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SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. __)
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
(AS PERMITTED BY RULE 14A-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
NORTH AMERICAN GALVANIZING & COATINGS, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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NORTH AMERICAN GALVANIZING & COATINGS, INC.
MAY 21, 2004
ANNUAL MEETING - JUNE 30, 2004
Dear Stockholder:
You are cordially invited to attend North American Galvanizing &
Coatings, Inc.'s Annual Meeting of Stockholders on Wednesday, June 30, 2004 at
11:00 a.m. The Annual Meeting will be held in the Boardroom of the American
Stock Exchange in New York City.
The business expected to be conducted at the Annual Meeting is
presented in the accompanying Notice of Annual Meeting of Stockholders and Proxy
Statement. Members of management will report on our operations and our outlook
for the future. After the business presentation, the directors and management
will be available for your questions.
If you cannot attend the Annual Meeting in person, please vote your
shares by proxy. The enclosed proxy card contains directions for voting your
shares by mail, by using the Internet or by telephone. Please ensure that your
shares will be represented at the Annual Meeting by voting now. Your vote is
important, either in person or by proxy.
On behalf of the Board of Directors, thank you for your continued
interest in North American Galvanizing & Coatings, Inc. We look forward to
seeing you at our Annual Meeting.
Sincerely,
Ronald J. Evans
President and Chief Executive Officer
NORTH AMERICAN GALVANIZING & COATINGS, INC.
2250 E. 73RD STREET, STE. 300
TULSA, OKLAHOMA 74136-6832 USA
918-494-0964 FAX 918-494-3999 WWW.NAGALV.COM
NORTH AMERICAN GALVANIZING & COATINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Notice is hereby given that the Annual Meeting of Stockholders of North
American Galvanizing & Coatings, Inc., a Delaware corporation, will be held at
the American Stock Exchange in the Boardroom -- 14th Floor, 86 Trinity Place,
New York, New York on Wednesday, June 30, 2004 at 11:00 a.m., local time, for
the purpose of:
1. Electing seven directors to one year terms.
2. Approving the 2004 Incentive Stock Plan.
3. Approving the Director Stock Unit Program.
4. Approving amendments to the Restated Certificate of Incorporation
to effect a reverse stock split followed by a forward stock split
of the common stock at the discretion of the board of directors.
5. Ratifying the appointment of Deloitte & Touche LLP as independent
accountants for 2004.
6. Transacting such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors fixed May 17, 2004 as the record date for
determining stockholders entitled to notice of and to vote at the Annual
Meeting. A list of those stockholders will be open for examination at our
offices for a period of ten days prior to the Annual Meeting and also will be
available for inspection at the Annual Meeting.
We have provided you the choice of voting your shares by Internet,
telephone or mail, as outlined on the enclosed proxy card. It is important that
your shares are represented at the Annual Meeting regardless of the number you
may hold. We encourage you to vote by Internet, telephone or mail even if you
plan to attend the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
Paul R. Chastain,
Vice President & Corporate Secretary
May 21, 2004
PROXY STATEMENT
NORTH AMERICAN GALVANIZING & COATINGS, INC.
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 30, 2004
GENERAL INFORMATION
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of North American Galvanizing &
Coatings, Inc. ("North American Galvanizing", the "Company", "we", "us" or
"our") for use at the Annual Meeting of Stockholders to be held June 30, 2004,
at 11:00 a.m., local time, at the American Stock Exchange ("AMEX") in New York,
New York, or at any adjournments thereof (the "Annual Meeting").
At the close of business on May 17, 2004, the record date for
stockholders entitled to notice of and to vote at the Annual Meeting, there were
________ outstanding shares of our common stock (the "Common Stock"). Each share
of Common Stock is entitled to one vote on all matters.
The holders of a majority of the Common Stock present in person or
represented by proxy will constitute a quorum for transaction of business at the
Annual Meeting. Abstentions and "broker non-votes" are counted to determine the
presence or absence of a quorum at the Annual Meeting. No cumulative voting
rights are authorized and dissenters' rights are not applicable to the matters
being proposed.
This proxy statement and accompanying proxy card are being mailed to our
stockholders on or about May 21, 2004.
Our principal executive office is located at 2250 East 73rd Street, Suite
300, Tulsa, Oklahoma 74136-6832.
The seven nominees receiving the highest number of affirmative votes will
be elected as directors at the Annual Meeting. This is called a plurality. A
vote withheld from a nominee for director will have no effect on the results of
the vote.
Assuming a quorum is present at the Annual Meeting, the affirmative vote
of the shares represented at the Annual Meeting and entitled to vote is required
to approve the 2004 Incentive Stock Plan, approve the Director Stock Unit
Program and ratify the appointment of Deloitte & Touche LLP as the independent
accountants. If you abstain from voting on one or more of these proposals, it
will have the same effect as a vote against that proposal.
The affirmative vote of a majority of the shares outstanding and entitled
to vote at the Annual Meeting is required to amend our Restated Certificate of
Incorporation to effect a reverse stock split followed by a forward stock split
of the common stock at the discretion of the board of directors. If you abstain
from voting on the proposal, it will have the same effect as a vote against the
proposal.
Under the rules of the New York Stock Exchange, brokers who hold shares
of Common Stock in "street name" for customers have authority to vote on certain
"routine" items on behalf of their clients if they do not receive voting
instructions within ten days of the Annual Meeting. Brokers will have
discretionary authority to vote on the election of directors and the
ratification of the independent auditors. For matters that are not routine, if a
broker has not received voting instructions from its client, the broker cannot
vote the shares on that proposal. This is called a "broker non-vote." Broker
non-votes will be counted for purposes of establishing a quorum to conduct
business at the Annual Meeting but not for determining the number of shares
voted for or against a non-routine matter or as an abstention on that matter.
The following non-routine matters are being considered at the Annual Meeting:
the approval of the 2004 Incentive Stock Plan, the approval of the Director
Stock Unit Program, and the approval of amendments to our Restated Certificate
of Incorporation to effect a reverse stock split followed by a forward stock
split of the Common Stock at the discretion of the Board.
You may revoke your proxy at any time before the Annual Meeting by:
o giving written notice to North American Galvanizing & Coatings, Inc.,
Attention: Corporate Secretary, 2250 East 73rd Street, Suite 300,
Tulsa, Oklahoma 74136,
o executing and delivering to the Corporate Secretary a proxy card
bearing a later date, or
o by voting in person at the Annual Meeting.
Shares represented by properly executed proxies will be voted at the Annual
Meeting as specified, unless such proxies are subsequently revoked as provided
above.
If no choice is specified on a valid, unrevoked proxy, the shares will be
voted as follows:
o FOR the election of the directors,
o FOR the approval of the 2004 Incentive Stock Plan,
o FOR the approval of the Director Stock Unit Program,
o FOR the approval of amendments to the Restated Certificate of
Incorporation to effect a reverse stock split followed by a forward
stock split of the Common Stock at the discretion of the Board, and
o FOR the ratification of the appointment of the independent
accountants.
Proxies will also authorize the shares represented thereby to be voted on any
matters not known as of the date of this proxy statement that may properly be
presented for action at the Annual Meeting.
ANNUAL REPORT
Our Annual Report to Stockholders and Form 10-K for the fiscal year ended
December 31, 2003, including audited financial statements, were mailed to our
stockholders on or about April 30, 2004. The annual report is not incorporated
in this proxy statement and is not deemed to be a part of the material for the
solicitation of proxies.
2
PROPOSAL 1
ELECTION OF DIRECTORS
The Board currently consists of seven members, each of whom is elected to
serve for a term of one year.
Seven directors, constituting the entire Board, are to be elected at the
Annual Meeting, in accordance with our Amended and Restated Bylaws (the
"Bylaws"), to serve until the 2005 annual meeting or until their respective
successors have been elected. All of the current directors, Linwood J. Bundy,
Paul R. Chastain, Ronald J. Evans, Gilbert L. Klemann, II, Patrick J. Lynch,
Joseph J. Morrow and John H. Sununu have been nominated for reelection at the
Annual Meeting for a term expiring at the 2005 annual meeting. Each of the
nominees has agreed to serve if elected; however, if any nominee is unable or
declines to serve as a director at the date of the Annual Meeting, such proxies
will be voted for a substitute nominee selected by the Board. The Board has no
reason to believe that any of the nominees will be unavailable to serve.
NOMINEES FOR ELECTION AS DIRECTORS
The experience and background of each of the nominees are set forth
below.
LINWOOD J. BUNDY, age 61, President, Chief Executive Officer and member
of the Board of Directors of Bundy, Inc., a privately-owned development,
entertainment and investment company located in Iowa, since 1993. From 1978 to
1998, President and Chief Executive Officer of Iowa State Ready Mix Concrete,
Inc., a privately-owned concrete company located in Ames, Iowa. Past owner of
Hallet Materials, a sand and gravel operation in Iowa and Texas (1986-1998). Mr.
Bundy serves on the Board of Directors of US Bank in Ames, Iowa. He is a past
member of the Board of Trustees of Mary Greeley Medical Center, a member of the
Order of the Knoll, an Iowa State University Foundation, and past member of a
number of civic and professional organizations in Iowa. Served as director of
the Company continuously since 2000.
PAUL R. CHASTAIN, age 69, currently serves as Vice President and Chief
Financial Officer of the Company since February 1996 and Corporate Secretary
since January 2000. Since joining the Company in 1973, Mr. Chastain has served
in the following capacities: 1993-1996 President and Chief Executive Officer;
1991-1993 Chairman and Chief Executive Officer; 1990-1991 Co-Chairman and
Co-Chief Executive Officer; 1976-1990 Executive Vice President and Treasurer;
1973-1976 Vice President Finance and Corporate Secretary. Served as director of
the Company continuously since 1975.
RONALD J. EVANS, age 54, appointed President of the Company in February
1996 and Chief Executive Officer in November 1999. Private investor from May
1995 to February 1996. From July 1989 to May 1995, Vice President and General
Manager of Deltech Corporation, a privately-owned specialty chemicals producer.
From January 1989 to July 1989, Vice President of Sales and Marketing for
Deltech Corporation. Manager from 1976 to 1989 for Hoechst Celanese Corporation.
Served as director of the Company continuously since 1995.
GILBERT L. KLEMANN, II, age 53, Senior Vice President and General Counsel
of Avon Products Inc. since January 2001. During 2000, Mr. Klemann was Of
Counsel for the international law firm of Chadbourne & Parke LLP, New York City.
From 1991 to 1999, Mr. Klemann was an Executive Officer and General Counsel of
Fortune Brands, Inc. (formerly American Brands, Inc.), a publicly-owned consumer
products holding company, where he also was a member of the Board of Directors.
Prior to 1990 he was a partner in the law firm of Chadbourne & Parke LLP. Served
as director of the Company continuously since 2000.
PATRICK J. LYNCH, age 66, Private investor and formerly Senior Vice
President and Chief Financial Officer of Texaco Inc., a publicly-owned oil and
petrochemicals company, from 1997 to 2001. For more than five years, Mr. Lynch
was actively engaged in the business of Texaco Inc. or one of its subsidiaries
or affiliated companies. He is a member of the Trustees of The American
Petroleum Institute, The Conference Board Financial Executives and CFO Advisory
Council, and serves as a Trustee for Iona College in New Rochelle, New York.
Served as director of the Company continuously since 2001.
3
JOSEPH J. MORROW, age 64, appointed Non-Executive Chairman of the Board
in November 1999. Currently a director of U.S. Agents Holding Corp. Chairman of
Proxy Services Corporation from 1992 to present. Chief Executive Officer of
Proxy Services Corporation from 1972 to 1992. Chief Executive Officer of Morrow
& Co., Inc., a privately-owned proxy solicitation firm, since 1972. Served as
director of the Company continuously since 1996.
JOHN H. SUNUNU, age 64, President of JHS Associates, Ltd. since June 1992
and a former partner in Trinity International Partners, both private financial
firms, and served as co-host of CNN's "Crossfire", a news/public affairs
discussion program, from March 1992 until February 1998. A member of the
National Academy of Engineering and the Board of Trustees for the George Bush
Presidential Library Foundation. From January 1989 until March 1992, Chief of
Staff to the President of the United States. Served on the Advisory Board of the
Technology and Policy Program at MIT from 1984 until 1989. From January 1983 to
January 1989, Governor of the State of New Hampshire. From 1968 until 1973,
Governor Sununu was Associate Dean of the College of Engineering at Tufts
University and Associate Professor of Mechanical Engineering. From 1963 until
his election as Governor, President of JHS Engineering Company and Thermal
Research Inc. Helped establish and served as chief engineer for Astro Dynamics
Inc. from 1960 until 1965. Served as director of the Company continuously since
1996.
With the exception of Messrs. Chastain and Evans, none of the directors
are, or have been, employed by us or any of our subsidiaries or other
affiliates.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE NOMINEES LISTED ABOVE.
4
BOARD OF DIRECTORS AND COMMITTEES
The business of the Company is managed under the direction of the Board.
The Board presently consists of seven directors. The Board meets regularly
during our fiscal year to review significant developments affecting us and to
act on matters requiring Board approval. It also holds special meetings when
necessary between scheduled meetings. The Board has determined that Messrs.
Lynch, Bundy, Morrow, Klemann and Sununu are "independent directors", as the
term is defined under the listing standards of AMEX.
The Board met seven times in 2003 (including regularly scheduled and
special telephonic meetings). All of the directors attended at least 91% of the
total meetings of the Board and the committees on which they were members. The
non-management directors meet in executive session, as needed, without the
management directors or other members of management. The Board does not have a
policy regarding director attendance at annual meetings. Last year, all of the
directors attended the annual meeting.
We have a non-executive Chairman in lieu of a "lead" director who
presides at all executive sessions of the Board. An interested person who wishes
to contact either the Chairman or the non-management directors as a group may do
so by writing to either the Chairman or the Non-Management Directors, c/o
Corporate Secretary, North American Galvanizing & Coatings, Inc., 2250 East 73rd
Street, Suite 300, Tulsa, Oklahoma 74136, which will be forwarded, unopened, to
the addressee.
DIRECTOR'S COMPENSATION
Non-management directors that are not our employees receive an annual fee
of $20,000, payable in quarterly installments, and receive no additional
compensation for committee services beyond their annual fee. A director may
elect to receive the annual fee in cash, shares of Common Stock, or a
combination thereof. Pursuant to the stockholder approved 1996 Stock Option
Plan, each non-management director who is serving as such on July 1 of each year
receives a grant of options to purchase 5,000 shares of Common Stock (the
"Non-Employee Director Options"). Under the 1996 Stock Option Plan, the exercise
price of Non-Employee Director Options is 100% of the fair market value of the
Common Stock on the date of the grant. Non-Employee Director Options become
exercisable six months following the date of the grant and have a ten year term.
Directors who are also our employees receive no compensation beyond their
normal salary for their Board and committee services. We reimburse all directors
for travel expenses incurred by them in connection with their attendance at
Board or committee meetings or other business of the Company.
CORPORATE GOVERNANCE
The Board adopted corporate governance guidelines in 2004. The guidelines
address the qualification and selection of Board members, independence of Board
members, Board leadership, structure of Board committees and Board processes. In
addition, the guidelines include a requirement for executive sessions of
non-management directors, an annual self-assessment of the performance of the
Board and its committees, an annual performance evaluation of the Chief
Executive Officer, and a charter for each Board committee. We have also adopted
a Code of Conduct and Ethics that applies to the Board, our corporate officers
and all of our other employees. Our corporate governance guidelines, the
charters for our committees and our Code of Conduct and Ethics are available on
our website at www.nagalv.com/locations/Nagc.asp.
COMMITTEES OF THE BOARD
The Board maintains the following four standing committees, the
membership of which is determined from time to time by the Board:
EXECUTIVE COMMITTEE. Messrs. Sununu (chairman), Klemann and Evans are
members of the Executive Committee, which met three times in 2003. The Executive
Committee is delegated authority to act on behalf of the Board in certain
operational and personnel matters, and to approve capital expenditures within
limits authorized by the Board.
5
AUDIT COMMITTEE. Messrs. Lynch (chairman), Bundy and Morrow are members
of the Audit Committee, which met nine times in 2003. Each member of the Audit
Committee is an "independent director" as defined in the AMEX rules. The Board
has determined that Mr. Lynch qualifies as an audit committee "financial expert"
within the meaning of the rules and regulations of the Securities and Exchange
Commission (the "SEC"). The charter of our Audit Committee is attached as Annex
A to this Proxy Statement and is also available on our website at
www.nagalv.com/locations/Nagc.asp.
The Audit Committee is responsible for, among other things,
o appointing our independent accountants, subject to stockholder
ratification,
o reviewing the scope of the annual audit and recommendations of the
independent audit firm,
o reviewing and discussing with management and the independent auditors
our audited financial statements and other financial information,
o monitoring the independence and performance of our independent
auditors, and
o evaluating overall risk exposures and the adequacy of the overall
internal control functions of the Company.
COMPENSATION COMMITTEE. Messrs. Morrow (chairman), Lynch and Bundy are
members of the Compensation Committee, which met two times in 2003. Each member
of the Compensation Committee is an "independent director" as defined in the
AMEX rules. The charter of our Compensation Committee is available on our
website at www.nagalv.com/locations/Nagc.asp.
The Compensation Committee considers remuneration of our corporate and
subsidiary officers, administers our incentive compensation and stock option
plans and approves the adoption of employee benefit plans. The Compensation
Committee evaluates the performance of the Chief Executive Officer and
recommends to the Board compensation of the Chief Executive Officer.
CORPORATE GOVERNANCE AND NOMINATING COMMITTEE. The Corporate Governance
and Nominating Committee was formed in 2003, and is composed of Messrs. Morrow
(chairman), Bundy, Klemann, Lynch and Sununu. Each member of the Corporate
Governance and Nominating Committee is an "independent director" as defined in
the AMEX rules. The Corporate Governance and Nominating Committee met one time
in 2003. The charter of our Corporate Governance and Nominating Committee is
available on our website at www.nagalv.com/locations/Nagc.asp.
The Corporate Governance and Nominating Committee conducts an annual
self-assessment to determine whether the Board and its committees are
functioning effectively. The Corporate Governance and Nominating Committee is
responsible for, among other things, identifying and evaluating the
qualifications of candidates for Board membership and making recommendations of
candidates for consideration of nomination by the Board.
The Corporate Governance and Nominating Committee reviews and recommends
to the Board the slate of director nominees to be proposed for election at
annual meetings of stockholders and candidates to fill vacancies on the Board
that occur between annual meetings of the stockholders. In identifying and
evaluating candidates for Board membership, the Corporate Governance and
Nominating Committee takes into account all factors it considers appropriate,
which may include professional experience, knowledge, integrity, independence,
diversity of backgrounds and the extent to which the candidate would fill a
present need on the Board.
The Corporate Governance and Nominating Committee will consider
candidates for director recommended by stockholders. Any stockholder who wishes
to recommend a person to be considered for nomination as a director by the
Corporate Governance and Nominating Committee may do so by submitting the
candidate's name and qualifications in writing to Corporate Governance and
Nominating Committee, c/o Corporate Secretary, 2250 E. 73rd Street, Suite 300,
Tulsa, Oklahoma 74136-6832. Stockholders may directly nominate persons for
director in accordance with the provisions of our Bylaws, a copy of which is on
file with the SEC.
6
COMPANY INFORMATION AVAILABLE ON WEBSITE
In addition to our corporate governance guidelines, our Code of Conduct
and Ethics and the charters of our Audit Committee, Compensation Committee and
our Corporate Governance and Nominating Committee, we make available through our
Internet website at www.nagalv.com/locations/Nagc.asp certain filings with the
SEC, including our Proxy Statements, Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, and Statements of Beneficial
Ownership of Securities on Forms 3, 4 and 5 for our directors and officers.
7
SECURITY OWNERSHIP OF PRINCIPAL STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information as of May 1, 2004,
regarding the beneficial ownership of the Common Stock by (a) all persons who
are beneficial owners of five percent or more of the Common Stock, (b) each of
our directors, (c) our Chief Executive Officer and our only other executive
officer (the "named executive officers"), and (d) all of our directors and
executive officers as a group. Unless otherwise noted, the persons named below
have sole voting and investment power with respect to such shares.
NUMBER OF OPTIONS AND
SHARES OF WARRANTS
COMMON STOCK EXERCISABLE PERCENTAGE OF
BENEFICIALLY WITHIN 60 COMMON
NAME OWNED DAYS(1) STOCK(2)
------------------------------- ------------ ------------ ------------
Linwood J. Bundy 50,121 87,292 2.0%
Paul R. Chastain 33,769 2,500 0.5%
Ronald J. Evans 52,890 299,583 5.0%
Gilbert L. Klemann, II 47,581 86,250 1.9%
Patrick J. Lynch 42,999 51,458 1.4%
Joseph J. Morrow 1,970,798 173,332 30.7%
John H. Sununu 208,996 106,667 4.6%
All Directors and Executive 2,407,154 807,082 42.2%
Officers as Group (7 persons)
Robert G. and Pauline B. Walker 345,724(3) -- 5.1%
Revocable Trust
Edmund A. Schwesinger, Jr. 397,900(4) -- 5.8%
--------------
(1) Represents shares which the directors and executive officers have, or
within 60 days of May 1, 2004 will have, the right to acquire through the
exercise of stock options and warrants.
