Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by Registrant [ X ]
Filed by Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or 240.14a-12
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14-6(e)(2)
INSITUFORM EAST, INCORPORATED
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i) (2)
of Item 22(a)(2)of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on
which the filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing by registration for which the
offsetting fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date of
its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, DECEMBER 12, 1997
To the Stockholders of Insituform East, Incorporated:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
Insituform East, Incorporated, a Delaware corporation (the "Company" or the
"Corporation"), for the fiscal year ended June 30, 1997 will be held at the Club
Hotel by Doubletree, 9100 Basil Court, Landover, Maryland 20774 on Friday,
December 12, 1997, at 10:00 a.m. local time, for the following purposes:
1. To elect directors of the Corporation; and
2. To transact such other business as may properly come before
the meeting and any adjournments thereof.
The Board of Directors has fixed the close of business on October 16,
1997, as the Record Date for determining stockholders entitled to notice of, and
to vote at, the Annual Meeting.
A copy of the Corporation's Annual Report for the fiscal year ended
June 30, 1997, a Proxy and a Proxy Statement accompany this Notice.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE AND
PROMPTLY MAIL THE ENCLOSED PROXY IN THE ENVELOPE PROVIDED. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. A PROMPT RESPONSE WILL ASSURE YOUR
PARTICIPATION IN THE MEETING AND REDUCE THE CORPORATION'S EXPENSE IN SOLICITING
PROXIES. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors,
Robert F. Hartman
Secretary
Landover, Maryland
November 3, 1997
<PAGE>
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 12, 1997
PROXY STATEMENT
SOLICITATION AND REVOCABILITY OF PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Insituform East, Incorporated, a
Delaware corporation (the "Company" or the "Corporation"), for use at the Annual
Meeting of Stockholders to be held at the Club Hotel by Doubletree, 9100 Basil
Court, Landover, Maryland, 20774 on Friday, December 12, 1997, at 10:00 a.m.
local time, and any adjournments thereof (the "Meeting").
The Board of Directors has fixed the close of business on October 16,
1997, as the record date (the "Record Date") for the determination of
stockholders who are entitled to notice of, and to vote at, the Meeting.
Stockholders are requested to complete, sign and date the accompanying
Proxy and return it promptly to the Company in the enclosed envelope. Any proxy
given pursuant to this solicitation may be revoked by the person executing it at
any time prior to or at the Meeting.
Shares of Common Stock and shares of Class B Common Stock represented
by valid proxies received in time for the Meeting, and not revoked, will be
voted as specified therein. If no instructions are given, the respective shares
of common stock will be voted FOR the election as directors of the Company those
nominees for director designated for election by holders of shares of Common
Stock and listed under the caption "Proposal No. 1 -- Election of Directors"
herein; FOR the election as directors of the Corporation those nominees for
director designated for election by holders of shares of Class B Common Stock
and listed under the caption "Proposal No. 1 -- Election of Directors" herein;
and, if authority is given to them, at the discretion of the proxy holders, on
any other matters that may properly come before the Meeting.
The cost of preparing, assembling, and mailing this Proxy Statement,
the Proxy and the Notice of Annual Meeting will be paid by the Company.
Additional solicitation by mail, telephone, telegraph or personal solicitation
may be done by directors, officers or regular employees of the Company. Such
persons will receive no additional compensation for such services. Brokerage
houses and other nominees, fiduciaries and custodians nominally holding shares
of Common Stock or Class B Common Stock of record will be requested to forward
proxy soliciting material to the beneficial owners of such shares, and will be
reimbursed by the Company for their reasonable expenses.
This Proxy Statement and the accompanying Notice of Annual Meeting of
Stockholders, Proxy, and Annual Report for the fiscal year ended June 30, 1997,
are first being mailed to the Company's stockholders of record on or about
November 3, 1997.
<PAGE>
OUTSTANDING SHARES AND VOTING RIGHTS
As of the Record Date, there were outstanding 4,059,266 shares of
Common Stock, par value four cents ($.04) per share (the "Common Stock"), and
297,596 shares of Class B Common Stock, par value four cents ($.04) per share
(the "Class B Common Stock"), which are the only classes of stock of the
Corporation outstanding. A quorum shall be constituted by the presence at the
Meeting of a majority of the outstanding shares of Common Stock, or 2,029,634 of
such shares, and a majority of the outstanding shares of Class B Common Stock,
or 148,799 of such shares.
Each share of Common Stock is entitled to one vote, and each share of
Class B Common Stock is entitled to ten votes, except with respect to the
election of directors and any other matter requiring the vote of Common Stock or
Class B Common Stock separately as a class. The holders of Common Stock, voting
as a separate class, are entitled to elect that number of directors which
constitutes 25% of the authorized number of members of the Board of Directors
and, if such 25% is not a whole number, then the holders of Common Stock are
entitled to elect the nearest higher whole number of directors that is at least
25% of such membership. The holders of Class B Common Stock, also voting as a
separate class, are entitled to elect the remaining directors. The affirmative
vote of the holders of a majority of each class of common stock present in
person or represented by proxy, provided a quorum of that class is present, is
necessary for the election of directors by the class. For purposes of
determining whether a proposal has received a majority vote, abstentions will be
included in the vote totals with the result that an abstention will have the
same effect as a negative vote. Where authority to vote shares is withheld,
including instances where brokers are prohibited from exercising discretionary
authority for beneficial owners who have not returned a proxy (so-called "broker
non-votes"), those shares will not be included in the vote totals and,
therefore, will have no effect on the vote.
