SCHEDULE
14A INFORMATION
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No.____)
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Soliciting
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Insituform Technologies,
Inc.
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Registrant as Specified in its Charter)
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INSITUFORM
TECHNOLOGIES, INC.
__________________________
NOTICE
OF ANNUAL MEETING OF STOCKHOLDERS
to
be held on April 26, 2006
__________________________
TO
THE
OWNERS OF COMMON STOCK
OF
INSITUFORM TECHNOLOGIES, INC.:
You
are
invited to attend Insituform Technologies, Inc.’s 2006 annual meeting of
stockholders. The meeting will be held on Wednesday, April 26, 2006 at 9:00
a.m.
local time at the Jumeirah Essex House, 160 Central Park South, New York, New
York.
The
purposes of this year’s meeting are:
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(1)
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to
elect eight directors,
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(2)
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to
approve the 2006 Non-Employee Director Equity Incentive
Plan,
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(3)
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to
approve the 2006 Employee Equity Incentive
Plan,
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(4)
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to
approve the 2006 Executive Performance Plan,
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(5)
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to
ratify the appointment of PricewaterhouseCoopers LLP as our independent
auditors for the year ending December 31, 2006, and
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(6)
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to
transact any other business that may properly come before the meeting
or
any adjournment(s) of the meeting.
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The
board
of directors set March 1, 2006 as the record date for the meeting. This means
that if you are an owner of our common stock at the close of business on that
date, you are entitled to receive this notice of the meeting, and to vote at
the
meeting and any adjournment(s) of the meeting.
If
you do
not expect to attend the meeting, please mark, sign, date and return the
enclosed proxy card in the postage-paid envelope, so that your vote can be
recorded.
By
Order
of the Board of Directors,
David
F.
Morris
Secretary
Chesterfield,
Missouri
March
10,
2006
P
ROXY
S
TATEMENT
Insituform
Technologies, Inc.’s board of directors is mailing this proxy statement and the
proxy card to you to solicit proxies on its behalf to be voted at our 2006
annual meeting of stockholders, and at any adjournment(s) of the meeting. This
proxy statement and the proxy card were first mailed on
March
10,
2006. The meeting will be held on Wednesday, April 26, 2006 at 9:00 a.m. local
time at the Jumeirah Essex House, 160 Central Park South, New York, New York,
for the purposes listed in the accompanying notice.
We
will
bear all costs relating to the solicitation of proxies. Proxies may be solicited
by our officers, directors and regular employees personally, by mail or by
telephone. We may pay brokers and other persons holding shares of stock in
their
names, or the names of their nominees, for the reasonable expenses in sending
soliciting material to their principals.
Our
executive office is located at 702 Spirit 40 Park Drive, Chesterfield, Missouri
63005.
T
ABLE
OF
C
ONTENTS
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2
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5
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5
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7
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18
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32
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34
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35
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A-1
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B-1
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C-1
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D-1
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Who
may vote?
You
may
vote if you owned shares at the close of business on March 1, 2006, the record
date for our 2006 annual meeting of stockholders. You are entitled to one vote
for each share you owned on that date for each director to be elected and on
each other matter presented at the meeting. As of March 1, 2006, we had
27,058,634 shares of Class A common stock, $.01 par value, outstanding. We
have
no class or series of voting stock outstanding other than the common
stock.
What
am I voting on?
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·
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First,
you are voting to elect eight directors. Each director, if elected,
will
serve a term of one year or until his or her successor has been elected
and qualified.
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Our
board of directors recommends a vote “FOR” the election of each of the nominees
for director.
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·
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Second,
you are voting to approve the 2006 Non-Employee Director Equity Incentive
Plan.
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Our
board of directors recommends a vote “FOR” the approval of the 2006 Non-Employee
Director Equity Incentive Plan.
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Third,
you are voting to approve the 2006 Employee Equity Incentive
Plan.
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Our
board of directors recommends a vote “FOR” the approval of the 2006 Employee
Equity Incentive Plan.
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·
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Fourth,
you are voting to approve the 2006 Executive Performance
Plan.
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Our
board of directors recommends a vote “FOR” the approval of the 2006 Executive
Performance Plan.
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·
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Fifth,
you are voting
to
ratify the appointment of PricewaterhouseCoopers LLP as our independent
auditors for the year ending December 31,
2006.
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Our
board of directors recommends a vote “FOR” the ratification of
the
appointment of PricewaterhouseCoopers LLP as our independent auditors for the
year ending December 31, 2006.
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·
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In
addition, you may vote on other business, if it properly comes before
the
meeting, or any adjournment(s) of the
meeting.
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How
do I vote?
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By
Written Proxy:
You can vote by written proxy. If you sign and return the enclosed
proxy
card, the shares represented by the proxy will be voted in accordance
with
the terms of the proxy, unless you subsequently revoke your proxy.
You can
return your proxy card in the enclosed envelope, which requires no
postage
if mailed in the U.S.
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In
Person:
If
you are a record stockholder, you can vote in person at the
meeting.
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What
is the difference between a record stockholder and a stockholder who holds
shares in street name?
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If
your shares are registered in your name, you are a record
stockholder.
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If
your shares are in the name of your broker or bank, your shares are
held
in street name.
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How
many votes are needed to approve the proposals?
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Directors
are elected by a plurality vote. That means that the eight nominees
who
receive the most votes are elected. A majority vote is not
required.
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Approval
of the 2006 Non-Employee Director Equity Incentive Plan requires
the
affirmative vote of a majority of the shares of our common stock
cast on
the proposal.
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Approval
of the 2006 Employee Equity Incentive Plan requires the affirmative
vote
of a majority of the shares of our common stock cast on the
proposal.
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Approval
of the 2006 Executive Performance Plan requires the affirmative vote
of a
majority of the shares of our common stock cast on the proposal.
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Ratification
of the appointment of PricewaterhouseCoopers LLP
as
our independent auditors for the year ending December 31, 2006
requires
the affirmative vote of a majority of the shares of our common stock
cast
on the proposal.
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Can
I revoke my proxy?
Yes.
You
can revoke your proxy by:
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giving
written notice to our corporate Secretary prior to the actual vote
at the
meeting,
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·
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delivering
a later-dated proxy card prior to or at the meeting,
or
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voting
in person at the meeting.
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What
is the record date and what does it mean?
The
record date for the 2006 annual meeting of stockholders is March 1, 2006.
The record date is set by our board of directors, as required by Delaware law.
Record stockholders at the close of business on the record date are entitled
to:
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·
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receive
notice of the meeting, and
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·
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vote
at the meeting, and at any adjournment(s) of the
meeting.
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What
if I do not specify my vote when I return my proxy?
You
should specify your choice for each proposal on the enclosed proxy card. If
no
specific instructions are given, proxies that are signed and returned will
be
voted “FOR” the election of all director nominees, “FOR” the approval of the
2006 Non-Employee Director Equity Incentive Plan, “FOR” the approval of the 2006
Employee Equity Incentive Plan, “FOR” the approval of the 2006
Executive
Performance Plan and “FOR” the ratification of the appointment
of
PricewaterhouseCoopers LLP as our independent auditors for the year ending
December 31, 2006.
How
are designations to “withhold authority,” broker non-votes and abstentions
counted?
If
you
designate on the proxy that you are “withholding authority” to vote for a
director nominee or nominees, your shares will be counted as present for the
purpose of determining the presence of a quorum for transacting business at
the
meeting, but will not have the effect of a vote against the director nominee
or
nominees. As discussed above, a plurality of the votes cast is required for
the
election of directors, which means that the nominees with the eight highest
vote
totals will be elected as directors. As a result, a designation on the proxy
that you are “withholding authority” for a director nominee or nominees will
only have the effect of lowering the vote totals of the individual directors
for
whom authority is withheld.
Broker
“non-votes” will not be counted as present for the purpose of determining the
presence of a quorum unless these shares are voted on another matter presented
at the meeting. A broker “non-vote” occurs when a broker or nominee holding
shares for a beneficial owner does not vote on a particular proposal because
the
broker or nominee:
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·
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has
not received voting instructions on a particular matter from the
beneficial owner or persons entitled to vote,
and
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does
not have the discretionary voting power on the
matter.
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Abstentions
will be counted as present for the purpose of determining the presence of a
quorum for transacting business at the meeting and as votes cast on Proposals
2
through 5. Because these proposals require a majority of the votes cast for
approval, an abstention will have the effect of a vote against the
proposal.
What
is a quorum?
A
majority of the outstanding shares of our common stock must be represented,
in
person or by proxy, at the meeting to constitute a quorum for purposes of
conducting business at the meeting.
*
*
*
At
the
meeting, stockholders will elect eight directors, each to serve a term of one
year or until a successor is elected and qualified. Unless otherwise instructed
in the proxy, each of the persons named on the accompanying proxy card intends
to vote the shares represented thereby in favor of the eight nominees listed
under “Certain Information Concerning Director Nominees” below and, in any
event, may not vote the shares for a greater number of persons than the eight
nominees named.
Each
director nominee is presently serving as a director of our company. We have
no
reason to believe that any of the director nominees will be unable or will
decline to serve. If, however, any nominee should become unable or unwilling
to
serve, the persons named on the accompanying proxy card will vote the shares
represented by the proxy for another person duly nominated by our board, based
on the recommendation of our Corporate Governance & Nominating
Committee, to act in the nominee’s place, or, if no other person is so
nominated, to vote the shares only for the remaining nominees.
Our
board of directors recommends a vote “FOR” each of the nominees for
director.
Certain
Information
Concerning Director
Nominees
Certain
information concerning the nominees for election as directors is set forth
below. This information was furnished to us by the nominees. No family
relationship exists between any of our directors or executive officers.
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STEPHEN
P. CORTINOVIS
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Director
since 1997
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Age
56
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Partner
of Bridley Capital Partners (a private equity firm) since 2001; Senior Advisor
to The Cypress Group (a private equity firm) since 2003; Vice President
International and President - Europe, Emerson Electric Co. (designer,
manufacturer and seller of electrical, electromechanical and electronic
products, systems and services) from before 2000 until 2001; Director: Plexus
Corp.
Member
of
our Corporate Governance & Nominating Committee and Strategic Planning
Committee.
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STEPHANIE
A. CUSKLEY
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Director
since 2005
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Age
45
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Managing
Director and Group Head - Mid Cap Investment Banking Coverage of JPMorgan
Securities
from 2003 until 2005; Managing Director and Project Manager
LeadershipMorganChase of JPMorgan Chase from 2001 until 2003; Managing Director,
High Yield Corporate Finance of JPMorgan Securities from before 2000 until
2001.
Chair
of
our Audit Committee and member of our Corporate Governance & Nominating
Committee.
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JOHN
P. DUBINSKY
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Director
since 2002
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Age
62
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President
and Chief Executive Officer of Westmoreland Associates, LLC (a financial
consulting company) since before 2000; President and Chief Executive Officer
of
CORTEX (a public purpose non-profit established to buy property for development
of a biotechnology corridor in the St. Louis, Missouri area) since 2003;
President Emeritus of Firstar Bank from before 2000 until 2001; Vice Chairman:
BJC HealthCare; Director: Accentia Biopharmaceuticals, Inc. and Stifel Financial
Corp.; Trustee: Barnes-Jewish Hospital and Washington University.
Chair
of
our Strategic Planning Committee and member of our Compensation
Committee.
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JUANITA
H. HINSHAW
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Director
since 2000
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Age
61
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President
and Chief Executive Officer of H&H Advisers (a financial advisory company)
since 2005; Senior Vice President and Chief Financial Officer of Graybar
Electric Company, Inc. (electrical and communications distributor) from 2000
until 2005; Chief Financial Officer (non-paying position) of Highlights of
Ophthalmology International, Inc. (a publishing company) from 1999 until 2000;
Director: IPSCO, Inc., Synergetics USA, Inc. and The Williams Company, Inc.
Chair
of
our Compensation Committee and member of our Audit Committee.
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ALFRED
T. MCNEILL
|
Director
since 2004
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Age
69
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Consultant
to the construction industry since before 2000; Chief Executive Officer of
New
Jersey Schools Construction Corporation from 2002 until 2003; Interim Chairman
and Chief Executive Officer of J.A. Jones Construction Group from 2000 until
2001.
Member
of
our Compensation Committee and Strategic Planning Committee.
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THOMAS
S. ROONEY, JR.
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Director
since 2003
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Age
46
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Insituform’s
President and Chief Executive Officer since July 2003; Insituform’s
President and Chief Operating Officer from April 2003 until July 2003;
Senior Vice President and Regional Manager, from 2000 until April 2003, of
Gilbane Building Company.
Member
of
our Strategic Planning Committee.
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SHELDON
WEINIG
|
Director
since 1992
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Age
78
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Adjunct
Professor at Columbia University and at State University of New York, Stony
Brook from before 2000; Director: Intermagnetics General
Corporation.
Chair
of
our Corporate Governance & Nominating Committee and member of our Audit
Committee.
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ALFRED
L. WOODS
|
Chairman
of the Board since
2003
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Director
since 1997
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Age
61
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President
of Woods Group (a management consulting company) since before 2000; Chairman
and
Chief Executive Officer of R&S/Strauss, Inc. (a specialty retail chain) from
before 2000 until 2001; Director: Clutchmobile, Inc.
Based
on
the findings of our board’s Corporate Governance & Nominating
Committee, our board has determined that the following directors are
“independent directors” as defined by the rules applicable to companies listed
on The Nasdaq Stock Market:
Stephen
P.
Cortinovis
Alfred
T.
McNeill
Stephanie
A.
Cuskley
Sheldon
Weinig
John
P.
Dubinsky
Alfred
L.
Woods
Juanita
H. Hinshaw
The
Chairman of the Board position is a non-executive position. Alfred L. Woods
has
served as our non-executive Chairman since July 2003.
Our
non-executive Chairman is responsible for the smooth functioning of our board,
enhancing its effectiveness. The non-executive Chairman guides the processes
of
our board, setting the agenda for, and presiding at, board meetings. Our
non-executive Chairman also presides at stockholder meetings, and ensures that
directors receive appropriate information from our company to fulfill their
responsibilities.
