METALCLAD CORPORATION
3737 Birch Street, Suite 300
Newport Beach, California 92660
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 15, 1997
(Approximate Mailing Date: April 17, 1997)
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, May 15, 1997 at 10:00 A.M. local time, for the
following purposes:
1. To set the number of members of the Board of Directors
at nine 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
1997 Omnibus Stock Option and Incentive Plan;
4. To vote on the grant of non-statutory stock options to
T. Daniel Neveau, the former Chairman of the Board of the
Company, to purchase 1,300,000 shares of Common Stock
exercisable at $3.625 per share;
5. To consider and act upon the ratification of the
appointment of Arthur Andersen LLP as the independent public
accountants of the Company for the year ending December 31,
1997; and<PAGE>
6. 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
April 14, 1997 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
/s/Bruce H. Haglund
---------------------------
Bruce H. Haglund, Secretary
Newport Beach, California
April 17, 1997
YOUR VOTE IS IMPORTANT.
PLEASE SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS
POSSIBLE IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THANK YOU FOR ACTING PROMPTLY.<PAGE>
METALCLAD CORPORATION
3737 Birch Street, Suite 300
Newport Beach, California 92660
PRELIMINARY PROXY STATEMENT
April 17, 1997
-----------------------------
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, May 15, 1997 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 or by attending the Meeting and voting in person.
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 April 17,
1997 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 without
additional compensation for such services.
Vote of Proxies
Subject to revocation, 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 (the Amendment ), the proposal to
ratify the adoption of the Company s 1997 Omnibus Stock Option
1<PAGE>
and Incentive Plan ( the Stock Option Plan ), 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 the
Amendment and to ratify the Stock Option Plan. With respect to
the proposal to grant options to Mr. Neveau, 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 not be voted on
such proposal. If any other matters are properly presented at
the Meeting, the Proxy will be voted in accordance with the best
judgment and in the discretion of the Proxy Holders.
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 April
14, 1997 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 29,123,239.
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. The amendment to
increase the authorized shares of common stock will require the
affirmative vote of at least a majority of the outstanding
shares of common stock. The ratification of the 1997 Stock
Option Plan, the grant of options to Mr. Neveau, and the
appointment of the accountants will require the 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 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.
2<PAGE>
The following table sets forth certain information as of
April 14, 1997 relating to the beneficial ownership of the
Company's Common Stock by (i) all persons 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 1,456,000 (5)(6) 4.4%
3737 Birch Street, Suite 300
Newport Beach, California 92660
T. Daniel Neveau 1,153,000 (6) (7) 3.6%
1632 5th Street
Santa Monica, California 90401
Javier Guerra Cisneros (8) 1.7%
Jose Maria Morelos #70-B
Fraccionamiento Industrial Naucalpan
Naucalpan, E.D.M. 53489
Mexico
Gordon M. Liddle 200,000 (9) 0.6%
4100 South 4400 West
West Valley City, Utah 84120
Douglas S. Land 400,000 (10) 1.2%
515 Madison Avenue
21st Floor
New York, New York 10022
Bruce H. Haglund 215,540 (11) 0.6%
2010 Main Street, Suite 400
Irvine, California 92614
Anthony C. Dabbene 50,000 (12) 0.2%
3737 Birch Street, Suite 300
Newport Beach, California 92660
Herbert L. Oakes 1,679,091 (13) 5.1%
Byron House, 7-9 St. James s Street
London SW1A 1EE, England
Jose Akle Fierro -0- 0.0%
Jose Vasconcelos 218-6
Col. Hipodromo Condesa
06140 Mexico, D.F.
Mexico
3<PAGE>
All Officers and Directors 4,577,498 (14) 13.8%
as a Group (7 persons)
</TABLE>
------------------------
(1) Beneficial ownership is determined in accordance with Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
Exchange Act ), and is generally determined by voting power
and/or investment power with respect to securities. Except as
indicated by footnote, and subject to community property laws
where applicable, the Company believes the persons named in the
table above have sole voting and investment power with respect
to all shares of Common Stock shown as beneficially 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 Proxy
Statement have been exercised.
(3)Unless otherwise indicated, the address of each stockholder
is 3737 Birch Street, Suite 300, Newport Beach, California
92660.
(4) Assumes 33,244,374 shares outstanding, including 29,123,239
shares currently outstanding and 4,121,135 issuable upon
exercise of presently exercisable stock options and common stock
purchase warrants held by the above-listed stockholders.
