UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------
Commission file number 0-10786
INSITUFORM TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 13-3032158
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
- ---------------------------------------- ------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 314-530-8000
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Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Class A Common Stock, $.01 par value
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(Title of class)
Indicate by a check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period as the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
<PAGE>
Indicate by check mark if disclosure of delinquent
filers pursuant to Item 405 of Regulation S-K (Section 229.405 of
this chapter) is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ ]
State the aggregate market value of the voting and non-
voting stock held by non-affiliates of the registrant. The
aggregate market value shall be computed by reference to the price
at which the common stock was sold, or the average bid and asked
prices of such common equity, as of a specified date within 60
days prior to the date of filing.
Aggregate market value as of March 15, 1999.....$346,265,593
Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of the latest practicable
date.
Class A Common Stock, $.01 par value,
as of March 15, 1999...................25,693,103 shares
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the documents, all or portions of which are
incorporated by reference herein, and the part of the Form 10-K
into which the document is incorporated: Proxy Statement to be
filed with respect to the 1999 Annual Meeting of Stockholders-Part
III.
<PAGE>
<PAGE>
PART I
ITEM 1. BUSINESS
General
Insituform Technologies, Inc. (the "Company") is a worldwide
provider of proprietary trenchless technologies for the
rehabilitation and improvement of pipelines. The Company's primary
technology is the Insituform(R) Process (the "Insituform
Process"), a "cured-in-place," non-disruptive pipeline
rehabilitation process that, during the Company's most recent
fiscal year, contributed approximately 64% of the Company's
revenues.
In addition to the Insituform Process, the Company offers
certain other products in trenchless pipeline system
rehabilitation. The Company's NuPipe(R) Process (the "NuPipe
Process"), which utilizes a "fold and formed" technology, is used
primarily to repair smaller or less damaged pipe. The Company also
exercises the exclusive rights in substantially all of North
America, and non-exclusive rights in specified other territories,
to the Paltem(R)-HL system and to the Thermopipe(R) System (the
"Thermopipe Process").
The Company's Tite Liner(R) Process (the "Tite Liner
Process") is used to line new and existing steel pipelines.
Through its Affholder, Inc. subsidiary, the Company is engaged in
trenchless tunnelling used in the installation of new underground
pipelines.
The Company was incorporated in Delaware in 1980 under the
name Insituform of North America, Inc., in order to act as the
exclusive licensee of the Insituform Process in most of the United
States, and to license other companies to market and provide
Insituform installation services in return for royalties and sales
from materials manufactured by the Company. Contemporaneously with
the consummation in 1992 of the Company's acquisition of its
licensor, the name of the Company was changed to Insituform
Technologies, Inc. As a result of its successive licensee
acquisitions, the Company has further integrated its business to
perform the entire process of manufacture and installation using
its trenchless processes.
As used in this Annual Report on Form 10-K, the term the
"Company" refers to the Company and, unless the context otherwise
requires, its direct and indirect subsidiaries. For certain
information concerning each of the Company's industry segments and
domestic and foreign operations, see Note 17 of the Notes to the
Company's Consolidated Financial Statements included in response
to "Item 14. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K," which information is incorporated herein by
reference.
<PAGE>
<PAGE>
This Annual Report on Form 10-K contains various forward
looking statements and information that are based on information
currently available to management and management's beliefs and
assumptions. When used in this document, the words "anticipate,"
"estimate," "believes," "plans," and similar expressions are
intended to identify forward-looking statements, but are not the
exclusive means of identifying such statements. Such statements
are subject to risks and uncertainties, and the Company's actual
results may vary materially from those anticipated, estimated or
projected due to a number of factors, including, without
limitation, the competitive environment for the Company's products
and services, the geographical distribution and mix of the
Company's work, and other factors set forth in reports and other
documents filed by the Company with the Securities and Exchange
Commission from time to time.
Technologies
Pipeline System Rehabilitation. The Insituform Process for
the rehabilitation of sewers, pipelines and other conduits
utilizes a custom-manufactured tube, or liner, made of a synthetic
fiber. After the tube is saturated (impregnated) with a
thermosetting resin mixture, it is installed in the host pipe by
various processes and the resin is then hardened, usually by
heating it by various means, forming a new rigid pipe within a
pipe.
The Company's NuPipe Process entails the manufacture of a
folded replacement pipe from a thermoplastic material which is
stored on a reel in a reduced shape. The pipe is heated at the
installation site in order to make it flexible enough to be
inserted into an existing conduit, pulled into place and then
sequentially expanded to match the existing conduit by internal
heat and pressure and progressive rounding, creating a tight fit
against the conduit being repaired.
See "Patents and Licenses" below for information concerning
the Paltem system and the Thermopipe Process, both licensed by the
Company, neither of which were material to the Company's results
of operations during the year ended December 31, 1998.
Corrosion and Abrasion Protection. The Company's Tite Liner
Process is a method of lining new and existing steel pipelines
with a corrosion and abrasion resistant polyethylene pipe.
Tunnelling. Tunnelling is a trenchless, subterranean
construction process that generally is utilized for the
construction of pipeline systems. The Company utilizes its
tunnelling machines to construct new pipes from two to fourteen-
foot diameter in size.
<PAGE>
<PAGE>
Rehabilitation Activities
The Company conducts its rehabilitation activities
principally through direct installation and other construction
operations performed through wholly-owned and, in some cases,
majority-owned subsidiaries. In addition, in those areas of the
world in which the Company's management believes it would not be
profitable for the Company to exploit its trenchless processes
directly, the Company has granted licenses to unaffiliated
companies. As described under "Ownership Interests in Licensees"
below, the Company has also entered into joint ventures from time
to time to encourage additional royalties, sales of its products
and exploitation of its trenchless rehabilitation processes.
The Company's principal rehabilitation activities in North
America are conducted directly or through subsidiaries which hold
the Insituform Process and NuPipe Process rights for 39 of the 50
states (and a portion of another state), in addition to Puerto
Rico and the U.S. Virgin Islands, and all of Canada, and the
rights in substantially all of North America to the Paltem system
and to the Thermopipe Process. Outside of North America, the
Company conducts Insituform Process or NuPipe Process direct
installation operations through its subsidiaries in the United
Kingdom and France.
North American rehabilitation operations are headquartered in
Chesterfield, Missouri, with principal operations facilities
maintained in approximately 13 locations geographically dispersed
through all major regions. European operations are headquartered
in La Courneuve, France, with regional operations facilities
located in the United Kingdom.
The worldwide rights to the Tite Liner Process are applied by
United Pipeline Systems USA, Inc. and, through its United Pipeline
division, Insituform Technologies Limited (Alberta), both
subsidiaries of the Company. During 1994, Tite Liner operations
commenced in Chile through a newly-organized subsidiary, United
Sistema de Tuberias Ltda. ("United Chile"), and during 1996,
through newly-organized subsidiaries in Argentina and Mexico. The
Company's corrosion and abrasion protection work is coordinated
through facilities in Durango, Colorado, with regional facilities
located in Canada and Latin America.
The Company's Affholder, Inc. subsidiary, in addition to
tunnelling, offers a range of pipe rehabilitation and construction
services.
The direct installation business of the Company is
project-oriented, and contracts may be obtained through
competitive bidding, usually requiring performance at a fixed
price. The profitability of these operations to the Company
depends upon the ability to estimate costs accurately, and such
estimates may prove to be inaccurate as a result of unforeseen
conditions or events. A substantial proportion of the work on any<PAGE>
<PAGE>
given project may be subcontracted out to third parties by the
Company.
Proper trenchless installation requires certain expertise
that is acquired on the job and through training, and, if an
installation is improperly performed, the Company may be required
to repair the defect, which may involve excavation. The Company,
accordingly, has incurred significant costs in establishing new
field installation crews, in training new operations personnel and
in equipping its direct installation staff. The Company generally
invoices installation revenues on a percentage-of-completion
basis. Under ordinary circumstances, collection from governmental
agencies in the United States is made within 60 to 90 days of
billing. In some cases, five to 15 percent of the contract value
is withheld by the owner until testing is completed or the
warranty period has expired.
The Company is required to carry insurance and bonding in
connection with certain direct installation projects and,
accordingly, maintains comprehensive insurance policies, including
workers' compensation, general and automobile liability, and
property coverage. The Company believes that it presently
maintains adequate insurance coverage for all direct installation
activities. The Company has also arranged bonding capacity for
bid, performance and payment bonds. Typically, the cost of a
performance bond is less than approximately 1% of the contract
value. The Company is required to indemnify surety companies for
any payments the sureties are required to make under the bonds.
The Company's principal rehabilitation activities are
conducted through subsidiaries that are less than wholly-owned as
follows:
<TABLE>
<CAPTION>
Subsidiary Processes Territory Interest
---------- --------- --------- --------
<S> <C> <C> <C>
Insituform France Insituform France 66-2/3% of
S.A. stock(2)
United Pipeline Tite Liner Mexico(1) 55% of
de Mexico, S.A. stock(3)
_________________________
(1) Jurisdiction of incorporation.
(2) The remaining interest is held by a subsidiary of Lyonnaise des Eaux S.A.
(3) The remaining interest is held by a subsidiary of Produtos y Servicios
Miller de Mexico, S.A.
</TABLE>
<PAGE>
<PAGE>
In addition, in September 1998 the Company completed its
acquisition of 80% of the shares of Video Injection S.A. ("Video
Injection"), a French company that utilizes multifunctional
robotic devices developed by it in connection with the inspection
and repair of pipelines, for a purchase price of $5.0 million
($2.6 million of which will be paid in installments through the
second anniversary of closing). The remaining 20% of the shares is
held by the sellers, who continue to be employed by Video
Injection. On the fifth anniversary of closing (or earlier, in
specified events), the Company will purchase the remaining shares
pursuant to a formula based on Video Injection's results of
operations. See"Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations-Liquidity and
Capital Resources."
In March 1998, the Company completed the acquisition of the
entire minority interest in United Chile for an aggregate purchase
price of approximately $2.1 million. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."
The Company's rehabilitation activities also extend to the
grant of licenses for the Insituform Process and the NuPipe
Process, covering exclusive and non-exclusive territories, to
licensees who provide pipeline repair and rehabilitation services
throughout their respective licensed territories. The licenses
generally grant to the licensee the right to utilize the know-how
and practice the invention of the patent rights (where they exist)
relating to the subject process, and to use the Company's
copyrights and trademarks. At present, the Insituform Process is
commercialized under license by an aggregate of 35 unaffiliated
licensees and sublicensees, and the NuPipe Process is commercial-
ized under license by an aggregate of seven unaffiliated
licensees.
The Company's licensees generally are obligated to pay a
royalty at a specified rate, which in many cases is subject to a
minimum royalty payment. Domestic licensees are also obligated to
pay specified royalty surcharges on their sales and contracts
outside of their licensed territories, which are then paid by the
Company to the domestic licensee in whose territory the
installation was performed. Any improvements or modifications a
licensee may make in the subject process during the term of the
license agreement becomes the property of the Company or are
licensed to the Company. Should a licensee fail to meet its
royalty obligations or other material obligations, the Company may
terminate the license. Many licensees (including the domestic
licensees), upon prior notice to the Company, may also terminate
the license for any reason. The Company may vary the agreement
used with new licensees according to prevailing conditions.
<PAGE>
<PAGE>
Ownership Interests in Licensees
The Company, through its subsidiary, Insituform Holdings (UK)
Limited, holds one-half of the equity interest in Insituform
Rohrsanierungstechniken GmbH ("IRT"), the Company's licensee of
the Insituform and NuPipe Processes in Germany. The remaining
interest is held by Per Aarsleff A/S, a Danish contractor. The
joint venture partners have rights-of-first-refusal in the event
either party determines to divest its interest.
The Company holds additional ownership interests in licensees
as follows:
<TABLE>
<CAPTION>
Licensee Processes Territory Interest
- -------- --------- --------- --------
<S> <C> <C> <C>
N.V. Kumpen-Insituform Insituform Belgium, 50% joint venture
Luxembourg interest(1)
Ka-Te Insituform A.G. Insituform Switzerland, 50% joint venture
Liechtenstein and interest(2)
Voralberg, Austria
_____________________
(1) The remaining interest is held by N.V. Kumpen.
(2) The remaining interest is held by Ka-Te Holding A.G.
</TABLE>
The Company has also entered into several contractual joint
ventures in order to develop joint bids on contracts for its
direct installation business, and for tunnelling operations. The
Company continues to investigate opportunities for augmenting its
business through such arrangements.
In March 1999, the Company delivered notice of termination of
its joint venture with Insituform East, Inc. ("Insituform East"),
an unaffiliated licensee, which does business under the name
Midsouth Partners ("Midsouth"). Midsouth has operated under a
license from the Company with respect to the Insituform Process
covering Tennessee and portions of Mississippi and Kentucky, which
the Company has also terminated. Although the Company, directly
and through a subsidiary, holds an aggregate of 57.5% of the
interest in Midsouth, with the remaining 42.5% interest held by a
subsidiary of Insituform East, as a result of the determination in
June 1996 by an arbitration panel that the Company's subsidiary
was in default of certain obligations under Midsouth's partnership
agreement (as a result of action taken before the Company's
acquisition of such subsidiary), Insituform East was awarded
majority control of the management committee of Midsouth and
effectively determines its business strategy and its
implementation. The termination of the Midsouth joint venture
will, as set forth in the Company's notice, become effective upon
affirmation by the Delaware Court of Chancery, in proceedings
initiated by the Company, of the Company's right to terminate
Midsouth's license agreement, which by its terms may be terminated
immediately in the event any partner of Midsouth seeks its<PAGE>
<PAGE>
dissolution. Insituform East has disputed the termination of both
Midsouth and its license agreement.
Marketing
The Company has focused the marketing of its rehabilitation
technologies primarily on the municipal wastewater markets
worldwide, which the Company expects to remain the largest part of
its business for the foreseeable future. The Company produces
sales literature and presentations, participates in trade shows,
conducts national advertising and executes other marketing
programs for the Company's own sales force and those of
unaffiliated licensees.
As a result of its acquisitions, the Company's distribution
efforts are implemented predominantly through the direct
installation activities of its subsidiaries. See "Rehabilitation
Activities" above for a description of the Company's licensing
operations and "Ownership Interests in Licensees" for a
description of investments in licensees. The Company's
unaffiliated licensees are responsible for marketing and sales
activities in their respective territories, and each has a staff
for that purpose.
The Company offers its corrosion and abrasion protection
technologies worldwide to line new and existing steel pipelines.
No customer accounted for more than ten percent of the
Company's consolidated revenues during the years ended December
31, 1998, 1997 and 1996, respectively.
Backlog
At December 31, 1998 and 1997, respectively, the Company
recorded backlog from construction operations (excluding projects
where the Company has been advised that it is the low bidder) in
the amounts of approximately $109.3 million and $102.1 million,
respectively. The Company anticipates that substantially all
construction backlog recorded at December 31, 1998 will be
completed in 1999.
Product Development
The Company, by utilizing its own laboratories and test
facilities and outside consulting organizations and academic
institutions, continues to develop improvements to its proprietary
processes, including the materials used and the methods of
manufacturing and installing pipe. See "Item 2. Properties" and
"Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations-Liquidity and Capital
Resources" for information concerning inauguration of the
Company's new research and development facility in Chesterfield,
Missouri. During the years ended December 31, 1998, 1997 and 1996,
the Company spent approximately $5.9 million, $7.0 million and<PAGE>
<PAGE>
$7.7 million, respectively, on all strategic marketing and product
development activities.
Manufacturing and Suppliers
The Company maintains its principal North American liner
manufacturing facility in Batesville, Mississippi, with an
additional facility located in Memphis, Tennessee. In Europe,
Insituform Linings Plc ("Linings"), a joint venture between the
Company and five licensees, manufactures and sells linings from
its plant located in Wellingborough, United Kingdom. The Company,
through a subsidiary, owns 51% of the equity of Linings, an
additional five percent of which is owned by IRT. The Company also
maintains a liner manufacturing facility in Matsubuse, Japan.
While raw materials used in the Company's Insituform products
are typically available from multiple sources, the Company's
historical practice has been to purchase materials from a limited
number of suppliers. The Company maintains its own felt
manufacturing facility contiguous to its Insitutube manufacturing
facility in Batesville, and purchases substantially all of its
fiber requirements from one source, alternate vendors of which the
Company believes are readily available. Although it has worked
with one vendor to develop a uniform and standard resin to source
substantially all of its resin requirements, the Company believes
that resins are also readily available from a number of major
corporations should there be a need for alternative resin
sourcing. The Company believes that the sources of supply in
connection with its Insituform operations are adequate for its
needs.
The Company has entered into a supply agreement with an
unaffiliated party, under which the Company will purchase the
thermoplastic pipe to satisfy the substantial portion of its
NuPipe requirements, subject to automatic annual renewal periods
and to minimum purchases by the Company. The Company believes that
alternative sources of supply for its pipe requirements in
connection with the NuPipe Process are available. If the Company
were unable to obtain its NuPipe requirements under its existing
third party arrangements, the Company might be adversely affected
until arrangements with alternative sources are formulated.
The Company sells liners and related products utilized in the
Insituform Process, and the thermoplastic pipe utilized in the
application of the NuPipe Process, to its licensees, in the case
of domestic licenses pursuant to fixed-term supply contracts.
The Company manufactures certain equipment used in its
corrosion and abrasion protection operations, and, in connection
with any licenses to unaffiliated parties, will sell such
equipment to its licensees.
<PAGE>
<PAGE>
Patents and Licenses
The Company currently holds 64 patents in the United States
relating to the Insituform Process, the last to expire of which
will remain in effect until 2016, and has obtained patent
protection in its principal overseas markets covering aspects of
the Insituform Process. These patents cover certain aspects of the
Insituform Process including the manufacture of liners, the resin
saturation process and the process of reconstructing the pipeline.
Two of the significant patents relating to the Insituform Process,
covering, respectively, the curing of a resin-impregnated tube and
material aspects of the inversion process, have expired where
previously in effect.
The specifications and/or rights granted in relation to each
patent will vary from jurisdiction to jurisdiction. In addition,
as a result of differences in the nature of the work performed and
in the climate of the countries in which the work is carried out,
not every licensee uses each patent, and the Company does not
necessarily seek patent protection for all of its inventions in
every jurisdiction in which it does business.
There can be no assurance that the validity of the Company's
patents will not be successfully challenged or that they are
sufficient to afford protection against another company utilizing
a process similar to the Insituform Process. The Company's
business could be adversely affected by increased competition in
the event that one or more of the patents were adjudicated to be
invalid or inadequate in scope to protect the Company's operations
or upon expiration of the patents. The Company believes, however,
that while the Company has relied on the strength and validity of
its patents, the Company's long experience with the Insituform
Process, its continued commitment to support and develop the
Insituform Process, the strength of its trademarks, and its degree
of market penetration, should enable the Company to continue to
compete effectively in the pipeline rehabilitation market.
Ten patents covering the NuPipe Process or the materials used
in connection with the NuPipe Process have been issued in the
United States. The Company holds patents in connection with the
NuPipe Process in 16 other countries.
The Company believes that the success of its corrosion and
abrasion protection operations will depend primarily upon its
proprietary know-how and its marketing and sales skills.
Pursuant to a license from Ashimori Industry Co., Ltd.
("Ashimori"), the Company holds the exclusive rights to use the
patents, trademarks and know-how related to the Paltem-HL system,
a process for rehabilitating pressure pipes, and certain other
products which are in various stages of development, for
substantially all of North America. In March 1998, the license was
amended to extend to additional non-exclusive territories in the
eastern hemisphere and Latin America. Ashimori is entitled to<PAGE>
<PAGE>
receive ongoing royalties at specified rates on installations and
sales of liners. The license extends for an initial term through
2009 and automatically is renewed for successive one-year terms
unless the Company gives notice of non-renewal at least 90 days
prior to the end of a term. In the event annual minimum royalties
are not met, Ashimori has the right to render the agreement non-
exclusive and, in the event minimum royalties are not met for two
consecutive years, to terminate the agreement.
Under a license from Angus Fire Armour Limited ("Angus"), the
Company holds exclusive rights for the United States and Canada,
and non-exclusive rights in Mexico and certain territories in the
eastern hemisphere, to use the patents, trademarks and know-how
related to the Thermopipe Process, a process for rehabilitating
potable water and other aqueous fluid pipes. Angus has the option
under the license to convert the exclusive rights to non-exclusive
rights in those territories where the Company does not meet
certain minimum purchases of Thermopipe liner. The license extends
for an initial term of five years and is renewable by the Company
for an additional five year term, subject to termination in the
event of specified defaults. After payment of an initial license
fee, no further royalties are due under the license.
Competition
The pipeline reconstruction, rehabilitation and repair
business is highly competitive, and the Company competes against
many companies, some of which have far greater financial resources
and experience than the Company. Accordingly, there can be no
assurance as to the success of the Company's processes in
competition with such companies and alternative technologies for
pipeline rehabilitation.
In each of its rehabilitation markets, the Company currently
faces competition from more conventional methods, including: (i)
total replacement, which is the excavation and replacement of an
entire section of pipe; (ii) point repair, which is the
replacement of cracked or structurally failed sections of pipes by
actual excavation and replacement; (iii) sliplining, which is the
insertion of a smaller pipe within an existing deteriorated pipe;
and (iv) the placement of gelatinous material, hydraulic cement,
or other acceptable material in defective pipes to repair leaks
and prevent infiltration in gravity sewers.
In addition, the Company faces competition from other
trenchless processes throughout the world. In the United States,
the Company faces competition from several cured-in-place
processes and, outside of the United States, from additional
cured-in-place processes currently in regional use. The Company
also faces competition from several fold and formed thermoplastic
processes. Several companies offer in-place polyethylene lining
systems which compete with the Company's abrasion and corrosion
protection technologies. The Company's trenchless processes may<PAGE>
<PAGE>
also encounter competition from alternative trenchless approaches
such as pipe bursting and other methods.
The Company's tunnelling operation competes with utility
contracting firms throughout North America.
Seasonality
Although the Company's operations can be affected by severe
weather, for the past five years seasonal variation in work
performed has not had a material effect on the Company's
consolidated results of operations.
Employees
As of December 31, 1998, the Company employed 1,472
individuals. Certain of the Company's contracting operations are
parties to collective bargaining agreements covering an aggregate
of 155 employees. The Company generally considers its relations
with its employees to be good.
Government Regulation
The Company and its licensees are required to comply with all
national, state and local statutes, regulations and ordinances,
including those disclosure and filing requirements relating to the
grant of licenses. In addition, the Company's direct installation
and other construction operations, and those of its licensees, may
have to comply with relevant code specifications, permit
requirements, and bonding and insurance requirements as well as
with fire regulations relating to the storage, handling and
transporting of flammable materials. The Company's manufacturing
facilities, as well as its direct installation operations and
those of its licensees, are subject to state and national
environmental protection regulations, none of which presently has
any material effect on the Company's capital expenditures,
earnings or competitive position in connection with the Company's
present business. However, while the Company's direct installation
operations have established monitoring programs relating to the
use of solvents, further restrictions could be imposed on the use
of solvents or the thermosetting resins used in the Insituform
Process. The Company believes that it is in material compliance
with environmental laws and regulations applicable to it.
The use of both thermoplastics and thermosetting resin
materials in contact with drinking water is strictly regulated in
most countries. In the United States, a consortium led by NSF
International ("NSF"), under arrangements with the United States
Environmental Protection Agency (the "EPA"), establishes minimum
requirements for the control of potential human health effects
from substances added indirectly to water via contact with
treatment, storage, transmission and distribution system
components, by defining the maximum permissible concentration of
materials which may be leached from such components into drinking<PAGE>
<PAGE>
water, and methods for testing them. In February 1996, the Paltem-
HL and Frepp processes under license from Ashimori were certified
by the NSF for use in drinking water systems, followed in April
1997 by certification by the NSF of the Insituform pressure pipe
liner for such use. The Thermopipe product also has NSF approval.
The NSF assumes no liability for use of any products, and the
NSF's arrangements with the EPA do not constitute the EPA's
endorsement of the NSF, the NSF's policies or its standards.
Because of the need for dedicated equipment in connection with use
of these products in drinking water applications, and the time
required for the marketing process, the Company does not expect
meaningful revenues from drinking water rehabilitation at least
through 1999.
Executive Officers
The executive officers of the Company, and their respective
ages and positions with the Company, are as follows:
Age at Position with
Name March 15, 1999 the Company
---- -------------- --------------
Anthony W. Hooper 51 Chairman of the Board,
President and Chief
Executive Officer
Robert W. Affholder 63 Senior Executive Vice
President
William A. Martin 57 Senior Vice
President-Chief
Financial Officer
Robert L. Kelley 53 Vice President-General
Counsel
Carroll W. Slusher 50 Vice President-North
America
Antoine Menard 48 Vice President-Europe
Anthony W. Hooper has been Chairman of the Board of the
Company since 1997, and has been President of the Company since
1996. Mr. Hooper was previously, since 1994, Senior Vice
President-Marketing and Technology of the Company, having served
as Senior Vice President-Marketing of the Company from 1993 to
1994.
Robert W. Affholder has been Senior Executive Vice President
of the Company since 1996. Mr. Affholder was previously, since
1995, Senior Vice President-Chief Operating Officer of North
American Contracting Operations of the Company. Mr. Affholder was<PAGE>
<PAGE>
President of Insituform Mid-America, Inc. ("IMA") from 1994 until
its acquisition by the Company in 1995, and was Vice Chairman of
IMA from 1993 to 1995.
William A. Martin has been Chief Financial Officer of the
Company since 1988, a Vice President from 1989 to 1993 and a
Senior Vice President since 1993.
Robert L. Kelley has been Vice President and General Counsel
of the Company since 1996. Mr. Kelley was Assistant General
Counsel of Monsanto Company from prior to 1994 until joining the
Company.
Carroll W. Slusher has been Vice President-North America of
the Company since February 1999, having served as the Company's
Director of North American Pipe Rehabilitation from 1997 to 1998
and Divisional Vice President-North American Operations from 1998
until February 1999. From prior to 1994 until joining the Company,
Mr. Slusher was a regional manager with General Electric Company.
Antoine Menard has been Vice President-Europe of the Company
since February 1999, having served as the Company's Managing
Director-Europe from 1995 until that date. From prior to 1994
until joining the Company, Mr. Menard was a general manager with
the French oil group TOTAL.
ITEM 2. PROPERTIES
The Company's executive offices, located in Chesterfield,
Missouri, a suburb of St. Louis, at 702 Spirit 40 Park Drive, are
leased from an unaffiliated party through May 31, 2002.
The Company maintains a liner fabrication facility and
contiguous felt manufacturing facility in Batesville, Mississippi.
Since prepayment in 1997 of the industrial development bond used
to finance such facilities, the property remains leased to the
Company under arrangements that provide for the Company's purchase
option at (subsequent to such prepayment) nominal value.
The Company's manufacturing facilities in Memphis, Tennessee
are located on land sub-leased from an unaffiliated entity for an
initial term of 40 years expiring on December 31, 2020. The cost
of the building, together with certain machinery and equipment,
was financed from the sale of a $1.5 million an industrial
development bond and secured by a mortgage on the premises and
equipment, which was prepaid in 1998.
Linings (a 51%-owned subsidiary) owns certain premises
comprising its liner manufacturing facility, located in
Wellingborough, England. The Company leases additional
manufacturing space in Matsubuse, Japan.
<PAGE>
<PAGE>
In March 1998, the Company inaugurated a new research and
development facility owned by it and adjacent to its installation
operations in Chesterfield, comprising approximately 59,500 square
feet of space.
In support of its direct installation operations, the Company
owns or leases facilities in the United States, Europe and Latin
America, the principal sites of which currently are in
Chesterfield, Missouri; Charlton, Massachusetts; Jacksonville,
Florida; Birmingham, Alabama; Hammond, Louisiana; Lemont,
Illinois; Owosso, Michigan; Houston, Texas; Wichita, Kansas; Santa
Fe Springs, California; Salem, Oregon; Edmonton, Alberta; Surrey,
British Columbia; Ossett, United Kingdom; Antofagasta, Chile; and
Villahermosa, Mexico. The Ossett property is subject to a
mortgage.
The foregoing facilities are regarded by management as
adequate for the current and anticipated future requirements of
the Company's business.
ITEM 3. LEGAL PROCEEDINGS
Cat Proceeding. The Company, in 1990, initiated proceedings
against Cat Contracting, Inc. ("Cat"), Michigan Sewer Construction
Company, Inc. ("Michigan") and Inliner U.S.A., Inc. ("Inliner"),
in the United States District Court for the Southern District of
Texas, Houston Division (Civil Action No. H-90-1690)(the "Cat
Proceeding"), alleging infringement of certain of the Insituform
patents in connection with conduit relining work performed in
Houston by licensees of Kanal Sanierung Hans Muller GmbH & Co. In
such proceeding, defendants asserted counterclaims alleging that
the suit had been brought in bad faith and further that the
Company had engaged in unfair competition.
In 1991, the jury rendered its verdict finding that defendants
had infringed the Insituform patents at issue and that such
patents were not invalid. In response to defendants' request, the
U.S. District Court (the "District Court") declined to declare
such patents invalid and further declined to disturb the jury's
verdict rejecting defendant's counterclaims that the suit had been
brought in bad faith and defendant's claims that plaintiffs had
engaged in unfair competition. The court did, however, grant the
defendants' motion for a new trial on the matter of whether
defendants had infringed the Insituform patents under the doctrine
of equivalents, setting aside that portion of the jury's verdict;
and granted defendants judgment notwithstanding the jury verdict
on the issue of literal infringement of those patents.
In October 1995, the District Court held the mandated new
trial and ruled that defendants' serial vacuum impregnation
processes infringed the Company's patent under the doctrine of
equivalents. The court further issued a permanent injunction
against defendants' use of the processes covered by such patent<PAGE>
<PAGE>
and ordered a trial on the issue of damages. Defendants filed a
notice of appeal to the United States Court of Appeals for the
Federal Circuit (the "Court of Appeals") and the Company filed a
notice of cross-appeal from the 1991 judgment.
In November 1996, the Court of Appeals affirmed the District
Court in declining to declare the Company's serial vacuum
impregnation patent invalid and found that the jury's rejection of
defendants' challenge to the validity of that patent was supported
by the evidence. The Court of Appeals further affirmed the
District Court's grant to defendants of judgment notwithstanding
the jury verdict on the issue of the literal infringement of the
patent, and vacated the District Court's finding of infringement
under the doctrine of equivalents, holding that the District Court
had used incorrect claim construction. Accordingly, the Court of
Appeals remanded the case to the District Court for new findings
on the infringement issue. In March 1997, defendants sought a writ
of certiorari from the U.S. Supreme Court to review that ruling,
which was denied by the Court.
In December 1996, the District Court issued its new findings
under the guidelines suggested by the Court of Appeals and again
found that both of the processes employed by defendants infringed
the Company's serial vacuum impregnation patent. In January 1997,
defendants appealed from those findings, as well as from the
refusal of the District Court to consider allegedly new evidence
on the issue of equivalency. The District Court, as affirmed by
the Court of Appeals in May 1997, also denied defendants' February
1996 motion for a partial new trial, which alleged that the
Company gave false testimony at the 1991 trial and sought
dismissal of the action and monetary sanctions.
In September 1998, the District Court awarded the Company
approximately $21.9 million in damages for infringement for use of
both multiple cups and multiple needles, consisting of reasonable
royalties on work performed by defendants Cat, Michigan and
Inliner utilizing the Company's patented processes and enhanced
damages against Cat and Inliner for willful infringement of the
Company's serial vacuum impregnation patent and prejudgment
interest. In addition, the District Court awarded the Company
recovery of its attorney's and expert witness fees.
In September 1998, the Court of Appeals issued its opinion
affirming the December 1996 determination of the District Court
that Inliner's multiple-cup process infringed the Company's serial
vacuum impregnation patent, but reversed the lower court and ruled
that Inliner's process involving the use of multiple needles for
impregnation of cured-in-place tubes did not infringe the
Company's patent. The Company's petition to the Court of Appeals
for reconsideration of the court's determination regarding
infringement of the multiple needle impregnation method has been
denied and the District Court has permitted discovery on the
issue of when defendants and their licensees in fact ceased using
the multiple-cup impregnation method and other issues concerning<PAGE>
<PAGE>
liability, which has been completed and all issues briefed. The
Company's petition for certiorari with the U.S. Supreme Court for
review of the Court of Appeals decision has been denied by the
Court.
The Company is unable to estimate what effect the findings in
discovery will have on the District Court's damage award, but the
result may be a substantial reduction in the amount of the damages
ultimately awarded to the Company. In addition, the Company is
unable to predict the likelihood of any recovery from defendants
of amounts ultimately awarded or whether defendants will elect to
appeal any decision awarding damages.
Additional Texas Proceeding. In October 1996, two of the
defendants in the Cat Proceeding filed a separate action in the
District Court against the Company and Insituform East,
Incorporated (Inliner U.S.A. and Cat Contracting, Inc. v.
Insituform Technologies, Inc. and Insituform East, Inc. [Civil
Action No. H96-3627]) alleging, among other matters, that the
Company had commenced the Cat Proceeding with knowledge that the
Company's serial impregnation patent was invalid and gave false
testimony in the Cat Proceeding. The suit further alleged that the
Company committed various infractions of the antitrust laws,
including conduct by the Company constituting unreasonable
restraints of trade and monopolization of its market, in violation
of Sections 1 and 2 of the Sherman Act, made false or misleading
representations in violation of Sections 1 and 2 of the Sherman
Act, made false or misleading representations in violation of
Section 43(a) of the Lanham Act, and engaged in other anti-
competitive practices in violation of Texas state law, and seeks
compensatory and punitive damages.
