<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
INSITUFORM TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Krugman, Chapnick & Grimshaw
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
INSITUFORM TECHNOLOGIES, INC.
------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JULY 15, 1997
------------------------------
Memphis, Tennessee
June 6, 1997
TO THE HOLDERS OF COMMON STOCK
OF INSITUFORM TECHNOLOGIES, INC.:
The Annual Meeting of the Stockholders of Insituform Technologies, Inc.
(the "Company") will be held at The New York Marriott East Side Hotel, 525
Lexington Avenue, New York, New York on Tuesday, July 15, 1997, at 10:00 A.M.,
local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
(1) To elect four Class II Directors of the Company for the ensuing
three year term and until their respective successors are elected and have
qualified; and
(2) To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The close of business on May 23, 1997 has been fixed by the Board of
Directors as the record date for the determination of stockholders entitled to
notice of, and to vote at, the Meeting.
By Order of the Board of Directors
HOWARD KAILES
Secretary
You are cordially invited to attend the Meeting in person. If you do not
expect to, please mark, sign and date the enclosed form of Proxy and mail in the
enclosed return envelope, which requires no postage if mailed in the United
States, so that your vote can be recorded.
<PAGE> 3
PROXY STATEMENT
This Proxy Statement, which will be mailed on or about June 6, 1997 to the
persons entitled to receive the accompanying Notice of Annual Meeting of
Stockholders, is provided in connection with the solicitation of proxies on
behalf of the Board of Directors of Insituform Technologies, Inc. for use at the
Annual Meeting of Stockholders (the "Meeting") of the Company to be held on July
15, 1997 and at any adjournment or adjournments thereof, for the purposes set
forth in such Notice. The Company's executive office is located at 1770 Kirby
Parkway, Suite 300, Memphis, Tennessee 38138.
At the close of business on May 23, 1997, the record date stated in the
accompanying Notice, the Company had outstanding 26,916,294 shares of class A
common stock, $.01 par value (the "Common Stock"), each of which is entitled to
one vote with respect to each matter to be voted on at the Meeting. The Company
has no class or series of voting stock outstanding other than the Common Stock.
A majority of the issued and outstanding shares of Common Stock present in
person or by proxy will constitute a quorum for the transaction of business at
the Meeting. Directors are elected by a plurality vote.
Abstentions and broker non-votes (as hereinafter defined) are counted as
present for the purpose of determining the presence or absence of a quorum for
the transaction of business. For the purpose of determining the vote required
for approval of matters to be voted on at the Meeting, shares held by
stockholders who abstain from voting will be treated as being "present" and
"entitled to vote" on the matter and, thus, an abstention has the same legal
effect as a vote against the matter. However, in the case of a broker non-vote
or where a stockholder withholds authority from his proxy to vote the proxy as
to a particular matter, such shares will not be treated as "present" and
"entitled to vote" on the matter. Accordingly, a broker non-vote or the
withholding of a proxy's authority will have no effect on the outcome of the
vote on the matter. A "broker non-vote" refers to shares represented at the
meeting in person or by proxy by a broker or nominee where such broker or
nominee (i) has not received voting instructions on a particular matter from the
beneficial owner or persons entitled to vote; and (ii) the broker or nominee
does not have the discretionary voting power on such matter.
2
<PAGE> 4
I. ELECTION OF DIRECTORS
At the Meeting, stockholders will elect four directors denominated as Class
II directors. This is in accord with the Company's certificate of incorporation
which provides for the division of its Board of Directors into three classes
with the term of office of the Class II directors expiring at the Meeting. Class
III and Class I directors will be elected at the Annual Meeting of Stockholders
of the Company to be held in 1998 and 1999, respectively. After the expiration
of the term of each class, the stockholders will elect directors in each class
to serve for a term of three years.
Accordingly, four Class II directors will be elected at the Meeting, each
to serve for three years and until a successor has been elected and has
qualified. It is the intention of each of the persons named in the accompanying
form of proxy to vote the shares represented thereby in favor of the four Class
II nominees listed in the following table, unless otherwise instructed in such
proxy. Each such nominee is presently serving as a director of the Company. The
Company's Board of Directors has no reason to believe that any of the nominees
listed in the following table will be unable or will decline to serve. In case
any of the nominees is unable or declines to serve, the persons named in the
accompanying form of proxy will vote the shares represented by such proxy for
another person duly nominated by the Company's Board of Directors in such
nominee's stead or, if no other person is so nominated, will vote such shares
only for the remaining nominees.
CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS
Certain information concerning the four nominees for election as Class II
directors, and the other current directors of the Company, is set forth below.
Such information was furnished by them to the Company:
Nominees for Election:
ROBERT W. AFFHOLDER (Class II director), age 61; Senior Executive Vice
President of the Company since August 1996; Senior Vice President -- Chief
Operating Officer of North American Contracting Operations of the Company
from October 1995 to August 1996; Vice Chairman, Insituform Mid-America,
Inc. ("IMA"), from 1993 to 1995; President of IMA from 1994 to 1995 and
from prior to 1992 to 1993; Director of the Company since 1995.
PAUL A. BIDDELMAN (Class II director), age 51; Treasurer, Hanseatic
Corporation (private investment company) since 1992; Director: Celadon
Group, Inc., Electronic Retailing Systems International, Inc., Premier
Parks Inc., Petroleum Heat & Power Company, Inc., Oppenheimer Group, Inc.,
Star Gas Corporation (general partner of Star Gas Partners, L.P.); Director
of the Company since 1988.
DOUGLAS K. CHICK (Class II director), age 73; private investor since
prior to 1992; consultant to the Company from 1991 to 1994; Director of the
Company since 1990.
STEVEN ROTH (Class II director), age 55; General Partner, Interstate
Properties (real estate development and construction) since prior to 1992;
Chairman and Chief Executive Officer, Vornado Realty Trust (real estate
operating company) since 1990; Chief Executive Officer of Alexander's, Inc.
since 1995; Director: Vornado Realty Trust, Alexander's, Inc.; Director of
the Company since 1992.
Other Directors Whose Term of Office Will Continue After the Meeting:
BRIAN CHANDLER (Class III director), age 71; private investor since
prior to 1992; consultant to the Company from prior to 1992 to 1994;
Director of the Company since 1987.
WILLIAM GORHAM (Class I director), age 66; President, The Urban
Institute (government policy research) since prior to 1992; Director of the
Company since 1992.
ANTHONY W. HOOPER (Class III director), age 49; President and Chief
Executive Officer of the Company since November 1996; Senior Vice President
Marketing and Senior Vice President -- Marketing and Technology of the
Company, successively, from 1993 to November 1996; President of Huyck
Formex/Weavexx Corporation (equipment manufacturer), a subsidiary of BTR,
Inc., from 1992 to 1993; Director of the Company since 1996.
3
<PAGE> 5
JEROME KALISHMAN (Class III director), age 69; Chairman of the Board
of the Company since November 1996; Vice Chairman of the Board of the
Company from October 1995 to November 1996; Chairman and Chief Executive
Officer of IMA from prior to 1992 to 1995; Director of the Company since
1995.
JAMES D. KRUGMAN (Class III director), age 49; Partner, Krugman
Chapnick & Grimshaw LLP (attorneys) since prior to 1992; Chairman of the
Board of the Company from 1988 to November 1996; Director: Hayward
Industries, Inc.; Director of the Company since 1987.
ALVIN J. SITEMAN (Class I director), age 69; Chairman of Mark Twain
Bancshares, Inc. since prior to 1992, merged into Mercantile
Bancorporation, Inc., then Chairman of Mercantile Bank of St. Louis since
May 1997; President of Flash Oil Corporation, Site Oil Company of Missouri
and The Siteman Organization (oil and real estate) since prior to 1992;
Director of the Company since 1995.
