SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange 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) or 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 10, 1999
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, 1999 will be held at the Club
Hotel by Doubletree, 9100 Basil Court, Landover, Maryland 20774 on Friday,
December 10, 1999, at 10:30 a.m. local time, for the following purposes:
1. Proposal No.1: To elect directors of the Corporation;
2. Proposal No.2: To approve the 1999 Board of Directors' Stock Option Plan;
3. Proposal No.3: To approve the 1999 Employee Stock Option Plan; and
4. 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 14, 1999,
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, 1999, 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 8, 1999
<PAGE>
INSITUFORM EAST, INCORPORATED
3421 Pennsy Drive
Landover, Maryland 20785
ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 10, 1999
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 10, 1999, at 10:30 a.m.
local time, and any adjournments thereof (the "Meeting").
The Board of Directors has fixed the close of business on October 14,
1999, 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 as follows: (i) FOR the election as directors of
the Company of 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; (ii) FOR the election as directors of the Corporation of
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; (iii) FOR approval of the 1999 Board of Directors' Stock
Option Plan as described in "Proposal No. 2 -- Approval of the 1999 Board of
Directors' Stock Option Plan" herein; (iv) FOR approval of the 1999 Employee
Stock Option Plan as described in "Proposal No. 3 - Approval of the 1999
Employee Stock Option Plan" 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, 1999,
are first being mailed to the Company's stockholders of record on or about
November 1, 1999.
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 1,250,350 30.8% 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
59.9% 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:
<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 75,000 1.7%
Webb C. Hayes, IV Common Stock 0 75,000 1.7%
Paul C. Kincheloe, Jr. Common Stock 0 75,000 1.7%
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 17,000 525,000 11.8%
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, 2000, 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:
<PAGE>
<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 57 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 54 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 69 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 51 3/ 1994 Class B Common Stock
-
Managing Director of Private Client Services at Friedman, Billings, Ramsey
Group, Inc.; Director and Vice Chairman of United Bank from June 1997 to May
1999; 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 58 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 74 2/ 3/ 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 61 2/ 3/ 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.
-
3/ Member of Stock Option Committee.
-
</TABLE>
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.
The Stock Option Committee, appointed on September 7, 1999, will
administer the 1999 Employee Stock Option Plan. Generally, the Stock Option
Committee has the authority to determine, subject to the provisions and
conditions of the plan, to whom options are granted, the number of shares to be
subject to the options and the terms and conditions thereof, including the
duration of the options and the times at which they become exercisable.
During the fiscal year ended June 30, 1999, 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 53
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.
<PAGE>
John F. Mulhall, Age 53
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 45
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 52
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.
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.
<PAGE>
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.
(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 not be
increased effective October 1, 1998.
(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, 1999, the Company contributed an amount equal to 4%
of the total compensation paid to all participating employees.
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 as defined in and limited by the executive's
agreement. 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.
<PAGE>
(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,
1999, due to negative net earnings, no incentive cash bonuses for officers were
either earned or approved.
COMPENSATION OF MEMBERS OF THE CEOC
On September 15, 1998, the Board approved without change a base annual
salary of $216,607, effective October 1, 1998, 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 was subjective, taking into account the philosophical
aim of setting executive compensation, and was not based upon any particular
performance criteria. 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 1999. Members of the CEOC participated in the Employee Advantage
Plan during fiscal year 1999 and each received profit sharing contributions of
$13,076. Mr. George Wm. Erikson also received a 401(k) plan matching
contribution of $2,400.
In approving the compensation of the CEOC members, the Board took into
account that, while George Wm. Erikson and Robert W. Erikson were devoting the
predominate portion of their time and effort to the Company, they were also
devoting a portion of their time and effort to the parent company, CERBCO, Inc.,
and to its wholly-owned subsidiary, CERBERONICS, Inc. The Board believes the
base salary levels set for George Wm. Erikson and Robert W. Erikson were
commensurate with the time and effort devoted to the activities of, and their
duties and responsibilities with, the Company.
The Board of Directors
George Wm. Erikson
Robert W. Erikson
Calvin G. Franklin
Webb C. Hayes, IV
Paul C. Kincheloe, Jr.
Jack Massar
Thomas J. Schaefer
<PAGE>
SUMMARY COMPENSATION
The following table sets forth information concerning the compensation
paid by the Company to each of the named executive officers for the fiscal years
ended June 30, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term Compensation
Annual Compensation Awards Payouts
Securities
Name Other Total Restricted Underlying
and Annual Annual Stock Options/ LTIP All Other
Principal Fiscal Salary Bonus Compensation Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) 2/ ($) ($) (#) ($) ($) 3/
- -
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 1999 $216,607 $0 $0 $216,607 $0 15,000 $0 $15,476
Chairman & General 1998 215,030 0 0 215,030 0 15,000 0 4,745
Counsel 1/ 1997 208,649 0 0 208,649 0 15,000 0 11,613
-
Robert W. Erikson 1999 $216,607 $0 $0 $216,607 $0 15,000 $0 $13,076
President 1/ 1998 215,030 0 0 215,030 0 15,000 0 2,345
-
1997 208,649 0 0 208,649 0 15,000 0 11,247
John F. Mulhall 1999 $126,729 $0 $0 $126,729 $0 0 $0 $10,308
Vice President of 1998 125,806 12,000 0 137,806 0 0 0 2,573
Sales & Marketing 1997 122,073 0 0 122,073 0 0 0 10,492
Gregory Laszczynski 1999 $137,917 $0 $0 $137,917 $0 0 $0 $12,878
Vice President of 1998 136,913 17,000 0 153,913 0 0 0 4,535
Operations 1997 132,850 0 0 132,850 0 0 0 13,130
Raymond T. Verrey 1999 $103,670 $0 $0 $103,670 $0 0 $0 $8,776
Vice President & 1998 102,915 1,000 0 103,915 0 0 0 2,840
Chief Financial 1997 99,861 0 0 99,861 0 0 0 9,170
Officer
Robert F. Hartman 1999 $92,195 $0 $0 $92,195 $0 0 $0 $7,626
Vice President of 1998 91,524 2,000 0 93,524 0 0 0 2,874
Administration & 1997 88,808 0 0 88,808 0 0 0 8,010
Secretary
</TABLE>
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 pages 9 and 10.
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 Year 1999 1/ as of 10/14/99
---------------------------- ----------------- - --------------
<S> <C> <C>
George Wm. Erikson, Chairman $13,076 100%
Robert W. Erikson, President 13,076 100%
John F. Mulhall, Vice President of Sales & Marketing 9,658 100%
Gregory Laszczynski, Vice President of Operations 10,806 100%
Raymond T. Verrey, Vice President & Chief Financial Officer 7,221 100%
Robert F. Hartman, Vice President of Administration & Secretary 7,296 100%
All Executive officers as a group (6 persons) $61,133 N/A
</TABLE>
1/ Total contributions to employees of $276,088 include Insituform East's
matching contribution of $196,506 and reallocated amounts totaling $80,582
forfeited by former participants who terminated employment with Insituform
East during fiscal year 1999.
