UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------
Commission file number 0-10786
INSITUFORM TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3032158
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1770 Kirby Parkway, Suite 300
Memphis, Tennessee 38138
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 901-759-7473
------------
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
------------------------------------
(Title of class)
Indicate by a check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period as the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
<PAGE>
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (Section 229.405 of this
chapter) is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
state-ments incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ X ]
State the aggregate market value of the voting stock held
by non-affiliates of the registrant. The aggregate market value
shall be computed by reference to the price at which the stock was
sold, as of a specified date within 60 days prior to the date of
filing.
Aggregate market value as of March 15, 1997.....$116,968,123
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date.
Class A Common Stock, $.01 par value,
as of March 15, 1997................. 26,915,752 shares
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are
incorporated by reference herein, and the part of the Form 10-K
into which the document is incorporated: Proxy Statement to be
filed with respect to the 1997 Annual Meeting of Stockholders-Part
III.
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Insituform Technologies, Inc. (the "Company") is a worldwide
provider of proprietary trenchless technologies for the
rehabilitation and improvement of sewer, water, gas and industrial
pipes. The Company's primary technology is the Insituform(R)
Process (the "Insituform Process"), a "cured-in-place,"
non-disruptive pipeline rehabilitation process that, during the
Company's most recent fiscal year, contributed approximately 70% of
the Company's revenues. The Insituform Process is based on a custom
manufactured polyester-fiber tubing, known as the Insitutube(R)
(the "Insitutube"), which forms a seamless, jointless and leak
resistant "pipe within a pipe." The Company believes the repaired
pipe, the Insitupipe(R) (the "Insitupipe"), is stronger and has
equal or greater flow capacity than the original pipe.
The Insituform Process has been used successfully for
approximately 26 years in the repair of sewers, tunnels and
pipelines throughout the world. The Company believes that the
Insituform Process offers many advantages over traditional "dig and
replace" methods of pipeline replacement. Such advantages include
installation without excavation, design and application
versatility, extension of the pipeline's useful life and speed of
installation. The Company believes that, under normal conditions,
sewer pipe repaired with the Insituform Process will generally have
a useful life in excess of 50 years.
In addition to the Insituform Process, the Company offers
certain other products in trenchless applications. The Company's
NuPipe(R) Process (the "NuPipe Process"), which utilizes a "fold
and formed" technology, is used primarily to repair smaller or less
damaged pipe and in situations where polyvinylchloride pipe is
preferred. The Company also exercises the exclusive rights in
substantially all of North America to the Paltem(R)-HL system and
certain other products (the "Ashimori Products"), which are in
various stages of development, under a license (the "Ashimori
License") from Ashimori Industry Co., Ltd. ("Ashimori"), and to the
Thermopipe(TM) System (the "Thermopipe Process"), under a license
from Angus Fire Armour Limited ("Angus"). The Company's Tite
Liner(R) Process (the "Tite Liner Process") and other abrasion and
corrosion protection technologies employ diameter-reduction
techniques tailored to meet the pressure pipe rehabilitation needs
of oil field, mining and industrial process pipelines. Through its
Affholder, Inc. subsidiary, the Company is engaged in trenchless
tunnelling used in the installation of new underground services.
The Company's products are marketed to governmental and
industrial customers primarily in North America and Western Europe,
and have also been introduced in South America, Eastern Europe, the
Middle East, Australia and the Pacific Rim. In the industrial
market, the Company focuses its marketing efforts on companies in
the pulp and paper, chemical, petrochemical, food and drug, and
nuclear power and utility industries.
<PAGE>
Historically, the Company's primary business was to license
other companies to market and provide Insituform installation
services using the Company's proprietary technology in return for
royalties and product sales revenue from materials manufactured by
the Company. As a result of its acquisitions, the Company has
further integrated its business to perform the entire process of
manufacture and installation using its trenchless processes. The
Company intends to continue pursuing this integration strategy in
its principal markets. In other areas, the Company will continue to
emphasize marketing its products through license or joint venture
arrangements. The Company provides design assistance, marketing,
research and technical support to all its licensees in an effort to
stimulate demand for its products and to ensure a high standard of
quality control throughout the process.
The Company was incorporated in Delaware in 1980 under the
name Insituform of North America, Inc., in order to act as the
exclusive licensee of the Insituform Process in most of the United
States of Insituform Group Limited ("IGL"), the then owner of the
worldwide rights to the Insituform Process. Contemporaneously with
the consummation in 1992 of the Company's acquisition of IGL (the
"IGL Acquisition"), the name of the Company was changed to
Insituform Technologies, Inc.
In October 1995, Insituform Mid-America, Inc. ("IMA") which,
together with its subsidiaries, was licensed to provide the
Insituform technology in all or a portion of 22 states, was merged
with a subsidiary of the Company as a result of which IMA became a
wholly-owned subsidiary of the Company (the "IMA Merger"). The IMA
Merger and the IGL Acquisition have each been accounted for as a
pooling-of-interests and, accordingly, the consolidated financial
statements for the three years ended December 31, 1996 included in
response to "Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K" for the periods prior to the IMA Merger, and
(unless the context otherwise requires) all other financial
information included herein for such periods and prior periods,
include the combined historical results of the Company and,
respectively, IMA and IGL. The following acquisitions by the
Company, together with those of IMA, during the past six years have
been accounted for under the purchase method of accounting, so that
the results of the acquired companies are included in the Company's
historical results of operations from the consummation of such
transactions, respectively:
<TABLE>
<CAPTION>
Date Company Acquired Principal Business
- ---- ---------------- ------------------
<S> <C> <C>
November 1995 FormaPipe Division, cured-in-place pipe-
Waterflow Services Limited line rehabilitation,
United Kingdom
April 1995 Enviroq Corporation Insituform and NuPipe
(pipeline rehabilitation licensee, southeast
business, including U.S. territories
Insituform Southeast, Inc.)
<PAGE>
<PAGE>
February 1995 Insituform France S.A.(1) Insituform licensee,
France
October 1994 Gelco Services, Inc. and Insituform and NuPipe
affiliated entities licensee, Pacific
Northwest territories
July 1993 Insituform Midwest, Inc. Insituform and NuPipe
licensee, midwestern
territories
July 1993 Naylor Industries, Inc. Insituform and NuPipe
(parent of Insituform licensee, Gulf coast
Gulf South, Inc.) territories
December 1992 H.T. Schneider, Inc. Insituform and NuPipe
(parent of Insituform of licensee, New England
New England, Inc.)
December 1992 Insituform Technologies Insituform and NuPipe
Limited(2) (formerly, licensee, Canada(3)
Insituform Canada Limited)
November 1992 Pipeline Rehabilitation Paltem licensee
Systems, Inc.
October 1991 United Pipeline Systems, Tite Liner installer,
Inc. (including stock Canada
of United Corrosion Cor-
poration, its parent)
April 1991 Insituform Southwest(4) Insituform and NuPipe
licensee, south-
western U.S.
territories
March 1991 United Pipeline Systems Tite Liner installer,
USA, Inc. U.S.
___________________
(1) two-thirds of stock acquired
(2) remaining 49% minority interest acquired
(3) effective October 1995, Insituform Canada Limited divested its open-cut
sewer and water pipeline construction and rehabilitation operations
(4) remaining two-thirds interest acquired
</TABLE>
As used in this Annual Report on Form 10-K, the term the
"Company" refers to the Company and, unless the context otherwise
requires, its direct and indirect subsidiaries. For certain
information concerning each of the Company's industry segments and
domestic and foreign operations, see Note 16 of the Notes to the
Company's Consolidated Financial Statements included in response to
"Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K," which information is incorporated herein by reference.
<PAGE>
<PAGE>
TECHNOLOGIES
Pipeline System Rehabilitation
The Insituform Process. The Insituform Process for the
rehabilitation of sewers, pipelines and other conduits utilizes a
tubing made of a synthetic fiber felt, the Insitutube, which is
constructed with a strong, smooth, watertight plastic coating on
the outside. The Insitutube is custom manufactured to the diameter,
length and other characteristics of the pipe, sewer or conduit to
be repaired.
A pipe to be repaired is first cleaned by removing tree roots
and other debris and a remote-controlled video camera is inserted
into the pipe to inspect it and in order to make a recording of the
location of the lateral connections for use in subsequent
re-opening of the connections. If necessary, the section of pipe to
be rehabilitated is bypassed from the balance of the pipeline
system. Services to users in the affected section are usually not
disconnected but usage may be curtailed to prevent excess back-up
in the lateral connections.
In the case of a typical sewer pipe to be repaired by the
Insituform Process, access is gained through an existing manhole.
Prior to the installation, the Insitutube is saturated throughout
its length with a thermosetting liquid resin. In most cases, the
Insitutube is installed using pressure from a column of water
maintained inside an inversion tube, and the Insitutube is turned
inside out and advanced through the pipe to be repaired with the
resin-saturated surface held against the surface of the existing
pipe. The smooth-coated side of the Insitutube forms the new
interior surface of the pipe. After the Insitutube is fully
extended through the pipe to be repaired, the water inside the
Insitutube is heated to a prescribed temperature in order to cause
the thermosetting liquid resin to harden, or cure. Essentially, the
Insituform Process creates a "pipe within a pipe," the Insitupipe.
Each end of the Insitupipe is cut off at the manhole walls and the
flow is re-established.
During the installation of the Insitutube, smaller lateral
lines feeding into the existing pipe are temporarily blocked.
Lateral lines are side connecting pipes, typically between four and
six inches in diameter, which discharge flow from homes and
businesses into the main pipe undergoing repair. To complete the
installation, the Insitupipe must be cut, or routed out, at the
lateral junctions to re-establish the flow from these laterals. A
remote-controlled cutter, the Insitucutter(R), and a video camera
are inserted into the pipe and used to open the lateral lines into
the pipe. The Company's lateral rehabilitation service includes the
cleaning, inspection, evaluation and rehabilitation of laterals,
utilizing the Insituform Process.
<PAGE>
<PAGE>
The NuPipe Process. The NuPipe Process entails the manufacture
for the Company of a folded replacement pipe from a thermoplastic
material which is stored on a reel in a reduced shape. The pipe is
heated at the installation site in order to make it flexible enough
to be inserted into an existing conduit, pulled into place and then
sequentially expanded to match the existing conduit by internal
heat and pressure and progressive rounding, creating a tight fit
against the conduit being repaired. In this position, the now
expanded NuPipe is subjected to internal pressure, and cooled to
create a new pipe for permanent installation, with lateral
connections then cut from within.
The NuPipe Process requires little or no excavation for
installation. In addition, the NuPipe Process does not materially
reduce the diameter of the existing pipe and minimizes the annular
space between the new rounded pipe and the original pipe. Because
the pipe is tight-fitting and jointless, flow capacity in most
cases is at least equal to that of the existing pipe, or is
improved. The NuPipe Process involves manufacture of pipe in
continuous lengths of standard pipe diameters, rather than custom
manufacture for specific applications, as is the case with the
Insituform Process, making it suited for small-diameter pipes.
Ashimori Products. The Paltem-HL system is a process for
rehabilitating pressure pipes, which the Company has the exclusive
license from Ashimori to offer in substantially all of North
America. The system utilizes a woven polyester hose with an
elastomer coating called a PAL-Liner(TM), which is custom-
manufactured to the dimensions of the pipe to be rehabilitated.
Prior to installation, the PAL-Liner hose is coated with epoxy
resin. Compressed air or other suitable means is then used to
invert and propel the PAL-Liner through the pipe from an access
pit. After the PAL-Liner reaches a receiving pit, the resin hardens
and the PAL-Liner forms a smooth, pressure resistant lining on the
inside surface of the pipe.
In addition to the Paltem-HL system, the Ashimori License
provides for the rights to utilize, manufacture and sell the
following Ashimori Products, which are in various stages of
development: (i) the Paltem-Apollo(TM) system, a process for point
repair by pulling a specially designed robot together with Apollo-
Liner into the pipe, inflating and light-curing the liner to form
a new rigid pipe at the spot to be repaired, including a system for
forming a new pipe at the point of connection of the lateral to the
main pipe and reconnecting the lateral; (ii) the Paltem-Frepp(TM)
system, a process for restoration of pipes by pulling a partially
folded Frepp-pipe into the pipe and reforming it to form a new pipe
within the pipe; (iii) Paltem-March(TM) products, which are non-
woven fiber tubes with a seamless coating used in pipeline
rehabilitation; and (iv) the Paltem-SZ(TM) system, a process for
restoration of sewer pipes by pulling SZ-Liner into the pipe,
inflating, and forming a new rigid pipe within a pipe utilizing
heat-curing resin applied to the liner.
<PAGE>
<PAGE>
The Thermopipe Process. The Thermopipe Process is a
trenchless process which the Company intends to introduce for
rehabilitating potable water and other aqueous fluid pipes. During
the third quarter of 1996, the Company acquired an exclusive
license from Angus to offer the Thermopipe Process in the United
States and Canada, and non-exclusive rights to offer the Thermopipe
Process in certain other countries (see "Patents and Licenses"
below). The process utilizes a thin-walled polyethylene liner
reinforced with a woven textile fiber, which is manufactured in
diameters that conform to the inside diameters of commonly used
water pipes, currently up to six inches in size. As a result of its
high long-term, independent internal pressure rating, the
Thermopipe liner is suited for the structural rehabilitation of
distribution mains made from most common materials. The factory-
folded pipe is stored on reels and, after insertion into the host
pipe, re-rounded by use of steam and air pressure to conform to the
inside of the pipe. End seals are then installed before the pipe is
placed back into service.
Corrosion and Abrasion Protection
The Company's Tite Liner Process is a method of lining
pipelines with a corrosion and abrasion resistant pipe in order to
extend system life. Oil field, natural gas distribution lines and
certain industrial process systems typically utilize steel pipe,
which is subjected to highly corrosive fluids and gases, while
slurry lines used in mining operations are subjected to highly
abrasive flows. The Tite Liner Process utilizes a polyethylene
liner which is diameter-reduced in a roller box and then pulled
through a steel pipe. When the pulling tension is released, the
liner expands to create, after a period of "relaxation", a tight
fit against the host pipe's inner wall. After installation, the
ends of the polyethylene pipe are finished by formation of a
flange.
Tunnelling
Tunnelling is a trenchless, subterranean construction process
that generally is utilized for the construction of pipeline
systems. In the Company's tunnelling operations, the crew first
digs a work shaft and then constructs the tunnel, installs pipe in
the new tunnel and fills the annular space around the newly-
constructed pipeline with grout. The Company utilizes seven
tunnelling machines to construct two to fourteen-foot diameter
tunnels into which pipes are inserted. Four of the Company's large
diameter tunnelling machines are state-of-the-art, earth-pressure-
balanced tunnelling machines, designed to reduce costs and risks of
subsidence, and improve competitiveness, by virtue of the ability
to tunnel without de-watering the surrounding soils, and two other
machines operated by the Company are capable of mining in hard
rock.
<PAGE>
<PAGE>
DIRECT INSTALLATION AND OTHER CONSTRUCTION ACTIVITIES
The Company's direct installation operations utilizing the
Insituform Process and its other construction activities accounted
for approximately 93% of the Company's consolidated revenues in
1996. Such operations are conducted in North America principally
through subsidiaries which hold the Insituform Process and NuPipe
Process licenses for 41 of the 50 states (and a portion of another
state), in addition to Puerto Rico and the U.S. Virgin Islands, and
all of Canada, and the rights in substantially all of North America
to the Paltem system and certain other products under a license
from Ashimori and to the Thermopipe Process under a license from
Angus. Outside of North America, the Company conducts Insituform
Process or NuPipe Process direct installation operations through
its subsidiaries in the United Kingdom and France.
The worldwide rights to the Tite Liner Process are applied by
United Pipeline Systems USA, Inc. and, through its United Pipeline
division, Insituform Technologies Limited ("Insituform Canada"),
both subsidiaries of the Company. During 1994, Tite Liner
operations commenced in Chile through a newly-organized subsidiary,
United Sistema de Tuberias Ltda. ("United Chile"), and during 1996,
through newly organized subsidiaries in Argentina and Mexico.
Following consummation of the IMA Merger, and in view of the start-
up nature of operations conducted by the Company under the
UltraPipe(R) name, the Company has consolidated such operations
with IMA's larger corrosion and abrasion protection activities.
Direct trenchless installation operations are organized into
field installation and construction crews. Each Insituform and
NuPipe field unit is typically composed of crews responsible for
cleaning and preparation, installation, and video/cutter
operations, and is equipped with a high-pressure- water cleaning
truck, a television van with cutting apparatus, other support
trucks and vans, pumping and safety equipment and, in the case of
Insituform operations, a boiler truck and a refrigeration truck,
and, in the case of NuPipe operations, a spool trailer and power
unit. Each Paltem crew is typically equipped with a turning truck,
resin mixers, pulling machine and other supporting trucks and
equipment. Installation crews engaged in the Company's corrosion
and abrasion protection work are typically equipped with a wire
line unit, roller boxes, fusion machines, a spool trailer, pickup
trucks and other supporting trucks and equipment. The Company is
formulating its plan to introduce the Thermopipe Process since its
acquisition of the rights to use such process during the third
quarter of 1996.
The Company's Affholder, Inc. subsidiary offers a broad range
of traditional pipe rehabilitation and construction services,
including tunnelling, point repairs, shaft work and pipe cleaning.
Effective in 1995, Insituform Canada sold the assets utilized in
its multi-service, open-cut sewer and water pipeline construction
and rehabilitation operations to certain members of its management,
after transferring its micro-tunnelling equipment to Affholder,
Inc.
<PAGE>
<PAGE>
The direct installation business of the Company is
project-oriented, and contracts may be obtained through competitive
bidding, usually requiring performance at a fixed price. The
profitability of these operations to the Company depends upon the
ability to estimate costs accurately, and such estimates may prove
to be inaccurate as a result of unforeseen conditions or events. A
substantial proportion of the work on any given project may be
subcontracted out to third parties by the Company.
Proper trenchless installation requires certain expertise that
is acquired on the job and through training, and, if an
installation is improperly performed, the Company may be required
to repair the defect, which may involve excavation. The Company,
accordingly, has incurred significant costs in establishing new
field installation crews, in training new operations personnel and
in equipping its direct installation staff. The Company generally
invoices installation revenues on a percentage-of-completion basis.
Under ordinary circumstances, collection from governmental agencies
in the United States is made within 60 to 90 days of billing.
The Company is required to carry insurance and bonding in
connection with certain direct installation projects, and,
accordingly, maintains comprehensive insurance policies, including
workers' compensation, general and automobile liability, and
property coverage. The Company believes that it presently maintains
adequate insurance coverage for all direct installation activities.
The Company has also arranged bonding capacity for bid, performance
and payment bonds. Typically, the cost of a performance bond is
approximately 1% of the contract value. The Company is required to
indemnify surety companies for any payments the sureties are
required to make under the bonds.
The Company's principal direct installation and other
construction activities are conducted by direct or indirect wholly-
owned subsidiaries, except for the following subsidiaries that are
less than wholly-owned:
<TABLE>
<CAPTION>
Subsidiary Processes Territory Interest
---------- --------- --------- --------
<S> <C> <C> <C>
United Sistema de Tite Liner Chile(1) 60% of
Tuberias Ltda. stock(2)
United Pipeline Tite Liner Mexico(1) 55% of
de Mexico, S.A. stock(3)
Insituform France Insituform France 66-2/3% of
S.A. stock(4)
Midsouth Partners Insituform Tennessee, 57-1/2%
NuPipe portions of general
Kentucky and partnership
Mississippi interest(5)
_______________________
(1) Jurisdiction of incorporation.
<PAGE>
(2) The remaining interest is held by Inversiones Bellavista S.A. ("IBS"). The
Company's arrangements provide for IBS' option to purchase an additional
10% of the equity of United Chile upon terms to be defined.
(3) The remaining interest is held by a subsidiary of Produtos y Servicios
Miller de Mexico, S.A.
(4) The remaining interest is held by a subsidiary of Lyonnaise des Eaux S.A.
(5) The Company holds a 15% partnership interest through Insituform Southwest,
Inc. ("ISW"), a wholly-owned subsidiary, and, as a result of the IMA
Merger, an additional 42.5% interest through a wholly-owned subsidiary of
Insituform Southeast, Inc. ("Insituform Southeast"). The remaining
interest is held by a subsidiary of Insituform East, Incorporated
("Insituform East"), an independent licensee.
</TABLE>
Partnership interests in Midsouth Partners may not be
transferred nor may there be a change in control of any partner,
without the approval of all partners. The management and conduct of
the business of Midsouth Partners is vested in a management
committee comprised of seven members. In June 1996, the arbitration
panel in proceedings initiated by the Insituform East subsidiary
holding a Midsouth Partners partnership interest determined the
Insituform Southeast subsidiary holding such interest, but not ISW,
was in default of its obligations under the Midsouth Partners
partnership agreement and that as a consequence thereof, the
Insituform East subsidiary had the right to appoint a
representative to the management committee, in place of one of the
three representatives appointed by the Insituform Southeast
subsidiary and in addition to the three members previously
appointed by the Insituform East subsidiary and the one member
appointed by ISW.
MANUFACTURING AND PRODUCT SALES
The Company's manufacturing and product sales operations
accounted for approximately 6% of the Company's consolidated
revenues in 1996. Product sales to licensees acquired by the
Company are, under the purchase method of accounting, eliminated
from the Company's consolidated revenues subsequent to the
respective acquisitions of such licensees by the Company. In
addition, as a result of accounting for the IMA Merger as a
pooling-of-interests, product sales to IMA are eliminated for all
periods including those prior to such transaction.
Although the Company's Insituform license agreements typically
contain no requirement that licensees purchase equipment or
materials from the Company, the Company sells Insitutubes and
related products utilized in the Insituform Process pursuant to
supply contracts with its domestic Insituform licensees. Under the
current term of the Company's domestic supply arrangements, the
licensee purchases from the Company a specified percentage (60% or
90%) of its Insitutube requirements, unless excused in certain
circumstances, subject to minimum annual purchases by the buyer and
maximum required sales by the Company. Prices under such contracts
are fixed, subject to limited annual increases by the Company. Such
contracts are renewable on an annual basis.
<PAGE>
In Europe, Insituform Linings Plc ("Linings"), a joint venture
between the Company and five licensees, manufactures and sells
Insitutube linings. The Company owns 51% of the equity of Linings.
In 1992, the Company inaugurated its Insitutube manufacturing
facility in Matsubuse, Japan.
The Insitutube is manufactured by the Company in varying
lengths, diameters and thicknesses to accommodate the requirements
of each specific installation. The average lead time necessary to
produce the custom manufactured Insitutube varies from one to two
weeks depending principally on the length, thickness and diameter
required. The Company maintains an inventory of the plain and
coated materials used in the manufacture of Insitutubes and a small
inventory of the most common diameters and thicknesses of
Insitutubes.
While raw materials used in the Company's Insituform products
are typically available from multiple sources, the Company's
historical practice has been to purchase the Insitutube materials
from a limited number of suppliers. The Company maintains its own
felt manufacturing facility contiguous to its Insitutube
manufacturing facility in Batesville, Mississippi. The Company
believes that resins are readily available from a number of major
corporations. The Company believes that the sources of supply in
connection with its Insituform operations are adequate for its
needs and that currently it is not substantially dependent upon any
one supplier.
In connection with the introduction of the NuPipe Process,
each domestic licensee has entered into supply agreements pursuant
to which the licensee is required to purchase from the Company all
of its requirements for the thermoplastic pipe utilized in the
application of the NuPipe Process. Prices under each supply
agreement are subject to limited increases by the Company. Each
supply agreement is automatically renewed for successive periods of
two years each, unless the licensee exercises a non-renewal option,
which is available if the Company's quality and prices are not
competitive with commercially practicable alternative sources. The
Company has not received notice of exercise of any such non-renewal
option.
The Company has entered into a supply agreement with an
unaffiliated party, under which the Company will purchase pipe to
satisfy no less than 90% of specified formulations of its
licensees' NuPipe requirements through the end of 1998, subject to
automatic renewal unless one party terminates upon at least twelve
months' prior notice and to minimum purchases by the Company. The
Company believes that alternative sources of supply for its pipe
requirements in connection with the NuPipe Process are available.
If the Company were unable to obtain its NuPipe requirements under
its existing third party arrangements, the Company might be
adversely affected until arrangements with alternative sources are
formulated.
<PAGE>
<PAGE>
The Company will continue to purchase the PAL-Liner it uses
from Ashimori. Pursuant to its license to the Thermopipe Process,
the Company will purchase the Thermopipe product and associated
components from Angus.
The Company manufactures certain equipment used in its
corrosion and abrasion protection operations, and, in connection
with any licenses to unaffiliated parties, will sell such equipment
to its licensees.
LICENSING OPERATIONS
The Company grants licenses for the Insituform Process,
covering exclusive and non-exclusive territories, to licensees who
provide sewer and pipeline repair and rehabilitation services to
governmental, industrial and commercial users throughout their
respective licensed territories. The licenses generally grant to
the licensee the right to utilize the know-how and practice the
invention of the patent rights (where they exist) relating to the
Insituform Process, to use the Company's copyrights and to use the
trademark "Insituform."
During 1996 the Company entered into one new Insituform
license agreement covering an additional territory and, at present,
the Insituform Process is commercialized under license by an
aggregate of 34 unaffiliated licensees and sublicensees. From time
to time, in those territories which do not justify the granting of
a license, the Company also appoints agents which promote the
Insituform Process and secure contracts to be performed by the
Company or its licensees. During the year ended December 31, 1996,
license fees and royalty income from the Company's Insituform
licensees represented approximately $5.4 million, or approximately
2% of consolidated revenues. Royalties from licensees acquired by
the Company are eliminated from the Company's consolidated revenues
subsequent to the respective acquisitions of such licensees by the
Company. In addition, as a result of accounting for the IMA Merger
as a pooling-of-interests, royalties from IMA are eliminated for
all periods including those prior to such transaction.
Effective in December 1990, NuPipe, Inc., a wholly-owned
subsidiary of the Company, entered into licenses granting the
exclusive right to commercialize the NuPipe Process in assigned
territories covering the United States. NuPipe International, Inc.,
a wholly-owned subsidiary of NuPipe, Inc., has entered into a
number of licensing arrangements outside of the United States.
During the year ended December 31, 1996, the Company recognized
royalty income from its NuPipe licensees in an amount less than 1%
of consolidated revenues.
Pursuant to the Ashimori License, the Company is obligated to
enter into a license granting to Ashimori the exclusive right to
use the Tite Liner Process in Japan, in exchange for royalties of
7% on installations. During 1996, the Company also granted an
exclusive license to use the Tite Liner Process for specified uses
in much of the Middle East, in exchange for royalty payments
calculated on the basis of the licensee's gross sales (subject to
<PAGE>
minimum payments). As a result of the Company's acquisition during
1994 of certain territories initially reserved by the seller of the
UltraPipe technologies, the Company assumed the seller's
obligations under the grant of an exclusive license of such
technologies for much of the Middle East.
Insituform License Agreements
Each licensee has entered into an agreement with the Company
setting forth the rights and obligations of the parties with
respect to the exploitation of the Insituform Process. Each of the
Company's domestic Insituform licensees (including its unaffiliated
licensees, which hold the rights to use the Insituform Process in
eight states and a portion of another state) pays a minimum annual
royalty, which varies according to the population of the licensed
territory, against a royalty of 8% of the gross contract price of
all sales and contracts utilizing the Insituform Process, including
any preparatory and finishing work performed and subject to
specified allowances. Domestic licensees are also obligated to pay
a royalty surcharge of 8% to 12% of their sales and contracts
utilizing the Insituform Process outside of their licensed
territories. The amount of such surcharges are then paid by the
Company to the domestic licensee in whose territory the
installation was performed.
In the event any domestic Insituform licensee has, for any
year, produced to the Company an acceptable plan for marketing and
sales penetration, minimum royalties otherwise established for such
year will not apply, subject to achievement of performance
objectives established with respect to utilization of the Company's
trenchless rehabilitation processes. In addition, the Company is
obligated to pay to Insituform East one-half of one percent of the
gross contract value of certain contracts using the Insituform
Process entered into by licensees introduced to the Company by
Insituform East's predecessor-in-interest, SAW Associates.
Insituform licensees outside of the United States are
obligated to pay royalties, calculated by reference to the gross
contract price of all contracts utilizing the Insituform Process,
ranging from 5% to 8%. Foreign licenses may also provide for
minimum annual royalties as well as initial license fees and
trademark fees.
The Company requires its licensees to be well-trained and
fully qualified in the installation and service of the Insituform
Process. The Company typically establishes certain financial,
professional and operating requirements which must be met by each
licensee. In addition to possessing adequate capital and competent
technical personnel each licensee must demonstrate an ability to
market the Insituform Process aggressively to potential users
within its territory.
Any improvements or modifications a licensee may make in the
Insituform Process during the term of the license agreement becomes
the property of the Company or are licensed to the Company. The
Company is generally required to disseminate all information with
<PAGE>
regard to the Insituform Process developed by it or any licensee to
all licensees, without any additional royalty.
Should a licensee fail to meet its royalty obligations or
other material obligations, the Company may terminate the license.
Many licensees (including the domestic licensees), upon prior
notice to the Company, may also terminate the license for any
reason. The Company may vary the agreement used with new licensees
according to prevailing conditions.
NuPipe Process License Agreements
In consideration for its NuPipe license, each domestic NuPipe
licensee (including its unaffiliated licensees, which hold the
rights to use the NuPipe Process in eight states and a portion of
another state) paid an initial license fee of $60,000 and agreed
thereafter to pay a royalty of 6.75% of the gross contract price
(including sales) of all contracts to the extent covering
installations performed utilizing the NuPipe Process. "Gross
contract price" is defined to include preparatory and finishing
work and does not exclude certain allowances as does the comparable
calculation utilized by the Company for domestic Insituform
royalties. If the licensee commercializes the NuPipe Process
outside of its assigned territory, it will be obligated to pay to
the Company, for repayment in turn to the licensee assigned such
territory, 10.125% of the gross contract price of such
installations. In connection with its introduction in 1995 of a
second fold and formed product, the Company has offered domestic
licensees the right to elect to modify royalty calculations so as
to be based upon linear feet of pipe delivered, but has not
completed such arrangements with its unaffiliated licensees.
Each domestic NuPipe licensee has committed to use its best
efforts to create a demand for the NuPipe Process within the
territory covered by its license and to use its best efforts to
fill such demand. In furtherance of its commitments under the
license, each domestic licensee has agreed that in order to
maintain the license it will, during each year of the term of the
license, complete contracts covering the repair, rehabilitation or
reconstruction in its territory of the minimum quantities of length
of pipeline as established under the license, by utilizing certain
of the Company's trenchless rehabilitation processes.
Each domestic licensee has, pursuant to its license, entered
into a supply agreement with the Company relating to its
requirements of the thermoplastic pipe utilized in the application
of the NuPipe Process, as described under "Manufacturing and
Product Sales" above. Domestic NuPipe licensees are subject to
terms similar to those in the Company's Insituform licenses with
respect to maintenance of quality standards, rights in improvements
to the process and termination of the license.
The Company has entered into licensing arrangements covering
Sweden, Switzerland and Germany, and also, through subsidiaries,
introduced the NuPipe Process in the United Kingdom, France and
Canada. In consideration for its NuPipe license, each unaffiliated
<PAGE>
foreign NuPipe licensee has paid an initial license fee, and each
foreign licensee remains obligated to pay a royalty of 8% of its
net invoices in connection with the operation of the NuPipe Process
in its exclusive territory, subject to minimum royalty payments,
throughout the life of the 20-year agreements or pay a royalty on
product ordered. Under the agreements, the licensees have committed
to use their best efforts to promote the operation of the NuPipe
Process in their respective territories, but may, upon six months
prior notice, terminate the license. The licensor may also
terminate the license in the event the licensee fails to make
payments when due or fails to meet its other material obligations.
Foreign licensees have granted to the licensor a non-exclusive,
royalty free license, without limit of time, covering all
improvements to the NuPipe Process that the licensees may develop
or acquire.
INVESTMENTS IN LICENSEES
The Company makes investments in its licensees, and enters
into joint ventures, from time to time to encourage additional
royalties and sales of its products and further enable the Company
to influence and participate in the exploitation of its trenchless
rehabilitation processes. During the three years ended December 31,
1996, the Company did not record earnings from any such investment
that were material to the Company's results of operations. See Note
6 of the Notes to the Company's Consolidated Financial Statements
included in response to "Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K."
The Company, through its subsidiary, Insituform Holdings (UK)
Limited ("Holdings"), holds one-half of the equity interest in
Insituform Rohrsanierungstechniken GmbH ("Insituform Germany"), the
Company's licensee of the Insituform and NuPipe Processes in
Germany. Under the joint venture arrangements, the managing
director of Insituform Germany is appointed by the agreement of the
parties, and the joint venture partners have rights--
of-first-refusal in the event any party determines to divest its
interest.
The Company holds additional investments in licensees as
follows:
<TABLE>
<CAPTION>
Licensee Processes Territory Interest
- -------- --------- --------- --------
<S> <C> <C> <C>
N.V. K-Insituform S.A. Insituform Belgium, 50% joint venture
Luxembourg interest(1)
Ka-Te Insituform A.G. Insituform Switzerland, 50% joint venture
Liechtenstein and interest(2)
Voralberg, Austria
_____________________
(1) The remaining interest is held by N.V. Kumpen.
(2) The remaining interest is held by Ka-Te Holding A.G.
</TABLE>
<PAGE>
<PAGE>
The interests in the Company's Belgian joint venture and its
Swiss joint venture, both formed in 1993, are subject to its
partners' right-of-first-refusal. The Company's joint venture in
Belgium is managed by four directors, two named by the Company, who
are responsible for technical and financial matters, and two named
by N.V. Kumpen, who are responsible for marketing, sales and
general management. The Company's Swiss joint venture is managed by
three directors, with unanimity required of the directors, or of
the shareholders, to take certain actions. Of the directors of the
Swiss joint venture, one is named by Ka-Te Holding A.G., who is
responsible for marketing, sales and general management, one is
named by the Company, who is responsible for technical and
financial matters, and a third is named by the Company with the
approval of its partner, which may not unreasonably be withheld.
Until March 1995, the Company was also a party to a joint
venture, called Enhansco, which develops, blends and sells resins
used in connection with the Insituform Process. At such date, the
Company's joint venture partner purchased the Company's one-half
interest in the joint venture for the sum of $400,000, one-half of
which was paid within 30 days of closing and the remainder of which
is due on December 31, 1997. The Company has agreed that it will
not compete in certain respects with the continuing resin business
of the joint venture for a period of three years after such
buy-out.
MARKETING
The Company markets its technologies primarily to the municipal
wastewater and industrial markets worldwide and natural gas
distribution market in North America. The Company's product
managers and engineers develop strategies and design products
intended to meet the needs of customers in each of these markets.
In addition, the Company produces sales literature and
presentations, participates in trade shows, conducts national
advertising and executes other marketing programs for the Company's
own sales force and those of unaffiliated licensees. The Company's
unaffiliated licensees are responsible for marketing and selling
the Company's trenchless rehabilitation processes in their
respective territories, and each has a staff for that purpose.
The municipal wastewater market has historically represented
the single largest segment for the Company's trenchless
rehabilitation services. The Company expects this segment to remain
the largest part of its business for the foreseeable future. In
response to competition from other providers of trenchless
technologies, the Company's strategy is to differentiate its
products based on design and performance benefits. The Company
attempts to build long-term relationships with its customers for
the utilization of the Company's complete line of rehabilitation
products and services. The Company utilizes its own sales force (or
that of unaffiliated licensees) with a view toward having its
technologies permitted or required in bid specifications.
<PAGE>
<PAGE>
The Company believes that the industrial market represents
significant opportunities for the use of the Company's trenchless
rehabilitation products and services. The Company's processes are
used to stop leakage in difficult-to-access pressurized pipes,
achieve containment of industrial effluents and restore structural
integrity to underground wastewater and storm sewers. In areas not
directly served by the Company, the Company's unaffiliated
licensees are responsible for marketing and selling the Company's
products to the industrial market.
The Company believes that its tunnelling operations strengthen
its relationships with its customers by positioning the Company as
a problem solver for pipeline systems and enhance its capacities to
perform large-diameter installations of the Insituform Process.
The Company has the right to market the Paltem-HL hoselining
system in substantially all of North America to natural gas
distribution companies, in order to renew both mains and services
connections which are suffering from the effects of corrosion or
similar deterioration. The Company currently utilizes its own sales
representatives who work with gas companies in selected areas to
educate them about the advantage of using the Company's trenchless
technologies.
The Company offers the Tite Liner system worldwide for use in
oil and gas field systems, which typically utilize steel pipe that
is subjected to highly corrosive fluids and gases, and in mining
slurry lines, which typically are subjected to highly abrasive
flows. The Company believes that customers in the oil and gas and
mining markets will continue to look for ways to improve and extend
the useful life of their facilities rather than to replace their
existing pipelines.
The Company expects to continue licensing the Insituform
Process and the NuPipe Process pursuant to existing arrangements
and in those additional areas of the world in which the Company's
management believes it would not be profitable for the Company to
exploit such processes directly. The Company intends to continue to
investigate the formation of subsidiaries and other affiliates,
including joint ventures, which will directly provide installation
services utilizing the Company's processes.
No customer accounted for more than ten percent of the
Company's consolidated revenues during the years ended December 31,
1996, 1995 and 1994, respectively.
BACKLOG
Orders for Insitutubes are generally shipped within one to two
weeks after receipt, and, accordingly, no substantial backlog of
orders for this product normally exists.
At December 31, 1996 and 1995, respectively, the Company
recorded backlog from construction operations (including projects
where the Company has been advised that it is the low bidder) in
the amounts of approximately $177.3 million and $134.1 million,
<PAGE>
respectively. Of such amounts, approximately $9.7 million and $25.6
million, respectively, represent projects where the Company was the
low bidder. Backlog at December 31, 1996 and December 31, 1995
included approximately $28.6 million and $11.1 million,
respectively, attributable to the Company's corrosion and abrasion
protection operations (primarily involving the application of the
Tite Liner Process) and approximately $39.7 million and $16.2
million, respectively, attributable to tunnelling operations. The
Company anticipates that substantially all construction backlog
recorded at December 31, 1996 will be completed in 1997, except
for amounts aggregating approximately $25.6 million, which the
Company anticipates will be completed the following year.
SEASONALITY
Although severe cold weather affects the Company's operations
in Canada in the months of December, January, February and March
(where, over the past three years, the volume of work performed in
the first calendar quarter has averaged 8% of the total year's
work), the volume of work reported on a consolidated basis by the
Company's licensees (including affiliated licensees) in the first
calendar quarter of the year has averaged, for the past five years,
approximately 24% of the work they reported over the full year.
COMPETITION
The pipeline reconstruction, rehabilitation and repair business
is highly competitive, and the Company competes against many
companies, some of which have far greater financial resources and
experience than the Company. Accordingly, there can be no assurance
as to the success of the Company's processes in competition with
such companies and alternative technologies for pipeline
rehabilitation.
In each of its rehabilitation markets, the Company currently
faces competition from more conventional methods, including: (i)
total replacement, which is the excavation and replacement of an
entire section of pipe; (ii) point repair, which is the replacement
of cracked or structurally failed sections of pipes by actual
excavation and replacement; (iii) sliplining, which is the
insertion of a smaller pipe within an existing deteriorated pipe;
and (iv) the placement of gelatinous material, hydraulic cement, or
other acceptable material in defective pipes to repair leaks and
prevent infiltration in gravity sewers.
In addition, the Company faces competition from other
trenchless processes throughout the world. In the United States,
the Company faces competition from several cured-in-place processes
and, outside of the United States, from additional cured-in-place
processes currently in regional use. The Company also faces
competition from several fold and formed thermoplastic processes.
Several companies offer in-place polyethylene lining systems which
compete with the Company's abrasion and corrosion protection
technologies. The Company's trenchless processes may also encounter
competition from alternative trenchless approaches such as pipe
bursting and other methods.<PAGE>
<PAGE>
The Company's tunnelling operation competes with utility
contracting firms throughout North America.
PATENTS AND LICENSES
The Insituform Process was developed in the United Kingdom in
1971. The Company's commercialization of the Insituform Process has
been protected by patents which cover certain aspects of the
Insituform Process including the Insitutube construction, the resin
saturation process and the process of reconstructing the pipeline.
Pursuant to provisions recently adopted under the General Agreement
on Tariffs and Trade, patents in force on June 8, 1995 will be
entitled to a patent term of the longer of 17 years from issuance
or 20 years from the earliest filing date of the patent. The
Company currently holds 59 patents in the United States relating to
the Insituform Process, the last to expire of which will remain in
effect until 2014, and has obtained patent protection in its
principal overseas markets covering aspects of the Insituform
Process.
Two of the significant patents relating to the Insituform
Process, covering, respectively, the curing of a resin-impregnated
tube and material aspects of the inversion process, have expired
where previously in effect. The following patents of the Company
relate to the Insituform Process, collectively constituting an
integrated product and service:
<TABLE>
<CAPTION>
Expiry Expiry Expiry Expiry
Patent U.S. Date Canada Date Japan Date U.K. Date
------ ---- ------- ------ ------ ----- ------ ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
(a) 4366012 02/05/01 -- -- -- -- -- --
(b) 4434115 02/11/02 -- -- -- -- 2096265 02/18/01
(c) 4446181 05/01/01 1134290 10/26/99 1202781 07/18/98 2031107 09/20/99
(d) 4581247 01/05/04 1254852 05/30/06 -- -- -- --
(e) 4776370 10/11/05 -- -- -- -- -- --
(f) 5044405 08/21/09 -- -- -- -- -- --
(g) 5108533 10/10/09 -- -- -- -- -- --
(h) 5154936 10/05/10 * * * * 0504343 09/19/11
(i) 5167901 10/05/10 -- -- -- -- -- --
(j) 5384086 01/24/12 * * * * 0511260 01/16/11
(k) 5407630 04/18/12 * * * * 0464121 03/19/10
(l) 5510078 04/23/13 * * -- -- * *
_____________
(a) method of serial vacuum impregnation of a resin into an Insitutube.
(b) method for remote lining of side connections.
(c) manufacture of tubular laminates.
(d) method for lining pipes incorporating the curing of a resin-impregnated
liner using a light source.
(e) apparatus for securing cable to a tubular pipe liner.
(f) method of installing a lateral lining from the main line by use of a
carrier tube.
(g) method of installing a lateral lining from the lateral clean-out to the main.
(h) apparatus for everting an Insitutube.
(i) method of everting an Insitutube.
(j) method of lining pipelines by inverting a tube against a moveable backstop.
(k) method of lining pipelines using a sealed inversion process.
(l) method of inverting a tube with the use of a rolling ring.
* application pending
/TABLE
<PAGE>
<PAGE>
In addition, in Germany applications for patents (h), (i) and (j)
are pending, and an application for patent (d) has been abandoned.
In the United Kingdom, in respect of certain classes of patents,
any person has the right to compel the patent holder to license
such person during the last four years of the patent's life, on
such terms as are agreed with the patent holder (including the
level and/or amount of royalty) failing which such terms are
judicially determined.
The specifications and/or rights granted in relation to each
patent will vary from jurisdiction to jurisdiction. In addition, as
a result of differences in the nature of the work performed and in
the climate of the countries in which the work is carried out, not
every licensee uses each patent, and the Company does not
necessarily seek patent protection for all of its inventions in
every jurisdiction in which it does business.
Although the Company believes these patents are important to
the business of the Company, there can be no assurance that the
validity of the patents will not be successfully challenged or that
they are sufficient to afford protection against another company
utilizing a process similar to the Insituform Process. The
Company's business could be adversely affected by increased
competition in the event that one or more of the patents were
adjudicated to be invalid or inadequate in scope to protect the
Company's operations or upon expiration of the patents. The Company
believes, however, that while the Company has relied on the
strength and validity of its patents, the Company's long experience
with the Insituform Process, its continued commitment to support
and develop the Insituform Process, the strength of its trademarks,
and its degree of market penetration, should enable the Company to
continue to compete effectively in the pipeline rehabilitation
market.
In September 1989, the United States Patent and Trademark
Office issued the Company's initial patent covering the NuPipe
Process, which was followed by nine additional patent grants.
Patents covering the NuPipe Process or the materials used in
connection with the NuPipe Process have also been issued in 20
other countries. The Company intends aggressively to pursue the
remaining U.S. and foreign patent applications related to the
NuPipe Process, but there can be no assurance that any of the
remaining patents will be issued as a result of such applications,
or that any patent granted will be sufficient to afford protection
against another company utilizing a process similar to the NuPipe
Process.
The Company believes that the success of its corrosion and
abrasion protection operations will depend primarily upon its
proprietary know-how and its marketing and sales skills.
Pursuant to the Ashimori License, the Company holds the
exclusive rights to use the patents, trademarks and know-how
related to the Ashimori Products, including the rights to
manufacture and sell Ashimori Products, for substantially all of
<PAGE>
North America. Such license currently covers seven United States
patents relating to Paltem-HL and the related PAL-Liner. In
addition, there are currently five patent applications filed in the
United States relating to the Ashimori Products.
In connection with the Ashimori License, Ashimori was paid an
initial license fee of $100,000 and is entitled to receive ongoing
royalties of 6% on Paltem-HL and Paltem-March installations and 7%
on installations of other licensed Ashimori Products, with a
royalty of 5% on sales of liners to which the installation royalty
does not apply, in each case due within 60 days of each semi-annual
royalty period. Under the Ashimori License, any non-patentable
improvements by the Company made to the licensed technology are
licensed on a non-exclusive basis to Ashimori, while Ashimori's
right to use patentable improvements made by the Company is subject
to payment to the Company of mutually agreeable royalties.
The Ashimori License extends for an initial term of 15 years
through 2009 and automatically is renewed for successive one-year
terms unless the Company gives notice of non-renewal at least 90
days prior to the end of a term. Commencing with the year ending in
September 1998, in the event annual minimum royalties are not met,
Ashimori has the right to render the agreement non-exclusive and,
in the event minimum royalties are not met for two consecutive
years, to terminate the agreement. In addition, the Ashimori
License is subject to termination in the event of specified
defaults.
Under its license from Angus (the "Angus License"), the Company
holds exclusive rights to use the patents, trademarks and know-how
related to the Thermopipe Process for the United States and Canada,
and non-exclusive rights in Mexico, France, Benelux, Spain and
Italy. Angus has the option under the license to convert the
exclusive rights to non-exclusive rights if the Company does not
meet certain minimum purchases of Thermopipe liner. The Angus
License extends for an initial term of five years and is renewable
by the Company for an additional five year term, subject to
termination in the event of specified defaults. In connection with
the Thermopipe license, Angus was paid an initial license fee of
$60,000, with two additional payments of $20,000 each due after the
end of the first and second years of the license. No further
royalties are due under the license. Under the Angus License, any
improvements made by the Company which relate exclusively to the
Thermopipe Process, and which are not derivative of the Company's
installation technology relating to other products, are licensed on
a royalty-free basis to Angus.
PRODUCT DEVELOPMENT
The Company, by utilizing its own laboratories and test
facilities and outside consulting organizations and academic
institutions, continues to develop improvements to its proprietary
processes, including the materials used and the methods of
manufacturing and installing pipe. During the years ended December
31, 1996, 1995 and 1994, the Company spent approximately $7.7
<PAGE>
million, $7.6 million and $6.2 million, respectively, on all
strategic marketing and product development activities.
EMPLOYEES
As of December 31, 1996, the Company employed 1,497
individuals, including nine officers, 136 technical specialists and
managers, 134 manufacturing staff, 908 direct installation staff,
225 administrative personnel and 94 marketing personnel. Certain of
the Company's contracting operations are parties to collective
bargaining agreements covering an aggregate of 262 employees. None
of the Company's other employees is represented by a labor union,
although the Company's United Kingdom operation belongs to a trade
association that prescribes minimum terms of employment for
members. The Company generally considers its relations with its
employees to be good.
GOVERNMENT REGULATION
The Company and its licensees are required to comply with all
national, state and local statutes, regulations and ordinances,
including those disclosure and filing requirements relating to the
grant of licenses. In addition, the Company's licensees (including
the Company's direct installation operations) may have to comply
with building code specifications, permit requirements, and
extensive bonding and insurance requirements with regard to
installation activities as well as with fire regulations relating
to the storage, handling and transporting of flammable materials.
The Company's manufacturing facilities, as well as its direct
installation operations and those of its licensees, are subject to
state and national environmental protection regulations, none of
which presently has any material effect on the Company's capital
expenditures, earnings or competitive position in connection with
the Company's present business. However, while the Company's direct
installation operations have established monitoring programs
relating to the use of solvents in the installation process,
further restrictions could be imposed on the use of solvents or the
thermosetting resins used in the Insituform Process. The Company
believes that it is in material compliance with environmental laws
and regulations applicable to it.
The use of both thermoplastics and thermosetting resin
materials in contact with drinking water is strictly regulated in
most countries. In the United States, a consortium led by NSF
International ("NSF"), under arrangements with the United States
Environmental Protection Agency (the "EPA"), establishes minimum
requirements for the control of potential human health effects from
substances added indirectly to water via contact with treatment,
storage, transmission and distribution system components, by
defining the maximum permissible concentration of materials which
may be leached from such components into drinking water, and
methods for testing them. In February 1996, the Paltem-HL and Frepp
processes were certified by the NSF for use in drinking water
systems. The Thermopipe product also has NSF approval. The NSF
assumes no liability for use of any products, and the NSF's
arrangements with the EPA do not constitute the EPA's endorsement
<PAGE>
of the NSF, the NSF's policies or its standards. The Company does
not currently have an NSF certified Insituform product, but intends
to submit an improved product for NSF certification.
EXECUTIVE OFFICERS
The executive officers of the Company, and their respective
ages and positions with the Company, are as follows:
<TABLE>
<CAPTION>
Age at Position with
Name March 15, 1997 the Company
---- -------------- --------------
<S> <C> <C>
Jerome Kalishman 69 Chairman of the Board
Anthony W. Hooper 49 President and Chief
Executive Officer
Robert W. Affholder 61 Senior Executive Vice
President
William A. Martin 55 Senior Vice
President-Chief
Financial Officer
Dale T. Harden 56 Senior Vice President-
Chief Operating Officer
of North American Con-
tracting Operations
Raymond P. Toth 49 Vice President-
Human Resources
Joseph F. Olson 52 Vice President-Controller
of North American Con-
tracting Operations
F. Thomas Driver 59 Vice President-Technical
Sales
Robert L. Kelley 51 Vice President-General
Counsel
</TABLE>
Jerome Kalishman has been Chairman of the Board of the Company
since November 1996, having served as Vice Chairman of the Board of
the Company from October 1995 until November 1996. Prior to the IMA
Merger and since prior to 1991, Mr. Kalishman was Chairman of the
Board and Chief Executive Officer of IMA.