SILAS SPENGLER (Class I director), age 66; Managing Director, Webb
Johnson Associates, Inc. (executive recruiter) since January 1997;
Principal, Sullivan Associates, Inc. (board of directors search firm) from
1994 until 1997; Partner, Reid & Priest (attorneys) from 1992 to 1994;
Partner, Spengler Carlson Gubar Brodsky & Frischling (attorneys) through
1992; Director of the Company since 1987.
SHELDON WEINIG (Class I director), age 69; Adjunct Professor at
Columbia University since 1994 and at State University of New York, Stony
Brook, since 1993; Consultant, Sony Engineering and Manufacturing of
America from 1994 to 1996, and Vice Chairman from prior to 1992 to 1994;
Director: Aseco Corporation, Intermagnetics General Corporation; Director
of the Company since 1992.
RUSSELL B. WIGHT, JR. (Class III director), age 58; General Partner,
Interstate Properties (real estate development and construction) since
prior to 1992; Director: Vornado Realty Trust, Alexander's, Inc.; Director
of the Company since 1992.
In December 1992, in connection with the Company's acquisition (the "IGL
Acquisition") of Insituform Group Limited ("IGL"), the Company's certificate of
incorporation was amended so as to divide the Board of Directors of the Company
into three classes, as equal in size as possible, having staggered three-year
terms, with the term of one class expiring each year, and to fix the number of
directors of the Company at not less than six nor more than 15, the exact number
to be specified in the By-laws of the Company.
In October 1995, in connection with the transaction pursuant to which the
Company's wholly-owned subsidiary, ITI Acquisition Corp. ("ITI Sub"), merged
into and with IMA so that IMA became a wholly-owned subsidiary of the Company
(the "IMA Merger"), the Company's certificate of incorporation was further
amended to replace certain other terms added in connection with the IGL
Acquisition and provide for the appointment of directors and filling of
vacancies on the Board as contemplated by the Agreement and Plan of Merger dated
as of May 23, 1995 among the Company, ITI Sub and IMA (the "IMA Merger
Agreement"). Pursuant to the IMA Merger Agreement, the Board of Directors
includes: Messrs. Affholder, Biddelman, Chick and Roth, for a term expiring at
the 1997 annual meeting of stockholders of the Company ("Class II Directors");
Messrs. Chandler, Kalishman, Krugman and Wight for a term expiring at the 1998
annual meeting of stockholders of the Company ("Class III Directors"); and
Messrs. Gorham, Siteman, Spengler and Weinig, for a term expiring at the 1999
annual meeting of stockholders of the Company ("Class I Directors"). Such
directors are grouped as follows: (i) Messrs. Biddelman, Chandler, Chick,
Krugman and Spengler constitute the "INA Group"; (ii) Messrs. Gorham, Roth,
Weinig and Wight constitute the "IGL Group"; and (iii) Messrs. Affholder,
Kalishman and Siteman constitute the "IMA Group." The members of the INA Group
and the IGL Group were directors of the Company prior to the IMA Merger, and the
IMA Group was designated for appointment by IMA. The Company has further agreed
that during the period from the consummation of the IMA Merger until December 9,
1998 (the "Term"), the Company will nominate and recommend for re-election to
its Board of Directors, upon expiration of their terms, the Class I Directors,
the Class II Directors and the Class III Directors. If, during the Term, any
director resigns or is unable to serve for any reason, such vacancy will be
filled with a designee chosen by the
4
<PAGE> 6
remaining members of that director's group, and thereafter the Company will
nominate and recommend such designee for election to the Board of Directors of
the Company.
In November 1996, Mr. Hooper was appointed to the vacancy on the Board
created by the resignation of Jean-Paul Richard, who had served as a Class III
Director but was not designated as part of any director's group in accordance
with the foregoing.
No family relationship exists between any of the directors or executive
officers of the Company.
BOARD MEETINGS AND COMMITTEES
During the year ended December 31, 1996, the Board of Directors of the
Company held nine meetings, and took action by unanimous written consent on
three occasions. No current director attended fewer than 75% of the aggregate
number of meetings of the Board of Directors of the Company and meetings of
committees of the board on which such person served which were held during the
period that he served.
During the year ended December 31, 1996, the members of the Audit Committee
of the Board of Directors of the Company were Silas Spengler, Sheldon Weinig and
Jerome Kalishman. The Audit Committee is responsible for overseeing that
management fulfills its responsibilities in connection with the preparation of
the consolidated financial statements of the Company and its subsidiaries. The
committee's functions include making recommendations to the board regarding the
engaging and discharging of the Company's independent auditors, reviewing with
the independent auditors the plan and the results of the auditing engagement,
reviewing the scope and results of the Company's procedures for internal
auditing, approving the professional services provided by the independent
auditors, reviewing the independence of the independent auditors, and reviewing
the adequacy of the Company's system of internal accounting controls. During the
year ended December 31, 1996, the Audit Committee held one meeting. In January
1997, the Audit Committee was reconstituted to consist of Robert W. Affholder,
Alvin J. Siteman and Silas Spengler.
During the year ended December 31, 1996, the members of the Compensation
Committee of the Board of Directors of the Company were Paul A. Biddelman,
William Gorham, James D. Krugman, Steven Roth and Alvin J. Siteman. The
functions of the Compensation Committee include making recommendations to the
Board of Directors of the Company regarding the salaries, bonuses, fringe
benefits or compensation of any kind for the officers and directors of the
Company. Until November 1996 when the Board of Directors assumed such functions,
the Compensation Committee was also responsible for the administration of the
Company's 1992 Employee Stock Option Plan (the "Employee Plan"), and determined
the eligible persons who are to receive options under such plan, the number of
shares to be subject to each option and the other terms and conditions upon
which options under such plan were granted and made exercisable. During the year
ended December 31, 1996, the Compensation Committee held one meeting. In January
1997, the Compensation Committee was reconstituted to consist of James D.
Krugman, Sheldon Weinig and Russell B. Wight, Jr.
The Company has not appointed a nominating committee of its Board of
Directors.
DIRECTOR COMPENSATION
Each director of the Company who is not an operating officer of the Company
is entitled to receive compensation in the amount of $12,000 per annum and
$1,000 per meeting of the Board of Directors attended by such director, plus
reimbursement of his expenses.
In November 1996, the Company supplemented its prior arrangements with
Jerome Kalishman to provide that the appointment of him as Chairman of the Board
of Directors, and his service in such position, would, during the period
thereof, substitute for the Company's and his respective obligations undertaken
in October 1995 in connection with the IMA Merger, under which Mr. Kalishman
became Vice Chairman of the Board for a term expiring on December 9, 1998 at an
annual salary of $100,000. Upon completion of the IMA Merger, the Company also
entered into a consulting agreement with Mr. Kalishman pursuant to which the
Company engaged Mr. Kalishman as a consultant in connection with the business of
the Company for a two year term at an annual fee of $150,000. Such agreements
are terminable by Mr. Kalishman at any time upon at least 60 days' written
notice, and are terminable by the Company upon the failure of Mr. Kalishman
5
<PAGE> 7
to perform his duties thereunder owing to illness or other incapacity, if such
failure continues for a period of six months, or for other cause (as defined in
such agreements). Mr. Kalishman's arrangements with the Company include health
insurance benefits and use of an automobile. In the event of Mr. Kalishman's
death, such agreements terminate automatically. Mr. Kalishman has also entered
into a non-competition agreement with the Company extending from the completion
of the IMA Merger until the later of five years thereafter or two years after
all service to the Company has ended.
