<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NCI Building Systems, Inc.
- - - - --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
(1) Title of each class of securities to which transaction applies:
- - - - --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- - - - --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- - - - --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- - - - --------------------------------------------------------------------------------
(5) Total fee paid:
- - - - --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- - - - --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- - - - --------------------------------------------------------------------------------
(3) Filing Party:
- - - - --------------------------------------------------------------------------------
(4) Date Filed:
- - - - --------------------------------------------------------------------------------
<PAGE> 2
January 31, 1997
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders
of NCI Building Systems, Inc. (the "Company") to be held at 10:00 a.m. local
time, on Wednesday, March 5, 1997, at the Ramada Inn Northwest, Houston, Texas.
At this meeting you will be asked to:
(i) Elect two directors to serve until the annual meeting of
stockholders to be held in 2000;
(ii) Approve an amendment to the Company's Restated Certificate of
Incorporation that would increase the number of authorized
shares of Common Stock from 15,000,000 to 25,000,000;
(iii) Approve amendments to and the restatement of the Company's
Nonqualified Stock Option Plan; and
(iv) Transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
It is important that your shares be represented at the meeting;
therefore, if you do not expect to attend in person, please sign and date the
enclosed proxy and return it in the enclosed envelope at your earliest
convenience.
Very truly yours,
C.A. Rundell, Jr.,
Chairman of the Board
Houston, Texas
January 31, 1997
<PAGE> 3
NCI BUILDING SYSTEMS, INC.
7301 FAIRVIEW
HOUSTON, TEXAS 77041
--------------------
NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 5, 1997
--------------------
The Annual Meeting of Stockholders of NCI Building Systems, Inc., a
Delaware corporation (hereinafter the "Company"), will be held at the Ramada
Inn Northwest, Houston, Texas, on Wednesday, March 5, 1997, at 10:00 a.m. local
time. The annual meeting will be held for the following purposes:
1. Election of two directors to serve until the annual
meeting of stockholders to be held in 2000;
2. Approval of an amendment to the Company's Restated
Certificate of Incorporation that would increase the number of
authorized shares of Common Stock from 15,000,000 to 25,000,000;
3. Approval of amendments to and the restatement of the
Company's Nonqualified Stock Option Plan; and
4. The transaction of such other business as may
properly come before the Annual Meeting or any adjournment or
postponement thereof.
Only stockholders of record at the close of business on January 17,
1997 are entitled to notice of, and to vote at, the meeting or any adjournments
thereof. A list of stockholders entitled to vote at the meeting will be
available at the meeting for examination by any stockholder.
It is desirable that as large a proportion as possible of the
stockholders' interests be represented at the meeting. WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING, IT IS REQUESTED THAT THE ENCLOSED FORM OF PROXY BE
PROPERLY EXECUTED AND PROMPTLY RETURNED TO THE COMPANY IN THE ENCLOSED
ADDRESSED AND STAMPED ENVELOPE. You may revoke the proxy at any time before
the proxy is exercised by delivering written notice of revocation to the
Secretary of the Company, by delivering a subsequently dated proxy or by
attending the meeting and withdrawing the proxy. Please date, sign and return
the enclosed proxy immediately in the stamped envelope provided.
By Order of the Board of Directors
Donnie R. Humphries,
Secretary
Houston, Texas
January 31, 1997
<PAGE> 4
NCI BUILDING SYSTEMS, INC.
7301 Fairview
Houston, Texas 77041
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MARCH 5, 1997
This Proxy Statement is furnished to stockholders of NCI Building
Systems, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies to be used at the Annual Meeting of Stockholders of the
Company to be held March 5, 1997 (the "Annual Meeting"). Proxies in the form
enclosed will be voted at the meeting if properly executed, returned to the
Company before the Annual Meeting and not revoked. Any stockholder giving such
a proxy may revoke it at any time before it is voted by delivering written
notice of revocation to the Secretary of the Company, by delivering a
subsequently dated proxy or by attending the meeting and withdrawing the proxy.
Your attendance at the meeting will not constitute automatic revocation of the
proxy.
This Proxy Statement and the enclosed proxy form are first being sent
to stockholders on or about January 31, 1997.
ACTION TO BE TAKEN AT MEETING
When stockholders have appropriately specified how their proxies
should be voted, the proxies will be voted accordingly. Unless the stockholder
otherwise specifies therein, the accompanying proxy will be voted (i) FOR the
election as directors of the nominees listed under "Election of Directors,"
(ii) FOR the proposed amendment to increase the shares of common stock of the
Company, (iii) FOR the proposed amendments to and restatement of the Company's
Nonqualified Stock Option Plan, and (iv) at the discretion of the proxy
holders, either FOR or AGAINST any other matter or business that may properly
come before the meeting. The Board of Directors does not know of any such
other matter or business.
PERSONS MAKING THE SOLICITATION
The accompanying proxy is being solicited by the Board of Directors of
the Company. The cost of soliciting your proxy will be borne entirely by the
Company and no other person or persons will bear such costs either directly or
indirectly. In addition to the use of the mails, proxies may be solicited by
personal interview, telephone and telegram by directors and regular officers
and employees of the Company.
OUTSTANDING CAPITAL STOCK
The record date for stockholders entitled to notice of, and to vote
at, the Annual Meeting is January 17, 1997. At the close of business on that
date the Company had 8,029,344 shares of Common Stock, $0.01 par value per
share, issued and outstanding and entitled to vote at the Annual Meeting.
The following table sets forth, as of January 1, 1997, the number of
shares of Common Stock beneficially owned by (1) each person or group known by
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (2) each director and each nominee for director, (3) the
Company's Chief Executive
<PAGE> 5
Officer and each of the Company's four other most highly compensated executive
officers, and (4) all directors and officers as a group. Except as otherwise
indicated, each of the persons or groups named below has sole voting power and
investment power with respect to such Common Stock.
<TABLE>
<CAPTION>
Beneficial Ownership (1)
------------------------
Name of Beneficial Number of
Owner or Group Shares Percent
------------------ --------- --------------
<S> <C> <C>
Johnie Schulte, Jr. (2)(3) 540,599 6.7 %
David B. Curtis 300,236 3.7 %
Daniel D. Zabcik (4) 195,884 2.4 %
C.A. Rundell, Jr. 132,967 1.7 %
Equus II Incorporated (5) 100,000 1.3 %
Gary L. Forbes
Leonard F. George (6) 78,350 *
Robert J. Medlock (7) 47,302 *
La Plaza Partnership (8) 24,037 *
Thomas C. Arnett
Alvan E. Richey, Jr. (9) 38,794 *
William D. Breedlove (10) 20,789 *
Robert N. McDonald (10) 13,289 *
Gary L. Forbes 2,000 *
All officers and directors as a group
(fourteen persons) (11) 1,609,171 20.0 %
* Less than one percent
</TABLE>
______________________
(1) Includes shares beneficially owned by such persons, including shares
owned pursuant to the NCI 401(k) Profit Sharing Plan. If a person has
the right to acquire beneficial ownership of any shares by exercise of
options within 60 days after January 1, 1997, such shares are deemed
beneficially owned by such person and are deemed to be outstanding
solely for the purpose of determining the percentage of the Common
Stock that he owns. Such shares are not included in the computations
for any other person.
(2) Includes 60,000 shares held in a trust, of which Mr. Schulte is sole
trustee, for the benefit of his daughter, 3,000 shares held by his
daughter, 10,000 shares held by a charitable foundation of which Mr.
Schulte is a director, and 78,083 shares exercisable as of January 1,
1997 pursuant to options held by Mr. Schulte. Mr. Schulte holds an
option to purchase an additional 25,000 shares which was not
exercisable at that date.
(3) The principal business address of Mr. Schulte is 7301 Fairview,
Houston, Texas 77041.
(4) Includes 41,728 shares exercisable as of January 1, 1997 pursuant to
options held by Mr. Zabcik.
(5) Mr. Forbes is a Vice President of Equus II Incorporated and may be
deemed to share voting and investment power with respect to such
shares. Mr. Forbes disclaims beneficial ownership of such shares.