(5) Includes 1,095,000 shares issuable upon exercise of
presently exercisable stock options, of which 595,000 are
exercisable at $2.25 per share and 500,000 are exercisable at
$1.625 per share..
(6) Does not include shares subject to a Voting Agreement and
Irrevocable Proxy (the Voting Agreement ) which expires on May
5, 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.
(7) Includes 595,000 shares issuable upon exercise of presently
exercisable stock options exercisable at $2.25 per share.
(8) Includes 430,772 shares held of record by Alba Duran
Barbaray, Mr. Guerra's wife, and 50,000 shares issuable upon
exercise of presently exercisable 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
4<PAGE>
with Messrs. Kesler and Neveau which expire of May 5, 1997. See
Notes 6 above.
(9) Represents 200,000 shares issuable upon exercise of
presently exercisable stock options 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 exercisable at $2.25 and 250,000 are
exercisable at $3.00 per share.
(11) Includes 200,000 shares issuable upon exercise of
presently exercisable stock options exercisable at $2.25 per
share.
(12) Includes 50,000 shares issuable upon presently exercisable
stock options exercisable at $3.625 per share.
(13) Includes 1,531,135 shares issuable upon presently
exercisable common stock warrants, of which ______ are
exercisable at $1.51 per share and _____ are exercisable at
$5.00 per share. Shares and common stock warrants deemed
beneficially owned by Mr. Oakes pursuant to Exchange Act Rule
13d-3 are held of record by various affiliates of Mr. Oakes, who
disclaims beneficial ownership thereof.
(14) Includes 4,121,135 shares issuable upon exercise of
presently exercisable stock options and common stock purchase
warrants at prices ranging from $1.51 to $5.00 per share.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the number of
directors shall be determined by the directors or the
stockholders. The directors have set the number of directors
for the ensuing year at nine. The 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 Jose Akle, Javier
Guerra Cisneros, Anthony C. Dabbene, Grant S. Kesler, and
Herbert L. Oakes 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
5<PAGE>
Board of Directors.
Cumulative voting applies to the election of directors.
The seven nominees receiving the highest number of votes shall
be duly elected.
Information about Nominees and Directors
The following sets forth certain information for each
person who is a director or nominated for election to the Board
of Directors:
<TABLE>
<S> <C> <C> <C>
Director
or Officer Current Position
Name Age Since with the Company
----------------------------------------------------------------------------
Grant S. Kesler 53 1991 President, Chief
Executive Officer, Director
Anthony C. Dabbene 45 1996 Chief Financial Officer,
Director Nominee
Javier Guerra Cisneros 49 1994 Director, Vice President-
Mexican Operations,
Director General of
Quimica Omega, S.A. de C.V.
and Ecosistemas Nacionales,
S.A. de C.V.
Jose Akle Fierro Director Nominee
Herbert L. Oakes 50 Director Nominee
</TABLE>
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.
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
6<PAGE>
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.
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.
Herbert L. Oakes is an investment banker located in London.
In 1987 he formed Oakes Fitzwilliams & Co. Limited, a member of
the Securities and Futures Authority and The London Stock
Exchange. In 1982 he formed H.L. Oakes & Co., Inc., a firm
specializing in arranging venture and development capital for
U.S. and U.K. corporations. Prior to forming that firm, he was
manager of the London branch of Dillon, Read & Co., Inc. He is
a director of publicly traded Harcor Energy Inc., The New World
Power Corporation and Shared Technologies Inc., and a number of
private corporations in the U.S. and U.K. Mr. Oakes received a
B.A. in Economics from the University of the South.
Committees and Compensation of the Board of Directors
The Board of Directors held six meetings during the twelve
months ended December 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.
7<PAGE>
In November 1992, the Board approved the creation of an
Executive Committee authorized to be comprised of up to five
members of the Board. The Executive Committee has all the powers
and authority of the Board in the management of the business and
affairs of the Company, including, without limitation, the power
and authority to authorize the issuance of stock, except with
respect to (i) approval of any action which also requires
stockholders' approval or approval of the outstanding shares;
(ii) filling of vacancies on the Board or in any committee;
(iii) fixing compensation of the directors for serving on the
Board or on any committee; (iv) amendment or repeal of Bylaws of
the adoption of new Bylaws; (v) amendment or repeal of any
resolution of the Board which by its express terms is not so
amendable or repealable; (vi) declaring distributions to the
stockholders of the Company except at a rate or in a periodic
amount or within a price range determined by the Board; (vii)
appointment of members of other committees of the Board.