Our
non-executive Chairman is an ex officio member of each standing board committee,
providing guidance and, like all directors, taking an active role in evaluating
our Chief Executive Officer.
Our
non-executive Chairman acts as a regular liaison between our board and our
Chief
Executive Officer, consulting regularly with our Chief Executive Officer over
business matters and providing our Chief Executive Officer with more immediate
consultation and advice on material business decisions which require prompt
reflection or policy interpretation.
The
non-executive Chairman has no operating or independent oversight authority
or
responsibility. All oversight authority and responsibility remains with our
full
board or its designated committees, and all executive authority and
responsibility remains with our Chief Executive Officer.
Board
of Directors
.
During
2005, our board of directors held eleven meetings and acted four
times
by
unanimous written consent. No director attended fewer than 75% of the aggregate
number of board meetings and board committee meetings on which the director
served during 2005. Our board has an Audit Committee, a Compensation Committee,
a Corporate Governance & Nominating Committee and a Strategic Planning
Committee.
Audit
Committee
.
The
members of our board’s Audit Committee are Stephanie A. Cuskley (Chair),
Juanita H. Hinshaw and Sheldon Weinig. Mmes. Cuskley and Hinshaw and Mr.
Weinig are
independent
directors as defined by the rules applicable to companies listed on The Nasdaq
Stock Market. Paul A. Biddelman, a former director of our company, served as
the
Chair of the Audit Committee until December 2005. Mr. Biddelman also qualified
as an independent director.
The
primary functions of the Audit Committee are to oversee (a) the integrity
of our financial statements, (b) our compliance with legal and regulatory
requirements, (c) the independent auditors’ qualifications and independence
and (d) the performance of our internal audit function and independent
auditors. The Audit Committee also prepares the Audit Committee report included
in our proxy statement. The Audit Committee’s activities are intended to involve
guidance and oversight and not to diminish the primary responsibility of
management for our financial statements and internal controls. The Audit
Committee’s responsibilities include:
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·
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the
appointment, compensation, retention and termination of the independent
auditors and of our internal
auditors,
|
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·
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oversight
of the work of independent auditors engaged for the purpose of preparing
or issuing an audit report or performing other audit, review or attest
services for us,
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·
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oversight
of the internal auditors’ work,
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·
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review
of the scope and results of our internal
controls,
|
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·
|
approval
of the professional services provided by the independent auditors,
and
|
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·
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review
of the independence of the independent
auditors.
|
Audit
Committee Financial Expert
.
Based
on the findings of the Audit Committee, our board has determined that the Audit
Committee has two “audit committee financial experts,” as defined in the rules
promulgated by the Securities and Exchange Commission, and as required of
Nasdaq-listed companies. They are Mmes. Cuskley and Hinshaw.
During
2005, the Audit Committee held seven meetings and acted two times by unanimous
written consent. Our board has adopted a written charter for the Audit
Committee. A copy of the Audit Committee charter, which was amended as of
October 25, 2005, is attached as
Exhibit
A
.
Compensation
Committee
.
The
members of our board’s Compensation Committee are Juanita H. Hinshaw (Chair),
John P. Dubinsky and Alfred T. McNeill. Ms. Hinshaw and Mr. Dubinsky served
on
the Compensation Committee at all times during 2005. Mr. McNeill has served
as a
member of the Compensation Committee since April 2005. Stephen P. Cortinovis
also served as a member of the Compensation Committee until April 2005. Messrs.
Dubinsky, McNeill and Cortinovis and Ms. Hinshaw are independent directors
as defined by the rules applicable to companies listed on The Nasdaq Stock
Market.
The
Compensation Committee (a) determines the compensation level of our Chief
Executive Officer and other executive officers, (b) prepares the executive
compensation report included in our proxy statement and (c) administers,
and makes recommendations with respect to, our incentive compensation plans
and
equity-based plans.
During
2005, the Compensation Committee held five meetings and acted three times by
unanimous written consent. Our board has adopted a written charter for the
Compensation Committee.
Compensation
Committee Interlocks and Insider Participation
.
There
were no compensation committee interlocks or insider participation on the part
of the members of our Compensation Committee. The members of the Compensation
Committee are set forth above under “Compensation Committee.”
Corporate
Governance & Nominating Committee
.
The
members of our Corporate Governance & Nominating Committee are Sheldon
Weinig (Chair), Stephen P. Cortinovis and Stephanie
A.
Cuskley. Messrs. Weinig and Cortinovis and Ms. Cuskley are independent directors
as defined by the rules applicable to companies listed on The Nasdaq Stock
Market. Paul A. Biddelman, a former director of our company, served as a member
of the Corporate Governance & Nominating Committee until December 2005.
Mr. Biddelman also qualified as an independent director.
The
Corporate Governance & Nominating Committee advises the board on
corporate governance principles, including developing and recommending to our
board a set of corporate governance guidelines, and identifies qualified
individuals to recommend as potential board members to our stockholders. In
its
evaluation of director candidates, the Corporate Governance &
Nominating Committee considers a variety of characteristics, including, but
not
limited to, core competencies, experience, independence, level of commitment,
board and company needs and considerations, and personal characteristics. The
Corporate Governance & Nominating Committee may engage a third party to
assist it in identifying potential director nominees.
Stockholder
Nominations.
Stockholders also may make nominations for directors. Stockholders wishing
to
propose nominees for consideration at our 2007 annual meeting of stockholders
must comply with a by-law provision dealing with nominations. For a discussion
of the nominating procedures, see “Stockholder Proposals” in this proxy
statement. All director candidates, including those recommended by stockholders,
are evaluated on the same basis.
The
Corporate Governance & Nominating Committee held six meetings and acted
once by unanimous written consent in 2005. Our board has adopted a written
charter for the Corporate Governance & Nominating
Committee.
Strategic
Planning Committee
.
The
members of our board’s Strategic Planning Committee are John P. Dubinsky
(Chair), Stephen P. Cortinovis, Alfred T. McNeill and Thomas S. Rooney, Jr.
Messrs. Dubinsky, Cortinovis and McNeill are independent directors as defined
by
the rules applicable to companies listed on The Nasdaq Stock Market. The role
of
this committee is to review and to make recommendations to the board regarding
our strategy and strategic planning process. The Strategic Planning Committee
held seven meetings during 2005. Our board has adopted a written charter for
the
Strategic Planning Committee.
Corporate
Governance Principles
.
Based
on
the recommendation of the Corporate Governance & Nominating Committee,
our board has adopted a set of corporate governance guidelines. These corporate
governance guidelines, which are subject to annual review by the Corporate
Governance & Nominating Committee, provide a framework within which our
board and executive officers fulfill their respective responsibilities and
reflect our board’s commitment to monitor the effectiveness of decision-making
both at the board and senior executive management level.
Board
Committee Charters
.
As
described above, our board has adopted a charter for each of its Audit,
Compensation, Corporate Governance & Nominating and Strategic Planning
Committees.
Code
of Ethics for our CEO, CFO and Senior Financial
Employees
.
Our
Audit Committee has adopted a written code of ethics that applies to our Chief
Executive Officer, our Chief Financial Officer and senior financial employees.
The purposes of the code of ethics, among other things, are to deter wrongdoing,
to promote ethical conduct and to ensure that information that we provide in
our
public reports, including those filed with the Securities and Exchange
Commission, is full, fair, accurate, timely and understandable.
Business
Code of Conduct
.
In
addition, based on the recommendation of the Corporate Governance &
Nominating Committee, our board has adopted a business code of conduct that
applies to all of our employees, including our officers, and our
directors.
Availability
of Corporate Governance Documents
.
Our
corporate governance guidelines, board committee charters, code of ethics and
business code of conduct are available, free of charge, on our website,
www.insituform.com, under “Investor Relations - Corporate Governance.” We also
will provide these documents, free of charge, to any stockholder who requests
them by writing to the following address:
Investor
Relations
c/o
Insituform Technologies, Inc.
702
Spirit 40 Park Drive
Chesterfield,
MO 63005
If
we
amend our code of ethics or grant a waiver of our code of ethics to any of
our
officers or directors, we will disclose the amendment or waiver on our
website.
The
board’s Audit Committee operates under a written charter, which was adopted by
our board of directors. A copy of this charter, which was amended as of October
25, 2005, is available, free of charge, on our website, www.insituform.com,
and
is attached as
Appendix
A
.
The
Audit Committee consists of three independent directors: Stephanie A. Cuskley
(Chair), Juanita H. Hinshaw and Sheldon Weinig. Paul A. Biddelman, a former
director of our company, served as the Chair of the Audit Committee until
December 2005. Mr. Biddelman also qualified as an independent director.
The
Audit
Committee reviewed and discussed our audited consolidated financial statements
for 2005 with our management. In addition, the Audit Committee discussed with
our independent auditors, PricewaterhouseCoopers LLP, the matters required
to be
discussed by Statement on Auditing Standards No. 61, as amended, which
include the following:
-
PricewaterhouseCoopers LLP’s responsibility under generally accepted auditing standards,
-
significant accounting policies,
-
management judgments and accounting estimates,
-
significant audit adjustments,
-
other information in documents containing audited financial statements,
-
disagreements with our management, including accounting principles, scope of audit and disclosures,
-
consultation with other accountants by management,
-
major issues discussed with our management prior to retention of PricewaterhouseCoopers LLP, and
-
difficulties encountered in performing the audit.
The
Audit
Committee received and discussed with PricewaterhouseCoopers LLP their written
disclosures and letter regarding any significant relationships that could impair
PricewaterhouseCoopers
LLP’s
independence (as required by Independence Standards Board Standard No. 1),
and considered the compatibility of non-audit services with
PricewaterhouseCoopers LLP’s independence. Based upon the above reviews and
discussions, the Audit Committee recommended to the board that our audited
consolidated financial statements for 2005 be included in the Annual Report
on
Form 10-K for the fiscal year ended December 31, 2005.
The
board
and the Audit Committee believe that the Audit Committee’s current member
composition satisfies the rules that govern audit committee composition,
including the requirement that all audit committee members are “independent”
directors, as that term is defined in the National Association of Securities
Dealers’ listing standards.
Based
on
the findings of the Audit Committee, our board has determined that the Audit
Committee has two “audit committee financial experts,” as defined in the rules
promulgated by the Securities and Exchange Commission, and as required of
Nasdaq-listed companies. They are Stephanie A. Cuskley and Juanita H.
Hinshaw.
Stephanie
A. Cuskley,
Chair
Juanita H. Hinshaw
Sheldon
Weinig
Notwithstanding
anything set forth in any of our previous filings under the Securities Act
of
1933 or the Securities Exchange Act of 1934 which might incorporate future
filings, including this proxy statement, in whole or in part, the preceding
report shall not be deemed incorporated by reference into any such
filings.
Consistent
with its charter adopted by our board of directors, the Audit Committee
pre-approves all auditing services and all significant non-audit services (to
the extent such non-audit services are permissible) to be provided by our
independent auditors. Proposed auditing and non-audit services are presented
to
our Audit Committee periodically for pre-approval, based on a budget that
includes a description of, and a budgeted amount for, particular categories
of
audit services, non-audit services, tax services and other services. The Audit
Committee’s approval is required to exceed the budgeted amount. In addition, as
permitted by law, the Chair of our Audit Committee may pre-approve services
or
changes to estimated, approved fees. If the Audit Committee Chair pre-approves
services on behalf of the Audit Committee, the services are presented to our
Audit Committee for ratification at its next regularly scheduled
meeting.
In
our
two most recent fiscal years, we paid the following amounts to
PricewaterhouseCoopers LLP, our independent auditors:
|
2005
|
2004
|
||||||
|
Audit
Fees
|
$
|
697,450
|
$
|
852,650
|
|||
|
Audit-Related
Fees
|
22,500
|
24,350
|
|||||
|
Tax
Fees
|
380,844
|
344,000
|
|||||
|
All
Other Fees
|
—
|
—
|
|||||
|
Total
|
$
|
1,100,794
|
$
|
1,221,000
|
|||
Audit
Fees.
We paid
an aggregate of $697,450 to PricewaterhouseCoopers LLP for the 2005 fiscal
year
audit, for the reviews of the financial statements included in our 2005
quarterly reports on Form 10-Q, and for statutory and subsidiary audits. In
2004, we paid an aggregate of $852,650 to PricewaterhouseCoopers LLP for these
services.
Audit-Related
Fees.
In
2005,
we paid PricewaterhouseCoopers LLP $22,500 for assurance and related services
that were reasonably related to the performance of PricewaterhouseCoopers LLP’s
audit and review of our financial statements. These services included employee
benefit plan audits and completion of state qualification forms. All of these
services were pre-approved by our Audit Committee. In 2004, we paid an aggregate
of $24,350 to PricewaterhouseCoopers LLP for these services.
Tax
Fees.
In
2005,
we paid PricewaterhouseCoopers LLP $380,844 for tax services, which primarily
consisted of services for federal, state and international tax compliance,
tax
planning and tax consultation, exclusive of tax services rendered in connection
with the audit. Our Audit Committee pre-approved all of these services. In
2004,
we paid an aggregate of $344,000 to PricewaterhouseCoopers LLP for these
services.
All
Other Fees.
In 2005
and 2004, PricewaterhouseCoopers LLP did not perform any services for us other
than those described above.
We
intend
to use our independent auditors to provide only audit, audit-related and tax
services in the future.
Each
director, other than Messrs. Woods and Rooney, is compensated at a rate of
$27,000 per year, plus reimbursement of related business travel expenses.
Directors are not paid meeting fees. Mr. Rooney, as our President and Chief
Executive Officer, receives no additional fees for his service as a director.
Mr. Woods, our non-executive Chairman, is compensated at a rate of $92,000
per year, plus reimbursement of related business travel expenses.
