over a
fixed period determined by the Board or the Committee. In making such
determinations, the Board or the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the Participant.
XI. DIVIDEND EQUIVALENTS
A Participant may also be granted "Dividend Equivalents" based on the
dividends declared on the Common Stock, to be credited as of dividend payment
dates, during the period between the Award Date and the date such Award is
exercised, vests or expires, as determined by the Board or the Committee.
11<PAGE>
Such Dividend Equivalents shall be converted to cash or additional shares of
Common Stock by such formula and at such time and subject to such limitations
as may be determined by the Board or the Committee.
XII. STOCK PAYMENTS
The Board or the Committee may approve Stock Payments to Eligible
Employees who elect to receive such payments in the manner determined from
time to time by the Board or the Committee. The number of shares shall be
determined by the Board or the Committee and may be based upon the Fair Market
Value, book value or other measure of the value of such shares on the Award
Date or on any date thereafter.
XIII. LOANS
The Corporation may, with the Board's or the Committee's approval, extend
one or more loans to Participants in connection with the exercise or receipt
of outstanding Awards granted under the Plan; provided any such loan shall be
subject to the following terms and conditions:
(i) The principal of the loan shall not exceed the amount
required to be paid to the Corporation upon the exercise or receipt of one or
more Awards under the Plan less the aggregate Par Value of any Common Stock
deliverable on such event, and the loan proceeds shall be paid directly to the
Corporation in consideration of such exercise or receipt.
(ii) The initial term of the loan shall be determined by the
Board or the Committee; provided that the term of the loan, including
extensions, shall not exceed a period of ten years.
(iii) The loan shall be with full recourse to the Participant,
shall be evidenced by the Participant's promissory note and shall bear
interest at a rate determined by the Board or the Committee but not less than
the Corporation's average cost of funds as of a date within thirty-one (31)
days of the date of such loan, as determined by the Board or the Committee.
(iv) In the event a Participant terminates his or her employment
at the request of the Corporation, the unpaid principal balance of the note
hall become due and payable on the tenth (10th) business days after such
termination; provided, however, that if a sale of such shares would cause such
Participant to incur liability under Section 16(b) of the Exchange Act, the
unpaid balance shall become due and payable on the tenth (10th) business day
after the first day on which a sale of such shares could have been made
without incurring such liability assuming for these purposes that there are no
other transactions by the Participant subsequent to such termination. In the
event a Participant terminates employment other than at the request of the
Corporation, the unpaid principal balance of the note shall become due and
payable six (6) months after the date of such termination.
XIV. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND
BENEFICIARIES
12<PAGE>
14.1 Employee Status. Status as an Eligible Employee shall not be
construed as a commitment that any Award will be made under the Plan to an
Eligible Employee or to Eligible Employees generally.
14.2 No Employment Contract. Nothing contained in the Plan (or in the
Award Agreements or in any other documents related to the Plan or to Awards)
shall confer upon any Eligible Employee or any Participant any right to
continue in the employee of the Corporation or constitute any contract or
agreement of employment, or interfere in any way with the right of the
Corporation to reduce such person's compensation or to terminate the
employment of such Eligible Employee or Participant, with or without cause,
but nothing contained in the plan or any document related thereto shall affect
any other contractual right of any Eligible Employee or Participant. Nothing
contained in the plan (or in the Award Agreements or in any other documents
related to the Plan or the Awards) shall confer upon any director of the
Corporation any right to continue as a director of the Corporation.
14.3 No Transferability. Awards may be exercised only by, and amounts
payable or shares issuable pursuant to an Award shall be paid only to or
registered only in the name of, the Participant or, in the event of the
Participant's death, to the Participant's Beneficiary or, in the event of the
Participant's Disability, to the Participant's Personal Representative or, if
there is none, to the Participant. Other than by will or the laws of descent
and distribution, no right or benefit under the Plan or any Award, including,
without limitation, any Option or share of Restricted Stock that has not
vested, shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge and any such attempted
action shall be void and no such right or benefit shall be, in any manner,
liable for, or subject to, debts, contract, liabilities, engagements or torts
of any Eligible Employee, Participant or Beneficiary, in any case except as
may otherwise be expressly required by applicable law. The Board or the
Committee shall disregard any attempt at transfer, assignment or other
alienation prohibited by the preceding sentence and shall pay or deliver such
cash or shares of Common Stock in accordance with the provisions of the Plan.
