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
[X] 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)
<PAGE>
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, DECEMBER 11, 1998
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, 1998 will be held at the Club
Hotel by Doubletree, 9100 Basil Court, Landover, Maryland 20774 on Friday,
December 11, 1998, 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 15, 1998,
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, 1998, 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,
/S/ ROBERT F. HARTMAN
Robert F. Hartman
Secretary
Landover, Maryland
November 9, 1998
<PAGE>
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 11, 1998
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 11, 1998, 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 15, 1998,
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, 1998,
are first being mailed to the Company's stockholders of record on or about
November 9, 1998.
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.
<PAGE>
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 44.5% 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 60,000 1.3%
Webb C. Hayes, IV Common Stock 0 60,000 1.3%
Paul C. Kincheloe, Jr. Common Stock 0 60,000 1.3%
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 17,000 480,000 10.9%
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 44.5% 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, 1999, 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 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 56 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.
Robert W. Erikson, Age 53 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 68 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 50 1994 Class B Common Stock
Director and Vice Chairman of United Bank since 1997;
Director and Executive Vice President of George Mason
Bankshares, Inc. and Chairman, President and CEO of The
George Mason Bank, N.A., from 1996 to 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 57 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 73 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 60 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 periodically 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, 1998, 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 1998:
Raymond T. Verrey, Age 52
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 52
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 44
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 51
Vice President of Administration and Secretary since 1991; Vice President
and Controller of CERBCO, Inc. since 1988, Secretary since 1991, Treasurer
and Chief Financial Officer since 1997; 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) compensation pursuant to plans; and
(c) incentive cash bonuses.
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 1997, 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, 1997.
(b) 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. For the
fiscal year ended June 30, 1998, due to negative net earnings, no profit sharing
contributions were made to the Employee Advantage Plan for the Company's
officers.
Three of the executive officers of the Company are eligible to receive plan
compensation through the Company's Supplemental Executive Retirement Plan (the
"IEI SERP"). The remaining three officers of the Company (including members of
the CEOC) do not participate in this plan, but are participants in a similar
plan offered by the Company's parent holding company, CERBCO, Inc.
Pursuant to the IEI SERP, the covered executives will receive a monthly
retirement benefit for life equivalent to 25% of the final monthly salary such
executive received from the Company (see "Compensation Pursuant to Plans"). The
terms of the IEI SERP require the Company to establish a trust to facilitate the
Company's satisfaction of its obligations thereunder to pay supplemental
retirement benefits to the covered executives. The Company has established such
a trust, which has been funded by life insurance policies.
The Board views the IEI SERP as providing important benefits to the covered
executives after their retirement. Further, the Board believes that the adoption
of the IEI SERP is fully consistent with Insituform East's compensation
philosophy and is a customary form of supplemental executive retirement similar
to that adopted by comparable companies.
(c) 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,
1998, due to negative net earnings, no incentive cash bonuses for officers were
either earned or approved.
<PAGE>
COMPENSATION OF MEMBERS OF THE CEOC
On September 13, 1997, the Board approved a 3% increase in base annual
salary from $210,298 to $216,607, effective October 1, 1997, 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 1998.
Members of the CEOC participated in the Employee Advantage Plan during fiscal
year 1998 but did not receive any profit sharing contributions. Mr. George Wm.
Erikson did receive a 401(k) plan matching contribution of $2,400, and both
members of the CEOC received allocations of forfeitures along with all other
plan participants.
In approving the compensation of the CEOC members, the Board took into
account that while George Wm. Erikson and Robert W. Erikson were devoting the
predominate portion of their time and effort to the Company they were also
devoting a portion of their time and effort to the parent company, CERBCO, Inc.,
and to its wholly-owned subsidiary, CERBERONICS, Inc. The Board believes the
base salary levels set for George Wm. Erikson and Robert W. Erikson were
commensurate with the time and effort devoted to the activities of, and their
duties and responsibilities with, the Company.