Directors
other than Messrs. Woods and Rooney receive additional compensation for serving
on board committees as follows:
|
Chair
|
Member
|
||||||
|
Board
Committee
|
Compensation
|
Compensation
|
|||||
|
Audit
Committee
|
$
|
19,000
|
$
|
13,000
|
|||
|
Compensation
Committee
|
15,000
|
9,000
|
|||||
|
Corporate
Governance & Nominating Committee
|
15,000
|
9,000
|
|||||
|
Strategic
Planning Committee
|
15,000
|
9,000
|
|||||
Non-employee
directors also are eligible to receive grants of stock options and/or deferred
stock units under our 2001 Non-Employee Director Equity Incentive Plan from
time
to time. During 2005, each of Messrs. Cortinovis, Dubinsky, McNeill and Weinig
and Mmes. Cuskley and Hinshaw received a grant of 3,200 deferred stock
units. Mr. Woods received a grant of 5,700 deferred stock units. Each
deferred stock unit represents our obligation to transfer one share of our
common stock to the director in the future, and is fully vested at grant.
Following termination of the director’s service on our board, shares of our
common stock equal to the number of deferred stock units reflected in the
director’s account will be distributed to the director. Messrs. Cortinovis,
Dubinsky, McNeill, Weinig and Woods and Mmes. Cuskley and Hinshaw did not
receive any options to purchase shares of our common stock in
2005.
E
XECUTIVE
C
OMPENSATION
The
Compensation Committee of our board of directors consists of three directors:
Juanita H. Hinshaw (Chair), John P. Dubinsky and Alfred T. McNeill, each of
whom
is an independent director.
The
Compensation Committee has a formal charter, pursuant to which it is directed
to:
|
·
|
assist
our board in the discharge of our board’s responsibilities relating to the
compensation of our directors and
executives,
|
|
·
|
issue
a report on executive compensation in accordance with applicable
requirements, including the rules and regulations of the Securities
and
Exchange Commission, for inclusion in our annual proxy statement,
and
|
|
·
|
administer,
and make recommendations with respect to, our incentive compensation
plans
and equity
-
based
plans.
|
Specifically,
the duties and responsibilities of our Compensation Committee under its charter
are to:
|
·
|
periodically
review and approve our corporate goals and objectives relevant to
the
compensation of our Chief Executive Officer and other executive
officers,
|
|
·
|
evaluate
our Chief Executive Officer’s and other executive officers’ performance in
light of our goals and objectives,
|
|
·
|
assess
our competitive position for the components of executive compensation
on a
national and local level as well as in our industry and consider
different
compensation approaches,
|
|
·
|
determine
the compensation level of our Chief Executive Officer and our other
executive officers,
|
|
·
|
annually
evaluate the performance of our Compensation Committee,
and
|
|
·
|
recommend
to our board specific amounts and forms of director compensation
based on
general guidelines established by our Corporate Governance &
Nominating Committee.
|
Our
Compensation Committee charter requires that the compensation of our Chief
Executive Officer be determined by our Compensation Committee meeting in an
executive session without our Chief Executive Officer present. The compensation
of our other executive officers must be determined by our Compensation Committee
meeting in an executive session in which our Chief Executive Officer may be
present, by invitation of the committee, but may not vote.
In
connection with our Compensation Committee’s review and approval of our Chief
Executive Officer’s long-term compensation, the charter requires the
Compensation Committee to consider the following factors:
|
·
|
our
performance and relative total shareholder
return,
|
|
·
|
the
value of such awards granted to other chief executive officers at
comparable companies, and
|
|
·
|
the
awards granted to our Chief Executive Officer in prior
years.
|
Our
Compensation Committee establishes the overall compensation philosophy for
our
company, but it may delegate the determination and administration of
non-executive officer compensation as it deems appropriate. It also makes
recommendations to our board regarding the adoption, amendment and rescission
of
equity-based incentive compensation plans. Our Compensation Committee also
administers the 2001 Employee Equity Incentive Plan and the Long-Term Incentive
Plan, under which incentive compensation may be awarded to executive
officers.
Consistent
with its charter, during 2005, our Compensation Committee made all decisions
relating to executive officer compensation, including the award of 2004 annual
incentive bonuses, payable in 2005, and the determination of bonus award
criteria and levels for the 2005 annual incentive bonuses and the long-term
incentive awards.
The
objectives of our Compensation Committee in establishing executive compensation
are:
|
·
|
to
offer levels of compensation substantially equivalent to those offered
by
other companies in similar businesses that we consider to be competitors
for executive talent,
|
|
·
|
to
compensate executives based on each executive’s level of responsibility
and contribution to our business
goals,
|
|
·
|
to
link compensation with the independent individual goals for each
executive
as well as the financial performance of the entire company and the
financial performance of the business unit for which the executive
is
responsible, and
|
|
·
|
to
align the interests of our executives with the interests of our
stockholders.
|
To
achieve these objectives, our executive compensation program, which includes
our
Chief Executive Officer, was developed with the assistance of an independent
compensation advisor retained by our Compensation Committee. Our program
consists principally of base salary, annual incentive cash bonuses, long-term
incentive plan awards payable in restricted stock, deferred stock
units
,
stock
options (both incentive and non-qualified)
and/or
long-term incentive cash bonuse
s
,
as
described below.
Base
Salary
.
Our
Compensation Committee evaluates executive base salaries by level of
responsibility, individual performance and our corporate performance, as well
as
by reference to competitive factors in the marketplace for key executives.
The
committee authorized a salary increase budget, net of the salary increases
for
executive officers, of 3.3% for 2005 to be assigned in the discretion of
ou
r
Chief
Executive Officer.
For
2005,
our Chief Executive Officer recommended to our Compensation Committee to raise
the annual salary of only one of the executive officers,
ou
r
former
Senior Vice President and Chief Financial Officer, Christian G. Farman, to
$310,000 from $
265,000,
based upon Mr. Farman’s efforts during 2004 to upgrade and energize our finance
function and to increase the rigor of our financial reporting
discipline
.
No
increase was made for 2005 to the annual salary of
ou
r
former
Senior Vice President and Chief Operating Officer, Thomas W. Vaughn, who joined
our company on August 30, 2004 at an annual salary of $
330,000
.
Our Vice
President and General Counsel, David F. Morris, joined the company on January
10, 2005 at an annual salary of $210,000. Thomas E. Vossman was appointed as
our
Senior Vice President and Chief Operating Officer on May 2, 2005 at an annual
salary of $280,000
after
joinin
g
our
company
in January 2005 as vice president of the southwest region of our rehabilitation
business
.
The
annual base salaries of Messrs. Vossman, Morris and Vaughn were established
based upon their past work experiences and competitive market data for their
counterparts at comparable companies.
For
2005,
the annual salary of our Chief Executive Officer, Thomas S. Rooney, Jr., was
increased to $630,000 from $590,000 for 2004. In approving such increase, the
Compensation Committee reviewed Mr. Rooney’s individual performance during 2004
as well as our company’s overall performance. While our financial results for
2004 were considerably below our board’s expectations, our board and our
Compensation Committee viewed 2004 as a turnaround year and believed that Mr.
Rooney made significant progress during the year in implementing our strategic
planning initiatives and positioning our company to realize its full potential.
Annual
Incentive Cash Bonuses
.
For
2005,
our
executive
officers
and
other
key employees
were
eligible to receive annual incentive cash bonuses if our company exceeded the
threshold net income level established in our 2005 Management Annual Incentive
Plan
.
In
2005, the Compensation Committee sought to more directly align payouts under
the
plan to our overall financial performance by relating
the
amount of the total bonus pool to a targeted net income level. To the extent
we
did not achieve the targeted net income level, the amount of the bonus pool
was
reduced.
The
Compensation Committee
believes
that this mechanism of funding the bonus pool advances the interests of our
company and stockholders by more directly aligning the interests of our key
employees with those of our stockholders. For 2005, the amount of the bonuses
awarded under the plan also was based o
n
a number
of independent individual performance components
and,
for
key employees at our business units, o
n
the
financial performance of
the
employee’s particula
r
business
unit
.
These
threshold levels and the individual and business unit performance goals were
set
for each of the participants in the first half of the year.
For
2005,
the mid-point target for annual incentive compensation was set at 70% of the
annual salary of Mr. Rooney, 50% of the respective annual salaries of Messrs.
Farman and Vaughn (who were not eligible for their 2005 annual bonuses because
of the termination of their employment prior to the end of the year), 50% of
the
annual salary of Mr. Vossman and 40% of the annual salary of Mr. Morris, with
an
opportunity to receive
a
bonus
of
up
to
twice
the
mid-point target percentages
based
upon the level of each executive’s
performance during the year
.
Each of
the computed bonuses is subject to reduction in the sole discretion of the
Compensation Committee.
For
2005,
Messrs. Rooney, Vossman and Morris were awarded bonuses in the amounts of
$75,000
,
$50,000
and $40,000, respectively, under the plan.
The
Compensation Committee believes that these partial bonus payments reflect the
objective of the Compensation Committee to more directly align annual incentive
payouts to our overall financial performance, as described above. While the
financial results of our rehabilitation and Tite Liner® businesses for 2005
matched or exceeded the expectations of our board and our Compensation
Committee, the results of our tunneling business were considerably lower than
expected, which resulted in our overall financial performance falling below
expectations. Notwithstanding that our overall financial performance in 2005
did
not meet expectations, the Compensation Committee believes that management
made
continued progress during the year in strengthening our company and implementing
our strategic initiatives, and approved the cash bonus payments to our executive
officers in recognition of their efforts
.
The
annual cash bonuses are intended to qualify as “qualified performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue Code
of 1986, as amended, by virtue of the Compensation Committee providing
performance criteria for these annual cash bonuses as awards under our Long-Term
Incentive Plan.
Long-Term
Executive Cash Performance Awards.
The
purpose of the Long-Term Cash Performance Program is to provide our senior
management with long-term incentive compensation in the form of cash based
on
the level of achievement of financial and other pre-established performance
criteria over a three-year performance period. Each year a new three-year
performance period commences with
differen
t
performance criteria and/or targets set for each such period. Our Long-Term
Cash
Performance
Plan
focuses the interests of our key executives on one or more of the key measures
of our financial success as determined by our Compensation Committee over the
longer term than the annual cash bonuses. The key performance criteria from
which our Compensation Committee can choose are embodied in the Long-Term
Incentive Plan, which our stockholders have previously approved.
For
the
three-year performance period starting in 2005 and ending in 2007, the
Compensation Committee established a target payout of $370,000 for Mr. Rooney,
a
target payout of $102,000 for each of Messrs. Farman and Vaughn (who will not
be
eligible for any part of these
award
s
because
of the termination of their employment prior to the end of the
perio
d
),
a
target payout of $102,000 for Mr. Vossman and a target payout of $53,000 for
Mr.
Morris. The actual payout amounts are to be calculated based on a stockholders’
equity target for the three-year period ending December 31, 2007 and may be
reduced in the sole discretion of the Compensation Committee.
Long-Term
Equity Incentive Awards.
The
primary purpose of our equity incentive program is to align the interests of
our
key employees, including the executive officers, more closely with the interests
of our stockholders by offering these key employees an opportunity to benefit
from increases in the market price of our common stock. Our equity incentive
program provides long-term incentives that have enabled us to attract and retain
key employees by encouraging their ownership of our common stock.
Each
of
our executive officers
wa
s
granted
stock options and restricted stock during 2005. Messrs. Rooney, Vossman and
Morris each received seven-year options to purchase 95,000, 26,000 and 13,500
shares, respectively, of our common stock, vesting 25% upon grant and 25%
annually thereafter for the next three years. The exercise price for the options
was set at the fair market value of our stock on the date of grant. Messrs.
Rooney, Vossman and Morris also were awarded 14,000, 4,000 and 2,000 shares,
respectively, of restricted stock that will vest fully on the third anniversary
date of the award if their employment with us has not terminated as of
tha
t
date
and if a
pre-established net income goal fo
r
the
performance period beginning on May 1, 2005 and ending on April 30, 2006 is
achieved.
Each
of
the restricted stock awards are intended to qualify as “qualified
performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code by virtue of the Compensation Committee setting
performance criteria for these restricted awards under our Long-Term Incentive
Plan.
Our
former Senior Vice President and Chief Financial Officer, Christian G. Farman,
also
was
granted 26,000 stock options and 4,000 shares of restricted stock
unde
r
the same
terms described above
during
2005
.
The
19,500 options that were unvested and unexercised as of December 28, 2005 were
cancelled. The 6,500 options that were vested and unexercised as of December
28,
2005 were exercised by Mr. Farman on February 24, 2006. The 4,000 restricted
shares were cancelled as of December 28, 2005.
Other
Compensation Matters
.
Executive officers may choose to defer up to specified maximum amounts of
compensation by contributing those amounts to our non-qualified, deferred
compensation plan for key employees. This plan allows for base salary deferral,
subject to legal limitations, of up to 15% of base salary, and bonus deferral
of
up to 50% of bonus amounts. Under the plan, we will match the first 3% of
contributions at a 100% rate, and the next 2% of contributions at a 50% rate,
when aggregated with any matching contributions made under our 401(k)
Profit-Sharing Plan (limited to compensation up to $210,000 per annum for 2005).
Contributions in the non-qualified, deferred compensation plan are adjusted
to
match the performance of participant-selected indices. Account balances will
accrue for each participant based on the amount of the participant’s deferrals
into the account and the investment performance of his or her selected indices.
Participants will be paid their account balances after termination of their
employment with our company. During 2005, Mr. Rooney deferred $122,962 of his
compensation under our non-qualified, deferred compensation plan, which amount
does not include $3,550 in company-matching contributions that we contributed
to
his account under the plan during 2005.
Section
162(m) of the Internal Revenue Code of 1986, as amended, generally limits
federal income tax deductions for compensation to $1 million per year for our
Chief Executive Officer and our four other most highly compensated executive
officers, but it contains an exception for performance-based compensation that
satisfies certain conditions. Our Long-Term Incentive Plan is intended to allow
us to pay performance-based compensation as defined in Section 162(m). Under
our
Long-Term Incentive Plan, our Compensation Committee designates participants
in
various incentive programs for each fiscal year or other period set by our
Compensation Committee. Each incentive program can have its own specific
performance goals or targets and performance period. Our Compensation Committee
establishes objective performance goals based upon one or more of the following
criteria, individually or in combination, adjusted in the manner our
Compensation Committee determines in its sole discretion:
|
·
stock
price
|
·
earnings
per shar
e
|
|
·
sales
|
·
free
cash flo
w
|
|
·
return
on equity
|
·
net
incom
e
|
|
·
book
value
|
·
individual
performance
|
|
·
expense
management
|
·
business
unit performance
|
The
payment of an incentive program award under our Long-Term Incentive Plan may
be
reduced by our Compensation Committee in its sole discretion, and the granting
of awards is subject to the discretion of our Compensation Committee.