The Company denied the allegations, raised affirmative
defenses, and filed a motion to dismiss regarding certain of the
antitrust claims. In August 1997, the District Court issued its
Memorandum and Order granting the Company's motion to dismiss as
to claims arising out of the Cat Proceeding, as well as Noerr-
Pennington immunity for the patent litigation in the Cat
Proceeding and the obtaining of certain product standards, among
other matters, and dismissed plaintiffs' claims that the
acquisition by the Company of a number of its licensees
constituted anti-competitive practices. Although the court denied
the Company's motion as to the antitrust claims of complementary
bidding, bid rigging, and predatory pricing, the court ordered the
plaintiffs to refile an amended complaint alleging with factual
particularity any timely claims for tortious interference with
business and contractual relations, true "sham" efforts to
manipulate municipalities for exclusionary purposes, antitrust
injury in regard to acts of complementary bidding, bid rigging and
predatory price fixing, and Section 43(a) Lanham Act claim of
misrepresentation.
<PAGE>
<PAGE>
In their third amended complaint, plaintiffs alleged that the
Company committed various violations of the antitrust laws,
including conduct by the Company constituting unreasonable
restraints of trade and monopolization of its market in violation
of Sections 1 and 2 of the Sherman Act, violations of Section 2 of
the Clayton Act, made false or misleading representations in
violation of Section 43(a) of the Lanham Act, tortious
interference and business disparagement, and sought compensatory
and punitive damages. The District Court dismissed, under the
doctrine of res adjudicata, plaintiffs' allegations that the
Company had commenced the patent infringement proceedings with
knowledge that the subject patent was invalid. The District Court
also dismissed certain other claims of plaintiffs and held that
plaintiffs had failed to plead a case with respect to the balance
of its allegations. Following the District Court's acceptance of
plaintiffs' third amended complaint in June 1998, a joint notice
of dismissal executed by all parties was filed and, the District
Court issued its order of dismissal. Plaintiffs thereafter filed
a motion to withdraw the voluntary dismissal motion, which the
court rejected in July 1998.
In the interim, on June 30, 1998 plaintiffs refiled, as a new
suit, their third amended complaint, including Insituform Gulf
South, Inc., a subsidiary of the Company, as a defendant in
addition to the original defendants (Inliner U.S.A. and CAT
Contracting, Inc. v. Insituform Technologies, Inc., Insituform
Gulf South, Inc. and Insituform East, Inc. [Civil Action
H-98-20651] in the United States District Court for the Southern
District of Texas, Houston Division). Plaintiffs repeat their
previous allegations that defendants conspired to exercise
monopoly power under Sections 1 and 2 of the Sherman Act and/or
acted in concert to restrain trade in an unlawful manner under
Sections 1 and 2 of the Sherman Act, that defendants have engaged
in a pattern of discriminatory pricing and subsidization
specifically designed to eliminate a competitor and/or lessen
competition in violation of Section 2 of the Clayton Act, that
defendants have made false and misleading statements about the
plaintiffs and its products in violation of Section 43(a) of the
Lanham Act, and that defendants have engaged in tortious
interference with plaintiffs' business and relationships with its
licensees so as to constitute business disparagement. The Company
intends vigorously to continue to contest plaintiffs' claims.
Discovery in this matter has commenced.
AM-Liner Proceeding. In December 1998, the United States
District Court for the Northern District of California issued a
favorable judgment and permanent injunction in certain patent
infringement proceedings brought by the Company against AM-Liner
USA, Inc. ("AM-Liner"), American Pipe & Plastics Inc. ("APP") and
J.F. Pacific Liners, Inc. (Civil Action No. C95-01511 CAL). The
court found that APP's method of installing folded and formed
plastic pipe practiced by AM-Liner and its licensees literally
infringes certain of the NuPipe patents and, in addition to<PAGE>
<PAGE>
injunctive relief against AM-Liner, APP and their licensees which
bars them from using their patented processes, awarded damages to
the Company in the amount of $3.1 million plus interest and costs.
In January 1999, the court conditionally stayed the injunction
with respect to work commenced or to commence before February 1,
upon posting of security by defendants in an amount equal to
damages per foot awarded by the court, and in February 1999
defendants filed a notice of appeal from the earlier judgment and
submitted a bond in the amount of the award and costs as security.
The Company is unable to predict the likelihood of any recovery
from defendants of amounts awarded.
Other. The Company is involved in certain additional
litigation incidental to the conduct of its business and affairs.
Management does not believe that the outcome of any such
litigation will have a material adverse effect on the financial
condition or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
(a) The Company's class A common stock, $.01 par value
("Common Stock"), is traded in the over-the-counter market under
the symbol "INSUA." The following table sets forth the range of
quarterly high and low sales prices commencing after December 31,
1996, as reported on The Nasdaq Stock Market. Quotations represent
prices between dealers and do not include retail mark-ups,
mark-downs or commissions.
Period High Low
------ ---- ---
1998
First Quarter $11.50 $ 7.75
Second Quarter 14.25 10.63
Third Quarter 15.75 11.88
Fourth Quarter 14.50 9.25
Period High Low
------ ---- ---
1997
First Quarter $7.88 $ 5.50
Second Quarter 6.75 5.38
Third Quarter 9.25 5.88
Fourth Quarter 10.19 7.38
<PAGE>
<PAGE>
As of March 15, 1999, the number of record holders of the
Company's Common Stock was 1,432.
Holders of Common Stock are entitled to receive dividends
as and when they may be declared by the Company's Board of
Directors. The Company has never paid a cash dividend on the
Common Stock. The Company's present policy is to retain earnings
to provide for the operation and expansion of its business.
However, the Company's Board of Directors will review the
Company's dividend policy from time to time and will consider the
Company's earnings, financial condition, cash flows, financing
agreements and other relevant factors in making determinations
regarding future dividends, if any. Under the terms of certain
debt arrangements to which the Company is a party, the Company is
subject to certain limitations in paying dividends. See Note 10 of
the Notes to the Company's Consolidated Financial Statements
included in response to "Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" and "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity," which information is incorporated herein by
reference.
(b) Not applicable.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data set forth below have been
derived from the Company's consolidated financial statements
referred to under "Item 14. Exhibits, Financial Statement
Schedules, and Reports on Form 8-K" of this Annual Report on Form
10-K, and previously published historical financial statements not
included in this Annual Report on Form 10-K. In October 1995, the
Company consummated the acquisition of IMA, which the Company has
accounted for as a pooling-of-interests and, accordingly, the
historical financial statements of the combining companies have
been retroactively combined (after adjustments to eliminate
intercompany balances and transactions, and to conform reporting
periods and accounting methods) as if the companies had operated
as a single entity for the periods presented. Certain historical
financial data of IMA have been reclassified to conform to the
Company's accounting policies. The selected financial data set
forth below should be read in connection with "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the Company's consolidated financial
statements, including the notes thereto, referred to herein.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
Unaudited
Year Ended December 31,
-----------------------------------------------------
1998 1997 1996 1995(1) 1994(2)
----- ---- ---- ------- -------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.................. $300,958 $320,640 $289,933 $ 272,203 $ 223,171
Operating income.......... 38,688 25,030 14,346 11,750(3) 29,232
Income (loss) from
continuing operations.... 17,887 9,644 4,492 (966)(4) 15,667
Net income (loss)......... 17,887 9,419 4,492 (966) 14,503
Basic and diluted earnings
(loss) per share:
Income (loss) from
continuing operations... .66 .36 .17 (.04) .57
Net income (loss)......... .66 .35 .17 (.04) .53(5)
BALANCE SHEET DATA:
Working capital........... 121,956 114,283 78,876 69,538 46,403
Current assets............ 170,105 161,273 130,372 120,711 106,926
Property and equipment.... 56,421 57,983 57,266 59,773 51,471
Total assets.............. 304,608 297,852 265,502 260,300 227,627
Long-term debt............ 112,131 111,440 82,384 82,813 47,347
Total liabilities......... 161,395 162,705 136,664 137,845 110,310
Total common stock and
other stockholders'
equity.................. 139,505 131,502 123,203 116,810 114,880
___________________
(1) In 1995, the Company consummated the acquisition of the pipeline rehabilitation
business of Enviroq Corporation, which has been accounted for under the purchase
method of accounting.
(2) In 1994 the Company consummated the acquisition of Gelco Services, Inc. and
affiliates, which has been accounted for under the purchase method of accounting.
(3) Reflects $6.5 million in costs associated with the acquisition of IMA, which have been
charged to operations primarily in the fourth quarter of 1995, and a pre-tax charge
in the amount of $8.1 million for restructuring costs, primarily for consolidation
of corrosion and abrasion protection operations, rationalization of Canadian
operations to one facility, elimination of duplicative management positions,
relocation of certain domestic employees and functions, and termination of
construction of proposed manufacturing capacity.
(4) In 1995 the Company settled certain outstanding litigation for a cash payment of $3.2
million and issuance of 30,000 shares of its Common Stock, resulting in an after-tax
charge against earnings of approximately $2.2 million.
(5) The Company recorded a fourth quarter 1994 charge resulting from the abandonment of
efforts to find a purchaser for, and shut down of, its division engaged in the offsite
rehabilitation of downhole tubulars for the oil and gas industry.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company's rehabilitation revenues derive primarily from
direct installation and other contracting activities, generated by
the Company's subsidiaries operating in the United States, Canada,
France, the United Kingdom, Chile, Argentina and Mexico, and
include product sales to, and royalties and license fees paid by,
the Company's 35 unaffiliated Insituform licensees and sub-
licensees and its seven unaffiliated NuPipe licensees. During the
three years ended December 31, 1998, 1997 and 1996, approximately
63.8%, 62.5% and 69.7%, respectively, of the Company's consolidated
revenues related to the Insituform Process.
RESULTS OF OPERATIONS
Year Ended December 31, 1998 Compared to Year Ended
December 31, 1997
Total rehabilitation revenues decreased 6.1% to $301.0 million
from $320.6 million in 1997. The principal reason for the decline
was decreased volume from the Company's corrosion and abrasion
operations in the United States and Latin America of $23.0 million.
The Company's pipe rehabilitation operations also experienced an
overall decline in revenues due to the elimination of non-core
projects, such as cleaning and inspection. For the year ended
December 31, 1998, as a result of the management committee
composition of Midsouth, the Company accounted for its investment
therein on an equity basis, which resulted in revenue of
$0.5 million in 1998, compared to $2.1 million in 1997, during
which Midsouth's results were consolidated with the Company prior
to April 1997. The Company's revenues were bolstered by increased
Insituform product sales and steel pipe sales from the Company's
corrosion and abrasion operations. Fluctuations in currency
exchange rates did not have a material impact on revenues in 1998.
The Company's gross profit from rehabilitation activities
increased 5.7% to $99.9 million from $94.5 million in 1997,
primarily due to improved gross profit from the Company's North
American and European pipeline rehabilitation operations. This
improvement was offset somewhat by a decrease in gross profit from
the Company's corrosion and abrasion operations due to the revenue
volume decrease. The overall gross profit margin for 1998 was 33.2%
compared to 29.5% in 1997, primarily due to improvements made in
productivity and efficiency in the Company's pipeline
rehabilitation operations. Much of this improvement came as a
result of extensive reorganization during 1997, where management
rationalized field crews and equipment throughout the organization.
In addition, in 1998 proportionately more projects with favorable
margins were undertaken, as a result of the elimination of lower
margin non-core projects such as cleaning and inspection, which was<PAGE>
<PAGE>
coupled with improved pricing on core pipeline rehabilitation
projects.
In 1998, selling, administrative and general expenses
decreased 4.3% to $55.3 million from $57.8 million in 1997. This
decrease was due to cost savings gained from the reorganization of
the Company's pipeline rehabilitation operations through
elimination of positions, facilities, and realignment of
responsibilities, along with the consolidation of the Company's
headquarters in Chesterfield. These decreases were offset by
increases in spending related to information systems, and patent
related activities. As a percentage of revenues, selling,
administrative and general expenses increased in 1998 to 18.4% from
18.0% in 1997. This increase was primarily attributable to lower
revenue volume in 1998.
In 1998, strategic marketing and product development costs
decreased 15.7% to $5.9 million from $7.0 million in 1997. This
decrease was primarily attributable to controlled spending in
marketing, along with decreased personnel in engineering, offset
somewhat by increased spending in research and development.
In 1997, the Company recorded in operating expense an unusual
item of $4.0 million for employee severance and costs of moving
employees and offices related to the restructuring of its corporate
headquarters and related facilities, which did not recur in the
current year. In addition, the Company recorded $0.6 million (prior
to any effect of taxes) in non-recurring expenses attendant to
activities leading to the settlement of a proxy contest attendant
to the annual stockholders meeting initiated by a group that
included two directors of the Company.
Interest expense in 1998 increased 3.4% to $9.1 million from
$8.8 million in 1997, due primarily to the effect of borrowings
resulting from the senior note financing completed in February
1997. See "Liquidity and Capital Resources" below.
Other income increased in 1998 to $2.3 million from $0.6
million in 1997, due principally to increased investment income of
$1.3 million, resulting from more invested cash and cash
equivalents in 1998.
In 1998, taxes on income increased 84.5% to $13.1 million from
$7.1 million in 1997, due principally to an increase in income
before taxes on income of $14.9 million. The Company's 1998
effective tax rate was 41.1%, as compared to 41.7% in 1997. This
decrease was principally due to a more favorable mix of income
generated in jurisdictions with lower tax rates in 1998 compared to
1997. As indicated in Note 15 of the Notes to Consolidated
Financial Statements included in response to "Item. 14 Exhibits,
Financial Statement Schedules and Reports on Form 8-K", the 1998
and 1997 effective tax rates were higher than the United States
federal statutory rate, primarily due to non-deductibility of
goodwill amortization associated with acquisitions, which is<PAGE>
<PAGE>
generally not deductible for tax purposes, and the effect of
foreign income earned taxed at higher rates.
In February 1997, as a result of the closing of the Company's
senior note financing, certain previous debt facilities were
retired. Costs of $0.4 million ($0.2 million after-tax benefits)
associated with these debt facilities which were capitalized, such
as commitment fees and legal costs, were written off. This expense
was classified as extraordinary in the Company's results of
operations for 1997.
As a result of the foregoing, net income for 1998 increased
90% to $17.9 million, representing a 5.9% return on revenue,
compared to $9.4 million for 1997, when a 2.9% return on revenue
was achieved. The Company also achieved a substantial improvement
in return on average stockholders' equity of 13.2% for 1998 as
compared to 7.4% for 1997.
Year Ended December 31, 1997 Compared to Year Ended December
31, 1996
Total rehabilitation revenues increased 10.6% to $320.6
million from $289.9 million in 1996. The principal reason for the
increase was increased volume from the Company's corrosion and
abrasion operations in the United States and Latin America. This
increase was offset slightly by lower volume from the Company's
North American and European pipeline rehabilitation operations,
primarily due to the elimination of non-core projects, such as
cleaning and inspection. In addition, since April 1997, the Company
accounted for its investment in Midsouth on an equity basis as a
result of the composition of its management committee; prior to
such date, the Company recorded $1.8 million of revenue in 1997,
compared to $7.0 million in 1996. Fluctuations in currency exchange
rates did not have a material impact on revenues in 1997.
The Company's gross profit from rehabilitation activities
increased 6.5% to $94.5 million from $88.7 million in 1996. This
increase was primarily due to increased revenue, offset slightly by
lower margins. The overall gross margin achieved in 1997 was 29.5%
versus 30.6% in 1996. This decrease was primarily due to increased
volume from the Company's corrosion and abrasion operations, which
traditionally carry lower margins than the Company's pipeline
rehabilitation operations.
Selling administrative and general expenses decreased 4.0% to
$57.8 million from $60.2 million in 1996. This decrease was due to
cost savings gained from the reorganization of the Company's
pipeline rehabilitation operations through elimination of
positions, facilities, and realignment of responsibilities, along
with the consolidation of the Company's headquarters in
Chesterfield. This was offset slightly by increased overhead costs
related to the buildup of personnel for the Company's corrosion and
abrasion operations in Latin America. As a percentage of revenues,
selling, administrative and general expenses decreased to 18.0%<PAGE>
<PAGE>
from 20.8% in 1996. This decrease was primarily attributable to
economies of scale resulting from increased volume, along with the
decrease in costs as a result of reorganization.
Strategic marketing and product development costs decreased
10.0% to $7.0 million from $7.7 million in 1996. This decrease was
primarily attributable to controlled spending in advertising and
research projects, along with decreased personnel in industrial
marketing.
During 1997, the Company charged to earnings $4.6 million in
unusual expenses related to further reorganization of the Company's
pipeline rehabilitation operations and the Company's headquarters.
The expenses primarily consist of severance, moving costs of
employees and office equipment, and costs related to exiting
facilities and markets. Such amount also included $0.6 million
incurred in settlement of the proxy contest attendant to the annual
stockholders meeting. In 1996, the unusual expenses of $6.5 million
relate to the Company's rationalization of rehabilitation
operations, as described below.
Interest expense increased 40.3% to $8.8 million from $6.2
million in 1996, due primarily to increased debt principal of
approximately $23 million from the senior notes financing completed
in February 1997.
Taxes on income increased 42.0% to $7.1 million from $5.0
million in 1996 due principally to an increase in income before
taxes on income of $7.5 million from 1996, offset by a decrease in
the effective tax rate to 41.7% from 53.0% in 1996. As indicated in
Note 15 of the Notes to Consolidated Financial Statements included
in response to "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K", the 1997 and 1996 effective tax rates
were higher than the United States federal statutory rate,
primarily due to non-deductibility of goodwill amortization
associated with acquisitions, which is generally not deductible for
tax purposes, and the effect of foreign income earned taxed at
higher rates.
In February 1997, as a result of the closing of the Company's
senior note financing, certain previous debt facilities were
retired. Costs of $0.4 million ($0.2 million after-tax benefits)
associated with these debt facilities which were capitalized, such
as commitment fees and legal costs, were written off. This expense
has been classified as an extraordinary item in the Company's
results of operations for 1997.
As a result of the foregoing, net income for 1997 was $9.4
million, an increase of $4.9 million from net income in 1996. Net
income in 1997 represented a 2.9% return on revenue, compared to
1.5% in the prior year. Net income in 1997 represented a 7.4%
return on stockholders equity, compared to 3.6% in 1996.
<PAGE>
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the balance of cash, U.S. Treasury
bills, and short-term investments was $76.9 million, compared to
$45.7 million at December 31, 1997. The increase in cash and cash
equivalents in 1998 resulted from the Company's continued strong
positive generation of cash from operating activities, amounting to
$55.6 million in 1998 compared to $27.2 million in 1997, and a
decrease in capital spending in 1998 to $13.4 million from $16.6
million in 1997, offset by a stock repurchase program undertaken in
1998, in which $9.8 million was spent. Working capital was $122.0
million at December 31, 1998 compared to $114.3 million at December
31, 1997.
The principal reason for the favorable increase in cash from
operations, to $55.6 million in 1998 compared to $27.2 million in
the prior year, was increased net income of $8.5 million compared
to the prior year, along with a favorable change in operating
assets and liabilities of $17.8 million, compared to an unfavorable
change in 1997 of $2.6 million. Trade receivables, together with
costs and estimated earnings in excess of billings and retainage
under construction contracts, decreased 16.1% to $74.4 million from
$88.7 million at December 1997, primarily attributable to stronger
management control over collections and, to a lesser extent,
decreased revenue volume in 1998. The collection cycle for
construction receivables is generally longer than that of the
Company's manufacturing and royalty operations due to provisions
for retainage, often 5% to 15% of the contract amount, as well as
the slow internal review processes often employed by the
construction subsidiaries' municipal customers. In the United
States, retainage receivables are generally received within 60 to
90 days after the completion of a contract.
Capital expenditures were $13.4 million in 1998, compared to
$16.6 million in 1997. Capital expenditures generally reflect
replacement equipment required by the Company's contracting
operations. During 1997, capital expenditures also reflected
approximately $3.5 million related to moving the Company's
corporate headquarters to Chesterfield and approximately $2.9
million for construction of the Company's new research and
development center, projects that were completed during 1998 with
an additional cost of approximately $0.5 million.
While the Company expects that routine capital spending will
continue at the current level in the foreseeable future, the
Company has several information system improvement initiatives
underway that will require increased expenditures during the next
several years. These initiatives, which began principally in 1997,
include expenditures of approximately $1.6 million in connection
with the installation of an electronic data collection system in
each of the Company's North American rehabilitation operations
during the course of 1999, of which $1.0 million was spent as of
the end of 1998, and continual accounting system upgrades and<PAGE>
<PAGE>
modifications. See "Year 2000" below for information concerning the
impact of year 2000 issues on the Company's operations.
Financing activities used $11.2 million in 1998, as compared
to cash provided of $23.4 million in 1997. In July 1998, the
Company announced that its Board of Directors had authorized the
repurchase of up to 2,700,000 shares of the Company's Common Stock,
to be made from time to time over the next five years in open
market transactions. The amount and timing of purchases will be
dependent upon a number of factors, including the price and
availability of the Company's shares, general market conditions and
competing alternative uses of funds, and may be discontinued at any
time. During the year ended December 31, 1998, the Company spent
$9.8 million for the repurchase of 735,900 shares. The repurchased
shares will be held as treasury stock.
In February 1997, the Company completed the sale, in a private
transaction, of $110 million principal amount of its 7.88% Senior
Notes Series A, due February 14, 2007 (the "Senior Notes"),
approximately $85 million of which was applied at closing to the
refinancing of outstanding indebtedness of the Company. In 1998,
the Company made principal payments totaling $1.8 million relating
to the Company's existing debt.
The Senior Notes bear interest, payable semi-annually in
August and February of each year, at the rate per annum of 7.88%.
Each year, from February 2001 to February 2006, inclusive, the
Company will be required to make principal payments of $15.7
million, together with an equivalent payment at maturity. The
Senior Notes may be prepaid at the Company's option, in whole or in
part, at any time, together with a make whole premium, and upon
specified change in control events each holder has the right to
require the Company to purchase its Senior Note without any premium
thereon.
In August 1997, the Company entered into a credit agreement
(the "Credit Agreement"), whereby, as amended effective in
September 1998, the lender will make available to the Company,
until September 1, 2001 (the "Maturity Date"), a revolving credit
line of up to $20,000,000 aggregate principal amount for working
capital and permitted acquisitions, including $10,000,000 available
for standby and commercial letters of credit. Interest on
outstanding advances accrues, at the election of the Company, at
either the lender's prime rate, payable monthly, or its LIBOR rate,
plus a margin ranging from .5% to 1.5% depending on the maintenance
of certain financial ratios, payable at the end of selected
interest periods (from one to six months). Outstanding principal is
subject to repayment on the Maturity Date, except that advances for
permitted acquisitions must be repaid within six months after
disbursement.
<PAGE>
<PAGE>
The note purchase agreements pursuant to which the Senior
Notes were acquired, and the Credit Agreement, obligate the Company
to comply with certain financial ratios and restrictive covenants
that, among other things, place limitations on operations and sales
of assets by the Company or its subsidiaries, and limit the ability
of the Company to incur further secured indebtedness and liens and
of subsidiaries to incur indebtedness, and, in the event of
default, limit the ability of the Company to pay cash dividends or
make other distributions to the holders of its capital stock or to
redeem such stock. The Credit Agreement also obligates certain of
the Company's domestic subsidiaries to guaranty the Company's
obligations, as a result of which the same subsidiaries have also
delivered their guaranty with respect to the Senior Notes.
In March 1998, the Company completed the acquisition of the
entire minority interest in United Chile for an aggregate purchase
price of approximately $2.1 million, $1.0 million of which was paid
in connection with closing, $0.6 million of which is due at the
first anniversary of closing, and the remainder of which is due on
the second anniversary of closing. In September 1998, the Company
completed its acquisition of 80% of the shares of Video Injection.
The purchase price for the Initial Shares was $5.0 million, $2.4
million of which was paid at closing, $1.3 million of which is due
on the first anniversary of closing and $1.3 million of which is
due on the second anniversary of closing, such additional
installments secured by the Company's letter of credit
arrangements. On the fifth anniversary of closing (or earlier, in
specified events), the Company will purchase the remaining 20% of
the shares of Video Injection pursuant to a formula based on Video
Injection's results of operations.
In February 1999, the Company offered $2.50 for each share of
outstanding common stock and Class B common stock of Insituform
East (an aggregate of 4,356,862 shares of which were outstanding on
February 1, 1999). In March 1999, the Company withdrew its offer
after not receiving any substantive response from Insituform East.
See "Item 1. Business-Ownership Interests in Licensees" for
information describing the Company's notice of termination of its
joint venture with Insituform East which does business under the
name Midsouth Partners.
Management believes its current working capital will be
adequate to meet its requirements for the foreseeable future.
YEAR 2000
The "year 2000" problem relates to computer systems that have
time and date-sensitive programs that were designed to read years
beginning with "19," but may not properly recognize the year 2000.
If a computer system or software application used by the Company or
a third party dealing with the Company fails because of the
inability of the system or application to properly read the year
"2000," the results may adversely affect the Company.
<PAGE>
<PAGE>
Accordingly, the Company is reviewing its internal computer
programs and systems to ensure year 2000 compliance. During the
year ended December 31, 1998, the Company established project teams
to address year 2000 risks facing the Company, and its customers
and suppliers, and engaged an internationally-recognized consulting
firm to assist the team with implementing programs addressing
preparedness of the Company. The project team is coordinating the
identification and implementation of changes to computer hardware
and software applications that will attempt to ensure the
availability and integrity of the Company's information systems.
The project team is also reviewing and analyzing voice and data
communications systems, building systems, manufacturing and
operations equipment with embedded components (including HVAC,
security and fire protection), and field operations equipment to
ensure the reliability of operational systems and manufacturing
processes, both in North America and in Europe.
The project team has identified the Company sites and entities
that may harbor assets at risk, collecting pertinent information,
establishing year 2000 disposition strategies and assessing and
reporting risks. The Company's manufacturing system has been
modified so as to achieve year 2000 compliance in all material
respects, and the Company has identified additional systems that
will be replaced by year end. The Company's project team provides
consulting services where needed in the areas of project planning
and estimating, testing and technical issues, and runs remedial
projects as appropriate.
The Company also faces risk to the extent that suppliers of
products, services and systems purchased by the Company and others
with whom the Company transacts business on a worldwide basis do
not comply with year 2000 requirements. Principal areas of the
Company's review are banking systems (and the effects on
receivables, payables and payroll), telecommunications, suppliers
to the Company's manufacturing and operating units (such as felt
and resin), transportation systems (both inbound and outbound), and
customer information systems for order placement and release and
payment of invoices. The Company's project team has initiated
formal communications with representatives from significant outside
parties that transact with the Company to determine the extent to
which the Company is vulnerable to failure by them to remediate
their own year 2000 issues. In the case of suppliers to the
Company's manufacturing and operating units, verification will
include site visits. The Company's strategy will entail proactive
compliance assessment in the case of these parties when
appropriate, as well as maintaining paper records of transactions
when advisable and inventory stocks of key materials.
The Company expects to complete its year 2000 compliance
program during 1999 and, based on information collected, presently
believes that any significant issues within its own operations and
facilities will be addressed in a timely manner. However, while the
Company has not identified material difficulties presented by its
suppliers or in its financial or communications support that are<PAGE>
<PAGE>
not being addressed, and while the estimated cost of the Company's
efforts is not expected to be material to the Company's financial
position or any year's results of operations, there can be no
assurance to this effect.
Based on management's current assessment that no material
exposure to significant business interruption exists, the Company
has not adopted any formal contingency plan in the event its year
2000 project is not completed in a timely manner, or in the event
unforeseen difficulties arise. The Company will appropriately
modify its strategy as additional circumstances come to its
attention, but there can be no assurance that the Company will
timely identify and remediate all significant year 2000 problems,
and that remedial efforts will not involve significant time and
expense, or that such problems will not have a material adverse
effect on the Company's business, results of operations or
financial position.
MARKET RISK
The Company conducts its rehabilitation activities on a
worldwide basis, giving rise to exposures related to changes in
foreign currency exchange rates. For example, foreign currency
exchange rate movements may create a degree of risk to the
Company's operations by affecting: (i) the U.S. dollar value of
sales made in foreign currencies, and (ii) the U.S. dollar value of
costs incurred in foreign currencies. In addition, the Company is
exposed to market risks related to changes in interest rates. The
Company's objective is to minimize the volatility in earnings and
cash flow from these risks.
The Company has selectively used, and will continue to use,
forward exchange contracts in order to manage its currency
exposure. Forward exchange contracts are executed by the Company
only with large, reputable banks and financial institutions and are
denominated in currencies of major industrial countries. Given its
assessment of such risk, the Company has not deemed it necessary to
offset any interest rate exposure. Furthermore, the Company does
not enter into transactions involving derivative financial
instruments for speculative trading purposes.
Based on the Company's overall currency exchange rate and
interest rate exposure at December 31, 1998, a ten percent
weakening in the U.S. dollar across all currencies or ten percent
increase in interest rates would not have a material impact on the
financial position, results of operations or cash flows of the
Company. These effects of hypothetical changes in currency exchange
rates and in interest rates, however, ignore other effects the same
movement may have arising from other variables, and actual results
could differ from the sensitivity calculations of the Company. The
Company regularly assesses these variables, establishes policies
and business practices to protect against the adverse effects of
foreign currency and interest rate fluctuations and does not
anticipate any material losses generated by these risks.<PAGE>
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
For information concerning this item, see "Item 7.
Management's Discussion and Analysis of Financial Condition and
Results of Operations-Market Risk," which information is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
For information concerning this item, see "Item 14.
Exhibits, Financial Statement Schedules, and Reports on Form 8-K,"
which information is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information concerning this item, see "Item 1.
Business-Executive Officers" and the Proxy Statement to be filed
with respect to the 1999 Annual Meeting of Stockholders (the "1999
Proxy Statement"), which information is incorporated herein by
reference.
ITEM 11. EXECUTIVE COMPENSATION
For information concerning this item, see the 1999 Proxy
Statement, which information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
For information concerning this item, see the 1999 Proxy
Statement, which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For information concerning this item, see the 1999 Proxy
Statement, which information is incorporated herein by reference.
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements:
The consolidated financial statements filed in this
Annual Report on Form 10-K are listed in the attached Index to
Consolidated Financial Statements and Schedules.
2. Financial Statement Schedules:
No Financial Statement Schedules are included herein
because they are not required or are not applicable or the required
information is contained in the consolidated financial statements
or notes thereto.
3. Exhibits:
The exhibits required to be filed as part of this Annual
Report on Form 10-K are listed in the attached Index to Exhibits.
(b) Current Reports on Form 8-K:
During the quarter ended December 31, 1998, the
Company did not file a Current Report on Form 8-K. The Company
filed Current Reports on Form 8-K dated, respectively, February 16,
1999, March 2, 1999 and March 10, 1999 reporting its subsequently
withdrawn offer to acquire Insituform East, and its termination of
the Midsouth license. No financial statements were filed as part of
any such report.
<PAGE>
<PAGE>
POWER OF ATTORNEY
The registrant and each person whose signature appears
below hereby appoint Anthony W. Hooper, William A. Martin, and
Robert L. Kelley as attorneys-in-fact with full power of
substitution, severally, to execute in the name and on behalf of
the registrant and each such person, individually and in each
capacity stated below, one or more amendments to the annual report
which amendments may make such changes in the report as the
attorney-in-fact acting deems appropriate and to file any such
amendment to the report with the Securities and Exchange
Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: March 26, 1999 INSITUFORM TECHNOLOGIES, INC.
By s/ Anthony W. Hooper
--------------------------------
Anthony W. Hooper
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the dates indicated:
Signature Title Date
s/Anthony W. Hooper
- -----------------------
Anthony W. Hooper Principal Executive March 26, 1999
Officer and Director
s/William A. Martin
- -----------------------
William A. Martin Principal Financial March 26, 1999
and Accounting Officer
s/Robert W. Affholder
- -----------------------
Robert W. Affholder Director March 26, 1999
<PAGE>
s/Paul A. Biddelman
- -----------------------
Paul A. Biddelman Director March 26, 1999
s/Stephen P. Cortinovis
- -----------------------
Stephen P. Cortinovis Director March 26, 1999
s/Thomas Kalishman
- -----------------------
Thomas Kalishman Director March 26, 1999
s/Silas Spengler
- -----------------------
Silas Spengler Director March 26, 1999
s/Sheldon Weinig
- -----------------------
Sheldon Weinig Director March 26, 1999
s/Russell B. Wight, Jr.
- -----------------------
Russell B. Wight, Jr. Director March 26, 1999
s/Alfred L. Woods
- -----------------------
Alfred L. Woods Director March 26, 1999
<PAGE>
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants............ F-2
Report of Management................................. F-3
Consolidated Balance Sheets, December 31,
1998 and 1997...................................... F-4
Consolidated Statements of Operations for
each of the three years in the period
ended December 31, 1998............................ F-5
Consolidated Statements of Stockholders'
Equity for each of the three years in
the period ended December 31, 1998................. F-6
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1998..................... F-7
Notes to Consolidated Financial Statements........... F-9
No Financial Statement Schedules are included herein because
they are not required or not applicable or the required information
is contained in the consolidated financial statements or notes
thereto.