Messrs. Kesler, Guerra, and Dabbene have been nominated to serve
on the Executive Committee conditioned upon their election to
the Board for the ensuing year. The Executive Committee was not
staffed during the twelve months ended December 31, 1996.
In February 1988, the Board approved the creation of a
standing Audit Committee Messrs. Akle and Oakes have been
nominated to serve on the Audit Committee conditioned upon their
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
twelve months ended December 31, 1996.
Mr. Oakes and Dr. Akle have been nominated to serve on the
Compensation Committee conditioned upon their election to the
Board. The duties of the Compensation Committee are to research
and recommend to the Board of Directors compensation structures
for key executive personnel. The Compensation Committee met
three times during the year ended December 31, 1996. Mr.
Haglund, Secretary and legal counsel to the Company, is an ex
officio member of the Compensation Committee.
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,
8<PAGE>
Director
Javier Guerra Cisneros 50 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, Director
Bruce H. Haglund 45 1991 Secretary, General Counsel
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.
Anthony C. Dabbene. See Information about Nominees and
Directors.
Javier Guerra Cisneros. See Information about Nominees and
Directors.
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 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 Aviation Distributors, Inc. And the Secretary of Renaissance
Golf Products, Inc., companies whose stock is publicly traded.
He is a graduate of the University of Utah College of Law.
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.
9<PAGE>
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 Seven Months Ended December 31,
1996
The following table sets forth for the seven months ended
December 31, 1996 and the 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 March
1998) and each of the other highly compensated executive
officers of the Company for fiscal 1996.
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, 7 Mos. 1996 116,662 200,000 12,320
C.E.O. Fiscal 1996 200,004 50,000 37,583
Fiscal 1995 200,016 28,194 40,000 (3)
Fiscal 1994 177,176 210,000 (3)
------------------------------------------------------------------------------------------------------------
T. Daniel Neveau, 7 Mos. 1996 83,330 45,644
Chairman Fiscal 1996 200,004 50,000 22,834
Fiscal 1995 200,016 13,184 40,000 (3)
Fiscal 1994 170,840 210,000 (3)
------------------------------------------------------------------------------------------------------------
Anthony C. Dabbbene 7 Mos. 1996 75,000 12,000 6,435
C.F.O. Fiscal 1996 43,333
------------------------------------------------------------------------------------------------------------
Javier Guerra 7 Mos. 1996 [______]
Cisneros, Fiscal 1996 137,000 10,000
Director General, Fiscal 1995 164,000
Quimica Omega Fiscal 1994 N/A
------------------------------------------------------------------------------------------------------------
Glenn W. Meyer, 7 Mos. 1996 57,771
President, MIC & Fiscal 1996 125,040
MEC Fiscal 1995 110,040
Fiscal 1994 104,808
------------------------------------------------------------------------------------------------------------
</TABLE>
10<PAGE>
---------------------
(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 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 and Director nominee. 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. 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 contingent upon approval of the terms of the
agreement by the Compensation Committee.
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
11<PAGE>
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 January 1997, the Company extended the existing
employment agreement with Mr. Kesler for an additional three
years ending March 7, 2000, with an optional one-year extension
to March 7, 2001. In addition, Mr. Kesler s annual salary was
increased to $250,000 effective January 1, 1997.
Effective September 1996, Mr. Neveau resigned as Chairman
of the Board and Senior Vice President of the Company and the
Company entered into a consulting with Mr. Neveau with
compensation at the rate of $18,500 for September 1996, $14,325
per month from October 1, 1996 to March 31, 1997, $10,160 per
month from April 1, 1997 to September 30, 1997, and $5,990 per
month from October 1, 1997 to March 31, 1998.
Options Granted in Fiscal Year 1996
In January 1996, the Board of Directors of the Company
adopted a resolution to grant 4,495,000 non-statutory stock
options to various officers, directors, and employees of the
Company at an exercise price of $3.625 (the fair market value of
the Company s Common Stock on the date of grant), 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. All of the proposed recipients of
such options, with the exception of T. Daniel Neveau, agreed in
December 1996 to waive any rights they had to such options and
the Board rescinded all of such options with the exception of
1,300,000 options granted to Mr. Neveau.
The terms and conditions of the proposed options for Mr.
Neveau that are 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,
12<PAGE>
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.
In January 1996, the Board of Directors approved the grant
of 50,000 nonstatutory stock options at an exercise price of
3.625 per share to Anthony C. Dabbene, the Company s Chief
Financial Officer, pursuant to the terms of his employment
agreement with the Company. Such options are fully vested and
expire on January 3, 2006.