In
making compensation decisions, we consider the net cost of compensation. We
also
consider whether it is practicable, and consistent with other compensation
objectives, to qualify our incentive compensation under the applicable exemption
of Section 162(m). We anticipate that deductibility of compensation payments
will be one of a number of factors considered in ascertaining appropriate levels
or types of compensation, and that we will make our compensation decision based
upon an overall determination of what we believe to be in the best interests
of
our stockholders.
The
foregoing report on executive compensation is provided by our Compensation
Committee.
Juanita
H. Hinshaw, Chair John P.
Dubinsky
Alfred
T. McNeill
Notwithstanding
anything set forth in any of our previous filings under the Securities Act
of
1933 or the Securities Exchange Act of 1934 which might incorporate future
filings, including this proxy statement, in whole or in part, the preceding
report shall not be deemed incorporated by reference into any such
filings.
*
*
*
The
following table sets forth certain information with respect to compensation
for
each of our last three completed fiscal years of our Chief Executive Officer,
Chief Operating Officer, General Counsel and two other individuals who served
as
executive officers during 2005, but were not executive officers as of December
31, 2005.
|
Annual
Compensation
|
Long-Term
Compensation
Awards
|
|||||||||||||||||||||
|
Name
and Principal
Position
|
Fiscal
Year
|
Salary(1
)
|
|
Bonus(2
)
|
|
Other
Compensation(3
)
|
|
Restricted
Stock
Awards($)(4
)
|
|
Number
of Securities Underlying Options(#
)
|
|
All
Other
Compensation(5
)
|
|
|||||||||
|
Thomas
S. Rooney, Jr.(6)
|
2005
|
$
|
630,000
|
$
|
75,000
|
$
|
—
|
$
|
205,100
|
95,000
|
$
|
14,698
|
||||||||||
|
President
and Chief
|
2004
|
590,000
|
206,500
|
75,302
|
534,560
|
154,000
|
12,578
|
|||||||||||||||
|
Executive
Officer
|
2003
|
329,615
|
210,000
|
222,260
|
201,216
|
32,200
|
6,325
|
|||||||||||||||
|
Thomas
E. Vossman(7)
|
2005
|
246,696
|
105,000
|
58,277
|
(8)
|
58,600
|
26,000
|
8,048
|
||||||||||||||
|
Senior
Vice President and
|
2004
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Chief
Operating Officer
|
2003
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
David
F. Morris(9)
|
2005
|
206,096
|
40,000
|
—
|
29,300
|
13,500
|
8,133
|
|||||||||||||||
|
Vice
President and
|
2004
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
General
Counsel
|
2003
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Christian
G. Farman(10)
|
2005
|
310,000
|
—
|
—
|
58,600
|
26,000
|
(11)
|
11,540
|
||||||||||||||
|
Former
Senior Vice
|
2004
|
265,000
|
141,250
|
114,993
|
107,520
|
16,500
|
(11)
|
10,478
|
||||||||||||||
|
President
and Chief
|
2003
|
19,196
|
—
|
1,848
|
—
|
12,500
|
(11)
|
—
|
||||||||||||||
|
Financial
Officer
|
||||||||||||||||||||||
|
Thomas
W. Vaughn(10)
|
2005
|
110,000
|
—
|
37,352
|
(8)
|
—
|
—
|
6,820
|
||||||||||||||
|
Former
Senior Vice
|
2004
|
112,530
|
77,500
|
34,926
|
107,520
|
16,500
|
(12)
|
5,570
|
||||||||||||||
|
President
and Chief
|
2003
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||||
|
Operating
Officer
|
||||||||||||||||||||||
_______________
|
(1)
|
Includes
amounts earned but deferred at the election of the executive officer
under
our non-qualified deferred compensation plan.
|
|
(2)
|
For
2005, represents bonuses awarded under our 2005 Management Annual
Incentive Plan. The amount for Mr. Vossman also includes $15,000
paid as a
sign-on bonus upon becoming vice president of the southwest region
of our
rehabilitation business in January 2005 and $40,000 paid as a relocation
bonus in connection with Mr. Vossman’s relocation to the St. Louis area
upon becoming Senior Vice President and Chief Operating Officer in
May
2005.
|
|
(3)
|
Excludes
car allowances, cellular phone allowances and certain other amounts
which,
when aggregated for each officer, did not exceed the lesser of $50,000
or
10% of any such officer’s salary and
bonus.
|
|
(4)
|
For
2005, represents the value of shares of restricted stock granted
in the
following amounts, calculated on the basis of the closing price of
our
common stock on The Nasdaq Stock Market on May 5, 2005, the date
of grant
($14.65 per share): Mr. Rooney, 14,000; Mr. Vossman, 4,000; Mr. Morris,
2,000; and Mr. Farman, 4,000. The restrictions on these shares lapse
on
May 5, 2008, provided that certain company performance goals are
met as of
April 30, 2006, and that employment continues through May 5, 2008.
The
aggregate number of shares of restricted stock held at December 31,
2005,
and the value of these shares calculated on the basis of the closing
price
of our common stock on The Nasdaq Stock Market on December 30, 2005
($19.37 per share) were as follows: Mr. Rooney, 40,000 shares valued
at
$774,800; Mr. Vossman, 4,000 shares valued at $77,480; and Mr. Morris,
2000 shares valued at $38,740. All shares granted to Messrs. Farman
and
Vaughn during their employment with us were cancelled as of December
28,
2005 and April 29, 2005, respectively. All shares of restricted stock
granted in 2003 have been cancelled because they
were
|
subject
to certain company performance goals that were not met. Dividends, if any,
paid
on restricted stock and deferred stock units would be paid at the same rate
as
paid to all stockholders.
|
(5)
|
For
2005, includes employer-matching contributions under our 401(k)
Profit-Sharing Plan in the following amounts: Mr. Rooney, $4,850;
Mr.
Vossman, $6,050; Mr. Morris, $6,300; Mr. Farman, $8,400; and Mr.
Vaughn,
$5,500; term life insurance premiums in the following amounts: Mr.
Rooney,
$2,100; Mr. Vossman, $399; Mr. Morris, $444; Mr. Farman, $1,026;
and Mr.
Vaughn, $561; and long-term disability insurance premiums in the
following
amounts: Mr. Rooney, $4,198; Mr. Vossman, $1,599; Mr. Morris, $1,389;
Mr.
Farman, $2,114; and Mr. Vaughn, $759. The amount for Mr. Rooney also
includes a $3,550 employer-matching contribution under our deferred
compensation plan.
|
|
(6)
|
Mr.
Rooney has served as our President and Chief Executive Officer since
July
2003 and previously served as our President and Chief Operating Officer
from April 2003 until July 2003.
|
|
(7)
|
Mr.
Vossman has served as our Senior Vice President and Chief Operating
Officer since May 2005 and previously served as vice president of
the
southwest region of our rehabilitation business from January 2005
until
May 2005.
|
|
(8)
|
Represents
amounts paid in reimbursement of expenses pursuant to our relocation
plan.
|
|
(9)
|
Mr.
Morris has served as our Vice President and General Counsel since
January
10, 2005.
|
|
(10)
|
Messrs. Farman
and Vaughn ceased to be executive officers on December 28, 2005 and
April
29, 2005, respectively.
|
|
(11)
|
Those
options that were unvested and unexercised as of December 28, 2005
(19,500
of the options granted in 2005, 8,250 of the options granted in 2004
and
3,125 of the options granted in 2003) were cancelled. Of the options
that
were vested and unexercised as of December 28, 2005, 17,625 options
(8,250
of the options granted in 2004 and 9,375 of the options granted in
2003)
were cancelled as of that date and 6,500 options (granted in 2005)
were
exercised by Mr. Farman on February 24, 2006.
|
|
(12)
|
All
options granted to Mr. Vaughn during 2004 were cancelled as of April
29,
2005.
|
The
following table sets forth certain information regarding options that we granted
during 2005 to the individuals named in the Summary Compensation Table. We
did
not grant any stock appreciation rights during 2005.
Option/SAR
Grants in Last Fiscal Year
|
Potential
Realizable
Value
at Assumed
Annual
Rates of Stock
Price
Appreciation for
Option
Term(2)
|
|||||||||||||||||||
|
|
|||||||||||||||||||
|
|
Individual
Grants
|
||||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Options/SARs
Granted
(#)(1)
|
%
of Total
Options/SARs
Granted
to
Employees
in
Fiscal
Year
|
Exercise
Price
($/share)
|
Expiration
Date
|
5%
|
10%
|
|||||||||||||
|
Thomas
S. Rooney, Jr
|
95,000
|
32.6
|
%
|
$
|
14.65
|
5/5/2012
|
$
|
566,582
|
$
|
1,320,377
|
|||||||||
|
Thomas
E. Vossman
|
26,000
|
8.9
|
14.65
|
5/5/2012
|
155,065
|
361,366
|
|||||||||||||
|
David
F. Morris
|
13,500
|
4.6
|
14.65
|
5/5/2012
|
80,514
|
187,633
|
|||||||||||||
|
Christian
G. Farman
|
26,000
|
(3)
|
8.9
|
(3)
|
14.65
|
5/5/2012
|
—
|
(3)
|
—
|
(3)
|
|||||||||
|
Thomas
W. Vaughn
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
_______________
|
(1)
|
Represents
grant on May 5, 2005, under our 2001 Employee Equity Incentive Plan,
of
options to purchase shares of our common stock. Each of the options
are
seven-year options, vesting 25% upon grant and 25% annually thereafter
for
the next three years. The exercise price for the options was set
at the
fair market value of our stock on the date of grant.
|
|
(2)
|
Amounts
represent hypothetical gains that could be achieved for the respective
options if exercised at the end of the option term. These gains are
based
on arbitrarily assumed rates of stock price appreciation of 5% and
10%
compounded annually from the date the respective options are granted
to
their expiration date. Actual gains, if any, on stock option exercises
will be dependent on, among other things, the future performance
of the
common stock and overall market conditions. There can be no assurance
that
the amounts reflected above will be
achieved.
|
|
(3)
|
Upon
the termination of Mr. Farman’s employment on December 28, 2005, the
19,500 options that were unvested and unexercised as of that date
were
cancelled. The 6,500 options that were vested and unexercised as
of
December 28, 2005 were exercised by Mr. Farman on February 24, 2006.
|
The
following table sets forth certain information regarding exercises of stock
options, and stock options held as of December 31, 2005, by the individuals
named in the Summary Compensation Table.
Aggregate
Option/SAR Exercises in Last Fiscal Year
and
Fiscal Year-End Option/SAR Values
|
Number
of Securities
Underlying
Unexercised
Options/SARs
at
Fiscal
Year-End(#)
|
Value
of Unexercised In-the-
Money
Options/SARs at
Fiscal
Year-End ($)(1)
|
||||||||||||||||||
|
|
|||||||||||||||||||
|
Name
|
Shares
Acquired
on
Exercise
(#)
|
Value
Realized
($)
|
Exercisable
|
Unexercisable
|
Exercisable
|
Unexercisable
|
|||||||||||||
|
Thomas
S. Rooney, Jr
|
—
|
$
|
—
|
137,400
|
143,800
|
$
|
398,389
|
$
|
431,730
|
||||||||||
|
Thomas
E. Vossman
|
—
|
—
|
6,500
|
19,500
|
30,680
|
92,040
|
|||||||||||||
|
David
F. Morris
|
—
|
—
|
3,375
|
10,125
|
15,930
|
47,790
|
|||||||||||||
|
Christian
G. Farman
|
—
|
—
|
6,500
|
(2)
|
—
|
(2)
|
30,680
|
(2)
|
—
|
(2)
|
|||||||||
|
Thomas
W. Vaughn
|
—
|
—
|
—
|
—
|
—
|
—
|
|||||||||||||
__________
|
(1)
|
Calculated
on the basis of the fair market value of our common stock on The
Nasdaq
Stock Market on December 30, 2005 ($19.37), minus the exercise
price.
|
|
(2)
|
Mr.
Farman was granted an aggregate of 55,000 options during his employment
with us. Those options that were unvested and unexercised as of December
28, 2005 (19,500 of the options granted in 2005, 8,250 of the options
granted in 2004 and 3,125 of the options granted in 2003) were cancelled.
Of the options that were vested and unexercised as of December 28,
2005,
17,625 options (8,250 of the options granted in 2004 and 9,375 of
the
options granted in 2003) were cancelled as of that date and 6,500
options
(granted in 2005) were exercised by Mr. Farman on February 24, 2006.
|
Under
our
Long-Term Incentive Plan, key executives designated by our Compensation
Committee are eligible to earn a deferred cash incentive award based on our
financial performance. Participants in the plan are eligible to earn an award
after the end of each performance period. New performance periods are expected
to begin each year. If our actual performance falls below certain parameters,
no
payouts are made.
Of
our
current named executive officers, only Thomas S. Rooney, Jr., our President
and
Chief Executive Officer, had been named as a participant in the 2003-2005
performance period and was eligible to receive an award under the plan for
the
period (Thomas E. Vossman, our Senior Vice President and Chief Operating
Officer, and David F. Morris, our Vice President and General Counsel, did not
join our company until May 2005 and January 2005, respectively). However, the
performance goals established for the period had not been achieved as of
December 31, 2005 and, as a result, Mr. Rooney’s award was forfeited.
The
following table sets forth certain information regarding awards made to
executive officers pursuant to our Long-Term Incentive Plan during the last
fiscal year for the 2005-2007 performance period.