(2) Based on 6,805,793 shares of the Common Stock outstanding as of May 1, 2004
plus any currently exercisable warrants and stock options or stock options
which become exercisable within 60 days. The address for each of our
directors is as follows: c/o North American Galvanizing & Coatings, Inc.,
2250 East 73rd Street, Suite 300, Tulsa, Oklahoma 74136-6832.
(3) Information based on Schedule 13D of the Robert G. and Pauline B. Walker
Revocable Trust, the Pauline B. Walker Revocable Trust A and the Robert G.
Walker Irrevocable Trust B filed with the SEC dated December 14, 1996. The
Robert G. and Pauline B. Walker Revocable Trust, together with two
affiliated trusts, the Pauline B. Walker Revocable Trust A and the Robert
G. Walker Irrevocable Trust B, beneficially own 345,724 shares. Pauline B.
Walker, 3505 Claymore Drive, Plano, Texas 75075, is the sole trustee of all
three trusts.
(4) Information based on Schedule 13G of Mr. Edmund A. Schwesinger, Jr., 94
Cutler Road, Greenwich, Connecticut 06831, filed with the SEC on January
24, 2003.
8
EXECUTIVE COMPENSATION
The following Summary Compensation Table provides information on the
annual and long-term compensation for services paid to the named executive
officers for the three fiscal years ended December 31, 2003.
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- --------------------------------
RESTRICTED SECURITIES ALL
NAME AND STOCK UNDERLYING LTIP OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS OPTIONS PAYMENTS COMPENSATION(1)
------------------ ---- -------- ------- ------ ---------- -------- ---------------
Ronald J. Evans 2003 $160,000 $50,000 -- 15,000 -- $9,922
President and CEO 2002 150,000 33,020 -- 25,000 -- 8,662
2001 100,000 -- -- -- 6,300
Paul R. Chastain 2003 $146,600 $ 7,500 -- 10,000 -- $9,157
Vice President, 2002 141,600 -- -- -- -- 8,921
CFO and Secretary 2001 141,600 -- -- -- -- 8,921
------------------
(1) Represents the Company's matching contributions to its 401(k) defined
contribution retirement plan on behalf of the named executive officer.
STOCK OPTION GRANTS IN FISCAL YEAR 2003
The following table provides information on fiscal year 2003 stock option
grants to the named executive officers.
POTENTIAL
REALIZATION
AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK
SECURITIES TOTAL OPTIONS EXERCISE PRICE APPRECIATION
UNDERLYING GRANTED TO OR FOR OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION -------------------
NAME GRANTED(#)(1) FISCAL YEAR ($/SHARE) DATE 5% 10%
---- ------------ ------------ --------- ---------- -------- --------
Ronald J. Evans 15,000 30.0% $ 1.50 3/18/13 $ 14,150 $ 35,859
Paul R. Chastain 10,000 20.0% $ 1.50 3/18/13 $ 9,433 $ 23,906
------------------
(1) Options are granted under the 1996 Stock Option Plan and become exercisable
over a four year period, with 25% of the shares becoming exercisable on
each anniversary of the grant date.
(2) The assumed values result from certain prescribed rates of stock price
appreciation. Values were calculated based on a ten-year exercise period.
The actual value of the option grant is dependent on future performance of
the Common Stock and overall stock market conditions. There is no assurance
that the values reflected in this table will be achieved.
9
OPTIONS EXERCISED IN FISCAL YEAR 2003
AND FISCAL YEAR-END VALUES
The following table provides information on options exercised by the named
executive officers during fiscal year 2003 and the value of options held at
fiscal year-end.
NUMBER OF SECURITIES VALUE OF UNEXERCISED
# OF SHARES UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED ON VALUE OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END ($)
NAME EXERCISE REALIZED($) EXERCISABLE / UNEXERCISABLE EXERCISABLE / UNEXERCISABLE(1)
---------------- ----------- ---------- --------------------------- ---------------------------
Ronald J. Evans -- $ -- 256,250 / 33,750 $2,500 / $7,900
Paul R. Chastain -- -- 6,000 / 10,000 -- / --
-------------------------------------------------------------------------------------------------------
(1) Value is the difference between the closing price of the Common Stock on
the last trading day of fiscal 2003 and the option exercise price of the
in-the-money options multiplied by the number of in-the-money options.
10
COMPENSATION COMMITTEE REPORT
The Compensation Committee reviews our general compensation policies and
the compensation plans and specific compensation levels for executive officers.
The 1996 Stock Option Plan and Rule 16b-3 of the Securities Exchange Act of
1934, as amended, require that at least two of the Compensation Committee
members be non-employee directors. The Compensation Committee consists of three
directors who are not employees of the Company. Each of the Compensation
Committee members also is an "independent director" as defined in the AMEX
rules. Joseph J. Morrow is the current Chairman of the Compensation Committee.
Former Board member Mark E. Walker served as Chairman of the Compensation
Committee until his retirement from the Board in February 2004. All decisions by
the Compensation Committee relating to the compensation of our executive
officers are reviewed by the full Board.
In accordance with SEC rules designed to enhance disclosure of companies'
policies toward executive compensation, the following is a report submitted by
the Compensation Committee members addressing our compensation policy as it
related to our executive officers and key subsidiary officers and managers for
the fiscal year 2003.
Our objective is to ensure that executive compensation is directly linked
to ongoing improvement in corporate performance and increasing stockholder
value. The following objectives are guidelines for compensation decisions:
CLASSIFICATION. The Compensation Committee has approved a compensation
program for our salaried employees which is based on annual national salary
surveys for industrial manufacturing companies. Approved salary ranges are
reviewed annually to determine parity with national compensation trends and to
ensure that we maintain a reasonably competitive compensation structure.
COMPETITIVE SALARY BASE. Actual salaries are based on individual
performance contributions within a competitive salary range for each position
established through job evaluation and market comparisons. The salary of each
subsidiary key officer and senior managers and corporate officer is reviewed
annually by the President and Chief Executive Officer who may recommend an
increase for approval by the Compensation Committee. The President and Chief
Executive Officer's salary is determined by the Board based on a review and
recommendation by the Compensation Committee, taking into consideration similar
competitive compensation, assessment of his past performance, his leadership
characteristics and its expectations of his future contributions to our
long-term success. The Compensation Committee approved a base salary of $160,000
for the Chief Executive Officer during 2003, reflecting our improved earnings
performance in 2002.
ANNUAL INCENTIVE COMPENSATION. Our executive officers and key subsidiary
personnel are eligible to participate in an annual incentive compensation plan
with awards based primarily on achievement of profit performance targets. Awards
are subject to decrease or increase on the basis of our performance and at the
discretion of the Compensation Committee. The Compensation Committee took into
consideration the contributions and earnings performance by the key managers and
officers of our galvanizing subsidiary and selectively approved an aggregate of
$130,920 in incentive awards for 27 persons, including our Chief Executive
Officer.
STOCK OPTION PROGRAM. The purpose of this program is to provide
additional incentives to employees to work to maximize our growth and
stockholder value. The stock option program may utilize vesting periods to
encourage key employees to continue in our employ. The number of options granted
is determined by the subjective evaluation of the executive's ability to
influence our long-term growth and profitability. Options are granted at the
current market price at the time of the grant. In 2003, the Compensation
Committee approved stock option grants totaling 50,000 shares of Common Stock to
our executive officers (which includes a stock option grant of 15,000 shares of
Common Stock to our Chief Executive Officer) and key galvanizing subsidiary
officers.
The Compensation Committee believes that its objectives of linking
executive compensation to corporate performance result in alignment of
compensation with corporate goals and stockholder interest. The Compensation
Committee believes that compensation levels during 2003 adequately reflect our
compensation goals and policies. The Compensation Committee will continue to
evaluate the relationship between its executive and key managerial compensation
and our performance and stockholder value.
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THE COMPENSATION COMMITTEE:
Joseph J. Morrow, Chairman
Linwood J. Bundy
Patrick J. Lynch
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee is presently comprised of the following
directors: Messrs. Morrow, Lynch and Bundy, none of whom are current or former
officers or employees of the Company or any of its subsidiaries. Former Board
member Mark E. Walker served as Chairman of the Compensation Committee until his
retirement from the Board in February 2004. None of our named executive officers
or directors was an executive officer or served as a member of the board of
directors or compensation committee of any entity that has one or more of its
executive officers serving as a member of our Board or Compensation Committee.
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AUDIT COMMITTEE REPORT
After a recommendation by the Audit Committee, the Board adopted a
revised Audit Committee charter setting forth the functions to be performed by
the Audit Committee. The Audit Committee consists of three directors, all of
whom must be independent in accordance with and meet the other requirements of
the AMEX rules.
The Audit Committee reviews our financial reporting process on behalf of
the Board. Management has the primary responsibility for the financial
statements and the reporting process, including the system of internal controls.
In this context, the Audit Committee has met and held discussions with
management and the independent auditor regarding the fair and complete
presentation of the Company's results. The Audit Committee has discussed
significant accounting policies applied by the Company in its financial
statements, as well as alternative treatments. Management represented to the
Audit Committee that our consolidated financial statements were prepared in
accordance with accounting principals generally accepted in the United States of
America.
The Audit Committee is responsible for, among other things, reviewing
with our independent auditors the scope and results of their audit engagement.
In connection with the fiscal 2003 audit, the Audit Committee has:
o reviewed and discussed with Deloitte & Touche, LLP, our independent
auditors ("Deloitte & Touche"), and with management our audited
financial statements to be included in our annual report on Form 10-K
for the year ended December 31, 2003,
o discussed with Deloitte & Touche the matters required by Statement on
Auditing Standards No. 61, as amended, relating to communications
between the Audit Committee and the independent accountants, and
o received from and discussed with Deloitte & Touche the written
disclosures and letter from Deloitte & Touche required by
Independence Standards Board Standard No. 1 as modified or
supplemented, regarding their independence from the Company.
Based on the review and the discussions described in the preceding bullet
points, the Audit Committee has recommended to the Board that the audited
financial statements be included in our Annual Report on Form 10-K for the year
ended December 31, 2003 for filing with the SEC. The revised Audit Committee
Charter, effective January 1, 2004, is set forth in Annex A hereto.
THE AUDIT COMMITTEE:
Patrick J. Lynch, Chairman
Linwood J. Bundy
Joseph J. Morrow
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PROPOSAL 2
2004 INCENTIVE STOCK PLAN PROPOSAL
The following discussion summarizes the material terms of the North
American Galvanizing & Coatings, Inc. 2004 Stock Incentive Plan (the "Plan").
This discussion does not purport to be complete and is qualified in its entirety
by reference to the Plan, a copy of which is attached hereto as Annex B.
PURPOSE
The primary purpose of the Plan is (1) to attract and retain eligible
employees and outside directors for us, (2) to provide an incentive to eligible
employees and outside directors to work to increase the value of our Common
Stock, and (3) to provide eligible employees and outside directors with a stake
in our future which corresponds to the stake of each of our stockholders.
ADMINISTRATION
The Plan is administered by a committee of our board of directors (the
"Committee"), which shall have at least two members, each of whom shall be a
non-employee director within the meaning of Rule 16b-3 and an outside director
under Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). Each grant under the Plan is evidenced by a certificate that
incorporates such terms and conditions as the Committee deems necessary or
appropriate.
COVERAGE, ELIGIBILITY AND GRANT LIMITS
The Plan provides for the grant of stock options ("Options"), stock
grants ("Stock Grants"), stock units ("Stock Units"), and stock appreciation
rights ("SARs") to certain eligible employees and to outside directors. An
eligible employee is any of our employees or any employee of our subsidiary,
parent or affiliate who has been designated by the Committee to receive a grant
under the Plan. No eligible employee or outside director in any calendar year
may be granted an Option to purchase more than 100,000 shares of Common Stock or
an SAR based on the appreciation with respect to more than 100,000 shares of
Common Stock or may be granted Stock Grants or Stock Units where the fair market
value of shares of Common Stock subject to such grant exceeds $100,000 shares.
This $100,000 limitation does not apply to a Stock Unit Grant made pursuant to
the Director Stock Unit Program. No more than 100,000 shares of Common Stock are
available for issuance pursuant to nonforfeitable Stock Grants or Stock Units
under the Plan; provided, however, that no non-forfeitable shares of Common
Stock issued pursuant to Stock Unit grants under the Director Stock Unit Program
shall be counted in determining whether this 100,000 share limitation has been
reached. No more than 1,250,000 shares of Common Stock are available for grant
of incentive stock options ("ISOs").
SHARES AVAILABLE FOR ISSUANCE
There will be 1,250,000 shares of Common Stock available for issuance
under the Plan, which includes 489,677 authorized but unissued shares under the
North American Galvanizing & Coatings, Inc. 1996 Stock Option Plan which are not
covered by outstanding options. In addition, shares that were subject to
outstanding grants under this plan and the North American Galvanizing &
Coatings, Inc. 1988 Stock Option Plan which are forfeited or lapse on or after
the effective date of the Plan shall become available for issuance under the
Plan. The number of such shares will depend upon which, if any, grants under
such plans are forfeited or lapse and therefore is not known at this time. Any
shares of Common Stock which remain unissued after the cancellation, expiration
or exchange of an Option, SAR or Stock Grant or which are forfeited after
issuance shall again be available for grants under the Plan.
OPTIONS
Under the Plan, non-incentive stock options ("Non-ISOs") may be granted
to eligible employees or outside directors by the Committee, but ISOs, which are
intended to qualify for special tax treatment under Section 422 of the Code, can
only be granted to our eligible employees or eligible employees of our
subsidiary or parent. Each Option granted under the Plan entitles the optionee
to purchase the number of shares of Common Stock specified in
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the grant at the option price specified in the related stock option certificate.
The terms and conditions of each Option granted under the Plan will be
determined by the Committee, but no Option will be granted at an exercise price
which is less than the fair market value of the Common Stock as determined on
the grant date in accordance with the Plan. In addition, if the Option is an ISO
that is granted to a ten percent stockholder, the option price may be no less
than 110% of the fair market value of the shares of Common Stock on the grant
date. Moreover, no eligible employee may be granted ISOs which are first
exercisable in any calendar year for stock having an aggregate fair market value
(determined as of the date that the ISO was granted) that exceeds $100,000.
Each Option granted under the Plan shall be exercisable as provided in
the related Option certificate. However, if the only condition to the exercise
of an Option is the completion of a period of service, such period of service
shall not be less than one year, starting on the date the Option is granted
unless the Committee determines that a shorter period of service (or no period
of service) better serves our interest. No Option may be exercisable more than
ten years from the grant date or, if the Option is an ISO granted to a ten
percent stockholder, it may not be exercisable more than five years from the
grant date.
STOCK APPRECIATION RIGHTS
SARs may be granted by the Committee to eligible employees and outside
directors under the Plan, either as part of an Option or as stand alone SARs.
The terms and conditions for an SAR granted as part of an Option will be set
forth in the Option certificate for the related Option while the terms and
conditions for a stand alone SAR will be set forth in a SAR certificate. SARs
entitle the holder to receive the appreciation of the fair market value of one
share of Common Stock as of the date such right is exercised over the baseline
price specified in the Option or SAR certificate (the "SAR Value"), multiplied
by the number of shares of Common Stock in respect of which the SAR is being
exercised. The SAR Value for an SAR must equal or exceed the fair market value
of a share of Common Stock as determined on the grant date in accordance with
the Plan. If an SAR is granted together with an Option, then the exercise of the
SAR shall cancel the right to exercise the related Option, and the exercise of a
related Option shall cancel the right to exercise the SAR. An SAR granted as a
part of an Option shall be exercisable only while the related Option is
exercisable. A stand alone SAR shall be exercisable as provided in the related
SAR certificate. The Committee in its discretion may require completion of a
period of service as an eligible employee or outside director before an SAR may
be exercised, but if the only condition to the exercise of an SAR is the
completion of a period of service, such period of service shall not be less than
one year, starting on the date the SAR is granted unless the Committee
determines that a shorter period of service (or no period of service) better
serves our interest. At the discretion of the Committee any payment due upon the
exercise of an SAR can be made in cash or in the form of Common Stock.
STOCK GRANTS
Stock Grants are grants which are designed to result in the issuance of
Common Stock to the eligible employee or outside director to whom the grants are
made, and Stock Grants may be granted by the Committee subject to such terms and
conditions, if any, as the Committee acting in its absolute discretion deems
appropriate. The Committee, in its discretion, may prescribe that an eligible
employee's or outside director's rights in a Stock Grant will be nontransferable
or forfeitable or both unless certain conditions are satisfied. These conditions
may include, for example, a requirement that the eligible employee continue
employment or the outside director continue service with us for a specified
period or that we or the eligible employee achieve stated performance or other
objectives. If the only condition to the forfeiture of a Stock Grant is the
completion of a period of service, such period of service shall not be less than
three years, starting on the date the Stock Grant is made unless the Committee
determines that a shorter period of service (or no period of service) better
serves our interest. Each Stock Grant shall be evidenced by a certificate which
will specify what rights, if any, an eligible employee or outside director has
with respect to such Stock Grant as well as any conditions applicable to the
Stock Grant.
Except as otherwise set forth in the related Stock Grant certificate, if
a cash dividend is paid on stock subject to a Stock Grant while such Stock Grant
remains subject to forfeiture conditions or restrictions on transfer, then the
cash dividend will be paid in cash directly to the eligible employee or outside
director. Except as otherwise set forth in the related Stock Grant certificate,
if a stock dividend is paid on stock subject to a Stock Grant while such Stock
remains subject to forfeiture conditions or restrictions on transfer, then the
stock dividend will be held by us subject to the same conditions or restrictions
as the related Stock Grant. Except as otherwise set forth in the related Stock
15
Grant certificate, an eligible employee or outside director shall have the right
to vote Stock issued under a Stock Grant while such Stock remains subject to
forfeiture conditions or restrictions on transfer.
STOCK UNITS
Stock Units are grants which are designed to result in cash payments to
the eligible employees and outside directors to whom grants are made based on
the fair market value of the Common Stock underlying the grant, and Stock Units
may be granted by the Committee subject to such terms and conditions, if any, as
the Committee acting in its absolute discretion deems appropriate. A Stock Unit
grant made pursuant to the Director Stock Unit Program may at the discretion of
the Committee result in the issuance of shares of Common Stock (and cash in lieu
of any fractional share). The terms and conditions for a Stock Unit grant will
be set forth in the certificate evidencing the grant and may include, for
example, a requirement that the eligible employee continue employment or the
outside director continue service with us for a specified period or that we or
the eligible employee achieve stated performance or other objectives. If the
only condition to the forfeiture of a Stock Unit is the completion of a period
of service, such period of service shall not be less than three years, starting
on the date the Stock Unit is granted unless the Committee determines that a
shorter period of service (or no period of service) better serves our interest.
Finally, the Committee shall have the discretion to settle Stock Units granted
under the director stock unit program with shares of Common Stock, and any such
settlement effected in Common Stock will be charged against the limit on shares
which can be issued pursuant to Stock Grants.
TRANSFERABILITY
No Option, SAR, Stock Grant or Stock Unit grant made to an eligible
employee or outside director is transferable by such eligible employee or
outside director other than by will or by the laws of descent and distribution.
Absent consent of the Committee, an Option or SAR shall be exercisable during an
eligible employee's or outside director's lifetime only by such eligible
employee or outside director.
CHANGE IN CONTROL
If there is a change in control, then all conditions to the exercise of
all outstanding Options and SARs and all issuance or forfeiture conditions on
all outstanding Stock Grants and Stock Unit grants will be deemed satisfied. The
board of directors shall have the right, to the extent required as a part of the
change in control transaction, to cancel all outstanding Options, SARs and Stock
Grants after giving eligible employees and outside directors a reasonable period
of time to exercise their outstanding Options and SARs or to take such other
action as is necessary to receive Common Stock subject to Stock Grants.
A change in control means, generally, (1) the acquisition by any person
of 30% or more of the outstanding shares of Common Stock, (2) the current
members of our board of directors, or their approved successors, ceasing to be a
majority of the board of directors during any period of two years or less, (3) a
reorganization, merger, consolidation or sale or disposition of substantially
all of our assets, unless our shareholders control the resulting company, or (4)
the approval by shareholders of our complete liquidation or dissolution, (5) any
other event the Committee determines is a change in control.
AMENDING OR TERMINATING THE PLAN
The Plan may be amended by the board of directors to the extent it deems
necessary or appropriate, but no amendment may be made on or after the effective
date of a change on control to the section of the Plan governing a change in
control which might adversely affect any rights that would otherwise vest on a
change in control. The Plan may also be terminated by the board of directors at
any time. The board of directors may not unilaterally modify, amend or cancel
any Option, SAR, Stock Grant or Stock Unit previously granted without the
consent of the holder of such Option, SAR, Stock Grant or Stock Unit or unless
we are completely dissolved or liquidated or a similar transaction occurs. No
amendment shall be made absent the approval of our stockholders to the extent
such approval is required under applicable law or the rules of the stock
exchange on which shares of Common Stock are listed.
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ADJUSTMENT OF SHARES
CAPITAL STRUCTURE. The number, kind or class of shares of Common Stock
reserved for issuance under the Plan, the annual grant caps, the number, kind or
class of shares of Common Stock subject to Options or SARs granted under the
Plan, and the option price of the Options and the SAR Value of the SARs, as well
as the number, kind or class of shares of Common Stock granted pursuant to Stock
Grants under the Plan and the payment due under Stock Unit grants under the
Plan, shall be adjusted by the Committee in an equitable manner to reflect any
change in our capitalization.
