<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
INSITUFORM TECHNOLOGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
<TABLE>
<C> <S>
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(1) 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:
------------------------------------------------------------
</TABLE>
<PAGE> 2
INSITUFORM TECHNOLOGIES, INC.
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 10, 1998
------------------------
Chesterfield, Missouri
May 4, 1998
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 Frontenac Hilton-St. Louis, 1335 South
Lindbergh Boulevard, St. Louis, Missouri, on Wednesday, June 10, 1998, at 10:00
A.M., local time, for the following purposes, as more fully described in the
accompanying Proxy Statement:
(1) To elect nine directors of the Company, each to serve for the
ensuing year and until their respective successors are elected and have
qualified;
(2) To consider and take action upon a proposal to approve and adopt
an amendment, heretofore approved by the Board of Directors, to the
Company's 1992 Employee Stock Option Plan in order to increase the number
of shares issuable pursuant to the exercise of options granted under said
plan from 1,000,000 to 1,850,000 shares of the Common Stock of the Company;
(3) To consider and take action upon a proposal to approve and adopt
an amendment, heretofore approved by the Board of Directors, to the
Company's 1992 Director Stock Option Plan in order to increase the number
of shares issuable pursuant to the exercise of options granted under said
plan from 500,000 to 1,000,000 shares of the Common Stock of the Company;
and
(4) To transact such other business as may properly come before the
Meeting or any adjournment or adjournments thereof.
The close of business on April 27, 1998 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 May 4, 1998 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 June
10, 1998 and at any adjournment or adjournments thereof, for the purposes set
forth in such Notice. The Company's executive office is located at 702 Spirit 40
Park Drive, Chesterfield, Missouri 63005.
At the close of business on April 27, 1998, the record date stated in the
accompanying Notice, the Company had outstanding 26,964,693 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. Neither the proposed
amendment to the Company's employee stock option plan, nor the proposed
amendment to the Company's director stock option plan, will be made effective
until it is approved and adopted by the holders of a majority of shares of
Common Stock present in person or represented by proxy and entitled to vote at
the Meeting.
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, in the election of directors, and
in the determination of whether to approve and adopt the amendments to the
Company's employee stock option plan and its director stock option plan,
respectively, 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.
I. ELECTION OF DIRECTORS
At the Meeting, stockholders will elect nine directors each to serve a term
of one year 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 nine 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, to vote such shares only for the remaining nominees.
CERTAIN INFORMATION CONCERNING NOMINEES AND DIRECTORS
Certain information concerning the nominees for election as directors is
set forth below. Such information was furnished by them to the Company:
ROBERT W. AFFHOLDER, age 62; 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.
<PAGE> 4
("IMA"), from 1993 to 1995; President of IMA from 1994 to 1995 and from
prior to 1993 to 1993; Director of the Company since 1995.
PAUL A. BIDDELMAN, age 52; President, Hanseatic Corporation (private
investment company) since 1997, and Treasurer from prior to 1993 to 1997;
Director: Celadon Group, Inc., Electronic Retailing Systems International,
Inc., Premier Parks Inc., Petroleum Heat & Power Company, Inc., Star Gas
Corporation (general partner of Star Gas Partners, L.P.); Director of the
Company since 1988.
STEPHEN P. CORTINOVIS, age 48; Vice President International and
President -- Europe, Emerson Electric Co. since prior to 1993; Director of
the Company since 1997.
ANTHONY W. HOOPER, age 50; President and Chief Executive Officer of
the Company since November 1996 and Chairman of the Board of the Company
since June 1997; Senior Vice President Marketing and Senior Vice
President -- Marketing and Technology of the Company, successively, from
November 1993 to November 1996; President of Huyck Formex/Weavexx
Corporation (industrial textile and process equipment manufacturer), a
subsidiary of BTR, Inc., from prior to 1993 to November 1993; Director of
the Company since 1996.
JEROME KALISHMAN, age 70; Vice Chairman of the Board of the Company
since June 1997 and from October 1995 to November 1996; Chairman of the
Board of the Company from November 1996 to June 1997; Chairman and Chief
Executive Officer of IMA from prior to 1993 to 1995; Director of the
Company since 1995.
SILAS SPENGLER, age 67; 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 prior to 1993 to 1994; Director of
the Company since 1987.
SHELDON WEINIG, age 70; 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 1993 to 1994; Director: Aseco
Corporation, Intermagnetics General Corporation, Kentek Information
Systems, Inc., U.S. Cast Polymers, Inc.; Director of the Company since
1992.
RUSSELL B. WIGHT, JR., age 59; General Partner, Interstate Properties
(real estate development and construction) since prior to 1993; Director:
Vornado Realty Trust, Alexander's, Inc.; Director of the Company since
1992.
ALFRED L. WOODS, age 54; President, Woods Group (management
consultant) since 1995; President and Chief Operating Officer, WSR
Corporation (holding company for specialty retail properties) from 1990 to
1995; President, R&S/Strauss (specialty store retail operator) from 1969 to
1990; Director of the Company since 1997.
The Company's directors have been designated for appointment to the Board
of Directors in accordance with the provisions of an agreement dated July 25,
1997, as amended (the "Settlement Agreement"), entered into by the Company with
Jerome Kalishman, Nancy F. Kalishman, The Jerome and Nancy Kalishman Family
Fund, Xanadu Investments L.P. and Robert W. Affholder (collectively, the
"Kalishman/Affholder Group"), Paul A. Biddelman, Stephen P. Cortinovis, Anthony
W. Hooper, Silas Spengler, Sheldon Weinig and Russell B. Wight, Jr., and later
joined by Alfred L. Woods. Under the Settlement Agreement, the
Kalishman/Affholder Group agreed to end the pending proxy contest with respect
to the election of directors at the Company's 1997 annual meeting of
stockholders (the "1997 Annual Meeting") and not to engage, prior to the
Company's 1999 annual meeting of stockholders (the "1999 Annual Meeting"), in
certain activities in opposition to the Company's management. The Company
agreed, pursuant to the Settlement Agreement, to make certain changes in the
structure and composition of the Board of Directors including: (i) reducing the
size of the Board from thirteen to eight directors, such number increasing
automatically to nine directors upon the appointment of an additional nominee to
the Board in the manner described in the Settlement Agreement; (ii) eliminating
classification of the Board; and (iii) designating specific individuals to be
nominated by the Company until the 1999 Annual Meeting to serve on the Board,
and providing a new means for filling vacancies which may occur on the Board.
2
<PAGE> 5
Pursuant to the Settlement Agreement, Messrs. Affholder, Biddelman,
Cortinovis, Hooper, Kalishman, Spengler, Weinig and Wight were nominated for
election at the 1997 Annual Meeting. Mr. Woods was designated for appointment to
the Board of Directors subsequent to the 1997 Annual Meeting in accordance with
the provisions of the Settlement Agreement. The Settlement Agreement provides
that the Company will nominate and recommend for re-election to the Board of
Directors at the Meeting and at the 1999 Annual Meeting the then incumbent
members of the Board.
