SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
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 ss.240.14a-11(c) or ss.240.14a-12
ITEQ, INC.
(Name of Registrant as Specified In Its Charter)
___________________________________________________________________
(Name of Person(s) Filing Proxy Statement if other than 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)(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 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>
ITEQ, INC.
2727 ALLEN PARKWAY, SUITE 760
HOUSTON, TEXAS 77019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 28, 2000
Notice is hereby given that the annual meeting of the stockholders
of ITEQ, Inc. (the "Company") will be held at Wortham Tower, Meeting Room
2, 2727 Allen Parkway, Houston, Texas 77019, on June 28, 2000, at 10:00
a.m. central time, for the following purposes:
1. To elect a board of six directors to serve until the next annual
meeting of stockholders or until their successors are elected and
qualify;
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 19, 2000, 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 16, 2000, 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 that 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,
/s/ WILLIAM P. REID
Mr. William P. Reid
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
SECRETARY
June 1, 2000
<PAGE>
ITEQ, INC.
2727 ALLEN PARKWAY, SUITE 760
HOUSTON, TEXAS 77019
PROXY STATEMENT
This Proxy Statement is being mailed to stockholders commencing on or about
June 1, 2000, 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 28, 2000, 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 where 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 19, 2000, there were 28,262,048 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, six 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(2)........... Director and chairman of the 49 1995
board
William P. Reid.............. Director, president, chief 50 1999
executive officer and secretary
Thomas N. Amonett(1)......... Director 56 1996
Pierre S. Melcher(2) ........ Director 40 2000
James L. Rainey, Jr.(1)(2)... Director 70 1993
Roy T. Rimmer(1) ............ Director 59 2000
</TABLE>
______________
(1) Member, audit committee of the board of directors.
(2) Member, compensation committee of the board of directors.
<PAGE>
MARK E. JOHNSON. Mr. Johnson has been a director of the Company since
December 1995 and chairman of the board since March 1996. He was also president
of the Company from September 1998 until February 1999 and from March 1996 until
May 1997. Mr. Johnson served as the Company's chief executive officer from March
1996 until July 1999. From February 1994 until December 1995, Mr. Johnson was a
shareholder, director and president of Allied Industries, Inc., 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., a manufacturer of
pneumatic conveyance 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.
WILLIAM P. REID. Mr. Reid has been a director of the Company since June 1999
and was named president and chief operating officer of the Company in February
1999. Mr. Reid was appointed acting chief executive officer in July 1999, and
was promoted to chief executive officer in March 2000. From 1989 to 1998, Mr.
Reid served as president and chief executive officer of Gundle/SLT
Environmental. Prior thereto, Mr. Reid served as president of Sperry Sun
Drilling Services, a division of Baroid Corporation from 1982 to 1989. From 1974
to 1982, Mr. Reid held several positions with Cameron Iron Works.
THOMAS N. AMONETT. Mr. Amonett has been a director of the Company since
April 1996. Since November 1999, Mr. Amonett has served as the president and
chief executive officer of Champion Technologies, a privately held supplier of
oilfield chemicals. From October 1997 until June 1999, Mr. Amonett served as
president and chief executive officer of American Residential Services, Inc., a
company engaged principally in providing comprehensive maintenance, repair,
replacement and new equipment installation services for heating, air
conditioning, plumbing, electrical, indoor air quality systems and major home
appliances. He served as interim president and chief executive officer of
Weatherford Enterra, Inc., an oilfield service and equipment company, from July
1996 to June 1997. From 1992 to 1996, he served as chairman of the board and
president of Reunion Resources Company (previously known as Buttes Gas and Oil
Company and now known as Reunion Industries, Inc.). Mr. Amonett also currently
serves as a director of PetroCorp Incorporated, an oil and gas producer and
Reunion Industries, Inc.
JAMES L. RAINEY. Mr. Rainey has served as a director of the Company since
October 1993. Mr. Rainey has been an independent business consultant since May
1991. From May 1986 through April 1991, Mr. Rainey 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. and the Wirthlin Group.
