PAGE
<PAGE>
METALCLAD CORPORATION
2 Corporate Plaza, Suite 125
Newport Beach, California 92660
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 2, 1999
(Approximate Mailing Date: April 30, 1999)
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the
Meeting ) of METALCLAD CORPORATION, a Delaware corporation (the
Company ), will be held at 2 Corporate Plaza, Suite 125, Newport Beach,
California 92660, on June 2, 1999, at 10:00 A.M. local time, for the
following purposes:
1. To elect five members of the Board of Directors to serve until the
next Annual Meeting of Stockholders;
2. To consider and act upon the ratification of the appointment of Moss
Adams LLP as the independent public accountants of the Company for the
year ending December 31, 1999;
3. To consider and act upon a proposal to effect up to a one for ten
reverse split of the stock of the Company, provided only that it becomes a
necessary requirement of NASDAQ; and
4. 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 26,
1999 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, Secretary
------------------------------
Newport Beach, California
April __, 1999
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.
-1-<PAGE>
METALCLAD CORPORATION
2 Corporate Plaza, Suite 125
Newport Beach, California 92660
PRELIMINARY PROXY STATEMENT
April 1, 1999
-----------------------------------------------
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 2 Corporate Plaza, Suite 125, Newport
Beach, California 92660, on June 2, 1999 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 30, 1999 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 approve the appointment of Moss-Adams, 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 ratify the appointment of the accountants. 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
-2-<PAGE>
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 26, 1999 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
34,727,522.
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 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.
The following table sets forth certain information as of March 15,
1999 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.
-3-<PAGE>
Name and Address of Amount and Nature of Percent
Beneficial Owner (1)(2)(3) Beneficial Ownership of Class(4)
--------------------------------------------------------------------
Grant S. Kesler 1,720,000(5) 3%
2 Corporate Plaza, Suite 125
Newport Beach, California 92660
Javier Guerra Cisneros 746,095(6) 1.5%
Bosques de Cidros No. 46
Suite 204
Col. Bosques de las Lomas
05120 Mexico, D.F.
Raymond J. Pacini 4,000 0%
6 Executive Circle
Suite 250
Irvine, California 92614
Bruce H. Haglund 404,500(7) 1%
2010 Main Street, Suite 400
Irvine, California 92614
Anthony C. Dabbene 626,000(8) 1.3%
2 Corporate Plaza, Suite 125
Newport Beach, California 92660
J. Thomas Talbot 0 0%
24 Corporate Plaza
Newport Beach,
California 92660
Jan Chr. G. Sundt 14,876,390(9) 30%
Luddesdown Court Lodge
Luddesdown, Near Cobham
Kent DA13 OXE
England
All Officers and Directors 3,700,595(10) 7.4%
as a Group (6 persons)
------------------------
(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.
-4-<PAGE>
(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 2
Corporate Plaza, Suite 125, Newport Beach, California 92660.
(4) Assumes 34.828.522 shares outstanding, including 15,212,143 shares
currently issuable upon exercise of presently exercisable stock options,
common stock purchase warrants and convertible securities held by the
above-listed stockholders.
(5) Includes 1,395,000 shares issuable upon exercise of presently
exercisable stock options, exercisable at a range of $1.50 - $2.25 per
share.
(6) Includes 650,000 shares issuable upon exercise of presently
exercisable stock options, exercisable at a price range of $1.50 - $2.25
per share.
(7) Includes 398,000 shares issuable upon the exercise of presently
exercisable stock options, exercisable at a price range of $.56 - $2.25
per share.
(8) Includes 500,000 shares issuable upon the exercise of presently
exercisable stock options, exercisable at a price range of $1.25 - $3.625
per share.
(9) Includes 12,269,143 shares issuable upon exercise of stock purchase
warrants and convertible debt securities presently exercisable at a price
range of $.25 - $.35 per share.
(10) Includes 2,943,000 shares issuable upon exercise of presently
exercisable stock options, exercisable at prices ranging from $.56-$3.625
per share.
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the directors or the
stockholders shall determine the number of directors. The directors have
set the number of directors for the ensuing year at nine. 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 Anthony C. Dabbene, Grant S.
-5-<PAGE>
Kesler, Bruce H. Haglund, J. Thomas Talbot and Raymond J. Pacini for
election as directors for the ensuing year.
It is the intention of the persons named in the enclosed form of
proxy to vote such proxies for the election of the nominees listed herein.
The proposed nominees are willing to serve for the ensuing year, but in
the event any nominee at the time of election is unable to serve or is
otherwise unavailable for election, it is intended that votes will be cast
pursuant to the accompanying proxy for substitute nominees designed by the
Board of Directors.
Cumulative voting applies to the election of directors. The five
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:
Director
or Officer Current Position
Name Age Since with the Company
--------------------------------------------------------------------------
Grant S. Kesler 55 1991 President, Chief Executive Officer,
Director
Anthony C. Dabbene 47 1996 Chief Financial Officer, Director
Bruce H. Haglund Esq. 47 1999 Secretary, Director
J. Thomas Talbot 63 1999 Director
Raymond J. Pacini 43 1999 Director
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.
Anthony C. Dabbene has been the Chief Financial Officer for the
Company since January 1996 and a Director since May 1997. 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.