In addition, the Settlement Agreement provides that if, during the period
ending immediately prior to the 1999 Annual Meeting, any director then in office
resigns or is unable to serve for any reason, such vacancy will be filled only
with a designee chosen by both members of the Nominating Committee of the
Company's Board of Directors, as constituted pursuant to the Settlement
Agreement, subject to specified dispute resolution procedures and the
confirmation of the Board of Directors that such person possesses no
characteristics that would disqualify him under applicable law from service as a
director, and thereafter the Company will nominate and recommend such designee
for election to the Board of Directors.
See "Information Concerning Certain Stockholders" below, for information
concerning certain voting, standstill and related agreements entered into by the
parties to the Settlement Agreement and "Executive Compensation" below, for
information concerning certain additional transactions under the Settlement
Agreement.
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, 1997, the Board of Directors of the
Company held twelve 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.
The Company's Audit Committee has, since the 1997 Annual Meeting, consisted
of Paul A. Biddelman, Silas Spengler and Sheldon Weinig. 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. Prior to the 1997 Annual Meeting, during the year
ended December 31, 1997 the members of the Audit Committee consisted of (i)
Jerome Kalishman, Silas Spengler and Sheldon Weinig, current directors of the
Company, for the period through January 1997, and (ii) from January 1997 through
the 1997 Annual Meeting, Robert W. Affholder and Silas Spengler, current
directors of the Company, and Alvin J. Siteman, a former director of the
Company. During the year ended December 31, 1997, the Audit Committee held one
meeting.
The Company's Compensation Committee has, since the 1997 Annual Meeting,
consisted of Robert W. Affholder and Stephen P. Cortinovis, with Alfred L. Woods
joining in January 1998. 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. Prior to the 1997 Annual Meeting, during the year
ended December 31, 1997 the members of the Compensation Committee consisted of
(i) Paul A. Biddelman, a current director of the Company, and William Gorham,
James D. Krugman, Steven Roth and Alvin J. Siteman, former directors of the
Company, through January 1997, and (ii) Sheldon Weinig and Russell B. Wight,
Jr., current directors of the Company, and James D. Krugman, a former director
of the Company, from January 1997 through the 1997 Annual Meeting. During the
year ended December 31, 1997 the Compensation Committee held four meetings.
3
<PAGE> 6
The Company's Nominating Committee has, since the 1997 Annual Meeting,
consisted of Jerome Kalishman and Russell B. Wight, Jr. Pursuant to the terms of
the Settlement Agreement, the Nominating Committee selects designees to fill
vacancies on the Board of Directors, subject to confirmation by the Board of
Directors, as described above under "Certain Information Concerning Nominees and
Directors." Under the Settlement Agreement, the Nominating Committee is not
authorized to consider nominees recommended by security holders. During the year
ended December 31, 1997, the Nominating Committee did not meet.
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, or committee of the Board,
attended by such director ($500 in the case of telephonic meetings and committee
meetings held in conjunction with Board meetings), plus reimbursement of his
expenses.
In November 1997, the Company granted options under its 1992 Director Stock
Option Plan (the "Director Plan") covering 14,000 shares of Common Stock to each
of Stephen P. Cortinovis and Alfred L. Woods, and covering 9,000 shares of
Common Stock to each of Robert W. Affholder, Paul A. Biddelman, Jerome
Kalishman, Silas Spengler, Sheldon Weinig and Russell B. Wight, Jr. All such
options are currently exercisable at a price per share equal to $8.75, the
closing price per share of Common Stock on The Nasdaq National Market on the
date of grant, and expire ten years from the date of grant. The Company
contemporaneously granted options under the Director Plan, on the same terms,
covering 49,000 shares of Common Stock to Anthony W. Hooper, who also 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
"Executive Compensation" and "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.
Under the Settlement Agreement, the term of the arrangements under which
Jerome Kalishman became Vice Chairman of the Board in October 1995 in connection
with the Company's combination with IMA (the "IMA Merger"), was extended for a
period of one year so as to expire on December 9, 1999, provided, that, during
such additional year Mr. Kalishman's annual salary in such position of $100,000
will not be payable but benefits and office arrangements will continue. In
November 1996, the Company had supplemented such arrangements with Mr. Kalishman
to provide that the appointment of him as Chairman of the Board of Directors,
and his service in such position (which extended through June 1997), would,
during the period thereof, substitute for the Company's and his respective
obligations under which Mr. Kalishman became Vice Chairman of the Board. 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 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 agreement). 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 agreement terminates automatically. Upon completion of
the IMA Merger and for a period of two years thereafter, the Company was also
party to 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 at an annual fee of $150,000. 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, who served as a
director until the 1997 Annual Meeting, amended the agreement 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,
4
<PAGE> 7
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 Director Plan in
December 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 Market on such date, and (ii) an option granted
under the Director Plan in November 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 Market on such
date.
As a consequence of the assumption and exchange of options previously
granted by IMA for options granted by the Company, in October 1995 Alvin
Siteman, who became a director of the Company upon consummation of the IMA
Merger and served until the 1997 Annual Meeting, 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, and in August 1997, exercised options with respect to
23,001 shares at exercise prices ranging from $2.61 to $4.32 per share. Mr.
Siteman's remaining options have expired without exercise.
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 (i) the Company's chief executive officer, (ii) each
of the other executive officers whose salary and bonus exceeded $100,000 during
the most recent fiscal year, and (iii) an additional individual who would have
been among the four most highly-compensated executive officers during the most
recent fiscal year, but was not an executive officer at the end of such year:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
----------------------------------------- SECURITIES
OTHER COM- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS PENSATION(1) OPTIONS(#) COMPENSATION
- --------------------------- ---- -------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper.......... 1997 $344,000 $160,875 $83,366(3) 49,000 $ 18,269(4)
President and Chief 1996 264,604 -- -- 150,000 14,434
Executive Officer(2) 1995 235,000 -- -- 25,000 2,405
Robert W. Affholder........ 1997 250,000 -- -- 9,000 20,718(6)
Senior Executive Vice 1996 250,000 -- -- -- 12,000
President(5) 1995 229,167 75,000 -- -- 11,531
William A. Martin.......... 1997 196,297 48,840 35,437(7) 15,000 17,655(8)
Senior Vice President -- 1996 186,764 -- -- -- 7,049
Chief Financial Officer 1995 175,000 -- -- 10,000 14,707
Robert L. Kelley(9)........ 1997 181,714 65,120 39,181(10) 15,000 16,349(11)
Vice President, General 1996 106,462 -- 12,842(12) 25,000 41,934
Counsel 1995 -- -- -- -- --
Dale T. Harden............. 1997 133,269 -- 15,750(12) -- 160,996(14)
Senior Vice President -- 1996 117,049 65,625 -- 50,000 30,857
Chief Operating Officer 1995 -- -- -- -- --
of North American
Contracting
Operations(13)
</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.
