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)
CERBCO, INC.
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>
CERBCO, Inc.
3421 Pennsy Drive
Landover, Maryland 20785
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
FRIDAY, DECEMBER 10, 1999
To the Stockholders of CERBCO, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
CERBCO, Inc., a Delaware corporation (the "Company"), for the fiscal year ended
June 30, 1999, will be held at the Club Hotel by Doubletree, 9100 Basil Court,
Landover, Maryland, on Friday, December 10, 1999, at 9:00 a.m. local time, for
the following purposes:
1. Proposal 1: To elect directors of the Company;
2. To transact such other business as may properly come before the
meeting or 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 Company'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 COMPANY'S EXPENSE IN SOLICITING
PROXIES. IF YOU ARE PRESENT AT THE MEETING, YOU MAY, IF YOU WISH, WITHDRAW YOUR
PROXY AND VOTE YOUR SHARES PERSONALLY.
By Order of the Board of Directors,
/s/ Robert F. Hartman
Robert F. Hartman
Secretary
Landover, Maryland
November 1, 1999
<PAGE>
CERBCO, Inc.
3421 Pennsy Drive
Landover, Maryland 20785
Annual Meeting of Stockholders to be Held
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 CERBCO, Inc., a Delaware corporation
("CERBCO" or the "Company"), for use at the Annual Meeting of Stockholders to be
held at the Club Hotel by Doubletree, 9100 Basil Court, Landover, Maryland, on
Friday, December 10, 1999, at 9:00 a.m. local time, and at any adjournments
thereof (the "Meeting").
The Board of Directors (the "Board") 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. If the
enclosed proxy is executed and returned, it may be revoked at any time before it
is voted at the Meeting by a written notice of revocation to the Secretary of
the Company, or by executing a proxy bearing a later date, or by voting at the
Meeting.
Shares of Common Stock and shares of Class B Common Stock represented
by valid proxies received in time for the Meeting, and not revoked, will be
voted as specified therein. If no instructions are given, the respective shares
of common stock will be voted FOR the election as director of the Company that
nominee for director designated for election by the holders of Common Stock and
listed under the caption "Proposal No. 1 - Election of Directors" herein; FOR
the election as directors of the Company those nominees for director designated
for election by the holders of Class B Common Stock and listed under the caption
"Proposal No. 1 - Election of Directors" herein; and, if authority is given to
them, at the discretion of the proxy holders, on any other matters that may
properly come before the Meeting.
The cost of solicitation will be borne by the Company. Additional
solicitations may be made by mail, telephone, telegraph, personal contact or
other means by the Company or by its directors or regular employees. The Company
may make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send proxies and proxy statements to the beneficial owners of
shares of the Company's common stock and to reimburse them for their reasonable
expenses in so doing.
This Proxy Statement and the accompanying Notice of Annual Meeting,
Proxy and Annual Report are first being mailed to the Company's stockholders of
record on or about November 1, 1999.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of the Record Date, there were outstanding 1,482,956 shares,
comprised of 1,189,476 shares of Common Stock, $.10 par value (the "Common
Stock"), and 293,480 shares of Class B Common Stock, $.10 par value (the "Class
B Common Stock"), which are the only classes of stock of the Company
outstanding. A quorum shall be constituted by the presence at the Meeting of
one-third (1/3) of the outstanding shares of Common Stock, or 396,492 of such
shares, and one-third (1/3) of the outstanding shares of Class B Common Stock,
or 97,827 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.
The following information is furnished with respect to each person or
entity who is known to the Company to be a beneficial owner of more than five
percent of any class of the Company's voting securities as of the Record Date:
<TABLE>
<CAPTION>
Amount and Nature of
Name & Address of Beneficial Owner Title of Class Beneficial Ownership Percent of Class
- ---------------------------------- -------------- -------------------- ----------------
<S> <C> <C> <C> <C>
Robert W. Erikson Common Stock 60,700 1/ 5.1%
3421 Pennsy Drive Class B Common Stock 131,750 1/ 44.5%
Landover, MD
George Wm. Erikson Common Stock 59,602 2/ 5.0%
3421 Pennsy Drive Class B Common Stock 115,814 2/ 39.1%
Landover, MD
Emanon Partners, L.P. Common Stock 135,500 3/ 11.4%
200 Park Avenue, Suite 3900
New York, NY
1/ Record and beneficial ownership, sole voting and sole investment power.
2/ Record and beneficial ownership. Includes 2,246 shares of each class of
stock owned jointly with Mr. Erikson's spouse, as to which there is shared
voting and investment power.
3/ Beneficial ownership, sole voting and sole investment power as publicly
disclosed in Form 4 filed on August 10, 1999 with the Securities and
Exchange Commission.
</TABLE>
The following information is furnished with respect to all directors of
CERBCO who were the beneficial owners of any shares of Common Stock and/or Class
B Common Stock as of the Record Date, and with respect to all directors and
officers of CERBCO 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> <C>
Robert W. Erikson Common Stock 60,700 1/ 10,000 5.8%
Class B Common Stock 131,750 1/ 0 44.8%
George Wm. Erikson Common Stock 59,602 2/ 10,000 5.7%
Class B Common Stock 115,814 2/ 0 39.0%
Webb C. Hayes, IV Common Stock 4,500 10,000 1.2%
Paul C. Kincheloe, Jr. Common Stock 7,500 10,000 1.4%
All Directors and Officers
as a Group (5 persons Common Stock 132,302 40,000 14.0%
including those named Class B Common Stock 247,564 0 83.4%
above) 3/
1/ Record and beneficial ownership, sole voting and sole investment power.
2/ Record and beneficial ownership. Includes 2,246 shares of each class of
stock owned jointly with Mr. Erikson's spouse, as to which there is shared
voting and investment power.
3/ Mr. George Erikson also is the beneficial owner of 16,500 shares of Common
Stock (less than 1% of such class) of Insituform East, Incorporated, a
subsidiary of the Company. In addition, Messrs. George Erikson and Robert
Erikson each are the beneficial owners of exercisable options on 75,000
shares of the Common Stock (approximately 1.7% of such class) of Insituform
East, Incorporated, pursuant to the Insituform East 1994 Board of
Directors' Stock Option Plan.
</TABLE>
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The authorized number of directorships of the Board of Directors is
four. Four directors are presently serving. Accordingly, in accordance with the
Company's Certificate of Incorporation and By-laws, the Board has nominated one
director to be elected by the holders of shares of Common Stock and three
directors to be elected by holders of shares of Class B Common Stock. The terms
of all presently serving directors expire upon the election and qualification of
the directors to be elected at the Meeting, and the four persons presently
serving as directors are all nominees to be elected at the Meeting. The
directors elected will serve subject to the Company's 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.