Anthony W. Hooper has been President of the Company since
November 1996. Mr. Hooper was previously, since August 1994, Senior
Vice President-Marketing and Technology of the Company, having
served as Senior Vice President-Marketing of the Company from
November 1993 to that date. From 1992 until joining the Company,
<PAGE>
Mr. Hooper was President of Huyck Formex/Weavexx Corporation, a
North Carolina industrial textile and process equipment
manufacturer and subsidiary of BTR, Inc. From prior to 1990 to
1991, Mr. Hooper was employed by Sprout Bauer, Inc., an industrial
machinery and systems manufacturer owned by Combustion Engineering,
Inc., where he was Vice President-Marketing before becoming
President of the Pulp and Paper Division.
Robert W. Affholder has been Senior Executive Vice President
of the Company since August 1996. Mr. Affholder was previously,
since October 1995, Senior Vice President-Chief Operating Officer
of North American Contracting Operations of the Company. Mr.
Affholder was President of IMA from 1994 to October 1995 and from
prior to 1991 to 1993, and was Vice Chairman of IMA from 1993 to
1995.
William A. Martin has been Chief Financial Officer of the
Company since 1988, a Vice President from 1989 to January 1993 and
a Senior Vice President since January 1993.
Dale T. Harden joined the Company as Senior Vice President in
June 1996 and became its Chief Operating Officer-North American
Contracting Operations in August 1996. From prior to 1991 until
joining the Company, Mr. Harden was employed by the General
Electric Company, serving most recently as General Manager of its
Power Generation and Apparatus Service Department.
Raymond P. Toth has been the Company's Vice President-Human
Resources since February 1994. Since prior to 1991 and until
joining the Company, Mr. Toth was employed as Director of Human
Resources for Sprout Bauer, Inc.
Joseph F. Olson has been Vice President-Controller of North
American Contracting Operations of the company since October 1995.
Mr. Olson was Vice President-Finance and Administration of IMA from
prior to 1991 to October 1995.
F. Thomas Driver has been Vice President-Technical Sales of the
Company since October 1995. Mr. Driver was Vice President-Product
Development and Manufacturing of IMA from January 1994 to October
1995. Mr. Driver was Senior Vice President-Manufacturing and
Research and Development of the Company from January 1993 to
January 1994 and its Vice President-Technical Director from prior
to 1991 to January 1993.
Robert L. Kelley has been Vice President of the Company since
June 1996, having joined the Company as General Counsel in the
prior month. Mr. Kelley was Assistant General Counsel of Monsanto
Company from prior to 1991 until joining the Company.
ITEM 2. PROPERTIES
The Company's executive offices are located in Memphis,
Tennessee, at 1770 Kirby Parkway. The Company's lease of such
premises with an unaffiliated party covers 17,885 square feet of
<PAGE>
office space, at an annual rental of $254,868, plus taxes and
operating expenses in excess of a base amount, and expires in 2000.
The Company's North American contracting operations are based
in Chesterfield, Missouri, where the Company owns 46,000 square
feet of space on 10.5 acres, 19,400 square feet of which is
utilized as office space and the remaining 27,000 square feet of
which is used for operations.
The Company's manufacturing facilities in Memphis, Tennessee
are sub-leased from an unaffiliated entity for an initial term of
forty years expiring on December 31, 2020. The annual rental cost
to the Company during the initial term of the lease is currently
$28,956, plus real estate taxes, and increases by varying
percentages every five years to $44,952, plus real estate taxes, in
2016 and thereafter. The premises consist of 56,000 square feet of
manufacturing space, with an adjoining 6,000 square foot
administrative office complex, the cost of a portion of which,
together with certain machinery and equipment, was financed from
the sale of a $1.5 million industrial development bond and secured
by a mortgage on the premises and equipment. An additional 2,700
square feet of space added to the facility is used for research and
development.
The Company maintains 87,000 square feet of space on 20 acres
of land in Batesville, Mississippi, 27,000 square feet of which is
utilized as an Insitutube fabrication facility, 27,000 square feet
as a contiguous felt manufacturing facility, 27,000 square feet as
warehousing space, and 6,000 square feet as office space. The costs
relating to the acquisition, construction and equipping of the
Batesville facilities, in the aggregate amount of $5.5 million,
were financed from the proceeds of the sale of an industrial
development bond, which was prepaid in February 1997, and was
secured by the issuer's title to the property, which is leased to
the Company under arrangements that provide for the Company's
purchase option at (subsequent to such prepayment) nominal value.
In January 1995 the Company sold to Linings (a 51%-owned
subsidiary), for a sale price of Pound Sterling 750,000, the land and building
previously leased to Linings and comprising its Insitutube
manufacturing facility located on 1.3 acres and comprising 25,100
square feet of space in Wellingborough, England. The Company leases
additional Insitutube manufacturing space in Matsubuse, Japan.
In support of its direct installation operations, the Company
owns facilities in Ossett, England (36,250 square feet), Lemont,
Illinois (24,378 square feet), Owosso, Michigan (21,500 square
feet), Littleton, Colorado (8,000 square feet), Durango, Colorado
(10,000 square feet), Grand Prairie, Texas (9,000 square feet),
Lakeland, Florida (15,000 square feet) and Jacksonville, Florida
(25,000 square feet). The Ossett and Jacksonville properties are
subject to mortgages. The Company manages installation operations
from leased sites in the United States in Houston, Indianapolis,
Santa Fe Springs, Sacramento and Charlton, Massachusetts, Kent,
Washington, Kailua, Hawaii, Hammond, Louisiana, Opaloca, Florida,
Atlanta, Georgia, and Salem, Oregon; and in Canada in Edmonton,
<PAGE>
Alberta, Surrey, British Columbia, Pickering, Ontario and
Vaudreuil, Quebec. The Company's contracting subsidiaries maintain
additional sales and administrative offices in the event required
by operations.
The foregoing facilities are regarded by management as adequate
for the current and anticipated future requirements of the
Company's business. Upon payment by the Company in the last quarter
of 1996 in the amount of approximately $1.26 million, the Company
terminated its lease, entered into by IGL prior to the IGL
Acquisition, of premises located in Langley, Berkshire, England,
which entailed an initial rent of Pound Sterling 245,960 per annum, subject to
adjustment every five years through 2015 based upon the open market
rent applicable at that time. The Company may seek to negotiate
termination of leases on certain additional properties in the
United Kingdom, and, in order to rationalize the Company's
operations combined as a result of the IMA Merger, to relocate
certain other operations.
ITEM 3. LEGAL PROCEEDINGS
The Company has initiated proceedings which are pending in the
United States District Court for the Southern District of Texas,
Houston Division (the "Texas Proceedings") against Cat Contracting,
Inc. et al. (Civil Action No. H-90-1690), alleging infringement of
certain of the Insituform patents in connection with conduit
relining work performed in Houston by licensees of Kanal Sanierung
Hans Muller GmbH & Co. In such proceeding, defendants asserted
counterclaims alleging both that suit was brought in bad faith, and
certain antitrust violations, and further alleging that the Company
engaged in unfair competition.
In June 1991, the jury in the Texas Proceedings rendered its
verdict finding that the competitors named as defendants had
infringed the Insituform patents at issue and that such patents
were not invalid. In the continuing proceedings, the court, in
August 1991, declined to declare such patents invalid, as was
requested by defendants, and did not disturb the jury's verdict
finding that the plaintiffs were not liable on the defendant's
counterclaims alleging that the suit had been brought in bad faith
and that plaintiffs had engaged in unfair competition. The court,
however, granted the defendants a new trial on the matter of
whether they had infringed certain Insituform patents, under the
doctrine of equivalents, setting aside that portion of the jury's
verdict, and granting defendants judgment notwithstanding the jury
verdict on the issue of literal infringement of that patent.
In October 1995, the court in the Texas Proceedings ruled that
the defendants' serial impregnation processes infringed the
Company's patent and issued a permanent injunction against
defendants' use of the processes covered by such patent and ordered
a trial on the issue of damages, the amount of which remains to be
determined. Defendants filed a notice of appeal to the United
States Court of Appeals for the Federal Circuit, and the Company
filed a notice of cross-appeal from the 1991 judgment. Furthermore,
<PAGE>
in February 1996 defendants filed a motion with the Texas district
court for a partial new trial alleging that the Company gave
knowingly false testimony at the 1991 trial and seeking dismissal
of the action and monetary sanctions, which the Company has
opposed. The District Court has denied defendants' motion for a
partial new trial, and defendants have filed a notice of appeal
from that ruling with the United States Court of Appeals for the
Federal Circuit which is set for argument in April 1997.
In November 1996, the Court of Appeals for the Federal Circuit
affirmed the District Court in declining to declare the Company's
serial impregnation patent invalid and found that the jury's
rejection of defendants' challenge to the validity of that patent
was supported by the evidence. The Court of Appeals further
affirmed the District Court in granting defendants' judgment
notwithstanding the jury verdict on the issue of literal
infringement of the patent, and vacated the District Court's
finding of infringement under the doctrine of equivalency, holding
that the District Court had used an incorrect claim construction
and remanding the case to the District Court for new findings
regarding such issue. In December 1996, the District Court issued
its new findings under the guidelines suggested by the Court of
Appeals, and again found that both of the processes employed by
defendants infringed the Company's serial vacuum impregnation
patent. The damages portion of the Texas Proceedings are
continuing, with trial currently scheduled for mid-1997. In March
1997, defendants filed a petition for a writ of certiorari in the
U.S. Supreme Court with respect to the November 1996 ruling, which
the Company is opposing.
In October 1996, two of the defendants in the Texas Proceedings
filed a separate action (the "Additional Texas Proceedings") in the
District Court against the Company and Insituform East,
Incorporated (Inliner U.S.A. and Cat Contracting, Inc. v.
Insituform Technologies, Inc. and Insituform East, Inc. [Civil
Action No. H96-3627]) alleging, among other matters, that the
Company had commenced the Texas Proceedings with knowledge that the
Company's serial impregnation patent was invalid and gave false
testimony in the Texas Proceedings. The suit further alleges that
the Company committed various infractions of the antitrust laws,
including conduct by the Company constituting unreasonable
restraints of trade and monopolization of its market, in violation
of Sections 1 and 2 of the Sherman Act, made false or misleading
representations in violation of Sections 1 and 2 of the Sherman
Act, made false or misleading representations in violation of
Section 43(a) of the Lanham Act, and engaged in other anti-
competitive practices in violation of Texas state law, and seeks
compensatory and punitive damages. The Company has denied the
allegations and raised affirmative defenses, including collateral
estoppel, the Noerr-Pennington doctrine, and statute of
limitations, and filed a motion to dismiss regarding certain of the
antitrust claims which plaintiffs are opposing. No discovery has
been conducted in the case. A scheduling order has been entered
with trial currently set for November 1998.
<PAGE>
<PAGE>
In October 1996, Western Slope Utilities, Inc., which utilizes
a serial impregnation process licensed from Inliner, U.S.A., one of
the defendants in the Texas Proceedings, commenced an action
against the Company in the United States District Court for the
District of Colorado (Western Slope Utilities, Inc. v. Insituform
Technologies, Inc. and Insituform Netherlands) B.V. [Civil Action
No. 96-N-2394]), seeking, among other things, a judgment declaring
the Company's serial impregnation patent invalid, unenforceable and
not infringed by plaintiff's current activities, and injunctive
relief enjoining the Company from charging plaintiff or any of its
customers or suppliers with infringing that patent. This case has
been transferred to the United States District Court for the
Southern District of Texas and a motion is pending to have it
consolidated with the Additional Texas Proceedings. Plaintiffs
recently filed an application for writ of mandamus with the United
States Court of Appeals for the Federal Circuit contesting the
transfer order, which the Company is opposing.
In December 1996, the Company entered into settlement
arrangements with respect to two previously reported proceedings
initiated by the Company against, inter alia, Spiniello Limited,
Inc. in the United States District Courts for, respectively, the
District of New Jersey (Civil Action No. 8904174 (MTB)) (the "New
Jersey Proceedings") and the Central District of California (Civil
Action No. 95-5484 (GHK) (the "California Proceedings"), alleging
infringement of the Company's Insituform patents, among other
matters. In the New Jersey Proceedings, defendants had asserted
counterclaims alleging both that the suit was brought in bad faith,
and certain antitrust violations, and, in the California
proceedings, seeking a declaratory judgment that the subject
patents were invalid. The New Jersey Proceedings had been stayed
pending a final judgment in the Texas Proceedings. In the
California Proceedings, the court had preliminarily enjoined
defendants from infringing the Company's serial impregnation
patent, and from misappropriating various of the Company's trade
secrets. Under the settlement arrangements, the New Jersey
Proceedings have been dismissed and, in the California Proceedings,
the parties agreed to convert the preliminary injunction against
infringing the Company's serial impregnation patent to a permanent
injunction for the life of the patent, the preliminary injunctive
relief against misappropriating the Company's trade secrets was
made permanent for an agreed upon term and defendants paid an
agreed upon sum to the Company.
The Company is involved in certain additional litigation
incidental to the conduct of its business and affairs. Management
does not believe that the outcome of any such litigation will have
a material adverse effect on the financial condition or operations
of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The Company's class A common stock, $.01 par value ("Common
Stock"), is traded in the over-the-counter market under the symbol
"INSUA". The following table sets forth the range of quarterly high
and low sales prices commencing after December 31, 1994, as
reported on The Nasdaq Stock Market. Quotations represent prices
between dealers and do not include retail mark-ups, mark-downs or
commissions.
<TABLE>
<CAPTION>
Period High Low
------ ---- ---
<S> <C> <C>
1996
First Quarter $12.00 $9.38
Second Quarter 13.38 7.63
Third Quarter 8.00 6.13
Fourth Quarter 8.38 6.38
Period High Low
------ ---- ---
1995
First Quarter $13.00 $11.13
Second Quarter 14.13 12.00
Third Quarter 16.63 12.88
Fourth Quarter 14.88 11.13
</TABLE>
As of March 15, 1997, the number of record holders of the
Company's Common Stock was 1,874.
Holders of Common Stock are entitled to receive dividends
as and when they may be declared by the Company's Board of
Directors. The Company has never paid a cash dividend on the Common
Stock. The Company's present policy is to retain earnings to
provide for the operation and expansion of its business. However,
the Company's Board of Directors will review the Company's dividend
policy from time to time and will consider the Company's earnings,
financial condition, cash flows, financing agreements and other
relevant factors in making determinations regarding future
dividends, if any. Under the terms of certain debt arrangements to
which the Company is a party, the Company is subject to certain
limitations in paying dividends. See Notes 8 and 20 of the Notes to
the Company's Consolidated Financial Statements included in
response to "Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K" and "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of
Operations-Liquidity," which information is incorporated herein by
reference.
<PAGE>
<PAGE>
For each year prior to consummation of the IMA Merger
covered by the Company's Consolidated Financial Statements included
in response to "Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K," IMA had a policy of paying regular cash
dividends, semi-annually in January and July, at an annual rate of
$.14 per share of the class A common stock, $.01 par value, of IMA
and $.1272 per share of the class B common stock, $.01 par value,
of IMA.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below have been
derived from the Company's consolidated financial statements
referred to under "Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" of this Annual Report on Form
10-K, and previously published historical financial statements not
included in this Annual Report on Form 10-K. In October 1995 and
December 1992, the Company consummated, respectively, the IMA
Merger and the IGL Acquisition, each of which the Company has
accounted for as a pooling-of-interests and, accordingly, the
historical financial statements of the combining companies have
been retroactively combined (after adjustments to eliminate
intercompany balances and transactions, and to conform reporting
periods and accounting methods) as if the companies had operated as
a single entity for the periods presented. Certain historical
financial data of IMA have been reclassified to conform to the
Company's accounting policies. The selected financial data set
forth below should be read in connection with "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements,
including the notes thereto, referred to herein.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------
1996(1) 1995(1)(2) 1994(3) 1993(4) 1992(5)
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(in thousands, except per share amounts)
INCOME STATEMENT DATA:
Revenues.................. $289,933 $ 272,203 $ 223,171 $ 151,622 $ 156,219
Operating costs and
expenses:
Cost of revenues......... 201,219 182,286 146,248 95,729 98,169
Selling, administrative
and general............. 60,181 55,990 41,511 34,889 29,873
Strategic marketing and
product development..... 7,689 7,636 6,180 6,878 6,303
Unusual items............. 6,498 14,541(6) -- (981) 14,572(7)
Total operating
income............ 14,346 11,750 29,232 15,107 7,302
Other income (expense)..... (4,933) (8,120)(8) (2,398) (468) 2,859
Taxes on income........... 4,985 3,987 10,457 5,159 8,907
Equity in earnings of
affiliated companies..... 441 666 570 638 1,282
Income (loss) from
continuing operations.... 4,492 (966)(8) 15,667 9,734 2,288
Net income (loss)......... 4,492 (966) 14,503 7,487 1,748
Earnings (loss) per share:
Income (loss) from
continuing operations... .17 (.04) .57 .36 .09
Discontinued operations... -- -- (.04)(9) (.09)(9) (.02)
Cumulative effect of
accounting change........ -- -- -- .01 --
Net income (loss)........ .17 (.04) .53 .28 .07
Weighted average common
and common equivalent
shares outstanding....... 27,112 26,902 27,162 27,206 24,317
BALANCE SHEET DATA:
Working capital........... 78,876 69,538 46,403 40,724 31,990
Current assets............ 130,879 120,711 106,926 81,102 67,074
Property and equipment.... 57,266 59,773 51,471 40,407 32,184
Intangibles............... 71,953 73,158 65,268 52,707 29,489
Total assets.............. 267,944 260,300 227,627 177,010 133,682
Long-term debt............ 82,384 82,813 47,347 36,297 7,675
Redeemable preferred
stock.................... -- -- -- 157 84
Total liabilities......... 139,106 137,845 110,310 77,108 43,652
Total common stock and
other stockholders'
equity.................. 123,203 116,810 114,880 100,106 90,267
___________________
(1) As a consequence of a 15% general partnership interest in Midsouth Partners held by a
subsidiary of the Company, and the consummation of the acquisition (the "Enviroq
Acquisition") of the pipeline rehabilitation business of Enviroq Corporation in April
1995, including a 42.5% interest in Midsouth Partners held by a subsidiary of Insituform
Southeast, Midsouth Partners has been consolidated in the Company's financial statements
since such date.
(2) In 1995 the Company consummated the acquisition of two-thirds of Insituform France S.A.
("Insituform France") and the Enviroq Acquisition, which have been accounted for under
the purchase method of accounting.
<PAGE>
<PAGE>
(3) In 1994 the Company consummated the acquisition of Gelco Services, Inc. and affiliates,
which has been accounted for under the purchase method of accounting.
(4) In 1993 the Company consummated the acquisitions of Naylor Industries, Inc. and
Insituform Midwest, Inc., which have been accounted for under the purchase method of
accounting.
(5) In 1992 the Company consummated the acquisitions of all of the assets of Pipeline
Rehabilitation Systems, Inc., the minority interest in Insituform Canada and of H.T.
Schneider, Inc., which have been accounted for under the purchase method of accounting.
(6) Reflects $6.5 million in costs associated with the IMA Merger, which have been charged
to operations primarily in the fourth quarter of 1995, and a pre-tax charge in the
amount of $8.1 million for restructuring costs, primarily for consolidation of corrosion
and abrasion protection operations, rationalization of Canadian operations to one
facility, elimination of duplicative management positions, relocation of certain
domestic employees and functions, and termination of construction of proposed
manufacturing capacity.
(7) Reflects $9.7 million in costs associated with the IGL Acquisition, which have been
charged to operations primarily in the fourth quarter of 1992, and a pre-tax charge in
the amount of $4.9 million for restructuring costs, primarily for asset-related write-
offs, lease termination provisions and personnel related costs.
(8) In 1995 the Company settled certain outstanding litigation for a cash payment of $3.2
million and issuance of 30,000 shares of Common Stock, resulting in an after-tax charge
against earnings of approximately $2.2 million.
(9) In December 1993 the Company determined to discontinue the operations of its division
engaged in the offsite rehabilitation of downhole tubulars for the oil and gas industry.
As a result, the Company recorded a fourth quarter 1993 charge to write down the
division's assets to their estimated net realizable values and to accrue for operating
losses during the anticipated phase-out period. The statement of operations and balance
sheets have been restated to reflect continuing operations. The Company also recorded
a fourth quarter 1994 charge resulting from the abandonment of efforts to find a
purchaser for, and shut down of, such division.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's revenues include construction revenues from
direct installation and other contracting activities, product sales
of materials and equipment to licensees and royalty income and
initial license fees received from licensees for the use of the
Company's trenchless rehabilitation processes. Product sales
consist primarily of sales of Insitutubes and NuPipe to licensees.
Construction contract revenue is generated by the Company's
subsidiaries operating in the United States, Canada, France, the
United Kingdom, Chile, Argentina and Mexico. Royalties and license
fees are paid by the Company's 34 unaffiliated Insituform licensees
and sub-licensees and its ten unaffiliated NuPipe licensees. During
the three years ended December 31, 1996, 1995 and 1994,
approximately 69.7%, 71.2% and 67.8%, respectively, of the
Company's consolidated revenues were derived from sales,
construction and royalty revenues related to the Insituform
Process.
<PAGE>
<PAGE>
Product sales and royalties are primarily a function of the
contracts performed by the Company's licensees. However, changes in
product sales may vary from changes in royalties because of several
factors, including differences between the timing of Insitutube
sales and contract performance by licensees and the accrual by the
Company of minimum royalties in excess of royalties otherwise due
on work performed. The Company's consolidated subsidiaries obtain
supplies of Insitutubes and related materials from the Company.
The Company was incorporated in Delaware in 1980 in order to
act as the exclusive licensee of the Insituform Process in most of
the United States. In October 1995, the Company consummated the IMA
Merger, which has been accounted for as a pooling-of-interests.
Under the pooling-of-interests method of accounting, the historical
financial statements of the combining companies are retroactively
combined (after adjustments to eliminate intercompany balances and
transactions, and to conform accounting methods) as if the
companies had operated as a single entity.
The Company's acquisitions in July 1993 of Naylor Industries,
Inc., the parent of Insituform Gulf South, Inc. ("Gulf South"), and
Insituform Midwest, Inc. ("Midwest"), its acquisition in October
1994 of Gelco Services, Inc. ("Gelco") and affiliates, its February
1995 acquisition of two-thirds of the interest in Insituform
France, the April 1995 Enviroq Acquisition and its November 1995
acquisition of Waterflow's FormaPipe division have been accounted
for under the purchase method of accounting, so that the results of
the acquired companies are included in the Company's historical
results of operations from the consummation of such transactions,
respectively. In addition, product sales and purchases and royalty
revenues and expenses related to intercompany transactions
occurring subsequent to the acquisition dates of Gulf South,
Midwest, Gelco, Insituform France and Insituform Southeast have
been eliminated.
Fluctuations in the exchange rates between the United States
dollar and the currencies of other countries in which the Company
operates or has licensees may have an impact on the Company's
consolidated results during the relevant reporting period. The
Company intends to manage any such foreign currency exposure in the
context of discrete commercial transactions and, when appropriate,
to offset such exposure in whole or in part by entering into
foreign currency forward contracts, in order to reduce the impact
of such fluctuations on results of operations. The Company does not
anticipate that the circumstances in which such hedging activity
would be appropriate will have a material effect on the Company's
liquidity.
<PAGE>
<PAGE>
RESULTS OF OPERATIONS
Year Ended December 31, 1996 Compared to Year Ended December
31, 1995
Revenues. Revenues increased 6.5% to $289.9 million from
$272.2 million in the prior year, primarily as a result of an
increase in construction revenues, offset by decreases in product
sales to and royalties and license fees from independent licensees.
The increase in revenues reflects the April 1995 Enviroq
Acquisition, including Insituform Southeast (and the consequent
consolidation of Midsouth Partners), resulting in the elimination
of the related product sales and royalty revenues. Fluctuations in
currency exchange rates of the Japanese yen, British pound
sterling, French franc and Canadian dollar to the United States
dollar negatively impacted total revenues by approximately $1.2
million in 1996.
Construction revenues increased 8.6% to $268.2 million from
$246.9 million in 1995 in part as a result of the acquisition of
Insituform Southeast (which together with the consolidation of
Midsouth Partners, contributed to construction revenues during the
entire 1996 fiscal year an aggregate of $9.9 million in excess of
the amount contributed in the prior year, subsequent to the April
acquisition), in addition to revenue increases in United Kingdom
operations which primarily reflect the acquisition of the FormaPipe
business in November 1995. Construction revenues in 1995 include
$10.2 million from the Company's water and sewer open cut
construction operations in Canada, the assets of which were sold to
certain members of management in November 1995.
Product sales decreased 12.3% to $16.4 million in 1996 from
$18.6 million in 1995 (which included pre-acquisition sales to
Insituform Southeast and Midsouth Partners). The decrease in
product sales was coupled with a decrease in sales in Japan
primarily as a result of the negative impact of the fluctuation in
the currency exchange rate of the Japanese yen to the United States
dollar by approximately $0.9 million.
Royalty and license fees decreased 19.1% to $5.4 million
compared to $6.7 million in 1995. The decrease was primarily
attributable to lower royalties collected from independent
licensees in the United States, coupled with the elimination of
intercompany royalties from recently-acquired subsidiaries. During
1996, the Company signed license agreements for Insituform in
Taiwan and for NuPipe in Germany, and recognized $0.3 million in
license fee revenue, while in 1995, the Company signed an
Insituform license agreement in New Zealand, recognizing $48,000 in
license fee revenue.
Operating Costs and Expenses. In 1996, cost of construction
contracts (which, during such year, included trenchless
installations, abrasion, corrosion and pipeline construction, and
tunnelling) increased 11.7% to $ 189.7 million from $ 169.9 million
in 1995, primarily attributable to newly-acquired licensees. Costs
of construction in 1995 included $9.4 million from the Company's
<PAGE>
open cut operations in Canada which were sold in November 1995.
Construction costs as a percentage of construction revenues
increased to 70.7%, as compared to 68.8% in 1995, principally due
to lower margins achieved by newly-acquired subsidiaries. In
addition, there was an increase in 1996 in worldwide volume of the
Company's abrasion and corrosion operations, which carry lower
margins than those of the Company's pipeline rehabilitation
operations.
Cost of product sales decreased 8.4% to $11.0 million in 1996
from $12.0 million in 1995. The decrease was a result of decreased
product revenue. Cost of product sales as a percentage of product
sales increased to 67.2%. in 1996, as compared to 64.3% in 1995,
due primarily to a shift in the mix of products sold.
As a percentage of revenues, selling, administrative and
general expenses were 20.8% compared to 20.6% in 1995. The 1996
increase as a percentage of revenues is attributable primarily to
the Company's investment in stronger operations and sales
management, improvement in quality (ISO 9000), and focus on the
industrial market. In 1996, selling, administrative and general
expenses increased 7.5% to $60.2 million as compared to $56.0
million in 1995. This increase is due, in large part, to the
incremental costs of operations for recently acquired entities of
$1.0 million (of which $0.3 million related to incremental goodwill
and non-compete amortization). Other increases were attributable to
added personnel costs in the Company's contracting operations in
the United States, principally in the areas of industrial sales,
and operations and project management. Strategic marketing and
product development costs did not materially change between 1995
and 1996.
Unusual Items. In 1996, the Company recognized $6.5 million in
unusual items in connection with the Company's rationalization of
its contracting operations. These consisted primarily of: (i) the
write-off of certain assets associated with the use of the
Company's Paltem product line in the gas distribution main
installation market (approximately $3.6 million), (ii) charges
related to the disposition of excess facilities (approximately $1.4
million), and (iii) costs related to reorganization of North
American contracting operations (approximately $1.5 million). In
1995, the Company recognized merger and restructuring costs of
approximately $14.5 million in connection with the IMA Merger,
completed in October 1995. These included transaction costs related
to the merger of $6.5 million, which were primarily attributable to
investment banking fees, legal and accounting fees, filing fees,
and management travel costs and a charge for approximately $8.1
million relating to restructuring costs.
Other Income (Expense). In 1996, other income increased to
$1.3 million from a $1.7 million expense in 1995, primarily due to
a 1995 charge to earnings of $3.6 million during the second
quarter, as a result of the settlement of a pending shareholder
class action lawsuit which entailed a cash payment to class members
in the amount of $3.2 million and the issuance of 30,000 shares of
<PAGE>
Common Stock. In 1996, interest expense decreased 3.1% to $6.2
million from $6.4 million in 1995, due primarily to reduced
principal and lower interest rates in 1996.
Taxes on Income. Taxes on income increased to $5.0 million
from $4.0 million in 1995 as a result of an increase of $5.8
million in income before taxes on income, offset by a decrease in
the effective tax rate to 53.0% from 109.8% in 1995. As indicated
in Note 14 of the Notes to Consolidated Financial Statements
included in response to "Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K," the 1996 and 1995 effective tax
rates were higher than the United States federal statutory rate,
primarily due to the non-deductibility of goodwill amortization
associated with the recent acquisitions, which is generally not
deductible for tax purposes. The 1995 effective rate was also
affected by certain merger costs which were capitalized for tax
purposes.
In its financial statements, the Company has reported net
deferred income tax assets of $3.0 million as of December 31, 1996.
The Company has net operating loss and foreign tax credit
carryforwards which, if fully realized, would produce future tax
benefits of $6.4 million. The realization of these benefits is
dependent on the generation of future taxable income in the
applicable jurisdictions, and the Company has recorded a valuation
allowance of $3.1 million to reduce the related net deferred tax
assets to $3.0 million. Such amounts represent the level of future
income tax benefits the realization of which, in management's
opinion, meets the "more likely than not" threshold required under
Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes". The net operating loss carryforwards ("NOLs") of
the Company's subsidiaries are summarized in Note 14 of the Notes
to Consolidated Financial Statements included in response to "Item
14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K".
Management has prepared projections that indicate that the
remaining NOLs would be absorbed prior to their expiration.
However, the Company does not believe that the future realization
of all of these future tax benefits indicated by its projections is
sufficiently assured to allow their full recognition in the
consolidated financial statements. In particular, projections of
operating results over an extended period are inherently imprecise.
Accordingly, a valuation allowance of $3.1 million has been
recorded.
The realization of the net deferred tax asset of $3.0 million
would require that certain of the Company's subsidiaries, including
ISW, Insituform Southwest, Insituform of New England, Inc.,
Insituform Technologies, Ltd. (formerly, Insituform Permaline,
Ltd.), and Insituform Technical Services Ltd., generate various
levels of annual taxable income over the respective carryforward
Periods. Management believes that it is more likely than not that
the applicable levels of taxable income can be generated. In
reaching this conclusion, management noted a number of factors,
including the following related to its domestic operations: (i) the
<PAGE>
operations of Insituform New England were historically profitable,
the NOL carryforward was generated by a non-recurring charge
immediately prior to its acquisition by the Company and the Company
believes managerial problems experienced during 1994 and early 1995
have been corrected; and (ii) historically profitable partnership
investments held by ISW are expected to continue to result in
annual taxable income. With regard to its foreign operations,
management noted a number of factors including that, with the
exception of NuPipe Limited, the Company's United Kingdom
operations have had a history of profitability (exclusive of the
United Kingdom recession), the Company has eliminated duplicative
administrative and research and development facilities in the
United Kingdom and has also reduced managerial and other staffing
levels in the United Kingdom and the acquisition of the business
and personnel of Waterflow's FormaPipe division in late 1995 have
helped to restore volume to needed levels.
Net Income. Total revenues increased by $17.7 million, or
6.5%, in 1996 over 1995, which was offset by an increase in cost of
revenues of $18.9 million, or 10.4%, coupled with increased
operating costs of $4.2 million, or 6.6%, offset by a decrease in
unusual items of $8.0 million, or 55.3%. These factors contributed
to an increase in operating income of $2.6 million, or 22.1%. A
decrease in interest expense of $0.2 million, coupled with the
non-recurrence of the litigation loss of $3.6 million, offset by
lower other income of $0.5 million and an increase in taxes on
income of $1.0 million, resulted in an increase in income before
minority interests and equity earnings from affiliated companies of
$4.8 million. As a result of the foregoing, net income for 1996 was
$4.5 million, an increase of $5.5 million from net income in 1995.
Year Ended December 31, 1995 Compared to Year Ended December
31, 1994
Revenues. Revenues increased 22.0% to $272.2 million in 1995
from $223.2 million in the prior year, primarily as a result of an
increase in construction revenues. As discussed above, during 1995
and 1994 the Company consolidated the construction revenues of
newly-acquired former licensees, both in the United States and in
Europe (and obtained a majority interest in Midsouth Partners,
another domestic licensee) resulting in the elimination of the
related product sales and royalty revenues. Fluctuations in
currency exchange rates had an immaterial effect on revenues during
1995.
Construction revenues increased 27.4% to $246.9 million from
$193.7 million in 1994, primarily as a result of the acquisitions
of Insituform Southeast (in April 1995), Insituform France (in
February 1995) and Gelco and affiliates (in October 1994), which,
together with the consolidation of Midsouth Partners, contributed
to 1995 construction revenues an aggregate of $43.1 million in
excess of the amount contributed (by Gelco subsequent to its
<PAGE>
<PAGE>
acquisition) in the prior year. During the fourth quarter of 1995,
Insituform Canada completed the sale to certain members of its
management of the assets utilized in its open cut business, which
in 1995, through the date of sale, represented $10.2 million in
revenues, compared to $14.0 million for the entire prior year.
Product sales decreased 15.0% to $18.6 million in 1995 from
$21.9 million in 1994. The decrease is primarily due to additional
eliminations of intercompany sales subsequent to recent
acquisitions.
Royalty and license fee revenue decreased 11.2% in 1995 to
$6.7 million compared to $7.5 million in 1994. The decrease is
primarily attributable to the elimination of post-acquisition
intercompany royalties from Insituform France, Insituform Southeast
and Midsouth Partners in 1995. In 1995, the Company added a license
for New Zealand, recognizing $48,000 in license fee revenue, while
in 1994, the Company signed licenses in South Korea and, on a
non-exclusive basis, for Japan and Poland, recognizing $0.3 million
in license fee revenue.
Operating Costs and Expenses. In 1995, cost of construction
contracts (which, during such year, included trenchless
installations, abrasion and corrosion and pipeline construction,
tunnelling and open cut excavation) increased 29.2% to $169.9
million from $131.5 million in 1994, primarily attributable to
newly-acquired licensees. During 1995, construction costs as a
percentage of construction revenues increased to 68.8% from 67.9%
in 1994, due primarily to poorer performance of certain newly-
acquired licensees and United Kingdom operations, in addition to
the historically lower margins associated with general contracting
in the Company's Chilean and tunnelling operations. These negative
factors were somewhat offset by improvements resulting from the
Gelco and Insituform France operations, which achieved
comparatively higher margins.
Cost of product sales as a percentage of product sales
decreased to 64.3% in 1995 compared to 66.0% in 1994, while gross
margins decreased to $6.7 million in 1995 from $7.5 million in
1994. This improvement in cost of product sales as a percentage of
product sales primarily reflects a favorable year for production
quality and customer satisfaction in the United States, offset by
increases in product sales in Japan and the United Kingdom, where
margins are historically lower. In 1994, the Company had recorded
a provision of $0.6 million for certain obsolete inventories of
NuPipe.
As a percentage of revenues, selling, administrative and
general expenses were 20.6% compared to 18.6% in 1994. The increase
in 1995 as a percent of revenues is primarily attributable to
higher costs of operations at Gelco, increased focus on company-
wide quality of $0.4 million, additional legal costs associated
with litigation and intellectual property maintenance of $0.8
million, and increased costs in certain newly-acquired operations
due to management transition and additional crew management to
handle increased volume during the first half of 1995. Selling,
<PAGE>
administrative and general costs increased 34.9% to $56.0 million
compared to $41.5 million in 1994 due, in part, to the incremental
costs of operations for recently acquired entities of $8.9 million
(of which $1.1 million related to incremental goodwill and
non-compete amortization).
Strategic marketing and product development costs increased
23.6% to $7.6 million compared to $6.2 million in 1994, primarily
due to the enhanced efforts in connection with Paltem and NuPipe of
$0.7 million. Management also expanded its strategic marketing
efforts in the industrial market in 1995, resulting in incremental
salaries and benefits of $0.4 million for additional personnel,
travel and associated costs.
Unusual Items. In 1995, the Company recognized merger and
restructuring costs of approximately $14.5 million in connection
with the IMA Merger. These included transaction costs related to
the merger of approximately $6.5 million, which were primarily
attributable to investment banking fees, legal and accounting fees,
filing fees, and management travel costs. These also included a
charge of approximately $8.1 million relating to restructuring
costs, consisting primarily of: (i) the consolidation of the
combined companies' corrosion and abrasion protection operations
and the abandonment of certain assets related to the UltraPipe
process (approximately $2.6 million), (ii) the rationalization of
certain Canadian operations to one facility in Edmonton
(approximately $0.5 million), (iii) the elimination of certain
duplicative management positions (approximately $0.8 million), (iv)
the relocation of certain domestic employees and functions
(approximately $1.7 million), and (v) the termination of
construction on IMA's proposed manufacturing facility in
Chesterfield, Missouri (approximately $1.8 million).
Other Income (Expense). Other expense increased to $8.1
million from $2.4 million in 1994, a significant portion of which
is attributable to additional interest incurred on debt issued to
fund the Company's recent acquisitions (an increase of $3.0 million
compared to 1994). In addition, notwithstanding its belief that it
had defenses to plaintiff's claims that were well-grounded in law
and fact, in May 1995 the Company entered into a memorandum of
understanding to settle a pending shareholder class action lawsuit.
Under the settlement, which has been evidenced by a stipulation of
settlement formally approved by court order in December 1995, the
Company made a cash payment to class members in the amount of $3.2
million and (in January 1996) issued 30,000 shares of Common Stock
(valued at $0.4 million). The Company recorded a pre-tax charge to
earnings for $3.6 million (after-tax effect of $2.2 million) during
1995 with respect to the settlement.
Taxes on Income. Taxes on income applicable to continuing
operations decreased to $4.0 million from $10.5 million in 1994 as
a result of a $23.2 million decrease in income before taxes on
income, offset by an increase in the effective tax rate to 109.8%,
as compared to 39.0% in 1994. As indicated in Note 14 of the Notes
to Consolidated Financial Statement included in response to "Item
<PAGE>
14. Exhibits, Financial Statement Schedules and Reports on Form 8-
K," the 1995 and 1994 effective tax rates were higher than the
United States federal statutory rate, which in 1995 was primarily
due to the non-deductibility of a substantial portion of the $6.5
million in merger-related costs in connection with the IMA Merger.
The additional amortization of goodwill associated with the recent
acquisitions, which is generally not deductible for tax purposes,
contributed to the increase in the rate for both years, as did the
need to provide a valuation allowance due to uncertainties
regarding the Company's ability to utilize certain current and
prior year losses in certain tax jurisdictions to offset current
and prior year profits in other jurisdictions.
Net Income. Total revenues increased $49.0 million, or 22.0%,
in 1995 over 1994, while cost of revenues increased $36.0 million,
or 24.6%, and operating costs (including merger and restructuring
costs of $14.5 million) increased $26.2 million, or 55.1%. These
factors contributed to a decrease in operating income of $17.5
million, or 59.8%. Excluding merger and restructuring costs in
1995, operating income would have decreased $2.9 million, or 10.0%.
An increase in other expense of $5.7 million, offset by a decrease
in taxes on income of $6.5 million, resulted in a decrease in
income from continuing operations of $16.6 million, or 106.2%. In
1994, the Company recognized a $1.2 million loss from discontinued
operations. As a result of the foregoing, net loss for 1995 was
$1.0 million, a decrease of $15.5 million, or 106.7%, from net
income in 1994.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had $13.5 million in cash,
U.S. treasury bills, and short-term investments, as compared to
$11.4 million at December 31, 1995. Cash and cash equivalents
increased $2.1 million primarily as a result of cash provided by
operations of $28.2 million offset by cash used for capital
expenditures of $18.2 million and net repayments of long-term debt
of $5.9 million. The Company's working capital ratio was 2.5 to 1.0
at December 31, 1996 representing an increase from 2.4 to 1.0 at
December 31, 1995. On February 14, 1997 (the "Senior Note
Closing"), the Company completed the sale, in a private
transaction, of $110,000,000 principal amount of its 7.88% Senior
Notes, Series A, due February 14, 2007 (the "Senior Notes"),
approximately $85.0 million of which was applied at closing to the
refinancing of outstanding indebtedness of the Company.
Operations provided cash of $28.2 million during 1996, as
compared to cash provided of $1.1 million in 1995. During 1996,
inventories changed by an immaterial amount (compared to a 1995
increase of $4.1 million), prepaid expenses and miscellaneous
decreased by $2.5 million (compared to a 1995 increase of $4.1
million), accounts payable and accruals (excluding changes in
restructuring reserve accruals) increased $5.6 million (compared to
a 1995 reduction of $3.8 million) and accrued income taxes
increased $0.1 million (compared to a 1995 reduction of $5.3
million). In addition, in 1996 there was an increase in
depreciation and amortization of $2.4 million primarily associated
<PAGE>
with continuing capital expenditures, as well as from the Enviroq
Acquisition.
Trade receivables, together with costs and estimated earnings
in excess of billings, used $8.2 million of cash during 1996,
compared to $1.0 million in 1995. Trade receivables, including
costs and estimated earnings in excess of billings, increased 10.6%
to $84.6 million from $76.5 million in 1995, reflecting a $1.0
million increase in trade receivables, a $1.1 million increase in
retainage receivables, and an increase of $6.1 million in costs and
estimated earnings in excess of billings on construction contracts.
These increases reflect increased volume in the Company's North
American operations in the fourth quarter 1996, in particular its
tunnelling and corrosion and abrasion operations. The collection
cycle for construction receivables is generally longer than for the
Company's other operations due to provisions for retainage, often
5% to 10% of the contract amount, as well as the slow internal
review processes often employed by the construction subsidiaries'
municipal customers. In the United States, the Company's retainage
receivables are generally received within 60 to 90 days after the
completion of a contract.
During 1996, increases in accounts payable and accruals
provided $5.6 million in cash compared to 1995, in which $3.8
million was used. This difference was due primarily to lower
payments for employee bonuses in 1996 compared to 1995. Increased
accruals of income taxes provided $0.1 million to cash in 1996,
compared to a decrease in accruals of $5.3 million in 1995.
Capital expenditures were $18.2 million in 1996, compared to
$16.5 million in 1995. Capital expenditures generally reflect
replacement equipment required by the Company's contracting
subsidiaries.
In April 1996, the Company entered into arrangements whereby,
in exchange for payments in the approximate amount of $1.1 million,
the Company increased its share of the equity of its German
licensee from one-third to one-half, effective January 1, 1996.
Financing activities used $6.1 million in cash during 1996 as
compared to cash provided in the amount of $26.1 million in 1995.
During 1996, the Company made principal payments of $5.4 million on
notes issued in connection with the October 1994 acquisition of
Gelco. In addition, as a result of demands for payment of the
Company's $3 million five-year subordinated note issued in April
1995 as part of the $18.3 million purchase price in the Enviroq
Acquisition, and ensuing litigation, the Company discharged its
obligation under such note and under arrangements to pay $1 million
in consulting fees over five years, and settled such litigation,
for the aggregate amount of $3.1 million and the release of other
claims.
The Company remains obligated on certain notes issued in
connection with the acquisition in October 1994, of all of the
outstanding stock of Gelco and affiliates, aggregating $1.4
million, to the former Gelco shareholders and their affiliates,
<PAGE>
representing net current liabilities of the acquired companies to
related parties and a portion of working capital at closing. The
notes issued in the Gelco closing are secured by the assets
acquired.
At December 31, 1996, $76.3 million was outstanding under the
Company's credit agreement dated October 25, 1995 (the "Credit
Agreement") with SunTrust Bank, Nashville, N.A. ("SunTrust"), as
agent, and a group of participating lenders (the "Lenders"), which
provided for advances by the Lenders through October 1997 on a
revolving basis aggregating up to $105 million (including a $5
million standby letter of credit facility). Indebtedness pursuant
to the Credit Agreement was due to mature in October 2000, with
installments based on a five-year amortization schedule, commencing
December 31, 1997. Interest on indebtedness under the Credit
Agreement was payable at a rate per annum selected by the Company
as either SunTrust's prime rate, plus a margin ranging from 1.00%
to 1.75%, depending on the maintenance of certain financial ratios.
Up to $5 million under the Credit Agreement was available for
borrowings from SunTrust pursuant to a swing-line facility, and
would accrue interest at a rate per annum equal to 0.5% below
SunTrust's prime rate. The Credit Agreement obligated the Company
to comply with certain financial ratios and restrictive covenants
that, among other things, limited the ability of the Company and
its subsidiaries to incur further indebtedness, pay dividends, make
loans and encumber any properties, and required guarantees of
certain domestic subsidiaries. At the Senior Note Closing, all
outstanding indebtedness to the Lenders under the Credit Agreement,
and outstanding indebtedness owed to SunTrust under an industrial
revenue bond encumbering the Company's Batesville facility ($3.4
million principal amount recorded at December 31, 1996), was
prepaid.
At the Senior Note Closing, the Company also prepaid recorded
amounts outstanding under the Company's senior subordinated note
acquired by Hanseatic Corporation ("Hanseatic") in July 1993 ($4.8
million principal amount recorded at December 31, 1996), which
required quarterly payments of interest at 8.5% per annum and
installments of principal in the amount of $1 million on each of
the fifth through eighth anniversary dates of closing, with the
entire remaining principal due nine years after closing. The note
was subordinated to bank and other institutional financing, and
purchase money debt incurred in connection with acquisitions of
businesses. The note was pre-payable at the option of the Company,
at premiums until the fifth anniversary of closing ranging from 3%
to 1% of the amount prepaid ($100,000 paid at the Senior Note
Closing). Warrants with respect to 350,877 shares of Common Stock
issued in connection with such note are exercisable, at the
election of the holder, through July 25, 1998, at a price per share
of Common Stock of $14.25, and such shares are entitled to demand
and incidental registration rights.
The Senior Notes issued by the Company in February 1997 mature
on February 14, 2007, and bear interest, payable semi-annually in
August and February of each year, at the rate per annum of 7.88%.
Each year, from February 2001 to February 2006, inclusive, the
<PAGE>
Company will be required to make principal payments of $15.7
million, together with an equivalent payment at maturity. The
Senior Notes may be prepaid at the Company's option, in whole or in
part, at any time, together with a make whole premium, and upon
specified change in control events each holder has the right to
require the Company to purchase its Senior Note without any premium
thereon.
The note purchase agreements pursuant to which the Senior
Notes were acquired obligate the Company to comply with certain
financial ratios and restrictive covenants that, among other
things, place limitations on operations and sales of assets by the
Company or its subsidiaries, and limit the ability of the Company
to incur further secured indebtedness and liens and of subsidiaries
to incur indebtedness, and, in the event of default under the
Senior Notes, limit the ability of the Company to pay cash
dividends or make other distributions to the holders of its capital
stock or to redeem such stock. Such agreements also obligate the
Company's subsidiaries to provide guarantees to holders of the
Senior Notes if guaranties are delivered by them to specified other
lenders. To the extent not utilized to refinance indebtedness of
the Company at the Senior Note Closing, proceeds of the sale of the
Senior Notes are available for general corporate purposes,
including possible acquisitions of products, technologies and
businesses and repurchases of Common Stock. The Company has not
reached any determination with respect to any such transaction, and
there can be no assurance that any such transaction will be
undertaken.
Management believes its current working capital, including the
proceeds of the Senior Note placement, will be adequate to meet its
requirements for the foreseeable future. In connection with the
anticipated expansion of its operations, and so as to maintain its
liquidity in the event of application of the proceeds of the Senior
Notes, the Company will seek to implement an additional revolving
credit facility for general corporate purposes.
RECENTLY ISSUED ACCOUNTING STANDARDS
During 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation ("SFAS 123"), issued by the Financial Accounting
Standards Board effective for transactions entered into in fiscal
years that begin after December 15, 1995. As allowed under the
provisions of SFAS 123, the Company will continue to measure
compensation cost for employee stock-based compensation plans using
the intrinsic value based method of accounting prescribed by the
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees. As such, the Company will make pro forma
disclosures (see Note 10 of the Notes to Consolidated Financial
Statements included in response to "Item 14. Exhibits, Financial
Statement Schedules and Reports on Form 8-K") of net income and
earnings per share as if the fair value based method of accounting
had been applied. Accordingly, adoption had no material effect on
the Company's financial position or results of operations.
<PAGE>
<PAGE>
During 1996, the Company also adopted Statements of Financial
Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for the Long-Lived Assets to be Disposed Of
("SFAS 121"). SFAS No. 121 establishes new guidelines regarding
when impairment losses on long-lived assets, which include plant
and equipment and certain identifiable intangibles and goodwill,
should be recognized and how impairment should be measured.
Adoption of this standard did not have a material effect on the
Company's financial condition or results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For information concerning this item, see "Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K",
which information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable. The Company has filed a Current Report
on Form 8-K dated July 17, 1996 reporting, under "Item 4. Changes
in Registrant's Certifying Accountant" thereunder, the engagement
of Arthur Andersen LLP as the Company's independent accountant in
substitution for BDO Seidman, LLP.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning this item, see "Item 1.
Business-Executive Officers" and the Proxy Statement to be filed
with respect to the 1997 Annual Meeting of Stockholders (the "Proxy
Statement"), which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning this item, see the Proxy
Statement, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning this item, see the Proxy
Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning this item, see the Proxy
Statement, which information is incorporated herein by reference.
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The consolidated financial statements filed in this
Annual Report on Form 10-K are listed in the attached Index to
Consolidated Financial Statements and Schedules.
2. Financial Statement Schedules:
No Financial Statement Schedules are included herein
because they are not required or are not applicable or the required
information is contained in the consolidated financial statements
or notes thereto.