The Board of Directors
George Wm. Erikson
Robert W. Erikson
Calvin G. Franklin
Webb C. Hayes, IV
Paul C. Kincheloe, Jr.
Jack Massar
Thomas J. Schaefer
<PAGE>
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation paid
by the Company to each of the named executive officers for the fiscal years
ended June 30, 1998, 1997 and 1996:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
------------------------
Annual Compensation Awards Payouts
------------------------------------------ ------------------------
Name Other Total Restricted
and Annual Annual Stock Options/ LTIP All Other
Principal Fiscal Salary Bonus Compensation Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) 2/ ($) ($) (#) ($) ($) 3/
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 1998 $215,030 $0 $0 $215,030 $0 15,000 $0 $4,745
Chairman & General 1997 208,649 0 0 208,649 0 15,000 0 11,613
Counsel 1/ 1996 201,555 22,393 0 223,948 0 15,000 0 11,264
-
Robert W. Erikson 1998 $215,030 $0 $0 $215,030 $0 15,000 $0 $2,345
President 1/ 1997 208,649 0 0 208,649 0 15,000 0 11,247
-
1996 201,555 22,393 0 223,948 0 15,000 0 9,014
John F. Mulhall 1998 $125,806 $12,000 $0 $137,806 $0 0 $0 $2,573
Vice President of 1997 122,073 0 0 122,073 0 0 0 10,492
Sales & Marketing 1996 118,023 13,112 0 131,135 0 0 0 8,639
Gregory Laszczynski 1998 $136,913 $17,000 $0 $153,913 $0 0 $0 $4,535
Vice President of 1997 132,850 0 0 132,850 0 0 0 $13,130
Operations 1996 124,335 13,814 0 138,149 0 0 0 10,531
Raymond T. Verrey 1998 $102,915 $1,000 $0 $103,915 $0 0 $0 $2,840
Vice President & 1997 99,861 0 0 99,861 0 0 0 9,170
Chief Financial 1996 96,568 10,729 0 107,297 0 0 0 7,564
Officer
Robert F. Hartman 1998 $91,524 $2,000 $0 $93,524 $0 0 $0 $2,874
Vice President of 1997 88,808 0 0 88,808 0 0 0 8,010
Administration & 1996 85,891 9,542 0 95,433 0 0 0 6,666
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. No contribution was authorized
for the fiscal year ended June 30, 1998.
The IEI Advantage Plan also 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. As mandated by the plan, the Company
contributes 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. During the fiscal year ended June
30, 1998, the Company made the following contributions for the Company's
officers:
<TABLE>
<CAPTION>
Names and Capacities in Which Contributions for Vested Percent
Cash Contributions Were Made Fiscal Year 1998 1/ as of 10/15/98
- ----------------------------- -------------------- --------------
<S> <C> <C>
George Wm. Erikson, Chairman $4,745 100%
Robert W. Erikson, President 2,345 100%
John F. Mulhall, Vice President of Sales & Marketing 2,573 100%
Gregory Laszczynski, Vice President of Operations 4,535 100%
Raymond T. Verrey, Vice President & Chief Financial Officer 2,840 100%
Robert F. Hartman, Vice President of Administration & Secretary 2,874 100%
All Executive officers as a group (6 persons) $19,912 N/A
- ---------------------------------------------------------------------------------------------------------------
1/ Total contributions to employees of $101,791 include Insituform East's
matching contribution of $48,575 and reallocated amounts totaling $53,216
forfeited by former participants who terminated employment with Insituform
East during fiscal year 1998.
</TABLE>
Insituform East, Incorporated Supplemental Executive Retirement Plan
During fiscal year 1998, the Company entered into Supplemental Executive
Retirement Agreements with Messrs. John Mulhall, Gregory Laszczynski and Raymond
Verrey pursuant to a Supplemental Executive Retirement Plan (the "IEI SERP").