It is intended that the individuals named in the enclosed form of proxy
will vote their proxies in favor of the election of the persons listed below as
the Board's nominees for the Company's directors, unless otherwise directed. The
Board has no reason to believe that any of the nominees for the office of
director will not be available for election as director. However, should any of
them become unwilling to be elected or unable to serve, 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
One of the four nominees for election to the Board of Directors
identified below has been designated for election by the holders of shares of
Common Stock, and only the holders of such shares may vote with respect to such
nominee. The remaining three 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 such nominees. Accordingly, the following list contains
a designation as to that nominee to be elected by holders of shares of Common
Stock and those nominees to be elected by holders of shares of Class B Common
Stock:
<TABLE>
<CAPTION>
First Became Class of Common Stock
Name, Age, Principal Occupation, Business Experience and Directorships A Director for Which Nominated
<S> <C> <C>
Robert W. Erikson, Age 54 2/ 3/ 4/ 1974 1/ Class B Common Stock
President and a Director of CERBCO since 1988; Insituform East, Inc. - Vice
Chairman since 1986 and President since 1991, a Director since 1985 and Vice
Chairman of the Board of Directors from 1985 to 1986; CERBERONICS, Inc. - a
Director since 1974, Chairman since 1988, and President from 1977 to 1988; a
Director of Palmer National Bancorp, Inc. and The Palmer National Bank from 1983
to 1996, and a Director of The Palmer National Bank's successor, The George
Mason Bank, N.A., from 1996 to 1997; Capitol Office Solutions, Inc. - Vice
Chairman and a Director from 1987 to June 30, 1997.
George Wm. Erikson, Age 57 2/ 3/ 1975 1/ Class B Common Stock
Chairman, General Counsel and a Director of CERBCO since 1988; Insituform
East, Inc. Chairman and General Counsel since 1986, a Director since 1984 and
Chairman of the Board of Directors from 1985 to 1986; CERBERONICS, Inc. - a
Director since 1975, General Counsel since 1976, Chairman from 1979 to 1988, and
Vice Chairman since 1988; Capitol Office Solutions, Inc. - Chairman, General
Counsel and a Director from 1987 to June 30, 1997.
Webb C. Hayes, IV, Age 51 4/ 1991 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;
Insituform East, Inc. - a Director since 1994; Capitol Office Solutions, Inc. -
a Director from 1992 to June 30, 1997; a Director of the Federal Reserve Bank of
Richmond from 1992 to 1995.
Paul C. Kincheloe, Jr., Age 58 4/ 1991 Common Stock
Practicing attorney and real estate investor since 1967; Partner in the law
firm of Kincheloe and Schneiderman since 1983; Insituform East, Inc. - a
Director since 1994; Capitol Office Solutions, Inc. - a Director from 1992 to
June 30, 1997; Director of Herndon Federal Savings & Loan from 1970 to 1983;
Director of First Federal Savings & Loan of Alexandria from 1983 to 1989.
1/ Includes service as a director of CERBERONICS, Inc., now a wholly-owned
subsidiary of the Company.
2/ Member of the Corporate Executive Committee of the Company, and the Chief
Executive Officer Committee of Insituform East, Incorporated which
committees perform the functions of the Chief Executive Officer of each of
the respective companies.
3/ Messrs. Robert Erikson and George Erikson are brothers.
4/ Member of the Audit Committee.
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS
AND MEETING ATTENDANCE
The Board of Directors has an Audit Committee, a majority of the
members of which are 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 Company's
financial policies and accounting systems and controls, 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 non-management members of the Audit Committee consult
with the independent public accountants outside the presence of corporate
management or other employees to discuss matters of concern, receive
recommendations or suggestions for change and have a free exchange of views and
information.
During the fiscal year ended June 30, 1999, the Board of Directors of
the Company held five meetings and the Audit Committee held two meetings. Each
of the Company's directors attended 75% or more of the total of (1) the number
of meetings of the Board of Directors and (2) the number of meetings held by all
committees of the Board on which such Director served during the fiscal year
ended June 30, 1999.
EXECUTIVE COMPENSATION
COMPENSATION REPORT BY THE BOARD OF DIRECTORS
GENERAL
CERBCO, Inc. ("CERBCO" or the "Company") is a parent holding company
which, through its wholly-owned subsidiary, CERBERONICS, Inc. ("CERBERONICS"),
holds a controlling interest in Insituform East, Incorporated ("Insituform
East") [excavationless sewer and pipeline rehabilitation] and, until June 30,
1997, Capitol Office Solutions, Inc. [copier and facsimile ("fax") equipment
sales, service and supplies].
The Company does not have a compensation committee. The Corporate Executive
Committee (the "CEC")(NOTE: 1/), with the annual review and oversight of the
Board, determines the base salary for all officers of the Company except the
members of the CEC. The Board, as a whole, considers compensation arrangements
proposed by and for members of the CEC and, pursuant to the By-laws, is the
ultimate determiner of compensation arrangements for members of the CEC. When
considering CEC compensation arrangements, a portion of Board review may be
conducted in camera, excluding CEC members, and resolutions of the Board
determining CEC compensation arrangements typically are voted upon twice, once
with CEC members abstaining.
- --------
(NOTE: 1/ Pursuant to the Company's By-laws, the CEC performs
the functions of the Chief Executive Officer of the Company.
The CEC presently has two members, Messrs. George Wm. Erikson,
Chairman and Robert W. Erikson, President.)
PHILOSOPHY
The executive compensation philosophy of the Company (which is intended
to apply to all of the executive officers of the Company, including members of
the CEC) 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 believes management compensation should be
set at levels 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 Board's view
that the compensation of management should have a component contingent upon the
Company's level of performance. By aligning the financial interests of the
Company's executive officers and those of its shareholders, the Company
encourages executive officers to enhance the profitability of the Company and
thus increase shareholders' value. Since CERBCO officers devote a predominate
portion of their time to the affairs of CERBCO's subsidiaries, the Board reviews
and considers the compensation decisions of such subsidiaries when determining
the total compensation arrangements of its officers. The Board and the CEC
review the compensation arrangements of the Company's executive officers on a
continuing basis to ensure that such arrangements are consistent with this
executive compensation philosophy.
COMPONENTS OF COMPENSATION
The compensation program for the Company's officers (including members
of the CEC) which after June 30, 1997 includes compensation received from
CERBCO, Insituform East and CERBERONICS, consists of: (a) base salaries; (b)
compensation pursuant to plans; and (c) incentive cash bonuses. The Board and/or
the CEC determine the base salaries of CERBCO officers and the Board administers
the Company's Supplemental Executive Retirement Plan (the "CERBCO SERP")
covering the Company's officers. However, each CERBCO officer additionally has
employment responsibilities and serves as an officer with the Company's
subsidiaries and receives most of their compensation, including base salary,
compensation pursuant to plans and incentive bonuses, from such subsidiaries.
