-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, P+cqeDaeGjGnAeHkAEipkumDmKeooby4gp+Ut96UZlMdTGIUgiCocTD3I3tyU+e6 GHpAa8u1aY3YixYprMMlkg== /in/edgar/work/0000013547-00-000040/0000013547-00-000040.txt : 20001012 0000013547-00-000040.hdr.sgml : 20001012 ACCESSION NUMBER: 0000013547-00-000040 CONFORMED SUBMISSION TYPE: DEF 14A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20001120 FILED AS OF DATE: 20001011 FILER: COMPANY DATA: COMPANY CONFORMED NAME: METALCLAD CORP CENTRAL INDEX KEY: 0000013547 STANDARD INDUSTRIAL CLASSIFICATION: [1700 ] IRS NUMBER: 952368719 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: DEF 14A SEC ACT: SEC FILE NUMBER: 000-02000 FILM NUMBER: 738597 BUSINESS ADDRESS: STREET 1: 2 CORPORATE PLAZA STREET 2: SUITE 125 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9497191234 MAIL ADDRESS: STREET 1: 2 CORPORATE PLAZA STREET 2: SUITE 125 CITY: NEWPORT BEACH STATE: CA ZIP: 92660 FORMER COMPANY: FORMER CONFORMED NAME: BOWER INDUSTRIES INC DATE OF NAME CHANGE: 19870618 FORMER COMPANY: FORMER CONFORMED NAME: PHOENIX GEMS INC DATE OF NAME CHANGE: 19730617 DEF 14A 1 0001.txt METALCLAD CORPORATION 2 Corporate Plaza, Suite 125 Newport Beach, California 92660 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD NOVEMBER 20, 2000 NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Meeting") of METALCLAD CORPORATION, a Delaware corporation (the "Company"), will be held at the Hyatt Newporter Hotel, Patio Room, 1107 Jamboree Road, Newport Beach, California 92660, on November 20, 2000, 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 ratify the adoption of the Metalclad Corporation 2000 Omnibus Stock Option and Incentive Plan; 3. 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, 2000. 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 October 10, 2000 as the record date for the determination of stockholders entitled to notice of and to vote at the Meeting. Only holders of the Company's Common Stock at the close of business on the record date are entitled to vote at the Meeting. You are cordially invited to attend the Meeting in person. However, whether you plan to attend or not, we urge you to complete, date, sign, and return the enclosed proxy promptly in the envelope provided, to which no postage need be affixed if mailed in the United States, in order that as many shares as possible may be represented at the Meeting. BY ORDER OF THE BOARD OF DIRECTORS /s/Bruce H. Haglund ----------------------------------------- Bruce H. Haglund, Secretary Newport Beach, California October 10, 2000 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. METALCLAD CORPORATION 2 Corporate Plaza, Suite 125 Newport Beach, California 92660 PROXY STATEMENT October 20, 2000 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 Hyatt Newporter Hotel, Patio Room, 1107 Jamboree Road, Newport Beach, California 92660, on November 20, 2000 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 October 20, 2000 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 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 October 10, 2000 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 6,167,452. 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 and the ratification of the Stock Option Plan 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 September 29, 2000 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.
Name and Address of Amount and Nature of Percent Beneficial Owner (1) Beneficial Ownership(1) of Class (1)(2) - -------------------- -------------------- --------------- Grant S. Kesler (3) 392,500 6.01% 2 Corporate Plaza, Suite 125 Newport Beach, California 92660 Anthony C. Dabbene (4) 162,600 2.57% 2 Corporate Plaza, Suite 125 Newport Beach, California 92660 Bruce H. Haglund (5) 63,783 1.02% 2 Park Plaza, Suite 450 Irvine, California 92614 J. Thomas Talbot (6) 23,333 * 24 Corporate Plaza Newport Beach, California 92660 Raymond J. Pacini (7) 23,733 * 6 Executive Circle Suite 250 Irvine, California 92614 Jan Chr. G. Sundt (8) 531,280 8.14% Luddesdown Court Lodge Luddesdown, Near Cobham Kent DA13 OXE England Oakes, Fitzwilliams & Co. Limited (9) 709,721 10.32% 7-9 St. James's Place London SW1A 1EE England Wayne & Tamara Mills 1,200,000 19.46% 5020 Blake Road South Edina, Minnesota 55436 All Officers and Directors As a Group (5) 666,949 9.81% - ----------------------------- Less than one percent.
(1) Beneficial ownership is determined in accordance with rules of the Securities and Exchange Commission (the "SEC"). In computing the number of shares beneficially owned by a person and the percentage ownership of that person, shares of Common Stock subject to options, warrants or convertible debt held by that person that are exercisable within 60 days of September 29, 2000 are deemed outstanding. Such shares, however, are not deemed outstanding for purposes of computing the ownership of any other person. Except as indicated in the footnotes to this table and pursuant to applicable community property laws, the stockholder named in the table has sole voting and investment power with respect to the shares set forth opposite such stockholders' name. (2) Based on 6,167,450 shares outstanding as of September 29, 2000. (3) Includes 359,500 shares issuable upon exercise of stock options exercisable within 60 days at prices ranging from $3.00 to $22.50 per share. (4) Includes 150,000 shares issuable upon exercise of stock options exercisable within 60 days at prices ranging from $3.00 to $36.25 per share. (5) Includes 63,133 shares issuable upon exercise of stock options exercisable within 60 days at prices ranging from $2.50 to $22.50 per share. (6) Includes 23,333 shares issuable upon exercise of stock options exercisable within 60 days at prices ranging from $2.50 to $3.00 per share. (7) Includes 23,333 shares issuable upon exercise of stock options exercisable within 60 days at prices ranging from $2.50 to $3.00 per share. (8) Includes debt conversion rights to a minimum of 358,480 shares exercisable within 60 days. (9) Includes warrants to purchase 709,721 shares exercisable within 60 days at $3.50 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 seven. 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. 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 57 1991 President, Chief Executive Officer, Director Anthony C. Dabbene 49 1996 Chief Financial Officer, Director Bruce H. Haglund Esq. 49 1993 Secretary, Director J. Thomas Talbot 64 1999 Director Raymond J. Pacini 44 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 & Paulsen in Orange County, California where he has been engaged in the private practice of law since 1980. He is also a member of the Boards of Directors of Aviation Distributors, Inc., HydroMaid International, Inc., Renaissance Golf Products, Inc. and Liquitek Enterprises, Inc. J. Thomas Talbot has been a Director since 1999. Mr. Talbot is the owner of The Talbot Company, an investment and asset management company and has been the Chief Executive Officer of HAL, Inc., the parent company of Hawaiian Airlines. He currently serves on the boards of directors of The Hallwood Group, Inc., Fidelity National Financial, Inc., California Coastal Communities, Inc., Competisys LLC and The Pacific Club. Raymond J. Pacini has been a Director since 1999 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. Prior to 1998, he was the Executive Vice President and Chief Financial Officer of Koll Real Estate Group, Inc. Committees and Compensation of the Board of Directors The Board of Directors held four meetings during the period January 1, 1999 to December 31, 1999. Each director attended at least 75% of the total number of Board Meetings held during the year ended December 31, 1999. 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 $10,000, 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, Talbot and Haglund are members of the Audit Committee conditioned upon their re-election to the Board. The duties of the Audit Committee are to review with the Company's independent auditors the results of the audit engagement, review the adequacy of the Company's system of accounting controls, approve the services rendered by the independent auditors, and examine the range of audit and non-audit fees. The Audit Committee met twice during the twelve months ended December 31, 1999. Messrs. Pacini, Talbot and Haglund are members of the Compensation Committee conditioned upon their re-election to the Board. The duties of the Compensation Committee are to evaluate and recommend to the Board of Directors compensation structures for key executive personnel. The Compensation Committee met once during the year ended December 31, 1999. Executive Officers The following lists the names, ages, and position of the Company's current executive officers: Officer Current Position Name Age Since With the Company - -------------------------------------------------------------------------- Grant S. Kesler 57 1991 President, Chief Executive Officer, Director Anthony C. Dabbene 49 1996 Chief Financial Officer, Director Bruce H. Haglund Esq. 49 1993 Secretary, General Counsel, Director Robert D. Rizzo 54 1999 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." Robert D. Rizzo joined the Company as President of Metalclad Insulation in November 1999. Prior to joining Metalclad, Mr. Rizzo was project manager for major projects at PDG Environmental, Inc. He has over 25 years experience in finance, engineering and construction. Mr. Rizzo has a B.S. in Civil Engineering and an M.B.A. Executive Compensation for the Year Ended December 31, 1999 The following table sets forth for the year ended December 31, 1999, the year ended December 31, 1998, and the year ended December 31, 1997, 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 Grant S. Kesler, C.E.O. 1999 250,000 50,000 25,920 1998 250,000 50,000 -- 1997 250,000 50,000 -- Anthony C. Dabbene, C.F.O. 1999 180,000 36,000 -- 1998 180,000 36,000 -- 1997 160,000 36,000 -- Robert D. Rizzo, President, 1999 14,375(2) -- -- M.I.C. - -------------- (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 Company in connection with their employment. (2) Mr. Rizzo started with the Company on November 16, 1999. Amount shown reflects actual 1999 compensation paid based on an annual salary of $115,000.
Annual Compensation Long-Term Compensation -------------------------------- ------------------------------- -------- Other Awards -------------------- Payouts/ Year Salary Bonus Annual Restricted Options/ LTIP All (1) ($) ($) Compen- Stock SARS Payouts Other Name and Principal Position sation ($) (#) ($) (1) - --------------------------- -------------------------------- ------------------------------- --------
Employment Agreements In January 1998, the Compensation Committee of the Company approved employment agreements for Messrs. Kesler and Dabbene. The contracts are for a three-year period, effective January 1, 1998 and call for annual salaries of $250,000 and $180,000, respectively. The contracts also include minimum bonus amounts of $50,000 and $36,000, respectively. The contracts are automatically renewed on January 1 unless terminated by the Company and contain incentive provisions as determined by the Compensation Committee. Additionally, the contracts contain a "special bonus" provision tied to the Company's success in its arbitration with the United Mexican States under the NAFTA. This provision provides Messrs. Kesler and Dabbene a special bonus of 2 1/2% and 1%, respectively, of any award of damages to the Company under this proceeding. Options Granted in 1999 In March 1999, upon their appointment to the Board of Directors, Messrs. Haglund, Talbot and Pacini were each granted 10,000 non-statutory stock options, exercisable at $2.50 per share. The options vest ratably over a three-year period on the anniversary date of the grant and expire on March 22, 2009. In August 1999, the Board of Directors approved the grant of non-qualified stock options, exercisable at $3.00 per share to the following officers and directors: Mr. Kesler, 170,000 shares; Mr. Dabbene, 100,000 shares; Mr. Haglund, 20,000 shares; Mr. Pacini, 20,000 shares; and Mr. Talbot, 20,000 shares. Such options are fully vested and expire August 24, 2009. In February 1999, Messrs. Kesler and Dabbene were also granted common stock in the amounts of 18,000 and 12,500 shares, respectively. These shares were issued for services rendered to the Company for which these individuals had not been otherwise compensated. The price per share at date of approval was $2.80. Options Granted in 2000 In September 2000, the Board of Directors adopted a resolution to grant options to purchase 520,000 shares of common stock exercisable at $3.00 per share, vesting over a three-year period, as follows: Mr. Kesler, 250,000 shares; Mr. Dabbene, 200,000 shares; Mr. Rizzo, 10,000 shares; and Messrs. Haglund, Talbot and Pacini 20,000 each. Granting of these options is subject to the approval of the Metalclad Corporation 2000 Omnibus Stock Option and Incentive Plan at the annual shareholders meeting on November 20, 2000. Aggregated Option/SAR Exercises in the year ended December 31, 1999, and Option Values at December 31, 1999 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, 1999 (assuming a market value of $5.6875 on December 31, 1999): Number of Value of Unexercised in-the-Money Options at Options at December 31, December 31, Shares 1999 1999 Acquired Value ---- ---- on Exercise Realized Exercisable/ Exercisable/ (#) ($) Unexercisable Unexercisable - -------------------------------------------------------------------------- Grant S. Kesler -0- $-0- 359,500/-0- $456,875/$-0- Anthony C. Dabbene -0- $-0- 150,000/-0- $268,750/$-0- Bruce Haglund -0- $-0- 59,800/10,000 $ 53,750/$31,875 Stock Option Plans 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 39,500, 33,100 and 390,000 shares, exercisable at a range of $2.50-$45.00 per share, are outstanding pursuant to the 1992 Plan, the 1993 Plan and the 1997 Plan, respectively. As of the date of this Proxy Statement, options granted pursuant to the 1992 Plan, the 1993 Plan and the 1997 Plan for the purchase of 37,800, 26,080 and 350,000 shares, respectively, were vested. In addition, the Company has granted non-qualified options from time to time not pursuant to any plan including non-qualified stock options granted to the following officers and directors: Grant S. Kesler, 50,000 options exercisable at $16.50 per share granted in January 1997 and 80,000 options exercisable at $15.00 per share granted in February 1998; Anthony C. Dabbene, 5,000 options exercisable at $36.25 per share granted in January 1996 and 35,000 options exercisable at $15.00 per share granted in February 1998; and Bruce H. Haglund, 15,000 options exercisable at $22.50 per share granted in March 1995 and 2,500 options exercisable at $15.00 per share granted in February 1998. As of the date of this Proxy, total options granted not pursuant to any plan were 450,200 exercisable at a range of $12.50-$45.00 per share with 450,200 being 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 or Committee member. All employees of the Company or of a subsidiary of the Company, who may be officers or directors of the Company, and consultants, vendors, customers, and others expected to provide significant services to the Company or any of its subsidiaries, are eligible to participate in the Plans. No Incentive Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Company or a subsidiary, and except that no Nonstatutory Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Company or a subsidiary other than upon a vote of a majority of disinterested directors finding that the value of the services rendered or to be rendered to the Company or a subsidiary by such non-employee director or non-employee consultant, vendor, customer, or other provider of services is at least equal to the value of the options granted. 