Notwithstanding the foregoing, the Board or the Committee may authorize
exercise by or transfers or payments to a third party in a specific case or
more generally; provided, however, with respect to any option or similar right
(including any stock appreciation right) such discretion may only be exercised
to the extent that applicable rules under Section 16 of the Exchange Act would
so permit without disqualifying the Plan from certain benefits thereunder.
14.4 Plan Not Funded. No Participant, Beneficiary or other person shall
have any right, title or interest in any fund or in any specific asset
(including shares of Common Stock) of the Corporation by reason of any Award
granted hereunder. There shall be no funding of any benefits which may become
payable hereunder. Neither the provisions of the Plan (or of any documents
related hereto), nor the creation or adoption of the plan, nor any action
taken pursuant to the provisions of the Plan shall create, or be construed to
create, a trust of any kind or a fiduciary relationship between the
Corporation and any Participant, Beneficiary. To the extent that a
Participant, a Beneficiary or other person acquires a right to receive an
Award hereunder, such right shall be no greater than the right of any
unsecured general creditor of the Corporation. Awards payable under the Plan
13<PAGE>
shall be paid in shares of Common Stock or from the general assets of the
Corporation, and no special or separate fund or deposit shall be established
and no segregation of assets or shares shall be made to assure payment of such
Awards.
14.5 Adjustment Upon Recapitalizations and Corporate Changes. If the
outstanding shares of Common Stock are changed into or exchanged for cash or a
different number or kind of shares or securities of the Corporation, or if the
outstanding shares of the Common Stock are increased, decreased, exchanged
for, or otherwise changed, or if additional shares or new or different shares
or securities are distributed with respect to the outstanding shares of the
Common Stock, through a reorganization or merger in which the Corporation is
the surviving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse stock
split, stock consolidation or other capital change or adjustment, an
appropriate adjustment shall be made in the number and kind of shares of other
consideration that is subject to or may be delivered under the Plan and
pursuant to outstanding Awards. A corresponding adjustment to the
consideration payable with respect to Awards granted prior to any such change
and to the price, if any, to be paid in connection with Restricted Stock
Awards shall also be made as appropriate. Corresponding adjustments shall be
made with respect to Stock Appreciation Rights related to Options to which
they are related. In addition, the Board or the Committee may grant such
additional rights in the foregoing circumstances as the Board or the Committee
deems to be in the best interest of any Participant and the Corporation in
order to preserve for the Participant the benefits of an Award.
14.6 Termination of Employment, Except by Death, Disability or
Retirement. If a Participant ceases to be an Employee for any reason other
than his or her death, Disability or Retirement, such Participant shall have
the right, subject to the restrictions of Section 14.3 above, to exercise any
Award at any time within three (3) months after termination of employment, but
only to the extent that, at the date of termination of employment, the
Participant's right to exercise such Award had accrued pursuant to the terms
of the applicable agreement and had not previously been exercised; provided,
however, that if the Participant was terminated for cause (as defined in the
applicable agreement) any Award not exercised in full prior to such
termination shall be canceled. For this purpose, the employment relationship
shall be treated as continuing intact while the Participant is on military
leave, sick leave or other bona fide leave of absence (to be determined in the
sole discretion of the Board or the Committee). The foregoing
notwithstanding, in the case of an Incentive Stock Option, employment shall
not be deemed to continue beyond the ninetieth (90th) day after the
Participant's reemployment rights are guaranteed by statute or by contract.