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, 1999, 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 1999 as of 10/14/99
---------------------------- ---------------- --------------
<S> <C> <C>
George Wm. Erikson, Chairman $2,400 100%
Robert W. Erikson, President 0 100%
John F. Mulhall, Vice President of Sales & Marketing 650 100%
Gregory Laszczynski, Vice President of Operations 2,072 100%
Raymond T. Verrey, Vice President & Chief Financial Officer 1,555 100%
Robert F. Hartman, Vice President of Administration & Secretary 330 100%
All Executive officers as a group (6 persons) $7,007 N/A
</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 table sets 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.
</TABLE>
Each executive's covered compensation under the SERP is equal to his
final base salary as defined in and limited by the executive's agreement. The
maximum covered compensation for each executive is his salary as of December 31,
1997, increased 2% annually beginning in 1998.
The following table sets forth information concerning vested annual
benefits as of June 30, 1999 for the three executives covered by the SERP:
<TABLE>
<CAPTION>
Years of Credited Current Annual Vested Vested
Name Service Under Plan Covered Compensation Percentage Annual Benefit
---- ------------------ -------------------- ---------- --------------
<S> <C> <C> <C> <C>
John F. Mulhall 2 $ 126,229 14.29% $ 4,527
Gregory Laszczynski 2 $ 137,917 9.09% $ 3,134
Raymond T. Verrey 2 $ 103,670 14.29% $ 3,704
</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 11, 1998, 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 $1.25. No options available under
this plan were exercised by directors of the Company during fiscal year 1999.
OPTIONS/SAR GRANTS TABLE
The following table sets forth information concerning options granted
to each of the named executive officers, who are also directors, during fiscal
year 1999 under the 1994 Board of Directors' Stock Option Plan:
<TABLE>
<CAPTION>
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
Potential Realized Value at
Assumed Annual Rates of Stock
Individual Grants Price Appreciation for Option Term
% of Total
Options/SARs
Granted to Exercised or
Options/SARs Employees Base Price Expiration
Name Granted (#) in Fiscal Year ($/Share) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C>
George Wm. Erikson 15,000 1/ 14% $1.25 12/11/03 $5,180 $11,447
-
Robert W. Erikson 15,000 1/ 14% $1.25 12/11/03 $5,180 $11,447
-
1/ Option grants under the 1994 Board of Directors Stock Option Plan, as
described on page 12.
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE TABLE
No option or Stock Appreciation Right grants made under the 1994 Board
of Directors Stock Option Plans to any of the named executive officers were
exercised during fiscal year 1999. The following table sets forth information
concerning option or Stock Appreciation right grants held by each of the named
executive officers, who are also directors, as of June 30, 1999:
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Securities Underlying Value of Unexercised
Unexercised Options/SARs at In the Money Options/SARs
Fiscal Year-End (#) at Fiscal Year-End ($)
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 $1,640 $0
-
Robert W. Erikson 0 $0 75,000 1/ 0 $1,640 $0
-
1/ Options exercisable under the IEI 1994 Board of Directors Stock Option
Plans, as described on page 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 1999.
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, Incorporated 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 1994 Board of Directors' Stock Option Plan, as described
under the section entitled "Compensation Pursuant to Plans." All directors of
the Company are reimbursed for Company travel-related expenses.
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
1999 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 1999
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:
Date , Company, Market, Market, Peer, Peer
, Index , Index , Count , Index, Count
"06/30/1994", 100.000, 100.000, 4577, 100.000, 12
"07/29/1994", 100.000, 102.054, 4595, 96.924, 12
"08/31/1994", 100.000, 108.556, 4613, 100.197, 13
"09/30/1994", 105.000, 108.280, 4616, 100.261, 13
"10/31/1994", 95.000, 110.392, 4638, 103.109, 13
"11/30/1994", 115.000, 106.734, 4654, 96.575, 13
"12/30/1994", 100.000, 107.023, 4659, 100.321, 13
"01/31/1995", 110.000, 107.639, 4649, 107.681, 13
"02/28/1995", 130.000, 113.329, 4651, 110.661, 13
"03/31/1995", 120.000, 116.692, 4645, 105.822, 13
"04/28/1995", 140.000, 120.368, 4656, 108.730, 12
"05/31/1995", 170.000, 123.482, 4655, 114.915, 12
"06/30/1995", 177.471, 133.481, 4672, 115.246, 12
"07/31/1995", 177.471, 143.284, 4691, 114.116, 12
"08/31/1995", 187.612, 146.193, 4714, 124.124, 12
"09/29/1995", 207.894, 149.558, 4710, 122.288, 12
"10/31/1995", 192.682, 148.696, 4748, 117.403, 12
"11/30/1995", 167.329, 152.185, 4780, 113.419, 12
"12/29/1995", 172.400, 151.380, 4820, 120.386, 12
"01/31/1996", 167.329, 152.137, 4810, 112.200, 12
"02/29/1996", 152.118, 157.936, 4840, 114.997, 12
"03/29/1996", 152.118, 158.467, 4879, 126.054, 12
"04/30/1996", 152.118, 171.595, 4924, 155.460, 12
"05/31/1996", 157.188, 179.467, 4981, 185.811, 12
"06/28/1996", 129.018, 171.378, 5035, 165.750, 12
"07/31/1996", 129.018, 156.121, 5067, 161.411, 12
"08/30/1996", 126.438, 164.878, 5091, 167.013, 12
"09/30/1996", 126.438, 177.482, 5097, 188.448, 12
"10/31/1996", 113.536, 175.517, 5139, 217.327, 12
"11/29/1996", 113.536, 186.407, 5181, 214.305, 12
"12/31/1996", 108.375, 186.251, 5177, 228.772, 12
"01/31/1997", 134.179, 199.468, 5162, 256.929, 12
"02/28/1997", 129.018, 188.435, 5171, 243.633, 11
"03/31/1997", 118.697, 176.149, 5169, 270.129, 11
"04/30/1997", 118.697, 181.635, 5155, 261.995, 11
"05/30/1997", 113.536, 202.210, 5148, 273.877, 11
"06/30/1997", 105.692, 208.425, 5132, 288.681, 10
"07/31/1997", 113.619, 230.388, 5127, 339.186, 10
"08/29/1997", 100.407, 230.043, 5116, 420.912, 10
"09/30/1997", 108.334, 243.683, 5106, 456.344, 10
"10/31/1997", 95.123, 230.988, 5115, 468.713, 10
"11/28/1997", 118.903, 232.219, 5131, 388.244, 10
"12/31/1997", 126.830, 228.223, 5082, 397.167, 10
"01/30/1998", 112.298, 235.446, 5053, 361.023, 10
"02/27/1998", 103.049, 257.587, 5032, 405.450, 10
"03/31/1998", 103.049, 267.090, 4994, 471.763, 10
"04/30/1998", 99.086, 271.588, 4973, 512.777, 10
"05/29/1998", 99.086, 256.513, 4966, 499.391, 10
"06/30/1998", 95.123, 274.430, 4944, 420.255, 10
"07/31/1998", 97.765, 271.221, 4921, 343.309, 10
"08/31/1998", 92.480, 217.624, 4883, 259.132, 10
"09/30/1998", 89.838, 247.839, 4822, 312.523, 10
"10/30/1998", 68.700, 258.549, 4738, 278.255, 10
"11/30/1998", 55.488, 284.695, 4703, 219.604, 10
"12/31/1998", 55.488, 321.627, 4653, 227.353, 10
"01/29/1999", 34.350, 368.384, 4602, 229.516, 10
"02/26/1999", 79.269, 335.349, 4574, 211.818, 10
"03/31/1999", 52.846, 359.703, 4518, 302.594, 10
"04/30/1999", 54.167, 369.882, 4497, 345.061, 10
"05/28/1999", 50.204, 361.312, 4486, 325.098, 10
"06/30/1999", 52.846, 393.582, 4468, 380.452, 10
<PAGE>
PROPOSAL NO. 2 - APPROVAL OF THE 1999 BOARD OF DIRECTORS' STOCK OPTION PLAN
The Insituform East, Incorporated 1999 Board of Directors' Stock Option
Plan (the "1999 Directors' Plan") was adopted by the Board of Directors on
September 7, 1999, subject to approval by the stockholders at the meeting. It
is intended that the individuals named in the enclosed form of Proxy will vote
their proxies to approve the plan, unless otherwise directed. A majority of
the votes cast by both Common stockholders and Class B Common stockholders,
voting together, will be required for approval of the plan.