ROY T. RIMMER. Mr. Rimmer has been a director of the Company since January
2000. Since 1986, Mr. Rimmer has served as the chairman and chief executive
officer of Producers Pipeline Corporation that is primarily involved in
acquisition and construction of crude oil and natural gas gathering and
transportation systems. In addition, since 1995, Mr. Rimmer has served as the
chairman and chief executive officer of Warner International Communications
Group, Inc., an Internet web site and content developer of commercial e-Commerce
sites. Mr. Rimmer also serves as a director of Telescan, Inc., a leading
Internet developer of financial databases and analytical software, and is a
director of Aviation Sales Company, an integrated aviation maintenance services
provider and components distributor.
PIERRE S. MELCHER. Mr. Melcher has been a director of the Company since
November 1999. Prior to that, Mr. Melcher served as a director of the
Company from March 1996 to June 1998. From April 1996 until September 1997, Mr.
Melcher served as a senior vice president and treasurer of the Company. From
April 1994 until December 1995 he was a director and senior vice president of
Allied Industries, Inc., a wholly-owned subsidiary of the Company since December
1995. Prior to that time Mr. Melcher pursued private investments and served as a
director and senior vice president for Semco, Inc. From 1989 to 1991, Mr.
Melcher was an investment banker with Texas Commerce Bank.
2
<PAGE>
BOARD AND COMMITTEE ACTIVITY, STRUCTURE AND COMPENSATION
During 1999, the board of directors convened on 6 regularly or specially
scheduled occasions. The audit and compensation committees of the board held 2
and 3 meetings, respectively, during the year. 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 annually granted 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 and committee meeting they attend provided that directors receive no
additional compensation for attendance at committee meetings held on the same
day as a board meeting. 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.
MANAGEMENT STOCKHOLDINGS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at April 1, 2000, by (i) all directors,
(ii) the chief executive officer and other executive officers and (iii) all
directors and executive officers as a group.
NAME OF PERSON OR NUMBER OF PERCENT
IDENTITY OF GROUP SHARES (1) OF CLASS
----------------- ---------- --------
Mark E. Johnson ................................... 1,793,062 6.3%
William P. Reid ................................... 300,000 1.1%
Thomas N. Amonett ................................. 43,000 *
Pierre S. Melcher ................................. 2,070,039 7.3%
Roy T. Rimmer(2) .................................. 3,633,235 12.9%
James L. Rainey, Jr. .............................. 50,000 *
All directors and executive officers as a group
(6 persons)(3) .................................. 7,889,336 27.1%
___________
* Less than 1% of outstanding shares.
(1) Includes shares underlying outstanding stock options, as follows: Mr.
Johnson - 425,000; Mr. Reid - 300,000; Mr. Amonett - 42,000; Mr. Melcher -
6,000; Mr. Rimmer - 5,000; and Mr. Rainey - 50,000.
(2) For a two-year period beginning January 25, 2000, Mr. Rimmer was appointed
as Proxy for the shares of LJH Corporation and at his sole discretion
represents the interest of the 3,528,235 shares of common stock held by that
shareholder. Includes 5,000 shares underlying outstanding stock options
referred to in Note (1) above.
(3) Includes all shares referred to in Note (1) above.
3
<PAGE>
VOTE REQUIRED FOR ELECTION
The six 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.
OTHER INFORMATION
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock at April 1, 2000, by each stockholder
who is known by the Company to own beneficially more than 5% of the outstanding
Common Stock.
NAME OF PERSON
OR IDENTITY OF GROUP NUMBER OF SHARES PERCENT OF CLASS
-------------------- ---------------- ----------------
Mark E. Johnson..................... 1,793,062(1) 6.3%
10101 Bay Area Boulevard
Pasadena, Texas 77507
Pierre S. Melcher................... 2,070,039(2) 7.3%
2 Remington Lane
Houston, Texas 77005
Don Sanders......................... 2,482,800(3) 8.8%
3100 Chase Tower
Houston, TX 77002
Robert Alpert....................... 1,849,200(4) 6.5%
Three Allen Center
333 Clay, Suite 4150
Houston, TX 77002
Lacy J. Harber...................... 3,528,235(5) 12.5%
LJH Corporation
377 Neva Lane
Dennison, TX 75020
Roy T. Rimmer....................... 3,633,235(6) 12.9%
4550 Post Oak Place, Suite 175
Houston, TX 77027
4
<PAGE>
(1) Includes 425,000 shares underlying outstanding stock options.