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 160,000 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 100,000 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 600,000 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 agreements in such form as the Committee may from time to time determine. Each Option must state the number of Shares to which it pertains and must provide for the adjustment thereof if the outstanding shares of Common Stock are changed into or exchanged for cash or a different number or kind of shares or securities of the Corporation, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for, or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in which the Corporation is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or other capital change or adjustment. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in order to preserve for the Participant the benefits of the Award. The exercise price in the case of any Incentive Stock Option may not be less than the fair market value on the date of grant and, in the case of any Option granted to an optionee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Company, may not be less than 110% of the fair market value on the date of grant. The exercise price in the case of any Nonstatutory Stock Option may not be less than 85% of the fair market value on the date of grant. The purchase price is be payable in full in United States dollars upon the exercise of the Option; provided, however, that if the applicable Option agreement so provides, the purchase price may be paid (i) by the surrender of Shares in good form for transfer, owned by the participant and having a fair market value on the date of exercise equal to the purchase price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the fair market value of the Shares so surrendered equals the purchase price, (ii) by cancellation of indebtedness owed by the Company to the participant, (iii) with a full recourse promissory note executed by the participant, or (iv) any combination of the foregoing. The interest rate and other terms and conditions of such note may be determined by the Board or the Committee. The Board or Committee may require that the participant pledge his or her Shares to the Company for the purpose of securing the payment of such note. In no event may the stock certificate(s) representing such Shares by released to the participant until such note shall be been paid in full. Each Option must state the time or times which all or part thereof becomes exercisable. No Option shall be exercisable after the expiration of 10 years from the date it was granted, and no Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company may be exercisable after the expiration of five years from the date it was granted. During the lifetime of a participant in the Plans, the Option may be exercisable only by that participant and may not be assignable or transferable. In the event of the participant's death, the Option may not be transferable by the participant other than by will or the laws of descent and distribution. Within the limitations of the Plans, the Board or Committee may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. No modification of an Option may, without the consent of the participant, alter or impair any rights or obligations under any Option previously granted. In the case of Incentive Stock Options granted under the Plans, the aggregate fair market value (determined as of the date of the grant thereof) of the Shares with respect to which Incentive Stock Options become exercisable by any participant for the first time during any calendar year (under the Plans and all other plans maintained by the Company may not exceed $100,000. The Board or Committee may, however, with the participant's consent, authorize an amendment to the Incentive Stock Option which renders it a Nonstatutory Stock Option. The stock option agreements authorized under the Plans may contain such other provisions not inconsistent with the terms of the Plans (including, without limitation, restrictions upon the exercise of the Option) as the Board or the Committee shall deem advisable. Restricted Stock Purchase Agreements. Restricted stock purchase rights (hereinabove defined as "Purchase Rights") must be evidenced by written stock purchase agreements in such form as the Committee must from time to time determine. Each Purchase Right must state the number of Shares to which it pertains and may provide for the adjustment thereof in the event that the outstanding shares of Common Stock are changed into or exchanged for cash or a different number or kind of shares or securities of the Corporation, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for, or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in which the Corporation is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or other capital change or adjustment. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in order to preserve for the Participant the benefits of the Award. Each agreement must state the purchase price per Share at which the Purchase Right may be exercised, which may not be less than the fair market value of a Share on the date on which the Purchase Rights are granted. Unless the Board or Committee otherwise determines, the purchase price per Share at which any Purchase Right granted under the Plans may be exercised may not be less than the fair market value of a Share as of the date on which the Purchase Right is granted, less a discount equal to not more than 75% of such value. Purchase Rights must be exercised within 60 days after the later to occur of (i) Board approval of the grant of the Purchase Right or (ii) delivery of notice of such grant. Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner and must expire immediately upon the death of the participant or the termination of such participant's employment with the Company. The purchase price must be payable in full in United States dollars upon exercise of the Purchase Right; provided, however, that if the applicable agreement so provides, the purchase price may be paid (i) by the surrender of Shares in good form for transfer, owned by the person exercising the Purchase Right and having a fair market value on the date of exercise equal to the purchase price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the fair market value of the Shares so surrendered equal the Purchase Price, or (ii) with a full recourse promissory note executed by the participant. The interest rate and other terms and conditions of such note must be determined by the Board or the Committee. The Board or Committee may require that the participant pledge his or her Shares to the Company for the purpose of securing the payment of such note. In no event may the stock certificate(s) representing such Shares be released to the participant until such note has been paid in full. In the event the Company determines that it is required to withhold state or Federal income tax as a result of the exercise of a Purchase Right, as a condition to the exercise thereof, a participant may be required to make arrangements satisfactory to the Company to enable it to satisfy such withholding requirements. In addition, the participant must agree to immediately notify the Company if he or she files an election pursuant to Section 83(b) of the Internal Revenue Code with respect to receipt of the Shares. Within the limitations of the Plans, the Board or the Committee may modify, extend or renew outstanding Purchase Rights or accept the cancellation of outstanding Purchase Rights (to the extent not previously exercised) for the granting of new Purchase Rights in substitution therefor. The foregoing notwithstanding, no modification of a Purchase Right may, without the consent of the participant, alter or impair any rights or obligations under any Purchase Right previously granted. In the event of the voluntary or involuntary termination or cessation of employment or association of a participant with the Company or any Subsidiary for any reason whatsoever, with or without cause (including death or disability), the Company may, upon the date of such termination, have an irrevocable, exclusive option to repurchase (the "Repurchase Option") all or any portion of the Shares held by the Employee that are subject to the Repurchase Option as of such date at the original purchase price. Initially, all of the Shares must be subject to the Repurchase Option. Thereafter, the Repurchase Option must lapse and expire, or "vest," as to a specified number of the Shares in accordance with a schedule to be determined by the Board or the Committee, as the case may be, which must be attached to the stock purchase agreement to be entered into between the participant and the Company. All Shares which continue to be subject to the Repurchase Option are sometimes hereinafter referred to as "Unvested Shares." Within 90 days following the date of the Participant's termination of employment by the Corporation, the Corporation shall notify the Employee as to whether it wishes to repurchase the Unvested Shares pursuant to the exercise of the Repurchase Option. If the Corporation elects to repurchase said Unvested Shares, it must set a date for the closing of the transaction at the Executive Offices of the Corporation, not later than 30 days from the date such notice. Except for transfers to participant's descendants and spouses, the participant may not transfer by sale, assignment, hypothecation, donation, or otherwise any of the Shares or any interest therein prior to the release of such Shares from the Repurchase Option. The Company's Repurchase Option may be assigned in whole or in part to any stockholder or stockholders of the Company or other persons or organizations. Each stock purchase agreement entered into as provided herein must provide for a right of first refusal and option on the part of the Company to purchase all or any part of any Shares which are no longer subject to the Repurchase Option which the participant purposes to sell, transfer or otherwise dispose of (except for transfers to participant's descendants and spouses) on the condition that: (a) the participant must notify the Company in writing of any proposed sale, transfer or other disposition of any of the Shares, specifying the proposed transferee, the number of Shares proposed to be transferred, and the price at which such Shares are to be sold, transferred or otherwise disposed; (b) the Company must have a period of 30 days from receipt of such notice to notify the participant in writing as to whether or not the Company elects to purchase all or a specified portion of such Shares at the lower of (i) price per share set forth in the notice given by the participant, or (ii) the fair market value for a share of the Company's Common Stock, without restrictions, on the date on which the notice is given by participant to the Company, less in either case an amount equal to the discount, if any; (c) if the Company elects not to purchase all of the Shares specified in the notice, the participant may sell, transfer or otherwise dispose of the remaining Shares in strict accordance with the terms specified in the notice within 90 days following the date of the notice. Any transferee of any of such Shares (other than the Company) will take and acquire all of such Shares subject to the continuing right o 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. 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 converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Board or the Committee. Stock Payments. The Board or the Committee may approve Stock Payments to eligible employees who elect to receive such payments in the manner determined from time to time by the Board or the Committee. The number of shares must be determined by the Board or the Committee and may be based upon the fair market value, book value or other measure of the value of such shares on the date the Award is granted or on any date thereafter. Loans. The Company may, with the Board's or the Committee's approval, extend one or more loans to participants in connection with the exercise or receipt of outstanding Awards granted under the Plans. Such loans are subject to the following conditions: (i) the principal of the loan may not exceed the amount required to be paid to the Corporation upon the exercise or receipt of one or more Awards under the Plans less the aggregate par value of any Common Stock deliverable on such event, and the loan proceeds must be paid directly to the Corporation in consideration of such exercise or receipt; (ii) the initial term of the loan must be determined by the Board or the Committee; provided that the term of the loan, including extensions, may not exceed a period of ten years; (iii) the loan must be with full recourse to the participant, must be evidenced by the participant's promissory note and must bear interest at a rate determined by the Board or the Committee but not less than the Company's average cost of funds as of a date within 31 days of the date of such loan, as determined by the Board or the Committee; and iv) in the event a participant terminates his or her employment at the request of the Company, the unpaid principal balance of the note must become due and payable on the tenth business day after such termination; provided, however, that if a sale of such shares would cause such participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance may become due and payable on the 10th business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions by the participant subsequent to such termination. In the event a participant terminates employment other than at the request of the Company, the unpaid principal balance of the note becomes due and payable six months after the date of such termination. Termination, Suspension and Amendment. The Board of Directors or the Committee may, at any time, suspend, amend, modify of terminate the Plans (or any part thereof) and may, with the consent of the recipient of an Award, authorize such modifications of the terms and conditions of such participant's Award as it shall deem advisable. However, no amendment or modification of the Plans may be adopted without approval by a majority of the shares of the Common Stock represented (in person or by proxy) at a meeting of stockholders at which a quorum is present and entitled to vote thereat, if such amendment or modification would materially increase the benefits accruing to participants under the Plans within the meaning of Rule 16b-3 under the Exchange Act or any successor provision; materially increase the aggregate number of shares which may be delivered pursuant to Awards granted under the 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 attributable to the participant's contribution and the portion attributable to the Company's contribution if the participant is fully vested. No contributions were made to the 401(k) Plan during the year ended December 31, 1999. Certain Relationships and Related Transactions In October 1994, in consideration of extraordinary contributions to the Company, including but not limited to the pledge of 75,500 shares of common stock of the Company owned by them to facilitate necessary financings for the Company, the board of Directors approved a loan of $370,000 to each of Mr. Kesler and Mr. Neveau. Such borrowings are due 30 days after demand and bear annual interest at the prime rate of interest plus 7%. In February 1996 Messrs. Kesler and Neveau each repaid $150,000 to the Company. In March 1996, the notes were amended to modify the loan principal between Messrs. Kesler and Neveau as well as to adjust the interest rates, effective March 1, 1996 to a variable rate based upon the Company's quarterly investment rate. Repayment of these notes has been extended until completion of the NAFTA arbitration. Mr. Kesler's note is secured by his employment agreement. In June 1996, Mr. Neveau, Chairman of the Board of Directors, Senior Vice President, and a Director of the Company, resigned his position effective the next shareholders' meeting. 