Bruce H. Haglund has served as Secretary-General Counsel of the
Company since 1983 and served as a Director of the Company from 1983 to
July 1991 and again in 1999. Mr. Haglund is a principal in the law firm
of Gibson, Haglund & Johnson in Orange County, California where he has
been engaged in the private practice of law since 1980. He is also a
-6-<PAGE>
member of the Boards of Directors of Aviation Distributors, Inc.,
HydroMaid International, Inc., Renaissance Golf products, Inc., Santa
Barbara Restaurant Group, and VitriSeal, Inc.
J. Thomas Talbot is a Director Nominee and is the owner of The Talbot
Company, an investment and asset management company. Mr. Talbot has been
the Chief Executive Officer of HAL, Inc., the parent company of Hawaiian
Airlines, and currently serves on the boards of directors of The Hallwood
Group, Inc., Fidelity National Financial, Inc., California Coastal
Communities, Inc., and The Pacific Club.
Raymond J. Pacini is a Director Nominee and is the President, Chief
Executive Officer, and a Director of California Coastal Communities, Inc.
(formerly Koll Real Estate Group, Inc.), where he has been since 1990.
Committees and Compensation of the Board of Directors
The Board of Directors held 5 meetings during the period January 1,
1998 to December 31, 1998. Each director attended at least 75% of the
total number of Board Meetings held during the year ended December 31,
1998. 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 committee meetings, with a minimum annual fee of $7,000, and
members of the Board of Directors have received non-statutory stock
options pursuant to the Company's Non-Qualified Stock Option Plan, non-
statutory 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, and the 1997 Omnibus Stock Option
and Incentive Plan.
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
and Dabbene are members of the Executive Committee and will continue as
members conditioned upon their re-election to the Board for the ensuing
year.
Messrs. Pacini and Talbot are proposed members of 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
-7-<PAGE>
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 once during the twelve months ended December 31,
1998.
Messrs. Pacini, Talbot and Haglund are proposed members of 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 2 times during the year ended December 31,
1998.
Executive Officers
The following lists the names, ages, and position of the Company's
current executive officers:
Officer
Name Age Since Current Position with the Company
--------------------------------------------------------------------------
Grant S. Kesler 55 1991 President, Chief Executive
Officer, Director
Javier Guerra Cisneros 52 1994 Vice President - Mexican
Operations
Anthony C. Dabbene 47 1996 Chief Financial Officer, Director
Bruce H. Haglund 47 1983 Secretary, General Counsel,
David Duclett 48 1998 President, Metalclad Insulation
Corp.
Grant S. Kesler. See Information about Nominees and Directors.
Anthony C. Dabbene. See Information about Nominees and Directors.
Bruce H. Haglund. See Information about Nominees and Directors.
David Duclett has been employed by the Company since 1977 and has
been Vice president of marketing and Sales of Metalclad Insulation and
Metalclad Environmental since 1989. He was appointed President in May
1998. Mr. Duclett s main responsibility is to lead the Company and
further the objectives of the Board while establishing and building long-
term client relationships. He has negotiated and managed contracts for
both industrial and commercial work, with concentration on refinery and
utility maintenance work and hi rise commercial buildings.
Javier Guerra Cisneros, a former Director of the Company, has been
the Director General of Quimica Omega since its formation in 1981. He
also founded and was the president of the Institute on Industrial
Hazardous Waste, a non-profit organization that promotes public awareness
of the Mexican environmental regulations through its publication, DIP.
Since 1990, Mr. Guerra, through Quimica Omega, 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
-8-<PAGE>
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 the EPA and SEDESOL.
Executive Compensation for the Year Ended December 31, 1999
The following table sets forth for the year ended December 31, 1998,
the year ended December 31, 1997, and years ended December 31, 1997 and
1996, information with respect to compensation paid by the Company to the
Chief Executive Officer and each of the other highly compensated executive
officers of the Company.
Summary Compensation Table
<TABLE>
<S><C> <C> <C> <C> <C> <C> <C> <C> <C>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------------------- ------------------------------
NAME AND OTHER AWARDS
PRINCIPAL YEAR SALARY BONUS ANNUAL --------------------- ALL
POSITION (1) (1) ($) ($) COMPEN- RESTRICTED OPTIONS/ LTIP OTHER
SATION STOCK SARS PAYOUTS (1)
($) ($) (#) ($)
------------------------------------------------------------------------------------------------------------
Grant S. Kesler, 1998 250,000 50,000 -
1997 250,000 50,000 -
7 Mos. 1996 116,662 200,000 -
Fiscal 1996 200,004 50,000 37,583
------------------------------------------------------------------------------------------------------------
Anthony C. Dabbene, 1998 180,000 36,000 -
C.F.O. 1997 160,000 36,000 -
7 Mos. 1996 75,000 12,000 -
Fiscal 1996 43,333 - -
------------------------------------------------------------------------------------------------------------
Javier Guerra 1998 200,000 40,000 -
Cisneros, 1997 200,000 10,000 -
Vice President-- 7 Mos. 1996 110,525 16,700 -
Mexican Operations Fiscal 1996 137,000 10,000 -
------------------------------------------------------------------------------------------------------------
David Duclett, 1998 112,667 14,545 -
President, M.I.C. 1997 63,201 12,000 -
7 Mos. 1996 51,003 - -
Fiscal 1996 117,978 - -
</TABLE>
---------------------
(1) 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
-9-<PAGE>
Company in connection with their employment.