(2) Includes 6,000 shares underlying outstanding stock options. Also includes
140,000 shares owned by Mr. Melcher, as sole trustee of the Kathryn Lewis
Melcher Trust ("the KLM Trust"); 80,000 shares owned by Mr. Melcher, as sole
trustee of the Paul Nicholas Melcher Trust (the "PNM Trust") and 1,844,039
shares owned by Polaris Partners Ltd. ("Polaris"). Mr. Melcher is also the
sole trustee of the Melcher 1998 Management Trust (the "Management Trust"),
the general partner of Polaris. As sole trustee of the KLM Trust, the PNM
Trust and the Management Trust, Mr. Melcher may be deemed to be the
beneficial owner of the shares owned by the KLM Trust, the PNM Trust and
Polaris.
(3) Includes 2,073,900 shares owned by Mr. Sanders individually and 408,900
shares owned by certain of Mr. Sanders' clients. Mr. Sanders is chairman of
the executive committee of Sanders Morris Harris, Inc., an
investment-banking firm. Mr. Sanders shares the power to dispose, or direct
the disposition, of the 408,900 shares owned by certain of his clients and,
consequently, beneficially owns said 408,900 shares.
(4) Includes 400,000 shares owned by Mr. Alpert individually; 110,000 shares
owned by Wildwood Capital Company ("WCC"); 242,500 shares owned by Markus
Ventures, L.P. ("MVLP"); 110,000 shares owned by Markus Investments, Inc.
("MII"); 610,000 shares owned by James Ventures, L.P. ("JVLP"); 351,700
shares owned by James Investments, Inc. ("JII"); and 25,000 shares owned by
Mr. Alpert's mother, Gladys Alpert ("GA"). Mr. Alpert is the sole
shareholder and president of Danro Corporation. Danro is the managing
general partner of WCC, MVLP and JVLP. MVLP is the sole shareholder of MII,
and JVLP is the sole shareholder of JII. Mr. Alpert is the chairman of JII
and MII. As the sole shareholder and president of Danro, Mr. Alpert may be
deemed to beneficially own the shares owned by WCC, MVLP, MII, JVLP and JII
and, as GA's son, Mr. Alpert may be deemed to beneficially own the shares
owned by GA.
(5) For a two-year period beginning January 25, 2000, Mr. Rimmer was appointed
as Proxy for the shares of LJH Corporation and at his sole discretion
represents the interest of the 3,528,235 shares of common stock held by that
shareholder. At the request of Mr. Harber, Mr. Rimmer was appointed to the
Company's board of directors in January 2000.
(6) For a two-year period beginning January 25, 2000, Mr. Rimmer was appointed
as Proxy for the shares of LJH Corporation and at his sole discretion
represents the interest of the 3,528,235 shares of common stock held by that
shareholder. Includes 5,000 shares underlying outstanding stock options.
5
<PAGE>
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, 1999 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION ------------
--------------------------- STOCK
OPTIONS
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OTHER (SHARES)
----------------------------------- ----- -------- -------- ----- -------
<S> <C> <C> <C> <C> <C>
Mark E. Johnson(1)................. 1999 $400,000 - - 350,000
Chairman of the Board 1998 $400,000 - - 150,000
1997 $350,000 $350,000 - -
William P. Reid(2)................. 1999 $310,667 - - 375,000
President, Chief Executive
Officer and Secretary
</TABLE>
________________
(1) Served as president from September 1998 until February 1999 and from March
1996 until May 1997 and as chief executive officer from March 1996 until
July 1999.
(2) Became president in February 1999 and acting chief executive officer in
July 1999.
OPTION GRANTS
The following sets forth information about stock option grants during 1999
to the Named Executives.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------- POTENTIAL REALIZED VALUE AT
PERCENTAGE OF ASSUMED ANNUAL RATES OF
TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
GRANTED OPTION TERM (1)
OPTIONS TO EMPLOYEES EXERCISE EXPIRATION -----------------
NAME GRANTED (2) IN 1999 PRICE DATE (3) 5% 10%
---- ---------- ------- ----- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Mark E. Johnson 100,000 11% $2.00 3/2/04 $55,256 $122,102
250,000 28% $1.00 10/26/04 $69,070 $152,628
William P. Reid 100,000 11% $2.25 1/29/04 $62,163 $137,365
25,000 3% $2.09 6/30/04 $14,462 $ 31,956
250,000 28% $1.00 10/26/04 $69,070 $152,628
</TABLE>
-------------
(1) Potential values stated are the result of using the Securities and Exchange
Commission (the "Commission") 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, subject to earlier
termination in certain events related to termination of employment.