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. There are no remaining payments due Mr. Neveau and his indebtedness to the Company as of December 31, 1999 was $71,000. During the twelve months ended December 31, 1999, the Company incurred legal fees of $77,000 from the law firm of Gibson, Haglund & Paulsen, of which Bruce H. Haglund, general counsel, Director, and Secretary of the Company, is a principal; however, none of such fees have yet been paid. Report of Compensation Committee April 15, 2000 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. The policies and underlying philosophy governing the Company's compensation program are to: maintain a comprehensive program that is competitive in the marketplace, provide opportunities integrating salary and stock rights to compensate short and long-term performance of management, recognize and reward individual accomplishments and allow the Company to retain seasoned executives who are essential to the Company's success. In determining management's 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. 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 Company entered into employment agreements with Messrs. Kesler and Dabbene in January 1998, which established base salaries and minimum bonus amounts. The number of options granted is scaled to the salary of each individual officer. The base salaries for executive officers are determined by evaluating the responsibilities of the positions held, the individual's experience, the competitive marketplace, the individual's performance of responsibilities and the individual's overall contribution to the Company. Mr. Kesler's last salary increase was in 1997 and Mr. Dabbene's last salary increase was also in 1997. 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 long-term 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. During 1999, options were granted to Messrs. Kesler and Dabbene for the purchase of 170,000 shares and 100,000 shares, respectively, at an exercise price of $3.00 per share. 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, 1999, the Company a) increased revenues in its insulation business; b) sold its Mexico businesses; c) continued pursuit of the NAFTA claim, including completion of the final hearing; and d) obtained the additional capital necessary to support the Company's operations. The executive officers devoted substantial time and effort in achieving the aforementioned objectives while at the same time devoting significant time to the daily affairs of the Company. Based on the performance of management in achieving these objectives in 1999 and the financial condition of the Company, Messrs. Kesler and Dabbene were granted stock options as described above and awarded the minimum bonus amounts of $50,000 and $36,000, respectively, as provided under their respective employment agreements. Compensation Committee /s/J. Thomas Talbot ------------------------------- J. Thomas Talbot, Chairman Compensation Committee /s/Raymond J. Pacini ------------------------------- Raymond J. Pacini, Member Compensation Committee Comparison of Five-Year Cumulative Total Returns Performance Report for Metalclad Corporation Date Company Market Market Peer Peer Index Index Count Index Count ------------ -------- ------- ------ ------- ----- 12/30/1994 100.000 100.000 4660 100.000 6 01/31/1995 95.652 100.527 4650 104.163 6 02/28/1995 69.565 105.809 4652 94.257 6 03/31/1995 67.391 108.953 4646 95.487 6 04/28/1995 58.696 112.385 4657 92.116 6 05/31/1995 65.217 115.289 4655 89.690 6 06/30/1995 71.739 124.622 4672 90.559 6 07/31/1995 100.000 133.774 4691 103.099 6 08/31/1995 110.870 136.490 4714 101.344 6 09/29/1995 119.565 139.634 4710 104.247 5 10/31/1995 91.304 138.829 4748 101.129 5 11/30/1995 132.609 142.086 4780 115.004 5 12/29/1995 139.130 141.335 4820 119.233 5 01/31/1996 173.913 142.042 4810 139.452 6 02/29/1996 193.478 147.457 4840 155.425 6 03/29/1996 163.043 147.952 4879 142.519 6 04/30/1996 123.913 160.210 4924 129.185 5 05/31/1996 110.869 167.557 4981 124.697 5 06/28/1996 106.522 160.004 5035 120.962 5 07/31/1996 93.478 145.764 5067 103.734 5 08/30/1996 113.043 153.954 5091 112.881 5 09/30/1996 80.435 165.725 5097 100.174 5 10/31/1996 63.043 163.882 5139 80.487 5 11/29/1996 53.261 174.044 5181 63.659 5 12/31/1996 63.043 173.898 5177 71.816 5 01/31/1997 65.217 186.240 5162 74.092 5 02/28/1997 45.652 175.937 5171 65.905 5 03/31/1997 43.478 164.466 5170 58.716 5 04/30/1997 35.870 169.591 5155 54.524 5 05/30/1997 41.304 188.793 5148 64.687 5 06/30/1997 53.261 194.600 5132 73.765 5 07/31/1997 45.652 215.102 5127 91.820 6 08/29/1997 50.000 214.784 5116 99.455 6 09/30/1997 47.826 227.516 5106 126.235 6 10/31/1997 45.652 215.662 5115 126.065 6 11/28/1997 41.304 216.799 5131 119.384 6 12/31/1997 38.043 213.068 5082 120.523 6 01/30/1998 54.348 219.812 5053 114.267 6 02/27/1998 60.869 240.480 5032 109.973 6 03/31/1998 38.043 249.367 4994 110.336 6 04/30/1998 34.783 253.569 4973 103.134 6 05/29/1998 34.783 239.480 4966 90.767 7 06/30/1998 35.870 256.207 4944 87.026 7 07/31/1998 44.565 253.220 4921 73.390 7 08/31/1998 30.435 203.026 4883 44.811 7 09/30/1998 33.696 231.195 4822 44.212 7 10/30/1998 23.913 241.359 4738 48.126 7 11/30/1998 13.043 265.895 4703 41.925 7 12/31/1998 14.130 300.440 4653 39.888 7 01/29/1999 11.956 344.027 4602 45.959 7 02/26/1999 9.783 313.222 4574 42.052 7 03/31/1999 7.609 336.872 4518 37.260 7 04/30/1999 10.870 347.549 4497 36.202 7 05/28/1999 8.696 338.151 4487 44.930 7 06/30/1999 6.522 368.620 4469 51.890 7 07/30/1999 8.696 362.005 4464 52.956 5 08/31/1999 9.891 377.257 4452 61.237 6 09/30/1999 13.696 377.473 4424 56.043 6 10/29/1999 16.522 407.442 4423 60.688 6 11/30/1999 23.043 456.758 4417 79.816 6 12/31/1999 19.783 556.913 4405 84.932 6 The index level for all series was set to 100.0 on 12/30/1994. Company Index: CUSIP Ticker Sic Exchange -------- ------ --- -------- 59114220 MTLC 1790 NASDAQ Fiscal Year-end: 12/31/1999 Market Index: Nasdaq Stock Market (US Companies) Peer Index: NASDAQ Stocks (SIC 1790-1799 US) Misc. Special Trade Contractors - ----------------- Prepared by the Center for Research in Security Prices Produced on 04/26/2000 including data to 12/31/1999 Copyright 2000 APPROVAL OF 2000 OMNIBUS STOCK OPTION AND INCENTIVE PLAN In September, 2000, the Board of Directors of the Company voted to adopt the 2000 Omnibus Stock Option Plan (the "2000 Plan"). The 2000 Plan is intended to provide incentive to key employees and directors of, and key consultants, vendors, customers, and others expected to provide significant services to, the Company, to encourage proprietary interest in the Company, to encourage such key employees to remain in the employ of the Company and its subsidiaries, to attract new employees with outstanding qualifications, and to afford additional incentive to consultants, vendors, customers, and others to increase their efforts in providing significant services to the Company. Pursuant to the terms of the 2000 Plan, the following types of incentives may from time to time be granted on a discretionary basis by the Board or the Committee: incentive stock options ("Incentive Stock Options"), nonstatutory stock options ("Nonstatutory Stock Options"), purchase rights ("Purchase Rights"), stock appreciation rights ("Stock Appreciation Rights"), performance awards ("Performance Awards"), dividend rights ("Dividend Rights"), and stock payments ("Stock Payments"), referred to hereinafter singly as "Award" and collectively as "Awards", as the context may require. The 2000 Plan also provides for the grant of Incentive Stock Options and Nonstatutory Stock Options to members of the Board of Directors on a "formula award" basis as provided in Rule 16b-3 of the Securities Exchange Act of 1934 ("Rule 16b-3"). As of the date of this Proxy Statement, no Awards have been granted pursuant to the 2000 Plan. The complete text of the 2000 Plan appears in the Appendix to this Proxy Statement. The 2000 Plan shall be administered by the Board in compliance with Rule 16b-3, or by a Committee (the "Committee") appointed by the Board, which Committee shall be constituted to permit the Plan to comply with Rule 16b-3, and which shall consist of not less than two members, each of whom has not participated in the 2000 Plan by way of receipt of any discretionary grant of an Award, and who will not so participate while serving as a member of the Committee, and each of whom has not participated under any other plan or have received options of the Company during the year preceding adoption of the 2000 Plan by the shareholders at the Meeting. A member of the Board or a Committee member shall in no event participate in any determination relation to Awards held by or to be granted on a discretionary basis to such Board or Committee member. All employees of the Company or of a subsidiary of the Company, who may be officers or directors of the Company, and consultants, vendors, customers, and others expected to provide significant services to the Company or any of its subsidiaries, are eligible to participate in the 2000 Plan. No Incentive Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Company or a subsidiary, and except that no Nonstatutory Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Company or a subsidiary other than upon a vote of a majority of disinterested directors finding that the value of the services rendered or to be rendered to the Company or a subsidiary by such non-employee director or non-employee consultant, vendor, customer, or other provider of services is at least equal to the value of the options granted. The aggregate number of shares of the Company's authorized but unissued Common Stock which may issued as an Award or which may be issued upon exercise of an Incentive Stock Option or nonstatutory Stock option under the 2000 Plan shall not exceed 1,000,000 shares. The number of shares subject to unexercised options, Stock Appreciation Rights or Purchase Rights granted under the 2000 Plan (plus the number of shares previously issued under the 2000 Plan) shall not at any time exceed the number of shares available for issuance under the 2000 Plan. In the event that any unexercised option, Stock Appreciation Right or Purchase Right, or any portion thereof, for any reason expires or is terminated, or if any shares subject to a restricted stock Award do not vest or are not delivered, the unexercised or unvested shares allocable to such Award may again be made subject to any Award. Options. Incentive Stock Options and Nonstatutory Stock Options (together hereinafter referred to as "Option" or "Options," unless the context otherwise requires) shall be evidenced by written stock option agreements in such form as the Committee shall from time to time determine. Each Option shall state the number of Shares to which it pertains, shall state the vesting period and conditions and shall provide for the adjustment thereof in the event that the outstanding shares of Common Stock are changed into or exchanged for cash or a different number or kind of shares or securities of the Company, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for, or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in which the Company is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or other capital change or adjustment. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in order to preserve for the Participant the benefits of the Award. The exercise price in the case of any Incentive Stock Option shall not be less than the fair market value on the date of grant and, in the case of any Option granted to an optionee who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, shall not be less than 110% of the fair market value on the date of grant. The exercise price in the case of any Nonstatutory Stock Option shall not be less than 85% of the fair market value on the date of grant. Formula Award Rider Members of the Board of Directors who serve on the Company's Compensation Committee are entitled to receive option grants each year in accordance with a "formula award" plan. The 2000 Plan provides that such directors will receive 20,000 Nonstatutory Options exercisable at $3.00 per share upon approval of the 2000 Plan by the shareholders and 20,000 Nonstatutory Options each June 1st thereafter if they are members of the Compensation Committee on that date and exercisable at the fair market value on the date of grant These options vest over a three-year period contingent on the Director's continued service as a member of the Board of Directors. The purchase price is be payable in full in United States dollars upon the exercise of the Option; provided, however, that if the applicable Option agreement so provides, the purchase price may be paid (i) by the surrender of Shares in good form for transfer, owned by the participant and having a fair market value on the date of exercise equal to the purchase price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the fair market value of the Shares so surrendered equals the purchase price, (ii) by cancellation of indebtedness owed by the Company to the participant, (iii) with a full recourse promissory note executed by the participant, or (iv) any combination of the foregoing. The interest rate and other terms and conditions of such note shall be determined by the Board or the Committee. The Board or Committee may require that the participant pledge his or her Shares to the Company for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Shares by released to the participant until such note shall be been paid in full. Each Option shall state the time or times which all or part thereof becomes exercisable. No Option shall be exercisable after the expiration of 10 years from the date it