Long-Term
Incentive Plans
—
Awards in Last Fiscal Year
|
Estimated
Future
Payouts Under
Non-Stock
Price-Based Plan(2)
|
||||||||||||||||
|
|
||||||||||||||||
|
Number
of
Shares,
Units or
Other
Rights(1)
|
Performance
or Other
Period
Until
Maturation
or Payout
|
Threshold
|
Target
|
Maximum
|
||||||||||||
|
Thomas
S. Rooney, Jr
|
109,000
|
2005-2007
|
$
|
185,000
|
$
|
370,000
|
$
|
740,000
|
||||||||
|
Thomas
E. Vossman
|
30,000
|
2005-2007
|
51,000
|
102,000
|
204,000
|
|||||||||||
|
David
F. Morris
|
15,500
|
2005-2007
|
26,500
|
53,000
|
106,000
|
|||||||||||
|
Christian
G. Farman
|
30,000
|
(3)
|
2005-2007
|
51,000
|
(4)
|
102,000
|
(4)
|
204,000
|
(4)
|
|||||||
|
Thomas
W. Vaughn
|
—
|
2005-2007
|
51,000
|
(4)
|
102,000
|
(4)
|
204,000
|
(4)
|
||||||||
__________
|
(1)
|
Represents
grant on May 5, 2005, under our 2001 Employee Equity Incentive Plan,
of
restricted shares of our common stock and options to purchase shares
of
our common stock in the following amounts: Mr. Rooney, 14,000 restricted
shares and options to purchase 95,000 shares of our common stock;
Mr.
Vossman, 4,000 restricted shares and options to purchase 26,000 shares
of
our common stock; Mr. Morris, 2,000 restricted shares and options
to
purchase 13,500 shares of our common stock; and Mr. Farman, 4,000
restricted shares and options to purchase 26,000 shares of our common
stock. Each of the options granted are seven-year options, vesting
25%
upon grant and 25% annually thereafter for the next three years.
The
exercise price for the options was set at the fair market value of
our
stock on the date of grant ($14.65).
|
|
(2)
|
The
target amount is earned if performance targets are achieved. Any
awards
earned under the Long-Term Incentive Plan during the 2005-2007 performance
period would be paid in 2008.
|
|
(3)
|
Upon
the termination of Mr. Farman’s employment on December 28, 2005, the 4,000
restricted shares and the 19,500 options that were unvested and
unexercised as of that date were cancelled. The 6,500 options that
were
vested and unexercised as of December 28, 2005 were exercised by
Mr.
Farman on February 24, 2006.
|
|
(4)
|
Messrs.
Farman and Vaughn ceased to be participants in the 2005-2007 performance
period as of December 28, 2005 and April 29, 2005,
respectively.
|
Thomas
S. Rooney, Jr.
Under
the terms of an employment letter, we hired Thomas S. Rooney, Jr. as our
President and Chief Operating Officer effective April 1, 2003.
Mr. Rooney assumed the title of Chief Executive Officer on July 22, 2003.
Pursuant to Mr. Rooney’s employment letter, his base salary and annual bonus are
both subject to annual review by our Compensation Committee. For 2005, Mr.
Rooney’s salary was $630,000 and his annual bonus center point objective was set
at 70%. We also provide Mr. Rooney with a car allowance, reimbursement for
one country club membership and medical and life insurance benefits.
Mr. Rooney’s
employment is “at-will” except that, pursuant to his employment letter as
amended during 2004, if his employment is terminated without “cause,” upon his
termination, he would be entitled to receive a severance payment equal to 12
months’ base salary, car allowance and medical benefits.
Mr. Rooney
also has entered into a non-competition and non-solicitation agreement with
us.
Thomas
E. Vossman
.
Mr.
Vossman joined our company in January 2005 as vice president of the southwest
region of our rehabilitation business. Effective May 2, 2005, Mr. Vossman was
appointed as our Senior Vice President and Chief Operating Officer under the
terms of an employment letter. Pursuant to Mr. Vossman’s employment letter,
his base salary was established at $280,000 for 2005, and he was eligible to
receive an annual bonus calculated as a percentage of his base salary,
determined with reference to (a) a range of percentages identified by our
Compensation Committee based upon a center point objective of 50%, intended
to
provide an opportunity of up to twice the center point and
(b) annual
goals,
each identified by our Compensation Committee. His base salary and his annual
bonus are both subject to annual review by our Compensation Committee. We also
provide Mr. Vossman with a car allowance and medical and life insurance
benefits.
Mr. Vossman’s
employment is “at-will” except that, if his employment is terminated without
“cause” during the first 24 months of employment, upon his termination, he will
be entitled to receive a severance payment equal to 12 months’ base salary and
car allowance and 12 months of the monthly cost we are then paying for his
medical insurance coverage.
In
connection with Mr. Vossman’s relocation to our headquarters facilities in
Chesterfield, Missouri, and in addition to the amounts extended to
Mr. Vossman under our relocation policy, we granted Mr. Vossman a
relocation bonus in the amount of $40,000 payable upon the purchase of his
home
in the St. Louis area.
Mr. Vossman
also has entered into a non-competition and non-solicitation agreement with
us.
David
F. Morris
.
Under
the terms of an employment letter, we hired David F. Morris as our Vice
President and General Counsel effective January 10, 2005. Pursuant to
Mr. Morris’ employment letter, his base salary was established at $210,000
for 2005, and he was eligible to receive an annual bonus calculated as a
percentage of his base salary, determined with reference to (a) a range of
percentages identified by our Compensation Committee based upon a center point
objective of 40%, intended to provide an opportunity of up to twice the center
point and (b) annual goals, each identified by our Compensation Committee.
His base salary and his annual bonus are both subject to annual review by our
Compensation Committee. We also provide Mr. Morris with a car allowance, a
cellular phone allowance and medical and life insurance benefits.
Mr. Morris’
employment is “at-will” except that, if his employment is terminated without
“cause” during the first 24 months of employment, upon his termination, he will
be entitled to receive a severance payment equal to 12 months’ base salary, car
allowance and medical benefits, and reasonable outplacement assistance.
Mr. Morris
also has entered into a non-competition and non-solicitation agreement with
us.
Affholder,
Inc., our wholly-owned subsidiary that comprises the tunneling segment, owns,
or
leases under long term operating leases with third-party leasing companies,
several pieces of tunneling equipment, including cranes and tunnel boring
machines. From time to time for specific projects, Affholder, Inc. will lease
additional equipment from a variety of sources. During 2005, Affholder, Inc.
leased four cranes and two tunnel boring machines from A-Y-K-E Partnership.
A-Y-K-E is a partnership that is controlled by Robert W. Affholder, a former
member of our board of directors who retired effective with our 2005 annual
meeting of stockholders. During 2005, Affholder, Inc. paid A-Y-K-E approximately
$0.7 million pursuant to equipment leases. This amount represents approximately
14.8% of all lease payments made by Affholder, Inc. during 2005 and 3.5% of
all
lease payments made by us in 2005. The cranes and tunnel boring machines that
were leased to Affholder, Inc. during 2005 were leased under separate lease
agreements on terms that were substantially similar to, or better than, those
otherwise available to Affholder, Inc. in the market. The leases were terminable
upon 30 days’ prior notice by either party. Affholder, Inc. also was entitled
under the leases to sublease the equipment to third parties and retain any
profit generated from the sublease.
Brett
Affholder, the son of Robert W. Affholder, is employed by Affholder, Inc. as
Regional Equipment Manager. For fiscal year 2005, Brett Affholder received
total
compensation of $104,221 from Affholder, Inc.
The
table
below sets forth certain information as of March 1, 2006 with respect to
the number of shares of common stock owned by:
|
·
|
each
of our executive officers or former executive officers named in the
Summary Compensation Table under “Executive
Compensation,”
|
|
·
|
each
of our directors and director
nominees,
|
|
·
|
each
person known by us to own beneficially more than 5% of the outstanding
shares of our common stock, and
|
|
·
|
all
of our directors and executive officers as a
group.
|
|
Beneficial
Owner
|
Amount
and Nature of
Beneficial
Ownership(1)
|
Percent
of
Class
|
|||||
|
T.
Rowe Price Associates, Inc.
100
East Pratt Street
Baltimore,
Maryland 21202
|
3,676,450
|
(2)
|
13.6
|
%
|
|||
|
Royce
& Associates, LLC
1414
Avenue of the Americas
New
York, New York 10019
|
2,346,000
|
(3)
|
8.7
|
||||
|
Barrow,
Hanley, Mewhinney & Strauss, Inc.
2200
Ross Avenue, 31
st
Floor
Dallas,
Texas 75201
|
1,740,200
|
(4)
|
6.4
|
||||
|
Kayne
Anderson Rudnick Investment Management, LLC
1800
Avenue of the Stars, Second Floor
Los
Angeles, California 90067
|
1,563,325
|
(5)
|
5.8
|
||||
|
Stephen
P. Cortinovis
|
62,025
|
(6)
|
—
|
(7)
|
|||
|
Stephanie
A. Cuskley
|
4,200
|
(8)
|
—
|
(7)
|
|||
|
John
P. Dubinsky
|
24,677
|
(9)
|
—
|
(7)
|
|||
|
Christian
G. Farman
|
6,500
|
(10)
|
—
|
(7)
|
|||
|
Juanita
H. Hinshaw
|
34,025
|
(11)
|
—
|
(7)
|
|||
|
Alfred
T. McNeill
|
7,400
|
(12)
|
—
|
(7)
|
|||
|
David
F. Morris
|
14,000
|
(13)
|
—
|
(7)
|
|||
|
Thomas
S. Rooney, Jr
|
236,332
|
(14)
|
—
|
(7)
|
|||
|
Thomas
W. Vaughn
|
—
|
—
|
|||||
|
Thomas
E. Vossman
|
24,275
|
(15)
|
—
|
(7)
|
|||
|
Sheldon
Weinig
|
53,025
|
(16)
|
—
|
(7)
|
|||
|
Alfred
L. Woods
|
69,025
|
(17)
|
—
|
(7)
|
|||
|
Directors
and executive officers as a group (10 persons)
|
528,984
|
(18)
|
1.9
|
||||
__________
|
(1)
|
Except
as otherwise indicated, as of March 1, 2006, all shares are owned
with sole voting and investment power. Beneficial ownership is determined
in accordance with the rules of the Securities and Exchange Commission.
For the listed officers and directors, the number of shares beneficially
owned includes shares of common stock that the individual had the
right to
acquire on or within 60 days after March 1, 2006, including through
the exercise of stock options and in connection with deferred stock
units.
References to stock options in the footnotes to this table include
only
those options that are or will become exercisable within 60 days
after
March 1, 2006. A director would only receive shares of common stock
in connection with deferred stock units within 60 days after March 1,
2006 if the director’s service on the board terminated during that time
period. Also included are restricted shares of common stock, over
which
the individual has voting power, but no investment
power.
|
|
(2)
|
The
information provided herein is based on a Schedule 13G/A filed jointly
by
T. Rowe Price Associates, Inc. and T. Rowe Price Small-Cap Value
Fund,
Inc. with the Securities and Exchange Commission on February 14,
2006. T.
Rowe Price Associates, Inc. has sole voting power with respect to
1,161,600 shares of our common stock and sole dispositive power with
respect to 3,676,450 shares of our common stock. These securities
are
owned by various
|
individual
and institutional investors, including the fund (which owns 1,648,200 shares,
representing 6.1% of the shares outstanding, over which the fund has sole voting
power), which T. Rowe Price Associates, Inc. serves as investment adviser with
power to direct investments and/or sole power to vote the securities. For
purposes of the reporting requirements of the Securities Exchange Act of 1934,
T. Rowe Price Associates, Inc. is deemed to be a beneficial owner of these
securities; however, T. Rowe Price Associates, Inc. expressly disclaims that
it
is, in fact, the beneficial owner of these securities.
|
(3)
|
The
information provided herein is based on a Schedule 13G/A filed by
Royce
& Associates, LLC with the Securities and Exchange Commission on
January 27, 2006. The information in the Schedule 13G/A indicates
that
Royce & Associates, LLC, an investment adviser, has sole voting and
dispositive power with respect to all of these
shares.
|
|
(4)
|
The
information provided herein is based on a Schedule 13G filed by Barrow,
Hanley, Mewhinney & Strauss, Inc. with the Securities and Exchange
Commission on February 7, 2006. The information in the Schedule 13G
indicates that Barrow, Hanley, Mewhinney & Strauss, Inc., an
investment adviser, has sole voting power with respect to 816,700
of these
shares, shared voting power with respect to 923,500 of these shares
and
sole dispositive power with respect to all 1,740,200 of these
shares.
|
|
(5)
|
The
information provided herein is based on a Schedule 13G/A filed by
Kayne
Anderson Rudnick Investment Management, LLC with the Securities and
Exchange Commission on
February
2, 2006. The information in the Schedule 13G/A indicates that Kayne
Anderson Rudnick Investment Management, LLC, an investment adviser,
has
sole voting and dispositive power with respect to all of these
shares.
|
|
(6)
|
Represents
1,000 shares of common stock, options to purchase 51,500 shares
of stock
and 9,525 deferred stock
units.
|
|
(7)
|
Less
than one percent.
|
|
(8)
|
Represents
1,000 shares of common stock and 3,200 deferred stock units.
|
|
(9)
|
Represents
152 shares of common stock, options to purchase 15,000 shares of
stock and
9,525 deferred stock units.
|
|
(10)
|
Represents
6,500 shares of common stock.
|
|
(11)
|
Represents
2,000 shares of common stock, options to purchase 22,500 shares of
stock
and 9,525 deferred stock units.
|
|
(12)
|
Represents
1,000 shares of common stock and 6,400 deferred stock
units.
|
|
(13)
|
Represents
5,600 restricted shares of common stock and options to purchase 8,400
shares of stock.
|
|
(14)
|
Represents
58,700 restricted shares of common stock, options to purchase 173,450
shares of stock (the options with respect to 8,050 shares become
exercisable on April 1, 2006) and 4,182 deferred stock units. Does
not
include the grant of deferred stock units on October 27, 2004, the
number
of which shall equal the product of 104,000 times the positive difference
between the market value of one share of our common stock on October
27,
2007, over $15.50 (not to exceed $5.06), divided by the market value
of
one share of our common stock on such date. We will not be able to
calculate the number of deferred stock units granted until after
October
27, 2007.
|
|
(15)
|
Represents
9,200 restricted shares of common stock and options to purchase 15,075
shares of stock.
|
|
(16)
|
Represents
6,000 shares of common stock, options to purchase 37,500 shares of
stock
and 9,525 deferred stock units.
|
|
(17)
|
Represents
500 shares of common stock, options to purchase 51,500 shares of
stock and
17,025 deferred stock units.
|
|
(18)
|
Includes
options to purchase 374,925 shares of stock and 68,907 deferred stock
units.
|
To
our
knowledge, based solely upon a review of copies of reports received by us
pursuant to Section 16(a) of the Securities Exchange Act of 1934 and
written representations that no other reports were required to be filed, we
believe that during 2005 all filing requirements applicable to our directors,
officers and 10% stockholders under Section 16(a) were
satisfied.