(6) Includes 71,764 shares exercisable as of January 1, 1997 pursuant to
options held by Mr. George. Mr. George holds options to purchase an
additional 27,000 shares which were not exercisable at that date.
(7) Includes 45,724 shares exercisable as of January 1, 1997 pursuant to
options held by Mr. Medlock. Mr. Medlock holds options to purchase an
additional 14,750 shares which were not exercisable at that date.
(8) Mr. Arnett is a general partner of La Plaza Partnership and may be
deemed to share voting and investment power with respect to such
shares.
(9) Includes 37,777 shares exercisable as of January 1, 1997 pursuant to
options held by Mr. Richey. Mr. Richey holds options to purchase an
additional 15,500 shares which were not exercisable at that date.
(10) Includes 15,789 and 10,789 shares exercisable as of January 1, 1997
pursuant to options held by each of Messrs. Breedlove and McDonald,
respectively.
(11) In addition to the shares identified in notes (2) through (10),
includes 12,500 shares exercisable as of January 1, 1997 pursuant to
options held by other officers. These other officers also hold
options to
2
<PAGE> 6
purchase an additional 28,500 shares which were not exercisable at
that date, and another officer holds a debenture that is convertible
after April 1, 1997 into 50,125 shares.
QUORUM AND VOTING
The presence in person or by proxy of the holders of a majority of the
outstanding shares of the Common Stock is necessary to constitute a quorum at
the Annual Meeting of stockholders. Each outstanding share of Common Stock is
entitled to one vote. Abstentions will be included in vote totals and, as
such, will have the same effect on each proposal other than the election of
directors as a negative vote. Broker non-votes, if any, will not be included
in vote totals and, as such, will have no effect on any proposal. Cumulative
voting is prohibited in the election of directors. To be elected a director,
each nominee must receive a plurality of all of the votes cast at the Annual
Meeting for the election of directors. The proposed amendment to the Restated
Certificate of Incorporation to increase the authorized shares of Common Stock
must be approved by the affirmative vote of the holders of a majority of the
outstanding Common Stock. The proposal to amend and restate the Company's
Nonqualified Stock Option Plan, and all other matters that properly come before
the Annual Meeting, must receive the affirmative vote of the holders of a
majority of the shares of Common Stock present in person or by proxy and
entitled to vote at the Annual Meeting.
ELECTION OF DIRECTORS
Two Class I directors are to be elected at the Annual Meeting for a
term expiring at the annual meeting of stockholders to be held in 2000 or until
their respective successors are duly elected and qualified. Stockholders are
not permitted to vote their shares cumulatively in connection with the election
of directors.
Set forth below is certain information concerning the persons
nominated for election as directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE
NOMINEES.
CLASS I NOMINEES TO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 2000:
THOMAS C. ARNETT
Mr. Arnett, age 64, has served as a director of the Company since
April 1989. Mr. Arnett is currently retired and manages his own investments.
Mr. Arnett was an Executive Vice President of Cronus Industries, Inc. (now
Business Records Corporation) ("Cronus") from 1977 to 1985 and served as a
director of Cronus from 1977 to 1988.
DANIEL D. ZABCIK
Mr. Zabcik, age 67, has been a director of the Company since April
1989 and served as an Executive Vice President of the Company from April 1989
until October 1993, when he resigned as an officer and assumed part-time
employee status. Since 1986, Mr. Zabcik has also served as President of
Southwest Bolt, Inc., a distributor of structural bolts. From 1980 until April
1989, Mr. Zabcik was employed as President, Executive Vice President, and Vice
Chairman of the Mid-West Metallic division of American Buildings Company, a
metal buildings manufacturer ("ABC"). Mr. Zabcik has spent 38 years in the
metal building industry. Mr. Zabcik is a licensed engineer and served on the
Executive Committee and as President of the Metal Building Manufacturers
Association in 1993.
3
<PAGE> 7
The present directors of the Company whose terms will expire after
1997 are as follows:
CLASS II DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 1998:
GARY L. FORBES
Mr. Forbes, age 52, has served as a director of the Company since
December 1991. Mr. Forbes has been a Vice President of Equus II Incorporated,
an investment company ("Equus"), since November 1991. Mr. Forbes is a
certified public accountant. Mr. Forbes is also a director of Consolidated
Graphics, Inc., a commercial printing company, and Drypers Corporation, a
manufacturer of disposable diapers.
ROBERT N. MCDONALD
Mr. McDonald, age 69, has served as a director since March 1992. Mr.
McDonald was a marketing consultant for ABC from 1985 until February 1992, and
served as a director of that company from 1989 to 1990. From 1956 to 1970, Mr.
McDonald was employed by Butler Manufacturing Company, a metal building
manufacturer, and served as Vice President of Marketing for ABC from 1970 to
1978.
C.A. RUNDELL, JR.
Mr. Rundell, age 65, has served as director and Chairman of the Board
of the Company since April 1989. Since May 1988, Mr. Rundell has owned and
operated Rundell Enterprises, a sole proprietorship engaged in providing
acquisition and financial consulting services to various business enterprises.
From 1977 to 1988, Mr. Rundell was the President, Chief Executive Officer, and
a director of Cronus. Mr. Rundell is also a director of Eljer Industries,
Inc., a manufacturer and marketer of building products, Inter-Regional
Financial Group, Inc., a holding company for two full-service regional
brokerage and investment banking companies, Tandy Brands Accessories, Inc., a
manufacturer of accessories for men, women and boys, and Tyler Corporation, a
provider of automotive aftermarket parts. Mr. Rundell also has served as
Chairman of the Board and Interim Chief Executive Officer of Tyler Corporation
since October 1996.
CLASS III DIRECTORS WHO SERVE UNTIL THE ANNUAL MEETING TO BE HELD IN 1999:
WILLIAM D. BREEDLOVE
Mr. Breedlove, age 57, has served as a director of the Company since
March 1992. Since August 1, 1996, Mr. Breedlove has been the Vice Chairman of
HBW Holdings, Inc., which manages a private merchant banking fund and owns Hoak
Breedlove Wesneski & Co., a registered broker-dealer. For more than five years
prior to August 1, 1996, Mr. Breedlove was the Chairman and Managing Director
of Breedlove Wesneski & Co., a private merchant banking firm and a predecessor
of the HBW Holdings, Inc. group of companies.
LEONARD F. GEORGE
Leonard F. George, age 44, has served as a director of the Company
since March 1993 and as an Executive Vice President of the Company since
September 1992. In addition, Mr. George has served as a director of A & S
Building Systems, L.P., a metal building manufacturer and a wholly-owned
subsidiary of the Company which has its principal operations in Caryville,
Tennessee ("A & S"), since October 1992 and served as the President of A & S
from October 1992 until December 1992. From 1987 to September 1992, Mr. George
was employed as President, Vice President of Engineering, Assistant Vice
President of Engineering and Regional Sales Manager of ABC. Mr. George has
spent over 18 years in the metal building industry.
4
<PAGE> 8
JOHNIE SCHULTE
Mr. Schulte, age 61, a founder of the Company, has been a director,
President and Chief Executive Officer of the Company since 1984. Mr. Schulte
founded and was President of Mid-West Steel Buildings Co., Inc. from 1970 until
its sale to ABC in 1980. Mr. Schulte remained as President of the Mid-West
Metallic Division of ABC until 1984, when he left to form the Company. Mr.
Schulte has spent 42 years in the metal building industry.
MANAGEMENT
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
Name Position
---- --------
C. A. Rundell, Jr. Chairman of the Board
Johnie Schulte President and Chief Executive Officer
Leonard F. George Executive Vice President
Robert J. Medlock Vice President, Treasurer, and Chief
Financial Officer
Alvan E. Richey, Jr. Vice President, Sales and Marketing
Fredrick D. Koetting Vice President
David B. Curtis President, Doors & Building
Components Division
John T. Eubanks President, Mesco Building Systems
Division
Donnie R. Humphries Vice President and Secretary
Information concerning the business experience of Messrs. Rundell,
Schulte and George is provided under the section entitled "Election of
Directors."