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Insituform Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of
Insituform Technologies, Inc. and subsidiaries (a Delaware
corporation) as of December 31, 1998 and 1997, and the related
consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended
December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Insituform Technologies, Inc. and subsidiaries as of
December 31, 1998 and 1997, and the results of their operations
and their cash flows for each of the three years in the period
ended December 31, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
February 17, 1999
F-2<PAGE>
<PAGE>
REPORT OF MANAGEMENT
Management is responsible for the preparation, integrity and
objectivity of financial information included in this annual
report. The financial statements have been prepared in
conformity with generally accepted accounting principles applied
on a consistent basis.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts.
Although the financial statements reflect all available
information and management's judgment and estimates of current
conditions and circumstances, and are prepared with the
assistance of specialists within and outside the Company, actual
results could differ from those estimates.
Management has established and maintains an internal control
structure to provide reasonable assurance that assets are
safeguarded against loss from unauthorized use or disposition,
that the accounting records provide a reliable basis for the
preparation of financial statements and that such financial
statements are not misstated due to material fraud or error.
Internal controls include the careful selection of associates,
the proper segregation of duties and the communication and
application of formal policies and procedures that are consistent
with high standards of accounting and administrative practices.
An important element of this system is a comprehensive internal
audit program.
Management continually reviews, modifies and improves its systems
of accounting and controls in response to changes in business
conditions and operations and in response to recommendations in
the reports prepared by the independent public accountants and
internal auditors.
Management believes that it is essential for the Company to
conduct its business affairs in accordance with the highest
ethical standards and in conformity with the law. This standard
is described in the Company's policies on business conduct, which
are publicized throughout the Company.
Anthony W. Hooper William A. Martin
Chairman, President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
F-3<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS -- AS OF DECEMBER 31, 1998 AND 1997
(In thousands, except share information)
<CAPTIONS>
ASSETS 1998 1997
- ------ ---- ----
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 76,904 $ 45,734
Trade receivables, less allowance for doubtful
accounts of $2,909 and $2,587 52,280 58,660
Retainage under construction contracts 12,368 14,480
Costs and estimated earnings in excess of billings 9,792 15,551
Inventories 11,282 12,214
Prepaid expenses and other 7,479 14,634
--------- ---------
Total current assets 170,105 161,273
--------- ---------
PROPERTY AND EQUIPMENT, less accumulated depreciation 56,421 57,983
--------- ---------
OTHER ASSETS:
Goodwill, less accumulated amortization of
$14,951 and $12,483, respectively 56,504 54,133
Patents and patent applications, less accumulated
amortization of $5,159 and $4,496 11,172 11,610
Investments in licensees and affiliated companies 5,234 5,499
Noncompete agreements, less accumulated amortization
of $5,324 and $4,282 851 1,744
Other 4,321 5,610
--------- ---------
Total other assets 78,082 78,596
--------- ---------
Total assets $ 304,608 $ 297,852
========= =========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
F-4<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS -- AS OF DECEMBER 31, 1998 AND 1997
(In thousands, except share information)
<CAPTIONS>
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
- ------------------------------------ ---- ----
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities of long-term debt and $ 2,918 $ 2,120
notes payable
Accounts payable and accruals 45,231 44,870
--------- ---------
Total current liabilities 48,149 46,990
LONG-TERM DEBT, less current maturities 112,131 111,440
DEFERRED INCOME TAXES - 3,258
OTHER LIABILITIES 1,115 1,017
--------- ---------
Total liabilities 161,395 162,705
--------- ---------
MINORITY INTERESTS 3,708 3,645
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, undesignated, $.10 par shares
authorized 2,000,000; none outstanding - -
Common stock, $.01 par shares authorized 40,000,000;
shares outstanding 27,302,304 and 27,214,718 273 272
Additional paid-in capital 68,931 68,119
Retained earnings 86,355 68,468
--------- ---------
155,559 136,859
Treasury stock 991,701 and 255,801 shares (13,097) (3,269)
Cumulative foreign currency translation adjustments (2,957) (2,088)
--------- ---------
Total stockholders' equity 139,505 131,502
--------- ---------
Total liabilities and stockholders' equity $ 304,608 $ 297,852
========= =========
The accompanying notes are an integral part of these balance sheets.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except per share amounts)
<CAPTIONS>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REHABILITATION REVENUES $ 300,958 $ 320,640 $ 289,933
--------- --------- ---------
COST OF REHABILITATION 201,056 226,152 201,219
--------- --------- ---------
GROSS PROFIT 99,902 94,488 88,714
--------- --------- ---------
OPERATING COSTS AND EXPENSES:
Selling, administrative and general 55,305 57,845 60,181
Strategic marketing and product development 5,909 7,007 7,689
Unusual items - 4,606 6,498
--------- --------- ---------
TOTAL OPERATING COSTS AND EXPENSES 61,214 69,458 74,368
--------- --------- ---------
OPERATING INCOME 38,688 25,030 14,346
--------- --------- ---------
OTHER (EXPENSE) INCOME:
Interest expense (9,099) (8,750) (6,223)
Other 2,270 647 1,290
--------- --------- ---------
TOTAL OTHER EXPENSE (6,829) (8,103) (4,933)
--------- --------- ---------
INCOME BEFORE TAXES ON INCOME 31,859 16,927 9,413
TAXES ON INCOME 13,079 7,067 4,985
--------- --------- ---------
INCOME BEFORE MINORITY INTERESTS AND
EQUITY IN EARNINGS 18,780 9,860 4,428
MINORITY INTERESTS (849) (519) (377)
EQUITY IN (LOSSES) EARNINGS OF AFFILIATED
COMPANIES (44) 303 441
--------- --------- ---------
INCOME BEFORE EXTRAORDINARY ITEM 17,887 9,644 4,492
EXTRAORDINARY ITEM - Loss on early
retirement of debt (net of income tax
benefits of $142) - (225) -
--------- --------- ---------
NET INCOME $ 17,887 $ 9,419 $ 4,492
========= ========= =========
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
AND COMMON STOCK EQUIVALENTS:
Net income per common share basic-
Income before extraordinary item $ .67 $ .36 $ .17
Extraordinary loss, net of income
tax benefits - (.01) -
--------- --------- ---------
Net income per common share
basic $ .67 $ .35 $ .17
========= ========= =========
<PAGE>
<PAGE>
</TABLE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except per share amounts)
(continued)
<CAPTIONS>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income per common share
dilutive-
Income before extraordinary item $ .66 $ .36 $ .17
Extraordinary loss, net of income
tax benefits - (.01) -
--------- --------- ---------
Net income per common share -
dilutive $ .66 $ .35 $ .17
========= ========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
F-5<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except number of shares)
<CAPTIONS>
Common Stock Additional
---------------- Paid-In Retained Treasury
Shares Amount Capital Earning Stock
------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1995 27,104,940 $ 271 $ 67,427 $ 54,557 $ -
Net income - - - 4,492 -
Issuance of common stock upon exercise
of options, including income tax
benefit of $15 9,391 - 76 - -
Stock issued in conjunction with
litigation settlement 30,000 - 321 - -
Foreclosure of note receivable from
affiliates - - - - (3,269)
Cumulative foreign currency translation
adjustment - - - - -
---------- ----- -------- -------- ------
BALANCE, December 31, 1996 27,144,331 271 67,824 59,049 (3,269)
Net income - - - 9,419 -
Issuance of common stock upon exercise
of options 70,387 1 295 - -
Cumulative foreign currency translation
adjustment - - - - -
---------- ----- -------- -------- ------
BALANCE, December 31, 1997 27,214,718 272 68,119 68,468 (3,269)
Net income - - - 17,887 -
Issuance of common stock upon exercise
of options 87,586 1 812 - -
Common stock repurchased - - - - (9,828)
Cumulative foreign currency translation
adjustment - - - - -
---------- ----- -------- -------- ------
BALANCE, December 31, 1998 27,302,304 $ 273 $ 68,931 $ 86,355 (13,097)
========== ===== ======== ======== =======
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
---------------------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
-----------------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands, except number of shares)
(CONTINUED)
<CAPTIONS>
Cumulative
Foreign Notes
Currency Receivable Total
Translation From Stockholders' Comprehensive
Adjustments Affiliates Equity Income
----------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
BALANCE, December 31, 1995 $(1,821) $ (3,624) $116,810 $ -
Net income - - 4,492 4,492
Issuance of common stock upon
exercise of options, including
income tax benefit of $15 - - 76 -
Stock issued in conjunction with
litigation settlement - - 321 -
Foreclosure of note receivable from
affiliates - 3,624 355 -
Cumulative foreign currency
translation adjustment 1,149 - 1,149 1,149
-------- ------- ------- -------
BALANCE, December 31, 1996 (672) - 123,203 $ 5,641
======== ======= ======= =======
Net income - - 9,419 $ 9,419
Issuance of common stock upon
exercise of options - - 296 -
Cumulative foreign currency
translation adjustment (1,416) - (1,416) (1,416)
-------- ------- ------- -------
BALANCE, December 31, 1997 (2,088) - 131,502 $ 8,003
======== ======= ======= =======
Net income - - 17,887 $17,887
Issuance of common stock upon
exercise of options - - 813 -
Common stock repurchased - - (9,828) -
Cumulative foreign currency
translation adjustment (869) - (869) (869)
-------- ------- -------- -------
BALANCE, December 31, 1998 $(2,957) $ - $139,505 $17,018
======== ======= ========= =======
The accompanying notes are an integral part of these statements.
</TABLE>
F-6<PAGE>
<PAGE>
<TABLE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
<CAPTIONS>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,887 $ 9,419 $ 4,492
Adjustments to reconcile net income to net
cash provided by operating activities-
Minority interests in net income 849 519 377
Depreciation and amortization 19,095 19,240 19,180
Other (627) 1,095 1,909
Deferred income taxes 1,174 728 (279)
Equity in earnings (losses) of affiliated
companies 44 (303) (441)
Changes in operating assets and liabilities,
net of effects of businesses purchased-
Receivables 13,247 (5,805) (8,217)
Inventories 1,049 2,766 (15)
Prepaid expenses and other 1,770 1,032 2,510
Other assets 999 (526) 609
Accounts payable and accruals 69 (993) 8,030
-------- --------- -------
Net cash provided by operating
activities 55,556 27,172 28,155
-------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (13,416) (16,552 (18,187)
Proceeds from (investments in) licensees
and affiliated companies 236 140 (1,141)
Patents and patent application expenditures (425) (2,227) (1,772)
Purchases of businesses, net of cash acquired (1,451) - -
Proceeds on disposal of property and equipment 1,738 426 780
-------- --------- -------
Net cash used in investing activities (13,318) (18,213) (20,320)
-------- --------- -------
(Continued on the following page)
</TABLE>
F-7<PAGE>
<PAGE>
<TABLE>
<CAPTIONS>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock $ 813 $ 296 $ 61
Purchases of treasury stock (9,828) - -
Proceeds from long-term debt 124 110,515 5,868
Principal payments on long-term debt (1,776) (87,105) (11,775)
Minority interests - (178) (562)
(Decrease) increase in short-term borrowings (565) (124) 333
-------- ------ -------
Net cash (used in) provided by
financing activities (11,232) 23,404 (6,075)
-------- ------ -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 164 (105) 300
-------- ------ -------
NET INCREASE IN CASH AND CASH EQUIVALENTS 31,170 32,258 2,060
CASH AND CASH EQUIVALENTS, beginning of year 45,734 13,476 11,416
-------- ------ -------
CASH AND CASH EQUIVALENTS, end of year $ 76,904 $ 45,734 $ 13,476
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for-
Interest $ 9,115 $ 5,849 $ 7,478
Income taxes 13,223 1,686 4,864
NONCASH INVESTING AND FINANCING ACTIVITIES:
Additional paid-in capital increased by
reduction in income taxes payable for tax
benefit arising from exercise of stock
options $ - $ - $ 15
Deferred consideration for businesses acquired 3,671 - -
Treasury stock acquired in connection with
foreclosure of director note receivable - - 3,624
Tax benefit arising from foreclosure of
director note receivable - - 760
Stock issued in conjunction with litigation
settlement - - 321
The accompanying notes are an integral part of these statements.
</TABLE>
F-8<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES, INC. AND SUBSIDIARIES
----------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. DESCRIPTION OF BUSINESS:
Insituform Technologies, Inc. (a Delaware corporation) and
subsidiaries (collectively, the "Company" or "ITI") is a
worldwide provider of proprietary trenchless technologies for
the rehabilitation and improvement of sewer, water, gas and
industrial pipes. The Company's primary technology is the
Insituform(R) Process, a "cured-in-place" pipeline rehabilitation
process. The Company's Tite Liner(R) (Tite Liner) Process is a
method of lining steel lines with a corrosion and abrasion
resistant pipe. Through its Affholder, Inc. subsidiary, the
Company is engaged in trenchless tunneling used in the
installation of new underground services.
2. SUMMARY OF ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of
the Company and its majority-owned subsidiaries, including a 51%
owned United Kingdom subsidiary, Insituform Linings, Plc.; a 55%
owned Mexican subsidiary, United Pipeline de Mexico, S.A.; a 66%
owned French subsidiary, Insituform France, S.A. and an 80%
owned French subsidiary, Video Injection SA. All intercompany
balances, transactions and stockholdings are eliminated.
Accounting Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Business Acquisitions
The net assets of businesses acquired and accounted for using
the purchase method of accounting are recorded at their fair
values at the acquisition dates, and the financial statements
include their operations from those dates. Any excess of
acquisition costs over the fair value of net assets acquired is
included in the balance sheet as goodwill.
F-9<PAGE>
<PAGE>
Taxes on Income
The Company provides for estimated income taxes payable or
refundable on current year income tax returns as well as the
estimated future tax effects attributable to temporary
differences and carryforwards, based upon enacted tax laws and
tax rates.
U.S. and foreign income taxes are not provided on undistributed
earnings of foreign subsidiaries where it is the Company's
intention to indefinitely reinvest such earnings in the
subsidiary's operations and not to transfer them in a taxable
transaction.
Foreign Currency Translation
Results of operations for foreign entities are translated using
the average exchange rates during the period. Assets and
liabilities are translated to U.S. dollars using the exchange
rates in effect at the balance sheet date, and the related
translation adjustments are reported as a separate component of
stockholders' equity.
Cash and Cash Equivalents
The Company classifies highly liquid investments with original
maturities of 90 days or less as cash equivalents.
Fair Value of Financial Instruments
Recorded book values are reasonable estimates of fair value for
cash and cash equivalents, receivables and accounts payable.
Current market values for debt instruments with fixed interest
rates are estimated based upon borrowing rates currently
available to the Company for loans with similar terms.
Investments
Corporate investments are carried at cost if ownership is less
than 20% and on the equity method if the Company's ownership
interest is 20% and greater, but not exceeding 50%. Investments
in partnerships for which the Company's ownership interest is
greater than 20% but less than 50% are accounted for on the
equity method. In addition, the Company has accounted for its
interest in Midsouth Partners, a domestic partnership 57-1/2%
owned by the Company, on the equity method, as a consequence of
Midsouth's management in a seven-member management committee
controlled by the minority partner.
Inventories
Inventories are valued at the lower of cost (first-in,
first-out) or market.
F-10<PAGE>
<PAGE>
Property, Equipment and Depreciation
Property and equipment are stated at cost. Depreciation on
property and equipment is computed using the straight-line
method over the following estimated useful lives:
Years
Land improvements 15-20
Buildings and improvements 5-40
Machinery and equipment 4-10
Furniture and fixtures 3-10
Autos and trucks 3-10
Intangibles
The Company amortizes goodwill over periods not in excess of 25
years on the straight-line basis. Noncompete agreements are
amortized on a straight-line basis over the term of the
applicable agreements.
Patent costs are amortized on a straight-line basis over the
statutory life, normally not exceeding 20 years. Certain of the
Company's patents related to the Insituform Process have expired
in many countries, including the United States.
Long-Lived Assets
The Company reviews for impairment of long-lived assets whenever
events or changes in circumstances indicate that the carrying
amount of an asset may not be recovered from their undiscounted
future cash flows.
Royalty Revenues and License Fees
Royalty revenues are accrued as earned in accordance with the
provisions of the license agreements and are recorded based upon
reports submitted by the licensees. License fees are recognized
as revenues when all material services have been substantially
performed.
Construction and Installation Revenues
Construction and installation revenues are recognized using the
percentage-of-completion method. Contract costs include all
direct material and labor costs and those indirect costs related
to contract performance, such as indirect labor, supplies, tools
and equipment costs. Changes in estimated total contract costs
are recognized in the period they are determined. Where a
contract loss is forecast, the full amount of the anticipated
loss is recognized in the period the loss is determined.
Earnings Per Share
Earnings per share has been calculated using the following share
information:
F-11
<PAGE>
<TABLE>
1998 1997 1996
---- ---- ----
<CAPTION>
<S> <C> <C> <C>
Weighted average number of common
shares used for Basic EPS 26,777,879 26,926,148 27,036,008
Effect of dilutive stock options
and warrants 280,180 46,900 76,838
---------- ---------- ----------
Weighted average number of common
shares and dilutive potential
common stock used in diluted EPS 27,058,059 26,973,048 27,112,846
========== ========== ==========
</TABLE>
New Accounting Pronouncement
The Company intends to adopt SFAS 133, "Accounting for
Derivative Instrument and Hedging Activities," which establishes
accounting and reporting standards for derivative instruments
and hedging activities in fiscal 2000. The Company believes
that SFAS 133 will not have a material impact on its results of
operations or financial position.
Reclassifications
Certain prior year amounts in the consolidated financial
statements have been reclassified to conform to the current year
presentation.
3. BUSINESS ACQUISITIONS:
In March 1998, the Company concluded the acquisition of the
entire minority interest in its Chilean subsidiary for an
aggregate price of approximately $2.1 million, $1.0 million of
which was paid in cash at closing, $0.6 million of which is due
at the first anniversary of closing, and the remainder of which
is due on the second anniversary of closing. The acquisition
resulted in additional goodwill of $1.3 million and a reduction
of minority interest of $0.8 million.
In September 1998, the Company completed its acquisition of 80%
of the shares (the "Initial Shares") of Video Injection SA
("Video Injection"), a French company that utilizes
multifunctional robotic devices developed in connection with the
inspection and repair of pipelines. The purchase price for the
Initial Shares was 28,000,000FF ($5.0 million), 13,500,000FF
($2.4 million) of which was paid in cash at closing, 7,020,000FF
($1.3 million) of which is due on the first anniversary of
closing and 7,480,000FF ($1.3 million) of which is due on the
second anniversary of closing, such additional installments are
secured by the Company's letter of credit arrangements. On the
fifth anniversary of closing (or earlier, in specified events),
the Company will purchase the remaining 20% of the shares of
Video Injection pursuant to a formula based on Video Injection's
F-12<PAGE>
results of operations. The Company has obtained noncompetition
agreements from the two principals of Video Injection (who
remain employed by Video Injection) that extend three years
beyond the period of employment. The purchase price was
allocated between tangible assets of $.8 million and goodwill of
$4.2 million.
4. UNUSUAL ITEMS:
In 1997, the Company recorded $4.0 million in costs related to
further reorganization of pipeline rehabilitation operations and
corporate headquarters. These costs consisted primarily of
severance, employee moving costs and expenses related to
existing facilities and markets.
In 1997, a group, including Jerome Kalishman and Robert
Affholder, both directors of the Company, filed an amended
Schedule 13D pursuant to the Securities and Exchange Act of 1934
which stated that it was the intention of Messrs. Kalishman and
Affholder to propose a slate of individuals to run for election
to the Board of Directors of the Company at its 1997 annual
meeting of stockholders in opposition to the slate proposed by
the Company in its original proxy statement. The Company and
Messrs. Kalishman and Affholder subsequently entered into a
settlement agreement to resolve the outstanding proxy contest.
The Company incurred costs of $0.6 million (prior to any effect
of taxes) related to legal and proxy solicitation expenses.
In 1996, the Company recorded $6.5 million in costs related to
the ongoing rationalization of pipeline rehabilitation
operations. These costs consisted principally of the write-off
of certain assets of the Paltem product line ($3.6 million),
charges related to the disposition of excess facilities ($1.4
million), and costs related to reorganization of the North
American contracting operations ($1.5 million).
The write-off of the Paltem product line includes $2.8 million
of manufacturing and installation equipment that related
specifically to the gas distribution main installation market,
which the Company has decided not to pursue. The Paltem product
line may, however, be used in other markets.
5. ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Activity in the allowance for doubtful accounts is summarized as
follows for the years ended December 31 (in thousands):
F-13<PAGE>
<PAGE>
<TABLE>
<CAPTIONS>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Balance, at beginning of period $ 2,587 $ 1,031 $ 974
Charged to expense 1,679 1,658 289
Uncollected balances written off,
net of recoveries (1,357) (102) (232)
-------- ------- -------
Balance, at end of period $ 2,909 $ 2,587 $ 1,031
======= ======= =======
</TABLE>
6. COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS:
Costs and estimated earnings on uncompleted contracts consist of
the following at December 31 (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- -------
<S> <C> <C>
Costs incurred on uncompleted contracts $ 111,204 $123,808
Estimated earnings 38,460 33,985
--------- --------
149,664 157,793
Less - Billings to date (145,278) (144,794)
--------- --------
$ 4,386 $ 12,999
========= ========
Included in the accompanying balance sheets:
Costs and estimated earnings in excess of
billings $ 9,792 $ 15,551
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 11) (5,406) (2,552)
--------- --------
$ 4,386 $ 12,999
========= ========
</TABLE>
Costs and estimated earnings in excess of billings represent
work performed which either due to contract stipulations or
lacking contractual documentation needed, could not be billed.
Substantially all unbilled amounts are expected to be collected
within one year.
7. INVENTORIES:
Inventories are summarized as follows at December 31 (in
thousands):
F-14<PAGE>
<PAGE>
1998 1997
--------- ---------
Raw materials $ 1,542 $ 2,127
Work-in-process 2,959 2,896
Finished products 1,144 1,177
Construction materials 5,637 6,014
--------- ---------
$ 11,282 $ 12,214
========= =========
8. PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31
(in thousands):
1998 1997
--------- ---------
Land and land improvements $ 2,621 $ 2,659
Buildings and improvements 21,928 15,824
Machinery and equipment 81,283 82,630
Furniture and fixtures 8,883 8,820
Autos and trucks 4,822 2,456
Construction in progress 3,731 5,987
--------- ---------
123,268 118,376
Less- Accumulated depreciation (66,847) (60,393)
--------- ---------
$ 56,421 $ 57,983
========= =========
9. INVESTMENTS IN LICENSEES AND AFFILIATED COMPANIES:
Investments in licensees and affiliated companies consist of the
following at December 31 (in thousands):
1998 1997
--------- ---------
Insituform Rohrsanierungstechnik
GmbH (50%) $ 3,120 $ 2,855
Midsouth Partners (57-1/2%) 1,836 2,217
Other 50% owned joint ventures 278 427
--------- ---------
$ 5,234 $ 5,499
========= =========
Beginning in April 1997, the Company began accounting for its
investment in Midsouth Partners on the equity method, as a
consequence of the composition of Midsouth's management
committee to include a majority of members named by the minority
partner.
10. LONG-TERM DEBT AND NOTES PAYABLE:
Long-term debt consists of the following at December 31 (in
thousands):
F-15<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
LONG-TERM DEBT:
7.88% senior notes, payable in $15,715
annual installments beginning February
2001 through 2007, with interest payable
semiannually $ 110,000 $ 110,000
DEFERRED PURCHASE CONSIDERATION:
Promissory notes to minority owners of
Video Injection, payable in two
installments of FF 7.0 million
($1.2 million) and FF 7.5 million
($1.3 million) on the first and second
anniversaries of closing, secured by
letter of credit arrangements 2,566 -
Promissory notes to former minority owners
of United Sistema de Tuberias Ltda., due
in two installments of $0.6 million and
$0.5 million on the first and second
anniversaries of closing 1,105 -
OTHER NOTES 681 2,329
--------- ---------
114,352 112,329
Less- Current maturities (2,221) (889)
--------- ---------
$ 112,131 $ 111,440
========= =========
</TABLE>
On February 14, 1997, the Company completed a $110 million
private debt offering of 7.88% Senior Notes due February 14,
2007 ("Senior Notes"). Interest is payable semiannually in
August and February of each year, and each year, from February
2001 to February 2006, inclusive, the Company is required to
make principal repayments of $15,715,000, together with an
equivalent payment at maturity. The Senior Notes may be prepaid
at the Company's option, in whole or in part, at any time,
together with a make-whole premium, and upon specified change in
control events each holder has the right to require the Company
to purchase its Senior Notes without any premium thereon. The
agreements obligate the Company to comply with certain financial
ratios and restrictive covenants that, among other things, place
limitations on operations and sales of assets by the Company or
its subsidiaries, and limit the ability of the Company to incur
further secured indebtedness and liens. Such agreements also
obligate the Company's subsidiaries to provide guarantees to the
holders of the Senior Notes if guarantees are given by them to
certain other lenders.
Debt issuance costs of $891,000 incurred in connection with the
private debt offering were recorded as deferred charges and will
be amortized over the life of the Senior Notes.
F-16<PAGE>
<PAGE>
Costs of approximately $400,000 ($225,000 after tax) associated
with a prior credit facility were written off and have been
classified as an extraordinary item in the 1997 results of
operations.
At December 31, 1998 and 1997, the estimated fair value of the
Company's long-term debt was approximately $111.6 million and
$118.1 million, respectively.
Principal payments required to be made for each of the next five
years and thereafter are summarized as follows (in thousands):
Years ending December 31 Amount
------------------------ --------
1999 $ 2,221
2000 2,131
2001 15,715
2002 15,715
2003 15,715
After 2003 62,855
---------
Total $ 114,352
=========
Effective August 20, 1997, the Company entered into a Loan
Agreement dated such date (the "Credit Agreement") with
NationsBank, N.A. ("NationsBank"), whereby, as amended effective
September 15, 1998, NationsBank will make available to the
Company, until September 1, 2001 (the "Maturity Date"), a
revolving credit line of up to $20,000,000 aggregate principal
amount for working capital and permitted acquisitions, including
$10,000,000 available for standby and commercial letters of
credit, of which $5,774,000 was outstanding at December 31, 1998.
Interest on outstanding advances accrues, at the election of the
Company, at either the Lender's prime rate, payable monthly, or
its LIBOR rate, plus a margin ranging from .5% to 1.5% depending
on the maintenance of certain financial ratios, payable at the end
of selected interest periods (from one to six months).
Outstanding principal is subject to repayment on the Maturity
Date, except that advances for permitted acquisitions must be
repaid within six months after disbursement.
The Credit Agreement obligates the Company to comply with certain
financial ratios and restrictive covenants that, among other
things, prohibit dividends and stock repurchases in the event of
loan defaults, place limitations on operations and sales of assets
by the Company and its subsidiaries, and limit the ability of the
Company and its subsidiaries to incur further secured indebtedness
and liens and of subsidiaries to incur additional indebtedness.
The Credit Agreement also obligates certain of the Company's
domestic subsidiaries to guarantee the Company's obligations, as a
result of which the same subsidiaries have also delivered their
guarantees with respect to the Senior Notes.
F-17
<PAGE>
The Company has various lines of credit related to its foreign
entities. These lines are secured by a parent company guarantee
and, in some cases, the entities' real property. Total amounts
outstanding at December 31, 1998 and 1997, were $697,000 and
$1,231,000, respectively.
11. ACCOUNTS PAYABLE AND ACCRUALS:
Accounts payable and accruals consist of the following at
December 31 (in thousands):
<TABLE>
<CAPTIONS>
1998 1997
---- ----
<S> <C> <C>
Accounts payable - trade $ 13,471 $ 8,071
Compensation and profit sharing 10,515 11,466
Billings in excess of costs and earnings 5,406 2,552
Interest 3,219 3,232
Accrued litigation and fees 1,914 2,778
Merger and restructuring 1,827 2,464
Taxes 920 3,172
Other 7,959 11,135
-------- -------
$ 45,231 $44,870
======== =======
</TABLE>
12. STOCKHOLDERS' EQUITY:
Stock Option Plan
Under the 1992 Employee Stock Option Plan and Director Stock
Option Plan (the "Plans"), the Company may grant options to its
employees and directors not to exceed 1,850,000 and 1,000,000
shares of common stock, respectively. The plans are
administered by the Board of Directors which determines the
timing of awards, individuals to be granted awards, the number
of options to be awarded and the price, vesting schedule and
other conditions of the options. The exercise price of each
option typically equals the market price of the Company's stock
on the date of grant and, therefore, the Company generally makes
no charge to earnings with respect to these options. Options
generally vest over a four or five year period and have an
expiration date of up to five or ten years after grant.
The Company applies APB Opinion No. 25, in accounting for stock
option grants. In accordance with SFAS No. 123, the Company has
estimated the fair value of each option grant using the
Black-Scholes option-pricing model. The following weighted
average assumptions were used for the grants in 1998, 1997 and
1996, respectively: expected volatility of 46%, 45% and 44%;
risk-free interest rates of 5.1%, 5.8% and 6.1%; expected lives
of five years and no dividends. Had compensation cost for the
stock options granted been determined based on their fair value
at the grant dates, the Company's net income and earnings per
share would have been reduced to the pro forma amounts indicated
below (in thousands, except per share amounts):
F-18
<PAGE>
<TABLE>
<CAPTIONS>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Net income:
As reported $ 17,887 $ 9,419 $ 4,492
Pro forma 16,833 8,867 4,116
Basic earnings per share:
As reported .67 .35 .17
Pro forma .63 .33 .15
Diluted earnings per share:
As Reported .66 .35 .17
Pro forma .62 .33 .15
</TABLE>
Based on the Black-Scholes option-pricing model, the weighted
average fair value of options granted in 1998, 1997 and 1996 was
$6.48, $4.16 and $3.84, respectively, for options granted at the
market price. In 1996, for options granted above market price,
the fair value was $1.82. The following table summarizes
information about options outstanding at December 31, 1998:
<TABLE>
<CAPTIONS>
Options Outstanding Options Exercisable
Weighted
Number Average Weighted Number Weighted
Outstanding at Remaining Average Exercisable at Average
Range of December 31, Contractual Exercise December 31, Exercise
Exercise Price 1998 Life Price 1998 Price
- -------------- ------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ 4.32 to 9.79 825,757 6.3 years $ 8.34 581,317 $ 8.17
$10.00 to $15.00 676,010 5.1 years $13.15 511,960 $13.03
--------- ---------
1,501,767 5.8 years $10.51 1,093,277 $10.45
========= =========
</TABLE>
Changes in options outstanding are summarized as follows:
Weighted
Average
Exercise
Shares Price
-------- --------
Balance, December 31, 1995 1,414,115 $12.90
Granted 325,000 $ 9.14
Exercised (9,316) $ 7.92
Canceled (132,420) $15.02
--------- ------
Balance, December 31, 1996 1,597,379 $12.22
Granted 568,900 $ 8.75
Exercised (70,387) $ 4.24
Canceled (235,885) $11.18
--------- ------
F-19<PAGE>
<PAGE>
Balance, December 31, 1997 1,860,007 $11.59
Granted 306,000 $13.68
Exercised (87,586) $ 9.28
Canceled (576,654) $15.87
Balance, December 31, 1998 1,501,767 $10.51
=========
At December 31, 1998, 2,850,000 shares of common stock were
reserved pursuant to stock option plans.
13. RELATED-PARTY TRANSACTIONS:
During the three years ended December 31, 1998, the Company
leased tunnelling equipment from a partnership whose partners
consisted of two officers and directors of the Company, one of
whom is now deceased. All transactions were made at arm's
length. During 1998, 1997 and 1996, the Company paid the
partnership $481,000, $317,000 and $384,575, respectively, under
such arrangements.
14. OTHER INCOME (EXPENSE):
Other income (expense) is comprised of the following at December
31 (in thousands):
1998 1997 1996
------ ------ ------
Investment income $ 3,130 $ 1,842 $ 1,059
Provision for excess equipment - (722) -
Other (860) (473) 231
------- -------- -------
$ 2,270 $ 647 $ 1,290
======= ======== =======
15. TAXES ON INCOME:
Income (loss) from continuing operations before taxes on income is
as follows for the years ended December 31 (in thousands):
1998 1997 1996
------ ------ ------
Domestic $25,803 $ 9,432 $10,182
Foreign 6,056 7,495 (769)
------- ------- -------
Total $31,859 $16,927 $ 9,413
======= ======= =======
Provisions for taxes on income from continuing operations consist
of the following components for the years ended December 31 (in
thousands):
F-20<PAGE>
<PAGE>
1998 1997 1996
------ ------ -------
Current:
Federal $ 6,730 $ 2,498 $ 2,968
Foreign 3,848 3,519 1,708
State 1,327 280 735
------- ------- -------
11,905 6,297 5,411
------- ------- -------
Deferred:
Federal 1,031 900 1,334
Foreign (76) (302) (569)
State 219 172 (243)
Adjustments to beginning of year
valuation allowance - - (948)
------- ------- -------
1,174 770 (426)
------- ------- -------
Total taxes on income $13,079 $ 7,067 $ 4,985
======= ======= =======
A reconciliation between the U.S. federal statutory tax rate and
the effective tax rate follows:
1998 1997 1996
------ ------ -------
Income taxes at U.S. federal
statutory tax rate 35.0% 34.0% 34.0%
Increase (decrease) in taxes
resulting from:
State income taxes, net of
federal income tax benefit 3.2 1.1 2.6
Tax amortization of intangibles (2.6) (4.7) (8.4)
Goodwill amortization 2.3 3.2 8.2
Effect of foreign income taxed
at foreign rates .3 3.0 7.4
Other 2.9 5.1 9.2
---- ---- ----
Total taxes on income 41.1% 41.7% 53.0%
==== ==== ====
Net deferred taxes consist of the following at December 31 (in
thousands):
1998 1997
---- ----
DEFERRED INCOME TAX ASSETS:
Foreign tax credits and net
operating loss carryforwards $ 6,123 $ 5,276
Accrued losses and nondeductible
reserves 2,160 3,350
Accrued compensation 1,799 1,570
Restructuring provision 219 1,056
Other 1,918 991
------- -------
Total deferred income tax assets 12,219 12,243
------- -------
F-21
<PAGE>
DEFERRED INCOME TAX LIABILITIES:
Depreciation (5,268) (4,041)
Patent defense cost (1,833) (1,643)
Other (1,044) (1,112)
------- -------
Total deferred income tax liabilities (8,145) (6,796)
------- -------
DEFERRED TAX ASSET VALUATION ALLOWANCE (3,066) (3,266)
------- -------
Net deferred income tax assets $1,008 $2,181
======= =======
Realization of the deferred tax asset is dependent upon
generating sufficient taxable income in the applicable
jurisdictions and, in some instances, prior to the expiration of
the carryforwards. Although realization is not assured,
management believes it is more likely than not that all of the
deferred tax assets will be realized. The amount of the
deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income
during the carryforward periods, as applicable are reduced.