The
following table provides information as of December 31, 2005 with respect
to the shares of common stock that may be issued under our existing equity
compensation plans:
|
Number
of
securities
to be
issued
upon
exercise
of
outstanding
options,
warrants
and
rights
(a)
|
Weighted-
average
exercise
price
of
outstanding
options,
warrants
and
rights
(b)
|
Number
of
securities
remaining
available
for
future
issuance
under
equity
compensation
plans
(excluding
securities
reflected
in
column (a))
(c)
|
|
|
Equity
compensation plans approved by security holders
|
1,459,908
|
$19.53
|
863,328
|
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|
Total
|
1,459,908
|
$19.53
|
863,328
|
We
have
never repriced options to purchase shares of our common stock and have no
intention of repricing such options in the future.
The
following performance graph compares the total stockholder return on our common
stock to the S&P 500 Index and a composite peer group index for the past
five years. Our peer group index is comprised of the following six
companies:
|
·
|
INEI
Corporation, f/k/a Insituform East
Incorporated
|
|
·
|
Michael
Baker Corporation
|
|
·
|
Granite
Construction, Inc.
|
|
·
|
Fluor
Corporation
|
|
·
|
Jacobs
Engineering Group, Inc.
|
|
·
|
Foster
Wheeler Corp.
|
As
of
September 5, 2003, we acquired the business of Insituform East
Incorporated, including selected assets.
At
the
end of 2000, Fluor Corporation, a publicly-traded company, completed a reverse
spin-off of one of its businesses that resulted in two publicly-traded
companies. As a result, Fluor Corporation, the company that now contains the
segment relevant to our peer group index, is only included in the peer group
index for 2001 through 2005, the period following the spin-off.
The
graph
assumes that $100 was invested in our common stock and each index on
December 31, 2000 and that all dividends were reinvested.
Comparison
of Five-Year Cumulative Return
|
2000
|
2001
|
2002
|
2003
|
2004
|
2005
|
|
|
Insituform
Technologies, Inc.
|
$100.00
|
$64.15
|
$42.76
|
$41.38
|
$56.85
|
$48.58
|
|
S&P
500 Index
|
$100.00
|
$88.12
|
$68.64
|
$88.33
|
$97.94
|
$102.75
|
|
Composite
Peer Group Index
|
$100.00
|
$124.16
|
$101.61
|
$142.98
|
$173.10
|
$245.80
|
Notwithstanding
anything set forth in any of our previous filings under the Securities Act
of
1933 or the Securities Exchange Act of 1934 which might incorporate future
filings, including this proxy statement, in whole or in part, the preceding
performance graph shall not be deemed incorporated by reference into any such
filings.
Our
board
of directors has adopted, subject to stockholder approval, the 2006 Non-Employee
Director Equity Incentive Plan (the “2006 Director Incentive Plan”). If the 2006
Director Incentive Plan is approved by stockholders, our board of directors
intends to terminate the Amended and Restated 2001 Non-Employee Director Equity
Incentive Plan (the “2001 Director Incentive Plan”), which would otherwise
expire on May 10, 2011, and cancel the authority to grant new awards under
the
2001 Director Incentive Plan. There are currently approximately 60,600 shares
which are authorized for issuance, and not otherwise subject to an outstanding
award, under the 2001 Director Incentive Plan which will no longer be available
for future awards upon the approval of the 2006 Director Incentive Plan.
The
2006
Director Incentive Plan provides for the granting of non-qualified stock options
and stock units to our directors who are not company employees. Our board of
directors believes that the plan advances the interests of our company and
stockholders by increasing the ownership interest of the directors in our
company, thus aligning their interests in our financial performance more
directly to those of our stockholders and providing them an incentive to serve
as a director over the long term.
The
maximum number of shares of our common stock that is being authorized for
issuance under the 2006 Director Incentive Plan is 200,000, subject to
adjustment in the event of any subsequent change in the number of issued shares
of our common stock without new consideration to our company, such as in a
stock
dividend, stock split or similar issuance.
The
complete text of the 2006 Director Incentive Plan is attached as
Appendix
B
.
The
following summary of the plan is subject to the provisions contained in the
complete text of the plan.
Description
of the
2006
Director Incentive Plan
Administration.
The 2006
Director Incentive Plan will be administered by our board of directors. Our
board of directors will have exclusive authority to interpret and administer
the
plan, to establish, amend and rescind any rules and regulations relating to
the
plan and to take all steps and make all determinations necessary or advisable
for the administration of the plan.
Eligibility.
All
of
our directors who are not employed by us or any of our subsidiaries or
affiliates will be eligible to participate.
Shares
Subject to the Plan.
An
aggregate of 200,000 shares of our common stock is being authorized for issuance
under the 2006 Director Incentive Plan, subject to adjustment in the event
of
any subsequent change in the number of issued shares of our common stock without
new consideration to our company, such as in a stock dividend, stock split
or
similar issuance.
Types
of Awards.
Non-qualified stock options and stock units may be granted.
Non-Qualified
Stock Options.
Non-qualified stock options are non-statutory options to purchase shares of
our
common stock that are not intended to qualify under Section 422 of the federal
tax code. Upon the exercise of a non-qualified stock option, shares of our
common stock may be purchased at a price established on the date of grant by
our
board of directors in its sole discretion. Our board of directors will determine
the terms and conditions of any stock options and the periods during which
the
stock options will be exercisable.
Stock
Units.
Stock
units represent the right to receive shares of our common stock at a time or
upon terms designated in the award agreement. Our board of directors may in
its
discretion provide in the award agreement that the holder will be entitled
to
payments in cash or adjustments in the number of stock units equivalent in
value
to the dividends on our common stock as if the stock units were shares of common
stock at our dividend payment dates.
No
Rights as a Stockholder.
Holders
of stock options or stock units will not have any rights as a stockholder on
the
basis of the awards.
Effective
Date, Amendments and Duration.
The
2006
Director Incentive Plan will be effective upon the approval of our stockholders
at the 2006 annual meeting.
Our
board
of directors may amend or modify the 2006 Director Incentive Plan at any time
except an amendment or modification (i) changing eligibility requirements
under the plan, (ii) increasing the number of shares of common stock that
may be issued under the plan or (iii) increasing the amount or type of
benefits that may be granted under the plan, requires the prior approval of
our
stockholders. The board may not reduce the amount or change the terms and
conditions of any outstanding option or stock unit without the holder’s prior
consent.
The
2006
Director Incentive Plan will be effective for a period of ten years from the
effective date unless our board of directors terminates the plan
earlier.
Federal
Tax Consequences
No
income
will be realized upon grant by the holders of non-qualified stock options or
stock units, and we will not be entitled to a deduction at such
time.
Upon
the
exercise of a non-qualified stock option, the excess, if any, of the fair market
value of the stock on the date of exercise over the purchase price is ordinary
income to the holder as of the date of exercise. We generally will be entitled
to a deduction equal to such excess amount in the year of exercise.
A
holder
will realize income as a result of an award of stock units at the time shares
of
common stock are issued in an amount equal to the fair market value of such
shares at the date of issuance. We will be entitled to a corresponding deduction
equal to the income realized in the year that the shares are
issued.
The
tax
consequences to the holder of an award described above assume that, to the
extent any award under the plan is subject to the requirements of Section 409A
of the federal tax code, such award will comply with that section. In the event
any such award that is subject to Section 409A was determined not to be in
compliance with the section, the holder could be subject to earlier taxation,
a
penalty tax of 20% of the amount includible in gross income, and interest on
federal income taxes that would have been payable if the amount were taxable
when first deferred.
New
Plan Benefits
Currently,
the seven non-employee members of our board of directors will be eligible to
participate in the 2006 Director Incentive Plan. Awards will be granted under
the plan in the discretion of our board of directors and may vary year to year.
Thus, the amount of stock options and/or stock units to be granted under the
plan is not determinable as of the date of this proxy statement. However, please
see “Director Compensation” above for an example of awards that would have been
granted under the plan had it been in effect during 2005.
The
fair
market value per share of our common stock for all purposes under the plan
will
be the closing selling price per share on The Nasdaq Stock Market on the
determination date. On March 1, 2006, the fair market value per share of our
common stock was $27.27.
Required
Vote for Approval
The
required vote for approval of the 2006 Director Incentive Plan is a majority
of
the shares of our common stock cast on this proposal at the annual
meeting.
Our
board of directors recommends a vote “FOR” the approval of the 2006 Non-Employee
Director Equity Incentive Plan.
Our
board
of directors has adopted, subject to stockholder approval, the 2006 Employee
Equity Incentive Plan (the “2006 Employee Incentive Plan”). If the 2006 Employee
Incentive Plan is approved by stockholders, our board of directors intends
to
terminate the Amended and Restated 2001 Employee Equity Incentive Plan (the
“2001 Employee Incentive Plan”), which would otherwise expire on May 10, 2011,
and cancel the authority to grant new awards under the 2001 Employee Incentive
Plan. There are currently approximately 426,000 shares which are authorized
for
issuance, and not otherwise subject to an outstanding award, under the 2001
Employee Incentive Plan which will no longer be available for future awards
upon
the approval of the 2006 Employee Incentive Plan.
The
2006
Employee Incentive Plan provides for the granting of stock options and other
stock-based awards to our key employees. Our board of directors believes that
it
is in our best interest to have sufficient shares available under the plan
for
awards to key employees, whose talents and special efforts are essential to
our
continued progress. In addition, our board of directors believes that the plan
advances the interests of our company and stockholders by encouraging key
employees to acquire an ownership interest in our company, thus aligning their
interests in our financial performance more directly to those of our
stockholders and providing them an incentive to remain employees over the long
term.
The
maximum number of shares of our common stock that is being authorized for
issuance under the 2006 Employee Incentive Plan is 2,000,000, subject to
adjustment in the event of any subsequent change in the number of issued shares
of our common stock without new consideration to our company, such as in a
stock
dividend, stock split or similar issuance.
The
complete text of the 2006 Employee Incentive Plan is attached as
Appendix
C
.
The
following summary of the plan is subject to the provisions contained in the
complete text of the plan.
Description
of the 2006 Employee Incentive Plan
Administration.
The 2006
Employee Incentive Plan will be administered by our board of directors or our
Compensation Committee (the “Administrator”). The Administrator will have
exclusive authority to interpret and administer the plan, to establish
appropriate rules relating to the plan, to delegate some or all of its authority
under the plan and to take all such steps and make all such determinations
in
connection with the plan and the benefits granted pursuant to the plan as it
may
deem necessary or advisable.
Eligibility.
Officers
and key employees of our company and subsidiaries will be eligible to
participate. The Administrator has the sole discretion to designate which
employees among the eligible participants will receive awards under the
plan.
Shares
Subject to the Plan.
An
aggregate of 2,000,000 shares of our common stock is being authorized for
issuance under the 2006 Employee Incentive Plan, subject to adjustment in the
event of any subsequent change in the number of issued shares of our common
stock without new consideration to our company, such as in a stock dividend,
stock split or similar issuance.
Types
of Awards.
Stock
appreciation rights, restricted stock, performance awards, stock options and
stock units may be granted.
Stock
Appreciation Rights.
Stock
appreciation rights entitle the holder to receive a payment equal to the
difference between the fair market value of our common stock at the time of
exercise of the stock appreciation right and the base price of the stock
appreciation right established by the Administrator at the time of grant. At
the
time of grant, the Administrator may establish a maximum amount per share which
will be payable upon exercise of a stock appreciation right, and may determine
whether a stock appreciation right may be exercised (i) in conjunction with
the
exercise of a stock option, (ii) upon lapse of a stock option and/or (iii)
independent of the exercise of a stock option. In the Administrator’s
discretion, the value of a stock appreciation right may be paid in cash or
common stock, or a combination thereof. The Administrator will establish the
term of any stock appreciation rights provided that stock appreciation rights
may not be exercised more than ten years from the date of grant.
Restricted
Stock.
Restricted stock are shares of our common stock that are subject to the
restrictions
or conditions specified by the Administrator at the time of grant. The
Administrator may issue shares of restricted stock either as a stock bonus
or at
a purchase price below the fair market value
of
our
stock on the date of grant. During the period that the stock is restricted,
holders will be entitled to receive all dividends and other distributions made
in respect of the restricted stock and to vote the restricted stock without
limitation. The maximum number of shares of restricted stock that may be awarded
in any calendar year to any individual may not exceed 50,000 shares, subject
to
the adjustment provisions of the plan.
Performance
Awards.
In the
discretion of the Administrator, performance awards entitle the holder to
receive shares of our common stock or cash, or both, upon the achievement of
certain pre-established performance criteria (such as return on average total
capital employed, earnings per share or increases in share price) during a
performance period that may not exceed five years. The holder has no right
to
receive dividends on or to vote shares subject to performance awards until
the
shares are actually earned and issued.
Stock
Options.
Stock
options entitle the holder to purchase common stock at a purchase
price
established by the Administrator on the date of grant. The purchase price of
any
stock option may not be less than the fair market value of our common stock
on
the date of grant. The Administrator will determine the terms and conditions
of
such stock options and the times at which such stock options will be
exercisable. The maximum number of shares subject to a stock option that may
be
awarded in any calendar year to any individual may not exceed 200,000 shares,
subject to the adjustment provisions under the plan. In addition, no incentive
stock option may be granted to any individual if the aggregate fair market
value
of common stock underlying all incentive stock options held by the individual
that are exercisable for the first time in any calendar year exceeds
$100,000.
Stock
Units.