5
<PAGE> 8
(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 $74,582 pursuant to the Company's relocation plan with respect
to the consolidation of facilities in Chesterfield, Missouri (the
"Relocation Plan") and $8,784 in reimbursement for taxes. See also "Certain
Agreements with Directors and Executive Officers" below.
(4) Represents $6,400 in 401(k) contributions under the Company's 401(k)
Profit-Sharing Plan (the "Restated Plan"), $8,000 in profit-sharing
contributions under the Restated Plan, and $3,869 in term life insurance
premiums.
(5) Mr. Affholder became an executive officer 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 1995 include compensation from IMA and
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.
(6) Represents $6,400 in 401(k) contributions under the Restated Plan, $8,000
in profit-sharing contributions under the Restated Plan and $6,318 in term
life insurance premiums.
(7) Represents $30,885 pursuant to the Relocation Plan and $4,552 in
reimbursement for taxes.
(8) Represents $6,400 in 401(k) contributions under the Restated Plan, $8,000
in profit-sharing contributions under the Restated Plan, and $3,255 in term
life insurance premiums.
(9) Mr. Kelley became an executive officer in June 1996, having joined the
Company as General Counsel in the prior month.
(10) Represents $34,961 pursuant to the Relocation Plan and $4,220 in
reimbursement for taxes.
(11) Represents $6,400 in 401(k) contributions under the Restated Plan, $8,000
in profit-sharing contributions under the Restated Plan and $1,949 in term
life insurance premiums.
(12) Represents reimbursement for taxes.
(13) Mr. Harden became an executive officer in June 1996 and resigned in July
1997.
(14) Represents $4,846 in 401(k) contributions under the Restated Plan, $3,650
in term life insurance premiums, $40,000 payment in lieu of relocation
expenses, and $112,500 in severance payments.
Option Grant Table. The following table sets forth certain information
regarding options granted by the Company during the year ended December 31, 1997
to the individuals named in the above compensation table:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
--------------------------------------------------------- VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING OPTIONS GRANTED EXERCISE FOR OPTION TERM(2)
OPTIONS TO EMPLOYEES PRICE EXPIRATION ----------------------
NAME GRANTED(#) IN FISCAL YEAR(1) ($/SH) DATE 5% 10%
---- ---------- ----------------- -------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper.... 49,000(3) 9.9% $8.75 11/14/07 $236,382 $582,220
Robert W.
Affholder.......... 9,000(3) 1.8 8.75 11/14/07 43,417 106,938
William A. Martin.... 15,000(4) 3.0 8.75 11/14/07 72,362 178,231
Robert L. Kelley..... 15,000(4) 3.0 8.75 11/14/07 72,362 178,231
Dale T. Harden....... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Includes options granted to employees under the Director Plan.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on arbitrarily assumed rates of stock price appreciation of 5% and
10% compounded annually from the date the respective options are granted to
their expiration date.
6
<PAGE> 9
(3) Such options were granted under the Director Plan (see "Director
Compensation" above) and are currently exercisable.
(4) One-fifth of such options became exercisable on grant, with the remainder
becoming exercisable in four equal annual installments thereafter.
Aggregate Option Exercises and Year-End Option Table. The following table
sets forth certain information regarding exercises of stock options, and stock
options held as of December 31, 1997, by the individuals named in the above
compensation table:
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END(#) AT YEAR-END($)(1)
SHARES ACQUIRED VALUE ----------------------------- ---------------------------
NAME ON EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Anthony W. Hooper...... -- -- 164,750 146,250 5,600 50,400
Robert W. Affholder.... -- -- 9,000 -- -- --
William A. Martin...... -- -- 33,500 14,500 -- --
Robert L. Kelley....... -- -- 15,500 24,500 -- --
Dale T. Harden......... -- -- -- -- -- --
</TABLE>
- ---------------
(1) Calculated on the basis of the fair market value of the underlying
securities at year-end, minus the exercise price.
STOCK PLANS
In June 1992, the stockholders of the Company approved the Company's 1992
Employee Stock Option Plan (the "Employee Plan") and its Director Plan, as
previously adopted by the Board of Directors. For a description of the Employee
Plan, see "II. Amendment to the 1992 Employee Stock Option Plan" below. For a
description of the Director Plan, see "III. Amendment to the 1992 Director Stock
Option Plan" below.
In October 1995, in connection with the consummation of the IMA Merger, the
Company assumed options (the "IMA Options") previously granted under the
Insituform Mid-America, Inc. 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, 244,393 shares
of which were covered by options outstanding at April 1, 1998.
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, provided 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 Market on the date
of grant), becoming 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, becoming
7
<PAGE> 10
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 subsequently granted, as described
under "Executive Compensation" above), 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. Such
severance agreements have been supplemented and superseded to the extent
provided in the severance agreement extended by the Company to Mr. Hooper in
June 1997, as more fully described below. In connection with Mr. Hooper's
relocation to the Company's new headquarters facilities in Chesterfield,
Missouri, and in addition to the amounts extended to Mr. Hooper under the
Company's Relocation Plan, in September 1997 the Company extended a loan to Mr.
Hooper in the amount of $200,000, due on the fifth anniversary thereof, or
earlier in the event of cessation of employment. Such loan accrues interest
after default, at the rate of 1% per month, and does not accrue interest prior
to default except as specified therein.
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. Such severance
agreements have been supplemented and superseded to the extent provided in the
severance agreement extended by the Company to Mr. Martin in June 1997, as more
fully described below.
In connection with the commencement of his employment as general counsel of
the Company in May 1996, the Company extended a severance arrangement to Robert
L. Kelley pursuant to which, in the event of termination of employment by the
Company without cause within the first twelve months of employment, Mr. Kelley
would be entitled to severance equal to six months' base salary which would be
paid over the severance period. Such severance agreements have been supplemented
as provided in the severance agreement extended by the Company to Mr. Kelley in
June 1997, as more fully described below.
The Company's arrangements with Dale T. Harden, who served as Senior Vice
President through his resignation in July 1997, entailed severance payments to
him in the amount of approximately $112,500, continuation of his car allowance
for six months after severance and payment of the amount of approximately
$57,750 (including tax reimbursements) to him in lieu of relocation expenses
after severance.
In June 1997, the Company entered into severance agreements with,
respectively, Anthony W. Hooper, William A. Martin and Robert L. Kelley which
provide that, subsequent to the occurrence of specified events during a period
of three years after the date of such agreements, if the employment of such
officer is terminated without "cause" or such officer resigns with "good reason"
(as those terms are defined under such agreements), or such officer resigns for
any reason during a 30-day period following the anniversary of the specified
events, such officer is entitled to the benefits set forth in the agreement. The
election of two members of the Board of Directors in October 1997 outside of the
procedures provided for under the Company's merger
8
<PAGE> 11
agreement with IMA was one of the specified events. The benefits to which each
officer would be entitled upon severance from the Company as aforesaid include
an amount, payable within 30 days after severance, equal to three times
compensation (including base salary and bonus, as defined, and accrued
supplemental retirement benefits) plus amounts to cover any excise taxes due, if
any, and coverage for a period of three years under the Company's welfare plans
(or equivalent coverage).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended December 31, 1997, the Company's Compensation
Committee consisted of: (i) for the period through January 1997, James D.