3. Exhibits:
The exhibits required to be filed as part of this Annual
Report on Form 10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
During the quarter ended December 31, 1996, the
Company filed a Current Report on Form 8-K dated November 18, 1996
which, under "Item 5. Other Events" thereunder, reported certain
changes in management. In addition, the Company has filed a Current
Report on Form 8-K dated February 14, 1997 which, under "Item 5.
Other Events" thereunder, reported the completion of the Company's
private sale of its 7.88% Senior Notes, Series A, due February 14,
2007. No financial statements were filed as part of either such
report.
<PAGE>
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears
below hereby appoint Jerome Kalishman, Anthony W. Hooper, and
William A. Martin as attorneys-in-fact with full power of
substitution, severally, to execute in the name and on behalf of
the registrant and each such person, individually and in each
capacity stated below, one or more amendments to the annual report
which amendments may make such changes in the report as the
attorney-in-fact acting deems appropriate and to file any such
amendment to the report with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 28, 1997 INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
--------------------------------
Anthony W. Hooper
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
Signature Title Date
S/Anthony W. Hooper
- -----------------------
Anthony W. Hooper Principal Executive March 28, 1997
Officer and Director
s/William A. Martin
- -----------------------
William A. Martin Principal Financial March 28, 1997
and Accounting Officer
s/Robert W. Affholder
- -----------------------
Robert W. Affholder Director March 28, 1997
<PAGE>
s/Paul A. Biddelman
- -----------------------
Paul A. Biddelman Director March 28, 1997
s/Brian Chandler
- -----------------------
Brian Chandler Director March 28, 1997
s/Douglas K. Chick
- -----------------------
Douglas K. Chick Director March 28, 1997
s/William Gorham
- -----------------------
William Gorham Director March 28, 1997
s/Jerome Kalishman
- -----------------------
Jerome Kalishman Director March 28, 1997
s/James D. Krugman
- -----------------------
James D. Krugman Director March 28, 1997
s/Steven Roth
- -----------------------
Steven Roth Director March 28, 1997
s/Alvin J. Siteman
- -----------------------
Alvin J. Siteman Director March 28, 1997
s/Silas Spengler
- -----------------------
Silas Spengler Director March 28, 1997
s/Sheldon Weinig
- -----------------------
Sheldon Weinig Director March 28, 1997
s/Russell B. Wight, Jr.
- -----------------------
Russell B. Wight, Jr. Director March 28, 1997
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Reports of Independent Certified Public
Accountants........................................ F-2
Consolidated Balance Sheets, December 31,
1996 and 1995.................................... F-4
Consolidated Statements of Operations for
each of the three years in the period
ended December 31, 1996............................ F-6
Consolidated Statements of Stockholders'
Equity for each of the three years in
the period ended December 31, 1996................. F-7
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1996..................... F-8
Summary of Accounting Policies....................... F-10
Notes to Consolidated Financial Statements........... F-15
No Financial Statement Schedules are included herein because
they are not required or not applicable or the required information
is contained in the consolidated financial statements or notes
thereto.
F-1<PAGE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Insituform Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of
Insituform Technologies, Inc. and subsidiaries (the "Company") as
of December 31, 1996, and the related consolidated statements of
operations, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audit. The financial
statements of the Company as of December 31, 1995, and for the
years ended December 31, 1995 and 1994, were audited by other
auditors whose report dated March 8, 1996, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Insituform Technologies, Inc. and subsidiaries as of December 31,
1996, and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
March 6, 1997
<PAGE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Insituform Technologies, Inc.:
We have audited the accompanying consolidated balance sheet of
Insituform Technologies, Inc. and subsidiaries as of December 31,
1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the two years in
the period ended December 31, 1995. These financial statements are
the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Insituform Technologies, Inc. and subsidiaries at
December 31, 1995, and the results of their operations and their
cash flows for each of the two years in the period ended December
31, 1995, in conformity with generally accepted accounting
principles.
BDO SEIDMAN, LLP
Memphis, Tennessee,
March 8, 1996, except for
Note 10 which is as of
March 26, 1997
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
AS OF DECEMBER 31
-----------------
(In thousands)
<CAPTION>
ASSETS 1996 1995
- ------ ------- -------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, restricted
$573 and $842 $ 13,476 $ 11,416
Receivables 68,627 64,717
Costs and estimated earnings in excess
of billings 20,127 14,008
Inventories 15,781 16,572
Deferred income taxes 5,158 4,287
Prepaid expenses and miscellaneous 7,710 9,711
-------- --------
Total current assets 130,879 120,711
-------- --------
PROPERTY AND EQUIPMENT, less accumulated
depreciation and amortization 57,266 59,773
-------- --------
OTHER ASSETS:
Costs in excess of net assets of
businesses acquired, lessaccumulated
amortization of $9,837 and $6,960 56,943 58,431
Patents and patent applications,
less accumulated amortization of
$3,889 and $3,270 10,049 8,963
Investments in licensees and affiliated
companies 3,137 1,555
Deferred income taxes 1,935 1,862
Non-compete agreements, less accumulated
amortization of $3,327 and $2,323 2,699 3,554
Miscellaneous 5,036 5,451
-------- --------
Total other assets 79,799 79,816
-------- --------
$267,944 $260,300
======== ========
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS (Continued)
--------------------------------------
AS OF DECEMBER 31
-----------------
(In thousands, except share amounts)
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Notes payable to banks $ 1,387 $ 1,053
Accounts payable and accruals 40,578 35,644
Income taxes payable 2,801 1,768
Deferred income taxes 507 627
Current maturities of long-term debt 6,730 12,081
--------- ---------
Total current liabilities 52,003 51,173
LONG-TERM DEBT, less current maturities 82,384 82,813
DEFERRED INCOME TAXES 3,635 2,850
OTHER LIABILITIES 1,084 1,009
--------- ---------
Total liabilities 139,106 137,845
--------- ---------
MINORITY INTERESTS 5,635 5,645
--------- ---------
COMMITMENTS AND CONTINGENCIES
(Notes 1, 10, 12 and 17)
STOCKHOLDERS' EQUITY:
Preferred stock, undesignated,
$.10 par - shares authorized 2,000,000;
none outstanding - -
Common stock, $.01 par - shares
authorized 40,000,000; shares outstanding
27,144,331 and 27,104,940 271 271
Additional paid-in capital 67,824 67,427
Retained earnings 59,049 54,557
--------- ---------
127,144 122,255
Treasury stock - 255,801 shares (3,269) -
Cumulative foreign currency translation
adjustments (672) (1,821)
Notes receivable from affiliates - (3,624)
--------- ---------
Total stockholders' equity 123,203 116,810
--------- ---------
$267,944 $260,300
========= =========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
------------------------------------
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
(In thousands, except per share amounts)
REVENUES:
Construction contracts $268,198 $246,904 $193,732
Product sales 16,353 18,649 21,949
Royalties and license fees 5,382 6,650 7,490
--------- --------- ---------
289,933 272,203 223,171
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Cost of construction contracts 189,683 169,864 131,533
Cost of product sales 10,985 11,987 14,492
Royalty expense 551 435 223
Selling, administrative and general 60,181 55,990 41,511
Strategic marketing and product development 7,689 7,636 6,180
Unusual items 6,498 14,541 -
--------- --------- ---------
275,587 260,453 193,939
--------- --------- ---------
OPERATING INCOME 14,346 11,750 29,232
--------- --------- ---------
OTHER INCOME (EXPENSE):
Interest expense (6,223) (6,393) (3,410)
Other 1,290 (1,727) 1,012
--------- --------- ---------
(4,933) (8,120) (2,398)
--------- --------- ---------
INCOME FROM CONTINUING OPERATIONS
BEFORE TAXES ON INCOME 9,413 3,630 26,834
TAXES ON INCOME (4,985) (3,987) (10,457)
MINORITY INTERESTS (377) (1,275) (1,280)
EQUITY IN EARNINGS OF AFFILIATED COMPANIES 441 666 570
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS 4,492 (966) 15,667
LOSS FROM DISCONTINUED OPERATIONS - - (1,164)
--------- --------- ---------
NET INCOME (LOSS) $ 4,492 $ (966) $ 14,503
========= ========= =========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS
Income (loss) from continuing operations$ .17$ (.04) $ .57
Discontinued operations - - (.04)
--------- --------- ---------
Net income (loss) $ .17 $ (.04) $ .53
========= ========= =========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
<CAPTION>
Common Stock Additional
------------------ Paid-in Retained Treasury
Shares Amount Capital Earnings Stock
------ ------ ------------------ --------
(In thousands, except number of shares)
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 199326,608,609$266 $61,991 $43,238 $ -
Net income for the year - - - 14,503 -
Issuance of common stock upon
exercise of options,
including income tax benefit
of $85 31,450 - 280 - -
Stock issued in conjunction
with acquisition 70,972 1 999 - -
Dividends declared - - - (1,474) -
Other - - - (5) -
--------------- -------- -------- -------
BALANCE, December 31, 199426,711,031 267 63,270 56,262 -
Net loss for the year - - - (966) -
Issuance of common stock
upon exercise ofoptions,
including income tax
benefit of $530 393,909 4 4,157 - -
Dividends declared - - - (739) -
Other - - - - -
---------------- -------- -------- -------
BALANCE, December 31, 199527,104,940 271 67,427 54,557 -
Net income for the year - - - 4,492 -
Issuance of common stock
upon exercise of options,
including income tax
benefit of $15 9,391 - 76 - -
Stock issued in conjunction
with litigation settlement 30,000 - 321 - -
Foreclosure of note
receivable from affiliates - - - - (3,269)
Other - - - - -
---------------- -------- -------- ---------
BALANCE, December 31, 199627,144,331$ 271 $67,824 $ 59,049 $ (3,269)
================ ======== ======== =========
See accompanying summary of accounting policies and notes to consolidated
financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
<CAPTION>
Cumulative
Foreign Unrealized Notes
Currency Holding Receivable Total
Translation Gains on From Stockholders'
Adjustments Investments Affiliates Equity
----------- ----------- ------------------------
(In thousands, except number of shares)
<S> <C> <C> <C> <C>
BALANCE, December 31, 1993 $(1,765) $ - $(3,624) $100,106
Net income for the year - - - 14,503
Issuance of common stock upon
exercise of options, including
income tax benefit of $85 - - - 280
Stock issued in conjunction with
acquisition - - - 1,000
Dividends declared - - - (1,474)
Other 32 438 - 465
-------- -------- -------- -----------
BALANCE, December 31, 1994 (1,733) 438 (3,624) 114,880
Net loss for the year - - - (966)
Issuance of common stock upon
exercise of options, including
income tax benefit of $530 - - - 4,161
Dividends declared - - - (739)
Other (88) (438) - (526)
------- --------- -------- -----------
BALANCE, December 31, 1995 (1,821) - (3,624) 116,810
Net income for the year - - - 4,492
Issuance of common stock upon
exercise of Options, including
income tax benefit of $15 - - - 76
Stock issued in conjunction with
litigation settlement - - - 321
Foreclosure of note receivable
from affiliates - - 3,624 355
Other 1,149 - - 1,149
---------- ---------- --------------------
BALANCE, December 31, 1996 $ (672) $ - $ - $ 123,203
========== ========== ====================
See accompanying summary of accounting policies and notes to consolidated
financial statements.
/TABLE
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
<CAPTION>
1996 1995 1994
------- ------- -------
(In thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations$ 4,492 $ (966) $15,667
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Minority interests in net income 377 1,275 1,280
Provision for unusual items 2,381 4,123 -
Depreciation and amortization 19,180 16,799 11,882
Miscellaneous 1,909 424 1,047
Deferred income taxes (279) (1,246) (271)
Equity in earnings of affiliated companies (441) (666) (570)
Changes in operating assets and liabilities,
net of effects of businesses purchased:
Receivables (8,217) (972) (17,472)
Inventories (15) (4,106) (2,211)
Prepaid expenses and miscellaneous 2,510 (4,084) (1,227)
Miscellaneous and other assets 609 123 (104)
Accounts payable and accruals 5,571 (3,795) 7,929
Income taxes 78 (5,268) 5,225
--------- --------- --------
Net cash provided by operating
activities 28,155 1,641 21,175
Net cash used by discontinued
operations - (500) (99)
--------- --------- --------
Net cash provided by operations 28,155 1,141 21,076
--------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (18,187) (16,497) (18,472)
Proceeds from (investments in) licensees
and affiliated companies (1,141) 445 407
Patents and patent application expenditures (1,772) (1,445) (811)
Purchases of businesses, net of cash acquired - (18,885) (9,379)
Proceeds on disposal of property and equipment 780 2,506 1,383
Other - (790) -
--------- --------- --------
Net cash used in investing activities (20,320) (34,666) (26,872)
--------- --------- --------
/TABLE
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
-------------------------------------------------
FOR THE YEARS ENDED DECEMBER 31
-------------------------------
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
(In thousands)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock $ 60 $ 3,631 $ 195
Proceeds from long-term debt 5,868 40,812 9,828
Principal payments on long-term debt (11,775) (9,439) (5,846)
Redemption of redeemable preferred stock - - (228)
Minority interests (562) (155) 239
Increase (decrease) in short-term borrowings 334 (7,293) 4,203
Dividends paid - (1,476) (1,474)
--------- --------- --------
Net cash provided (used) by financing
activities (6,075) 26,080 6,917
--------- --------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 300 191 60
--------- --------- --------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS FOR THE YEAR 2,060 (7,254) 1,181
CASH AND CASH EQUIVALENTS, beginning of year 11,416 18,670 17,489
--------- --------- --------
CASH AND CASH EQUIVALENTS, end of year $ 13,476 $ 11,416 $18,670
========= ========= ========
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION:
Interest (net of amount capitalized) $ 7,478 $ 6,165 $ 3,587
Income taxes 4,864 8,265 4,467
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Deferred consideration for intangible
assets acquired $ - $ 1,000 $ -
Additional paid-in capital increased by
reduction in income taxes payable for
tax benefit arising from exercise of
stock options 15 530 85
Deferred consideration for businesses acquired - 3,000 11,850
Common stock issued in connection with purchase
of business - - 1,000
Treasury stock acquired in connection with
foreclosure of director note receivable 3,624 - -
Tax benefit arising from foreclosure of
director note receivable 760 - -
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
SUMMARY OF ACCOUNTING POLICIES
------------------------------
Industry Information
Insituform Technologies, Inc. and subsidiaries (collectively, the
"Company" or "ITI") is a worldwide provider of proprietary
trenchless technologies for the rehabilitation and improvement of
sewer, water, gas and industrial pipes. In addition to the
Company's primary technology, the Insituform(R) Process, a "cured-
in-place" pipeline rehabilitation process, the Company also offers
the NuPipe(R) Process, a "fold and formed" technology, through
licensees or its subsidiaries. The Company sells the materials
used in these processes to many of its licensees. The Company is
the licensee in substantially all of North America for the
Paltem(R)-HL system of rehabilitating pressure pipes, and the
Company's Tite Liner(R) Process which is a method of lining oil
field, natural gas distribution and slurry lines with a corrosion
and abrasion resistant pipe. Through its Affholder, Inc.
subsidiary, the Company is engaged in trenchless tunneling used in
the installation of new underground services.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its majority-owned subsidiaries, including a 51% owned
United Kingdom subsidiary, Insituform Linings, Plc., a 60% owned
Chilean subsidiary, United Sistema de Tuberias, Ltda., a 55% owned
Mexican subsidiary, United Pipeline de Mexico, S.A., a 66% owned
French subsidiary, Insituform France, S.A. and a 57.5% owned
domestic partnership, Midsouth Partners. All material intercompany
balances, transactions and stockholdings are eliminated.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Business Acquisitions
The accounts and operations of businesses acquired in exchange for
common stock, and which were accounted for as poolings of
interests, are included in the financial statements as if they had
always been subsidiaries.
<PAGE>
<PAGE>
The net assets of businesses acquired and accounted for using the
purchase method of accounting are recorded at their fair values at
the acquisition dates, and the financial statements include their
operations only from those dates. Any excess of acquisition costs
over the fair value of net assets acquired is included in the
balance sheet as "Costs in excess of net assets of businesses
acquired."
Taxes on Income
The Company provides for estimated income taxes payable or
refundable on current year income tax returns as well as the
estimated future tax effects attributable to temporary differences
and carryforwards, based upon enacted tax laws and tax rates.
U.S. and foreign income taxes are not provided on undistributed
earnings of foreign subsidiaries where it is the Company's
intention to indefinitely reinvest such earnings in the
subsidiary's operations and not to transfer them in a taxable
transaction.
Foreign Currency Translation
Results of operations for foreign entities are translated using the
average exchange rates during the period. Assets and liabilities
are translated to U.S. dollars using the exchange rates in effect
at the balance sheet date, and the related translation adjustments
are reported as a separate component of stockholders' equity.
Cash and Cash Equivalents
The Company classifies highly liquid investments with maturities of
90 days or less as cash equivalents.
Investments
The Company has classified investments in equity securities that
have readily determinable fair values and all investments in debt
securities as available-for-sale. Such investments are reported
at fair value, with unrealized gains and losses excluded from
earnings and reported in a separate component of stockholders'
equity.
Investments in licensees and affiliated companies are carried on
the equity method if the Company's ownership interest is 20% or
greater, but not exceeding 50%. Intercompany profits and losses
are eliminated.
Inventories
Inventories are valued at the lower of cost (first-in, first-out)
or market. Maintenance and office supplies are not inventoried.
<PAGE>
<PAGE>
Property, Equipment, Depreciation and Amortization
Property and equipment are stated at cost. Depreciation and
amortization on property and equipment are computed using the
straight-line method over the following estimated useful lives:
Years
-----
Land improvements 15-20
Buildings and improvements 5-40
Machinery and equipment 4-10
Furniture and fixtures 3-10
Autos and trucks 3-10
For income tax purposes, depreciation and amortization are computed
using accelerated methods over the estimated useful lives.
Intangibles
The Company amortizes any excess of cost of businesses acquired
over the fair value of the net assets at dates of acquisition over
periods not in excess of 25 years on the straight-line basis.
Noncompete agreements are amortized on a straight-line basis over
the term of the applicable agreements.
Patent costs are amortized on a straight-line basis over the
statutory life, normally not exceeding 20 years. Existing patents
acquired are amortized in a similar manner. Certain of the
Company's patents related to the Insituform process have expired in
many countries, including the United States.
The Company's management continually evaluates the market coverage
and earnings capacity of its acquirees and its patented processes
to determine if the unamortized balances can be recovered from
their undiscounted future cash flows.
Royalty Revenues and License Fees
Royalty revenues are accrued as earned in accordance with the
provisions of the license agreements and are recorded based upon
reports submitted by the licensees. License fees are recognized as
revenues when all material services have been substantially
performed.
Construction and Installation Revenues
Construction and installation revenues are recognized using the
percentage-of-completion method. Contract costs include all direct
material and labor costs and those indirect costs related to
contract performance, such as indirect labor, supplies, tools and
equipment costs. Changes in estimated total contract costs are
recognized in the period they are determined. Where a contract
loss is forecast, the full amount of the anticipated loss is
recognized in the period the loss is determined.
<PAGE>
<PAGE>
Stock Options
During 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based
Compensation. As allowed under the provisions of SFAS No. 123, the
Company will continue to measure compensation cost for employee
stock-based compensation plans using the intrinsic value based
method of accounting prescribed by the Accounting Principles Board
("APB") Opinion No. 25, Accounting for Stock Issued to Employees.
As such, the Company will make pro forma disclosures (see Note 10)
of net income and earnings per share as if the fair value based
method of accounting had been applied. Thus, adoption had no
effect on the Company's financial position or results of
operations.
Stock options are typically granted to certain officers, directors,
and employees at the prevailing market price on the date of the
grant and, therefore, the Company generally makes no charge to
earnings with respect to these options. Proceeds from the sale of
common stock issued under these options are credited to common
stock and additional paid-in capital at the time the options are
exercised.
With respect to non-qualified stock options, the Company recognizes
a tax benefit upon exercise in an amount equal to the difference
between the exercise price and the fair market value of the common
stock. With respect to incentive stock options, tax benefits
arising from disqualifying dispositions are generally recognized at
the time of disposition. Tax benefits related to stock options are
credited to additional paid-in capital.
Retirement Plans
The Company and certain subsidiaries provide non-contributory
profit sharing/voluntary contributory 401(k) plans which cover
substantially all domestic employees. The Company's policy is to
annually fund the retirement plan costs accrued for that year.
Earnings Per Share
Earnings per share are computed on the basis of the weighted
average number of common and common equivalent shares outstanding
during each year and include the common and common equivalent
shares issued in acquisitions of businesses accounted for as a
pooling-of-interests as if such shares had been outstanding in all
periods.
<PAGE>
<PAGE>
Earnings per share has been computed using 27,112,846, 26,902,321
and 27,162,020 shares in 1996, 1995 and 1994, respectively. Common
stock equivalents were not considered in the 1995 calculation as
the effect would be anti-dilutive.
Reclassifications
Certain prior year amounts in the consolidated financial statements
have been reclassified to conform to the 1996 presentation.
New Accounting Standards
During 1996, the Company adopted SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of. This standard establishes new guidelines regarding
when impairment losses on long-lived assets, which include plant
and equipment and certain identifiable intangible assets and
goodwill, should be recognized and how impairment losses should be
measured. Adoption of this standard did not have a material effect
on the Company's financial position or results of operations.
<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
----------------
1. BUSINESS ACQUISITIONS:
---------------------
Insituform Mid-America, Inc.
On October 25, 1995, the Company completed the acquisition (the
"IMA Merger") of Insituform Mid-America, Inc. ("IMA") through the
merger into IMA of the Company's wholly-owned subsidiary, ITI
Acquisition Corp., as a result of which IMA became a wholly-owned
subsidiary of the Company. The Company issued an aggregate of
12,450,896 shares of common stock to all prior holders of IMA's
Class A common stock, subsequent to the conversion, in accordance
with its terms, of all shares of IMA Class B common stock into IMA
Class A common stock.
IMA, through its subsidiaries, utilizes various trenchless and
other technologies for rehabilitation, new construction and
improvement of pipeline systems, including sewers, gas lines,
industrial waste lines and oil fields, mining, and industrial
process pipelines, and as the Company's licensee in all or a
portion of 22 states, Puerto Rico and the U.S. Virgin Islands. The
work typically is performed under fixed-price contracts.
The IMA Merger has been accounted for using the pooling-of-
interests method of accounting and, accordingly, the accompanying
consolidated financial statements give retroactive effect to the
acquisition, as if the companies had always operated as a single
entity.
Costs related to the IMA Merger of approximately $6.48 million were
charged to expense, primarily during the fourth quarter of 1995.
(See Note 14 for information regarding the related impact on taxes
on income.) The Company also recorded a pre-tax charge of
approximately $8.06 million in the fourth quarter of 1995 for
restructuring costs, including the consolidation of corrosion and
abrasion protection operations under the Tite Liner process and the
abandonment of certain assets related to the Ultra Pipe Process
(approximately $2.6 million), the rationalization of certain
Canadian operations to one facility in Edmonton (approximately $0.5
million), the elimination of certain duplicative management
positions (approximately $0.8 million), the relocation of certain
domestic employees and functions ($1.7 million) and the termination
of construction on IMA's new manufacturing facility in
Chesterfield, Missouri ($1.8 million).<PAGE>
<PAGE>
1. BUSINESS ACQUISITIONS (Continued):
---------------------------------
In 1996, the Company recorded an additional $6.5 million in costs
related to the ongoing rationalization of contracting operations.
These costs consisted principally of the write-off of certain
assets of the Paltem product line ($3.6 million), charges related
to the disposition of excess facilities ($1.4 million), and costs
related to reorganization of the North American contracting
operations ($1.5 million).
The write-off of the Paltem product line includes $2.8 million of
manufacturing and installation equipment that related specifically
to the gas distribution main installation market, which the Company
has decided not to pursue. The Paltem product line may, however,
be used in other markets.
Combined and separate results of the Company and IMA are as follows
(in thousands):
<TABLE>
<CAPTION>
ITI IMA EliminationsCombined
--- --- --------------------
<S> <C> <C> <C> <C>
January 1, 1995 to October 25, 1995:
Revenues $141,381 $94,341 $(10,617) $225,105
Net income 6,312 4,142 - 10,454
Year ended December 31, 1994:
Revenues $148,247 $84,022 $ (9,098) $223,171
Net income 8,630 5,873 - 14,503
</TABLE>
During the three-year period ended December 31, 1996, the Company
also completed acquisitions of two of its domestic licensees, each
of which has been accounted for using the purchase method of
accounting, as follows:
Enviroq
On April 18, 1995, the Company acquired the pipeline rehabilitation
business of Enviroq Corporation ("Enviroq"), including Enviroq's
Insituform process business conducted by its Insituform Southeast,
Inc. subsidiary in Alabama, Florida, Georgia, North Carolina and
South Carolina, through the merger into Enviroq of a wholly-owned
subsidiary of the Company.
The base purchase price of $18,250,000 (including $3,000,000 in
payment of a five-year covenant not to compete) was paid
$15,250,000 in cash (see Note 8) and $3,000,000 in a five-year
subordinated promissory note. In March 1996, as a result of
demands for payment and ensuing litigation, the Company discharged
its obligation under such note and under arrangements to pay $1
million in consulting fees over five years, and settled such
litigation for the aggregate amount of $3.1 million and the release
of other claims.<PAGE>
<PAGE>
1. BUSINESS ACQUISITIONS (Continued):
---------------------------------
Prior to April 18, 1995, a 15% general partnership interest in
Midsouth Partners, an Insituform licensee in Tennessee, Kentucky
and northern Mississippi, was held by a subsidiary of the Company,
and a 42.5% interest therein was held by a subsidiary of Enviroq.
As a result of the Enviroq acquisition, the Company holds a
majority ownership (57.5%) in Midsouth Partners and has accordingly
consolidated the accounts of Midsouth Partners since April 18,
1995. In June 1996, the arbitration panel in proceedings
commenced by the remaining partner, a wholly-owned subsidiary of
Insituform East, Incorporated (a licensee of the Company),
determined that the Enviroq subsidiary but not the Company's
original subsidiary was in default of its obligations under the
Midsouth Partners partnership agreement and that, as a consequence
thereof, the remaining partner had the right unilaterally to
appoint a representative to the seven-member management committee
of the partnership, in place of a representative appointed by the
Enviroq subsidiary and in addition to the three members previously
appointed by the remaining partner.
Gelco Companies
On October 21, 1994, the Company acquired all of the outstanding
common stock of Gelco Services, Inc., Gelco NuPipe, Inc., GelTech
Constructors, Inc. and Mar-Tech Insituform Ltd. (the "Gelco
companies"), the Company's licensees of the Insituform and NuPipe
processes in Oregon, Washington, Idaho, Alaska, Hawaii, Guam,
northern California and northern Nevada, portions of Montana and
British Columbia. In addition, the Company acquired related assets
of an affiliated company. The purchase price of $18,000,000 was
paid $9,000,000 in cash, together with promissory notes aggregating
$9,000,000 due on the first and second anniversaries of the closing
date. In addition, the Company issued promissory notes aggregating
$2,850,000, representing net current liabilities (as defined) of
the acquired Gelco companies to related parties and a portion of
working capital at closing.
Except as otherwise described, these acquisitions were funded
primarily from the proceeds of the Company's prior existing credit
facility with SunTrust Bank, Nashville, N.A. ("SunTrust"), or loans
refinanced by such facility, and from working capital and the
issuance of subordinated and purchase-money debt.
Allocation of the purchase prices of these acquisitions is
summarized as follows (in thousands):
<PAGE>
<PAGE>
1. BUSINESS ACQUISITIONS (Continued):
---------------------------------
<TABLE>
<CAPTION)
Allocated
----------------------------------------------------
Cost in
Total Property excess of
purchase Working and Other net assets
price capital equipmentassets acquired
-------- ------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Enviroq $18,899 $3,934 $5,489 $4,938 $ 4,538
Year ended December 31, 1994:
Gelco Companies 21,613 2,209 3,003 1,349 15,052
</TABLE>
The following table presents summarized consolidated unaudited pro
forma results of operations for 1995 and 1994 as if the Enviroq
acquisition and the Gelco acquisition had occurred at the beginning
of 1994. These pro forma results are provided for comparative
purposes only and do not purport to be indicative of the results
which would have been obtained if these acquisitions had been
effected on the dates indicated or which may be obtained in the
future.
<TABLE>
<CAPTION>
Year ended December 31, (in thousands) 1995 1994
- -------------------------------------- ------- -------
<S> <C> <C>
Total revenues $282,742 $269,257
Income (loss) from continuing operations (1,709) 16,959
Income (loss) from continuing operations
per common and common equivalent share (.06) .62
</TABLE>
Other
During 1995, the Company also completed two smaller acquisitions.
On February 16, 1995, the Company acquired 66% of the common stock
of Insituform France, S.A., a newly formed subsidiary of its former
French licensee, for approximately $1,463,000. Additionally, on
November 30, 1995, the Company completed the acquisition of the UK-
based Formapipe Division of Water Flow Services Limited, for
$4,308,000.
<PAGE>
<PAGE>
2. RECEIVABLES:
-----------
Receivables consist of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Trade, less allowance for doubtful accounts
of $1,031 and $974 $52,030 $51,049
Retainage under construction contracts 12,456 11,395
Refundable income taxes 4,141 2,273
------- -------
$68,627 $64,717
======= =======
</TABLE>
Activity in the allowance for doubtful accounts is summarized as
follows for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Balance, at beginning of period$ 974 $ 637 $ 495
Charged to expense 289 657 575
Uncollected balances written off,
net of recoveries (232) (320) (433)
------- ------ ------
Balance, at end of period $1,031 $ 974 $ 637
======= ====== ======
</TABLE>
3. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
-----------------------------------------------------
Costs and estimated earnings on uncompleted contracts consist of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 105,109 $ 98,421
Estimated earnings 17,097 20,535
---------- ---------
122,206 118,956
Less billings to date (103,098) (105,488)
---------- ---------
$ 19,108 $ 13,468
========== =========
Included in the accompanying balance sheets
under the following captions:
Costs and estimated earnings in excess
of billings $ 20,127 $ 14,008
Billings in excess of costs and
estimated earnings on uncompleted contracts
(Note 9) (1,019) (540)
---------- ----------
$ 19,108 $ 13,468
========== ==========
</TABLE>
<PAGE>
4. INVENTORIES:
-----------
Inventories are summarized as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Raw materials $ 968 $ 1,451
Manufactured components 1,921 2,839
Work-in-process 1,289 1,053
Finished products 1,988 822
Construction materials 9,615 10,407
------- --------
$15,781 $ 16,572
======= ========
</TABLE>
5. PROPERTY AND EQUIPMENT:
----------------------
Property and equipment consists of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Land and land improvements $ 2,667 $ 3,474
Buildings and improvements 15,715 15,264
Machinery and equipment 77,608 64,980
Furniture and fixtures 8,796 7,967
Autos and trucks 2,647 3,685
Construction in progress 1,730 5,168
--------- ---------
109,163 100,538
Less accumulated depreciation (51,897) (40,765)
--------- ---------
$ 57,266 $ 59,773
========= =========
</TABLE>
6. INVESTMENTS IN LICENSEES AND AFFILIATED COMPANIES:
-------------------------------------------------
Investments in licensees and affiliated companies consist of the
following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
Insituform Rohrsanierungstechniken GmbH
(50% and 33%, respectively) $2,800 $ 982
KA-TE Insituform AG (50%) 161 398
N.V. K - Insituform S.A. (50%) 128 116
M&M Soltar, a Joint Venture (50%) 48 59
------ -------
$3,137 $ 1,555
====== =======
/TABLE
<PAGE>
<PAGE>
6. INVESTMENTS IN LICENSEES AND AFFILIATED COMPANIES (Continued):
-------------------------------------------------------------
In April 1996, the Company entered into arrangements whereby, in
exchange for payments in the approximate amount of $1.1 million, the
Company increased its share of the equity of Insituform
Rohrsanierungstechniken GmbH, its German licensee, from one-third to
one-half, effective January 1, 1996.
7. LINES OF CREDIT:
---------------
See Note 8 for a description of the Company's prior existing revolving
credit facility.
Insituform Technologies Limited (formerly Insituform Permaline Limited)
("ITL") has a line of credit and overdraft facility of pounds Sterling
700,000 (US$1,183,000) with National Westminister Bank Plc ("NatWest")
which bears interest at NatWest's base rate (6.0% at December 31, 1996)
plus 2.0% for borrowings up to pounds Sterling 450,000 and 3.0% for
those above pounds Sterling 450,000. The facility is available through
March 1997, and is secured by ITL's real property and the Company's
guarantee. At December 31, 1996 and 1995, respectively, pounds Sterling
473,000 (US$800,000) and pounds Sterling 398,000 (US$618,000) were
outstanding under this facility.
Insituform Japan KK ("Japan") also has a line of credit facility of
Yen 100,000,000 (US$871,000) with Fuji Bank which bears interest at
Fuji Bank's base rate and is available through December 1997. At
December 31, 1996 and 1995, Yen 0 and Yen 45,000,000 (US$435,000) were
outstanding under this facility, respectively.
Prior to October 1995, IMA had a line of credit facility which provided
for advances of up to $23 million for working capital purposes.
Interest on related borrowings was payable monthly, at the lesser of
the bank's prime lending rate or a rate tied to the London Interbank
Offered Rate ("LIBOR"). As of October 25, 1995, the facility was
terminated, and all outstanding principal (together with IMA's term
loan) was refinanced with SunTrust (see Note 8). Weighted average
borrowings for 1995 through October were approximately $7.6 million,
with maximum borrowings during the year of approximately $17.5 million.
<PAGE>
<PAGE>
8. LONG-TERM DEBT:
--------------
Long-term debt consists of the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995
------ -------
<S> <C> <C>
SunTrust facilities $76,275 $ 73,052
8.5% senior subordinated note,
payable in $1,000 installments 4,789 4,730
annually each July 1998 through
2001, with the entire remaining
balance due in July 2002 with
interest quarterly (net of
unamortized discount of $211 and $270)
Industrial revenue bond, payments 3,356 3,701
ranging from $85 to $170 through
January 2004, with interest at 90% of
prime (prime was 8.25% at December 31,
1996)
Industrial development bond, quarterly 921 1,020
principal payments ranging from $23 to
$51 through January 2003, with interest
at approximately 79% of prime (prime
was 8.25% at December 31, 1996)
Promissory notes retired October 1996, - 4,000
interest paid quarterly
Promissory notes payable to affiliates 1,425 2,850
of former shareholders of Gelco
companies, payable in two equal
installments in October 1996 and
1997, with interest payable quarterly
at lesser of prime or LIBOR + 2.75%
Subordinated promissory note, 6% - 3,000
interest payable semiannually, retired
in March 1996 (Note 1)
Other 2,348 2,541
-------- ---------
89,114 94,894
Less current maturities (6,730) (12,081)
-------- ---------
$82,384 $ 82,813
======== =========
</TABLE>
In July 1993, the Company obtained from SunTrust a credit facility
providing for advances up to $30 million, which was restated in June
1995 to aggregate up to $50 million. Pursuant to the June 1995
restatement of the facility, interest accrued at a rate selected by the
Company as either the bank's prime rate, plus a margin ranging up to
.25%, or 30-day adjusted LIBOR, plus a margin ranging from 1.75% to
2.25%. Initially, quarterly principal payments of $1,072,000 were
required, with an additional $339,000 to commence in September 1995
with maturity in June 2000. This facility was utilized to fund the
acquisition of the Gelco companies (see Note 1), as well as prior
acquisitions.
<PAGE>
<PAGE>
8. LONG-TERM DEBT (Continued):
--------------------------
In October 1995, the Company obtained a credit facility from SunTrust,
as agent, and a group of participating lenders which provided for
advances through October 1997 on a revolving basis aggregating up to
$105 million (including a $5.0 million standby letter of credit
facility). Of such amount, approximately $66.4 million was applied to
refinance existing debt under the Company's prior arrangements with
SunTrust (approximately $35.9 million), IMA's term loans ($14.5
million), and short-term debt under IMA's line of credit ($16.0
million) (see Note 7). Additional advances were available for the
expansion of the Company's business and for general corporate purposes.
Prior to its prepayment in February 1997, the SunTrust facility was due
to mature in October 2000, with installments based on a five-year
amortization schedule, commencing December 31, 1997. Interest on
indebtedness under the facility was payable at either (i) SunTrust's
prime rate (8.25% at December 31, 1996), plus a margin of up to .25% in
the event certain financial ratios were not maintained, or (ii) an
adjusted LIBOR rate (5.6% at December 31, 1996), plus a margin ranging
from 1.00% to 1.75%, depending on the maintenance of certain financial
ratios. Up to $5 million under the credit facility was available to be
borrowed from SunTrust pursuant to a "swing line facility," which
accrued interest at a rate per annum equal to 0.5% below SunTrust's
prime rate. Such facility obligated the Company to comply with certain
financial ratios and restrictive covenants that, among other things,
limited the ability of the Company and its subsidiaries to incur
indebtedness, pay dividends, make loans and encumber any properties,
and required guarantees of certain domestic subsidiaries. Essentially
all of the Company's retained earnings at December 31, 1996 were
restricted under such covenants.
In April 1995, in connection with the Enviroq acquisition, the Company
obtained a $15.25 million term loan payable $1.5 million per year with
the balance due in April 2002. This term loan was secured by first
mortgages on real estate and a pledge of the shares of certain U.S. and
Canadian subsidiaries, and was retired as part of the October 1995
refinancing discussed above.
Prior to its prepayment in February 1997, the 8.5% senior subordinated
note was subordinated in right to the Company's bank and other
institutional financing and to deferred consideration incurred in
connection with business acquisitions. As discussed in Note 10,
warrants to purchase 350,877 unregistered shares of Common Stock were
also issued to the lender. The note was prepayable at the Company's
option, at premiums until July 1998 ranging from 3% to 1% of the amount
prepaid. The subordinated note also restricted the Company's ability
to pay dividends and repurchase outstanding common stock.
<PAGE>
<PAGE>
8. LONG-TERM DEBT (Continued):
--------------------------
Prior to its prepayment in February 1997, the industrial revenue bond
was subject to call by the holder, an institutional purchaser, in 1999
or each year thereafter until maturity. Property and equipment with a
net book value of approximately $3,500,000 was pledged to collateralize
these bonds. These bonds also restricted the Company's ability to pay
dividends.
On February 14, 1997 the Company completed a $110 million private debt
offering of 7.88% Senior Notes due February 14, 2007 ("Senior Notes").
Interest is payable semi-annually in August and February of each year,
and each year, from February 2001 to February 2006, inclusive, the
Company is required to make principal repayments of $15,715,000,
together with an equivalent payment at maturity. The Senior Notes may
be prepaid at the Company's option, in whole or in part, at any time,
together with a make-whole premium, and upon specified change in
control events each holder has the right to require the Company to
purchase its Senior Note without any premium thereon. The agreements
pursuant to which the Senior Notes were acquired obligate the Company
to comply with certain financial ratios and restrictive covenants that,
among other things, place limitations on operations and sales of assets
by the Company or its subsidiaries, and limit the ability of the
Company to incur further secured indebtedness and liens and of
subsidiaries to incur indebtedness, and, in the event of default under
the Senior Notes, limit the ability of the Company to pay cash
dividends or make other distributions to the holders of its capital
stock or to redeem such stock. Such agreements also obligate the
Company's subsidiaries to provide guarantees to the holders of the
Senior Notes if guaranties are given by them to certain other lenders.
The transaction costs of $891,000 incurred in connection with the
private debt offering were recorded as deferred charges and will be
amortized over the life of the Senior Notes. The net proceeds were
used to repay existing indebtedness (approximately $85 million), as
discussed above, and for general corporate purposes.
After considering the issuance of the Senior Notes and the repayment of
existing indebtedness with the proceeds thereof, as discussed above,
principal payments required to be made for each of the next five years
and thereafter are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Years ending December 31, Amount
------------------------- ------
<S> <C>
1997 $ 2,537
1998 845
1999 595
2000 300
2001 15,929
After 2001 94,493
---------
$ 114,699
=========
/TABLE
<PAGE>
<PAGE>
9. ACCOUNTS PAYABLE AND ACCRUALS:
-----------------------------
Accounts payable and accruals consist of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Accounts payable - trade $17,108 $15,130
Compensation and profit sharing 6,759 4,185
Merger and restructuring 2,840 4,123
Accrual for pending litigation and claims 1,180 1,793
Bank overdrafts 3,369 545
Billings in excess of costs and earnings 1,019 540
Miscellaneous 8,303 9,328
------- -------
$40,578 $35,644
======= =======
</TABLE>
10. STOCKHOLDERS' EQUITY:
--------------------
In accordance with accounting for a pooling-of-interests, all prior
period stockholders' equity accounts have been restated to give effect
to the IMA Merger described in Note 1.
Stock Option Plan
Under the 1992 Employee Stock Option Plan and Director Stock Option
Plan (the "Plans"), the Company may grant options to its employees and
directors not to exceed 1,000,000 and 500,000 shares of common stock,
respectively. The Plans are administered by the Board of Directors,
which determines the timing of awards, individuals to be granted
awards, the number of options to be rewarded and the price, vesting
schedule and other conditions of the options. The exercise price of
each option typically equals the market price of the Company's stock on
the date of grant. Options generally vest over a five year period and
have an expiration date of up to 10 years after grant.
Prior to the IMA Merger, IMA had granted options to certain officers,
directors and employees to acquire IMA Class A common shares. In
connection with the IMA Merger, all outstanding IMA options as of the
date of the acquisition, became options to purchase that number of
shares of ITI Common Stock that would have been received had the
options been exercised prior to the IMA Merger. Dividends reflected in
the statements of stockholders' equity reflect those which had been
declared on the IMA common shares prior to the IMA Merger.
The Company applies APB Opinion No. 25, and related interpretations in
accounting for stock option grants. Accordingly, no compensation cost
has been recognized in the statements of operations for this stock
option plan. In accordance with SFAS No. 123, the Company has
estimated the fair value of each option grant using the Black-Scholes
option-pricing model. The following weighted average assumptions were
used for the grants in 1996 and 1995, respectively: expected
<PAGE>
<PAGE>
10. STOCKHOLDERS' EQUITY (Continued):
--------------------------------
volatility of 44% and 48%; risk-free interest rates of 6.1% and 6.2%;
expected lives of five years and no dividends. Had compensation cost
for the stock options granted been determined based on their fair value
at the grant dates, the Company's net income and earnings per share
would have been reduced to the pro forma amounts indicated below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
Net income (loss)
As reported $4,492 $ (966)
Pro forma 4,116 (1,015)
Earnings (loss) per share
As reported .17 (.04)
Pro forma .15 (.04)
</TABLE>
Based on the Black-Scholes option-pricing model the weighted average
fair value of options granted in 1996 was $3.84 for options granted at
the market price and $1.82 for options granted above market price. The
weighted average fair value of options granted in 1995 was $5.91, which
were granted at market price. The following table summarizes
information about options outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
-----------------------------------------------------
Weighted
Number Average Weighted Number Weighted
OutstandingRemainingAverage ExercisableAverage
at DecemberContractualExerciseDecember Exercise
Range of Exercise Price31, 1996Life Price 31, 1996 Price
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$2.61 to $9.79 537,989 4.8 years $ 7.40 305,065 $ 7.26
$11.09 to $16.25 660,609 4.2 years $13.15 427,687 $13.23
$19.25 to $25.00 83,601 1.0 years $22.91 83,601 $22.91
--------- -------
1,282,199 4.2 years $11.37 816,353 $11.99
========= =======
</TABLE>
<PAGE>
<PAGE>
10. STOCKHOLDERS' EQUITY (Continued):
--------------------------------
Changes in options outstanding are summarized as follows:
<TABLE>
<CAPTION>
Weighted
Average
Shares Option Price
------ ------------
<S> <C> <C>
Balance, December 31, 1993 1,759,091 $14.98
Granted 193,551 $13.33
Exercised (31,450) $ 5.66
Canceled (233,892) $16.08
----------
Balance, December 31, 1994 1,687,300 $14.80
Granted 398,210 $12.00
Exercised (393,909) $ 9.27
Canceled (292,666) $16.61
----------
Balance, December 31, 1995 1,398,935 $13.00
Granted 325,000 $ 9.14
Exercised (9,316) $ 7.92
Canceled (432,420) $15.02
----------
Balance, December 31, 1996 1,282,199 $11.37
==========
</TABLE>
At December 31, 1996, 2,329,089 shares of Common Stock were
reserved pursuant to stock option plans and warrants.
In July 1993, the Company issued to Hanseatic Corporation warrants
to purchase 350,877 unregistered shares of Common Stock in
connection with the issuance of subordinated debt (see Note 8).
The warrants are exercisable at $14.25 per share and expire on
July 26, 1998. Paul Biddelman, a director of the Company, is
Treasurer of Hanseatic.
11. RELATED PARTY TRANSACTIONS:
--------------------------
On July 3, 1992, Ringwood Limited ("Ringwood"), and Douglas K.
Chick and Brian Chandler, both directors of the Company, entered
into an agreement whereby Ringwood executed to the Company a
secured, non-recourse promissory note (the "Note") in the amount of
$3,624,000 which bore interest at Citibank's prime rate plus 2-
1/2%, was originally due July 3, 1995, and was secured by a pledge
(the "Pledge") to the Company by Ringwood and Messrs. Chick and
Chandler of 255,801 shares (the "Shares") of the Company's stock
beneficially owned by them.
<PAGE>
11. RELATED PARTY TRANSACTIONS (Continued):
--------------------------------------
On May 21, 1995, the Company extended the maturity date of the Note
to July 3, 1996 (the "Maturity Date"), and in December 1995 the
interest payment otherwise due in January 1996 was postponed to be
due on a date (the "Extension Date") no later than 30 days after
the date of first publication of the Company's operating results
covering at least a 30-day period after the consummation of the IMA
Merger. At the Extension Date, Ringwood had defaulted in the
payment to the Company of its interest payment postponed as
aforesaid, and on the Maturity Date had defaulted in payment of the
principal amount of the Note. Effective in August 1996, the
Company foreclosed on the Shares in full satisfaction of the
obligation of Ringwood and Messrs. Chick and Chandler under the
Note and the Pledge. The amount of the Note plus accrued interest
to the date of foreclosure has been recorded in treasury stock.
Krugman, Chapnick and Grimshaw provides legal services to the
Company. The Company paid Krugman, Chapnick and Grimshaw $815,000,
$1,766,000 and $755,000 in 1996, 1995 and 1994, respectively, for
legal services provided, together with reimbursement of out-of-
pocket expenses of $151,000, $248,000 and $162,000, respectively.
James D. Krugman, a partner at Krugman, Chapnick and Grimshaw, is
a director of the Company.
12. LICENSEES:
---------
The Company markets the Insituform Process and the NuPipe Process
in selected territories by utilization of licensees. The bulk of
the trenchless repair and rehabilitation services has historically
been performed for municipalities, and the Company expects this to
remain the largest part of the licensees' business for the
foreseeable future.
The Insituform Process license agreements require royalty payments
based upon 5% to 8% (generally 8% in the U.S.) of the gross
contract price, as defined, often with varying minimum annual
royalties.
In addition to an initial license fee, the NuPipe Process license
agreements require continuing royalty payments based upon 6.75% to
8% of the gross contract price, as defined.
The former stockholders of NuPipe, Inc. were entitled to receive
35% of the royalty income collected by the Company in connection
with NuPipe technology acquired by the Company in 1988. In March
1995, the Company exercised an option, granted in October 1994, to
acquire such parties' interest in such payments in exchange for
issuance of the Company's promissory notes aggregating $1,000,000.
The notes are payable in quarterly installments over three years
and bear interest at 5.4% per annum.
<PAGE>
<PAGE>
13. OTHER INCOME (EXPENSE):
----------------------
Other income (expense) is comprised of the following at December 31
(in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Investment income $1,059 $ 1,177 $ 959
Litigation settlement (Note 17) - (3,547) -
Casualty gain - 722 -
Miscellaneous 231 (79) 53
------ -------- -------
$1,290 $(1,727) $ 1,012
====== ======== =======
</TABLE>
14. TAXES ON INCOME:
---------------
Deferred federal income taxes are not provided on the unremitted
earnings of foreign subsidiaries since it has been the practice and
is the intention of the Company to continue to reinvest these
earnings in the business outside the United States. It is not
practicable to estimate the amount of the unrecognized deferred tax
liability on such earnings.
Net deferred tax assets consist of the following at December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
DEFERRED INCOME TAX ASSETS
Net operating loss carryforwards $ 5,527 $ 5,391
Foreign tax credit carryforwards 828 1,650
Accrued compensation 1,005 943
Inventory valuation 752 706
Accrual for pending litigation
and claims 356 660
Restructuring provision 2,580 1,675
Other 1,107 534
--------- ---------
Gross deferred income tax assets 12,155 11,559
Valuation allowance (3,056) (3,767)
--------- ---------
Total deferred income tax assets 9,099 7,792
--------- ---------
DEFERRED INCOME TAX LIABILITIES
Depreciation (4,219) (4,211)
Patent defense cost (905) -
Other (1,024) (909)
--------- ---------
Total deferred income tax liabilities (6,148) (5,120)
--------- ---------
Net deferred income tax assets $ 2,951 $ 2,672
========= =========
</TABLE>
<PAGE>
<PAGE>
14. TAXES ON INCOME (Continued):
---------------------------
The Company has recorded deferred tax assets of $2,951,000
reflecting the benefit of $5,527,000 in loss carryforwards and
$828,000 in foreign tax credit carryforwards. Realization is
dependent upon generating sufficient taxable income in the
applicable jurisdictions and, in some instances, prior to the
expiration of the carryforwards. Although realization is not
assured, management believes it is more likely than not that all of
the deferred tax assets will be realized. The amount of the
deferred tax asset considered realizable, however, could be reduced
in the near term if estimates of future taxable income during the
carryforward periods, as applicable are reduced.