was granted, and no Option granted to an optionee who owns more than 10 of the total combined voting power of all classes of outstanding stock of the Company shall be exercisable after the expiration of five years from the date it was granted. During the lifetime of a participant in the 2000 Plan, the Option shall be exercisable only by that participant and shall not be assignable or transferable. In the event of the participant's death, the Option shall not be transferable by the participant other than by will or the laws of descent and distribution. Within the limitations of the 2000 Plan, the Board or Committee may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. No modification of an Option shall, without the consent of the participant, alter or impair any rights or obligations under any Option previously granted. In the case of Incentive Stock Options granted under the 2000 Plan, the aggregate fair market value (determined as of the date of the grant thereof) of the Shares with respect to which Incentive Stock Options become exercisable by any participant for the first time during any calendar year (under the 2000 Plan and all other plans maintained by the Company shall not exceed $100,000. The Board or Committee may, however, with the participant's consent, authorize an amendment to the Incentive Stock Option which renders it a Nonstatutory Stock Option. The stock option agreements authorized under the 2000 Plan may contain such other provisions not inconsistent with the terms of the 2000 Plan (including, without limitation, restrictions upon the exercise of the Option) as the Board or the Committee shall deem advisable. Restricted Stock Purchase Agreements. Restricted stock purchase rights (hereinabove defined as "Purchase Rights") shall be evidenced by written stock purchase agreements in such form as the Committee shall from time to time determine. Each Purchase Right shall state the number of Shares to which it pertains and shall provide for the adjustment thereof in the event that the outstanding shares of Common Stock are changed into or exchanged for cash or a different number or kind of shares or securities of the Corporation, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for, or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in which the Corporation is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or other capital change or adjustment. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in order to preserve for the Participant the benefits of the Award. Each agreement shall state the purchase price per Share at which the Purchase Right may be exercised, which shall not be less than the fair market value of a Share on the date on which the Purchase Rights are granted. Unless the Board or Committee otherwise determines, the purchase price per Share at which any Purchase Right granted under the 2000 Plan may be exercised shall not be less than the fair market value of a Share as of the date on which the Purchase Right is granted, less a discount equal to not more than 75% of such value. Purchase Rights must be exercised within 60 days after the later to occur of (i) Board approval of the grant of the Purchase Right or (ii) delivery of notice of such grant. Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner and shall expire immediately upon the death of the participant or the termination of such participant's employment with the Company. The purchase price shall be payable in full in United States dollars upon exercise of the Purchase Right; provided, however, that if the applicable agreement so provides, the purchase price may be paid (i) by the surrender of Shares in good form for transfer, owned by the person exercising the Purchase Right and having a fair market value on the date of exercise equal to the purchase price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the fair market value of the Shares so surrendered equal the Purchase Price, or (ii) with a full recourse promissory note executed by the participant. The interest rate and other terms and conditions of such note shall be determined by the Board or the Committee. The Board or Committee may require that the participant pledge his or her Shares to the Company for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Shares by released to the participant until such note shall be been paid in full. In the event the Company determines that it is required to withhold state or Federal income tax as a result of the exercise of a Purchase Right, as a condition to the exercise thereof, a participant may be required to make arrangements satisfactory to the Company to enable it to satisfy such withholding requirements. In addition, the participant shall agree to immediately notify the Company if he or she files an election pursuant to Section 83(b) of the Internal Revenue Code with respect to receipt of the Shares. Within the limitations of the 2000 Plan, the Board or the Committee may modify, extend or renew outstanding Purchase Rights or accept the cancellation of outstanding Purchase Rights (to the extent not previously exercised) for the granting of new Purchase Rights in substitution therefor. The foregoing notwithstanding, no modification of a Purchase Right shall, without the consent of the participant, alter or impair any rights or obligations under any Purchase Right previously granted. In the event of the voluntary or involuntary termination or cessation of employment or association of a participant with the Company or any Subsidiary for any reason whatsoever, with or without cause (including death or disability), the Company shall, upon the date of such termination, have an irrevocable, exclusive option to repurchase (the "Repurchase Option") all or any portion of the Shares held by the Employee that are subject to the Repurchase Option as of such date at the original purchase price. Initially, all of the Shares shall be subject to the Repurchase Option. Thereafter, the Repurchase Option shall lapse and expire, or "vest," as to a specified number of the Shares in accordance with a schedule to be determined by the Board or the Committee, as the case may be, which shall be attached to the stock purchase agreement to be entered into between the participant and the Company. All Shares which continue to be subject to the Repurchase Option are sometimes hereinafter referred to as "Unvested Shares." Within 90 days following the date of the Participant's termination of employment by the Corporation, the Corporation shall notify the Employee as to whether it wishes to repurchase the Unvested Shares pursuant to the exercise of the Repurchase Option. If the Corporation elects to repurchase said Unvested Shares, it shall set a date for the closing of the transaction at the Executive Offices of the Corporation, not later than 30 days from the date such notice. Except for transfers to participant's descendants and spouses, the participant shall not transfer by sale, assignment, hypothecation donation or otherwise any of the Shares or any interest therein prior to the release of such Shares from the Repurchase Option. The Company's Repurchase Option may be assigned in whole or in part to any stockholder or stockholders of the Company or other persons or organizations. Each stock purchase agreement entered into as provided herein shall provide for a right of first refusal and option on the part of the Company to purchase all or any part of any Shares which are no longer subject to the Repurchase Option which the participant purposes to sell, transfer or otherwise dispose of (except for transfers to participant's descendants and spouses) on the condition that: (a) the participant must notify the Company in writing of any proposed sale, transfer or other disposition of any of the Shares, specifying the proposed transferee, the number of Shares proposed to be transferred, and the price at which such Shares are to be sold, transferred or otherwise disposed; (b) the Company shall have a period of 30 days from receipt of such notice to notify the participant in writing as to whether or not the Company elects to purchase all or a specified portion of such Shares at the lower of (i) price per share set forth in the notice given by the participant, or (ii) the fair market value for a share of the Company's Common Stock, without restrictions, on the date on which the notice is given by participant to the Company, less in either case an amount equal to the discount, if any; (c) if the Company elects not to purchase all of the Shares specified in the notice, the participant may sell, transfer or otherwise dispose of the remaining Shares in strict accordance with the terms specified in the notice within 90 days following the date of the notice. Any transferee of any of such Shares (other than the Company) will take and acquire all of such Shares subject to the continuing right of first refusal and option on the part of the Company to purchase all or any portion of such Shares from the transferee on all of the same terms and conditions as are set forth in the stock purchase agreement, unless the participant shall have paid to the Company, out of the proceeds from the sale of such Shares or otherwise, an amount equal to the lesser of (i) the discount or (ii) the amount by which the fair market value for a share of the Company Common Stock, without restrictions, on the date on which the notice is given by participant to the Company exceeds the price per Share paid by the participant for such Shares. Stock Appreciation Rights. Stock Appreciation Rights related or unrelated to Options or other Awards may be granted to eligible employees: (i) at any time if unrelated to an Award or if related to an Award other than an Incentive Stock Option; or (ii) only at the time of grant of an Incentive Stock Option if related thereto. A Stock Appreciation Right may extend to all or a portion of the shares covered by a related Award. A Stock Appreciation Right granted in connection with an Award shall be exercisable only at such time or times, and to the extent, that a related Award is exercisable. A Stock Appreciation Right granted in connection with an Incentive Stock Option may be exercisable only when the fair market value of the stock subject to the Incentive Stock Option exceeds the exercise price of the Incentive Stock Option. Upon the exercise of a Stock Appreciation Right, and if such Stock Appreciation Right is related to an Award surrender of an exercisable portion of the related Award, the participant shall be entitled to receive payment of a amount determined by multiplying the difference obtained by subtracting the purchase price of a share of Common Stock specified in the related Award, or if such Stock Appreciation Right is unrelated to an Award, from the fair market value, book value or other measure specified in the Award of such Stock Appreciation Right of a share of Common Stock on the date of exercise of such Stock Appreciation Right, by the number of shares as to which such Stock Appreciation Right has been exercised. The Board or the Committee, as the case may be, in its sole discretion, may require settlement of the amount determined under paragraph (i) above solely in cash, solely in shares of Common Stock valued at fair market value, or partly in such shares and partly in cash. Each Stock Appreciation Right and all rights and obligations thereunder shall expire on such date as shall be determined by the Board or the Committee, but not later than 10 years after the date of the Award thereof, and shall be subject to earlier termination as provided in the 2000 Plan. Performance Awards. One or more Performance Awards may be granted to any eligible employee. The value of such Awards may be linked to the market value, book value or other measure of the value of the Common stock or other specific performance criteria determined appropriate by the Board or the Committee, in each case on a specified date or over any period determined by the Board or the Committee, or may be based upon the appreciation in the market value, book value or other measure of the value of a specified number of shares of Common stock over a fixed period determined by the Board or the Committee. In making such determinations, the Board or the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the participant. Dividend Equivalents. A participant may also be granted Dividend Rights based on the dividends declared on the Common Stock, to be credited as of dividend payment dates, during the period between the date of grant of the Award and the date such Award is exercised, vests or expires, as determined by the Board or the Committee. Such Dividend Rights shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Board or the Committee. Stock Payments. The Board or the Committee may approve Stock Payments to eligible employees who elect to receive such payments in the manner determined from time to time by the Board or the Committee. The number of shares shall be determined by the Board or the Committee and may be based upon the fair market value, book value or other measure of the value of such shares on the date the Award is granted or on any date thereafter. Loans. The Company may, with the Board's or the Committee's approval, extend one or more loans to participants in connection with the exercise or receipt of outstanding Awards granted under the Plan. Such loans are subject to the following conditions: (i) the principal of the loan shall not exceed the amount required to be paid to the Corporation upon the exercise or receipt of one or more Awards under the Plan less the aggregate par value of any Common Stock deliverable on such event, and the loan proceeds shall be paid directly to the Corporation in consideration of such exercise or receipt; (ii) the initial term of the loan shall be determined by the Board or the Committee; provided that the term of the loan, including extensions, shall not exceed a period of ten years; (iii) the loan shall be with full recourse to the participant, shall be evidenced by the participant's promissory note and shall bear interest at a rate determined by the Board or the Committee but not less than the Company's average cost of funds as of a date within 31 days of the date of such loan, as determined by the Board or the Committee; and iv) in the event a participant terminates his or her employment at the request of the Company, the unpaid principal balance of the note hall become due and payable on the tenth business day after such termination; provided, however, that if a sale of such shares would cause such participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance shall become due and payable on the tenth business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions by the participant subsequent to such termination. In the event a participant terminates employment other than at the request of the Company, the unpaid principal balance of the note shall become due and payable six months after the date of such termination. Termination, Suspension and Amendment. The Board of Directors or the Committee may, at any time, suspend, amend, modify of terminate the 2000 Plan (or any part thereof) and may, with the consent of the recipient of an Award, authorize such modifications of the terms and conditions of such participant's Award as it shall deem advisable. However, no amendment or modification of the 2000 Plan may be adopted without approval by a majority of the shares of the Common Stock represented (in person or by proxy) at a meeting of stockholders at which a quorum is present and entitled to vote thereat, if such amendment or modification would materially increase the benefits accruing to participants under the 2000 Plan within the meaning of Rule 16b-3 under the Exchange Act or any successor provision; materially increase the aggregate number of shares which may be delivered pursuant to Awards granted under the 2000 Plan; or materially modify the requirements of eligibility for participation in the Plan. The ratification of the 2000 Plan requires the affirmative vote of the majority of the shares present at the Meeting. Neither adoption of the 2000 Plan nor the provisions thereof shall limit the authority of the Board of Directors to adopt other plans or to authorize other payments of compensation and benefits under applicable law. APPROVAL OF ENGAGEMENT OF AUDITORS The Board of Directors has selected Moss Adams, LLP as independent public accountant for the Company for the year ending December 31, 2000, 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. SUBMISSION OF SHAREHOLDER PROPOSALS Stockholders are advised that any stockholder proposal intended for consideration at the 2001 Annual Meeting must be received by the Company on or before February 1, 2001 to be included in any proxy materials prepared for the 2001 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, 1999, and the year ended December 31, 1998 appear on the pages following page 18 of its 1999 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. EX-99.1 2 0002.txt METALCLAD CORPORATION 2000 OMNIBUS STOCK OPTION AND INCENTIVE PLAN 1,000,000 SHARES METALCLAD CORPORATION 2000 OMNIBUS STOCK OPTION AND INCENTIVE PLAN Page I. PURPOSE....................................................... 