Each agreement provides for monthly retirement benefits of 25% of the
executive's final aggregate monthly salary from the Company as defined in and
limited by the executive's agreement. Each covered executive's benefit under the
plan is payable in equal monthly amounts for the remainder of the covered
executive's life beginning as of any date on or after his 62nd birthday (at the
covered executive's election) but not before his termination of service.
Payments under the SERP are not subject to any reduction for Social Security or
any other offset amounts but are subject to Social Security and other applicable
tax withholding.
To compute the monthly retirement benefits, the percentage of final monthly
salary is multiplied by a ratio (not to exceed 1) of:
the completed years (and any fractional year) of employment by the
Company after 1997
to
the total number of years (and any fractional year) of employment
by the Company after 1997 that the executive would have completed
if he had continued in employment to age 65.
In the case of Messrs. Mulhall and Laszczynski, if the executive dies prior
to retirement, the executive's beneficiary will receive a pre-retirement death
benefit under a split-dollar insurance arrangement. The executive's beneficiary
will receive a one-time lump sum payment in the amount of $700,000. In the case
of Mr. Verrey, the executive's beneficiary will receive a pre-retirement death
benefit of 25% of the executive's final monthly salary for 180 months. If any
executive dies after commencement of the payment of retirement benefits, but
before receiving 180 monthly payments, the executive's beneficiary will continue
to receive payments until the total payments received by the executive and/or
his beneficiary equal 180.
The SERP is technically unfunded, except as described below. The Company
will pay all benefits from its general revenues and assets. To facilitate the
payment of benefits and provide the executives with a measure of benefit
security without subjecting the SERP to various rules under the Employment
Retirement Income Security Act of 1974, the Company has established an
irrevocable trust called the Insituform East, Incorporated Supplemental
Executive Retirement Trust. This trust is subject to the claims of the Company's
creditors in the event of bankruptcy or insolvency. The trust has purchased life
insurance on the lives of Messrs. Mulhall and Laszczynski to provide for
financial obligations under the plan. Assets in the trust consist of the cash
surrender values of the executive life insurance policies and are carried on the
Company's balance sheet as assets. The trust will not terminate until
participants and beneficiaries are no longer entitled to benefits under the
plan. Upon termination, all assets remaining in the trust will be returned to
the Company.
The following tables set forth the annual retirement benefits that would be
received under the SERP at various compensation levels after the specified years
of service:
<TABLE>
<CAPTION>
Pension Plan Table Where Formula Provides 25% of Compensation 1/
(Final) Years of Service (Under Plan)
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
50,000 11,719 12,500 12,500 12,500 12,500
75,000 17,578 18,750 18,750 18,750 18,750
100,000 23,438 25,000 25,000 25,000 25,000
125,000 30,925 31,250 31,250 31,250 31,250
150,000 30,925 36,420 37,500 37,500 37,500
175,000 30,925 36,420 40,211 43,750 43,750
200,000 30,925 36,420 40,211 44,396 49,017
250,000 30,925 36,420 40,211 44,396 49,017
300,000 30,925 36,420 40,211 44,396 49,017
350,000 30,925 36,420 40,211 44,396 49,017
400,000 30,925 36,420 40,211 44,396 49,017
1/ Assumes at the time the Plan was established (i) the individual is age 50,
(ii) maximum covered compensation is $100,000 and is increased 2% (
compounded annually) each year of service after 1997, and (iii) retirement
is effective at age 65.
Each executive's covered compensation under the SERP is equal to the lesser
of his final base salary or his salary as of December 31, 1997, increased
2% annually beginning in 1998.