Income (loss) from continuing operations before taxes on income is
as follows for the years ended December 31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Domestic $10,182 $1,897 $22,375
Foreign (769) 1,733 4,459
-------- ------ -------
Totals $ 9,413 $3,630 $26,834
======== ====== =======
</TABLE>
Provisions for taxes on income from continuing operations consist
of the following components for the years ended December 31 (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Current:
Federal $2,953 $1,225 $ 7,474
Foreign 1,708 2,154 1,715
State 735 827 1,270
------- ------- ---------
5,396 4,206 10,459
------- ------- ---------
Current tax benefit related to
exercise of stock options 15 530 85
------- ------- ---------
Deferred:
Federal 1,334 (622) (124)
Foreign (569) (54) 66
State (243) (73) (29)
Adjustments to beginning of year
valuation allowance (948) - -
-------- ------- ---------
(426) (749) (87)
-------- ------- ---------
Total taxes on income $ 4,985 $3,987 $ 10,457
======== ======= =========
/TABLE
<PAGE>
<PAGE>
14. TAXES ON INCOME (Continued):
---------------------------
A reconciliation between the U.S. federal statutory tax rate and
the effective tax rate follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Income taxes at U.S. federal
statutory tax rate 34.0% 34.0% 34.0%
Increase (decrease) in taxes
resulting from:
State income taxes, net of
federal income tax benefit 2.6 13.7 3.1
Tax amortization of intangibles(8.4) (21.5)(2.9)
Tax benefit not currently
recognizable on losses of
subsidiaries - 10.0 0.5
Merger costs capitalized for
tax purposes - 59.1 -
Goodwill amortization 8.2 18.3 2.0
Effect of foreign income taxed
at foreign rates 7.4 (4.4) (0.5)
Other 9.2 0.6 2.8
----- ----- -----
Total taxes on income 53.0% 109.8% 39.0%
===== ====== =====
</TABLE>
Subject to the future taxable income on certain of the Company's
subsidiaries, the Company has available tax operating loss
carryforwards as follows:
<TABLE>
<CAPTION>
Amount Expiration
Jurisdiction (in thousands) date
- ------------ -------------- ----------
<S> <C> <C>
United Kingdom $11,077 Indefinite
France 113 2001
Puerto Rico 1,779 2000-2003
U.S. State 11,967 2004-2010
U.S. Federal 3,726 1997-2011
</TABLE>
15. DISCONTINUED OPERATIONS:
------------------------
On December 30, 1993, the Company adopted a plan to discontinue the
operation of its division engaged in the off-site rehabilitation of
downhole tubulars for the oil and gas industry, yet was unable to
sell the business during 1994. As a result, the Company decided to
liquidate the division's assets, and during the fourth quarter of
1994, a provision of $1,164,000 (net of applicable income taxes of
$627,000) was made to write down the assets to their estimated
liquidation values and accrue the estimated costs of closing the
<PAGE>
operation. The division's revenue for the year ended December 31,
1994 was $1,137,000.
16. SEGMENT AND GEOGRAPHIC INFORMATION:
-----------------------------------
The Company's continuing operations include the following
reportable segments:
"Pipeline Technology" - includes licensing, selling and
servicing trenchless, on-site pipeline reconstruction
technology and products.
"Construction" - includes the installation of trenchless
pipeline reconstruction materials as well as nontrenchless
pipeline construction.
Operating profit (loss) by business segment and by geographic area
are defined as revenues less operating costs and expenses. Income
and expense not allocated to business segments or geographic areas
include investment income and corporate expenses.
Identifiable assets are those assets used exclusively in the
operations of each business segment or geographic area, or which
are allocated, when used jointly. Corporate assets are principally
comprised of cash equivalents and investments.
Financial information by industry segment is as follows at December
31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
PIPELINE TECHNOLOGY
Revenues:
Unaffiliated companies $ 21,735 $ 25,299 $ 29,439
Intersegment 51,420 45,582 36,993
-------- -------- --------
Total revenues 73,155 70,881 66,432
-------- -------- --------
Operating income 18,428 16,642 25,582
Identifiable assets 25,494 29,699 24,036
Capital expenditures 2,133 750 950
Depreciation and amortization 1,628 1,569 1,465
CONSTRUCTION
Revenues $268,198 $246,904 $193,732
Operating income 7,908 5,479 11,972
Identifiable assets 218,096 211,543 183,168
Capital expenditures 15,881 15,557 17,434
Depreciation and amortization 17,141 14,961 10,130
ELIMINATIONS AND CORPORATE ITEMS
Revenues $(51,420) $(45,582) $(36,993)
Operating loss (11,990) (10,371) (8,322)
Identifiable assets 24,354 19,058 20,423
Capital expenditures 173 190 88
Depreciation and amortization 411 269 287
</TABLE>
<PAGE>
16. SEGMENT AND GEOGRAPHIC INFORMATION (Continued):
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
CONSOLIDATED
Revenues $289,933 $272,203 $223,171
Operating income 14,346 11,750 29,232
Identifiable assets 267,944 260,300 227,627
Capital expenditures 18,187 16,497 18,472
Depreciation and amortization 19,180 16,799 11,882
</TABLE>
Financial information by geographic area is as follows at December
31 (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
UNITED STATES
Revenues:
Unaffiliated companies $220,848 $202,555 $160,378
Between geographic areas 43,986 40,243 32,740
-------- -------- --------
Total revenues 264,834 242,798 193,118
-------- -------- --------
Operating income 19,291 11,055 24,373
Identifiable assets 204,598 202,165 182,380
CANADA
Revenues:
Unaffiliated companies $ 16,955 $ 28,620 $ 27,304
Between geographic areas 1,305 1,617 1,190
-------- -------- --------
Total revenues 18,260 30,237 28,494
-------- -------- --------
Operating income 2,179 1,674 1,849
Identifiable assets 18,541 21,233 21,851
EUROPEAN COMMUNITY
Revenues:
Unaffiliated companies $ 32,934 $ 21,566 $ 18,014
Between geographic areas 4,516 2,325 2,636
-------- -------- --------
Total revenues 37,450 23,891 20,650
-------- -------- --------
Operating income 4,018 8,253 9,408
Identifiable assets 29,533 20,959 10,971
ASIA
Revenues:
Unaffiliated companies $ 7,137 $ 8,048 $ 6,182
Between geographic areas 1,613 1,256 427
-------- -------- --------
Total revenues 8,750 9,304 6,609
-------- -------- --------
</TABLE>
<PAGE>
16. SEGMENT AND GEOGRAPHIC INFORMATION (Continued):
----------------------------------------------
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Operating income $ 1,208 $ 440 $ 476
Identifiable assets 3,186 4,162 2,477
SOUTH AMERICA
Revenues:
Unaffiliated companies $ 9,805 $ 9,740 $ 11,252
Operating income (loss) (360) 786 1,739
Identifiable assets 6,969 4,806 5,071
OTHER
Revenues:
Unaffiliated companies $ 2,254 $ 1,674 $ 41
Between geographic areas - 141 -
-------- -------- --------
Total revenues 2,254 1,815 41
-------- -------- --------
Operating loss - (796) -
Identifiable assets - - -
ELIMINATIONS AND CORPORATE ITEMS
Revenues:
Between geographic areas $(51,420) $(45,582) $(36,993)
Operating loss (11,990) (9,662) (8,613)
Identifiable assets 5,117 6,975 4,877
CONSOLIDATED
Revenues $289,933 $272,203 $223,171
Operating income 14,346 11,750 29,232
Identifiable assets 267,944 260,300 227,627
</TABLE>
17. COMMITMENTS AND CONTINGENCIES:
-----------------------------
Leases
The Company leases a number of its administrative operations
facilities under noncancellable operating leases expiring at
various dates through 2020. In addition, the Company also leases
certain construction and automotive equipment on a multi-year,
monthly, or daily basis. Rent expense under all operating leases
for 1996, 1995 and 1994 was $8,837,000, $6,000,000 and $3,326,000,
respectively.
At December 31, 1996, the future minimum lease payments required
under the noncancellable operating leases were as follows (in
thousands):
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Year ending December 31, Minimum lease payments
------------------------ ----------------------
<S> <C>
1997 $3,164
1998 2,657
1999 1,639
2000 981
2001 509
After 2001 830
------
Total $9,780
======
</TABLE>
Employment Agreements
The Company and certain of its subsidiaries have employment
contracts with various officers with remaining terms ranging from
six months to three years at amounts approximating their current
levels of compensation. The companies' minimum aggregate
commitment at December 31, 1996 under such contracts was
approximately $1,929,000.
Litigation
On May 23, 1995, the Company, notwithstanding its belief that it
had defenses to plaintiff's claim that were well grounded in fact
and law, entered into a memorandum of understanding to settle the
previously disclosed stockholder class action against the Company
in the United States District Court for the Western District of
Tennessee alleging various misstatements and omissions, relating
to, among other things, acquisition and restructuring costs arising
from the acquisition of Insituform Group Limited in December 1992,
in public disclosures by the Company during the period from
October 28, 1992 to May 12, 1993 in violation of, among other
things, Rule 10b-5 under the Securities Exchange Act of 1934.
Under the settlement, the Company has made a cash payment to class
members in the amount of $3.2 million and (in January 1996) issued
to class members 30,000 shares of the Company's class A common
stock.
The Company is involved in certain additional litigation incidental
to the conduct of its business. In the Company's opinion, none of
these proceedings will have a material adverse effect on the
Company's financial position, results of operations and liquidity.
The financial statements include the estimated amounts of
liabilities that are likely to be incurred from these and various
other pending litigation and claims.
<PAGE>
<PAGE>
17. COMMITMENTS AND CONTINGENCIES (Continued):
-----------------------------------------
Retirement Plans
The Company maintains profit sharing/401(k) plans which cover
substantially all eligible domestic employees. Company profit
sharing contributions are discretionary. Under the terms of its
401(k) features, the plan also provides for the Company to
contribute 100% of the participating employee's contribution up to
3% of the employee's salary, and 50% of the next 2% of the
employee's salary. Certain recently acquired domestic subsidiaries
had continued to maintain their pre-existing profit sharing plans
during 1995 and 1996 until such time as their employees could be
added to the Company's plan. As of July 1, 1996, all non-union
employees had been added to the Company's plan. Total
contributions to the domestic plans were $2,447,000, $1,401,000 and
$815,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
In addition, certain foreign subsidiaries maintain various other
defined contribution retirement plans. Company contributions to
such plans for the years ended December 31, 1996, 1995 and 1994
were $107,000, $136,000 and $125,000, respectively.
Paltem License
Pursuant to a license agreement with Ashimori Industry Co., Ltd.,
the Company holds the exclusive rights to use the patents,
trademarks and know-how related to Ashimori products, including
Paltem-HL, for substantially all of North America. In connection
with the license, the Company paid Ashimori an initial licensee fee
of $100,000 and is required to remit ongoing royalties ranging from
5% to 7% of revenues from Paltem process installations.
Other
At December 31, 1996, $2,080,000 in stand-by letters of credit were
outstanding under the Company's SunTrust facility. The Company has
outstanding letter of credit commitments totaling $450,000 from
Texas Commerce Bank to its insurance carriers. Cash equivalents
totaling $464,000 are pledged to secure these commitments at
December 31, 1996. At December 31, 1996, the Company's U.K.
subsidiary had outstanding performance bonds aggregating Pound
Sterling 416,000 (US$712,000).
18. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS:
---------------------------------------------
For financial instruments bearing a variable interest rate, it is
presumed that recorded book values are reasonable estimates of fair
value. For all other financial instruments, the following methods
and assumptions are used to estimate fair values:
Cash and cash equivalents, receivables, accounts payable and
accrued expenses
<PAGE>
18. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued):
---------------------------------------------------------
Recorded book values are a reasonable estimate of fair value.
Long-term debt
Current market values for debt instruments with fixed interest
rates are estimated based on borrowing rates currently available to
the Company for loans with similar terms. At December 31, 1996 and
1995, the estimated fair value of debt instruments with fixed
interest rates was approximately $5.2 million and $7.7 million,
respectively, as compared with a carrying value of such instruments
of $5.3 million and $8.5 million, respectively.
The remaining assets and liabilities of the Company are not
considered financial instruments and have not been valued
differently than is customary under historical cost accounting.
19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
---------------------------------------------
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
------- ------- ------- ------
<S> <C> <C> <C> <C>
(In thousands, except per share data)
Year ended December 31, 1996:
Revenues $68,110 $71,769 $70,647 $79,407
Operating income (loss) 5,180 7,489 6,625 (4,948)(A)
Net income (loss) 2,250 3,830 3,416 (5,004)(A)
Earnings (loss) per share .08 .14 .13 (.19)
Year ended December 31, 1995:
Revenues $62,266 $69,621 $69,893 $70,423
Operating income (loss) 6,434 8,618 7,782 (11,084)(A)
Net income (loss) 3,420 2,143(B) 4,223 (10,752)(A)
Earnings (loss) per share .13 .08 .15 (.40)
</TABLE>
(A) See Note 1 for information relative to unusual charges
recorded in the fourth quarters of 1996 and 1995.
(B) See Notes 13 and 17 for information relative to the charge
recorded against second quarter 1995 income in connection with the
settlement of certain litigation.
<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2)
3.1 - Certificate of Incorporation of the
Company (Incorporated by reference to
Exhibit 4(iii) to the Registration
Statement Form S-8 No. 33-63953).
3.2 - By-Laws of the Company (Incorporated
by reference to Exhibit 3.2 to the
Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.1 - Agreement and Plan of Merger dated as of
May 23, 1995 among the Company, ITI
Acquisition Corp. and Insituform Mid-
America, Inc. (Incorporated by reference
to Exhibit 5(a) to Current Report on
Form 8-K dated May 23, 1995).
10.2 - Merger Agreement dated as of November 2,
1994 by and among Insituform Mid-America,
Inc., IMA Merger Sub, Inc., Enviroq
Corporation and New Enviroq Corporation
(Incorporated by reference to Exhibit 10(a)
to the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1995).
10.3 - Agreement of Purchase and Sale dated
as of October 21, 1994 among Gelco
Services, Inc., Gelco NuPipe, Inc.,
GelTech Constructors, Inc., Gelco
Corporation, Mar-Tech Insituform Ltd.
and the stockholders thereof, the
Company and GCO Acquisition Corp.
(Incorporated by reference to Exhibit
2(a) to the Current Report on Form 8-K
dated October 21, 1994), together with
Supplemental Agreement dated March 21,
1995 among the Company, GCO Acquisition
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
Corp., James D. Monaghan, Richard D. Beck,
as Trustee of The Richard D. Back Revocable
Trust, D. Robert Innis, J.R. Investments Co.,
and Pipe Recon Products Ltd. (Incorporated
by reference to Exhibit 10.11 to the
Annual Report on Form 10-K for the fiscal
year ended December 31, 1994).
10.4 - Agreement dated as of October 21, 1994,
among the Company, NuPipe, Inc., James
D. Monaghan, Richard D. Beck and Campbell
H. Steketee, Jr. (Incorporated by reference
to Exhibit 2(o) to the Current Report on
Form 8-K dated October 21, 1994).
10.5 - Amended and Restated License Agreement
dated as of September 9, 1994 among
Insituform Mid-America, Inc., Ashimori
Industry Co., Ltd. and Ashimori Inter-
national Limited. (Incorporated by refer-
ence to Exhibit 10.5 to the Annual Report
on Form 10-K for the fiscal year ended
December 31, 1996).
10.6 - Form of Note Purchase Agreements dated
as of February 14, 1997 among the Company
and, respectively, each of the lenders
listed therein.
10.7 - Credit Agreement dated October 25, 1995
among the Company, the lenders listed
therein and SunTrust Bank, Nashville,
National Association, as agent (In-
corporated by reference to Exhibit 5(a)
to the Current Report on Form 8-K dated
October 25, 1995), together with Re-
volving Credit Notes each dated October
25, 1995 executed by the Company to,
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
respectively, SunTrust Bank, Nashville,
National Association, The Boatmen's
National Bank of St. Louis, United
States Bank of Oregon, Harris Trust
and Savings Bank, Daiwa Bank, Limited
and Union Planters National Bank (In-
corporated by reference to Exhibit 5(b)
to the Current Report on Form 8-K dated
October 25, 1995), Swing Line Promissory
Note dated October 25, 1995 executed by
the Company to SunTrust Bank, Nashville,
National Association (Incorporated by
reference to Exhibit 5(c) to the Current
Report on Form 8-K dated October 25, 1995)
and Master Letter of Credit Demand Note
dated October 25, 1995 executed by the
Company to SunTrust Bank, Nashville,
National Association (Incorporated by
reference to Exhibit 5(d) to the Current
Report on Form 8-K dated October 25, 1995).
10.8 - Employment Agreement dated as of July
3, 1992 between the Company and James
D. Krugman (Incorporated by reference
to Exhibit 10.53 of Registration
Statement on Form S-4 No. 33-53772).
10.9 - Amendment dated November 18, 1996 to
Employment Agreement between the
Company and James D. Krugman.(3)
10.10 - Agreement dated October 25, 1995 between
the Company and Jerome Kalishman
(Incorporated by reference to Exhibit
2(b) to the Current Report on Form 8-K
dated October 25, 1995).(3)
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.
3 Management contract or compensatory plan or arrangement.<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.11 - Amendment dated November 18, 1996 to
Agreement between the Company and
Jerome Kalishman.(3)
10.12 - Consulting Agreement dated October 25,
1995 between the Company and Jerome
Kalishman (Incorporated by reference to
Exhibit 2(c) to the Current Report on
Form 8-K dated October 25, 1995).(3)
10.13 - Letter Agreement dated November 18, 1996
between the Company and Anthony W.
Hooper.(3)
10.14 - Employment Agreement dated October 25,
1995 between the Company and Robert
W. Affholder (Incorporated by reference
to Exhibit 2(d) to the Current Report
on Form 8-K dated October 25, 1995).(3)
10.15 - Employment Agreement dated December 17,
1993 between Insituform Mid-America, Inc.
and Franklin T. Driver (Incorporated by
reference to Exhibit 10.14 to the Annual
Report on Form 10-K for the fiscal year
ended December 31, 1995).(3)
10.16 - Registration Rights Agreement dated as
of October 19, 1992, among the Company,
Interstate Properties, and the Ringwood
Group consisting of Parkwood Limited,
as trustee of the Anthony Basmadjian
"P" Settlement, Barford, as trustee of
the Anthony Basmadjian Settlement,
Ringwood Limited, Brian Chandler and
Douglas K. Chick. (Incorporated by
reference to Exhibit 10.54 of Registra-
tion Statement on Form S-4 No. 33-53772).
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.
3 Management contract or compensatory plan or arrangement.<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.17 - Registration Rights Agreement dated as of
September 1, 1995 among the Company,
Xanadu Investments L.P. and Robert W.
Affholder (Incorporated by reference to
Exhibit 10.29 of Registration Statement
on Form S-4 No. 33-62677).
10.18 - Equipment Lease dated as of October 10,
1989 between A-Y-K-E Partnership and
Affholder, Inc. (Incorporated by reference
to Exhibit 10.20 to the Annual Report on
Form 10-K for the fiscal year ended
December 31, 1995).
10.19 - 1983 Stock Option Plan of the Company
(Incorporated by reference to Exhibit
10.48 to the Annual Report on Form 10-K
for the fiscal year ended December 31, 1991).(3)
10.20 - 1992 Employee Stock Option Plan of the
Company.
10.21 - 1992 Director Stock Option Plan of the
Company.
10.22 - INA Acquisition Corp. Stock Option Plan
(Incorporated by reference to Exhibit
10.58 to Registration Statement on Form
S-4 No. 33-53772).(3)
10.23 - Insituform Mid-America, Inc. Stock Option
Plan, as amended (Incorporated by reference
to Exhibit 4(i) to the Registration
Statement on Form S-8 No. 33-63953).(3)
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.
3 Management contract or compensatory plan or arrangement.
<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.24 - Form of Directors' Indemnification
Agreement (Incorporated by reference
to Exhibit 10.47 to the Annual Report
on Form 10-K for the fiscal year
ended December 31, 1988).(3)
21 - Subsidiaries of the Company.
23.1 - Consent of Arthur Andersen LLP.
23.2 - Consent of BDO Seidman, LLP.
- ------------------------
1 The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
2 Pursuant to Reg. Section 229.601, does not include certain
instruments with respect to long-term debt of the Company and
its consolidated subsidiaries not exceeding 10% of the total
assets of the Company and its subsidiaries on a consolidated
basis. The Company undertakes to furnish to the Securities and
Exchange Commission, upon request, a copy of all long-term
debt instruments not filed herewith.
3 Management contract or compensatory plan or arrangement.
<PAGE>
<PAGE>
INDEX TO EXHIBITS (Continued)
24 - Power of Attorney (See "Power of
Attorney" in the Annual Report on
Form 10-K).
27 - Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission
for information only and not filed.
Exhibit 10.6
Insituform Technologies, Inc.
$110,000,000
7.88% Senior Notes, Series A, Due February 14, 2007
______________
Note Purchase Agreement
_____________
Dated as of February 14, 1997
<PAGE>
<PAGE> Table of Contents
(Not a part of the Agreement)
Section Heading Page
- ------- ------- ----
Section 1. Authorization of Notes 1
Section 2. Sale and Purchase of Notes 1
Section 2.1. Series A Notes 1
Section 2.2. Additional Notes 2
Section 3. Closing 2
Section 4. Conditions to Closing 2
Section 4.1. Representations and Warranties 2
Section 4.2. Performance; No Default 3
Section 4.3. Compliance Certificates 3
Section 4.4. Opinions of Counsel 3
Section 4.5. Purchase Permitted By Applicable
Law, etc 3
Section 4.6. Sale of Other Notes 3
Section 4.7. Payment of Special Counsel Fees 4
Section 4.8. Private Placement Number 4
Section 4.9. Changes in Corporate Structure 4
Section 4.10. Repayment of Certain Indebtedness 4
Section 4.11. Proceedings and Documents 4
Section 5. Representations and Warranties
of the Company 4
Section 5.1. Organization; Power and Authority 4
Section 5.2. Authorization, etc 4
Section 5.3. Disclosure 5
Section 5.4. Organization and Ownership of Shares
of Subsidiaries; Affiliates 5
Section 5.5. Financial Statements 6
Section 5.6. Compliance with Laws, Other
Instruments, etc 6
Section 5.7. Governmental Authorizations, etc 7
Section 5.8. Litigation; Observance of Agreements,
Statutes and Orders 7
Section 5.9. Taxes 7
Section 5.10. Title to Property; Leases 8
Section 5.11. Licenses, Permits, etc 8
Section 5.12. Compliance with ERISA 8
Section 5.13. Private Offering by the Company 9
Section 5.14. Use of Proceeds; Margin Regulations 10
Section 5.15. Existing Indebtedness; Future Liens 10
Section 5.16. Foreign Assets Control Regulations,
etc 10
Section 5.17. Status under Certain Statutes 10
Section 5.18. Environmental Matters 10
Section 6. Representations of the Purchaser 11
Section 6.1. Purchase for Investment 11
Section 6.2. Source of Funds 11
Section 7. Information as to Company 13
Section 7.1. Financial and Business Information 13
Section 7.2. Officer's Certificate 16
Section 7.3. Inspection 16
Section 7.4. Reporting Treatment of Certain
Subsidiaries 17
Section 8. Prepayment of the Notes 17
<PAGE>
Section 8.1. Required Prepayments 17
Section 8.2. Optional Prepayments with Make-Whole
Amount 18
Section 8.3. Prepayment of Notes upon Change of
Control 18
Section 8.4. Allocation of Partial Prepayments 20
Section 8.5. Maturity; Surrender, etc 20
Section 8.6. Purchase of Notes 20
Section 8.7. Make-Whole Amount 20
Section 9. Affirmative Covenants 22
Section 9.1. Compliance with Law 22
Section 9.2. Insurance 22
Section 9.3. Maintenance of Properties 22
Section 9.4. Payment of Taxes and Claims 23
Section 9.5. Corporate Existence, etc 23
Section 9.6. Maintenance of Business 23
Section 9.7. Notes to Rank Pari Passu 23
Section 9.8. Guaranty by Subsidiaries 23
Section 10. Negative Covenants 25
Section 10.1. Consolidated Adjusted Net Worth 25
Section 10.2. Fixed Charges Coverage Ratio 25
Section 10.3. Consolidated Indebtedness Ratio 25
Section 10.4. Priority Debt 25
Section 10.5. Limitation on Liens 26
Section 10.6. Restricted Payments 29
Section 10.7. Mergers, Consolidations and Sales of
Assets 29
Section 10.8. Transactions with Affiliates 32
Section 11. Events of Default 32
Section 12. Remedies on Default, etc 34
Section 12.1. Acceleration 34
Section 12.2. Other Remedies 35
Section 12.3. Rescission 35
Section 12.4. No Waivers or Election of Remedies,
Expenses, etc 35
Section 13. Registration; Exchange; Substitution
of Notes 36
Section 13.1. Registration of Notes 36
Section 13.2. Transfer and Exchange of Notes 36
Section 13.3. Replacement of Notes 36
Section 14. Payments on Notes 37
Section 14.1. Place of Payment 37
Section 14.2. Home Office Payment 37
Section 15. Expenses, Etc 37
Section 15.1. Transaction Expenses 37
Section 15.2. Survival 38
Section 16. Survival of Representations and Warranties;
Entire Agreement 38
Section 17. Amendment and Waiver 38
Section 17.1. Requirements 38
Section 17.2. Solicitation of Holders of Notes 39
Section 17.3. Binding Effect, etc 39
Section 17.4. Notes Held by Company, etc 39
Section 18. Notices 40
Section 19. Reproduction of Documents 40
Section 20. Confidential Information 40
<PAGE>
Section 21. Substitution of Purchaser 41
Section 22. Miscellaneous 42
Section 22.1. Successors and Assigns 42
Section 22.2. Payments Due on Non-Business Days 42
Section 22.3. Severability 42
Section 22.4. Construction 42
Section 22.5. Counterparts 42
Section 22.6. Governing Law 42
Section 22.7. Submission to Jurisdiction 43
Signature 44
Schedule A - Information Relating To Purchasers
Schedule B - Defined Terms
Schedule 4.9 - Changes in Corporate Structure
Schedule 5.3 - Disclosure Materials
Schedule 5.4 - Subsidiaries of the Company and
Ownership of Subsidiary Stock
Schedule 5.5 - Financial Statements
Schedule 5.6 - Agreements to Be Terminated on Date of Closing
Schedule 5.8 - Certain Litigation
Schedule 5.11 - Patents, etc.
Schedule 5.14 - Use of Proceeds
Schedule 5.15 - Existing Indebtedness
Schedule 10.5 - Existing Liens
Exhibit 1 - Form of 7.88% Senior Note, Series A,
Due February 14, 2007
Exhibit 4.4(a) - Form of Opinion of Special Counsel for the Company
Exhibit 4.4(b) - Form of Opinion of Special Counsel for the
Purchasers
Exhibit 9.8(a) - Form of Subsidiary Guaranty
Exhibit 9.8(e) - Form of Intercreditor Agreement
<PAGE>
<PAGE> Insituform Technologies, Inc.
1770 Kirby Parkway, Suite 300
Memphis, Tennessee 38138
7.88% Senior Notes, Series A, Due February 14, 2007
Dated as of February 14, 1997
To the Purchaser listed in
the attached Schedule A
who is a signatory hereto:
Ladies and Gentlemen:
Insituform Technologies, Inc., a Delaware corporation (the
"Company"), agrees with you as follows:
Section 1. Authorization of Notes.
The Company will authorize the issue and sale of $110,000,000
aggregate principal amount of its 7.88% Senior Notes, Series A, due
February 14, 2007 (the "Notes", such term to include any such notes
issued in substitution therefor pursuant to Section 13 of this
Agreement or the Other Agreements (as hereinafter defined)). The
Notes shall be substantially in the form set out in Exhibit 1, with
such changes therefrom, if any, as may be approved by you and the
Company. Certain capitalized terms used in this Agreement are
defined in Schedule B; references to a "Schedule" or an "Exhibit"
are, unless otherwise specified, to a Schedule or an Exhibit
attached to this Agreement.
Section 2. Sale and Purchase of Notes.
Section 2.1 Series A Notes.
Subject to the terms and conditions of this Agreement, the
Company will issue and sell to you and you will purchase from the
Company, at the Closing provided for in Section 3, Series A Notes
in the principal amount specified opposite your name in Schedule A
at the purchase price of 100% of the principal amount thereof.
Contemporaneously with entering into this Agreement, the Company is
entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other
purchasers named in Schedule A (the "Other Purchasers"), providing
for the sale at such Closing to each of the Other Purchasers of
Series A Notes in the principal amount specified opposite its name
in Schedule A. Your obligation hereunder, and the obligations of
the Other Purchasers under the Other Agreements, are several and
not joint obligations, and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance
or nonperformance by any Other Purchaser thereunder.
Section 2.2. Additional Notes.
Subject to the terms and provisions hereof, the Company may,
from time to time in its sole discretion, issue and sell additional
unsecured promissory notes ranking pari passu with the Notes and
<PAGE>
may in its sole discretion, in connection with the documentation
thereof, incorporate by reference various provisions of this
Agreement or use the form of this Agreement as the basis for the
issuance of such additional notes. Such incorporation by reference
or use of the form of this Agreement shall not dilute or otherwise
affect the relative priority or other rights of the holders of the
Notes hereunder or in any way affect the percentages of these Notes
required to approve an amendment or effectuate a waiver under the
provisions of Section 17 or the percentages of these Notes required
to accelerate the Notes or rescind such an acceleration under the
provisions of Sections 12.1 or 12.3.
Section 3. Closing.
The sale and purchase of the Notes to be purchased by you and
the Other Purchasers shall occur at the offices of Chapman and
Cutler, 111 West Monroe Street, Chicago, Illinois 60603, at 10:00
a.m. Chicago time, at a closing (the "Closing") on February 14,
1997 or on such other Business Day thereafter on or prior to
February 28, 1997 as may be agreed upon by the Company and you and
the Other Purchasers. At the Closing the Company will deliver to
you the Notes to be purchased by you in the form of a single Note
(or such greater number of Notes in denominations of at least
$100,000 as you may request) dated the date of the Closing and
registered in your name (or in the name of your nominee), against
delivery by you to the Company or its order of immediately
available funds in the amount of the purchase price therefor by
wire transfer of immediately available funds for the account of the
Company to account number 670040002362252 at SunTrust Bank,
Nashville, N.A., 201 Fourth Avenue, North, Nashville, Tennessee
37219, A.B.A. No. 064000046 (Attention: Carol Yochem (901)
766-7561). If at the Closing the Company shall fail to tender such
Notes to you as provided above in this Section 3, or any of the
conditions specified in Section 4 shall not have been fulfilled to
your satisfaction, you shall, at your election, be relieved of all
further obligations under this Agreement, without thereby waiving
any rights you may have by reason of such failure or such
nonfulfillment.
Section 4. Conditions to Closing.
Your obligation to purchase and pay for the Notes to be sold
to you at the Closing is subject to the fulfillment to your
satisfaction, prior to or at the Closing, of the following
conditions:
Section 4.1. Representations and Warranties.
The representations and warranties of the Company in this
Agreement shall be correct when made and at the time of the
Closing.
Section 4.2. Performance; No Default.
The Company shall have performed and complied with all
agreements and conditions contained in this Agreement required to
<PAGE>
be performed or complied with by it prior to or at the Closing, and
after giving effect to the issue and sale of the Notes (and the
application of the proceeds thereof as contemplated by Schedule
5.14), no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have
entered into any transaction since the date of the Memorandum that
would have been prohibited by any covenant contained in any of
Sections 9.1 through 9.6 or Sections 10.4 through 10.8 hereof had
such Sections applied since such date.
Section 4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered
to you an Officer's Certificate, dated the date of the Closing,
certifying that the conditions specified in Sections 4.1, 4.2 and
4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have
delivered to you a certificate certifying as to the resolutions
attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and the
Agreements.
Section 4.4. Opinions of Counsel.
You shall have received opinions in form and substance
satisfactory to you, dated the date of the Closing (a) from
Krugman, Chapnick & Grimshaw, counsel for the Company, covering the
matters set forth in Exhibit 4.4(a) and covering such other matters
incident to the transactions contemplated hereby as you or your
counsel may reasonably request (and the Company hereby instructs
its counsel to deliver such opinion to you) and (b) from Chapman
and Cutler, your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.4(b)
and covering such other matters incident to such transactions as
you may reasonably request.
Section 4.5. Purchase Permitted By Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which
you are subject, without recourse to provisions (such as Section
1405(a)(8) of the New York Insurance Law) permitting limited
investments by insurance companies without restriction as to the
character of the particular investment, (b) not violate any
applicable law or regulation (including, without limitation,
Regulation G, T or X of the Board of Governors of the Federal
Reserve System) and (c) not subject you to any tax, penalty or
liability under or pursuant to any applicable law or regulation,
which law or regulation was not in effect on the date hereof. If
requested by you, you shall have received an Officer's Certificate
certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
<PAGE>
Section 4.6. Sale of Other Notes.
Contemporaneously with the Closing, the Company shall sell to
the Other Purchasers, and the Other Purchasers shall purchase, the
Notes to be purchased by them at the Closing as specified in
Schedule A.
Section 4.7. Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company
shall have paid on or before the Closing the fees, charges and
disbursements of your special counsel referred to in Section 4.4 to
the extent reflected in a statement of such counsel rendered to the
Company at least one Business Day prior to the Closing.
Section 4.8. Private Placement Number.
A Private Placement number issued by Standard & Poor's CUSIP
Service Bureau (in cooperation with the Securities Valuation Office
of the National Association of Insurance Commissioners) shall have
been obtained for the Notes.
Section 4.9. Changes in Corporate Structure.
Except as specified in Schedule 4.9, the Company shall not
have changed its jurisdiction of incorporation or been a party to
any merger or consolidation and shall not have succeeded to all or
any substantial part of the liabilities of any other entity, at any
time following the date of the most recent financial statements
referred to in Schedule 5.5.
Section 4.10. Repayment of Certain Indebtedness.
On the Closing Date, the Company shall have delivered to you
and your special counsel evidence of the discharge of the
agreements described in Schedule 5.6 and the concurrent release of
all related Guaranties in their entirety.
Section 4.11. Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement and all documents and
instruments incident to such transactions shall be satisfactory to
you and your special counsel, and you and your special counsel
shall have received all such counterpart originals or certified or
other copies of such documents as you or they may reasonably
request.
Section 5. Representations and Warranties of the Company.
The Company represents and warrants to you that:
Section 5.1. Organization; Power and Authority.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
<PAGE>
incorporation, and is duly qualified as a foreign corporation and
is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. The Company has the corporate power
and authority to own or hold under lease the properties it purports
to own or hold under lease, to transact the business it transacts
and proposes to transact, to execute and deliver this Agreement and
the Other Agreements and the Notes and to perform the provisions
hereof and thereof.
Section 5.2. Authorization, etc.
This Agreement, the Other Agreements and the Notes have been
duly authorized by all necessary corporate action on the part of
the Company, and this Agreement constitutes, and upon execution and
delivery thereof each Note will constitute, a legal, valid and
binding obligation of the Company enforceable against the Company
in accordance with its terms, except as such enforceability may be
limited by (a) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
Section 5.3. Disclosure.
The Company, through its agents, SPP Hambro & Co., LLC and The
Boatmen's National Bank of St. Louis, has delivered to you and each
Other Purchaser a copy of a Direct Placement Memorandum dated
December 1996 (including the exhibits thereto, the "Memorandum"),
relating to the transactions contemplated hereby. The Memorandum
fairly describes, in all material respects, the general nature of
the business and principal properties of the Company and its
Subsidiaries (before giving effect to the transactions contemplated
by this Agreement). Except as disclosed in Schedule 5.3, this
Agreement, the Memorandum, the documents, certificates or other
writings which were prepared by the Company and delivered to you by
or on behalf of the Company in connection with the transactions
contemplated hereby and the financial statements listed in Schedule
5.5, taken as a whole, do not contain any untrue statement of a
material fact or omit to state any material fact necessary to make
the statements therein not misleading in light of the circumstances
under which they were made. Except as disclosed in the Memorandum
or as disclosed in Schedule 5.3, or in one of the documents,
certificates or other writings identified therein, or in the
financial statements listed in Schedule 5.5, since December 31,
1995, there has been no change in the financial condition,
operations, business, properties or prospects of the Company or any
Subsidiary except changes that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect.
There is no fact known to the Company unique to the operation by
the Company and its Subsidiaries, taken as a whole, of their
business as currently conducted or proposed to be conducted that
could reasonably be expected to have a Material Adverse Effect that
<PAGE>
has not been set forth herein or in the Memorandum or in the other
documents, certificates and other writings delivered to you by or
on behalf of the Company specifically for use in connection with
the transactions contemplated hereby.
Section 5.4. Organization and Ownership of Shares
of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete
and correct lists (i) of the Company's Subsidiaries, showing, as to
each Subsidiary, the correct name thereof, the jurisdiction of its
organization, and the percentage of shares of each class of its
capital stock or similar equity interests outstanding owned by the
Company and each other Subsidiary (exclusive of directors'
qualifying shares), (ii) of the Company's Affiliates (excluding
directors and officers of Subsidiaries), other than Subsidiaries,
and (iii) of the Company's directors and executive officers.
(b) All of the outstanding shares of capital stock or similar
equity interests of each Subsidiary shown in Schedule 5.4 as being
owned by the Company and its Subsidiaries have been validly issued,
are fully paid and nonassessable and (other than directors'
qualifying shares) are owned by the Company or another Subsidiary
free and clear of any Lien (except as otherwise disclosed in
Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a
corporation or other legal entity duly organized, validly existing
and, with respect to the Subsidiaries which are incorporated, in
good standing under the laws of its jurisdiction of organization,
and is duly qualified as a foreign corporation or other legal
entity and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as
to which the failure to be so qualified or in good standing could
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect. Each such Subsidiary has the
corporate or other power and authority to own or hold under lease
the properties it purports to own or hold under lease and to
transact the business it transacts and proposes to transact.
(d) No Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than (i) this Agreement,
(ii) the agreements listed on Schedule 5.4 and (iii) customary
limitations imposed by corporate law statutes or, in the case of
Subsidiaries organized under any foreign jurisdiction, limitations
of general application imposed by such foreign jurisdictions)
restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the
Company or any of its Subsidiaries that owns outstanding shares of
capital stock or similar equity interests of such Subsidiary.
Section 5.5. Financial Statements.
The Company has delivered to each Purchaser copies of the
consolidated financial statements of the Company and its
Subsidiaries listed on Schedule 5.5. All of said financial
<PAGE>
statements (including in each case the related schedules and notes)
fairly present in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective
dates specified in such Schedule and the consolidated results of
their operations and cash flows for the respective periods so
specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set
forth in the notes thereto (subject, in the case of any interim
financial statements, to normal year-end adjustments).
Section 5.6. Compliance with Laws, Other Instruments, etc.
(a) The execution, delivery and performance by the Company of
this Agreement and the Notes will not, upon the application of the
proceeds from the sale of the Notes and the concurrent termination
and release of the agreements disclosed in Schedule 5.6, (i)
contravene, result in any breach of, or constitute a default under,
or result in the creation of any Lien in respect of any property of
the Company or any Subsidiary under, any indenture, mortgage, deed
of trust, loan, purchase or credit agreement, lease, corporate
charter or by-laws, or any other agreement or instrument to which
the Company or any Subsidiary is bound or by which the Company or
any Subsidiary or any of their respective properties may be bound
or affected, (ii) conflict with or result in a breach of any of the
terms, conditions or provisions of any order, judgment, decree, or
ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary or (iii) violate any
provision of any statute or other rule or regulation of any
Governmental Authority applicable to the Company or any Subsidiary,
other than any contravention, breach, default, creation, conflict
or violation under clauses (i) through (iii), inclusive, of this
Section 5.6(a) which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
(b) The Notes and all other obligations under this Agreement
of the Company are direct and unsecured obligations of the Company
ranking pari passu with all other existing unsecured Indebtedness
of the Company (actual or contingent) which is not expressed to be
subordinated or junior in rank to any other unsecured Indebtedness
of the Company.
Section 5.7. Governmental Authorizations, etc.
Based to the extent relevant upon the accuracy of your
representation set forth in Section 6.2, no consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the
execution, delivery or performance by the Company of this Agreement
or the Notes.
Section 5.8. Litigation; Observance of Agreements,
Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no
actions, suits or proceedings pending or, to the knowledge of the
Company, threatened against or affecting the Company or any
<PAGE>
Subsidiary or any property of the Company or any Subsidiary in any
court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default
under any term of any agreement or instrument to which it is a
party or by which it is bound, or any order, judgment, decree or
ruling of any court, arbitrator or Governmental Authority or is in
violation of any applicable law, ordinance, rule or regulation
(including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or
in the aggregate, could reasonably be expected to have a Material
Adverse Effect.
Section 5.9. Taxes.
The Company and its Subsidiaries have filed all tax returns
that are required to have been filed in any jurisdiction, and have
paid all taxes shown to be due and payable on such returns and all
other taxes and assessments levied upon them or their properties,
assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of
which is not individually or in the aggregate Material or (b) the
amount, applicability or validity of which is currently being
contested in good faith by appropriate proceedings and with respect
to which the Company or a Subsidiary, as the case may be, has
established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment which may be
imposed with respect to periods covered by such returns that could
reasonably be expected to have a Material Adverse Effect. The
charges, accruals and reserves on the books of the Company and its
Subsidiaries in respect of Federal, state or other taxes for all
fiscal periods are adequate in all material respects. The Federal
income tax liabilities of the Company and its Subsidiaries have
been determined by the Internal Revenue Service and paid for all
fiscal years up to and including the fiscal year ended December 31,
1992, except that the Company continues to carry forward net
operating losses from the fiscal years ended December 31, 1979
through December 31, 1985, and accordingly, such fiscal years
remain open with respect to, and only with respect to, such
carryforwards.
Section 5.10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient
title to their respective properties that individually or in the
aggregate are Material, including all such properties reflected in
the most recent audited balance sheet referred to in Section 5.5 or
purported to have been acquired by the Company or any Subsidiary
after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens
prohibited by this Agreement. All leases that individually or in
the aggregate are Material are valid and subsisting and are in full
force and effect in all material respects.
<PAGE>
Section 5.11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights,
service marks, trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without known
conflict with the rights of others, other than conflicts which,
individually or in the aggregate, could not reasonably be expected
to have a Material Adverse Effect;
(b) to the best knowledge of the Company, no product of the
Company or any of its Subsidiaries infringes in any Material
respect any license, permit, franchise, authorization, patent,
copyright, service mark, trademark, trade name or other right owned
by any other Person; and
(c) to the best knowledge of the Company, there is no
Material violation by any Person of any right of the Company or any
of its Subsidiaries with respect to any patent, copyright, service
mark, trademark, trade name or other right owned or used by the
Company or any of its Subsidiaries.
Section 5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws
except for such instances of noncompliance as have not resulted in
and could not reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any ERISA Affiliate has
incurred any liability pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in Section 3 of ERISA), and no event,
transaction or condition has occurred or exists that could
reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the
imposition of any Lien on any of the rights, properties or assets
of the Company or any ERISA Affiliate, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax provisions
or to Section 401(a)(29) or 412 of the Code, other than such
liabilities or Liens as would not be individually or in the
aggregate Material.
(b) The present value of the aggregate benefit liabilities
under each of the Plans (other than Multiemployer Plans),
determined as of the end of such Plan's most recently ended plan
year on the basis of the actuarial assumptions specified for
funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets
(including contributions with respect to such plan year made by the
due date under Section 404(a)(6) of the Code) of such Plan
allocable to such benefit liabilities. The terms "benefit
liabilities" has the meaning specified in section 4001 of ERISA and
the terms "current value" and "present value" have the meaning
specified in section 3 of ERISA.
<PAGE>
(c) The Company and its ERISA Affiliates have not incurred
any currently outstanding withdrawal liabilities (and are not
subject to contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multiemployer Plans that individually
or in the aggregate are Material.
(d) The expected post-retirement benefit obligation
(determined as of the last day of the Company's most recently ended
fiscal year in accordance with Financial Accounting Standards Board
Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code or Part
6 of Title I of ERISA) of the Company and its Subsidiaries is not
Material.
(e) The execution and delivery of this Agreement and the
issuance and sale of the Notes hereunder will not involve any
transaction that is subject to the prohibitions of section 406 of
ERISA or in connection with which a tax could be imposed pursuant
to section 4975(c)(1)(A)-(D) of the Code. The representation by the
Company in the first sentence of this Section 5.12(e) is made in
reliance upon and subject to the accuracy of your representation in
Section 6.2 as to the sources of the funds used to pay the purchase
price of the Notes to be purchased by you.
(f) Each Foreign Pension Plan has been maintained in
substantial compliance with its terms and with the requirements of
any and all applicable laws, statutes, rules, regulations and
orders and has been maintained, where required, in good standing
with applicable regulatory authorities; neither the Company nor any
Subsidiary has incurred any currently outstanding obligation in
connection with the termination of or withdrawal from any Foreign
Pension Plan; and, the present value of the accrued benefit
liabilities (whether or not vested) under each Foreign Pension
Plan, determined as of the end of the Company's most recently ended
fiscal year on the basis of actuarial assumptions, each of which is
reasonable, did not exceed the present value of the assets of such
Foreign Pension Plan allocable to such benefit liabilities. All
contributions required to be made with respect to a Foreign Pension
Plan have been timely made.
Section 5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has
offered the Notes or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any Person other
than you, the Other Purchasers and not more than 64 other
Institutional Investors, each of which has been offered the Notes
at a private sale for investment. Based to the extent relevant on
the accuracy of your representation set forth in Section 6.1,
neither the Company nor anyone acting on its behalf has taken, or
will take, any action that would subject the issuance or sale of
the Notes to the registration requirements of Section 5 of the
Securities Act.
<PAGE>
<PAGE>
Section 5.14. Use of Proceeds; Margin Regulations.
The Company will apply the proceeds of the sale of the Notes
as set forth in Schedule 5.14. Except as described in Schedule
5.14, no part of the proceeds from the sale of the Notes hereunder
will be used, directly or indirectly, for the purpose of buying or
carrying any margin stock within the meaning of Regulation G of the
Board of Governors of the Federal Reserve System (12 CFR 207); or
for the purpose of buying or carrying or trading in any securities
under such circumstances as to involve the Company in a violation
of Regulation X of said Board (12 CFR 224) or to involve any broker
or dealer in a violation of Regulation T of said Board (12 CFR
220). Margin stock does not constitute more than 1% of the value of
the consolidated assets of the Company and its Subsidiaries and the
Company does not have any present intention that margin stock will
constitute more than 10% of the value of such assets. As used in
this Section, the terms "margin stock" and "purpose of buying or
carrying" shall have the meanings assigned to them in said
Regulation G.
Section 5.15. Existing Indebtedness; Future Liens.
(a) Schedule 5.15 sets forth a complete and correct list of
all outstanding Indebtedness of the Company and its Subsidiaries as
of December 31, 1996, since which date there has been no Material
change in the amounts, interest rates, sinking funds, installment
payments or maturities of the Indebtedness of the Company or its
Subsidiaries (other than as contemplated in connection with the
Closing). Neither the Company nor any Subsidiary is in default and
no waiver of default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company or such
Subsidiary. No event or condition exists with respect to any
Indebtedness of the Company or any Subsidiary that would permit (or
that with notice or the lapse of time, or both, would permit) one
or more Persons to cause such Indebtedness to become due and
payable before its stated maturity or before its regularly
scheduled dates of payment, which event or condition could
reasonably be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary has agreed or
consented to cause or permit in the future (upon the happening of
a contingency or otherwise) any of its property, whether now owned
or hereafter acquired, to be subject to a Lien not permitted by
Section 10.5.
Section 5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its
use of the proceeds thereof will violate the Trading with the Enemy
Act, as amended, or any of the foreign assets control regulations
of the United States Treasury Department (31 CFR, Subtitle B,
Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
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Section 5.17. Status under Certain Statutes.
Neither the Company nor any Subsidiary is subject to
regulation under the Investment Company Act of 1940, as amended,
the Public Utility Holding Company Act of 1935, as amended, the
Interstate Commerce Act, as amended, or the Federal Power Act, as
amended.
Section 5.18. Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any
claim or has received any notice of any claim, and no proceeding
has been instituted raising any claim against the Company or any of
its Subsidiaries or any of their respective real properties now or
formerly owned, leased or operated by any of them or other assets,
alleging any damage to the environment or violation of any
Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.
Except as otherwise disclosed to you in writing:
(a) neither the Company nor any Subsidiary has knowledge of
any facts which would give rise to any claim, public or private, of
violation of Environmental Laws or damage to the environment
emanating from, occurring on or in any way related to real
properties now or formerly owned, leased or operated by any of them
or to other assets or their use, except, in each case, such as
could not reasonably be expected to result in a Material Adverse
Effect;
(b) neither the Company nor any of its Subsidiaries has
stored any Hazardous Materials on real properties now or formerly
owned, leased or operated by any of them or has disposed of any
Hazardous Materials in a manner contrary to any Environmental Laws
which storage or disposal could reasonably be expected to result in
a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or
operated by the Company or any of its Subsidiaries are in
compliance with applicable Environmental Laws, except where failure
to comply could not reasonably be expected to result in a Material
Adverse Effect.
Section 6. Representations of the Purchaser.
Section 6.1. Purchase for Investment.
You represent that you are purchasing the Notes for your own
account or for one or more separate accounts maintained by you or
for the account of one or more pension or trust funds and not with
a view to the distribution thereof; provided that the disposition
of your or their property shall at all times be within your or
their control. You understand that the Notes have not been
registered under the Securities Act and agree that the Notes may be
resold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available,
except under circumstances where neither such registration nor such
<PAGE>
an exemption is required by law, and that the Company is not
required to register the Notes.
Section 6.2. Source of Funds.