1 II. DEFINITIONS................................................... 1 III. EFFECTIVE DATE................................................ 4 IV. ADMINISTRATION................................................ 4 V. PARTICIPATION................................................. 5 5.1 Eligibility.............................................. 5 5.2 Ten Percent Shareholders................................. 5 5.3 Stock Ownership.......................................... 5 5.4 Outstanding Stock........................................ 6 VI. STOCK SUBJECT TO THE PLAN..................................... 6 VII. OPTIONS....................................................... 6 7.1 Stock Option Agreements.................................. 6 7.2 Number of Shares......................................... 6 7.3 Exercise Price........................................... 6 7.4 Medium and Time of Payment............................... 6 7.5 Term and Transferability of Options...................... 7 7.6 Modification, Extension and Renewal of Options.......... 7 7.7 Limitation on Grant of Incentive Stock Options........... 7 7.8 "Formula Award" Grants to Certain Directors.............. 7 7.9 Other Provisions......................................... 8 VIII. RESTRICTED STOCK PURCHASE AGREEMENTS.......................... 8 8.1 Stock Purchase Agreements................................ 8 8.2 Number of Shares......................................... 8 8.3 Purchase Price........................................... 8 8.4 Exercisability and Nontransferability of Purchase Rights. 8 8.5 Medium and Time of Payment............................... 9 8.6 Consent of Spouse........................................ 9 8.7 Modification, Extension and Renewal of Purchase Rights... 9 8.8 Repurchase Option as to Unvested Shares.................. 9 8.9 Corporation's Right of First Refusal to Purchase Vested Shares.......................................... 10 8.10 Other Provisions......................................... 10 IX. STOCK APPRECIATION RIGHTS..................................... 11 9.1 Grant.................................................... 11 9.2 Exercise of Stock Appreciation Rights.................... 11 9.3 Payment.................................................. 11 9.4 Maximum Stock Appreciation Right Term.................... 12 X. PERFORMANCE AWARDS............................................ 12 XI. DIVIDEND EQUIVALENTS.......................................... 12 XII. STOCK PAYMENTS................................................ 12 XIII. LOANS......................................................... 12 XIV. RIGHTS OF PARTICIPANTS AND BENEFICIARIES...................... 13 14.1 Employee Status......................................... 13 14.2 No Employment Contract.................................. 13 14.3 No Transferability...................................... 14 14.4 Plan Not Funded......................................... 14 14.5 Adjustments upon Recapitalizations and Corporate Changes............................................... 14 14.6 Termination of Employment............................... 15 14.7 Death of Participant.................................... 15 14.8 Disability of Participant............................... 15 14.9 Retirement of Participant............................... 16 14.10 Rights as a Stockholder................................. 16 14.11 Deferral of Payments.................................... 16 14.12 Acceleration of Awards.................................. 16 XV. MISCELLANEOUS................................................. 16 15.1 Termination, Suspension and Amendment................... 16 15.2 No Fractional Shares.................................... 17 15.3 Tax Withholding and Tax Bonuses......................... 17 15.4 Restrictions of Elections Made by Participants.......... 17 15.5 Limitations on the Corporation's Obligations............ 18 15.6 Compliance with Laws.................................... 18 15.7 Governing Law........................................... 18 15.8 Securities Law Requirements............................. 18 15.9 Execution............................................... METALCLAD CORPORATION 2000 OMNIBUS STOCK OPTION AND INCENTIVE PLAN I. PURPOSE The Plan is intended to provide incentive to key employees and directors of, and key consultants, vendors, customers, and others expected to provide significant services to, the Corporation, to encourage proprietary interest in the Corporation, to encourage such key employees to remain in the employ of the Corporation and its Subsidiaries, to attract new employees with outstanding qualifications, and to afford additional incentive to consultants, vendors, customers, and others to increase their efforts in providing significant services to the Corporation. II. DEFINITIONS. 2.1 "Award" shall mean an Option, which may be designated an Incentive Stock Option or a Nonstatutory Stock Option, a Purchase Right, a Stock Appreciation Right, a Performance Award, a Dividend Right or a Stock Payment, in each case as granted pursuant to the Plan. 2.2 "Award Agreement" shall mean a Stock Option Agreement, Restricted Stock Agreement or a Purchase Right Agreement. 2.3 "Beneficiary" shall mean the person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive the benefits specified under the Plan in the event of a Participant's death. 2.4 "Board" shall mean the Board of Directors of the Corporation. 2.5 "Code" shall mean the Internal Revenue Code of 1986, as amended. 2.6 "Committee" shall mean the committee, if any, appointed by the Board in accordance with Section 4 of the Plan. 2.7 "Common Stock" shall mean the Common Stock, without par value, of the Corporation. 2.8 "Corporation" shall mean Metalclad Corporation, a Delaware corporation, and its Subsidiaries. 2.9 "Disability" shall mean the condition of a Participant who is unable to perform his or her substantial and material job duties due to injury or sickness or such other condition as the Board or Committee may determine in its sole discretion/engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve (12) months. 2.10 "Discount" shall mean, with respect to the Purchase Price of Purchase Rights, the discount from the Fair Market Value of a Share as set forth in Section 8.3. 2.11 "Dividend Equivalent" shall mean a right to receive a number of Shares or a cash amount, determined as provided in Article XII hereof. 2.12 "Eligible Employee" shall mean an individual who is employed (within the meaning of Code Section 3401 and the regulations thereunder) by the Corporation. 2.13 "Event" shall mean any of the following: (a) Any person or entity (or group of affiliated persons or entities) acquires in one or more transactions, whether before or after the effective date of the Plan, ownership of more than 50 percent of the outstanding shares of stock entitled to vote in the election of directors of the Corporation; or (b) The dissolution or liquidation of the Corporation or a reorganization, merger or consolidation of the Corporation with one or more entities, as a result of which the Corporation is not the surviving entity, or a sale of all or substantially all of the assets of the Corporation as an entirety to another entity. For purposes of this definition, ownership does not include ownership (i) by a person owning such shares merely of record (such as a member of a securities exchange, a nominee or a securities depository system), (ii) by a person as a bona fide pledgee of shares prior to a default and determination to exercise powers as an owner of the shares, (iii) by a person who is not required to file statements on Schedule 13D by virtue of Rule 13d-1(b) of the Securities and Exchange Commission under the Exchange Act, or (iv) by a person who owns or holds shares as an underwriter acquired in connection with an underwritten offering pending and for purposes of resale. 2.14 "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. 2.15 "Exercise Price" shall mean the price per Share of Common Stock, determined by the Board or the Committee, at which an Award may be exercised. 2.16 "Fair Market Value" shall mean the value of one (1) Share of Common Stock, determined as follows: (i) If the Shares are traded on an exchange, the price at which Shares traded at the close of business on the date of valuation; or (ii) If the Shares are traded over-the-counter on the NASDAQ System, the closing price if one is available, or the mean between the bid and asked prices on said System at the close of business on the date of valuation; or (iii) If neither (i) nor (ii) above applies, the fair market value as determined by the Board or the Committee in good faith. Such determination shall be conclusive and binding on all persons. 2.17 "Incentive Stock Option" shall mean an option described in Section 422A(b) of the Code. 2.18 "Nonstatutory Stock Option" shall mean an option not described in Section 422(b), 422A(b), 423(b) or 424(b) of the Code. 2.19 "Option" shall mean either an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan. 2.20 "Participant" shall mean an Eligible Employee who has received an Award under the Plan. 2.21 "Performance Award" shall mean a cash bonus, stock bonus or other performance or incentive award that is paid in cash, stock or a combination of both. 2.22 "Plan" shall mean the Metalclad Corporation 2000 Omnibus Stock Option and Incentive Plan, as it may be amended from time to time. 2.23 "Purchase Price" shall mean the Exercise Price times the number of Shares with respect to which an Award is exercised. 2.24 "Purchase Right" shall mean the grant to an Employee of the right to purchase Shares under the Plan. 2.25 "Restricted Stock" shall mean those Shares issued pursuant to a Restricted Stock Award that are not free of the restrictions set forth in the related Restricted Stock Agreement. 2.26 "Restricted Stock Award" shall mean an award of a fixed number of shares subject to payment of such consideration, if any, and such forfeiture provisions, as are set forth in the related Restricted Stock Agreement. 2.27 "Retirement" shall mean the voluntary termination of employment by an Employee upon the attainment of age sixty-five (65) and the completion of not less than twenty (20) years of service with the Corporation or a Subsidiary. 2.28 "Share" shall mean one (1) share of Common Stock, adjusted in accordance with Section 15.4 of the Plan (if applicable). 2.29 "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. 2.30 "Stock Appreciation Right" shall mean the right to receive a number of Shares or a cash amount, or a combination of Shares and cash, based upon the Fair Market Value, book value or other measure determined by the Board or the Committee, as the case may be, pursuant to Section 10.1 of the Plan. 2.31 "Stock Payment" shall mean a payment in the form of Shares, or a Purchase Right, as part of a deferred compensation arrangement, made in lieu of all or any portion of the compensation, including without limitation the salary, bonuses or commissions, that would otherwise become payable in cash to an Eligible Employee. 2.32 "Subsidiary" shall mean any corporation at least fifty percent (50%) of the total combined voting power of which is owned by the Corporation or by another Subsidiary. 