Krugman, Paul A. Biddelman, William Gorham, Steven Roth and Alvin J. Siteman;
(ii) for the period from January 1997 through the 1997 Annual Meeting, James D.
Krugman, Sheldon Weinig and Russell B. Wight, Jr.; and (iii) after the 1997
Annual Meeting, Stephen P. Cortinovis and Robert W. Affholder (with Alfred L.
Woods joining in January 1998). In accordance with the terms of the Settlement
Agreement, Messrs. Gorham, Krugman, Roth and Siteman executed resignations from
the Board of Directors effective at the 1997 Annual Meeting. In addition, the
Company's Employee Plan (under which executive officers who are not directors
are granted stock options) and its Director Plan (under which executive officers
who are directors are granted stock options) were, during the year ended
December 31, 1997, administered by the entire Board of Directors which, in
addition to the foregoing directors, included Jerome Kalishman, Silas Spengler
and (until June 1997) Douglas K. Chick and (until the effectiveness at the 1997
Annual Meeting of his resignation pursuant to the Settlement Agreement) Brian
Chandler.
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 "Subordinated
Note"), and related warrants exercisable with respect to 350,877 unregistered
shares of Common Stock, to Hanseatic Corporation ("Hanseatic"), which Hanseatic
acquired for discretionary customer accounts and an affiliate, as described
under "Information Concerning Certain Stockholders" below. Paul Biddelman, a
current director of the Company, is President 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). In February 1997, the Company prepaid all amounts
outstanding under the Subordinated Note (including $162,917 in accrued
interest). 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.
The Company and Messrs. Chandler and Chick, both former directors of the
Company, and their affiliates have addressed the application, if any, of certain
commitments alleged by Insituform Group Limited ("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 by a group (the "Ringwood Group"), within the meaning
of Section 13(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), consisting of Messrs. Chandler and Chick and their affiliates,
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 does not anticipate any transactions with Messrs. Chandler and Chick and
their affiliates which might raise any issues concerning such technologies.
As principal stockholders of IGL, the members of the Ringwood Group and
Interstate Properties (a principal stockholder of the Company, in which Mr.
Wight, a current director of the Company, and Mr. Roth, a former director, are
partners), in connection with the Company's acquisition of IGL, 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
9
<PAGE> 12
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.
As principal stockholders of IMA, Robert W. Affholder, a current 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, a current
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 class A common stock, $.01 par value, of IMA
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, 1997, such partnership was paid
$317,000 under such arrangements.
Pursuant to the Settlement Agreement, the Company has reimbursed the group
including Messrs. Kalishman and Affholder for reasonable out-of-pocket costs and
expenses in connection with the 1997 Annual Meeting in the amount of $143,000.
James D. Krugman, a former director of the Company, 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, 1997, Krugman
Chapnick & Grimshaw LLP received fees for legal services rendered to the Company
of $664,000, together with reimbursement of out-of-pocket expenses of $141,000.
It is expected that Krugman Chapnick & Grimshaw LLP will continue to render
legal services to the Company in the future.
REPORT OF BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors of the Company
currently consists of three directors, a majority of whom are not executive
officers of the Company. The Compensation Committee makes recommendations to the
Board of Directors of the Company regarding the compensation arrangements for
executive officers of the Company, including the Company's Chief Executive
Officer. Administration of the Employee Plan, under which stock options may be
awarded to executive officers who are not directors, and of the Director Plan,
under which options may be awarded to executive officers who serve on the Board,
is vested in the Board of Directors.
The objectives of the Compensation Committee in recommending executive
compensation to the Board of Directors 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 year ended December 31, 1997, the achievement of the foregoing
objectives was directed to the support of the Company's principal business
strategies, including a continuation of the Company's improved profitability in
its core business while cutting costs and reducing overhead. In particular, in
April 1997 the Board of Directors confirmed the applicability to executive
officers of the Company's relocation program for employees generally, designed
to assist, among other matters, in the consolidation of executive management in
new headquarters facilities in Chesterfield, Missouri. The relocation program,
as so adopted, provides for adjustments in base salary of relocating personnel
(as described below), in addition to assistance
10
<PAGE> 13
through reimbursement of temporary living expenses and moving expenses, home
sale assistance, and reimbursement for additional taxes resulting from such
benefits.
In addition, in June 1997 the Company extended to its key executives the
severance arrangements described above under "Certain Agreements with Directors
and Executive Officers."
As a result of the foregoing objectives, the compensation program for the
Company's executives, including its Chief Executive Officer, has been formulated
to consist of: (x) base salary; (y) bonuses; and (z) stock options, as follows:
(i) Base Salary. The Compensation Committee evaluates 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 the recommendations of the Chief Executive Officer 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, 1997, the Company, based upon
analyses undertaken by an independent consultant retained by the Company to
compare differences in living costs between the Company's new headquarters in
Chesterfield and its prior location in Memphis (due principally to the cost of
housing and state income taxes), adjusted base salaries for employees relocating
to the new facilities by ten percent; and, in April 1997, the Board of Directors
confirmed the applicability of the relocation package to the Company's executive
officers.
During the year ended December 31, 1997, remuneration as President and
Chief Executive Officer to Mr. Hooper was initially at the rate of $325,000 per
annum, pursuant to his employment arrangements entered into with the Company
upon appointment to that position in November 1996. In accordance with the
benefits extended under the Company's relocation program, base salary was
adjusted upwards by ten percent in connection with relocation to Chesterfield in
July 1997. The Company has also extended certain loan arrangements to Mr. Hooper
in connection with relocation, as described under "Certain Agreements with
Directors and Executive Officers" above.
(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, are eligible for bonuses of up to approximately 50% of base salary.
Such guidelines have typically provided 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, individual objectives established for
executive management by the Compensation Committee in discussions with the Chief
Executive Officer, and an evaluation of executive management by the Compensation
Committee. During the year ended December 31, 1997, bonus amounts earned by the
Chief Executive Officer were in the amount of $160,875 and were based on the
Compensation Committee's evaluation of such specific factors as Mr. Hooper's
performance during a substantial reorganization of operations and relocation of
headquarters to Chesterfield, and improved earnings per share, in the context
also of the circumstances that resulted in the Settlement Agreement.
(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's Common Stock. In connection with attracting new
executive management, the Compensation Committee has typically authorized the
grant of options effective upon commencement of employment.