The CERBCO Board carefully reviews the compensation decisions of the
subsidiaries as they relate to each of the officers of CERBCO.
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. The base salary level for each executive officer
(including members of the CEC) 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 CEC is empowered to
adjust the annual base salary level of executive officers (other than members of
the CEC) at other times during the year should it deem any such adjustments
appropriate. Such adjustments are 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. Since the officers of CERBCO are employed by and
receive most of their salaries from one or more of the Company's subsidiaries,
the CERBCO Board reviews and considers the base salary received from such
subsidiaries and determines whether the aggregate base compensation received by
each officer is commensurate with the time and effort devoted to the activities
of the Company and each subsidiary.
Applying the Company's compensation philosophy during the
annual review in September 1998, it was the judgment of the CEC and the Board
that the base salary level of each executive officer of the Company (including
members of the CEC) should not be increased effective October 1, 1998. In
addition, the officers of CERBCO, including members of the CEC, are employees of
the Company's principal operating subsidiary, Insituform East, and the Board
concurred with the decision of the Insituform East Board of Directors, to not
increase the base salary of its officers effective October 1, 1998.
(b) Compensation Pursuant to Plans. The officers of CERBCO are eligible
to receive plan compensation through the CERBCO SERP. In addition, the officers
of CERBCO, including members of the CEC, as employees of Insituform East, are
eligible to receive plan compensation through the Insituform East Employee
Advantage Plan. Participation in, and benefits acquired under this plan are on a
nondiscretionary formula basis applicable to all Insituform East employees (see
"Compensation Pursuant to Plans - Insituform East, Incorporated Plans").
Pursuant to the CERBCO SERP, the members of the CEC will
receive a monthly retirement benefit for life equivalent to 50% of the final
aggregate monthly salary such executives received from the Company and its
subsidiaries as defined in and limited by the executives' agreement. The other
executive presently covered by the CERBCO SERP will receive a monthly retirement
benefit for life equivalent to 25% of the final aggregate monthly salary such
executive received from the Company and its subsidiaries as defined in and
limited by the executive's agreement (see "Compensation Pursuant to Plans -
CERBCO, Inc. Plans").
The terms of the CERBCO 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 Company's executive officers. The
Company has established such a trust, which has been funded by life insurance
policies.
The Board views the CERBCO SERP as providing important
benefits to the covered executives after their retirement. Further, the Board
believes that the adoption of the CERBCO SERP is fully consistent with CERBCO's
compensation philosophy and is a customary form of supplemental executive
retirement similar to that adopted by comparable companies.
(c) Incentive Cash Bonuses. CERBCO has deferred the direct employ of an
incentive cash bonus as part of the compensation package of its officers.
However, the Company believes that the compensation of its officers is typically
more directly linked to the overall profitability of the Company's operations as
a whole because each of the officers is employed by the Company's principal
operating subsidiary, Insituform East, which does offer incentive cash bonuses.
Insituform East employs an annual return-on-equity ("ROE") incentive cash bonus
which is tied to its earnings. The Insituform East ROE incentive bonus amount is
calculated by multiplying Insituform East's annual ROE percentage (net earnings
divided by weighted average equity less current earnings) by the base
compensation paid to the officer over the fiscal year. The maximum annual
individual bonus available to any officer is normally limited to an upper cap of
30% of the officer's base compensation used in the respective ROE formula. For
the most recent fiscal year ended June 30, 1999, due to negative net earnings,
no incentive cash bonuses were awarded to Insituform East officers. The
Company's Board concurred with the incentive bonus decisions made by Insituform
East for fiscal year 1999.
COMPENSATION OF MEMBERS OF THE CEC
On September 15, 1998, the CERBCO Board approved without change a base
salary of $11,475 per year, effective October 1, 1998, for each current member
of the CEC, namely, Messrs. George Erikson and Robert Erikson. The decision made
by the CERBCO Board was subjective, taking into account the philosophical aim of
setting executive compensation and was not based on any particular performance
criteria. As part of its analysis when it determined the compensation packages
for Messrs. George Erikson and Robert Erikson, the Board reviewed the
compensation they received from Insituform East and CERBERONICS in order to
ensure that their aggregate compensation was reasonably apportioned in relation
to the time, duties and responsibilities among each of the three companies.
At Insituform East, the base salary received by Messrs. George Erikson
and Robert Erikson remained unchanged at a rate of $216,607 per year, effective
October 1, 1998. Due to the negative earnings results obtained by Insituform
East for fiscal year 1999, no incentive cash bonus was earned by either Mr.
George Erikson or Mr. Robert Erikson.
At CERBERONICS, the base salary received by Messrs. George Erikson and
Robert Erikson remained unchanged at a rate of $90,640 per year, effective
October 1, 1998.
As previously discussed, in approving the compensation package for the
CEC members, the Board considered that Messrs. George Erikson and Robert Erikson
devote a predominate portion of their time and effort directly to the activities
of CERBCO's subsidiaries, and that their work for CERBCO requires a smaller
portion of their time and effort. The Board concurred in the compensation paid
to the members of the CEC by each such subsidiary and believes the components of
the aggregate compensation paid to Messrs. George Erikson and Robert Erikson by
the Company and its subsidiaries provide a compensation package that fairly
reflects the time and effort devoted by such officers to the Company and each of
its subsidiaries.
THE ABOVE COMPENSATION REPORT IS MADE OVER THE NAME OF EACH MEMBER OF THE BOARD
OF DIRECTORS.
Robert W. Erikson George Wm. Erikson Webb C. Hayes, IV Paul C. Kincheloe, Jr.