In November 1996, the Company and James D. Krugman amended the agreement,
which became effective on December 9, 1992 upon the closing of the IGL
Acquisition, pursuant to which Mr. Krugman served as Chairman of the Board, so
as to provide that the Company would thereafter engage Mr. Krugman as consultant
to the Company through November 1999. Under the amended arrangements, Mr.
Krugman is paid annual amounts, through December 1998, of $100,000. In the event
of Mr. Krugman's death, the agreement terminates automatically. Mr. Krugman may
cancel the agreement at any time upon 60 days' written notice delivered to the
Company, and the Company may terminate the agreement upon the failure of Mr.
Krugman to perform his duties thereunder owing to illness or other incapacity,
if such failure continues for a period of more than six months, or if Mr.
Krugman commits any act in bad faith and to the material detriment of the
Company or is convicted of a felony.
Mr. Krugman also holds: (i) an option granted under the Company's 1992
Director Stock Option Plan (the "Director Plan") on December 13, 1993 covering
95,000 shares of Common Stock, exercisable for five years after grant at a per
share price of $14.50, the closing price of the Common Stock on the NASDAQ
National Stock Market on such date, and (ii) an option granted under the
Director Plan on November 18, 1996 covering 100,000 shares of Common Stock,
exercisable for three years after grant at a per share price of $7.19, the
closing price of the Common Stock on the NASDAQ National Stock Market on such
date.
As a consequence of the assumption and exchange of options previously
granted by IMA for options granted by the Company, on October 25, 1995 Alvin
Siteman, who became a director of the Company upon consummation of the IMA
Merger, held options covering 38,335 shares, at exercise prices ranging from
$2.61 to $9.79 per share, calculated in accordance with the terms of the IMA
Merger (see "Stock Plans" below). In January 1997, Mr. Siteman exercised options
with respect to 7,667 shares, at an exercise price of $5.22.
Anthony W. Hooper holds options covering 150,000 shares granted under the
Director Plan in November 1996 in connection with his appointment as President
of the Company and a director, in addition to options previously granted to him
as an executive officer (see "Certain Agreements with Directors and Executive
Officers" below). Except for the foregoing, no current director of the Company
holds any options granted by the Company.
6
<PAGE> 8
EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth certain
information with respect to compensation for each of the Company's last three
completed fiscal years of the Company's Chief Executive Officer and each of the
four other most highly-compensated executive officers during the most recent
fiscal year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
-------------------------------------------- SECURITIES
NAME AND OTHER UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) OPTIONS(#) COMPENSATION
- ----------------------------- ---- -------- -------- --------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper 1996 $264,604 -- -- 150,000 $ 14,434(3)
President and Chief 1995 235,000 -- -- 25,000 2,405
Executive Officer(2) 1994 220,000 $100,100 $53,968(4) 12,000 80,730
Jean-Paul Richard 1996 400,619 -- -- -- 9,398(6)
President and Chief 1995 400,000 -- -- 100,000 12,542
Executive Officer(5) 1994 400,000 264,000 -- -- 83,405
Robert W. Affholder 1996 250,000 -- -- -- 12,000(8)
Senior Executive Vice 1995 229,167 75,000 -- -- 11,531
President(7) 1994 225,000 -- -- -- 3,509
William A. Martin 1996 186,764 -- -- -- 17,049(9)
Senior Vice President -- 1995 175,000 -- -- 10,000 14,707
Chief Financial Officer 1994 165,334 51,709 -- 8,000 15,623
Dale T. Harden 1996 117,049 -- -- 50,000 30,857(11)
Senior Vice President -- 1995 -- -- -- -- --
Chief Operating Officer 1994 -- -- -- -- --
of North American
Contracting Operations(10)
Raymond Toth 1996 139,853 -- -- -- 12,973(13)
Vice President -- Human 1995 126,353 -- -- 8,000 5,113
Resources(12) 1994 110,000 40,040 16,353(14) 8,000 53,286
</TABLE>
- ---------------
(1) Excludes perquisites and other personal benefits unless the aggregate
amount of such compensation exceeds the lesser of either $50,000 or 10% of
the total of annual salary and bonus reported for the named executive
officer.
(2) Mr. Hooper became President and Chief Executive Officer in November 1996,
prior to which he was the Company's Senior Vice President -- Marketing and
Technology.
(3) Represents $6,000 in 401(k) contributions under the Company's 401(k)
Profit-Sharing Plan (the "Restated Plan"), $6,000 in profit-sharing
contributions under the Restated Plan, and $2,434 in term life insurance
premiums.
(4) Includes reimbursement for taxes in the amount of $43,509.
(5) Mr. Richard resigned from the Company in November 1996.
(6) Represents $6,000 in 401(k) contributions under the Restated Plan and
$3,398 in term life insurance premiums.
(7) Mr. Affholder became an Executive Oficer of the Company in October 1995 in
connection with the IMA Merger. Prior to that time he served as Vice
Chairman of IMA. Amounts shown for 1994 represent compensation from IMA,
and amounts shown for 1995 include compensation from IMA and
7
<PAGE> 9
amounts paid pursuant to the agreements entered into by the Company with
Mr. Affholder effective upon completion of the IMA Merger. See "Certain
Agreements with Executive Officers" below.
(8) Represents $6,000 in 401(k) contributions under the Restated Plan, and
$6,000 in profit-sharing contributions under the Restated Plan.
(9) Represents $6,000 in 401(k) contributions under such plan, $6,000 in
profit-sharing contributions under the Restated Plan, and $5,049 in term
life insurance premiums.
(10) Mr. Harden became an executive officer in June 1996.
(11) Represents $24,653 in relocation expenses, $4,404 in 401(k) contributions
under the Restated Plan, and $1,800 in term life insurance premiums.
(12) Mr. Toth became an executive officer of the Company in February 1994.
(13) Represents $5,660 in 401(k) contributions under the Restated Plan, $5,660
in profit-sharing contributions under the Restated Plan, and $1,653 in term
life insurance premiums.
(14) Represents reimbursement for taxes.
Option Grant Table. The following table sets forth certain information
regarding options granted by the Company during the year ended December 31, 1996
to the individuals named in the above compensation table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
------------------------------------------------------------ Value at Assumed
Number of Annual Rates of Stock
Securities % of Total Price Appreciation
Underlying Options Granted Exercise for Option Term(1)
Options to Employees Price Expiration ---------------------
Name Granted(#) In Fiscal Year ($/sh) Date 5% 10%
- --------------------- ---------- ----------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper.... 100,000(2) 30.8% $ 7.19 11/18/01 $198,646 $438,957
50,000(3) 15.4 15.00 11/18/02 -0- -0-
Jean-Paul Richard.... -- -- -- -- -- --
Robert W.
Affholder.......... -- -- -- -- -- --
William A. Martin.... -- -- -- -- -- --
Dale T. Harden....... 50,000(4) 15.4 9.13 06/03/01 126,123 278,698
Raymond Toth......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on arbitrarily assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options are granted to
their expiration date.
(2) Ten percent of such option becomes exercisable on the first anniversary of
grant, twenty percent thereof on the second anniversary of grant, thirty
percent thereof on the third anniversary of grant and forty percent thereof
on the fourth anniversary of grant.
(3) Ten percent of such option becomes exercisable on the second anniversary of
grant, twenty percent on the third anniversary thereof, thirty percent on
the fourth anniversary thereof and forty percent on the fifth anniversary
thereof.
(4) One quarter of such option became exercisable upon grant, with the remainder
becoming exercisable in three equal annual installments thereafter.