The purpose of the 1999 Directors' 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 non-qualified for federal income tax
purposes and only members of the Board of Directors are entitled to grants of
options thereunder.
The following is a summary of the 1999 Directors Plan, and reference
should be made to the full text of the plan contained in Appendix A.
General. Options may be issued for a maximum of 525,000 shares of
Common Stock under the plan, subject to adjustment upon changes in the capital
structure of the Company. Options may only be granted to directors of the
Company. Each option granted under the plan will entitle each director to whom
such option is granted the right to purchase 15,000 shares of the Company's
Common Stock (subject to adjustment upon changes in the capital structure of
the Company) at a designated option price (the "Option Price"), at any time
and from time to time, within five years from the date of grant; provided that
the director serves continually as a director of the Company for at least six
months following the date the option was granted. If the seven nominees named
under Proposal No. 1 of this Proxy statement are elected as directors, they
would be eligible, in consideration for serving as directors of the Company,
to receive in 1999 grants of options entitling each such director to purchase
at any time until December 11, 2004 up to 15,000 shares of the Company's
Common Stock (subject to adjustment for any change in capital structure of the
Company) at the Option price determined on December 11, 1999. Two of such
nominees, George Wm. Erikson and Robert W. Erikson, are current executive
officers, and Messrs. Franklin, Hayes, Kincheloe, Massar and Schaefer are
current directors who are not executive officers; thus, if all nominees are
elected, options for a total of 30,000 shares of Common Stock would be granted
to current executive officers as a group, and options for a total of 75,000
shares of Common Stock would be granted to the five current directors who are
not executive officers.
Administration. The Board of Directors shall administer the 1999
Directors' Plan and shall have exclusive authority to interpret, construe and
implement the provisions of the plan, except as may be delegated in whole or
in part by the Board to a committee of the Board (the "Committee") which shall
consist of two or more members of the Board. Each determination,
interpretation or other action that may be taken pursuant to the plan by the
Board or Committee shall be final and shall be binding and conclusive for all
purposes and upon all persons. The Board from time to time may amend the plan
as it deems necessary to carry out the purposes thereof, provided, however,
that no change shall be made that increases the total number of shares
reserved for issuance or materially modifies the provisions of the plan with
respect to eligibility for participation unless such change is approved by the
stockholders.
Terms and Conditions of Options. Each director granted an option under
the 1999 Directors' Plan shall enter into a separate written agreement (the
"Option Agreement") with the Company covering each such option granted, in
such form and containing such terms and conditions as are not inconsistent
with the plan, as the Board or the Committee shall from time to time
determine. Each option granted under the plan and pursuant to each Option
Agreement will entitle each director to whom such option is granted the right
to purchase 15,000 shares of the Company's Common Stock (subject to adjustment
upon changes in the capital structure of the Company) at the Option Price, any
time and from time to time, within five (5) years from the date of grant;
provided that the director serves continually as a director of the Company for
at least six months following the date the option was granted. Options will be
granted under the plan each year to each member of the Board of Directors of
the Company serving as such on the date of grant. To the extent the 1999
Directors' Plan is approved by the stockholders at the Annual Meeting of
Stockholders on December 10, 1999, the first option grant will be made on the
date of such annual meeting and the Option Price with respect to such option
shall be as of the date of such annual meeting. Each of the succeeding grants
will be made by the Board on the date of each succeeding Annual Meeting of
Stockholders and the Option Price shall be determined in accordance with the
plan's provisions by the Board as of each respective date. A director may
exercise an option only if he has served continually as a director of the
Company or its successor company for at least six months following the date of
the grant.
Federal Income Tax Consequences. The options granted under the plan are
not eligible for the special tax treatment afforded incentive stock options
under the Internal Revenue Code. Under existing federal income tax law and
regulations, an optionee will not recognize taxable income, and the Company
will not be entitled to a deduction, upon the grant of a non-statutory stock
option. Upon exercise of such an option, an optionee will recognize ordinary
income in an amount equal to the amount by which the fair market value of each
share on the date of exercise exceeds the Option Price. The amount so
recognized as income by the optionee generally will be deductible by the
Company.
The foregoing summary of the principal federal income tax
considerations applicable to the 1999 Directors' Plan does not include all
aspects of federal income tax law which may be relevant to a particular
director. The federal income tax laws, the regulations or interpretations by
the Internal Revenue Service or the courts could be changed after the date of
this Proxy Statement. The effect might be to change some or all of the federal
income tax consequences pertaining to this plan of such change. In addition,
the receipt of a grant under the plan, the exercise of a grant or the sale of
stock acquired upon exercise may create tax liabilities for the optionee under
the laws of any state or other taxing jurisdiction. No attempt is made in this
Proxy Statement to summarize these tax consequences.
PROPOSAL NO. 3 - APPROVAL OF THE 1999 EMPLOYEE STOCK OPTION PLAN
The Insituform East, Incorporated 1999 Employee Stock Option Plan (the
"1999 Employee Plan") was adopted by the Board of Directors on September 7,
1999, subject to approval by the stockholders at the meeting. It is intended
that the individuals named in the enclosed form of proxy will vote their
proxies to approve the plan, unless otherwise directed. A majority of the
votes cast by both Common stockholders and Class B Common stockholders, voting
together, will be required for approval of the plan.
The purpose of the 1999 Employee Plan is to promote the growth and
general prosperity of the Company, be permitting key management employees of
the Company and of any wholly-owned subsidiary to purchase shares, through the
grant and exercise of options, of the Company's Common stock. It is
anticipated that the 1999 Employee Plan will serve as an incentive to such key
employees to maximize their efforts on the Company's behalf. Under the terms
of the 1999 Employee Plan, both incentive and nonstatutory stock options may
be granted to eligible employees.