MERGERS. The Committee as part of any transaction described in Code
Section 424(a) shall have the right to adjust (in any manner which the Committee
in its discretion deems consistent with Code Section 424(a)) the number, kind or
class of shares of Common Stock reserved for issuance under the Plan, the
number, kind or class of shares of Common Stock underlying any Stock Grants
previously made under the Plan and any related grant and forfeiture conditions,
and the number, kind or class of shares of Common Stock subject to Option and
SAR grants previously made under the Plan and the related option price of the
Options and SAR Value of the SARs and cash payment under Stock Unit grants
previously made under the Plan, and, further, shall have the right to make (in
any manner which the Committee in its discretion deems consistent with Code
Section 424(a)) Stock Grant, Stock Unit, Option and SAR grants to effect the
assumption of, or the substitution for, stock grants, option and stock
appreciation right grants previously made by any other corporation to the extent
that such transaction calls for the substitution or assumption of such grants.
FEDERAL INCOME TAX CONSEQUENCES
The rules concerning the federal income tax consequences with respect to
grants made pursuant to the Plan are technical, and reasonable persons may
differ on the proper interpretation of such rules. Moreover, the applicable
statutory and regulatory provisions are subject to change, as are their
interpretations and applications, which may vary in individual circumstances.
Therefore, the following discussion is designed to provide only a brief, general
summary description of the federal income tax consequences associated with such
grants, based on a good faith interpretation of the current federal income tax
laws, regulations (including certain proposed regulations) and judicial and
administrative interpretations. The following discussion does not set forth (1)
any federal tax consequences other than income tax consequences or (2) any
state, local or foreign tax consequences that may apply.
ISOS. In general, an eligible employee will not recognize taxable income
upon the grant or the exercise of an ISO. For purposes of the alternative
minimum tax, however, the eligible employee will be required to treat an amount
equal to the difference between the fair market value of the Common Stock on the
date of exercise over the exercise price as an item of adjustment in computing
the eligible employee's alternative minimum taxable income. If the eligible
employee does not dispose of the Common Stock received pursuant to the exercise
of the ISO within either (1) two years after the date of the grant of the ISO or
(2) one year after the date of exercise of the ISO, a subsequent disposition of
the Common Stock will generally result in long-term capital gain or loss to such
individual with respect to the difference between the amount realized on the
disposition and the exercise price. We will not be entitled to any income tax
deduction as a result of such disposition. We normally will not be entitled to
take an income tax deduction upon either the grant or the exercise of an ISO.
If the eligible employee disposes of the Common Stock acquired upon
exercise of the ISO within either of the above-mentioned time periods, then in
the year of such disposition, such individual generally will recognize ordinary
income, and we will be entitled to an income tax deduction (provided we satisfy
applicable federal income tax reporting requirements), in an amount equal to the
lesser of (1) the excess of the fair market value of the Common Stock on the
date of exercise over the exercise price or (2) the amount realized upon
disposition over the exercise price. Any gain in excess of such amount
recognized by the eligible employee as ordinary income would be taxed to such
individual as short-term or long-term capital gain (depending on the applicable
holding period).
NON-ISOS. An eligible employee or an outside director will not recognize
any taxable income upon the grant of a Non-ISO, and we will not be entitled to
take an income tax deduction at the time of such grant. Upon the exercise of a
Non-ISO, the eligible employee or outside director generally will recognize
ordinary income and we will be entitled to take an income tax deduction
(provided we satisfy applicable federal income tax reporting requirements) in an
amount equal to the excess of the fair market value of the Common Stock on the
date of exercise
17
over the exercise price. However, if an eligible employee or outside director is
subject to Section 16(b) of the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and cannot sell the Common Stock purchased after the exercise
of the Non-ISO without being subject to liability under such section, the stock
will be treated as subject to a substantial risk of forfeiture for six months or
until the stock can be sold without any such liability, whichever comes first,
and the eligible employee or outside director will be taxable on such spread at
that time. Upon a subsequent sale of the Common Stock by the eligible employee
or outside director, such individual will recognize short-term or long-term
capital gain or loss (depending on the applicable holding period).
SARS. An eligible employee will recognize ordinary income for federal
income tax purposes upon the exercise of an SAR under the Plan for cash, Common
Stock or a combination of cash and Common Stock, and the amount of income that
the eligible employee will recognize will depend on the amount of cash, if any,
and the fair market value of the Common Stock, if any, that the eligible
employee receives as a result of such exercise. We generally will be entitled to
a federal income tax deduction in an amount equal to the ordinary income
recognized by the eligible employee in the same taxable year in which the
eligible employee recognizes such income, if we satisfy applicable federal
income tax reporting requirements.
STOCK GRANTS. An eligible employee or outside director is not subject to
any federal income tax upon the grant of a Stock Grant, nor does the grant of a
Stock Grant result in an income tax deduction for us, unless the restrictions on
the stock do not present a "substantial risk of forfeiture" or the stock is
"transferable", each within the meaning of Section 83 of the Code. Stock which
is subject to a substantial risk of forfeiture within the meaning of Section 83
of the Code is transferable within the meaning of Section 83 if the transferee
would not be subject to such risk of forfeiture after such transfer. In the year
that the Stock Grant is either no longer subject to a substantial risk of
forfeiture or is transferable, the eligible employee or outside director will
recognize ordinary income in an amount equal to the excess, if any, of the fair
market value of the shares of Common Stock transferred to the eligible employee
or outside director, generally determined on the date the Stock Grant is no
longer subject to a substantial risk of forfeiture, or is transferable,
whichever comes first, over the amount, if any, paid for such shares. If an
eligible employee or outside director is subject to Section 16(b) of the 1934
Act and cannot sell the Common Stock without being subject to liability under
such section after the Common Stock is no longer subject to a substantial risk
of forfeiture or is transferable, the Common Stock will be treated as subject to
a substantial risk of forfeiture and non-transferable for six months or until
the stock can be sold without any such liability, whichever comes first. If the
Stock Grant is forfeited, the eligible employee or outside director will
recognize no gain.
STOCK UNITS. An eligible employee or outside director is not subject to
any federal income tax upon the grant of a Stock Unit, nor does the grant of a
Stock Unit result in an income tax deduction for us. In the year that the Stock
Unit is either redeemed for cash or transferable, the eligible employee or
outside director will recognize ordinary income in an amount equal to the amount
of the payment made under the Stock Unit or received in the transfer. If the
Stock Unit is forfeited, the eligible employee or outside director will
recognize no gain.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE 2004 INCENTIVE STOCK PLAN.
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PROPOSAL 3
DIRECTOR STOCK UNIT PROGRAM PROPOSAL
The following discussion summarizes the material terms of the North
American Galvanizing & Coatings, Inc. Director Stock Unit Program (the
"Program"). This discussion does not purport to be complete and is qualified in
its entirety by reference to the Program, a copy of which is attached hereto as
Annex C.
PURPOSE
The primary purpose of the Program is to tie a percentage of each
Director's compensation to the long-term value of our Common Stock.
Additionally, the Program is expected to reduce the Company's cash outlay for
administrative expenses. Under the Program, each director will receive some or
all of his or her compensation for service as a director in the form of stock
unit grants under our 2004 Incentive Stock Plan. The Program has been adopted in
connection with the adoption of our 2004 Incentive Stock Plan and has been
adopted subject to the approval of both this Program and the 2004 Incentive
Stock Plan by our stockholders. The Program will be effective on the date it is
approved by our stockholders.
ADMINISTRATION
The Program is administered by a committee of our board of directors (the
"Committee"), which is the same committee that administers the 2004 Incentive
Stock Plan. The Committee shall have at least two members, each of whom shall be
a non-employee director within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934 and an outside director under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). The Committee shall have
the absolute power and authority to interpret the terms of the Program,
including the final authority to determine a director's benefits under the
Program, and to take any other action in connection with the operation of the
Program that the Committee deems fair and appropriate under the circumstances.
STOCK UNIT GRANTS TO OUTSIDE DIRECTORS
For purposes of this Program, an outside director is a member of our
board of directors who is not our employee. Each outside director shall be
required to defer at least 50% of his or her director fees each calendar year in
accordance with this Program, and each outside director will be given the
opportunity to defer 75% or 100% of his or her director fees for each calendar
year. Amounts deferred under the Program will be converted into a stock unit
grant under the 2004 Incentive Stock Plan at the average of the closing prices
for a share of our Common Stock for the 10 trading days before the date the
director fees for outside directors otherwise would have been payable in cash.
MATCHING UNITS FOR OUTSIDE DIRECTORS
To encourage deferral of fees by outside directors, matching units will
be granted to each outside director based on the percentage of his or her
director fees such outside director defers. If an outside director only defers
50% of his or her director fees, such outside director will receive a match
equal to 25% of his or her deferral in an additional stock unit grant. If an
outside director elects to defer 75% of his or her director fees, such outside
director will receive a match equal to 50% of his or her deferral in an
additional stock unit grant. If an outside director elects to defer 100% of his
or her director fees, such outside director will receive a match equal to 75% of
his or her deferral in an additional stock unit grant.
DEFERRAL ELECTION RULES FOR OUTSIDE DIRECTORS
If an outside director wishes to defer 75% or 100% of his or her director
fees in a calendar year, he or she must make a deferral election on the form
provided by us. The election form must be received by us before the beginning of
the calendar year for which it is made. For 2004, each outside director wishing
to defer 75% or 100% of his or her director fees must deliver an election to us
within 30 days of our annual stockholders' meeting. An outside director who is
first elected during a calendar year and who wishes to defer 75% or 100% of his
or her
19
director fees must deliver an election to us within 30 days of the date when he
or she is first elected an outside director. Once an election is received by us
for a calendar year, it is irrevocable for such calendar year.
STOCK UNIT GRANTS TO INSIDE DIRECTORS
For purposes of this Program, an inside director is a member of our board
of directors who is our employee. For each inside director, we automatically
shall defer from his or her base salary or other compensation a dollar amount
equal to 50% of the director fees for outside directors. Each inside director
may defer an amount equal to 50% or 75% of the director fees for outside
directors from his or her compensation. Inside directors who wish to make such
additional deferrals must follow the same deferral election procedures that
apply to outside directors. Deferrals for inside directors shall be matched at
the same rate as deferrals for outside directors. Thus, if an inside director
only defers an amount equal to 50% of the outside director fees, such inside
director will receive a match equal to 25% of his or her deferral in an
additional stock unit grant. If an inside director elects to defer an amount
equal to 75% of the outside director fees, such inside director will receive a
match equal to 50% of his or her deferral in an additional stock unit grant. If
an inside director elects to defer an amount equal to 100% of his or her
director fees, such inside director will receive a match equal to 75% of his or
her deferral in an additional stock unit grant.
The deferrals for each inside director shall coincide with deferrals for
outside directors and shall be converted into a stock unit grant under the 2004
Incentive Stock Plan at the same time and in accordance with the same procedures
followed for outside directors.
DEFERRAL PERIOD
All deferrals made in any calendar year automatically will be deferred
for five calendar years following the calendar year for which the deferral is
made. If a director makes an election at least one full year before the end of
such a five-year deferral period, his or her deferrals under the Program shall
be deferred for an additional five years. An election to defer payment for an
additional five years shall be irrevocable. However, all deferrals under the
Program will be paid as of the later of the date a director's service as a
director ends or the date his or her employment with us ends.
If a director can demonstrate to a majority of our board of directors
(excluding the director seeking payment of his or her deferrals) that he or she
has an extreme financial hardship as a result of reasonably unforeseeable
circumstances, then the board of directors may authorize payment of all or a
portion of such director's deferrals to cure such hardship.
PAYMENT OF DEFERRALS
When deferrals become payable under the Program, payment shall be made,
subject to applicable withholdings, in a lump sum in cash or, at the Committee's
discretion, in whole shares of Common Stock (and cash in lieu of a fractional
share) based on the average of the closing prices for a share of Common Stock
for the 10 trading days before the date as of which payment is made. We shall
make a payment as soon as practicable after the payment becomes payable unless
making a payment at such time could result in a violation of securities or other
laws. Any payment in shares of Common Stock will be made subject to the limits
in our 2004 Incentive Stock Plan.
TAX CONSEQUENCES
The rules concerning the federal income tax consequences with respect to
stock unit grants deferred pursuant to the Program are technical, and reasonable
persons may differ on the proper interpretation of such rules. Moreover, the
applicable statutory and regulatory provisions are subject to change, as are
their interpretations and applications, which may vary in individual
circumstances. Therefore, the following discussion is designed to provide only a
brief, general summary description of the federal income tax consequences
associated with such grants, based on a good faith interpretation of the current
federal income tax laws, regulations (including certain proposed regulations)
and judicial and administrative interpretations. The following discussion does
not set forth (1) any federal tax consequences other than income tax
consequences or (2) any state, local or foreign tax consequences that may apply.
20
A director is not subject to any federal income tax upon the deferral of
director fees or the grant of a stock unit under the 2004 Incentive Stock Plan,
nor does the deferral of director fees or grant of a stock unit result in an
income tax deduction for us. In the year that the stock unit grant is either
redeemed for cash or Common Stock, the director will recognize ordinary income
in an amount equal to the amount of the payment (whether in cash or in Common
Stock) made under the stock unit or received in the transfer, and the Company
will receive a deduction in an amount equal to the amount of such payment.
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE DIRECTOR STOCK UNIT PROGRAM.
21
PROPOSAL 4
AMENDMENTS OF THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A REVERSE STOCK SPLIT FOLLOWED BY A FORWARD STOCK SPLIT
SUMMARY
The Board has authorized, and recommends for your approval a 1-for-500
reverse stock split of the Common Stock (the "Reverse Split") followed
immediately by a 500-for-1 forward stock split of the Common Stock (the "Forward
Split"). We refer to the Reverse Split, the Forward Split and any cash payments
due for fractional shares, collectively, as the "Reverse/Forward Split".
Under the Reverse Split, 500 shares of Common Stock (the "Minimum
Number") registered in the name of a stockholder at the effective time of the
Reverse Split will be converted into one share of Common Stock, followed
immediately by the Forward Split pursuant to which each share of Common Stock
outstanding upon consummation of the Reverse Split will be converted into 500
shares of Common Stock. If a registered stockholder holds fewer than the Minimum
Number of shares of Common Stock in his or her account at the effective time of
the Reverse Split, any fractional shares resulting from the Reverse Split will
instead be converted into the right to receive a cash payment as described
below.
If a registered stockholder holds the Minimum Number or more shares of
Common Stock in his or her account at the effective time of the Reverse Split,
any fractional share in the holder's account resulting from the Reverse Split
will not be cashed out. The Reverse Split will be followed immediately by the
Forward Split and the total number of shares held by the holder will not change
as a result of the Reverse/Forward Split.
We are submitting a proposal to approve (and the Board recommends that
the stockholders approve) the Reverse/Forward Split, and the Board in its
discretion may determine if and when to effect the Reverse/Forward Split after
it is approved by the stockholders. The Board reserves the right to abandon the
Reverse/Forward Split even if approved by the stockholders (see "Reservation of
Rights"). We expect that, if the Board elects to implement the Reverse/Forward
Split, the Reverse/Forward Split would be consummated within one year of the
date of the Annual Meeting. If the Board does not effect the Reverse/Forward
Split prior to the 2005 annual meeting of stockholders, the Board may put the
proposal in the 2005 proxy for consideration by the stockholders. If the Board
determines to implement the Reverse/Forward Split, we will publicly announce the
Board's decision in a press release and post the information on our website at
www.nagalv.com prior to the effective date of the Reverse/Forward Split.
We have a large number of stockholders that own relatively few shares. We
believe that the Reverse/Forward Split will significantly reduce stockholder
record keeping and mailing expenses. Additionally, the Reverse/Forward Split
will provide holders of fewer than the Minimum Number of shares with an
efficient way to cash-out their investments without incurring transaction costs.
In many cases, holders of fewer than the Minimum Number would incur brokerage
commissions or other transaction costs in amount equal to a large percentage of
the proceeds of the sale of their shares. In the Reverse/Forward Split, these
holders will receive cash for their shares without incurring any transaction
costs.
In determining whether to implement the Reverse/Forward Split, the Board
will consider factors such as:
o the prevailing trading price and trading volume for the Common Stock
at the time the decision is made;
o the anticipated impact of the Reverse/Forward Split on the trading
market for the Common Stock;
o the availability and cost of funds required to make the cash payments
to stockholders with fewer than the Minimum Number of shares whose
shares are to be converted into the right to receive cash pursuant to
the Reverse/Forward Split, and the terms of any arrangements that we
may enter into to raise those funds;
22
o other transactions that we might be considering; and
o prevailing general market and economic conditions.
If approved by stockholders and implemented by the Board, the
Reverse/Forward Split will become effective on a date to be determined by the
Board upon the filing of the necessary amendments to our Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware (the
"Effective Date"). The forms of proposed amendments to our Restated Certificate
of Incorporation necessary to effect the Reverse/Forward Split are attached to
this Proxy Statement as Annex D.
EFFECT ON STOCKHOLDERS
If approved by stockholders at the Annual Meeting and implemented by the
Board, the Reverse/Forward Split will affect our stockholders as follows:
-------------------------------------------------- ---------------------------------------------------------------------------
STOCKHOLDER BEFORE COMPLETION
OF THE REVERSE/FORWARD SPLIT NET EFFECT AFTER COMPLETION OF THE REVERSE/FORWARD SPLIT
-------------------------------------------------- ---------------------------------------------------------------------------
Registered stockholders holding the Minimum Number None.
or more shares of Common Stock in an account.
-------------------------------------------------- ---------------------------------------------------------------------------
Registered stockholders holding fewer than the Shares will be converted into the right to receive cash (see "Determination
Minimum Number of shares of Common Stock in an of Cash-Out Price" at page 27).
account.
-------------------------------------------------- ---------------------------------------------------------------------------
Stockholders holding Common Stock in "street name" We intend for the Reverse/Forward Split to treat stockholders holding
through a nominee (such as a bank or broker). Common Stock in "street name" through a nominee (such as a bank or broker)
in the same manner as stockholders of record. Nominees will be instructed
to effect the Reverse/Forward Split for their beneficial holders. However,
nominees may have different procedures and stockholders holding shares in
"street name" should contact their nominees.
-------------------------------------------------- ---------------------------------------------------------------------------
If stockholders holding fewer than the Minimum Number do not want to be
cashed out in the Reverse/Forward Split, they may do so by purchasing a
sufficient number of shares before the Effective Date on the open market, or, if
applicable, by consolidating their accounts into an account with at least the
Minimum Number. Consolidation of accounts could take a substantial amount of
time, particularly if accounts are held at different financial institutions.
Even if a stockholder initiates the consolidation of his or her accounts
substantially in advance of the Effective Date, there is no assurance that the
accounts will be consolidated by the Effective Date or, even if they are
consolidated, that the financial institution holding the consolidated account
will provide notice to the transfer agent by the Effective Date. If the transfer
agent does not receive notice of the consolidation of accounts holding fewer
than the Minimum Number by the Effective Date, whether or not the accounts are
consolidated by the Effective Date, a stockholder will receive a cash payment
with respect to the shares in any account that held fewer than the Minimum
Number before the consolidation.
STRUCTURE OF THE REVERSE/FORWARD SPLIT
If the Reverse/Forward Split is approved by stockholders and implemented
by the Board, the Reverse Split is expected to occur at 5:00 p.m. (central time)
on the Effective Date and the Forward Split is expected to occur at 5:01 p.m.
(central time) on the Effective Date.
Upon consummation of the Reverse Split, each registered stockholder on
the Effective Date will receive one share of Common Stock for each Minimum
Number of shares of Common Stock held in his or her account at
23
that time. If a registered stockholder holds the Minimum Number or more shares
of Common Stock on the Effective Date, any fractional share resulting from the
Reverse Split will not be cashed out after the Reverse Split. After the Forward
Split, the total number of shares held by such holder will not change as a
result of the Reverse/Forward Split. Each registered stockholder who holds fewer
than the Minimum Number of shares of Common Stock in his or her account at the
time of the Reverse Split (also referred to as a "Cashed-Out Stockholder") will
receive a cash payment instead of a fractional share, as permitted under
Delaware law. This cash payment will be determined and paid as described below
under "Determination of Cash-Out Price" at page 27. Immediately following the
Reverse Split, all stockholders who are not Cashed-Out Stockholders will receive
500 shares of Common Stock for every one share of Common Stock they held
following the Reverse Split.
We intend for the Reverse/Forward Split to treat stockholders holding
Common Stock in "street name" through a nominee (such as a bank or broker) in
the same manner as holders of record. Nominees will be instructed to effect the
Reverse/Forward Split for their beneficial holders. Accordingly, we also refer
to those beneficial or "street name" holders who receive a cash payment instead
of fractional shares as "Cashed-Out Stockholders." However, nominees may have
different procedures, and stockholders holding shares in "street name" should
contact their nominees.