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<PAGE> 14
The Company's current executive officers, collectively, hold options under
the Employee Plan and, in the case of Messrs. Hooper and Affholder, under the
Director Plan. During the year ended December 31, 1997, the Company authorized
option grants to officers named in the Summary Compensation Table under
"Executive Compensation" above covering 88,000 shares of Common Stock,
representing options with respect to approximately 17.7% of the Common Stock
covered by options granted to employees that year under all plans (and exclusive
of option grants to directors who are not employees). Of such awards, options
covering 49,000 shares, or 9.9% of the Common Stock covered by options granted
to all employees that year under all plans (and exclusive of option grants to
directors who are not employees), were granted to the Chief Executive Officer.
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, constituting the entire Board of Directors:
<TABLE>
<S> <C>
Robert W. Affholder Silas Spengler
Paul A. Biddelman Sheldon Weinig
Stephen P. Cortinovis Russell B. Wight, Jr.
Anthony W. Hooper Alfred L. Woods
Jerome Kalishman
</TABLE>
Notwithstanding anything set forth in any of the Company's previous filings
under the Securities Act of 1933 or the Securities Exchange Act of 1934 which
might incorporate future filings, including this Proxy Statement, in whole or in
part, the preceding report and the performance graph that follows shall not be
deemed incorporated by reference into any such filings.
12
<PAGE> 15
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, Utilx Corporation, Michael Baker Corporation, BFC
Construction Corporation (formerly Banister 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,
1992 and that all dividends were reinvested.
COMPARISON OF FIVE-YEAR CUMULATIVE RETURN
<TABLE>
<CAPTION>
MEASUREMENT PERIOD 'INSITUFORM COMPOSITE PEER
(FISCAL YEAR COVERED) TECHNOLOGIES, INC.' S&P 500 INDEX GROUP INDEX
<S> <C> <C> <C>
1992 100 100 100
1993 48.04 110.08 104.09
1994 45.59 111.53 93.65
1995 45.59 153.45 121.12
1996 28.92 188.68 140.71
1997 30.39 251.63 235.08
</TABLE>
INFORMATION CONCERNING CERTAIN STOCKHOLDERS
The following table sets forth certain information as of April 1, 1998 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," 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........................... 3,102,848(2) 11.5%
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
T. Rowe Price Associates, Inc. ......................... 2,438,825(3) 9.1
100 East Pratt Street
Baltimore, Maryland 21202
</TABLE>
13
<PAGE> 16
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK PERCENT
BENEFICIAL OWNER BENEFICIALLY OWNED(1) OF CLASS
---------------- --------------------- --------
<S> <C> <C>
Interstate Properties................................... 1,660,072 6.2
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663(4)
David Mandelbaum................................... 1,660,072(5) 6.2
80 Main Street
West Orange, New Jersey 07052
Steven Roth........................................ 1,670,072(5) 6.2
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663
Russell B. Wight, Jr............................... 1,695,905(5)(6)(7) 6.3
Park 80 West-Plaza Two
Saddle Brook, New Jersey 07663
Kalmar Investments Inc.................................. 1,401,275(8) 5.2
3701 Kennett Pike
Greenville, Delaware 19807
Robert W. Affholder..................................... 1,316,858(6)(9) 4.9
Paul A. Biddelman....................................... 359,877(6)(10) 1.3
Stephen P. Cortinovis................................... 14,000(11) (12)
Anthony W. Hooper....................................... 185,050(13) (12)
Silas Spengler.......................................... 11,000(6) (12)
Sheldon Weinig.......................................... 21,099(6) (12)
Alfred L. Woods......................................... 14,500(11) (12)
William A. Martin....................................... 23,500(14) (12)
Robert L. Kelley........................................ 17,200(15) (12)
Dale T. Harden.......................................... 100 (12)
Directors and Executive Officers as a group (11 6,761,837(16) 24.8
persons)..............................................
</TABLE>
- ---------------
(1) Except as otherwise indicated, as of April 1, 1998 all of such shares are
owned with sole voting and investment power.
(2) Represents: (i) 142,159 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), (iii) 82,415 shares (the "Fund Shares")
beneficially owned by Jerome Kalishman, as trustee of The Jerome and Nancy
Kalishman Family Fund, and (iv) 9,000 shares (the "Option Shares") issuable
upon exercise of stock options granted by the Company to Mr. Kalishman and
exercisable at April 1, 1998; Nancy F. Kalishman disclaims beneficial
ownership of the Fund Shares and the Option 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 2,438,825 shares, and that Associates and
the Fund have sole voting power over, respectively, 355,700 shares and
1,087,125 shares.
14
<PAGE> 17
(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 9,000 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998.
(7) Includes 22,161 shares held by a foundation as to which Mr. Wight has sole
voting and investment power.
(8) In a Statement on Schedule 13G filed with the Securities and Exchange
Commission, Kalmar Investments Inc., a registered investment advisor, has
reported sole investment power with respect to such shares.
(9) Includes 3,000 shares beneficially owned by Mr. Affholder as trustee of the
Robert W. and Pamela Rae Affholder Grandchildren's Trust.
(10) 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 President 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"
above.
(11) Includes 14,000 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998.
(12) Less than one percent.
(13) Includes 164,750 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998.
(14) Includes 15,500 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998.
(15) Includes 15,500 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998.
(16) Includes 277,750 shares issuable upon exercise of stock options granted by
the Company and exercisable at April 1, 1998 and currently exercisable
warrants held by Hanseatic.
Pursuant to the Settlement Agreement, each party thereto other than the
Company (which includes Messrs. Affholder, Biddelman, Cortinovis, Hooper,
Kalishman, Spengler, Weinig, Wight and Woods, Xanadu Investments, LP and Mrs.
Kalishman) agreed to certain voting and standstill provisions. During the period
(the "Term") commencing on the date of the Settlement Agreement and ending
immediately prior to the 1999 Annual Meeting, each such party will cause all
shares of capital stock of the Company which have the right to vote generally in
the election of directors, including, without limitation, shares of Common Stock
(collectively, "Voting Stock"), that are beneficially owned by such party (i) to
be present, in person or by proxy, at all meetings of stockholders so that all
such shares may be counted for the purpose of determining if a quorum is present
at such meetings, (ii) to be voted in favor of the election of the Company's
nominees to the Board of Directors at the 1998 Annual Meeting, and (iii) to be
voted in favor of persons nominated and recommended by the Company in any other
election of directors.