</TABLE>
The following table sets forth information concerning vested annual
benefits as of June 30, 1998 for the three executives covered by the SERP:
<TABLE>
<CAPTION>
Current Annual Vested Vested
Name Covered Compensation Percentage Annual Benefit
<S> <C> <C> <C>
John F. Mulhall $ 126,729 7.14% $ 2,262
Gregory Laszczynski $ 137,917 4.55% $ 1,567
Raymond T. Verrey $ 103,670 7.14% $ 1,851
</TABLE>
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 12, 1997, 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 $2.46875. No options available under
this plan were exercised by directors of the Company during fiscal year 1998.
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, 60,000 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 1998.
OPTIONS/SAR GRANTS TABLE
No option or Stock Appreciation Right grants were made to any of the named
executive officers during fiscal year 1998 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 1998 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% $2.46875 12/12/02 $10,231 $22,608
Robert W. Erikson 15,000 1/ 14% $2.46875 12/12/02 $10,231 $22,608
- ---------------------------------------------------------------------------------------------------------------------
1/ Option grants under the 1994 Board of Directors Stock Option Plan, as
described on pages 11-12.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
No option or Stock Appreciation Right grants made under the 1989 and 1994
Board of Directors Stock Option Plans to any of the named executive officers
were exercised during fiscal year 1997. The following table sets forth
information concerning option or Stock Appreciation right grants held by each of
the named executive officers, who are also directors, as of June 30, 1998:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR GRANTS IN LAST FISCAL YEAR
AND FY-END OPTIONS/SAR VALUES
Number of Unexercised Value of Unexercised
Options/SARs at In the Money Options/SARs
Fiscal Year-End (#) at Fiscal Year-End ($)
--------------------------- --------------------------
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 $0 $0
Robert W. Erikson 0 $0 75,000 1/ 0 $0 $0
- -------------------------------------------------------------------------------------------------------------------
1/ Options exercisable under the IEI 1989 and 1994 Board of Directors Stock
Option Plans, as described on pages 11-12.
</TABLE>
REPRICING OF OPTIONS/SARs
The Company did not adjust or amend the exercise price of stock options or
SARs previously awarded to any of the named executive officers during fiscal
year 1998.
<PAGE>
LONG-TERM INCENTIVE PLAN AWARDS
The Company does not have any long-term incentive plans.
DEFINED BENEFIT OR ACTUARIAL PLANS
The Company maintains a defined benefit plan called the Insituform East
Supplemental Executive Retirement Plan to provide annual retirement benefits to
covered executives. See "Compensation Pursuant to Plans" as to the basis upon
which benefits under the plan are computed.
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.
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, had a consulting
agreement with the Company which ended on March 16, 1998. Mr. Massar received
$26,100 from the Company for services rendered pursuant to this agreement during
fiscal year 1998. 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 of
President, respectively, participate in, and during fiscal year 1998
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 1998
participated in, deliberations of the CERBCO, Inc. Board of Directors concerning
executive officer compensation for CERBCO, Inc.
<PAGE>
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:
<TABLE>