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following information is furnished with respect to each person or
entity who is known to the Company to be the beneficial owner of more than 5% of
any class of the Company's voting securities as of the Record Date:
<TABLE>
<CAPTION>
Name & Address of Amount & Nature of Percent
Beneficial Owner Title of Class Beneficial Ownership of Class
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CERBCO, Inc. Common Stock 1,127,500 27.8% 1/
3421 Pennsy Drive Class B Common Stock 296,141 99.5% 1/
Landover, MD 20785
George Wm. Erikson 2/
CERBCO, Inc.
3421 Pennsy Drive
Landover, MD 20785
Robert W. Erikson 2/
CERBCO, Inc.
3421 Pennsy Drive
Landover, MD 20785
</TABLE>
- --------------------------------------------------------------------------------
1/ Through its ownership of such percentages of the outstanding shares of
Common Stock and Class B Common Stock, CERBCO, Inc. is entitled to cast
58.1% of all votes entitled to be cast on matters on which holders of
shares of both classes of the Company's common stock vote together.
2/ Messrs. George Wm. Erikson and Robert W. Erikson own 44.4% and 39.1%,
respectively, of the outstanding shares of Class B Common Stock of CERBCO,
Inc. On the basis of their stockholdings and management positions in
CERBCO, Inc., they could act together to control either the disposition or
the voting of the shares of the Company's Common Stock or Class B Common
Stock held by CERBCO, Inc. Messrs. George Wm. Erikson and Robert W. Erikson
are brothers.
SECURITY OWNERSHIP OF MANAGEMENT
The following information is furnished with respect to all directors of
the Company who were the beneficial owners of any shares of the Company's Common
Stock or Class B Common Stock as of the Record Date, and with respect to all
directors and officers of the Company as a group:
<PAGE>
<TABLE>
<CAPTION>
Amount & Nature of Beneficial Ownership
Name of Beneficial Owner Title of Class Owned Outright Exercisable Options Percent of Class
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
George Wm. Erikson 1/ Common Stock 16,500 75,000 2.0%
Robert W. Erikson 1/ Common Stock 0 75,000 1.7%
Calvin G. Franklin Common Stock 0 45,000 1.0%
Webb C. Hayes, IV Common Stock 0 45,000 1.0%
Paul C. Kincheloe, Jr Common Stock 0 45,000 1.0%
Jack Massar Common Stock 0 75,000 1.7%
Thomas J. Schaefer Common Stock 0 75,000 1.7%
All directors and officers as Common Stock 17,000 435,000 10.1%
a group (11 persons, Class B Common Stock 0 0 0.0%
including those named above)
</TABLE>
1/ Messrs. George Wm. Erikson and Robert W. Erikson own 44.4% and 39.1%,
respectively, of the outstanding shares of Class B Common Stock of CERBCO,
Inc. On the basis of their stockholdings and management positions in
CERBCO, Inc., they could act together to control either the disposition or
the voting of the shares of the Company's Common Stock or Class B Common
Stock held by CERBCO, Inc. Messrs. George Wm. Erikson and Robert W. Erikson
are brothers.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board of Directors is currently comprised of seven directors. The
terms of all presently serving directors expire upon the election and
qualification of the directors to be elected at the Meeting. The directors
elected at the Meeting will serve subject to the By-laws until the next Annual
Meeting of Stockholders for the fiscal year ending June 30, 1998, and until
their respective successors shall have been duly elected and qualified.
All of the seven persons presently serving as directors are nominees to
be elected at the Meeting and are listed below. It is intended that the
individuals named in the enclosed form of Proxy will vote their proxies in favor
of these nominees for the Company's directors, unless otherwise directed. The
Board has no reason to believe that any of the nominees for the office of
director will not be available for election as director. However, should any of
them become unwilling or unable to be nominated, it is intended that the
individuals named in the enclosed Proxy may vote for the election of such other
person as the Board may recommend.
PRESENT DIRECTORS WHO ARE NOMINATED FOR RE-ELECTION
Two of the seven nominees for election to the Company's Board of
Directors identified below have been designated for election by the holders of
shares of Common Stock, and only the holders of such shares may vote with
respect to these nominees. The remaining five nominees have been designated for
election by the holders of shares of Class B Common Stock, and only the holders
of such shares may vote with respect to these nominees. Accordingly, the
following list contains a designation as to those nominees to be elected by
holders of shares of Common Stock and those nominees to be elected by holders of
shares of Class B Common Stock: <TABLE> <CAPTION>
Name, Age, Principal Occupation, First Became Class of Common Stock
Business Experience and Directorships A Director For Which Nominated
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
George Wm. Erikson, Age 55 1/ 1984 Class B Common Stock
Chairman, member of the Chief Executive Officer Committee and General Counsel
since 1986, Chairman of the Board of Directors from 1985 to 1986; CERBCO, Inc.
- -- Chairman, General Counsel and Director since 1988; CERBERONICS, Inc. -- Vice
Chairman since 1988, Chairman from 1979 to 1988, Secretary from 1976 to 1988,
General Counsel since 1976 and Director since 1975; Capitol Office Solutions,
Inc. -- Chairman, General Counsel and Director from 1987 to June 30, 1997.
<PAGE>
Robert W. Erikson, Age 52 1/ 1985 Class B Common Stock
President since September 1991, Vice Chairman and member of the Chief
Executive Officer Committee since 1986, Vice Chairman of the Board of Directors
from 1985 to 1986; CERBCO, Inc. -- President, Vice Chairman and Director since
1988; CERBERONICS, Inc. -- Chairman since 1988, President from 1977 to 1988 and
Director since 1974; Capitol Office Solutions, Inc. -- Vice Chairman and
Director from 1987 to June 30, 1997; Director of The Palmer National Bank from
1983 to 1996, and Director of its successor, The George Mason Bank, N.A., until
June, 1997.