2.33 "Tax Date" shall have the meaning set forth in Section 15.3 hereof. III. EFFECTIVE DATE The Plan was adopted by the Board on September 20, 2000, subject to the approval by the Corporation's shareholders. The Plan is being submitted to the shareholders of the Corporation for their approval at the Annual Meeting thereof scheduled for November 20, 2000. The effective date of the Plan shall be September 20, 2000 (the "Effective Date"), provided that the Plan is approved by the shareholders of the Corporation at the Annual Meeting. IV. ADMINISTRATION The Plan shall be administered by the Board in compliance with Rule 16b-3 of the Securities Exchange Act of 1934 ("Rule 16b-3"), or by a Committee appointed by the Board, which Committee shall be constituted to permit the Plan to comply with Rule 16b-3, and which shall consist of not less than three (3) members. The Board shall appoint one of the members of the Committee, if there be one, as Chairman of the Committee. If a Committee has been appointed, the Committee shall hold meetings at such times and places as it may determine. Acts of a majority of the Committee at which a quorum is present, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. The Board, or the Committee if there be one, shall from time to time at its discretion select the Eligible Employees and consultants who are to be granted Awards, determine the number of Shares or cash, or the combination thereof, to be applicable to such Award, and designate any Options as Incentive Stock Options or Nonstatutory Stock Options, except that no Incentive Stock Option may be granted to a non-employee director or a non-employee consultant. A member of the Board or a Committee member shall in no event participate in any determination relating to Awards held by or to be granted to such Board or Committee member; however, a member of the Board or a Committee member shall be entitled to receive Awards approved by the shareholders in accordance with the provisions of Rule 16b-3. The interpretation and construction by the Board, or by the Committee if there be one, of any provision of the Plan or of any Award granted thereunder shall be final. No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any Award granted thereunder. In addition to any right of indemnification provided by the Articles of Incorporation or Bylaws of the Corporation, such person shall be indemnified and held harmless by the Corporation from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him in connection with any claim, suit, action or proceeding to which he may be a party by reason of any action or omission under the Plan. V. PARTICIPATION 5.1 Eligibility. Subject to the terms and conditions of Section 5.2 below, the Participants shall be such persons as the shareholders may approve or as the Committee may select from among the following classes of persons: (i) Employees of the Corporation or of a Subsidiary (who may be officers, whether or not they are directors); and (ii) Consultants, vendors, customers, and others expected to provide significant services to the Corporation or a Subsidiary. For purposes of this Plan, a Participant who is a director or a consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary shall be deemed to be an Eligible Employee, and service as a director, consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary shall be deemed to be employment, except that no Incentive Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary, and except that no Nonstatutory Stock Option may be granted to a non-employee director or non-employee consultant, vendor, customer, or other provider of significant services to the Corporation or a Subsidiary other than upon a vote of a majority of disinterested directors finding that the value of the services rendered or to be rendered to the Corporation or a Subsidiary by such non-employee director or non-employee consultant, vendor, customer, or other provider of services is at least equal to the value of the Awards granted. 5.2 Ten-Percent Shareholders. An Eligible Employee who owns more than ten percent (10%) of the total combined voting power of all classes of outstanding stock of the Corporation, its parent or any of its Subsidiaries shall not be eligible to receive an Award for an Incentive Stock Option unless (i) the Exercise Price of the Shares subject to such Award is at least one hundred ten percent (110%) of the Fair Market Value of such Shares on the date of grant; and (ii) such Award by its terms is not exercisable after the expiration of five (5) years from the date of grant. 5.3 Stock Ownership. For purposes of Section 5.2 above, in determining stock ownership an Eligible Employee shall be considered as owning the stock owned, directly or indirectly, by of for his brothers, sisters, spouses, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by or for its shareholders, partners or beneficiaries. Stock with respect to which such Eligible Employee holds an Award shall not be counted. 5.4 Outstanding Stock. For purposes of Section 5.2 above, "outstanding stock" shall include all stock actually issued and outstanding immediately after the grant of the Award to the Participant. "Outstanding stock" shall not include shares authorized for issue under outstanding Options or Purchase Rights held by the Participant or by any other person. VI. STOCK SUBJECT TO THE PLAN The stock subject to Awards granted under the Plan shall be Shares of the Corporation's authorized but unissued or reacquired Common Stock. The aggregate number of Shares which may be issued as Awards or upon exercise of Awards under the Plan shall not exceed One Million (1,000,000) shares. The number of Shares subject to unexercised Options, Stock Appreciation Rights or Purchase Rights (plus the number of Shares previously issued under the Plan) shall not at any time exceed the number of Shares available for issuance under the Plan. In the event that any unexercised Option, Stock Appreciation Right or Purchase Right, or any portion thereof, for any reason expires or is terminated, or if any shares subject to a Restricted Stock Award do not vest or are not delivered, the unexercised or unvested Shares allocable to such Option, Stock Appreciation Right, Purchase Right or Restricted Stock Award may again be made subject to any Award. Any Shares withheld by the Corporation pursuant to Section 15.3 shall not be deemed to be issued. The number of withheld Shares shall be deducted from the applicable Award and shall not entitle the Participant to receive additional Shares. The limitations established by this Article VI shall be subject to adjustment in the manner provided in Section 14.5 hereof upon the occurrence of an event specified therein. VII. OPTIONS 7.1 Stock Option Agreements. Options shall be evidenced by written stock option agreements in such form as the Committee shall from time to time determine. Such agreements shall comply with and be subject to the terms and conditions set forth below. 7.2 Number of Shares. Each Option shall state the number of Shares to which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 14.5 hereof. 7.3 Exercise Price. Each Option shall state the Exercise Price thereof. The Exercise Price in the case of any Incentive Stock Option shall not be less than the Fair Market Value on the date of grant and, in the case of any Option granted to an Optionee described in Section 5.2 hereof, shall not be less than one hundred ten percent (110%) of the Fair Market Value on the date of grant. The Exercise Price in the case of any Nonstatutory Stock Option shall not be less than eighty-five percent (85%) of the Fair Market Value on the date of grant. 7.4 Medium and Time of Payment. The Purchase Price shall be payable in full in United States dollars upon the exercise of the Option; provided, however, that if the applicable Stock Option Agreement so provides the Purchase Price may be paid (i) by the surrender of Shares in good form for transfer, owned by the Participant and having a Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the Fair Market Value of the Shares so surrendered equal the Purchase Price, (ii) by cancellation of indebtedness owed by the Corporation to the Participant, (iii) with a full recourse promissory note executed by the Participant, or (iv) any combination of the foregoing. The interest rate and other terms and conditions of such note shall be determined by the Committee. The Committee may require that the Participant pledge his or her Shares to the Corporation for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Shares by released to the Participant until such note shall be been paid in full. 7.5 Term and Nontransferability of Options. Each Option shall state the time or times which all or part thereof becomes exercisable. No Option shall be exercisable after the expiration of ten (10) years from the date it was granted, and no Option granted to a Participant described in Section 5.2 hereof shall be exercisable after the expiration of five (5) years from the date it was granted. During the lifetime of the Participant, the Option shall be exercisable only by the Participant and shall not be assignable or transferable. In the event of the Participant's death, the Option shall not be transferable by the Participant other than by will or the laws of descent and distribution. 7.6 Modification, Extension and Renewal of Option. Within the limitations of the Plan, the Committee may modify, extend or renew outstanding Options or accept the cancellation of outstanding Options (to the extent not previously exercised) for the granting of new Options in substitution therefor. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Participant, alter or impair any rights or obligations under any Option previously granted. 7.7 Limitation on Grant of Incentive Stock Options. In the case of Incentive Stock Options granted hereunder, the aggregate Fair Market Value (determined as of the date of the grant thereof) of the Shares with respect to which Incentive Stock Options become exercisable by any Participant for the first time during any calendar year (under this Plan and all other plans maintained by the Corporation, its parent or its Subsidiaries) shall not exceed One Hundred Thousand Dollars ($100,000). The Board or Committee may, however, with the Participant's consent authorize an amendment to the Incentive Stock Option which renders it a Nonstatutory Stock Option. 7.8 "Formula Award" Grants to Certain Directors. Each Director of the Company who is a member of the Compensation Committee shall be eligible to receive a grant of Nonstatutory Options for 20,000 Shares at an exercise price of $3.00 per share as of September 20, 2000 and for 20,000 Shares at an exercise price equal to the Fair Market Value on the date of grant on June 1st of each year during the term of the Plan, commencing on June 1, 2001, for so long as there shall remain shares available for grant. The "formula award" options shall vest ratable over a three-year period on each anniversary of the grant date; however, in the event of a change of control of the Company that results in a change in the majority of the members of the Board of Directors, all of the Options granted shall immediately vest. In the event that there shall at any time be an insufficient number of shares remaining available to award and grant to each of the eligible Directors hereunder an Option covering the full number of shares then to be awarded, then and in such event each Director shall receive an Option coving a pro rata number of shares, calculated on the basis of the number of Directors then eligible to participate in the formula award hereunder. Nothing in this Plan or any Stock Option Agreement shall obligate the Company to increase the number of shares subject to the Plan so that the Company may grant Options to eligible Directors throughout the entire term of this Plan or to grant Options or other rights to any Director after Options covering the total number of shares covered by the Plan have been granted or after the expiration of the term of the Plan. 7.9 Other Provisions. The Stock Option Agreements authorized under the Plan may contain such other provisions not inconsistent with the terms of the Plan (including, without limitation, restrictions upon the exercise of the Option) as the Committee shall deem advisable. VIII. RESTRICTED STOCK PURCHASE RIGHTS 8.1 Stock Purchase Agreements. Purchase Rights shall be evidenced by written Stock Purchase Agreements in such form as the Committee shall from time to time determine. Such agreements shall comply with and be subject to the terms and conditions set forth below. 8.2 Number of Shares. Each Purchase Right shall state the number of Shares to which it pertains and shall provide for the adjustment thereof in accordance with the provisions of Section 14.5 hereof. 8.3 Purchase Price. Each Stock Purchase Agreement shall state the Purchase Price per Share at which the Purchase Right may be exercised, which shall not be less than the Fair Market Value of a Share on the date on which the Purchase Rights are granted. Unless the Board or Committee otherwise determines, the Purchase Price per Share at which any Purchase Right granted under the Plan may be exercised shall not be less than the Fair Market Value of a Share as of the date on which the Purchase Right is granted, less a discount (the "Discount") equal to not more than seventy-five percent (75%) of such value. 8.4 Exercisability and Non-Transferability of Purchase Rights. Purchase Rights granted to an Eligible Employee pursuant to the Plan must be exercised within sixty (60) days after the later to occur of (i) Board approval of the grant of the Purchase Right or (ii) delivery of notice of such grant. Purchase Rights may not be sold, pledged, assigned, hypothecated, transferred or disposed of in any manner and shall expire immediately upon the death of the Participant or the termination of such Participant's employment with the Corporation. 8.5 Medium and Time of Payment. The Purchase Price shall be payable in full in United States dollars upon exercise of the Purchase Right; provided, however, that if the applicable Stock Purchase Agreement so provides, the Purchase Price may be paid (i) by the surrender of Shares in good form for transfer, owned by the person exercising the Purchase Right and having a Fair Market Value on the date of exercise equal to the Purchase Price, or in any combination of cash and Shares, as long as the sum of the cash so paid and the Fair Market Value of the Shares so surrendered equal the Purchase Price, or (ii) with a full recourse promissory note executed by the Participant. The interest rate and other terms and conditions of such note shall be determined by the Committee. The Committee may require that the Participant pledge his or her Shares to the Corporation for the purpose of securing the payment of such note. In no event shall the stock certificate(s) representing such Shares by released to the Participant until such note shall be been paid in full. In the event the Corporation determines that it is required to withhold state or Federal income tax as a result of the exercise of a Purchase Right, as a condition to the exercise thereof, a Participant may be required to make arrangements satisfactory to the Corporation to enable it to satisfy such withholding requirements. In addition, the Participant shall agree to immediately notify the Corporation if he or she files an election pursuant to Section 83(b) of the Code with respect to receipt of the Shares. 8.6 Consent of Spouse. Each Participant who is married must cause his or her spouse to sign and deliver the Stock Purchase Agreement to the Corporation, in the place provided for such signature on the Stock Purchase Agreement. 8.7 Modification, Extension and Renewal of Purchase Rights. Within the limitations of the Plan, the Board or the Committee may modify, extend or renew outstanding Purchase Rights or accept the cancellation of outstanding Purchase Rights (to the extent not previously exercised) for the granting of new Purchase Rights in substitution therefor. The foregoing notwithstanding, no modification of a Purchase Right shall, without the consent of the Employee, alter or impair any rights or obligations under any Purchase Right previously granted. 