Robert J. Medlock, age 57, has served as Vice President and Chief
Financial Officer of the Company since February 1992. Mr. Medlock served as
the Chief Financial Officer and Treasurer of Enviropact, Inc., an environmental
services company, from 1989 to 1991. Mr. Medlock is a certified public
accountant.
Alvan E. Richey, Jr., age 61, has been Vice President Sales and
Marketing of the Company since July 1, 1995 and President of A & S since
December 1992. Prior to joining the Company in September 1992, Mr. Richey was
employed by ABC for over five years. Mr. Richey has over 26 years of
experience in the metal building industry.
Fredrick D. Koetting, age 38, has been a Vice President of the
Company since May 1994. Prior to joining the Company in May 1994, Mr. Koetting
served as an Account Manager for National Steel Corporation, a steel supplier
of the Company, from 1991 until May 1994.
David B. Curtis, age 36, has served as President of the Doors &
Building Components Division of the Company since it was acquired from Doors &
Building Components, Inc. in November 1995. Mr. Curtis was the founder of
Doors & Building Components, Inc. and served as its President and Chief
Executive Officer for more than five years.
John T. Eubanks, age 56, has served as President of the Mesco Metal
Buildings Division of the Company since 1989. Mesco Metal Buildings was a
division of Anderson Industries, Inc. prior to April 1, 1996, at which time it
was acquired by a subsidiary of the Company. Mr. Eubanks also has been
President of Anderson Industries, Inc. since 1994, which is in the process of
liquidating. He has over 20 years of experience in the metal building industry.
5
<PAGE> 9
Donnie R. Humphries, age 47, has been Vice President and Secretary of
the Company since 1985. Mr. Humphries was employed by Mid-West Steel Buildings
Co., Inc. from 1976 to 1980 and by ABC from 1980 to 1985. Mr. Humphries has
over 20 years of experience in the metal building industry.
6
<PAGE> 10
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding
compensation paid during each of the Company's last three fiscal years to the
Company's Chief Executive Officer and each of the Company's four other most
highly compensated executive officers, based on salary and bonus earned during
fiscal 1996.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
---------------------------------------- ------------
Other Securities
Name Annual Under- All Other
and Compen- lying Compen-
Principal sation Options sation
Position Year Salary ($) Bonus ($) ($) (#)(1) ($)(2)
- - - - ------------- -------- --------- --------- ------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Johnie Schulte 1996 $ 225,000 $ 168,750 ----- ----- -----
President and 1995 211,538 161,250 ----- ----- -----
Chief Executive 1994 191,667 146,250 ----- ----- -----
Officer
Leonard F. George 1996 $ 190,000 $ 142,500 ----- 10,000 $ 9,500
Executive Vice 1995 177,404 135,000 ----- 15,000 9,240
President 1994 162,500 123,750 ----- ----- 8,101
Alvan E. Richey, Jr. 1996 $ 145,000 $ 108,750 ----- ----- $ 194,727
Vice President, 1995 118,625 71,667 ----- 10,000 9,240
Sales and Marketing 1994 100,209 50,875 ----- ----- 8,101
Robert J. Medlock 1996 $ 135,000 $ 101,250 ----- 5,000 $ 241,097
Vice President, 1995 113,183 86,250 ----- 10,000 9,240
Treasurer, and 1994 102,916 78,375 ----- ----- 8,088
Chief Financial
Officer
C.A. Rundell, Jr. 1996 $ 100,000 $ 71,250 ----- ----- $ 124,361
Chairman of 1995 100,000 71,250 ----- ----- 8,563
the Board 1994 100,000 72,750 ----- ----- 7,365
</TABLE>
______________________
(1) Options to acquire shares of Common Stock.
(2) This column is comprised of: (a) the Company's matching
contribution under its 401(k) plan and (b) with respect to
Messrs. Rundell, Medlock and Richey for fiscal 1996, an amount
which represents the present value of a retirement benefit
under the Company's Supplemental Retirement Plan payable
beginning when Mr. Rundell reaches the age of 70 and the other
officers reach the age of 65. The present value of the
vested portion of the retirement benefit included in this
column for Messrs. Rundell, Richey and Medlock is $115,798,
$185,227 and $231,597, respectively.
7
<PAGE> 11
OPTION GRANTS DURING 1996 FISCAL YEAR
The following table sets forth the options granted during fiscal 1996
to the Chief Executive Officer and the four other most highly compensated
executive officers of the Company pursuant to the Company's Nonqualified Stock
Option Plan. The Company did not grant any stock appreciation rights during
fiscal 1996.
<TABLE>
<CAPTION>
Potential
Realizable Value at
Assumed Annual
Rates of Stock Price
Appreciation
Individual Grants for Option Term
----------------- ---------------
% of
Total
Options
Granted to Exercise
Options Employees or Base Expira-
Granted in Fiscal Price tion
Name (#) Year ($/Sh) Date 5% ($) 10% ($)
- - - - ---- ---------- ---------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C>
Johnie Schulte 0 ----- ----- ----- ----- -----
Leonard F. George 10,000 3.2% $25.50 12-15-05 $160,400 $406,400
Robert J. Medlock 5,000 1.6% $25.50 12-15-05 $ 80,200 $203,200
C.A. Rundell, Jr. 0 ----- ----- ----- ----- -----
Alvan E. Richey, Jr. 0 ----- ----- ----- ----- -----
</TABLE>
OPTION EXERCISES DURING 1996 FISCAL YEAR AND FISCAL YEAR END OPTION VALUES
The following table provides information related to options exercised
by the named executive officers during the 1996 fiscal year and the number and
value of options held at fiscal year end. The Company does not have any
outstanding stock appreciation rights.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
Number of
Securities Under- Value of
lying Unexercised
Unexercised In-the-Money
Options at Options at
FY-End (#) FY-End
Shares Acquired Exercisable/ Exercisable/
Name on Exercise (#) Value Realized (1) Unexercisable Unexercisable (1)
- - - - -------------- ---------------- ------------------ ----------------- --------------------
<S> <C> <C> <C>
Johnie Schulte 200,000 $4,302,000 78,083/0 $2,432,285/0
Leonard F. George ----- ----- 65,514/21,250 $1,731,312/246,875
C.A. Rundell, Jr. ----- ----- 0/0 0/0
Robert J. Medlock ----- ----- 41,974/12,500 $1,081,653/152,500
Alvan E. Richey, Jr. ----- ----- 37,777/7,500 $ 991,854/118,125
</TABLE>
____________________________
(1) Value is calculated on the basis of the difference between the
option exercise price and the market value of the Common Stock
on the exercise date or year-end, as the case may be.
8
<PAGE> 12
COMPENSATION OF DIRECTORS
Directors of the Company who are employees of the Company do not
receive compensation as directors. The Company paid each non-employee director
an annual fee of $15,000 plus expenses incurred by him and $500 for each
meeting of the board of directors or committee meeting that he attended.
Pursuant to the amended and restated Nonqualified Stock Option Plan
being submitted to stockholders for approval at the 1997 Annual Meeting, each
"non-employee director" (as defined in the plan) will receive an annual grant
of an option to purchase 1,000 shares of Common Stock of the Company. In
addition, upon election to the Board of Directors, each non-employee director
will receive an initial grant of an option to purchase 5,000 shares.
The Company has a deferred compensation agreement with Mr. McDonald,
pursuant to which the payment of $65,000 earned by him for special services in
1993 has been deferred until 1998. Interest on the deferred compensation is
accruing at the annual rate of 1-1/2% below the prime rate of the Company's
principal lending bank.