Subject to the future taxable income on certain of the Company's
subsidiaries, the Company has available tax operating loss
carryforwards as follows:
Expiration
Jurisdiction Amount Date
------------ ------ ----------
(in thousands)
United Kingdom $11,475 Indefinite
France 254 2001-2002
U.S. State 9,154 2004-2010
U.S. Federal 1,426 2001-2011
16. COMMITMENTS AND CONTINGENCIES:
Leases
The Company leases a number of its administrative operations
facilities under noncancellable operating leases expiring at
various dates through 2020. In addition, the Company leases
certain construction and automotive equipment on a multiyear,
monthly or daily basis. Rent expense under all operating leases
for 1998, 1997 and 1996 was $6,135,000, $9,960,000 and
$8,837,000, respectively.
At December 31, 1998, the future minimum lease payments required
under the noncancellable operating leases were as follows (in
thousands):
F-22<PAGE>
<PAGE>
Year Ending December 31 Minimum Lease Payments
----------------------- ----------------------
1999 $ 3,405
2000 2,419
2001 1,678
2002 1,018
2003 509
After 2003 686
-------
Total $ 9,715
=======
Minimum payments have not been reduced by minimum sublease
rentals of $364,000 due in the future under noncancelable
subleases.
Litigation
The Company is involved in certain litigation incidental to the
conduct of its business. In the Company's opinion, none of
these proceedings will have a material adverse effect on the
Company's financial position, results of operations and
liquidity. The financial statements include the estimated
amounts of liabilities that are likely to be incurred from these
and various other pending litigation and claims.
Retirement Plans
The Company maintains profit sharing/401(k) plans which cover
substantially all eligible domestic employees. Company profit
sharing contributions are discretionary. Under the terms of its
401(k) features, the plan also provides for the Company to
contribute 100% of the participating employee's contribution up
to 3% of the employee's salary, and 50% of the next 2% of the
employee's salary. Total contributions to the domestic plans
were $2,885,000, $2,496,000 and $2,447,000 for the years ended
December 31, 1998, 1997 and 1996, respectively.
In addition, certain foreign subsidiaries maintain various other
defined contribution retirement plans. Company contributions to
such plans for the years ended December 31, 1998, 1997 and 1996,
were $103,000, $132,000 and $107,000, respectively.
17. SEGMENT AND GEOGRAPHIC INFORMATION:
During the fourth quarter of 1998, the Company adopted SFAS 131,
"Disclosures about Segments of an Enterprise and Related
Information." SFAS 131 establishes standards for reporting
information about operating segments in annual financial
statements and requires selected information about operating
segments in interim financial reports issued to stockholders.
It also establishes standards for related disclosures about
products and services, and geographic areas. Operating segments
are defined as components of an enterprise about which separate
F-23<PAGE>
financial information is available and utilized by economic
decision-makers in deciding how to allocate resources and in
assessing performance.
The Company has principally three operating segments:
rehabilitation, tunnelling and corrosion and abrasion operations
(Tite Liner). These operating units represent strategic
business units that offer distinct products and services and
serve different markets.
The following disaggregated financial results have been prepared
using a management approach, which is consistent with the basis
and manner with which management internally disaggregates
financial information for the purpose of assisting in making
internal operating decisions. The Company evaluates performance
based on standalone operating income.
There were no customers which accounted for more than 10% of the
Company's revenues during the three years ended December 31,
1998.
Financial information by segment is as follows at December 31
(in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Revenues:
Rehabilitation $ 225,192 $ 228,072 $ 237,635
Tite Liner 43,430 62,353 28,649
Tunneling 32,336 30,215 23,649
--------- --------- ---------
Total revenues $ 300,958 $ 320,640 $ 289,933
========= ========= =========
Operating income:
Rehabilitation $ 33,439 $ 15,206 $ 9,608
Tite Liner 2,181 7,831 1,440
Tunneling 3,068 1,993 3,298
--------- --------- ---------
Total operating income $ 38,688 $ 25,030 $ 14,346
========= ========= =========
Total assets:
Rehabilitation $ 170,289 $ 155,118 $ 155,442
Tite Liner 25,566 34,419 26,908
Tunneling 15,914 14,189 14,869
Corporate 92,839 94,126 68,283
--------- --------- ---------
Total assets $ 304,608 $ 297,852 $ 265,502
========= ========= =========
</TABLE>
Financial information by geographic area is as follows at
December 31 (in thousands):
F-24<PAGE>
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- --------
<S> <C> <C> <C>
Revenues:
United States $ 220,090 $ 225,642 $ 221,334
Europe 32,986 31,216 32,411
South America 19,033 27,205 7,895
Canada 17,850 23,386 15,423
Asia 8,899 9,842 6,858
Other 2,100 3,349 6,012
--------- --------- ---------
Total revenues $ 300,958 $ 320,640 $ 289,933
========= ========= =========
Operating income:
United States $ 30,155 $ 17,227 $ 13,012
Europe 5,473 1,355 (1,288)
South America 736 1,909 (991)
Canada 1,294 3,724 2,066
Asia 1,395 401 386
Other (365) 414 1,161
--------- --------- ---------
Total operating income $ 38,688 $ 25,030 $ 14,346
========= ========= =========
Total assets:
United States $ 226,851 $ 228,102 $ 204,308
Europe 45,906 33,272 32,611
South America 10,518 12,093 6,263
Canada 16,868 20,179 18,541
Asia 4,048 3,541 3,073
Other 417 665 706
--------- --------- ---------
Total assets $ 304,608 $ 297,852 $ 265,502
========= ========= =========
<\TABLE.
18. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
(In thousands, except per share data)
</TABLE>
<TABLE>
<CAPTIONS>
1st 2nd 3rd 4th
<S> <C> <C> <C> <C>
Year ended December 31, 1998:
Revenues $63,760 $75,501 $81,047 $80,650
Operating income 7,017 9,254 11,784 10,633
Net income 3,046 4,409 5,566 4,866
Basic and diluted earnings
per share .11 .16 .21 .18
Year ended December 31, 1997:
Revenues $77,082 $75,316 $85,490 $82,752
Operating income 4,050 2,513 9,666 8,801(a)
Income before extraordinary item 1,306 214 4,282 3,842
Extraordinary loss (225) - - -
Net income 1,081 214 4,282 3,842(a)
Basic and diluted earnings per
share:
Income before extraordinary item .05 .01 .16 .14
Extraordinary loss (.01) - - -
Net income .04 .01 .16 .14
(a) See Note 4 for information relative to unusual charges recorded in 1997.
</TABLE>
F-25<PAGE>
<PAGE>
INDEX TO EXHIBITS(1)(2)
3.1 - Certificate of Incorporation of the
Company (Incorporated by reference to
Exhibit 3(a) to the Quarterly Report
on Form 10-Q for the quarter ended
September 30, 1997).
3.2 - By-Laws of the Company.
10.1 - Note Purchase Agreements dated as of
February 14, 1997 among the Company
and, respectively, each of the lenders
(the "Noteholders") listed therein
(Incorporated by reference to Exhibit
10.6 to the Annual Report on Form 10-K
for the year ended December 31, 1996),
together with First Amendment dated as
of August 20, 1997, Guaranty Agreement
dated as of August 20, 1997 by each of
the subsidiaries named therein to the
Noteholders, and Intercreditor Agreement
dated as of August 20, 1997 among NationsBank,
N.A. and the Noteholders (Incorporated by
reference to Exhibit 10(a) to the Quarterly
Report on Form 10-Q for the quarter ended
September 30, 1997).
10.2 - Supplement No. 1 dated as of March 31, 1998 to
Intercreditor Agreement among NationsBank,
N.A. and the Noteholders, together with
Guaranty Agreement dated as of March 31,
1998 by Insituform Southwest, Inc. to the
Noteholders.
- ----------------------
(1) The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
(2) Pursuant to Reg. Section does not include certain instruments
with respect to long-term debt of the Company and its
consolidated subsidiaries not exceeding 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. The
Company undertakes to furnish to the Securities and Exchange
Commission, upon request, a copy of all long-term debt
instruments not filed herewith.
E-1
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.3 - Loan Agreement dated as of August 20, 1997
between NationsBank, N.A. and the Company,
together with Unlimited Guaranty dated as
of August 20, 1997 by each of the subsidiaries
named therein to NationsBank, N.A. and
Contribution Agreement dated August 20, 1997
between NationsBank, N.A. and such guarantors
(Incorporated by reference to Exhibit 10(b)
to the Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997) and Amendment
No. 1 to Loan Agreement (Incorporated by
reference to Exhibit 10.5 to the Annual Report
on Form 10-K for the year ended December 31, 1997).
10.4 - Amendment No. 2 to Loan Agreement dated as of
September 15, 1998 between NationsBank, N.A. and
the Company, together with Joinder to Unlimited
Guaranty and Contribution Agreement dated as of
March 31, 1998 by Insituform Southwest, Inc. to
NationsBank, N.A.
10.5 - Agreement dated July 25, 1997 among Jerome
Kalishman, Nancy F. Kalishman, Robert W.
Affholder, Xanadu Investments L.P., The
Jerome and Nancy Kalishman Family Fund,
Paul A. Biddelman, Stephen P. Cortinovis,
Anthony W. Hooper, Silas Spengler, Sheldon
Weinig and Russell B. Wight, Jr. (Incorporated
by reference to Exhibit 99.1 to the Current
Report on Form 8-K dated July 25, 1997),
together with Amendment No. 1 thereto (Incor-
porated by reference to Exhibit 10(d) to the
Quarterly Report on Form 10-Q for the quarter
ended September 30, 1997).
- ----------------------
(1) The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
(2) Pursuant to Reg. Section does not include certain instruments
with respect to long-term debt of the Company and its
consolidated subsidiaries not exceeding 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. The
Company undertakes to furnish to the Securities and Exchange
Commission, upon request, a copy of all long-term debt
instruments not filed herewith.
E-2
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.6 - Severance Agreement dated as of June 19,
1997 between the Company and Anthony W.
Hooper (Incorporated by reference to
Exhibit 10(a) to the Quarterly Report
on Form 10-Q for the quarter ended
June 30, 1997).(3)
10.7 - Employment Letter dated July 15, 1998
between the Company and Anthony W.
Hooper (Incorporated by reference to
Exhibit 10.1 to the Quarterly Report on
Form 10-Q for the quarter ended September
30, 1998).(3)
10.8 - Employment Agreement dated October 25,
1995 between the Company and Robert
W. Affholder (Incorporated by reference
to Exhibit 2(d) to the Current Report
on Form 8-K dated October 25, 1995).(3)
10.9 - Amendment No. 1 dated as of October 25,
1998 to Employment Agreement between the
Company and Robert W. Affholder.(3)
10.10 - Letter agreement dated as of February 9,
1999 between the Company and Thomas N.
Kalishman.(3)
10.11 - Severance Agreement dated as of June 19,
1997 between the Company and William A.
Martin (Incorporated by reference to
Exhibit 10(b) to the Quarterly Report
on Form 10-Q for the period ended
June 30, 1997).(3)
- ----------------------
(1) The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
(2) Pursuant to Reg. Section does not include certain instruments
with respect to long-term debt of the Company and its
consolidated subsidiaries not exceeding 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. The
Company undertakes to furnish to the Securities and Exchange
Commission, upon request, a copy of all long-term debt
instruments not filed herewith.
(3) Management contract or compensatory plan or arrangement.
E-3
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.12 - Letter agreement dated as of October 9,
1998 between the Company and William A.
Martin, together with notice of even
date therewith from Mr. Martin to the
Company.(3)
10.13 - Severance Agreement dated as of June 19,
1997 between the Company and Robert L.
Kelley (Incorporated by reference to
Exhibit 10(c) to the Quarterly Report
on Form 10-Q for the period ended
June 30, 1997).(3)
10.14 - Severance Agreement dated as of March 14,
1999 between the Company and Robert L.
Kelley, together with letter agreements
dated, respectively, November 6, 1998
and December 18, 1998 between the Company
and Mr. Kelley and notice dated as of
October 9, 1998 from Mr. Kelley to the
Company.(3)
10.15 - Equipment Lease dated as of October 10,
1989 between A-Y-K-E Partnership and
Affholder, Inc. (Incorporated by reference
to Exhibit 10.20 to the Annual Report on
Form 10-K for the year ended December 31,
1995).
10.16 - 1992 Employee Stock Option Plan of the
Company (Incorporated by reference to
Exhibit 10.17 to the Annual Report on Form
10-K for the year ended December 31, 1997).(3)
- ----------------------
(1) The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
(2) Pursuant to Reg. Section does not include certain instruments
with respect to long-term debt of the Company and its
consolidated subsidiaries not exceeding 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. The
Company undertakes to furnish to the Securities and Exchange
Commission, upon request, a copy of all long-term debt
instruments not filed herewith.
(3) Management contract or compensatory plan or arrangement.
E-4
<PAGE>
INDEX TO EXHIBITS(1)(2) (Continued)
10.17 - 1992 Director Stock Option Plan of the
Company (Incorporated by reference to
Exhibit 10.18 to the Annual Report on Form
10-K for the year ended December 31, 1997).(3)
10.18 - Insituform Mid-America, Inc. Stock Option
Plan, as amended (Incorporated by reference
to Exhibit 4(i) to the Registration
Statement on Form S-8 No. 33-63953).(3)
10.19 - Senior Management Voluntary Deferred
Compensation Plan of the Company.(3)
10.20 - Form of Directors' Indemnification
Agreement (Incorporated by reference
to Exhibit 10.47 to the Annual Report
on Form 10-K for the year ended
December 31, 1988).(3)
21 - Subsidiaries of the Company.
23 - Consent of Arthur Andersen LLP.
24 - Power of Attorney (See "Power of
Attorney" in the Annual Report on
Form 10-K).
27 - Financial Data Schedule, which is
submitted electronically to the
Securities and Exchange Commission
for information only and not filed.
- ----------------------
(1) The Company's current, quarterly and annual reports are filed
with the Securities and Exchange Commission under file no. 0-
10786.
(2) Pursuant to Reg. Section does not include certain instruments
with respect to long-term debt of the Company and its
consolidated subsidiaries not exceeding 10% of the total assets
of the Company and its subsidiaries on a consolidated basis. The
Company undertakes to furnish to the Securities and Exchange
Commission, upon request, a copy of all long-term debt
instruments not filed herewith.
(3) Management contract or compensatory plan or arrangement.
E-5
Exhibit 3.2
BY-LAWS
OF
INSITUFORM TECHNOLOGIES, INC.
(as amended through February 16, 1999)
ARTICLE I - OFFICES
The principal offices of the corporation in the State of
Delaware shall be located in the City of Dover, County of Kent. The
Corporation may have such other offices, either within or without
the State of incorporation as the board of directors may designate
or as the business of the corporation may from time to time
require.
ARTICLE II - STOCKHOLDERS
1. ANNUAL MEETING.
The annual meeting of the stockholders shall be held at
such time and upon such date during the month of June in each year
as the Board of Directors may determine, for the purpose of
electing directors and for the transaction of such other business
as may come before the meeting. If the day fixed for the annual
meeting shall be a legal holiday such meeting shall be held on the
next succeeding business day.
2. SPECIAL MEETINGS.
Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by
either the chairman of the board, the president or by the
directors, and shall be called by the president at the request of
the holders of not less than fifty per cent of all the outstanding
shares of the Corporation entitled to vote at the meeting.
3. PLACE OF MEETING.
The directors may designate any place, either within or
without the State unless otherwise prescribed by statute, as the
place of meeting for any annual meeting or for any special meeting
called by the directors. A waiver of notice signed by all
stockholders entitled to vote at a meeting may designate any place,
either within or without the state unless otherwise prescribed by
statute, as the place for holding such meeting. If no designation
is made, or if a special meeting be otherwise called, the place of
meeting shall be the principal office of the corporation.
<PAGE>
<PAGE>
4. NOTICE OF MEETING.
Written or printed notice stating the place, day and hour
of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not
less than ten nor more than fifty days before the date of the
meeting, either personally or by mail, by or at the direction of
either the chairman of the board, the president, the secretary, or
the officer or persons calling the meeting, to each stockholder of
record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States
mail, addressed to the stockholder at his address as it appears on
the stock transfer books of the corporation, with postage thereon
pre-paid.
5. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.
For the purpose of determining stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or stockholders entitled to receive payment of
any dividend, or in order to make a determination of stockholders
for any other proper purpose, the directors may fix in advance a
date as the record date for any such determination of stockholders,
such date in any case to be not more than sixty days and, in case
of a meeting of stockholders, not less than ten days prior to the
date on which the particular action requiring such determination of
stockholders is to be taken. If the stock transfer books are not
closed and no record date is fixed for the determination of
stockholders entitled to notice of or to vote at a meeting of
stockholders, or stockholders entitled to receive payment of a
dividend, the date on which notice of the meeting is mailed or the
date on which the resolution of the directors declaring such
dividend is adopted, as the case may be, shall be the record date
for such determination of stockholders. When a determination of
stockholders entitled to vote at any meeting of stockholders has
been made as provided in this section, such determination shall
apply to any adjournment thereof.
6. VOTING LISTS.
The officer or agent having charge of the stock transfer
books for shares of the corporation shall make, at least ten days
before each meeting of stockholders, a complete list of the
stockholders entitled to vote at such meeting, or any adjournment
thereof, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten
days prior to such meeting, shall be kept on file at the principal
office of the corporation and shall be subject to inspection by any
stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting. The original stock transfer
book shall be prima facie evidence as to who are the stockholders<PAGE>
<PAGE>
entitled to examine such list or transfer books or to vote at the
meeting of stockholders.
7. QUORUM.
At any meeting of stockholders a majority of the
outstanding shares of the corporation entitled to vote, represented
in person or by proxy, shall constitute a quorum at a meeting of
stockholders. If less than said number of the outstanding shares
are represented at a meeting, a majority of the shares so
represented may adjourn the meeting from time to time without
further notice. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which
might have been transacted at the meeting as originally notified.
The stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the
withdrawal of enough stockholders to leave less than a quorum.
8. PROXIES.
At all meetings of stockholders, a stockholder may vote
by proxy executed in writing by the stockholder or by his duly
authorized attorney-in-fact. Such proxy shall be filed with the
secretary of the corporation before or at the time of the meeting.
9. VOTING.
Each stockholder entitled to vote in accordance with the
terms and provisions of the certificate of incorporation and these
by-laws shall be entitled to one vote, in person or by proxy, for
each share of stock entitled to vote held by such stockholders.
Upon the demand of any stockholder, the vote for directors and upon
any question before the meeting shall be by ballot. All elections
for directors shall be decided by plurality vote; all other
questions shall be decided by majority vote except as otherwise
provided by the Certificate of Incorporation or the laws of this
State.
10. ORDER OF BUSINESS.
The order of business at all meetings of the
stockholders, shall be as follows:
1. Roll call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officer.
5. Reports of Committees.
<PAGE>
<PAGE>
6. Election of Directors.
7. Unfinished Business.
8. New Business.
11. BUSINESS AT MEETINGS.
Subsequent to the 1999 annual meeting of stockholders, no
business shall be transacted at an annual meeting of stockholders
other than business that is (i) specified in the notice of meeting
(or any supplement thereto) given by or at the direction of the
Board of Directors (or any duly authorized committee thereof), (ii)
otherwise properly brought before the annual meeting by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), or (iii) otherwise properly brought before the
annual meeting by a stockholder who (x) is a stockholder of record
on the record date for the determination of stockholders entitled
to vote at such annual meeting and on the date of the giving of the
notice provided for in this Section 11 and (y) complies with the
procedures set forth in this Section 11 and any other applicable
requirements. No business shall be conducted at a special meeting
of stockholders other than business that is specified in the
corporation's notice of meeting (or any supplement thereto). In
addition, subsequent to the 1999 annual meeting of stockholders
only persons who are nominated in accordance with the procedures
set forth in this Section 11 (and any other applicable
requirements) shall be eligible for election as directors of the
corporation. If business is not properly brought before any meeting
of stockholders in accordance with the procedures set forth in this
Section 11, or if a nomination at any meeting was not made in
accordance with the requirements of this Section 11, the chairman
shall declare to the meeting that the business was not properly
brought before the meeting, and such business shall not be
transacted, or the nomination was defective, and such defective
nomination shall be disregarded.
Subsequent to the 1999 annual meeting of stockholders,
nominations of persons for election to the Board of Directors may
be made at any annual meeting of stockholders, or at any special
meeting of stockholders at which directors are to be elected
pursuant to the Corporation's notice of meeting: (i) by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), subject to the requirements of these By-laws,
or (ii) by any stockholder who (x) is a stockholder of record on
the record date for the determination of stockholders entitled to
vote at such annual meeting and on the date of the giving of the
notice provided for in this Section 11 and (y) has complied with
the procedures set forth in this Section 11.
For a stockholder to be entitled to properly bring business
before an annual meeting of stockholders subsequent to the 1999
annual meeting of stockholders, a proper Stockholder's Notice (as<PAGE>
<PAGE>
defined below) must have been received by the secretary of the
corporation at the principal executive offices of the corporation,
and for any nomination of a person or persons for election to the
Board of Directors by a stockholder (a "Stockholder Nomination") to
be made at any annual meeting of stockholders subsequent to the
1999 annual meeting of stockholders, written notice thereof meeting
the requirements set forth below must have been received by the
secretary of the corporation at the principal executive offices of
the corporation, in each case not less than 90 days nor more than
120 days prior to the first anniversary of the date of the
preceding year's annual meeting of stockholders; provided, however,
that in the event that the date of the annual meeting is advanced
or delayed by more than 30 days compared to the preceding year's
annual meeting, notice by the stockholder to be timely must be so
received not later than the close of business on the later of (i)
the ninetieth (90th) day prior to such annual meeting or (ii) the
tenth (10th) day following the day on which public disclosure (as
defined below) of the date of the annual meeting is first made.
For a Stockholder Nomination to be made at any special meeting
of stockholders as aforesaid, written notice thereof meeting the
requirements set forth below must have been received by the
secretary of the corporation at the principal executive offices of
the corporation, in each case not later than the close of business
on the later of (i) the ninetieth (90th) day prior to such special
meeting or (ii) the tenth (10th) day following the day on which
public disclosure of the date of the special meeting is made.
A Stockholder's Notice shall mean a written notice to the
secretary of the corporation which sets forth as to each matter
such stockholder proposes to bring before the annual meeting (i) a
brief description of the business desired to be brought before the
annual meeting (including the form of the proposal) and the reasons
for conducting such business at the annual meeting, (ii) the name
and record address of such stockholder, (iii) the class or series
and number of shares of capital stock of the corporation that are
owned beneficially or of record by such stockholder, indicating the
name and address of any beneficial owner of such shares, (iv) a
description of all arrangements or understandings between such
stockholder (and any person acting on behalf of the stockholder)
and any other person or persons (including their names) in
connection with the proposal of such business by such stockholder
and any material interest of such stockholder in such business, and
(v) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business
before the meeting.
Any notice of a Stockholder Nomination must set forth (a) as
to each person whom the stockholder proposes to nominate for
election as a director (i) the name, age, business address and
residence address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and number of
shares of capital stock of the corporation that are owned<PAGE>
<PAGE>
beneficially or of record by the person and (iv) any other
information relating to the person that would be required to be
disclosed in a proxy statement or other filings required to be made
in connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Securities Exchange Act of
1934, as then in effect (the "Exchange Act"), and the rules and
regulations promulgated thereunder; and (b) as to the stockholder
giving the notice (i) the name and record address of such
stockholder, (ii) the class or series and number of shares of
capital stock of the corporation that are owned beneficially or of
record by such stockholder, (iii) a description of all arrangements
or understandings between such stockholder and each proposed
nominee and any other person or persons (including their names)
pursuant to which the nomination(s) are to be made by such
stockholder, (iv) a representation that such stockholder intends to
appear in person or by proxy at the meeting to nominate the persons
named in its notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a proxy
statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to
Section 14 of the Exchange Act and the rules and regulations
promulgated thereunder. Such notice must be accompanied by a
written consent of each proposed nominee to being named as a
nominee and to serve as a director if elected.
For purposes of this Section 11, "public disclosure" shall
mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in
a document publicly filed by the corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
ARTICLE III - BOARD OF DIRECTORS
1. GENERAL POWERS.
The business and affairs of the corporation shall be
managed by its board of directors. The directors shall in all cases
act as a board, and they may adopt such rules and regulations for
the conduct of their meetings and the management of the
corporation, as they may deem proper, not inconsistent with these
by-laws and the laws of this State.
2. NUMBER OF DIRECTORS, TENURE AND QUALIFICATIONS.
The Board of Directors shall consist of eight (8)
directors, provided that the size of the Board of Directors shall
increase automatically, without any further amendment to this
Section 2, to nine (9) directors upon the election or appointment
of the Additional Nominee (as defined in that certain Agreement,
dated July 25, 1997, among the corporation, Jerome Kalishman, Nancy
F. Kalishman, The Jerome and Nancy Kalishman Family Fund, Robert W.
Affholder, Xanadu Investments, L.P., Paul A. Biddelman, Stephen P.<PAGE>
<PAGE>
Cortinovis, Anthony W. Hooper, Silas Spengler, Sheldon Weinig and
Russell B. Wight, Jr., as it may be amended from time to time (the
"Agreement")) contemplated by, and selected in accordance with, the
provisions of the Agreement. Such directors (except as hereinafter
provided for the filling of vacancies) shall be elected in
accordance with the Corporation's Certificate of Incorporation by
the stockholders by a plurality vote of the number of shares voting
at the meeting at which such election shall take place.
3. REGULAR MEETINGS.
A regular meeting of the directors, shall be held without
other notice than this by-law immediately after, and at the same
place as, the annual meeting of stockholders. The directors may
provide, by resolution, the time and place for the holding of
additional regular meetings without other notice than such
resolution.
4. SPECIAL MEETINGS.
Special meetings of the directors may be called by or at
the request of the president, the Chairman of the Board, or any two
directors. The person or persons authorized to call special
meetings of the directors may fix the place either within or
without the state or country, for holding any special meeting of
the directors called by them.
5. NOTICE.
Notice of any special meeting shall be given at least 24
hours previously thereto by written notice delivered personally, or
by telegram or telecopy or mailed to each director at his residence
or business address. If mailed, such notice shall be deemed to be
delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, such
notice shall be deemed to be delivered when the telegram is
delivered to the telegraph company. The attendance of a director at
a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose
of objecting to the transaction of any business because the meeting
is not lawfully called or convened.
6. QUORUM.
At any meeting of the directors a majority shall
constitute a quorum for the transaction of business, but if less
than said number is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without
further notice.
<PAGE>
<PAGE>
7. MANNER OF ACTING.
The act of the majority of the directors present at a
meeting at which a quorum is present shall be the act of the
directors.
8. NEWLY-CREATED DIRECTORSHIPS AND VACANCIES.*
Any vacancy on the board of directors and any newly-
created directorship resulting from an increase in the number of
directors may be filled by the directors in accordance with the
Corporation's Certificate of Incorporation and Section 14 of this
Article III.
9. REMOVAL OF DIRECTORS.
Any or all of the directors may be removed only for cause
by vote of the stockholders.
10. RESIGNATION.
A director may resign at any time by giving written
notice to the board, the president or the secretary of the
corporation. Unless otherwise specified in the notice, the
resignation shall take effect upon receipt thereof by the board or
such officer, and the acceptance of the resignation shall not be
necessary to make it effective.
11. COMPENSATION.
The Board of Directors shall have the authority to fix
the compensation of directors. Nothing herein shall preclude any
director from serving the corporation in any other capacity and
receiving compensation therefor. Members of special or standing
committees may be allowed compensation for attending committee
meetings.
- -------------------
* as amended by the Board of Directors on October 26, 1998
subject to the approval and authorization by the stockholders
of the Corporation; prior to such action, Section 8 read as
follows:
"8. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Any vacancy on the Board of Directors and any
newly created directorship resulting from an increase in
the number of directors may be filled by the directors in
accordance with the Corporation's Certificate of
Incorporation."
<PAGE>
<PAGE>
12. PRESUMPTION OF ASSENT.
A director of the corporation who is present at a meeting
of the directors at which action on any corporate matter is taken
shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he
shall file his written dissent to such action with the person
acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered mail to the
secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action. 13. EXECUTIVE AND OTHER
COMMITTEES.
The board, by resolution, may designate from among its
members an executive committee and other committees, each
consisting of one or more directors. Each such committee shall
serve at the pleasure of the board.
14. NOMINATING COMMITTEE*
Effective immediately subsequent to the 1999 annual
meeting of stockholders, the board shall designate a nominating
committee consisting of three directors who shall serve at the
pleasure of the board, the functions of which shall include
establishing criteria for the selection of the nominees for
election as directors, reviewing the qualifications of and
maintaining information concerning potential nominees, making
appropriate recommendations to the Board with respect to nominees
for election as directors at the annual meeting of stockholders,
reviewing on a long-term basis the size and composition of the
board, and, as vacancies occur on the board between annual
meetings, establishing procedures for stockholders to submit and
said Committee to review proposed nominations. The board shall not,
subsequent to the 1999 annual meeting of the stockholders, nominate
any person not then serving as a director for election as a
director, or fill any vacancy on the board with any person, unless
such person is either (i) recommended to the board by said
Committee or (ii) approved by the unanimous vote of the members of
the board of directors. The presence of all members of said
Committee shall be necessary to constitute a quorum and to transact
business, and the act of the majority of the members at a meeting
at which a quorum is present shall be the act of said Committee.
Meetings of said Committee may be called by any member thereof,
upon written or oral notice of such meeting given to each member at
lest 24 hours prior thereto. The Chairman of the Board shall
preside at all meetings of said Committee.
- ---------------------
* Section 14 was adopted by the Board of Directors on October
26, 1998, as amended February 16, 1999, subject to the
approval and authorization by the stockholders of the
Corporation<PAGE>
<PAGE>
15. NOTICE AND APPROVAL OF CERTAIN ACTIONS
Notwithstanding any other provision of these By-laws (and
except for the implementation of Sections 2(a), (b), (c) and (e)
and Section 6 of the Agreement): (a) in the event that any director
proposes to bring before any regular or special meeting of the
Board of Directors any proposal relating to any amendment of the
Corporation's Certificate of Incorporation or these By-laws or the
Agreement (as defined in Article III, Section 2), or any change in
the structure, composition (other than such director's resignation)
or governance of the Board of Directors (any such action being
referred to herein as a "Special Action"), such director must
provide written notice thereof (including a reasonably detailed
description of such proposal) to each member of the Board of
Directors at least seven days prior to the date of the directors'
meeting at which the Special Action is to be proposed; and (b) the
taking of any Special Action by the Board of Directors must be
approved by a majority of all directors then serving; provided,
however, that no Special Action which would have any effect prior
to the 1999 annual meeting of the stockholders may be taken if such
Special Action would conflict with, have the effect of modifying or
otherwise frustrating any provision of the Agreement, including,
without limitation, any amendment to Article SIXTH of the
Corporation's Certificate of Incorporation or Section 2 of this
Article III, as such provisions will be in effect pursuant to the
Agreement following the 1997 annual meeting of the stockholders.
ARTICLE IV - OFFICERS
1. NUMBER.
The officers of the corporation shall be a chairman of
the board, a vice chairman of the board,a president, one or more
senior vice presidents, one or more vice presidents, a secretary
and a treasurer, each of whom shall be elected by the directors.
Such other officers and assistant officers as may be deemed
necessary may be elected or appointed by the directors. In
addition, the President may from time to time appoint such officers
of operating divisions, and such contracting and attesting
officers, of the corporation as he may deem proper, who shall have
such authority, subject to the control of the directors, as the
President may from time to time prescribe.
2. ELECTION AND TERM OF OFFICE.
The officers of the corporation to be elected by the
directors shall be elected annually at the first meeting of the
directors held after each annual meeting of the stockholders. Each
officer elected by the directors shall hold office until his
successor shall have been duly elected and shall have qualified or,
if earlier, until his death or until he shall resign or shall have
been removed in the manner hereinafter provided. Each officer of<PAGE>
<PAGE>
the corporation appointed by the President shall hold office for
such period as the President may from time to time prescribe or, if
earlier, until his death or until he shall resign or shall have
been removed in the manner hereinafter provided.