You represent that at least one of the following statements is
an accurate representation as to each source of funds (a "Source")
to be used by you to pay the purchase price of the Notes to be
purchased by you hereunder:
(a) if you are an insurance company, the Source is an
"insurance company general account" within the meaning of
Department of Labor Prohibited Transaction Exemption ("PTE") 95-60
(issued July 12, 1995) and there is no employee benefit plan,
treating as a single plan all plans maintained by the same employer
or employee organization, with respect to which the amount of the
general account reserves and liabilities for all contracts held by
or on behalf of such plan exceeds ten percent (10%) of the total
reserves and liabilities of such general account (exclusive of
separate account liabilities) plus surplus, as set forth in the
NAIC Annual Statement filed with your state of domicile; or
(b) if you are an insurance company, the Source does not
include assets allocated to any separate account maintained by you
in which any employee benefit plan (or its related trust) has any
interest, other than a separate account that is maintained solely
in connection with your fixed contractual obligations under which
the amounts payable, or credited, to such plan and to any
participant or beneficiary of such plan (including any annuitant)
are not affected in any manner by the investment performance of the
separate account; or
(c) the Source is either (i) an insurance company pooled
separate account, within the meaning of PTE 90-1 (issued January
29, 1990), or (ii) a bank collective investment fund, within the
meaning of the PTE 91-38 (issued July 12, 1991) and, except as you
have disclosed to the Company in writing pursuant to this paragraph
(c), no employee benefit plan or group of plans maintained by the
same employer or employee organization beneficially owns more than
10% of all assets allocated to such pooled separate account or
collective investment fund; or
(d) the Source constitutes assets of an "investment fund"
(within the meaning of Part V of the QPAM Exemption) managed by a
"qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit
plan's assets that are included in such investment fund, when
combined with the assets of all other employee benefit plans
established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by
such QPAM, exceed 20% of the total client assets managed by such
QPAM, the conditions of Part l(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a Person controlling or controlled
by the QPAM (applying the definition of "control" in Section V(e)
of the QPAM Exemption) owns a 5% or more interest in the Company
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and (i) the identity of such QPAM and (ii) the names of all
employee benefit plans whose assets are included in such investment
fund have been disclosed to the Company in writing pursuant to this
paragraph (d); or
(e) the Source is a governmental plan; or
(f) the Source is one or more employee benefit plans, or a
separate account or trust fund comprised of one or more employee
benefit plans, each of which has been identified to the Company in
writing pursuant to this paragraph (f); or
(g) the Source does not include assets of any employee
benefit plan, other than a plan exempt from the coverage of ERISA.
If you or any subsequent transferee of the Notes indicates
that you or such transferee are relying on any representation
contained in paragraph (c), (d) or (f) above, the Company shall
deliver on the date of Closing and on the date of any applicable
transfer a certificate, which shall either state that (i) it is
neither a party in interest nor a "disqualified person" (as defined
in Section 4975(e)(2) of the Code), with respect to any employee
benefit plan identified pursuant to paragraphs (c) or (f) above, or
(ii) with respect to any employee benefit plan, identified pursuant
to paragraph (d) above, neither it nor any "affiliate" (as defined
in Section V(c) of the QPAM Exemption) has at such time, and during
the immediately preceding one year, exercised the authority to
appoint or terminate said QPAM as manager of any plan identified in
writing pursuant to paragraph (d) above or to negotiate the terms
of said QPAM's management agreement on behalf of any such
identified plan. As used in this Section 6.2, the terms "employee
benefit plan", "governmental plan", "party in interest" and
"separate account" shall have the respective meanings assigned to
such terms in Section 3 of ERISA.
Section 7. Information as to Company.
Section 7.1. Financial and Business Information.
Subject to the provisions of Section 7.4, the Company shall
deliver to each holder of Notes that is an Institutional Investor:
(a) Quarterly Statements - within 60 days after the end of
each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of:
(i) a consolidated balance sheet of the Company and its
Subsidiaries as at the end of such quarter, and
(ii) consolidated statements of operations, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries for such quarter and (in the case of the second
and third quarters) for the portion of the fiscal year ending
with such quarter,
<PAGE>
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP applicable to
quarterly financial statements generally, and certified by a Senior
Financial Officer as fairly presenting, in all material respects,
the financial position of the companies being reported on and their
results of operations and cash flows, subject to changes resulting
from year-end adjustments; provided that delivery within the time
period specified above of copies of the Company's Quarterly Report
on Form 10-Q prepared in compliance with the requirements therefor
and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements - within 90 days after the end of each
fiscal year of the Company (unless the Company has timely filed a
Form 12b-25 with the SEC with respect to any fiscal year, in which
case the Company shall be required to deliver the following reports
within 105 days after the end of such fiscal year), duplicate
copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries, as at the end of such year, and
(ii) consolidated statements of operations, changes in
shareholders' equity and cash flows of the Company and its
Subsidiaries, for such year,
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in
accordance with GAAP, and accompanied
(A) by an opinion thereon of independent certified
public accountants of recognized national standing, which
opinion shall state that such financial statements present
fairly, in all material respects, the financial position of
the companies being reported upon and their results of
operations and cash flows and have been prepared in conformity
with GAAP, and that the examination of such accountants in
connection with such financial statements has been made in
accordance with generally accepted auditing standards, and
that such audit provides a reasonable basis for such opinion
in the circumstances, and
(B) a certificate of such accountants stating that they
have reviewed this Agreement and stating further whether, in
making their audit, they have become aware of any condition or
event that then constitutes a Default or an Event of Default,
and, if they are aware that any such condition or event then
exists, specifying the nature and period of the existence
thereof (it being understood that such accountants shall not
be liable, directly or indirectly, for any failure to obtain
knowledge of any Default or Event of Default unless such
accountants should have obtained knowledge thereof in making
an audit in accordance with generally accepted auditing
standards or did not make such an audit),
<PAGE>
provided that the delivery within the time period specified above
of the Company's Annual Report on Form 10-K for such fiscal year
(and delivery of the Company's annual report to shareholders, if
any, prepared pursuant to Rule 14a-3 under the Exchange Act,
delivered concurrently with the delivery of such annual report to
shareholders generally whether within or after the time period
prescribed above) prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission,
together with the accountant's certificate described in clause (B)
above, shall be deemed to satisfy the requirements of this Section
7.1(b);
(c) SEC and Other Reports - promptly upon their becoming
available, one copy of (i) each financial statement, report, notice
or proxy statement sent by the Company or any Subsidiary to public
securities holders generally, and (ii) each regular or periodic
report, each registration statement (without exhibits except as
expressly requested by such holder), other than a registration
statement on Form S-8 (or any successor form), and each prospectus
and all amendments thereto filed by the Company or any Subsidiary
with the Securities and Exchange Commission and (iii) all press
releases and other statements concerning developments that are
Material made available generally by the Company or any Subsidiary
to the public and made available by the Company or any Subsidiary
to shareholders generally or to any Institutional Investor;
(d) Notice of Default or Event of Default - promptly, and in
any event within five days after a Responsible Officer becoming
aware of the existence of any Default or Event of Default or that
any Person has given any notice or taken any action with respect to
a claimed default hereunder or that any Person has given any notice
or taken any action with respect to a claimed default of the type
referred to in Section 11(f), a written notice specifying the
nature and period of existence thereof and what action the Company
is taking or proposes to take with respect thereto;
(e) ERISA Matters - promptly, and in any event within five
days after a Responsible Officer becoming aware of any of the
following, a written notice setting forth the nature thereof and
the action, if any, that the Company or an ERISA Affiliate proposes
to take with respect thereto:
(i) with respect to any Plan, any reportable event, as
defined in section 4043(b) of ERISA and the regulations
thereunder, for which notice thereof has not been waived
pursuant to such regulations as in effect on the date hereof;
or
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings
under section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from
a Multiemployer Plan that such action has been taken by the
PBGC with respect to such Multiemployer Plan; or
<PAGE>
(iii) any event, transaction or condition that could
result in the incurrence of any liability by the Company or
any ERISA Affiliate pursuant to Title I or IV of ERISA or the
penalty or excise tax provisions of the Code relating to
employee benefit plans, or in the imposition of any Lien on
any of the rights, properties or assets of the Company or any
ERISA Affiliate pursuant to Title I or IV of ERISA or such
penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then
existing, could reasonably be expected to have a Material
Adverse Effect;
(f) Notices from Governmental Authority - promptly, and in
any event within 30 days of receipt thereof, copies of any notice
to the Company or any Subsidiary from any Federal or state
Governmental Authority relating to any order, ruling, statute or
other law or regulation that could reasonably be expected to have
a Material Adverse Effect;
(g) Notice of Proposed Change of Control - promptly following
knowledge by any Responsible Officer of any proposed Change of
Control which such officer believes in good faith will more likely
than not occur, a written notice setting forth in reasonable detail
the facts and circumstances giving rise to such proposed Change of
Control, including an estimate of the date on which such officer
believes the Change of Control will occur; and
(h) Requested Information - with reasonable promptness, such
other data and information relating to the business, operations,
affairs, financial condition, assets or properties of the Company
or any of its Subsidiaries or relating to the ability of the
Company to perform its obligations hereunder and under the Notes as
from time to time may be reasonably requested by any such holder of
Notes.
Section 7.2. Officer's Certificate.
Each set of financial statements delivered to a holder of
Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be
accompanied by a certificate of a Senior Financial Officer setting
forth:
(a) Covenant Compliance - the information (including
reasonably detailed calculations of covenants and amounts
representing pertinent defined terms) required in order to
establish whether the Company was in compliance with the
requirements of Section 10.1 through Section 10.7 hereof,
inclusive, during the quarterly or annual period covered by the
statements then being furnished (including with respect to each
such Section, where applicable, the calculations of the maximum or
minimum amount, ratio or percentage, as the case may be,
permissible under the terms of such Sections, and the calculation
of the amount, ratio or percentage then in existence); and
<PAGE>
<PAGE>
(b) Event of Default - a statement that such officer has
reviewed the relevant terms hereof and has made, or caused to be
made, under his or her supervision, a review of the transactions
and conditions of the Company and its Subsidiaries from the
beginning of the quarterly or annual period covered by the
statements then being furnished to the date of the certificate and
that such review shall not have disclosed the existence during such
period of any condition or event that constitutes a Default or an
Event of Default or, if any such condition or event existed or
exists (including, without limitation, any such event or condition
resulting from the failure of the Company or any Subsidiary to
comply with any Environmental Law), specifying the nature and
period of existence thereof and what action the Company shall have
taken or proposes to take with respect thereto.
Section 7.3. Inspection.
The Company shall permit the representatives of each holder of
Notes that is an Institutional Investor:
(a) No Default - if no Default or Event of Default then
exists, at the expense of such holder and upon reasonable prior
notice to the Company, to visit the principal executive office of
the Company, to discuss the affairs, finances and accounts of the
Company and its Subsidiaries with the Company's officers, and (with
the consent of the Company, which consent will not be unreasonably
withheld) its independent public accountants, and (with the consent
of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each
Subsidiary, all at such reasonable times and as often as may be
reasonably requested in writing; and
(b) Default - if a Default or Event of Default then exists,
at the expense of the Company and upon one Business Day prior
notice to the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to
make copies and extracts therefrom, and to discuss their respective
affairs, finances and accounts with their respective officers and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and
accounts of the Company and its Subsidiaries), all at such times
and as often as may be reasonably requested.
Section 7.4. Reporting Treatment of Certain Subsidiaries.
Notwithstanding anything to the contrary contained in this
Agreement, including without limitation the definition of
"Subsidiary" contained in Exhibit B, so long as Midsouth Partners
and Insituform Linings Plc each own less than 1.0% of Consolidated
Total Assets and contribute less than 1.0% of Consolidated Net
Earnings in any fiscal period, the Company shall be permitted to
include, for purposes of the financial reporting requirements
contained in Sections 7.1(a) and (b), and only for purposes of such
Sections, and in no event for purposes of determining compliance
with any of the covenants contained in Sections 9 or 10 hereof, the
<PAGE>
financial information of such entities on a consolidated basis. If
at any time either Midsouth Partners or Insituform Linings Plc
shall own 1.0% or more of Consolidated Total Assets or contribute
1.0% or more of Consolidated Net Earnings in any fiscal period and
not be a Subsidiary (as defined in Schedule B), the Company shall
either: (a) provide consolidating financial statements setting
forth separately the financial information for Midsouth or
Insituform Linings Plc, as the case may be, for such period, to-
gether with the financial information of such entity on a con-
solidated basis for purposes of the financial reporting require-
ments contained in Sections 7.1(a) and (b) and only for purposes of
such Sections (and in no event for purposes of determining
compliance with any of the covenants contained in Sections 9 and 10
hereof) or (b) exclude the financial information on a consolidated
basis for Midsouth Partners or Insituform Linings Plc, as the case
may be, from the consolidated financial statements required to be
delivered by the Company for such period pursuant to Sections
7.1(a) and (b) (and shall in no event include such financial
information for purposes of any determination of compliance with
any of the covenants contained in Sections 9 or 10 hereof).
Section 8. Prepayment of the Notes.
Section 8.1. Required Prepayments.
On February 14, 2001 and on each February 14 thereafter to and
including February 14, 2006 the Company will prepay $15,715,000
principal amount (or such lesser principal amount as shall then be
outstanding) of the Notes at par and without payment of the Make-
Whole Amount or any premium; provided that upon any partial prepay-
ment of the Notes pursuant to Section 8.2 or 8.3 or purchase of the
Notes permitted by Section 8.6, the principal amount of each re-
quired prepayment of the Notes becoming due under this Section 8.1
on and after the date of such prepayment or purchase shall be
reduced in the same proportion as the aggregate unpaid principal
amount of the Notes is reduced as a result of such prepayment or
purchase.
Section 8.2. Optional Prepayments with Make-Whole Amount.
The Company may, at its option, upon notice as provided below,
prepay at any time all, or from time to time any part, of the
Notes, in a minimum aggregate amount not less than $5,000,000 in
the case of a partial prepayment, or in amounts equal to any
prepayment made pursuant to the terms of Section 10.7(b)(iii)(C),
in each case, at 100% of the principal amount so prepaid, plus the
Make-Whole Amount determined for the prepayment date with respect
to such principal amount, together with interest accrued to the
date of prepayment. The Company will give each holder of Notes
written notice of each optional prepayment under this Section 8.2
not less than 30 days and not more than 60 days prior to the date
fixed for such prepayment. Each such notice shall specify such
date, the aggregate principal amount of the Notes to be prepaid on
such date, the principal amount of each Note held by such holder to
be prepaid (determined in accordance with Section 8.4), and the
interest to be paid on the prepayment date with respect to such
<PAGE>
principal amount being prepaid, and shall be accompanied by a
certificate of a Senior Financial Officer as to the estimated
Make-Whole Amount due in connection with such prepayment
(calculated as if the date of such notice were the date of the
prepayment), setting forth the details of such computation. Not
later than five Business Days prior to prepayment date specified in
such notice, the Company shall provide to the holders of the Notes
written notice (the "Calculation Notice") of the Make-Whole Amount
payable in connection with such prepayment of the Notes and,
whether or not a Make Whole Amount is payable, a reasonably
detailed calculation of the Make-Whole Amount. The calculations
with respect to the Make-Whole Amount shall in any event be subject
to the review and approval of the holders of the Notes and, in the
case of any disagreement among such holders and the Company with
respect to such calculations or method of computation thereof, the
conclusion of such holders shall, in the absence of manifest error,
be deemed, binding and conclusive. It is understood and agreed that
the failure of such holders to respond to such Calculation Notice
shall be deemed to be a concurrence by such holders to such
calculation. Two Business Days prior to such prepayment, the
Company shall deliver to each holder of Notes a certificate of a
Senior Financial Officer specifying the calculation of such
Make-Whole Amount as of the specified prepayment date.
Section 8.3. Prepayment of Notes upon Change of Control.
(a) In the event that any Responsible Officer has knowledge
of the occurrence of any Change of Control, the Company will give
written notice (the "Company Notice") of such fact in the manner
provided in Section 18 to each holder of the Notes. The Company
Notice shall be delivered promptly upon receipt of such knowledge
by the Company and in any event no later than five Business Days
following knowledge by such Responsible Officer thereof. The
Company Notice shall (i) describe the facts and circumstances of
such Change of Control in reasonable detail, (ii) make reference to
this Section 8.3 and the right of each holder of the Notes to
require prepayment of all, but not less than all, of such holder's
Notes on the terms and conditions provided for in this Section 8.3,
(iii) offer in writing to prepay the outstanding Notes together
with accrued interest to the date of prepayment, but without a
premium, and (iv) specify a date for such prepayment (the "Change
of Control Prepayment Date"), which Change of Control Prepayment
Date shall be not more than 30 days nor less than 20 days following
the date of such Company Notice. Each holder of the then
outstanding Notes shall have the right to accept such offer and
require prepayment of the Notes held by such holder in full by
written notice to the Company (a "Noteholder Notice") given not
later than 10 days after receipt of the Company Notice (the
"Noteholder Notice Period"). Subject to the provisions of the
immediately succeeding sentence, the failure by a holder of Notes
to accept or reject any offer to prepay made by the Company
pursuant to this Section 8.3 shall be deemed to constitute an
acceptance of such offer to prepay. Within 3 days following the
expiration of the Noteholder Notice Period, the Company shall
deliver by telecopy in the manner provided in Section 18 to each
holder of the Notes a second written notice (the "Secondary Company
<PAGE>
Notice") specifying the decision of each other holder of the Notes
to accept or reject the original offer of prepayment and offering
to prepay on the Change of Control Payment Date all, but not less
than all, of the Notes held by each holder which has rejected or
otherwise failed to respond to the offer contained in the initial
Company Notice, on the same terms as provided in the initial
Company Notice. Each holder of the then outstanding Notes which
rejected or otherwise failed to respond to (and is deemed to have
accepted) the Company's initial offer to prepay its Notes shall
have the right to accept or reject such secondary offer and, if
accepted, require prepayment of the Notes held by such holder in
full by written notice to the Company given not later than 3 days
after receipt of the Secondary Company Notice. The Company shall on
the Change of Control Prepayment Date prepay in full all of the
Notes held by holders which have so accepted such offer of
prepayment. The prepayment price of the Notes payable upon the
occurrence of any Change of Control shall be an amount equal to
100% of the outstanding principal amount of the Notes so to be
prepaid and accrued interest thereon to the date of such
prepayment, but without a premium.
(b)(i) Without limiting the foregoing, notwithstanding any
failure on the part of the Company to give the Company Notice
herein required as a result of the occurrence of a Change of
Control, each holder of the Notes shall have the right by delivery
of written notice to the Company to require the Company to prepay,
and the Company will prepay, such holder's Notes in full, together
with accrued interest thereon to the date of prepayment, but
without a premium. Notice of any required prepayment pursuant to
this Section 8.3(b)(i) shall be delivered by any holder of the
Notes which was entitled to, but did not receive, such Company
Notice to the Company after such holder has actual knowledge of
such Change of Control. On the date (the "Change of Control Delayed
Prepayment Date") designated in such holder's notice (which shall
be not more than 90 days nor less than 30 days following the date
of such holder's notice), the Company shall prepay in full all of
the Notes held by such holder, together with accrued interest
thereon to the date of prepayment, but without a premium. If the
holder of any Note gives any notice pursuant to this Section
8.3(b)(i), the Company shall give a Company Notice within three
Business Days of receipt of such notice and identify the Change of
Control Delayed Prepayment Date to all other holders of the Notes
and each of such other holders shall then and thereupon have the
right to accept the Company's offer to prepay the Notes held by
such holder in full and require prepayment of such Notes by
delivery of a Noteholder Notice within 20 days following receipt of
such Company Notice; provided only that any date for prepayment of
such holder's Notes shall be the Change of Control Delayed
Prepayment Date. On the Change of Control Delayed Prepayment Date,
the Company shall prepay in full the Notes of each holder thereof
which has accepted such offer of prepayment at a prepayment price
equal to 100% of the outstanding principal amount of the Notes so
to be prepaid and accrued interest thereon to the date of such
prepayment, but without a premium.
<PAGE>
(ii) Compliance with the provisions of this Section 8.3(b)
shall not be deemed to constitute a waiver of, or consent to, any
Default or Event of Default caused by any violation of the
provisions of Section 8.3(a).
Section 8.4. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Notes pursuant
to Section 8.1 or Section 8.2, the principal amount of the Notes to
be prepaid shall be allocated among all of the Notes at the time
outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof not theretofore called
for prepayment. All partial prepayments made pursuant to Section
8.3 shall be applied only to the Notes of the holders who have
elected to participate in such prepayment.
Section 8.5. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this
Section 8, the principal amount of each Note to be prepaid shall
mature and become due and payable on the date fixed for such
prepayment, together with interest on such principal amount accrued
to such date and the applicable Make-Whole Amount, if any. From and
after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the
interest and Make-Whole Amount, if any, as aforesaid, interest on
such principal amount shall cease to accrue. Any Note paid or
prepaid in full shall be surrendered to the Company and cancelled
and shall not be reissued, and no Note shall be issued in lieu of
any prepaid principal amount of any Note.
Section 8.6. Purchase of Notes.
The Company will not and will not permit any Affiliate
(excluding any Affiliate which is not controlled by the Company,
but including any Affiliate which is a member of the Senior
Management Group) to purchase, redeem, prepay or otherwise acquire,
directly or indirectly, any of the outstanding Notes except upon
the payment or prepayment of the Notes in accordance with the terms
of this Agreement and the Notes. The Company will promptly cancel
all Notes acquired by it or any Affiliate (excluding any Affiliate
which is not controlled by the Company, but including any Affiliate
which is a member of the Senior Management Group) pursuant to any
payment, prepayment or purchase of Notes pursuant to any provision
of this Agreement and no Notes may be issued in substitution or
exchange for any such Notes.
Section 8.7. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note,
an amount equal to the excess, if any, of the Discounted Value of
the Remaining Scheduled Payments with respect to the Called
Principal of such Note over the amount of such Called Principal;
provided that the Make-Whole Amount may in no event be less than
zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
<PAGE>
"Called Principal" means, with respect to any Note, the
principal of such Note that is to be prepaid pursuant to Section
8.2 or Section 10.7 or has become or is declared to be immediately
due and payable pursuant to Section 12.1, as the context requires.
"Discounted Value" means, with respect to the Called Principal
of any Note, the amount obtained by discounting all Remaining
Scheduled Payments with respect to such Called Principal from their
respective scheduled due dates to the Settlement Date with respect
to such Called Principal, in accordance with accepted financial
practice and at a discount factor (applied on the same periodic
basis as that on which interest on the Notes is payable) equal to
the Reinvestment Yield with respect to such Called Principal.
"Reinvestment Yield" means, with respect to the Called
Principal of any Note, .50% over the yield to maturity implied by
(a) the yields reported, as of 10:00 A.M. (New York City time) on
the second Business Day preceding the Settlement Date with respect
to such Called Principal, on the display designated as "Page USD"
on the Bloomberg Financial Markets Services Screen (or such other
display as may replace Page USD on Bloomberg Financial Markets
Services Screen) for actively traded U.S. Treasury securities
having a maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date, or (b) if such yields
are not reported as of such time or the yields reported as of such
time are not ascertainable, the Treasury Constant Maturity Series
Yields reported, for the latest day for which such yields have been
so reported as of the second Business Day preceding the Settlement
Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor
publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such
Called Principal as of such Settlement Date. Such implied yield
will be determined, if necessary, by (i) converting U.S. Treasury
bill quotations to bond-equivalent yields in accordance with
accepted financial practice and (ii) interpolating linearly between
(1) the actively traded U.S. Treasury security with the average
life closest to and greater than the Remaining Average Life and (2)
the actively traded U.S. Treasury security with the average life
closest to and less than the Remaining Average Life.
"Remaining Average Life" means, with respect to any Called
Principal, the number of years (calculated to the nearest
one-twelfth year) obtained by dividing (i) such Called Principal
into (ii) the sum of the products obtained by multiplying (a) the
principal component of each Remaining Scheduled Payment with
respect to such Called Principal by (b) the number of years
(calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal
and the scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the
Called Principal of any Note, all payments of such Called Principal
and interest thereon that would be due after the Settlement Date
with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date; provided that
<PAGE>
if such Settlement Date is not a date on which interest payments
are due to be made under the terms of the Notes, then the amount of
the next succeeding scheduled interest payment will be reduced by
the amount of interest accrued to such Settlement Date and required
to be paid on such Settlement Date pursuant to Section 8.2 or
Section 10.7 or Section 12.1.
"Settlement Date" means, with respect to the Called Principal
of any Note, the date on which such Called Principal is to be
prepaid pursuant to Section 8.2 or Section 10.7 or has become or is
declared to be immediately due and payable pursuant to Section
12.1, as the context requires.
Section 9. Affirmative Covenants;.
The Company covenants that so long as any of the Notes are
outstanding:
Section 9.1. Compliance with Law.
The Company will and will cause each of its Subsidiaries to
comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without
limitation, Environmental Laws and ERISA, and will obtain and
maintain in effect all licenses, certificates, permits, franchises
and other governmental authorizations necessary to the ownership of
their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that
non-compliance with such laws, ordinances or governmental rules or
regulations or failures to obtain or maintain in effect such
licenses, certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or, in
connection with any non-compliance with ERISA, could reasonably be
expected to result in any liability to a holder of any Note.
Section 9.2. Insurance.
The Company will and will cause each of its Subsidiaries to
maintain, with financially sound and reputable insurers, insurance
with respect to their respective properties and businesses against
such casualties and contingencies, of such types, on such terms and
in such amounts (including deductibles, co-insurance and
self-insurance, if adequate reserves are maintained with respect
thereto) as is customary in the case of entities of established
reputations engaged in the same or a similar business and similarly
situated.
Section 9.3. Maintenance of Properties.
The Company will and will cause each of its Subsidiaries to
maintain and keep, or cause to be maintained and kept, their
respective properties in good repair, working order and condition
(other than ordinary wear and tear), so that the business carried
on in connection therewith may be properly conducted at all times;
provided that this Section shall not prevent the Company or any
<PAGE>
Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is desirable in the
conduct of its business and the Company has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 9.4. Payment of Taxes and Claims.
The Company will and will cause each of its Subsidiaries to
file all tax returns required to be filed in any jurisdiction and
to pay and discharge all taxes shown to be due and payable on such
returns and all other taxes, assessments, governmental charges, or
levies imposed on them or any of their properties, assets, income
or franchises, to the extent such taxes and assessments have become
due and payable and before they have become delinquent and all
claims for which sums have become due and payable that have or
might become a Lien on properties or assets of the Company or any
Subsidiary; provided that neither the Company nor any Subsidiary
need pay any such tax or assessment or claims if (a) the amount,
applicability or validity thereof is contested by the Company or
such Subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Company or a Subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of
the Company or such Subsidiary or (b) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
Section 9.5. Corporate Existence, etc.
The Company will at all times preserve and keep in full force
and effect its corporate existence. Subject to Section 10.7(a)(i),
the Company will at all times preserve and keep in full force and
effect the corporate or other existence of each of its Subsidiaries
and all rights and franchises of the Company and its Subsidiaries
unless, in the good faith judgment of the Company, the termination
of or failure to preserve and keep in full force and effect such
right or franchise could not, individually or in the aggregate,
have a Material Adverse Effect.
Section 9.6. Maintenance of Business.
Neither the Company nor any Subsidiary will engage to any
substantial extent in any business other than the businesses in
which the Company and its Subsidiaries are engaged on the date of
this Agreement and as described in the Memorandum and businesses
reasonably related thereto or in furtherance thereof.
Section 9.7. Notes to Rank Pari Passu.
The Notes and all other obligations under this Agreement of
the Company are and at all times shall remain direct and unsecured
obligations of the Company ranking pari passu as against the assets
of the Company with all other Notes from time to time issued and
outstanding hereunder without any preference among themselves and
pari passu with all other present and future unsecured Indebtedness
(actual or contingent) of the Company which is not expressed to be
<PAGE>
subordinate or junior in rank to any other unsecured Indebtedness
of the Company.
Section 9.8. Guaranty by Subsidiaries.
The Company will cause each Subsidiary which delivers a
Guaranty to any Person with respect to Indebtedness of the Company
of the types described in clauses (a) through (e) of the definition
thereof to concurrently enter into a Subsidiary Guaranty, and
within three Business Days thereafter shall deliver to each of the
holders of the Notes the following items:
(a) an executed counterpart of such Subsidiary Guaranty
substantially in the form of Exhibit 9.8(a);
(b) a certificate signed by the President, a Vice President
or another authorized Responsible Officer of such Subsidiary making
representations and warranties to the effect of those contained in
Sections 5.1, 5.2, 5.6 and 5.7, but with respect to such Subsidiary
and such Subsidiary Guaranty, as applicable;
(c) such documents and evidence with respect to such
Subsidiary as any holder of the Notes may reasonably request in
order to establish the existence and good standing of such
Subsidiary and the authorization of the transactions contemplated
by such Subsidiary Guaranty;
(d) an opinion of counsel reasonably satisfactory to the
Required Holders to the effect that such Subsidiary Guaranty has
been duly authorized, executed and delivered and constitutes the
legal, valid and binding contract and agreement of such Subsidiary
enforceable in accordance with its terms, except as an enforcement
of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the
enforcement of creditors' rights generally and by general equitable
principles; and
(e) an executed counterpart of an intercreditor agreement
substantially in the form of Exhibit 9.8(e) among the holders of
the Notes and each such Person to which a Subsidiary is then
delivering a Guaranty giving rise to the requirements of this
Section 9.8, which agreement shall provide that the proceeds from
the enforcement of any such Guaranty shall be shared on an equal
and ratable basis with the holders of the Notes.
Notwithstanding the foregoing, it is understood and agreed that the
delivery of a Subsidiary Guaranty shall not be required under this
Section 9.8 as a result of
(w) the delivery by a Subsidiary of a Guaranty to any Person
in the ordinary course of business securing bids to obtain
construction contracts, or securing construction contracts or bonds
relating to work to be performed by the Company or any Subsidiary
or Joint Venture and not incurred or made in connection with the
incurrence of Indebtedness, the obtaining of advances or credit or
the payment of the deferred purchase of property, or
<PAGE>
(x) any liability (other than for borrowed money) in respect
of the obligations of a Joint Venture, or
(y) the Guaranties outstanding on the date of Closing, or
renewals or replacements thereof without increase in the maximum
principal amount as of the date of such renewal or replacement,
given by Insituform Holdings (UK) Limited of Indebtedness of
Rohrsanierungstechnik GmbH and its Subsidiaries to (1) Deutsche
Bank AG in an aggregate principal amount not exceeding DM6,000,000
and (2) the State of Thuringen in an aggregate principal amount not
exceeding DM600,000, or
(z) the delivery by a Wholly-owned Subsidiary of a Guaranty
to another Wholly-owned Subsidiary with respect to a third
Wholly-owned Subsidiary.
Section 10. Negative Covenants.
The Company covenants that so long as any of the Notes are
outstanding:
Section 10.1. Consolidated Adjusted Net Worth.
The Company will at all times keep and maintain Consolidated
Adjusted Net Worth at an amount not less than the sum of (a)
$100,000,000 plus (b) 50% of Consolidated Net Earnings computed on
a cumulative basis for each of the elapsed fiscal years ending
after December 31, 1996; provided that notwithstanding that
Consolidated Net Earnings for any such elapsed fiscal year may be
a deficit figure, no reduction as a result thereof shall be made on
the sum to be maintained pursuant hereto.
Section 10.2. Fixed Charges Coverage Ratio.
The Company will as at the end of each fiscal quarter keep and
maintain the ratio of Consolidated Cash Flow Available for Fixed
Charges for the four consecutive fiscal quarter period ending at
such date to Consolidated Fixed Charges for such four consecutive
fiscal quarter period at not less than 2.5 to 1.0.
Section 10.3. Consolidated Indebtedness Ratio.
The Company will not at any time permit the ratio of
Consolidated Total Indebtedness to Consolidated Total
Capitalization to exceed .55 to 1.00; provided that in connection
with any calculation of Indebtedness for purposes of determining
compliance with this Section 10.3, there shall be excluded all
Indebtedness of the Company and its Subsidiaries outstanding under
any revolving credit agreement between the Company and a committed
bank or banks if, during the 365-day period immediately preceding
the date of any such calculation of Indebtedness, there shall have
been a period of at least 60 consecutive days on each day of which
Indebtedness of the Company and its Subsidiaries outstanding under
such revolving credit agreement is equal to zero by virtue, and
solely by virtue, of such Indebtedness having been paid from
general corporate funds of the Company and not from funds borrowed
<PAGE>
by the Company or any Subsidiary pursuant to any other revolving
credit agreement for the purpose of paying such Indebtedness. If
there shall not have been such 60 consecutive day period on each
day of which such Indebtedness was equal to zero, then and in such
event there shall be included in such calculation of Indebtedness
for purposes of this Section 10.3 an amount equal to the average
aggregate amount of all Indebtedness outstanding under such
revolving credit agreement during such preceding 365-day period.
Section 10.4. Priority Debt.
The Company will not, and will not permit any Subsidiary to
create, issue, assume, guarantee or otherwise incur or in any
manner become liable in respect of any Priority Debt unless at the
time of creation, issuance, assumption, guarantee or incurrence
thereof and after giving effect thereto and to the application of
the proceeds thereof: (a) no Specified Default or Event of Default
would exist and (b) the aggregate amount of all Priority Debt would
not exceed 10% of Consolidated Adjusted Net Worth determined as of
the end of the immediately preceding fiscal quarter.
Any Person which becomes a Subsidiary after the date of this
Agreement, shall, for all purposes of this Section 10.4, be deemed
to have created, issued, assumed, guaranteed or incurred, at the
time it becomes a Subsidiary, all Priority Debt of such Person
existing immediately after it becomes a Subsidiary.
Section 10.5. Limitation on Liens.
The Company will not, and will not permit any Subsidiary to,
create or incur, or suffer to be incurred or to exist, any Lien on
its or their property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of
obligations in priority to the payment of its or their general
creditors, or acquire or agree to acquire, or permit any Subsidiary
to acquire, any property or assets upon conditional sales
agreements or other title retention devices (unless it concurrently
makes, or causes to be made, effective provision whereby the Notes
will be equally and ratably secured with any and all other
obligations thereby secured, such security to be pursuant to such
agreements reasonably satisfactory to the Required Holders
providing for such security (including an opinion of counsel to the
Company to the effect that the holders of the Notes are so equally
and ratably secured) and, in any such case, the Notes shall have
the benefit, to the fullest extent that, and with such priority as,
the holders of the Notes may be entitled under applicable law, of
an equitable Lien on such property), except:
(a) Liens for taxes and assessments or governmental charges
or levies; provided that payment thereof is not at the time
required by Section 9.4;
(b) Liens of or resulting from any attachment, judgment or
award, the time for the appeal or petition for rehearing of which
shall not have expired, or in respect of which the Company or a
<PAGE>
Subsidiary shall at any time in good faith and by appropriate
proceedings be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or
proceeding for review shall have been secured;
(c) Liens incidental to the conduct of business or the
ownership of properties and assets (including Liens in connection
with worker's compensation, unemployment insurance and other like
laws, warehousemen's and attorneys' and like liens and statutory
landlords' liens) and Liens to secure (or to obtain letters of
credit to secure) the performance of bids, tenders or purchase,
construction or trade contracts, or to secure statutory
obligations, surety, performance or appeal bonds or other Liens of
like general nature, in any such case incurred in the ordinary
course of business and not in connection with the borrowing of
money; provided that in each case: (i) the obligation secured is
not overdue or, if overdue, is being contested in good faith by
appropriate actions or proceedings, and (ii) such Lien would not
materially impair the use of such property in the operation of the
business of the Company and its Subsidiaries or the value of such
property for the purposes of such business;
(d) survey exceptions or encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and
other similar purposes, or zoning or other restrictions as to the
use of real properties, which are incidental to the conduct of the
activities of the Company and its Subsidiaries or which customarily
exist on properties of corporations engaged in similar activities
and similarly situated and which do not in any event materially
impair their use in the operation of the business of the Company
and its Subsidiaries or their value for the purposes of such
business;
(e) Liens securing Indebtedness of a Subsidiary to the
Company or to another Wholly-owned Subsidiary;
(f) Liens securing Indebtedness existing as of the date of
Closing and described on Schedule 10.5 hereto;
(g) Liens created or incurred after the date of Closing given
to secure the payment of, or to secure Indebtedness incurred or
assumed to pay all or any part of, the purchase price incurred in
connection with the acquisition or purchase of tangible property
(or any improvement thereon) or the cost of construction of
improvements to tangible property, in any such case, useful and
intended to be used in carrying on the business of the Company or
a Subsidiary; provided that in each such case: (i) the Lien shall
attach solely to the tangible property (or any improvement thereon)
acquired, purchased or constructed and, if required by the terms of
the instrument originally creating such Lien, other property which
is an improvement to or is acquired for specific use in connection
with such acquired or constructed property (or improvement thereon)
or which is real property being improved by such acquired or
constructed property (or improvement thereon), (ii) such Lien shall
have been created or incurred within 180 days of the date of
acquisition or purchase of, or the date of completion of
<PAGE>
construction of improvements to, such tangible property, as the
case may be, (iii) at the time of the imposition of such Lien, the
aggregate amount remaining unpaid on all Indebtedness secured by
such Lien (whether or not assumed by the Company or a Subsidiary)
shall not exceed an amount equal to the lesser of the total
acquisition or purchase price or cost of construction, as the case
may be, or the fair market value at the time of acquisition,
purchase or completion of construction, as the case may be (as
determined in good faith by the Board of Directors of the Company),
and (iv) at the time of creation, issuance, assumption, guarantee
or incurrence of the Indebtedness secured by such Lien and after
giving effect thereto and to the application of the proceeds
thereof, no Specified Default or Event of Default would exist;
(h) Liens created or incurred after the date of Closing given
to secure the payment of the purchase price incurred in connection
with the acquisition or purchase of intangible property, in any
such case, useful and intended to be used in carrying on the
business of the Company or a Subsidiary; provided that in each such
case: (i) the Lien shall attach solely to the intangible property
acquired or purchased, (ii) such Lien shall have been created or
incurred within 180 days of the date of acquisition or purchase of
such property, as the case may be, (iii) at the time of the
imposition of such Lien, the aggregate amount remaining unpaid on
all Indebtedness secured by such Lien (whether or not assumed by
the Company or a Subsidiary) shall not exceed an amount equal to
the lesser of the total acquisition or purchase price, as the case
may be, or the fair market value at the time of acquisition or
purchase, as the case may be (as determined in good faith by the
Board of Directors of the Company), and (iv) at the time of
creation, issuance, assumption, guarantee or incurrence of the
Indebtedness secured by such Lien and after giving effect thereto
and to the application of the proceeds thereof, no Specified
Default or Event of Default would exist;
(i) Liens on tangible property existing: (i) at the time of
acquisition thereof, whether or not the Indebtedness secured
thereby is assumed by the Company or any Subsidiary or (ii) on the
property of a Person at the time such Person is acquired or merged
into or consolidated with the Company or any Subsidiary or at the
time of a sale, lease or other disposition of the property or
outstanding shares or Indebtedness of the Person in its entirety to
the Company or any Subsidiary; provided that in each such case:
(i) the Lien shall attach solely to such tangible property and, if
required by the terms of the instrument originally creating such
Lien, other property which is an improvement to or is acquired for
specific use in connection with such acquired property, (ii) the
amount of Indebtedness secured by such Lien shall not exceed an
amount equal to the lesser of the acquisition or purchase price or
fair market value of such tangible property (as determined by good
faith by the Board of Directors of the Company), (iii) such Lien
shall not have been incurred in contemplation of the acquisition of
such property, and (iv) at the time of creation, issuance,
assumption, guarantee or incurrence of the Indebtedness secured by
such Lien and after giving effect thereto and to the application of
<PAGE>
the proceeds thereof, no Specified Default or Event of Default
would exist;
(j) Liens constituting limitations on the disposition or
transfer of the Company's or any Subsidiary's equity investment in
a Joint Venture (if such limitations are reciprocal) or a
Subsidiary inuring to the benefit of Persons owning equity in the
same Joint Venture or Subsidiary;
(k) any extension, renewal or refunding of any Lien permitted
by the preceding clause (f) of this Section 10.5 in respect of the
same property theretofore subject to such Lien in connection with
the extension, renewal or refunding of the Indebtedness secured
thereby; provided that: (i) such extension, renewal or refunding
of Indebtedness shall be without increase in the principal amount
remaining unpaid as of the date of such extension, renewal or
refunding, (ii) such Lien shall attach solely to the same such
property, and (iii) as of the date of such extension, renewal or
refunding and after giving effect thereto, no Specified Default or
Event of Default would exist; and
(l) Liens created or incurred after the date of Closing given
to secure Indebtedness of the Company or any Subsidiary in addition
to the Liens permitted by the preceding clauses (a) through (k)
hereof; provided that: (i) at the time of creation, issuance,
assumption, guarantee or incurrence of the Indebtedness secured by
any such Lien and after giving effect thereto and to the
application of the proceeds thereof, no Specified Default or Event
of Default would exist and (ii) all Indebtedness secured by such
Lien shall have been incurred within the limitations provided in
Section 10.4.
Section 10.6. Restricted Payments.
(a) The Company will not:
(1) declare or pay any dividends, either in cash or property,
on any shares of its capital stock of any class (except dividends
or other distributions payable solely in shares of common stock of
the Company),
(2) directly or indirectly, or through any Subsidiary or
through any Affiliate of the Company, purchase, redeem or retire
any shares of its capital stock of any class or any warrants,
rights or options to purchase or acquire any shares of its capital
stock (other than in exchange for or out of the net cash proceeds
to the Company from the substantially concurrent issue or sale of
shares of common stock of the Company or warrants, rights or
options to purchase or acquire any shares of its common stock), or
(3) make any other payment or distribution, either directly
or indirectly or through any Subsidiary, in respect of its capital
stock, (such declarations or payments of dividends, purchases,
redemptions or retirements of capital stock and warrants, rights or
options and all such other payments or distributions being herein
collectively called "Restricted Payments"), if: (i) immediately
<PAGE>
prior to the making of any Restricted Payment, a Specified Default
or Event of Default exists, (ii) immediately after giving effect to
the making of any Restricted Payment, a Specified Default or Event
of Default would exist, and (iii) immediately after giving effect
to the making of any Restricted Payment, the Company could not
incur at least $1.00 of additional Indebtedness pursuant to Section
10.3.
(b) The Company will not declare any dividend which
constitutes a Restricted Payment payable more than 60 days after
the date of declaration thereof.
Section 10.7. Mergers, Consolidations and Sales of Assets.
(a) The Company will not, and will not permit any Subsidiary
to, consolidate with or be a party to a merger with any other
Person, or sell, lease or otherwise dispose of all or substantially
all of its assets; provided that:
(i) any Subsidiary may merge or consolidate with or into
the Company or any Wholly-owned Subsidiary so long as in (1)
any merger or consolidation involving the Company, the Company
shall be the surviving or continuing corporation and (2) in
any merger or consolidation involving a Wholly-owned
Subsidiary (and not the Company), a Wholly-owned Subsidiary
shall be the surviving or continuing corporation; and
(ii) the Company may consolidate or merge with or into
any other corporation if (1) the corporation which results
from such consolidation or merger (the "surviving
corporation") is organized under the laws of any state of the
United States or the District of Columbia, (2) if the Company
is not the surviving corporation, the due and punctual payment
of the principal of and premium, if any, and interest on all
of the Notes, according to their tenor, and the due and
punctual performance and observation of all of the covenants
in the Notes and this Agreement to be performed or observed by
the Company are expressly assumed in writing by the surviving
corporation and the surviving corporation shall furnish to the
holders of the Notes an opinion of counsel reasonably
satisfactory to such holders to the effect that the instrument
of assumption has been duly authorized, executed and delivered
and constitutes the legal, valid and binding contract and
agreement of the surviving corporation enforceable in
accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable
principles, and (3) at the time of such consolidation or
merger and immediately after giving effect thereto: (A) no
Default or Event of Default would exist and (B) the surviving
corporation would be permitted by the provisions of Section
10.3 to incur at least $1.00 of additional Indebtedness.
<PAGE>
<PAGE>
(b) The Company will not, and will not permit any Subsidiary
to, sell, lease, transfer, abandon as obsolete or otherwise dispose
of assets (except assets sold, leased or otherwise disposed of in
the ordinary course of business for fair market value); provided
that the foregoing restrictions do not apply to:
(i) the sale, lease, transfer or other disposition of
assets of a Subsidiary to the Company or a Wholly-owned
Subsidiary or from the Company to a Wholly-owned Subsidiary;
or
(ii) the sale, transfer, abandonment or other disposition
of assets of the Company or a Subsidiary if in the opinion of
a Responsible Officer of the Company or such Subsidiary such
assets are obsolete, worn-out or without material economic
value to the business or operations of the Company or such
Subsidiary; or
(iii) the sale, lease, transfer or other disposition of
assets for cash or other property to a Person or Persons if
all of the following conditions are met:
(1) such assets (valued at net book value) do not,
together with all other assets of the Company and its
Subsidiaries previously disposed of during the period from the
date of this Agreement to and including the date of the sale
of such assets (other than in the ordinary course of business
or pursuant to clauses (i) or (ii) above), exceed 25% of
Consolidated Total Assets, determined as set forth in the
Company's most recently filed Form 10-K;
(2) in the opinion of a Responsible Officer of the
Company or such Subsidiary if the aggregate sale price of such
assets is $5,000,000 or less and the opinion of the Company's
Board of Directors if the aggregate sale price of such assets
is more than $5,000,000, the sale is for fair value and is in
the best interests of the Company or such Subsidiary; and
(3) immediately after the consummation of the
transaction and after giving effect thereto, no Specified
Default or Event of Default would exist;
(y) provided, however, that for purposes of the foregoing
calculation, there shall not be included any assets the net
proceeds of which were or are within twelve months of the date
of sale, lease, transfer or other disposition of such assets
either: (A) applied to the acquisition of property useful and
intended to be used in the operation of the business of the
Company and its Subsidiaries as described in Section 9.6
(provided that proceeds from the disposition of tangible
property shall be applied to the acquisition of tangible
property) and having a fair market value (as determined in
good faith by a Responsible Officer of the Company if the
aggregate purchase price of such assets is $5,000,000 or less
and in the opinion of the Company's Board of Directors if the
aggregate purchase price of such assets is more than
<PAGE>
$5,000,000) at least equal to that of the assets so disposed
of, or (B) committed to the acquisition of property useful and
intended to be used in the operation of the business of the
Company and its Subsidiaries as described in Section 9.6
(provided that proceeds from the disposition of tangible
property shall be committed to the acquisition of tangible
property) and having a fair market value (as determined in
good faith by a Responsible Officer of the Company if the
aggregate purchase price of such assets is $5,000,000 or less
and in the opinion of the Company's Board of Directors if the
aggregate purchase price of such assets is more than
$5,000,000) at least equal to the assets so disposed of
pursuant to a written agreement binding on the Company or the
relevant Subsidiary which provides for the consummation of the
acquisition of such property to be completed within 60 days
from the date of such agreement or (C) offered on a pro rata
basis towards the prepayment at any applicable prepayment
premium, of Senior Indebtedness of the Company and (z)
provided further that in no event will the Company or any of
its Subsidiaries transfer title to any patent to Insituform
Linings Plc or to Midsouth Partners.
In the event the Company shall offer to prepay Senior
Indebtedness pursuant to clause (C) above, the Company shall offer
pursuant to a written notice (the "Asset Disposition Prepayment
Notice") to apply on a pro rata basis the proceeds to which such
assets relate towards the prepayment of all outstanding Senior
Indebtedness of the Company (including, without limitation, the
Notes). Such Asset Disposition Prepayment Notice shall specify (A)
a date (the "Asset Disposition Prepayment Date"), which shall be
not less than 120 days nor more than 180 days following the date of
such Asset Disposition Prepayment Notice, on which the Company will
apply such proceeds to the prepayment on a pro rata basis of all of
the outstanding Senior Indebtedness of the Company held by any
Person which accepts such offer of prepayment and (B) a date, which
shall be not more than 60 days nor less than 30 days prior to such
Asset Disposition Prepayment Date, on which each holder of Senior
Indebtedness of the Company must accept or decline such offer of
prepayment. On such Asset Disposition Prepayment Date, the Company
shall apply the amount of such proceeds which has been agreed or
deemed to be agreed by holders of Senior Indebtedness of the
Company pursuant to any agreement pursuant to which any such Senior
Indebtedness is outstanding shall be applied to the prepayment of
Senior Indebtedness held by each holder thereof which has accepted
such initial offer of prepayment to the prepayment of Senior
Indebtedness as and to the extent herein contemplated. It is
understood and agreed by the Company and each holder of the Notes
by its acceptance thereof that any such holder may decline any such
offer of prepayment, that the failure of any such holder to accept
or decline any such offer of prepayment shall be deemed to be an
election by such holder to accept such prepayment and that if any
such offer is accepted, the proceeds so offered towards the
prepayment of the Notes and accepted shall be prepaid as and to the
extent provided in Section 8.2.
<PAGE>
<PAGE>
Section 10.8. Transactions with Affiliates.
The Company will not and will not permit any Subsidiary to
enter into directly or indirectly any Material transaction or
Material group of related transactions (including without
limitation the purchase, lease, sale or exchange of properties of
any kind or the rendering of any service) with any Affiliate (other
than the Company or another Wholly-owned Subsidiary), except in the
ordinary course and pursuant to the reasonable requirements of the
Company's or such Subsidiary's business and upon fair and
reasonable terms no less favorable to the Company or such
Subsidiary than would be obtainable in a comparable arm's-length
transaction with a Person not an Affiliate.
Section 11. Events of Default.