<CAPTION>
Date , Company, Market, Market, Peer, Peer
, Index , Index , Count , Index, Count
<S> <C> <C> <C> <C> <C>
"06/30/1993", 100.000, 100.000, 4072, 100.000, 11
"07/30/1993", 82.609, 100.118, 4104, 97.672, 12
"08/31/1993", 80.435, 105.291, 4139, 103.531, 12
"09/30/1993", 76.087, 108.428, 4174, 102.083, 12
"10/29/1993", 89.130, 110.865, 4221, 110.008, 12
"11/30/1993", 95.652, 107.561, 4304, 104.138, 12
"12/31/1993", 82.609, 110.560, 4376, 94.283, 12
"01/31/1994", 86.957, 113.916, 4400, 101.120, 12
"02/28/1994", 95.652, 112.852, 4439, 106.489, 12
"03/31/1994", 104.348, 105.914, 4491, 105.742, 12
"04/29/1994", 100.000, 104.538, 4520, 104.761, 12
"05/31/1994", 91.304, 104.794, 4562, 104.356, 12
"06/30/1994", 88.696, 100.962, 4576, 100.716, 12
"07/29/1994", 88.696, 103.034, 4594, 97.618, 12
"08/31/1994", 88.696, 109.604, 4612, 100.914, 13
"09/30/1994", 93.130, 109.323, 4615, 100.979, 13
"10/31/1994", 84.261, 111.471, 4637, 103.847, 13
"11/30/1994", 102.000, 107.773, 4653, 97.266, 13
"12/30/1994", 88.696, 108.075, 4658, 101.040, 13
"01/31/1995", 97.565, 108.691, 4648, 108.451, 13
"02/28/1995", 115.304, 114.440, 4650, 111.453, 13
"03/31/1995", 106.435, 117.834, 4644, 106.580, 13
"04/28/1995", 124.174, 121.546, 4655, 109.508, 12
"05/31/1995", 150.783, 124.681, 4654, 115.738, 12
"06/30/1995", 157.409, 134.785, 4671, 116.071, 12
"07/31/1995", 157.409, 144.694, 4690, 114.933, 12
"08/31/1995", 166.403, 147.626, 4713, 125.013, 12
"09/29/1995", 184.393, 151.020, 4709, 123.163, 12
"10/31/1995", 170.901, 150.148, 4747, 118.244, 12
"11/30/1995", 148.414, 153.674, 4779, 114.231, 12
"12/29/1995", 152.911, 152.856, 4819, 121.247, 12
"01/31/1996", 148.414, 153.608, 4809, 113.003, 12
"02/29/1996", 134.922, 159.454, 4839, 115.820, 12
"03/29/1996", 134.922, 159.979, 4878, 126.956, 12
"04/30/1996", 134.922, 173.248, 4923, 156.573, 12
"05/31/1996", 139.419, 181.203, 4981, 187.141, 12
"06/28/1996", 114.434, 173.035, 5034, 166.936, 12
"07/31/1996", 114.434, 157.604, 5066, 162.566, 12
"08/30/1996", 112.145, 166.434, 5090, 168.209, 12
"09/30/1996", 112.145, 179.164, 5096, 189.797, 12
"10/31/1996", 100.702, 177.185, 5138, 218.883, 12
"11/29/1996", 100.702, 188.138, 5180, 215.839, 12
"12/31/1996", 96.124, 187.969, 5176, 230.410, 12
"01/31/1997", 119.011, 201.328, 5161, 258.768, 12
"02/28/1997", 114.434, 190.192, 5170, 245.377, 11
"03/31/1997", 105.279, 177.773, 5168, 272.063, 11
"04/30/1997", 105.279, 183.331, 5155, 263.870, 11
"05/30/1997", 100.702, 204.107, 5148, 275.838, 11
"06/30/1997", 93.744, 210.358, 5132, 290.748, 10
"07/31/1997", 100.775, 232.561, 5127, 341.614, 10
"08/29/1997", 89.057, 232.207, 5116, 423.926, 10
"09/30/1997", 96.088, 245.930, 5106, 459.611, 10
"10/31/1997", 84.370, 233.192, 5114, 472.069, 10
"11/28/1997", 105.462, 234.361, 5130, 391.023, 10
"12/31/1997", 112.493, 230.617, 5081, 400.010, 10
"01/30/1998", 99.603, 237.850, 5052, 363.608, 10
"02/27/1998", 91.400, 260.182, 5031, 408.351, 10
"03/31/1998", 91.400, 269.776, 4993, 475.144, 10
"04/30/1998", 87.885, 274.347, 4972, 516.320, 10
"05/29/1998", 87.885, 259.291, 4964, 502.960, 10
"06/30/1998", 84.370, 277.559, 4942, 423.381, 10
</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, 1998. 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, 1999. 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, 1999.
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, 1998, 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 1999 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, 1999 must be
received no later than June 30, 1999, 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,
/S/ ROBERT F. HARTMAN
Robert F. Hartman
Secretary
Landover, Maryland
November 9, 1998