Employment Agreements
In January 1998, the Compensation Committee of the Company approved
employment agreements for Messrs. Kesler, Dabbene and Guerra. The
contracts are for a three-year period, effective January 1, 1998 and call
for annual salaries of $250,000, $180,000 and $220,000, respectively. The
contracts are automatically renewed each on January 1 unless terminated by
the Company and contain incentive provisions as determined by the
Compensation Committee.
Options Granted in 1998
In January 1998, the Board of Directors approved the grant of non-
statutory stock options, exercisable at $1.50 per share to the following
officers and directors: Mr. Kesler, 800,000 shares; Mr. Guerra, 600,000
shares; Mr. Dabbene, 350,000 shares; Mr. Haglund, 25,000 shares; and Mr.
Duclett, 25,000 shares. Mr. Haglund was also granted non-statutory stock
options for 148,000 shares, exercisable at $.56 per share, in November
1998. Such options are fully vested except Mr. Duclett s, which vest over
five years and expire January 2, 2002.
Aggregated Option/SAR Exercises in the year ended December 31, 1998,
and Option Values at December 31, 1998
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, 1998 (assuming a market value of $.406 on December 31, 1998):
Number of Value of
Unexercised in-the-Money
Options at Options at
December 31, December 31,
Shares 1998 1998
Acquired Value ---------------------------
on Exercise Realized Exercisable/ Exercisable/
(#) ($) Unexercisable Unexercisable
--------------------------------------------------------------------------
Grant S. Kesler -0- $-0- 1,395,000/-0- $-0-/$-0-
Javier Guerra Cisneros -0- $-0- 650,000/100,000 $-0-/$-0-
Anthony C. Dabbene -0- $-0- 500,000/-0- $-0-/$-0-
Bruce Haglund -0- $-0- 398,000/-0- $-0-/$-0-
David Duclett -0- $-0- 45,000/25,000 $-0-/$-0-
Stock Option Plans
Incentive Stock Option Plan. On May 12, 1989, the stockholders
adopted the Metalclad Corporation 1988 Incentive Stock Option Plan
-10-<PAGE>
(referred to collectively as the ISOP ). The purpose of the ISOP is to
provide full-time employees of the Company with an added incentive to
continue their service to the Company and to induce them to exert maximum
efforts toward the Company's success.
The ISOP, which is currently administered by the Board of Directors,
also provides for administration by a stock option committee which may be
appointed by the Board of Directors. Among other things, the Board of
Directors or the committee has the authority to determine the employees to
be granted options under the ISOP and the number of shares subject to each
option. The exercise price of any option granted under the ISOP, which
shall be determined by the Board of Directors, shall not be less than the
fair market value of the shares subject to the option on the date of
grant; provided, however, that the exercise price of any option granted to
an eligible employee owning more than 10% of the Common Stock shall not be
less than 110% of the fair market value of the shares underlying such
option on the date of grant. The term of each option and the manner in
which it may be exercised is determined by the Board of Directors or
committee, provided that no option may be exercisable more than five years
after the date of grant. The ISOP limits the value of Common Stock with
respect to which options may be granted to any one employee in a calendar
year. All options granted under the ISOP are non-transferable and
terminate within a specified period of time following termination of
employment with the Company. The aggregate fair market value of shares
for which options granted to any employee are exercisable for the first
time by such employee during any calendar year (under all stock option
plans of the Company and any related corporation) may not exceed $100,000.
The Board of Directors is authorized to modify, amend or terminate
the ISOP; provided, however, any amendment that would increase the
aggregate 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.
As of the date of this Proxy Statement, there are no options
outstanding under this plan.
Non-Qualified Stock Option Plan. In 1984, the Company adopted a non-
statutory stock option plan (the NQSOP ) for individuals who acted as
consultants to the Company and who were actively involved in the
development of the business of the Company. The NQSOP provided for the
issuance of a maximum of 5% of the shares of Common Stock outstanding from
time to time at prices not less than the fair market value thereof on the
date of grant. The NQSOP terminated in 1989; however, outstanding options
are exercisable over a five-year period from the date of grant. Each
option lapsed, if not previously exercised, on the fifth anniversary of
the date of grant or after 90 days after the optionee has terminated his
continuous activity with the Company.
-11-<PAGE>
No options under the NQSOP were outstanding as of the date of this
Proxy Statement.
1992, 1993 and 1997 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 ). On May 15, 1997, the stockholders adopted the 1997 Omnibus
Stock Option and Incentive Plan. The 1992 Plan, the 1993 Plan and the
1997 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 ), non-statutory 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 ).
As of the date of this Proxy Statement, stock options for the
purchase of 770,000 and 674,500 shares, exercisable at a range of $.56-
$2.25 per share, are outstanding pursuant to the 1992 Plan and the 1993
Plan, respectively. There are no outstanding options under the 1997 Plan.
As of the date of this Proxy Statement, options granted pursuant to
the 1992 Plan and the 1993 Plan for the purchase of 720,000 and 674,500
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, the 1993 Plan or the
1997 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
-12-<PAGE>
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
n o n - 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 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 non-statutory 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. 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
non-statutory stock option under the 1997 Plan may 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) may 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) must be evidenced by written stock option
-13-<PAGE>
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
s u r v i ving entity or through a combination, consolidation,
recapitalization, reclassification, stock split, stock dividend, reverse
stock split, stock consolidation or other capital change or adjustment.
In addition, the Board or the Committee may grant such additional rights
in the foregoing circumstances as the Board or the Committee deems to be
in the best interest of any Participant and the Corporation in order to
preserve for the Participant the benefits of the Award.