An "Event of Default" shall exist if any of the following
conditions or events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or
Make-Whole Amount, if any, on any Note when the same becomes due
and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise; or
(b) the Company defaults in the payment of any interest on
any Note for more than five Business Days after the same becomes
due and payable; or
(c) the Company defaults in the performance of or compliance
with any term contained in Sections 7.1(d), 9.8 or 10.1 through
10.8; or
(d) the Company defaults in the performance of or compliance
with any term contained herein (other than those referred to in
paragraphs (a), (b) and (c) of this Section 11) and such default is
not remedied within 30 days after the earlier of (i) a Responsible
Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of
a Note; or
(e) any representation or warranty made in writing by or on
behalf of the Company or by any officer of the Company in this
Agreement or in any writing furnished in connection with the
transactions contemplated hereby proves to have been false or
incorrect in any material respect on the date as of which made; or
(f) (i) the Company or any Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any
principal of or premium or make-whole amount or interest on any
Indebtedness that is outstanding in an aggregate principal amount
of at least $5,000,000 beyond any period of grace provided with
respect thereto, or (ii) the Company or any Subsidiary is in
default in the performance of or compliance with any term of any
evidence of any Indebtedness in an aggregate outstanding principal
amount of at least $5,000,000 or of any mortgage, indenture or
other agreement relating thereto or any other condition exists, and
<PAGE>
as a consequence of such default or condition such Indebtedness has
become, or has been declared, due and payable before its stated
maturity or before its regularly scheduled dates of payment, or
(iii) as a consequence of the occurrence or continuation of any
event or condition (other than the passage of time or the right of
the holder of Indebtedness to convert such Indebtedness into equity
interests), (x) the Company or any Subsidiary has become obligated
to purchase or repay Indebtedness before its regular maturity or
before its regularly scheduled dates of payment in an aggregate
outstanding principal amount of at least $5,000,000, or (y) in the
case of an event or condition described in clause (i) above, one or
more Persons have the right to require the Company or any
Subsidiary so to purchase or repay such Indebtedness; or
(g) Any Subsidiary Guaranty delivered pursuant to Section 9.8
hereof shall cease to be in full force and effect for any reason
whatsoever, including, without limitation, a determination by any
governmental body or court that such Subsidiary Guaranty is
invalid, void or unenforceable or such Subsidiary shall contest or
deny in writing the validity or enforceability of any of its
obligations under the Subsidiary Guaranty; or
(h) the Company or any Subsidiary (i) is generally not
paying, or admits in writing its inability to pay, its debts as
they become due, (ii) files, or consents by answer or otherwise to
the filing against it of, a petition for relief or reorganization
or arrangement or any other petition in bankruptcy, for liquidation
or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent
or to be liquidated, or (vi) takes corporate action for the purpose
of any of the foregoing; or
(i) a court or governmental authority of competent
jurisdiction enters an order appointing, without consent by the
Company or any of its Subsidiaries, a custodian, receiver, trustee
or other officer with similar powers with respect to it or with
respect to any substantial part of its property, or constituting an
order for relief or approving a petition for relief or
reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency
law of any jurisdiction, or ordering the dissolution, winding-up or
liquidation of the Company or any of its Subsidiaries, or any such
petition shall be filed against the Company or any of its
Subsidiaries and such petition shall not be dismissed within 60
days; or
(j) a final judgment or judgments for the payment of money
aggregating in excess of $3,000,000 are rendered against one or
more of the Company and its Subsidiaries and which judgments are
not, within 45 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 45 days after
the expiration of such stay; or
<PAGE>
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or
a waiver of such standards or extension of any amortization period
is sought or granted under section 412 of the Code, (ii) a notice
of intent to terminate any Plan shall have been or is reasonably
expected to be filed with the PBGC or the PBGC shall have
instituted proceedings under ERISA section 4042 to terminate or
appoint a trustee to administer any Plan or the PBGC shall have
notified the Company or any ERISA Affiliate that a Plan may become
a subject of any such proceedings, (iii) the aggregate "amount of
unfunded benefit liabilities" (within the meaning of section
4001(a)(18) of ERISA) under all Plans, determined in accordance
with Title IV of ERISA, shall exceed $1,000,000, (iv) the Company
or any ERISA Affiliate shall have incurred or is reasonably
expected to incur any liability pursuant to Title I or IV of ERISA
or the penalty or excise tax provisions of the Code relating to
employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan, or (vi) the Company or any
Subsidiary establishes or amends any employee welfare benefit plan
that provides post-employment welfare benefits in a manner that
would increase the liability of the Company or any Subsidiary
thereunder; and any such event or events described in clauses (i)
through (vi) above, either individually or together with any other
such event or events, could reasonably be expected to have a
Material Adverse Effect.
As used in Section 11(k), the terms "employee benefit plan"
and "employee welfare benefit plan" shall have the respective
meanings assigned to such terms in Section 3 of ERISA.
Section 12. Remedies on Default, etc.
Section 12.1. Acceleration.
(a) If an Event of Default with respect to the Company
described in paragraph (h) or (i) of Section 11 (other than an
Event of Default described in clause (i) of paragraph (h) or
described in clause (vi) of paragraph (h) by virtue of the fact
that such clause encompasses clause (i) of paragraph (h)) has
occurred, all the Notes then outstanding shall automatically become
immediately due and payable.
(b) If any other Event of Default has occurred and is
continuing, any holder or holders of more than 37% in principal
amount of the Notes at the time outstanding may at any time at its
or their option, by notice or notices to the Company, declare all
the Notes then outstanding to be immediately due and payable.
(c) If any Event of Default described in paragraph (a) or (b)
of Section 11 has occurred and is continuing, any holder or holders
of Notes at the time outstanding affected by such Event of Default
may at any time, at its or their option, by notice or notices to
the Company, declare all the Notes held by it or them to be
immediately due and payable.
<PAGE>
Upon any Note's becoming due and payable under this Section
12.1, whether automatically or by declaration, such Note will
forthwith mature and the entire unpaid principal amount of such
Note, plus (x) all accrued and unpaid interest thereon and (y) the
Make-Whole Amount determined in respect of such principal amount
(to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without
presentment, demand, protest or further notice, all of which are
hereby waived. The Company acknowledges, and the parties hereto
agree, that each holder of a Note has the right to maintain its
investment in the Notes free from repayment by the Company (except
as herein specifically provided for), and that the provision for
payment of a Make-Whole Amount by the Company in the event that the
Notes are prepaid or are accelerated as a result of an Event of
Default, is intended to provide compensation for the deprivation of
such right under such circumstances.
Section 12.2. Other Remedies.
If any Default or Event of Default has occurred and is
continuing, and irrespective of whether any Notes have become or
have been declared immediately due and payable under Section 12.1,
the holder of any Note at the time outstanding may proceed to
protect and enforce the rights of such holder by an action at law,
suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any
Note, or for an injunction against a violation of any of the terms
hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
Section 12.3. Rescission.
At any time after any Notes have been declared due and payable
pursuant to clause (b) or (c) of Section 12.1, the holders of not
less than 70% in principal amount of the Notes then outstanding, by
written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all
overdue interest on the Notes, all principal of and Make-Whole
Amount, if any, on any Notes that are due and payable and are
unpaid other than by reason of such declaration, and all interest
on such overdue principal and Make-Whole Amount, if any, and (to
the extent permitted by applicable law) any overdue interest in
respect of the Notes, at the Default Rate, (b) all Events of
Default and Defaults, other than non-payment of amounts that have
become due solely by reason of such declaration, have been cured or
have been waived pursuant to Section 17, and (c) no judgment or
decree has been entered for the payment of any monies due pursuant
hereto or to the Notes. No rescission and annulment under this
Section 12.3 will extend to or affect any subsequent Event of
Default or Default or impair any right consequent thereon.
Section 12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of
any Note in exercising any right, power or remedy shall operate as
a waiver thereof or otherwise prejudice such holder's rights,
<PAGE>
powers or remedies. No right, power or remedy conferred by this
Agreement or by any Note upon any holder thereof shall be exclusive
of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or
otherwise. Without limiting the obligations of the Company under
Section 15, the Company will pay to the holder of each Note on
demand such further amount as shall be sufficient to cover all
costs and expenses of such holder incurred in any enforcement or
collection under this Section 12, including, without limitation,
reasonable attorneys' fees, expenses and disbursements.
Section 13. Registration; Exchange; Substitution of Notes.
Section 13.1. Registration of Notes.
The Company shall keep at its principal executive office a
register for the registration and registration of transfers of
Notes. The name and address of each holder of one or more Notes,
each transfer thereof and the name and address of each transferee
of one or more Notes shall be registered in such register. Prior to
due presentment for registration of transfer, the Person in whose
name any Note shall be registered shall be deemed and treated as
the owner and holder thereof for all purposes hereof, and the
Company shall not be affected by any notice or knowledge to the
contrary. The Company shall give to any holder of a Note that is an
Institutional Investor promptly upon request therefor, a complete
and correct copy of the names and addresses of all registered
holders of Notes.
Section 13.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office
of the Company for registration of transfer or exchange (and in the
case of a surrender for registration of transfer, duly endorsed or
accompanied by a written instrument of transfer duly executed by
the registered holder of such Note or its attorney duly authorized
in writing and accompanied by the address for notices of each
transferee of such Note or part thereof), the Company shall execute
and deliver, at the Company's expense (except as provided below),
one or more new Notes (as requested by the holder thereof) in
exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note
shall be payable to such Person as such holder may request and
shall be substantially in the form of Exhibit 1. Each such new Note
shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of
the surrendered Note if no interest shall have been paid thereon.
The Company may require payment of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such
transfer of Notes. Notes shall not be transferred in denominations
of less than $1,000,000 (other than Notes held by the original
Purchasers); provided that if necessary to enable the registration
of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $1,000,000. Any transferee,
by its acceptance of a Note registered in its name (or the name of
<PAGE>
its nominee), shall be deemed to have made the representation set
forth in Section 6.2.
Section 13.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note (which evidence shall be, in
the case of an Institutional Investor, notice from such
Institutional Investor of such ownership and such loss, theft,
destruction or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (provided that if the holder of such
Note is, or is a nominee for, an original Purchaser or another
holder of a Note with a minimum net worth of at least $5,000,000,
such Person's own unsecured agreement of indemnity shall be deemed
to be satisfactory), or
(b) in the case of mutilation, upon surrender and
cancellation thereof,
the Company at its own expense shall execute and deliver, in lieu
thereof, a new Note, dated and bearing interest from the date to
which interest shall have been paid on such lost, stolen, destroyed
or mutilated Note or dated the date of such lost, stolen, destroyed
or mutilated Note if no interest shall have been paid thereon.
Section 14. Payments on Notes.
Section 14.1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole
Amount, if any, and interest becoming due and payable on the Notes
shall be made in Chicago, Illinois at the principal office of a
bank or trust company in such jurisdiction which the Company agrees
to designate at any time when there is any holder of any Note not
entitled to the benefits of Section 14.2.
Section 14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any
Note, and notwithstanding anything contained in Section 14.1 or in
such Note to the contrary, the Company will pay all sums becoming
due on such Note for principal, Make-Whole Amount, if any, and
interest by the method and at the address specified for such
purpose below your name in Schedule A, or by such other method or
at such other address as you shall have from time to time specified
to the Company in writing for such purpose, without the
presentation or surrender of such Note or the making of any
notation thereon, except that upon written request of the Company
made concurrently with or reasonably promptly after payment or
prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the
Company at its principal executive office or at the place of
payment most recently designated by the Company pursuant to Section
<PAGE>
14.1. Prior to any sale or other disposition of any Note held by
you or your nominee you will, at your election, either endorse
thereon the amount of principal paid thereon and the last date to
which interest has been paid thereon or surrender such Note to the
Company in exchange for a new Note or Notes pursuant to Section
13.2. The Company will afford the benefits of this Section 14.2 to
any Institutional Investor that is the direct or indirect
transferee of any Note purchased by you under this Agreement and
that has made the same agreement relating to such Note as you have
made in this Section 14.2.
Section 15. Expenses, Etc.
Section 15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including
reasonable attorneys' fees of a special counsel and, if reasonably
required, local or other counsel) incurred by you and each Other
Purchaser or holder of a Note in connection with such transactions
and in connection with any amendments, waivers or consents under or
in respect of this Agreement or the Notes (whether or not such
amendment, waiver or consent becomes effective) or the delivery of
any Subsidiary Guaranty, including, without limitation: (a) the
costs and expenses incurred in enforcing or defending (or
determining whether or how to enforce or defend) any rights under
this Agreement, any Subsidiary Guaranty or the Notes or in
responding to any subpoena or other legal process or informal
investigative demand issued in connection with this Agreement, any
Subsidiary Guaranty or the Notes, or by reason of being a holder of
any Note, and (b) the costs and expenses, including financial
advisors' fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with
any work-out or restructuring of the transactions contemplated
hereby and by the Notes. The Company will pay, and will save you
and each other holder of a Note harmless from, all claims in
respect of any fees, costs or expenses, if any, of brokers and
finders (other than those retained by you).
Section 15.2. Survival.
The obligations of the Company under this Section 15 will
survive the payment or transfer of any Note, the enforcement,
amendment or waiver of any provision of this Agreement or the
Notes, and the termination of this Agreement.
Section 16. Survival of Representations and Warranties;
Entire Agreement.
All representations and warranties contained herein shall
survive the execution and delivery of this Agreement and the Notes,
the purchase or transfer by you of any Note or portion thereof or
interest therein and the payment of any Note, and may be relied
upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other
holder of a Note. All statements contained in any certificate or
<PAGE>
other instrument delivered by or on behalf of the Company pursuant
to this Agreement shall be deemed representations and warranties of
the Company under this Agreement. Subject to the preceding
sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all
prior agreements and understandings relating to the subject matter
hereof.
Section 17. Amendment and Waiver.
Section 17.1. Requirements.
This Agreement and the Notes may be amended, and the
observance of any term hereof or of the Notes may be waived (either
retroactively or prospectively), with (and only with) the written
consent of the Company and the Required Holders, except that (a) no
amendment or waiver of any of the provisions of Section 1, 2, 3, 4,
5, 6 or 21 hereof, or any defined term (as it is used therein),
will be effective as to you unless consented to by you in writing,
and (b) no such amendment or waiver may, without the written
consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 12 relating to
acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or reduce the rate or change
the time of payment or method of computation of interest or of the
Make-Whole Amount on, the Notes, (ii) change the percentage of the
principal amount of the Notes the holders of which are required to
consent to any such amendment or waiver, or (iii) amend any of
Sections 8, 11(a), 11(b), 12, 17 or 20.
Section 17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of
the Notes (irrespective of the amount of Notes then owned by it)
with sufficient information, sufficiently far in advance of the
date a decision is required, to enable such holder to make an
informed and considered decision with respect to any proposed
amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true
and correct copies of each amendment, waiver or consent effected
pursuant to the provisions of this Section 17 to each holder of
outstanding Notes promptly following the date on which it is
executed and delivered by, or receives the consent or approval of,
the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay
or cause to be paid any remuneration, whether by way of
supplemental or additional interest, fee or otherwise, or grant any
security, to any holder of Notes as consideration for or as an
inducement to the entering into by any holder of Notes or any
waiver or amendment of any of the terms and provisions hereof
unless such remuneration is concurrently paid, or security is
concurrently granted, on the same terms, ratably to each holder of
Notes then outstanding even if such holder did not consent to such
waiver or amendment.
<PAGE>
Section 17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this
Section 17 applies equally to all holders of Notes and is binding
upon them and upon each future holder of any Note and upon the
Company without regard to whether such Note has been marked to
indicate such amendment or waiver. No such amendment or waiver will
extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair any
right consequent thereon. No course of dealing between the Company
and the holder of any Note nor any delay in exercising any rights
hereunder or under any Note shall operate as a waiver of any rights
of any holder of such Note. As used herein, the term "this
Agreement" and references thereto shall mean this Agreement as it
may from time to time be amended or supplemented.
Section 17.4. Notes Held by Company, etc.
Solely for the purpose of determining whether the holders of
the requisite percentage of the aggregate principal amount of Notes
then outstanding approved or consented to any amendment, waiver or
consent to be given under this Agreement or the Notes, or have
directed the taking of any action provided herein or in the Notes
to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or
any of its Affiliates shall be deemed not to be outstanding.
Section 18. Notices.
All notices and communications provided for hereunder shall be
in writing and sent (a) by telefacsimile if the sender on the same
day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by registered
or certified mail with return receipt requested (postage prepaid),
or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if to you or your nominee, to you or it at the address
specified for such communications in Schedule A, or at such other
address as you or it shall have specified to the Company in
writing,
(ii) if to any other holder of any Note, to such holder at
such address as such other holder shall have specified to the
Company in writing, or
(iii) if to the Company, to the Company at its address set
forth at the beginning hereof to the attention of the President, or
at such other address as the Company shall have specified to the
holder of each Note in writing.
Notices under this Section 18 will be deemed given only when
actually received.
<PAGE>
<PAGE>
Section 19. Reproduction of Documents.
This Agreement and all documents relating thereto, including,
without limitation, (a) consents, waivers and modifications that
may hereafter be executed, (b) documents received by you at the
Closing (except the Notes themselves), and (c) financial
statements, certificates and other information previously or
hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature
photographic or other similar process and you may destroy any
original document so reproduced. The Company agrees and stipulates
that, to the extent permitted by applicable law, any such
reproduction shall be admissible in evidence as the original itself
in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such reproduction was
made by you in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence. This Section 19 shall not
prohibit the Company or any other holder of Notes from contesting
any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the
inaccuracy of any such reproduction.
Section 20. Confidential Information.
For the purposes of this Section 20, "Confidential
Information" means information delivered to you by or on behalf of
the Company or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is
proprietary in nature and that was clearly marked or labeled or
otherwise adequately identified in writing when received by you as
being confidential information of the Company or such Subsidiary;
provided that such term does not include information that (a) was
publicly known or otherwise known to you prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act
or omission by you or any Person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the
Company or any Subsidiary or (d) constitutes financial statements
delivered to you under Section 7.1 that are otherwise publicly
available. You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by
you in good faith to protect confidential information of third
parties delivered to you; provided that you may deliver or disclose
Confidential Information to (i) your directors, trustees, officers,
employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the
investment represented by your Notes), (ii) your financial advisors
and other professional advisors who agree to hold confidential the
Confidential Information substantially in accordance with the terms
of this Section 20, (iii) any other holder of any Note, (iv) any
Institutional Investor to which you sell or offer to sell such Note
or any part thereof or any participation therein (if such Person
has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20), (v)
any Person from which you offer to purchase any security of the
Company (if such Person has agreed in writing prior to its receipt
<PAGE>
of such Confidential Information to be bound by the provisions of
this Section 20), (vi) any federal or state regulatory authority
having jurisdiction over you, (vii) the National Association of
Insurance Commissioners or any similar organization, or any
nationally recognized rating agency that requires access to
information about your investment portfolio or (viii) any other
Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation
or order applicable to you, (x) in response to any subpoena or
other legal process, (y) in connection with any litigation to which
you are a party or (z) if an Event of Default has occurred and is
continuing, to the extent you may reasonably determine such
delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under
your Notes and this Agreement. Each holder of a Note, by its
acceptance of a Note, will be deemed to have agreed to be bound by
and to be entitled to the benefits of this Section 20 as though it
were a party to this Agreement. On reasonable request by the
Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this
Agreement or requested by such holder (other than a holder that is
a party to this Agreement or its nominee), such holder will enter
into an agreement with the Company embodying the provisions of this
Section 20.
Section 21. Substitution of Purchaser.
You shall have the right to substitute any one of your
Affiliates as the purchaser of the Notes that you have agreed to
purchase hereunder, by written notice to the Company, which notice
shall be signed by both you and such Affiliate, shall contain such
Affiliate's agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with
respect to it of the representations set forth in Section 6. Upon
receipt of such notice, wherever the word "you" is used in this
Agreement (other than in this Section 21), such word shall be
deemed to refer to such Affiliate in lieu of you. In the event that
such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by
such Affiliate, upon receipt by the Company of notice of such
transfer, wherever the word "you" is used in this Agreement (other
than in this Section 21), such word shall no longer be deemed to
refer to such Affiliate, but shall refer to you, and you shall have
all the rights of an original holder of the Notes under this
Agreement.
Section 22. Miscellaneous.
Section 22.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement
by or on behalf of any of the parties hereto bind and inure to the
benefit of their respective successors and assigns (including,
without limitation, any subsequent holder of a Note) whether so
expressed or not.
<PAGE>
Section 22.2. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary
notwithstanding, any payment of principal of or Make-Whole Amount
or interest on any Note that is due on a date other than a Business
Day shall be made on the next succeeding Business Day without
including the additional days elapsed in the computation of the
interest payable on such next succeeding Business Day.
Section 22.3. Severability.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not
invalidate or render unenforceable such provision in any other
jurisdiction.
Section 22.4. Construction.
Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each
other covenant contained herein, so that compliance with any one
covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or
which such Person is prohibited from taking, such provision shall
be applicable whether such action is taken directly or indirectly
by such Person.
Section 22.5. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be an original but all of which together shall
constitute one instrument. Each counterpart may consist of a number
of copies hereof, each signed by less than all, but together signed
by all, of the parties hereto.
Section 22.6. Governing Law.
This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law
of the State of Illinois, excluding choice-of-law principles of the
law of such State that would require the application of the laws of
a jurisdiction other than such State.
Section 22.7. Submission to Jurisdiction.
The Company hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the Federal court located within the
Northern District of the State of Illinois (or if such court lacks
jurisdiction, the state courts located therein) and irrevocably
agrees that all actions or proceedings related to this Agreement or
the Notes may be litigated in such courts, and unconditionally
<PAGE>
waives any objection which it may have based on improper venue or
forum non conveniens to the conduct of any proceeding in any such
court and waives personal service of any and all process upon it,
and consents that all such service of process be made by delivery
to the Company as set forth in Section 18. Nothing contained in
this section shall affect the right of any holder of Notes to serve
legal process in any other manner permitted by law or to bring any
action or proceeding in the courts of any jurisdiction against the
Company or to enforce a judgment obtained in the courts of any
other jurisdiction.
* * * * *
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By s/A. Kipp Koester
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY
By s/Shabnam B. Miglani
------------------------------
Its Counsel
By s/Karen A. Pearston
------------------------------
Its Counsel
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
ALLSTATE LIFE INSURANCE COMPANY
By s/Jerry D. Zinkula
------------------------------
Authorized Signatories
By s/Patricia W. Wilson
------------------------------
Authorized Signatories
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY
By: CIGNA Investments, Inc.
By s/Daniel E. Feder
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY
By: CIGNA Investments, Inc.
By s/Daniel E. Feder
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
CONNECTICUT GENERAL LIFE INSURANCE
COMPANY, ON BEHALF OF ONE OR MORE
SEPARATE ACCOUNTS
By: CIGNA Investments, Inc.
By s/Daniel E. Feder
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
JEFFERSON PILOT LIFE INSURANCE
COMPANY
By s/James E. McDonald, Jr.
------------------------------
Second Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
ALEXANDER HAMILTON LIFE INSURANCE
COMPANY OF AMERICA
By s/James E. McDonald, Jr.
------------------------------
Second Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
THE MINNESOTA MUTUAL LIFE INSURANCE
COMPANY
By: MIMLIC Asset Management Company
By s/Loren A. Haugland
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
MUTUAL TRUST LIFE INSURANCE
COMPANY
By: MIMLIC Asset Management Company
By s/Loren A. Haugland
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
MUTUAL TRUST LIFE INSURANCE COMPANY
By: MIMLIC Asset Management Company
By s/Lauren A. Haugland
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
NORTHERN LIFE INSURANCE COMPANY
By s/James V. Wittich
------------------------------
Assistant Treasurer
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
RELIASTAR UNITED SERVICES LIFE
INSURANCE COMPANY
By s/James V. Wittich
------------------------------
Assistant Treasurer
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
RELIASTAR BANKERS SECURITY LIFE
INSURANCE COMPANY
By s/James V. Wittich
------------------------------
Vice President
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
PIERCE NATIONAL LIFE INSURANCE
COMPANY
By s/Douglas W. Kroske
------------------------------
Authorized Officer
<PAGE>
<PAGE>
If you are in agreement with the foregoing, please sign the
form of agreement on the accompanying counterpart of this Agreement
and return it to the Company, whereupon the foregoing shall become
a binding agreement between you and the Company.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
------------------------------
Senior Vice President
The foregoing is hereby agreed
to as of the date thereof.
Accepted as of February 14, 1997:
THE SECURITY MUTUAL LIFE INSURANCE
COMPANY OF LINCOLN, NEBRASKA
By s/Kevin W. Hammond
------------------------------
Vice President
Chief Investment Officer
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
The Northwestern Mutual Life $20,000,000
Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Securities Department
Telecopier Number: (414) 299-7124
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
Bankers Trust Company (ABA #0210-0103-3)
16 Wall Street
Insurance Unit, 4th Floor
New York, New York 10005
for credit to: The Northwestern Mutual Life Insurance Company
Account Number 00-000-027
Notices
All notices and communications to be addressed as first provided
above, except notices with respect to payments and written
confirmation of each such payment to be addressed, Attention:
Investment Operations.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 39-0509570
Schedule A
(to Note Purchase Agreement)<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Principal Mutual Life Insurance Company $20,000,000
711 High Street
Des Moines, Iowa 50392-0800
Attention: Investment Department-Securities Division
Regarding Bond No. 1-B-60981
Telefacsimile: (515) 248-2490
Confirmation: (515) 248-3495
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds to:
ABA #073 000 228
Norwest Bank Iowa, N.A.
7th and Walnut Streets
Des Moines, Iowa 50309
Account Number 014752
OBI PFGSE(S) B60981 (Insituform Technologies, Inc.)
Each wire transfer shall identify such payment as Insituform
Technologies, Inc., 7.88% Senior Notes, Series A, Due 2007, PPN
457667 A* 4, Bond No. 1-B-60981 principal, premium or interest".
Notices
All notices concerning payment on or in respect of the Notes, to:
Principal Mutual Life Insurance Company
711 High Street
Des Moines, Iowa 50392-0960
Attention: Investment Accounting and Treasury - Securities
Facsimile: (515) 248-2643
Confirmation: (515) 248-8301
All notices and communications other than those in respect to
payments to be addressed as provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 42-0127290
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Allstate Life Insurance Company $4,000,000
$4,000,000
3075 Sanders Road, STE G3A $3,000,000
Northbrook, Illinois 60062-7127 $3,000,000
Attention: Private Placements Department
Telephone Number: (847) 402-4394
Telecopier Number: (847) 402-3092
Payments
All payments on or in respect of the Notes to be made by Fedwire
transfer of immediately available funds (identifying each payment
as Insituform Technologies, Inc., 7.88% Senior Notes, Series A, Due
2007, PPN 457667 A* 4, principal, premium or interest) in the exact
format as follows:
BBK = Harris Trust and Savings Bank
ABA #071000288
BNF = Allstate Life Insurance Company
Collection Account #168-117-0
ORG = Insituform Technologies, Inc.
OBI = DPP - PPN 457667 A* 4 -
Payment Due Date (MM/DD/YY) -
P ______ (enter "P" and the amount of principal
being remitted, for example, P5000000.00) -
I ______ (enter "I" and the amount of interest being
remitted, for example, I225000.00)
Notices
All notices of scheduled payments and written confirmation of each
such payment, to be addressed:
Allstate Insurance Company
Investment Operations-Private Placements
3075 Sanders Road, STE G4A
Northbrook, Illinois 60062-7127
Telephone: (847) 402-8709
Telecopy: (847) 402-7331
All financial reports, compliance certificates and all other
written communications, including notice of prepayments to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 36-2554642
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Connecticut General Life Insurance $3,000,000
Company $3,000,000
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division - S-307
Fax: 860-726-7203
Payments
All payments on or in respect of the Notes to be by Federal Funds
Wire Transfer to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=Insituform Technologies, Inc.; 7.88% Senior Notes, Series
A, Due 2007; PPN 457667 A* 4; principal, premium or interest;
contact name and phone.
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
<PAGE>
<PAGE>
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Daniel E. Feder
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
CIGNA Property and Casualty Insurance $5,000,000
Company
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division - S-307
Fax: 860-726-7203
Payments
All payments on or in respect of the Notes to be by Federal Funds
Wire Transfer to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=Insituform Technologies, Inc.; 7.88% Senior Notes, Series
A, Due 2007; PPN 457667 A* 4; principal, premium or interest;
contact name and phone.
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
<PAGE>
<PAGE>
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Daniel E. Feder
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Connecticut General Life Insurance $3,000,000
Company, on behalf of one or
more separate accounts
c/o CIGNA Investments, Inc.
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Attention: Private Securities Division - S-307
Fax: 860-726-7203
Payments
All payments on or in respect of the Notes to be by Federal Funds
Wire Transfer to:
Chase NYC/CTR/
BNF=CIGNA Private Placements/AC=9009001802
ABA #021000021
OBI=Insituform Technologies, Inc.; 7.88% Senior Notes, Series
A, Due 2007; PPN 457667 A* 4; principal, premium or interest;
contact name and phone.
Address for Notices Related to Payments:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Securities Processing S-309
900 Cottage Grove Road
Hartford, Connecticut 06152-2309
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Operations Group
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
with a copy to:
Chase Manhattan Bank, N.A.
Private Placement Servicing
P. O. Box 1508
Bowling Green Station
New York, New York 10081
Attention: CIGNA Private Placements
Fax: 212-552-3107/1005
<PAGE>
<PAGE>
Address for All Other Notices:
CIG & Co.
c/o CIGNA Investments, Inc.
Attention: Private Securities Division - S-307
Daniel E. Feder
900 Cottage Grove Road
Hartford, Connecticut 06152-2307
Fax: 860-726-7203
Name of Nominee in which Notes are to be issued: CIG & Co.
Taxpayer I.D. Number for CIG & Co.: 13-3574027
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Jefferson-Pilot Life Insurance Company $7,000,000
P. O. Box 21008*
Greensboro, North Carolina 27420
Attention: Securities Administration - 3630
Telefacsimile: (910) 691-3025
*for hand delivery:
100 North Greene Street
Greensboro, NC 27401
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
ABA #021 000 018 BNF: IOC566
Attention: P&I Department
Notices
All notices of payment on or in respect of the Notes and written
confirmation of each such payment, to be addressed to:
Jefferson-Pilot Life Insurance Company
c/o The Bank of New York
P. O. Box 19266
Newark, NJ 07195
Attention: P&I Department
with duplicate notice to Jefferson-Pilot Life Insurance Company at
the address first provided above.
All notices and communications other than those in respect to
payments to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 56-0359860
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Alexander Hamilton Life Insurance $7,000,000
Company of America
P. O. Box 21008*
Greensboro, North Carolina 27420
Attention: Securities Administration - 3630
Telefacsimile: (910) 691-3025
*for hand delivery:
100 North Greene Street
Greensboro, NC 27401
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
Alexander Hamilton Life Insurance Company of America
c/o The Bank of New York
ABA #021 000 018 BNF: IOC566
Attention: P&I Department
Notices
All notices of payment on or in respect of the Notes and written
confirmation of each such payment, to be addressed to:
Alexander Hamilton Life Insurance Company of America
c/o The Bank of New York
P. O. Box 19266
Newark, NJ 07195
Attention: P&I Department
with duplicate notice to Alexander Hamilton Life Insurance Company
of America at the address first provided above.
All notices and communications other than those in respect to
payments to be addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 56-1311063
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
The Minnesota Mutual Life Insurance $13,000,000
Company
400 Robert Street North
St. Paul, Minnesota 55101
Attention: MIMLIC Asset Management Company
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
First Bank National Association (ABA #091000022)
Minneapolis, Minnesota
BNF The Minnesota Mutual Life Insurance Company
Account Number 1801-10-00600-4
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0417830
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Mutual Trust Life Insurance $1,000,000
Company
c/o MIMLIC Asset Management Company
400 Robert Street North
St. Paul, Minnesota 55101
Attention: Client Administrator
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
The Northern Trust Company (ABA #071-000-152)
Chicago, IL
For Credit to: Account Number 5186041000
For further credit to : Mutual Trust Life Insurance Company
Account Number 26-00621
Attn. MBS Department
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: ELL & Co.
Taxpayer I.D. Number: 36-1516780
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Northern Life Insurance $4,000,000
Company
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Analyst Name
Phone: (612) 372-5257
Fax: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
First National Bank N.A./Mpls.
601 2nd Avenue South
Acct. #1602-3237-6105
Bank ABA #091000022
Attention: Securities Accounting
Ref: Issuer, Cusip, Coupon & Maturity
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-1295933
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
ReliaStar United Services Life $1,000,000
Insurance Company
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401-2121
Attention: Analyst Name
Phone: (612) 372-5257
Fax: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
Bankers Trust
New York, New York
ABA #021001033
A/C #99-911-145
Ref: Security description & P&I Breakdown
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: SALKELD & CO.
Taxpayer I.D. Number: 53-0159267
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
ReliaStar Bankers Security Life $1,000,000
Insurance Company
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401-2121
Attention: Analyst Name
Phone: (612) 372-5257
Fax: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
Chase Manhattan
New York, New York
A/C #544755102
F/C #1960 Dept 571 NonStandard Securities
Bank ABA #021000021
Ref: Issue Name, PPN and P&I Breakdown
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: SIGLER & CO.
Taxpayer I.D. Number: 53-0242530
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
ReliaStar Life Insurance Company $3,000,000
c/o ReliaStar Investment Research, Inc.
100 Washington Avenue South, Suite 800
Minneapolis, Minnesota 55401-2147
Attention: Analyst Name
Phone: (612) 372-5257
Fax: (612) 372-5368
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
First National Bank N.A./Mpls.
601 2nd Avenue South
Acct. #1102-4001-4461
Bank ABA #091000022
Attention: Securities Accounting
Ref: Issuer, Cusip, Coupon & Maturity
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 41-0451140
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
Pierce National Life Insurance Company $4,000,000
c/o Liberty Capital Advisors
Post Office Box 789
Greenville, South Carolina 29602
Attention: Patrick Weston, Securities Department
Overnight Mail Address:
2000 Wade Hampton Boulevard
Greenville, South Carolina 29615
Attention: Patrick Weston, Securities Department
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
The Bank of New York (ABA #021000018)
BNF IOC 566
Attention: P&I Department
For account name: Pierce National Life Insurance Company
Account: #288431
Notices
All notices and communications to be addressed as first provided
above, except notices with respect to payments and written
confirmation of each such payment to:
Pierce National Life Insurance Company
c/o The Bank of New York
Attention: P&I Department
P.O. Box 19266
Newark, New Jersey 07195
with a duplicate notice to Liberty Capital Advisors at the address
provided above.
Name of Nominee in which Notes are to be issued: Hare & Co.
<PAGE>
<PAGE>
Principal Amount of
Name of Note Purchaser Notes Being Purchased
The Security Mutual Life Insurance $1,000,000
Company of Lincoln, Nebraska
200 Centennial Mall North
Lincoln, Nebraska 68508
Attention: Investment Department
Payments
All payments on or in respect of the Notes to be by bank wire
transfer of Federal or other immediately available funds
(identifying each payment as Insituform Technologies, Inc., 7.88%
Senior Notes, Series A, Due 2007, PPN 457667 A* 4, principal,
premium or interest") to:
National Bank of Commerce (ABA #1040-00045)
13th and "O" Streets
Lincoln, Nebraska
for credit to: Security Mutual Life
Account Number 40-797-624
Notices
All notices and communications, including notices with respect to
payments and written confirmation of each such payment, to be
addressed as first provided above.
Name of Nominee in which Notes are to be issued: None
Taxpayer I.D. Number: 47-0293990
<PAGE>
<PAGE>
Defined Terms
As used herein, the following terms have the respective
meanings set forth below or set forth in the Section hereof
following such term:
"Acquiring Person" means a "person" or "group of persons"
within the meaning of Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934, as amended; provided that notwithstanding the
foregoing, "Acquiring Person" shall not be deemed to include either
member of the Senior Management Group (or any group including such
member) unless such member has, directly or indirectly, transferred
control (whether by means of voting trust agreement or otherwise),
of the voting rights relating to all or any portion of the Voting
Stock of the Company, directly or indirectly owned or controlled by
such member to or for the benefit of the Acquiring Person or any
other member thereof.
"Affiliate" means, at any time, and with respect to any
Person, (a) any other Person that at such time directly or
indirectly through one or more intermediaries Controls, or is
Controlled by, or is under common Control with, such first Person,
(b) (1) any Person beneficially owning or holding, directly or
indirectly, 5% or more of any class of voting or equity interests
of the Company or any Subsidiary or (2) any corporation of which
the Company and its Subsidiaries beneficially own or hold, in the
aggregate, directly or indirectly, 5% or more of any class of
voting or equity interests, and (c) any officer or director of the
Company or its Subsidiaries. As used in this definition, "Control"
means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an
Affiliate of the Company.
"Asset Disposition Prepayment Date" is defined in Section
10.7.
"Asset Disposition Prepayment Notice" is defined in Section
10.7.
"Business Day" means (a) for the purposes of Section 8.7 only,
any day other than a Saturday, a Sunday or a day on which
commercial banks in New York City are required or authorized to be
closed, and (b) for the purposes of any other provision of this
Agreement, any day other than a Saturday, a Sunday or a day on
which commercial banks in Chicago, Illinois or Memphis, Tennessee
are required or authorized to be closed.
"Calculation Notice" is defined in Section 8.2.
Schedule B
(to Note Purchase Agreement)<PAGE>
<PAGE>
"Capital Lease" means, at any time, a lease with respect to
which the lessee is required concurrently to recognize the
acquisition of an asset and the incurrence of a liability in
accordance with GAAP.
"Capitalized Rentals" of any Person means as of the date of
any determination thereof, without duplication, the amount at which
the aggregate Rentals due and to become due under all Capital
Leases under which such Person is a lessee would be reflected as a
liability on a consolidated balance sheet of such Person.
"Change of Control" means the earliest to occur of: (a) the
date a tender offer or exchange offer results in an Acquiring
Person, directly or indirectly, beneficially owning 50% or more of
the Voting Stock of the Company then outstanding, or (b) the date
an Acquiring Person becomes, directly or indirectly, the beneficial
owner of 50% or more of the Voting Stock of the Company then
outstanding, or (c) the date of a merger or statutory share
exchange between the Company and any other Person, a consolidation
of the Company with any other Person or an acquisition of any other
Person by the Company, if immediately after such event, the
Acquiring Person shall hold 50% or more of the Voting Stock of the
Company outstanding immediately after giving effect to such merger,
statutory share exchange, consolidation or acquisition, or (d) the
replacement (other than solely by reason of retirement, death or
disability) of 50% or more of the members of the Board of Directors
of the Company over a one year period from the directors who
constituted such Board of Directors at the beginning of such period
and such replacement shall not have been approved by a vote of at
least a majority of the Board of Directors of the Company then
still in office who either were members of such Board of Directors
at the beginning of such one year period or whose election as
members of the Board of Directors was previously so approved;
provided, that no Change of Control shall be deemed to have
occurred under this clause (d) in connection with changes to the
Board of Directors approved by a member of the Senior Management
Group.
"Change of Control Delayed Prepayment Date" is defined in
Section 8.3(b).
"Change of Control Prepayment Date" is defined in Section
8.3(a).
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and the rules and regulations promulgated
thereunder from time to time.
"Company" means Insituform Technologies, Inc., a Delaware
corporation.
"Company Notice" is defined in Section 8.3(a).
"Confidential Information" is defined in Section 20.
<PAGE>
"Consolidated Adjusted Net Worth" means as of the date of any
determination thereof, without duplication, the arithmetic sum of:
(a) the amount of the consolidated stockholders' equity of
the Company and its Subsidiaries as reflected in its most recent
quarterly financial statements,
PLUS
(b) Minority Interests and deferred tax liabilities of the
Company and its Subsidiaries up to an amount not exceeding
$10,000,000 in the aggregate;
MINUS
(c) the net book value, after deducting any reserves
applicable thereto, of all items of the following character which
are included in the assets of the Company and its Subsidiaries, to
wit:
(i) the incremental increase in an asset resulting from
any reappraisal, revaluation or write-up of assets (other than
any revaluation or write-up of assets in accordance with
GAAP);
(ii) goodwill or the "cost in excess of net assets of
businesses acquired" to the extent and in the amount by which
the net book value thereof exceeds $70,000,000; and
(iii) patents, patent applications, permits, trademarks,
trade names, copyrights, licenses, franchises, experimental
expense, organizational expense, unamortized debt discount and
expense, and such other assets (other than goodwill or the
"cost in excess of net assets of businesses acquired") as are
properly classified as "intangible assets" in accordance with
GAAP to the extent and in the amount by which the net book
value thereof exceeds $20,000,000;
all determined in accordance with GAAP.
"Consolidated Cash Flow Available for Fixed Charges" for any
period means, without duplication, the sum of (a) Consolidated Net
Earnings during such period plus (to the extent deducted in
determining Consolidated Net Earnings), (b) all provisions for any
Federal, state or other income taxes made by the Company and its
Subsidiaries during such period, (c) all provisions for
depreciation and amortization (other than the amortization of debt
discount) made by the Company and its Subsidiaries during such
period, (d) merger and restructuring charges provided with respect
to the period prior to the date of the Closing (including those
provided with respect to the fiscal year ended December 31, 1996,
provided that in no event shall the amount thereof provided with
respect to the fiscal year ended December 31, 1996 and included in
any computation of Consolidated Cash Flow Available for Fixed
Charges exceed $8,000,000), and (e) Consolidated Fixed Charges
during such period.
<PAGE>
"Consolidated Fixed Charges" for any period means on a
consolidated basis (in each case, eliminating all offsetting debits
and credits between the Company and its Subsidiaries and all other
items to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP), without duplication, the sum
of (a) all Rentals (other than Rentals on Capital Leases) payable
during such period by the Company and its Subsidiaries, and (b) all
Interest Expense on all Indebtedness of the Company and its
Subsidiaries payable during such period.
"Consolidated Net Earnings" for any period means, without
duplication, the gross revenues of the Company and its Subsidiaries
for such period less all expenses and other proper charges
(including taxes on income), determined on a consolidated basis
after eliminating earnings or losses attributable to outstanding
Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such
excluded gains and any tax deductions or credits on account of any
such excluded losses;
(b) the proceeds of any life insurance policy, net of
out-of-pocket expenses;
(c) net earnings and losses of any Subsidiary accrued prior
to the date it became a Subsidiary;
(d) net earnings and losses of any Person (other than a
Subsidiary), substantially all the assets of which have been
acquired in any manner by the Company or any Subsidiary, realized
by such Person prior to the date of such acquisition;
(e) net earnings and losses of any Person (other than a
Subsidiary) with which the Company or a Subsidiary shall have
consolidated or which shall have merged into or with the Company or
a Subsidiary prior to the date of such consolidation or merger;
(f) net earnings of any business entity (other than a
Subsidiary) in which the Company or any Subsidiary has an ownership
interest unless such net earnings shall have actually been received
by the Company or such Subsidiary in the form of cash
distributions;
(g) any portion of the net earnings of any Subsidiary which
for any reason is unavailable for payment of dividends to the
Company or any other Subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of
the equity in any Subsidiary at the date of acquisition thereof
over the amount invested in such Subsidiary;
<PAGE>
(j) any gain arising from the acquisition of any securities
of the Company or any Subsidiary;
(k) any reversal of any contingency reserve, except to the
extent that provision for such contingency reserve shall have been
made from income arising during such period; and
(l) any other extraordinary gain;
all determined in accordance with GAAP.
"Consolidated Total Assets" means as of the date of any
determination thereof, without duplication, total assets of the
Company and its Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Total Capitalization" means as of the date of
any determination thereof, without duplication, the sum of (a)
Consolidated Total Indebtedness plus (b) Consolidated Adjusted Net
Worth.
"Consolidated Total Indebtedness" means as of the date of any
determination thereof, without duplication, all Indebtedness of the
Company and its Subsidiaries after eliminating all offsetting
debits and credits between the Company and its Subsidiaries and all
other items to be eliminated in the course of the preparation of
consolidated financial statements of the Company and its
Subsidiaries in accordance with GAAP.
"Default" means an event or condition the occurrence or
existence of which would, with the lapse of time or the giving of
notice or both, become an Event of Default.
"Default Rate" means that rate of interest that is the greater
of (i) 9.88% per annum above the rate of interest stated in clause
(a) of the first paragraph of the Notes or (ii) 2% over the rate of
interest publicly announced by Morgan Guaranty Trust Company of New
York in New York, New York as its "base" or "prime" rate.
"Environmental Laws" means any and all Federal, state, local,
and foreign statutes, laws, regulations, ordinances, rules,
judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions
relating to pollution and the protection of the environment or the
release of any materials into the environment, including but not
limited to those related to hazardous substances or wastes, air
emissions and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the rules and regulations
promulgated thereunder from time to time in effect.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with
the Company under section 414 of the Code.
<PAGE>
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Foreign Pension Plan" means any plan, fund, or other similar
program established or maintained outside the United States of
America by the Company or any one or more of the Subsidiaries
primarily for the benefit of employees of the Company or such
Subsidiaries residing outside the United States of America, which
plan, fund or other similar program provides for retirement income
for such employees or a deferral of income for such employees in
contemplation of retirement and is not subject to ERISA or the
Code.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America; provided,
that for purposes of determining compliance with the terms of this
Agreement, the Company will in any event amortize goodwill created
or acquired after the date of the Closing over a period not to
exceed twenty years.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other
political subdivision thereof, or
(ii) any other jurisdiction in which the Company or any
Subsidiary conducts all or any part of its business, or which
asserts jurisdiction over any properties of the Company or any
Subsidiary, or
(b) any entity exercising executive, legislative, judicial,
regulatory or administrative functions of, or pertaining to, any
such government.
"Guaranty" means, with respect to any Person, without
duplication, any obligation (except the endorsement in the ordinary
course of business of negotiable instruments for deposit or
collection) of such Person guaranteeing or in effect guaranteeing
(including, without limitation, having recourse obligations for the
Guaranties of another Person) any indebtedness, dividend or other
obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred
through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any
property constituting security therefor;
(b) to advance or supply funds (i) for the purchase or
payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income
statement condition of any other Person or otherwise to advance or
<PAGE>
make available funds for the purchase or payment of such
Indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of any other Person to
make payment of the Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or
obligation against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of
the obligor under any Guaranty, the Indebtedness or other
obligations that are the subject of such Guaranty shall be assumed
to be direct obligations of such obligor.
"Hazardous Material" means any and all pollutants, toxic or
hazardous wastes or any other substances that might pose a hazard
to health or safety, the removal of which may be required or the
generation, manufacture, refining, production, processing,
treatment, storage, handling, transportation, transfer, use,
disposal, release, discharge, spillage, seepage, or filtration of
which is or shall be restricted, prohibited or penalized by any
applicable law (including, without limitation, asbestos, urea
formaldehyde foam insulation and polychlorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose
name such Note is registered in the register maintained by the
Company pursuant to Section 13.1.
"Indebtedness" with respect to any Person means, at any time,
without duplication,
(a) its liabilities for borrowed money and its redemption
obligations in respect of mandatorily redeemable Preferred Stock;
(b) its liabilities for the deferred purchase price of
property acquired by such Person (excluding accounts payable
arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other
title retention agreement with respect to any such property);
(c) all liabilities appearing on its balance sheet in
accordance with GAAP in respect of Capital Leases;
(d) all liabilities for borrowed money secured by any Lien
with respect to any property owned by such Person (whether or not
it has assumed or otherwise become liable for such liabilities);
(e) all its liabilities in respect of letters of credit or
instruments serving a similar function issued or accepted for its
account by banks and other financial institutions valued (i) in the
case of letters of credit supporting obligations for borrowed
money, at the face amount of such letters of credit and (ii) in the
case of other letters of credit, at the amount drawn on such
letters of credit at such time and not reimbursed;
<PAGE>
(f) Swaps of such Person; and
(g) any Guaranty of such Person with respect to liabilities
of a type described in any of clauses (a) through (f) hereof.
Indebtedness of any Person shall include all obligations of
such Person of the character described in clauses (a) through (g)
to the extent such Person remains legally liable in respect thereof
notwithstanding that any such obligation is deemed to be
extinguished under GAAP, but shall not include Unfunded Pension
Liabilities of any Plan of the Company and its Subsidiaries, which
amount, as of December 31, 1996, was zero.
"Interest Expense" of the Company and its Subsidiaries for any
period means, without duplication, all (a) interest (including
capitalized interest and the interest component on Rentals on
Capital Leases) and all amortization of debt discount and expense
on any particular Indebtedness (including payment-in-kind, zero
coupon and other like securities) for which such calculations are
being made, (b) expenses, fees and commissions for letters of
credit and bankers' acceptances, and (c) the net interest cost of
Swaps.
"Insituform Linings Plc" mean Insituform Linings Plc, a United
Kingdom corporation.
"Institutional Investor" means (a) any original purchaser of
a Note, (b) any holder of a Note holding more than 2% of the
aggregate principal amount of the Notes then outstanding, and (c)
any bank, trust company, savings and loan association or other
financial institution, any pension plan, any investment company,
any insurance company, any broker or dealer, or any other similar
financial institution or entity, regardless of legal form.
"Investments" means, without duplication, all investments, in
cash or by delivery of property, made directly or indirectly in any
property or assets or in any Person, whether by acquisition of
shares of capital stock, Indebtedness or other obligations or
securities or by loan, advance, capital contribution or otherwise.
"Joint Venture" means any Person (other than a Subsidiary) in
which the Company or any Subsidiary holds, directly or indirectly
15% or more of any class of equity or voting interests.
"Lien" means, with respect to any Person, any mortgage, lien,
pledge, charge, security interest or other encumbrance, or any
interest or title of any vendor, lessor, lender or other secured
party to or of such Person under any conditional sale or other
title retention agreement or Capital Lease, upon or with respect to
any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all
similar arrangements).
"Make-Whole Amount" is defined in Section 8.7.
<PAGE>
"Material" means material in relation to the business,
operations, affairs, financial condition, assets, properties, or
prospects of the Company and its Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, operations, affairs, financial condition, assets
or properties of the Company and its Subsidiaries taken as a whole,
or (b) the ability of the Company to perform its obligations under
this Agreement and the Notes, or (c) the validity or enforceability
of this Agreement or the Notes.
"Memorandum" is defined in Section 5.3.
"Midsouth Partners" means Midsouth Partners, a Tennessee
partnership.
"Minority Interests" means, without duplication, any shares of
stock of any class of a Subsidiary (other than directors'
qualifying shares as required by law) that are not owned by the
Company and/or one or more of its Subsidiaries. Minority Interests
shall be valued by valuing Minority Interests constituting
preferred stock at the voluntary or involuntary liquidating value
of such preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of
common stock, additional paid-in capital and retained earnings
applicable thereto adjusted, if necessary, to reflect any changes
from the book value of such common stock required by the foregoing
method of valuing Minority Interests in preferred stock.
"Multiemployer Plan" means any Plan that is a "multiemployer
plan" (as such term is defined in section 4001(a)(3) of ERISA).
"Noteholder Notice" is defined in Section 8.3(a).
"Notes" is defined in Section 1.
"Officer's Certificate" means a certificate of a Senior
Financial Officer or of any other officer of the Company whose
responsibilities extend to the subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred
to and defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation,
limited liability company, association, trust, unincorporated
organization, or a government or agency or political subdivision
thereof.
"Plan" means an "employee benefit plan" (as defined in section
3(3) of ERISA) that is or, within the preceding five years, has
been established or maintained, or to which contributions are or,
within the preceding five years, have been made or required to be
<PAGE>
made, by the Company or any ERISA Affiliate or with respect to
which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a
corporation that is preferred over any other class of capital stock
of such corporation as to the payment of dividends or the payment
of any amount upon liquidation or dissolution of such corporation.
"Priority Debt" means, as of the date of any determination
thereof, without duplication, (a) all Indebtedness of Subsidiaries
(other than the Indebtedness owing to the Company or another
Wholly-owned Subsidiary) and (b) all Indebtedness of the Company
and its Subsidiaries secured by Liens within the limitations of
Section 10.5(l).