Calvin G. Franklin, Age 67 1994 Common Stock
President and Chief Executive Officer of Engineering Systems Consultants,
Inc. since 1992; Commanding General of D.C. National Guard from 1981 to 1992;
Director of Columbia First Bank from 1989 to 1995; Director of Signet Bank, N.A
from 1985 to 1989; retired Major General, U.S. Army.
Webb C. Hayes, IV, Age 49 1994 Class B Common Stock
Director and Executive Vice President of George Mason Bankshares, Inc. and
Chairman, President and CEO of The George Mason Bank, N.A., until June, 1997;
Chairman of the Board of Palmer National Bancorp., Inc. and The Palmer National
Bank from 1985 to 1996, President and Chief Executive Officer from 1983 to 1996;
Director of CERBCO, Inc. since 1991; Director of Capitol Office Solutions, Inc.
from 1992 to June 30, 1997; Director of the Federal Reserve Bank of Richmond
from 1992 to 1995.
Paul C. Kincheloe, Jr., Age 56 1994 Class B Common Stock
Practicing attorney and real estate investor since 1967; Partner in the law
firm of Kincheloe and Schneiderman since 1983; Director of CERBCO, Inc. since
1991; Director of Capitol Office Solutions, Inc. from 1992 to June 30, 1997;
Director of Herndon Federal Saving & Loan from 1970 to 1983; Director of First
Federal Savings & Loan of Alexandria from 1983 to 1989.
Jack Massar, Age 72 2/ 1991 Class B Common Stock
Independent business consultant since 1991; President of Insituform
Technologies, Inc. (formerly Insituform of North America, Inc.) from 1984 to
1991 (retired January 1991), Director from 1983 to 1987; President and Director
of NuPipe, Inc. from 1988 to 1991; Director of Insituform Mid-America, Inc. from
1983 to 1991; Director of Wellington Leisure Products, Inc. from 1991 to 1994.
Thomas J. Schaefer, Age 59 2/ 1981 Common Stock
Independent private investor since 1995; President, Chief Executive Officer
and Director of Columbia First Bank, N.A from 1988 to 1995; President and Chief
Executive Officer of Signet Bank, N.A. from 1981 to 1988 and Director of Signet
Bank, N.A. from 1978 to 1988; Director of CERBCO, Inc. from July 1990 to
November 1990.
- ----------------------------------------------------------------------------------------------------------------
1/ Messrs. George Wm. Erikson and Robert W. Erikson are brothers.
2/ Member of Audit Committee.
</TABLE>
<PAGE>
COMMITTEES OF THE BOARD OF DIRECTORS
AND MEETING ATTENDANCE
The Board of Directors has an Audit Committee, the members of which are
all outside directors. The names of the committee's members are indicated in the
table above. The Board of Directors does not have standing nominating or
compensation committees, or committees performing similar functions.
The Audit Committee, among its functions, reviews the Corporation's
financial policies and accounting systems, reviews the scope of the independent
public accountants' audit, and approves the duties and compensation of the
independent public accountants, both with respect to audit and any non-audit
services. The Audit Committee meets with the independent public accountants
outside the presence of corporate management or other employees to discuss
matters of concern, receive recommendations or suggestions for change and have a
free exchange of views and information.
During the fiscal year ended June 30, 1997, the Board of Directors met
on five occasions. The Audit Committee met on two occasions. Each incumbent
director attended more than 75% of both (i) the total number of meetings of the
Board of Directors, and (ii) the total number of meetings held by all committees
of the Board on which he served.
EXECUTIVE OFFICERS OF THE COMPANY
Information concerning Messrs. George Wm. Erikson and Robert W.
Erikson, who were executive officers and directors, is provided under the
section entitled "Present Directors Who are Nominated for Re-election." The
following table sets forth the name, age, position(s) held and business
experience of the individuals who were executive officers, but not directors, of
the Company throughout fiscal year 1997:
Raymond T. Verrey, Age 51
Vice President, Treasurer and Chief Financial Officer since 1988, Principal
Accounting Officer since 1987; employed by Touche Ross & Co. from 1975 to
1987, serving as an Audit Manager from 1981 to 1987.
John F. Mulhall, Age 51
Vice President of Sales and Marketing since 1988, Director of Sales and
Marketing from 1987 to 1988; employed by Translogic Corporation, a material
conveying system manufacturer, from 1972 to 1987, serving as Eastern
Regional Manager from 1979 to 1987.
Gregory Laszczynski, Age 43
Vice President of Operations since 1989, Director of Operations from 1987
to 1989; employed by FMC Corporation from 1984 to 1987, serving as a
Project Engineer.
Robert F. Hartman, Age 50
Vice President of Administration and Secretary since 1991; Vice President
and Controller of CERBCO, Inc. since 1988, Secretary since 1991; Vice
President and Treasurer of CERBERONICS, Inc. since 1988; employed by
Dynamac International, Inc. from 1985 to 1988, serving as Controller;
employed by CERBERONICS, Inc. from 1979 to 1985, serving as Vice President
and Treasurer from 1984 to 1985.