The exercise price in the case of any Incentive Stock Option may not
be less than the fair market value on the date of grant and, in the case
of any Option granted to an optionee who owns more than ten percent (10%)
of the total combined voting power of all classes of outstanding stock of
the Company, may not be less than 110% of the fair market value on the
date of grant. The exercise price in the case of any Nonstatutory Stock
Option may not be less than 85% of the fair market value on the date of
grant.
The purchase price is be payable in full in United States dollars
upon the exercise of the Option; provided, however, that if the applicable
Option agreement so provides, the purchase price may be paid (i) by the
surrender of 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
s u r r endered 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
-14-<PAGE>
event of the participant's death, the Option may not be transferable by
t h e participant other than by will or the laws of descent and
distribution.
Within the limitations of the Plans, the Board or Committee may
modify, extend or renew outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously exercised) for the
granting of new Options in substitution therefor. No modification of an
Option may, without the consent of the participant, alter or impair any
rights or obligations under any Option previously granted.
In the case of Incentive Stock Options granted under the Plans, the
aggregate fair market value (determined as of the date of the grant
thereof) of the Shares with respect to which Incentive Stock Options
become exercisable by any participant for the first time during any
calendar year (under the Plans and all other plans maintained by the
Company may not exceed $100,000. The Board or Committee may, however,
with the participant's consent, authorize an amendment to the Incentive
Stock Option which renders it a Nonstatutory Stock Option.
The stock option agreements authorized under the Plans may contain
such other provisions not inconsistent with the terms of the Plans
(including, without limitation, restrictions upon the exercise of the
Option) as the Board or the Committee shall deem advisable.
Restricted Stock Purchase Agreements. Restricted stock purchase
rights (hereinabove defined as Purchase Rights ) must be evidenced by
written stock purchase agreements in such form as the Committee must from
time to time determine. Each Purchase Right must state the number of
Shares to which it pertains and may provide for the adjustment thereof in
the event that the outstanding shares of Common Stock are changed into or
exchanged for cash or a different number or kind of shares or securities
of the Corporation, or if the outstanding shares of the Common Stock are
i n creased, 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
-15-<PAGE>
more than 75% of such value.
Purchase Rights must be exercised within 60 days after the later to
occur of (i) Board approval of the grant of the Purchase Right or (ii)
delivery of notice of such grant. Purchase Rights may not be sold,
pledged, assigned, hypothecated, transferred or disposed of in any manner
and must expire immediately upon the death of the participant or the
termination of such participant's employment with the Company.
The purchase price must be payable in full in United States dollars
upon exercise of the Purchase Right; provided, however, that if the
applicable agreement so provides, the purchase price may be paid (i) by
the surrender of Shares in good form for transfer, owned by the person
exercising the Purchase Right and having a fair market value on the date
of exercise equal to the purchase price, or in any combination of cash and
Shares, as long as the sum of the cash so paid and the fair market value
of the Shares so surrendered equal the Purchase Price, or (ii) with a full
recourse promissory note executed by the participant. The interest rate
and other terms and conditions of such note must be determined by the
Board or the Committee. The Board or Committee may require that the
participant pledge his or her Shares to the Company for the purpose of
securing the payment of such note. In no event may the stock
certificate(s) representing such Shares be released to the participant
until such note has been paid in full. In the event the Company
determines that it is required to withhold state or Federal income tax as
a result of the exercise of a Purchase Right, as a condition to the
exercise thereof, a participant may be required to make arrangements
satisfactory to the Company to enable it to satisfy such withholding
requirements. In addition, the participant must agree to immediately
notify the Company if he or she files an election pursuant to Section
83(b) of the Internal Revenue Code with respect to receipt of the Shares.
Within the limitations of the Plans, the Board or the Committee may
modify, extend or renew outstanding Purchase Rights or accept the
cancellation of outstanding Purchase Rights (to the extent not previously
exercised) for the granting of new Purchase Rights in substitution
therefor. The foregoing notwithstanding, no modification of a Purchase
Right may, without the consent 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
-16-<PAGE>
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
P a r t icipant's termination of employment by the Corporation, the
Corporation shall notify the Employee as to whether it wishes to
repurchase the Unvested Shares pursuant to the exercise of the Repurchase
Option. If the Corporation elects to repurchase said Unvested Shares, it
must set a date for the closing of the transaction at the Executive
Offices of the Corporation, not later than 30 days from the date such
notice.
Except for transfers to participant's descendants and spouses, the
participant may not transfer by sale, assignment, hypothecation, donation,
or otherwise any of the Shares or any interest therein prior to the
release of such Shares from the Repurchase Option. The Company's
Repurchase Option may be assigned in whole or in part to any stockholder
or stockholders of the Company or other persons or organizations. Each
stock purchase agreement entered into as provided herein must provide for
a right of first refusal and option on the part of the Company to purchase
all or any part of any Shares which are no longer subject to the
Repurchase Option which the participant purposes to sell, transfer or
otherwise dispose of (except for transfers to participant's descendants
and spouses) on the condition that: (a) the participant must notify the
Company in writing of any proposed sale, transfer or other disposition of
any of the Shares, specifying the proposed transferee, the number of
Shares proposed to be transferred, and the price at which such Shares are
to be sold, transferred or otherwise disposed; (b) the Company must have a
period of 30 days from receipt of such notice to notify the participant in
writing as to whether or not the Company elects to purchase all or a
specified portion of such Shares at the lower of (i) price per share set
forth in the notice given by the participant, or (ii) the fair market
value for a share of the Company's Common Stock, without restrictions, on
the date on which the notice is given by participant to the Company, less
in either case an amount equal to the discount, if any; (c) if the Company
elects not to purchase all of the Shares specified in the notice, the
participant may sell, transfer or otherwise dispose of the remaining
Shares in strict accordance with the terms specified in the notice within
90 days following the date of the notice. Any transferee of any of such
Shares (other than the Company) will take and acquire all of such Shares
subject to the continuing right o firs 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.