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<PAGE> 10
Aggregate Option Exercises and Year-End Option Table. The following table
sets forth certain information regarding exercises of stock options, and stock
options held as of December 31, 1996, by the individuals named in the above
compensation table:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END(#) AT YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper......... -- -- 96,500 165,500 -- 18,500
Jean-Paul Richard......... -- -- 300,000 -- -- --
Robert W. Affholder....... -- -- -- -- -- --
William A. Martin......... -- -- 26,000 7,000 -- --
Dale T. Harden............ -- -- 12,500 37,500 -- --
Raymond Toth.............. -- -- 10,000 6,000 -- --
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at the exercise date or at year-end, as the case may be, minus
the exercise price.
STOCK PLANS
In June 1992, the stockholders of the Company approved the Employee Plan,
under which options to purchase an aggregate of 500,000 shares of Common Stock
(as subsequently increased) were subject to grants to key employees who are not
directors (including executive officers), and the Director Plan, under which
options to purchase an aggregate of 500,000 shares of Common Stock may be
granted to directors of the Company (including executive officers), as
previously adopted by the Board of Directors. In June 1994, the stockholders of
the Company approved an increase in the number of authorized shares of Common
Stock available for issuance under the Employee Plan to 1,000,000 shares.
Both the Employee Plan and the Director Plan are, since November 1996,
administered by the Board of Directors, which is empowered to determine the
persons who are to receive options, the number of shares to be subject to each
option and whether such options will be incentive stock options or non-qualified
stock options. Pursuant to amendments to the Employee Plan adopted in April
1994, the Board of Directors may authorize a committee of the Board constituted
for such purpose to allocate options approved in the aggregate by the Board of
Directors among employees who are not officers. The exercise price of an option
under either the Employee Plan or the Director Plan may not be less than the
lesser of the fair market value of the Common Stock on the date of grant of the
option, or the tangible book value per share of Common Stock as of the end of
the fiscal quarter of the Company immediately preceding the grant, provided that
no incentive stock option may be granted at an option price which is less than
the market value per share of the Common Stock on the date of grant.
In October 1995, in connection with the consummation of the IMA Merger, the
Company assumed options (the "IMA Options") previously granted under the IMA
Stock Option Plan upon the same terms and conditions as contained under such
plan, except that: (i) each IMA Option became exercisable for that number of
shares of the Company's Common Stock into which the number of shares of IMA
Class A Common Stock subject to such option immediately prior to the IMA Merger
would have been convertible in such transaction if such shares had been
outstanding, and (ii) the option price per share of the Company's Common Stock
was adjusted to an amount obtained by dividing (x) the exercise price per share
in effect on such date times the number of shares of IMA Class A Common Stock
previously covered by such IMA Option, by (y) the number of shares of the
Company's Common Stock covered by such option as so assumed. As a result of such
arrangements, the Company assumed options covering an aggregate of 449,236
shares of Common Stock 384,109 shares of which were covered by options
outstanding at April 1, 1997.
9
<PAGE> 11
CERTAIN AGREEMENTS WITH DIRECTORS AND EXECUTIVE OFFICERS
The Company's arrangements with Anthony W. Hooper, under which Mr. Hooper
became President and Chief Executive Officer in November 1996, provide for an
initial annual base salary of $325,000, in addition to bonus payments in an
amount up to 50% of base salary. Under such arrangements, and upon appointment
of Mr. Hooper to the Company's Board of Directors, the Company granted to Mr.
Hooper: (x) a five-year option under the Director Plan, covering 100,000 shares
of Common Stock exercisable at a per share price of $7.19 (equal to the closing
price of the Common Stock, as quoted on the Nasdaq National Stock Market on the
date of grant), which becomes exercisable with respect to 10%, 20%, 30% and 40%
of the number of shares covered on the first through fourth anniversaries,
respectively, of the date of grant, and (y) an additional six-year option under
such plan, covering 50,000 shares of Common Stock exercisable at a per share
price of $15.00, which becomes exercisable with respect to 10%, 20%, 30% and 40%
of the number of shares covered on the second through fifth anniversaries,
respectively, of the date of grant. Such options are in addition to options
theretofore granted to Mr. Hooper as an executive officer of the Company, and
become immediately exercisable in the event of specified changes in control of
the Company.
Under such arrangements, and consistent with the Company's prior
arrangements with Mr. Hooper under which he became an executive officer in
November 1993, the Company also provides Mr. Hooper with a car allowance,
reimbursement for one country club membership and medical and life insurance
benefits. Consistent with the prior arrangements, in the event Mr. Hooper's
employment is terminated by the Company other than for cause, the Company would
be obligated to pay him amounts equal to twelve months base salary.
The Company's prior arrangements with Jean-Paul Richard, under which Mr.
Richard became President and Chief Executive Officer in November 1993 and served
until his resignation in November 1996, in addition to base salary provided for
bonus payments in an amount per annum up to 75% of base salary, conditioned on
fulfilling performance criteria. As an inducement to his accepting employment
with the Company, the Board of Directors authorized the grant to Mr. Richard of
a five-year option covering 300,000 shares of Common Stock, issuable upon
exercise of such option at a per share price of $16.25 (equal to the closing
price of the Common Stock as quoted on the NASDAQ National Stock Market on the
date of grant). Such option vested and became exercisable through the option
term with respect to 50,000 shares upon commencement of employment, and with
respect to the remainder of such shares in October 1995 upon consummation of the
IMA Merger and the election of a Board of Directors of the Company other than
pursuant to the terms of the IGL Acquisition. The Company's arrangements with
Mr. Richard provided that in the event Mr. Richard's employment with the Company
was terminated other than for cause, the Company would be obligated to pay
severance to Mr. Richard in an amount equal to two years' base salary.
The Company's arrangements with Robert W. Affholder, entered into in
October 1995 in connection with the IMA Merger, provided for Mr. Affholder
initially to serve as Senior Vice President -- Chief Operating Officer of North
American Contracting Operations of the Company, and currently as Senior
Executive Vice President, over a term of three years at an annual salary of
$250,000. In the event of Mr. Affholder's death, such arrangements terminate
automatically, and are terminable by the Company upon the failure of Mr.
Affholder to perform his duties thereunder owing to illness or other incapacity,
if such illness continues for a period of six months, or for other cause (as
defined in such agreement). Mr. Affholder's arrangements with the Company
entitle him to participate in medical and other employee benefit plans and to
the use of an automobile. Mr. Affholder has also entered into a non-competition
agreement with the Company extending from the completion of the IMA Merger until
the later of five years thereafter or two years after all service to the Company
has ended.
In connection with the commencement of his employment as chief financial
officer of the Company, the Company extended a severance arrangement to William
A. Martin pursuant to which, in the event of termination of employment by the
Company without cause, the Company will deliver six months' prior notice thereof
plus payments equal in amount to six months' base salary.
The Company's arrangements with Dale T. Harden, in connection with his
employment as Senior Vice President in June 1996, provide for an initial annual
base salary of $215,000 with a guaranteed bonus opportunity for 1995 equal to
50% of base salary (pro rated over the period of employment during such year)
10
<PAGE> 12
and subject to a maximum of 75% of base salary in subsequent years. Under such
arrangements, the Company also granted to Mr. Harden a five-year option under
the Employee Plan covering 50,000 shares of Common Stock, exercisable at a per
share price of $9.13 (equal to the closing price of the Common Stock as quoted
on the Nasdaq National Stock Market on the date of grant). The Company's
arrangements with Mr. Harden provide for the Company to extend relocation
assistance to him, together with a car allowance, a social club membership and
customary welfare benefits.
PERFORMANCE GRAPH
The following performance graph compares the total stockholder return on
the Company's Common Stock to the S&P 500 Index and a Composite Peer Group Index
for the past five years. The Composite Peer Group Index is comprised of
Insituform East Incorporated, Utilix Corporation, Michael Baker Corporation,
Bannister Foundation, Inc., Granite Construction, Inc., MYR Group, Inc.