The following examples illustrate the Reverse/Forward Split for
hypothetical stockholders, assuming a hypothetical cash-out price of $1.00 per
share:
----------------------------------------------- -----------------------------------------------------------------------------
HYPOTHETICAL SCENARIO RESULT
----------------------------------------------- ----------------------------------------------------------------------------
Mr. Taylor is a registered holder of 100 shares Mr. Taylor holds fewer than the Minimum Number of shares. Instead of
of Common Stock in one account immediately receiving a fractional share of Common Stock immediately after the Reverse
prior to the Reverse/Forward Split. Split, Mr. Taylor's shares will be converted into the right to receive $100
in cash (100 shares x $1.00).
If Mr. Taylor wants to continue his investment in the Company, he can, prior
to the Effective Date, buy at least 400 more shares of Common Stock so that
he will have the Minimum Number of shares. Mr. Taylor would have to act far
enough in advance of the Reverse/Forward Split so that the purchase is
completed and the additional shares are credited in his account prior to 5:00
p.m. (central time) on the Effective Date.
----------------------------------------------- -----------------------------------------------------------------------------
Ms. Eastwood has two separate record accounts. Each account will be treated individually. Because neither account holds the
Immediately prior to the Reverse/Forward Split, Minimum Number of shares, Ms. Eastwood will receive cash payments equal to
she holds 300 shares of Common Stock in one the cash-out price of her Common Stock in each record account instead of
account and 250 shares of Common Stock in the receiving fractional shares. Ms. Eastwood would receive two checks totaling
other. All of her shares are registered in her $550 (300 shares x $1.00 plus 250 shares x $1.00).
name only.
If Ms. Eastwood wants to continue her investment in the Company, she can
consolidate or transfer her two record accounts prior to the Effective Date
into one account with at least the Minimum Number of shares of Common Stock.
Alternatively, she can buy at least 200 more shares for the first account and
250 more shares for the second account so that she will have the Minimum
Number of shares in each account. She would have to act far enough in
advance of the Reverse/Forward Split so that the consolidation or the
purchase is completed prior to 5:00 p.m. (central time) on the Effective
Date. Even if she does consolidate these accounts, there is no assurance
that the accounts will be consolidated by the Effective Date or, even if they
are consolidated, that the financial institution holding the consolidated
account will provide timely notice to the transfer agent. If the transfer
agent does not receive timely notice, Ms. Eastwood will receive the cash
payment and will not retain her shares.
----------------------------------------------- -----------------------------------------------------------------------------
24
----------------------------------------------- -----------------------------------------------------------------------------
Ms. Baker holds 600 shares of Common Stock in After the Reverse/Forward Split, Ms. Baker will continue to hold all 600
one account immediately prior to the Reverse/ shares of Common Stock.
Forward Split.
----------------------------------------------- -----------------------------------------------------------------------------
Mr. Phillips holds 100 shares of Common Stock We intend for the Reverse/Forward Split to treat stockholders holding Common
in a brokerage account immediately prior to the Stock in "street name" through a nominee (such as a bank or broker) in the
Reverse/Forward Split. same manner as stockholders whose shares are registered in their names.
Nominees will be instructed to effect the Reverse/Forward Split for their
beneficial holders. However, nominees may have different procedures and
stockholders holding Common Stock in "street name" should contact their
nominees.
----------------------------------------------- -----------------------------------------------------------------------------
BACKGROUND AND PURPOSE OF THE REVERSE/FORWARD SPLIT
We have approximately 3,200 stockholders, including 1,906 holders of
record and 1,294 beneficial owners holding shares in "street name". As of May 1,
2004, approximately 1,785 registered holders of Common Stock owned fewer than
the Minimum Number, representing approximately 94% of the total number of
registered holders of Common Stock, but only approximately 3% of the total
number of outstanding shares of Common Stock. In addition, as of May 1, 2004,
approximately 544 stockholders holding Common Stock in "street name" through a
nominee owned fewer than the Minimum Number, representing approximately 42% of
the total number of "street name" stockholders, but only approximately 2% of the
total number of outstanding shares of Common Stock.
We expect to benefit from cost savings as a result of the Reverse/Forward
Split. The cost of administering each account, whether registered or in "street
name", is the same regardless of the number of shares held in that account. We
expect that these costs will increase over time. Therefore, our cost to maintain
such small accounts are disproportionately high when compared to the total
number of shares involved. We estimate that if we complete the Reverse/Forward
Split, we will reduce the total cost of administering stockholder accounts by at
least 30% of our total costs, or approximately $55,000 per year.
The Reverse/Forward Split will provide stockholders with fewer than the
Minimum Number of shares of Common Stock with a cost-effective way to cash out
their investments, because we will pay all transaction costs such as brokerage
or service fees in connection with the Reverse/Forward Split. Otherwise,
stockholders with small holdings would likely incur brokerage fees which are
disproportionately high relative to the market value of their shares if they
wanted to sell their stock. The Reverse/Forward Split will eliminate these
problems for most stockholders with small holdings.
In light of these disproportionate costs, the Board believes that it is
in our best interests and the best interests of our stockholders as a whole to
eliminate the administrative burden and costs associated with such small
accounts.
We have in the past and may in the future pursue alternative methods of
reducing our stockholder base, whether or not the Reverse/Forward Split is
approved and implemented, including odd-lot tender offers and programs to
facilitate sales by stockholders of odd-lot holdings. However, there can be no
assurance that we will decide to pursue any such transaction.
EFFECT OF THE REVERSE/FORWARD SPLIT ON THE COMPANY'S STOCKHOLDERS
REGISTERED STOCKHOLDERS WITH FEWER THAN THE MINIMUM NUMBER OF SHARES OF
COMMON STOCK. If we complete the Reverse/Forward Split and you are a stockholder
holding fewer than the Minimum Number of shares of Common Stock immediately
prior to the Reverse Split:
o You will not receive a fractional share of stock as a result of the
Reverse Split in respect of your shares being cashed out.
o Instead of receiving a fractional share, you will receive a cash
payment for your shares. See "Determination of Cash-Out Price" below.
25
o After the Reverse Split, you will have no further interest in the
Company with respect to your cashed-out shares. These shares will no
longer entitle you to the right to vote as a stockholder or share in
our assets, earnings, or profits or in any dividends paid after the
Reverse Split. In other words, you will no longer hold your
cashed-out shares and you will have only the right to receive cash
for these shares. In addition, you will not be entitled to receive
interest with respect to the period of time between the Effective
Date and the date you receive your payment for the cashed-out shares.
o You will not have to pay any service charges or brokerage commissions
in connection with the Reverse/Forward Split.
o As soon as practicable after the time we effect the Reverse/Forward
Split, you will receive a payment for the cashed-out shares you held
immediately prior to the Reverse Split in accordance with the
procedures described below.
o HOLDERS OF BOOK-ENTRY SHARES. Most of our registered stockholders
hold their shares in book-entry form and do not have stock
certificates evidencing their ownership of Common Stock. They
are, however, provided with a statement reflecting the number of
shares registered in their accounts. If you are a Cashed-Out
Stockholder who holds registered shares in a book-entry account,
you do not need to take any action to receive your cash payment.
A check will be mailed to you at your registered address as soon
as practicable after the Effective Date. By signing and cashing
this check, you will warrant that you owned the shares for which
you received a cash payment.
o HOLDERS OF CERTIFICATED SHARES. If you are a Cashed-Out
Stockholder with a stock certificate representing your cashed-out
shares, you will receive a transmittal letter as soon as
practicable after the Effective Date. The letter of transmittal
will contain instructions on how to surrender your certificate(s)
to our transfer agent for your cash payment. You will not receive
your cash payment until you surrender your outstanding
certificate(s) to the transfer agent, together with a completed
and executed copy of the letter of transmittal. Please do not
send your certificates until you receive your letter of
transmittal. For further information, see "Stock Certificates"
below.
o All amounts owed to you will be subject to applicable federal income
tax and state abandoned property laws.
If you want to continue to hold Common Stock after the Reverse/Forward
Split, you may do so by taking one of the following actions far enough in
advance so that it is completed by the Effective Date:
o purchase a sufficient number of shares of Common Stock on the
open market so that you hold at least the Minimum Number of
shares of Common Stock in your account prior to the Effective
Date; or
o if applicable, consolidate your accounts so that you hold at
least the Minimum Number of shares of Common Stock in one account
prior to the Effective Date.
If you attempt to consolidate your accounts by the Effective Date, there
is no assurance that the consolidation will be completed by the Effective Date
or, even if it is completed, that the financial institution holding the
consolidated account will provide notice of the consolidation to the transfer
agent by the Effective Date. If the transfer agent does not receive notice that
your accounts have been consolidated by the Effective Date, whether or not your
accounts are consolidated by the Effective Date, you will receive a cash payment
and will not retain your shares.
REGISTERED STOCKHOLDERS WITH THE MINIMUM NUMBER OR MORE SHARES OF COMMON
STOCK. If you are a registered stockholder with the Minimum Number or more
shares of Common Stock in your account as of 5:00 p.m. (central time) on the
Effective Date, we will first reclassify your shares into one-five hundredth
(1/500) of the number of shares you held immediately prior to the Reverse Split.
One minute after the Reverse Split, at 5:01 p.m. (central time), we will
reclassify your shares in the Forward Split into five hundred times the number
of shares you held after the Reverse Split, which will result in the same number
of shares you held before the Reverse Split. The
26
Reverse/Forward Split therefore will not affect the number of shares that you
own if you hold the Minimum Number or more shares of Common Stock in your
account immediately prior to the Reverse Split. To illustrate, if you held 1,000
shares of Common Stock in your account immediately prior to the Reverse Split,
your shares would be converted into 2 shares in the Reverse Split and then back
to 1,000 shares in the Forward Split.
STREET NAME HOLDERS OF COMMON STOCK. We intend for the Reverse/Forward
Split to treat stockholders holding Common Stock in "street name" through a
nominee (such as a bank or broker) in the same manner as stockholders whose
shares are registered in their names. Nominees will be instructed to effect the
Reverse/Forward Split for their beneficial holders. However, nominees may have
different procedures and stockholders holding Common Stock in "street name"
should contact their nominees.
CURRENT AND FORMER COMPANY EMPLOYEES AND DIRECTORS. If you are a current
or former employee or a director of the Company, you may own restricted shares
of Common Stock and/or hold options to purchase the Common Stock through our
stock plans. With respect to the restricted shares of Common Stock, you will be
treated in the same manner as the other stockholders. If you hold options to
purchase fewer than the Minimum Number, you will not receive a cash payment for
these options. The Reverse/Forward Split will not affect the number of shares
issuable upon the exercise of these options.
DETERMINATION OF CASH-OUT PRICE
In order to avoid the expense and inconvenience of issuing fractional
shares to stockholders who hold less than one share of Common Stock after the
Reverse Split, under Delaware state law we may either arrange for the sale of
these fractional shares or pay cash for their fair value. If stockholders
approve the Reverse/Forward Split at the Annual Meeting and the Reverse/Forward
Split is completed, the Board will elect either to arrange for our transfer
agent to aggregate and sell these fractional shares of Common Stock on the open
market, or to have us pay cash for the fractional shares based on the trading
value of the Common Stock that is cashed out. The Board will make this decision,
in its sole discretion, prior to the Effective Date and will publicly announce
its decision in a press release and post it on our website at www.nagalv.com.
The details of each of the Board's alternatives and the manner of
determining the cash-out price under each alternative are summarized in the
following chart:
------------------------------------------ ------------------------------------------------------------------------------
OPTION DETERMINATION OF CASH-OUT PRICE
------------------------------------------ ------------------------------------------------------------------------------
ARRANGE FOR THE SALE OF FRACTIONAL SHARES As soon as practicable after the Effective Date, the exchange agent will sell
ON THE OPEN MARKET: If this alternative is the aggregated fractional shares of the Cashed-Out Stockholders at the then
selected, the fractional shares of Common prevailing price on the open market. Sales will be executed on the AMEX in
Stock of the Cashed-Out Stockholders will round lots to the extent practicable. We expect that the exchange agent will
be aggregated and sold by our transfer conduct the sale in an orderly fashion at a reasonable pace and that it will
agent, Mellon Investor Services LLC, take several days to sell all of the aggregated fractional shares of Common
acting as an exchange agent on behalf of Stock. If the exchange agent attempts to sell these shares too quickly, it
the Cashed-Out Stockholders. could hurt the sales price for the shares. There can be no assurance as to the
sales price that the exchange agent will receive for the aggregated fractional
shares.
After completing the sale of all of the aggregated fractional shares, the
exchange agent will make a cash payment (without interest) equal to each
Cashed-Out Stockholder's proportionate interest in the net proceeds from the
sale of the aggregated fractional shares. We will pay all of the commissions
and other out-of-pocket transaction costs in connection with the sale. Until
the proceeds of the sale have been distributed, the transfer agent will hold
the proceeds in trust for the Cashed-Out Stockholders. As soon as practicable
after the determination of the amount of cash to be paid in place of
fractional shares, the transfer agent will pay the cash to the Cashed-Out
Stockholders as described above in "Effect of the Reverse/Forward Split on the
Company's Stockholders."
------------------------------------------ ------------------------------------------------------------------------------
27
------------------------------------------ ------------------------------------------------------------------------------
PAY CASH FOR FRACTIONAL SHARES: If this The Cashed-Out Stockholders will receive a cash payment in consideration of
alternative is selected, we will pay cash the shares they held immediately prior to the Reverse Split in accounts with
for the fractional shares of Common Stock fewer than the Minimum Number of shares of Common Stock. This cash-out payment
of the Cashed-Out Stockholders. will be an amount per share equal to the average of the closing prices per
share of Common Stock on the AMEX for the period of ten consecutive AMEX
trading days ending on (and including) the Effective Date, without interest.
------------------------------------------ ------------------------------------------------------------------------------
In the event the Board elects to have us pay cash for the fractional shares of
Cashed-Out Stockholders, we may seek to obtain the funds for these payments
through a public or private offering of debt or equity securities or through
another financing transaction and, in such event, the completion of the
Reverse/Forward Split will be contingent upon obtaining financing on terms
acceptable to the Board in its discretion. We cannot assure you that any
financings will be available to us on acceptable terms or at all.
EFFECT OF THE REVERSE/FORWARD SPLIT ON THE COMPANY
We do not intend the Reverse/Forward Split to affect the public
registration of the Common Stock with the SEC under the Securities Exchange Act
of 1934, as amended. Similarly, we do not expect that the Reverse/Forward Split
will affect the continued listing of the Common Stock on the AMEX. The par value
of the Common Stock will remain at $0.10 per share after the Reverse/Forward
Split.
The number of authorized shares of Common Stock will not change as a
result of the Reverse/Forward Split. On May 1, 2004, there were 6,805,793 shares
of Common Stock issued and outstanding. If the Board elects to arrange for the
sale of the Cashed-Out Stockholders' fractional shares on the open market, there
will be no effect on the number of issued and outstanding shares of Common
Stock. On the other hand, if the Board elects to have us pay cash for the
fractional shares of the Cashed-Out Stockholders, the total number of
outstanding shares of Common Stock will be reduced by the number of shares held
by the Cashed-Out Stockholders immediately prior to the Reverse Split. In the
event the Board elects to have us pay cash for the fractional shares of the
Cashed-Out Stockholders and finance such payment with proceeds of an offering of
Common Stock, any reduction in the total number of outstanding shares of Common
Stock attributable to the Reverse/Forward Split would be offset by the issuance
of Common Stock in connection with such offering.
If the Board opts to have us pay cash for the fractional shares of Common
Stock of the Cashed-Out Stockholders, the total number of shares that will be
cashed-out and the total cash to be paid by us are unknown at this point in
time. Also, we do not know what the average daily closing price per share of the
Common Stock on the AMEX for the period of ten trading days ending on the
Effective Date will be or, if applicable, what the net proceeds of the sale of
the aggregate fractional shares by the exchange agent will be. However, by way
of example, if the Reverse/Forward Split had been completed as of May 1, 2004,
when the average daily closing price per share of the Common Stock on the AMEX
for the ten consecutive AMEX trading days then ended was $1.65, and the Board
elected to have us pay cash for the fractional shares of Cashed-Out
Stockholders, then the cash payments that would have been issued to Cashed-Out
Stockholders, including both registered and "street name" holders, would have
been approximately $561,000. The actual amounts will depend on the number of
Cashed-Out Stockholders on the Effective Date, which will vary from the number
of such stockholders on May 1, 2004.
STOCK CERTIFICATES
The Reverse/Forward Split will not affect any certificates representing
shares of Common Stock held by registered stockholders owning the Minimum Number
or more shares of Common Stock in an account immediately prior to the Reverse
Split. Existing certificates held by any of these stockholders will continue to
evidence ownership of the same number of shares as is set forth on the face of
the certificate.
Any Cashed-Out Stockholder with share certificates will receive a letter
of transmittal after the Reverse/Forward Split is completed. These stockholders
must complete and sign the letter of transmittal and return it with their stock
certificate(s) to our transfer agent before they can receive cash payment for
those shares.
28
POTENTIAL ANTI-TAKEOVER EFFECT
The Reverse/Forward Split is not being proposed in response to any third
party effort to accumulate shares of the Common Stock or obtain control of the
Company, nor is it part of a plan by management to recommend to the Board and
stockholders a series of amendments to our Restated Certificate of Incorporation
that could be construed to affect the ability of third parties to take over or
gain control of the Company.
REGULATORY REQUIREMENTS
We do not believe that the Reverse/Forward Split will require the
approval of any governmental agency. It is not our intention for the
Reverse/Forward Split to be the first step in a "going-private" transaction.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
GENERAL INFORMATION. We have summarized below certain federal income tax
consequences to us and our stockholders resulting from the Reverse/Forward
Split. This summary is based on U.S. federal income tax law existing as of the
date of this Proxy Statement, and such tax laws may change, potentially with
retroactive effect. This summary does not discuss all aspects of federal income
taxation that may be important to you in light of your individual circumstances.
Many stockholders (such as financial institutions, insurance companies,
broker-dealers, tax-exempt organizations, and foreign persons) may be subject to
special tax rules. Other stockholders may also be subject to special tax rules,
including (but not limited to): stockholders who received Common Stock as
compensation for services (such as restricted stock) or pursuant to the exercise
of an employee stock option, or stockholders who have held, or will hold, stock
as part of a straddle, hedging, or conversion transaction for federal income tax
purposes. In addition, this summary does not discuss any state, local, foreign,
or other tax considerations. This summary assumes that you are an individual
U.S. citizen and have held, and will hold, your shares as capital assets under
the Internal Revenue Code. You should consult your tax advisor as to the
particular federal, state, local, foreign, and other tax consequences of the
Reverse/Forward Split to you, in light of your specific circumstances.
CONSEQUENCES TO THE COMPANY. The Reverse/Forward Split will not be a
taxable transaction to us. Accordingly, the Reverse/Forward Split will not
result in any material federal income tax consequences to us.
CONSEQUENCES TO STOCKHOLDERS WHO ARE NOT CASHED OUT. If you (1) continue
to hold Common Stock immediately after the Reverse/Forward Split and (2) receive
no cash as a result of the Reverse/Forward Split, you will not recognize any
gain or loss in the Reverse/Forward Split, and you will have the same adjusted
tax basis and holding period in your Common Stock as you had in such stock
immediately prior to the Reverse/Forward Split.
CONSEQUENCES TO CASHED-OUT STOCKHOLDERS. The federal income tax
consequences to Cashed-Out Stockholders will depend in part on whether the Board
chooses to arrange for the sale of the Cashed-Out Stockholders' fractional
shares on the open market or to have us pay cash for these fractional shares
directly. See "Determination of Cash-Out Price" above. The federal income tax
consequences of these alternatives are discussed below.
ALTERNATIVE 1. The Board Chooses to Arrange for Sale of the Fractional
Shares on the Open Market.
If you receive cash as a result of the Reverse/Forward Split, you will
recognize capital gain or loss in an amount equal to the difference between the
cash you receive and your aggregate adjusted tax basis in the shares of Common
Stock cashed out.
ALTERNATIVE 2. The Board Chooses to Have the Company Pay Cash for the
Fractional Shares Directly.
If you receive cash as a result of the Reverse/Forward Split, your tax
consequences will depend on whether, in addition to receiving cash, you or a
person or entity related to you continues to hold Common Stock immediately after
the Reverse/Forward Split, as explained below.
a. Stockholders Who Exchange All of Their Common Stock for Cash and Do
Not Actually or Constructively Own Common Stock After the
Reverse/Forward Split
29
If you (1) receive cash in exchange for your shares as a result of the
Reverse/Forward Split and (2) do not continue to own, either actually or
constructively under Section 318 of the Internal Revenue Code, any Common Stock
immediately after the Reverse/Forward Split, you generally will recognize
capital gain or loss in an amount equal to the difference between the cash you
receive for your cashed-out stock and your aggregate adjusted tax basis in such
stock.
b. Stockholders Who Both Receive Cash and Continue to Own, Actually or
Constructively, Common Stock After the Reverse/Forward Split
If you both receive cash as a result of the Reverse/Forward Split and
continue to own, either actually or constructively under Section 318 of the
Internal Revenue Code, Common Stock immediately after the Reverse/Forward Split,
you generally will recognize capital gain or loss in the same manner as set
forth in the previous paragraph, provided that your receipt of cash either (1)
is "not essentially equivalent to a dividend," or (2) is a "substantially
disproportionate redemption of stock," as described below.
o "NOT ESSENTIALLY EQUIVALENT TO A DIVIDEND." You will satisfy the "not
essentially equivalent to a dividend" test if the reduction in your
proportionate stock ownership interest in the Company resulting from
the Reverse/Forward Split, including both actual and constructive
ownership, is considered a "meaningful reduction" given your
particular facts and circumstances. The Internal Revenue Service has
ruled that a small reduction by a minority stockholder whose relative
stock interest is minimal and who exercises no control over the
affairs of the corporation will meet this test.
o "SUBSTANTIALLY DISPROPORTIONATE REDEMPTION OF STOCK." The receipt of
cash in the Reverse/Forward Split will be a "substantially
disproportionate redemption of stock" for you if the percentage of
the outstanding shares of Common Stock actually or constructively
owned by you immediately after the Reverse/Forward Split is less than
80% of the percentage of shares of Common Stock actually or
constructively owned by you immediately before the Reverse/Forward
Split.