SUMMARY COMPENSATION
As of July 1, 1997, CERBCO is a parent holding company with a
controlling interest, through its wholly-owned subsidiary, CERBERONICS, in
Insituform East ("IEI"). Prior to June 30, 1997, CERBCO also had a controlling
interest in Capitol Office Solutions, Inc. ("COS"). CERBCO officers also
participate, or participated in the case of COS prior to June 30, 1997, in the
management of one or more of these subsidiaries. The following table sets forth
information concerning the compensation paid to each of the named executive
officers of the Company and its subsidiaries for the fiscal years ended June 30,
1999, 1998 and 1997:
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
----------------------------
Annual Compensation Awards Payouts
---------------------------------------------- -------------------- -------
Name Other Total Restricted
and Annual Annual Stock Options/ LTIP All Other
Principal Salary Bonus Compensation Compensation Awards SARs Payouts Compensation
Position Year ($) ($) ($) 3/ ($) ($) (#) ($) ($) 4/
- ------------------------ ---- -------- --------- ------------- ------------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Robert W. Erikson 1999 CERBCO $ 11,475 $ 0 $0 $ 11,475 $0 5,000 $0 $ 0
Director & President 1/ IEI 216,607 0 0 216,607 0 15,000 0 13,076
CERBERONICS 90,640 0 0 90,640 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$318,722 $ 0 $0 $318,722 $0 20,000 $0 $13,076
======== ======= == ======== == ====== == =======
1998 CERBCO $ 11,480 $ 0 $0 $ 11,480 $0 5,000 $0 $ 0
IEI 215,030 0 0 215,030 0 15,000 0 2,345
CERBERONICS 90,339 0 0 90,339 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$316,849 $ 0 $0 $316,849 $0 20,000 $0 $ 2,345
======== ======= == ======== == ====== == =======
1997 CERBCO $ 11,053 $ 0 $0 $ 11,053 $0 0 $0 $ 0
IEI 208,649 0 0 208,649 0 15,000 0 11,247
COS 65,924 23,095 0 89,019 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$285,626 $23,095 $0 $308,721 $0 15,000 $0 $11,247
======== ======= == ======== == ====== == =======
George Wm. Erikson 1999 CERBCO $ 11,475 $ 0 $0 $ 11,475 $0 5,000 $0 $ 0
Director, Chairman IEI 216,607 0 0 216,607 0 15,000 0 15,476
& General Counsel 1/ CERBERONICS 90,640 0 0 90,640 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$318,722 $ 0 $0 $318,722 $0 20,000 $0 $15,476
======== ======= == ======== == ====== == =======
1998 CERBCO $ 11,480 $ 0 $0 $ 11,480 $0 5,000 $0 $ 0
IEI 215,030 0 0 215,030 0 15,000 0 4,745
CERBERONICS 90,339 0 0 90,339 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$316,849 $ 0 $0 $316,849 $0 20,000 $0 $ 4,745
======== ======= == ======== == ====== == =======
1997 CERBCO $ 11,053 $ 0 $0 $ 11,053 $0 0 $0 $ 0
IEI 208,649 0 0 208,649 0 15,000 0 11,613
COS 65,924 23,095 0 89,019 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$285,626 $23,095 $0 $308,721 $0 15,000 $0 $11,613
======== ======= == ======== == ====== == =======
Robert F. Hartman 1999 CERBCO $ 8,475 $ 0 $0 $ 8,475 $0 0 $0 $ 0
Vice President, IEI 92,195 0 0 92,195 0 0 0 7,626
Secretary & CERBERONICS 3,000 0 0 3,000 0 0 0 0
Treasurer 2/ -------- ------- -- -------- -- ------ -- -------
$103,670 $ 0 $0 $103,670 $0 0 $0 $ 7,626
======== ======= == ======== == ====== == =======
1998 CERBCO $ 9,207 $ 0 $0 $ 9,207 $0 0 $0 $ 0
IEI 91,524 2,000 0 93,524 0 0 0 2,874
CERBERONICS 2,273 0 0 2,273 0 0 0 0
-------- ------- -- -------- -- ------ -- -------
$103,004 $ 2,000 $0 $105,004 $0 0 $0 $ 2,874
======== ======= == ======== == ====== == =======
1997 CERBCO $ 11,053 $ 0 $0 $ 11,053 $0 0 $0 $ 0
IEI 88,808 0 0 88,808 0 0 0 8,010
-------- ------- -- -------- -- ------ -- -------
$ 99,861 $ 0 $0 $ 99,861 $0 0 $0 $ 8,010
======== ======= == ======== == ====== == =======
1/ The Company's Corporate Executive Committee, consisting of the Chairman and
the President, exercises the duties and responsibilities of the Chief
Executive Officer of the Company. Information concerning Messrs. George
Erikson and Robert Erikson is provided under the section entitled,
"Proposal No. 1 - Election of Directors."
2/ Mr. Robert Hartman, age 52, has been Vice President and Controller of
CERBCO since February 1988, Secretary since June 1991, Treasurer and Chief
Financial Officer since December 1997. He has also been Vice President -
Administration and Secretary of Insituform East, Incorporated since June
1991. From October 1985 to February 1988, Mr. Hartman was Controller of
Dynamac International, Inc. From August 1979 to September 1985, Mr. Hartman
served in various capacities with CERBERONICS, Inc.
including Vice President and Treasurer.
3/ 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.
4/ Insituform East contributions to the IEI Advantage Plan.
</TABLE>
<PAGE>
COMPENSATION PURSUANT TO PLANS
CERBCO, Inc. Plans
CERBCO Supplemental Executive Retirement Plan
During fiscal year 1994, CERBCO entered into Supplemental Executive
Retirement Agreements with Messrs. Robert Erikson, George Erikson and Robert
Hartman pursuant to a Supplemental Executive Retirement Plan (the "CERBCO
SERP"). The agreements provide for monthly retirement benefits of 50% of the
executive's final aggregate monthly salary from CERBCO and its subsidiaries as
defined in and limited by the executives' agreement, for Messrs. Robert Erikson
and George Erikson. In the case of Mr. Robert Hartman, the agreement provides
for 25% of the executive's final aggregate monthly salary from CERBCO and its
subsidiaries 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 CERBCO 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 of employment by CERBCO after 1992
to
the total number of years of employment after 1992 that the executive
would have completed if he had continued in employment to age 65.
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 $1,400,000 (in the case of Messrs. Robert Erikson or
George Erikson) or $700,000 (in the case of Mr. Robert Hartman). If the
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 CERBCO SERP is technically unfunded, except as described below.
CERBCO 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 CERBCO SERP to various rules under the Employee
Retirement Income Security Act of 1974, CERBCO has established an irrevocable
trust called the CERBCO, Inc. Supplemental Executive Retirement Trust. This
trust is subject to the claims of CERBCO's creditors in the event of bankruptcy
or insolvency. The trust has purchased life insurance on the lives of the
executive officers covered by the Supplemental Executive Retirement Agreements
to provide for CERBCO's 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 CERBCO'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 CERBCO.