<PAGE>
EXECUTIVE COMPENSATION
JOINT COMPENSATION REPORT BY THE BOARD OF DIRECTORS
GENERAL
Pursuant to the Company's By-laws, the Chief Executive Officer
Committee (the "CEOC") -- consisting of the Chairman, the Vice Chairman, the
President, and such other officers of the Corporation as may from time to time
be determined by the Board -- performs the functions of the Chief Executive
Officer of the Company. Since August 30, 1991, the CEOC has consisted of George
Wm. Erikson, Chairman, and Robert W. Erikson, Vice Chairman and President.
The Company does not have a compensation committee. The CEOC, with the
annual review and oversight of the Board, determines the compensation for all
officers of the Company except the members of the CEOC. The Board as a whole,
considers compensation arrangements proposed by and for members of the CEOC,
and, pursuant to the By-laws, is the ultimate determiner of compensation
arrangements for members of the CEOC. When considering CEOC compensation
arrangements, Board review may be conducted with or without the presence (or
participation) of the CEOC members who are also members of the Board as the
Board deems appropriate under the circumstances. Resolutions of the Board
altering CEOC compensation arrangements, in any material way, are voted upon by
the Board with such CEOC members abstaining. A second vote is then taken with
all directors participating.
PHILOSOPHY
The executive compensation philosophy of the Company (which is intended
to apply to all of the executive officers of the Company, including the CEOC
members) is aimed at: (i) attracting and retaining qualified management to
implement the Company's business plan; (ii) establishing a direct link between
management compensation and the achievement of the Company's annual and
long-term performance goals; and (iii) recognizing and rewarding individual
initiative and achievement. The Board and CEOC believe that management
compensation should be set at levels that are competitive with compensation
arrangements provided by other companies with which the Company competes for
executive talent, and by other companies of similar size, business or location.
It is also the view of the Board and the CEOC members that the compensation of
management should have a significant component which is contingent upon the
Company's level of performance thereby encouraging executive officers to enhance
the profitability of the Company and thus increase shareholders' value by
aligning closely the financial interests of the Company's executive officers and
those of its shareholders. The Board reviews on an annual basis the compensation
arrangements of the Company's executive officers to ensure that such
arrangements are consistent with this executive compensation philosophy.
COMPONENTS OF COMPENSATION
The compensation program for the Company's officers, including members
of the CEOC, consists of: (a) base salary; (b) incentive cash bonuses; and (c)
compensation pursuant to plans.
Commencing in 1994, a publicly held corporation may not, subject to
limited exceptions, deduct for federal income tax purposes certain compensation
paid to certain executives in excess of $1 million in any taxable year (the
"Deduction Limitation"). While the Company's compensation programs generally are
not intended to qualify for any of the exceptions to the applicability of the
Deduction Limitation, it is not expected that compensation to executives of the
Company will exceed the Deduction Limitation in the foreseeable future.
<PAGE>
(a) Base Salary. Typically, the base salary level for each executive
officer (including members of the CEOC) is considered annually in September and
yearly adjustments, if any, are made effective on or about October 1st of each
year. The timing of such yearly reviews permits consideration of information
which is developed each year for the Company's annual report, including audited
financial statements for the fiscal year then ended June 30th. The CEOC is
empowered to adjust the annual base salary level of executive officers (other
than members of the CEOC) at other times during the year should it deem any such
adjustments appropriate, with such adjustments included in the annual officer
compensation review and approvals conducted by the Board each September.
The annual September review of base salary levels is subjective. No
specific factors, targets or criteria, such as the market value of the Company's
stock, are employed in any formula or other quantitative prescription to
determine base compensation. However, consistent with the Company's compensation
philosophy, consideration is given to individual initiative, individual
achievement and the Company's performance, as well as information on salaries
and other remuneration at other companies of similar size, business or location.
Applying the Company's compensation philosophy during the annual review
in September 1996, it was the judgment of the CEOC and the Board that the base
salary of each executive officer (including members of the CEOC) should be
increased by 3% effective October 1, 1996.
(b) Incentive Cash Bonuses. In addition to base compensation, the Board
annually considers, at its sole discretion, the award of an annual
return-on-equity ("ROE") incentive cash bonus for each of the officers of the
Company (including members of the CEOC). The incentive bonus amount, if approved
by the Board at the annual September review following the fiscal year in which
the ROE bonus is earned, is calculated by multiplying the Company's annual ROE
percentage (net earnings divided by weighted average equity less current
earnings) times the base compensation paid to the officers over the fiscal year.
The maximum annual individual incentive bonus eligible to any officer is limited
to an upper cap of 30% of the officer's base compensation. The underlying
concept of the ROE bonus is to have officer incentive compensation rise and fall
in direct parallel with the Company's overall profitability results obtained by
the officers on behalf of the shareholders.
For the fiscal year ended June 30, 1997, due to negative net earnings,
no incentive cash bonuses for officers were either earned or approved.
(c) Compensation Pursuant to Plans. Officers of the Company (including
members of the CEOC), are eligible to participate in the Employee Advantage
Plan. The plan is a non-contributory profit sharing retirement plan, and
includes a salary reduction feature under Section 401(k) of the Internal Revenue
Code. Participation in, and benefits acquired under, the Employee Advantage Plan
are on a nondiscretionary formula basis applicable to all employees.
<PAGE>
COMPENSATION OF MEMBERS OF THE CEOC
On September 13, 1996, the Board approved a 3% increase in base annual
salary from $204,173 to $210,298, effective October 1, 1996, for each current
member of the CEOC, namely, George Wm. Erikson and Robert W. Erikson. Approval
came after a review of total compensation conducted without members of the CEOC
present. The decision made by the Board to increase the base annual salary of
the CEOC members by 3% was subjective, taking into account the philosophical aim
of setting executive compensation, and was not based upon any particular
performance criteria. A resolution of the Board to increase the base annual
salary was voted upon twice by the Board, without and with CEOC members voting.
