<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
ITEQ, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) 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 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> 2
ITEQ, INC.
2727 ALLEN PARKWAY, SUITE 760
HOUSTON, TEXAS 77019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 19, 1997
------------------------------
Notice is hereby given that the annual meeting of the stockholders of
ITEQ, Inc. (the "Company") will be held at the offices of the Company, 2727
Allen Parkway, Suite 760, Houston, Texas 77019, on Thursday, June 19, 1997, at
11:00 a.m. central time, for the following purposes:
1. To elect a board of seven directors to serve until the next annual
meeting of stockholders or until their successors are elected and qualify; and
2. To consider and act upon such other business as may properly be
presented to the meeting.
A record of stockholders has been taken as of the close of business on May
15, 1997, and only those stockholders of record on that date will be entitled
to notice of and to vote at the meeting. A stockholders' list will be
available at the offices of the Company commencing June 7, 1997, and may be
inspected during normal business hours before the annual meeting.
If you do not expect to be present at the meeting, PLEASE SIGN AND DATE
THE ENCLOSED PROXY AND RETURN IT PROMPTLY in the enclosed stamped envelope
which has been provided for your convenience. The prompt return of proxies
will ensure a quorum and save the Company the expense of further solicitation.
By Order of the Board of Directors,
Lawrance W. McAfee,
Executive Vice President, Chief
Financial Officer and Secretary
May 21, 1997
<PAGE> 3
ITEQ, INC.
2727 ALLEN PARKWAY, SUITE 760
HOUSTON, TEXAS 77019
PROXY STATEMENT
This Proxy Statement is being mailed to stockholders commencing on or about
May 21, 1997, in connection with the solicitation by the board of directors of
ITEQ, Inc. (the "Company") of proxies to be voted at the annual meeting of
stockholders to be held in Houston, Texas on June 19, 1997, and at any
adjournment thereof, for the purposes set forth in the accompanying notice.
Proxies will be voted in accordance with the directions specified thereon and
otherwise in accordance with the judgment of the persons designated as the
holders of the proxies. Proxies marked as abstaining on any matter to be acted
on by the stockholders will be treated as present at the annual meeting for
purposes of determining a quorum but will not be counted as votes cast on such
matters. Any proxy on which no direction is specified will be voted for the
election of each of the directors nominated by the Company named herein. A
stockholder may revoke a proxy by delivering to the Company written notice of
revocation, delivering to the Company a proxy signed on a later date or voting
in person at the annual meeting.
As of May 15, 1997, the record date for the determination of stockholders
entitled to vote at the annual meeting, there were 11,845,793 shares of the
Common Stock outstanding. Each share of Common Stock entitles the holder to
one vote on all matters presented at the meeting.
ELECTION OF DIRECTORS
At the meeting, seven nominees are to be elected, each director to hold
office until the next annual meeting of stockholders or until his successor is
elected and qualifies. The persons named in the accompanying proxy have been
designated by the board of directors and, unless authority is withheld, they
intend to vote for the election of the nominees named below to the board of
directors. If any nominee should become unavailable for election, the proxy
may be voted for a substitute nominee selected by the persons named in the
proxy, or the board may be reduced accordingly; however, the board of directors
is not aware of any circumstances likely to render any nominee unavailable.
NOMINEES
Certain information concerning the nominees is set forth below:
<TABLE>
<CAPTION>
NAME POSITION AGE DIRECTOR SINCE
---- -------- --- --------------
<S> <C> <C> <C>
Mark E. Johnson . . . . . . . . . Director, chairman of the board, 46 1995
president and chief executive officer
Lawrance W. McAfee(1) . . . . . . Director, executive vice president, 42 1995
chief financial officer and secretary
Pierre S. Melcher . . . . . . . . Director, senior vice president and 37 1995
treasurer
Thomas N. Amonett(2) . . . . . . Director 52 1996
T. William Porter(1)(2) . . . . . Director 55 1995
James L. Rainey, Jr.(1)(2) . . . Director 66 1993
James A. Read . . . . . . . . . . Director 46 1997
</TABLE>
(1) Member, audit committee of the board of directors.