-17-<PAGE>
Stock Appreciation Rights. Stock Appreciation Rights related or
unrelated to Options or other Awards may be granted to eligible employees:
(i) at any time if unrelated to an Award or if related to an Award other
than an Incentive Stock Option; or (ii) only at the time of grant of an
Incentive Stock Option if related thereto. A Stock Appreciation Right may
extend to all or a portion of the shares covered by a related Award.
A Stock Appreciation Right granted in connection with an Award may be
exercisable only at such time or times, and to the extent, that a related
Award is exercisable. A Stock Appreciation Right granted in connection
with an Incentive Stock Option may be exercisable only when the fair
market value of the stock subject to the Incentive Stock Option exceeds
the exercise price of the Incentive Stock Option. Upon the exercise of a
Stock Appreciation Right, and if such Stock Appreciation Right is related
to an Award surrender of an exercisable portion of the related Award, the
participant shall be entitled to receive payment of a amount determined by
multiplying the difference obtained by subtracting the purchase price of a
share of Common Stock specified in the related Award, or if such Stock
Appreciation Right is unrelated to an Award, from the fair market value,
book value or other measure specified in the Award of such Stock
Appreciation Right of a share of Common Stock on the date of exercise of
such Stock Appreciation Right, by the number of shares as to which such
Stock Appreciation Right has been exercised.
The Board or the Committee, as the case may be, in its sole
discretion, may require settlement of the amount determined under
paragraph (i) above solely in cash, solely in shares of Common Stock
valued at fair market value, or partly in such shares and partly in cash.
Each Stock Appreciation Right and all rights and obligations thereunder
must expire on such date as shall be determined by the Board or the
Committee, but not later than 10 years after the date of the Award
thereof, and must be subject to earlier termination as provided in the
Plans.
Performance Awards. One or more Performance Awards may be granted to
any eligible employee. The value of such Awards may be linked to the
market value, book value or other measure of the value of the Common stock
or other specific performance criteria determined appropriate by the Board
or the Committee, in each case on a specified date or over any period
determined by the Board or the Committee, or may be based upon the
appreciation in the market value, book value or other measure of the value
of a specified number of shares of Common stock over a fixed period
determined by the Board or the Committee. In making such determinations,
the Board or the Committee may consider (among such other factors, as it
deems relevant in light of the specific type of award) the contributions,
responsibilities, and other compensation of the participant.
Dividend Equivalents. A participant may also be granted Dividend
Rights 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
-18-<PAGE>
converted to cash or additional shares of Common Stock by such formula and
at such time and subject to such limitations as may be determined by the
Board or the Committee.
Stock Payments. The Board or the Committee may approve Stock
Payments to eligible employees who elect to receive such payments in the
manner determined from time to time by the Board or the Committee. The
number of shares must be determined by the Board or the Committee and may
be based upon the fair market value, book value or other measure of the
value of such shares on the date the Award is granted or on any date
thereafter.
Loans. The Company may, with the Board's or the Committee's
approval, extend one or more loans to participants in connection with the
exercise or receipt of outstanding Awards granted under the Plans. Such
loans are subject to the following conditions: (i) the principal of the
loan may not exceed the amount required to be paid to the Corporation upon
the exercise or receipt of one or more Awards under the Plans less the
aggregate par value of any Common Stock deliverable on such event, and the
loan proceeds must be paid directly to the Corporation in consideration of
such exercise or receipt; (ii) the initial term of the loan must be
determined by the Board or the Committee; provided that the term of the
loan, including extensions, may not exceed a period of ten years; (iii)
the loan must be with full recourse to the participant, must be evidenced
by the participant's promissory note and must bear interest at a rate
determined by the Board or the Committee but not less than the Company's
average cost of funds as of a date within 31 days of the date of such
loan, as determined by the Board or the Committee; and iv) in the event a
participant terminates his or her employment at the request of the
Company, the unpaid principal balance of the note must become due and
payable on the tenth business day after such termination; provided,
however, that if a sale of such shares would cause such participant to
incur liability under Section 16(b) of the Exchange Act, the unpaid
balance may become due and payable on the 10th business day after the
first day on which a sale of such shares could have been made without
incurring such liability assuming for these purposes that there are no
other transactions by the participant subsequent to such termination. In
the event a participant terminates employment other than at the request of
the Company, the unpaid principal balance of the note becomes due and
payable six months after the date of such termination.
Termination, Suspension and Amendment. The Board of Directors or the
Committee may, at any time, suspend, amend, modify of terminate the Plans
(or any part thereof) and may, with the consent of the recipient of an
Award, authorize such modifications of the terms and conditions of such
participant's Award as it shall deem advisable. However, no amendment or
modification of the Plans may be adopted without approval by a majority of
the shares of the Common Stock represented (in person or by proxy) at a
meeting of stockholders at which a quorum is present and entitled to vote
thereat, if such amendment or modification would materially increase the
benefits accruing to participants under the Plans within the meaning of
Rule 16b-3 under the Exchange Act or any successor provision; materially
-19-<PAGE>
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.