The following tables set forth the annual retirement benefits that would be
received under the CERBCO SERP at various compensation levels after the
specified years of service:
<TABLE>
Pension Plan Table Where Formula Provides 50% of Compensation 1/
<CAPTION>
(Final) Years of Service (Under Plan)
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$125,000 $ 58,594 $ 62,500 $ 62,500 $ 62,500 $ 62,500
$150,000 $ 70,313 $ 75,000 $ 75,000 $ 75,000 $ 75,000
$175,000 $ 82,031 $ 87,500 $ 87,500 $ 87,500 $ 87,500
$200,000 $ 93,750 $100,000 $100,000 $100,000 $100,000
$225,000 $105,469 $112,500 $112,500 $112,500 $112,500
$250,000 $117,188 $125,000 $125,000 $125,000 $125,000
$300,000 $140,625 $150,000 $150,000 $150,000 $150,000
$350,000 $154,627 $175,000 $175,000 $175,000 $175,000
$400,000 $154,627 $182,101 $200,000 $200,000 $200,000
$450,000 $154,627 $182,101 $201,055 $221,961 $225,000
$500,000 $154,627 $182,101 $201,055 $221,961 $245,085
1/ Assumes at the time the Plan was established (i) the individual is age 50,
(ii) maximum covered compensation is $250,000 and is increased 2% (compounded
annually) each year of service after 1992, and (iii) retirement is effective at
the beginning of the year.
</TABLE>
<TABLE>
Pension Plan Table Where Formula Provides 25% of Compensation 2/
<CAPTION>
(Final) Years of Service (Under Plan)
Remuneration 15 20 25 30 35
- ------------ -- -- -- -- --
<S> <C> <C> <C> <C> <C>
$ 50,000 $ 8,929 $11,905 $12,500 $12,500 $12,500
$ 75,000 $13,393 $17,858 $18,750 $18,750 $18,750
$100,000 $17,858 $23,810 $25,000 $25,000 $25,000
$200,000 $21,206 $31,218 $36,190 $39,957 $44,115
$300,000 $21,206 $31,218 $36,190 $39,957 $44,115
$400,000 $21,206 $31,218 $36,190 $39,957 $44,115
$500,000 $21,206 $31,218 $36,190 $39,957 $44,115
2/ Assumes at the time the Plan was established (i) the individual is age 45,
(ii) maximum covered compensation is $90,000 and is increased 2% (compounded
annually) each year of service after 1992, and (iii) retirement is effective at
the beginning of the year.
</TABLE>
Each executive's covered compensation under the CERBCO SERP is equal to his
final monthly salary as defined in and limited by the executive's agreement. The
maximum covered compensation for Messrs. Robert Erikson and George Erikson is
limited to $20,834 per month ($250,000 annually), increased 2% annually
beginning in 1993. The maximum covered compensation for Mr. Robert Hartman is
limited to $7,500 per month ($90,000 annually), increased 2% annually beginning
in 1993.
The following table sets forth information concerning vested annual
benefits as of June 30, 1999 for the executives listed in the Summary
Compensation Table covered by the CERBCO SERP:
<TABLE>
<CAPTION>
Years of Credited Current Annual Vested Vested
Name Service Under Plan Covered Compensation Percentage Annual Benefit
<S> <C> <C> <C> <C>
Robert W. Erikson 7 $281,541 38.89% $54,744
George Wm. Erikson 7 $281,541 48.67% $65,893
Robert F. Hartman 7 $101,355 35.00% $ 8,869
</TABLE>
CERBCO 1997 Directors' Stock Option Plan
CERBCO adopted, with stockholder approval at the 1997 Annual Meeting of
Stockholders, the CERBCO, Inc. 1997 Board of Directors' Stock Option Plan (the
"CERBCO 1997 Directors' Plan"). The purpose of the CERBCO 1997 Directors' Plan
is to promote the growth and general prosperity of CERBCO by permitting the
Company, through the granting of options to purchase shares of CERBCO's Common
Stock, to attract and retain the best available persons as members of CERBCO's
Board of Directors with an additional incentive for such persons to contribute
to the success of the Company. A maximum of 125,000 shares of Common Stock may
be made subject to options under the CERBCO 1997 Directors' Plan. Options shall
be granted to all directors of CERBCO pursuant to the terms of the plan. Each
option granted under the CERBCO Directors' Plan entitles each director to whom
such option is granted the right to purchase shares of CERBCO's Common Stock at
a designated option price, any time and from time to time, within five years
from the date of grant, provided the director has served continually for at
least six months following the date of the grant.
The CERBCO Board of Directors administers the CERBCO 1997 Directors' Plan
and has 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 which may consist of three or more members of the Board.
No such delegation of authority has been made. Each determination,
interpretation or other action that may be taken pursuant to the CERBCO 1997
Directors' Plan by the Board is final and 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.
The terms of the CERBCO 1997 Directors' Plan contemplated that each
director of the Company be granted an option to purchase 5,000 shares of the
Company's Common Stock each year for five years, for a total of 25,000 shares of
Common Stock per director, beginning in fiscal year 1997. On December 18, 1998,
options on a total of 20,000 shares of Common Stock were granted to directors of
the Company (options on 5,000 shares to each of four directors) at a per share
price of $7.656. No options available under the plan were exercised by directors
of the Company during fiscal year 1999.
Insituform East, Incorporated Plans
Insituform East Employee Advantage Plan
As executive officers of Insituform East, Messrs. Robert Erikson, George
Erikson and Robert Hartman participate in the Insituform East, Incorporated
Employee Advantage Plan (the "IEI Advantage Plan"). The IEI Advantage Plan is a
noncontributory profit sharing (retirement) plan in which all employees not
covered by a collective bargaining agreement and employed with Insituform East
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
Insituform East Board of Directors which determines, at its discretion, the
amount of Insituform East's annual contribution. The Insituform East Board of
Directors can authorize a contribution, on behalf of Insituform East, 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 Insituform East'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
above FICA limits. Amounts allocated under the IEI Advantage Plan begin to vest
after three years of service (at which time 20% of the contribution paid vests)
and are fully vested after seven years of service.
During fiscal year 1999, Insituform East contributed an amount equal to
4.0% of the total compensation paid to all participating employees.
<TABLE>
<CAPTION>
Names and Capacities in Which Contributions for Vested Percent
Cash Contributions Were Made Fiscal Year 1999 1/ as of 11/01/99
<S> <C> <C>
George Wm. Erikson, Chairman $13,076 100%
Robert W. Erikson, President $13,076 100%
Robert F. Hartman, Vice President - Administration & Secretary $ 7,296 100%
Executive Officers of Insituform East as a Group,
(6 persons, including those named above) $61,133 N/A
1/ Total contributions to employees of $276,088 include Insituform East's
contribution of $195,506 and reallocated amounts totaling $80,582 forfeited
by former participants who terminated employment with Insituform East
during fiscal year 1999.