8.8. Repurchase Option as to Unvested Shares. (a) Termination of Employment. In the event of the voluntary or involuntary termination or cessation of employment or association of the Participant with the Corporation or any Subsidiary for any reason whatsoever, with or without cause (including death or disability), the Corporation shall, upon the date of such termination, have an irrevocable, exclusive option to repurchase (the "Repurchase Option") all or any portion of the Shares held by the Employee that are subject to the Repurchase Option as of such date at the original Purchase Price. (b) Vesting. Initially, all of the Shares shall be subject to the Repurchase Option. Thereafter, the Repurchase Option shall lapse and expire, or "vest," as to a specified number of the Shares in accordance with a schedule to be determined by the Board or the Committee, as the case may be, which shall be attached to the Stock Purchase Agreement to be entered into between the Participant and the Corporation as provided in Section 8.1 above. All Shares which continue to be subject to the Repurchase Option are sometimes hereinafter referred to as "Unvested Shares." (c) Notice. Within ninety (90) days following the date of the Participant's termination of employment by the Corporation, the Corporation shall notify the Employee as to whether it wishes to repurchase the Unvested Shares pursuant to the exercise of the Repurchase Option. If the Corporation elects to repurchase said Unvested Shares, it shall set a date for the closing of the transaction at the Executive Offices of the Corporation, not later than thirty (30) days from the date such notice. (d) Transfers. Except for transfers to Participant's descendants and spouses, the Participant shall not transfer by sale, assignment, hypothecation donation or otherwise any of the Shares or any interest therein prior to the release of such Shares from the Repurchase Option. (e) Assignment. The Corporation's Repurchase Option may be assigned in whole or in part to any stockholder or stockholders of the Corporation or other persons or organizations. 8.9 Corporation's Right of First Refusal to Purchase Vested Shares. Each Stock Purchase Agreement entered into as provided herein shall provide for a right of first refusal and option on the part of the Corporation to purchase all or any part of any Shares which are no longer subject to the Repurchase Option which the Participant purposes to sell, transfer or otherwise dispose of (except for transfers to Participant's descendants and spouses) on the following terms and conditions: (a) The Participant must notify the Corporation in writing of any proposed sale, transfer or other disposition of any of the Shares, specifying the proposed transferee, the number of Shares proposed to be transferred, and the price at which such Shares are to be sold, transferred or otherwise disposed. (b) The Corporation shall have a period of thirty (30) days from receipt of such notice to notify the Participant in writing as to whether or not the Corporation elects to purchase all or a specified portion of such Shares at the lower of (i) price per share set forth in the notice given by the Participant, or (ii) the Fair Market Value for a share of the Corporation's Common Stock, without restrictions, on the date on which the notice is given by Participant to the Corporation (determined as provided in Section 2.13 above), less in either case an amount equal to the Discount. (c) If the Corporation elects not to purchase all of the Shares specified in the notice, the Participant may sell, transfer or otherwise dispose of the remaining Shares in strict accordance with the terms specified in the notice within ninety (90) days following the date of the notice. It is understood and agreed that any transferee of any of such Shares (other than the Corporation) will take and acquire all of such Shares subject to the continuing right of first refusal and option on the part of the Corporation to purchase all or any portion of such Shares from the transferee on all of the same terms and conditions as are set forth in the Stock Purchase Agreement, unless the Participant shall have paid to the Corporation, out of the proceeds from the sale of such Shares or otherwise, an amount equal to the lesser of (i) the Discount or (ii) the amount by which the Fair Market Value for a share of the Corporation's Common Stock, without restrictions, on the date on which the notice is given by Participant to the Corporation (determined as provided in Section 2.13 above) exceeds the price per Share paid by the Participant for such Shares. 8.10 Other Provisions. The Stock Purchase Agreements authorized may contain such other provisions not inconsistent with the terms of the Plan as the Board or the Committee shall deem advisable. IX. STOCK APPRECIATION RIGHTS 9.1 Grant. Stock Appreciation Rights related or unrelated to Options or other Awards may be granted to Eligible Employees (i) at any time if unrelated to an Award or if related to an Award other than an Incentive Stock Option; or (ii) only at the time of grant of an Option if related thereto. A Stock Appreciation Right may extend to all or a portion of the shares covered by a related Award. 9.2 Exercise of Stock Appreciation Rights. A Stock Appreciation Right granted in connection with an Award shall be exercisable only at such time or times, and to the extent, that a related Award is exercisable. A Stock Appreciation Right granted in connection with an Option may be exercisable only when the Fair Market Value of the stock subject to the Option exceeds the exercise price of the Incentive Stock Option. 9.3 Payment. (a) Upon the exercise of a Stock Appreciation Right, and, if such Stock Appreciation Right is related to an Award, surrender of an exercisable portion of the related Award, the Participant shall be entitled to receive payment of an amount determined by multiplying: (i) the difference obtained by subtracting the purchase price of a share of Common Stock specified in the related Award, or if such Stock Appreciation Right is unrelated to an Award, from the Fair Market Value, book value or other measure specified in the Award of such Stock Appreciation Right of a share of Common Stock on the date of exercise of such Stock Appreciation Right, by (ii) the number of shares as to which such Stock Appreciation Right has been exercised. (b) The Board or the Committee, as the case may be, in its sole discretion, may require settlement of the amount determined under paragraph (b) above solely in cash, solely in shares of Common Stock (valued at Fair Market Value on the business day next preceding the date of exercise of such Stock Appreciation Right), or partly in such shares and partly in cash. 9.4 Maximum Stock Appreciation Right Term. Each Stock Appreciation Right and all rights and obligations thereunder shall expire on such date as shall be determined by the Board or the Committee, but not later than ten (10) years after the date of the Award thereof, and shall be subject to earlier termination as provided in the related Award Agreement and Sections 14.6, 14.7, 14.8, 14.9 and 15.1. X. PERFORMANCE AWARDS One or more Performance Awards may be granted to any Eligible Employee. The value of such Awards may be linked to the market value, book value or other measure of the value of the Common stock or other specific performance criteria determined appropriate by the Board or the Committee, in each case on a specified date or over any period determined by the Board or the Committee, or may be based upon the appreciation in the market value, book value or other measure of the value of a specified number of shares of Common stock over a fixed period determined by the Board or the Committee. In making such determinations, the Board or the Committee shall consider (among such other factors as it deems relevant in light of the specific type of award) the contributions, responsibilities and other compensation of the Participant. XI. DIVIDEND EQUIVALENTS A Participant may also be granted "Dividend Equivalents" based on the dividends declared on the Common Stock, to be credited as of dividend payment dates, during the period between the Award Date and the date such Award is exercised, vests or expires, as determined by the Board or the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Board or the Committee. XII. STOCK PAYMENTS The Board or the Committee may approve Stock Payments to Eligible Employees who elect to receive such payments in the manner determined from time to time by the Board or the Committee. The number of shares shall be determined by the Board or the Committee and may be based upon the Fair Market Value, book value or other measure of the value of such shares on the Award Date or on any date thereafter. XIII. LOANS The Corporation may, with the Board's or the Committee's approval, extend one or more loans to Participants in connection with the exercise or receipt of outstanding Awards granted under the Plan; provided any such loan shall be subject to the following terms and conditions: (i) The principal of the loan shall not exceed the amount required to be paid to the Corporation upon the exercise or receipt of one or more Awards under the Plan less the aggregate Par Value of any Common Stock deliverable on such event, and the loan proceeds shall be paid directly to the Corporation in consideration of such exercise or receipt. (ii) The initial term of the loan shall be determined by the Board or the Committee; provided that the term of the loan, including extensions, shall not exceed a period of ten years. (iii) The loan shall be with full recourse to the Participant, shall be evidenced by the Participant's promissory note and shall bear interest at a rate determined by the Board or the Committee but not less than the Corporation's average cost of funds as of a date within thirty-one (31) days of the date of such loan, as determined by the Board or the Committee. (iv) In the event a Participant terminates his or her employment at the request of the Corporation, the unpaid principal balance of the note hall become due and payable on the tenth (10th) business days after such termination; provided, however, that if a sale of such shares would cause such Participant to incur liability under Section 16(b) of the Exchange Act, the unpaid balance shall become due and payable on the tenth (10th) business day after the first day on which a sale of such shares could have been made without incurring such liability assuming for these purposes that there are no other transactions by the Participant subsequent to such termination. In the event a Participant terminates employment other than at the request of the Corporation, the unpaid principal balance of the note shall become due and payable six (6) months after the date of such termination. XIV. RIGHTS OF ELIGIBLE EMPLOYEES, PARTICIPANTS AND BENEFICIARIES 14.1 Employee Status. Status as an Eligible Employee shall not be construed as a commitment that any Award will be made under the Plan to an Eligible Employee or to Eligible Employees generally. 14.2 No Employment Contract. Nothing contained in the Plan (or in the Award Agreements or in any other documents related to the Plan or to Awards) shall confer upon any Eligible Employee or any Participant any right to continue in the employee of the Corporation or constitute any contract or agreement of employment, or interfere in any way with the right of the Corporation to reduce such person's compensation or to terminate the employment of such Eligible Employee or Participant, with or without cause, but nothing contained in the plan or any document related thereto shall affect any other contractual right of any Eligible Employee or Participant. Nothing contained in the plan (or in the Award Agreements or in any other documents related to the Plan or the Awards) shall confer upon any director of the Corporation any right to continue as a director of the Corporation. 14.3 No Transferability. Awards may be exercised only by, and amounts payable or shares issuable pursuant to an Award shall be paid only to or registered only in the name of, the Participant or, in the event of the Participant's death, to the Participant's Beneficiary or, in the event of the Participant's Disability, to the Participant's Personal Representative or, if there is none, to the Participant. Other than by will or the laws of descent and distribution, no right or benefit under the Plan or any Award, including, without limitation, any Option or share of Restricted Stock that has not vested, shall be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance or charge and any such attempted action shall be void and no such right or benefit shall be, in any manner, liable for, or subject to, debts, contract, liabilities, engagements or torts of any Eligible Employee, Participant or Beneficiary, in any case except as may otherwise be expressly required by applicable law. The Board or the Committee shall disregard any attempt at transfer, assignment or other alienation prohibited by the preceding sentence and shall pay or deliver such cash or shares of Common Stock in accordance with the provisions of the Plan. Notwithstanding the foregoing, the Board or the Committee may authorize exercise by or transfers or payments to a third party in a specific case or more generally; provided, however, with respect to any option or similar right (including any stock appreciation right) such discretion may only be exercised to the extent that applicable rules under Section 16 of the Exchange Act would so permit without disqualifying the Plan from certain benefits thereunder. 14.4 Plan Not Funded. No Participant, Beneficiary or other person shall have any right, title or interest in any fund or in any specific asset (including shares of Common Stock) of the Corporation by reason of any Award granted hereunder. There shall be no funding of any benefits which may become payable hereunder. Neither the provisions of the Plan (or of any documents related hereto), nor the creation or adoption of the plan, nor any action taken pursuant to the provisions of the Plan shall create, or be construed to create, a trust of any kind or a fiduciary relationship between the Corporation and any Participant, Beneficiary. To the extent that a Participant, a Beneficiary or other person acquires a right to receive an Award hereunder, such right shall be no greater than the right of any unsecured general creditor of the Corporation. Awards payable under the Plan shall be paid in shares of Common Stock or from the general assets of the Corporation, and no special or separate fund or deposit shall be established and no segregation of assets or shares shall be made to assure payment of such Awards. 14.5 Adjustment Upon Recapitalizations and Corporate Changes. If the outstanding shares of Common Stock are changed into or exchanged for cash or a different number or kind of shares or securities of the Corporation, or if the outstanding shares of the Common Stock are increased, decreased, exchanged for, or otherwise changed, or if additional shares or new or different shares or securities are distributed with respect to the outstanding shares of the Common Stock, through a reorganization or merger in which the Corporation is the surviving entity or through a combination, consolidation, recapitalization, reclassification, stock split, stock dividend, reverse stock split, stock consolidation or other capital change or adjustment, an appropriate adjustment shall be made in the number and kind of shares of other consideration that is subject to or may be delivered under the Plan and pursuant to outstanding Awards. A corresponding adjustment to the consideration payable with respect to Awards granted prior to any such change and to the price, if any, to be paid in connection with Restricted Stock Awards shall also be made as appropriate. Corresponding adjustments shall be made with respect to Stock Appreciation Rights related to Options to which they are related. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of any Participant and the Corporation in order to preserve for the Participant the benefits of an Award. 