Compliance With Section 16 (a) of the Exchange Act
Section 16 (a) of the Securities Exchange Act of 1934 requires the
Company's officers, directors, and persons who own more than 10% of a
registered class of the Company's equity securities to file reports of
ownership and changes in ownership with the Securities and Exchange
Commission (the SEC ). 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
a t t r i butable 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 year
ended December 31, 1998.
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
$740,000 to Mr. Kesler and Mr. T Daniel Neveau, who was a Director at the
time. 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 repaid $300,000 of such loan.
In March 1996, the notes were amended to modify the interest rate
effective March 1, 1996 to a variable rate based on the Company s
quarterly investment rate. In June 1996, Mr. Neveau, Chairman of the
Board, Senior Vice President, and a Director of the Company, resigned his
-20-<PAGE>
positions. As a result, the Company and Mr. Neveau renegotiated the terms
of his employment agreement relative to compensation, benefits and stock
options. Since May 1997, the company has been offsetting payments due Mr.
Neveau against his outstanding loan balance to the Company. As of
December 31, 1998, the Company s remaining receivable from Mr. Kesler and
Mr. Neveau was $545,000. The Board of Directors has extended repayment of
these notes until December 31, 1999. The Company currently holds 180,000
shares of stock as security on the loan.
During the year ended May 31, 1998, the Company incurred legal fees
of $74,000 to the law firm of Gibson, Haglund & Johnson, of which Bruce H.
Haglund, general counsel, secretary and Director 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
March 25, 1998
Board of Directors
Metalclad Corporation
2 Corporate Plaza 125
Newport Beach, California 92660
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, 1997.
In the opinion of the Committee, the compensation of the executive
officers of the Company is reasonable in view of the Company s performance
and the respective contributions of such officers to that performance.
In determining the management compensation, this Committee evaluates
the compensation paid to management based on their performance, their
experience, and the stage of development of the Company. The Committee
also takes into account such relevant external factors as general economic
conditions, stock price performance, and stock market prices generally.
In doing the foregoing, the Committee has sought and obtained opinions
from outside professional advisors.
Management compensation is composed of salary, bonuses, and options
to purchase shares of Common Stock at the fair market value on the date of
grant. The number of options granted is scaled to the salary of each
individual officer.
The 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
-21-<PAGE>
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 an 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 stockholders interests. Stock options
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 Committee s recommendations concerning executive
compensation and option grants are significant events which have occurred
over time as well as objectives set for the coming year. With regard to
the year ended December 31, 1997, the Company a) restructured its
insulation group, returning it to profitability; b) completed the
repurchase of BFI-OMEGA ( ARI ) from BFI-Mexico; c) refocused ARI and has
it on the path to profitability; d) filed a comprehensive claim under the
NAFTA; and e) reduced the overall cost structure of the Company.
Additionally, the Company was successful in bringing a second landfill
project through the development stage. Lastly, the Company was successful
in raising the additional capital necessary for its operations.
The executive officers devoted substantial time and effort in
achieving the aforementioned activities 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 to stock options as recommended are
appropriate and reasonable.
Compensation Committee
/s/Jose Akle F.
----------------------------
Jose Akle F.
Comparison of Five-Year Cumulative Total Returns
Performance Report for
Metalclad Corporation
Prepared by the Center for Research in Security Prices
-22-<PAGE>
Produced on 03/30/99 including data to 12/31/98
Company Index: CUSIP Ticker Class Sic Exchange
59114210 MTLC 1790 NASDAQ
Fiscal Year-end is 12/31/1998
Market Index: NASDAQ Stock Market (US Companies)
Peer Index: NASDAQ Stocks (STC 1790-1799 US Companies)
Miscellaneous Special Trade Contractors
Date Company Market Peer
Index Index Index
------------------------------------------
12/31/1993 100.000 100.000 100.000
01/31/1994 73.333 103.035 93.663
02/28/1994 80.000 102.073 98.051
03/31/1994 80.000 95.798 92.915
04/29/1994 86.667 94.554 92.241
05/31/1994 93.333 94.785 94.232
06/30/1994 96.667 91.319 85.230
07/29/1994 76.667 93.192 83.064
08/31/1994 66.667 99.135 85.082
09/30/1994 86.667 98.881 86.364
10/31/1994 81.667 100.824 97.257
11/30/1994 100.000 97.479 92.034
12/30/1994 76.667 97.752 82.031
01/31/1995 73.333 98.309 85.446
02/28/1995 53.333 103.509 77.320
03/31/1995 51.667 106.579 78.329
04/28/1995 45.000 109.937 75.564
05/31/1995 50.000 112.775 73.573
06/30/1995 55.000 121.914 74.286
07/31/1995 76.667 130.876 84.573
08/31/1995 85.000 133.531 83.133
09/29/1995 91.667 136.601 85.515
10/31/1995 70.000 135.813 82.957
11/30/1995 101.667 139.004 94.339
12/29/1995 106.667 138.265 97.808
01/31/1996 133.333 138.944 114.394
02/29/1996 148.333 144.233 127.497
03/29/1996 125.000 144.708 116.910
04/30/1996 95.000 156.710 105.972
05/31/1996 85.000 163.906 102.291
06/28/1996 81.667 156.517 99.226
07/31/1996 71.667 142.559 85.094
08/30/1996 86.667 150.547 92.597
09/30/1996 61.667 162.062 82.174
10/31/1996 48.333 160.271 66.024
11/29/1996 40.833 170.179 52.220
-23-<PAGE>
12/31/1996 48.333 170.025 58.912
01/31/1997 50.000 182.109 60.779
02/28/1997 35.000 172.037 54.063
03/31/1997 33.333 160.804 48.166
04/30/1997 27.500 165.831 44.726
05/30/1997 31.667 184.696 53.063
06/30/1997 40.833 190.353 60.510
07/31/1997 35.000 210.432 75.321
08/29/1997 38.333 210.179 81.584
09/30/1997 36.667 222.580 103.552
10/31/1997 35.000 211.020 103.412
11/28/1997 31.667 212.164 97.932
12/31/1997 29.167 208.532 98.866
01/30/1998 41.667 215.158 93.741
02/27/1998 46.667 235.389 90.127
03/31/1998 29.167 244.025 90.537
04/30/1998 26.667 248.054 84.628
05/29/1998 26.667 234.261 74.480
06/30/1998 27.500 250.681 71.410
07/31/1998 34.167 247.694 60.221
08/31/1998 23.333 198.800 36.771
09/30/1998 25.833 226.450 36.278
10/30/1998 18.333 236.226 39.491
11/30/1998 10.000 260.132 34.402
12/31/1998 10.833 293.832 32.730
The index level for all series was set to 100.0 on 12/31/93.