In addition, during the Term, each such party: (a) shall not directly or
indirectly (except through the Company pursuant to due authorization) solicit
any proxies or consents with respect to Voting Stock or in any way participate
in any solicitation of any proxy with respect to shares of Voting Stock or
become a participant in any election contest with respect to the Company or
request or induce or attempt to induce any other person to take any such actions
or attempt to advise, counsel or otherwise influence in any way any person with
respect to the voting of Voting Stock; provided however that such constraint
shall not apply to actions taken in advance of the 1999 Annual Meeting with
respect to actions to be taken at the 1999 Annual Meeting, including, without
limitation, the election of directors; (b) shall not, subject to exception (i)
form, join or otherwise participate in any "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) with
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<PAGE> 18
respect to any Voting Stock (a "13D Group"), (ii) otherwise act in concert with
any other person for the purpose of holding or voting Voting Stock, or (iii)
file any amendment to any Schedule 13D that relates to a plan or proposal to
seek to influence control of the Company or that contains any statement that is
in any way inconsistent with the provisions of the Settlement Agreement;
provided that such constraint shall not apply to any 13D Group formed for the
purposes of conducting a solicitation or otherwise taking action with respect to
actions to be taken at the 1999 Annual Meeting, including, without limitation,
the election of directors; (c) shall not, subject to exception, deposit any
Voting Stock in a voting trust or subject any Voting Stock to any arrangement or
agreement with respect to the voting of such Voting Stock or other agreement
having similar effect; (d) except as expressly contemplated by the Settlement
Agreement, shall not make any proposal or bring any business before any meeting
of stockholders and, other than actions proposed or taken at any meeting of the
Board of Directors, shall not take or seek to take any action in the name or on
behalf of the Company except pursuant to the performance of any responsibilities
attendant to any office in the Company held by such party or pursuant to a
resolution adopted by the Board of Directors; (e) shall not call, request the
call, or seek to call, any special meeting of stockholders; and (f) shall not
enter into any discussions, negotiations, arrangements or understandings with
any other person with respect to any of the foregoing matters.
Nothing in the Settlement Agreement shall, however, prevent any party to
the Settlement Agreement from taking any of the actions referred to in clauses
(a), (b), (c) and (insofar as it relates to clauses (a), (b) and (c)), clause
(f) above, to the extent (but solely to the extent) that such actions are taken
in response to any proposal relating to matters other than (i) the election of
directors, (ii) the election, approval or ratification of accountants, (iii) a
proposal made by a stockholder or (iv) a proposal relating to certain employee
compensation plans, that is set forth in any preliminary or definitive proxy
statement filed by the Company with the Securities and Exchange Commission.
Pursuant to the Settlement Agreement, the parties also agreed that, in the event
that any directors other than the Company's nominees are elected at the 1998
Annual Meeting as the result, directly or indirectly, of a breach of the
Settlement Agreement or any failure to vote in favor of matters specified in the
Settlement Agreement, by any party or parties hereto, the voting and standstill
obligations of such breaching or non-voting party or parties, and its affiliates
as described above shall not terminate at the time specified above but shall
terminate on December 31, 1999.
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 1997 all filing requirements applicable to its
directors, officers and ten percent holders under said section were satisfied,
except that Douglas K. Chick, a former director, reported on a Form 4 filed less
than two weeks subsequent to the due date thereof four open market sales of
Common Stock.
II. AMENDMENT TO THE 1992 EMPLOYEE STOCK OPTION PLAN
At the Meeting, the Company will propose an amendment of the Employee Plan
in order to increase the number of shares of Common Stock issuable pursuant to
the exercise of options granted under such plan from 1,000,000 to 1,850,000.
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 were not
directors (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. In January 1998, the Board of Directors of
the Company approved, subject to approval and adoption by the stockholders of
the Company, an increase in the number of authorized shares of Common Stock
available for issuance under the Employee Plan to 1,850,000 shares.
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<PAGE> 19
SUMMARY OF EMPLOYEE PLAN
Under the Employee Plan, options to purchase shares of Common Stock may be
granted to key employees, including executive officers, of the Company or any
subsidiary thereof, and to consultants and other individuals providing services
to the Company, through March 31, 2002. Options may not be granted under the
Employee Plan to any member of the Board of Directors of the Company (whether or
not a key employee or consultant of the Company or any subsidiary).
The Employee Plan is administered by the Board of Directors of the Company.
The Board of Directors determines the persons who are to receive options under
the Employee Plan, the number of shares subject to each option and whether such
options will be incentive stock options or non-qualified stock options. In
selecting individuals for options and determining the terms thereof, the Board
of Directors of the Company may take into consideration any factors it deems
relevant, including present and potential contributions to the success of the
Company. Options granted under the Employee Plan must be exercised within a
period fixed by the Board of Directors of the Company, which may not exceed ten
years from the date of the grant of the option or, in the case of incentive
stock options granted to any holder on the date of grant of more than ten
percent of the total combined voting power of all classes of stock of the
Company, five years from the date of grant of the option. Options may be made
exercisable in whole or in installments, as determined by the Board of Directors
of the Company. 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.
Options under the Employee Plan may not be transferred other than by will
or by the laws of descent and distribution, and during the lifetime of an
optionee may be exercised only by the optionee. The exercise price of an option
under the Employee Plan may not be less than the par value per share of the
Common Stock, provided that no incentive stock options 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 the case of incentive stock options granted to any
holder on the date of grant of more than ten percent of the total combined
voting power of all classes of stock of the Company, the exercise price may not
be less than 110% of the fair market value of the Common Stock on the date of
grant. Unless designated as "incentive stock options" intended to qualify under
Section 422 of the Code, options which are granted under the Employee Plan are
intended to be "non-qualified stock options." The exercise price may be paid in
cash, shares of Common Stock owned by the optionee, or a combination of both.
The Employee Plan provides that, in the event of changes in the corporate
structure of the Company or certain events affecting the Common Stock, the Board
of Directors of the Company may, in its discretion, make adjustments with
respect to the number and kind of shares which may be issued under the Employee
Plan or which are covered by outstanding options, in the exercise price per
share, or both. In addition, the Board of Directors may terminate the Employee
Plan at any time. No termination or amendment of the Employee Plan may, without
the consent of the optionee, adversely affect the rights of such optionee under
any option held by such optionee.
TAX STATUS OF EMPLOYEE STOCK OPTIONS
For federal income tax purposes, an optionee under the Employee Plan will
not recognize any income upon the grant of a non-qualified or incentive stock
option. Upon the exercise of a non-qualified stock option granted under the
Employee Plan, the optionee will recognize ordinary income in an amount equal to
the excess, if any, of the fair market value of the option stock at the time of
exercise over the exercise price of the option. In certain circumstances, where
the shares are subject to a substantial risk of forfeiture when acquired or
where the optionee is an officer or 10% stockholder of the Company, the date of
taxation may be deferred unless the optionee files an election under Section
83(b) of the Code. Subject to the limitations of Section 162(m) of the Code, the
Company will be entitled to a tax deduction in the same amount and at the same
time as the optionee realizes such income. Upon the sale of shares purchased
upon such exercise, the optionee will realize capital gain or loss measured by
the difference between the amount realized on the sale
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<PAGE> 20
and the fair market value of the option stock at the time of exercise of the
option. Such capital gain or loss may be short-term or long-term, depending upon
the length of time such shares were held by the optionee.