14.6 Termination of Employment, Except by Death, Disability or Retirement. If a Participant ceases to be an Employee for any reason other than his or her death, Disability or Retirement, such Participant shall have the right, subject to the restrictions of Section 14.3 above, to exercise any Award at any time within three (3) months after termination of employment, but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had accrued pursuant to the terms of the applicable agreement and had not previously been exercised; provided, however, that if the Participant was terminated for cause (as defined in the applicable agreement) any Award not exercised in full prior to such termination shall be canceled. For this purpose, the employment relationship shall be treated as continuing intact while the Participant is on military leave, sick leave or other bona fide leave of absence (to be determined in the sole discretion of the Board or the Committee). The foregoing notwithstanding, in the case of an Incentive Stock Option, employment shall not be deemed to continue beyond the ninetieth (90th) day after the Participant's reemployment rights are guaranteed by statute or by contract. 14.7 Death of Participant. If an Participant dies while an Employee, or after ceasing to be an Employee but during the period while he or she could have exercised the Award under this Section 14.7, and has not fully exercised the Award, then the Award may be exercised in full at any time within twelve (12) months after the Participant's death (but not later than the date of termination fixed in the applicable agreement), by the executors or administrators of his or her estate or by any person or persons who have acquired the Award directly from the Participant by bequest or inheritance, but only to the extent that, at the date of death, the Participant's right to exercise such Award had accrued and had not been forfeited pursuant to the terms of the applicable agreement and had not previously been exercised. 14.8 Disability of Participant. If an Participant ceases to be an Employee by reason of Disability, such Participant shall have the right to exercise the Award at any time within twelve (12) months after termination of employment (but not later than the termination date fixed in the applicable agreement), but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had accrued pursuant to the terms of the applicable agreement and had not previously been exercised. 14.9 Retirement of Participant. If an Participant ceases to be an Employee by reason of Retirement, such Participant shall have the right to exercise the Award at any time within three (3) months after termination of employment (but not later than the termination date fixed in the applicable agreement), but only to the extent that, at the date of termination of employment, the Participant's right to exercise such Award had accrued pursuant to the terms of the applicable agreement and had not previously been exercised. 14.10 Rights as a Stockholder. An Participant, or a transferee of an Participant, shall have no rights as a stockholder with respect to any Shares covered by his or her Award until the date of the issuance of a stock certificate for such Shares. No adjustment shall be made for dividends (ordinary or extraordinary, whether in cash, securities or other property), distributions or other rights for which the record date is prior to the date such stock certificate is issued, except as provided in Section 14.5 hereof. 14.11 Deferral of Payments. The Board or the Committee may approve the deferral of any payments that may become due under the Plan. Such deferrals shall be subject to any conditions, restrictions or requirements as the Board or the Committee may determine. 14.12 Acceleration of Awards. Immediately prior to the occurrence of an Event, (i) each Option and Stock Appreciation Right under the Plan shall become exercisable in full; (ii) Restricted Stock delivered under the Plan shall immediately vest free of restrictions; and (iii) each other Award outstanding under the Plan shall be fully vested or exercisable, unless, prior to the Event, the Board or the Committee otherwise determines that there shall be no such acceleration or vesting of an Award or otherwise determines those Awards which shall be accelerated or vested and to the extent to which they shall be accelerated or vested, or that an Award shall terminate, or unless in connection with such Event the Board provides (A) for the assumption of such Awards theretofore granted; or (B) for the substitution for such Awards of new awards covering securities or obligations (or any combination thereof) of a successor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to number and kind of shares and prices; or (C) for the payment of the fair market value of the then outstanding Awards. In addition, the Board or the Committee may grant such additional rights in the foregoing circumstances as the Board or the Committee deems to be in the best interest of the Participant and the Corporation in order to preserve for the Participant the benefits of an Award. For purposes of this Section 14.12 only, Board shall mean the Board of Directors of the Corporation as constituted immediately prior to the Event. In addition, the Board may in its sole discretion accelerate the exercisability or vesting of any or all Awards outstanding under the Plan in circumstances under which the Board or the Committee determines such acceleration appropriate. XV. MISCELLANEOUS 15.1 Termination, Suspension and Amendment. The Board or the Committee may, at any time, suspend, amend, modify of terminate the Plan (or any part thereof) and may, with the consent of a Participant, authorize such modifications of the terms and conditions of such Participant's Award as it shall deem advisable; provided that, except as permitted under the provisions of Section 14.5 hereof, no amendment or modification of the plan may be adopted without approval by a majority of the shares of the Common Stock represented (in person or by proxy) at a meeting of stockholders at which a quorum is present and entitled to vote thereat, if such amendment or modification would: (i) materially increase the benefits accruing to Participants under the plan within the meaning of Rule 16b-3 under the Exchange Act or any successor provision; (ii) materially increase the aggregate number of shares which may be delivered pursuant to Awards granted under the Plan; or (iii) materially modify the requirements of eligibility for participation in the Plan. Neither adoption of the plan nor the provisions hereof shall limit the authority of the Board to adopt other plans or to authorize other payments of compensation and benefits under applicable law. No Awards under the plan may be granted or amended during any suspension of the Plan or after its termination. The amendment, suspension or termination of the Plan shall not, without the consent of the Participant, alter or impair any rights or obligations pertaining to any Awards granted under the plan prior to such amendment, suspension or termination. 15.2 No Fractional Shares. No Award or installment thereof shall be exercisable except in respect of whole shares, and fractional share interests shall be disregarded. 15.3 Tax Withholding and Tax Bonuses. As required by law, federal, state or local taxes that are subject to the withholding of tax at the source shall be withheld by the Corporation as necessary to satisfy such requirements. The Corporation is entitled to require deduction from other compensation payable to each Participant or, in the alternative: (i) the Corporation may require the Participant to advance such sums; or (ii) if a Participant elects, the Corporation may withhold (or require the return of) Shares having the Fair Market Value equal to the sums required to be withheld. If the Participant elects to advance such sums directly, written notice of that election shall be delivered prior to such exercise and, whether pursuant to such election or pursuant to a requirement imposed by the Corporation, payment in cash or by check of such sums for taxes shall be delivered within ten (10) days after the exercise date. If the Participant elects to have the Corporation withhold Shares (or be entitled to the return of Shares) having a Fair Market Value equal to the sums required to be withheld, the value of the Shares to be withheld (or returned) will be equal to the Fair Market Value on the date the amount of tax to be withheld (or subject to return) is to be determined (the "Tax Date"). 15.4 Restrictions on Elections Made by Participants. Elections by Participants to have Shares withheld (or subject to return) for this purpose will be subject to the following restrictions: (i) the election must be made prior to the Tax Date; (ii) the election must be irrevocable; (iii) the election will be subject to the Board's disapproval; and (iv) if the Participant is an "officer" within the meaning of Section 16 of the Exchange Act, the election shall be subject to such additional restrictions as the Board or the Committee may impose in an effort to secure the benefits of any regulations thereunder. 15.5 Limitations on the Corporation's Obligations. The Corporation shall not be obligated to issue shares and/or distribute cash to the Participant upon any Award exercise until such payment has been received or Shares have been withheld, unless withholding (or offset against a cash payment) as of or prior to the exercise date is sufficient to cover all such sums due or which may be due with respect to such exercise. In addition, the Board or the Committee may grant to a Participant a cash bonus in any amount required by federal, state, or local tax law to be withheld with respect to an Award. 15.6 Compliance with Laws. The Plan, the granting of Awards under the Plan, the Stock Option Agreements and Stock Purchase Agreements and the delivery of Options, Shares and Awards (and/or the payment of money or Common Stock) pursuant thereto and the extension of any loans hereunder are subject to such additional requirements as the Board or the Committee may impose to assure or facilitate compliance with all applicable federal and state laws, rules and regulations (including, without limitation, securities laws and margin requirements) and to such approvals by any regulatory or governmental agency which may be necessary or advisable in connection therewith. In connection with the administration of the Plan or the grant of any Award, the Board or the Committee may impose such further limitations or conditions as in its opinion may be required or advisable to satisfy, or secure the benefits of, applicable regulatory requirements (including those rules promulgated under Section 16 of the Exchange Act or those rules that facilitate exemption from or compliance with the Securities Act or the Exchange Act), the requirements of any stock exchange upon which such shares or shares of the same class are then listed, and any blue sky or other securities laws applicable to such shares. 15.7 Governing Laws. The Plan and all Awards granted under the Plan and the documents evidencing Awards shall be governed by, and construed in accordance with, the laws of the State of California, except as to those matters governed by the laws of the State of Arizona as the state of incorporation of the Corporation. 15.8 Securities Law Requirements. (a) Legality of Issuance. The issuance of any Shares upon the exercise of any Option and the grant of any Option shall be contingent upon the following: (i) the Corporation and the Participant shall have taken all actions required to register the Shares under the Securities Act of 1933, as amended (the "Securities Act"), and to qualify the Option and the Shares under any and all applicable state securities or "blue sky" laws or regulations, or to perfect an exemption from the respective registration and qualification requirements thereof; (ii) any applicable listing requirement of any stock exchange on which the Common Stock is listed shall have been satisfied; and (iii) any other applicable provision of state of Federal law shall have been satisfied. (b) Restrictions on Transfer. Regardless of whether the offering and sale of Shares under the plan has been registered under the Securities Act or has been registered or qualified under the securities laws of any state, the Corporation may impose restrictions on the sale, pledge or other transfer of such Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Corporation and its counsel, such restrictions are necessary or desirable in order to achieve compliance with the provisions of the Securities Act, the securities laws of any state or any other law. In the event that the sale of Shares under the Plan is not registered under the Securities Act but an exemption is available which required an investment representation or other representation, each Participant shall be required to represent that such Shares are being acquired for investment, and not with a view to the sale or distribution thereof, and to make such other representations as are deemed necessary or appropriate by the Corporation and its counsel. Any determination by the Corporation and its counsel in connection with any of the matters set forth in this Section 15.6(b) shall be conclusive and binding on all persons. Stock certificates evidencing Shares acquired under the Plan pursuant to an unregistered transaction shall bear the following restrictive legend and such other restrictive legends as are required or deemed advisable under the provisions of any applicable law: "THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"). ANY TRANSFER OF SUCH SECURITIES WILL BE INVALID UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE OPINION OF COUNSEL FOR THE ISSUER SUCH REGISTRATION IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO COMPLY WITH THE SECURITIES ACT." (c) Registration or Qualification of Securities. The Corporation may, but shall not be obligated to register or qualify the issuance of Awards and/or the sale of Shares under the Securities Act or any other applicable law. The Corporation shall not be obligated to take any affirmative action in order to cause the issuance of Awards or the sale of Shares under the plan to comply with any law. (d) Exchange of Certificates. If, in the opinion of the Corporation and its counsel, any legend placed on a stock certificate representing shares issued under the Plan is no longer required, the holder of such certificate shall be entitled to exchange such certificate for a certificate representing the same number of Shares but lacking such legend. 15.9 Execution. To record the adoption of the Plan in the form set forth above by the Board effective as of September 20, 2000, the Corporation has caused this Plan to be executed in the name and on behalf of the Corporation where provided below by an officer of the Corporation thereunto duly authorized. METALCLAD CORPORATION By: /s/ Grant S. Kesler ---------------------------- Grant S. Kesler, President ATTEST: /s/ Bruce H. Haglund - ------------------------------ Bruce H. Haglund, Secretary (SEAL) -----END PRIVACY-ENHANCED MESSAGE-----