APPROVAL OF ENGAGEMENT OF AUDITORS
The Board of Directors has selected Moss Adams, LLP as independent
public accountant for the Company for the year ending December 31, 1999,
subject to approval by the stockholders of the Company. Prior to such
engagement, neither the Company nor anyone on the Company's behalf
consulted Moss Adams, 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 Moss Adams, LLP or a reportable event. To the knowledge of the
Company, at no time has Moss Adams, 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 Moss Adams, LLP will be available at the Meeting to make a statement if
so desired and to respond to appropriate questions.
REVERSE STOCK SPLIT
The Board of Directors of the Company has adopted a resolution
recommending to the Stockholders a reverse split of up to one Share for
every ten Shares (1:10) of outstanding common stock without amending the
-24-<PAGE>
Company s Certificate of Incorporation to reduce the number of authorized
Shares or to modify the par value of the Shares (the Reverse Split ). A
reverse stock split is the opposite of a conventional stock split.
Instead of a corporation splitting its outstanding shares to provide for
more shares outstanding, the corporation consolidates its outstanding
stock into a lesser number of shares. The proposed Reverse Split reflects
the Board s intent to increase the stock price in an effort to enable the
Company to meet one of the requirements necessary to maintain the listing
of the Company s Common Stock on The Nasdaq Stock Market . The Reverse
Split will be implemented in the discretion of management of the Company
to maintain the Company s listing on The Nasdaq Stock Market .
The Board considers the proposed Reverse Split to be in the best
interest of all stockholders based upon its belief that the Company will
be able to maintain the Company s listing of its Common Stock on The
Nasdaq Stock Market . The Board also believes that the stock held by the
stockholders will maintain and possibly increase in value more readily if
the Company maintains its The Nasdaq Stock Market listing; however, the
Company cannot accurately predict if the stockholders will experience any
increase in the value of their stock holdings, merely as result of the
Reverse Split.
If the Reverse Split proposal is adopted, each stockholder s
percentage ownership interest in the Company and proportional voting power
will not immediately change upon effecting the stock split. The rights and
privileges of the holders of Shares would be substantially unaffected by
the adoption of the Reverse Split proposal other than by the dilution
which could occur if the Conversion Shares are exercised. The issuance of
cash in lieu of fractional Shares will not affect the Company s reporting
requirements pursuant to the Securities Exchange Act of 1934.
The effective date of the Reverse Split will be June __, 1999 (the
Effective Date ).
The Reverse Split proposal may be abandoned by the Board of
Directors, at any time before or after the Annual Meeting and prior to
effecting the Reverse Split by mailing notice to the Stockholders, if for
any reason the Board of Directors deems it advisable to abandon the
proposal.
Cash Payment in Lieu of Fractional Shares; Exchange of Stock Certificates
No fractional Shares will be issued as a result of the Reverse Split.
In lieu of receiving fractional Shares, any Stockholder who holds any
number of Shares not evenly divisible by ten immediately prior to the
Reverse Split will be entitled to receive cash in the sum of such
stockholder s fractional interest multiplied by the fair value of the
Shares (as determined by the Board of Directors) on the Effective Date of
the Reverse Split. For purposes of such determination, fair value will be
deemed to be an amount equal to the higher of (a) the Average Price of the
Shares for any of the ten trading days immediately following the effective
date of the Reverse Split, and (b) the product of ten multiplied by the
-25-<PAGE>
closing price of the Shares on the last trading date prior to the
effective date of the Reverse Split. As used herein, Average Price
means the arithmetic average of the closing prices for the Shares as
reported by Nasdaq.