(formerly The LE Meyers Co. Group) and J. Ray McDermott, S.A. (weighted by
market capitalization). The graph assumes that $100 was invested in the
Company's Common Stock and each Index on December 31, 1991 and that all
dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
'INSITUFORM
MEASUREMENT PERIOD TECHNOLOGIES, COMPOSITE PEER
(FISCAL YEAR COVERED) INC.' S&P 500 INDEX GROUP INDEX
<S> <C> <C> <C>
1991 100.00 100.00 100.00
1992 128.30 107.62 89.58
1993 61.64 118.46 93.24
1994 58.49 120.03 83.89
1995 58.49 165.13 108.49
1996 37.11 203.05 126.04
</TABLE>
Notwithstanding anything set forth in any of the Company's previous filings
under the Securities Act of 1933 or the Securities Exchange Act 1934 which might
incorporate future filings, including this Proxy Statement, in whole or in part,
the preceding performance graph and the report that follows shall not be deemed
incorporated by reference into any such filings.
REPORT OF THE COMPENSATION COMMITTEE
During the year ended December 31, 1996, the Compensation Committee was
composed of James D. Krugman, who held the position of Chairman of the Board of
the Company through November 1996, and Messrs. Biddelman, Gorham, Roth and
Siteman, who were not executive officers of the Company. The Compensation
Committee of the Board of Directors of the Company makes recommendations to the
Board of Directors of the Company regarding the compensation arrangements for
executive officers of the Company,
11
<PAGE> 13
including the Company's Chief Executive Officer, and, until November 1996 (when
the Board of Directors assumed such function), administered the Company's
stock-based employee compensation plans.
The objectives of the Compensation Committee in formulating the Company's
executive compensation program are: (i) to offer levels of compensation which
are competitive with those offered by other companies in similar businesses;
(ii) to compensate executives based on each executive's level of responsibility
and contribution to the Company's business goals; (iii) to link compensation
with the Company's financial performance; and (iv) to align the interests of the
Company's executives with the interests of the Company's stockholders.
During the fiscal year ended December 31, 1996, the achievement of the
foregoing objectives was directed to support the continuing consolidation of the
operations of the Company following the consummation of the IMA Merger. As a
result of the Company's hiring efforts in furtherance thereof, during such year
the Company entered into employment arrangements with Dale T. Harden, who became
Senior Vice President in June 1996 and assumed responsibility as Chief Operating
Officer of North American Contracting Operations in August, and with Robert L.
Kelley, who became General Counsel in May 1996, which established levels of
compensation for the remainder of the year. In addition, in November 1996,
following the resignation of Jean-Paul Richard as President and Chief Executive
Officer, the Company entered into new arrangements with Anthony W. Hooper in
connection with his assumption of such position, which established his
compensation for the remainder of the year. Pursuant to the terms of the IMA
Merger, Robert W. Affholder remained employed as an executive officer under an
employment agreement governing his compensation.
The compensation program for the Company's executives, including its Chief
Executive Officer, consists of: (i) base salary; (ii) bonuses; and (iii) stock
options. Since the majority of the Company's executive management has been
engaged or promoted during the two most recent fiscal years, compensation has in
large part resulted from the foregoing arrangements negotiated in connection
with their assumption of responsibilities with the Company.
(i) Base Salary. The Compensation Committee determines executive base
salaries by level of responsibility, individual performances and the Company's
performance, as well as by the need to provide a competitive package that allows
the Company to retain key executives. At the commencement of each year, the
Chief Executive Officer, in consultation with key executives, establishes
individual performance objectives for the ensuing year. After reviewing
individual and Company performance and available information on salaries at
other companies of similar size (with particular focus on other
construction-based operations), the Chief Executive Officer makes
recommendations to the Compensation Committee concerning the base salaries of
executive officers. The Compensation Committee reviews and, with any changes it
deems appropriate, approves these recommendations for submission to the Board of
Directors. Using the same review process, the Compensation Committee makes
decisions pertaining to the Chief Executive Officer. During the year ended
December 31, 1996, remuneration as Chief Executive Officer to Mr. Richard was
$425,000 per annum, an increase over the level established in connection with
the commencement of his employment in November 1993. Upon assumption by Mr.
Hooper of the office of President and Chief Executive Officer in November 1996,
Mr. Hooper's base salary of $245,000 per annum as Senior Vice
President -- Marketing and Technology was adjusted to $325,000 pursuant to his
new employment arrangements.
(ii) Cash Bonuses. Under historical guidelines designed to motivate and
reward key management personnel through the award of cash bonuses, the Chief
Executive Officer and executive officers who report to the Chief Executive
Officer, including those engaged during the last fiscal year, are eligible for
bonuses of up to approximately 50% of base salary. Such guidelines provide for
an award of cash bonuses based on the achievement of corporate goals recommended
by senior executive management and approved by the Board of Directors (which in
the most recently completed year were weighted in the Company's program to
account for approximately 70% of overall quantitative criteria), individual
objectives established for executive management by the Compensation Committee in
discussions with the Chief Executive Officer (which in the most recently
completed year were weighted in the Company's program to account for
approximately 30% of overall quantitative criteria), and an evaluation of
executive management by the Compensation Committee.
12
<PAGE> 14
(iii) Stock Options. The primary purpose of the Company's stock option
program is to align the interests of the Company's executive officers more
closely with the interests of the Company's stockholders by offering the
executives an opportunity to benefit from increases in the market price of the
Common Stock. The Company's stock option program provides long-term incentives
that have enabled the Company to attract and retain key employees by encouraging
their ownership of the Company Common Stock. In connection with attracting new
executive management, the Compensation Committee has typically authorized the
grant of options effective upon commencement of employment.
The Company's current executive officers, collectively, hold options under
the Employee Plan and, in the case of Mr. Hooper, under the Director Plan.
During the year ended December 31, 1996, the Company authorized option grants to
officers named in the Summary Compensation Table under "Executive Compensation"
above covering 200,000 shares of Common Stock, representing options with respect
to approximately 61% of the Common Stock covered by options granted that year
under all plans. All of the options granted to such officers were granted either
in connection with new hires or (in the case of Mr. Hooper) in connection with
his assumption of additional responsibilities. In defining the limits of option
grants and in selecting individual officers for options and determining the
terms thereof, the Company may take into consideration any factors it deems
relevant, including present and potential contributions to the success of the
Company.
------------------------
Section 162(m) ("Section 162") of the Internal Revenue Code of 1986, as
amended (the "Code"), generally limits federal income tax deductions for
compensation paid after 1993 to the Chief Executive Officer and the four other
most highly compensated officers of the Company to $1 million per year, but
contains an exception for performance-based compensation that satisfies certain
conditions. The Company has not adopted an absolute policy regarding Section 162
and is currently studying the implications of Section 162 on its compensation
programs. In making compensation decisions, the Company will consider the net
cost of compensation to it and whether it is practicable and consistent with
other compensation objectives to qualify the Company's incentive compensation
under the applicable exemption of Section 162. The Company anticipates that
deductibility of compensation payments will be one among a number of factors
used in ascertaining appropriate levels or modes of compensation, and that the
Company will make its compensation decision based upon an overall determination
of what it believes to be in the best interests of its stockholders.
The foregoing report on executive compensation is provided by the following
directors, who constituted the Compensation Committee during 1996:
James D. Krugman
Paul A. Biddelman
William Gorham
Steven Roth
Alvin J. Siteman
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1996, the Company's Compensation
Committee consisted of James D. Krugman, Paul Biddelman, William Gorham, Steven
Roth and Alvin J. Siteman.