In contrast, an optionee will not be taxed upon exercise of an incentive
stock option granted under the Employee Plan, and the Company will not be
entitled to a deduction from income in respect thereof. If the optionee retains
the shares transferred to him upon exercise of an incentive stock option granted
under the Employee Plan for more than one year after the date of issuance of the
stock and two years after the date of grant of the option, any gain or loss
realized on a subsequent sale of the shares by the optionee will be treated as
long-term capital gain or loss. If, on the other hand, the optionee sells the
shares within one year after the date of transfer or two years after the date of
grant of the option, the optionee will realize ordinary income, and the Company
will be entitled to a deduction from income, to the extent of the excess of the
value of the shares on the date of exercise or the amount realized on the sale
(whichever is less) over the exercise price. Any excess of the sale price over
the value of the shares on the date of exercise will be treated as capital gain.
The spread between the fair market value of the shares on the date of exercise
and the exercise price constitutes a tax preference item for purposes of the
alternative minimum tax which, under certain circumstances, could cause tax
liability as a result of the exercise.
The foregoing statements are based upon current federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, change.
NEW PLAN BENEFITS
The grant of options pursuant to the additional authorization proposed
under the Employee Plan to eligible employees and consultants, including the
individuals in the Summary Compensation Table under "I. Election of
Directors -- Executive Compensation," is currently subject to the discretion of
the Board of Directors. As of the date of this Proxy Statement, there has been
no action taken by the Board of Directors with respect to awards under the
additional authorization proposed under the Employee Plan.
During the year ended December 31, 1997, options to purchase an aggregate
of 30,000 shares of Common Stock were granted under the Employee Plan to all
executive officers as a group, and options to purchase an aggregate of 407,900
shares of Common Stock were granted under the Employee Plan to all other
employees of the Company as a group (including officers who are not executive
officers), in each case at an exercise price of $8.75 per share, equal to the
closing price of the Common Stock on The Nasdaq National Market on the date of
grant. Options granted under the Employee Plan during 1997 to the individuals
named in the Summary Compensation Table are set forth under "I. Election of
Directors -- Executive Compensation -- Option Grant Table." No options were
granted under the Employee Plan during 1997 to directors or nominees (including
executive officers who are directors or nominees). At April 20, 1998, the
closing price per share of the Common Stock on The Nasdaq National Market was
$12.25.
AMENDMENT OF THE EMPLOYEE PLAN
As of April 1, 1998, an aggregate of 800,900 shares of Common Stock
remained subject to options granted and outstanding under the Employee Plan. As
of such date, 15,325 shares of Common Stock had been issued under the Employee
Plan from its inception. On April 1, 1998, the Company had approximately 1,518
full-time employees.
There will be presented to the stockholders at the Meeting, a proposal to
amend the Employee Plan to increase from 1,000,000 to 1,850,000 the number of
shares of Common Stock available for options under the Employee Plan as set
forth below.
Section 3 of the Employee Plan would be amended so that the first sentence
thereof would provide as follows:
There shall be available for options under the Plan a total of
1,850,000 shares of Common Stock, subject to any adjustments
which may be made pursuant to Section 5(f) hereof.
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<PAGE> 21
The amendment to the Employee Plan will not be made effective unless it is
approved and adopted by the holders of a majority of the shares of the Company's
Common Stock present in person or represented by proxy and entitled to vote at
the Meeting. The Board of Directors regards the number of shares remaining
available under the Employee Plan for new options as insufficient for the future
requirements of the Company. The Board of Directors believes that the benefits
of stockholder approval and adoption of the amendment to the Employee Plan are
desirable for the Company and will assist in effectuating the objectives of the
Employee Plan. Accordingly, the Board urges stockholders to vote FOR approval
and adoption of the amendment to the Employee Plan.
III. AMENDMENT TO THE 1992 DIRECTOR STOCK OPTION PLAN
At the Meeting, the Company will propose an amendment of the Director Plan
in order to increase the number of shares of Common Stock issuable pursuant to
the exercise of options granted under such plan from 500,000 to 1,000,000.
In June 1992, the stockholders of the Company approved the Director Plan,
as previously adopted by the Board of Directors. In January 1998, the Board of
Directors of the Company approved, subject to approval and adoption by the
stockholders of the Company, an increase in the number of authorized shares of
Common Stock available for issuance under the Director Plan to 1,000,000 shares.
SUMMARY OF DIRECTOR PLAN
Under the Director Plan, options to purchase shares of Common Stock may be
granted to directors of the Company, including officers, key employees and
consultants providing services to the Company, through March 31, 2002.
The Director Plan is administered by the Board of Directors of the Company.
The Board of Directors of the Company determines the persons who are to receive
options under the Director Plan, the number of shares to be subject to each
option and whether such options will be incentive stock options or non-qualified
stock options. In selecting individuals for options and determining the terms
thereof, the Board of Directors of the Company may take into consideration any
factors it deems relevant, including present and potential contributions to the
success of the Company. Options granted under the Director Plan must be
exercised within a period fixed by the Board of Directors of the Company, which
may not exceed ten years from the date of the grant of the option or, in the
case of incentive stock options granted to any holder on the date of grant of
more than ten percent of the total combined voting power of all classes of stock
of the Company, five years from the date of grant of the option. Options may be
made exercisable in whole or in installments, as determined by the Board of
Directors of the Company.
Options under the Director Plan may not be transferred other than by will
or by the laws of descent and distribution, and during the life of an optionee
may be exercised only by the optionee. The exercise price of an option under the
Director Plan may not be less than par value per share of the Common Stock
provided that no incentive stock options 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 the case of incentive stock options granted to any holder on the date
of grant of more than ten percent of the total combined voting power of all
classes of stock of the Company, the exercise price may not be less than 110% of
the fair market value of the Common Stock on the date of grant. Unless
designated as "incentive stock options" intended to qualify under Section 422 of
the Code, options which are granted under the Director Plan are intended to be
"non-qualified stock options." The exercise price may be paid in cash, shares of
Common Stock owned by the optionee, or a combination of both.
The Director Plan provides that, in the event of changes in the corporate
structure of the Company or certain events affecting the Common Stock, the Board
of Directors of the Company may, in its discretion make adjustments with respect
to the number and kind of shares which may be issued under the Director Plan or
which are covered by outstanding options, in the exercise price per share, or
both. The Board of Directors may terminate the Director Plan at any time. No
termination or amendment of the Director Plan may,
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without the consent of the optionee, adversely affect the rights of such
optionee under any option held by such optionee.
TAX STATUS OF DIRECTOR STOCK OPTIONS
For federal income tax purposes, an optionee under the Director Plan will
not recognize any income upon the grant of a non-qualified or incentive stock
option. Upon the exercise of a non-qualified stock option granted under the
Director Plan, the optionee will recognize ordinary income in an amount equal to
the excess, if any, of the fair market value of the option stock at the time of
exercise over the exercise price of the option. In certain circumstances, where
the shares are subject to a substantial risk of forfeiture when acquired or
where the optionee is an officer, director or 10% stockholder of the Company,
the date of taxation may be deferred unless the optionee files an election under
Section 83(b) of the Code. Subject to the limitations of Section 162(m) of the
Code, the Company will be entitled to a tax deduction in the same amount and at
the same time as the optionee realizes such income. Upon the sale of shares
purchased upon such exercise, the optionee will realize capital gain or loss
measured by the difference between the amount realized on the sale and the fair
market value of the option stock at the time of exercise of the option. Such
capital gain or loss may be short-term or long-term, depending upon the length
of time such shares were held by the optionee.