As permitted by Delaware law, promptly following the Effective Date,
the Company will exchange certificates issued before the Effective Date
for new certificates on or before a date (the Certificate Exchange
Deadline ) which is 45 days after the Effective Date. Each Stockholder
will receive a letter of transmittal from the transfer agent containing
instructions on how to exchange certificates. (Please do not return your
certificate until you receive these instructions.) The Company will not
issue certificates for fractional Shares. In the event that any holder
fails to surrender presently held certificate(s) on or before the
C e rtificate Exchange Deadline, such holder shall not be entitled
thereafter to vote or to receive dividends or to exercise any of the other
rights of a Stockholder of the Shares represented by such certificate(s)
until such holder has surrendered the certificate(s).
Reasons for the Proposed Reverse Split
The Company s Shares have traded below $1.00 per Share since
September 30, 1998. The Board of Directors believes that the current low
per share price of the Shares has had a negative effect on the
marketability of the existing Shares and the potential ability of the
Company to raise capital by issuing additional Shares.
Many brokerage firms are reluctant to recommend low-priced stocks to
their clients, and a variety of brokerage house practices and policies
exist which tend to discourage individual brokers within those firms from
dealing in low-priced stocks such as the Company s Shares. In addition,
by virtue of the per share price, the Shares are now subject to a
Commission rule that imposes various sales practice requirements on
broker-dealers who sell the Shares to persons other than established
customers or accredited investors. For these types of transactions, the
broker-dealer must make a special suitability determination for the
purchase and have received the purchaser s written consent to the
transaction prior to sale.
In addition, since brokers commissions on low-priced stocks
generally represent a higher percentage of the stock price than the
commission on higher priced stock, the current Share price can result in
individual Stockholders paying transaction costs which are a higher
percentage of their total Share value than would be the case if the Share
price was substantially higher.
The Company was notified by Nasdaq in November 1998 that because the
Company s common stock had failed to trade at a closing bid price of $1.00
or greater during the previous 30 consecutive trading days. The Company
was given a 90-day period in which to regain compliance with the minimum
bid price requirement for continued Nasdaq listing. The Company then
requested a hearing with Nasdaq to stay the delisting procedure. The
-26-<PAGE>
hearing is scheduled for April 22, 1999.
There can be no assurance that the market price of the Shares after
the proposed Reverse Split will be ten times the market price before the
proposed Reverse Split, that the resulting market prices will be
maintained for any period of time, or that Nasdaq will allow the Company s
Common Stock to continue to be listed on the Nasdaq Small Cap Market.
Dissenters Rights
No dissenter s rights are available to dissenting Stockholders under
Delaware law with respect to the Reverse Split.
Federal Income Tax Consequences
The Reverse Split is intended to be a tax-free re-capitalization to
the Company and its Stockholders, except for those Stockholders who
receive cash in lieu of a fractional share. Stockholders will not
recognize any gain or loss for Federal income tax purposes as a result of
the Reverse Split, except for those Stockholders receiving cash in lieu of
a fractional share (as described below). The holding period for Shares
after the Reverse Split will include the holding period of Shares before
the Reverse Split, provided that such Shares are held as a capital asset
on the Effective Date. The adjusted basis of the Shares after the Reverse
Split will be the same as the adjusted basis of the Shares before the
Reverse Split excluding the basis of fractional Shares.
A Stockholder who receives cash in lieu of fractional Shares will be
treated as if the Company has issued fractional Shares to such Stockholder
and then immediately redeemed such Shares for cash. Such Stockholder
would generally recognize gain or loss, as the case may be, measured by
the difference between the amount of cash received and the basis of such
stockholder s Shares (prior to the Reverse Split) allocable to such
fractional share.
Although the Company believes that the foregoing summary describes
the material Federal income tax consequences of the Reverse Split, there
can be no assurance that the actual tax consequences will not be
different. Stockholders should be advised that the Company has not
obtained, and does not intend to request, either a ruling from the
Internal Revenue Service or an opinion of counsel regarding any tax
consequences. Furthermore, the foregoing is only a summary of the Federal
income tax consequences of the Reverse Split and does not deal with all of
the tax consequence that may be relevant to particular Stockholders, such
as Stockholders who are dealers in securities, foreign persons or
Stockholders who acquired their Shares upon the exercise of stock options
or in other compensatory transactions. In view of the individual nature
of tax consequences, Stockholders are urged to consult their own tax
advisers as to the specific tax consequences to them of the proposed
Reverse Split, including the applicability of Federal, state, local, and
foreign tax laws.
-27-<PAGE>
Vote Required
The affirmative vote of a majority of the outstanding Shares is
required to approve this proposal. Management intends to vote FOR the
proposal to effect the Reverse Split.
The Board of Directors unanimously recommends that the Company s
Stockholders vote FOR the proposal to effect a Reverse Split, and your
proxy will be so voted unless you specify otherwise.
SUBMISSION OF SHAREHOLDER PROPOSALS
Stockholders are advised that any stockholder proposal intended for
consideration at the 2000 Annual Meeting must be received by the Company
on or before February 1, 2000 to be included in any proxy materials
prepared for the 2000 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 year ended December 31,
1998, and the year ended December 31, 1997 appear on the pages following
page 19 of its 1998 Annual Report on Form 10-K which is being mailed to
all stockholders along with this Proxy Statement. Said pages are
incorporated herein by reference.
Matters Not Determined at the Time of the Solicitation
Management knows of no matters to come before the Meeting other than
as specified herein. If any other matter should come before the Meeting,
then the persons named in the enclosed form of proxy will have
discretionary authority to vote all proxies with respect thereto in
accordance with their judgment.
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, 2 CORPORATE PLAZA, SUITE 125, NEWPORT BEACH,
CALIFORNIA 92660.