In applying these tests, you will be treated as owning shares actually or
constructively owned by certain individuals and entities related to you, as
determined under Section 318 of the Internal Revenue Code. In addition, you may
possibly be allowed or required to take into account sales and purchases of
shares of Common Stock by you and by related parties that occur substantially
contemporaneously with the Reverse/Forward Split. If the taxable amount is not
treated as capital gain under any of the tests, it will be treated first as
ordinary dividend income to the extent of your ratable share of our
undistributed earnings and profits, then as a tax-free return of capital to the
extent of your aggregate adjusted tax basis in your shares, and any remaining
gain will be treated as capital gain. See "Capital Gain and Loss" and "Special
Rate for Certain Dividends" below.
CAPITAL GAIN AND LOSS. For individuals, net capital gain recognized upon
the sale or exchange of capital assets that have been held for more than one
year generally will be subject to tax at a rate not to exceed 15%. Net capital
gain recognized from the sale of capital assets that have been held for one year
or less will continue to be subject to tax at ordinary income tax rates. There
are limitations on the deductibility of capital losses.
SPECIAL RATE FOR CERTAIN DIVIDENDS. In general, dividends are taxed at
ordinary income tax rates. However, you may qualify for a 15% rate of federal
income tax on any cash received in the Reverse/Forward Split that is treated as
a dividend as described above, if (i) you are an individual or other
non-corporate stockholder, (ii) you have held the share of stock with respect to
which the dividend was received for more than 60 days during the 120-day period
beginning 60 days before the ex-dividend date, as determined under the Internal
Revenue Code, and (iii) you were not obligated during such period (pursuant to a
short sale or otherwise) to make related payments with respect to positions in
substantially similar or related property. You are urged to consult with your
tax advisor concerning the federal income tax rate applicable to amounts treated
as dividends.
BACKUP WITHHOLDING. Stockholders who receive cash in connection with the
Reverse/Forward Split may be required to provide their social security or other
taxpayer identification numbers (or, in some instances, additional
30
information) to the exchange agent in connection with the Reverse/Forward Split
to avoid backup withholding on cash proceeds. Failure to provide such
information when requested may result in backup withholding on cash payments to
you.
OUR UNDERSTANDING OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REVERSE/FORWARD SPLIT IS NOT BINDING ON THE INTERNAL REVENUE SERVICE OR ANY
COURT. YOU SHOULD CONSULT YOUR TAX ADVISOR AS TO THE PARTICULAR FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE REVERSE/FORWARD SPLIT TO YOU,
IN LIGHT OF YOUR SPECIFIC CIRCUMSTANCES.
APPRAISAL RIGHTS
Stockholders do not have appraisal rights under Delaware state law or
under the our Restated Certificate of Incorporation or Bylaws in connection with
the Reverse/Forward Split.
RESERVATION OF RIGHTS
We reserve the right to abandon the Reverse/Forward Split without further
action by our stockholders at any time before the filing of the necessary
amendments to our Restated Certificate of Incorporation with the Delaware
Secretary of State, even if the Reverse/Forward Split has been authorized by our
stockholders at the Annual Meeting. By voting for the Reverse/Forward Split you
are expressly also authorizing us to determine not to proceed with the
Reverse/Forward Split if we should so decide.
If the Board elects to have us pay cash for the fractional shares held by
the Cashed-Out Stockholders, the completion of the Reverse/Forward Split may be
contingent upon our ability to obtain financing on terms acceptable to us to
complete the purchase of the fractional shares as described under "Determination
of Cash-Out Price."
THE BOARD RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND OUR RESTATED
CERTIFICATE OF INCORPORATION TO EFFECT, AT THE DISCRETION OF THE BOARD, THE
REVERSE/FORWARD SPLIT.
31
PROPOSAL 5
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
The Audit Committee has appointed Deloitte & Touche LLP ("Deloitte") as
independent accountants to conduct the 2004 audit of our financial statements.
The Board has directed that such appointment be submitted for ratification by
the stockholders at the Annual Meeting.
Deloitte has served as our independent accountants since 1990. A
representative of Deloitte is expected to be present at the Annual Meeting and
will have the opportunity to make a statement if he or she desires to do so and
will be available to respond to appropriate questions.
Total fees for professional services provided by Deloitte for the years
ended December 31, 2003 and 2002 were $197,494 and $212,980, respectively, for
the following services:
AUDIT FEES
The aggregate fees for professional services rendered by Deloitte for the
audit of our annual financial statements and for the reviews of the financial
statements included in our Quarterly Reports on Form 10-Q in 2003 and 2002 were
$134,095 and $127,053, respectively.
AUDIT-RELATED FEES
The aggregate fees paid for audit-related services in 2003 and 2002 were
$9,933 and $9,700, respectively, and relate to attestation fees paid for audits
of the Company's employee benefit plan.
TAX FEES
The aggregate fees paid for preparation of tax returns were $26,714 and
$24,600 for 2003 and 2002, respectively. The aggregate fees for tax planning and
consultation on tax compliance in 2003 and 2002 were $26,752 and $51,627,
respectively.
ALL OTHER FEES
There were no other fees paid during 2003 and 2002.
The Audit Committee charter provides for the pre-approval of all audit
services and all non-audit services to be provided by our independent
accountants that are permitted under applicable law and regulation, and all
corresponding fees and terms, in accordance with procedures established by the
Audit Committee in respect of such approvals, subject to the de minimus
exception for non-audit services permitted by SEC rules and regulations. For
fiscal years 2003 and 2002, none of the fees listed above were covered by the de
minimus exception.
The Audit Committee has considered whether the provision of non-audit
services by Deloitte for the year ended December 31, 2003 is compatible with
maintaining the principal auditor's independence.
THE BOARD RECOMMENDS THAT YOU VOTE FOR RATIFICATION OF THE APPOINTMENT OF
DELOITTE & TOUCHE LLP.
32
COMPANY PERFORMANCE
The following performance graph compares cumulative total stockholder
returns on the Common Stock compared to the Dow Jones US Industrial Diversified
Index and the Dow Jones US Total Market Index calculated at the end of each
fiscal year, December 31, 1998 through December 31, 2003. The Dow Jones US
Industrial Diversified Index is comprised of 30 companies in 1 industry. The Dow
Jones US Total Market Index is comprised of 2,000 companies in 52 industries.
The graph assumes $100 was invested December 31, 1998, in the Common Stock and
in each of the referenced indices and assumes the reinvestment of dividends.
[PERFORMANCE GRAPH]
Cumulative Total Return ($)
------ ------ ------ ------ ------ ------
12/98 12/99 12/00 12/01 12/02 12/03
North American Galvanizing & Coatings, Inc. 100.00 68.57 40.00 44.34 67.20 64.00
Dow Jones US Total Market 100.00 122.72 111.35 98.08 76.43 99.92
Dow Jones US Industrial Diversified 100.00 135.47 136.45 122.67 79.65 107.76
33
RELATED PARTY TRANSACTIONS
PRIVATE PLACEMENT OF SECURITIES. In February 2001, we offered a private
placement of subordinated promissory notes and warrants to certain of our
directors and to accredited stockholders that held, prior to the private
placement, at least 100,000 shares of Common Stock. The following directors and
nominees for reelection participated in the offering as indicated:
o Linwood J. Bundy - 10% Subordinated Promissory Note for $100,000 and
Warrant to purchase 66,666 shares of Common Stock.
o Ronald J. Evans (President) - 10% Subordinated Promissory Note for
$50,000 and Warrant to purchase 33,333 shares of Common Stock.
o Gilbert L. Klemann, II - 10% Subordinated Promissory Note for
$100,000 and Warrant to purchase 66,666 shares of Common Stock.
o Patrick J. Lynch - 10% Subordinated Promissory Note for $50,000 and
Warrant to purchase 33,333 shares of Common Stock.
o Joseph J. Morrow - 10% Subordinated Promissory Note for $100,000 and
Warrant to purchase 66,666 shares of Common Stock.
o John H. Sununu - 10% Subordinated Promissory Note for $100,000 and
Warrant to purchase 66,666 shares of Common Stock.
o The Morrow Foundation - 10% Subordinated Promissory Note for $100,000
and Warrant to purchase 66,666 shares of Common Stock. Mrs. Claire
Morrow, wife of Joseph J. Morrow, is the Managing Trustee of The
Morrow Foundation.
The principal amount of each of the subordinated promissory notes and any
accrued interest thereon are due upon demand beginning on the earlier of (i)
February 17, 2006, (ii) the occurrence of a merger or consolidation of the
Company with any other person in which the Company is not the surviving entity,
or (iii) the sale, assignment, lease or other disposition of all or
substantially all of the assets of the Company. The interest rate of each of the
subordinated promissory notes is 10%, and accrued interest on each of the
subordinated promissory notes is paid annually on February 17.
The exercise price of $.856 per share for the warrants was determined
based on the average closing market price for the Common Stock on AMEX for the
20 business day period beginning three business days after February 17, 2001. A
special committee of the Board approved the private placement and the special
committee received an opinion from The Robinson-Humphrey Company, LLC that the
consideration to be paid was fair to us from a financial point of view.
MORROW & CO. Mr. Joseph J. Morrow, a director of the Company and a
nominee for reelection, is the chief executive officer of Morrow & Co., Inc.,
which provides proxy solicitation and other stockholder related services to us
as described in the section titled "Other Matters" in this Proxy Statement.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended,
requires our executive officers and directors to file reports of changes in
ownership of the Common Stock with the SEC. Executive officers and directors are
required by SEC regulations to furnish us with copies of all Section 16(a) forms
so filed. Based solely on a review of the copies of such reports furnished to
us, we believe that all persons subject to these reporting requirements filed
the required reports on a timely basis during fiscal year 2003.
34
STOCKHOLDER PROPOSALS
If any stockholder wishes to submit a proposal, including nominations for
the Board, for inclusion in the proxy statement for our next annual meeting in
2005, such proposal must be received at our principal executive office by
January 21, 2005. Such proposal should be directed to North American Galvanizing
& Coatings, Inc., Attention: Corporate Secretary, 2250 East 73rd Street, Suite
300, Tulsa, Oklahoma 74136.
For business to be properly brought before an annual meeting (including
nominations for the Board), but not included in the proxy statement, a
stockholder must follow certain procedures set forth in the Bylaws. Generally, a
stockholder must give timely notice to our Corporate Secretary. To be timely, a
stockholder's notice must be received at our principal executive offices not
less than 90 days prior to the meeting. The Bylaws specify the information which
must accompany such stockholder notice. Details of the relevant section of the
Bylaws may be obtained by any stockholder from our Corporate Secretary.
35
OTHER MATTERS
All expenses in connection with solicitation of proxies will be borne by
us. In addition to solicitation by mail, proxies may be solicited personally by
telephone, telecopy or telegraph by our officers and employees, who will receive
no compensation for their services. We have also retained Morrow & Co., Inc.,
445 Park Avenue, New York, New York 10022, to assist in such solicitation. We
expect to pay Morrow & Co. a fee of $7,500 for its services and will reimburse
Morrow for certain out-of-pocket expenses estimated to be $6,000. Brokers,
banks, nominees, fiduciaries and other custodians will be requested to solicit
beneficial owners of shares and will be reimbursed for their expenses.
Mellon Investor Services LLC has been retained to receive and tabulate
proxies and to provide a representative to act as inspector of election for the
Annual Meeting.
The Board is not aware of any other matter, other than those described
above, that may be presented for action at the Annual Meeting. If any other
matter or proposal should be presented and should properly come before the
Annual Meeting for action, the persons named in the accompanying proxy will vote
upon such matter and upon such proposal in accordance with their best judgment.
The enclosed proxy confers discretionary authority to take action with respect
to any additional matters which may come before the Annual Meeting.
36
ANNEX A
AUDIT COMMITTEE CHARTER
NORTH AMERICAN GALVANIZING & COATINGS, INC.
AUDIT COMMITTEE CHARTER
EFFECTIVE AS OF JANUARY 1, 2004
PURPOSES
The Audit Committee is appointed by the Board of Directors to assist the Board
in fulfilling its responsibility to oversee (1) the integrity of the Company's
financial statements, controls and disclosure; (2) the qualifications and
independence of the Company's independent accountants; (3) the performance of
the Company's independent accountants ; and (4) the Company's compliance with
legal and regulatory requirements. The Audit Committee shall have the sole
authority to appoint the Company's independent accountants, subject to any
shareholder ratification. The Audit Committee shall also prepare the annual
Audit Committee report required by the rules and regulations of the Securities
and Exchange Commission ("SEC") to be included in the Company's annual proxy
statement.
The Audit Committee has the authority to conduct any investigation appropriate
to fulfilling its purposes and responsibilities. It has at all times direct
access to the independent accountants and to any officer or employee of the
Company. The Committee also has the authority and responsibility to engage
outside legal, accounting and other advisors, as it deems appropriate, without
first seeking authorization from the Board of Directors. Funding for any such
outside advisors shall be determined by the Committee and paid by the Company.
The basic function of the Audit Committee is oversight. The Company's management
is responsible for preparing the Company's financial statements and its outside
independent accountants are responsible for auditing those financial statements.
Management, including its accounting staffs, is responsible for the fair
presentation of the information set forth in such financial statements in
conformity with generally accepted accounting principles, and for maintaining
effective disclosure controls and procedures and an effective internal control
structure. The independent accountants' responsibility is to provide their
opinion, based on their audits, as to whether the financial statements fairly
present, in all material respects, the financial position, results of operations
and cash flows of North American Galvanizing & Coatings in conformity with
generally accepted accounting principles and to design and perform their audit
to provide reasonable assurance that the Company's financial statements are free
of material misstatements and omissions. It is not the duty of the Audit
Committee, or of any of its members, to conduct separate auditing or accounting
reviews or provide independent assurance of the Company's compliance with
applicable laws and regulations.
COMMITTEE MEMBERSHIP, STRUCTURE AND OPERATIONS
The Committee shall be comprised of three or more members of the Board of
Directors, each of whom is determined by the Board of Directors to meet the
independence and experience requirements of the Sarbanes-Oxley Act of 2002, the
SEC and the American Stock Exchange. Additionally, none of the members of the
Committee shall be a current or former employee of the Company. At least one
member of the Committee shall qualify as a financial expert as defined by the
Sarbanes-Oxley Act of 2002 and the SEC.
The members and Chair of the Committee shall be appointed annually by the Board
and shall serve until the member's successor is duly appointed or until the
member's earlier resignation or removal. A member may be removed at any time by
the Board, with or without cause.
The Committee shall hold four regular meetings per year, and such further
meetings as circumstances dictate.
A-1
The Committee shall review the Company's quarterly results and quarterly reports
on Form 10-Q.
The Audit Committee may delegate responsibilities to a subcommittee comprised of
one or more members of the Committee, PROVIDED that any action taken, including
with respect to an audit service or a non-audit service or the fees
corresponding thereto, shall be reported to the full Committee as soon as
practicable, but in no event later than at the Committee's next meeting.
The Committee shall meet periodically in executive session, including separate
executive sessions with the Company's management and the independent
accountants.
The Committee shall review and evaluate annually the performance of the
Committee and its members, including review of the compliance by the Committee
with this Charter.
The Committee shall also review and assess annually the adequacy of this charter
and recommend to the Board any changes to the Charter deemed advisable by the
Committee.
RESPONSIBILITIES
In performing its oversight responsibilities, the Committee shall:
Financial Statements and Disclosure
-----------------------------------
1. Review significant changes in, and overall compliance with, accounting
and financial reporting requirements, policies and procedures.
2. Review and discuss with management and the independent accountants the
Company's annual audited financial statements and other financial
information, including the Company's disclosure in Management's
Discussion and Analysis of Financial Condition and Results of
Operations ("MD&A"), and recommend to the Board of Directors whether
the audited financial statements should be included in the Company's
annual report on Form 10-K.
3. Discuss with management and the independent accountants the Company's
financial statements and other financial information, including the
Company's disclosure in MD&A, to be included in the Company's quarterly
reports on Form 10-Q and the results of the review by the independent
accountants of the quarterly financial statements.
4. Discuss with management the process used to develop the Company's
earnings press releases, including the type of information, the
presentation thereof and any use of pro forma information.
5. Discuss with management the nature of financial information and
earnings guidance provided to securities analysts and to credit rating
agencies.
6. Prior to the filing of each quarterly report on Form 10-Q and the
annual report on Form 10-K, review and discuss with management and the
independent accountants the selection, application and disclosure of
critical accounting policies and practices, including the evaluative
criteria used by management in their selection and discuss with
management the disclosure in MD&A in such quarterly report or annual
report regarding critical accounting estimates.
7. Prior to the filing of the annual report on Form 10-K, review with the
independent accountants the matters required to be discussed by
Statement of Auditing Standards ("SAS") No. 61 (relating to the conduct
of the audit and the application of significant accounting policies and
estimates), SAS No. 89 (relating to audit adjustments) and SAS No. 90
(relating to the quality, not just the acceptability, of the Company's
accounting principles and estimates).
A-2
8. Review the results of each audit or review performed by the independent
accountants, including any material comments and recommendations on
internal controls or accounting matters by the Company's independent
accountants and any difficulties encountered during the course of their
audit work, and the Company's responses thereto.
9. Prior to the filing of each quarterly report on Form 10-Q and the
annual report on Form 10-K, obtain from the independent accountants a
report of all alternative treatments of financial information within
generally accepted accounting principles in the United States discussed
with management, the ramifications of the use of such alternative
disclosures and treatments, and the treatment preferred by the
independent accountants.
10. Prior to the filing of each quarterly report on Form 10-Q and the
annual report on Form 10-K, discuss with the independent accountants a
report of all material written communications between the independent
accountants and the Company's management, including any management
letter or Summary of Unadjusted Differences.
11. Obtain regularly from the independent accountants a list of all
significant issues on which the national office of the independent
accountants was consulted by the audit team of the independent
accountants.
12. Review the scope and effectiveness of, and resources devoted to, the
Company's internal control function and significant internal control
findings, and management's responses thereto.
The Independent Accountants
---------------------------
13. Exercise sole authority to appoint and terminate (subject to any
shareholder ratification) the Company's independent accountants, who
shall report directly to the Committee. Be directly responsible for the
compensation and oversight of the accounting firm employed by the
Company to issue an audit report.
14. Obtain and review, at least annually, a report by the independent
accountants describing: (i) the firm's internal quality-control
procedures; (ii) any material issues raised by the most recent internal
quality-control or peer review of the firm, or by any inquiry or
investigation by governmental or professional authorities, within the
preceding five years, respecting one or more independent audits carried
out by the firm, and any steps taken to deal with any such issues; and
(iii) all relationships between the independent accountants and the
Company. This evaluation by the Committee of the independent
accountants' qualifications, performance and independence shall include
the review and evaluation of the lead audit partner and other senior
members of the independent accountant engagement team. The Committee
shall also consider from time to time whether there should be regular
rotation of the audit firm. The Committee shall present its conclusions
from this evaluation to the Board of Directors.
15. Exercise sole authority to approve in advance all audit services and
all corresponding fees and terms, in accordance with procedures
established by the Committee in respect of such approvals.
16. Exercise sole authority to approve in advance all non-audit services to
be provided by the Company's independent accountants that are permitted
under applicable law and regulation, and all corresponding fees and
terms, in accordance with procedures established by the Committee in
respect of such approvals. In exercising this authority, the Committee
shall consider whether the provision by the independent accountants of
any non-audit services to the Company is compatible with maintaining
the independence of such accountants.
17. At least once a year, obtain from the independent accountants a formal
written statement delineating all relationships between the independent
accountants and the Company (including their respective related
entities) that might bear on the independence of the accountants and
which confirms that, in the professional judgment of the independent
accountants, they are independent of the Company within the meaning of
the federal securities laws, and discuss with the independent
accountants their independence, consistent with Independence Standards
Board Standard No. 1.
A-3
18. Engage in a dialogue with the independent accountants about any
disclosed relationships or services that may impact their objectivity
and independence and, when appropriate in the judgment of the
Committee, take appropriate action in response to the accountants'
disclosure to satisfy itself and the Board of Directors of the
accountants' independence.
19. Review, whenever the Committee deems it to be appropriate, the
Company's policy regarding employment by the Company of present and
former employees of the independent accountants.
Controls and Compliance
-----------------------
20. Review with management and the independent accountants the Company's
compliance with applicable laws and regulations, the violation of which
could have a material adverse effect on the Company's consolidated
financial statements. Such review shall include any correspondence with
regulators or governmental agencies, and any published reports that
raise material issues regarding the Company's financial statements or
accounting policies.
21. Review with management and the independent accountants the Company's
disclosure controls and procedures and its internal controls, including
compliance by the Company's employees with the Company's code of
conduct.