(2) Member, compensation committee of the board of directors.
<PAGE> 4
Mark E. Johnson. Mr. Johnson has been a director of the Company since
December 1995 and chairman of the board, president and chief executive officer
since March 1996. From February 1994 until December 1995, Mr. Johnson was a
shareholder, director and president of Allied Industries, Inc. ("Allied"), a
wholly-owned subsidiary of the Company since December 1995. Prior to that
time, Mr. Johnson was a private investor and was a shareholder and served as
chairman of the board, chief executive officer and president of Semco, Inc.
("Semco"), a manufacturer of pneumatic conveyancing equipment, and of
Stillbrooke Corporation, a cemetery and funeral home holding company. From
1982 to 1986, Mr. Johnson served as a partner of KPMG Peat Marwick LLP.
Lawrance W. McAfee. Mr. McAfee has been a director of the Company since
December 1995 and executive vice president and chief financial officer since
January 1993 and secretary since May 1993. From 1991 until the time he joined
the Company in 1993, Mr. McAfee served as a director and chief financial
officer of Waste Processor Industries, Inc., an environmental services company.
Prior to that time, Mr. McAfee served as senior vice president and chief
financial officer of Stillbrooke Corporation from 1989 to 1991. From 1982 to
1989, Mr. McAfee served as vice president and chief financial officer of U.S.
Home Corporation, a residential builder, developer and financial services
company.
Pierre S. Melcher. Mr. Melcher has been a director of the Company since
March 1996 and senior vice president and treasurer since April 1996. From
February 1994 until December 1995, Mr. Melcher was a shareholder and served as
director and senior vice president of Allied. Prior to that time , Mr. Melcher
pursued private investments and was a shareholder and served as a director and
senior vice president of Semco. From 1988 to 1991, Mr. Melcher served as an
investment banker with Texas Commerce Bank.
Thomas N. Amonett. Mr. Amonett has been a director of the Company since
April 1996. Mr. Amonett has served as acting chief executive officer of
Weatherford Enterra, Inc., an energy services company, since July 1996, and a
director since May 1974. From July 1992 to December 1995, he served as
president and a director of Reunion Resources Company (previously known as
Buttes Gas and Oil Company), a Houston-based oil and gas exploration,
development and production company. From 1986 to 1992, he was of counsel with
the law firm of Fulbright & Jaworski L.L.P. Mr. Amonett also currently serves
as a director of American Residential Services, Inc., a residential services
company, and of PetroCorp Incorporated, an oil and gas producer.
T. William Porter. Mr. Porter has served as a director of the Company
since December 1995. Since 1981, Mr. Porter has been a partner of Porter &
Hedges, L.L.P., a Houston-based law firm and the Company's principal outside
legal counsel. Mr. Porter also serves on the board of Gundle/SLT
Environmental, Inc., a manufacturer and supplier of lining systems used in
waste and industrial containment systems.
James L. Rainey. Mr. Rainey has served as a director of the Company since
October 1993. He is an independent business consultant. From May 1986 through
April 1991, he served as president and chief executive officer of Farmland
Industries, Inc., the largest domestic agricultural supply cooperative. Prior
to that time, he spent over 20 years with Kerr-McGee Corporation, including
serving as president of Kerr-McGee Chemical Corporation. Mr. Rainey also
serves on the boards of Jacobs Engineering Group, Inc., The Wirthlin Group and
Biomat, Inc.
James A. Read. Mr. Read has served as a director of the Company since
January 1997. Since 1988, Mr. Read has served as a managing director of
Mezzanine Management Limited, an independent private debt and equity fund
management and advisory company. Mr. Read also serves on the boards of Core
Laboratories N.V., JJI Lighting Group, Inc. and Western Sky Industries, Inc. in
the United States and British Printing Co. Limited, Page One Communications
Limited, Wellington Holding plc, CF Holdings Ltd. and CB Holdings SA in Europe.