14.7 Death of Participant. If an Participant dies while an Employee, or
after ceasing to be an Employee but during the period while he or she could
have exercised the Award under this Section 14.7, and has not fully exercised
the Award, then the Award may be exercised in full at any time within twelve
(12) months after the Participant's death (but not later than the date of
termination fixed in the applicable agreement), by the executors or
administrators of his or her estate or by any person or persons who have
acquired the Award directly from the Participant by bequest or inheritance,
but only to the extent that, at the date of death, the Participant's right to
14<PAGE>
exercise such Award had accrued and had not been forfeited pursuant to the
terms of the applicable agreement and had not previously been exercised.
14.8 Disability of Participant. If an Participant ceases to be an
Employee by reason of Disability, such Participant shall have the right to
exercise the Award at any time within twelve (12) months after termination of
employment (but not later than the termination date fixed in the applicable
agreement), but only to the extent that, at the date of termination of
employment, the Participant's right to exercise such Award had accrued
pursuant to the terms of the applicable agreement and had not previously been
exercised.
14.9 Retirement of Participant. If an Participant ceases to be an
Employee by reason of Retirement, such Participant shall have the right to
exercise the Award at any time within three (3) months after termination of
employment (but not later than the termination date fixed in the applicable
agreement), but only to the extent that, at the date of termination of
employment, the Participant's right to exercise such Award had accrued
pursuant to the terms of the applicable agreement and had not previously been
exercised.
14.10 Rights as a Stockholder. An Participant, or a transferee of an
Participant, shall have no rights as a stockholder with respect to any Shares
covered by his or her Award until the date of the issuance of a stock
certificate for such Shares. No adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior to the date
such stock certificate is issued, except as provided in Section 14.5 hereof.
14.11 Deferral of Payments. The Board or the Committee may approve the
deferral of any payments that may become due under the Plan. Such deferrals
shall be subject to any conditions, restrictions or requirements as the Board
or the Committee may determine.
14.12 Acceleration of Awards. Immediately prior to the occurrence of an
Event, (i) each Option and Stock Appreciation Right under the Plan shall
become exercisable in full; (ii) Restricted Stock delivered under the Plan
shall immediately vest free of restrictions; and (iii) each other Award
outstanding under the Plan shall be fully vested or exercisable, unless, prior
to the Event, the Board or the Committee otherwise determines that there shall
be no such acceleration or vesting of an Award or otherwise determines those
Awards which shall be accelerated or vested and to the extent to which they
shall be accelerated or vested, or that an Award shall terminate, or unless in
connection with such Event the Board provides (A) for the assumption of such
Awards theretofore granted; or (B) for the substitution for such Awards of new
awards covering securities or obligations (or any combination thereof) of a
successor corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to number and kind of shares and prices; or (C) for the payment
of the fair market value of the then outstanding Awards. In addition, the
Board or the Committee may grant such additional rights in the foregoing
circumstances as the Board or the Committee deems to be in the best interest
of the Participant and the Corporation in order to preserve for the
Participant the benefits of an Award. For purposes of this Section 14.12
only, Board shall mean the Board of Directors of the Corporation as
15<PAGE>
constituted immediately prior to the Event. In addition, the Board may in its
sole discretion accelerate the exercisability or vesting of any or all Awards
outstanding under the Plan in circumstances under which the Board or the
Committee determines such acceleration appropriate.
XV. MISCELLANEOUS
15.1 Termination, Suspension and Amendment. The Board or the Committee
may, at any time, suspend, amend, modify of terminate the Plan (or any part
thereof) and may, with the consent of a Participant, authorize such
modifications of the terms and conditions of such Participant's Award as it
shall deem advisable; provided that, except as permitted under the provisions
of Section 14.5 hereof, no amendment or modification of the plan may be
adopted without approval by a majority of the shares of the Common Stock
represented (in person or by proxy) at a meeting of stockholders at which a
quorum is present and entitled to vote thereat, if such amendment or
modification would:
(i) materially increase the benefits accruing to Participants
under the plan within the meaning of Rule 16b-3 under the Exchange Act or any
successor provision;
(ii) materially increase the aggregate number of shares which
may be delivered pursuant to Awards granted under the Plan; or
(iii) materially modify the requirements of eligibility for
participation in the Plan.