Stock
units represent the right to receive shares of our common stock at a
time
or
upon terms designated in the award agreement. The Administrator may in its
discretion provide in the award agreement that the holder will be entitled
to
payments in cash or adjustments in the number of stock units equivalent in
value
to the dividends on our common stock as if the stock units were shares of common
stock at our dividend payment dates.
No
Rights as a Stockholder.
Except
in
the case of awards of restricted stock, holders of awards under the plan will
not have any rights as a stockholder on the basis of the awards.
Effective
Date, Amendments and Duration.
The
2006
Employee Incentive Plan will be effective upon approval of our stockholders
at
the 2006 annual meeting.
Our
board
of directors may amend or modify the 2006 Employee Incentive Plan at any time
except an amendment or modification (i) increasing the number of shares of
common stock that may be issued under the plan, (ii) increasing the amount
or
type of benefits that may be granted under the plan or (iii) modifying the
eligibility requirements for benefits under the plan, requires the prior
approval of our stockholders. The Administrator may not reduce the amount,
or
change the terms and conditions, of any existing award without the holder’s
prior consent.
The
2006
Employee Incentive Plan will be effective for a period of ten years from the
effective date unless our board of directors terminates the plan
earlier.
Federal
Tax Consequences
A
participating employee will not realize income on the grant of stock options
or
stock appreciation rights or the award of restricted stock or stock units,
and
we will not be entitled to a deduction at such time. If a holder exercises
an
incentive stock option and does not dispose of the shares acquired within two
years from the date of the grant, or within one year from the date of exercise
of the stock option, no ordinary income will be realized by the holder at the
time of exercise, and we will not be
entitled
to a deduction by reason of the exercise. The holder will realize capital gain
or loss upon the sale of the acquired shares equal to the difference between
the
sale price and the purchase price for the shares. If a holder disposes of the
shares acquired pursuant to an incentive stock option within two years from
the
date of grant of the stock option or within one year from the date of exercise
of the stock option, the holder will realize ordinary income at the time of
disposition equal to the excess, if any, of the lesser of (a) the amount
realized on the disposition or (b) the fair market value of the shares on the
date of exercise, over the holder’s basis in the shares. We generally will be
entitled to a deduction in an amount equal to such income in the year of the
disqualifying disposition, except to the extent, if any, that such deduction
may
be limited under Section 162(m) or Section 280G of the federal tax code. In
addition, the holder will realize capital gain or loss on any excess of the
sale
price over the fair market value on the exercise date.
Upon
the
exercise of a non-qualified stock option or the surrender of a stock
appreciation right, the excess, if any, of the fair market value of the stock
on
the date of exercise over the purchase price or base price, as the case may
be,
is ordinary income to the holder as of the date of exercise. We generally will
be entitled to a deduction equal to such excess amount in the year of exercise,
except to the extent, if any, that such deduction may be limited under Section
162(m) or Section 280G of the federal tax code.
Subject
to a voluntary election by the holder under Section 83(b) of the federal tax
code, a holder of restricted shares of common stock will realize income as
a
result of the award of such shares at the time the restrictions expire on such
shares. An election pursuant to Section 83(b) of the federal tax code would
cause the holder to realize income in the year in which such award was granted.
The amount of income realized will be the difference between the fair market
value of the shares on the date such restrictions expire (or on the date of
issuance of the shares, in the event of a Section 83(b) election) over the
purchase price, if any, of such shares. We generally will be entitled to a
deduction equal to the income realized in the year in which the holder is
required to report such income, except to the extent, if any, that such
deduction may be limited under Section 162(m) or Section 280G of the federal
tax
code.
A
holder
will realize income as a result of a performance award at the time the award
is
paid or made available. The amount of income realized by the holder will be
equal to the fair market value of the shares on the date of issuance, in the
case of a stock award, and to the amount of the cash paid, in the event of
a
cash award. We will be entitled to a corresponding deduction equal to the income
realized in the year of such issuance or payment, except to the extent, if
any,
that such deduction may be limited under Section 162(m) or Section 280G of
the
federal tax code.
A
holder
will realize income as a result of an award of stock units at the time shares
of
common stock are issued in an amount equal to the fair market value of such
shares at that time. We will be entitled to a corresponding deduction equal
to
the income realized in the year of such issuance, except to the extent, if
any,
that such deduction may be limited under Section 162(m) or Section 280G of
the
federal tax code.
The
tax
consequences to the holder of an award described above assume that, to the
extent any award under the plan is subject to the requirements of Section 409A
of the federal tax code, such award will comply with that section. In the event
any such award that is subject to Section 409A was determined not to be in
compliance with the section, the holder could be subject to earlier taxation,
a
penalty tax of 20% of the amount includible in gross income, and interest on
federal income taxes that would have been payable if the amount were taxable
when first deferred.
New
Plan Benefits
Currently,
approximately 70 employees will be eligible to participate in the 2006 Employee
Incentive Plan. The Administrator will determine annually the award recipients
and the actual awards granted under the plan. As these awards are discretionary,
the amount of awards to be granted under the plan is not determinable as of
the
date of this proxy statement. However, please see the “Summary
Compensation
Table” above for an example of awards that would have been granted under the
plan had it been in effect during 2005.
The
fair
market value per share of our common stock for all purposes under the plan
will
be the closing selling price per share on The Nasdaq Stock Market on the
determination date. On March 1, 2006, the fair market value per share of our
common stock was $27.27.
Required
Vote for Approval
The
required vote for approval of the 2006 Employee Incentive Plan is a majority
of
the shares of our common stock cast on this proposal at the annual
meeting.
Our
board of directors recommends a vote “FOR” the approval of the 2006 Employee
Equity Incentive Plan.
Our
board
of directors has adopted, subject to stockholder approval, the 2006 Executive
Performance Plan (the “Executive Performance Plan”). Pursuant to Section 162(m)
of the federal tax code, a plan setting forth the criteria that will be used
by
the board of directors or the Compensation Committee in establishing objective
goals for earning incentive compensation that will be deemed to be
performance-based under Section 162(m) must be approved by the stockholders
at
least every five years. Our Long-Term Incentive Plan, which currently sets
forth
the criteria used by the board or the committee to set goals for
performance-based compensation, was last approved by the stockholders at the
2001 annual meeting. The Executive Performance Plan is being submitted to the
stockholders at the 2006 annual meeting to allow continued compliance with
Section 162(m).
Under
Section 162(m) of the federal tax code, the amount of our deduction for a fiscal
year relating to compensation for certain executive officers is limited to
$1,000,000 unless the compensation is deemed to be performance based. Our board
of directors believes that approval of the Executive Performance Plan advances
the interest of our company and stockholders by providing for the payment of
incentive compensation that will meet the Section 162(m) requirements for
performance-based compensation thereby assuring that the compensation paid
or
issued will be fully deductible by our company for federal tax
purposes.
The
complete text of the Executive Performance Plan is attached as
Appendix
D
.
The
following summary of the plan is subject to the provisions contained in the
complete text of the plan.
Description
of the Executive Performance Plan
Administration
and Eligibility.
Under
the
Executive Performance Plan, which will be administered by our Compensation
Committee, the chief executive officer and any other executive officer who
is
required to be named in the summary compensation table of our proxy statement
will be eligible to participate in the plan and receive performance-based
compensation in the form of cash bonuses or in the grant of an award (other
than
a stock option) under any of our equity incentive plans (such as the 2006
Employee Incentive Plan). Other employees will also be eligible to receive
incentive awards for a particular fiscal year or other performance period,
but
the incentive awards for these employees are not required to be paid or issued
pursuant to this plan by Section 162(m).
Performance
Criteria.
Our
Compensation Committee will establish objective performance goals in writing
not
later than 90 days after the beginning of each fiscal year or other performance
period for the payment of incentive compensation. The performance goals will
be
established by the committee based
upon
one
or more of the following criteria, individually or in combination, adjusted
in
such manner as the committee shall determine in its sole discretion: (i) stock
price; (ii) sales; (iii) return on equity; (iv) book value; (v) expense
management; (vi) earnings per share; (vii) free cash flow; (viii) net income;
(ix) return on assets; (x) individual performance; and (xi) business unit
performance. The payment of any award under the Executive Performance Plan
may
be reduced by the committee in its sole discretion based upon such factors
as
the committee shall determine.
The
maximum aggregate amount of compensation that may be paid to a participant
in
any fiscal year pursuant to one or more awards under the plan may not exceed
the
Maximum Amount (as defined below) for such fiscal year. For purposes of this
plan, the Maximum Amount for a fiscal year shall be $3,220,000 for the 2006
fiscal year, and, for each succeeding fiscal year, 110% of the Maximum Amount
for the immediately preceding year. If the Maximum Amount (including
carryforwards under this sentence) for a fiscal year exceeds the amount paid
to
a participant in that year, the excess shall be carried forward and added to
the
Maximum Amount for the succeeding fiscal year.
Amendments
and Termination.
The
Executive Performance Plan may be amended or terminated at any time by our
board
of directors in its sole and absolute discretion.
Federal
Tax Consequences
Upon
the
payment of a cash bonus pursuant to the Executive Performance Plan, a
participant will realize ordinary income as of the date the bonus is payable
to
the participant and we will be entitled to a deduction at that time. Upon the
grant of a performance-based award under any of our equity incentive plans,
a
participant will realize income with respect to a particular award, and we
will
be entitled to a corresponding deduction, in the same manner as described above
under “Proposal 3: Approval and Adoption of the 2006 Employee Equity Incentive
Plan - Federal Tax Consequences.”
New
Plan Benefits
Currently,
three employees will be eligible to participate in the Executive Performance
Plan. Our Compensation Committee will determine annually the award recipients
and the actual awards granted under the plan. As these awards are discretionary,
the amount of awards to be granted under the plan is not determinable as of
the
date of this proxy statement. However, please see the “Long-Term Incentive Plan
Awards Table” above for an example of awards that would have been granted under
the plan had it been in effect during 2005.
The
fair
market value per share of our common stock for all purposes under the plan
will
be the closing selling price per share on The Nasdaq Stock Market on the
determination date. On March 1, 2006, the fair market value per share of our
common stock was $27.27.
Required
Vote for Approval
The
required vote for approval of the 2006 Executive Performance Plan is a majority
of the shares of our common stock cast on this proposal at the annual
meeting.
Our
board of directors recommends a vote “FOR” the approval of the 2006 Executive
Performance Plan.
Our
board
of directors, upon the recommendation of the Audit Committee of the board,
has
appointed PricewaterhouseCoopers LLP as our independent auditors for the year
ending December 31, 2006. A resolution will be presented at the meeting to
ratify the appointment of PricewaterhouseCoopers LLP.
PricewaterhouseCoopers
LLP
served as our independent auditors for the year ended December 31, 2005.
Representatives of PricewaterhouseCoopers
LLP
are
expected to be present at our annual meeting to respond to appropriate questions
from our stockholders and to make statements if they so desire.
Ratification
of the Appointment of Independent Auditors
Ratification
of the appointment of PricewaterhouseCoopers LLP as our independent auditors
for
the year ending December 31, 2006 will require the affirmative vote of a
majority of the votes cast upon this proposal at the annual
meeting.
Our
board of directors recommends a vote “FOR” the ratification of the appointment
of PricewaterhouseCoopers LLP as our independent auditors for the year ending
December 31, 2006.
The
board
does not know of any other matters that may be brought before the annual
meeting. However, if any other matters are properly presented for action, it
is
the intention of the persons named on the accompanying proxy card to vote the
shares represented thereby in accordance with their judgment on such
matters.
Our
by-laws provide that, in order for a stockholder to nominate a candidate for
director or to bring other business before a meeting of stockholders, the
stockholder must have given timely notice thereof in writing to our Secretary.
We must receive stockholder proposals intended to be presented at an annual
meeting at least 120 days (which for the 2007 annual meeting would be November
10, 2006) prior to the anniversary date on which we first mailed our proxy
materials for the preceding year’s annual meeting of stockholders, in order to
be considered for inclusion in our proxy statement relating to the meeting.
Stockholder proposals that do not appear in the proxy statement may be
considered at a meeting of stockholders only if written notice of the proposal
is delivered to or mailed and received by our corporate Secretary at our
principal executive office not less than 90 days nor more than 120 days (which
for the 2007 annual meeting of stockholders would be January 26, 2007 and
December 27, 2006, respectively) prior to the anniversary date of the
preceding year’s annual meeting of stockholders.
However,
if the date of the annual meeting is advanced or delayed by more than 30 days
compared to the date of the preceding year’s annual meeting, notice by the
stockholder to be timely made must be received not later than the close of
business on the later of:
|
·
|
the
ninetieth day prior to the meeting,
or
|
|
·
|
the
tenth day following the date on which the date set for the meeting
is
first announced publicly.
|
Notwithstanding
the foregoing requirements, a proxy may confer discretionary authority to vote
on any stockholder proposal, provided that such proposal is received at least
45
days (which for the 2007 annual meeting of stockholders would be January 24,
2007) prior to the anniversary date on which we first mailed our proxy materials
for the preceding year’s annual meeting of stockholders.
Any
written notice of a stockholder proposal must include the information required
by our by-laws and, in the case of a notice of nomination, all information
relating to each person whom the stockholder proposes to nominate for election
or reelection as a director, that is required to be disclosed in solicitations
of proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Exchange Act, as amended (including such
person’s written consent to being named in the proxy statement as a nominee and
to serving as a director if elected).
If
a
stockholder fails to notify us within the time limits described above of an
intent to present a nomination or proposal for a stockholder vote at our 2007
annual meeting of stockholders, we will declare the nomination or business
to be
not properly brought before the meeting and, therefore, the nomination will
be
disregarded or the business will not be transacted. The foregoing requirements
are separate from and in addition to the requirements of the Securities and
Exchange Commission that a stockholder must meet to have a proposal included
in
our proxy statement.
Our
board
has an informal process in place for our stockholders to communicate with
directors. Any stockholder wishing to contact our board or one of our directors
can write to:
Board
of
Directors
c/o
Insituform Technologies, Inc.
702
Spirit 40 Park Drive
Chesterfield,
MO 63005
All
correspondence received by us and addressed as indicated above will be reviewed
by appropriate Insituform personnel and promptly forwarded to our Chairman
of
the Board and/or to the appropriate director. Communications that relate to
our
accounting, internal accounting controls or auditing matters will also be
referred to the Chair of our board’s Audit Committee.