2
<PAGE> 5
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1996, the board of directors convened on 6 regularly or specially
scheduled occasions. The audit and compensation committees of the board each
held one meeting in 1996. Each director attended at least 75% of all meetings
of the board and all committees on which he served during the year.
The Company's operations are managed under the broad supervision and
direction of the board of directors, which has the ultimate responsibility for
the establishment and implementation of the Company's general operating
philosophy, objectives, goals and policies. Pursuant to delegated authority,
certain board functions are discharged by the standing committees of the board.
The compensation committee is responsible for the formulation and adoption of
all executive compensation, benefit and insurance programs, subject to full
board approval where legally required, and supervises the administration of all
executive compensation and benefit programs, including the establishment of
specific criteria against which all annual performance based benefits are to be
measured. The audit committee assists the board in assuring that the
accounting and reporting practices of the Company are in accordance with all
applicable requirements. The board of directors does not presently maintain a
nominating committee; stockholders who may wish to suggest individuals for
possible future consideration for board positions should direct recommendations
to the board of directors at the Company's principal offices.
Directors not employed by the Company are granted annually options to
purchase 10,000 shares of Common Stock under the Directors' Stock Option Plan
to compensate them for their services. They also receive $1,000 for each
meeting of the board they attend in person. In addition, they are reimbursed
for their expenses of attending these meetings.
EXECUTIVE OFFICER TENURE AND IDENTIFICATION
The executive officers serve at the pleasure of the board of directors and
are subject to annual appointment by the board at its first meeting following
the annual meeting of stockholders. Certain information concerning the
executive officer of the Company who is not also a member of the board of
directors is set forth below:
John P. Fitzpatrick, 54, was elected vice president of operations of the
Company in March 1995. Previously, Mr. Fitzpatrick had served as president of
Air-Cure, Inc., a former subsidiary of the Company. Prior to joining the
Company in July 1993, Mr. Fitzpatrick spent seven years with Graco, Inc.
including as manager of engineered systems operations. Previously, he spent 20
years in various sales, marketing and management positions with General
Electric Corporation.
3
<PAGE> 6
MANAGEMENT STOCKHOLDINGS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at April 30, 1997, by (i)
all directors, (ii) the chief executive officer and other executive officers
and (iii) all directors and executive officers as a group.
<TABLE>
<CAPTION>
NAME OF PERSON OR NUMBER OF PERCENT OF
IDENTITY OF GROUP SHARES(1) CLASS
--------------------- ---------- ----------
<S> <C> <C>
Mark E. Johnson . . . . . . . . . . . . . . . . . . . . . . 1,668,062 14.1%
Thomas N. Amonett . . . . . . . . . . . . . . . . . . . . . 12,000 *
Lawrance W. McAfee . . . . . . . . . . . . . . . . . . . . 228,000 1.8%
Pierre S. Melcher . . . . . . . . . . . . . . . . . . . . . 2,019,034 17.0%
T. William Porter . . . . . . . . . . . . . . . . . . . . . 15,000 *
James L. Rainey, Jr. . . . . . . . . . . . . . . . . . . . 30,000 *
James A. Read Jr. . . . . . . . . . . . . . . . . . . . . . 5,000 *
John P. Fitzpatrick . . . . . . . . . . . . . . . . . . . . 45,995 *
All directors and officers as a group (8 persons)(2) . . . 4,023,091 33.5%
</TABLE>
- ----------
*Less than 1% of outstanding shares.
(1) Includes shares underlying outstanding stock options, as follows: Mr.
Amonett - 12,000; Mr. McAfee - 213,750; Mr. Porter - 15,000; Mr. Rainey -
30,000; Mr. Read - 5,000; and Mr. Fitzpatrick - 39,375.