22. Prior to the filing of each quarterly report on Form 10-Q and the
annual report on Form 10-K, ensure that the Chief Executive Officer and
the Chief Financial Officer have disclosed to the Committee and the
independent accountants, based on the most recent evaluation by those
officers, any significant deficiencies in the design or operation of
the Company's internal controls which could adversely affect the
Company's ability to record, process, summarize or report financial
data, including identification for the independent accountants of any
material weaknesses in the Company's internal controls, and of any
fraud, whether or not material, involving management or other employees
who have a significant role in internal controls.
23. Obtain from the independent accountants, as appropriate, assurance that
the independent accountants shall inform the Audit Committee if they
detect or become aware of any illegal act, as and to the extent
required by Section 10A(b) of the Securities Exchange Act of 1934, as
amended.
24. Establish procedures for the receipt, retention and treatment of
complaints received by the Company regarding accounting, internal
controls or auditing matters, and for anonymous submission by employees
of the Company regarding questionable accounting or auditing matters.
25. Discuss with management on at least an annual basis the Company's
policies with respect to risk assessment and risk management, including
the Company's major financial risk exposures and the steps management
has taken to monitor and control such exposures.
Reports to the Board of Directors
---------------------------------
26. Report regularly to the Board of Directors, which reports may include,
in the Committee's judgment, any issues that may arise relating to the
quality or integrity of the Company's financial statements, the
Company's compliance with legal and regulatory requirements, the
independence of the independent accountants and the performance of the
independent accountants and of the internal audit function.
A-4
ANNEX B
NORTH AMERICAN GALVANIZING & COATINGS, INC.
2004 INCENTIVE STOCK PLAN
TABLE OF CONTENTS
Page
----
ss. 1. BACKGROUND AND PURPOSE...........................................1
ss. 2. DEFINITIONS......................................................1
2.1 Affiliate.................................................1
2.2 Board.....................................................1
2.3 Change Effective Date.....................................1
2.4 Change in Control.........................................1
2.5 Code......................................................3
2.6 Committee.................................................3
2.7 Company...................................................3
2.8 Director..................................................3
2.9 Director Stock Unit Program...............................3
2.10 Eligible Employee.........................................3
2.11 Fair Market Value.........................................3
2.12 ISO.......................................................4
2.13 1933 Act..................................................4
2.14 1934 Act..................................................4
2.15 Non-ISO...................................................4
2.16 Option....................................................4
2.17 Option Certificate........................................4
2.18 Option Price..............................................4
2.19 Parent....................................................4
2.20 Plan......................................................4
2.21 Preexisting Plan..........................................4
2.22 Rule 16b-3................................................4
2.23 SAR Value.................................................4
2.24 Stock.....................................................4
2.25 Stock Appreciation Right..................................4
2.26 Stock Appreciation Right Certificate......................5
2.27 Stock Grant...............................................5
2.28 Stock Grant Certificate...................................5
2.29 Stock Unit Grant..........................................5
2.30 Subsidiary................................................5
2.31 Ten Percent Shareholder...................................5
ss. 3. SHARES AND GRANT LIMITS..........................................5
3.1 Shares Reserved...........................................5
3.2 Source of Shares..........................................6
3.3 Use of Proceeds...........................................6
3.4 Grant Limits..............................................6
3.5 Preexisting Plan..........................................7
ss. 4. EFFECTIVE DATE...................................................7
ss. 5. COMMITTEE........................................................7
ss. 6. ELIGIBILITY AND ANNUAL GRANT CAPS................................7
ss. 7. OPTIONS..........................................................7
7.1 Committee Action..........................................7
7.2 $100,000 Limit............................................8
7.3 Option Price..............................................8
7.4 Payment...................................................8
7.5 Exercise..................................................9
ss. 8. STOCK APPRECIATION RIGHTS........................................9
8.1 Committee Action..........................................9
8.2 Terms and Conditions.....................................10
8.3 Exercise.................................................11
ss. 9. STOCK GRANTS....................................................11
9.1 Committee Action.........................................11
9.2 Conditions...............................................11
9.3 Dividends, Voting Rights and Creditor Status.............13
9.4 Satisfaction of Forfeiture Conditions....................14
9.5 Income Tax Deduction.....................................14
9.6 Director Stock Unit Program..............................16
ss. 10. NON-TRANSFERABILITY............................................16
ss. 11. SECURITIES REGISTRATION........................................16
ss. 12. LIFE OF PLAN...................................................17
ss. 13. ADJUSTMENT.....................................................17
13.1 Capital Structure........................................17
13.2 Transactions Described inss. 424.........................18
13.3 Fractional Shares........................................18
ss. 14. CHANGE IN CONTROL..............................................19
ss. 15. AMENDMENT OR TERMINATION.......................................19
ss. 16. MISCELLANEOUS..................................................20
16.1 Shareholder Rights.......................................20
16.2 No Contract of Employment................................20
16.3 Withholding..............................................20
ii
16.4 Construction.............................................20
16.5 Other Conditions.........................................21
16.6 Rule 16b-3...............................................21
iii
ss. 1
BACKGROUND AND PURPOSE
----------------------
The purpose of this Plan is to promote the interest of the Company by
authorizing the Committee to grant Options and Stock Appreciation Rights and to
make Stock Grants and Stock Unit Grants to Eligible Employees and Directors in
order (1) to attract and retain Eligible Employees and Directors, (2) to provide
an additional incentive to each Eligible Employee or Director to work to
increase the value of Stock and (3) to provide each Eligible Employee or
Director with a stake in the future of the Company which corresponds to the
stake of each of the Company's shareholders.
ss. 2
DEFINITIONS
-----------
2.1 AFFILIATE -- means any organization (other than a Subsidiary) that
would be treated as under common control with the Company under ss. 414(c) of
the Code if "50 percent" were substituted for "80 percent" in the income tax
regulations under ss. 414(c) of the Code.
2.2 BOARD -- means the Board of Directors of the Company.
2.3 CHANGE EFFECTIVE DATE -- means either the date which includes the
"closing" of the transaction which makes a Change in Control effective if the
Change in Control is made effective through a transaction which has a "closing"
or the date a Change in Control is reported in accordance with applicable law as
effective to the Securities and Exchange Commission if the Change in Control is
made effective other than through a transaction which has a "closing".
2.4 CHANGE IN CONTROL -- means a change in control of the Company of a
nature that would be required to be reported in response to Item 6(e) of
Schedule 14A of Regulation 14A promulgated under the 1934 Act as in effect at
the time of such "change in control", provided that such a change in control
shall be deemed to have occurred at such time as
(a) any "person" (as that term is used in Sections 13(d) and 14(d)(2)
of the 1934 Act), is or becomes the beneficial owner (as defined
in Rule 13d-3 under the 1934 Act) directly or indirectly, of
securities representing 30% or more of the combined voting power
for election of directors of the then outstanding securities of
the Company or any successor to the Company;
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(b) during any period of two consecutive years or less, individuals
who at the beginning of such period constitute the Board cease,
for any reason, to constitute at least a majority of the Board,
unless the election or nomination for election of each new
director was approved by a vote of at least two-thirds of the
directors then still in office who were directors at the
beginning of the period;
(c) the shareholders of the Company approve any reorganization,
merger, consolidation or share exchange as a result of which the
common stock of the Company shall be changed, converted or
exchanged into or for securities of another corporation (other
than a merger with a wholly-owned subsidiary of the Company) or
any dissolution or liquidation of the Company or any sale or the
disposition of 50% or more of the assets or business of the
Company; or
(d) shareholders of the Company approve any reorganization, merger,
consolidation or share exchange unless (A) the persons who were
the beneficial owners of the outstanding shares of the common
stock of the Company immediately before the consummation of such
transaction beneficially own more than 60% of the outstanding
shares of the common stock of the successor or survivor
corporation in such transaction immediately following the
consummation of such transaction and (B) the number of shares of
the common stock of such successor or survivor corporation
beneficially owned by the persons described inss. 2.4(d)(A)
immediately following the consummation of such transaction is
beneficially owned by each such person in substantially the same
proportion that each such person had beneficially owned shares of
the Company common stock immediately before the consummation of
such transaction, provided (C) the percentage described inss.
2.4(d)(A) of the beneficially owned shares of the successor or
survivor corporation and the number described inss. 2.4 (d)(B) of
the beneficially owned shares of the successor or survivor
corporation shall be determined exclusively by reference to the
shares of the successor or survivor corporation which result from
the beneficial ownership of shares of common stock of the Company
by the persons described inss. 2.4(d)(A) immediately before the
consummation of such transaction.
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2.5 CODE -- means the Internal Revenue Code of 1986, as amended.
2.6 COMMITTEE -- means a committee of the Board which shall have at least 2
members, each of whom shall be appointed by and shall serve at the pleasure of
the Board and shall come within the definition of a "non-employee director"
under Rule 16b-3 and an "outside director" under ss. 162(m) of the Code.
2.7 COMPANY -- means North American Galvanizing & Coatings, Inc. and any
successor to North American Galvanizing & Coatings, Inc.
2.8 DIRECTOR -- means any member of the Board who is not an employee of the
Company or a Parent or Subsidiary or affiliate (as such term is defined in Rule
405 of the 1933 Act) of the Company.
2.9 DIRECTOR STOCK UNIT PROGRAM -- means the North American Galvanizing &
Coatings, Inc. Director Stock Unit Program as effective as of the date approved
by the shareholders of the Company and as amended from time to time thereafter.
2.10 ELIGIBLE EMPLOYEE -- means an employee of the Company or any
Subsidiary or Parent or Affiliate to whom the Committee decides for reasons
sufficient to the Committee to make a grant under this Plan.
2.11 FAIR MARKET VALUE -- means either (a) the closing price on any date
for a share of Stock as reported by THE WALL STREET JOURNAL or, if THE WALL
STREET JOURNAL no longer reports such closing price, such closing price as
reported by a newspaper or trade journal selected by the Committee or, if no
such closing price is available on such date, (b) such closing price as so
reported in accordance with ss. 2.10(a) for the immediately preceding business
day, or, if no newspaper or trade journal reports such closing price or if no
such price quotation is available, (c) the price which the Committee acting in
good faith determines through any reasonable valuation method that a share of
Stock might change hands between a willing buyer and a willing seller, neither
being under any compulsion to buy or to sell and both having reasonable
knowledge of the relevant facts.
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2.12 ISO -- means an option granted under this Plan to purchase Stock which
is intended to satisfy the requirements ofss. 422 of the Code.
2.13 1933 ACT -- means the Securities Act of 1933, as amended.
2.14 1934 ACT -- means the Securities Exchange Act of 1934, as amended.
2.15 Non-ISO -- means an option granted under this Plan to purchase Stock
which is intended to fail to satisfy the requirements ofss. 422 of the Code.
2.16 OPTION -- means an ISO or a Non-ISO which is granted underss.7.
2.17 OPTION CERTIFICATE -- means the certificate (whether in electronic or
written form) which sets forth the terms and conditions of an Option granted
under this Plan.
2.18 OPTION PRICE -- means the price which shall be paid to purchase one
share of Stock upon the exercise of an Option granted under this Plan.
2.19 PARENT -- means any corporation which is a parent corporation (within
the meaning of ss. 424(e) of the Code) of the Company.
2.20 PLAN -- means this North American Galvanizing & Coatings, Inc. 2004
Incentive Stock Plan as effective as of the date approved by the shareholders of
the Company and as amended from time to time thereafter.
2.21 PREEXISTING PLAN -- means each of the following plans, as each such
plan has been amended from time to time up to the date this Plan is effective:
(1) the North American Galvanizing & Coatings, Inc. 1996 Stock Option Plan and
(2) the North American Galvanizing & Coatings, Inc. 1988 Stock Option Plan.
2.22 RULE 16b-3 -- means the exemption under Rule 16b-3 to Section 16(b) of
the 1934 Act or any successor to such rule.
2.23 SAR VALUE -- means the value assigned by the Committee to a share of
Stock in connection with the grant of a Stock Appreciation Right underss.8.
2.24 STOCK -- means the $0.10 par value common stock of the Company.
2.25 STOCK APPRECIATION RIGHT -- means a right which is granted underss.8
to receive the appreciation in a share of Stock.
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2.26 STOCK APPRECIATION RIGHT CERTIFICATE -- means the certificate (whether
in electronic or written form) which sets forth the terms and conditions of a
Stock Appreciation Right which is not granted as part of an Option.
2.27 STOCK GRANT -- means a grant under ss. 9 which is designed to result
in the issuance of the number of shares of Stock described in such grant rather
than a payment in cash based on the Fair Market Value of such shares of Stock.
2.28 STOCK GRANT CERTIFICATE -- means the certificate (whether in
electronic or written form) which sets forth the terms and conditions of a Stock
Grant or a Stock Unit Grant.
2.29 STOCK UNIT GRANT -- means a grant under ss. 9 which shall be designed
to result in the payment of cash based on the Fair Market Value or average Fair
Market Value of the number of shares of Stock described in such grant rather
than in the issuance of the number of shares of Stock described in such grant
but which may at the discretion of the Committee result in the issuance of
shares of Stock (and cash in lieu of any fractional share) with respect to Stock
Unit Grants made pursuant to the Director Stock Unit Program.
2.30 SUBSIDIARY -- means a corporation which is a subsidiary corporation
(within the meaning ofss. 424(f) of the Code) of the Company.
2.31 TEN PERCENT SHAREHOLDER -- means a person who owns (after taking into
account the attribution rules of ss. 424(d) of the Code) more than ten percent
of the total combined voting power of all classes of stock of either the
Company, a Subsidiary or Parent.
ss. 3
SHARES AND GRANT LIMITS
-----------------------
3.1 SHARES RESERVED. There shall (subject toss. 13) be reserved for
issuance under this Plan (a) 1,250,000 shares of Stock, 489,667 of which were
authorized for issuance under the North American Galvanizing & Coatings, Inc.
1996 Stock Option Plan and would have remained authorized and available for
issuance under such plan if shares were issued under such plan on the effective
date of this Plan sufficient to satisfy all then outstanding grants under such
plan plus (b) the number of shares of Stock subject to grants under each
Preexisting Plan which are outstanding on the effective date of this Plan and
which are forfeited or expire on or after such effective date in accordance with
the terms of such
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grants; provided, however, only the shares of Stock described inss. 3.1(a) shall
be issued in connection with the exercise of ISOs and nothing in this Plan shall
affect any grants under a Preexisting Plan which are outstanding on the
effective date of this Plan until such time, if any, that any shares of Stock
subject to such grants are forfeited or grants respecting any shares of Stock
expire on or after such effective date in accordance with the terms of such
grants.
3.2 SOURCE OF SHARES. The shares of Stock described in ss. 3.1 shall be
reserved to the extent that the Company deems appropriate from authorized but
unissued shares of Stock and from shares of Stock which have been reacquired by
the Company. All shares of Stock described in ss. 3.1 shall remain available for
issuance under this Plan until issued pursuant to the exercise of an Option or a
Stock Appreciation Right or issued pursuant to a Stock Grant, and any such
shares of stock which are issued pursuant to an Option, a Stock Appreciation
Right or a Stock Grant which are forfeited thereafter shall again become
available for issuance under this Plan. Finally, if the Option Price under an
Option is paid in whole or in part in shares of Stock or if shares of Stock are
tendered to the Company in satisfaction of any condition to a Stock Grant, such
shares thereafter shall become available for issuance under this Plan and shall
be treated the same as any other shares available for issuance under this Plan.
3.3 USE OF PROCEEDS. The proceeds which the Company receives from the sale
of any shares of Stock under this Plan shall be used for general corporate
purposes and shall be added to the general funds of the Company.
3.4 GRANT LIMITS. No Eligible Employee or Director in any calendar year
shall be granted an Option to purchase (subject to ss. 13) more than 100,000
shares of Stock or a Stock Appreciation Right based on the appreciation with
respect to (subject to ss. 13) more than 100,000 shares of Stock, and no Stock
Grant or Stock Unit Grant shall be made to any Eligible Employee or Director in
any calendar year where the Fair Market Value of the Stock subject to such grant
on the date of the grant exceeds $100,000; provided, however, that this limit
shall not apply to a Stock Unit Grant made pursuant to the Director Stock Unit
Program. No more than 100,000 non-forfeitable shares of Stock shall (subject to
ss. 13) be issued pursuant to Stock Grants or Stock Unit Grants under ss. 9;
provided, however, that no non-forfeitable shares of Stock issued pursuant to
Stock Unit Grants under the Director Stock Unit Program shall be counted in
determining whether this 100,000 share limitation has been reached.
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3.5 PREEXISTING PLAN. No grants shall be made under any Preexisting Plan on
or after the date this Plan becomes effective.
ss. 4
EFFECTIVE DATE
--------------
The effective date of this Plan shall be the date the shareholders of the
Company (acting at a duly called meeting of such shareholders) approve the
adoption of this Plan.
ss. 5
COMMITTEE
---------
This Plan shall be administered by the Committee. The Committee acting in
its absolute discretion shall exercise such powers and take such action as
expressly called for under this Plan and, further, the Committee shall have the
power to interpret this Plan and (subject to ss. 14 and ss. 15 and Rule 16b-3)
to take such other action in the administration and operation of this Plan as
the Committee deems equitable under the circumstances, which action shall be
binding on the Company, on each affected Eligible Employee or Director and on
each other person directly or indirectly affected by such action. Furthermore,
the Committee as a condition to making any grant under this Plan to any Eligible
Employee or Director shall have the right to require him or her to execute an
agreement which makes the Eligible Employee or Director subject to
non-competition provisions and other restrictive covenants which run in favor of
the Company.
ss. 6
ELIGIBILITY AND ANNUAL GRANT CAPS
---------------------------------
Only Eligible Employees who are employed by the Company or a Subsidiary or
Parent shall be eligible for the grant of ISOs under this Plan. All Eligible
Employees and Directors shall be eligible for the grant of Non-ISOs and Stock
Appreciation Rights and for Stock Grants and Stock Unit Grants under this Plan.
ss. 7
OPTIONS
-------
7.1 COMMITTEE ACTION. The Committee acting in its absolute discretion shall
have the right to grant Options to Eligible Employees and to Directors under
this Plan from time to time to purchase
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shares of Stock, but the Committee shall not, absent the approval of the
Company's shareholders, take any action, whether through amendment,
cancellation, replacement grants, or any other means, to reduce the Option Price
of any outstanding Options. Each grant of an Option to a Eligible Employee or
Director shall be evidenced by an Option Certificate, and each Option
Certificate shall set forth whether the Option is an ISO or a Non-ISO and shall
set forth such other terms and conditions of such grant as the Committee acting
in its absolute discretion deems consistent with the terms of this Plan;
however, (a) if the Committee grants an ISO and a Non-ISO to a Eligible Employee
on the same date, the right of the Eligible Employee to exercise the ISO shall
not be conditioned on his or her failure to exercise the Non-ISO and (b) if the
only condition to exercise of the Option is the completion of a period of
service, such period of service shall be no less than the one (1) year period
which starts on the date as of which the Option is granted, unless the Committee
determines that a shorter period of service (or no period of service) better
serves the Company's interest.
7.2 $100,000 LIMIT. No Option shall be treated as an ISO to the extent that
the aggregate Fair Market Value of the Stock subject to the Option which would
first become exercisable in any calendar year exceeds $100,000. Any such excess
shall instead automatically be treated as a Non-ISO. The Committee shall
interpret and administer the ISO limitation set forth in thisss. 7.2 in
accordance withss. 422(d) of the Code, and the Committee shall treat thisss.7.2
as in effect only for those periods for whichss. 422(d) of the Code is in
effect.
7.3 OPTION PRICE. The Option Price for each share of Stock subject to an
Option shall be no less than the Fair Market Value of a share of Stock on the
date the Option is granted; provided, however, if the Option is an ISO granted
to an Eligible Employee who is a Ten Percent Shareholder, the Option Price for
each share of Stock subject to such ISO shall be no less than 110% of the Fair
Market Value of a share of Stock on the date such ISO is granted.
7.4 PAYMENT. The Option Price shall be payable in full upon the exercise of
any Option and, at the discretion of the Committee, an Option Certificate can
provide for the payment of the Option Price either in cash, by check or in Stock
which has been held for at least 6 months and which is acceptable to the
Committee, or through any cashless exercise procedure which is effected by an
unrelated broker through a sale of Stock in the open market and which is
acceptable to the Committee, or
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in any combination of such forms of payment. Any payment made in Stock shall be
treated as equal to the Fair Market Value of such Stock on the date the
certificate for such Stock (or proper evidence of such certificate) is presented
to the Committee or its delegate in such form as acceptable to the Committee.
7.5 EXERCISE.
(a) EXERCISE PERIOD. Each Option granted under
this Plan shall be exercisable in whole or
in part at such time or times as set forth
in the related Option Certificate, but no
Option Certificate shall make an Option
exercisable on or after the earlier of
(1) the date which is the fifth
anniversary of the date the
Option is granted, if the
Option is an ISO and the
Eligible Employee is a Ten
Percent Shareholder on the
date the Option is granted,
or
(2) the date which is the tenth
anniversary of the date the
Option is granted, if the
Option is (a) a Non-ISO or
(b) an ISO which is granted
to an Eligible Employee who
is not a Ten Percent
Shareholder on the date the
Option is granted.