As a consequence of the Company's reported negative net earnings, the members of
the CEOC did not receive any cash incentive bonuses for fiscal year 1997.
Members of the CEOC participated in the Employee Advantage Plan during fiscal
year 1997 and received profit sharing contributions of $11,247. Mr. George Wm.
Erikson also received a 401(k) plan matching contribution of $366.
In approving the compensation of the CEOC members, the Board took into
account that while George Wm. Erikson and Robert W. Erikson were devoting the
predominate portion of their time and effort to the Company they were also
devoting a portion of their time and effort to the parent company, CERBCO, Inc.,
and to its majority-owned subsidiary, Capitol Office Solutions, Inc. The Board
believes the base salary levels set for George Wm. Erikson and Robert W. Erikson
were commensurate with the time and effort devoted to the activities of, and
their duties and responsibilities with, the Company. The Board of Directors
George Wm. Erikson
Robert W. Erikson
Calvin G. Franklin
Webb C. Hayes, IV
Paul C. Kincheloe, Jr.
Jack Massar
Thomas J. Schaefer
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company to each of the named executive officers for the fiscal years
ended June 30, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
----------------------
Annual Compensation Awards Payouts
------------------- ------------------ -------
Name Other Total Restricted
and Annual Annual Stock Options/ LTIP All Other
Principal Fiscal Salary Bonus Compensation Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) 2/ ($) ($) (#) ($) ($) 3/
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 1997 $208,649 $ 0 $ 0 $208,649 $ 0 15,000 $ 0 $11,613
Chairman & General 1996 201,555 22,393 0 223,948 0 15,000 0 11,264
Counsel 1/ 1995 196,555 31,457 0 228,012 0 15,000 0 12,033
Robert W. Erikson 1997 $208,649 $ 0 $ 0 $208,649 $ 0 15,000 $ 0 $11,247
President 1/ 1996 201,555 22,393 0 223,948 0 15,000 0 9,014
1995 196,555 31,457 0 228,012 0 15,000 0 10,118
John F. Mulhall 1997 $122,073 $ 0 $ 0 $122,073 $ 0 0 $ 0 $10,492
Vice President of 1996 118,023 13,112 0 131,135 0 0 0 8,639
Sales & Marketing 1995 114,993 18,404 0 133,397 0 0 0 7,926
Gregory Laszczynski 1997 $132,850 $ 0 $ 0 $132,850 $ 0 0 $ 0 $13,130
Vice President of 1996 124,335 13,814 0 138,149 0 0 0 10,531
Operations 1995 109,756 17,564 0 127,320 0 0 0 8,308
Raymond T. Verrey 1997 $ 99,861 $ 0 $ 0 $ 99,861 $ 0 0 $ 0 $ 9,170
Vice President & Chief 1996 96,568 10,729 0 107,297 0 0 0 7,564
Financial Officer 1995 94,076 15,056 0 109,132 0 0 0 6,859
Robert F. Hartman 1997 $ 88,808 $ 0 $ 0 $ 88,808 $ 0 0 $ 0 $ 7,826
Vice President of 1996 85,891 9,542 0 95,433 0 0 0 6,665
Administration & 1995 83,664 13,390 0 97,054 0 0 0 5,754
Secretary
- --------------------------------------------------------------------------------------------------------------------
1/ The Company's Chief Executive Officer Committee, consisting of the Chairman
and the President, exercises the duties and responsibilities of the Chief
Executive Officer of the Company.
2/ None of the named executive officers received perquisites or other personal
benefits in excess of the lesser of $50,000 or 10% of his total salary and
bonus.
3/ Contributions to the Insituform East, Incorporated Employee Advantage Plan,
as described on page 9
</TABLE>
COMPENSATION PURSUANT TO PLANS
Insituform East, Incorporated Employee Advantage Plan
The Company maintains a noncontributory profit sharing (retirement)
plan, the Insituform East, Incorporated Employee Advantage Plan (the "IEI
Advantage Plan"), in which all employees not covered by a collective bargaining
agreement and employed with the Company for at least one year are eligible to
participate. No employee is covered by a collective bargaining agreement. The
IEI Advantage Plan is administered by the Company's Board of Directors which
determines, at its discretion, the amount of the Company's annual contribution.
The Insituform East Board of Directors can authorize a contribution, on behalf
of the Company, of up to 15% of the compensation paid to participating employees
during the year. The plan is integrated with Social Security. Each participating
employee is allocated a portion of the Company's contribution based on the
amount of that employee's compensation plus compensation above FICA limits
relative to the total compensation paid to all participating employees plus
total compensation paid above FICA limits. Discretionary amounts allocated under
the IEI Advantage Plan begin to vest after three years of service (at which time
20% vests) and are fully vested after seven years of service.