EMPLOYMENT AND CHANGE-IN-CONTROL AGREEMENTS
Under the terms of an employment agreement, Mr. Schulte has agreed to
serve in an executive capacity for the Company through December 1995, and
thereafter for successive one-month periods until his discharge by the Company,
his voluntary resignation or his death or disability, at a minimum annual
salary of $125,000. His base salary rate may be increased at the discretion of
the Board of Directors. If Mr. Schulte's employment with the Company is
terminated, whether by voluntary termination by Mr. Schulte or by termination
with or without cause by the Company, Mr. Schulte has agreed not to compete
with the Company within a 500-mile radius of any of the Company's manufacturing
facilities for a three-year period after such termination. In consideration of
Mr. Schulte's covenant not to compete, Mr. Schulte is entitled to receive 100%
of his then current base salary for the first 30 days after such termination or
discharge, and will thereafter receive 75% of his base salary for the remainder
of the three-year period. In addition, Mr. Schulte may continue to participate
in the Company's group health insurance plan. The Company may elect to cease
making noncompete payments to Mr. Schulte at any time, in which case Mr.
Schulte would be relieved of his covenant not to compete.
The Company maintains a non-qualified, unfunded benefit plan (the
"Supplemental Plan") pursuant to which certain key employees of the Company are
eligible to receive monthly benefits following their retirement with the
Company, or if a participating key employee dies prior to retirement, his
designated beneficiary is eligible to receive monthly preretirement survivor
benefits. The Board of Directors determines the amount of retirement benefit
to be payable to an eligible employee at the time the Board designates such
employee as eligible to participate in the Supplemental Plan. Generally, a
participant becomes vested in his retirement benefit under the Supplemental
Plan at the rate of 10% for each year of service with the Company and becomes
fully vested upon his disability or upon the occurrence of a change in control
of the Company (as defined in the Supplemental Plan). Messrs. Rundell, Medlock
and Richey are currently participants in the Supplemental Plan. The benefit
payable to Mr. Rundell, beginning at age 70, is $50,000 per year for 10 years.
The benefit payable to Messrs. Richey and Medlock, beginning at age 65, is
$100,000 per year for 10 years. The Company has acquired certain life
insurance policies to be used to discharge its obligations under the
Supplemental Plan.
The Company has entered into Split Dollar Life Insurance Agreements
with certain key employees, including Mr. George, pursuant to which they are
the owners of life insurance policies providing death benefits. The Company
advances the annual premium on each policy and the insured employee pays income
tax on the one-year term cost of his policy. Each insured employee has
collaterally assigned an interest in his respective policy to the Company in an
amount equal to the premiums paid by the Company. The policy on Mr. George
provides a death benefit of $3,000,000.
9
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Board of Directors is responsible
for determining executive compensation. Mr. Arnett and Mr. McDonald are the
only members of the Compensation Committee. Neither Mr. Arnett nor Mr.
McDonald are officers or employees of the Company.
REPORT OF THE COMPENSATION COMMITTEE
The principal elements of compensation provided to executive and other
officers of the Company, including Mr. Johnie Schulte, the President and Chief
Executive Officer of the Company, historically have consisted of a base salary,
supplemented with the opportunity to earn a bonus under the Company's annual
cash bonus program ("Bonus Program") if performance exceeds targeted levels.
Option grants under the Company's Nonqualified Stock Option Plan also have been
utilized as a principal component of compensation.
Mr. Schulte, the President and Chief Executive Officer of the Company,
is entitled to receive a minimum annual salary of $125,000 pursuant to his
employment agreement with the Company. Subject to this minimum, Mr. Schulte's
base salary rate may be adjusted at the discretion of the Board of Directors
based upon such factors as the Board of Directors deems appropriate. Mr.
Schulte's base salary for fiscal 1996 was $225,000.
The Bonus Program provides annual cash bonuses to members of
management based on the return on assets of the Company for the fiscal year.
No bonus may be given pursuant to the Bonus Program unless the return on assets
of the Company is at least 20%. If the return on assets is 20%, Level I
participants, including Mr. Schulte, Mr. George, Mr. Richey, Mr. Medlock and
Mr. Rundell, may receive bonuses equal to 37.5% of their base salary for the
fiscal year and Level II and Level III participants may receive bonuses equal
to 25% and 12-1/2%, respectively, of their base salary for the fiscal year.
The percentage of base salary payable as a bonus increases proportionately with
increases in the return on assets achieved. The maximum bonuses payable under
the Bonus Program are 75%, 50% and 25% of base salary for Level I, II and III
participants, respectively, if the return on assets for the Company is 30% or
more. In fiscal 1996, the return on assets for the Company exceeded 30%, so
all eligible participants received the maximum available bonus.
The Compensation Committee believes that this performance-based bonus
program enables the Company to provide base compensation to its management
group below comparable rates paid by other companies, in exchange for generous
bonuses when warranted by the Company's performance. The Compensation
Committee believes that basing bonuses on achievement of a specified return on
assets provides incentives to management to aggressively manage asset accounts
as well as income and expense items. The Compensation
<PAGE> 14
Committee believes that these incentives result in increased cash flows to the
Company.
During fiscal 1996, the Compensation Committee also approved the
establishment of the Supplemental Plan and the delivery of the Split Dollar
Life Insurance Agreements for selected executive and other officers described
above under "Employment and Change-in-Control Agreements". The Compensation
Committee believes that benefit programs such as these, which address the
unique circumstances of executives in light of limitations imposed on benefits
payable from qualified welfare, profit-sharing and retirement plans, are
critical in attracting and retaining quality executives.
In December 1996, the Compensation Committee engaged an independent
compensation consultant to compare the overall management salary, bonus and
option programs of the Company to the compensation programs of other companies
in its industry and size range, and utilized the results of that study to
assist it in determining the appropriate adjustments to salaries, bonus
eligibility and option grants for key employees and directors of the Company
for the 1977 fiscal year.
At this time, based on the Company's current executive structure, the
Company does not believe it is necessary to adopt a policy with respect to
qualifying executive compensation in excess of $1.0 million for deductibility
under Section 162(m) of the Internal Revenue Code of 1986, as amended.
This report is submitted by the members of the Compensation Committee.
T.C. ARNETT
ROBERT M. DONALD
<PAGE> 15
STOCK PERFORMANCE CHART
The following chart compares the yearly percentage change in the
cumulative stockholder return on the Company's Common Stock from April 1992 to
the end of the fiscal year ended October 31, 1996 with the cumulative total
return on the Nasdaq Market Index and the MG Industry Group 058 -- Other
Building Materials, a peer group. The comparison assumes $100 was invested on
April 3, 1992 in the Company's Common Stock and in each of the foregoing indices
and assumes reinvestment of dividends.
STOCK PERFORMANCE
- - - - ---------------------------------------------------------------------
April 1992 1992 1993 1994 1995 1996
=====================================================================
NCI 100 97.47 258.1 284.67 352.99 497.22
- - - - ---------------------------------------------------------------------
MARKET 100 94.26 130.29 126.23 153.09 167.03
- - - - ---------------------------------------------------------------------
PEER 100 98.18 128.85 136.99 162.5 190.82
=====================================================================
<PAGE> 16
PROPOSAL TO APPROVE AMENDMENT TO RESTATED CERTIFICATE
OF INCORPORATION TO INCREASE AUTHORIZED COMMON STOCK
The Board of Directors believes that it is desirable for the
stockholders to consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation (the "Certificate"). Pursuant to the
proposal, the currently authorized shares of Common Stock, $0.01 par value,
will be increased from 15,000,000 to 25,000,000.
Of the 15,000,000 currently authorized shares of Common Stock,
8,022,595 were issued as of January 1, 1997. Of the remaining 6,977,405
authorized shares of Common Stock, 206,776 were reserved for issuance in
connection with the Company's Nonqualified Stock Option Plan, as amended and
restated.
Except for shares currently reserved, the Company does not now have
any present plan, understanding or agreement to issue additional shares of
Common Stock. However, the Board of Directors believes that the proposed
increase in authorized shares of Common Stock is desirable to enhance the
Company's flexibility in connection with possible future actions, such as stock
splits, stock dividends, financings, corporate mergers, acquisitions of
property, use in employee benefit plans, or other corporate purposes. The
Board will determine whether, when and on what terms the issuance of shares of
Common Stock may be appropriate in connection with any of the foregoing
purposes.
If the proposed amendment is approved, all or any of the additional
authorized shares of Common Stock may be issued without further action by the
stockholders and without first offering such shares to the stockholders for
subscription. The issuance of Common Stock otherwise than on a pro-rata basis
to all holders of such stock would reduce the proportionate interests of such
stockholders.