(2) Includes all shares referred to note in (1) above.
VOTE REQUIRED FOR ELECTION
The seven nominees for election as directors at the annual meeting who
receive the greatest number of votes cast for election by the holders of Common
Stock of record shall be the duly elected directors upon completion of the vote
tabulation at the annual meeting, provided a majority of the outstanding shares
as of the record date are present in person or by proxy at the meeting. Any
proxy containing an abstention from voting for any nominee will be sufficient
to represent the shares at the meeting for purposes of determining whether a
quorum is present, but will count neither as a vote for nor against any nominee
with respect to whom the holder has abstained from voting. In tabulating
votes, a record will be made of the number of shares voted for each nominee,
the number of shares with respect to which authority to vote for that nominee
has been withheld, and the number of shares held of record by broker-dealers
and present at the meeting but not voting.
4
<PAGE> 7
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock at April 30, 1997, by each
stockholder who is known by the Company to own beneficially more than 5% of the
outstanding Common Stock.
<TABLE>
<CAPTION>
NAME OF PERSON
OR IDENTITY OF GROUP NUMBER OF SHARES PERCENT OF CLASS
-------------------- ---------------- ----------------
<S> <C> <C>
Mark E. Johnson 1,668,062 14.1%
2727 Allen Parkway, Suite 760
Houston, Texas 77019
Pierre S. Melcher 2,019,034 17.0%
2727 Allen Parkway, Suite 760
Houston, Texas 77019
International Mezzanine Capital, B.V. 1,525,333(1) 11.6%
Manfield House
376-379 Strand
London WCZR-OLR
United Kingdom
</TABLE>
- ----------
5
<PAGE> 8
(1) Consists of Common Stock which may be acquired upon exercise of
outstanding warrants.
EXECUTIVE COMPENSATION
The following table reflects all forms of compensation for services to the
Company for the periods indicated of each individual who was (i) the chief
executive officer at any time during the period or (ii) an executive officer at
December 31, 1996 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
STOCK
OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER (SHARES)
- --------------------------------- ---- -------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Mark E. Johnson . . . . . . . . . 1996 $330,886 $200,000 - -
Chairman, president and 1995 $300,000 $150,000 - -
chief executive officer 1994 $268,622 $150,000 - -
Lawrance W. McAfee . . . . . . . 1996 $192,067 $110,000 $47,112(1) 106,250
Executive vice president, 1995 $141,750 $ 82,215 - 25,000
chief financial officer and 1994 $135,000 $ 6,250 - 15,000
secretary
Pierre S. Melcher . . . . . . . . 1996 $158,214 $ 40,000 - -
Senior vice president 1995 $150,000 $150,000 - -
and treasurer 1994 $133,583 $150,000 - -
John P. Fitzpatrick . . . . . . . 1996 $143,694 $ 65,000 - 12,500
Vice president of operations 1995 $130,000 $ 75,400 - 12,500
1994 $120,000 $ 33,648 - 12,500
</TABLE>
- ------------
(1) Consists of reimbursement of relocation expenses.
6
<PAGE> 9
OPTION GRANTS
The following sets forth information about stock option grants during 1996
to the Named Executives.
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM(1)
----------------------------------------------------------- -----------------------
PERCENTAGE
OF
TOTAL
OPTIONS
GRANTED
TO
OPTIONS EMPLOYEES EXERCISE EXPIRATION
NAME GRANTED(2) IN 1996 PRICE DATE(3) 5% 10%
---- ---------- --------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Lawrance W. McAfee 100,000 30% $3.88 2/28/2006 $244,011 $618,372
6,250 2% $3.38 6/26/2001 $ 4,553 $ 12,897
John P. Fitzpatrick 12,500 4% $3.38 6/26/2001 $ 9,106 $ 25,794
</TABLE>
- ----------
(1) Potential values stated are the result of using the SEC method of
calculations of 5% and 10% appreciation in value from the date of grant to
the end of the option term. Such assumed rates of appreciation and
potential realizable values are not necessarily indicative of the
appreciation, if any, which may be realized in future periods.