"property" or "properties" means, unless otherwise
specifically limited, real or personal property of any kind,
tangible or intangible, choate or inchoate.
"QPAM Exemption" means Prohibited Transaction Class Exemption
84-14 issued by the United States Department of Labor.
"Rentals" means and includes as of the date of any
determination thereof, without duplication, all fixed payments
(including as such all payments which the lessee is obligated to
make to the lessor on termination of the lease or surrender of the
property) payable by the Company or a Subsidiary, as lessee or
sublessee under a lease of real or personal property, but shall be
exclusive of any amounts required to be paid by the Company or a
Subsidiary (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar
charges. Fixed rents under any so-called "percentage leases" shall
be computed solely on the basis of the minimum rents, if any,
required to be paid by the lessee regardless of sales volume or
gross revenues.
"Required Holders" means, at any time, the holders of at least
66-2/3% in principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by the Company or any of its
Affiliates).
"Responsible Officer" means any Senior Financial Officer and
any other officer of the Company or Subsidiary, as the case may be,
with responsibility for the administration of the relevant portion
of this agreement.
"Restricted Payments" is defined in Section 10.6.
"Securities Act" means the Securities Act of 1933, as amended
from time to time.
"Senior Financial Officer" means the chief financial officer,
principal accounting officer, treasurer or comptroller of the
Company.
<PAGE>
"Senior Indebtedness" means Indebtedness of the Company which
is not expressed to be subordinate or junior in rank to any other
Indebtedness of the Company.
"Senior Management Group" means, for purposes of any
determination of whether or not a Change of Control has occurred,
either of Jerome Kalishman and Anthony W. Hooper; provided that
after giving effect to the subject transaction such Person
beneficially owns (within the meaning of Section 13(d) of the
Exchange Act) ten percent (10%) or more of the Voting Stock of the
Company and is an "executive officer" of the Company within the
meaning of Rule 405 of the Securities Act as in effect on the date
of Closing.
"Specified Default" means (a) any event or condition under or
pursuant to Sections 7.1(a), 7.1(b), 7.2, 9.7 or 9.8 (which has
occurred and which, with the lapse of time or the giving of notice
or both become an Event of Default), (b) any Default in the
performance of or compliance with any term contained in any of
Sections 10.1 through 10.8 hereof, (c) any Default by the Company
in the payment of interest on any Note on the due date thereof or
(d) any other Default (other than any event, condition, default or
other term referred to in clauses (a), (b) or (c) hereof, provision
for which is made in said foregoing clauses (a), (b) or (c)) and
either a Responsible Officer has obtained actual knowledge of such
Default or has received notice thereof pursuant to Section 7.1(d)
hereof. The Company understands and agrees with the holders of the
Notes that the definition "Specified Default" has been created
solely for the purpose of the specified covenants where utilized in
this Agreement, and that such definition shall not modify or waive
any of the rights or remedies of the holders of the Notes or
obligations of the Company herein contained (except and to the
extent expressly stated in said Sections and then only as and to
the extent expressly contemplated by said definition as contained
in said Sections).
"Subsidiary" means, as to any Person, any corporation,
association or other business entity in which such Person or one or
more of its Subsidiaries or such Person and one or more of its
Subsidiaries owns sufficient equity or voting interests to enable
it or them (as a group) ordinarily, in the absence of
contingencies, to elect a majority of the directors (or Persons
performing similar functions) of such entity, and any partnership
or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its
Subsidiaries or such Person and one or more of its Subsidiaries
(unless such partnership can and does ordinarily take major
business actions without the prior approval of such Person or one
or more of its Subsidiaries), provided, however, that (y) for all
purposes of this Agreement other than Sections 5, 7.1 and 20, and
subject to the provisions of Section 7.4, the term "Subsidiary"
shall not include (1) Midsouth Partners and (2) Insituform Linings
Plc, unless and until the Company or any Subsidiary shall acquire
the entire interest in such companies, respectively, and (z) for
all purposes of this Agreement, the term "Subsidiary" shall not
include dormant Persons otherwise constituting "Subsidiaries"
<PAGE>
pursuant to the terms hereof which, taken as a group, (1) own less
than 1.0% of Consolidated Total Assets and (2) contribute less than
1.0% of Consolidated Net Earnings in any fiscal year. Unless the
context otherwise clearly requires, any reference to a "Subsidiary"
is a reference to a Subsidiary of the Company.
"Subsidiary Guaranty" means any Guaranty of any Subsidiary of
the Company with respect to the payment of the Notes and all other
sums due and owing by the Company under this Agreement, which
Guaranty shall be in form and substance reasonably satisfactory to
the Required Holders.
"Swaps" means, with respect to any Person, without
duplication, payment obligations with respect to interest rate
swaps, currency swaps and similar obligations obligating such
Person to make payments, whether periodically or upon the happening
of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in
respect thereof as of the end of the then most recently ended
fiscal quarter of such Person, based on the assumption that such
Swap had terminated at the end of such fiscal quarter, and in
making such determination, if any agreement relating to such Swap
provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous
payment of amounts by and to such Person, then in each such case,
the amount of such obligation shall be the net amount so
determined.
"Unfunded Pension Liability" of any Plan means the amount, if
any, by which the actuarial present value of the accumulated plan
benefits under the Plan as of the close of its most recent plan
year, determined in accordance with statement of Financial
Accounting Standards No. 35, based upon the actuarial assumptions
used by the Plan's actuary in the most recent annual valuation of
the Plan, exceeds the fair market value of the assets allocable
thereto, determined in accordance with Section 412 of the Code.
"Voting Stock" means capital stock of any class or classes of
a corporation, the holders of which are ordinarily, in the absence
of contingencies, entitled to elect the majority of the corporate
directors (or Persons performing similar functions), irrespective
of whether not at the time capital stock of any such class or
classes shall have or might have special voting power or rights by
reason of the occurrence of any contingency.
"Wholly-Owned Subsidiary" means, at any time, any Subsidiary
one hundred percent (100%) of all of the equity interests (except
directors' qualifying shares) and voting interests of which are
owned by any one or more of the Company and the Company's other
Wholly-Owned Subsidiaries at such time.
<PAGE>
<PAGE>
This Note has not been registered under the Securities Act of 1933,
as amended, and may not be transferred in violation of such Act.
[Form of Note]
Insituform Technologies, Inc.
7.88% Senior Note, Series A, due February 14, 2007
No. _________ Date
$____________ PPN 457667 A* 4
For Value Received, the undersigned, Insituform Technologies,
Inc. (herein called the "Company"), a corporation organized and
existing under the laws of the State of Delaware, hereby promises
to pay to ________________, or registered assigns, the principal
sum of ________________ Dollars on February 14, 2007, with interest
(computed on the basis of a 360-day year of twelve 30-day months)
(a) on the unpaid balance thereof at the rate of 7.88% per annum
from the date hereof, payable semiannually, on the fourteenth day
of February and August in each year, commencing with August 14,
1997 until the principal hereof shall have become due and payable,
and (b) to the extent permitted by law on any overdue payment
(including any overdue prepayment) of principal, any overdue
payment of interest and any overdue payment of any Make-Whole
Amount (as defined in the Note Purchase Agreements referred to
below), payable semiannually as aforesaid (or, at the option of the
registered holder hereof, on demand), at a rate per annum from time
to time equal to the greater of (i) 9.88% or (ii) 2% over the rate
of interest publicly announced by Morgan Guaranty Trust Company of
New York from time to time in New York, New York as its "base" or
"prime" rate.
Payments of principal of, interest on and any Make-Whole
Amount with respect to this Note are to be made in lawful money of
the United States of America at Chicago, Illinois or at such other
place as the Company shall have designated by written notice to the
holder of this Note as provided in the Note Purchase Agreements
referred to below.
This Note is one of a series of Senior Notes, Series A (herein
called the "Notes"), issued pursuant to separate Note Purchase
Agreements, each dated as of February 14, 1997 (as from time to
time amended, the "Note Purchase Agreements"), between the Company
and the respective Purchasers named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its
acceptance hereof, (1) to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements
and (2) to have made the representation set forth in Section 6.2 of
the Note Purchase Agreements.
As more fully provided in Section 2.2 of the Note Purchase
Agreements, the Company may issue and sell additional series of
unsecured promissory notes ranking pari passu with the Notes and,
in connection therewith, may incorporate by reference provisions of
the Note Purchase Agreements or use the form of the Note Purchase
Agreements as the basis for the issuance of such additional notes.
Exhibit 1
(to Note Purchase Agreement)
<PAGE>
Such incorporation by reference or use of the form of the Note
Purchase Agreements shall not dilute or otherwise affect the
relative priority or other rights of the holders of the Notes or in
any way affect the percentages of the Notes required to take action
under the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note
Purchase Agreements, upon surrender of this Note for registration
of transfer, duly endorsed, or accompanied by a written instrument
of transfer duly executed, by the registered holder hereof or such
holder's attorney duly authorized in writing, a new Note for a like
principal amount will be issued to, and registered in the name of,
the transferee. Prior to due presentment for registration of
transfer, the Company may treat the person in whose name this Note
is registered as the owner hereof for the purpose of receiving
payment and for all other purposes, and the Company will not be
affected by any notice to the contrary.
The Company will make required prepayments of principal on the
dates and in the amounts specified in the Note Purchase Agreements.
This Note is also subject to optional prepayment, in whole or from
time to time in part, at the times and on the terms specified in
the Note Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase
Agreements, occurs and is continuing, the principal of this Note
may be declared or otherwise become due and payable in the manner,
at the price (including any applicable Make-Whole Amount) and with
the effect provided in the Note Purchase Agreements.
This Note shall be construed and enforced in accordance with,
and the rights and parties shall be governed by, the law of the
State of Illinois, excluding choice-of-law principles of the law of
such State which would require application of the laws of the
jurisdiction other than such State.
INSITUFORM TECHNOLOGIES, INC.
By
----------------------------------
[Title]
<PAGE>
<PAGE>
Description of Closing Opinion of Counsel to the Company
The closing opinion of Krugman, Chapnick & Grimshaw, counsel
for the Company, which is called for by Section 4.4 of the Note
Purchase Agreements, shall be dated the date of Closing and
addressed to you and the Other Purchasers, shall be satisfactory in
scope and form to you and the Other Purchasers and shall be to the
effect that:
1. The Company is a corporation, duly incorporated, validly
existing and in good standing under the laws of the State of
Delaware, has the corporate power and the corporate authority to
execute and perform the Note Purchase Agreements and to issue the
Notes and has the full corporate power and the corporate authority
to conduct the activities in which it is now engaged and is duly
licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary.
2. Each Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and is duly licensed or qualified and is in good
standing in each jurisdiction in which the character of the
properties owned or leased by it or the nature of the business
transacted by it makes such licensing or qualification necessary
and all of the issued and outstanding shares of capital stock of
each such Subsidiary have been duly issued, are fully paid and
non-assessable and are owned by the Company, by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
3. Each Note Purchase Agreement has been duly authorized by
all necessary corporate action on the part of the Company, has been
duly executed and delivered by the Company and constitutes the
legal, valid and binding contract of the Company enforceable in
accordance with its terms, subject to bankruptcy, insolvency or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
4. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly
executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency or
similar laws affecting creditors' rights generally, and general
principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law).
5. No approval, consent or withholding of objection on the
part of, or filing, registration or qualification with, any
governmental body, Federal, state or local, is necessary in
connection with the execution, delivery and performance of the Note
Purchase Agreements or the Notes.
Exhibit 4.4(a)
(to Note Purchase Agreement)
<PAGE>
6. The issuance and sale of the Notes and the execution,
delivery and performance by the Company of the Note Purchase
Agreements do not conflict with or result in any breach of any of
the provisions of or constitute a default under or result in the
creation or imposition of any Lien upon any of the property of the
Company pursuant to the provisions of the Certificate of
Incorporation or By-laws of the Company or any agreement or other
instrument known to such counsel to which the Company is a party or
by which the Company may be bound.
7. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreements does
not, under existing law, require the registration of the Notes
under the Securities Act of 1933, as amended, or the qualification
of an indenture under the Trust Indenture Act of 1939, as amended.
8. The issuance of the Notes and the use of the proceeds of
the sale of the Notes in accordance with the provisions of and
contemplated by the Note Purchase Agreements do not violate or
conflict with Regulation G, T, U or X of the Board of Governors of
the Federal Reserve System.
9. There is no litigation pending or, to the best knowledge
of such counsel, threatened which in such counsel's opinion could
reasonably be expected to have a materially adverse effect on the
Company's business or assets or which would impair the ability of
the Company to issue and deliver the Notes or to comply with the
provisions of the Note Purchase Agreements.
The opinion of Krugman, Chapnick & Grimshaw shall cover such
other matters relating to the sale of the Notes as you and the
Other Purchasers may reasonably request. With respect to matters of
fact on which such opinion is based, such counsel shall be entitled
to rely on appropriate certificates of public officials and
officers of the Company.
<PAGE>
<PAGE>
Form of Opinion of Special Counsel
to the Purchasers
The closing opinion of Chapman and Cutler, special counsel to
the Purchasers, called for by Section 4.4 of the Note Purchase
Agreements, shall be dated the date of Closing and addressed to you
and the Other Purchasers, shall be satisfactory in form and
substance to you and the Other Purchasers and shall be to the
effect that:
1. The Company is a corporation, validly existing and in
good standing under the laws of the State of Delaware and has the
corporate power and the corporate authority to execute and deliver
the Note Purchase Agreements and to issue the Notes.
2. The Note Purchase Agreements have been duly authorized by
all necessary corporate action on the part of the Company, have
been duly executed and delivered by the Company and constitute the
legal, valid and binding contracts of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in
equity or at law).
3. The Notes have been duly authorized by all necessary
corporate action on the part of the Company, have been duly
executed and delivered by the Company and constitute the legal,
valid and binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent conveyance or similar laws affecting creditors' rights
generally, and general principles of equity (regardless of whether
the application of such principles is considered in a proceeding in
equity or at law).
4. The issuance, sale and delivery of the Notes under the
circumstances contemplated by the Note Purchase Agreements does
not, under existing law, require the registration of the Notes
under the Securities Act of 1933, as amended, or the qualification
of an indenture under the Trust Indenture Act of 1939, as amended.
The opinion of Chapman and Cutler shall also state that the
opinion of Krugman, Chapnick & Grimshaw is satisfactory in scope
and form to Chapman and Cutler and that, in their opinion, you and
the Other Purchasers are justified in relying thereon.
In rendering the opinion set forth in paragraph 1 above,
Chapman and Cutler may rely solely upon an examination of the
Certificate of Incorporation certified by, and a certificate of
good standing of the Company from, the Secretary of State of the
State of Delaware, the By-laws of the Company and the general
business corporation law of the State of Delaware. The opinion of
Exhibit 4.4(b)
(to Note Purchase Agreement)<PAGE>
<PAGE>
Chapman and Cutler is limited to the laws of the State of Illinois,
the general business corporation law of the State of Delaware and
the Federal laws of the United States.
With respect to matters of fact upon which such opinion is
based, Chapman and Cutler may rely on appropriate certificates of
public officials and officers of the Company.
<PAGE>
<PAGE>
GUARANTY AGREEMENT
Dated as of
---------------------
By
[SUBSIDIARY GUARANTOR]
Re: $110,000,000 7.88% Senior Notes, Series A,
Due February , 2007
of
INSITUFORM TECHNOLOGIES, INC.
EXHIBIT 9.8(a)
(to Note Purchase Agreement)
<PAGE>
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
Parties 1
Recitals 1
SECTION 1. Definitions 1
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT 2
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE 2
SECTION 4. GENERAL PROVISIONS RELATING TO THE
GUARANTY 3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF
THE GUARANTOR 7
SECTION 6. GUARANTOR COVENANTS 8
Section 6.1. Compliance with Law 8
Section 6.2. Insurance 9
Section 6.3. Maintenance of Properties 9
Section 6.4. Payment of Taxes and Claims 9
Section 6.5. Corporate Existence, etc. 9
SECTION 7. SUBMISSION TO JURISDICTION 10
SECTION 8. JUDGMENTS 10
SECTION 9. NOTICES 10
SECTION 10. AMENDMENTS AND MODIFICATIONS;
SOLICITATION OF NOTEHOLDERS 11
SECTION 11. PROCEEDS 12
SECTION 12. MISCELLANEOUS 12
Signatures 13
-i-
<PAGE>
<PAGE>
GUARANTY AGREEMENT
Re: $110,000,000 7.88% Senior Notes, Series A,
Due January 31, 2007;
of
INSITUFORM TECHNOLOGIES, INC.
This GUARANTY AGREEMENT (the or this "Guaranty") is dated as
of , by [Subsidiary Guarantor], a corporation
organized under the laws of (the "Guarantor").
RECITALS:
A. The Guarantor is a Subsidiary of Insituform Technologies,
Inc., a Delaware corporation (the "Company").
B. The Company has entered into separate and several Note
Purchase Agreements each dated as of February , 1997
(collectively, the "Note Purchase Agreements") between the Company
and each of the Purchasers named on Schedule A attached to the Note
Purchase Agreements (together with their successors and assigns,
the "Noteholders"), providing for, among other things, the issue
and sale by the Company to the Noteholders of $110,000,000
aggregate principal amount of its 7.88% Senior Notes, Series A, due
February , 2007 (the "Notes").
C. Pursuant to Section 9.8 of the Note Purchase Agreements,
upon which the Noteholders relied at the time of the original
issuance of the Notes, and upon which each subsequent holder of the
Notes relied at the time of its subsequent acquisition of the
Notes, the Company is required to cause the Guarantor to enter into
this Guaranty.
D. The Guarantor is part of an affiliated group of
corporations with the Company and will receive substantial direct
and indirect benefit by reason of the original issue and sale by
the Company of the Notes.
NOW, THEREFORE, in consideration of the premises and in
further consideration of the sum of Ten Dollars ($10.00) paid to
the Guarantor by the Noteholders, the receipt whereof is hereby
acknowledged, the Guarantor does hereby covenant and agree as
follows:
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used
herein shall have the meanings assigned thereto in the Note
Purchase Agreements and such definitions shall be equally
applicable to both the singular and plural forms of any of the
terms so defined.
<PAGE>
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT.
(a) Subject to Section 2(b) below, the Guarantor does hereby
irrevocably, absolutely and unconditionally guaranty unto the
Noteholders (i) the full and prompt payment of the principal of,
premium, if any, and interest on the Notes from time to time
outstanding, as and when such payments shall become due and
payable, whether by lapse of time, upon redemption or prepayment,
by extension or by acceleration or declaration or otherwise
(including (to the extent legally enforceable) interest due on
overdue payments of principal, premium, if any, or interest at the
rate set forth in the Notes) in coin or currency of the United
States of America which at the time of payment or demand therefor
shall be legal tender for the payment of public and private debts,
(ii) the full and prompt performance and observance by the Company
of each and all of the obligations, covenants and agreements
required to be performed or owned by the Company under the terms of
the Notes and the Note Purchase Agreements, and (iii) the full and
prompt payment, upon demand by any Noteholder of all costs and
expenses, legal or otherwise (including reasonable attorneys'
fees), if any, as shall have been expended or incurred in the
protection or enforcement of any right or privilege under the Notes
or the Note Purchase Agreements or in the protection or enforcement
of any rights, privileges or liabilities under this Guaranty or in
any consultation or action in connection therewith or herewith and
in each and every case irrespective of the validity, regularity, or
enforcement of any of the Notes or the Note Purchase Agreements or
any of the terms thereof or of any other like circumstance or
circumstances.
(b) The obligations of the Guarantor hereunder shall be
limited to the lesser of (i) the obligations of the Company
guaranteed hereunder, or (ii) a maximum aggregate amount equal to
the largest amount that would not render its obligations hereunder
subject to avoidance as a fraudulent transfer or conveyance under
Section 548 of Title 11 of the United States Code or any applicable
provisions of comparable state law (collectively, the "Fraudulent
Transfer Laws"), if and to the extent the Guarantor (or a trustee
on its behalf) has properly invoked the protections of the
Fraudulent Transfer Laws in each case after giving effect to all
other liabilities of the Guarantor, contingent or otherwise, that
are relevant under the Fraudulent Transfer Laws.
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE.
This is a guaranty of payment and performance and the
Guarantor hereby waives, to the fullest extent permitted by law,
any right to require that any action on or in respect of any Note
or the Note Purchase Agreements be brought against the Company or
that resort be had to any direct or indirect security for the Notes
or for this Guaranty or any other remedy. Any Noteholder may, at
its option, proceed hereunder against the Guarantor in the first
instance to collect monies when due, the payment of which is
guaranteed hereby, without first proceeding against the Company or
any other Person and without first resorting to any direct or
indirect security for the Notes or for this Guaranty or any other
<PAGE>
remedy. The liability of the Guarantor hereunder shall in no way be
affected or impaired by any acceptance by any Noteholder of any
direct or indirect security for, or other guaranties of, any
indebtedness, liability or obligation of the Company or any other
Person to any Noteholder or by any failure, delay, neglect or
omission by the Noteholder to realize upon or protect any such
indebtedness, liability or obligation or any notes or other
instruments evidencing the same or any direct or indirect security
therefor or by any approval, consent, waiver, or other action
taken, or omitted to be taken by any such Noteholder.
SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY.
(a) The Guarantor hereby consents and agrees that any
Noteholder or Noteholders from time to time, with or without any
further notice to or assent from the Guarantor, may, without in any
manner affecting the liability of the Guarantor under this
Guaranty, upon such terms and conditions as any such Noteholder may
deem advisable:
(i) extend in whole or in part (by renewal or
otherwise), modify, change, compromise, release or extend the
duration of the time for the performance or payment of any
indebtedness, liability or obligation of the Company or any
other Person secondarily or otherwise liable for any
indebtedness, liability or obligations of the Company on the
Notes, or waive any Default with respect thereto, or waive,
modify, amend or change any provision of any other instruments
and this Guaranty; or
(ii) sell, release, surrender, modify, impair, exchange
or substitute any and all property, of any nature and from
whomsoever received, held by, or for the benefit of, any such
Noteholder as direct or indirect security for the payment or
performance of any indebtedness, liability or obligation of
the Company or any other Person secondarily or otherwise
liable for any indebtedness, liability or obligation of the
Company on the Notes; or
(iii) settle, adjust or compromise any claim of the
Company against any other Person secondarily or otherwise
liable for any indebtedness, liability or obligation of the
Company on the Notes.
The Guarantor hereby ratifies and confirms any such extension,
renewal, change, sale, release, waiver, surrender, exchange,
modification, amendment, impairment, substitution, settlement,
adjustment or compromise and that the same shall be binding upon
it, and hereby waives, to the fullest extent permitted by law, any
and all defenses, counterclaims or offsets which it might or could
have by reason thereof, it being understood that the Guarantor
shall at all times be bound by this Guaranty and remain liable
hereunder.
<PAGE>
<PAGE>
(b) The Guarantor hereby waives, to the fullest extent
permitted by law: (i) notice of acceptance of this Guaranty by the
Noteholders or of the creation, renewal or accrual of any liability
of the Company, present or future, or of the reliance of such
Noteholders upon this Guaranty (it being understood that every
indebtedness, liability and obligation described in Section 1 shall
conclusively be presumed to have been created, contracted or
incurred in reliance upon the execution of this Guaranty); (ii)
demand of payment by any Noteholder from the Company or any other
Person indebted in any manner on or for any of the indebtedness,
liabilities or obligations hereby guaranteed; and (iii) presentment
for the payment by any Noteholder or any other Person of the Notes
or any other instrument, protest thereof and notice of its dishonor
to any party thereto and to the Guarantor. The obligations of the
Guarantor under this Guaranty and the rights of any Noteholder to
enforce such obligations by any proceedings, whether by action at
law, suit in equity or otherwise, shall not be subject to any
reduction, limitation, impairment or termination, whether by reason
of any claim of any character whatsoever or otherwise and shall not
be subject to any defense, set-off, counterclaim (other than any
compulsory counterclaim), recoupment or termination whatsoever.
(c) The obligations of the Guarantor hereunder shall be
binding upon the Guarantor and its successors and assigns, and
shall remain in full force and effect irrespective of:
(i) the genuineness, validity, regularity or
enforceability of the Notes, the Note Purchase Agreements or
any other instruments relating thereto or any of the terms of
any thereof, the continuance of any obligation on the part of
the Company or any other Person on the Notes or under the Note
Purchase Agreements or the power or authority or the lack of
power or authority of the Company to issue the Notes or
execute and deliver the Note Purchase Agreements or to perform
any of its obligations thereunder or the existence or
continuance of the Company or any other Person as a legal
entity; or
(ii) any default, failure or delay, willful or otherwise,
in the performance by the Company or any other Person of any
obligations of any kind or character whatsoever of the Company
or any other Person (including, without limitation, the
obligations and undertakings of the Company or any other
Person under the Notes or the Note Purchase Agreements); or
(iii) any creditors' rights, bankruptcy, receivership or
other insolvency proceeding of the Company or any other Person
or in respect of the property of the Company or any other
Person or any merger, consolidation, reorganization,
dissolution, liquidation or winding up of the Company or any
other Person; or
(iv) impossibility or illegality of performance on the
part of the Company or any other Person of its obligations
under the Notes, the Note Purchase Agreements or any other
instruments; or
<PAGE>
(v) in respect of the Company or any other Person, any
change of circumstances, whether or not foreseen or
foreseeable, whether or not imputable to the Company or any
other Person, or other impossibility of performance through
fire, explosion, accident, labor disturbance, floods,
droughts, embargoes, wars (whether or not declared), civil
commotions, acts of God or the public enemy, delays or failure
of suppliers or carriers, inability to obtain materials,
action of any Federal or state regulatory body or agency,
change of law or any other causes affecting performance, or
any other force majeure, whether or not beyond the control of
the Company or any other Person and whether or not of the kind
hereinbefore specified; or
(vi) any attachment, claim, demand, charge, Lien, order,
process, encumbrance or any other happening or event or
reason, similar or dissimilar to the foregoing, or any
withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or
any claims, demands, charges or Liens of any nature, foreseen
or unforeseen, incurred by any Person, or against any sums
payable under this Guaranty, so that such sums would be
rendered inadequate or would be unavailable to make the
payments herein provided; or
(vii) any order, judgment, decree, ruling or regulation
(whether or not valid) of any court of any nation or of any
political subdivision thereof or any body, agency, department,
official or administrative or regulatory agency of any thereof
or any other action, happening, event or reason whatsoever
which shall delay, interfere with, hinder or prevent, or in
any way adversely affect, the performance by any party of its
respective obligations under the Notes, the Note Purchase
Agreements or any instrument relating thereto; or
(viii) the failure of the Guarantor to receive any
benefit from or as a result of its execution, delivery and
performance of this Guaranty; or
(ix) any failure or lack of diligence in collection or
protection, failure in presentment or demand for payment,
protest, notice of protest, notice of Default and of
nonpayment, any failure to give notice to the Guarantor of
failure of the Company or any other Person to keep and perform
any obligation, covenant or agreement under the terms of the
Notes or the Note Purchase Agreements or failure to resort for
payment to the Company or any other Person or to any other
guaranty or to any property, security, Liens or other rights
or remedies; or
(x) the acceptance of any additional security or other
guaranty, the advance of additional money to the Company or
any other Person, the renewal or extension of the Notes or
amendments, modifications, consents or waivers with respect to
<PAGE>
the Notes or the Note Purchase Agreements, or the sale,
release, substitution or exchange of any security for the
Notes; or
(xi) any defense whatsoever that the Company or any other
Person might have to the payment of the Notes (principal,
premium, if any, or interest), other than payment in cash
thereof, or to the performance or observance of any of the
provisions of the Note Purchase Agreements, whether through
the satisfaction or purported satisfaction by the Company or
any other Person of its debts due to any cause such as
bankruptcy, insolvency, receivership, merger, consolidation,
reorganization, dissolution, liquidation, winding-up or
otherwise; or
(xii) any act or failure to act with regard to the Notes,
the Note Purchase Agreements or anything which might vary the
risk of the Guarantor; or
(xiii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of the
Guarantor in respect of the obligations of the Guarantor under
this Guaranty;
provided, that the specific enumeration of the above-mentioned
acts, failures or omissions shall not be deemed to exclude any
other acts, failures or omissions, though not specifically
mentioned above, it being the purpose and intent of this Guaranty
that the obligations of the Guarantor shall be absolute and
unconditional and shall not be discharged, impaired or varied
except by the payment of the principal of, premium, if any, and
interest on the Notes in accordance with their respective terms
whenever the same shall become due and payable as in the Notes
provided and all other sums due and payable under the Note Purchase
Agreements, at the place specified in and all in the manner and
with the effect provided in the Notes and the Note Purchase
Agreements, as amended or modified from time to time. Without
limiting the foregoing, it is understood that repeated and
successive demands may be made and recoveries may be had hereunder
as and when, from time to time, the Company shall Default under the
terms of the Notes or the Note Purchase Agreements and that
notwithstanding recovery hereunder for or in respect of any given
Default or Defaults by the Company under the Notes or the Note
Purchase Agreements, this Guaranty shall remain in full force and
effect and shall apply to each and every subsequent Default.
(d) Subject to the provisions of the Note Purchase
Agreements, all rights of any Noteholder may be transferred or
assigned at any time and shall be considered to be transferred or
assigned at any time or from time to time upon the transfer of such
Note whether with or without the consent of or notice to the
Guarantor under this Guaranty or the Company.
<PAGE>
<PAGE>
(e) To the extent of any payments made under this Guaranty,
the Guarantor shall be subrogated to the rights of the Noteholder
upon whose Note such payment was made, but the Guarantor covenants
and agrees that such right of subrogation shall be subordinate in
right of payment to the rights of any Noteholder for which full
payment has not been made or provided for and, to that end, the
Guarantor agrees not to claim or enforce any such right of
subrogation or any right of set-off or any other right which may
arise on account of any payment made by the Guarantor in accordance
with the provisions of this Guaranty, including, without
limitation, any right of subrogation, reimbursement, exoneration,
contribution or indemnification and any right to participate in any
claim or remedy of any Noteholder or Noteholders against the
Company, whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without
limitation, the right to take or receive from the Company, directly
or indirectly, in cash or other property or by set-off or in any
other manner, payment or security on account of such claim, remedy
or right unless and until 366 days after all of the Notes and all
other sums due and payable under the Note Purchase Agreements have
been fully paid and discharged. If any amount shall be paid to the
Guarantor in violation of the preceding sentence at any time prior
to the indefeasible cash payment in full of the Notes and all other
amounts payable under the Note Purchase Agreements and this
Guaranty, such amounts shall be held in trust for the benefit of
the Noteholders and shall forthwith be paid to the Noteholders to
be credited and applied to the amounts due or to become due with
respect to the Notes and all other amounts payable under the Note
Purchase Agreements and this Guaranty, whether matured or
unmatured. The Guarantor acknowledges that it has received direct
and indirect benefits from the financing arrangements contemplated
by the Note Purchase Agreements and that the waiver set forth in
this subsection is knowingly made as a result of the receipt of
such benefits.
(f) The Guarantor agrees that to the extent the Company or
any other Person makes any payment on any Note, which payment or
any part thereof is subsequently invalidated, voided, declared to
be fraudulent or preferential, set aside, recovered, rescinded or
is required to be retained by or repaid to a trustee, liquidator,
receiver, or any other Person under any bankruptcy code, common
law, or equitable cause, then and to the extent of such payment,
the obligation or the part thereof intended to be satisfied shall
be revived and continued in full force and effect with respect to
the Guarantor's obligations hereunder, as if said payment had not
been made. The liability of the Guarantor hereunder shall not be
reduced or discharged, in whole or in part, by any payment to any
Noteholder from any source that is thereafter paid, returned or
refunded in whole or in part by reason of the assertion of a claim
of any kind relating thereto, including, but not limited to, any
claim for breach of contract, breach of warranty, preference,
illegality, invalidity, or fraud asserted by any account debtor or
by any other Person.
<PAGE>
<PAGE>
(g) No Noteholder shall be under any obligation (i) to
marshal any assets in favor of the Guarantor or in payment of any
or all of the liabilities of the Company under or in respect of the
Notes or the obligations of the Guarantor hereunder or (ii) to
pursue any other remedy that the Guarantor may or may not be able
to pursue itself and that may lighten the Guarantor's burden or any
right to which the Guarantor hereby expressly waives.
(h) The obligations of the Guarantor with respect to the
guaranty and all other obligations under this Guaranty of the
Guarantor are direct and unsecured obligations of the Guarantor
ranking pari passu as against the assets of the Guarantor and pari
passu with all other present and future Indebtedness of the
Guarantor which is not expressed to be subordinate or junior in
rank to any other Indebtedness of the Guarantor (except to the
extent that the foregoing is not true by virtue of, and solely by
virtue of, Liens expressly permitted by the Note Purchase
Agreements securing other Indebtedness).
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor represents and warrants to you as follows:
(a) Organization; Power and Authority. The Guarantor is duly
organized, validly existing and, if a corporation, in good standing
under the laws of its jurisdiction of incorporation and is duly
qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other
than those jurisdictions as to which the failure to be so qualified
or in good standing could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. The
Guarantor has the corporate or other power and authority to own or
hold under lease the properties it purports to own or hold under
lease, to transact the business it transacts and proposes to
transact, to execute and deliver this Guaranty and to perform the
provisions hereof.
(b) Authorization, etc. This Guaranty has been duly
authorized by all necessary corporate or other action under its
organizational and governing instruments on the part of the
Guarantor, and this Guaranty constitutes a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as such enforceability may be
limited by (1) applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (2) general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(c) Compliance with Laws, Other Instruments, etc. (1) The
execution, delivery and performance by the Guarantor of this
Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien
in respect of any property of the Guarantor or any subsidiary
thereof under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws,
<PAGE>
or any other agreement or instrument to which the Guarantor or any
subsidiary thereof is bound or by which the Guarantor or any
subsidiary thereof or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of any
of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Guarantor or any subsidiary thereof or
(iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the
Guarantor or any subsidiary thereof, other than any contravention,
breach, default, creation, conflict or violation under clauses (i)
through (iii), inclusive, of this Section 5(c) which individually
or in the aggregate could reasonably be expected to have a Material
Adverse Effect.
(2) All obligations of the Guarantor under this Guaranty
are direct and unsecured obligations of the Guarantor ranking
pari passu with all other existing unsecured Indebtedness of
the Guarantor (actual or contingent) which is not expressed to
be subordinated or junior in rank to any other unsecured
Indebtedness of the Guarantor.
(d) Governmental Authorizations, etc. No consent, approval or
authorization of, or registration, filing or declaration with, any
Governmental Authority is required in connection with the
execution, delivery or performance by the Guarantor of this
Guaranty.
SECTION 6. GUARANTOR COVENANTS.
Section 6.1. Compliance with Law. The Guarantor will and will
cause each of its subsidiaries to comply with all laws, ordinances
or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws and
ERISA, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or
failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 6.2. Insurance. The Guarantor will and will cause each
of its Subsidiaries to maintain, with financially sound and
reputable insurers, insurance with respect to their respective
properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
<PAGE>
Section 6.3. Maintenance of Properties. The Guarantor will and
will cause each of its Subsidiaries to maintain and keep, or cause
to be maintained and kept, their respective Material properties in
good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith
may be properly conducted at all times; provided that this Section
shall not prevent the Guarantor or any subsidiary from
discontinuing the operation and the maintenance of any of its
properties if such discontinuance is desirable in the conduct of
its business and the Guarantor has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 6.4. Payment of Taxes and Claims. The Guarantor will
and will cause each of its subsidiaries to file all tax returns
required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them
or any of their properties, assets, income or franchises, to the
extent such taxes and assessments have become due and payable and
before they have become delinquent and all claims for which sums
have become due and payable that have or might become a Lien on
properties or assets of the Guarantor or any subsidiary thereof;
provided that neither the Guarantor nor any subsidiary need pay any
such tax or assessment or claims if (a) the amount, applicability
or validity thereof is contested by the Guarantor or such
subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Guarantor or a subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of
the Guarantor or such subsidiary or (b) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
Section 6.5. Corporate Existence, etc. The Guarantor will at
all times preserve and keep in full force and effect its corporate
or other existence. The Guarantor will at all times preserve and
keep in full force and effect the corporate existence of each of
its Subsidiaries and all rights and franchises of the Guarantor and
its subsidiaries unless, in the good faith judgment of the
Guarantor, the termination of or failure to preserve and keep in
full force and effect such right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 7. SUBMISSION TO JURISDICTION.
The Guarantor hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the Federal court located within the
Northern District of the State of Illinois (or if such court lacks
jurisdiction, the state courts located therein) and irrevocably
agrees that all actions or proceedings relating to this Guaranty
may be litigated in such courts, and the Guarantor waives any
objection which it may have based on improper venue or forum non
conveniens to the conduct of any proceeding in any such court and
waives personal service of any and all process upon it, and
consents that all such service of process be made by delivery to it
at the address set forth in Section 9 or to its agent referred to
<PAGE>
below at such agent's address set forth below and that service so
made shall be deemed to be completed upon actual receipt. The
Guarantor hereby irrevocably appoints the Company as its agent for
the purpose of accepting service of any process within the State of
Illinois. Nothing contained in this Section 7 shall affect the
right of any Noteholder to serve legal process in any other manner
permitted by law or to bring any action or proceeding in the courts
of any jurisdiction against the Guarantor or to enforce a judgment
obtained in the courts of any other jurisdiction.
SECTION 8. JUDGMENTS.
The Guarantor agrees that any payment made by the Guarantor to
any Noteholder or for the account of any such Noteholder in respect
of any amount required to be paid by the Guarantor in lawful
currency of the United States of America, which payment is made in
any currency other than lawful currency of the United States of
America, whether pursuant to any judgment or order of the court or
tribunal or otherwise, shall constitute a discharge of the
obligations of the Guarantor only to the extent of the amount of
lawful currency of the United States of America which may be
purchased with such other currency on the day of payment. The
Guarantor covenants and agrees that it shall, as a separate and
independent obligation, which shall not be merged in any such
judgment or order, pay or cause to be paid the amount not so
discharged and required to be paid in lawful currency of the United
States of America.
SECTION 9. NOTICES.
All communications provided for herein shall be in writing,
and (a) if to the Company or the Guarantor, delivered or mailed
prepaid by registered or certified mail or express commercial air
courier, or by facsimile communication (prompt express commercial
air courier delivery of hard copy to follow such facsimile
communication), or (b) if to any Noteholder, delivered or mailed
prepaid by express commercial air courier, or by facsimile
communication (prompt express commercial air courier delivery of
hard copy to follow such facsimile communication), in any case at
the addresses set forth below, or to such other address as such
person may designate to the other persons named below by notice
given in accordance with this Section 9:
If to any Noteholder: To its address for notices appearing
in Schedule A to the Note Purchase
Agreements, as the case may be
If to the Guarantor:
-------------------------------
-------------------------------
Attention:---------------------
<PAGE>
<PAGE>
If to the Company: Insituform Technologies, Inc.
1770 Kirby Parkway, Suite 300
Memphis, Tennessee 38138
Attention: President
SECTION 10. AMENDMENTS AND MODIFICATIONS;
SOLICITATION OF NOTEHOLDERS.
(a) This Guaranty may only be amended and/or modified by an
instrument in writing signed by the Guarantor and by the Noteholder
or Noteholders of at least 66 2/3% in aggregate principal amount of
the Notes then outstanding; provided, that without the written
consent of the Noteholders of all of the Notes then outstanding, no
such waiver, modification, alteration or amendment shall be
effective which will reduce the scope of the guaranty set forth in
this Guaranty or amend the requirements of Sections 2, 3, 4 or 8
hereof or amend this Section 10. No such amendment or modification
shall extend to or affect any obligation not expressly amended or
modified or impair any right consequent thereon.
(b) The Guarantor agrees that it will not solicit, request or
negotiate for or with respect to any proposed waiver or amendment
of any of the provisions of this Guaranty, the Note Purchase
Agreements or the Notes unless each Noteholder (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the
Guarantor and shall be afforded the opportunity of considering the
same for a period of not less than 30 days and shall be supplied by
the Guarantor with a brief statement regarding the reasons for any
such proposed waiver or amendment, a copy of the proposed waiver or
amendment and such other information regarding such amendment or
waiver as any Noteholder shall reasonably request to enable it to
make an informed decision with respect thereto. Executed or true
and correct copies of any waiver or amendment effected pursuant to
the provisions of this Section 10 shall be delivered by the
Guarantor to each Noteholder of outstanding Notes within 30 days
following the date on which the same shall have been executed and
delivered by the holder or holders of the requisite percentage of
the outstanding Notes. The Guarantor agrees that it will not,
directly or indirectly, pay or cause to be paid any remuneration,
whether by way of supplemental or additional interest, fee or
otherwise, to any Noteholder as consideration for or as an
inducement to the entering into by any Noteholder of any waiver or
amendment of any of the terms and provisions of this Guaranty, the
Note Purchase Agreements or the Notes unless such remuneration is
concurrently paid, on the same terms, ratably to the Noteholders of
all of the Notes then outstanding.
SECTION 11. PROCEEDS.
Each beneficiary of this Guaranty by its execution and
acceptance hereof agrees that any proceeds recovered hereunder will
be shared pro rata among each beneficiary hereunder or under any
other guaranty of the Guarantor.
<PAGE>
<PAGE>
SECTION 12. MISCELLANEOUS.
(a) No remedy herein conferred upon or reserved to any
Noteholder is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given
under this Guaranty now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon
any default, omission or failure of performance hereunder shall
impair any such right or power or shall be construed to be a waiver
thereof, but any such right or power may be exercised from time to
time and as often as may be deemed expedient. In order to entitle
any Noteholder to exercise any remedy reserved to it under the
Guaranty, it shall not be necessary for such Noteholder to
physically produce its Note in any proceedings instituted by it or
to give any notice, other than such notice as may be herein
expressly required.
(b) In case any one or more of the provisions contained in
this Guaranty shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein shall not in any way be
affected or impaired thereby.
(c) This Guaranty shall be binding upon the undersigned
Guarantor and its respective successors and assigns and shall inure
to the benefit of each Noteholder and its successors and assigns so
long as its Note remains outstanding and unpaid.
(d) The Guarantor hereby agrees that the obligations of the
Guarantor hereunder are joint and several with the obligations of
any other guarantor of all or any portion of the indebtedness
guaranteed hereby.
(e) This Guaranty shall be governed by and construed in
accordance with Illinois law, including all matters of
construction, validity and performance.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed by an authorized officer as of the day of
, .
[SUBSIDIARY GUARANTOR]
By
---------------------------------
Title:
Acknowledged By:
INSITUFORM TECHNOLOGIES, INC.
By
-----------------------------
Title:
<PAGE>
<PAGE>
INTERCREDITOR AGREEMENT
Dated as of ,
Among
[LENDERS]
And
[NOTEHOLDERS]
Exhibit 9.8(e)
(to Note Purchase Agreement)
<PAGE>
<PAGE>
TABLE OF CONTENTS
SECTION HEADING PAGE
Parties 1
Recitals 1
SECTION 1. DEFINITIONS 2
SECTION 2. SHARING OF RECOVERIES 4
SECTION 3. AGREEMENTS AMONG THE CREDITORS 5
Section 3.1. Independent Actions by Creditors 5
Section 3.2 Relation of Creditors 5
Section 3.3. Acknowledgment of Guaranties 5
Section 3.4. Additional Creditors 5
SECTION 4. MISCELLANEOUS 6
Section 4.1. Entire Agreement 6
Section 4.2. Notices 6
Section 4.3. Successors and Assigns 6
Section 4.4. Consents, Amendment, Waivers 6
Section 4.5. Governing Law 6
Section 4.6. Counterparts 6
Section 4.7. Sale of Interest 6
Section 4.8. Severability 6
Section 4.9. Expenses 6
Section 4.10. Term of Agreement 6
Signature Page 8
-i-
<PAGE>
<PAGE>
INTERCREDITOR AGREEMENT
This INTERCREDITOR AGREEMENT, dated as of , ,
is made among (i) each of the Lenders (as hereinafter defined) and
(ii) each of the Noteholders (as hereinafter defined); the
Noteholders, the Lenders and each of the additional Persons, if
any, that become Creditors hereunder as contemplated by Section 3.4
hereof are individually referred to herein as a "Creditor" and are
collectively referred to herein as the "Creditors".
R E C I T A L S
A. Under and pursuant to the separate and several Note
Purchase Agreements, each dated as of February 14, 1997 (as such
agreements may be modified or amended from time to time,
collectively, the "Note Purchase Agreements"), between Insituform
Technologies, Inc., a Delaware corporation (the "Company"), and
each of the Purchasers named on Schedule A attached thereto
respectively, the Company has heretofore issued and sold its 7.88%
Senior Notes, Series A, due February 14, 2007 in the aggregate
principal amount of $110,000,000 (the "Notes"). The holders of the
Notes currently outstanding are referred to herein individually as
a "Noteholder" and collectively as the "Noteholders."
B. Under and pursuant to that certain [Lender Facility]
dated as (as such agreement may be modified, amended,
renewed or replaced, including any increase in the amount thereof,
the ["Lender Facility"]) between the Company and the Lenders which
are parties thereto (individually a "Lender" and collectively the
"Lenders"), the Lenders have made available to the Company certain
credit facilities in a current aggregate principal amount up to
$ (all obligations in respect of said credit facilities
being hereinafter collectively referred to as the "Loans").
C. As required by the Note Purchase Agreements, each of
, a corporation and , a
corporation (collectively, the "Subsidiary Guarantors") have
concurrently herewith executed and delivered a Guaranty Agreement
or Guaranty Agreements (as such agreement(s) may be modified or
amended from time to time, collectively, the "Noteholder Guaranty")
dated as of pursuant to which the Subsidiary Guarantors
have irrevocably, absolutely and unconditionally guaranteed to the
Noteholders the payment of the principal of, premium, if any, and
interest on the Notes and the payment and performance of all other
obligations of the Company under the Note Purchase Agreements.
D. As required by the [Lender Facility], the Subsidiary
Guarantors have concurrently herewith executed and delivered a
Guaranty Agreement or Guaranty Agreements (as such agreement(s) may
be modified or amended from time to time, collectively, the "Lender
Guaranty") dated as of pursuant to which the Subsidiary
Guarantors have irrevocably, absolutely and unconditionally
guaranteed to the Lenders the payment and performance of all
obligations of the Company under the [Lender Facility]. The Lender
Guaranty and the Noteholder Guaranty are hereinafter referred to as
the "Subsidiary Agreements."
<PAGE>
E. Pursuant to the requirements of the Note Purchase
Agreements, the Company and the Subsidiary Guarantors have
requested and the Lenders have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
SECTION 1. DEFINITIONS.
The following terms shall have the meanings assigned to them
below in this Section 1 or in the provisions of this Agreement
referred to below:
"Bankruptcy Proceeding" shall mean, with respect to any
person, (i) the filing by such person, or consent by answer or
otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy,
for liquidation or to take advantage of any bankruptcy, insolvency,
reorganization, moratorium or other similar law of any
jurisdiction, (ii) the making of an assignment for the benefit of
such person's creditors, (iii) consent by such person to the
appointment of a custodian, receiver, trustee or other officer with
similar powers with respect to such person or with respect to any
substantial part of its property, (iv) the adjudication of such
person as insolvent or to be liquidated, (v) the taking by such
person of corporate action for the purpose of any of the foregoing,
or (vi) the entry by a court or governmental authority of competent
jurisdiction of an order appointing, without consent by such
person, a custodian, receiver, trustee or other officer with
similar powers with respect to it or with respect to any
substantial part of its property, or constituting an order for
relief or approving a petition for relief or reorganization or any
other petition in bankruptcy or for liquidation or to take
advantage of any bankruptcy or insolvency law of any jurisdiction,
or ordering the dissolution, winding-up or liquidation of such
person.
"Company" shall have the meaning assigned thereto in the
Recitals hereof.
"Credit Documents" shall mean, collectively, the Note Purchase
Agreements, the [Lender Facility] and each other agreement or
document pursuant to which any Person becomes an additional
Creditor pursuant to Section 3.4.
"Creditor" shall have the meaning assigned thereto in the
introductory paragraph hereto.
"Excess Subsidiary Payment" shall mean as to any Creditor an
amount equal to the Subsidiary Payment received by such Creditor
less the Pro Rata Share of Subsidiary Payments to which such
Creditor is then entitled.
<PAGE>
"Lender" and "Lenders" shall have the meanings assigned
thereto in the introductory paragraph hereto.
["Lender Facility"] shall have the meaning assigned thereto in
the Recitals hereof.
"Lender Guaranty" shall have the meaning assigned thereto in
the Recitals hereof.
"Loans" shall have the meaning assigned thereto in the
Recitals hereof.
"Note Purchase Agreements" shall have the meaning assigned
thereto in the Recitals hereof.
"Noteholder" and "Noteholders" shall have the meanings
assigned thereto in the introductory paragraph hereto.
"Noteholder Guaranty" shall have the meaning assigned thereto
in the Recitals hereof.
"Notes" shall have the meaning assigned thereto in the
Recitals hereof.
"Person" shall mean an individual, partnership, limited
liability company, corporation, trust or unincorporated
organization, and a government or agency or political subdivision
thereof.
"Pro Rata Share of Subsidiary Payments" shall mean as of the
date of any Subsidiary Payment to a Creditor in respect to a
Subsidiary Agreement an amount equal to the product obtained by
multiplying (x) the amount of all Subsidiary Payments made by the
Subsidiary Guarantors to all Creditors concurrently with the
payments to such Creditor less all reasonable costs incurred by
such Creditors in connection with the collection of such Subsidiary
Payments by (y) a fraction, the numerator of which shall be the
Specified Amount owing to such Creditor, and the denominator of
which is the aggregate amount of all outstanding Subject
Obligations (without giving effect to the application of any such
Subsidiary Payments).
"Receiving Creditor" shall have the meaning assigned thereto
in Section 2.
"Specified Amount" shall mean, as to any Creditor, the
aggregate amount of the Subject Obligations owed to such Creditor.