Other than increasing the authorized shares of Common Stock from
15,000,000 to 25,000,000, the proposed amendment in no way changes the
Certificate.
The Board has unanimously adopted resolutions setting forth
<PAGE> 17
the proposed amendment to the Certificate, declaring its advisability and
directing that the proposed amendment be submitted to the stockholders for
their approval at the annual meeting on March 5, 1997. If adopted by the
stockholders, the amendment will become effective upon filing as required by
the General Corporation Law of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE CERTIFICATE, AS PROPOSED ABOVE.
<PAGE> 18
PROPOSAL FOR
AMENDMENT AND RESTATEMENT OF NONQUALIFIED STOCK OPTION PLAN
The Company maintains the NCI Nonqualified Stock Option Plan, as
amended (the "Option Plan"), covering an aggregate of 1,550,000 shares of
Common Stock of the Company. The Option Plan was originally adopted by the
Board of Directors on April 11, 1989, was amended and restated on February 5,
1992 and was unanimously approved by the stockholders of the Company on
February 5, 1992. The Board of Directors amended the Option Plan in 1993 and
1995, with stockholder approval, to increase the number of shares available for
issuance under the Option Plan. After taking into account those amendments and
an increase in the number of shares available for issuance due to a stock split
in 1993, the total number of shares of Common Stock authorized for issuance
pursuant to the Option Plan is 1,550,000.
On December 12, 1996, subject to approval by stockholders, the Board
of Directors further amended and restated the Option Plan to, among other
things: (a) increase the number of shares of stock issuable under the Option
Plan from 1,550,000 to 2,050,000; (b) provide for automatic grants of options
to non-employee directors; (c) permit grants of options to consultants; (d)
extend the expiration date of the Option Plan from 1999 to 2009; and (e) permit
further amendments to the Option Plan without further stockholder approval
(other than amendments to increase available shares).
The proposed amendments to and restatement of the Option Plan are
intended to make the Company's overall compensation levels for directors and
officers more comparable to other companies in the industry, and, thus, make
the Company more competitive in attracting qualified directors and key
employees.
The purpose of the Option Plan is to provide key employees,
consultants and eligible directors with a proprietary interest in the Company
through the granting of options that will (a) increase the interest of such
persons in the Company's welfare, (b) furnish an incentive to such persons to
continue their services for the Company, and (c) provide a means through which
the Company may attract persons to enter its employ, accept a directorship or
provide consulting services.
As of January 1, 1997, options to purchase an aggregate of 1,343,224
shares of Common Stock (net of cancellations) had been granted pursuant to the
Option Plan, an aggregate of 420,833 shares had been issued pursuant to
exercise of options, and 706,776 shares (including the 500,000 additional
shares being submitted for stockholder approval) remain available for future
grant. As of January 1, 1997, Johnie Schulte, Leonard F. George, Alvan E.
Richey, Jr., Robert J. Medlock and C.A. Rundell, Jr. had been
<PAGE> 19
granted options covering an aggregate of 278,083 shares, 98,764 shares, 61,477
shares, 60,474 shares and 25,000 shares of Common Stock, respectively, and all
current executive officers as a group had been granted options covering
635,798 shares of Common Stock. As of January 1, 1997, directors as a group
who are not currently executive officers had been granted options covering
198,492 shares of Common Stock, and all other employees as a group had been
granted options covering 707,426 shares of Common Stock (net of cancellations).
As of January 1, 1997, the market value of all shares of Common Stock subject
to options granted pursuant to the Plan and outstanding on that date was
$31,822,490 (based upon the closing sales price of Common Stock as reported on
the NASDAQ National Market on December 31, 1996).
Grants of options under the Option Plan are, in general,
discretionary, and the benefits to be received under the amended and restated
plan are not determinable, except for the number of shares covered by the
initial and annual grants to be made to non-employee directors as described
below. If the December 12, 1996 amendment and restatement of the Option Plan
had been in effect for fiscal 1996, the four non-employee directors would each
have received, at the time of the 1996 annual meeting, an option to purchase
1,000 shares of Common Stock at an exercise price of $31.33, the last sales
price on the day preceding the date of grant of the option.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE
AMENDMENT AND RESTATEMENT OF THE OPTION PLAN, AS PROPOSED ABOVE.
SUMMARY OF OPTION PLAN
As amended and restated on December 12, 1996, the Option Plan is
designed to permit the granting of options to key employees, non-employee
directors (i.e., directors who are not employees and who are generally not
engaged in other significant business relationships with the Company) and
consultants of the Company. The Option Plan provides for the granting of
nonqualified stock options, which are options which do not meet the
requirements of Section 422A of the Internal Revenue Code of 1986, as amended.
The Option Plan, prior to the December 12, 1996 amendment and restatement
("Existing Plan") provided only for the granting of options to key employees
and eligible directors.
The Board of Directors of the Company will administer the Option Plan
for all participants and, with respect to key employees and consultants,
designate the optionees, the number of shares subject to the options and the
terms and conditions of each option. The Board of Directors may delegate to a
committee of the Board the power to grant options to key employees and
consultants and to administer the Option Plan as it relates to them. The Board
of Directors has delegated these administrative functions to the Compensation
Committee. Non-employee directors will receive grants of options to purchase
5,000 shares upon their initial election to
<PAGE> 20
the Board of Directors, and annual grants of options to purchase 1,000 shares
on the date of each annual meeting of the stockholders. The Existing Plan is
administered by the Compensation Committee for all eligible participants, and
does not provide for automatic grants of options to non-employee directors.
Under the Option Plan, the exercise price may not be less than the
fair market value of the stock on the date of the grant of the option. The
fair market value per share on the date the option is granted is determined by
the Board of Directors or Compensation Committee and may be determined using
any reasonable valuation method. Unless another method is selected, the fair
market value of each share will be the last sales price of the Common Stock as
reported in the NASDAQ National Market on the last trading date preceding the
date of the grant of the option. The Existing Plan does not specify any method
to determine fair market value.
Options under the Option Plan become exercisable in 25% increments on
each anniversary date of the option with respect to non-employee directors, if
the non-employee director has served continuously as a director from the date
of grant through the vesting date. With respect to options granted to key
employees and consultants, the Board of Directors or Compensation Committee may
set any vesting schedule that it chooses. All options heretofore granted have
become exercisable in 25% increments on each anniversary date of the option.
The Existing Plan does not establish a required vesting schedule for options
granted to non-employee directors.
If an optionee dies or becomes permanently disabled while serving as
an employee, director or consultant or retires on or after normal retirement
age, the options held by that optionee will become 100% vested. Upon a change
in control of the Company, the then outstanding options will become 100%
vested. All options granted under the Option Plan must be exercised, if at
all, within ten years from the date of grant, although a shorter period may be
set for options granted to employees or consultants. The Existing Plan does
not provide for 100% vesting upon permanent disability, retirement or death.
The exercise price of options is payable in cash or check at the time
of exercise. Shares of Common Stock deliverable upon exercise of the options
may be transferred from treasury or issued from authorized but unissued shares.
If an option under the Option Plan expires or terminates before it has been
exercised in full, the shares of Common Stock allocable to the unexercised
portion of that option may be made the subject of future grants of options
under the Option Plan.
Options are not assignable and may not be exercised subsequent to the
expiration of a specified period following the termination of the employment,
director or consulting relationship.
Unless sooner terminated by action of the Board of Directors, the
Option Plan will terminate on April 10, 2009, and no options
<PAGE> 21
may thereafter be granted under the Option Plan. An amendment that increases
the aggregate number of shares that may be issued under the Option Plan must be
approved by stockholders. The Option Plan may be amended or discontinued by
the Board of Directors in any other respect without obtaining the approval of
the stockholders. The Board of Directors may make appropriate adjustments in
the number of shares covered by the Option Plan and the outstanding options,
and in the option prices, to reflect any stock dividend, stock split, share
combination or other recapitalization; provided, however, that the number of
shares to be granted to non-employee directors under initial grants and annual
grants will not be adjusted for stock dividends or stock splits that might
occur prior to such grant. The Existing Plan would terminate on April 10,
1999, and requires stockholder approval of amendments that would materially
increase plan benefits or materially modify the requirements of eligibility for
participation in the Plan.