(2) The options were granted for terms of five years or ten years, as
indicated, subject to earlier termination in certain events related to
termination of employment.
(3) The options vest over three to four years from the date of grant.
OPTION EXERCISES AND YEAR-END VALUES
The following table sets forth information with respect to the unexercised
options to purchase shares of Common Stock for each of the Named Executives
held by them at December 31, 1996. None of the Named Executives exercised any
options during 1996.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
DECEMBER 31, 1996 OPTIONS AT
(SHARES) DECEMBER 31, 1996(1)
-------------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Lawrance W. McAfee 138,750 107,500 $112,791 $120,681
John P. Fitzpatrick 39,375 28,125 $ 20,820 $ 45,648
</TABLE>
7
<PAGE> 10
- ----------
(1) Represents the difference between the closing price of the Common Stock on
the Nasdaq National Market on December 31, 1996 ($4.69 per share), and any
lesser exercise price.
EMPLOYMENT AGREEMENTS
Mr. Johnson is employed under an agreement entered into effective December
1995 providing for a two year term, which terminates in December 1997.
Pursuant to the agreement, Mr. Johnson receives an annual salary of $300,000
per year and is entitled to receive an annual bonus in an amount up to 50% of
the annual salary pursuant to mutually agreed upon incentive plans. The
agreement also provides that the employee will not compete with the business of
the Company for a period of two years after termination of the Agreement.
Mr. McAfee is employed under an agreement entered into effective March
1996 with the Company which is for a three year term and for which an
additional one year term is added to the term of the agreement upon the
expiration of each one year period, unless either party gives prior notice that
such one year additional term will not apply. Pursuant to the agreement, Mr.
McAfee receives a base annual salary of $200,000 and for 1996, he was entitled
to a bonus of not less than $50,000. Additionally, the agreement provides for
a stock option grant of 100,000 shares of Common Stock, 25,000 shares of which
are immediately vested and the remaining 75,000 shares vest as to 33% thereof
on March 1 of each year beginning in 1997. Mr. McAfee's agreement also
contains a provision pursuant to which if he is terminated subsequent to a
change of control in the Company or Mr. McAfee elects to terminate his
employment within one year after such change of control, he is entitled to
payment of two times his base compensation. The agreement also provides that
the employee will not compete with the business of the Company for a period of
two years after termination of the Agreement.
Mr. Melcher is employed under an agreement entered into in December 1995
providing for a two year term, which is automatically extended for additional
one year periods unless either party gives the other six months notice prior to
the end of any term then in effect. Pursuant to the agreement, Mr. Melcher
receives an annual salary of $150,000 per year and is entitled to receive an
annual bonus in an amount up to 50% of the annual salary pursuant to mutually
agreed upon incentive plans. The agreement also provides that the employee
will not compete with the business of the Company for a period of two years
after termination of the Agreement.
Mr. Fitzpatrick is employed under an agreement entered into in July 1996
providing for a three year term. Pursuant to the agreement, Mr. Fitzpatrick
receives an annual salary of $143,000 per year and is entitled to receive an
annual bonus in an amount based on any incentive plans adopted by the Company.
Mr. Fitzpatrick's agreement also contains a provision pursuant to which if he
is terminated subsequent to a change of control in the Company or Mr.