<TABLE>
<CAPTION>
Names and Capacities in Which Contributions for Vested Percent
Cash Contributions Were Made Fiscal Years of 1997 1/ as of 10/16/97
- ----------------------------- ----------------------- --------------
<S> <C> <C>
George Wm. Erikson, Chairman $11,247 100%
Robert W. Erikson, President 11,247 100%
John F. Mulhall, Vice President of Sales & Marketing 9,842 100%
Gregory Laszczynski, Vice President of Operations 10,930 100%
Raymond T. Verrey, Vice President & Chief Financial Officer 7,511 100%
Robert F. Hartman, Vice President of Administration & Secretary 6,351 80%
All Executive officers as a group (6 persons) $57,128 N/A
- ----------------------------------------------------------------------------------------------------------
1/ Total contributions to employees of $276,123 include Insituform East's
contribution of $212,409 and reallocated amounts totaling $63,714 forfeited
by former participants who terminated employment with Insituform East
during fiscal year 1997
</TABLE>
The IEI Advantage Plan includes a salary reduction profit sharing
feature under Section 401(k) of the Internal Revenue Code. Each participant may
elect to defer a portion of his compensation by any whole percentage from 2% to
16% subject to certain limitations. During the fiscal year ended June 30, 1997,
the Company contributed an employer matching contribution equal to 25% of the
participant's deferred compensation up to a maximum of 1.5% of the participant's
total paid compensation for the fiscal year. Participants are 100% vested at all
times in their deferral and employer matching accounts.
<TABLE>
<CAPTION>
Names and Capacities in Which Contributions for Vested Percent
Cash Contributions Were Made Fiscal Year 1997 as of 10/16/97
- ----------------------------- ----------------- --------------
<S> <C> <C>
George Wm. Erikson, Chairman $ 366 100%
Robert W. Erikson, President 0 100%
John F. Mulhall, Vice President of Sales & Marketing 650 100%
Gregory Laszczynski, Vice President of Operations 2,200 100%
Raymond T. Verrey, Vice President & Chief Financial Officer 1,659 100%
Robert F. Hartman, Vice President of Administration & Secretary 1,475 100%
All Executive officers as a group (6 persons) $6,350 N/A
- ---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
1994 Board of Directors Stock Option Plan
The Company adopted, with stockholder approval at the 1994 Annual
Meeting of Stockholders, the Insituform East, Incorporated 1994 Board of
Directors Stock Option Plan. The purpose of the plan is to promote the growth
and general prosperity of the Company by permitting the Company, through the
granting of options to purchase shares of its Common Stock, to attract and
retain the best available persons as members of the Company's Board of Directors
with an additional incentive for such persons to contribute to the success of
the Company. The plan is administered and options are granted by the Board of
Directors. Under the terms of this plan, up to 525,000 shares of Common Stock
have been reserved for the Directors of the Company.
Each grant of options under the plan will entitle each director to whom
such options are granted the right to purchase 15,000 shares of the Company's
Common Stock at a designated option price, anytime and from time to time, within
five years from the date of grant. Options are granted under the 1994 Board of
Directors Stock Option Plan each year for five years to each member of the Board
of Directors serving as such on the date of grant; i.e., for each director
serving for five years, a total of five options covering in the aggregate 75,000
shares of Common Stock (subject to adjustments upon changes in the capital
structure of the Company), over a five year period.
On December 13, 1996, options on a total of 105,000 shares of Common
Stock were granted to directors of the Company (options on 15,000 shares to each
of seven directors) at a per share price of $2.625. No options available under
this plan were exercised by directors of the Company during fiscal year 1997.
1989 Board of Directors Stock Option Plan
The Company adopted, with stockholder approval at the 1989 Annual
Meeting of Stockholders, the Insituform East, Incorporated 1989 Board of
Directors Stock Option Plan. The purpose of this plan was the same as the 1994
Board of Directors Stock Option Plan. The plan is administered by the Board of
Directors. Options were first granted to directors on December 1, 1989 and at
each of the four succeeding Board of Directors meetings following the Annual
Meetings of Stockholders in 1990, 1991, 1992 and 1993. No further options are
anticipated to be granted under this plan.
Each grant of options under the plan entitles each director to whom
such options were granted the right to purchase 15,000 shares of the Company's
Common Stock at a designated option price, anytime and from time to time, within
five years from the date of grant. Options previously granted, which have not
already been exercised or expired, will remain in effect until exercise or
expiration, whichever comes first. The Plan will terminate in 1999, unless
terminated sooner by the Board of Directors. Under terms of this plan, 120,000
shares of Common Stock remain reserved for the directors of the Company.
No options available under this plan were exercised by directors of the
Company during fiscal year 1997.
OPTIONS/SAR GRANTS TABLE
No option or Stock Appreciation Right grants were made to any of the
named executive officers during fiscal year 1997 under the 1989 Board of
Directors' Stock Option Plan. The following table sets forth information
concerning options granted to each of the named executive officers, who are also
directors, during fiscal year 1997 under the 1994 Board of Directors' Stock
Option Plan:
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
----------------- ----------------------------------
% of Total
Options/SARs
Granted to Exercised or
Options/SARs Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 15,000 1/ 14% $2.625 12/30/01 $10,875 $24,045
Robert W. Erikson 15,000 1/ 14% $2.625 12/30/01 $10,875 $24,045
- ------------------------------------------------------------------------------------------------------------------------
1/ Option grants under the 1994 Board of Directors Stock Option Plans, as
described on page 10.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
No option or Stock Appreciation Right grants made under the 1989 and
1994 Board of Directors Stock Option Plans to any of the named executive
officers were exercised during fiscal year 1997. The following table sets forth
information concerning option or Stock Appreciation right grants held by each of
the named executive officers, who are also directors, as of June 30, 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR GRANTS IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
Number of Unexercised Value of Unexercised
Options/SARs at In the Money Options/SARs
Fiscal Year-End (#) at Fiscal Year-End ($)
-------------------------- ---------------------------
Shares Acquired Value
Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 0 $ 0 75,000 1/ 0 $938 $ 0
Robert W. Erikson 0 $ 0 75,000 1/ 0 $938 $ 0
- ---------------------------------------------------------------------------------------------------------------------
1/ Options exercisable under the IEI 1989 and 1994 Board of Directors Stock
Option Plans, as described on page 10
</TABLE>
REPRICING OF OPTIONS/SARs
The Company did not adjust or amended the exercise price of stock
options or SARs previously awarded to any of the named executive officers during
fiscal year 1997.