TAX STATUS OF STOCK OPTIONS
Upon exercise of an option granted pursuant to the Option Plan, an
optionee will recognize ordinary income in an amount equal to the excess, if
any, of the fair market value at the time of exercise of the Common Stock
acquired over the exercise price of the option. The exercise of an option will
entitle the Company to a tax deduction for the Company's fiscal year within
which the exercise occurs in the same amount as will be includible in the
income of the optionee. The option holder's basis in the Common Stock will be
equal to the fair market value on the date of exercise. Any gain or loss
realized by an option holder on disposition of the Common Stock generally will
be a capital gain or loss and will not result in any tax deduction to the
Company.
An optionee will have no taxable income, and the Company will not be
entitled to a deduction, at the time of or as a result of the grant of a
nonqualified stock option.
BOARD MEETINGS, COMMITTEES AND ATTENDANCE
The Board of Directors of the Company met four times during the fiscal
year ended October 31, 1996. Each director attended at least 75% of the called
meetings. The Board of Directors currently has appointed three committees, the
Executive Committee, the Audit Committee and the Compensation Committee.
EXECUTIVE COMMITTEE
The Executive Committee is generally authorized to act on behalf of
the Board of Directors of the Company between scheduled meetings of the Board
of Directors to the fullest extent permitted by Delaware corporate law. The
members of the Executive Committee are Mr. Rundell, Mr. Schulte and Mr. Zabcik.
The Executive Committee did not meet during the fiscal year ended October 31,
1996.
<PAGE> 22
AUDIT COMMITTEE
The Audit Committee is responsible for engaging and discharging the
independent auditors of the Company and for monitoring internal audit functions
and procedures. The members of the Audit Committee are Mr. Breedlove and Mr.
Forbes. The Audit Committee is comprised solely of directors who are not
officers or employees of the Company. The Audit Committee met three times
during the fiscal year ended October 31, 1996.
COMPENSATION COMMITTEE
The Compensation Committee is responsible for review and making
recommendations to the Board of Directors on all matters relating to
compensation and benefits provided to executive management. The members of the
Compensation Committee are Mr. Arnett and Mr. McDonald. The Compensation
Committee is comprised solely of directors who are not officers or employees of
the Company. The Compensation Committee met three times during the period from
November 1, 1995 to October 31, 1996.
SECTION 16 REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires the Company's directors and officers and persons who own more than 10%
of a registered class of the Company's equity securities to file initial
reports of ownership and reports of changes in ownership with the Securities
and Exchange Commission (the "SEC") and the NASDAQ National Stock Market. Such
persons are required by the SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it
with respect to fiscal 1996, or written representations from certain reporting
persons, the Company believes that all filing requirements applicable to its
directors, officers and persons who own more than 10% of a registered class of
the Company's equity securities have been complied with, except that from
November 1, 1995 to October 31, 1995, Messrs. Eubanks and Curtis were late in
filing one report required pursuant to Section 16(a). No other officer,
director or 10% stockholder was late in filing his or its reports pursuant to
Section 16(a).
<PAGE> 23
TRANSACTIONS WITH DIRECTORS, OFFICERS AND AFFILIATES
On April 1, 1996, a wholly-owned subsidiary of the Company purchased
the assets and business of Mesco Metal Buildings, a division of Anderson
Industries, Inc., for a purchase price of $19,500,000 in cash and a $1,500,000,
7% subordinated convertible debenture due April 1, 2001. The purchase price
was determined by arm's-length negotiations between the parties. Breedlove
Wesneski & Co. acted as financial advisor and consultant to Anderson
Industries, Inc. in connection with the sale of its Mesco Metal Buildings
division and received a fee of approximately $250,000 for its services. At the
time of the transaction, Mr. Breedlove was the Chairman and Managing Director
of Breedlove Wesneski & Co. and Mr. Rundell was a limited partner in that firm.
Prior to the transaction, Mr. Eubanks was the President of Mesco Metal
Buildings and the principal stockholder in Anderson Industries, Inc. and, as
part of the transaction, received a distribution of the $1.5 million debenture
from Anderson Industries, Inc. Since the acquisition, Mr. Eubanks has served
as President of the Mesco Metal Buildings division of the Company's subsidiary.
On November 13, 1995, a wholly-owned subsidiary of the Company
acquired the assets and business of Doors & Building Components, Inc. for a
purchase price, after closing adjustments, of approximately $9.5 million plus
300,000 shares of Common Stock of the Company. The purchase price was
determined by arm's-length negotiations between the parties, who had no prior
relationship. Mr. Curtis was the sole shareholder of the selling entity and,
since November 13, 1995, has served as the President of the Doors & Building
Components operations conducted by the subsidiaries of the Company.
Southwest Bolt, Inc., a corporation in which Mr. Zabcik is the
President and owns 32% of the capital stock, is the Company's primary supplier
of structural bolts. In fiscal 1996, the Company made purchases from Southwest
Bolt, Inc. in the amount of $1,417,064.
RELATIONSHIP WITH INDEPENDENT AUDITORS
Ernst & Young LLP served as the independent auditors of the Company
for the fiscal year ended October 31, 1996. A representative of Ernst & Young
LLP is expected to be present at the Annual Meeting and will have the
opportunity to make a statement. The representative will be available to
answer appropriate stockholder questions.
<PAGE> 24
STOCKHOLDERS' PROPOSALS
Stockholders must submit their proposals to the Secretary of the
Company on or before October 3, 1997 for consideration at the Company's next
Annual Meeting.
FINANCIAL STATEMENTS
The proxy statement has been preceded or accompanied by the Company's
Annual Report to Shareholders for the fiscal year ended October 31, 1996. The
consolidated financial statements and auditor's report on pages 17-27, the
management discussion and analysis of financial condition and results of
operations on pages 28-30, and the information concerning quarterly financial
data on page 31 of the Annual Report are incorporated herein by reference.
MISCELLANEOUS
The Board of Directors knows of no business other than that set forth
above to be transacted at the Annual Meeting. If other matters requiring a
vote of the stockholders arise, the persons designated as proxies will vote the
shares of Common Stock represented by the proxies in accordance with their
judgment on such matters.
The information contained in the Proxy Statement relating to the
occupations and security holdings of the directors and officers of the Company
and their transactions with the Company is based upon information received from
the individual directors and officers. All information relating to any
beneficial owner of more than 5% of the Company's Common Stock is based upon
information contained in reports filed by such owner with the Securities and
Exchange Commission.
By Order of the Board of Directors
Donnie R. Humphries,
Secretary
Houston, Texas
January 31, 1997
<PAGE> 25
NCI BUILDING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION PLAN
[AMENDED AND RESTATED AS OF DECEMBER 12, 1996]
On April 11, 1989, the Board of Directors of NCI Building Systems,
Inc. (then named National Components Incorporated), a Delaware corporation (the
"Company"). adopted the Nonqualified Stock Option Plan (the "Plan"). The
Company subsequently has amended the Plan from time to time.
On December 12, 1996, the Board of Directors of the Company amended
and restated the Plan in its entirety to, among other things, increase the
number of shares of Common Stock that may be made the subject of options under
the Plan, set forth the terms for the automatic grant of options to
Non-Employee Directors, extend the term of the Plan and provide that
stockholder approval of any amendments to the Plan shall not be required except
for an amendment that would increase the number of securities that may be
issued under the Plan.
The Plan, as so amended and restated on December 12, 1996, is as
follows:
1. PURPOSE. The purpose of the Plan is to provide certain key
employees and consultants (i.e., persons who provide management or consulting
services) of the Company and the Non-Employee Directors with a proprietary
interest in the Company through the granting of options which will
(a) increase the interest of the key employees,
consultants, and Non-Employee Directors in the Company's welfare;
(b) furnish an incentive to the key employees,
consultants, and Non-Employee Directors to continue their services for the
Company; and
(c) provide a means through which the Company may attract
able persons to enter its employ or to provide management and consulting
services to the Company or to serve as Non-Employee Directors.