Options Granted in 1997
In January 1997, the Board of Directors approved the grant
of 500,000 nonstatutory stock options to Grant S. Kesler, the
Company s Chief Executive Officer, at an exercise price of
$1.625 per share. Such options are fully vested and expire
January 2, 2002.
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 December 31, 1996 (assuming a market value of
$1.813 on December 31, 1996):
<TABLE>
<S> <C> <C> <C> <C>
Number of
Unexercised Value of
Options at in-the-Money
May 31, May 31,
Shares 1996 1996
Acquired Value
on Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
-------------------------------------------------------------------------------------------------------------
Grant S. Kesler -0- $-0- 1,095,000/-0- $-0-/$-0-
T. Daniel Neveau -0- $-0- 595,000/-0- $-0-/$-0-
Javier Guerra Cisneros -0 $-0- 150,000/50,000 $-0-/$-0-
Anthony C. Dabbene -0- $-0- -0-/-0- $-0-/$-0-
Glenn W. Meyer -0- $-0- 15,000/15,000 $-0-/$-0-
David G. Duclett -0- $-0- 30,000/15,000 $-0-/$-0-
Wayne M. May -0- $-0- 25,000/15,000 $-0-/$-0-
</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
13<PAGE>
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 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%
14<PAGE>
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 ).
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:
15<PAGE>
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
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 to the value of the
options granted.
16<PAGE>
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
17<PAGE>
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 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.
18<PAGE>
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 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
19<PAGE>
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 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
20<PAGE>
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 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
21<PAGE>
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 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
22<PAGE>
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
23<PAGE>
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 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.
In March 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.
In June 1996, in connection with the Company s formation of
BFI-Omega, S.A. de C.V., the Company s joint venture in Mexico
with Browning-Ferris Industries, Inc., the Company granted non-
statutory stock options to an affiliate of Mr. Land for the
purchase of 250,000 shares at an exercise price of $3.00 per
share, all of which options are fully vested and expire on
December 31, 2006.
Compliance With Section 16 (a) of the Exchange Act
24<PAGE>
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 ).
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 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 seven months ended December 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
25<PAGE>
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.
During the fiscal year ended May 31, 1996, the Company paid
legal fees of $283,000 to the law firm of Gibson, Haglund &
Johnson, of which Bruce H. Haglund, general counsel, secretary
and board nominee of the Company, is a principal. The Company
intends to continue to utilize the legal services of Gibson,
Haglund & Johnson for the following year.
Report of Compensation Committee
April 1, 1997
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 December 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
26<PAGE>
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 policies and underlying philosophy governing the
Company s compensation program are to: maintain a comprehensive
program that is competitive in the marketplace, provide
opportunities integrating salary and stock rights to compensate
short- and long-term performance of management, recognize and
reward individual accomplishments and allow the Company to hire
and retain seasoned executives who are essential to the
Company s success.
The base salaries for executive officers are determined by
evaluating the responsibilities of the positions held, the
individual s experience, the competitive marketplace, the
individual s performance of responsibilities and the
individual s overall contribution to the Company.
The Committee considers and recommends stock option grants
under the Company s stock option plans for key employees and
others who make substantial contributions to the financial
success of the Company. The Company and the Committee believe
that stock options provide strong incentive to increase the
value of shareholders interests. Stock option grants are
believed by the Committee to help focus management on the long-
term success of the Company. The amount of any stock option
grant is based primarily on an individual s responsibilities and
position with the Company. Individual awards of options are
affected by the Committee s subjective evaluation of factors it
deems appropriate such as the assumption of responsibilities,
competitive factors and achievements.
Significant to the Committees recommendations concerning
executive compensation and option grants, among other factors,
are significant events which occurred over time and were
accomplished in fiscal 1996. First, the Company entered into an
agreement with BFI-International, Inc., a subsidiary of
Browning-Ferris Industries, Inc., to form a joint venture
corporation in Mexico for the purpose of providing a full range
of industrial waste collection, transportation, treatment and
disposal services within the Republic of Mexico. Second,
through the efforts of management the Company issued
27<PAGE>
substantially all of the convertible subordinated debentures
outstanding at May 31, 1995 into shares of common stock. Third,
the Company consummated an institutional placement resulting in
net proceeds to the Company of approximately $8,000,000.
The executive officers devoted substantial time and effort
in bringing to fruition the joint venture, completing the
debenture conversion, and consummating the financing while at
the same time devoting significant time to the daily affairs of
the Company. The Committee believes that based upon these and
other factors, the compensation of the executive officers and
the grant of stock options as recommended are appropriate and
reasonable.