3. REMOVAL.
Any officer elected or appointed by the directors, or any
officer appointed by the President, may be removed by the directors
whenever in their judgment the best interests of the corporation
would be served thereby, but such removal shall be without
prejudice to the contract, if any, of the person so removed. Any
officer appointed by the President may be removed by the President
whenever in his judgment the best interests of the corporation
would be served thereby, but such removal shall be without
prejudice to the contract, if any, of the person so removed.
4. VACANCIES.
A vacancy in any office because of death, resignation,
removal, disqualification or otherwise of an officer elected or
appointed by the directors may be filled by the directors for the
unexpired portion of the term. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise of any
officer appointed by the President may be filled by the President
for the unexpired portion of the term.
4A. CHAIRMAN OF THE BOARD.
The Chairman of the Board shall preside, when present, at
all meetings of the Board of Directors and at all meetings of the
stockholders and will perform such other duties as may be
prescribed from time to time by the Board or these By-laws.
4B. VICE CHAIRMAN OF THE BOARD.
In the absence of the Chairman of the Board or in the
event of his death, inability or refusal to act, the Vice Chairman
of the Board shall perform the duties of the Chairman of the Board
and, when so acting, shall have all the powers of and be subject to
all the restrictions on the Chairman of the Board. The Vice
Chairman of the Board shall perform such other duties as may be
prescribed from time to time by the Board or these by-laws.
Notwithstanding any other provisions of these By-laws, the Vice
Chairman of the Board, acting in any capacity, shall not have the
power to call any special meeting of the Stockholders.
5. PRESIDENT.
The President shall be the chief executive officer of the
corporation and, subject to the control of the Board of Directors,
shall have general and active management of the business of the
corporation, and shall see that all orders and resolutions of the<PAGE>
<PAGE>
Board and stockholders are carried into effect. He shall have the
general authority to execute bonds, deeds and contracts, in the
name of the corporation and affix the corporate seal thereto; to
sign stock certificates; to cause the employment or appointment of
such employees and agents of the corporation as the proper conduct
of operations may require, and to fix their compensation, subject
to the provisions of these By-laws; to remove or suspend any
employee or agent who shall have been employed or appointed under
his authority or under authority of an officer subordinate to him;
and, in general, to exercise all the powers and authority usually
appertaining to the chief executive officer of a corporation.
6. VICE-PRESIDENT.
In the absence of the president or in the event of his
death, inability or refusal to act, one of the vice-presidents
designated by the directors shall perform the duties of the
president, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the president. The
vice-president shall perform such other duties as from time to time
may be assigned to him by the president or by the directors.
7. SECRETARY.
The secretary shall keep the minutes of the stockholders'
and of the directors' meetings in one or more books provided for
that purpose, see that all notices are duly given in accordance
with the provisions of these by-laws or, as required, be custodian
of the corporate records and of the seal of the corporation and
keep a register of the post office address of each stockholder
which shall be furnished to the secretary by such stockholder, have
general charge of the stock transfer books of the corporation and
in general perform all duties incident to the office of secretary
and such other duties as from time to time may be assigned to him
by the president or by the directors.
8. TREASURER.
If required by the directors, the treasurer shall give a
bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the directors shall determine. He shall
have charge and custody of and be responsible for all funds and
securities of the corporation; receive and give receipts for monies
due and payable to the corporation from any source, whatsoever, and
deposit all such monies in the name of corporation in such banks,
trust companies or other depositories as shall be selected in
accordance with these by-laws and in general perform all of the
duties incident to the office of treasurer and such other duties as
from time to time may be assigned to him by the president or by the
directors.
<PAGE>
<PAGE>
9. SALARIES.
The salaries of those officers elected or appointed by
the directors shall be fixed from time to time by the directors and
no officer shall be prevented from receiving such salary by reason
of the fact that he is also a director of the corporation.
ARTICLE V - CONTRACTS, LOANS, CHECKS AND DEPOSITS
1. CONTRACTS.
The directors may authorize any officer or officers,
agent or agents, to enter into any contract or execute and deliver
any instrument in the name of and on behalf of the corporation, and
such authority may be general or confined to specific instances.
The President may authorize any contracting officer appointed by
him pursuant to Section 1 of Article IV to enter into any pipeline
rehabilitation contract in the ordinary course of business of the
corporation, or execute and deliver any instrument in connection
therewith, in the name and on behalf of the corporation.
2. LOANS.
No loans shall be contracted on behalf of the corporation
and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the directors. Such authority may be
general or confined to specific instances.
3. CHECKS, DRAFTS, ETC.
All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name
of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from
time to time be determined by resolution of the directors.
4. DEPOSITS.
All funds of the corporation not otherwise employed shall
be deposited from time to time to the credit of the corporation in
such banks, trust companies or other depositaries as the directors
may select.
ARTICLE VI - CERTIFICATES FOR SHARES AND THEIR TRANSFER
1. CERTIFICATES FOR SHARES.
Certificates representing shares of the corporation shall
be in such form as shall be determined by the directors. Such
certificates shall be signed by any of the chairman of the board,
or the president, as authorized by the directors and the secretary,
or such other officers authorized by law and by the directors. All
certificates for shares shall be consecutively numbered or<PAGE>
<PAGE>
otherwise identified. The name and address of the stockholders, the
number of shares and date of issue, shall be entered on the stock
transfer books of the corporation. All certificates surrendered to
the corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new
one may be issued therefor upon such terms and indemnity to the
corporation as the directors may prescribe.
2. TRANSFERS OF SHARES.
(a) Upon surrender to the corporation or the transfer
agent of the corporation of a certificate for shares duly endorsed
or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, and cancel
the old certificate; every such transfer shall be entered on the
transfer book of the corporation which shall be kept at its
principal office.
(b) The corporation shall be entitled to treat the holder
of record of any share as the holder in fact thereof, and,
accordingly, shall not be bound to recognized any equitable or
other claim to or interest in such share on the part of any other
person whether or not it shall have express or other notice
thereof, except as expressly provided by the laws of this state.
ARTICLE VII - FISCAL YEAR
The fiscal year of the corporation shall begin on the first
day of January in each year.
ARTICLE VIII - DIVIDENDS
The directors may from time to time declare, and the
corporation may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law.
ARTICLE IX - SEAL
The directors shall provide a corporate seal which shall be
circular in form and shall have inscribed thereon the name of the
corporation, the state of incorporation, year of incorporation and
the words, "Corporate Seal".
ARTICLE X - WAIVER OF NOTICE
Unless otherwise provided by law, whenever any notice is
required to be given to any stockholder or director of the
corporation under the provisions of these by-laws or under the
provisions of the articles of incorporation, a waiver thereof in
writing, signed by the person or persons entitled to such notice,<PAGE>
<PAGE>
whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI - AMENDMENTS*
Except as otherwise provided by law, the Board of Directors
may adopt, alter, amend or repeal the by-laws of the Corporation,
provided, however, that the stockholders, representing a majority
of all the shares issued and outstanding at any annual stock
holders' meeting or at any special stockholders' meeting, may
repeal, alter or amend by-laws adopted by the Board or Directors
and may adopt new by-laws; provided, further, however, that the
size of the Board of Directors, as set forth in Section 2 of
Article III, may only be amended by a vote of at least 80% of the
members of the Board of Directors or by a vote of the stockholders,
representing a majority of all of the shares issued and
outstanding, at any annual stockholders' meeting or at any special
stockholders' meeting provided, further, however, that the
provisions of Sections 8 and 14 of Article III may only be amended
by a unanimous vote of the members of the board of directors or by
a vote of the stockholders, representing a majority of all of the
shares issued and outstanding, at any annual stockholders' meeting
or at any special stockholders' meeting.
- -----------------------
* the final proviso of Article XI was added by the Board of
Directors on October 26, 1998 subject to the approval and
authorization by the stockholders of the Corporation
Exhibit 10.2
SUPPLEMENT NO. 1 TO INTERCREDITOR AGREEMENT
This Supplement No. 1 dated as of this 31st day of March,
1998 to the Intercreditor Agreement dated as of August 20, 1997
(the "Intercreditor Agreement") is made among the Lender (as
hereinafter defined), and each of the Noteholders (as hereinafter
defined); the Noteholders, the Lender and each of the additional
Persons, if any, that become Creditors under the Intercreditor
Agreement are individually referred to as a "Creditor" and are
collectively referred to herein as the "Creditors."
RECITALS:
A. Under and pursuant to the separate and several Note
Purchase Agreements, each dated as of February 14, 1997 (as such
agreements may have been or may be modified or amended from time
to time, collectively, the "Note Purchase Agreements"), between
Insituform Technologies, Inc., a Delaware corporation (the
"Company"), and each of the Purchasers named on Schedule A
attached thereto respectively, the Company has heretofore issued
and sold its 7.88% Senior Notes, Series A, due February 14, 2007,
in the aggregate principal amount of $110,000,000 (the holders of
the Notes currently outstanding are referred to herein
individually as a "Noteholder" and collectively as the
"Noteholders").
B. Under and pursuant to that certain Loan Agreement dated
as of August 20, 1997 (as such agreement may have been or may be
modified, amended, renewed or replaced, including any increase in
the amount thereof, the "Loan Agreement"), between the Company and
NationsBank, N.A. (the "Lender"), the Lender has made available to
the Company certain revolving credit facilities in a current
aggregate principal amount up to $20,000,000 (all obligations in
respect of said credit facilities being hereinafter collectively
referred to as the "Loans").
C. The Lender and the Noteholders have heretofore entered
into the Intercreditor Agreement.
D. As required by the Loan Agreement, Insituform Southwest,
Inc., a Delaware corporation (the "Additional Subsidiary
Guarantor") and successor-in-interest to Insituform Southwest, has
concurrently herewith executed and delivered a Joinder to
Unlimited Guaranty and Contribution Agreement (as such agreement
may be modified or amended from time to time, the "Additional
Lender Guaranty"), dated as of March 31, 1998, pursuant to which
the Additional Subsidiary Guarantor has irrevocably, absolutely
and unconditionally guaranteed to the Lender the payment and
performance of all obligations of the Company under the Loan
Agreement.
<PAGE>
<PAGE>
E. As required by the Note Purchase Agreements, the
Additional Subsidiary Guarantor has concurrently herewith executed
and delivered a Guaranty Agreement (as such agreement may be
modified or amended, the "Additional Noteholder Guaranty"), dated
as of March 31, 1998, pursuant to which the Additional Subsidiary
Guarantor has irrevocably, absolutely and unconditionally
guaranteed to the Noteholders the payment of the principal of,
premium, if any, and interest on the Notes and the payment and
performance of all other obligations of the Company under the Note
Purchase Agreements.
F. Pursuant to the requirements of the Loan Agreement and
the Note Purchase Agreements, the parties have agreed to enter
into this Supplement No. 1, so as to require of the Creditors the
sharing of any recovery under the Additional Lender Guaranty and
the Additional Noteholder Guaranty in accordance with the terms of
the Intercreditor Agreement.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the sufficiency and receipt of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Capitalized terms not otherwise defined herein shall
have the meanings assigned to such terms in the Intercreditor
Agreement.
2. Effective as of the date hereof, for purposes of the
Intercreditor Agreement: (i) the term "Subsidiary Guarantors"
shall include the Additional Subsidiary Guarantor; (ii) the term
"Lender Guaranty" shall include the Additional Lender Guaranty;
and (iii) the term "Noteholder Guaranty" shall include the
Additional Noteholder Guaranty.
3. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one
Agreement, and any of the parties hereto may execute this
Agreement by signing any such counterpart.
4. Except as modified by this Supplement No. 1, all terms,
conditions and covenants contained in the Intercreditor Agreement
are hereby ratified and shall remain in full force and effect.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be executed as of the date first above written.
NATIONSBANK, N.A. THE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY
By s/Emil A. Krueger By s/Richard A. Strait
------------------------ ----------------------------
Its Vice President Its Authorized Representative
THE SECURITY MUTUAL LIFE IN- PRINCIPAL MUTUAL LIFE INSURANCE
SURANCE COMPANY OF LINCOLN, COMPANY
NEBRASKA
By s/William R. Schmeeckle By s/Shabnam P. Miglani
------------------------- ----------------------------
Its 2nd Vice President Its Counsel
By s/Kent T. Kelsey
----------------------------
Its Counsel
RELIASTAR LIFE INSURANCE COMPANY ALLSTATE LIFE INSURANCE COMPANY
By s/James V. Wittich By s/Charles D. Mires
-------------------------- ----------------------------
Its Authorized Representative
NORTHERN LIFE INSURANCE COMPANY By s/Ronald A. Mendel
----------------------------
Authorized Signatories
By s/James V. Wittich THE LIBERTY CORPORATION (as
--------------------------- transferee of PIERCE NATIONAL
Its Assistant Treasurer LIFE INSURANCE COMPANY)
RELIASTAR UNITED SERVICES LIFE
INSURANCE COMPANY
By s/James V. Wittich By s/Douglas W. Kroske
--------------------------- ----------------------------
Its Assistant Treasurer Its Authorized Officer
RELIASTAR BANKERS SECURITY LIFE ALEXANDER HAMILTON LIFE
INSURANCE COMPANY INSURANCE COMPANY OF AMERICA
By s/James V. Wittich By s/John C. Ingram
--------------------------- ----------------------------
Its Vice President, Investments Its Senior Vice President
<PAGE>
<PAGE>
JEFFERSON-PILOT LIFE INSURANCE
COMPANY
By s/Robert E. Whalen
---------------------------
Its Vice President
CONNECTICUT GENERAL LIFE IN- THE LINCOLN NATIONAL LIFE IN-
SURANCE COMPANY, on behalf SURANCE COMPANY (as transferee
of one or more separate of CONNECTICUT GENERAL LIFE
accounts INSURANCE COMPANY)
By: CIGNA Investments, Inc.
By s/Daniel E. Feder By s/J.Steven Staggs
-------------------------- ----------------------------
Its Vice President Its Vice President
CONNECTICUT GENERAL LIFE CIGNA PROPERTY AND CASUALTY
INSURANCE COMPANY INSURANCE COMPANY
By: CIGNA Investments, Inc. By: CIGNA Investments, Inc.
By s/Daniel E. Feder By s/Daniel E. Feder
-------------------------- ----------------------------
Its Vice President Its Vice President
LIFE INSURANCE COMPANY OF
NORTH AMERICA
By: CIGNA Investments, Inc.
By s/Daniel E. Feder
--------------------------
Its Vice President
<PAGE>
<PAGE>
The undersigned hereby acknowledge and agree to the foregoing
Supplement No. 1.
INSITUFORM TECHNOLOGIES, INC. AFFHOLDER, INC.
INA ACQUISITION CORP.
INSITUFORM CENTRAL, INC.
By s/William A. Martin INSITUFORM GULF SOUTH, INC.
---------------------------- INSITUFORM MID-AMERICA, INC.
Its Senior Vice President - INSITUFORM MIDWEST, INC.
Chief Financial Officer INSITUFORM MISSOURI, INC.
INSITUFORM NORTH, INC.
INSITUFORM OF NEW ENGLAND, INC. INSITUFORM NORTH AMERICA CORP.
INSITUFORM PLAINS, INC.
INSITUFORM ROCKIES, INC.
By s/William A. Martin INSITUFORM SOUTHEAST, INC.
----------------------------- INSITUFORM SOUTHWEST, INC.
Its Treasurer and Clerk INSITUFORM TEXARK, INC.
INSITUFORM WEST, INC.
NUPIPE, INC.
UNITED PIPELINE SYSTEMS USA, INC.
By s/William A. Martin
----------------------------
Vice President of each of the
foregoing entities
<PAGE>
<PAGE>
=================================================================
GUARANTY AGREEMENT
Dated as of March 31, 1998
By
Insituform Southwest, Inc.
Re: $110,000,000 7.88% Senior Notes, Series A,
Due February 14, 2007,
of
INSITUFORM TECHNOLOGIES, INC.
=================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
(Not a part of the Agreement)
SECTION HEADING PAGE
Parties. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . 1
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT. . . . . 2
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE . . . . . 2
SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY . 3
SECTION 5. REPRESENTATIONS AND WARRANTIES OF
THE GUARANTORS. . . . . . . . . . . . . . . . 8
SECTION 6. GUARANTOR COVENANTS . . . . . . . . . . . . . 9
Section 6.1. Compliance with Law. . . . . . . . . . . 9
Section 6.2. Insurance. . . . . . . . . . . . . . . . 10
Section 6.3. Maintenance of Properties. . . . . . . . 10
Section 6.4. Payment of Taxes and Claims. . . . . . . 10
Section 6.5. Corporate Existence, etc.. . . . . . . . 11
SECTION 7. SUBMISSION TO JURISDICTION. . . . . . . . . . 11
SECTION 8. JUDGMENTS . . . . . . . . . . . . . . . . . . 11
SECTION 9. NOTICES . . . . . . . . . . . . . . . . . . . 12
SECTION 10. AMENDMENTS AND MODIFICATIONS;
SOLICITATION OF NOTEHOLDERS . . . . . . . . . 12
SECTION 11. PROCEEDS. . . . . . . . . . . . . . . . . . . 13
SECTION 12. MISCELLANEOUS . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
<PAGE>
GUARANTY AGREEMENT
Re: $110,000,000 7.88% Senior Notes, Series A,
Due February 14, 2007, of
INSITUFORM TECHNOLOGIES, INC.
This GUARANTY AGREEMENT (the or this "Guaranty") is dated as
of March 31, 1998 and given by Insituform Southwest, Inc., a
corporation organized under the laws of the State of Delaware (the
"Guarantor").
RECITALS:
A. The Guarantor is a Subsidiary of Insituform
Technologies, Inc., a Delaware corporation (the "Company").
B. The Company has entered into separate and several Note
Purchase Agreements each dated as of February 14, 1997
(collectively, the "Note Purchase Agreements"), between the
Company and each of the Purchasers named on Schedule A attached to
the Note Purchase Agreements (together with their successors and
assigns, the "Noteholders"), providing for, among other things,
the issue and sale by the Company to the Noteholders of
$110,000,000 aggregate principal amount of its 7.88% Senior Notes,
Series A, due February 14, 2007 (the "Notes").
C. Certain Subsidiaries of the Company (the "Other
Guarantors") entered into a Guaranty Agreement dated as of August
20, 1997 in which they irrevocably, absolutely and unconditionally
guaranteed to the Noteholders the payment of the principal of,
premium, if any, and interest on the Notes and the payment and
performance of all other obligations of the Company under the Note
Purchase Agreements.
D. Pursuant to Section 9.8 of the Note Purchase Agreements,
upon which the Noteholders relied at the time of the original
issuance of the Notes, and upon which each subsequent holder of
the Notes relied at the time of its subsequent acquisition of the
Notes, the Company is required to cause the Guarantor to enter
into this Guaranty.
E. The Guarantor is part of an affiliated group of
corporations with the Company and it will receive substantial
direct and indirect benefit by reason of the original issue and
sale by the Company of the Notes.
NOW, THEREFORE, in consideration of the premises and in
further consideration of the sum of Ten Dollars ($10.00) paid to
the Guarantor by the Noteholders, the receipt whereof is hereby
acknowledged, the Guarantor does hereby covenant and agree as
follows:
<PAGE>
<PAGE>
SECTION 1. DEFINITIONS.
Unless the context otherwise requires, capitalized terms used
herein shall have the meanings assigned thereto in the Note
Purchase Agreements and such definitions shall be equally
applicable to both the singular and plural forms of any of the
terms so defined.
SECTION 2. GUARANTY OF NOTES AND NOTE AGREEMENT.
(a) Subject to Section 2(b) below, the Guarantor does hereby
irrevocably, absolutely and unconditionally guaranty unto the
Noteholders (i) the full and prompt payment of the principal of,
premium, if any, and interest on the Notes from time to time
outstanding, as and when such payments shall become due and
payable, whether by lapse of time, upon redemption or prepayment,
by extension or by acceleration or declaration or otherwise
(including (to the extent legally enforceable) interest due on
overdue payments of principal, premium, if any, or interest at the
rate set forth in the Notes) in coin or currency of the United
States of America which at the time of payment or demand therefor
shall be legal tender for the payment of public and private debts,
(ii) the full and prompt performance and observance by the Company
of each and all of the obligations, covenants and agreements
required to be performed or owned by the Company under the terms
of the Notes and the Note Purchase Agreements, and (iii) the full
and prompt payment, upon demand by any Noteholder of all costs and
expenses, legal or otherwise (including reasonable attorneys'
fees), if any, as shall have been expended or incurred in the
protection or enforcement of any right or privilege under the
Notes or the Note Purchase Agreements or in the protection or
enforcement of any rights, privileges or liabilities under this
Guaranty or in any consultation or action in connection therewith
or herewith and in each and every case irrespective of the
validity, regularity, or enforcement of any of the Notes or the
Note Purchase Agreements or any of the terms thereof or of any
other like circumstance or circumstances.
(b) The obligations of the Guarantor hereunder shall be
limited to the lesser of (i) the obligations of the Company
guaranteed hereunder, or (ii) a maximum aggregate amount equal to
the largest amount that would not render its obligations hereunder
subject to avoidance as a fraudulent transfer or conveyance under
Section 548 of Title 11 of the United States Code or any
applicable provisions of comparable state law (collectively, the
"Fraudulent Transfer Laws"), if and to the extent the Guarantor
(or a trustee on its behalf) has properly invoked the protections
of the Fraudulent Transfer Laws in each case after giving effect
to all other liabilities of the Guarantor, contingent or
otherwise, that are relevant under the Fraudulent Transfer Laws.
<PAGE>
<PAGE>
SECTION 3. GUARANTY OF PAYMENT AND PERFORMANCE.
This is a guaranty of payment and performance and the
Guarantor hereby waives, to the fullest extent permitted by law,
any right to require that any action on or in respect of any Note
or the Note Purchase Agreements be brought against the Company or
that resort be had to any direct or indirect security for the
Notes or for this Guaranty or any other remedy. Any Noteholder
may, at its option, proceed hereunder against the Guarantor in the
first instance to collect monies when due, the payment of which is
guaranteed hereby, without first proceeding against the Company,
any of the Other Guarantors, or any other Person and without first
resorting to any direct or indirect security for the Notes or for
this Guaranty or any other remedy. The liability of the Guarantor
hereunder shall in no way be affected or impaired by any
acceptance by any Noteholder of any direct or indirect security
for, or other guaranties of, any indebtedness, liability or
obligation of the Company, any of the Other Guarantors, or any
other Person to any Noteholder or by any failure, delay, neglect
or omission by the Noteholder to realize upon or protect any such
indebtedness, liability or obligation or any notes or other
instruments evidencing the same or any direct or indirect security
therefor or by any approval, consent, waiver, or other action
taken, or omitted to be taken by any such Noteholder.
SECTION 4. GENERAL PROVISIONS RELATING TO THE GUARANTY.
(a) The Guarantor hereby consents and agrees that any
Noteholder or Noteholders from time to time, with or without any
further notice to or assent from the Guarantor, may, without in
any manner affecting the liability of the Guarantor under this
Guaranty, upon such terms and conditions as any such Noteholder
may deem advisable:
(i) extend in whole or in part (by renewal or
otherwise), modify, change, compromise, release or extend the
duration of the time for the performance or payment of any
indebtedness, liability or obligation of the Company or any
other Person secondarily or otherwise liable for any
indebtedness, liability or obligations of the Company on the
Notes, or waive any Default with respect thereto, or waive,
modify, amend or change any provision of any other
instruments and this Guaranty; or
(ii) sell, release, surrender, modify, impair, exchange
or substitute any and all property, of any nature and from
whomsoever received, held by, or for the benefit of, any such
Noteholder as direct or indirect security for the payment or
performance of any indebtedness, liability or obligation of
the Company or any other Person secondarily or otherwise
liable for any indebtedness, liability or obligation of the
Company on the Notes; or
<PAGE>
<PAGE>
(iii) settle, adjust or compromise any claim of the
Company against any other Person secondarily or otherwise
liable for any indebtedness, liability or obligation of the
Company on the Notes.
The Guarantor hereby ratifies and confirms any such
extension, renewal, change, sale, release, waiver, surrender,
exchange, modification, amendment, impairment, substitution,
settlement, adjustment or compromise and that the same shall be
binding upon it, and hereby waives, to the fullest extent
permitted by law, any and all defenses, counterclaims or offsets
which it might or could have by reason thereof, it being
understood that the Guarantor shall at all times be bound by this
Guaranty and remain liable hereunder.
(b) The Guarantor hereby waives, to the fullest extent
permitted by law: (i) notice of acceptance of this Guaranty by the
Noteholders or of the creation, renewal or accrual of any
liability of the Company, present or future, or of the reliance of
such Noteholders upon this Guaranty (it being understood that
every indebtedness, liability and obligation described in Section
1 shall conclusively be presumed to have been created, contracted
or incurred in reliance upon the execution of this Guaranty); (ii)
demand of payment by any Noteholder from the Company, any of the
Other Guarantors, or any other Person indebted in any manner on or
for any of the indebtedness, liabilities or obligations hereby
guaranteed; and (iii) presentment for the payment by any
Noteholder or any other Person of the Notes or any other
instrument, protest thereof and notice of its dishonor to any
party thereto and to the Guarantor. The obligations of the
Guarantor under this Guaranty and the rights of any Noteholder to
enforce such obligations by any proceedings, whether by action at
law, suit in equity or otherwise, shall not be subject to any
reduction, limitation, impairment or termination, whether by
reason of any claim of any character whatsoever or otherwise and
shall not be subject to any defense, set-off, counterclaim (other
than any compulsory counterclaim), recoupment or termination
whatsoever.
(c) The obligations of the Guarantor hereunder shall be
binding upon the Guarantor and its successors and assigns, and
shall remain in full force and effect irrespective of:
(i) the genuineness, validity, regularity or
enforceability of the Notes, the Note Purchase Agreements or
any other instruments relating thereto or any of the terms of
any thereof, the continuance of any obligation on the part of
the Company, any of the Other Guarantors, or any other Person
on the Notes or under the Note Purchase Agreements or the
power or authority or the lack of power or authority of the
Company to issue the Notes or execute and deliver the Note
Purchase Agreements or to perform any of its obligations<PAGE>
<PAGE>
thereunder or the existence or continuance of the Company,
any of the Other Guarantors, or any other Person as a legal
entity; or
(ii) any default, failure or delay, willful or
otherwise, in the performance by the Company, any of the
Other Guarantors, or any other Person of any obligations of
any kind or character whatsoever of the Company, any of the
Other Guarantors, or any other Person (including, without
limitation, the obligations and undertakings of the Company,
any of the Other Guarantors, or any other Person under the
Notes or the Note Purchase Agreements); or
(iii) any creditors' rights, bankruptcy, receivership or
other insolvency proceeding of the Company, any of the Other
Guarantors, or any other Person or in respect of the property
of the Company, any of the Other Guarantors, or any other
Person or any merger, consolidation, reorganization,
dissolution, liquidation or winding up of the Company, any of
the Other Guarantors, or any other Person; or
(iv) impossibility or illegality of performance on the
part of the Company, any of the Other Guarantors, or any
other Person of its obligations under the Notes, the Note
Purchase Agreements, this Guaranty or any other instruments;
or
(v) in respect of the Company, any of the Other
Guarantors, or any other Person, any change of circumstances,
whether or not foreseen or foreseeable, whether or not
imputable to the Company, any of the Other Guarantors, or any
other Person, or other impossibility of performance through
fire, explosion, accident, labor disturbance, floods,
droughts, embargoes, wars (whether or not declared), civil
commotions, acts of God or the public enemy, delays or
failure of suppliers or carriers, inability to obtain
materials, action of any Federal or state regulatory body or
agency, change of law or any other causes affecting
performance, or any other force majeure, whether or not
beyond the control of the Company, any of the Other
Guarantors, or any other Person and whether or not of the
kind hereinbefore specified; or
(vi) any attachment, claim, demand, charge, Lien,
order, process, encumbrance or any other happening or event
or reason, similar or dissimilar to the foregoing, or any
withholding or diminution at the source, by reason of any
taxes, assessments, expenses, indebtedness, obligations or
liabilities of any character, foreseen or unforeseen, and
whether or not valid, incurred by or against any Person, or
any claims, demands, charges or Liens of any nature, foreseen<PAGE>
<PAGE>
or unforeseen, incurred by any Person, or against any sums
payable under this Guaranty, so that such sums would be
rendered inadequate or would be unavailable to make the
payments herein provided; or
(vii) any order, judgment, decree, ruling or regulation
(whether or not valid) of any court of any nation or of any
political subdivision thereof or any body, agency,
department, official or administrative or regulatory agency
of any thereof or any other action, happening, event or
reason whatsoever which shall delay, interfere with, hinder
or prevent, or in any way adversely affect, the performance
by any party of its respective obligations under the Notes,
the Note Purchase Agreements or any instrument relating
thereto; or
(viii) the failure of the Guarantor to receive any
benefit from or as a result of its execution, delivery and
performance of this Guaranty; or
(ix) any failure or lack of diligence in collection or
protection, failure in presentment or demand for payment,
protest, notice of protest, notice of Default and of
nonpayment, any failure to give notice to the Guarantor of
failure of the Company, any of the Other Guarantors, or any
other Person to keep and perform any obligation, covenant or
agreement under the terms of the Notes or the Note Purchase
Agreements or failure to resort for payment to the Company,
any of the Other Guarantors, or any other Person or to any
other guaranty or to any property, security, Liens or other
rights or remedies; or
(x) the acceptance of any additional security or
other guaranty, the advance of additional money to the
Company, any of the Other Guarantors, or any other Person,
the renewal or extension of the Notes or amendments,
modifications, consents or waivers with respect to the Notes
or the Note Purchase Agreements, or the sale, release,
substitution or exchange of any security for the Notes; or
(xi) any defense whatsoever that the Company, any of
the Other Guarantors, or any other Person might have to the
payment of the Notes (principal, premium, if any, or
interest), other than payment in cash thereof, or to the
performance or observance of any of the provisions of the
Note Purchase Agreements, whether through the satisfaction or
purported satisfaction by the Company, any of the Other
Guarantors, or any other Person of its debts due to any cause
such as bankruptcy, insolvency, receivership, merger,
consolidation, reorganization, dissolution, liquidation,
winding up or otherwise; or
<PAGE>
<PAGE>
(xii) any act or failure to act with regard to the
Notes, the Note Purchase Agreements or anything which might
vary the risk of the Guarantor; or
(xiii) any other circumstance which might otherwise
constitute a defense available to, or a discharge of, the
Guarantor in respect of the obligations of the Guarantor
under this Guaranty;
provided, that the specific enumeration of the above-mentioned
acts, failures or omissions shall not be deemed to exclude any
other acts, failures or omissions, though not specifically
mentioned above, it being the purpose and intent of this Guaranty
that the obligations of the Guarantor shall be absolute and
unconditional and shall not be discharged, impaired or varied
except by the payment of the principal of, premium, if any, and
interest on the Notes in accordance with their respective terms
whenever the same shall become due and payable as in the Notes
provided and all other sums due and payable under the Note
Purchase Agreements, at the place specified in and all in the
manner and with the effect provided in the Notes and the Note
Purchase Agreements, as amended or modified from time to time.
Without limiting the foregoing, it is understood that repeated and
successive demands may be made and recoveries may be had hereunder
as and when, from time to time, the Company shall Default under
the terms of the Notes or the Note Purchase Agreements and that
notwithstanding recovery hereunder for or in respect of any given
Default or Defaults by the Company under the Notes or the Note
Purchase Agreements, this Guaranty shall remain in full force and
effect and shall apply to each and every subsequent Default.
(d) Subject to the provisions of the Note Purchase
Agreements, all rights of any Noteholder may be transferred or
assigned at any time and shall be considered to be transferred or
assigned at any time or from time to time upon the transfer of
such Note whether with or without the consent of or notice to the
Guarantor under this Guaranty or the Company.
(e) To the extent of any payments made under this Guaranty,
the Guarantor shall be subrogated to the rights of the Noteholder
upon whose Note such payment was made, but the Guarantor covenants
and agrees that such right of subrogation shall be subordinate in
right of payment to the rights of any Noteholder for which full
payment has not been made or provided for and, to that end, the
Guarantor agrees not to claim or enforce any such right of
subrogation or any right of set-off or any other right which may
arise on account of any payment made by the Guarantor in
accordance with the provisions of this Guaranty, including,
without limitation, any right of subrogation, reimbursement,
exoneration, contribution or indemnification and any right to
participate in any claim or remedy of any Noteholder or
Noteholders against the Company, whether or not such claim, remedy
or right arises in equity or under contract, statute or common<PAGE>
<PAGE>
law, including, without limitation, the right to take or receive
from the Company, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security
on account of such claim, remedy or right unless and until 366
days after all of the Notes and all other sums due and payable
under the Note Purchase Agreements have been fully paid and
discharged. If any amount shall be paid to the Guarantor in
violation of the preceding sentence at any time prior to the
indefeasible cash payment in full of the Notes and all other
amounts payable under the Note Purchase Agreements and this
Guaranty, such amounts shall be held in trust for the benefit of
the Noteholders and shall forthwith be paid to the Noteholders to
be credited and applied to the amounts due or to become due with
respect to the Notes and all other amounts payable under the Note
Purchase Agreements and this Guaranty, whether matured or
unmatured. The Guarantor acknowledges that it has received direct
and indirect benefits from the financing arrangements contemplated
by the Note Purchase Agreements and that the waiver set forth in
this subsection is knowingly made as a result of the receipt of
such benefits.