The following is a summary of the 1999 Employee Plan, and reference
should be made to the full text of the plan contained in Appendix B.
General. The Company will reserve 350,000 shares of Common stock for
issuance upon the exercise of stock options granted under the 1999 Employee
Plan (subject to adjustment upon changes in the capital structure of the
Company). The option price of each share of Common stock to be issued pursuant
to the exercise of options granted under the plan will be fair market value
determined on the date of grant. The Company has no present plans to grant
options to any particular individuals. It is not possible to identify all of
the officers who may eventually receive options under the plan or to predict
the number or amount of the options that may be granted to any one officer or
to all officers and directors as a group.
Administration. The 1999 Employee Plan will be administered by a Stock
Option Plan Committee appointed by and comprised of members of the Board of
Directors. The Stock Option Plan Committee, in its sole discretion, shall have
full power and authority to designate eligible employees to whom an incentive
stock option or a nonstatutory stock option shall be granted, determine the
number of shares to be made available under any option granted, determine the
periods in which a participant may exercise his option (provided, however, that
no incentive stock option may be exercised more than ten (10) years after the
date of grant), and determine the date on which the option shall expire. The
Board of Directors may amend or terminate the plan at any time, although any
amendment which increases the total number of shares of Common stock covered by
the plan or changes the definition of "eligible employee" is subject to approval
by the stockholders.
Federal Income Tax Consequences. The federal income tax consequences to
an optionee under the 1999 Employee Plan differ depending on whether an
incentive or a nonstatutory stock option has been granted. With regard to an
incentive stock option (if the applicable special holding periods are met),
there will be no federal income tax consequences to an optionee at either the
time of the initial grant of the option or the time of its exercise (unless the
alternative minimum tax applies). The optionee may be taxed at long-term capital
gains rates when the stock is sold subsequently.
With regard to a nonstatutory stock option, there will be no federal
income tax consequences to an optionee at the time such an option is granted to
him. Upon exercise of a nonstatutory stock option, the optionee will recognize
taxable income in an amount equal to the fair market value of the stock on the
date of exercise minus the exercise price paid, and the Company generally will
be allowed a corresponding compensation deduction. (Similar results apply in
cases in which an incentive stock option is exercised and the special holding
periods applicable with respect to such options are not met.) The optionee may
be taxed at long-term capital gains rates when the stock is sold subsequently.
The foregoing summary of the principal federal income tax
considerations applicable to the 1999 Employee Plan does not include all aspects
of federal income tax law which may be relevant to a particular optionee. The
federal income tax laws, the regulations or interpretations by the Internal
Revenue Service or the courts could be changed after the date of this Proxy
Statement. The effect of such change might be to change some or all of the
federal income tax consequences pertaining to this plan. In addition, the
receipt of a grant under the plan, the exercise of a grant or the sale of stock
acquired upon exercise may create tax liabilities for the optionee under the
laws of any state or other taxing jurisdiction. No attempt is made i this Proxy
Statement to summarize these tax consequences.
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, 1999. 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, 2000. 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, 2000.
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, 1999, 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 2000 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, 2000 must
be received no later than June 30, 2000, 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 8, 1999
<PAGE>
APPENDIX A
INSITUFORM EAST, INCORPORATED
1999 BOARD OF DIRECTORS'
STOCK OPTION PLAN
1. Purpose.
The purpose of the Insituform East, Incorporated 1999 Board of
Directors Stock Option Plan (the "Plan") is to promote the growth and general
prosperity of Insituform East, Incorporated (the "Company") by permitting the
Company, through the granting of Options to purchase shares of its Common Stock,
par value $.04 per share (the "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.
2. Administration.
The Board of Directors shall administer the Plan and shall have
exclusive authority to interpret, construe and implement the provisions of the
Plan, except as may be delegated in whole or in part by the Board to a committee
of the Board (the "Committee") which shall consist of two or more members of the
Board. Each determination, interpretation or other action that may be taken
pursuant to the Plan by the Board or the Committee shall be final and shall be
binding and conclusive for all purposes and upon all persons.
3. Eligibility.
All members of the Board of Directors shall receive Options pursuant to
the terms of the Plan, as set forth herein.
4. Shares of Common Stock Subject to Options.
Subject to the provisions of Sections 10 and 11 hereof, the maximum
number of shares of Common Stock which may be optioned and sold under the Plan
is 525,000 shares of authorized but unissued, or reacquired, shares of Common
Stock of the Company. In the event any shares of Common Stock subject to an
Option are not issued for any reason at the expiration or termination of such
Option, such shares may again be subject to an Option under the Plan.
5. The Options.
Each Director granted an Option under this Plan shall enter into a
separate written Option Agreement with the Company covering each such Option
granted, in such form containing such terms and conditions as are not
inconsistent with the Plan, as the Board or the Committee shall from time to
time determine. Except as provided in this Section, each Option granted
hereunder and pursuant to each such agreement will entitle each Director to whom
such Option is granted the right to purchase 15,000 shares of the Company's
Common Stock at the Option Price, at any time and from time to time, up to five
(5) years from the date of grant. Options will be granted hereunder each year to
each member of the Board of Directors of the Company serving as such on the date
of grant. The first Option grant will be made on December 10, 1999, and the
Option Price with respect to such Option shall be determined as of such date,
subject to approval of the Plan by the Company's Stockholders at the Annual
Meeting of Stockholders to be held on December 10, 1999. Each of the succeeding
grants will be made on the date of each succeeding Board of Directors meeting,
which follows each succeeding Annual Meeting of Stockholders, and the Option
Price shall be determined as of each such respective date.
6. Option Price.
The Option Price for each share of the Common Stock to be issued upon
exercise of Options under the Plan shall be determined on the date of grant in
the following manner: (i) if the trading prices for the Common Stock are
reported on the consolidated transaction reporting system (the "consolidated
system") operated by the Consolidated Tape Association, whether or not the
Common Stock is traded on an exchange, the average of the high and low prices at
which the Common Stock is reported in the consolidated system to have been
traded on such date; (ii) if the principal market for the Common Stock is an
exchange and if the trading prices for the Common Stock are not reported in the
consolidated system, the average of the high and low prices at which the Common
Stock is reported to have traded on such exchange on such date; (iii) if the
principal market for the Common Stock is otherwise than on an exchange, trading
prices for the Common Stock are not reported on the consolidated system, and
bids and offers for such security are reported in the automated quotation system
operated by the National Association of Securities Dealers, Inc. ("NASDAQ"), the
mean between the highest current independent bid price and the lowest current
independent asked price reported on "level 2" of the NASDAQ on such date; (iv)
if the principal market for the Common Stock is otherwise than on an exchange,
trading prices for the Common Stock are not reported on the consolidated system,
and bids and offers for the Common Stock are not reported in NASDAQ, the mean
between the highest current independent bid and the lowest current independent
asked price on such date, determined on the basis of reasonable inquiry; or (v)
if there is no market for the Common Stock, such price as the Board in its
discretion, acting in good faith, shall determine, but not less than the price
of any contemporaneous sales of the Common Stock. If there is a market for the
Common Stock and if, on the pertinent date, no transactions or bid and asked
prices, as the case may be, are reported for the Common Stock under the relevant
clause above, the Option Price of the Common Stock shall be determined on the
next day on which transactions or bid and asked prices, as the case may be, are
reported for the Common Stock under such clause. The Option Price shall be
subject to adjustment as set forth in Section 10 hereof.