Fitzpatrick elects to terminate his employment within two months after such
change of control, he is entitled to payment of two times his base
compensation. The agreement also provides that the employee will not compete
with the business of the Company for a period of two years after termination of
the Agreement.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
In March 1996, six stockholders who collectively owned a majority of the
Company's outstanding common stock acted by consent and reconstituted the
Company's board of directors. The reconstituted board then made certain
changes in the Company's management and in the composition of various board
committees. The compensation committee of the board of directors, as the
committee was reconstituted following the March 1996 change of control, has
furnished the following report on executive compensation for 1996:
Under the supervision of the compensation committee, the Company intends
to maintain and enhance its profitability, and thus the value of its common
stock, by relating executive compensation and stock-based benefits to the
Company's financial performance. In general, executive financial rewards may
be segregated into the following significant components: base compensation,
bonus and stock-based benefits.
The 1996 compensation packages for executive officers who were incumbent
at the beginning of the year were approved by a predecessor compensation
committee and ratified without change by the then incumbent board of
8
<PAGE> 11
directors. Messrs. Mark E. Johnson, Larry W. McAfee and Pierre S. Melcher were
subject to preexisting employment contracts which established their respective
salaries at $300,000, $150,000 and $150,000 and generally outlined their
entitlements to bonus consideration for the year. Upon becoming the Company's
chief executive officer in March 1996, Mr. Johnson renegotiated Mr. McAfee's
existing employment agreement on behalf of the Company as an inducement to
cause Mr. McAfee to remain with the Company and relocate to the Company's new
executive offices in Houston at an increased annual salary of $200,000. This
amendment was subsequently ratified by the board.
Following a reevaluation by the compensation committee of the Company's
overall compensation policies, the board approved a base pay increase to
$350,000 for Mr. Johnson upon recommendation of the compensation committee,
based upon a chief executive salary survey conducted by an independent
consulting firm. This increase was intended to reflect Mr. Johnson's
increased duties resulting from his promotion to the chief executive officer
position. At the same time, the committee recommended and the board approved
base pay increases for Messrs. Melcher and Fitzpatrick to $160,000 and
$143,000, respectively, based principally upon the recommendation of the chief
executive officer.
Base compensation for senior executives (including the chief executive
officer and the other Named Executives) is intended to be competitive with that
paid in comparably situated industries, with a reasonable degree of financial
security and flexibility afforded to those individuals who are regarded by the
board of directors as acceptably discharging the levels and types of
responsibility implicit in the various senior executive positions. In the
course of considering annual executive salary increases, appropriate
consideration is given to the credentials and experience of the individual
senior executives, as viewed in the compensation committee's collective best
judgment, which necessarily involves subjective as well as objective elements.
Should the committee be persuaded that an executive has not met expectations
for a protracted period, a recommendation to the board of directors that the
executive be terminated would be a more likely eventuality than a reduction in
his base compensation.
Under the Company's revised bonus program, bonuses are capped at
percentages of base pay not to exceed 100% for the chief executive officer and
lesser percentages for subordinate senior executives. Of the varying
percentages, one-half may be awarded on a discretionary basis, and the remainder
is entirely objective. The objective component is intended to reflect a policy
of requiring a minimum level of Company financial performance for the year
before any bonus amount is earned by the executive, with bonus amounts for
higher levels of performance directly related to the level achieved. The
discretionary bonus component is intended to reflect the individual executive's
achievements during the year against personal goals established in consultation
with the compensation committee at the beginning of the year; however, such
personal development goals were not established until mid-1996 and, therefore,
any bonus amounts paid or accrued during the year were entirely discretionary
and through July 1996 reflected only the compensation committee's subjective
view of each executive's performance. On the basis described above, bonuses
have been awarded in respect of 1996 performance as follows: Mr.
Johnson--$200,000, of which $178,000 was discretionary; Mr. McAfee--$110,000, of
which $97,500 was discretionary; Mr. Melcher--$40,000, of which $30,000 was
discretionary; and Mr. Fitzpatrick--$65,000 of which $56,000 was discretionary.
In future years, it is to be expected that increasingly more stringent criteria
will be used to measure bonus awards payable under both the financial
performance and discretionary components of the bonus program.