James D. Krugman, in addition to Howard Kailes, Secretary of the Company,
are members of the law firm of Krugman Chapnick & Grimshaw LLP. During the year
ended December 31, 1996, Krugman Chapnick & Grimshaw LLP received fees for legal
services rendered to the Company of $815,000, together with reimbursement of
out-of-pocket expenses of $151,000. It is expected that Krugman Chapnick &
Grimshaw LLP will continue to render legal services to the Company in the
future.
In order to finance a portion of the purchase price for its acquisition of
Insituform Midwest, Inc., in July 1993 the Company sold its 8.5% senior
subordinated note in the principal amount of $5 million (the
13
<PAGE> 15
"Subordinated Note"), and related warrants exercisable with respect to 350,877
unregistered shares of Common Stock, to Hanseatic Corporation ("Hanseatic"),
which Hanseatic holds for discretionary customer accounts and an affiliate, as
described under "Information Concerning Certain Stockholders" below. Paul
Biddelman is Treasurer of Hanseatic. Prior to its prepayment in February 1997,
the Subordinated Note 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 Subordinated Note was subordinated to bank and
other institutional financing, and purchase money debt incurred in connection
with acquisitions of businesses, and was prepayable 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 upon prepayment in February 1997).
During the year ended December 31, 1996, the Company paid to Hanseatic $425,000
in interest on the Subordinated Note. In February 1997, the Company prepaid all
amounts outstanding under the Subordinated Note. The warrants remain
exercisable, at the election of the holder, through July 26, 1998, at a price
per share of Common Stock of $14.25, and such shares are entitled to demand and
incidental registration rights.
Steven Roth is a member of a partnership which holds certain registration
rights extended by the Company. See "Other Information Concerning Nominees for
Director, Directors, Officers and Stockholders" below.
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
The following table sets forth certain information as of May 1, 1997 with
respect to the number of shares of Common Stock owned by (i) each person known
by the Company to own beneficially more than 5% of the outstanding shares of
Common Stock, (ii) each director of the Company who owned beneficially any
shares of Common Stock, (iii) each executive officer of the Company named in the
Summary Compensation Table under "Executive Compensation" above, and (iv) all
directors and executive officers of the Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
--------------------------------------------------------- --------------------- --------
<S> <C> <C>
Jerome and Nancy F. Kalishman
17988 Edison Avenue
Chesterfield, Missouri 63005........................... 3,097,848(2) 11.5%
T. Rowe Price Associates, Inc.
100 East Pratt Street
Baltimore, Maryland 21202.............................. 2,667,825(3) 9.9
Interstate Properties
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663(4)...................... 1,660,072 6.2
David Mandelbaum
80 Main Street
West Orange, New Jersey 07052..................... 1,660,072(5) 6.2
Steven Roth
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663.................... 1,670,072(5) 6.2
Russell B. Wight, Jr.
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663.................... 1,664,744(5) 6.2
Robert W. Affholder...................................... 1,307,858(6) 4.9
Paul A. Biddelman........................................ 380,877(7) 1.4
Brian Chandler(8)........................................ 183,590 (9)
Douglas K. Chick(8)(10).................................. 917,231 3.4
William Gorham........................................... 9,425(11) (9)
James D. Krugman......................................... 278,664(12) 1.0
Alvin J. Siteman......................................... 246,190(13) (9)
Silas Spengler........................................... 2,000 (9)
Sheldon Weinig........................................... 12,099 (9)
</TABLE>
14
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
--------------------------------------------------------- --------- ----
<S> <C> <C>
Anthony W. Hooper........................................ 114,800(14) (9)
Jean-Paul Richard........................................ 310,000(15) 1.1
William A. Martin........................................ 28,000(16) (9)
Dale T. Harden........................................... 12,500(16) (9)
Raymond Toth............................................. 12,000(16) (9)
Directors and Executive Officers as a group (19
persons)............................................... 8,189,755(17) 29.5
</TABLE>
- ---------------
(1) Except as otherwise indicated, as of May 1, 1997 all of such shares are
owned with sole voting and investment power.
(2) Represents: (i) 146,159 shares beneficially owned by Jerome and Nancy F.
Kalishman as tenants by the entirety, (ii) 2,869,274 shares beneficially
owned by Xanadu Investments, L.P. (the general partners of which are The
Jerome Kalishman Revocable Trust, as to which Jerome Kalishman acts as
trustee, and The Nancy F. Kalishman Revocable Trust, as to which Nancy F.
Kalishman acts as trustee), and (iii) 82,415 shares (the "Fund Shares")
beneficially owned by Jerome Kalishman, as trustee of The Jerome and Nancy
Kalishman Family Fund; Nancy F. Kalishman disclaims beneficial ownership of
the Fund Shares. Excludes: (i) 302,463 shares beneficially owned with sole
voting and investment power by John Kalishman, (ii) 302,463 shares
beneficially owned with sole voting and investment power by James
Kalishman, (iii) 302,462 shares beneficially owned with sole voting and
investment power by Susan Kalishman, (iv) 302,463 shares beneficially owned
with sole voting and investment power by Thomas Kalishman and (v) 115,000
shares held by The Jerome and Nancy F. Kalishman Irrevocable
Grandchildren's Trust, as to which John, James, Susan and Thomas Kalishman
(all of whom are children of Jerome and Nancy F. Kalishman) act as
co-trustees and have shared voting and investment power; Jerome and Nancy
F. Kalishman disclaim beneficial ownership of such shares.
(3) Includes 1,087,125 shares beneficially owned by T. Rowe Price New Horizons
Fund, Inc. (the "Fund"), a registered investment company. In a Statement on
Schedule 13G, as amended, filed with the Securities and Exchange
Commission, T. Rowe Price Associates, Inc. ("Associates"), a registered
investment advisor, and the Fund have reported that Associates has sole
investment power over all such 2,667,825 shares, and that Associates and
the Fund have sole voting power over, respectively, 355,700 shares and
1,087,125 shares.
(4) In a Statement on Schedule 13D filed with the Securities and Exchange
Commission by Interstate Properties and its partners, such parties have
reported that Interstate Properties is a general partnership consisting of
David Mandelbaum, Steven Roth and Russell B. Wight, Jr.
(5) Includes 1,660,072 shares beneficially owned by Interstate Properties.
(6) Includes 3,000 shares beneficially owned by Mr. Affholder as trustee of the
Robert W. and Pamela Rae Affholder Grandchildren's Trust.
(7) Includes 350,877 shares issuable pursuant to currently exercisable warrants
granted by the Company to Hanseatic and held for discretionary customer
accounts and for an affiliate in which Hanseatic is the indirect managing
member. Mr. Biddelman is Treasurer of Hanseatic and, accordingly, would
hold shared voting and investment power in the event of exercise of such
warrants. See "Compensation Committee Interlocks and Insider
Participation."
(8) Represents 183,590 shares of Common Stock beneficially owned by Ringwood
Limited ("Ringwood"), a holding company whose shareholders are Mr. Chandler
and Barford Limited, as trustee of the Anthony Basmadjian Settlement
("Barford"), and held with shared voting and investment power with Mr.
Chandler, Barford and, as a result of the arrangements described under
footnote (10), Mr. Chick.
(9) Less than one percent.
(10) Represents 183,590 shares of Common Stock beneficially owned by Ringwood
Limited, in which Barford is a shareholder (see footnote(8)), and 733,641
shares of Common Stock beneficially owned by
15
<PAGE> 17
Parkwood Limited, as trustee of the Anthony Basmadjian "P" Settlement
("Parkwood"). The shares beneficially owned by Barford and Parkwood are
held with shared voting and investment power with Mr. Chick under oral
agreements pursuant to which Barford and Parkwood, respectively, will not
vote or dispose of any securities of the Company without the written
approval of Mr. Chick having first been obtained. Such parties have
reported that the settlor of the settlements as to which Barford and
Parkwood, respectively, act as trustees has further expressed his wishes to
the effect that the powers of trustee be exercised in consultation with Mr.