7. Exercise of Option.
(a) An Option may be exercised at any time and from time to time within
a period of five (5) years from the date of grant of such Option with respect to
all or part of the shares covered thereby, subject however, to the further
restrictions contained in this Section 7.
In the event the Company or the Stockholders of the Company
enter into an agreement to dispose of all or substantially all of the assets or
stock of the Company by means of a sale, a reorganization, a liquidation or
otherwise, each outstanding Option shall be exercisable with respect to the full
number of shares subject to that Option, notwithstanding the preceding paragraph
of this Section 7(a), only during the period commencing as of the date of such
agreement and ending when the disposition of assets or stock contemplated by the
Agreement is consummated.
(b) An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company at its principal business office by
the person entitled to exercise the Option and full payment for the shares with
respect to which the Option is exercised has been received by the Secretary of
the Company. As soon as practicable after the date an Option is exercised, the
Company shall deliver to the Director a certificate or certificates for the
number of shares of Common Stock acquired upon such exercise, registered in the
name of the Director or the name of any other person entitled to such shares as
contemplated by Section 7(c).
(c) An Option may be exercised by the optionee only (i) if the optionee
has served continually as a Director of the Company or its Successor Company for
at least six months following the date of grant and (ii) (x) while he is, and
has continually been since the date of the grant of the Option, a Director of
the Company or its Successor Company, or (y) for a period ending six (6) months
after the Director has terminated his services in all of such capacities; except
that if a Director's continuous service terminates by reason of his death, such
Option may be exercised within six (6) months after the death of such Director,
but in no event later than five (5) years after the date of grant of such
Option, by (and only by) the person or persons to whom his right under such
Option shall have passed by will or by laws of descent and distribution.
(d) An Option may be exercised in accordance with this Section 7 as to
all or any portion of the shares subject to the Option from time to time, but
shall not be exercisable with respect to fractions of a share.
8. Options not Transferable.
Options under the Plan may not be sold, pledged, assigned or
transferred in any manner otherwise than by will or the laws of descent or
distribution, and may be exercised during the lifetime of an optionee only by
such optionee.
9. Amendment or Termination of the Plan.
(a) The Board of Directors may amend the Plan in such respects as it shall deem
advisable; provided that, no change shall be made that increases the total
number of shares of Common Stock reserved for issuance under the Plan (except
pursuant to Section 11), or materially modifies the requirements as to
eligibility for participation in the Plan, unless such change is authorized by
the Stockholders of the Company. An amendment of the Plan shall not, without the
consent of the Director, adversely affect a Director's rights under an Option
previously granted to him or her.
(b) The Board of Directors may at any time terminate the Plan. Any such
terminations of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
terminated.
10. Adjustments Upon Changes in Capitalization.
If all or any portion of the Option is exercised subsequent to any
stock dividend, split-up, recapitalization, combination or exchange of shares,
merger, consolidation, acquisition of property or stock, reorganization, or
other similar change or transaction of or by the Company, as a result of which
shares of any class shall be issued in respect of outstanding shares of the
class covered by the Option, or shares of the class covered by the Option shall
be changed into the same or different number of shares of the same or another
class or classes, the person or persons so exercising such an Option shall
receive, for the aggregate option price payable upon such exercise of the
Option, an aggregate number and class of shares equal to the number and class of
shares he would have had on the date of exercise had the shares been purchased
for the same aggregate price at the date the Option was granted and not been
disposed of, taking into consideration any such stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidated,
acquisition of property or stock, separation, reorganization or other similar
change or transaction; provided, however, that no fractional shares shall be
issued upon any such exercise, and the aggregate price paid shall be
approximately reduced on account of any fractional shares not issued.
11. Changes in Capital Structure of Company.
In the event of a change in the capital structure of the Company, the
number of shares specified in Section 5 of the Plan, the number of shares
covered by each outstanding Option and the price per share shall be adjusted
proportionately for any increase or decrease in the number of issued shares of
Common Stock resulting from the splitting or consolidation of shares, or the
payment of a stock dividend or effected in any other manner without receipt of
additional or further consideration by the Company.
12. Agreement and Representations of Director.
As a condition to the exercise of any portion of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
under the Securities Act of 1933, as amended, or any other applicable law, rule
or regulation.
13. Reservation of Shares of Common Stock.
The Company, during the term of this Plan, will at all times reserve
and keep available, and will seek or obtain from any regulatory body having
jurisdiction any requisite authority in order to issue and sell, such number of
shares of its Common Stock as shall be sufficient to satisfy the requirements of
the Plan. Inability of the Company to obtain from any regulatory body having
jurisdictional authority deemed by the Company's counsel to be necessary to the
lawful issuance and sale of shares of Common Stock under the Plan shall not
result in any liability of the Company in respect of the nonissuance or sale of
such stock as to which such requisite authority shall not have been obtained.
14. Term.
The Plan shall be effective upon its adoption by the Board of Directors
and approval by the Company's Stockholders. It shall continue in effect for a
term of ten (10) years unless sooner terminated under Section 9.
15. Definitions.
As used herein, the following definitions shall apply:
(a) "Common Stock" shall mean Common Stock, par value $.04 per share,
of the Company.
(b) "Continuous Service" shall mean service as a member of the Board
of Directors, without interruption, of the Company or its
Successor Company.
(c) "Option" shall mean a stock option granted pursuant to the Plan.
(d) "Option Price" means the purchase price, as determined in
accordance with Section 6 of the Plan, for each share of the
Common Stock issued upon the exercise of Options.
(e) "Plan" shall mean the Company's Board of Directors' 1999 Stock
Option Plan.
(f) "Stockholders" shall mean the holders of outstanding shares of the
Company's Common Stock and Class B Common Stock.
(g) "Successor Company" means any company which acquires all or
substantially all of the stock or assets of the Company.
Dated: September 7, 1999
<PAGE>
APPENDIX B
INSITUFORM EAST, INCORPORATED
EMPLOYEE INCENTIVE PROGRAM
1999 EMPLOYEE STOCK OPTION PLAN
INSITUFORM EAST, INCORPORATED, a Delaware corporation (the "Company"),
does hereby adopt an Employee Stock Option Plan with the terms and conditions
set forth below (the "Plan").
SECTION ONE
Designation and Purpose of the Plan
A. Designation. The Plan is designated the "INSITUFORM EAST,
INCORPORATED 1999 EMPLOYEE STOCK OPTION PLAN."
B. Purpose. The purpose of the Plan is to promote the growth and
general prosperity of the Company by permitting key management employees of the
Company and its Subsidiary Companies to purchase shares, by grant of options, of
the Company's Common Stock. The Plan will serve as an incentive for employees to
maximize their efforts on the Company's behalf and will increase the Company's
ability to attract and retain the most competent professionals, thus serving the
best interest of the Company's customers and Stockholders.