(f) The Guarantor agrees that to the extent the Company,
any of the Other Guarantors, or any other Person makes any payment
on any Note, which payment or any part thereof is subsequently
invalidated, voided, declared to be fraudulent or preferential,
set aside, recovered, rescinded or is required to be retained by
or repaid to a trustee, liquidator, receiver, or any other Person
under any bankruptcy code, common law, or equitable cause, then
and to the extent of such payment, the obligation or the part
thereof intended to be satisfied shall be revived and continued in
full force and effect with respect to the Guarantor's obligations
hereunder, as if said payment had not been made. The liability of
the Guarantor hereunder shall not be reduced or discharged, in
whole or in part, by any payment to any Noteholder from any source
that is thereafter paid, returned or refunded in whole or in part
by reason of the assertion of a claim of any kind relating
thereto, including, but not limited to, any claim for breach of
contract, breach of warranty, preference, illegality, invalidity,
or fraud asserted by any account debtor or by any other Person.
(g) No Noteholder shall be under any obligation (i) to
marshal any assets in favor of the Guarantor or in payment of any
or all of the liabilities of the Company under or in respect of
the Notes or the obligations of the Guarantor hereunder or (ii) to
pursue any other remedy that the Guarantor may or may not be able
to pursue itself and that may lighten the Guarantor's burden or
any right which the Guarantor hereby expressly waives.
(h) The obligations of the Guarantor with respect to the
guaranty and all other obligations under this Guaranty of the
Guarantor are direct and unsecured obligations of the Guarantor
ranking pari passu as against the assets of the Guarantor and pari<PAGE>
<PAGE>
passu with all other present and future Indebtedness of the
Guarantor which is not expressed to be subordinate or junior in
rank to any other Indebtedness of the Guarantor (except to the
extent that the foregoing is not true by virtue of, and solely by
virtue of, Liens expressly permitted by the Note Purchase
Agreements securing other Indebtedness).
SECTION 5. REPRESENTATIONS AND WARRANTIES OF THE GUARANTOR.
The Guarantor represents and warrants to you as follows:
(a) Organization; Power and Authority. The Guarantor is duly
organized, validly existing and, if a corporation, in good
standing under the laws of its jurisdiction of incorporation and
is duly qualified as a foreign corporation and is in good standing
in each jurisdiction in which such qualification is required by
law, other than those jurisdictions as to which the failure to be
so qualified or in good standing could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. The Guarantor has the corporate or other power and
authority to own or hold under lease the properties it purports to
own or hold under lease, to transact the business it transacts and
proposes to transact, to execute and deliver this Guaranty and to
perform the provisions hereof.
(b) Authorization, etc. This Guaranty has been duly
authorized by all necessary corporate or other action under its
organizational and governing instruments on the part of the
Guarantor, and this Guaranty constitutes a legal, valid and
binding obligation of the Guarantor enforceable against the
Guarantor in accordance with its terms, except as such
enforceability may be limited by (1) applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and (2)
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(c) Compliance with Laws, Other Instruments, etc. (1) The
execution, delivery and performance by the Guarantor of this
Guaranty will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien
in respect of any property of the Guarantor or any subsidiary
thereof under, any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws,
or any other agreement or instrument to which the Guarantor or any
subsidiary thereof is bound or by which the Guarantor or any
subsidiary thereof or any of their respective properties may be
bound or affected, (ii) conflict with or result in a breach of any
of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental
Authority applicable to the Guarantor or any subsidiary thereof or
(iii) violate any provision of any statute or other rule or
regulation of any Governmental Authority applicable to the<PAGE>
<PAGE>
Guarantor or any subsidiary thereof, other than any contravention,
breach, default, creation, conflict or violation under clauses (i)
through (iii), inclusive, of this Section 5(c) which individually
or in the aggregate could not reasonably be expected to have a
Material Adverse Effect.
(2) All obligations of the Guarantor under this
Guaranty are direct and unsecured obligations of the
Guarantor ranking pari passu with all other existing
unsecured Indebtedness of the Guarantor (actual or
contingent) which is not expressed to be subordinated or
junior in rank to any other unsecured Indebtedness of the
Guarantor.
(d) Governmental Authorizations, etc. No consent, approval
or authorization of, or registration, filing or declaration with,
any Governmental Authority is required in connection with the
execution, delivery or performance by the Guarantor of this
Guaranty.
SECTION 6. GUARANTOR COVENANTS.
Section 6.1. Compliance with Law. The Guarantor will and will
cause each of its Subsidiaries to comply with all laws, ordinances
or governmental rules or regulations to which each of them is
subject, including, without limitation, Environmental Laws and
ERISA, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental
authorizations necessary to the ownership of their respective
properties or to the conduct of their respective businesses, in
each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or
failures to obtain or maintain in effect such licenses,
certificates, permits, franchises and other governmental
authorizations could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 6.2. Insurance. The Guarantor will and will cause
each of its Subsidiaries to maintain, with financially sound and
reputable insurers, insurance with respect to their respective
properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if
adequate reserves are maintained with respect thereto) as is
customary in the case of entities of established reputations
engaged in the same or a similar business and similarly situated.
Section 6.3. Maintenance of Properties. The Guarantor will
and will cause each of its Subsidiaries to maintain and keep, or
cause to be maintained and kept, their respective Material
properties in good repair, working order and condition (other than
ordinary wear and tear), so that the business carried on in
connection therewith may be properly conducted at all times;<PAGE>
<PAGE>
provided that this Section shall not prevent the Guarantor or any
Subsidiary from discontinuing the operation and the maintenance of
any of its properties if such discontinuance is desirable in the
conduct of its business and the Guarantor has concluded that such
discontinuance could not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect.
Section 6.4. Payment of Taxes and Claims. The Guarantor will
and will cause each of its Subsidiaries to file all tax returns
required to be filed in any jurisdiction and to pay and discharge
all taxes shown to be due and payable on such returns and all
other taxes, assessments, governmental charges, or levies imposed
on them or any of their properties, assets, income or franchises,
to the extent such taxes and assessments have become due and
payable and before they have become delinquent and all claims for
which sums have become due and payable that have or might become
a Lien on properties or assets of the Guarantor or any subsidiary
thereof; provided that neither the Guarantor nor any subsidiary
need pay any such tax or assessment or claims if (a) the amount,
applicability or validity thereof is contested by the Guarantor or
such subsidiary on a timely basis in good faith and in appropriate
proceedings, and the Guarantor or a subsidiary has established
adequate reserves therefor in accordance with GAAP on the books of
the Guarantor or such subsidiary or (b) the nonpayment of all such
taxes and assessments in the aggregate could not reasonably be
expected to have a Material Adverse Effect.
Section 6.5. Corporate Existence, etc. The Guarantor will at
all times preserve and keep in full force and effect its corporate
or other existence, except to the extent otherwise permitted by
the Note Purchase Agreements. The Guarantor will at all times
preserve and keep in full force and effect the corporate existence
of each of its Subsidiaries and all rights and franchises of the
Guarantor and its Subsidiaries unless, in the good faith judgment
of the Guarantor, the termination of or failure to preserve and
keep in full force and effect such right or franchise could not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 7. SUBMISSION TO JURISDICTION.
The Guarantor hereby irrevocably submits and consents to the
nonexclusive jurisdiction of the Federal court located within the
Northern District of the State of Illinois (or if such court lacks
jurisdiction, the state courts located therein) and irrevocably
agrees that all actions or proceedings relating to this Guaranty
may be litigated in such courts, and the Guarantor waives any
objection which it may have based on improper venue or forum non
conveniens to the conduct of any proceeding in any such court and
waives personal service of any and all process upon it, and
consents that all such service of process be made by delivery to
it at the address set forth in Section 9 or to its agent referred
to below at such agent's address set forth below and that service
so made shall be deemed to be completed upon actual receipt. The<PAGE>
<PAGE>
Guarantor hereby irrevocably appoints the Company as its agent for
the purpose of accepting service of any process within the State
of Illinois. Nothing contained in this Section 7 shall affect the
right of any Noteholder to serve legal process in any other manner
permitted by law or to bring any action or proceeding in the
courts of any jurisdiction against the Guarantor or to enforce a
judgment obtained in the courts of any other jurisdiction.
SECTION 8. JUDGMENTS.
The Guarantor agrees that any payment made by the Guarantor
to any Noteholder or for the account of any such Noteholder in
respect of any amount required to be paid by the Guarantor in
lawful currency of the United States of America, which payment is
made in any currency other than lawful currency of the United
States of America, whether pursuant to any judgment or order of
the court or tribunal or otherwise, shall constitute a discharge
of the obligations of the Guarantor only to the extent of the
amount of lawful currency of the United States of America which
may be purchased with such other currency on the day of payment.
The Guarantor covenants and agrees that it shall, as a separate
and independent obligation, which shall not be merged in any such
judgment or order, pay or cause to be paid the amount not so
discharged and required to be paid in lawful currency of the
United States of America.
SECTION 9. NOTICES.
All communications provided for herein shall be in writing,
and (a) if to the Company or the Guarantor, delivered or mailed
prepaid by registered or certified mail or express commercial air
courier, or by facsimile communication (prompt express commercial
air courier delivery of hard copy to follow such facsimile
communication), or (b) if to any Noteholder, delivered or mailed
prepaid by express commercial air courier, or by facsimile
communication (prompt express commercial air courier delivery of
hard copy to follow such facsimile communication), in any case at
the addresses set forth below, or to such other address as such
person may designate to the other persons named below by notice
given in accordance with this Section 9:
If to any Noteholder: To its address for notices
appearing in Schedule A to the Note
Purchase Agreements or in any
written notice provided by any
Noteholder to the Company in
accordance with the Note Purchase
Agreements, as the case may be
If to the Guarantor: c/o Insituform Technologies, Inc.
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Attention: President<PAGE>
<PAGE>
If to the Company: Insituform Technologies, Inc.
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Attention: President
SECTION 10. AMENDMENTS AND MODIFICATIONS;
SOLICITATION OF NOTEHOLDERS.
(a) This Guaranty may only be amended and/or modified by an
instrument in writing signed by the Guarantor and by the
Noteholder or Noteholders of at least 66 2/3% in aggregate
principal amount of the Notes then outstanding; provided, that
without the written consent of the Noteholders of all of the Notes
then outstanding, no such waiver, modification, alteration or
amendment shall be effective which will reduce the scope of the
guaranty set forth in this Guaranty or amend the requirements of
Sections 2, 3, 4 or 8 hereof or amend this Section 10. No such
amendment or modification shall extend to or affect any obligation
not expressly amended or modified or impair any right consequent
thereon.
(b) The Guarantor agrees that it will not solicit, request
or negotiate for or with respect to any proposed waiver or
amendment of any of the provisions of this Guaranty, the Note
Purchase Agreements or the Notes unless each Noteholder
(irrespective of the amount of Notes then owned by it) shall be
informed thereof by the Guarantor and shall be afforded the
opportunity of considering the same for a period of not less than
30 days and shall be supplied by the Guarantor with a brief
statement regarding the reasons for any such proposed waiver or
amendment, a copy of the proposed waiver or amendment and such
other information regarding such amendment or waiver as any
Noteholder shall reasonably request to enable it to make an
informed decision with respect thereto. Executed or true and
correct copies of any waiver or amendment effected pursuant to the
provisions of this Section 10 shall be delivered by the Guarantor
to each Noteholder of outstanding Notes within 30 days following
the date on which the same shall have been executed and delivered
by the holder or holders of the requisite percentage of the
outstanding Notes. The Guarantor agrees that it will not, directly
or indirectly, pay or cause to be paid yearly remuneration,
whether by way of supplemental or additional interest, fee or
otherwise, to any Noteholder as consideration for or as an
inducement to the entering into by any Noteholder of any waiver or
amendment of any of the terms and provisions of this Guaranty, the
Note Purchase Agreements or the Notes unless such remuneration is
concurrently paid, on the same terms, ratably to the Noteholders
of all of the Notes then outstanding.
<PAGE>
<PAGE>
SECTION 11. PROCEEDS.
Each beneficiary of this Guaranty by its acceptance hereof
agrees that any proceeds recovered hereunder will be shared pro
rata among each beneficiary hereunder or under any other guaranty
of the Guarantor.
SECTION 12. MISCELLANEOUS.
(a) No remedy herein conferred upon or reserved to any
Noteholder is intended to be exclusive of any other available
remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given
under this Guaranty now or hereafter existing at law or in equity.
No delay or omission to exercise any right or power accruing upon
any default, omission or failure of performance hereunder shall
impair any such right or power or shall be construed to be a
waiver thereof, but any such right or power may be exercised from
time to time and as often as may be deemed expedient. In order to
entitle any Noteholder to exercise any remedy reserved to it under
this Guaranty, it shall not be necessary for such Noteholder to
physically produce its Note in any proceedings instituted by it or
to give any notice, other than such notice as may be herein
expressly required.
(b) In case any one or more of the provisions contained in
this Guaranty shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in any
way be affected or impaired thereby.
(c) This Guaranty shall be binding upon each of the
undersigned Guarantors and its respective successors and assigns
and shall inure to the benefit of each Noteholder and its
Successors and assigns so long as its Note remains outstanding and
unpaid.
(d) The Guarantor hereby agrees that the obligations of the
Guarantor hereunder are joint and several with the obligations of
any other guarantor of all or any portion of the indebtedness
guaranteed hereby.
(e) This Guaranty shall be governed by and construed in
accordance with Illinois law, including all matters of
construction, validity and performance.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to
be duly executed by an authorized officer as of the 31st day of
March, 1998.
INSITUFORM SOUTHWEST, INC.
By s/William A. Martin
--------------------------------
Its Vice President
Acknowledged By:
INSITUFORM TECHNOLOGIES, INC.
By s/William A. Martin
---------------------------
Its Senior Vice President
Chief Financial Officer
Exhibit 10.4
SECOND AMENDMENT
to
LOAN AGREEMENT
This SECOND AMENDMENT to LOAN AGREEMENT (this Amendment) has
been entered into by and between INSITUFORM TECHNOLOGIES, INC. as
Borrower and NATIONSBANK, N.A. as Lender.
Recitals:
A. Borrower and Lender are parties to that certain Loan
Agreement effective as of August 20, 1997; as amended by
Amendment No. One thereto effective as of August 30, 1997
(collectively the "Original Loan Agreement").
B. Borrower has requested that Lender extend the Maturity Date
under the Original Loan Agreement and effect certain other
amendments thereto, and Lender has agreed to do so on the
terms and conditions contained herein.
Amendment
Therefore, in consideration of the mutual agreements herein and
other sufficient consideration, the receipt of which is hereby
acknowledged, Borrower and Lenders hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise
defined herein have the meanings given them in the Original Loan
Agreement. All references to the Agreement or the Loan Agreement
in the Original Loan Agreement and in this Amendment, and in the
other Loan Documents, shall be deemed to be references to the
Original Loan Agreement as it is amended hereby and as it may be
further amended, restated, extended, renewed, replaced, or
otherwise modified from time to time. Each reference in the Loan
Agreement to "the Agreement", "hereunder", "hereof", "herein", or
words of like import, shall be read as referring to the Loan
Agreement as amended by this Amendment.
2. Conditions to Effectiveness of Amendment. This Amendment
shall be effective as of September 15, 1998 (the "Amendment
Effective Date"), provided that Borrower has executed and
delivered to Lender an Amendment and Attachment to Note in the
form of Exhibit A hereto.
3. Amendments.
3.1. The first sentence of Section 6.1 of the Original Loan
Agreement is replaced with the following:
"Borrower shall repay the Revolving Loan and all unpaid
accrued interest thereon on September 1, 2001."
<PAGE>
<PAGE>
3.2. The number "$5,000,000" in clause (i) Section 3.2 of the
Original Loan Agreement is replaced with the words
"$10,000,000 in Dollar Equivalent Amount" and the following
sentence is added at the end of Section 3.2 of the Original
Loan Agreement: "If as of the last day of any fiscal quarter
of Borrower the Dollar Equivalent Amount of the Letter of
Credit Exposure exceeds $10,000,000 or the Dollar Equivalent
Amount of the sum of the Letter of Credit Exposure plus the
Revolving Loan exceeds the amount of the Revolving
Commitment, Borrower shall either (i) provide cash collateral
satisfactory to Lender, and/or (ii) if the Revolving Loan is
not then zero, make a principal payment thereon, sufficient
in the aggregate to cover the amount Letter of Credit
Exposure equal to such excess."
3.3. The following sentence is added at the beginning of
Section 17.1 of the Original Loan Agreement:
"Borrower covenants and agrees that, until Final Payment (and
after any reinstatement as contemplated in Section 8.4), the
provisions of Sections 17.2 through 17.5 shall apply."
3.4. The last sentence of Section 12.1 of the Original Loan
Agreement is amended to read as follows:
"In the case of any conflict between such agreement and this
Agreement, this Agreement shall be controlling; .and any
definition of Event of Default or Default contained in such
agreement shall be deemed superseded by the definitions of
Event of Default and Default herein; and any requirement in
such agreement to grant a security interest shall be subject
to the prohibitions in Section 16.3 hereof and in Sectin 10.5 of
the Note Purchase Agreement."
3.5. The definition of Fixed Charges in Section 17.1 of the
Original Loan Agreement is amended to read as follows:
'Fixed Charges' means, for any period of calculation, the sum
of (i) interest expense, (ii) the sum of all scheduled
principal payments on any long-term Indebtedness of Borrower
(including the Revolving Loan and other current maturities of
long term Indebtedness), (iii) federal, state and local
income tax expense, (iv) scheduled payments on Capital
Leases, and (v) dividends paid, all as accrued in such
period."
3.6. Section 17.3 is amended to read as follows:
"17.3 Minimum Tangible Net Worth. Borrower's Tangible Net
Worth as of the end of each fiscal quarter of Borrower ended
after the Effective Date shall not be less than $50,000,000
plus (i) the sum of (a) 50% of net income (but not any net
loss) for each fiscal quarter ended after the Effective Date<PAGE>
<PAGE>
and (b) the amount of the net proceeds received in cash by
Borrower in each fiscal quarter of Borrower ended after the
Effective Date from the issuance of equity securities (other
than in connection with any employee benefit plan or
compensatory arrangement), minus (ii) the amount expended by
Borrower in each fiscal quarter of Borrower ended after the
Effective Date to repurchase its outstanding stock to the
extent such expenditure does not cause the amount of all such
expenditures after the Effective Date to exceed $15,000,000."
3.7. The following definitions are added in Exhibit 2.1 to
the Original Loan Agreement:
"Determination Date Exchange Rate -- (i) in the case of any
Letter of Credit whose face amount is denominated in an
Offshore Currency, the Spot Rate of Exchange as of the date
two Business Days preceding the date such Letter of Credit is
to be issued, (ii) in the case of a drawing under a Letter of
Credit whose face amount is denominated in an Offshore
Currency, the Spot Rate of Exchange as of the date of such
drawing, and (iii) in any other case in which the value in
Dollars of an Offshore Currency must be determined hereunder
as of any date, the Spot Rate of Exchange two Business Days
preceding such date, or if such Spot Rate of Exchange cannot
be determined by Lender, the rate of exchange of such
Offshore Currency into Dollars as reported in the most recent
edition of the Wall Street Journal.
Dollar Equivalent Amount -- (i) with respect to any amount
denominated in Dollars, such amount, or (ii) with respect to
any amount denominated in an Offshore Currency, the
equivalent amount in Dollars based on the applicable
Determination Date Exchange Rate as determined by Lender.
Offshore Currency-any currency other than Dollars.
Spot Rate of Exchange -- the spot exchange rate determined by
Lender in accordance with its usual procedures for the
purchase by Lender of Dollars with such Offshore Currency at
approximately 10:00 A.M. in Charlotte, North Carolina, on the
applicable Business Day for determining such rate as provided
herein."
4. Representations and Warranties of Borrower. Borrower
represents and warrants to Lender as of the date hereof that (i)
this Amendment has been duly authorized by all requisite corporate
action, (ii) since the date Borrower last delivered to Lender
copies of Borrower's Certificate of Incorporation and Bylaws,
Borrower's Certificate of Incorporation and Bylaws have not been
amended, restated or otherwise modified (except for such
amendments delivered to Lender contemporaneously herewith), (iii)
no consents are necessary from any third Person for Borrower's
execution, delivery or performance of this Amendment which have<PAGE>
<PAGE>
not been obtained, (iv) this Amendment constitutes the legal,
valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms except as the enforcement
thereof may be limited by bankruptcy, insolvency or other laws
related to creditors rights generally or by the application of
equity principles, (v) except as set forth in the Disclosure
Schedule attached to the Loan Agreement, as supplemented by the
disclosure schedules heretofore delivered by Borrower to Lender
with its Compliance Certificates and the disclosure schedule
attached to this Amendment as Exhibit B, the representations and
warranties in the Loan Agreement were true and correct when made
and are true and correct in all material respects as of the date
hereof, and (vi) there exists no Default or Event of Default under
the Loan Agreement.
5. Effect of Amendment. The execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of
any right, power or remedy of Lender under the Loan Agreement or
any of the other Loan Documents, nor constitute a waiver of any
provision of the Loan Agreement, any of the other Loan Documents
or any existing Default or Event of Default.
6. Reaffirmation. Borrower hereby acknowledges and confirms that
(a) the Loan Agreement and other Loan Documents remain in full
force and effect, (b) Borrower has no defenses to its obligations
under the Loan Agreement and the other Loan Documents, and (c)
Borrower has no claim against Lender arising from or in connection
with the Loan Agreement or the other Loan Documents.
7. Governing Law. This Amendment has been executed and delivered
in St. Louis, Missouri, and shall be governed by and construed
under the laws of the State of Missouri without giving effect to
choice or conflicts of law principles thereunder.
8. Section Titles. The section titles in this Amendment are for
convenience of reference only and shall not be construed so as to
modify any provisions of this Amendment.
9. Counterparts; Facsimile Transmissions. This Amendment may be
executed in one or more counterparts and on separate counterparts,
each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Signatures
to this Amendment may be given by facsimile or other electronic
transmission, and such signatures shall be fully binding on the
party sending the same.
10. Incorporation By Reference. Lender and Borrower hereby agree
that all of the terms of the Loan Documents are incorporated in
and made a part of this Amendment by this reference.
<PAGE>
<PAGE>
11. Statutory Notice. The following notice is given pursuant to
Section 432.045 of the Missouri Revised Statutes; nothing
contained in such notice will be deemed to limit or modify the
terms of the Loan Documents or this Amendment:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT
OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING
PROMISES TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE.
TO PROTECT YOU (BORROWER(S)) AND US (LENDER(S)) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH
COVERING SUCH MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS
THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT BETWEEN
US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.
Borrower and Lender hereby affirm that there is no unwritten oral
credit agreement between Borrower and Lender with respect to the
subject matter of this amendment.
IN WITNESS WHEREOF, this Amendment has been duly executed as
of the Amendment Effective Date.
INSITUFORM TECHNOLOGIES, INC. NATIONSBANK, N.A.
by its Senior Vice President by its Vice President
Name: s/William A. Martin Name: s/
------------------------- -------------------------
<PAGE>
<PAGE>
EXHIBIT A
Form of Amendment and Attachment to Note
AMENDMENT AND ATTACHMENT TO NOTE
This is an amendment to the Revolving Note (the Note) from
Insituform Technologies, Inc. (Borrower) to NationsBank, N.A.
(Lender) dated August 20, 1997, in the original principal amount
of $20,000,000 and shall be attached thereto, but the failure to
so attach this amendment shall not invalidate this amendment or
the Note.
The date upon which the outstanding principal amount of the Note
and all unpaid interest accrued thereon is fully due and payable
is extended to September 1, 2001.
Executed and effective as of September 15, 1998
INSITUFORM TECHNOLOGIES, INC.
by its
----------------------------
Name:
-------------------------------
<PAGE>
<PAGE>
EXHIBIT B
Supplemental Disclosure Schedule
As of September 15, 1998, the following changes to Subsidiaries
should be made to item 13.18 of the Disclosure Schedule:
1. The name "Insituform Central, Inc." has been changed to
"Insituform Technologies USA, Inc."
2. The equity owner of Insituform France S.A. set forth under
said item should be changed from Insituform Technologies, Inc. to
INA Acquisition Corp.
3. The equity owner of Insituform West, Inc. set forth under
said item should be changed from INA Acquisition Corp. to
Insituform Technologies, Inc.
4. INA Acquisition Corp. has acquired 80% of the equity of Video
Injection S.A.R.L., organized in France.
Effective December 31, 1998, the following Subsidiaries should be
deleted from item 3.18 of the Disclosure Schedule:
Jurisdiction
Name of Subsidiary of Organization
- ------------------ ---------------
E-Midsouth, Inc. Florida
Insituform Gulf South, Inc. Delaware
Insituform Mid-America, Inc. Delaware
Insituform Midwest, Inc. Delaware
Insituform Missouri, Inc. Delaware
Insituform of New England, Inc. Massachusetts
Insituform North, Inc. Delaware
Insituform de Puerto Rico, Inc. Delaware
Insituform Rockies, Inc. Delaware
Insituform Southeast, Inc. Florida
Insituform Texark, Inc. Delaware
Insituform Licensees B.V., Inc. Delaware
Insituform Plains, Inc. Delaware
Insituform Mar-Tech Limited Alberta<PAGE>
<PAGE>
JOINDER TO UNLIMITED GUARANTY
AND CONTRIBUTION AGREEMENT
This Joinder to Unlimited Guaranty and Contribution Agreement
(this "Joinder") is executed by Insituform Southwest, Inc.
(Joining Guarantor), a Delaware corporation.
Recitals
A. NationsBank, N.A. (Lender) has made available to Insituform
Technologies, Inc. a revolving credit facility under a Loan
Agreement dated effective August 20, 1997 (as the same may
hereafter be renewed, extended, amended, restated, replaced
or otherwise modified from time to time, the Loan Agreement),
and the Loan Documents defined therein, including an
Unlimited Guaranty of the full and prompt payment of all of
the Loan Obligations and all costs of collection thereof (the
Guaranty) and a Contribution Agreement among the parties to
the Guaranty (the Contribution Agreement).
B. The Loan Agreement requires that certain Subsidiaries, as
defined in the Loan Agreement, who were not original parties
to the Guaranty must execute and deliver to Lender a joinder
to the Guaranty satisfactory to Lender. Lender and Joining
Guarantor also deem it advisable for Joining Guarantor to
join in the Contribution Agreement.
C. Joining Guarantor acknowledges that it is a Subsidiary that
is obligated under the terms of the Loan Agreement to execute
such a joinder and that its failure to do so as required
under the terms of the Loan Agreement would constitute an
Event of Default under the Loan Agreement.
Agreement
Therefore, Joining Guarantor acknowledges and agrees as follows:
1. Defined Terms. Capitalized terms used and not otherwise
defined in this Joinder have the meanings defined in the Guaranty
or the Contribution Agreement, as applicable.
2. Joinder to Guaranty. By execution of this Joinder, Joining
Guarantor guaranties to Beneficiary, jointly and severally with
the other Guarantors and as provided in the Guaranty, the full and
prompt payment and performance of the Loan Obligations (whenever
arising, including those existing on the date hereof) and all
costs of collection thereof, including reasonable attorneys' fees
and expenses (whether or not there is litigation), court costs and
all costs in connection with any proceedings under the United
States Bankruptcy Code (collectively, as defined in the Guaranty,
the Guarantied Obligations). Joining Guarantor further agrees and
acknowledges that by execution of this Joinder, Joining Guarantor<PAGE>
<PAGE>
is obligated as a Guarantor under the Guaranty to the same extent
as if Joining Guarantor had executed the Guaranty itself, that
there is no limit on the Guarantied Obligations, that the guaranty
by Joining Guarantor is a continuing, absolute and unconditional
guaranty of payment and performance and not merely of collection,
that Joining Guarantor's liability with respect to the Guarantied
Obligations is primary, not secondary. and that, upon the
occurrence of any Event of Default and at any time thereafter,
Beneficiary may proceed directly against any Guarantor without
first proceeding against Borrower, any other Person liable for the
payment or performance of the Guarantied Obligations, or any
Collateral or other security for the Guarantied Obligations. All
of the terms of the Guaranty are incorporated herein by this
reference. Joining Guarantor acknowledges that it has received a
copy of the Guaranty, has had the opportunity to discuss it with
counsel, and has read and fully understands its provisions.
3. Joinder to Contribution Agreement. Also by execution of this
Joinder, Joining Guarantor agrees and acknowledges that Joining
Guarantor has become a party to the Contribution Agreement and is
obligated thereunder as a Contributor to the same extent as if
Joining Guarantor had executed the Contribution Agreement itself.
4. Representations and Warranties. Joining Guarantor hereby
makes the same representations and warranties to Beneficiary as
were made by each other Guarantor in the Guaranty, but as of the
date hereof.
<PAGE>
<PAGE>
This Joinder is executed and effective as of March 31, 1998.
Insituform Southwest, Inc.
By its Vice President
s/William A. Martin
------------------------------------
Printed Name: William A. Martin
Accepted: Affholder, Inc.
NationsBank, N.A. Insituform Central, Inc.
Insituform Mid-America, Inc.
Insituform Missouri, Inc.
s/Emil A. Krueger, V.P. INA Acquisition Corp.
- ------------------------- Insituform Gulf South Inc.
Printed Name: Emil A. Krueger Insituform Midwest, Inc.
Insituform of New England, Inc.
Insituform North, Inc.
Insituform Plains, Inc.
Insituform Southeast, Inc.
Insituform Texark, Inc.
Insituform Rockies, Inc.
Insituform West, Inc.
NuPipe, Inc.
United Pipeline Systems USA, Inc.
By: s/William A. Martin
-------------------------------
Printed Name: William A. Martin
----------------------
Exhibit 10.9
Amendment No. 1 dated as of October 25, 1998 to Agreement
dated as of October 25, 1995 (the "Original Agreement") between
Insituform Technologies, Inc., a corporation organized and
existing under the laws of the State of Delaware (hereinafter
referred to as the "Corporation") and Robert W. Affholder
(hereinafter referred to as the "Employee").
W I T N E S S E T H
WHEREAS, the parties have entered into the Original Agreement
and desire to effectuate the amendments thereto hereinafter set
forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties agree as follows:
1. Paragraph B of Section I of the Original Agreement is
hereby amended by deleting the reference to "all of his business
time to the performance thereof" and substituting therefor a
reference to "an amount of his time substantially equal to one-
half of the time devoted to performance hereunder from the date of
this Agreement through December 31, 1998".
2. Paragraph A of Section II of the Original Agreement is
hereby amended by deleting the reference to "for a period of three
years thereafter" and substituting therefor a reference to "until
December 31, 1999."
3. Paragraph A of Section III of the Original Agreement is
hereby amended by deleting the reference to "an annual salary of
$250,000" and substituting therefor a reference to "an annual
salary of $125,000".
4. Paragraph A of Section VI of the Original Agreement is
hereby amended by deleting the reference to "1770 Kirby Parkway,
Suite 300, Memphis, Tennessee 38138" and substituting therefor a
reference to "702 Spirit 40 Park Drive, Chesterfield, Missouri
63005".
5. Except as set forth herein, the Original Agreement shall
remain in full force and effect and continue to bind the parties
hereto. This Amendment No. 1 contains the entire agreement of the
parties with respect to the subject matter herein and supersedes
all other understandings, oral or written, with respect thereto.
This Amendment No. 1 may be executed in counterparts, each of
which shall be deemed an original and both of which shall
constitute one and the same agreement.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Amendment No. 1 as of the effective date first-above written.
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
----------------------------
EMPLOYEE:
s/Robert W. Affholder
------------------------------
Robert W. Affholder
Exhibit 10.10
February 9, 1999
Mr. Thomas Kalishman
8020 Daytona Drive
St. Louis, MO 63105
Dear Tom:
The following describes our agreement regarding salary, benefits
and other financial compensation to be provided to you as you
transition from a company employee to a Member of the Company
Board of Directors.
SALARY CONTINUATION
To assist you during the transitional period, the Company will
continue your salary for a period ending on June 30, 1999 ("Salary
Continuation Period").
VACATION
You will not be entitled to any vacation, vacation pay, or pay in
lieu of vacation after December 31, 1998.
BONUS
You will receive your earned bonus for 1998 per the Company plan
to be paid when disbursed to like employees.
OTHER COMPENSATION
You will be paid a lump sum payment on July 1, 1999 of $40,000 to
cover other expenses that you have had or may incur during your
transition period.
HEALTH AND LIFE INSURANCE BENEFITS
A. Medical and Dental
Your General American Medical Insurance Plan and your dental
benefits will continue during the Salary Continuation Period
for the same employee premium that you currently are paying.
Beginning July 1, 1999, you will be offered extended medical
insurance to be paid at your expense for up to an additional
18 months under the Consolidated Budget Reconciliation Act
(COBRA). Cost for this extension will be at 102% of the<PAGE>
<PAGE>
premium cost to cover the benefit expense and administrative
costs. Conversion to COBRA must be effected June 30,1999.
B. Life, Accidental Death & Dismemberment and Long-Term
Disability
Life and Accidental Death and Dismemberment Insurance will be
provided during the Salary Continuation Period and will cease
when the Salary Continuation Period ceases. Disability
Benefits will cease on December 31, 1998. Buck Fetters will
provide life insurance conversion information to you.
401(k) PROFIT SHARING
You may continue contributions during your Salary Continuation
Period, however you will not be eligible for the Company match in
1999. Thereafter, as a participant in the 401(k) Profit Sharing
Plan, you will receive a notice of the options that are available
regarding the distribution of your accounts. Buck Fetters can
assist you with any questions regarding your 401(k) Profit Sharing
Plan and the health and life insurance benefits. You will receive
1998 401K matching and profit sharing, if paid to employees.