2. ADMINISTRATION. The Plan will be administered and interpreted
by the Board. The Board may delegate to any Committee or Committees of the
Board the power and authority to grant options to any or all classes of key
employees of the Company and to administer and interpret the Plan as its
relates to such employees and any options granted to them.
3. PARTICIPANTS. The Board may from time to time select the
particular employees of and consultants to the Company and its Subsidiaries to
whom options are to be granted. Upon each such grant, the selected employee or
consultant will become a participant in the Plan. Each Non-Employee Director
of the Company shall be granted an option under the Plan from time to time as
provided herein and, upon the initial grant of an option, will become a
participant in the Plan.
<PAGE> 26
4. SHARES SUBJECT TO PLAN. The Board may not grant options under
the Plan for more than 2,050,000 shares of Common Stock of the Company, but
this number may be adjusted to reflect, if deemed appropriate by the Board, any
stock dividend, stock split, share combination, recapitalization or the like,
of or by the Company. Shares to be optioned and sold may be made available
from either authorized but unissued Common Stock or Common Stock held by the
Company in its treasury. Shares that by reason of the expiration of an option
or otherwise are no longer subject to purchase pursuant to an option granted
under the Plan may be reoffered under the Plan.
5. GRANT OF OPTIONS; ALLOTMENT OF SHARES.
(a) The Board shall determine the number of shares of
Common Stock to be offered from time to time by grant of options to key
employees of or consultants to the Company or its Subsidiaries. The grant of
an option to a key employee or consultant shall not be deemed either to entitle
the employee or consultant to, or to disqualify the employee or consultant
from, participation in any other grant of options under the Plan. The Board
may grant options to key employees or consultants after its amendment and
restatement on December 12, 1996 and prior to stockholder approval of the Plan.
If for any reason the stockholders of the Company do not approve the restated
Plan at their 1997 annual meeting (or any adjournment thereof), all options
granted to consultants, and all options granted to employees under the restated
Plan at a time when the aggregate number of shares subject to then outstanding
options exceeded the aggregate number of shares then available for issuance
pursuant to the Plan, will be terminated and of no effect and all other options
granted to employees during such period shall remain outstanding and shall be
governed by the Plan as it existed prior to its amendment and restatement on
December 12, 1996. No option that is so subject to termination may be
exercised in whole or in part prior to such stockholder approval.
(b) On the date of his or her initial election or
appointment to the Board, a Non-Employee Director of the Company shall be
granted an option to purchase 5,000 shares of Common Stock of the Company. On
the date of each annual stockholders meeting of the Company, each Non-Employee
Director of the Company shall be granted an option to purchase 1,000 shares of
Common Stock of the Company unless (i) the initial election of such
Non-Employee Director is at such annual stockholders meeting or (ii) the term
of such Non-Employee Director ends on such date and he or she is not elected to
an additional term at such annual stockholders meeting. No option may be
granted under this subsection prior to the date of the 1997 annual meeting of
stockholders of the Company (or any adjournment thereof).
6. OPTION AGREEMENTS. Options granted pursuant to the Plan shall
be evidenced by stock option agreements containing such terms and provisions as
are approved by the Board but not inconsistent with the Plan. The Company
shall execute stock option agreements upon instructions from the Board.
Options granted under the Plan prior to its amendment and restatement on
December 12, 1996 shall continue in effect in accordance with the terms of
their original grant and the option agreements executed in connection therewith
and, if the restated Plan is approved by stockholders of the Company at their
1997 annual meeting, shall be entitled to the benefit of any amendments to the
Plan so approved that favorably modify the rights of the participants.
-2-
<PAGE> 27
7. OPTION PRICE.
(a) With respect to options granted to key employees or
consultants, the option price shall be not less than 100% of the fair market
value per share of the Common Stock on the date of grant. The Board shall
determine the fair market value of the Common Stock, and shall set forth the
determination in its minutes, using any reasonable valuation method. Unless
the Board determines that another valuation method should be used for a
particular grant, the fair market value of the Common Stock shall be deemed to
be the last sale price of the Common Stock of the Company on the major
securities exchange or market on which it is traded on the last trading day
immediately preceding the date of grant.
(b) With respect to options granted to Non-Employee
Directors, the option price shall be equal to 100% of the fair market value per
share of the Common Stock on the date of grant, which for these purposes shall
be deemed to be the last sale price of the Common Stock of the Company on the
major securities exchange or market on which it is traded on the last trading
day immediately preceding the date of grant.
8. OPTION PERIOD; VESTING.
(a) The Option Period for options granted to key
employees and consultants will begin on the date the option is granted, which
will be the date the Board authorizes the option unless the Board specifies a
later date. No option may terminate later than ten years from the date the
option is granted. The Board or the Committee may provide for the options to
vest and become exercisable in installments and upon such other terms,
conditions and restrictions as it may determine. The Board may provide for
earlier termination of the option and the Option Period in the case of
termination of the employment or consulting relationship, or for any other
reason. If the employee or consultant dies or becomes permanently disabled (as
determined in the sole discretion of the Board or Committee) while serving in
the employment of or as a consultant to the Company or retires from such
employment or consulting relationship at or after Normal Retirement Age, or if
there occurs a Change in Control, then 100% of the shares subject to his or her
options will become vested and will be available thereafter for purchase during
the Option Period.
(b) The Option Period for options granted to a
Non-Employee Director will begin on the date the option is granted and will
terminate on the earlier of (i) the tenth anniversary of the date of grant;
(ii) the 30th day after the Non-Employee Director is no longer a director of
the Company for a reason other than death, permanent disability (as determined
in the sole discretion of the Board or Committee) or retirement at or after the
Normal Retirement Age; or (iii) one year after death or permanent disability
(as determined in the sole discretion of the Board or Committee) of the
Non-Employee Director or after his or her retirement as a director of the
Company at or after the Normal Retirement Age. On the anniversary of the date
of grant of each such option, 25% of the shares subject to the option will
become vested and will be available thereafter for purchase during the Option
Period, provided that from the date of grant through such vesting date the
Non-Employee Director had served continuously as a director of the Company. If
the Non-Employee Director dies or becomes permanently disabled (as determined
in the sole discretion of the Board or Committee) while serving as a director
of the Company or retires as a director of the Company at or after Normal
Retirement Age, or if there occurs a Change in Control, then 100% of the shares
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<PAGE> 28
subject to the option will become vested and will be available thereafter for
purchase during the Option Period.
9. RIGHTS OF ESTATE OR BENEFICIARIES IN EVENT OF DEATH. If a
participant dies prior to termination of his or her right to exercise an option
in accordance with the provisions of the Plan or his or her stock option
agreement without having totally exercised the option, the option may be
exercised during the remainder of the Option Period by the participant's estate
or by the person who acquired the right to exercise the option by bequest or
inheritance or by reason of the death of the participant, provided the option
is exercised prior to the date of expiration of the Option Period or one year
from the date of the participant's death, whichever first occurs.
10. PAYMENT. Full payment for shares of Common Stock purchased
upon exercising an option shall be made in cash or by check at the time of
exercise, or on such other terms as are set forth in the applicable option
agreement. No shares of Common Stock may be issued until full payment of the
purchase price therefor has been made, and a participant will have none of the
rights of a stockholder until shares are issued to him.
11. EXERCISE OF OPTION. Unless otherwise provided in this Plan,
all options granted under the Plan may be exercised during the Option Period at
such times, in such amounts, in accordance with such terms and subject to such
restrictions as are set forth in the applicable stock option agreements. In no
event may an option be exercised or shares be issued pursuant to an option if
any requisite action, approval or consent of any governmental authority of any
kind having jurisdiction over the exercise of options shall not have been taken
or secured.