SECTION TWO
Definitions
As used herein, the following definitions shall apply:
(a) "Code" means the Internal Revenue Code of 1986, as amended.
(b) "Committee" means the Stock Option Plan Committee appointed to
administer the Plan pursuant to Section Four of the Plan.
(c) "Common Stock" means either authorized and unissued or reacquired
shares of the Common Stock , par value $.04 per share, of the Company.
(d) "Company" means INSITUFORM EAST, INCORPORATED, a Delaware
corporation.
(e) "Eligible Employee" means any key management employee of the
Company or its wholly-owned Subsidiary Companies.
(f) "Incentive Stock Option" means an option as defined in Section
422(b) of the Code and any other applicable provisions of the Code and includes,
without limitation, any portion of an Incentive Stock Option remaining after a
Participant has exercised such Option with respect to only part of the shares
covered by the Option Agreement (within the meaning given that term under
Section Six of the Plan).
(g) "Nonstatutory Stock Option" means a stock option that is not an
Incentive Stock Option and includes, without limitation, any portion of a
Nonstatutory Stock Option remaining after a Participant has exercised such
Option with respect to only part of the shares covered by the Option Agreement
(within the meaning given that term under Section Six of the Plan).
(h) "Option" means either an Incentive Stock Option or a Nonstatutory
Stock Option or both, as the context shall indicate.
(i) "Option Price" means the price, as set forth in Section Seven of
the Plan, of an Option granted pursuant to the Plan.
(j) "Participant" means an Eligible Employee who is granted either an
Incentive Stock Option or a Nonstatutory Stock Option.
(k) "Stockholder" means any holder of an outstanding share or shares of
the Company's Common Stock.
(l) "Subsidiary Company" means any present or future "subsidiary
corporation" of the Company as defined in Section 424(f) of the Code and which
the Company has determined to include under the Plan.
SECTION THREE
Stock Subject to Option
A. Total Number of Shares. The total number of shares of Common Stock
which may be issued by the Company to all Participants under the Plan is 350,000
shares, which may be increased only by a resolution of the Board of Directors of
the Company and approved the Stockholders. Such shares may be either authorized
and unissued or reacquired Common Stock.
B. Expired Options. If either an Incentive Stock Option or a
Nonstatutory Stock Option granted under the Plan is terminated or expires for
any reason whatsoever, in whole or in part, the shares (or remaining shares) of
Common Stock subject to such Option again shall be available for grant under the
Plan.
SECTION FOUR
Administration of the Plan
A. Appointment of Committee. The Board of Directors of the Company
shall appoint a Stock Option Plan Committee which shall consist of at least two
members selected from the Board of Directors each of whom is a "disinterested
person" as defined in Rule 16b-3 as promulgated by the Securities and Exchange
Commission ("Rule 16b-3") under the Securities Exchange Act of 1934, as amended.
The Board of Directors shall designate a member of the Committee to act as
Chairman of the Committee. The Board of Directors, in its discretion, may at any
time remove any member of the Committee and may fill the resulting vacancy with
any director who is a "disinterested person". Any member of the Committee who,
after having been designated a member of the Committee, is no longer a
"disinterested person" immediately shall cease to be a member of the Committee'
the vacancy created thereby shall be filled by the Board of Directors as
hereinabove described.
B. Committee Meetings. The Committee shall hold its meetings at such
times and places as specified by the Committee Chairman. A majority of the
Committee shall constitute a quorum. All actions of the Committee shall be taken
by a majority of a quorum present at a meeting duly called by the Committee
Chairman; provided, however, that any action taken without a meeting but
consented to in writing by a majority of the Committee members shall be
effective as action taken by the Committee at a meeting duly called and held.
C. Committee Power. Subject to the terms and provisions of the Plan,
the Committee, in its sole discretion, shall have full power and authority to
(a) designate Eligible Employees to whom either an Incentive Stock Option or a
Nonstatutory Stock Option shall be granted, (b) determine the number of shares
to be made available under any Option granted, (c) determine the period or
periods in which a Participant may exercise his Option, (d) determine the Option
Price, and (e) determine the date on which any Option shall expire. The
Committee shall have all such additional rights, power and authority necessary
or appropriate to administer the Plan in accordance with its terms including,
without limitation, the power to make binding interpretations of the Plan and to
resolve all questions, whether express or implied, arising thereunder. The
committee may prescribe such rules and regulations for administering the Plan as
the Committee, in its discretion, deems necessary or appropriate.
SECTION FIVE
Selection of Participants
A. Discretion of Committee. To determine to which of the Eligible
Employees either an Incentive Stock Option or a Nonstatutory Stock Option shall
be granted, and the terms and conditions of any Option so granted, the Committee
shall evaluate, among other things, (i) the duties and responsibilities of
Eligible Employees, (ii) their past and prospective contributions to the success
of the Company, (iii) the extent to which they are performing and will continue
to perform outstanding services for the benefit of the Company, and (iv) such
other factors as the Committee deems relevant.
B. Limitation on Grant of Incentive Stock Options. An Incentive Stock
Option may not be granted to any Eligible Employee if (i) such grant (regardless
of when granted) would cause the aggregate fair market value of the Common Stock
granted under the Plan (or any other stock option plan required to be taken into
account under Section 422(d) of the Code) to exceed $100,000 plus the relevant
"unused limit carryover" provided for under prior tax law or (ii) the aggregate
fair market value (determined in accordance with paragraph A. of Section Seven),
determined as of the date an Incentive Stock Option is granted (where the Option
is granted after December 31, 1986), of the Common Stock for which any Eligible
Employee may be awarded Incentive Stock Options which are first exercisable by
the Eligible Employee during any calendar year under the Plan ( or any other
stock option plan required to be taken into account under Section 422(d) of the
Code) exceeds $100,000 (without regard to options granted before January 1,
1987).
C. Determination of Common Stock Ownership. For purposes of the Plan
(and especially of Section Eight hereof), a participant's Common Stock ownership
shall be determined by taking into account the rules of constructive ownership
set forth in Section 424(d) of the Code.
SECTION SIX
Option Agreement
A. Form of Option. Each Option granted to a Participant shall be
designated either an Incentive Stock Option or a Nonstatutory Stock Option. A
written agreement incorporating the provisions of the Plan and such other terms
and conditions as the Committee determines shall identify any Option granted
pursuant to the Plan as either an Incentive Stock Option or a Nonstatutory Stock
Option, as the case may be. In the event that both an Incentive Stock Option and
a Nonstatutory Stock Option are granted to a Participant the written agreement
shall identify the respective Options and the terms and conditions thereof.
B. Date of Grant of Option. The date of the grant of either an
Incentive Stock Option or a Nonstatutory Stock Option is the date specified in
the Option Agreement described in this Section Six and signed by the Participant
and the Company.