CAR ALLOWANCE
Your car allowance will be discontinued after the February payment
of $728.00.
STOCK OPTIONS
You have 15,000 options to purchase Company common stock at
$8.75/share under the Employee Stock Option Plan. Of these
options, 40%, or 6,000 shares, are now Avested@ and available to
exercise. The Company will appoint you as an officer of an
appropriate subsidiary to ensure that your Employee Stock Options
may continue for the balance of the option grant period.
COMPANY PROPERTY
All company property issued to you such as facility office keys,
company telephone credit cards, confidential documents, plans,
manuals, etc. are to be returned to me on or prior to February 15,
1999. Ownership of the computer and Palm Pilot will be
transferred to you June 30, 1999, at no cost to you. Your e-mail
will be forwarded through June 30, 1999 to an Internet address
that you will specify.
OUTSTANDING EXPENSE REPORTS
Any outstanding employee expense reports, including the report for
the January San Diego conference, should be sent to me for
approval prior to February 15, 1999. An extra expense lump-sum
payment will be issued.<PAGE>
<PAGE>
CONFIDENTIALITY/NON-DISCLOSURE/NON-COMPETITION AGREEMENTS
You are reminded of your obligations under the CONFIDENTIALITY AND
NON-COMPETITION AGREEMENTS and will be asked to sign a
reaffirmation statement as part of the exiting process, which
should take place not later than January 31, 1999.
BOARD COMPENSATION AND DUTIES
So long as you receive Salary Continuation, you will not be
eligible for the retainer and meeting fees paid to members of the
Board. When your Salary Continuation Period ends, you will be
paid a prorated annual retainer for the balance of 1999, as well
as receive fees for Board and Committee meetings which take place
subsequent to the end of your Salary Continuation. The Directors
receive a $16,000 annual retainer, payable in equal quarterly
installments on the first day of each calendar quarter. Board
members are also paid $1,500 per meeting conducted primarily
through attendance by directors in person, whether the director
attends in person or by telephone. Directors receive $750 per
Board meeting conducted principally by telephone, and $750 for
each meeting of the Board Committees on which they serve and which
meeting is conducted in conjunction with a Board meeting. $1,500
will be paid for any Committee meeting held independently of a
Board meeting.
If you are required to travel to a Board meeting, or if I
specifically ask you to travel outside the St. Louis area on
Company business, you may travel by first class airfare and your
reasonable hotel and meal charges will be reimbursed.
Board members do not receive health, life or disability insurance,
car allowances, leased vehicles, offices, or office support
services. Except as described above and as applicable to your
circumstances, Board members do not participate in the Company=s
401(k) Plan or Employee Stock Option Plan.
Board members, including yourself, were awarded 15,000 stock
options under the Director's Stock Option Plan. These Options
were awarded on December 18, 1998, with an exercise price of
$13.81/share. You will be receiving your certificate for these
options shortly.
Directors are covered by indemnification agreements to protect
them from liability when, in the exercise of their statutory and
fiduciary duties, suits are brought against them. This indemnity
does not apply, by law, in all cases, and the extent of coverage
will be described in a memorandum you will be receiving from the
Company's Secretary. This indemnification agreement is
supplemented with Director and Officer Errors and Omission
insurance.
<PAGE>
<PAGE>
The Company's Secretary will also be distributing a memorandum
shortly which generally describes your duties as a director under
Delaware law.
We are pleased that you have accepted this appointment to the
Board and we look forward to your contributions as the Company
continues its exciting strategies. We also want to especially
thank you for your efforts during the past eight years, as you
responded on short notice to perform management functions in
Puerto Rico, Chile, Argentina, Atlanta, Durango, and St. Louis.
Sincerely,
s/Anthony W. Hooper s/Robert W. Affholder
- ---------------------------- ----------------------------
Anthony W. Hooper Robert W. Affholder
Chairman, President & CEO Sr. Executive Vice-President
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
Please sign, date and return one copy of this letter in the
envelope provided as evidence of acceptance of the terms and
conditions herein, and retain the other copy for your records.
s/Thomas N. Kalishman 2/9/99
- ---------------------------- ----------------------------
Thomas N. Kalishman Date
Exhibit 10.12
October 9, 1998
Mr. William A. Martin
6364 Massey Manor Cove
Memphis, Tennessee 38120
Dear Mr. Martin:
Reference is hereby made to: (i) the Severance Agreement
dated June 19, 1997 (the "Agreement") between you and Insituform
Technologies, Inc. (the "Company"); and (ii) the Notice of
Termination dated as of even date herewith delivered by you to the
Company thereunder.
In connection with the foregoing, the Company and you hereby
agree as follows (capitalized terms used herein and not otherwise
defined herein, to have the same meanings ascribed to them in the
Agreement):
(a) The Company hereby acknowledges that the foregoing
Notice of Termination has been timely delivered and that, as
modified pursuant to this letter, shall for all purposes of
the Agreement be deemed to evidence termination for Good
Reason, as defined in the final sentence of Paragraph (p) of
Article I of the Agreement.
(b) Notwithstanding anything to the contrary contained
in the Agreement (including without limitation, the
provisions of clause (iii) of Paragraph (s) of Article I of
the Agreement), and without prejudice to any of your rights
under the Agreement arising from delivery of the aforesaid
Notice of Termination, the Date of Termination referenced in
the aforesaid Notice of Termination (the "Original Date of
Termination") shall, for all purposes of the Agreement
(except as set forth in the immediately succeeding
paragraph), be postponed to such date set forth in a written
notice delivered in the manner set forth in the Agreement by
the Company to you (or, such earlier date set forth in a
written notice delivered in the manner set forth in the
Agreement by you to the Company), provided that any notice as
aforesaid shall be delivered no less than 30 days prior to
the date specified therein (the postponed date as aforesaid
to be the "Postponed Date of Termination").
<PAGE>
Mr. William A. Martin October 9, 1998
Page 2 of 2
(c) Without limiting the generality of paragraph (b)
immediately preceding, you and the Company acknowledge and
agree that the lump sum cash payment required under Paragraph
(b) (i) of Article II of the Agreement shall be made within
30 days of the Postponed Date of Termination, and the
continuation of benefits required under Paragraph (b)(ii) of
said Article II shall extend through the period of three
years after the Postponed Date of Termination; it being
understood and agreed, however, that, for purposes of the
calculation of Annual Base Salary and Annual Bonus under the
Agreement, the Date of Termination shall be deemed to be the
Original Date of Termination, and the reference under said
Paragraph (b) (i) to the "current fiscal year" shall be
deemed to refer to the "fiscal year of the Date of
Termination" (with such last date deemed to be the Original
Date of Termination).
The Company and you hereby acknowledge and agree that your
entitlement to the benefits of the Agreement arising from
termination by you for Good Reason as aforesaid during the
Protected Period shall survive any Disability (or death), or any
other event, subsequent to the date hereof.
Except as stated herein, all provisions of the Agreement
shall remain in full force and effect, without modification and
without any adverse effect on any rights, benefits or privileges
conferred on you pursuant to the Agreement.
If the foregoing accurately reflects our agreement, kindly
acknowledge your acceptance hereof by countersigning the enclosed
copy of this letter in the space below provided and returning such
signed copy to the undersigned.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
-------------------------------
ACCEPTED AND AGREED:
s/William A. Martin
- --------------------------------
William A. Martin
<PAGE>
October 9, 1998
Insituform Technologies, Inc.
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Attention: General Counsel
Dear Sirs:
Reference is hereby made to the Severance Agreement dated
June 19, 1997 (the "Agreement") between you and the undersigned.
Capitalized terms utilized herein and not otherwise defined herein
shall have the respective meanings ascribed to them in the
Agreement.
This letter shall constitute a Notice of Termination pursuant
to the Agreement, notifying you of the termination by the
undersigned of his employment with the Company and its Affiliates
for Good Reason. In accordance with the Agreement, the undersigned
hereby advises you as follows:
(a) Paragraph (p) of Article I of the Agreement provides
that, "a termination by the Executive for any reason during the...
30-day period immediately following the first anniversary of the
Effective Date... shall be deemed to be a termination for Good
Reason for all purposes of this Agreement."
(b) The Effective Date occurred on October 8, 1997, as a
result of a Change of Control described in Paragraph (g)(i) of
Article I of the Agreement, upon the election to the Board of at
least two members other than pursuant to the circumstances
described under clauses (x) or (y) of said paragraph and, in
particular, pursuant to the circumstances described in the
Company's proxy statement dated August 25, 1997. Accordingly, the
termination to which this Notice of Termination relates shall be
deemed a termination for Good Reason.
(c) The Date of Termination shall be October 31, 1998 (which
is not later than 30 days after the first anniversary of the
Effective Date).
<PAGE>
<PAGE>
Insituform Technologies, Inc. October 9, 1998
Page Two
Please acknowledge your receipt of this letter and the Notice
of Termination herein by countersigning the enclosed copy of this
letter in the space below provided and returning such signed copy
to the undersigned.
Very truly yours,
s/William A. Martin
----------------------------------
William A. Martin
RECEIPT ACKNOWLEDGED:
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
------------------------------
Exhibit 10.14
SEVERANCE AGREEMENT
AGREEMENT dated as of the 14th day of March, 1999 between
Insituform Technologies, Inc., a Delaware corporation (the
"Company"), and Robert L. Kelley (the "Executive").
W I T N E S S E T H:
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and its
stockholders to assure that the Company shall have the continued
dedication of the Executive, and, accordingly, to extend to the
Executive the arrangements hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereby agree as
follows:
ARTICLE I
CERTAIN DEFINITIONS
As used in this Agreement, the following capitalized terms
shall have the meanings set forth below:
(a) The term "1997 Agreement" shall mean the Severance
Agreement dated June 19, 1997 between the Executive and the
Company.
(b) The term "Change in Control" shall mean:
(i) the acquisition by any "person" or "group" (as
defined pursuant to Section 13(d) under the Securities
Exchange Act of 1934) of "beneficial ownership" (as
defined in Rule 13d-3 under said Act) of in excess of 50%
of the combined voting power of the outstanding Voting
Securities of the Company; and/or
(ii) the replacement of 50% or more of the members
of the Company's Board of Directors (excluding, for
purposes of such calculation, the Chairman of the Board)
over a one year period from the directors who constituted
such Board at the beginning of such period, where such
replacement shall not have been approved by a vote
including at least a majority of the directors who were
members of the Board at the beginning of such one-year
period or whose election as members of the Board was
previously so approved; and/or
(iii) consummation of a merger, statutory share
exchange or consolidation involving the Company or sale
or other disposition of all or substantially all of the
assets of the Company, unless following such transaction:
(x) all or substantially all of the individuals and
entities who were the "beneficial owners" (as hereinabove<PAGE>
<PAGE>
defined), respectively, of the outstanding Voting
Securities immediately prior to such transaction
"beneficially owned", directly or indirectly, more than
50% of the combined voting power of the then outstanding
Voting Securities of the corporation resulting from such
transaction in substantially the same proportion as their
ownership immediately prior to such transaction of the
outstanding Voting Securities of the Company, (y) no
"person" or "group" (as hereinabove defined)
"beneficially owns", directly or indirectly, 20% or more
of the combined voting power of the then outstanding
Voting Securities of such corporation except to the
extent that such ownership existed prior to such
transaction and (z) at least a majority of the members of
the board of directors resulting from such transaction
were members of the Company's Board of Directors
immediately prior to such transaction or were nominated
by at least a majority of the members of the Company's
Board of Directors at the time of the execution of the
initial agreement for such transaction, or by the action
of the Company's Board of Directors providing for such
transaction; and/or
(iv) approval by the stockholder of the Company of
a complete liquidation or dissolution of the Company.
(c) The term "Excise Tax" shall have the meaning set
forth under Paragraph A of Article III hereof.
(d) The term "good reason" shall mean (1) the assignment
to the Executive by the Company of duties inconsistent with
the position of Vice President and General Counsel of the
Company (including status, offices, titles and reporting
requirements), or any authority, duties or responsibilities
not at least commensurate in all material respects with the
most significant of those exercised or assigned to the
Executive during the 120-day period prior to the date hereof;
or (2) any other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities (excluding any isolated, insubstantial and
inadvertent action by the Company not taken in bad faith and
which is remedied by the Company promptly after receipt of
notice thereof from the Executive); or (3) the Company's
requiring the Executive to be based at any office or location
other than in metropolitan St. Louis or to travel on Company
business during an extended period to a substantially greater
extent than required during the Executive's employment with
the Company and its Affiliates prior to the date hereof; or
(4) subject to reasonable assessment by the Company of the
performance of the Executive, adjustments in the base salary
of the Executive or determination of achievement of bonus
entitlement or calculation of stock option grants, in each
case not at least substantially commensurate with the
treatment by the Company with respect to other peer executives
of the Company and its Affiliates (hereinafter referred to as
the "Peer Group").<PAGE>
<PAGE>
(e) The term "Gross-Up Payment shall have the meaning
set forth under Paragraph A of Article III hereof.
(f) The term "Other Plans" shall have the meaning set
forth in paragraph B of Article II hereof.
(g) The term "Payments" shall mean any payment or
distribution by the Company to or for the benefit of the
Executive pursuant to the terms of this Agreement (but
determined without regard to any additional payments required
under Article III hereof).
(h) The term "Peer Group" shall have the meaning set
forth in Paragraph (d) of this Article I.
(i) The term "Severance Amount" shall mean the lump-sum
cash payment set forth under Paragraph (b)(i) of Article II of
the 1997 Agreement, it being understood and agreed, however,
that, for purposes of the calculation of "Annual Base Salary"
and "Annual Bonus" thereunder, the "Date of Termination"
thereunder shall be deemed to be November 6, 1998 and the
reference under said Paragraph (b)(i) to the "current fiscal
year" shall be deemed to refer to "1998".
(j) The term "Supplemental Letters" shall mean the
notice dated October 9, 1998 delivered by the Executive to the
Company under the 1997 Agreement, and the letter agreements
dated, respectively, November 6 and December 18, 1998 between
the Executive and the Company supplementing the 1997
Agreement.
(k) The term "Voting Securities" shall mean the voting
securities of the subject referenced entitled to vote
generally in the election of directors.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned and ascribed to them in the 1997
Agreement.
ARTICLE II
SEVERANCE BENEFITS
A. The Executive shall be entitled to payment by or on behalf
of the Company of the Severance Amount in the following
circumstances:
(i) with 30 days after (x) termination by the Company of
the Executive's employment for any reason, or (y) the
Executive's death, or (z) the Executive's disability (defined
as his inability to report for work for a period of four
months or longer);
(ii) within six months after termination by the Executive
of his employment for "good reason";
<PAGE>
<PAGE>
(iii) within 30 days after termination by the Executive
of his employment during the 30-day period immediately
following the first anniversary of any Change in Control; or
(iv) in the event of termination by the Executive of his
employment other than for "good reason" or pursuant to clause
(iii) immediately preceding, at the later of (x) December 31,
2002 or (y) on or prior to any June 30 or December 31
following no less than six months' prior written notice by the
Executive to the Company that such payment is due;
it being acknowledged and agreed that the Executive's entitlement
to the Severance Amount arising from any termination of employment
as aforesaid shall survive any disability (or death), or any other
event subsequent to termination.
B. For three years after the termination of the Executive's
employment for any reason, or such longer period as may be provided
by the terms of the appropriate plan, program, practice or policy,
the Company shall continue benefits to the Executive and/or the
Executive's family at least equal to all those which would have
been provided to them under the Welfare Benefit Plans and the car
allowance and other plans, programs or arrangements applicable to
Company employees generally or to the Peer Group specifically (such
car allowance and other plans, programs and arrangements herein
referred to, collectively, as "Other Plans") in effect at November
6, 1998, as if the Executive's employment had not been terminated
or, if more favorable to the Executive, the benefits available
under the Welfare Benefit Plans, Other Plans or new plans, programs
or arrangements, as in effect generally at any time thereafter with
respect to other employees of the Company generally or the Peer
Group specifically and their families, provided, however, that if
and to the extent the Executive becomes reemployed with another
employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and
other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of
eligibility; provided, further, that if and to the extent the
Executive is eligible to receive medical or other welfare benefits
under any retirement plan provided by Monsanto Company, or any
successor thereto, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan
during such applicable period of eligibility (subject to
reimbursement by the Company to the Executive of his premium under
such other plan). For purposes of determining eligibility (but not
the time of commencement of benefits) of the Executive for retiree
benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until
three years after the termination of his employment and to have
retired on the last day of such period.
C. In the event the Executive's employment shall terminate
for any reason, to the extent not theretofore paid or provided the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or<PAGE>
<PAGE>
practice or contract or agreement of the Company and its affiliated
companies.
ARTICLE III
CERTAIN ADDITIONAL PAYMENTS
A. Except as set forth below, in the event it shall be
determined that any Payments would be subject to any excise tax
imposed by Section 4999 of the Code, and any interest or penalties
incurred by you with respect to such excise tax (herein referred
to, collectively, as the "Excise Tax"), then you shall be entitled
to receive an additional payment (herein referred to as a "Gross-Up
Payment") in an amount such that after payment by you of all taxes,
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto), and Excise Tax imposed
upon the Gross-Up Payment, you retain an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Paragraph A, if it
shall be determined that you are entitled to a Gross-Up Payment,
but that the Payments do not exceed 110% of the greatest amount
that could be paid to you such that the receipt of Payments would
not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to you and the Payments, in the aggregate, shall be reduced to
such greatest amount.
B. All determinations required to be made under this Article
III shall be made by the Company's independent auditors, who shall
provide detailed supporting calculations both to the Company and
you within 15 business days of the receipt of notice from you that
there has been a Payment, or such earlier time as is requested by
the Company. All fees and expenses of the accounting firm acting
hereunder shall be borne solely by the Company. Any Gross-Up
Payment, as determined pursuant to this Article III, shall be paid
by the Company to you within five days of the receipt of the
accounting firm's determination.
C. The Executive shall promptly notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. If the Company notifies the Executive in writing
prior to the expiration of 30 days after receipt of such notice
that it desires to contest such claim, the Executive shall: (A)
give the Company any information reasonably requested by the
Company relating to such claim, and (B) take such action in
connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without
limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company, provided,
however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in
connection with such contest. Without limitation on the foregoing
provisions of this Article III, the Company shall control all
proceedings taken in connection with such contest.
<PAGE>
<PAGE>
ARTICLE IV
NOTICE OF TERMINATION
Any termination by the Executive of his employment for other
than "good reason" shall be subject to no less than six months'
prior written notice of termination delivered by the Executive to
the Company.
ARTICLE V
MISCELLANEOUS
A. All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party
or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
317 Cabin Grove Lane
Creve Coeur, Missouri 63141
If to the Company:
702 Spirit 40 Park Drive
Chesterfield, Missouri 63005
Attention: President
With a copy to:
Krugman & Kailes LLP
Park 80 West - Plaza Two
Saddle Brook, New Jersey 07663
Attention: Howard Kailes, Esq.
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
B. This Agreement shall contain the entire agreement of the
parties with respect to the transactions contemplated hereby.
Without limiting the generality of the foregoing (and except to the
extent certain provisions of the 1997 Agreement are referenced
hereunder), the terms hereof supersede in all respects: (i) the
letter agreement dated February 23, 1996 between the parties
hereto, (ii) the 1997 Agreement, and (iii) the Supplemental
Letters, which are hereby terminated and shall have no further
force or effect.
<PAGE>
<PAGE>
C. (i) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of
descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive's legal representatives.
(ii) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(iii) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or other-
wise) to all or substantially all of the business and/or assets of
the Company to assume expressly and agree to perform this Agreement
in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As
used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
D. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this
Agreement are not part of the provisions hereof and shall have no
force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
E. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
F. The Company may withhold from any amounts payable under
this Agreement such federal, state, local or foreign taxes as shall
be required to be withheld pursuant to any applicable law or
regulation.
G. The Executive's or the Company's failure to insist upon
strict compliance with any provision of this Agreement the failure
to assert any right the Executive or the Company may have
hereunder, including, without limitation, the right of the
Executive to terminate employment for "good reason", shall not be
deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.
H. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together
shall constitute one and the same instrument.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its Board
of Directors, the Company has caused these presents to be executed
in its name on its behalf, all as of the day and year first above
written.
Executive:
s/Robert L. Kelley
----------------------------------
Robert L. Kelley
Insituform Technologies, Inc.
By s/Anthony W. Hooper
--------------------------------
President
<PAGE>
<PAGE>
HAND DELIVERY
October 9, 1998
Insituform Technologies, Inc.
702 Spirit 40 Park drive
Chesterfield, MO 63005
Attention: Anthony W. Hooper, Chairman,
President & CEO
Gentlemen:
Reference is hereby made to the Severance Agreement dated June 19,
1997 (the "Agreement") between Insituform Technologies, Inc. (the
"Company") and the undersigned. Capitalized terms utilized herein
and not otherwise defined herein shall have the respective meanings
ascribed to them in the Agreement.
This letter shall constitute a Notice of Termination pursuant to
the Agreement, notifying the Company of the termination by the
undersigned of his employment with the Company and its Affiliates
for Good Reason. In accordance with the Agreement, the undersigned
hereby advises the Company as follows:
(a) Paragraph (p) of Article I of the Agreement provides that a
"termination by the Executive for any reason during the 30-
day period immediately following the first anniversary of the
Effective Date ... shall be deemed to be a termination for
Good Reason for all purposes of this Agreement."
(b) The Effective Date occurred on October 8, 1997, as a result of
a Change of Control described in paragraph (g)(i) of Article
I of the Agreement, upon the election the Board of at least
two members other than pursuant to the circumstances described
under clauses (x) or (y) of said paragraph and, in particular,
pursuant to the circumstances described in the Company's proxy
statement dated August 25, 1997. Accordingly, the termination
to which this Notice of Termination relates shall be deemed a
termination for Good Reason.
(c) The Date of Termination shall be November 6, 1998 (which is
not later than 30 days after the first anniversary of the
Effective Date).
This Notice of Termination may be withdrawn by the undersigned in
the event that the Company and the undersigned reach a mutually
satisfactory new agreement on or before November 6, 1998, in which
event this letter and Notice of termination hereunder shall have no
further effect.
Please acknowledge your receipt of this letter and the Notice of
Termination herein by countersigning the enclosed copy of this
letter in the space provided below and returning the copy to the
undersigned. <PAGE>
<PAGE>
Your acknowledgement also constitutes confirmation that the address
of the Company for purposes of notices and other communications as
set out in paragraph (a) of Article IV of the Agreement is amended
to read as set out at the head of this letter.
Very truly yours,
s/Robert L. Kelley
----------------------------
Robert L. Kelley
RECEIPT ACKNOWLEDGED
INSITUFORM TECHNOLOGIES, INC.
By: s/Anthony W. Hooper
-------------------------
<PAGE>
<PAGE>
November 6, 1998
Mr. Robert L. Kelley
317 Cabin Grove Lane
Creve Coeur, Missouri 63141
Dear Mr. Kelley:
Reference is hereby made to: (i) the Severance Agreement dated June
19, 1997 (the "Agreement") between you and Insituform Technologies,
Inc. (the "Company"); and (ii) the Notice of Termination dated
October 9, 1998 delivered by you to the Company thereunder.
In connection with the foregoing, the Company and you hereby agree
as follows (capitalized terms used herein and not otherwise defined
herein, to have the same meanings ascribed to them in the
Agreement):
(a) The Company hereby acknowledges that the foregoing
Notice of Termination has been timely delivered and that, as
modified pursuant to this letter, shall for all purposes of
the Agreement be deemed to evidence termination for Good
Reason, as defined in the final sentence of Paragraph (p) of
Article I of the Agreement.
(b) Notwithstanding anything to the contrary contained in
the Agreement (including without limitation, the provisions of
clause (iii) of Paragraph (s) of Article I of the Agreement),
and without prejudice to any of your rights under the
Agreement arising from delivery of the aforesaid Notice of
Termination, the Date of Termination referenced in the
aforesaid Notice of Termination (the "Original Date of
Termination") shall, for all purposes of the Agreement (except
as set forth in the immediately succeeding paragraph), be
postponed to December 14, 1998 (the postponed date as
aforesaid to be the "Postponed Date of Termination").
<PAGE>
<PAGE>
Mr. Robert L. Kelley November 6, 1998
Page 2 of 2
(c) Without limiting the generality of paragraph (b)
immediately preceding, you and the Company acknowledge and
agree that the lump-sum cash payment required under Paragraph
(b)(i) of Article II of the Agreement shall be made within 30
days of the Postponed Date of Termination, but not earlier
than January 2, 1999, and the continuation of benefits
required under Paragraph (b)(ii) of said Article II shall
extend through the period of three years after the Postponed
Date of Termination; it being understood and agreed, however,
that, for purposes of the calculation of Annual Base Salary
and Annual Bonus under the Agreement, the Date of Termination
shall be deemed to be the Original Date of Termination, and
reference under said Paragraph (b)(i) to the "current fiscal
year" shall be deemed to refer to the "fiscal year of the Date
of Termination" (with such last date deemed to be the Original
Date of Termination).
(d) Notwithstanding anything in this letter to the
contrary (including, without limitation, paragraph (c)
immediately preceding), you and the Company acknowledge and
agree that you have the right to accelerate the Postponed Date
of Termination (the "Accelerated Postpone Date of
Termination") in the event of the occurrence of any change (or
approval of a change) in the governance of the Company
occurring at any time after the date of this letter or change
(or approval of change) in the equity ownership of the Company
held by affiliates of the Company; such Accelerated Postponed
Date of Termination to be effective immediately upon hand
delivery to the Company of your written notice of Accelerated
Postponed Date of Termination or effective the date of
postmark of such written notice if mailed through the United
States Postal Service.
The Company and you hereby acknowledge and agree that your
entitlement to the benefits of the Agreement arising from
termination by you for Good Reason as aforesaid during the
Protected Period shall survive any Disability (or death), or any
other event, subsequent to the date hereof.
Except as stated herein, all provisions of the Agreement shall
remain in full force and effect, without modification and without
adverse effect on any rights, benefits or privileges conferred on
you pursuant to the Agreement.
If the foregoing accurately reflects our agreement, kindly
acknowledge your acceptance hereof by countersigning the enclosed
copy of this letter in the space below provided and returning such
signed copy to the undersigned.
<PAGE>
<PAGE>
Your acknowledgement also constitutes confirmation that your
address for purposes of notices and other communications as set out
in paragraph (a) of Article IV of the Agreement is amended to read
as set out at the head of this letter.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
----------------------------
ACCEPTED AND AGREED:
s/Robert L. Kelley
- --------------------------
Robert L. Kelley
<PAGE>
<PAGE>
as of December 18, 1998
Mr. Robert L. Kelley
317 Cabin Grove Lane
Creve Coeur, Missouri 63141
Dear Mr. Kelley:
Reference is hereby made to: (i) the Severance Agreement dated
June 19, 1997 (the "Agreement") between you and Insituform
Technologies, Inc. (the "Company"); (ii) the Notice of Termination
dated October 9, 1998 delivered by you to the Company thereunder;
and (iii) the letter agreement dated November 6, 1998 (the
"Moratorium Letter") between you and the Company.
This letter shall evidence that the Company and you hereby
agree that the reference in the Moratorium Letter to "December 14,
1998" shall be modified to refer to "March 14, 1999"; and that the
Moratorium Letter, as so amended, shall remain in full force and
effect.
If the foregoing accurately reflects our agreement, kindly so
indicate by countersigning the enclosed copy of this letter in the
space below provided and returning such signed copy to the
undersigned.
Very truly yours,
INSITUFORM TECHNOLOGIES, INC.
By s/Anthony W. Hooper
------------------------------
ACCEPTED AND AGREED:
s/Robert L. Kelley
- -----------------------------
Robert L. Kelley
Exhibit 10.19
SENIOR MANAGEMENT VOLUNTARY DEFERRED COMPENSATION PLAN
prepared for
INSITUFORM TECHNOLOGIES, INC.
<PAGE>
<PAGE>
INSITUFORM TECHNOLOGIES INC.
SENIOR MANAGEMENT VOLUNTARY DEFERRED COMPENSATION PLAN
ARTICLE I - PURPOSE; EFFECTIVE DATE
1.1. Purpose. The purpose of this Senior Management Voluntary
Deferred Compensation Plan (hereinafter, the "Plan") is to
permit a select group of management and highly compensated
employees of Insituform Technologies, Inc. and its
subsidiaries to defer the receipt of income which would
otherwise become payable to them. It is intended that this
plan, by providing this deferral opportunity, will assist
in retaining and attracting individuals of exceptional
ability by providing them with these benefits.
1.2. Effective Date. The Plan shall be effective as of February
1, 1999.
ARTICLE II - DEFINITIONS
For the purpose of this Plan, the following terms shall
have the meanings indicated, unless the context clearly indicates
otherwise:
2.1. Account(s). "Account(s)" means the account or accounts
maintained on the books of the Company used solely to
calculate the amount payable to each Participant under this
Plan and shall not constitute a separate fund of assets.
The Accounts available for each Participant shall be
identified as:
a) Retirement Account; and,
b) In-Service Account.
2.2. Beneficiary. "Beneficiary" means the person, persons or
entity as designated by the Participant, entitled under
Article VI to receive any Plan benefits payable after the
Participant's death.
2.3. Board. "Board" means the Board of Directors of the
Company.
2.4. Change in Control. A "Change in Control" shall occur if:
a) Any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Securities Exchange Act of
1934, as amended) becomes the "beneficial owner" (as
defined in Rule 13-d under such Act) of more than fifty
(50%) of the then outstanding voting stock of the
Company, other than through a transaction arranged by,
or consummated with the prior approval of, the Board; or<PAGE>
<PAGE>
b) During any period of two (2) consecutive years,
individuals who at the beginning of such period
constitute the Board (and any new Director whose
election by the Board or whose nomination for election
by the stockholders of the Company was approved by a
vote of at least two-thirds (2/3) of the Directors at
the beginning of such period or whose election or
nomination for election was previously so approved)
cease for any reason to constitute a majority thereof;
or
c) The shareholders of Company approve a merger or
consolidation of Company with any other corporation,
other than a merger or consolidation which would result
in the voting securities of a Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of the surviving entity) more
than eighty percent (80%) of the combined voting power
of the voting securities of Company or such surviving
entity outstanding immediately after such merger or
consolidation; or
d) The shareholders of Company approve a plan of complete
liquidation of Company or an agreement for the sale or
disposition by Company of all or substantially all of
the Company's assets.
2.5. Committee. "Committee" means the Committee appointed by
the CEO to administer the Plan pursuant to Article VII.
The initial Committee shall consist of the CEO, the Human
Resources Director and Legal Counsel.
2.6. Company. "Company" means Insituform Technologies, Inc., a
Delaware corporation, and any directly or indirectly 100%
owned or affiliated U.S based subsidiary corporations, any
other affiliate designated by the Board, or any successor
to the business of any of the foregoing if such successor
is a U.S. based entity.
2.7. Compensation. "Compensation" means the base salary payable
to and bonus or incentive compensation earned by a
Participant with respect to employment services performed
for the Company by the Participant and considered to be
"wages" for purposes of federal income tax withholding.
For purposes of this Plan only, Compensation shall be
calculated before reduction for any amounts deferred by the
Participant pursuant to the Company's tax qualified plans
which may be maintained under Section 401(k) or Section 125
of the Internal Revenue Code of 1986, as amended, (the
"Code"), or pursuant to this Plan or any other non-
qualified plan which permits the voluntary deferral of
compensation. Inclusion of any other forms of compensation
is subject to Committee Approval.
<PAGE>
<PAGE>
2.8. Deferral Commitment. "Deferral Commitment" means a
commitment made by a Participant to defer a portion of
Compensation as set forth in Article III. The Deferral
Commitment shall apply to salary and/or bonus payable to a
Participant, and shall specify the Account or Accounts to
which the Compensation deferred shall be allocated. Such
deferral commitment shall be made in whole percentages or
stated dollar amounts and shall be made in a form
acceptable to the Committee. A Deferral Commitment shall
remain in effect until amended or revoked as provided under
Section 3.2 (b), below.
2.9. Deferral Period. "Deferral Period" means each calendar
year, except that the initial Deferral Period shall be
February 1, 1999 through and including December 31, 1999.
2.10. Determination Date. "Determination Date" means the last
day of each calendar month.
2.11. Disability. "Disability" means a permanent physical or
mental condition that prevents the Participant from
satisfactorily performing the Participant's usual duties
for Company. The Committee shall determine the existence
of Disability, in its sole discretion, and may rely on
advice from a medical examiner satisfactory to the
Committee in making the determination.
2.12. Discretionary Contribution. "Discretionary Contribution"
means the Company contribution credited to a Participant's
Account(s) under Section 4.5, below.
2.13. Interest. "Interest" means the amount credited to a
Participant's Account(s) on each Determination Date, which
shall be based on the Valuation Funds chosen by the
Participant as provided in Section 2.21, below and in a
manner consistent with Section 4.3, below. Such credits to
a Participant's Account may be either positive or negative
to reflect the increase or decrease in value of the Account
in accordance with the provisions of this Plan.
2.14. Form of Payment Designation. "Form of Payment Designation"
means the form prescribed by the Committee and completed by
the Participant, indicating the chosen form of payment for
benefits payable from each Account under this Plan, as
elected by the Participant.