12. CAPITAL ADJUSTMENTS AND REORGANIZATIONS. The number of shares
of Common Stock covered by each outstanding option granted under the Plan
(including those held by Non-Employee Directors) and the option price may be
adjusted to reflect, as deemed appropriate by the Board, any stock dividend,
stock split, share combination, exchange of shares, recapitalization, merger,
consolidation, separation, reorganization, liquidation or the like, of or by
the Company. The number of shares to be made the subject of an initial grant
and annual grants to Non-Employee Directors, as set forth in Section 5 hereof,
shall not be adjusted for any stock dividend or stock split that may occur
prior to the grant, but shall be adjusted to reflect any share combination,
exchange of shares, recapitalization, merger, consolidation, separation,
reorganization, liquidation or the like of or by the Company that occurs prior
to the grant, in the same manner as outstanding options held by all
participants are adjusted by the Board. If a Change of Control shall occur,
the holder of an option will be entitled to receive, for the aggregate exercise
price payable upon exercise of his or her option and in lieu of the Common
Stock or other consideration otherwise issuable to him or her upon exercise of
the option, the same kind and amount of securities or assets as may be
distributable, in or pursuant to the transaction or transactions resulting in
the Change of Control, to a holder of the same number of outstanding shares of
Common Stock of the Company as the number of shares of Common Stock of the
Company that are subject to the option immediately prior to such transaction or
transactions.
13. NON-ASSIGNABILITY. Options may not be transferred other than
by will or by the laws of descent and distribution. During a participant's
lifetime, options granted to a participant may be exercised only by the
participant.
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<PAGE> 29
14. INTERPRETATION. The Board shall interpret the Plan and shall
prescribe such rules and regulations in connection with the operation of the
Plan as it determines to be advisable for the administration of the Plan. The
Board may rescind and amend its rules and regulations.
15. AMENDMENT OR DISCONTINUANCE. The Plan may be amended or
discontinued by the Board without the approval of the stockholders of the
Company, except that any amendment that would materially increase the number of
securities that may be issued under the Plan must be approved by the
stockholders of the Company. The Plan may not be amended more than once in any
six-month period to modify any of the terms or provisions of the Plan relating
to options granted or that may be granted to Non-Employee Directors, unless the
amendment is required to comply with changes in tax laws and regulations or
with laws and regulations governing employee benefit plans and programs.
16. EFFECT OF PLAN. Neither the adoption of the Plan nor any
action of the Board shall be deemed to give any officer, employee, or
consultant or director any right to be granted an option to purchase Common
Stock of the Company or any other rights except as may be evidenced by the
stock option agreement, or any amendment thereto, duly authorized by the Board
and executed on behalf of the Company and then only to the extent and on the
terms and conditions expressly set forth therein and in the Plan.
17. TERM. Unless sooner terminated by action of the Board, this
Plan will terminate on April 10, 2009. The Board may not grant options under
the Plan after that date, but options granted before that date will continue to
be effective in accordance with their terms (subject to the condition of
obtaining stockholder approval with respect to certain options as set forth in
Section 5(a)).
18. DEFINITIONS. For the purpose of this Plan, unless the context
requires otherwise, the following terms shall have the meanings indicated:
(a) "Board" means the Board of Directors of the Company.
(b) "Change of Control" means any sale of substantially
all of the assets of the Company, or any merger, consolidation or corporate
reorganization of the Company, or any tender offer or exchange offer for stock
of the Company, as a result of which the holders of Common Stock of the Company
immediately prior to the consummation of such transactions or series of
transactions own or could own capital stock representing less than 50.1% of the
equity or less than 50.1% of the voting power of all classes of stock of the
surviving, resulting or purchasing corporation that is outstanding immediately
following the consummation thereof.
(c) "Committee" means any committee of the Board to which
it has delegated the power and authority to grant options to any or all classes
of key employees of the Company and to administer and interpret the Plan as its
relates to such employees or consultants and any options granted to them.
(d) "Common Stock" means the Company's Common Stock, $.01
par value, which the Company is currently authorized to issue or may in the
future be authorized to issue (as
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<PAGE> 30
long as the common stock varies from that currently authorized, if at all, only
in amount of par value).
(e) "Non-Employee Director" means an independent director
who:
(1) Is not currently an officer of the Company or
a Subsidiary, or otherwise currently employed by the Company or a
Subsidiary;
(2) Does not receive compensation, either
directly or indirectly, from the Company or a Subsidiary for services
rendered as a consultant or in any capacity other than as a director,
except for an amount that does not exceed the dollar amount for which
the disclosure would be required under the Securities Acts;
(3) Does not possess an interest in any other
transaction for which disclosure would be required under the
Securities Acts; and
(4) Is not engaged in a business relationship for
which disclosure would be required pursuant to the Securities Acts.
(f) "Nonqualified Option" means an option granted under
the Plan which is not intended to be an option that satisfies the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended.
(g) "Normal Retirement Age" means the age established by
the Board from time to time as the normal age for retirement of a director or
employee, as applicable. In the absence of a determination by the Board, the
Normal Retirement Age of Non-Employee Directors shall be deemed to be 70 years
of age and, for all other participants, shall be deemed to be 65 years of age.
(h) "Option Period" means the period beginning on the
date of grant of an option and terminating on the last day an option may be
exercised, as provided in the Plan or, if applicable, the related stock option
agreement.
(i) "Plan" means the NCI Building Systems, Inc.
Nonqualified Stock Option Plan, as amended and restated as of December 12,
1996, as hereafter amended from time to time.
(j) "Securities Acts" means the Securities Act of 1933
and the Securities Exchange Act of 1934, as amended, and the regulations issued
thereunder.
(k) "Subsidiary" means any corporation in an unbroken
chain of corporations beginning with the Company if, at the time of the
granting of the option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in the chain, and "Subsidiaries" means more than one of any such
corporations.
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<PAGE> 31
NCI BUILDING SYSTEMS, INC.
The undersigned hereby (i) acknowledges receipt of the Notice dated January 31,
1997, of the Annual Meeting of Stockholders of NCI Building Systems, Inc. (the
"Company") to be held at the Ramada Inn Northwest, Houston, Texas on Wednesday,
March 5, 1997 at 10:00 a.m., local time, and the Proxy Statement in connection
therewith; and (ii) appoints C.A. Rundell, Jr. and Johnie Schulte, and each of
them, his proxies with full power of substitution, for and in the name, place
and stead of the undersigned, to vote upon and act with respect to all of the
shares of Common Stock of the Company standing in the name of the undersigned
or with respect to which the undersigned is entitled to vote and act, at the
meeting and at any adjournment thereof, and the undersigned directs that his
proxy be voted as follows:
(a) Proposal to elect two Class I directors to serve until the 2000 Annual
Meeting of Stockholders, or until their respective successors are
elected and qualified.
<TABLE>
<S> <C>
/ / FOR all nominees listed below (except as / / WITHHOLD AUTHORITY to vote for all nominees
marked to the contrary) listed below
</TABLE>
Directors: Thomas C. Arnett and Daniel D. Zabcik
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below)
- - - - ------------------------------------------------------------------------------
(b) Proposal to approve an amendment to Restated Certificate of
Incorporation to increase number of authorized shares of Common Stock
from 15,000,000 to 25,000,000.
/ / FOR / / AGAINST / / ABSTAIN
(c) Proposal to approve amended and restated Nonqualified Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
(d) In the discretion of the proxies on any other matter that may properly
come before the meeting or any adjournment thereof.
/ / FOR / / AGAINST / / ABSTAIN
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 32
(Continued from other side)
THIS PROXY WILL BE VOTED AS SPECIFIED ABOVE. IF NO SPECIFICATION IS MADE, THIS
PROXY WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO ABOVE.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, both of the proxies so
present and voting, either in person or by substitute, shall exercise all of
the proxies hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such Common Stock and hereby ratifies and confirms
all that the proxies, their substitutes, or any of them may lawfully do by
virtue hereof.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY.
Dated:______________________________________
____________________________________________
____________________________________________
Please date this Proxy and sign your name
exactly as it appears hereon. Where there is
more than one owner, each should sign. When
signing as an attorney, administrator,
executor, guardian or trustee, please add your
title as such. If executed by a corporation,
the Proxy should be signed by a duly authorized
officer.
Please date, sign and mail this proxy card in
the enclosed envelope. No postage is required.