"Subject Obligations" shall mean (i) all principal of,
premium, if any, and interest on, the Notes and the Loans and all
other obligations of the Company under or in respect of the Notes
and the Loans and under the Note Purchase Agreements and the
[Lender Facility] and any other obligations of the Company to the
Lender which are guaranteed by the Lender Guaranty and (ii) all
principal of, premium, if any, and interest on, the obligations of
the Subsidiary Guarantors under or in respect of [additional
<PAGE>
facility included pursuant to Section 3.4] and any other
obligations of the Subsidiary Guarantors to [such additional
Person]; provided that any amount of such Subject Obligations which
is not allowed as a claim enforceable against the Company in a
Bankruptcy Proceeding under applicable law shall be excluded from
the computation of "Subject Obligations" hereunder.
"Subsidiary Agreements" shall have the meaning assigned
thereto in the Recitals hereof.
"Subsidiary Guarantors" shall have the meaning assigned
thereto in the Recitals hereof.
"Subsidiary Payments" shall have the meaning assigned thereto
in Section 2.
SECTION 2. SHARING OF RECOVERIES.
Each Creditor hereby agrees with each other Creditor that
payments (including payments made through setoff of deposit
balances or otherwise or payments or recoveries from any security
interest granted to any Creditor securing any Subsidiary Agreement)
made pursuant to the terms of the Subsidiary Agreements (a
"Subsidiary Payments") (x) within 90 days prior to the commencement
of a Bankruptcy Proceeding with respect to the Subsidiary
Guarantors or the Company, as the case may be, or (y) following the
acceleration of the Notes generally or the Loans or the
acceleration of any other Subject Obligation, shall be shared so
that each Creditor shall receive its Pro Rata Share of Subsidiary
Payments. Accordingly, each Creditor hereby agrees that in the
event (a) an event described in clauses (x) or (y) above shall have
occurred, (b) any Creditor shall receive a Subsidiary Payment (a
"Receiving Creditor"), and (c) any other Creditor shall not
concurrently receive its Pro Rata Share of Subsidiary Payments from
the Subsidiary Guarantors, then the Receiving Creditor shall
promptly remit the Excess Subsidiary Payment to each other Creditor
who shall then be entitled thereto so that after giving effect to
such payment (and any other payments then being made by any other
Receiving Creditor pursuant to this Section 2) each Creditor shall
have received its Pro Rata Share of Subsidiary Payments.
Any such payments shall be deemed to be and shall be made in
consideration of the purchase for cash at face value, but without
recourse, ratably from the other Creditors of such amount of Notes
or Loans (or interest therein), as the case may be (exclusive of
any lien or security interest granted to such other Creditors and
not securing a Subsidiary Agreement), necessary to cause such
Creditor to share such Excess Subsidiary Payment with the other
Creditors as hereinabove provided; provided, however, that if any
such purchase or payment is made by any Receiving Creditor and if
such Excess Subsidiary Payment or part thereof is thereafter
recovered from such Receiving Creditor by the Subsidiary Guarantors
(including, without limitation, by any trustee in bankruptcy of the
Subsidiary Guarantors or any creditor thereof), the related
purchase from the other Creditors shall be rescinded ratably and
the purchase price restored as to the portion of such Excess
<PAGE>
Subsidiary Payment so recovered, but without interest; and provided
further nothing herein contained shall obligate any Creditor to
resort to any setoff, application of deposit balance or other means
of payment under any Subsidiary Agreement or avail itself of any
recourse by resort to any property of the Company or the Subsidiary
Guarantors, the taking of any such action to remain within the
absolute discretion of such Creditor without obligation of any kind
to the other Creditors to take any such action.
SECTION 3. AGREEMENTS AMONG THE CREDITORS.
Section 3.1. Independent Actions by Creditors. Nothing
contained in this Agreement shall prohibit any Creditor from
accelerating the maturity of, or demanding payment from the
Subsidiary Guarantors on, any Subject Obligation of the Company or
the Subsidiary Guarantors, as the case may be, to such Creditor or
from instituting legal action against the Company or the Subsidiary
Guarantors to obtain a judgment or other legal process in respect
of such Subject Obligation, but any funds received from the
Subsidiary Guarantors in connection with any recovery under any
Subsidiary Agreement (exclusive of recoveries arising from liens or
security interests granted to other Creditors and not securing any
Subsidiary Agreement) shall be subject to the terms of this
Agreement.
Section 3.2. Relation of Creditors. This Agreement is entered
into solely for the purposes set forth herein, and no Creditor
assumes any responsibility to any other party hereto to advise such
other party of information known to such regarding the financial
condition of the Company or the Subsidiary Guarantors or of any
other circumstances bearing upon the risk of nonpayment of the
Subject Obligations. Each Creditor specifically acknowledges and
agrees that nothing contained in this Agreement is or is intended
to be for the benefit of the Company or the Subsidiary Guarantors
and nothing contained herein shall limit or in any way modify any
of the obligations of the Company or the Subsidiary Guarantors to
the Creditors.
Section 3.3. Acknowledgment of Guaranties. The Lender hereby
expressly acknowledges the existence of the Noteholder Guaranty and
the Noteholders hereby expressly acknowledge the existence of the
Lender Guaranty.
Section 3.4. Additional Creditors. Additional Persons may
become "Creditors" hereunder by executing and delivering to each of
the then existing Creditors (i) a copy of this Agreement so
executed and (ii) a copy of the agreement or documents pursuant to
which such Person becomes a creditor of the Subsidiary Guarantors.
Accordingly, upon the execution and delivery of any such copy of
this Agreement by any such Person, such Person shall thereinafter
become a Creditor for all purposes of this Agreement.
<PAGE>
<PAGE>
Notwithstanding the foregoing or any other provision of this
Agreement, the provisions hereof shall not in any manner modify any
covenant, obligation or agreement of the Company and its
Subsidiaries contained in the Credit Documents with respect to (x)
limitations on additional indebtedness of the Company or any
Subsidiary permitted under any Credit Document or (y) limitations
on liens or security interests which may be created or granted by
the Company or any Subsidiary under such Credit Document.
SECTION 4. MISCELLANEOUS.
Section 4.1. Entire Agreement. This Agreement represents the
entire Agreement among the Creditors and, except as otherwise
provided, this Agreement may not be altered, amended or modified
except in a writing executed by all the parties to this Agreement.
Section 4.2. Notices. Notices hereunder shall be given to the
Creditors at their addresses as set forth in the Note Purchase
Agreements or the [Lender Facility], as the case may be, or at such
other address as may be designated by each in a written notice to
the other parties hereto.
Section 4.3. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of each of the Creditors and
their respective successors and assigns, whether so expressed or
not, and, in particular, shall inure to the benefit of and be
enforceable by any future holder or holders of any Subject
Obligations, and the term "Creditor" shall include any such
subsequent holder of Subject Obligations, wherever the context
permits.
Section 4.4. Consents, Amendment, Waivers. All amendments,
waivers or consents of any provision of this Agreement shall be
effective only if the same shall be in writing and signed by all of
the Creditors.
Section 4.5. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of
Illinois.
Section 4.6. Counterparts. This Agreement may be executed in
any number of counterparts, all of which taken together shall
constitute one Agreement, and any of the parties hereto may execute
this Agreement by signing any such counterpart.
Section 4.7. Sale of Interest. No Creditor will sell, transfer
or otherwise dispose of any interest in the Subject Obligations
unless such purchaser or transferee shall agree, in writing, to be
bound by the terms of this Agreement, or unless the Subject
Obligations are sold, transferred or disposed of at a time when the
Subsidiary Agreements are no longer in effect for the benefit of
such Subject Obligations.
<PAGE>
<PAGE>
Section 4.8. Severability. In case any one or more of the
provisions contained in this Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
Section 4.9. Expenses. In the event of any litigation to
enforce this Agreement, the prevailing party shall be entitled to
its reasonable attorney's fees (including the allocated costs of
in-house counsel).
Section 4.10. Term of Agreement. This Agreement shall
terminate when all Subject Obligations are paid in full and such
payments are not subject to any possibility of revocation or
rescission or until all of the parties hereto mutually agree in a
writing to terminate this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first above written.
[NOTEHOLDER]
By
------------------------------
Its
[NOTEHOLDER]
By
------------------------------
Its
[NOTEHOLDER]
By
------------------------------
Its
[LENDER]
By
------------------------------
Its
[LENDER]
By
------------------------------
Its
<PAGE>
<PAGE>
[LENDER]
By
------------------------------
Its
The undersigned hereby acknowledge and agree to the foregoing
Agreement.
INSITUFORM TECHNOLOGIES, INC.
By
-----------------------------
Its
[SUBSIDIARY GUARANTOR]
By
-----------------------------
Its
Exhibit 10.9
AMENDMENT NO. 1 TO AGREEMENT
Amendment No. 1 dated as of November 18, 1996, to Agreement
dated as of July 3, 1992 (the "Original Agreement") by and between
Insituform Technologies, Inc. (formerly Insituform of North
America, Inc.; hereinafter "ITI") and James D. Krugman ("Krugman").
W I T N E S S T H:
WHEREAS, the parties have entered into the Original Agreement
and desire to effectuate the amendments thereto hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. Definitions. Each reference in the Original Agreement to
"INA" is hereby deemed a reference to "ITI". Each reference in the
Original Agreement to "employ" and "employment" is hereby deemed a
reference to, respectively, "engage" and "engagement". Each
reference in the Original Agreement to "Employment Period" is
hereby deemed a reference to "Engagement Period". Each reference in
the Original Agreement to "salary" is hereby deemed a reference to
"fee".
2. Duties. Section 1 of the Original Agreement is hereby
amended by deleting the reference to "Chairman of the Board of
Directors" and substituting therefor a reference to "consultant and
advisor to ITI in connection with its business, under the direction
of the board of directors and of the President of ITI, to provide
ITI with such consulting services as ITI may, upon reasonable prior
notice, from time to time reasonably require of him."
3. Payments. Section 3 of the Original Agreement is hereby
amended by deleting the reference to "during the Employment Period"
and inserting in lieu thereof a reference to "hereunder", and
inserting a further reference, immediately following the word
"installments", to "from the Effective Date through the period
ending on December 9, 1998".
4. Term. Section 1 of the Original Agreement is hereby
amended by deleting the reference to "the later of (i) the sixth
anniversary of the Effective Date or (ii) the date of the sixth
annual meeting of shareholders of INA following the date hereof"
and substituting therefor a reference to "November 18, 1999".
5. Miscellaneous. Except as set forth herein, the Original
Agreement shall remain in full force and effect and continue to
bind the parties hereto. This Amendment No. 1 contains the entire
agreement of the parties with respect to the subject matter herein
and supersedes all other understandings, oral or written, with
respect thereto. This Amendment No. 1 may be executed in
counterparts, each of which shall be deemed an original and both of
which shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 1 as of the effective date first-above written.
INSITUFORM TECHNOLOGIES, INC.
By s/Jerome Kalishman
--------------------------
Jerome Kalishman
Chairman of the Board
s/James D. Krugman
----------------------------
James D. Krugman
Exhibit 10.11
As of November 18, 1996
Mr. Jerome Kalishman
11445 Conway Road
St. Louis, Missouri 63131
Dear Mr. Kalishman:
Reference is hereby made to the Agreement dated October 25,
1995 (the "Agreement") between Insituform Technologies, Inc.
("ITI") and you, pursuant to which you have served as Vice Chairman
of the Board of Directors of ITI and ITI pays to you an annual fee
in consideration for such services.
This letter shall confirm that ITI's appointment of you, and
your service, as Chairman of the Board of Directors of ITI shall,
during the period thereof, satisfy the respective obligations of
ITI to engage you, and for you to serve, as Vice Chairman of the
Board of Directors of ITI; and that your service as Chairman of the
Board shall, during the period thereof, for all purposes of the
Agreement, without limitation including the payment of fees and
other amounts thereunder, constitute service as Vice Chairman of
the Board thereunder.
Except as set forth herein, the Agreement shall remain in full
force and effect and continue to bind the parties thereto. Please
evidence your agreement with the foregoing by executing the
enclosed counterpart of this letter in the space below provided for
that purpose.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
---------------------------
Anthony W. Hooper
President
AGREED:
s/Jerome Kalishman
- --------------------------
Jerome Kalishman
Exhibit 10.13
November 18, 1996
Mr. Anthony Hooper
2274 Dogwood Meadows Cove
Germantown, Tennessee 38139
Dear Tony:
This letter will confirm the offer we discussed to have you
serve as the President and chief executive officer of Insituform
Technologies, Inc. ("ITI"). The principal terms and conditions of
the offer are as follows:
1. Base Salary. The annual base salary for the position will
be $325,000 (the "Base Salary"). Base Salary will be
reviewed on an annual basis.
2. Bonus. Upon accomplishment of such annual goals for ITI
as shall be determined by the Board of Directors of ITI,
you will be entitled to receive a bonus in a maximum
amount of 50% of your Base Salary. The amount of your
bonus will also be reviewed annually.
3. Board Appointment. The Company will endeavor to have you
appointed as a director of ITI. As a director you will
be entitled to an indemnification agreement in the form
supplied to all directors of the Company.
4. Stock Options. Effective upon your assumption of the
position of President and chief executive officer of ITI,
and appointment to the Board of Directors (the "Effective
Date"), an award of the following stock options pursuant
to ITI's 1992 Director Stock Option Plan (the "Plan")
will become effective:
(a) Stock options (the "Initial Options) for
the purchase of 100,000 shares of the class A
common stock, $.01 par value (the "Common Stock"),
of ITI, such options to become exercisable with
respect to 10% of such shares on the first
anniversary of the Effective Date, with respect to
an additional 20% of such shares on the second
anniversary of the Effective Date, with respect to
an additional 30% of such shares on the third
anniversary of the Effective Date, and with respect
to the remaining 40% of such shares on the fourth
<PAGE>
anniversary of the Effective Date, such options to
expire on the fifth anniversary of the Effective
Date. The exercise price per share for the Initial
Options shall be the fair market value per share on
the Effective Date as determined under the terms of
the Plan.
(b) Stock options (the "Additional Options")
for the purchase of 50,000 shares of Common Stock,
such options to become exercisable with respect to
10% of such shares on the second anniversary of the
Effective Date, with respect to an additional 20%
of such shares on the third anniversary of the
Effective Date, with respect to an additional 30%
of such shares on the fourth anniversary of the
Effective Date, and with respect to the remaining
40% of such shares on the fifth anniversary of the
Effective Date, such options to expire on the sixth
anniversary of the Effective Date. The exercise
price per share for the Additional Options shall be
$15.00.
The Initial Options and the Additional Options shall be
in addition to the options to acquire shares of Common
Stock you presently hold, and: (x) to the maximum extent
permitted under the limitations contained in the Internal
Revenue Code (the "Code") and considering your
outstanding options, the Initial Options shall be
"incentive stock options", the remainder of which shall
be non-qualified stock options; and (y) after giving
effect to the foregoing clause (x), to the maximum extent
permitted under the limitations contained in the Code the
Additional Options shall be "incentive stock options",
the remainder of which shall be non-qualified stock
options. The foregoing exercise schedules anticipate
your continued employment with ITI as set forth in the
Plan, such options otherwise to conform to the provisions
of the Plan and the form of option agreements thereunder
heretofore adopted by the Director Stock Option Committee
of the Board of Directors.
In addition, the Initial Options and the Additional
Options will provide that they become immediately
exercisable upon the occurrence of a change in control of
ITI 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 Securities Exchange Act of 1934 (or
in response to any similar item on any similar schedule
or form), whereby any "person" (as defined under Section
13(d) of said Act) who is not on the date hereof the
"beneficial owner" (as defined in Rule 13d-3 under said
Act) of in excess of 5% of the outstanding Common Stock
<PAGE>
becomes the beneficial owner of in excess of 50% of the
outstanding Common Stock.
5. Additional Benefits.
(a) You shall be provided with a car allowance in
the amount currently paid to you, subject to adjustment
in accordance with ITI's policy.
(b) You will be reimbursed for country club
membership fees for one club in the Memphis area.
(c) You will participate in the ITI 401(k) Profit-
Sharing Plan, and medical insurance and life insurance
programs, including ITI's supplemental executive life
insurance and long-term disability program.
(d) You will receive holidays and vacations in
accordance with ITI's policy, with the understanding that
the position of President currently provides four weeks
of vacation.
6. Severance. In the event you are terminated for reasons
other than "cause", you would be entitled to severance
equal to twelve months' Base Salary, which would be paid
over that period. "Cause" shall be defined as a
substantial dereliction of duty after written notice
thereof, conviction of a felony or inability to report
for work for a period of four months or greater.
7. Secrecy; Non-Competition. You hereby acknowledge and
agree that you have previously entered into a Non-
Disclosure and Non-Competition Agreement dated January
27, 1994 with ITI, the terms of which are hereby
incorporated by this reference herein and deemed to be a
part of this letter. Without limiting the provisions
thereof, you hereby agree that, during your employment or
other relationship with ITI or any Affiliate thereof (as
hereinafter defined), and for a period of one year
subsequent to the termination of your employment or other
relationship with ITI or any Affiliate thereof, you will
not, directly or indirectly, engage in the business of
rehabilitating, lining, relining, coating, constructing
or reconstructing pipelines, sewers, conduits or
passageways (the "Services") anywhere in the world, or
otherwise engage in Prohibited Competition (as
hereinafter defined). You agree and acknowledge that it
is contemplated that ITI will continue to seek and obtain
work in the United States and internationally and
acknowledge that ITI's business presently involves
operations in the United States and internationally.
Accordingly, you agree that the foregoing geographic
<PAGE>
scope is reasonable in light of current and presently
anticipated operations of ITI.
For purposes of this Section 7, "Prohibited Competition"
shall include, but not be limited to, acting as
consultant, advisor, independent contractor, officer,
manager, employee, principal, agent, director or trustee
of any corporation, partnership, association or agent or
agency, or directly or indirectly owning more than one
percent of the outstanding capital stock of any
corporation, or being a member or employee of any
partnership or any owner or employee of any other
business, any of which is engaged in providing any of the
Services. "Prohibited Competition" also shall include (in
addition to the foregoing):
(i) Accepting employment with a customer of
ITI or of its Affiliates with the intent or purpose
of transferring defined business performed by ITI
or its Affiliates to a department, division or
affiliate of the customer;
(ii) Requesting or advising any of the
customers, suppliers, or other business contacts of
ITI or its Affiliates to withdraw, curtail or
cancel their business with ITI or its Affiliates;
or
(iii) Causing or inducing, or attempting to
cause or induce, either directly or indirectly, any
employees, sales representatives, consultants or
other personnel of ITI or its Affiliates to
terminate their relationships or employment or
breach their agreements with ITI or its Affiliates,
whether for the purpose of accepting employment
with you or any other person, firm, association or
corporation with which you are associated, or
otherwise.
As used herein, "Affiliate" shall mean any entity
directly or indirectly controlled by ITI.
You recognize that the breach of any of your obligations
under this Section 7 may give rise to irreparable injury
to ITI or its Affiliates inadequately compensable in
damages and that, accordingly, ITI or any of its
Affiliates may seek injunctive relief against the breach
or threatened breach of the within undertaking, in
addition to other remedies at law or in equity which may
be available. You acknowledge that compliance with your
obligations under this Section 7 will not impair your
ability to earn a livelihood.
<PAGE>
If any restriction set forth in this Section 7 is found
by any court of competent jurisdiction to be
unenforceable because it extends for too long a period of
time or over too great range of activities or in too
broad a geographic area, it shall be interpreted and
amended automatically to extend only over the maximum
period of time, range of activities or geographic area as
to which it may be enforceable to protect the interests
of ITI and its Affiliates.
* * *
I look forward to your assuming the position of President and
chief executive officer of ITI and continuing as a part of this
exciting opportunity in your new capacity. If the above accurately
reflects our understandings, please sign the copy of his letter
where indicated and send such copy back to me acknowledging your
acceptance of the offer.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/Jerome Kalishman
----------------------------
Jerome Kalishman
Chairman of the Board
Accepted and Agreed
this 18th day of November, 1996
s/Anthony W. Hooper
- ----------------------------
Anthony W. Hooper
Exhibit 10.20
INSITUFORM TECHNOLOGIES, INC.
1992 EMPLOYEE STOCK OPTION PLAN
1. Purposes of Plan. The purposes of this Plan, which
shall be known as the Insituform Technologies, Inc. 1992 Employee
Stock Option Plan, and is hereinafter referred to as the "Plan",
are (i) to provide incentives for key employees of Insituform
Technologies, Inc. (the "Company") and any parent and subsidiary
corporations (within the respective meanings of Sections 424(e) and
424(f) of the Internal Revenue Code of 1986, as amended (the
"Code"), and referred to herein as "Parent" and "Subsidiary,"
respectively), and to consultants and other individuals providing
services to such companies, by encouraging their ownership of the
class A common stock, $.01 par value (the "Common Stock"), of the
Company, and (ii) to aid the Company in retaining such key
employees and other persons, upon whose efforts the Company's
success and future growth depends, and attracting other such
employees and other persons.
2. Administration. The Plan shall be administered by
the Board of Directors of the Company or, as determined by the
Board of Directors in its sole discretion, by a committee from time
to time appointed by the Board of Directors and consisting of not
less than two of its members (the Board of Directors, or such
committee, for purposes of this Plan hereinafter referred to as the
"Committee"), as hereinafter provided. Subject to the terms of the
Plan, the Committee shall have plenary authority to determine the
key employees, consultants and other individuals to whom options
are to be granted under the Plan, the number of shares to be
subject to each such option, the terms and conditions upon which
the options are granted and are exercisable and whether such
options will be incentive stock options or non-qualified stock
options. For purposes of administration, the Committee, subject to
the terms of the Plan, shall have plenary authority to establish
such rules and regulations, make such determinations and
interpretations and take such other administrative actions as it
deems necessary or advisable. All determinations and
interpretations made by the Committee shall be final, conclusive
and binding on all persons, including Optionees (as hereinafter
defined) and their legal representatives and beneficiaries.
The Board of Directors shall designate one of the members
of the Committee as its Chairman. The Committee shall hold its
meetings at such times and at such places as it may determine. A
majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and
signed by all members shall be as effective as if it had been made
by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the
Committee). No member of the Committee shall be liable for any act
or omission with respect to his service on the Committee if he acts
<PAGE>
in good faith and in a manner he reasonably believes to be in or
not opposed to the best interests of the Company. Service on the
Committee shall constitute service as a director of the Company for
all purposes.
The Committee may, in its sole discretion, authorize the
Non-Insider Stock Option Committee (the "Non-Insider Committee") of
the Board of Directors to determine the key employees, consultants
and other individuals to whom options otherwise authorized by the
Committee are to be granted, in each case subject to the terms of
the Plan and such authorization by the Committee and insofar as
such optionees do not constitute "officers", for purposes of
Section 16 of the Securities and Exchange Act of 1934; and, in the
event the Non-Insider Committee does not determine such
individuals, shares of Common Stock otherwise covered by options
authorized by the Committee and submitted to the Non-Insider Stock
Option Committee shall be available for further options hereunder.
The Non-Insider Committee shall be appointed from time to
time by the Board of Directors and shall consist of one or more of
its members, who need not be members of the Committee. The Non-
Insider Committee shall hold its meetings at such times and at such
places as it may determine. A majority of its members shall
constitute a quorum. All determinations made by the Non-Insider
Committee shall be made by a majority of its members. Any decision
or determination reduced to writing and signed by all members shall
be effective as if it had been made by a majority vote at a meeting
duly called and held. The Non-Insider Committee may appoint a
Secretary (who need not be a member of the Committee). No member
of the Non-Insider Committee shall be liable for any act or
omission with respect to his service on the Committee if he acts in
good faith and in a manner he reasonably believes to be in or not
opposed to the best interests of the Company. Service on the Non-
Insider Committee shall constitute service as a director of the
Company for all purposes.
3. Stock Available for Options. There shall be
available for options under the Plan the total of 1,000,000 shares
of Common Stock, subject to any adjustments which may be made
pursuant to Section 5(f) hereof. Shares of Common Stock used for
purposes of the Plan may be either authorized and unissued shares,
or previously issued shares held in the treasury of the Company, or
both. Shares of Common Stock covered by options which have
terminated or expired prior to exercise shall be available for
further options hereunder.
4. Eligibility. Options under the Plan may be granted
to key employees of the Company or any Parent or Subsidiary
thereof, including officers of the Company or any Parent or
Subsidiary thereof, and to consultants and other individuals
providing services to the Company or any Parent or Subsidiary.
<PAGE>
Options may not be granted under the Plan to any member of the
Board of Directors of the Company (whether or not a key employee
of, or a consultant or other individual providing services to, the
Company or any Parent or Subsidiary). Options may be granted to
eligible individuals whether or not they hold or have held options
previously granted under the Plan or otherwise granted or assumed
by the Company. In selecting individuals for options, the
Committee (with reference to any action of the Non-Insider
Committee, if and to the extent authorized pursuant to Section 2)
may take into consideration any factors it may deem relevant,
including its estimate of the individual's present and potential
contributions to the success of the Company and/or any Parent or
Subsidiary thereof. Service as a consultant of or to the Company
or any Parent or Subsidiary shall be considered employment for
purposes of the Plan (and the period of such service shall be
considered the period of employment for purposes of Section 5(d) of
the Plan); provided, however, that incentive stock options may be
granted under the Plan only to an individual who is an "employee"
(as such term is used in Section 422 of the Code) of the Company or
any Subsidiary or Parent.
5. Terms and Conditions of Options. The Committee
(with reference to any action of the Non-Insider Committee, if and
to the extent authorized pursuant to Section 2) shall, in its
discretion, prescribe the terms and conditions of the options to
be granted hereunder which terms and conditions need not be the
same in each case, subject to the following:
(a) Option Price. The price at which each share
of Common Stock covered by an option granted under the Plan may be
purchased shall be determined by the Committee (with reference to
any action of the Non-Insider Committee, if and to the extent
authorized pursuant to Section 2) and shall not be less than the
lesser of (i) the tangible book value per share of Common Stock,
determined in accordance with generally accepted accounting
principles, as of the end of the fiscal quarter of the Company
immediately preceding the fiscal quarter in which the option is
granted, or (ii) the market value per share of Common Stock on the
date of grant of an option as determined pursuant to Section 5(c).
The date of the grant of an option shall be the date specified by
the Committee (with reference to any action of the Non-Insider
Committee, if and to the extent authorized pursuant to Section 2)
in its grant of the option.
(b) Option Period. The period for exercise of an
option shall in no event be more than ten years from the date of
grant. Options may, in the discretion of the Committee, be made
exercisable in installments during the option period. Any shares
not purchased on any applicable installment date may be purchased
thereafter at any time before the expiration of the option period.
<PAGE>
(c) Exercise of Options. In order to exercise an
option, the holder thereof (the "Optionee") shall deliver to the
Company written notice specifying the number of shares of Common
Stock to be purchased, together with cash or a certified or bank
cashier's check payable to the order of the Company in the full
amount of the purchase price therefor; provided that, for the
purpose of assisting an Optionee to exercise an option, the Company
may make loans to the Optionee or guarantee loans made by third
parties to the Optionee, on such terms and conditions as the Board
of Directors may authorize and approve; and provided further that
such purchase price may be paid in shares of Common Stock owned by
the Optionee having a market value on the date of exercise equal to
the aggregate purchase price, or in a combination of cash and
Common Stock. For purposes of the Plan, the market value per share
of Common Stock shall be the last sale price regular way on the
date of reference, or, in case no sale takes place on such day, the
average of the closing bid and asked prices regular way, in either
case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any national
securities exchange, the last sale price of the Common Stock as
reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System on such date,
or if the Common Stock is not so reported, the average of the
closing high bid and low asked prices of the Common Stock in the
over-the-counter market on such date, as reported on the NASDAQ
system, or if there are no such prices reported on the NASDAQ
system on such date, as furnished to the Committee by a New York
Stock Exchange member selected from time to time by the Committee
for such purpose. If there is no bid or asked price reported on
any such date, the market value shall be determined by the
Committee in accordance with the regulations promulgated under
Section 2031 of the Code, or by any other appropriate method
selected by the Committee. An Optionee shall have none of the
rights of a stockholder until the shares of Common Stock are issued
to him. An option may not be exercised for less than ten shares of
Common Stock, or the number of shares of Common Stock remaining
subject to such option, whichever is smaller.
(d) Effect of Termination of Employment. An
option may not be exercised after the Optionee has ceased to be in
the employ of the Company or any Parent or Subsidiary, except in
the following circumstances:
(i) if the Optionee's employment is
terminated by action of his employer, or by
reason of disability or retirement under any
retirement plan maintained by the Company or
any Parent or Subsidiary thereof, the option
may be exercised by the Optionee within 30
days after such termination, but only as to
<PAGE>
any shares exercisable on the date the Optionee's
employment so terminates;
(ii) in the event of the death of the
Optionee during the 30-day period after
termination of employment covered by (i)
above, the person or persons to whom his
rights are transferred by will or the laws of
descent and distribution shall have a period
of one year from the date of his death to
exercise any options which were exercisable by
the Optionee at the time of his death;
(iii) in the event of the death of the
Optionee while employed, the option shall
thereupon become exercisable in full, and the
person or persons to whom the Optionee's
rights are transferred by will or the laws of
descent and distribution shall have a period
of one year from the date of the Optionee's
death to exercise such option.
The provisions of the foregoing clause (iii) shall apply to any
outstanding options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding
options in excess thereof shall, immediately upon the occurrence of
the event described in the foregoing clause (iii), be treated for
all purposes of the Plan as nonstatutory stock options and shall be
immediately exercisable as such as provided in the foregoing clause
(iii).
In no event shall any option be exercisable more than ten
years from the date of grant thereof. Nothing in the Plan or in
any option granted pursuant to the Plan (in the absence of an
express provision to the contrary) shall confer on any individual
any right to continue in the employ of the Company or any Parent or
Subsidiary thereof or interfere in any way with the right of the
Company to terminate his employment at any time.
(e) Nontransferability of Options. During the
lifetime of an Optionee, options held by such Optionee shall be
exercisable only by him. No option shall be transferable other
than by will or by the laws of descent and distribution.
(f) Adjustments for Change in Stock Subject to
Plan and Other Events. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other change
in the corporate structure or shares of the Company, the Committee
shall make such adjustments, if any, as it deems appropriate in the
<PAGE>
number and kind of shares subject to the Plan, in the number and
kind of shares covered by outstanding options, or in the option
price per share.
(g) Registration, Listing and Qualification of
Shares of Stock. Each option shall be subject to the requirement
that if at any time the Board of Directors shall determine that the
registration, listing or qualification of the shares of Common
Stock covered thereby upon any securities exchange or under any
federal or state law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or
the purchase of shares of Common Stock thereunder, no such option
may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of
Directors. The Company may require
that any person exercising an option shall make such
representations and agreements and furnish such information as it
deems appropriate to assure compliance with the foregoing or any
other applicable legal requirement.
(h) Other Terms and Conditions. The Committee
may impose such other terms and conditions, not inconsistent with
the terms hereof, on the grant or exercise of options, as it deems
advisable.
6. Provisions Applicable to Incentive Stock Options.
The Committee (with reference to any action of the Non-Insider
Committee, if and to the extent authorized pursuant to Section 2)
may, in its discretion, grant "incentive stock options" (within the
meaning of Section 422 of the Code) under the Plan to eligible
employees, provided, however, that: (a) no such incentive stock
option shall be granted at an option price which is less than the
market value per share of Common Stock on the date of the grant;
(b) no such incentive stock option shall be issued to any one
Optionee if the aggregate fair market value, determined at the time
of the grant of such incentive stock options, of the shares with
respect to which such incentive stock options are exercisable for
the first time by such Optionee during any calendar year, together
with all options under any other incentive stock option plan of the
Company exercisable during such year, exceeds $100,000; (c) no such
incentive stock option shall be granted to any Optionee who at the
time such option is granted owns more than 10 percent of the total
combined voting stock of the Company unless (i) the option price is
not less than 110 percent of the fair market value per share of
stock on the date of the grant, and (ii) the option is not
exercisable after five years from the date such option is granted;
and (d) Section 5(d)(ii) hereof shall not apply to any incentive
stock option.
<PAGE>
7. Withholding Tax. Upon the disposition by any person
of shares of Common Stock acquired pursuant to the exercise of an
option granted pursuant to the Plan, the Company shall have the
right to require such person to pay the Company the amount of any
taxes which the Company may be required to withhold with respect to
such shares.
8. Amendment and Termination. Unless the Plan shall
theretofore have been terminated as hereinafter provided, the Plan
shall terminate on, and no option shall be granted thereunder after
March 31, 2002; provided, however, that the Board of Directors may
at any time prior to that date terminate the Plan. The Board of
Directors may at any time amend the Plan; provided, however, that,
except as contemplated in Section 5(f) hereof, the Board of
Directors shall not, without approval by a majority of the votes
cast by the stockholders of the Company at a meeting of stock-
holders at which a proposal to amend the Plan is voted upon: (i)
increase the maximum number of shares of Common Stock for which
options may be granted under the Plan, (ii) change the formula as
to minimum option prices, (iii) extend the period during which
options may be granted or exercised, or (iv) amend the requirements
as to the class of persons eligible to receive options. No
termination or amendment of the Plan may, without the consent of an
Optionee, adversely affect the rights of such Optionee under any
option held by such Optionee.
9. Effectiveness of Plan. The Plan will not be made
effective unless approved by a majority of the votes cast by the
stockholders of the Company at a meeting of stockholders within
twelve (12) months from the date the Plan is adopted by the Board
of Directors, duly called and held for such purpose, and no option
granted hereunder shall be exercisable prior to such approval.
10. Other Actions. Nothing contained in the Plan shall
be construed to limit the authority of the Company to exercise its
corporate rights and powers, including but not by way of
limitation, the right of the Company to grant or assume options for
proper corporate purposes other than under the Plan with respect to
any employee or other person, firm, corporation or association.
Exhibit 10.21
INSITUFORM TECHNOLOGIES, INC.
1992 DIRECTOR STOCK OPTION PLAN
1. Purposes of Plan. The purposes of this Plan, which
shall be known as the Insituform Technologies, Inc. 1992 Director
Stock Option Plan, and is hereinafter referred to as the "Plan",
are (i) to provide incentives for members of the Board of Directors
of Insituform Technologies, Inc. (the "Company") by encouraging
their ownership of the class A common stock, $.01 par value (the
"Common Stock"), of the Company, and (ii) to aid the Company in
retaining such directors, upon whose efforts the Company's success
and future growth depends, and attracting other such directors.
2. Administration. The Plan shall be administered by
the Board of Directors of the Company or, as determined by the
Board of Directors in its sole discretion, by a committee from time
to time appointed by the Board of Directors and consisting of not
less than two of its members (the Board of Directors, or such
committee, for purposes of this Plan hereinafter referred to as the
"Committee"), as hereinafter provided. Subject to the terms of the
Plan, the Committee shall have plenary authority to determine the
directors to whom options are to be granted, the number of shares
to be subject to each such option, the terms and conditions upon
which the options are granted and are exercisable, and whether such
options will be incentive stock options or non-qualified stock
options. For purposes of administration, the Committee, subject to
the terms of the Plan, shall have plenary authority to establish
such rules and regulations, make such determinations and inter-
pretations, and take such other administrative actions as it deems
necessary or advisable. All determinations and interpretations
made by the Committee shall be final, conclusive and binding on all
persons, including Optionees (as hereinafter defined) and their
legal representatives and beneficiaries.
The Board of Directors shall designate one of the members
of the Committee as its Chairman. The Committee shall hold its
meetings at such times and at such places as it may determine. A
majority of its members shall constitute a quorum. All
determinations of the Committee shall be made by a majority of its
members. Any decision or determination reduced to writing and
signed by all members shall be as effective as if it had been made
by a majority vote at a meeting duly called and held. The
Committee may appoint a secretary (who need not be a member of the
Committee). No member of the Committee shall be liable for any act
or omission with respect to his service on the Committee if he acts
in good faith and in a manner he reasonably believes to be in or
not opposed to the best interests of the Company. Service on the
Committee shall constitute service as a director of the Company for
all purposes.
<PAGE>
<PAGE>
3. Stock Available for Options. There shall be
available for options under the Plan a total of 500,000 shares of
Common Stock, subject to any adjustments which may be made pursuant
to Section 5(f) hereof. Shares of Common Stock used for purposes
of the Plan may be either authorized and unissued shares, or
previously issued shares held in the treasury of the Company, or
both. Shares of Common Stock covered by options which have
terminated or expired prior to exercise shall be available for
further options hereunder.
4. Eligibility. Options under the Plan may be granted
to directors of the Company (including officers, key employees and
consultants of the Company). Options may be granted to such
directors whether or not they hold or have held options previously
granted under the Plan or otherwise granted or assumed by the
Company. In selecting directors for options, the Committee may
take into consideration any factors it may deem relevant, including
its estimate of the director's present and potential contributions
to the success of the Company.
5. Terms and Conditions of Options. The Committee
shall, in its discretion, prescribe the terms and conditions of
the options to be granted hereunder which terms and conditions
need not be the same in each case, subject to the following:
(a) Option Price. The price at which each share
of Common Stock covered by an option granted under the Plan may be
purchased shall be determined by the Committee and shall not be
less than the lesser of (i) the tangible book value per share of
Common Stock, determined in accordance with generally accepted
accounting principles, as of the end of the fiscal quarter of the
Company immediately preceding the fiscal quarter in which the
option is granted, or (ii) the market value per share of Common
Stock on the date of grant of an option as determined pursuant to
Section 5(c). The date of the grant of an option shall be the date
specified by the Committee in its grant of the option.
(b) Option Period. The period for exercise of an
option shall in no event be more than ten years from the date of
grant. Options may, in the discretion of the Committee, be made
exercisable in installments during the option period. Any shares
not purchased on any applicable installment date may be purchased
thereafter at any time before the expiration of the option period.
(c) Exercise of Options. In order to exercise an
option, the holder thereof (the "Optionee") shall deliver to the
Company written notice specifying the number of shares of Common
Stock to be purchased, together with cash or a certified or bank
cashier's check payable to the order of the Company in the full
amount of the purchase price therefor; provided that, for the
purpose of assisting an Optionee to exercise an option, the Company
<PAGE>
may make loans to the Optionee or guarantee loans made by third
parties to the Optionee, on such terms and conditions as the Board
of Directors may authorize; and provided further that such purchase
price may be paid in shares of Common Stock owned by the Optionee
having a market value on the date of exercise equal to the
aggregate purchase price, or in a combination of cash and Common
Stock. For purposes of the Plan, the market value per share of
Common Stock shall be the last sale price regular way on the date
of reference, or, in case no sale takes place on such day, the
average of the closing bid and asked prices regular way, in either
case on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or if the Common
Stock is not listed or admitted to trading on any national
securities exchange, the last sale price of the Common Stock as
reported on the National Association of Securities Dealers
Automated Quotation ("NASDAQ") National Market System on such date,
or if the Common Stock is not so reported, the average of the
closing high bid and low asked prices of the Common Stock in the
over-the-counter market on such date, as reported on the NASDAQ
system, or if there are no such prices reported on the NASDAQ
system on such date, as furnished to the Committee by a New York
Stock Exchange member selected from time to time by the Committee
for such purpose. If there is no bid or asked price reported on
any such date, the market value shall be determined by the
Committee in accordance with the regulations promulgated under
Section 2031 of the Code, or by any other appropriate method
selected by the Committee. An Optionee shall have none of the
rights of a stockholder until the shares of Common Stock are issued
to him. An option may not be exercised for less than 1,000 shares
of Common Stock, or the number of shares of Common Stock remaining
subject to such option, whichever is smaller.
(d) Effect of Termination of Service. An option
may not be exercised after the Optionee has ceased to be in the
service of the Company or any parent or subsidiary corporations
(within the respective meanings of Sections 424(e) and 424(f) of
the Internal Revenue Code of 1986, as amended [the "Code"], and
referred to herein as "Parent" or "Subsidiary", respectively),
whether as a director of the Company or an employee or consultant
of the Company or any Parent or Subsidiary thereof, except in the
following circumstances:
(i) if (x) the Optionee's service as a
director is terminated for any reason, and (y)
the Optionee is not an employee or consultant
of the Company or any Parent or Subsidiary
thereof, or his employ is terminated by action
of the Company or by reason of disability or
retirement under any retirement plan
maintained by the Company or any Parent or
Subsidiary thereof, the option may be
<PAGE>
exercised by the Optionee within 30 days after
the last such termination, but only as to any
shares exercisable on the date the Optionee's
service and/or employment so terminates;
(ii) in the event of the death of the
Optionee during the 30-day period after
termination of service and/or employment
covered by (i) above, the person or persons to
whom his rights are transferred by will or the
laws of descent and distribution shall have a
period of one year from the date of his death
to exercise any options which were exercisable
by the Optionee at the time of his death;
(iii) in the event of the death of the
Optionee while serving as a director or
employed, the option shall thereupon become
exercisable in full, and the person or persons
to whom the Optionee's rights are transferred
by will or the laws of descent and
distribution shall have a period of one year
from the date of the Optionee's death to
exercise such option.
The provisions of the foregoing clause (iii) shall apply to any
outstanding options which are incentive stock options to the extent
permitted by Section 422(d) of the Code and such outstanding
options in excess thereof shall, immediately upon the occurrence of
the event described in the foregoing clause (iii), be treated for
all purposes of the Plan as nonstatutory stock options and shall be
immediately exercisable as such as provided in the foregoing clause
(iii).
For purposes of this Section 5(d), service as a
consultant of or to the Company or any Parent or Subsidiary shall
be considered employment, and the period of such service shall be
considered the period of employment; provided, however, that
incentive stock options may be granted under the Plan only to a
director who is an "employee" (as such term is used in Section 422
of the Code) of the Company or any Subsidiary or Parent.
In no event shall any option be exercisable more than ten
years from the date of grant thereof. Nothing in the Plan or in
any option granted pursuant to the Plan (in the absence of an
express provision to the contrary) shall confer on any individual
any right to continue in the service of the Company or any Parent
or Subsidiary thereof or interfere in any way with the right of the
Company to terminate his service.
<PAGE>
(e) Nontransferability of Options. During the
lifetime of an Optionee, options held by such Optionee shall be
exercisable only by him. No option shall be transferable other
than by will or by the laws of descent and distribution.
(f) Adjustments for Change in Stock Subject to
Plan and Other Events. In the event of a reorganization,
recapitalization, stock split, stock dividend, combination of
shares, merger, consolidation, rights offering, or any other change
in the corporate structure or shares of the Company, the Committee
shall make such adjustments, if any, as it deems appropriate in the
number and kind of shares subject to the Plan, in the number and
kind of shares covered by outstanding options, or in the option
price per share.
(g) Registration, Listing and Qualification
Shares of Stock. Each option shall be subject to the requirement
that if at any time the Board of Directors shall determine that the
registration, listing or qualification of the shares of Common
Stock covered thereby upon any securities exchange or under any
federal or state law, or the consent or approval of any
governmental regulatory body is necessary or desirable as a
condition of, or in connection with, the granting of such option or
the purchase of shares of Common Stock thereunder, no such option
may be exercised unless and until such registration, listing,
qualification, consent or approval shall have been effected or
obtained free of any conditions not acceptable to the Board of
Directors. The Company may require that any person exercising an
option shall make such representations and agreements and furnish
such information as it deems appropriate to assure compliance with
the foregoing or any other applicable legal requirement.
(h) Other Terms and Conditions. The Committee
may impose such other terms and conditions, not inconsistent with
the terms hereof, on the grant or exercise of options, as it deems
advisable.
6. Provisions Applicable to Incentive Stock Options.
The Committee may, in its discretion, grant "incentive stock
options" (within the meaning of Section 422 of the Code), under the
Plan to directors provided, however, that: (a) no such incentive
stock option shall be issued to a director of the Company who is
not also an employee or officer of the Company; (b) no such
incentive stock option shall be granted at an option price which is
less than the market value per share of Common Stock on the date of
the grant; (c) no such incentive stock option shall be issued to
any one Optionee if the aggregate fair market value, determined at
the time of the grant of such incentive stock options, of the
shares with respect to which such incentive stock options are
exercisable for the first time by such Optionee during any calendar
year, together with all options under any other incentive stock
<PAGE>
option plan of the Company exercisable during such year, exceeds
$100,000; (d) no such incentive stock option shall be granted to
any Optionee who at the time such option is granted owns more than
10 percent of the total combined voting stock of the Company
unless (i) the option price is not less than 110 percent of the
fair market value per share of stock on the date of the grant, and
(ii) the option is not exercisable after five years from the date
such option is granted; and (e) Section 5(d)(ii) hereof shall not
apply to any incentive stock option.
7. Withholding Tax. Upon the disposition by any person
of shares of Common Stock acquired pursuant to the exercise of an
option granted pursuant to the Plan, the Company shall have the
right to require such person to pay the Company the amount of any
taxes which the Company may be required to withhold with respect to
such shares.
8. Amendment and Termination. Unless the Plan shall
theretofore have been terminated as hereinafter provided, the Plan
shall terminate on, and no option shall be granted thereunder after
March 31, 2002; provided, however, that the Board of Directors may
at any time prior to that date terminate the Plan. The Board of
Directors may at any time amend the Plan; provided, however, that,
except as contemplated in Section 5(f) hereof, the Board of
Directors shall not, without approval by a majority of the votes
cast by the stockholders of the Company at a meeting of stock-
holders at which a proposal to amend the Plan is voted upon: (i)
increase the maximum number of shares of Stock for which options
may be granted under the Plan, (ii) change the formula as to
minimum option prices, (iii) extend the period during which options
may be granted or exercised, or (iv) amend the requirements as to
the class of persons eligible to receive options. No termination or
amendment of the Plan may, without the consent of an Optionee,
adversely affect the rights of such Optionee under any option held
by such Optionee.
9. Effectiveness of Plan. The Plan will not be made
effective unless approved by a majority of the votes cast by the
stockholders of the Company at a meeting of stockholders within
twelve (12) months from the date the Plan is adopted by the Board
of Directors, duly called and held for such purpose, and no option
granted hereunder shall be exercisable prior to such approval.
10. Other Actions. Nothing contained in the Plan shall
be construed to limit the authority of the Company to exercise its
corporate rights and powers, including but not by way of
limitation, the right of the Company to grant or assume options for
proper corporate purposes other than under the Plan with respect to
any employee or other person, firm, corporation or association.
EXHIBIT 21
<TABLE>
SUBSIDIARIES OF INSITUFORM TECHNOLOGIES, INC.
The following table sets forth certain information as of
December 31, 1996 concerning the Company and certain of its
subsidiaries. Unless otherwise indicated all securities of such
subsidiaries are owned by the Company:
<CAPTION>
% of
Name Place of Incorporation Voting Securities
---- ---------------------- -----------------
<S> <C> <C>
Affholder, Inc. Missouri 100(1)
INA Acquisition Corp. Delaware 100
Insituform Central, Inc. Delaware 100(1)
Insituform France S.A. France 66.6
Insituform Gulf South, Inc. Delaware 100(2)
Insituform Holdings (UK) United Kingdom 100(3)
Ltd.
Insituform Japan K.K. Japan 100(3)
Insituform Licensees
B.V./S.A. Netherlands and Delaware 100(3)
Insituform Linings Plc. United Kingdom 51(4)
Insituform Mid-America, Inc. Delaware 100
Insituform Midwest, Inc. Delaware 100
Insituform Missouri, Inc. Delaware 100(1)
Insituform (Netherlands)
B.V. Netherlands and Delaware 100(5)
Insituform of New England, Massachusetts
Inc. 100(6)
Insituform North, Inc. Delaware 100(1)
Insituform North America
Corp. Tennessee 100
Insituform Plains, Inc. Delaware 100(1)
Insituform de Puerto Rico,
Inc. Puerto Rico 100(1)
Insituform Rockies, Inc. Delaware 100(1)
Insituform Southeast, Inc. Florida 100(1)
Insituform Southwest California (Partnership) 100(7)
Insituform Technologies
Limited Alberta 100(4)
Insituform Technologies
Limited United Kingdom 100(5)
Insituform Texark, Inc. Delaware 100(1)
Insituform West, Inc. Oregon 100(3)
Mar-Tech Insituform Limited British Columbia 100(3)
Midsouth Partners
(partnership) Tennessee (Partnership) 57.5(8)
NuPipe, Inc. Oregon 100
NuPipe International, Inc. Delaware 100(9)
NuPipe Limited United Kingdom 100(4)
% of
Name Place of Incorporation Voting Securities
---- ---------------------- -----------------
PALTEM Systems, Inc. Delaware 100(1)
Tite Liner NRO Corp. Alberta 100(1)
United Pipelines Argentina Argentina 100(1)
S.A.
United Pipeline de Mexico Mexico 55(1)
S.A. de C.V.
United Pipeline Systems USA,
Inc. Delaware 100(1)
United Sistema de Tuberias
Ltda. Chile 60(1)
</TABLE>
Other subsidiaries of the Company are not named in the table
above. Such unnamed subsidiaries considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary.
(1) Securities are owned by Insituform Mid-America, Inc.
(2) Securities are owned by Naylor Industries, Inc.
(3) Securities are owned by INA Acquisition Corp.
(4) Securities are owned by Insituform Holdings (UK) Ltd.
(5) Securities are owned by Insituform Licensees B.V./S.A.
(6) Securities are owned by H.T. Schneider, Inc.
(7) 80% of partnership interest owned by Insituform Southwest,
Inc. and 20% owned by NuPipe California, Inc., a wholly-owned
subsidiary of the Company.
(8) Securities are owned 42.5% by E-Midsouth, Inc., a wholly-owned
subsidiary of the Company, and 15% by Insituform Southwest,
Inc.
(9) Securities are owned by NuPipe, Inc.
Exhibit 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our report, dated March 6, 1997, included in
Insituform Technologies, Inc.'s 1996 Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 Nos. 33-00002,
33-42445, 33-55988, 33-82486, 33-82488 and 33-63953.
Arthur Andersen LLP
Memphis, Tennessee
March 26, 1997
Exhibit 23.2
Consent of Independent Certified Public Accountants
Insituform Technologies, Inc.
Memphis, Tennessee
We hereby consent to the incorporation by reference in
Registration Statement No. 33-00002 on Form S-8, Registration
Statement No. 33-42445 on Form S-8, Registration Statement No. 33-
55988 on Form S-8, Registration Statement No. 33-82486 on Form S-8,
Registration Statement No. 33-82488 on Form S-8 and Registration
Statement No. 33-63953 on Form S-8 of our report dated March 8,
1996, except for Note 10 which is as of March 26, 1997, relating to
the consolidated financial statements of Insituform Technologies,
Inc. appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.
BDO SEIDMAN, LLP
Memphis, Tennessee
March 26, 1997
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0
0
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