In contrast, an optionee will not be taxed upon exercise of an incentive
stock option granted under the Director Plan, and the Company will not be
entitled to a deduction from income in respect thereof. If the optionee retains
the shares transferred to him upon exercise of an incentive stock option granted
under the Director Plan for more than one year after the date of issuance of the
stock and two years after the date of grant of the option, any gain or loss
realized on a subsequent sale of the shares by the optionee will be treated as
long-term capital gain or loss. If, on the other hand, the optionee sells the
shares within one year after the date of transfer or two years after the date of
grant of the option, the optionee will realize ordinary income, and the Company
will be entitled to a deduction from income, to the extent of the excess of the
value of the shares on the date of exercise or the amount realized on the sale
(whichever is less) over the exercise price. Any excess of the sale price over
the value of the shares on the date of exercise will be treated as capital gain.
The spread between the fair market value of the shares on the date of exercise
and the exercise price constitutes a tax preference item for purposes of the
alternative minimum tax which, under certain circumstances, could cause tax
liability as a result of the exercise.
The foregoing statements are based upon current federal income tax laws and
regulations and are subject to change if the tax laws and regulations, or
interpretations thereof, change.
NEW PLAN BENEFITS
The grant of options pursuant to the additional authorization proposed
under the Director Plan to directors (including employees who are directors) is
currently subject to the discretion of the Board of Directors. As of the date of
this Proxy Statement, there has been no action taken by the Board of Directors
with respect to awards under the additional authorization proposed under the
Director Plan.
During the year ended December 31, 1997, options to purchase an aggregate
of 131,000 shares of Common Stock were granted under the Director Plan to
directors of the Company, all of whom are nominees for election at the Meeting
(as set forth under "I. Election of Directors -- Director Compensation"),
including two individuals named in the Summary Compensation Table (as set forth
under "I. Election of Directors -- Executive Compensation -- Option Grant
Table"). Of such grants, options to purchase an aggregate of 67,000 shares of
Common Stock were granted to all executive officers as a group, options to
purchase an aggregate of 64,000 shares of Common Stock were granted to directors
who were not executive officers, and no such options were granted to other
employees of the Company. All such options were granted at an exercise price of
$8.75 per share, equal to the closing price of the Common Stock on The Nasdaq
National Market on the date of grant. At April 20, 1998, the closing price per
share of the Common Stock on The Nasdaq National Market was $12.25.
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AMENDMENT OF THE DIRECTOR PLAN
As of April 1, 1998, an aggregate of 476,000 shares of Common Stock were
subject to options granted and outstanding under the Director Plan. As of April
1, 1998, 23,310 shares had been issued under the Director Plan from its
inception. On such date, the Company had nine directors.
There will be presented to the stockholders at the Meeting, a proposal to
amend the Director Plan to increase from 500,000 to 1,000,000 the number of
shares of Common Stock available for options under the Director Plan as set
forth below.
Section 3 of the Director Plan would be amended so that the first sentence
thereof would provide as follows:
There shall be available for options under the Plan a total of
1,000,000 shares of Common Stock, subject to any adjustments
which may be made pursuant to Section 5(f) hereof.
The amendment to the Director Plan will not be made effective unless it is
approved and adopted by the holders of a majority of the shares of the Company's
Common Stock present in person or represented by proxy and entitled to vote at
the Meeting. The Board of Directors regards the number of shares remaining
available under the Director Plan for new options as insufficient for the future
requirements of the Company. The Board of Directors believes that the benefits
of stockholder approval and adoption of the amendment to the Director Plan are
desirable for the Company and will assist in effectuating the objectives of the
Director Plan. Accordingly, the Board urges stockholders to vote FOR approval
and adoption of the amendment to the Director Plan.
IV. 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, 1998. Such firm has audited the consolidated financial
statements of the Company for the fiscal year ended December 31, 1997. 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.
V. 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.
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VI. 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 approval and adoption of the
amendment to the Employee Plan, FOR approval and adoption of the amendment to
the Director Plan and, in the election of directors, in favor of the nine
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.
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 1999 Annual Meeting
must be received by the Company by January 4, 1999 in order to be considered for
inclusion in the Company's Proxy Statement relating to such Meeting.
HOWARD KAILES,
Secretary
Chesterfield, Missouri
May 4, 1998
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Appendix 1
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> 26
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 1,850,000 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.
Options may not be granted under the Plan to any member of the
2
<PAGE> 27
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.
(c) Exercise of Options. In order to exercise an
option, the holder thereof (the "Optionee") shall deliver to the
3
<PAGE> 28
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 any shares exercisable on the date
the Optionee's employment so terminates;
4
<PAGE> 29
(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 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.
5
<PAGE> 30
(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.
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.
6
<PAGE> 31
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 stockholders 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.
7
<PAGE> 32
Appendix 2
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 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 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.
3. Stock Available for Options. There shall be available for
options under the Plan a total of 1,000,000 shares of
<PAGE> 33
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 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
2
<PAGE> 34
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 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;
3
<PAGE> 35
(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.
(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.
4
<PAGE> 36
(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 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
5
<PAGE> 37
(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 stockholders 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.
6
<PAGE> 38
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 Frontenac Hilton-St. Louis, 1335 South Lindbergh Boulevard, St.
Louis, Missouri on Wednesday, June 10, 1998 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 (the "Common Stock") 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 specified on the reverse side.
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.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
-------------
SEE REVERSE
SIDE
-------------
<PAGE> 39
[X] Please mark your votes as in this example
FOR WITHHOLD
all nominees AUTHORITY
listed at to vote
right (except for all
as marked to nominees
the contrary listed
below). at right.
(a) Election of [ ] [ ] Nominees: Robert W. Affholder
Directors. Paul A. Biddelman
Stephen P. Cortinovis
(Instructions: To withhold authority to vote Anthony W. Hooper
for any individual nominee as a director, write Jerome Kalishman
that nominee's name in the space provided below.) Silas Spengler
Sheldon Weinig
- ------------------------------------------------- Russell B. Wight, Jr.
Alfred L. Woods
FOR AGAINST ABSTAIN
(b) Proposal to approve and adopt an amendment to [ ] [ ] [ ]
the Company's 1992 Employee Stock Option Plan
to increase the number of shares of Common
Stock issuable pursuant to the exercise of
options from 1,000,000 to 1,850,000.
FOR AGAINST ABSTAIN
(c) Proposal to approve and adopt an amendment to [ ] [ ] [ ]
the Company's 1992 Director Stock Option Plan
to increase the number of shares of Common
Stock issuable pursuant to the exercise of
options from 500,000 to 1,000,000.
(d) 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.
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 jointly) (and TITLE, if applicable)
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.