LONG-TERM INCENTIVE PLAN AWARDS
The Company does not have any long-term incentive plans.
DEFINED BENEFIT OR ACTUARIAL PLANS
The Company does not have any defined benefit or actuarial plans.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
There are no employment contracts between the Company and any named
executive officer. There are no arrangements between the Company and any named
executive officer, or payments made to an executive officer, that resulted, or
will result, from the resignation, retirement or other termination of employment
with the Company, in an amount that exceeded $100,000.
<PAGE>
COMPENSATION OF DIRECTORS
Non-officer directors of the Company are paid an annual fee of $5,000
plus $1,000 for each meeting of the Board of Directors, and each committee
meeting, attended in person. Meetings attended by telephone are compensated at
the rate of $200. Directors who are salaried employees receive no remuneration
for their service as directors but are eligible with all other directors to
participate in the 1989 and 1994 Board of Directors' Stock Option Plans, as
described under the section entitled "Compensation Pursuant to Plans." All
directors of the Company are reimbursed for Company travel-related expenses.
Mr. Jack Massar, a director of the Company since 1991, has a consulting
agreement with the Company. Mr. Massar received $35,300 from the Company for
services rendered pursuant to this agreement during fiscal year 1997. Mr. Massar
is also reimbursed for travel-related expenses in connection with this
agreement.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN COMPENSATION
DECISIONS
The Company's Board of Directors does not have a Compensation
Committee; the Board of Directors serves in that capacity. Messrs. George Wm.
Erikson and Robert W. Erikson, both members of the Board of Directors and
executive officers of the Company, holding the offices of Chairman & General
Counsel and President, respectively, participate in and during fiscal year 1997
participated in deliberations of the Board of Directors concerning executive
officer compensation.
Messrs. George Wm. Erikson and Robert W. Erikson are both members of
the Board of Directors and executive officers of CERBCO, Inc. In their capacity
as directors of CERBCO, Inc., they participate in and during fiscal year 1997
participated in deliberations of the CERBCO, Inc. Board of Directors concerning
executive officer compensation for CERBCO, Inc.
PERFORMANCE GRAPH
The following graph compares the total stockholder return on the
Company's Common Stock to the Total Return Index for the NASDAQ Stock Market
(U.S. companies) and to a Peer Group Index based on NASDAQ Stocks SIC Code 162,
"Heavy Construction, Except Highway," for the last five fiscal years.
<PAGE>
<TABLE>
<CAPTION>
Date Company Index Market Index Peer Index
<S> <C> <C> <C>
06/30/92 ................................ 100.000 100.000 100.000
07/31/92 ................................ 103.448 103.541 93.942
08/31/92 ................................ 137.931 100.377 94.669
09/30/92 ................................ 124.138 104.108 93.692
10/30/92 ................................ 110.345 108.208 99.876
11/30/92 ................................ 148.276 116.819 121.538
12/31/92 ................................ 137.931 121.120 127.613
01/29/93 ................................ 134.483 124.568 121.432
02/26/93 ................................ 110.345 119.921 120.280
03/31/93 ................................ 100.000 123.392 106.777
04/30/93 ................................ 93.103 118.126 107.258
05/28/93 ................................ 86.207 125.182 99.995
06/30/93 ................................ 80.821 125.761 95.702
07/30/93 ................................ 66.765 125.909 93.475
08/31/93 ................................ 65.008 132.417 99.081
09/30/93 ................................ 61.494 136.361 97.697
10/29/93 ................................ 72.036 139.426 105.281
11/30/93 ................................ 77.307 135.267 99.663
12/31/93 ................................ 66.765 139.038 90.231
01/31/94 ................................ 70.279 143.259 96.775
02/28/94 ................................ 77.307 141.922 101.913
03/31/94 ................................ 84.335 133.195 101.198
04/29/94 ................................ 80.821 131.467 100.260
05/31/94 ................................ 73.793 131.788 99.872
06/30/94 ................................ 71.685 126.969 96.388
07/29/94 ................................ 71.685 129.573 93.423
08/31/94 ................................ 71.685 137.833 96.578
09/30/94 ................................ 75.269 137.480 96.640
10/31/94 ................................ 68.100 140.182 99.385
11/30/94 ................................ 82.437 135.532 93.087
12/30/94 ................................ 71.685 135.912 96.698
01/31/95 ................................ 78.853 136.674 103.787
02/28/95 ................................ 93.190 143.902 106.660
03/31/95 ................................ 86.022 148.167 101.996
04/28/95 ................................ 100.359 152.832 104.798
05/31/95 ................................ 121.864 156.773 110.760
06/30/95 ................................ 127.219 169.478 111.079
07/31/95 ................................ 127.219 181.935 109.990
08/31/95 ................................ 134.489 185.622 119.636
09/29/95 ................................ 149.028 189.891 117.866
10/31/95 ................................ 138.124 188.803 113.162
11/30/95 ................................ 119.950 193.236 109.321
12/29/95 ................................ 123.584 192.207 116.036
01/31/96 ................................ 119.950 193.155 108.144
02/29/96 ................................ 109.045 200.508 110.840
03/29/96 ................................ 109.045 201.173 121.497
04/30/96 ................................ 109.045 217.862 149.841
05/31/96 ................................ 112.680 227.866 179.095
06/28/96 ................................ 92.486 217.594 159.759
07/31/96 ................................ 92.486 198.213 155.613
08/30/96 ................................ 90.637 209.319 161.014
09/30/96 ................................ 90.637 225.330 181.684
10/31/96 ................................ 81.388 222.841 209.527
11/29/96 ................................ 81.388 236.617 206.613
12/31/96 ................................ 77.689 236.405 220.561
01/31/97 ................................ 96.186 253.209 247.707
02/28/97 ................................ 92.486 239.212 234.888
03/31/97 ................................ 85.088 223.595 260.433
04/30/97 ................................ 85.088 230.587 252.591
05/30/97 ................................ 81.388 256.730 264.047
06/30/97 ................................ 75.765 264.575 278.318
</TABLE>
<PAGE>
APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The firm of Deloitte & Touche was engaged to audit the financial
statements of the Company for the fiscal year ended June 30, 1997. A
representative of Deloitte & Touche will be at the Meeting and will have an
opportunity to make a statement if he or she desires to do so. The
representative will also be available to respond to appropriate questions from
any stockholders present at the Meeting.