Chick with due regard to any suggestions made, and that, accordingly, Mr.
Chick has an informal ability to influence decisions of Barford and
Parkwood, respectively, regarding securities of the Company held by them as
trustees, but, under governing law, no right to enforce such settlements,
respectively, so as to override or compel the trustees or the councillors
who nominate beneficiaries in the exercise of a trust power or discretion
in a particular manner.
(11) Represents 9,425 shares jointly owned with Gail Gorham, Mr. Gorham's wife.
(12) Includes 195,000 shares issuable upon exercise of stock options granted by
the Company and exercisable at May 1, 1997, 40,364 shares held by a general
partnership whose managing partner is James D. Krugman and 33,300 shares,
as to which Mr. Krugman holds shared voting and investment power, held by a
general partnership in which Mr. Krugman's mother has an interest.
(13) Represents: (i) 210,348 shares held by Mr. Siteman as trustee of the Alvin
J. Siteman Revocable Trust; (ii) 5,174 shares held by Mr. Siteman as
trustee of trusts for the benefit of members of his immediate family; and
(iii) 30,668 shares issuable upon exercise of stock options granted by the
Company and exercisable at May 1, 1997.
(14) Includes 99,500 shares issuable upon exercise of stock options granted by
the Company and exercisable at May 1, 1997.
(15) Includes 300,000 shares issuable upon exercise of stock options granted by
the Company and exercisable at May 1, 1997.
(16) Represents shares issuable upon exercise of stock options granted by the
Company and exercisable at May 1, 1997.
(17) Includes 816,461 shares issuable upon exercise of stock options granted by
the Company and exercisable at May 1, 1997 and currently exercisable
warrants held by Hanseatic.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of copies of reports received by it pursuant to
Section 16(a) of the Securities Exchange Act of 1934, and the written
representations of its incumbent directors and officers, and holders of more
than ten percent of any registered class of the Company's equity securities, the
Company believes that during 1996 all filing requirements applicable to its
directors, officers and ten percent holders under said section were satisfied,
except that William Gorham reported on a Form 5 filed subsequent to the due date
thereof one open market sale of 5,750 shares of Common Stock required to have
been reported earlier on Form 4.
OTHER INFORMATION CONCERNING NOMINEES FOR DIRECTOR, DIRECTORS, OFFICERS AND
STOCKHOLDERS
In connection with the IGL Acquisition, and so as to enable the IGL
Acquisition to qualify as a pooling-of-interests under United States generally
accepted accounting principles, the Company, Brian Chandler, Douglas K. Chick,
Parkwood and Ringwood entered into an agreement dated July 3, 1992 pursuant to
which a prior pledge agreement extended by Messrs. Chandler and Chick and
Parkwood, covering Ordinary Shares of IGL and securing a promissory note from
Mr. Chandler and Parkwood to the Company were, together with Mr. Chick's
guaranty of such note, cancelled, and in exchange Messrs. Chick and Chandler and
Ringwood executed and delivered to the Company a substitute stock pledge
agreement (the "New Pledge Agreement"), and Ringwood executed and delivered to
the Company a secured non-recourse promissory note in the initial principal
amount of $3,623,842.40 (the "Non-Recourse Note"). Messrs. Chandler and Chick
are both directors of the Company and, together with Parkwood, Ringwood and
Barford, are members of a group (the
16
<PAGE> 18
"Ringwood Group"), within the meaning of Section 13(d) of Securities Exchange
Act of 1934, which, during the year ended December 31, 1996, previously held in
excess of 5% of the outstanding Common Stock.
The Non-Recourse Note bore interest at a rate per annum equal to 2 1/2%
above the prime rate from time to time in effect at Citibank, N.A. and was
originally due July 3, 1995. In May 1995, the maturity date was extended by one
year 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
consummation of the IMA Merger. Pursuant to the New Pledge Agreement, and as
security for the Non-Recourse Note, Ringwood and Messrs. Chick and Chandler
pledged to the Company 255,801 shares of class B common stock, $.01 par value,
of the Company beneficially owned by them (which, in connection with the IGL
Acquisition and in accordance with their terms, were converted into shares (the
"Pledged Shares") of Common Stock on a share-for-share basis). 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 Non-Recourse Note. Effective in August
1996, the Company foreclosed on the Pledged Shares in full satisfaction of the
obligation of Ringwood and Messrs. Chandler and Chick under the Non-Recourse
Note and the New Pledge Agreement.
In December 1995, in exchange for payment in the amount of $250,000, the
Company obtained an option from Sound Pipe Limited ("SPL"), a company affiliated
with Messrs. Chandler and Chick, for a three-month period to evaluate certain
pipe rehabilitation technologies developed by SPL and, at the election of the
Company, to negotiate a license agreement from SPL providing for the
commercialization of such technologies by the Company. SPL, as guaranteed by
Messrs. Chandler and Chick, further agreed that, in the event the Company
elected not to pursue such transaction, such payment would be refunded to the
Company. The Company elected not to pursue any such license and, accordingly, in
March 1996, SPL returned such amount to the Company. Later in 1996 and again in
early 1997, SPL again approached the Company to discuss any potential interest
in SPL's technology. The Company again declined any interest. As a result of the
Company's election not to pursue any such license, there is no guarantee that
this technology will not be licensed to competitors or potential competitors of
the Company.
The Company and Messrs. Chandler and Chick and their affiliates have
addressed the application, if any, of certain commitments alleged by IGL (which
was acquired by the Company in 1992) to have been made by Mr. Chandler in 1983
requiring him, through November 1993, to offer free of cost to IGL any new
ideas, inventions and technology for which Mr. Chandler was responsible. Mr.
Chandler had previously taken the position, in a Statement on Schedule 13D filed
in 1989 with respect to shareholdings in IGL by the Ringwood Group, that such
commitments are not enforceable. The Company has acknowledged Mr. Chandler's
position, but has not formally agreed or disagreed with it. The Company will
submit any definitive arrangements regarding transactions with Messrs. Chandler
and Chick and their affiliates for review and approval by a majority of the
disinterested members of the Company's Board of Directors, which will include
consideration of any legal issues concerning such technologies. There can be no
assurance that the Company would have access to any technology developed by
Messrs. Chandler and Chick and their affiliates on favorable terms or at all, or
would be in a position to prevent the conduct of potentially competing
activities utilizing such developments.
As principal stockholders of IGL, the members of the Ringwood Group and
Interstate Properties, in connection with the IGL Acquisition, received certain
registration rights covering the shares of Common Stock issued in exchange for
their Ordinary Shares of IGL, and all other shares of Common Stock held by them.
Such agreement terminates in December 1998. Under such agreement, a stockholder
may demand registration under the Securities Act of 1933 on one occasion (unless
the Company is entitled to use a registration statement on Form S-3, in which
case each stockholder is entitled to three demand registrations) of no less than
500,000 shares of Common Stock. In addition, the stockholders are entitled to
incidental registration rights, during the term of such agreement, with respect
to the shares of Common Stock beneficially owned by them.
17
<PAGE> 19
As principal stockholders of IMA, Robert W. Affholder, a director of the
Company, and Xanadu Investments, L.P. (the general partners of which are The
Jerome Kalishman Revocable Trust, as to which Jerome Kalishman, Chairman of the
Board and a director of the Company, acts as trustee, and The Nancy F. Kalishman
Revocable Trust, as to which Nancy F. Kalishman acts as trustee), in connection
with the IMA Merger, received certain registration rights covering the shares of
Common Stock issued in exchange for the IMA Class A Common Stock held by them.