(3) The options vest at specified dates up to four years from the date of grant.
6
<PAGE>
OPTION EXERCISES AND YEAR-END VALUES
None of the Named Executives exercised any options during 1999. 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, 1999.
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED UNEXERCISED
OPTIONS AT IN-THE-MONEY
SHARES DECEMBER 31, 1999 OPTIONS AT
ACQUIRED (SHARES) DECEMBER 31, 1999(1)
ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
--------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mark E. Johnson -- -- 175,000 325,000 -- --
William P. Reid -- -- 75,000 300,000 -- --
</TABLE>
_______________
(1) Represents the difference between the closing price of the Common Stock on
the Nasdaq National Market on December 31, 1999 ($0.875 per share), and any
lesser exercise price.
EMPLOYMENT AGREEMENTS
Mr. Johnson is employed under an agreement entered into effective June 30,
1999 and subsequently amended on January 10, 2000. The agreement remains in
effect until December 31, 2004 or until Mr. Johnson no longer occupies the
position of either chairman of the board of directors of the Company or
director. Under the terms of the amended agreement, until June 30, 2000, Mr.
Johnson is to devote substantially his full time during normal business hours to
insure an orderly management transition at the Company and to undertake any
additional executive duties requested by the Company's chief executive officer.
During this period, Mr. Johnson is to receive a salary of $33,333 per month.
Following this initial transition period, Mr. Johnson will continue to be an
employee of the Company responsible for consulting with the Company's chief
executive officer concerning acquisitions, divestitures and similar matters and
undertaking additional executive duties as requested by the Company's chief
executive officer. During this second period, Mr. Johnson's services will not be
required during more than three days during any week. Mr. Johnson's salary will
be reduced to $16,667 per month and he will no longer be eligible to participate
in the Company's employee stock purchase plan and 401K plan. If Mr. Johnson's
employment is terminated because he no longer occupies the position of chairman
of the board of directors of the Company for reasons other than his resignation
or refusal to serve, he is entitled to a lump sum cash payment of the lesser of
(i) $600,000 or (ii) an amount equal to $16,667 multiplied by the number of
months remaining from the date of his termination until December 31, 2004. In
addition, all of Mr. Johnson's unvested benefits under any benefit plan in which
he is a participant when the agreement is terminated as mentioned above will
become fully vested, exercisable, distributable or otherwise performable by the
Company, and the Company will continue to provide insurance benefits to Mr.
Johnson until December 31, 2004.
Mr. Reid is employed under an agreement entered into effective January 29,
1999 providing 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, subject to prior termination of the agreement by either party. Pursuant
to the agreement, Mr. Reid received an annual salary of $340,000 per year from
the date of the agreement through December 31, 1999 at which time he was
entitled to participate in the Company's incentive bonus plan. For the periods
after December 31, 1999, Mr. Reid's base salary is established by the
compensation committee, but no adjustment may result in a base salary less than
the highest amount authorized by the committee to be paid during any previous
year. Mr. Reid's agreement provides that if he is terminated by the Company
without
7
<PAGE>
cause, or he elects to terminate his employment for good reason, following a
change of control, he is entitled to payment of three times the highest base
salary earned by him in the immediately preceding three years plus three times
the greater of (i) the maximum award for which he is eligible under the
Company's incentive bonus plan for the calendar year of termination, or (ii) the
largest award earned under the incentive bonus plan. Following such termination,
all rights and options to contingent incentive compensation, except the
incentive bonus, defined contribution plans and health and life insurance, shall
immediately become fully vested, exercisable and distributable. In addition,
following such termination, the Company must maintain all insured and
self-insured employee welfare benefit coverage until commencement of equivalent
benefits from a new employer, but not longer than three years, or, at Mr. Reid's
option, pay him a sum equal to three times the average annual cost to the
Company of such coverage over the years before said termination. If a change of
control occurs as a result of a consummated tender offer, the agreement requires
that, upon Mr. Reid's election, the Company purchase a certain percentage of the
shares acquired by him under any benefit plan prior to the tender offer.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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.