Neither adoption of the plan nor the provisions hereof shall limit the
authority of the Board to adopt other plans or to authorize other payments of
compensation and benefits under applicable law. No Awards under the plan may
be granted or amended during any suspension of the Plan or after its
termination. The amendment, suspension or termination of the Plan shall not,
without the consent of the Participant, alter or impair any rights or
obligations pertaining to any Awards granted under the plan prior to such
amendment, suspension or termination.
15.2 No Fractional Shares. No Award or installment thereof shall be
exercisable except in respect of whole shares, and fractional share interests
shall be disregarded.
15.3 Tax Withholding and Tax Bonuses. As required by law, federal,
state or local taxes that are subject to the withholding of tax at the source
shall be withheld by the Corporation as necessary to satisfy such
requirements. The Corporation is entitled to require deduction from other
compensation payable to each Participant or, in the alternative: (i) the
Corporation may require the Participant to advance such sums; or (ii) if a
Participant elects, the Corporation may withhold (or require the return of)
Shares having the Fair Market Value equal to the sums required to be withheld.
If the Participant elects to advance such sums directly, written notice of
that election shall be delivered prior to such exercise and, whether pursuant
to such election or pursuant to a requirement imposed by the Corporation,
payment in cash or by check of such sums for taxes shall be delivered within
16<PAGE>
ten (10) days after the exercise date. If the Participant elects to have the
Corporation withhold Shares (or be entitled to the return of Shares) having a
Fair Market Value equal to the sums required to be withheld, the value of the
Shares to be withheld (or returned) will be equal to the Fair Market Value on
the date the amount of tax to be withheld (or subject to return) is to be
determined (the "Tax Date").
15.4 Restrictions on Elections Made by Participants. Elections by
Participants to have Shares withheld (or subject to return) for this purpose
will be subject to the following restrictions: (i) the election must be made
prior to the Tax Date; (ii) the election must be irrevocable; (iii) the
election will be subject to the Board's disapproval; and (iv) if the
Participant is an "officer" within the meaning of Section 16 of the Exchange
Act, the election shall be subject to such additional restrictions as the
Board or the Committee may impose in an effort to secure the benefits of any
regulations thereunder.
15.5 Limitations on the Corporation's Obligations. The Corporation
shall not be obligated to issue shares and/or distribute cash to the
Participant upon any Award exercise until such payment has been received or
Shares have been withheld, unless withholding (or offset against a cash
payment) as of or prior to the exercise date is sufficient to cover all such
sums due or which may be due with respect to such exercise. In addition, the
Board or the Committee may grant to a Participant a cash bonus in any amount
required by federal, state, or local tax law to be withheld with respect to an
Award.
15.6 Compliance with Laws. The Plan, the granting of Awards under the
Plan, the Stock Option Agreements and Stock Purchase Agreements and the
delivery of Options, Shares and Awards (and/or the payment of money or Common
Stock) pursuant thereto and the extension of any loans hereunder are subject
to such additional requirements as the Board or the Committee may impose to
assure or facilitate compliance with all applicable federal and state laws,
rules and regulations (including, without limitation, securities laws and
margin requirements) and to such approvals by any regulatory or governmental
agency which may be necessary or advisable in connection therewith. In
connection with the administration of the Plan or the grant of any Award, the
Board or the Committee may impose such further limitations or conditions as in
its opinion may be required or advisable to satisfy, or secure the benefits
of, applicable regulatory requirements (including those rules promulgated
under Section 16 of the Exchange Act or those rules that facilitate exemption
from or compliance with the Securities Act or the Exchange Act), the
requirements of any stock exchange upon which such shares or shares of the
same class are then listed, and any blue sky or other securities laws
applicable to such shares.
15.7 Governing Laws.
The Plan and all Awards granted under the Plan and the documents evidencing
Awards shall be governed by, and construed in accordance with, the laws of the
State of California, except as to those matters governed by the laws of the
State of Arizona as the state of incorporation of the Corporation.