Such agreement terminates in December 1998. Under such agreement a stockholder
may demand registration under the Securities Act of 1933 on one occasion (unless
the Company is entitled to use a registration statement on Form S-3, in which
case each stockholder is entitled to three demand registrations) of no less than
500,000 shares of Common Stock. In addition, the stockholders are entitled to
incidental registration rights, during the term of such agreement, with respect
to the shares of Common Stock beneficially owned by them.
A subsidiary of the Company is party to a tunnelling equipment lease
agreement with A-Y-K-E Partnership, in which Messrs. Kalishman and Affholder are
partners. Such agreement covers equipment held by such partnership for lease
both to the Company's subsidiary and other parties, as available, and is
terminable upon 30 days prior notice by either such partnership or the Company's
subsidiary. During the year ended December 31, 1996, such partnership was paid
$384,575 under such arrangements, $29,050 of which was attributable to equipment
overhaul invoiced on a cost pass-through basis.
See "Compensation Committee Interlocks and Insider Participation" above for
information concerning legal services rendered to the Company by the firm in
which James D. Krugman, a director of the Company, and Howard Kailes, Secretary
of the Company, are members, and concerning a company in which Paul A.
Biddelman, a director of the Company, is treasurer, which held the Company's
8.5% senior subordinated note until prepayment in February 1997.
II. RELATIONSHIP WITH INDEPENDENT AUDITORS
The Board of Directors has selected Arthur Andersen LLP, independent
certified public accountants, as the auditors of the Company for the fiscal year
ending December 31, 1997. Such firm has audited the consolidated financial
statements of the Company for the fiscal year ended December 31, 1996. The Board
of Directors considers Arthur Andersen LLP to be eminently qualified.
One or more representatives of Arthur Andersen LLP will attend the Meeting,
will have an opportunity to make a statement and will respond to appropriate
questions from stockholders.
On July 17, 1996, the Company engaged Arthur Andersen LLP as its
independent accountants after dismissing its former independent auditors, BDO
Seidman, LLP. The report of the Company's former independent auditors on the
Company's financial statements for the fiscal year prior thereto did not contain
any adverse opinions or disclaimers of opinions and were not qualified or
modified as to uncertainty, audit scope, or accounting principles. There were no
disagreements with the Company's prior independent auditors during the prior
fiscal year or any subsequent interim period prior to July 17, 1996 on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of the prior independent auditors, would have caused them to make
reference in connection with their report to the subject matter of their
disagreement. The Company's decision to change independent auditors was
recommended by the audit committee of its Board of Directors and approved by its
Board of Directors.
III. OTHER MATTERS
The Board of Directors of the Company does not know of any other matters
which may be brought before the Meeting. However, if any such other matters are
properly presented for action, it is the intention of the persons named in the
accompanying form of proxy to vote the shares represented thereby in accordance
with their judgment on such matters.
18
<PAGE> 20
IV. MISCELLANEOUS
If the accompanying form of proxy is executed and returned, the shares
represented thereby will be voted in accordance with the terms of the proxy,
unless the proxy is revoked. If no directions are indicated in such proxy, the
shares represented thereby will be voted FOR the election of the four Class II
nominees proposed by the Board of Directors. Any proxy may be revoked at any
time before it is exercised by giving written notice to the Secretary of the
Company prior to the actual vote at the Meeting. The casting of a later dated
ballot or proxy at the Meeting by a stockholder who may theretofore have given a
proxy will have the effect of revoking the initial proxy.
All costs relating to the solicitation of proxies will be borne by the
Company. Proxies may be solicited by officers, directors and regular employees
of the Company and its subsidiaries personally, by mail or by telephone or
telegraph, and the Company may pay brokers and other persons holding shares of
stock in their names or those of their nominees for the reasonable expenses in
sending soliciting material to their principals. The Company has also engaged
Morrow & Co. Inc., 345 Hudson Street, New York, New York 10011, to aid in the
solicitation of proxies with respect to the Meeting for a fee estimated at
$7,500 plus reimbursement for reasonable and customary out-of-pocket expenses.
It is important that proxies be returned promptly. Stockholders who do not
expect to attend the Meeting in person are urged to mark, sign and date the
accompanying form of proxy and mail it in the enclosed return envelope, which
requires no postage if mailed in the United States, so that their votes can be
recorded.
STOCKHOLDER PROPOSALS
Stockholder proposals intended to be presented at the 1998 Annual Meeting
of Stockholders of the Company must be received by the Company by February 6,
1998 in order to be considered for inclusion in the Company's Proxy Statement
relating to such Meeting.
HOWARD KAILES,
Secretary
Memphis, Tennessee
June 6, 1997
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<PAGE> 21
INSITUFORM TECHNOLOGIES, INC.
CLASS A COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE COMPANY
The undersigned hereby (1) acknowledges receipt of the notice of the Annual
Meeting of Stockholders of Insituform Technologies, Inc. (the "Company") to be
held at The New York Marriott East Side Hotel, 525 Lexington Avenue, New York,
New York on Tuesday, July 15, 1997 at 10:00 A.M., local time, and the Proxy
Statement in connection therewith and (2) appoints Anthony W. Hooper, William
A. Martin and Robert L. Kelley and each of them his proxies with full power of
substitution, for and in the name, place and stead of the undersigned, to vote
and act with respect to all of the shares of Class A Common Stock, $.01 par
value, of the Company standing in the name of the undersigned or with respect
to which the undersigned is entitled to vote and act, at the meeting and at any
adjournment thereof, and the undersigned directs that this proxy be voted as
follows:
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
<PAGE> 22
(CONTINUED FROM OTHER SIDE)
[X] PLEASE MARK YOUR
VOTE AS IN THIS
EXAMPLE
(a) Election of Class II Directors:
<TABLE>
<S> <C> <C>
FOR WITHHOLD NOMINEES: Robert W. Affholder,
ALL CLASS II NOMINEES LISTED AUTHORITY Paul A. Biddelman,
AT RIGHT (EXCEPT AS MARKED TO TO VOTE FOR ALL Douglas K. Chick and
THE CONTRARY BELOW). NOMINEES LISTED AT RIGHT. Steven Roth
[ ] [ ]
</TABLE>
(INSTRUCTIONS: To withhold authority to vote for any individual nominee
as a Class II Director, write that nominee's name in the
space provided below.)
_______________________________________________________________________________
(b) In the discretion of the proxies on any other matter that may properly come
before the meeting or any adjournment thereof.
THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO SPECIFICATION IS MADE, THIS PROXY
WILL BE VOTED FOR THE MATTERS SPECIFICALLY REFERRED TO HEREON.
If more than one of the proxies named above shall be present in person or by
substitute at the meeting or any adjournment thereof, all of the proxies so
present and voting, either in person or by substitute, shall exercise all of
the proxies hereby given.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
upon or act with respect to such stock and hereby ratifies and confirms all
that the proxies so present and voting, their substitutes or any of them, may
lawfully do by virtue hereof.
PLEASE DATE, SIGN AND MAIL THIS PROXY CARD IN THE ENCLOSED ENVELOPE. NO POSTAGE
IS REQUIRED.
SIGNATURE: _____________________________ DATED: _______________________
(and TITLE, if applicable)
SIGNATURE: _____________________________ DATED: _______________________
(if held (and TITLE, if applicable)
jointly)
Please date this proxy and sign your name exactly as it appears herein. Where
there is more than one owner, each should sign. When signing as an attorney,
administrator, executor, guardian or trustee, please add your title as such. If
executed by a corporation, the proxy should be signed by a duly authorized
officer.