2.15. 401(k) Plan. "401(k) Plan" means the Insituform
Technologies 401(k) Profit Sharing Plan, or any other
successor defined contribution plan maintained by the
Company that qualifies under Section 401(a) of the Code and
satisfies the requirements of Section 401(k) of the Code.
<PAGE>
<PAGE>
2.16. Matching Contribution. "Matching Contribution" means the
Company contribution credited to a Participant's Account(s)
under Section 4.4, below.
2.17. Participant. "Participant" means any employee who is
eligible, pursuant to Section 3.1, below, to participate in
this Plan, and who has elected to defer Compensation under
this Plan in accordance with Article III, below. Such
employee shall remain a Participant in this Plan for the
period of deferral and until such time as all benefits
payable under this Plan have been paid in accordance with
the provisions hereof.
2.18. Plan. "Plan" means this Senior Management Voluntary
Deferred Compensation Plan as amended from time to time.
2.19. Retirement. "Retirement" means the termination of
employment with the Company of the Participant after
attaining age 55 with at least 10 Years of Service.
2.20. Plan Year. "Plan Year" or "Year" shall be the calendar
year except for the first and last years in which the Plan
operates, in which case the Plan Year shall be that portion
of the first and last calendar years in which the Plan
operated if less than 12 full months.
2.21. Valuation Funds. "Valuation Funds" means one or more of
the independently established funds or indices that are
identified and listed by the Committee. These Valuation
Funds are used solely to calculate the Interest that is
credited to each Participant's Account(s) in accordance
with Article IV, below, and do not represent, nor should it
be interpreted to convey any beneficial interest on the
part of the Participant in any asset or other property of
the Company. The determination of the increase or decrease
in the performance of each Valuation Fund shall be made by
the Committee in its reasonable discretion. The Committee
shall select the various Valuation Funds available to the
Participants with respect to this Plan and shall set forth
a list of these Valuation Funds attached hereto as Exhibit
A, which may be amended from time to time in the discretion
of the Committee.
<PAGE>
<PAGE>
ARTICLE III - ELIGIBILITY AND PARTICIPATION
3.1. Eligibility and Participation.
a) Eligibility. Eligibility to participate in the Plan
shall be limited to those select Senior Management
employees of Company whose base salary for the calendar
year immediately prior to their first year of
eligibility to participate in this plan was at least
ninety thousand dollars ($90,000), plus any other select
key executives designated by the Committee from time to
time.
b) Participation. An employee's participation in the Plan
shall be effective upon notification to the employee by
the Committee of eligibility to participate, and
completion, submission, and acceptance by the Committee,
of a Deferral Commitment and a Form of Payment
Designation to the Committee no later than thirty (30)
days prior to the beginning of the Deferral Period.
c) First-Year Participation. When an individual first
becomes eligible to participate during a Deferral
Period, a Deferral Commitment may be submitted to the
Committee within thirty (30) days after the Committee
notifies the individual of eligibility to participate.
Such Deferral Commitment will be effective only with
regard to Compensation earned and payable following
submission of the Deferral Commitment to the Committee.
3.2. Form of Deferral. A Participant may elect a Deferral
Commitment as follows:
a) Form of Deferral Commitment. A Deferral Commitment
shall be made with respect to salary and/or bonus
payable by the Company to a Participant during the
immediately succeeding Deferral Period, and shall
designate the portion of each deferral that shall be
allocated among the various Accounts. The Participant
shall set forth the amount to be deferred as either a
full percentage of salary and/or bonus (the Participant
may designate a different percentage of salary and bonus
that is to be deferred under this Plan), or as a stated
dollar amount. Salary Deferral Commitments shall be
offset by amounts deferred by the Participant into the
401(k) Plan, and shall be made in roughly equal amounts
over the calendar year, but only after the Participant
has reached the maximum deferral amounts permitted under
the 401(k) Plan. Bonus Deferral Commitments will be in
addition to contributions from the bonus to the 401(k)
Plan. In addition, the Deferral Commitment shall
specify the Participant's initial allocation of the
amounts deferred into each Account among the various
available Valuation Funds
<PAGE>
<PAGE>
b) Period of Commitment. Once a Participant has made a
Deferral Commitment, that Commitment shall remain in
effect for the next succeeding Deferral Period and shall
remain in effect for all future Deferral Periods unless
revoked or amended in writing by the Participant and
delivered to the Committee no later than thirty (30)
days prior to the beginning of a subsequent Deferral
Period.
3.3. Limitations on Deferral Commitments. The following
limitations shall apply to a Deferral Commitment, subject
to amendment by the Committee upon providing written notice
to all Participants:
a) Maximum. The maximum amount of each payment of base
salary that may be deferred into this Plan and the
401(k) Plan shall be fifteen percent (15%) of base
salary, and the maximum amount of each payment of bonus
or incentive compensation that may be deferred into this
Plan shall be twenty-five percent (25%) of bonus or
incentive compensation.
b) Minimum. The minimum amount of each payment of base
salary that may be deferred shall be 1% of base pay, and
the minimum amount of each payment of bonus or incentive
compensation that may be deferred shall be 1% of the
bonus or $1,000 if a dollar amount is specified.
3.4. Commitment Limited by Termination. If a Participant
terminates employment with Company prior to the end of the
Deferral Period, the Deferral Period shall end as of the
date of termination.
3.5. Modification of Deferral Commitment. A Deferral Commitment
shall be irrevocable by the Participant during a Deferral
Period.
3.6. Change in Employment Status. If the Committee determines
that a Participant's employment performance is no longer at
a level that warrants reward through participation in this
Plan, but does not terminate the Participant's employment
with Company, the Participant's existing Deferral
Commitment shall terminate at the end of the Deferral
Period, and no new Deferral Commitment may be made by such
Participant after notice of such determination is given by
the Committee, unless the Participant later satisfies the
requirements of '3.1, above and has Committee approval. If
the Committee, in its sole discretion, determines that the
Participant no longer qualifies as a member of a select
group of management or highly compensated employees, as
determined in accordance with the Employee Retirement
Income Security Act of 1974, as amended, the Committee may,
in its sole discretion terminate any Deferral Commitment
for that year, prohibit the Participant from making any<PAGE>
<PAGE>
future Deferral Commitments and/or distribute the
Participant's Account Balances in accordance with Article
V of this Plan as if the Participant had terminated
employment with the Company as of that time.
ARTICLE IV - DEFERRED COMPENSATION ACCOUNT
4.1. Accounts. The Compensation deferred by a Participant under
the Plan, any Matching Contributions, Discretionary
Contributions and Interest shall be credited to the
Participant's Account(s). Separate sub-accounts may be
maintained to reflect the different Accounts chosen by the
Participant, and the Participant shall designate the
portion of each deferral that will be credited to each
Account as set forth in Section 3.2(a), above. These
Accounts shall be used solely to calculate the amount
payable to each Participant under this Plan and shall not
constitute a separate fund of assets.
4.2. Timing of Credits; Withholding. A Participant's deferred
Compensation shall be credited to each Account designated
by the Participant on the last day of the month during
which the Compensation deferred would have otherwise been
payable to the Participant, except that the Committee shall
have complete discretion to establish administrative
procedures, to the extent practical, to insure that the
Participant's deferrals into the 401(k) Plan are maximized
to the extent permitted by law. Any Matching Contributions
shall be credited to each Participant's Retirement Account
on the last day of the Deferral Period during which the
deferred Compensation to which the Matching Contributions
relates was credited to each Account. Any Discretionary
Contributions shall be credited to the Retirement Account
as provided by the Committee. Any withholding of taxes or
other amounts with respect to deferred Compensation that is
required by local, state or federal law shall be withheld
from the Participant's corresponding non-deferred portion
of the Compensation to the maximum extent possible, and any
remaining amount shall reduce the amount credited to the
Participant's Account in a manner specified by the
Committee.
4.3. Valuation Funds. A Participant shall designate, at a time
and in a manner acceptable to the Committee, one or more
Valuation Funds for each Account for the sole purpose of
determining the amount of Interest to be credited or
debited to such Account. Such election shall designate the
portion of each deferral of Compensation made into each
Account that shall be allocated among the available
Valuation Fund(s), and such election shall apply to each
succeeding deferral of Compensation until such time as the
Participant shall file a new election with the Committee.<PAGE>
<PAGE>
Upon notice to the Committee, the Participant may also
reallocate the balance in each Valuation Fund among the
other available Valuation Funds as of the next succeeding
Determination Date, but in no event shall such re-
allocation occur more frequently than quarterly.
4.4. Matching Contributions. Company shall credit a Matching
Contribution to the Participant's Retirement Account with
respect to the Compensation deferred by the Participant
under this Plan during a Deferral Period. Such Matching
Contribution shall be equal to one hundred percent (100%)
of the first three percent (3%) of the Participant's
Compensation before such deferrals, plus fifty percent
(50%) of the next two percent (2%) of the Participant's
Compensation before such deferrals. For purposes of this
Plan only base Compensation shall not include compensation
of any participant which is in excess of one hundred sixty
thousand dollars ($160,000) in any year or such other sum
as the committee shall determine from time to time. The
Matching Contribution to this Plan shall be reduced by any
Matching Contributions credited on behalf of the
Participant into the 401(k) Plan. The Matching
Contribution shall be credited to the Retirement Account in
the same proportion as set forth in section 4.1 above.
4.5. Discretionary Contributions. Company may make
Discretionary Contributions to a Participant's Retirement
Account. Discretionary Contributions shall be credited at
such times and in such amounts as recommended by the
Committee and approved by the Compensation Committee of the
Board, or the Board in its sole discretion shall determine.
Unless the Committee specifies otherwise, such
Discretionary Contribution shall be allocated to the
Retirement Account.
4.6. Determination of Accounts. Each Participant's Account as
of each Determination Date shall consist of the balance of
the Account as of the immediately preceding Determination
Date, adjusted as follows:
a) New Deferrals. Each Account shall be increased by any
deferred Compensation credited since such prior
Determination Date in the proportion chosen by the
Participant.
b) Company Contributions. The Retirement Account shall be
increased by any Matching and/or Discretionary
Contributions credited since such prior Determination
Date in the same proportion chosen by the Participant
with respect to new deferrals as set forth above.
c) Distributions. Each Account shall be reduced by the
amount of each benefit payment made from that Account
since the prior Determination Date. Distributions shall<PAGE>
<PAGE>
be deemed to have been made proportionally from each of
the Valuation Funds maintained within such Account based
on the proportion that such Valuation Fund bears to the
sum of all Valuation Funds maintained within such
Account for that Participant as of the Determination
Date immediately preceding the date of payment.
d) Interest. Each Account shall be increased or decreased
by the Interest credited to such Account since such
Determination Date as though the balance of that Account
as of the beginning of the current month had been
invested in the applicable Valuation Funds chosen by the
Participant.
4.7. Vesting of Accounts. Each Participant shall be vested in
the amounts credited to such Participant's Account and
Interest thereon as follows:
a) Amounts Deferred. A Participant shall be one hundred
percent (100%) vested at all times in the amount of
Compensation elected to be deferred under this Plan and
Interest thereon.
b) Matching Contributions. A Participant shall be one
hundred percent (100%) vested at all times in the amount
of the Matching Contributions credited to the
Participant's Retirement Account and Interest thereon.
c) Discretionary Contributions. A Participant's
Discretionary Contributions and Interest thereon shall
become vested as determined by the Compensation
Committee of the Board, or the Board.
4.8. Statement of Accounts. The Committee shall give to each
Participant a statement showing the balances in the
Participant's Account on a quarterly basis.
ARTICLE V - PLAN BENEFITS
5.1. Retirement Account. The vested portion of a Participant's
Retirement Account shall be distributed to the Participant
upon the termination of employment with the Company.
Benefits under this section shall be payable as soon as
administratively practical after termination of employment.
The form of benefit payment shall be that form selected by
the Participant pursuant to Section 5.4, below, unless the
Participant terminates employment prior to Retirement, in
which event, the Retirement Account shall be paid in the
form of a lump sum payment.
5.2. In-Service Account. The vested portion of a Participant's
In-Service Account shall be distributed to the Participant
upon the date chosen by the Participant in the first
Deferral Commitment which designated a portion of the
Compensation deferred be allocated to the In-Service
Account, provided that the date specified shall not be<PAGE>
<PAGE>
prior to the fifth anniversary of the first Deferral
Commitment electing an In-Service distribution. The
permitted forms of benefit payments are:
a) A lump sum amount which is equal to the vested Account
balance; and,
b) Annual installments for a period of five (5) years where
the annual payment shall be equal to the balance of the
Account or sub-account immediately prior to the payment,
multiplied by a fraction, the numerator of which is one
(1) and the denominator of which commences with five (5)
and is reduced by one (1) in each succeeding year,
unless the total amount in the Participant's In-Service
Account as of the date chosen by the Participant for
payment is less than $5,000, the In-Service Account
shall be paid in a lump sum, notwithstanding any
election by the Participant to the contrary. Interest
on the unpaid balance shall be based on the most recent
allocation among the available Valuation Funds chosen by
the Participant, made in accordance with Section 4.3,
above.
Notwithstanding anything to the contrary in this section,
if the Participant terminates employment with the Company
prior to the date so chosen by the Participant, the vested
portion of the In-Service Account shall be added to the
Retirement Account as of the date of termination of service
and shall be paid in accordance with the provisions of
Section 5.1, above.
5.3. Death Benefit. Upon the death of a Participant prior to
the commencement of benefits under this Plan from any
Account, Company shall pay to the Participant's beneficiary
an amount equal to the vested Account balance in that
Account in a manner chosen by the Participant in the most
recent Deferral Commitment. In the event of the death of
the Participant after the commencement of benefits under
this Plan from any Account, the benefits from that
Account(s) shall be paid to the Participant's designated
Beneficiary from that Account at the same time and in the
same manner as if the Participant had survived.
5.4. Form of Payment. Unless otherwise specified in this Plan,
the benefits payable from any Account under this Plan shall
be paid in the form of benefit as provided, and specified
by the Participant in the Form of Payment Designation. The
most recently submitted Form of Payment Designation shall
be effective for the entire vested Account balance unless
amended in writing by the Participant and delivered to the
Committee. If, at the time payment of benefits under this
Plan become due and payable, the Participant's most recent
election as to the form of payment was made within one (1)
year of such payment, then the most recent election made by<PAGE>
<PAGE>
the Participant more that one year prior to the time of
payment shall be used to determine the form of payment.
The permitted forms of benefit payments with respect to the
Retirement Account are:
a) A lump sum amount which is equal to the vested Account
balance; and,
b) Annual installments for a period of up to ten (10) years
where the annual payment shall be equal to the balance
of the Account or sub-account immediately prior to the
payment, multiplied by a fraction, the numerator of
which is one (1) and the denominator of which commences
at the number of annual payment initially chosen and is
reduced by one (1) in each succeeding year. Interest on
the unpaid balance shall be based on the most recent
allocation among the available Valuation Funds chosen by
the Participant, made in accordance with Section 4.3,
above.
5.5. Small Account. If the total of a Participant's vested,
unpaid Account balances as of the Participant's Retirement
is less than $50,000, the remaining unpaid, vested
Account(s) shall be paid in a lump sum, notwithstanding any
election by the Participant to the contrary.
5.6. Withholding; Payroll Taxes. Company shall withhold from
any payment made pursuant to this Plan any taxes required
to be withheld from such payments under local, state or
federal law. A Beneficiary, however, may elect not to have
withholding of federal income tax pursuant to Section
3405(a)(2) of the Code, or any successor provision thereto.
5.7. Payment to Guardian. If a Plan benefit is payable to a
minor or a person declared incompetent or to a person
incapable of handling the disposition of the property, the
Committee may direct payment to the guardian, legal
representative or person having the care and custody of
such minor, incompetent or person. The Committee may
require proof of incompetency, minority, incapacity or
guardianship as it may deem appropriate prior to
distribution. Such distribution shall completely discharge
the Committee and Company from all liability with respect
to such benefit.
5.8. Effect of Payment. The full payment of the applicable
benefit under this Article V shall completely discharge all
obligations on the part of the Company to the Participant
(and the Participant's Beneficiary) with respect to the
operation of this Plan, and the Participant's (and
Participant's Beneficiary's) rights under this Plan shall
terminate.
<PAGE>
<PAGE>
ARTICLE VI - BENEFICIARY DESIGNATION
6.1. Beneficiary Designation. Each Participant shall have the
right, at any time, to designate one (1) or more persons or
entity as Beneficiary (both primary as well as secondary)
to whom benefits under this Plan shall be paid in the event
of Participant's death prior to complete distribution of
the Participant's vested Account balance. Each Beneficiary
designation shall be in a written form prescribed by the
Committee and shall be effective only when filed with the
Committee during the Participant's lifetime. Designation
by a married Participant to the Participant's spouse of
less than a fifty percent (50%) interest in the benefit due
shall not be effective unless the spouse executes a written
consent that acknowledges the effect of the designation, or
it is established that the consent cannot be obtained
because the spouse cannot be located.
6.2. Changing Beneficiary. Any Beneficiary designation may be
changed by an unmarried Participant without the consent of
the previously named Beneficiary by the filing of a new
Beneficiary designation with the Committee. A married
Participant's Beneficiary designation may be changed by a
Participant with the consent of the Participant's spouse as
provided for in Section 6.1 above, by the filing of a new
designation shall cancel all designations previously filed.
6.3. Change in Marital Status. If the Participant's marital
status changes after the Participant has designated a
Beneficiary, the following shall apply:
a) If the Participant is married at death but was unmarried
when the designation was made, the designation shall be
void unless the spouse has consented to it in the manner
prescribed in Section 6.1 above.
b) If the Participant is unmarried at death but was married
when the designation was made:
i) The designation shall be void if the spouse was named as
Beneficiary.
ii) The designation shall remain valid if a non-spouse
Beneficiary was named.
c) If the Participant was married when the designation was
made and is married to a different spouse at death, the
designation shall be void unless the new spouse has
consented to it in the manner prescribed in Section 6.1
above.
6.4. No Beneficiary Designation. If any Participant fails to
designate a Beneficiary in the manner provided above, if
the designation is void, or if the Beneficiary designated
by a deceased Participant dies before the Participant or
before complete distribution of the Participant's benefits,<PAGE>
<PAGE>
the Participant's Beneficiary shall be the person in the
first of the following classes in which there is a
survivor:
a) The Participant's surviving spouse;
b) The Participant's children in equal shares, except that
if any of the children predeceases the Participant but
leaves surviving issue, then such issue shall take by
right of representation the share the deceased child
would have taken if living;
c) The Participant's estate.
6.5. Effect of Payment. Payment to the Beneficiary shall
completely discharge the Company's obligations under this
Plan.
ARTICLE VII - ADMINISTRATION
7.1. Committee; Duties. This Plan shall be administered by the
Committee, which shall consist of not less than three (3)
persons appointed by the CEO, except after a Change in
Control as provided in Section 7.5 below. The Committee
shall have the authority to make, amend, interpret and
enforce all appropriate rules and regulations for the
administration of the Plan and decide or resolve any and
all questions, including interpretations of the Plan, as
may arise in such administration. A majority vote of the
Committee members shall control any decision. Members of
the Committee may be Participants under this Plan.
7.2. Agents. The Committee may, from time to time, employ
agents and delegate to them such administrative duties as
it sees fit, and may from time to time consult with counsel
who may be counsel to the Company.
7.3. Binding Effect of Decisions. The decision or action of
the Committee with respect to any question arising out of
or in connection with the administration, interpretation
and application of the Plan and the rules and regulations
promulgated hereunder shall be final, conclusive and
binding upon all persons having any interest in the Plan.
7.4. Indemnity of Committee. The Company shall indemnify and
hold harmless the members of the Committee against any and
all claims, loss, damage, expense or liability arising from
any action or failure to act with respect to this Plan on
account of such member's service on the Committee, except
in the case of gross negligence or willful misconduct.
7.5. Election of Committee After Change in Control. After a
Change in Control, vacancies on the Committee shall be
filled by majority vote of the remaining Committee members
and Committee members may be removed only by such a vote. <PAGE>
<PAGE>
If no Committee members remain, a new Committee shall be
elected by majority vote of the Participants in the Plan
immediately preceding such Change in control. No amendment
shall be made to Article VII or other Plan provisions
regarding Committee authority with respect to the Plan
without prior approval by the Committee.
ARTICLE VIII - CLAIMS PROCEDURE
8.1. Claim. Any person or entity claiming a benefit,
requesting an interpretation or ruling under the Plan
(hereinafter referred to as "Claimant"), or requesting
information under the Plan shall present the request in
writing to the Committee, which shall respond in writing as
soon as practicable.
8.2. Denial of Claim. If the claim or request is denied, the
written notice of denial shall state:
a) The reasons for denial, with specific reference to the
Plan provisions on which the denial is based;
b) A description of any additional material or information
required and an explanation of why it is necessary; and
c) An explanation of the Plan's claim review procedure.
8.3. Review of Claim. Any Claimant whose claim or request is
denied or who has not received a response within sixty (60)
days may request a review by notice given in writing to the
Committee. Such request must be made within sixty (60)
days after receipt by the Claimant of the written notice of
denial, or in the event Claimant has not received a
response sixty (60) days after receipt by the Committee of
Claimant's claim or request. The claim or request shall be
reviewed by the Committee which may, but shall not be
required to, grant the Claimant a hearing. On review, the
claimant may have representation, examine pertinent
documents, and submit issues and comments in writing.
8.4. Final Decision. The decision on review shall normally be
made within sixty (60) days after the Committee's receipt
of claimant's claim or request. If an extension of time is
required for a hearing or other special circumstances, the
Claimant shall be notified and the time limit shall be one
hundred twenty (120) days. The decision shall be in
writing and shall state the reasons and the relevant Plan
provisions. All decisions on review shall be final and
bind all parties concerned.
<PAGE>
<PAGE>
ARTICLE IX - AMENDMENT AND TERMINATION OF PLAN
9.1. Amendment. The Board may at any time amend the Plan by
written instrument, notice of which is given to all
Participants and to Beneficiary receiving installment
payments, subject to the following:
a) Preservation of Account Balance. No amendment shall
reduce the amount accrued in any Account as of the date
such notice of the amendment is given.
b) Changes in Interest Rate. No amendment shall reduce,
either prospectively or retroactively, the rate of
Interest to be credited to the amount already accrued in
any of the Participant's Accounts and any amounts
credited to the Account under Deferral Commitments
already in effect on that date, except as may be
provided in section 2.21, above as a result of a
selection or deletion of available Valuation Funds.
Future Account Balances will depend on the Valuation
Fund Performance.
9.2. Company's Right to Terminate. The Board may at any time
partially or completely terminate the Plan if, in its
judgement, the tax, accounting or other effects of the
continuance of the Plan, or potential payments thereunder
would not be in the best interests of Company.
a) Partial Termination. The Board may partially terminate
the Plan by instructing the Committee not to accept any
additional Deferral Commitments. If such a partial
termination occurs, the Plan shall continue to operate
and be effective with regard to Deferral Commitments
entered into prior to the effective date of such partial
termination.
b) Complete Termination. The Board may completely
terminate the Plan by instructing the Committee not to
accept any additional Deferral Commitments, and by
terminating all ongoing Deferral Commitments. In the
event of complete termination, the Plan shall cease to
operate and Company shall distribute each Account to the
appropriate Participant. Payment shall be made as a lump
sum or in the number of annual installments indicated
below based on the sum of the Participant's Account
Balances at the time of termination of the Plan by the
Board where the annual payment shall be equal to the
balance of the Accounts immediately prior to the
payment, multiplied by a fraction, the numerator of
which is one (1) and the denominator of which commences
at the number of annual payment indicated below and is
reduced by one (1) in each succeeding year:
<PAGE>
<PAGE>
Account Balance Payout Period
--------------- -------------
Less than $10,000 Lump Sum
$10,000 but less than $50,000 3 Years
More than $50,000 5 Years
Interest on the unpaid balance shall be based on the
most recent allocation among the available Valuation
Funds chosen by the Participant in accordance with
Section 4.3, above.
ARTICLE X - MISCELLANEOUS
10.1. Unfunded Plan. This plan is an unfunded plan maintained
primarily to provide deferred compensation benefits for a
select group of "management or highly-compensated
employees" within the meaning of Sections 201, 301, and 401
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and therefore is exempt from the
provisions of Parts 2, 3 and 4 of Title I of ERISA.
Accordingly, the Board may terminate the Plan and make no
further benefit payments or remove certain employees as
Participants if it is determined by the United States
Department of Labor, a court of competent jurisdiction, or
an opinion of counsel that the Plan constitutes an employee
pension benefit plan within the meaning of Section 3 (2) of
ERISA (as currently in effect or hereafter amended) which
is not so exempt.
10.2. Company Obligation. The obligation to make benefit
payments to any Participant under the Plan shall be an
obligation solely of the Company with respect to the
deferred Compensation receivable from, and contributions
by, that Company and shall not be an obligation of another
company.
10.3. Unsecured General Creditor. Notwithstanding any other
provision of this Plan, Participants and Participants'
Beneficiary shall be unsecured general creditors, with no
secured or preferential rights to any assets of Company or
any other party for payment of benefits under this Plan.
Any property held by Company for the purpose of generating
the cash flow for benefit payments shall remain its
general, unpledged and unrestricted assets. Company's
obligation under the Plan shall be an unfunded and
unsecured promise to pay money in the future.
10.4. Trust Fund. Company shall be responsible for the payment
of all benefits provided under the Plan. At its
discretion, Company may establish one (1) or more trusts,
with such trustees as the Board may approve, for the
purpose of assisting in the payment of such benefits. <PAGE>
<PAGE>
Although such a trust shall be irrevocable, its assets
shall be held for payment of all Company's general
creditors in the event of insolvency. To the extent any
benefits provided under the Plan are paid from any such
trust, Company shall have no further obligation to pay
them. If not paid from the trust, such benefits shall
remain the obligation of Company.
10.5. Nonassignability. Neither a Participant nor any other
person shall have any right to commute, sell, assign,
transfer, pledge, anticipate, mortgage or otherwise
encumber, transfer, hypothecate or convey in advance of
actual receipt the amounts, if any, payable hereunder, or
any part thereof, which are, and all rights to which are,
expressly declared to be unassignable and non-transferable.
No part of the amounts payable shall, prior to actual
payment pursuant to the terms of this Plan be subject to
seizure or sequestration for the payment of any debts,
judgements, alimony or separate maintenance owed by a
Participant or any other person, nor be transferable by
operation of law in the event of a Participant's or any
other person's bankruptcy or insolvency. All amounts
credited under this Plan to any Participant's Account
constitute property of the Company until payment is in fact
made to the Participant pursuant to the terms hereof.
10.6. Not a Contract of Employment. This Plan shall not
constitute a contract of employment between Company and the
Participant. Nothing in this Plan shall give a Participant
the right to be retained in the service of Company or to
interfere with the right of the Company to discipline or
discharge a Participant at any time.
10.7. Protective Provisions. A Participant will cooperate with
Company by furnishing any and all information requested by
Company, in order to facilitate the payment of benefits
hereunder, and by taking such physical examinations as
Company may deem necessary and taking such other action as
may be requested by Company. Participants may also be
required to enroll in Life Insurance Programs as determined
by the Company providing equal benefits under the Company's
Group Life Insurance Program.
10.8. Governing Law. The provisions of this Plan shall be
construed and interpreted according to the laws of the
State of Missouri, except as preempted by federal law.
10.9. Validity. If any provision of this Plan shall be held
illegal or invalid for any reason, said illegality or
invalidity shall not affect the remaining parts hereof, but
this Plan shall be construed and enforced as if such
illegal and invalid provision had never been inserted
herein.<PAGE>
<PAGE>
10.10. Notice. Any notice required or permitted under the Plan
shall be sufficient if in writing and hand delivered or
sent by registered or certified mail. Such notice shall
be deemed given as of the date of delivery or, if delivery
is made by mail, as of the date shown on the postmark on
the receipt for registration or certification. Mailed
notice to the Committee shall be directed to the company's
address. Mailed notice to a Participant or Beneficiary
shall be directed to the individual's last known address
in company's records.
10.11. Successors. The provisions of this Plan shall bind and
inure to the benefit of Company and its successors and
assigns. The term successors as used herein shall include
any corporate or other business entity which shall,
whether by merger, consolidation, purchase or otherwise
acquire all or substantially all of the business and
assets of Company, and successors of any such corporation
or other business entity.
EXHIBIT 21
SUBSIDIARIES OF INSITUFORM TECHNOLOGIES, INC.
The following table sets forth certain information as of
December 31, 1998 concerning the Company and certain of its
subsidiaries. Unless otherwise indicated all securities of such
subsidiaries are owned by the Company:
<TABLE>
<CAPTION>
% of
Name Place of Incorporation Voting Securities
---- ---------------------- -----------------
<S> <C> <C>
Affholder, Inc. Missouri 100(1)
INA Acquisition Corp. Delaware 100
Insituform Technologies USA, Delaware 100(1)
Inc.
Insituform France S.A. France 66.6(2)
Insituform Gulf South, Inc.* Delaware 100
Insituform Holdings (UK) United Kingdom 100(2)
Ltd.
Insituform Japan K.K. Japan 100(2)
Insituform Licensees
B.V./S.A.**** Netherlands and Delaware 100(2)
Insituform Linings Plc. United Kingdom 51(3)
Insituform Mid-America, Inc.* Delaware 100
Insituform Midwest, Inc.** Delaware 100
Insituform Missouri, Inc.** Delaware 100(1)
Insituform (Netherlands)
B.V. Netherlands and Delaware 100(4)
Insituform of New England, Massachusetts
Inc.* 100
Insituform North, Inc.** Delaware 100(1)
Insituform Plains, Inc.* Delaware 100(1)
Insituform de Puerto Rico,
Inc.* Delaware 100(1)
Insituform Rockies, Inc.* Delaware 100(1)
Insituform Southeast, Inc.* Florida 100(1)
Insituform Southwest, Inc. Delaware 100
Insituform Technologies
Limited Alberta 100(1)
Insituform Technologies
Limited United Kingdom 100(3)
Insituform Texark, Inc.* Delaware 100(1)
Insituform West, Inc.*** Oregon 100
Insituform Mar-Tech
Limited***** Alberta 100(5)
Midsouth Partners
(partnership) Tennessee (Partnership) 57.5(6)
NuPipe, Inc.*** Oregon 100
NuPipe International, Inc.*** Delaware 100(7)
NuPipe Limited United Kingdom 100(3)
% of
Name Place of Incorporation Voting Securities
---- ---------------------- -----------------
PALTEM Systems, Inc.*** Delaware 100(1)
Tite Liner NRO Corp. Alberta 100(1)
United Pipelines Argentina Argentina 100(1)
S.A.
United Pipeline de Mexico Mexico 55(1)
S.A. de C.V.
United Pipeline Systems USA,
Inc. Delaware 100(1)
United Sistema de Tuberias
Ltda. Chile 100(8)
Video Injection S.A. France 80(2)
Other subsidiaries of the Company are not named in the table
above. Such unnamed subsidiaries considered in the aggregate as a
single subsidiary, would not constitute a significant subsidiary.
- -------------------
(1) Securities are owned by Insituform Mid-America, Inc. which,
effective December 31, 1998, was merged into the Company.
(2) Securities are owned by INA Acquisition Corp.
(3) Securities are owned by Insituform Holdings (UK) Ltd.
(4) Securities are owned by Insituform Licensees B.V./S.A.; which,
effective December 31, 1998, was merged into INA Acquisition
Corp.
(5) Securities are owned by Insituform Technologies Limited
(Alberta).
(6) Securities are owned 42.5% by E-Midsouth, Inc.(a wholly-
owned subsidiary of the Company which, effective December 31,
1998, was merged into the Company, and 15% by Insituform
Southwest, Inc.
(7) Securities are owned by NuPipe, Inc.
(8) Securities are owned 60% by Insituform Mid-America, Inc.
(which, effective December 31, 1998, was merged into the
Company) and 40% by INA Acquisition Corp.
* Effective December 31, 1998, such subsidiary was merged into
the Company.
** Effective December 31, 1998, such subsidiary was merged into
Insituform Technologies USA, Inc.
*** Effective March 31, 1999, such subsidiary will be merged
into the Company.
**** Effective December 31, 1998, such subsidiary was merged into
INA Acquisition Corp.
***** Effective December 31, 1998, such subsidiary was merged
into Insituform Technologies Limited (Alberta).
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report, dated February 17, 1999, included in
Insituform Technologies, Inc.'s 1998 Form 10-K, into the Company's
previously filed Registration Statements on Form S-8 Nos. 33-82486,
33-82488 and 33-63953.
s/Arthur Andersen LLP
- ---------------------------
ARTHUR ANDERSEN LLP
St. Louis, Missouri,
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 76,904
<SECURITIES> 1
<RECEIVABLES> 64,648
<ALLOWANCES> 2,909
<INVENTORY> 11,282
<CURRENT-ASSETS> 170,105
<PP&E> 56,421
<DEPRECIATION> 66,847
<TOTAL-ASSETS> 304,608
<CURRENT-LIABILITIES> 48,149
<BONDS> 0
0
0
<COMMON> 273
<OTHER-SE> 139,232
<TOTAL-LIABILITY-AND-EQUITY> 304,608
<SALES> 24,018
<TOTAL-REVENUES> 300,958
<CGS> 16,766
<TOTAL-COSTS> 201,056
<OTHER-EXPENSES> 61,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,099
<INCOME-PRETAX> 31,859
<INCOME-TAX> 13,079
<INCOME-CONTINUING> 17,887
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,887
<EPS-PRIMARY> 0.67
<EPS-DILUTED> 0.66
</TABLE>