15.8 Securities Law Requirements.
17<PAGE>
(a) Legality of Issuance. The issuance of any Shares upon the
exercise of any Option and the grant of any Option shall be contingent upon
the following:
(i) the Corporation and the Participant shall have taken all
actions required to register the Shares under the Securities Act of 1933, as
amended (the "Securities Act"), and to qualify the Option and the Shares under
any and all applicable state securities or "blue sky" laws or regulations, or
to perfect an exemption from the respective registration and qualification
requirements thereof;
(ii) any applicable listing requirement of any stock exchange on
which the Common Stock is listed shall have been satisfied; and
(iii) any other applicable provision of state of Federal law
shall have been satisfied.
(b) Restrictions on Transfer. Regardless of whether the offering
and sale of Shares under the plan has been registered under the Securities Act
or has been registered or qualified under the securities laws of any state,
the Corporation may impose restrictions on the sale, pledge or other transfer
of such Shares (including the placement of appropriate legends on stock
certificates) if, in the judgment of the Corporation and its counsel, such
restrictions are necessary or desirable in order to achieve compliance with
the provisions of the Securities Act, the securities laws of any state or any
other law. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which
required an investment representation or other representation, each
Participant shall be required to represent that such Shares are being acquired
for investment, and not with a view to the sale or distribution thereof, and
to make such other representations as are deemed necessary or appropriate by
the Corporation and its counsel. Any determination by the Corporation and its
counsel in connection with any of the matters set forth in this Section
15.6(b) shall be conclusive and binding on all persons. Stock certificates
evidencing Shares acquired under the Plan pursuant to an unregistered
transaction shall bear the following restrictive legend and such other
restrictive legends as are required or deemed advisable under the provisions
of any applicable law:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). ANY TRANSFER OF SUCH
SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE
SECURITIES ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL
FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE SECURITIES ACT."
(c) Registration or Qualification of Securities. The Corporation
may, but shall not be obligated to register or qualify the issuance of Awards
and/or the sale of Shares under the Securities Act or any other applicable
law. The Corporation shall not be obligated to take any affirmative action in
order to cause the issuance of Awards or the sale of Shares under the plan to
comply with any law.
(d) Exchange of Certificates. If, in the opinion of the
18<PAGE>
Corporation and its counsel, any legend placed on a stock certificate
representing shares issued under the Plan is no longer required, the holder of
such certificate shall be entitled to exchange such certificate for a
certificate representing the same number of Shares but lacking such legend.
15.9 Execution. To record the adoption of the Plan in the form set
forth above by the Board effective as of March 24, 1993, the Corporation has
caused this Plan to be executed in the name and on behalf of the Corporation
where provided below by an officer of the Corporation thereunto duly
authorized.
METALCLAD CORPORATION
By:______________________________
Grant S. Kesler, President
ATTEST:
_________________________________
Bruce H. Haglund, Secretary
(SEAL)
19<PAGE>
EXHIBIT "A"
METALCLAD CORPORATION
1996 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
SCHEDULE OF NONSTATUTORY STOCK OPTION AWARDS
Position With Number of Exercise
Name the Company Shares Price
------------------------------------------------------------------
Grant S. Kesler Officer/Director 1,500,000 $3.625
T. Daniel Neveau Consultant 1,300,000 $3.625
Javier Guerra Cisneros Officer/Director 500,000 $3.625
Douglas S. Land Director 400,000 $3.625
Bruce H. Haglund Officer/Director 300,000 $3.625
Gordon M. Liddle Director 300,000 $3.625
Anthony C. Dabbene Officer 50,000 $3.625
Glenn W. Meyer Employee 20,000 $3.625
Wayne M. May Employee 20,000 $3.625
David G. Duclett Employee 20,000 $3.625
All Nonstatutory Stock Options granted as set forth in this schedule vest on
the effective date of grant.
EXHIBIT "A"-1<PAGE>