The board of directors is of the view that properly designed and
administered stock-based incentives for senior executives closely align the
executives' economic interests with those of stockholders and provide a direct
and continuing focus upon the goal of constantly striving to increase long-term
stockholder value. For several years, the Company has sought to encourage such
value building for stockholders through the annual award of nonqualified stock
options to senior executives. Options were awarded to the Named Executives
during 1996, as follows: Mr. Johnson--none; Mr. McAfee--6,250; Mr.
Melcher--none; and Mr. Fitzpatrick--12,500. In addition, Mr. McAfee also was
awarded options to purchase another 100,000 shares in connection with the
employment agreement renegotiation referred to above.
The compensation committee intends, with any necessary concurrence of the
board of directors, to continue to consider alternate forms of stock-based
incentives with a view to affording the maximum possible long-term performance
based benefits to senior executives at the least possible cost and the greatest
attainable economic efficiency to the Company, with such benefits designed as
nearly as practicable to align directly the economic interests of professional
managers with those of the Company's stockholders.
9
<PAGE> 12
The Compensation Committee
T. William Porter, Chairman
Thomas N. Amonett
James L. Rainey
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on the
Company's Common Stock (trading symbol "ITEQ") since December 14, 1990, the date
the Company's Common Stock began trading, as compared to the returns of all
companies whose equity securities are traded on the Nasdaq National Market (the
"Broad Market") and a peer group (the "Peer Group") selected by the Company.
This Peer Group includes Air & Water Technologies Corporation, Environmental
Elements Corporation, Midwesco Filter Resources, Inc. and BHA Associates. The
graph assumes $100 was invested on December 14, 1990 in the Company's Common
Stock, the Broad Markets and the Peer Group and assumes reinvestment of
dividends.
[GRAPH]
<TABLE>
<CAPTION>
12-14-90 03-28-91 03-31-92 03-31-93 12-31-93 12-31-94 12-31-95 12-31-96
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NASDAQ 100 129.83 162.52 185.77 209.1 202.42 283.2 347.51
ITEQ 100 118.15 178.57 86.87 94.11 45.85 69.98 90.49
COMPARABLES 100 117.66 114.8 85.45 76.14 52.15 52.75 61.46
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company enters into transactions with related parties only with the
approval of a majority of the independent and disinterested members of the
board of the directors and only on terms the Company believes to be comparable
to or better than those that would be available from unaffiliated parties.
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James A. Read was elected a director of the Company in January 1997. On
November 18, 1996, the Company entered into a Subordinated Note and Warrant
Purchase Agreement pursuant to which the Company borrowed $15 million, which
was used as partial consideration for the acquisition of Ohmstede, Inc. Mr.
Read is affiliated with International Mezzanine Capital, B.V., which purchased
$13,000,000 of the subordinated notes and received a warrant to purchase
1,525,333 shares of the Company's common stock at an exercise price of $5.10
per share. The warrant expires November 2003.
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AUDITORS
Arthur Andersen L.L.P., a certified public accounting firm, has served as
the independent auditor of the Company since 1994. While management
anticipates that this relationship will continue to be maintained during 1997
and subsequent years, no formal action is proposed to be taken at the annual
meeting with respect to the continued employment of Arthur Andersen L.L.P.
inasmuch as no such action is legally required. Representatives of Arthur
Andersen L.L.P. plan to attend the annual meeting and will be available to
answer appropriate questions. Its representatives also will have an
opportunity to make a statement at the meeting if they so desire, although it
is not expected that any statement will be made.
The audit committee of the board of directors assists the board in
assuring that the accounting and reporting practices of the Company are in
accordance will all applicable requirements. The committee reviews with the
auditors the scope of the proposed audit work and meets with the auditors to
discuss matters pertaining to the audit and any other matter which the
committee or the auditors may wish to discuss.