</TABLE>
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, Insituform East
contributed an employer matching contribution equal to 25% of the participant's
deferred compensation up to a maximum of 1.5% of the participant's total paid
compensation for the fiscal year. Participants are 100% vested at all times in
their deferral and employer matching accounts. During the fiscal year ended June
30, 1999, Insituform East 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 11/01/99
<S> <C> <C>
George Wm. Erikson, Chairman $2,400 100%
Robert W. Erikson, President $ 0 100%
Robert F. Hartman, Vice President - Administration & Secretary $ 330 100%
Executive Officers of Insituform East as a Group,
(6 persons, including those named above) $7,007
</TABLE>
Insituform East 1994 Board of Directors' Stock Option Plan
Insituform East adopted, with stockholder approval at the 1994 Annual
Meeting of Stockholders, the Insituform East, Incorporated 1994 Board of
Directors' Stock Option Plan (the "IEI 1994 Directors' Plan"). The purpose of
this plan is to promote the growth and general prosperity of Insituform East by
permitting Insituform East, through the granting of options to purchase shares
of its Common Stock, to attract and retain the best available persons as members
of Insituform East's Board of Directors with an additional incentive for such
persons to contribute to the success of Insituform East. The IEI 1994 Directors'
Plan is administered and options are granted by the Insituform East Board of
Directors. As directors of Insituform East, Messrs. Robert Erikson and George
Erikson participate in this plan.
Each grant of options under the IEI 1994 Directors' Plan will entitle each
Insituform East director to whom such options are granted the right to purchase
15,000 shares of Insituform East's Common Stock at a designated option price,
any time and from time to time, within five years from the date of grant.
Options are granted under the IEI Directors' Plan each year for five years to
each member of the Board of Directors of Insituform East 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 Insituform East) over a
five year period. Under the terms of this plan, up to 525,000 shares of
Insituform East's Common Stock have been reserved for the directors of
Insituform East.
On December 11, 1998, options on a total of 105,000 shares of Insituform
East's Common Stock were granted to directors of Insituform East (options on
15,000 shares to each of seven directors, including Messrs. Robert Erikson and
George Erikson) at a per share option price of $1.1407. No options available
under this plan were exercised by directors of Insituform East during fiscal
year 1999.
OPTION/SAR GRANTS
The following table sets forth information concerning options or Stock
Appreciation Rights granted to each of the named executive officers during
fiscal year 1999 under the CERBCO 1997 Directors' Plan and the IEI 1994
Directors' Plan:
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
Potential Realized
Value at Assumed
Individual Grants Annual Rates of Stock
Price Appreciation
for Option Term
------------------------------------------------------------ -----------------------
Option/ % of Total Options/SARs Exercise or Expiration
Name SARs Granted to Employees in Base Date 5% ($) 10% ($)
Granted (#) Fiscal Year ($/Share)
- --------------------------- ------------- ------------------------------ ------------- ----------- --------- ---------
Robert W. Erikson
CERBCO 1997
<S> <C> <C> <C> <C> <C> <C>
Directors' Plan 5,000 25% $7.656 12/18/03 $10,576 $23,335
IEI 1994 Directors' Plan 15,000 14% $1.250 12/11/03 $ 5,180 $11,447
George Wm. Erikson
CERBCO 1997
Directors' Plan 5,000 25% $7.656 12/18/03 $10,576 $23,335
IEI 1994 Directors' Plan 15,000 14% $1.250 12/11/03 $ 5,180 $11,447
</TABLE>
AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END OPTION/SAR VALUE
No option or Stock Appreciation Right grants made under the CERBCO 1997
Directors' Plan or the IEI 1994 Directors' Plan to any of the named executive
officers were exercised during fiscal year 1999. The following table sets forth
information concerning option or Stock Appreciation Right grants held by each of
the named executive officers under all plans as of June 30, 1999:
<TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES
<CAPTION>
Number of Unexercised Value of Unexercised in the
Options/SARs at FY-End(#) Money Options/SARs at
FY-End($)
------------------------- ---------------------------
Shares
Acquired on Value Realized
Name Exercise (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------- ---------------- ---------------- ------------ ------------- ----------- -------------
Robert W. Erikson
CERBCO 1997
<S> <C> <C> <C> <C> <C> <C>
Directors' Plan 0 $0 10,000 0 $ 0 $0
IEI 1994 Directors' Plan 0 $0 75,000 0 $1,640 $0
George Wm. Erikson
CERBCO 1997
Directors' Plan 0 $0 10,000 0 $ 0 $0
IEI 1994 Directors' Plan 0 $0 75,000 0 $1,640 $0
</TABLE>
REPRICING OF OPTIONS/SARs
Neither the Company nor its subsidiaries adjusted or amended 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
Neither the Company nor its subsidiaries have a long-term incentive
plan.
DEFINED BENEFIT OR ACTUARIAL PLANS
The Company maintains a defined benefit plan called the CERBCO
Supplemental Executive Retirement Plan to provide annual retirement benefits to
covered executives. See "Compensation Pursuant to Plans - CERBCO, Inc. 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 or its
subsidiaries and any named executive officer. There are no arrangements between
the Company or its subsidiaries 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 or
its subsidiaries, in an amount that exceeds $100,000.
COMPENSATION OF DIRECTORS
Non-officer directors of the Company are paid an annual fee of $5,000
and an attendance fee of $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 also officers of the Company
do not receive separate fees for service as directors, but are eligible with all
other directors to participate in the CERBCO 1997 Directors' Stock Option Plan,
as described under the section entitled, "Compensation Pursuant to Plans -
CERBCO, Inc. Plans." All directors of the Company are reimbursed for Company
travel-related expenses.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors does not have a compensation
committee; the Board of Directors as a whole serves in that equivalent capacity.
Messrs. George Erikson and Robert Erikson, both members of the Board of
Directors and executive officers of the Company, holding the offices of Chairman
& General Counsel and President, respectively, participated during fiscal year
1999 in deliberations of the Board of Directors concerning executive officer
compensation.
Messrs. George Erikson and Robert Erikson are both members of the Board
of Directors and executive officers of Insituform East. In their capacities as
directors of this subsidiary company, they participated in deliberations of its
Board of Directors concerning executive officer compensation.
PERFORMANCE GRAPH
The following graph compares the total stockholder return on the
Company's Common Stock to the Total Return Index for the NASDAQ Stock Market
(U.S. Companies) and to a Peer Group Index based on NASDAQ Stocks SIC Code 162,
"Heavy Construction, Except Highway," for the last five fiscal years.