Compensation Committee
Gordon M. Liddle,
Chairman
28<PAGE>
[Chart]
[Comparison of Five-Year Cumulative Total Return]
[see paper submittal]
29<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 December
31, 1996, there were 29,123,239 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,
30<PAGE>
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.
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 1997 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
On January 3, 1996, the Board of Directors of the Company
voted to adopt the 1997 Omnibus Stock Option Plan (the "1997
Plan"). The 1997 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 1997 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 1997 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 1997 Plan. The complete text of
the 1997 Plan appears in the Appendix to this Proxy Statement.
The 1997 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 1997 Plan by way of receipt of any
discretionary grant of an Award, and who will not so
31<PAGE>
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 1997 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 1997 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 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 1997 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 1997 Plan (plus the number of shares previously issued
under the 1997 Plan) shall not at any time exceed the number of
shares available for issuance under the 1997 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 Company, or if the outstanding shares of the Common Stock
are increased, decreased, exchanged for, or otherwise changed,
32<PAGE>
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
Company 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) 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 1997 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.
33<PAGE>
Within the limitations of the 1997 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
1997 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 1997 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 1997 Plan
may contain such other provisions not inconsistent with the
terms of the 1997 Plan (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") 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 1997 Plan may be exercised
34<PAGE>
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 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 1997 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,
35<PAGE>
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 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.
36<PAGE>
Any transferee of any of such Shares (other than the Company)
will take and acquire all of such Shares subject to the
continuing right of 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 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 1997
Plan.
Performance Awards. One or more Performance Awards may be
37<PAGE>
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 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;
38<PAGE>
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 1997 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 1997 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 1997 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 1997 Plan; or
materially modify the requirements of eligibility for
participation in the Plan.
The ratification of the 1997 Plan requires an affirmative
vote of the majority of the shares present at the Meeting.
Neither adoption of the 1997 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.
OPTIONS GRANTED IN FISCAL YEAR 1996
In January 1996, the Board of Directors of the Company
adopted a resolution to grant 4,495,000 non-statutory stock
options to various officers, directors, and employees of the
Company at an exercise price of $3.625 (the fair market value of
the Company s Common Stock on the date of grant), 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. All of the proposed recipients of
such options, with the exception of T. Daniel Neveau, agreed in
December 1996 to waive any rights they had to such options and
the Board rescinded all of such options with the exception of
1,300,000 options granted to Mr. Neveau.
39<PAGE>
The terms and conditions of the proposed options for Mr.
Neveau are 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.
APPROVAL OF ENGAGEMENT OF AUDITORS
Effective May 1996, the Company's Board of Directors
dismissed Grant Thornton and approved and 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 year ending December
31, 1996, 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 Arthur Andersen, LLP or a reportable event.
To the knowledge of the Company, at no time has Arthur Andersen,
LLP 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, LLP will be available at the Meeting to make a
statement if so desired and to respond to appropriate questions.
SUBMISSION OF SHAREHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal
intended for consideration at the 1998 Annual Meeting must be
received by the Company on or before February 28, 1998 to be
included in any proxy materials prepared for the 1998 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 and the seven months ended December 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.
40<PAGE>
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.
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.
41<PAGE>
METALCLAD CORPORATION
1997 OMNIBUS STOCK OPTION AND INCENTIVE PLAN
EXHIBIT "A"<PAGE>
METALCLAD CORPORATION
1997 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
i<PAGE>
to Purchase Vested Shares.................... 8
8.10 Other Provisions............................... 9
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 Participants. 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
1997 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.
1<PAGE>
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 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<PAGE>
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.
2.17 "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.
3<PAGE>
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.
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
May 15, 1997. 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
4<PAGE>
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.
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
5<PAGE>
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 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
6<PAGE>
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
7<PAGE>
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.
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.
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<PAGE>
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.
9<PAGE>
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 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.
10<PAGE>
(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
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
11<PAGE>
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 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
12<PAGE>
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. 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:
13<PAGE>
(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
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
14<PAGE>
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 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
15<PAGE>
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
16<PAGE>
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 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
17<PAGE>
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 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
18<PAGE>
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 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
19<PAGE>
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.
(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.
20<PAGE>
(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 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
21<PAGE>
name and on behalf of the Corporation where provided below by an
officer of the Corporation thereunto duly authorized.
METALCLAD CORPORATION
By: /s/Grant S. Kesler
---------------------------
Grant S. Kesler,
President
ATTEST:
/s/Bruce H. Haglund
------------------------------
Bruce H. Haglund, Secretary
(SEAL)