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, age 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 may not exceed 100% of
base pay for the chief executive officer and the 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. On
the basis described above, no bonuses were paid in 2000 in respect of 1999
performance.
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 1999, as follows: Mr. Johnson--350,000 and Mr. Reid--375,000.
8
<PAGE>
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.
The Compensation Committee
Pierre S. Melcher, Chairman
Mark E. Johnson
James L. Rainey, Jr.
PERFORMANCE GRAPH
The following graph shows the cumulative total stockholder return on the
Company's Common Stock (trading symbol "ITEQ") since December 31, 1994 as
compared to the returns of all companies whose equity securities are traded on
the Nasdaq National Market (the "Broad Market") and those constituting the
Nasdaq Industrial Average and the Dow Jones Industrial Average (the "Averages").
The graph assumes $100 was invested on December 31, 1994 in the Company's Common
Stock, the Broad Market and the Averages and assumes reinvestment of dividends.
[PERFORMANCE GRAPH]
-------------------------------------------------------------------------------
12/31/94 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99
-------------------------------------------------------------------------------
DJIA $100.00 $133.45 $168.17 $206.24 $239.45 $299.84
-------------------------------------------------------------------------------
NASDAQ Composite $100.00 $139.92 $171.69 $208.83 $291.60 $541.16
-------------------------------------------------------------------------------
NASDAQ Industrial $100.00 $127.97 $147.20 $161.98 $173.02 $297.02
-------------------------------------------------------------------------------
ITEQ $100.00 $152.63 $197.37 $484.21 $89.47 $36.84
-------------------------------------------------------------------------------
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.
In February 2000, the Company sold its wholly owned-subsidiary Graver
Manufacturing Company, a maker of field erected pressure vessels, to a newly
formed entity. Mark Johnson, the Company's chairman of the board, owns a
majority interest in the newly formed entity. The $4.0 million sales price for
Graver Manufacturing consisted of $3 million cash and a $1 million five-year
term note bearing interest at 9% per annum and secured by all the outstanding
capital stock of Graver Manufacturing. In connection with this transaction,
Graver Manufacturing was independently appraised, and management is of the
opinion that the terms of this transaction were at least as favorable to the
Company as could have been obtained from an unrelated third party.
9
<PAGE>
AUDITORS
Arthur Andersen LLP, a certified public accounting firm, has served as the
independent auditor of the Company since 1994. While management anticipates that
this relationship may continue to be maintained during 2000 and subsequent
years, no formal action is proposed to be taken at the annual meeting with
respect to the continued engagement of Arthur Andersen LLP inasmuch as no such
action is legally required. Representatives of Arthur Andersen LLP 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
with 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 that 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 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."
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities and Exchange Act of 1934, as amended,
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, 1999, all filing requirements applicable to the
Company's executive officers, directors and 10% shareholders were met.
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 2001 annual
meeting of stockholders is required to submit such proposals to the Company on
or before February 1, 2001, and otherwise comply with the provisions of Rule
14a-8 under the Exchange Act. If a stockholder intends to bring business before
the Company's 2001 annual meeting of stockholders (other than pursuant to the
procedures under Rule 14a-8), pursuant to the Company's Amended and Restated
Bylaws, notice thereof must be delivered to or mailed and received at the
principal executive offices of the Company not later than April 29, 2001, and
not before December 30, 2000, and the stockholder must otherwise comply with the
requirements in the Company's Amended and Restated Bylaws relating to business
brought by a stockholder at an annual meeting.
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 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
/s/ WILLIAM P. REID
Mr. William P. Reid
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
SECRETARY
June 1, 2000
<PAGE>
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 28, 2000
The undersigned stockholder of ITEQ, Inc. (the "Company") hereby appoints each
of Mark E. Johnson and William P. Reid 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 Wortham Tower,
Meeting Room 2, 2727 Allen Parkway, Houston, Texas 77019, on June 28, 2000, at
10:00 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.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE>
ITEQ, INC.
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
For Withhold For All
1. Election of Directors All All Except
Nominees: 01) Mark E. Johnson, 02) William P. Reid,
03) Thomas N. Amonett, 04) Pierre S. Melcher,
05) James L. Rainey, Jr. and 06) Roy T. Rimmer
For all except nominees written in below:
_____________________________________________________
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 of the Proxy Statement furnished herewith.
Dated: ____________________________, 2000
_________________________________________
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.