<TABLE>
<CAPTION>
Date Company Market Peer
Index Index Index
<S> <C> <C> <C>
6/30/94 100.000 100.000 100.000
7/29/94 96.078 102.054 96.924
8/31/94 88.235 108.556 100.197
9/30/94 109.804 108.280 100.261
10/31/94 111.765 110.392 103.109
11/30/94 141.176 106.734 96.575
12/30/94 152.941 107.024 100.321
1/31/95 135.294 107.639 107.681
2/28/95 154.902 113.329 110.661
3/31/95 141.176 116.693 105.822
4/28/95 133.333 120.368 108.730
5/31/95 149.020 123.482 114.915
6/30/95 152.941 133.482 115.246
7/31/95 172.549 143.284 114.116
8/31/95 200.000 146.193 124.124
9/29/95 223.529 149.559 122.288
10/31/95 207.843 148.697 117.403
11/30/95 227.451 152.185 113.419
12/29/95 211.765 151.380 120.386
1/31/96 211.765 152.137 112.200
2/29/96 198.039 157.937 114.997
3/29/96 196.078 158.467 126.054
4/30/96 196.078 171.595 155.460
5/31/96 243.137 179.468 185.811
6/28/96 221.265 171.378 165.750
7/31/96 189.656 156.122 161.411
8/30/96 201.509 164.878 167.013
9/30/96 205.461 177.482 188.448
10/31/96 189.656 175.517 217.327
11/29/96 201.509 186.407 214.305
12/31/96 197.558 186.251 228.772
1/31/97 229.168 199.468 256.929
2/28/97 219.290 188.436 243.633
3/31/97 241.021 176.149 270.129
4/30/97 296.337 181.635 261.995
5/30/97 292.880 202.210 273.877
6/30/97 381.118 208.425 288.681
7/31/97 360.092 230.388 339.186
8/29/97 328.185 230.043 420.912
9/30/97 382.883 243.683 456.344
10/31/97 369.208 230.989 468.713
11/28/97 350.976 232.219 388.244
12/31/97 510.510 228.224 397.167
1/30/98 369.208 235.446 361.023
2/27/98 337.301 257.588 405.450
3/31/98 357.813 267.091 471.763
4/30/98 341.860 271.589 512.777
5/29/98 339.580 256.514 499.391
6/30/98 329.917 274.430 420.255
7/31/98 318.382 271.210 343.309
8/31/98 313.767 217.660 259.132
9/30/98 322.996 247.875 312.523
10/30/98 264.165 258.590 278.255
11/30/98 290.696 284.698 219.604
12/31/98 286.082 321.592 227.353
1/29/99 252.629 368.221 229.516
2/26/99 276.854 335.237 211.818
3/31/99 267.625 359.367 302.594
4/30/99 230.711 368.901 345.061
5/28/99 239.940 360.285 325.098
6/30/99 243.857 392.155 380.492
</TABLE>
TRANSACTIONS WITH MANAGEMENT
In accordance with the Company's By-laws and pursuant to authorizations
by the Board of Directors, the Company has made certain advancements to Mr.
George Erikson, Director, Chairman & General Counsel, and certain advancements
to Mr. Robert Erikson, Director and President (together the "Eriksons") for
their respective legal fees and expenses which each has incurred for personal
legal representation in connection with the stockholder lawsuit filed in August
1990 challenging a proposed but unconsummated transaction between each of the
Eriksons and Insituform Technologies, Inc. (see section entitled "Legal
Proceedings" below).
As of November 1, 1999, pursuant to such Board authorizations, the
Company has expensed and advanced in total $600,482 to Mr. George Erikson and
has expensed and advanced in total $600,482 to Mr. Robert Erikson.
Pending a final outcome of these legal proceedings, and as contemplated
by the Company's By-laws, the Board of Directors deferred consideration or
ultimate determination of entitlement of Mr. George Erikson and/or Mr. Robert
Erikson to indemnification by the Company for their legal fees and expenses. The
legal proceedings in this suit are now complete and, accordingly, the Board of
Directors will consider the entitlement by the Eriksons to indemnification under
the Company's By-laws. If it is ultimately determined by the Board of Directors
or otherwise in accordance with Section 145 of Delaware Corporation Law that Mr.
George Erikson and/or Mr. Robert Erikson are not entitled to indemnification for
any such legal fees and expenses under Section 145 of Delaware Corporation Law,
such advances shall be reimbursed by Mr. George Erikson and/or Mr. Robert
Erikson to the Company pursuant to an agreement with the Company executed by
each of the Eriksons and delivered to the Board of Directors.
LEGAL PROCEEDINGS
The only material pending legal proceedings to which the Company is a
party or any such legal proceedings contemplated of which the Company is aware
is a previously disclosed lawsuit pending in the Superior Court of the District
of Columbia.
As previously reported by the Company, on March 12, 1990, the
controlling stockholders of the Company, Messrs. George Erikson and Robert
Erikson (together, the "Eriksons"), executed a letter of intent and subsequently
executed four amendments thereto (collectively referred to herein as the "Letter
of Intent") with Insituform Technologies, Inc. ("ITI") (formerly Insituform of
North America, Inc. or "INA") to effect a sale of their controlling interest in
the Company to ITI for $6,000,000 (the "Proposed Transaction"). The Proposed
Transaction, had it been consummated, would have had the effect of making ITI
the controlling stockholder of the Company and, indirectly, of each of the
Company's three direct subsidiaries at the time, Insituform East, Capitol Copy
and CERBERONICS. On September 19, 1990, however, the Company issued a press
release announcing that the Eriksons had informed the Company that the Letter of
Intent had expired without consummation of any transaction, that it would not be
further extended, that negotiations had ceased and that the Eriksons had no
further intention at the time of pursuing the proposed sale of their controlling
interest in the Company to ITI.
As previously reported by the Company, two stockholders commenced a
derivative lawsuit in the Delaware Court of Chancery against the Eriksons in
August, 1990, making certain claims with respect to the Proposed Transaction
(the "Delaware Action"). The Delaware Action finally was concluded on December
3, 1997, when the Delaware Supreme Court issued its order affirming the findings
of the Court of Chancery with respect to (a) the trial court's assessment of
certain damages against the Eriksons on remand from a previous appeal and (b)
the renewed petition of plaintiffs' attorneys for an award of attorneys' fees
and expenses. Those findings by the Court of Chancery had been made on remand
from the same Delaware Supreme Court after a 1996 ruling in which the Supreme
Court affirmed the Court of Chancery's holding that CERBCO had not suffered any
transactional damages with respect to the Proposed Transaction.