(b) TERMINATION OF STATUS AS ELIGIBLE EMPLOYEE
OR DIRECTOR. Subject to ss. 7.5(a), an
Option Certificate may provide for the
exercise of an Option after an Eligible
Employee's or a Director's status as such
has terminated for any reason whatsoever,
including death or disability.
ss. 8
STOCK APPRECIATION RIGHTS
-------------------------
8.1 COMMITTEE ACTION. The Committee acting in its absolute discretion shall
have the right to grant Stock Appreciation Rights to Eligible Employees and to
Directors under this Plan from time to time, and each Stock Appreciation Right
grant shall be evidenced by a Stock Appreciation Right Certificate or, if such
Stock Appreciation Right is granted as part of an Option, shall be evidenced by
the Option Certificate for the related Option.
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8.2 TERMS AND CONDITIONS.
(a) STOCK APPRECIATION RIGHT CERTIFICATE. If a Stock
Appreciation Right is granted independent of an
Option, such Stock Appreciation Right shall be
evidenced by a Stock Appreciation Right Certificate,
and such certificate shall set forth the number of
shares of Stock on which the Eligible Employee's or
Director's right to appreciation shall be based and
the SAR Value of each share of Stock. Such SAR Value
shall be no less than the Fair Market Value of a
share of Stock on the date that the Stock
Appreciation Right is granted. The Stock Appreciation
Right Certificate shall set forth such other terms
and conditions for the exercise of the Stock
Appreciation Right as the Committee deems appropriate
under the circumstances, but no Stock Appreciation
Right Certificate shall make a Stock Appreciation
Right exercisable on or after the date which is the
tenth anniversary of the date such Stock Appreciation
Right is granted.
(b) OPTION CERTIFICATE. If a Stock Appreciation Right is
granted together with an Option, such Stock
Appreciation Right shall be evidenced by an Option
Certificate, the number of shares of Stock on which
the Eligible Employee's or Director's right to
appreciation shall be based shall be the same as the
number of shares of Stock subject to the related
Option, and the SAR Value for each such share of
Stock shall be no less than the Option Price under
the related Option. Each such Option Certificate
shall provide that the exercise of the Stock
Appreciation Right with respect to any share of Stock
shall cancel the Eligible Employee's or Director's
right to exercise his or her Option with respect to
such share and, conversely, that the exercise of the
Option with respect to any share of Stock shall
cancel the Eligible Employee's or Director's right to
exercise his or her Stock Appreciation Right with
respect to such share. A Stock Appreciation Right
which is granted as part of an Option shall be
exercisable only while the related Option is
exercisable. The Option Certificate shall set forth
such other
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terms and conditions for the exercise of the Stock
Appreciation Right as the Committee deems appropriate
under the circumstances.
(c) MINIMUM PERIOD OF SERVICE. If the only condition to
exercise of a Stock Appreciation Right is the
completion of a period of service, such period of
service shall be no less than the one (1) year period
which starts on the date as of which the Stock
Appreciation Right is granted, unless the Committee
determines that a shorter period of service (or no
period of service) better serves the Company's
interest.
8.3 EXERCISE. A Stock Appreciation Right shall be exercisable only when the
Fair Market Value of a share of Stock on which the right to appreciation is
based exceeds the SAR Value for such share, and the payment due on exercise
shall be based on such excess with respect to the number of shares of Stock to
which the exercise relates. An Eligible Employee or Director upon the exercise
of his or her Stock Appreciation Right shall receive a payment from the Company
in cash or in Stock issued under this Plan, or in a combination of cash and
Stock, and the number of shares of Stock issued shall be based on the Fair
Market Value of a share of Stock on the date the Stock Appreciation Right is
exercised. The Committee acting in its absolute discretion shall have the right
to determine the form and time of any payment under thisss. 8.3.
ss. 9
STOCK GRANTS
9.1 COMMITTEE ACTION. The Committee acting in its absolute discretion shall
have the right to make Stock Grants and Stock Unit Grants to Eligible Employees
and to Directors. Each Stock Grant and each Stock Unit Grant shall be evidenced
by a Stock Grant Certificate, and each Stock Grant Certificate shall set forth
the conditions, if any, under which Stock will be issued under the Stock Grant
or cash will be paid under the Stock Unit Grant and the conditions under which
the Eligible Employee's or Director's interest in any Stock which has been
issued will become non-forfeitable.
9.2 CONDITIONS.
(a) CONDITIONS TO ISSUANCE OF STOCK. The Committee acting
in its absolute discretion may make the issuance of
Stock under a Stock Grant subject to the satisfaction
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of one, or more than one, condition which the
Committee deems appropriate under the circumstances
for Eligible Employees or Directors generally or for
an Eligible Employee or a Director in particular, and
the related Stock Grant Certificate shall set forth
each such condition and the deadline for satisfying
each such condition. Stock subject to a Stock Grant
shall be issued in the name of an Eligible Employee
or Director only after each such condition, if any,
has been timely satisfied, and any Stock which is so
issued shall be held by the Company pending the
satisfaction of the forfeiture conditions, if any,
underss.9.2(b) for the related Stock Grant.
(b) CONDITIONS ON FORFEITURE OF STOCK OR CASH PAYMENT.
The Committee acting in its absolute discretion may
make any cash payment due under a Stock Unit Grant or
Stock issued in the name of an Eligible Employee or
Director under a Stock Grant non-forfeitable subject
to the satisfaction of one, or more than one,
objective employment, performance or other condition
that the Committee acting in its absolute discretion
deems appropriate under the circumstances for
Eligible Employees or Directors generally or for an
Eligible Employee or a Director in particular, and
the related Stock Grant Certificate shall set forth
each such condition, if any, and the deadline, if
any, for satisfying each such condition. An Eligible
Employee's or a Director's non-forfeitable interest
in the shares of Stock underlying a Stock Grant or
the cash payable under a Stock Unit Grant shall
depend on the extent to which he or she timely
satisfies each such condition. Each share of Stock
underlying a Stock Grant shall not be available
underss. 3 after such grant is effective until such
time, if any, as such share thereafter is forfeited
as a result of a failure to timely satisfy a
forfeiture condition, in which event such share of
Stock shall again become available underss. 3 as of
the date of such forfeiture. Finally, the Company
shall have the right to require an Eligible Employee
or Director to sign an irrevocable stock power in
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favor of the Company with respect to forfeitable
shares of Stock issued under thisss. 9.2(b) in order
for the Company to effect a forfeiture in accordance
with thisss. 9.2(b).
(c) MINIMUM PERIOD OF SERVICE. If the only condition to
the forfeiture of a Stock Grant or a Stock Unit
Grant is the completion of a period of service, such
period of service shall be no less than the three
(3) year period which starts on the date as of which
the Stock Grant or Stock Unit Grant is made, unless
the Committee determines that a shorter period of
service (or no period of service) better serves the
Company's interest.
9.3 DIVIDENDS, VOTING RIGHTS AND CREDITOR STATUS.
(a) CASH DIVIDENDS. Except as otherwise set forth in a
Stock Grant, if a dividend is paid in cash on a share
of Stock after such Stock has been issued under a
Stock Grant but before the first date that an
Eligible Employee's or a Director's interest in such
Stock (1) is forfeited completely or (2) becomes
completely non-forfeitable, the Company shall pay
such cash dividend directly to such Eligible Employee
or Director.
(b) STOCK DIVIDENDS. If a dividend is paid on a share of
Stock in Stock after such Stock has been issued under
a Stock Grant but before the first date that an
Eligible Employee's or a Director's interest in such
Stock (1) is forfeited completely or (2) becomes
completely non-forfeitable, the Company shall hold
such dividend Stock subject to the same conditions
under ss. 9.2(b) as the related Stock Grant.
(c) OTHER. If a dividend (other than a dividend described
in ss. 9.3(a) or ss. 9.3(b)) is paid with respect to
a share of Stock after such Stock has been issued
under a Stock Grant but before the first date that an
Eligible Employee's or a Director's interest in such
Stock (1) is forfeited completely or (2) becomes
completely non-forfeitable, the Company shall
distribute or hold such dividend in accordance with
such rules as the Committee shall adopt with respect
to each such dividend.
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(d) VOTING. Except as otherwise set forth in a Stock
Grant, an Eligible Employee or a Director shall have
the right to vote the Stock issued under his or her
Stock Grant during the period which comes after such
Stock has been issued under a Stock Grant but before
the first date that an Eligible Employee's or
Director's interest in such Stock (1) is forfeited
completely or (2) becomes completely non-forfeitable.
(e) GENERAL CREDITOR STATUS. An Eligible Employee and a
Director to whom a Stock Unit grant is made shall be
no more than a general and unsecured creditor of the
Company with respect to any cash payable under such
Stock Unit Grant.
9.4 SATISFACTION OF FORFEITURE CONDITIONS. A share of Stock shall cease to
be subject to a Stock Grant at such time as an Eligible Employee's or a
Director's interest in such Stock becomes non-forfeitable under this Plan, and
the certificate or other evidence of ownership representing such share shall be
transferred to the Eligible Employee or Director as soon as practicable
thereafter.
9.5 INCOME TAX DEDUCTION.
(a) GENERAL. The Committee shall (where the Committee
under the circumstances deems in the Company's best
interest) make Stock Grants and Stock Unit Grants to
Eligible Employees either (1) subject to at least one
condition related to one, or more than one,
performance goal based on the performance goals
described inss. 9.5(b) which seems likely to result
in the Stock Grant or Stock Unit Grant qualifying as
"performance-based compensation" underss.162(m) of
the Code or (2) under such other circumstances as the
Committee deems likely to result in an income tax
deduction for the Company with respect such Stock
Grant or Stock Unit Grant. A performance goal may be
set in any manner determined by the Committee,
including looking to achievement on an absolute or
relative basis in relation to peer groups or indexes.
(b) PERFORMANCE GOALS. A performance goal is described in
thisss. 9.5(b) if such goal relates to (1) the
Company's return over capital costs or increases in
return over capital costs, (2) the Company's total
earnings or the growth in such earnings, (3) the
Company's consolidated earnings or the growth in such
earnings, (4) the Company's earnings per share or the
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growth in such earnings, (5) the Company's net
earnings or the growth in such earnings, (6) the
Company's earnings before interest expense, taxes,
depreciation, amortization and other non-cash items
or the growth in such earnings, (7) the Company's
earnings before interest and taxes or the growth in
such earnings, (8) the Company's consolidated net
income or the growth in such income, (9) the value of
the Company's common stock or the growth in such
value, (10) the Company's stock price or the growth
in such price, (11) the Company's return on assets or
the growth on such return, (12) the Company's cash
flow or the growth in such cash flow, (13) the
Company's total shareholder return or the growth in
such return, (14) the Company's expenses or the
reduction of such expenses, (15) the Company's sales
growth, (16) the Company's overhead ratios or changes
in such ratios, (17) the Company's expense-to-sales
ratios or the changes in such ratios, or (18) the
Company's economic value added or changes in such
value added.
(c) ADJUSTMENTS. When the Committee determines whether a
performance goal has been satisfied for any period,
the Committee may exclude any or all "extraordinary
items" as determined under U.S. generally accepted
accounting principles and any other unusual or
non-recurring items, including, without limitation,
the charges or costs associated with restructurings
of the Company, discontinued operations, and the
cumulative effects of accounting changes. The
Committee may also adjust any performance goal for a
period as it deems equitable in recognition of
unusual or non-recurring events affecting the
Company, changes in applicable tax laws or accounting
principles, or such other factors as the Committee
may determine (including, without limitation, any
adjustments that would result in the Company's paying
non-deductible compensation to an Eligible Employee).
B-15
9.6 DIRECTOR STOCK UNIT PROGRAM. The Company at the direction of the
Committee may establish a revocable "rabbi trust" which is a part of this Plan
and the Director Stock Unit Program and transfer a number of shares of Stock to
the trustee of such trust which matches the number of Stock Unit Grants made
pursuant to the Director Stock Unit Program if a determination is made that such
transfers will minimize or eliminate the adverse financial accounting
consequences, if any, to the Company as a result of Stock Unit Grants made
pursuant to the Director Stock Unit Program.
ss. 10
NON-TRANSFERABILITY
-------------------
No Option, Stock Grant, Stock Unit Grant or Stock Appreciation Right shall
(absent the Committee's consent) be transferable by an Eligible Employee or a
Director other than by will or by the laws of descent and distribution, and any
Option or Stock Appreciation Right shall (absent the Committee's consent) be
exercisable during a Eligible Employee's or Director's lifetime only by the
Eligible Employee or Director. The person or persons to whom an Option or Stock
Grant or Stock Unit Grant or Stock Appreciation Right is transferred by will or
by the laws of descent and distribution (or with the Committee's consent)
thereafter shall be treated as the Eligible Employee or Director.
ss. 11
SECURITIES REGISTRATION
-----------------------
As a condition to the receipt of shares of Stock under this Plan, the
Eligible Employee or Director shall, if so requested by the Company, agree to
hold such shares of Stock for investment and not with a view of resale or
distribution to the public and, if so requested by the Company, shall deliver to
the Company a written statement satisfactory to the Company to that effect.
Furthermore, if so requested by the Company, the Eligible Employee or Director
shall make a written representation to the Company that he or she will not sell
or offer for sale any of such Stock unless a registration statement shall be in
effect with respect to such Stock under the 1933 Act and any applicable state
securities law or he or she shall have furnished to the Company an opinion in
form and substance satisfactory to the Company of legal counsel satisfactory to
the Company that such registration is not required. Certificates or other
B-16
evidence of ownership representing the Stock transferred upon the exercise of an
Option or Stock Appreciation Right or upon the lapse of the forfeiture
conditions, if any, on any Stock Grant may at the discretion of the Company bear
a legend to the effect that such Stock has not been registered under the 1933
Act or any applicable state securities law and that such Stock cannot be sold or
offered for sale in the absence of an effective registration statement as to
such Stock under the 1933 Act and any applicable state securities law or an
opinion in form and substance satisfactory to the Company of legal counsel
satisfactory to the Company that such registration is not required.
ss. 12
LIFE OF PLAN
------------
No Option or Stock Appreciation Right shall be granted or Stock Grant or
Stock Unit Grant made under this Plan on or after the earlier of:
(1) the tenth anniversary of the effective date
of this Plan (as determined under ss. 4), in
which event this Plan otherwise thereafter
shall continue in effect until all
outstanding Options and Stock Appreciation
Rights have been exercised in full or no
longer are exercisable and all Stock issued
under any Stock Grants under this Plan have
been forfeited or have become
non-forfeitable, or
(2) the date on which all of the Stock reserved
under ss. 3 has (as a result of the exercise
of Options or Stock Appreciation Rights
granted under this Plan or the satisfaction
of the forfeiture conditions, if any, on
Stock Grants) been issued or no longer is
available for use under this Plan, in which
event this Plan also shall terminate on such
date.
ss. 13
ADJUSTMENT
----------
13.1 CAPITAL STRUCTURE. The number, kind or class (or any combination
thereof) of shares of Stock reserved underss. 3, the grant caps described
inss.3, the number, kind or class (or any combination thereof) of shares of
Stock subject to Options or Stock Appreciation Rights granted under this Plan
and the Option Price of such Options and the SAR Value of such Stock
Appreciation Rights as
B-17
well as the number, kind or class (or any combination thereof) of shares of
Stock subject to Stock Grants or Stock Unit Grants made under this Plan shall be
adjusted by the Committee in an equitable manner to reflect any equity
restructuring or change in the capitalization of the Company, including, but not
limited to, spin offs, stock dividends, large non-reoccurring dividends, rights
offerings or stock splits.
13.2 TRANSACTIONS DESCRIBED IN ss. 424. The Committee as part of any
corporate transaction described inss. 424(a) of the Code shall have the right to
adjust (in any manner which the Committee in its discretion deems consistent
withss. 424(a) of the Code) the number, kind or class (or any combination
thereof) of shares of Stock reserved underss. 3 and the annual grant caps
described inss.3. Furthermore, the Committee as part of any corporate
transaction described inss. 424(a) of the Code shall have the right to adjust
(in any manner which the Committee in its discretion deems consistent withss.
424(a) of the Code) the number, kind or class (or any combination thereof) of
shares of Stock subject to any outstanding Stock Grants or Stock Unit Grants
under this Plan and any related grant conditions and forfeiture conditions, and
the number, kind or class (or any combination thereof) of shares subject to
Option and Stock Appreciation Right grants previously made under this Plan and
the related Option Price and SAR Value for each such Option and Stock
Appreciation Right, and, further, shall have the right (in any manner which the
Committee in its discretion deems consistent withss. 424(a) of the Code and
without regard to the annual grant caps described inss. 3 of this Plan) to make
any Stock Grants and Option and Stock Appreciation Right grants to effect the
assumption of, or the substitution for, stock grants, stock unit grants and
option and stock appreciation right grants previously made by any other
corporation to the extent that such corporate transaction calls for such
substitution or assumption of such stock grants, stock unit grants and stock
option and stock appreciation right grants.
13.3 FRACTIONAL SHARES. If any adjustment under thisss. 13 would create a
fractional share of Stock or a right to acquire a fractional share of Stock
under any Option, Stock Appreciation Right or Stock Grant, such fractional share
shall be disregarded and the number of shares of Stock reserved under this Plan
and the number subject to any Options or Stock Appreciation Right grants and
Stock Grants shall be the next lower number of shares of Stock, rounding all
fractions downward. An adjustment made under thisss. 13 by the Committee shall
be conclusive and binding on all affected persons.
B-18
ss. 14
CHANGE IN CONTROL
-----------------
If there is a Change in Control of the Company, then as of the
Change Effective Date for such Change in Control any and all conditions to the
exercise of all outstanding Options and Stock Appreciation Rights on such date
and any and all outstanding issuance and forfeiture conditions on any Stock
Grants and Stock Unit Grants on such date automatically shall be deemed 100%
satisfied as of such Change Effective Date, and the Board shall have the right
(to the extent expressly required as part of such transaction) to cancel such
Options, Stock Appreciation Rights, Stock Grants and Stock Unit Grants after
providing each Eligible Employee and Director a reasonable period to exercise
his or her Options and Stock Appreciation Rights and to take such other action
as necessary or appropriate to receive the Stock subject to any Stock Grants and
the cash payable under any Stock Unit Grants; provided, if any issuance or
forfeiture condition described in this ss. 14 relates to satisfying any
performance goal and there is a target for such goal, such issuance or
forfeiture condition shall be deemed satisfied under this ss. 14 only to the
extent of such target unless such target has been exceeded before the Change
Effective Date, in which event such issuance or forfeiture condition shall be
deemed satisfied to the extent such target had been so exceeded.
ss. 15
AMENDMENT OR TERMINATION
------------------------
This Plan may be amended by the Board from time to time to the extent that
the Board deems necessary or appropriate; provided, however, (a) no amendment
shall be made absent the approval of the shareholders of the Company to the
extent such approval is required under applicable law or the rules of the stock
exchange on which shares of Stock are listed and (b) no amendment shall be made
to ss. 14 on or after the date of any Change in Control which might adversely
affect any rights which otherwise would vest on the related Change Effective
Date. The Board also may suspend granting Options or Stock Appreciation Rights
or making Stock Grants or Stock Unit Grants under this Plan at any time and may
terminate this Plan at any time; provided, however, the Board shall not have the
right unilaterally to modify, amend or cancel any Option or Stock Appreciation
Right granted or Stock Grant made before such suspension or termination unless
(1) the Eligible Employee or Director consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or liquidation of the
Company or a transaction described in ss. 13.2 or ss. 14.
B-19
ss. 16
MISCELLANEOUS
-------------
16.1 SHAREHOLDER RIGHTS. No Eligible Employee or Director shall have any
rights as a shareholder of the Company as a result of the grant of an Option or
a Stock Appreciation Right pending the actual delivery of the Stock subject to
such Option or Stock Appreciation Right to such Eligible Employee or Director.
Subject toss. 9.3, an Eligible Employee's or a Director's rights as a
shareholder in the shares of Stock underlying a Stock Grant which is effective
shall be set forth in the related Stock Grant Certificate.
16.2 NO CONTRACT OF EMPLOYMENT. The grant of an Option or a Stock
Appreciation Right or a Stock Grant or Stock Unit Grant to an Eligible Employee
or Director under this Plan shall not constitute a contract of employment or a
right to continue to serve on the Board and shall not confer on an Eligible
Employee or Director any rights upon his or her termination of employment or
service in addition to those rights, if any, expressly set forth in this Plan or
the related Option Certificate, Stock Appreciation Right Certificate, or Stock
Grant Certificate.
16.3 WITHHOLDING. Each Option, Stock Appreciation Right, Stock Grant and
Stock Unit Grant shall be made subject to the condition that the Eligible
Employee or Director consents to whatever action the Committee directs to
satisfy the minimum statutory federal and state tax withholding requirements, if
any, which the Company determines are applicable to the exercise of such Option
or Stock Appreciation Right or to the satisfaction of any forfeiture conditions
with respect to Stock subject to a Stock Grant or Stock Unit Grant issued in the
name of the Eligible Employee or Director. No withholding shall be effected
under this Plan which exceeds the minimum statutory federal and state
withholding requirements.