SECTION SEVEN
Option Price
A. Determination of Stock Option Price. The Option Price for each share
of the Common Stock to be issued on exercise of either an Incentive Stock Option
or a Nonstatutory Stock Option under the Plan shall be fair market value of the
Common Stock determined on the date of grant in the following manner: (i) if the
trading prices for the Common Stock are reported on the consolidated transaction
reporting system (the "consolidated system") operated by the Consolidated Tape
Association, the average of the high and low prices at which the Common Stock is
reported in the consolidated system to have been traded on such date; (ii) if
the principal market for the Common Stock is an exchange and if the trading
prices for the Common Stock are not reported in the consolidated system, the
average of the high and low prices at which the Common Stock is reported to have
traded on such exchange on such date; (iii) if the principal market for the
Common Stock is otherwise than on an exchange and bids and offers for such
security are reported in the automated quotation system operated by the National
Association of Securities Dealers, Inc. ("NASDAQ"), the mean between the highest
current independent bid price and the lowest current independent asked price
reported on "level 2" of the NASDAQ on such date; (iv) if the principal market
for the Common Stock is otherwise than on an exchange and bids and offers for
the Common Stock are not reported on NASDAQ, the mean between the highest
current independent bid price and the lowest current independent asked price on
such date, determined on the basis of reasonable inquiry; or (v) if there is no
market for the Common Stock, such price as the Board of Directors of the Company
in its discretion, acting in good faith, shall determine, but not less than the
price of any contemporaneous sales of the Common Stock. If there is a market for
the Common Stock and if, on the pertinent date, no transactions or bid and asked
prices, as the case may be, are reported for the Common Stock under the relevant
clause above, the Option Price of the Common Stock shall be determined on the
next day on which transactions or bid and asked prices, as the case may be, are
reported for the Common Stock under such clause. Such Option Price shall be
subject to adjustment as set forth in Paragraph B. of this Section Seven.
Notwithstanding the foregoing, the Option Price with respect to each Incentive
Stock Option granted to an individual described in Section 422(b)(6) of the Code
(relating to certain 10 percent owners) shall not be less than 110 percent of
such fair market value.
B. Adjustments Upon Changes in Capitalization. If all or any portion of
an Option is exercised subsequent to any stock dividend, split-up,
recapitalization, combination or exchange of shares, merger, consolidation,
acquisition of property or stock, reorganization, or other similar change or
transaction of or by the Company, as a result of which shares of any class shall
be issued in respect of outstanding shares of the class covered by the Option or
shares of the class covered by the Option shall be changed into the same or
different number of shares of the same or another class or classes, the person
or persons so exercising such an Option shall receive, for the aggregate Option
Price payable on such exercise of the Option, the aggregate number and class of
shares equal to the number and class of shares he would have had on the date of
exercise had the shares been purchased for the same aggregate price at the date
the Option was granted and not been disposed of, taking into consideration any
such stock dividend, split-up, recapitalization, combination or exchange of
shares, merger, consolidation, acquisition of property or stock, separation,
reorganization or other similar change or transaction; provided, however, that
no fractional share shall be issued upon any such exercise, and the aggregate
price paid shall be reduced appropriately on account of any fractional share not
issued.
SECTION EIGHT
Term of Option
No Incentive Stock Option, by its terms, may be exercised more than 10
years after the date of its grant; provided, however, that no Incentive Stock
Option granted to an individual described in Section 422(b)(6) of the Code
(relating to certain 10 percent owners), by its terms, may be exercised more
than five years from the date of its grant. The term of any Nonstatutory Stock
Option shall be determined by the Committee.
SECTION NINE
Exercise of Option
A. Limitation of Exercise of Option. Except as otherwise provided
herein, the Committee, in its sole discretion, may limit an Option by
restricting its exercise in whole or in part for a specified period or periods.
B. Method of Exercising an Option. Subject to the provisions of any
particular Option Agreement, a Participant may exercise his Option in whole or
in part any time during its term by written notice to the Company stating the
number of shares of Common Stock such Participant elects to purchase under his
Option.
C. No Obligation to Exercise Option. A Participant is under no
obligation to exercise an Option or any part thereof.
D. Payment for Option Common Stock. Upon exercise of an Option, a
Participant shall be required to pay, in cash or by good check or money order
made payable to the Company, the exercise price for the number of shares of
Common Stock which the Participant elects to purchase.
E. Delivery of Common Stock to Participant. The Company shall undertake
and follow all necessary procedures to deliver promptly the number of shares of
Common Stock that the Participant elects to purchase on exercise of an Option
granted under the Plan. Such delivery, however, may be postponed, at the sole
discretion of the Company, to enable the Company to comply with any applicable
procedures, regulations or listing requirements of any governmental agency,
stock exchange or regulatory authority.
SECTION TEN
Nontransferability of Option
During a Participant's lifetime, an Option granted to him may be
exercised only by him. It may not be sold, exchanged, assigned, pledged,
discounted, hypothecated or otherwise transferred except by will or by the laws
of descent and distribution; provided however, that the Committee, after giving
due consideration to the applicable rules under the Code, may permit other
transfers to the extent consistent with Rule 16b-3. No Option or any right
thereunder shall be subject to execution, attachment or similar process. Any
attempt to so sell, exchange, assign, pledge, discount, hypothecate or otherwise
transfer any such Option, or any right thereunder, contrary to the provisions
thereof immediately shall nullify and void such Option and all rights
thereunder.
SECTION ELEVEN
Tax Withholding by Company
In every case of an exercise by a Participant of a Nonstatutory Stock
Option, the Company shall deduct and withhold from the Participant's salary
payable at the end of the payroll period during which exercise is made an amount
calculated in accordance with Section 3402 of the Code. In the event that the
Company is unable to withhold funds sufficient to satisfy the requirements of
Section 83(h) of the Code, the Participant promptly shall pay to the Company
such additional amount as may be necessary to enable the Company to satisfy such
requirements.
<PAGE>
SECTION TWELVE
Compliance with Securities Laws
A. Written Agreement by Participants. Unless a registration statement
under the Securities Act of 1933 is then in effect with respect to the Common
Stock a Participant receives upon exercise of his Option, the Committee, in its
discretion, may require, at the time that a Participant exercises his Option,
that the Participant agree in writing to acquire such Common Stock for
investment and not for resale or distribution, or to consent to such other
agreement as the Committee, in its discretion, may deem necessary to comply with
the requirements of the Securities Act of 1933 or any applicable state
securities laws. A reference to any such agreement shall be inscribed on the
Common Stock certificate(s).
B. Registration Requirement. Each Option granted pursuant to the Plan
shall be subject to the requirement that, if at any time the Board of Directors
of the Company determines that the listing, registration or qualification of the
shares subject to the Option upon any stock exchange or under any state or
federal law is necessary or desirable as a condition of, or in connection with,
the issuance of shares thereunder, the Option may not be exercised in whole or
in part unless such listing, registration or qualification shall have been
effected or obtained (and the same shall have been free of any conditions not
acceptable to the Board of Directors of the Company).
SECTION THIRTEEN
Changes in Capital Structure of Company
In the event of a change in the capital structure of the Company, the
number of shares specified in Section Three of the Plan, the number of shares
covered by each outstanding Option and the price per share shall be adjusted
proportionately for any increase or decrease in the number of issued shares of
Common Stock resulting from the splitting or consolidation of shares, or the
payment of a stock dividend, or effected in any other manner without receipt of
additional or further consideration by the Company; provided, however, that any
such adjustment shall be made so as not to result in a "modification" of any
Incentive Stock Option within the meaning of Section 424(h) of the Code.