In January 1993, a derivative lawsuit against the partners in the law
firm of Rogers & Wells and the Company, arising out of the subject matter of the
Delaware Action, was filed in the Superior Court of the District of Columbia
(the "D.C. Complaint"). Plaintiffs were the same two stockholders who were
plaintiffs in the Delaware litigation, and a former director of the Company, and
alleged that Rogers & Wells breached its duty of loyalty and care to the Company
by representing allegedly conflicting interests of the Eriksons in the Proposed
Transaction with ITI. Plaintiffs also claimed that Rogers & Wells committed
malpractice by allegedly making misrepresentations to the Company's Board and
allegedly failing to properly inform the Company's Board. Plaintiffs claimed
that the conduct of Rogers & Wells caused the Company to lose an opportunity to
sell its control of Insituform East to ITI, caused the Company to incur
substantial expense, and unjustly enriched Rogers & Wells. The D.C. Complaint
sought to recover from Rogers & Wells (i) damages in an amount equal to all fees
paid to Rogers & Wells, (ii) damages in an amount not less than $6,000,000 for
the loss of the opportunity for the Company to sell its control of Insituform
East to ITI, and (iii) punitive damages. Although the D.C. Complaint stated that
it was filed on behalf of the Company, management does not believe that Rogers &
Wells should be sued on any of the claims set forth therein.
Motions to dismiss this case by the Company and Rogers & Wells were
denied, but a stay of the proceedings was granted until after the Delaware
trial. Plaintiffs agreed to a stay in the Superior Court action pending the
outcome of the appeal of the outcome of the Delaware Action to the Delaware
Supreme Court and, subsequently, the stay was continued at least until such time
as the Delaware Court of Chancery ruled upon plaintiffs' pending motion for
post-remand relief. After the Delaware Supreme Court's most recent ruling on
December 3, 1997, finally affirming the Delaware Court of Chancery with respect
to such post-remand relief and a renewed petition for counsel fees and expenses,
the stay of the District of Columbia action was lifted, and plaintiffs filed an
amended D.C. Complaint. In the amended D.C. Complaint, plaintiffs assert
essentially the same conflicts of interest charges against Rogers & Wells but
shift their focus from the value of the alleged lost opportunity to the
litigation expenses incurred by the Company in the Delaware Action. Plaintiffs
now seek to recover from Rogers & Wells (i) damages in an amount equal to all
fees paid to Rogers & Wells, (ii) damages for more than $2 million in attorneys'
fees and expenses incurred by CERBCO in the Delaware Action and other
unspecified compensatory damages, and (iii) punitive damages. On March 27, 1998,
the Company filed its answer to the amended D.C. Complaint, in which it denied
all liability and asserted certain affirmative defenses. On the same day, it
filed its motion for summary judgment, together with a supporting memorandum of
law, on the grounds of collateral estoppel and res judicata. Rogers & Wells
likewise answered the amended D.C. Complaint, denying liability, and filed a
motion for summary judgment on collateral estoppel grounds. On February 18,
1999, the D.C Superior Court entered an Order denying the Company's motion on
the ground of res judicata, but granting the defendants' summary judgment motion
on the issue of punitive damages only. On April 9, 1999, the Court conducted a
hearing limited to the issues of causation, damages, and collateral estoppel
with respect to the defendants' pending motions. On May 20, 1999, the Court
denied the Company's motion for summary judgment on the ground of collateral
estoppel. The matter has now been referred to mediation in the District of
Columbia.
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 on Form 10-K 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,
/s/ Robert F. Hartman
Robert F. Hartman
Secretary
Landover, Maryland
November 1, 1999
<PAGE>
APPENDIX A
TEXT OF COMMON STOCK PROXY CARD
- --------------------------------------------------------------------------------
COMMON STOCK
- --------------------------------------------------------------------------------
CERBCO, Inc.
3421 Pennsy Drive
Landover, Maryland 20785
(301) 773-1784
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 10, 1999
PROXY - COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.W. Erikson and G.Wm. Erikson, and
each of them, with full power of substitution, the Proxies of the undersigned to
represent and to vote, as designated on the reverse side of this proxy card, all
the shares of Common Stock of CERBCO, Inc. held of record by the undersigned on
October 14, 1999, at the Annual Meeting of Stockholders to be held on December
10, 1999 or any adjournments thereof.
(TO BE SIGNED ON REVERSE SIDE)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
X Please mark your votes as in this example.
1. Proposal - Election of Director.
FOR, the nominee WITHHOLD
listed at right (except authority to vote Nominee: P.C. Kincheloe, Jr.
as noted to the for the nominee
contrary below) listed at right
[ ] [ ]
(INSTRUCTION: To indicate that you do not wish to
have your shares voted for the nominee, print the
name of such nominee on the line provided below.)
- -------------------------------------------------
2. In their own discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- ------------------------------------------------ Dated:------------------, 1999
SIGNATURE SIGNATURE (IF HELD JOINTLY)
NOTE: Signature(s) should be exactly as name(s) appearing on your
certificate. If stock is held jointly, each holder should sign. If
signing is by attorney, executor, administrator, trustee, guardian or
corporate officer, etc., please give your full title as such.
<PAGE>
APPENDIX B
TEXT OF CLASS B COMMON STOCK PROXY CARD
- --------------------------------------------------------------------------------
CLASS B COMMON STOCK
- --------------------------------------------------------------------------------
CERBCO, Inc.
3421 Pennsy Drive
Landover, Maryland 20785
(301) 773-1784
ANNUAL MEETING OF STOCKHOLDERS - DECEMBER 10, 1999
PROXY - CLASS B COMMON STOCK
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints R.W. Erikson and G.Wm. Erikson, and
each of them, with full power of substitution, the Proxies of the undersigned to
represent and to vote, as designated on the reverse side of this proxy card, all
the shares of Class B Common Stock of CERBCO, Inc. held of record by the
undersigned on October 14, 1999, at the Annual Meeting of Stockholders to be
held on December 10, 1999 or any adjournments thereof.
(TO BE SIGNED ON REVERSE SIDE)
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
X Please mark your votes as in this example.
1. Proposal - Election of Directors.
FOR, all nominees WITHHOLD
listed at right (except authority to vote Nominee: R.W. Erikson
as noted to the for all nominees G.Wm. Erikson
contrary below) listed at right W.C. Hayes, IV
[ ] [ ]
(INSTRUCTION: To indicate that you do not wish to
have your shares voted for one or more individual
nominee(s), check the FOR box above and print the
name(s) of such nominee(s) on the lines provided below.)
- -------------------------------------------------
- -------------------------------------------------
2. In their own discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER(S). IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSAL 1.
PLEASE SIGN, DATE AND RETURN PROMPTLY USING THE ENCLOSED ENVELOPE.
- ------------------------------------------------ Dated:------------------, 1999
SIGNATURE SIGNATURE (IF HELD JOINTLY)
NOTE: Signature(s) should be exactly as name(s) appearing on your
certificate. If stock is held jointly, each holder should sign. If
signing is by attorney, executor, administrator, trustee, guardian or
corporate officer, etc., please give your full title as such.