16.4 CONSTRUCTION. All references to sections (ss.) are to sections (ss.)
of this Plan unless otherwise indicated. This Plan shall be construed under the
laws of the State of Delaware. Each term set forth in ss. 2 shall, unless
otherwise stated, have the meaning set forth opposite such term for purposes of
this Plan and, for purposes of such definitions, the singular shall include the
plural and the plural shall
B-20
include the singular. Finally, if there is any conflict between the terms of
this Plan and the terms of any Option Certificate, Stock Appreciation Right
Certificate or Stock Grant Certificate, the terms of this Plan shall control.
16.5 OTHER CONDITIONS. Each Option Certificate, Stock Appreciation Right
Certificate or Stock Grant Certificate may require that an Eligible Employee or
a Director (as a condition to the exercise of an Option or a Stock Appreciation
Right or the issuance of Stock subject to a Stock Grant) enter into any
agreement or make such representations prepared by the Company, including
(without limitation) any agreement which restricts the transfer of Stock
acquired pursuant to the exercise of an Option or a Stock Appreciation Right or
a Stock Grant or provides for the repurchase of such Stock by the Company.
16.6 RULE 16b-3. The Committee shall have the right to amend any Option,
Stock Grant or Stock Appreciation Right to withhold or otherwise restrict the
transfer of any Stock or cash under this Plan to an Eligible Employee or
Director as the Committee deems appropriate in order to satisfy any condition or
requirement under Rule 16b-3 to the extent Rule 16 of the 1934 Act might be
applicable to such grant or transfer.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Plan to evidence its adoption of this Plan.
NORTH AMERICAN GALVANIZING &
COATINGS, INC.
By: ________________________
Date: ______________________
B-21
ANNEX C
DIRECTOR STOCK UNIT PROGRAM
NORTH AMERICAN GALVANIZING & COATINGS, INC.
DIRECTOR STOCK UNIT PROGRAM
ss. 1
PURPOSE AND EFFECTIVE DATE
--------------------------
The purpose of this Program is to tie a percentage of each Director's
compensation to the long-term value of Stock. This Program has been adopted in
connection with the adoption of the 2004 Incentive Stock Plan and has been
adopted subject to the approval of this Program and the 2004 Incentive Stock
Plan. This Program shall be effective on the date NAGALV's shareholders approve
the adoption of this Program.
ss. 2
DEFINITIONS
-----------
2.1. ACCOUNT for purposes of this Program shall mean the bookkeeping
account maintained by the Committee to show for each Director as of any date all
Stock Unit Grant credits made for such Director under this Program, the
adjustments to such credits and any distributions to such Director.
2.2. AUTOMATIC DEFERRAL PERIOD for purposes of this Program shall mean the
period described in ss. 3.5(b).
2.3. BENEFICIARY for purposes of this Program shall mean for each Director
the person designated as such by the Director on the form provided for this
purpose or, if no such person is so designated or if no such person survives the
Director, the Director's estate.
2.4. BOARD for purposes of this Program shall mean the Board of Directors
of NAGALV.
2.5. COMMITTEE for purposes of this Program shall mean the Committee under
the 2004 Incentive Stock Plan.
2.6. DEFERRAL PERIOD for purposes of this Program shall mean the period
described in ss. 3.5(b) and the period described in ss. 3.5(c) .
2.7. DIRECTOR for purposes of this Program shall mean a member of the
Board.
2.8. ELECTIVE DEFERRAL PERIOD for purposes of this Program shall mean the
period described in ss. 3.5(c).
2.9. INSIDE DIRECTOR for purposes of this Program shall mean a member of
the Board who is an employee of NAGALV.
2.10. NAGALV for purposes of this Program shall mean North American
Galvanizing & Coatings, Inc. and any successor to such corporation.
2.11. OUTSIDE DIRECTOR for purposes of this Program shall mean a member of
NAGALV's Board of Directors who is not an employee of NAGALV.
C-1
2.12. PROGRAM for purposes of this Program shall mean this North American
Galvanizing & Coatings, Inc. Director Stock Unit Program, as amended from time
to time.
2.13. STOCK for purposes of this Program shall mean Stock under the 2004
Incentive Stock Plan.
2.14. STOCK UNIT GRANT for purposes of this Program shall mean a Stock Unit
Grant under the 2004 Incentive Stock Plan.
2.15. 2004 STOCK INCENTIVE PLAN for purposes of this Program shall mean the
North American Galvanizing & Coatings, Inc. 2004 Stock Incentive Plan, as
amended from time to time.
ss. 3
STOCK UNIT GRANT
----------------
3.1. OUTSIDE DIRECTORS. Each Outside Director shall be required to defer at
least 50% of his or her director fees each calendar year and shall have the
right under ss. 3.3 to elect to defer 75% or 100% oF such fees each calendar
year. The deferrals for each Outside Director will be deducted (if he or she
elects less than a 100% deferral) on a pro-rata basis from his or her director
fees when such fees are otherwise payable in cash, and the deferrals shall be
converted into a Stock Unit Grant at the average of the closing prices for a
share of Stock for the 10 trading days before the date the director fees for
Outside Directors otherwise would have been payable in cash.
3.2. INSIDE DIRECTORS. NAGALV automatically shall defer for each Inside
Director a dollar amount equal to 50% of the director fees for Outside
Directors. Inside Directors shall have the right to elect additional deferrals
which will correspond to an Outside Director's right to elect to defer 75% or
100% of such fees each calendar year. Any such additional deferrals by Inside
Directors shall be matched by the Committee at the same rate at which additional
deferrals by Outside Directors are matched under ss. 3.3, and Inside Directors
wishing to elect any additional deferral shall do so in accordance with the
deferral election procedures described in ss. 3.3(d). The deferrals for each
Inside Director shall be effected to coincide with the deferrals for Outside
Directors, and the deferrals for Inside Directors shall be converted into a
Stock Unit Grant at the same time and in accordance with the same procedure
followed for Outside Directors.
3.3. MATCHING UNITS AND DEFERRAL ELECTIONS.
(a) FIFTY PERCENT. If an Outside Director does not elect
to defer more than the required deferral under ss.
3.1, the Committee shall match 25% of his or her
deferral in an additional Stock Unit Grant
(b) SEVENTY FIVE PERCENT. If an Outside Director elects
in accordance with ss. 3.3(d) to defer 75% of his or
her director fees, the Committee shall match 50% of
his or her deferral in an additional Stock Unit
Grant.
(c) ONE HUNDRED PERCENT. If an Outside Director elects in
accordance with ss. 3.3(d) to defer 100% of his or
her director fees, the Committee shall match 75% of
his or her deferral in an additional Stock Unit
Grant. The Committee shall match 75% of each Inside
Director's automatic deferrals under ss. 3.2 in an
additional Stock Unit Grant.
(d) DEFERRAL ELECTION RULES FOR OUTSIDE DIRECTORS.
C-2
(1) General Rule. A deferral election under ss.
3.3(b) or ss. 3.3(c) shall be effective for
fees paid in any calendar year only if
delivered to NAGALV before the beginning of
such calendar year, and an election shall be
effective only if made on the form provided
for this purpose.
(2) SPECIAL RULES.
(A) Each Outside Director may make an
election under ss. 3.3(b) or ss.
3.3(c) after NAGALV's annual
shareholder meeting in 2004 if such
shareholders approve this Program at
such meeting and such election is
delivered to NAGALV before the end
of the 30 day period which starts on
the date of such meeting. An
election under this ss. 3.3(d)(2)(A)
shall be effective for director fees
otherwise payablE in 2004 after such
election is delivered to NAGALV.
(B) Each Outside Director may make an
election underss. 3.3(b) orss.
3.3(c) with respect to director fees
payable in the calendar year in
which he or she is first elected an
Outside Director if such election is
delivered to NAGALV before the end
of the 30 day period which starts on
the date he or she is first elected
an Outside Director. An election
under thisss. 3.3(d)(2)(B) shall be
effective for directors' fees
otherwise payable in such calendar
year after such election is
delivered to NAGALV.
(3) IRREVOCABLE. An election under this ss.
3.3(d) shall be irrevocable for the calendar
year for which the election is made when the
election is delivered to NAGALV.
(e) CONVERSION TO A STOCK UNIT GRANT. A Director's match
under this ss. 3.3 will be converted into a Stock
Unit Grant at the same time and under the same
procedure as his or her deferrals are converted into
a Stock Unit Grant.
3.5. Deferral Periods.
(a) GENERAL. All deferrals under this Program shall be
paid in the calendar year immediately following the
end of an Automatic Deferral Period or, if a Director
so elects in accordance with this ss. 3.5, the end of
an additional Elective Deferral Period.
(b) AUTOMATIC DEFERRAL PERIOD. The Automatic Deferral
Period for a Director for deferrals effected in any
calendar year shall be the five calendar year period
starting on the immediately following January 1.
There will be separate Automatic Deferral Period for
deferrals effected in each calendar year.
(c) ELECTIVE DEFERRAL PERIOD. If a Director delivers an
election on the form provided for this purpose to
NAGALV at least one full year before the end of any
Automatic Deferral Period, the payment of the
deferrals subject to such Automatic Deferral Period
shall be deferred for an additional five calendar
years. Any such election shall be irrevocable when
delivered to NAGALV.
(d) SPECIAL RULES.
(1) TERMINATION. All deferrals (whether subject
to an Automatic Deferral Period or an
Elective Deferral Period) shall be payable
as of the date a Director's service as such
ends or the date his or her employment with
NAGALV ends, whichever comes last.
C-3
(2) HARDSHIP. If a Director can demonstrate to a
majority of the other members of the Board
that he or she has an extreme financial
hardship as a result of a reasonably
unforeseeable event and that access to his
or her deferrals under this Program is more
appropriate under the circumstances than
using any of his or her other assets to cure
such hardship, the Board (acting by a
majority vote with the affected Director not
voting) may authorize the payment of all or
a portion of his or her deferrals to cure
such hardship.
3.6. PAYMENT. When any deferrals become payable at the end of a Deferral
Period or become payable under ss. 3.5(d), payment shall be made (subject to
applicable withholdings) in a lump sum in cash or, at the Committee's
discretion, in whole shares of Stock (and cash in lieu of a fractional share)
based on the average of the closing prices for a share of Stock for the 10
trading days before the date as of which payment is made. NAGALV shall make a
payment as soon as practicable after a deferral becomes payable; provided,
however, NAGALV may defer any payment to a future date if making a payment
before such future date could result in the violation of any securities or other
laws.
3.7. NON-FORFEITABLE ACCOUNT AND ACCOUNT ADJUSTMENTS. A Director's interest
in his or her Account shall be non-forfeitable. The number of shares described
in a Stock Unit Grant credited to a Director's Account shall be adjusted at the
same time and in the same manner as other Stock Unit Grant made under the 2004
Incentive Stock Plan and such number shall be reduced to reflect any cash
payments made or shares of Stock issued to a Director.
ss. 4
ADMINISTRATION
--------------
4.1. POWERS. This Program shall be administered by the Committee, and the
Committee shall have the absolute and complete authority, duty and power to
interpret and construe the provisions of this Program as the Committee deems
appropriate, including the final authority to determine a Director's benefits
under this Program, and to take any other action in connection with the
operation or administration of this Program which the Committee deems fair and
appropriate under the circumstances. All interpretations, determinations,
regulations and calculations shall be final and binding on all affected persons.
4.2. STATEMENTS. NAGALV shall furnish individual statements of Account
balances to each Director in such form and as of such dates as determined by the
Committee.
ss. 5
AMENDMENT AND TERMINATION
-------------------------
NAGALV reserves the right to amend or terminate this Program at any time by
action of the Board. NAGALV upon the termination of this Program shall have the
right in its sole discretion to accelerate the timing of distributions of
Accounts. No amendment or termination shall directly or indirectly reduce the
balance of any Account as of the effective date of such amendment or
termination.
C-4
ss. 6
MISCELLANEOUS
-------------
6.1. GENERAL ASSETS. All cash distributions to, or on behalf of, a Director
under this Program shall be made from NAGALV's general assets and all shares of
Common Stock issued shall be issued under the 2004 Stock Incentive Plan, and any
claim by a Director or by his or her Beneficiary against NAGALV for any cash
distribution or stock issuance under this Program shall be treated the same as a
claim of any general and unsecured creditor of NAGALV.
6.2. NO LIABILITY. No Director and no Beneficiary shall have the right to
look to, or have any claim whatsoever against, any officer, director, employee
or agent of NAGALV in his or her individual capacity for the distribution of any
Account.
6.3. NO ASSIGNMENT; Binding Effect. No Director or Beneficiary shall have
the right to alienate, assign, commute or otherwise encumber an Account for any
purpose whatsoever, whether through a domestic relations order or otherwise, and
any attempt to do so shall be disregarded as completely null and void. The
provisions of this Program shall be binding on each Director and Beneficiary and
on NAGALV.
6.4. CONSTRUCTION. This Program shall be construed in accordance with the
laws of the State of Delaware except to the extent such laws are preempted by
federal law. Headings and subheadings have been added only for convenience of
reference and shall have no substantive effect whatsoever. All references to
sections (ss.) shall be to sections (ss.) to this Program. All references to the
singular shall include the plural and all references to the plural shall include
the singular. All definitions in this Program shall apply exclusively to this
Program.
6.5. NO CONTRACT OF EMPLOYMENT. A Director's participation in this Program
shall not constitute a contract of employment by NAGALV or a right to be
nominated to serve on, or serve on, the Board.
6.6. 2004 INCENTIVE STOCK PLAN. The terms of the 2004 Incentive Stock Plan
are incorporated by this ss. 6.6 in the Program, and the Program is subject to
the terms of such plan. This Program shall not confer on any Director any rights
with respect to a Stock Unit Grant which are superior to his or her rights under
the 2004 Incentive Stock Plan with respect to such Stock Unit Grant.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer to
execute this Program to evidence its adoption of this Program.
North American Galvanizing &
Coatings, Inc.
By: ________________________
Date: ______________________
C-5
ANNEX D
PROPOSED FORM OF CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT THE REVERSE SPLIT
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN GALVANIZING & COATINGS, INC.
North American Galvanizing & Coatings, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The amendment set forth below to the Corporation's Restated Certificate
of Incorporation, as amended (the "Certificate"), was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
2. The following amendment (the "Reverse Split Amendment") shall take
effect at 5:00 P.M., Central Time, on the date of the filing of this Certificate
of Amendment:
The following new subsection (a) is added to Article Fourth of the
Certificate:
(a) REVERSE STOCK SPLIT OF COMMON STOCK.
Immediately upon the effectiveness of this amendment to this
Certificate of Incorporation (the "Reverse Split Effective Time"), each
five hundred (500) shares of the Common Stock of the Corporation that are
issued and outstanding immediately prior to the Reverse Split Effective
Time shall automatically, without further action on the part of the
Corporation or any holder of Common Stock and without requiring the
surrender of certificates representing Common Stock, be combined,
converted, reclassified and changed into (the "Reverse Split") one (1)
fully paid and nonassessable share of Common Stock, except that holders of
Common Stock who otherwise would be entitled to receive only a fractional
interest in less than one share of Common Stock (an "Unattached Fractional
Interest") as a result of the Reverse Split shall be entitled to receive,
in lieu of such Unattached Fractional Interest, a cash payment in an amount
equal to the product calculated by multiplying five hundred (500) times the
fair value of one (1) share of Common Stock immediately prior to the
Reverse Split Effective Time by the decimal equivalent of such Unattached
Fractional Interest. As of the Reverse Split Effective Time, no such
Unattached Fractional Interest held by such a holder shall be issued or
outstanding.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed this Certificate of Amendment on the ___ day of
_____________, 200_.
By:
--------------------------------------
Name:
--------------------------------
Title:
-------------------------------
D-1
PROPOSED FORM OF CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
TO EFFECT THE FORWARD SPLIT
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
NORTH AMERICAN GALVANIZING & COATINGS, INC.
North American Galvanizing & Coatings, Inc., a corporation organized and
existing under the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify as follows:
1. The amendment set forth below to the Corporation's Restated Certificate
of Incorporation, as amended (the "Certificate"), was duly adopted in accordance
with the provisions of Section 242 of the General Corporation Law of the State
of Delaware.
2. The following amendment (the "Forward Split Amendment") shall take
effect at 5:01 P.M., Central Time, on the date of the filing of this Certificate
of Amendment:
The following new subsection (b) is added to Article Fourth of the
Certificate immediately following subsection (a) thereof entitled "Reverse Stock
Split of Common Stock" (which subsection (a) provided for the "Reverse Split
Amendment" to the Certificate):
(b) FORWARD STOCK SPLIT OF COMMON STOCK.
Immediately upon the effectiveness of this amendment to this
Certificate of Incorporation (the "Forward Split Effective Time"), each
share of the Common Stock of the Corporation that is issued and outstanding
immediately prior to the Forward Split Effective Time (which shall not
include any fractional interest in less than one share of Common Stock (an
"Unattached Fractional Interest") held by a holder of Common Stock who is
entitled to receive a cash payment in lieu of such Unattached Fractional
Interest pursuant to the terms of the Reverse Split Amendment) shall
automatically, without further action on the part of the Corporation or any
holder of Common Stock and without requiring the surrender of certificates
representing Common Stock, be subdivided into (the "Forward Stock Split")
five hundred (500) fully paid and nonassessable shares of Common Stock.
IN WITNESS WHEREOF, the undersigned duly authorized officer of the
Corporation has executed this Certificate of Amendment on the ___ day of
_____________, 200_.
By:
---------------------------------
Name:
--------------------------
Title:
-------------------------
D-2
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES Please
LISTED BELOW AND FOR THE PROPOSALS Mark Here
for Address |_|
Change or
Comments
SEE REVERSE SIDE
1. Election of the following nominees as Directors:
01 Linwood J. Bundy, 02 Paul R. Chastain, 03 Ronald J. Evans, 04 Gilbert L.
Klemann, II, 05Patrick J. Lynch, 06 Joseph J. Morrow, 07 John H. Sununu
FOR all nominees listed (except WITHHOLD AUTHORITY to
as marked to the contrary) vote for nominees listed
|_| |_|
INSTRUCTIONS: To vote FOR or WITHHOLD AUTHORITY to vote for the election of all
candidates, check the appropriate box hereon. To withhold authority to the
election of any candidate(s), write the name(s) of such candidate(s) in the
following space:
________________________________________________________________________________
If no box is marked hereon, the undersigned will be deemed to vote FOR each
candidate, except for any candidate whose name is written in the space provided
above.
2. Approve the 2004 Incentive Stock Plan
FOR AGAINST ABSTAIN
|_| |_| |_|
3. Approve the Director Stock Unit Program
FOR AGAINST ABSTAIN
|_| |_| |_|
4. Amend the Company's Restated Certificate of Incorporation to effect a
reverse stock split followed by a forward stock split at the discretion of
the Board
FOR AGAINST ABSTAIN
|_| |_| |_|
5. Ratify the appointment of Deloitte & Touche LLP as independent accountants
for fiscal 2004
FOR AGAINST ABSTAIN
|_| |_| |_|
6. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
Please sign, date and return this proxy promptly, using the enclosed envelope.
If no box is marked above with respect to proposals 2, 3, 4 or 5, the
undersigned will be deemed to have voted FOR such proposals.
Signature _____________________ Signature _____________________ Date ___________
Please sign above exactly as name appears on the Proxy. If shares are registered
in more than one name, all such persons should sign. A corporation should sign
in its full corporate name by a duly authorized officer, stating his/her title.
Trustees, guardians, executors and administrators should sign in their official
capacity, giving their full title as such. If a partnership, please sign in the
partnership name by authorized persons. Make sure that name on your stock
certificate(s) is exactly as you indicate above.
--------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Vote by Internet, Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting are available until 11:59 p.m. Eastern Time
June 29, 2004
Your Internet or telephone vote authorizes the named proxies to vote your shares
in the same manner as if you marked, signed and returned your proxy card.
------------------------------------- -------------------------------- ---------------------
Internet Telephone Mail
http://www.eproxy.com/nga 1-800-435-6710 Mark, sign and date
Use the Internet to vote your proxy. Use any touch-tone telephone to your proxy card
Have your proxy card in hand when you OR vote your proxy. Have your proxy OR and
access the web site. card in hand when you call. return it in the
enclosed postage-paid
envelope.
------------------------------------- -------------------------------- ---------------------
If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.
NORTH AMERICAN GALVANIZING & COATINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For the Annual Meeting of Stockholders on June 30, 2004
The undersigned, a stockholder of record of North American Galvanizing &
Coatings, Inc. (formerly Kinark Corporation) on May 17, 2004 (the "Record
Date"), hereby appoints Linwood J. Bundy, Paul R. Chastain and Ronald J. Evans,
or any of them with full power of substitution, as proxies for the undersigned,
to vote all shares of common stock, $.10 par value per share (the "Common
Stock"), of the Company, which the undersigned is entitled to vote at the Annual
Meeting of Stockholders to be held on June 30, 2004, and at any adjournments or
postponements thereof, on the matters listed on the reverse side.
(Continued, and to be marked, dated and signed, on the reserve side)
________________________________________________________________________________
Address Change/Comments (Mark the corresponding box on the reverse side)
________________________________________________________________________________
________________________________________________________________________________
--------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
Annual Meeting
of
North American Galvanizing & Coatings, Inc.
Wednesday, June 30, 2004
11:00 a.m.
American Stock Exchange
Boardroom - 14th Floor
86 Trinity Place
New York, NY
(If you plan to attend the meeting in person, your photo identification must be
presented at the American Stock Exchange entrance)