SECTION FOURTEEN
Consolidation, Reorganization or Liquidation
In the event the Company or any Subsidiary Company is a party to a
corporate merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, within the meaning of Section 424 of the Code,
all outstanding Options shall thereupon terminate; provided, however, that the
Company shall give at least fifteen days' written notice to holders of
unexercised Options prior to the effective date of such merger, consolidation
acquisition, separation, reorganization or liquidation; provided further, that,
unless such Options are assumed or substitutes therefor are issued (within the
meaning of Section 424(a) of the Code) by the surviving or acquiring corporation
in any such merger, consolidation or other reorganization, all Options
previously issued shall accelerate upon such notice, and the holders thereof may
exercise such Options prior to such effective date, notwithstanding any time
limitation previously placed on the exercise of such Options but subject to the
provisions of Section Nineteen.
SECTION FIFTEEN
Employment Agreement
Each Participant shall agree to remain with and render services to the
Company or any Subsidiary Company for a period of not less than 24 months from
the date of grant of an Option, and further shall agree during such employment
(subject to death, disability, retirement, vacations, sick leave and other
absences in accordance with the Company's regular policies) to devote his entire
time, energy and skill to the service of the Company or any Subsidiary Company
and the promotion of its interest. Nothing in the Plan or in any Option shall be
construed as constituting a commitment, guarantee, agreement or understanding of
any kind or nature that the Company or any Subsidiary Company shall continue to
employ any individual; nor does the Plan or any Option granted under it affect
in any way the Company's or any Subsidiary Company's right to terminate the
employment of any individual at any time. Participation under the Plan shall not
affect eligibility for any profit-sharing, bonus, insurance, pension or other
extra-compensation plan which the Company or any Subsidiary Company has
heretofore adopted or may at any time adopt for Eligible Employees.
SECTION SIXTEEN
Termination of Employment
A. Severance. Subject to the subsequent provisions of this Section
Sixteen in the event that a Participant's employment with the Company or any
Subsidiary Company terminates for any reason, any Option, to the extent to which
it has vested, granted to him terminates three months after the date of such
termination of employment. Transfer of employment between corporations in the
group comprised of the Company and its Subsidiary Companies shall not be deemed
a termination of employment.
B. Death. Subject to the provisions of Paragraph C. of this Section
Sixteen if a Participant dies while an employee of the Company or any Subsidiary
Company, his Option may be exercised within six months after his death by the
executor or administrator of the estate of the Participant or by the person to
whom the Option shall pass by will or by the laws of descent and distribution,
but only to the extent the Participant was entitled to exercise the Option on
the date of his death.
C. Limitation. In no event may an Option be exercised by anyone after
the expiration date provided for in Section Eight of the Plan or, if a shorter
term is specified in the Option Agreement, the date specified therein.
SECTION SEVENTEEN
Application of Funds
All proceeds received by the Company from the exercise of Options shall
be paid into its treasury. Such proceeds shall be used for general corporate
purposes.
SECTION EIGHTEEN
Participant's Rights as a Holder of Shares
A Participant, or other person authorized to exercise the Participant's
Option pursuant to paragraph B. of Section Sixteen has no rights as a
Stockholder with respect to any shares of Common Stock covered by his Option
until the date a certificate is issued to him for such shares. Except as
otherwise provided in Section Thirteen of the Plan, no adjustment shall be made
for dividends or other rights for which the record date occurs prior to the date
such stock certificate is issued.
<PAGE>
SECTION NINETEEN
Approval, Amendment and Termination of the Plan
A. Effective Date of the Plan. The Plan shall become effective on the
date that it is approved by the Stockholders.
B. Discretion of the Board of Directors. The Board of Directors of the
Company may amend or terminate the Plan at any time; provided, however, that (i)
any such amendment or termination shall not adversely affect the rights of
participants who were granted Options prior thereto; (ii) any such amendment
shall not result in a "modification" of any Incentive Stock Option within the
meaning of Section 424(h) of the Code; (iii) any such amendment shall not
change, modify or otherwise alter the provisions of the Plan applicable to
Participants who are both officers and directors; and (iv) any amendment which
increases the total number of shares of stock covered by the Plan or changes the
definition of Eligible Employee shall be subject to approval thereof by the
Stockholders.
C. Automatic Termination. In any event, the Plan shall terminate 10
years after its approval by the Stockholders or its adoption by the Board of
Directors of the Company, whichever is the earlier. Options may be granted under
the Plan at any time and from time to time before the Plan is terminated under
this Paragraph C. Any Option outstanding at the time the Plan is terminated
under this Paragraph C. shall remain in effect until it is exercised or expires.
SECTION TWENTY
Notices
All notices and elections by a Participant or any person succeeding to
his right to an Option as a result of the Participant's death shall be in
writing and delivered in person or by mail to the President or Secretary of the
Company at the Company's principal office.
Dated: September 7, 1999
<PAGE>
APPENDIX C
COMMON
S T O C K H O L D E R B A L L O T
INSITUFORM EAST, INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
10 DECEMBER 1999
The undersigned hereby vote(s) the number of shares of Common Stock of
Insituform East, Incorporated to which they are entitled to vote as follows:
NUMBER OF SHARES
Proposal No. 1A For Withhold
To elect the nominees (Messrs. Calvin CGF: -------- --------
G. Franklin and Thomas J. Schaefer)
as directors of the Corporation until TJS: -------- --------
the next Annual Meeting and until their
successors are elected and qualified.
Proposal No. 2
To approve adoption of the 1999 Board FOR AGAINST ABSTAIN
of Directors' Stock Option Plan -------- -------- --------
Proposal No. 3
To approve adoption of the 1999 FOR AGAINST ABSTAIN
Employees Stock Option Plan -------- -------- --------
Signed:
Print Name:---------------------------------
Print Address:------------------------------
Signed:
Print Name:--------------------------------
Print Address:-----------------------------
Dated: 10 December 1999
<PAGE>
APPENDIX D
CLASS B
S T O C K H O L D E R B A L L O T
INSITUFORM EAST, INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS
10 DECEMBER 1999
The undersigned hereby vote(s) the number of shares of Class B Common
Stock of Insituform East, Incorporated to which they are entitled to vote as
follows:
NUMBER OF SHARES
Proposal No. 1B For Withhold
To elect the five nominees (Messrs. RWE:
Robert W. Erikson, George Wm. Erikson, GWE:
Webb C. Hayes, IV, Paul C. Kincheloe, Jr. WCH:
and Jack Massar) as directors of the PCK:
Corporation until the next Annual Meeting JM:
and until their successors are elected and
qualified.
Proposal No. 2
To approve adoption of the 1999 Board FOR AGAINST ABSTAIN
of Directors' Stock Option Plan
Proposal No. 3
To approve adoption of the 1999 FOR AGAINST ABSTAIN
Employees Stock Option Plan
Signed:
Print Name:
Print Address:
Signed:
Print Name:
Print Address:
Dated: 10 December 1999