LIMITATION ON INCORPORATION BY REFERENCE
Notwithstanding any reference in prior or future filings of the Company
with the Securities and Exchange Commission which purport to incorporate this
proxy statement by reference into another filing, such incorporation shall not
include any material included herein under the captions "Other Information -
Board Report on Executive Compensation" or "Other Information - Performance
Graph."
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers, directors and persons who own more than 10% of a registered class of
the Company's equity securities to file reports of ownership and changes of
ownership with the Commission. Executive officers, directors and greater than
10% shareholders are required to furnish the Company with copies of all Section
16(a) reports they file. Based solely on its review of the forms received by
it, the Company believes that during the year ended December 31, 1996, all
filing requirements applicable to the Company's executive officers, directors
and 10% shareholders were met, except Mr. Porter was late in filing a Form 3
upon being appointed to the board of directors.
OTHER MATTERS
Any stockholder who wishes to submit a proposal for action to be included
in the proxy statement and form of proxy relating to the Company's 1998 annual
meeting of stockholders is required to submit such proposals to the Company on
or before December 31, 1997.
The cost of soliciting proxies in the accompanying form will be borne by
the Company. In addition to solicitations by mail, regular employees of the
Company may, if necessary to assure the presence of a quorum, solicit proxies
in person or by telephone.
The persons designated to vote shares covered by board of directors'
proxies intend to exercise their judgment in voting such shares on other
matters that may properly come before the meeting. Management does not expect
that any matters other than those referred to in this proxy statement will be
presented for action at the meeting.
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The persons designated as proxies to vote shares at the meeting intend to
exercise their judgment in voting such shares on other matters that may
properly come before the meeting. Management does not expect that any matters
other than those referred to in this proxy statement will be presented for
action at the meeting.
By Order of the Board of Directors
Lawrance W. McAfee,
Executive Vice President, Chief
Financial Officer and Secretary
May 21, 1997
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PROXY ITEQ, INC.
2727 ALLEN PARKWAY, SUITE 760
HOUSTON, TEXAS 77019
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF
STOCKHOLDERS TO BE HELD ON JUNE 19, 1997
The undersigned stockholder of ITEQ, Inc. (the "Company") hereby
appoints each of Mark E. Johnson and Lawrance W. McAfee attorneys and proxies
of the undersigned, with full power of substitution, to vote on behalf of the
undersigned at the Annual Meeting of Stockholders of the Company to be held at
the offices of the Company, 2727 Allen Parkway, Suite 760, Houston, Texas
77019, on June 19, 1997, at 11:00 a.m., central time, and at any adjournments
of said meeting, all of the shares of Common Stock which the undersigned may be
entitled to vote.
1. ELECTION OF DIRECTORS [ ] FOR the election of Mark E. Johnson, Thomas N.
Amonett, Lawrance W. McAfee, Pierre S. Melcher,
T. William Porter, James L. Rainey, Jr., and
James A. Read as directors.
[ ] WITHHOLD AUTHORITY to vote for ALL directors
listed above.
[ ] WITHHOLD AUTHORITY to vote ONLY for the
directors written on the line below:
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CONTINUED FROM OTHER SIDE
2. In their discretion, upon such other matters as may properly come before
the meeting; hereby revoking any proxy or proxies regarding such matters
heretofore given by the undersigned.
The board of directors recommends a vote FOR the nominees and if no
specification is made, the shares will be voted for election of the nominees
named herein. The undersigned hereby acknowledges receipt of the Notice of
Annual Meeting of Stockholders and the Proxy Statement furnished herewith.
Dated ......................, 1997
..................................
Stockholder's Signature
..................................
Stockholder's Signature
Signature should agree with name printed hereon. If Stock is held in the name
of more than one person, EACH joint owner should sign. Executors,
administrators, trustees, guardians, and attorneys should indicate the capacity
in which they sign. Attorneys should submit powers of attorney.
PLEASE SIGN AND RETURN IN THE ENVELOPE ENCLOSED