The Audit Committee of the Board of Directors has not yet recommended,
and the Board has not yet approved, the appointment of independent public
accountants to audit the financial statements of the Company for the fiscal
year ending June 30, 1998. It is anticipated that the Audit Committee will
make its recommendation to the Board and that the appointment of independent
public accountants will be made by the Board prior to June 30, 1998.
OTHER MATTERS
The Board of Directors is not aware of any other matters which are
likely to be brought before the Meeting. However, if any other matters are
properly brought before the Meeting, it is the intention of the individuals
named in the enclosed form of Proxy to vote the proxy in accordance with their
judgment on such matters.
ANNUAL REPORT AND FINANCIAL STATEMENTS
Financial statements of the Company are contained in the Company's
Annual Report for the fiscal year ended June 30, 1997, a copy of which is
enclosed herewith.
DEADLINE FOR SUBMITTING STOCKHOLDER PROPOSALS
FOR INCLUSION IN THE BOARD'S PROXY STATEMENT IN CONNECTION
WITH THE FISCAL YEAR 1998 ANNUAL MEETING
A proposal submitted by a stockholder for action at the Company's
Annual Meeting of Stockholders for the fiscal year ending June 30, 1998 must
be received no later than June 30, 1998, in order to be included in the
Company's Proxy Statement for that meeting. It is suggested that proponents
submit their proposals by certified mail-return receipt requested.
A proponent of a proposal must be a record or beneficial owner entitled
to vote at the next Annual Meeting on the proposal and must continue to be
entitled to vote through the date on which the meeting is held.
By Order of the Board of Directors,
Robert F. Hartman
Secretary
Landover, Maryland
November 3, 1997
<PAGE>
APPENDIX A
TEXT OF COMMON STOCK PROXY CARD:
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
(301) 386-4100
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 12, 1997
PROXY - COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G.Wm. Erikson and R.W. Erikson, and
each of them, with full power of substitution, the Proxies of the undersigned to
represent and to vote, as designated on the reverse side hereof, all the shares
of Common Stock of INSITUFORM EAST, INCORPORATED held of record by the
undersigned on October 16, 1997, at the Annual Meeting of Stockholders to be
held on December 12, 1997 or any adjournments thereof.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
[ X ] Please mark your votes as in this example.
FOR, the nominee WITHHOLD Nominee: C.G. Franklin
listed at right authority to vote T.J. Schaefer
for the nominee
listed at right
1. Proposal -
Election of [ ] [ ]
Directors.
(INSTRUCTION: To indicate that you do not wish to have your shares voted for an
individual nominee, check the FOR box above and print the name of such nominee
on the line provided below.)
2. In their own discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE (IF HELD JOINTLY) Dated: ,1997
NOTE: Signature(s) should be exactly as name(s) appearing on your
certificate. If stock is held jointly, each holder should sign. If
signing is by attorney, executor, administrator, trustee, guardian or
corporate officer, etc., please give your full title as such.
<PAGE>
TEXT OF CLASS B COMMON STOCK PROXY CARD:
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
(301) 386-4100
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 12, 1997
PROXY - CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints G.Wm. Erikson and R.W. Erikson, and
each of them, with full power of substitution, the Proxies of the undersigned to
represent and to vote, as designated on the reverse side hereof, all the shares
of Common Stock of INSITUFORM EAST, INCORPORATED held of record by the
undersigned on October 16, 1997, at the Annual Meeting of Stockholders to be
held on December 12, 1997 or any adjournments thereof.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
[ X ] Please mark your votes as in this example.
FOR, the nominee WITHHOLD Nominee: G.Wm. Erikson
listed at right authority to vote R.W. Erikson
for the nominee W.C. Hayes, IV
listed at right P.C. Kincheloe, Jr.
J. Massar
1. Proposal -
Election of [ ] [ ]
Directors.
(INSTRUCTION: To indicate that you do not wish to have your shares voted for an
individual nominee, check the FOR box above and print the name of such nominee
on the line provided below.)
2. In their own discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
SIGNATURE SIGNATURE (IF HELD JOINTLY) Dated: ,1997
NOTE: Signature(s) should be exactly as name(s) appearing on your
certificate. If stock is held jointly, each holder should sign. If
signing is by attorney, executor, administrator, trustee, guardian or
corporate officer, etc., please give your full title as such.