Although
our board does not have an express policy regarding director attendance at
the
annual meeting of stockholders, we anticipate that all directors will attend
this year’s annual meeting. Eight directors attended the 2005 annual meeting of
stockholders.
David
F.
Morris
Secretary
Chesterfield,
Missouri
March
10,
2006
Appendix
A
INSITUFORM
TECHNOLOGIES, INC.
Charter
I.
Purpose
.
The
primary functions of the Audit Committee (the “
Committee
”)
of the
Board of Directors (the “
Board
”)
of
Insituform Technologies, Inc. (the “
Company
”)
are:
|
•
|
To
oversee the Company’s accounting and financial reporting processes and the
audits of the Company’s financial statements, including
overseeing:
|
•
the
integrity of the Company’s financial statements,
•
the
Company’s compliance with legal and regulatory requirements,
•
the
independent auditor’s qualifications and independence, and
•
the
performance of the Company’s internal audit function and independent auditors,
and
|
•
|
To
prepare the report that the Securities and Exchange Commission (the
“
SEC
”)
rules require be included in the Company’s proxy
statement.
|
The
Committee will address these functions by carrying out the activities enumerated
in this Charter, which are intended to describe a program of guidance and
oversight and not to diminish the primary responsibility of the Company’s
management for the Company’s financial statements and internal
controls.
II.
Organization
and Authority
.
The
Committee shall be comprised of three or more directors, as determined by the
Board. Each member of the Committee shall satisfy the applicable independence
requirements of The Nasdaq Stock Market (“
Nasdaq
”)
and
any other applicable regulatory requirements. Committee members may not receive
any payment from the Company except for Board or Board committee service. No
Committee member may have participated in the preparation of the financial
statements of the Company or of any Company subsidiary at any time during the
previous three (3) years. Committee members shall be appointed by the Board
annually. The Board may remove any Committee member. Members shall serve until
their successors are duly elected and qualified.
The
Chairman of the Committee shall be designated by the Board; provided, however,
if the Board does not do so, the Committee members shall elect a Chairman by
vote of a majority of the Committee. The Chairman of the Committee may establish
rules as determined by the Chairman to be necessary or appropriate for the
conduct of the Committee’s business.
All
members of the Committee must be able to read and understand fundamental
financial statements, including a company’s balance sheet, income statement and
cash flow statement. At least one member of the Committee shall have past
employment experience in finance or accounting, requisite professional
certification in accounting, or any other comparable experience or background
which results in the individual’s financial sophistication.
The
Committee shall meet on a regular basis, and as frequently as circumstances
dictate. The Committee shall maintain minutes and other records of its meetings
and other activities. In furtherance of its objective of creating an open avenue
of communication among the Company’s accountants, financial and senior
management, internal auditors and the Board, the Committee shall meet at least
annually with management and the independent auditors in executive session,
to
discuss any matters that the Committee or these groups believe should be
discussed privately. In addition, the Committee should meet with the independent
auditors and management quarterly to review the Company’s financial statements
consistent with the responsibilities set forth in this Charter.
III.
Responsibilities
.
To
fulfill its responsibilities and duties, the Committee shall:
Periodic
Review
|
1
.
|
Review
and update this Charter periodically, at least annually, as conditions
dictate, and submit any changes for ratification by the Board.
|
|
2.
|
Review
the Committee’s performance of its responsibilities and duties on an
annual basis.
|
|
3.
|
Review
and discuss with management and the independent auditor, prior to
filing
with the SEC, the Company’s annual audited financial statements and
quarterly financial statements and the Company’s specific disclosures
under “Management’s Discussion and Analysis of Financial Condition and
Results of Operations.” The Chairman of the Committee may represent the
entire Committee for purposes of this review.
|
|
4.
|
Review,
prior to filing and/or publishing, other financial statements contained
in
filings by the Company with the SEC and other published documents,
including the Company’s quarterly and annual earnings
releases.
|
|
5.
|
Discuss
financial information and earnings guidance provided by the Company
to
analysts and rating agencies.
|
|
6.
|
Review
with the Board any issues that arise with respect to the quality
or
integrity of the Company’s financial statements, the Company’s compliance
with legal or regulatory requirements, the performance and independence
of
the Company’s independent auditors, or the performance of the internal
audit function.
|
|
7.
|
Determine
appropriate funding for payment of compensation to the independent
auditors, any advisers engaged by the Committee and ordinary
administrative expenses of the
Committee.
|
Independent
Auditors
|
8.
|
Bear
direct responsibility for the appointment, compensation (including
approval of all audit engagement fees and terms, and all significant
non-audit engagements), retention and termination of the independent
auditors, and oversight of the work of independent auditors engaged
(including resolution of disagreements between management and the
independent auditors regarding financial reporting) for the purpose
of
preparing or
|
issuing
an audit report or performing other audit, review or attest services for the
Company.
|
9.
|
Pre-approve
all auditing services and all non-audit services (to the extent such
non-audit services are permissible) to be provided to the Company
by the
independent auditors.
|
|
10.
|
Obtain
an annual report from the independent auditor describing (i) the
independent auditor’s internal quality-control procedures; and (ii) any
material issues raised by the most recent internal quality-control
review
of the independent auditor or by any inquiry or investigation by
governmental or professional authorities, within the preceding five
years,
respecting one or more independent audits carried out by the independent
auditor, and the steps taken to deal with any such
issues.
|
|
11.
|
On
an annual basis, review and discuss with the independent auditors
all
significant relationships the independent auditors have with the
Company,
to determine independence and objectivity, including actively engaging
in
a dialogue with the independent auditors with respect to any disclosed
relationships or services that may impact the objectivity and independence
of the independent auditors and take (or recommend that the full
Board
take) appropriate action to oversee the independence of the independent
auditors; and be responsible for ensuring receipt from the independent
auditors of a formal written statement delineating all relationships
between the independent auditors and the Company, consistent with
Independence Standards Board Standard
1.
|
|
12.
|
Take
steps to ensure the independent auditors’ ultimate accountability to the
Committee, as representatives of the stockholders, and the ultimate
authority of the Committee, as such representatives, to select, evaluate
and, where applicable, replace the independent
auditors.
|
|
13.
|
Consult
with the independent auditors, out of the presence of management,
concerning internal controls, and the fullness and accuracy of the
Company’s financial statements.
|
|
14.
|
Monitor
rotation of the audit partner, such that neither the lead (or
coordinating) audit partner (having primary responsibility for the
Company’s audit), nor the audit partner responsible for reviewing the
Company’s audit (e.g., the concurring audit partner), has performed audit
services for the Company in each of the Company’s five previous fiscal
years.
|
|
15.
|
Meet
with the independent auditors to receive their report
regarding:
|
|
•
|
all
critical accounting policies and practices to be
used;
|
|
•
|
all
alternative treatments of financial information within generally
accepted
accounting principles that have been discussed with management,
ramifications of the use of such alternative disclosures and treatments,
and the treatment preferred by the independent auditors;
and
|
|
•
|
other
material written communications between the independent auditors
and
management.
|
|
17.
|
Present
to the Board the Committee’s conclusions with respect to the independent
auditor’s qualifications, performance and
independence.
|
Internal
Auditors
|
18.
|
Bear
direct responsibility for the appointment, compensation and termination
of
the internal auditors, and oversight of the internal auditors’ work
(including resolution of disagreements between management and the
internal
auditors regarding financial
reporting).
|
|
19.
|
Take
steps to ensure the internal auditors’ ultimate accountability to the
Committee, as representatives of the stockholders, and the ultimate
authority of the Committee, as such representatives, to select, evaluate
and, where applicable, replace the internal
auditors.
|
|
20.
|
Consult
with the internal auditors, out of the presence of management, concerning
internal controls, the fullness and accuracy of the Company’s financial
statements, and management
integrity.
|
Financial
Reporting Processes
|
21.
|
In
consultation with the independent auditors and the internal auditors,
review the integrity of the Company’s financial reporting processes, both
internal and external.
|
|
22.
|
Consider
the independent auditors’ judgments about the quality and appropriateness
of the Company’s accounting principles, as applied in its financial
reporting.
|
|
23.
|
Consider
and approve, if appropriate, any major changes to the Company’s auditing
and accounting principles and practices as suggested by the independent
auditors, management or the internal
auditors.
|
Process
Improvement
|
24.
|
Establish
regular and separate systems of reporting to the Committee by each
of
management, the independent auditors and the internal auditors regarding
any significant judgments made in management’s preparation of the
financial statements and the view of each as to appropriateness of
such
judgments.
|
|
25.
|
Inquire
of the independent auditors, the internal auditors and management
about
assessing risk of fraudulent financial reporting and assess the steps
management has taken to minimize such risks to the
Company.
|
|
26.
|
Following
completion of the annual audit, review separately with each of management,
the independent auditors and the internal auditors any significant
difficulties encountered during the course of the audit, including
any
restrictions on the scope of work or access to required
information.
|
|
27.
|
Review
any significant disagreement among management and the independent
auditors
or the internal auditors in connection with the preparation of the
financial statements.
|
|
28.
|
Review
with the independent auditors, the internal auditors and management
the
extent to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been
implemented.
|
|
29.
|
Review
with the independent auditors critical accounting policies and practices,
alternative treatments of financial information, and other material
written communications between the independent auditors and
management.
|
|
30.
|
Review
with the Chief Executive Officer and the Chief Financial
Officer:
|
|
•
|
any
significant deficiencies in the design or operation of internal
controls
which could adversely affect the Company’s ability to record, process,
summarize and report financial data,
and
|
|
•
|
any
fraud that involves management or other Company employees who have
a
significant role in the Company’s internal
controls.
|
Legal
and Ethical Compliance
|
31.
|
Prepare
the report that SEC rules require be included in the Company’s proxy
statement.
|
|
32.
|
Review
and approve all related-party
transactions.
|
|
33.
|
Review
and approve all off-balance sheet arrangements that may have a current
or
future material effect on the Company’s financial condition, changes in
financial condition, results of operations, revenues or expenses,
liquidity, capital expenditures or capital
resources.
|
|
34.
|
Monitor
conflicts of interest between the independent auditors and
management.
|
|
35.
|
Consult
with management to ensure that appropriate ethical standards for
business
conduct are communicated to Company employees generally, and review
compliance with such standards.
|
|
36.
|
Establish
and maintain procedures for:
|
|
•
|
the
receipt, retention and treatment of complaints received by the Company
regarding accounting, internal accounting controls or auditing matters,
and
|
|
•
|
the
confidential, anonymous submission by Company employees of concerns
regarding questionable accounting or auditing
matters.
|
|
37.
|
Review
activities, organizational structure, and qualifications of the internal
auditors.
|
|
38.
|
Review,
with the Company’s General Counsel and, when appropriate, outside counsel,
legal compliance matters, and any legal matter that could have a
significant impact on the Company’s financial statements.
|
|
39.
|
Review
the effect of regulatory and accounting
initiatives.
|
|
40.
|
Conduct
or authorize investigations into any other matters within its scope
of
responsibilities.
|
|
41.
|
Engage
independent counsel and other advisers, as the Committee deems necessary
or advisable to carry out its
duties.
|
|
42.
|
Discuss
policies with respect to risk assessment and risk
management.
|
|
43.
|
Perform
any other activities consistent with this Charter, the Company’s by-laws,
the enabling resolutions for the Committee adopted by the Board,
and
governing law, as the Committee or the Board deems necessary or
appropriate.
|
#
#
#
Appendix
B
1.
Purpose
and Nature of Plan.
The
purpose of this 2006 Non-Employee Director Equity Incentive Plan (the
“
Plan
”)
of
Insituform Technologies, Inc. (the “
Company
”)
is to
increase the ownership interest in the Company of non-employee directors whose
services are considered essential to the Company’s continued progress and thus
provide a further incentive to serve as a director of the Company.
2.
Administration
.
The
Plan shall be administered by the Board of Directors of the Company (the
“
Board
”).
Subject to the provisions of the Plan, the Board shall have exclusive authority
to interpret and administer the Plan, to establish, amend and rescind any rules
and regulations relating to the Plan, and to take all steps and make all
determinations necessary or advisable for the administration of the Plan. The
determination of the Board in the administration of the Plan shall be conclusive
and binding upon all persons, including without limitation the Company, its
stockholders and persons granted options or other benefits under the Plan.
The
officers of the Company shall be authorized to implement the Plan in accordance
with its terms and to take such actions of a ministerial nature as shall be
necessary to effectuate the intent and purposes of the Plan.
3.
Participants
.
Directors of the Company who are not employees of the Company (or any affiliate
of the Company) during a calendar year shall be eligible to participate in
awards made pursuant to the Plan with respect to such calendar year
(“
Eligible
Directors
”).
4.
Shares
Subject to the Plan
.
Subject
to adjustment as provided in Section 7 (relating to adjustment for changes
in
capital stock), an aggregate of 200,000 shares of the Company’s Class A common
shares, $0.01 par value (“
Common
Stock
”),
shall
be available for issuance under the Plan. The shares of Common Stock issued
under the Plan may be made available from authorized but unissued shares or
from
shares re-acquired by the Company, including shares purchased in the open market
or in private transactions. If any option granted under the Plan shall expire
or
terminate for any reason without having been exercised in full, the shares
subject to, but not delivered under, such option may again become available
for
the grant of other options or Stock Units under the Plan. If any Stock Unit
granted under the Plan shall be forfeited or cancelled for any reason, the
shares subject to, but not delivered under, such Stock Unit may again become
available for the grant of other options or Stock Units under the
Plan.
5.
Awards
of Benefits
.
The
Board of Directors may, in its sole discretion, grant benefits in accordance
with the Plan to Eligible Directors, and establish the timing, pricing, amount
and other terms and conditions of such grants, which need not be uniform with
respect to the various participants or with respect to different grants to
the
same participant.
6.
Types
of Benefits
.
The
following benefits may be granted under the Plan: (i) nonqualified stock
options (“
NQSOs
”);
and
(ii) Stock Units, as described below.
(a)
Stock
Options
.
NQSOs
are nonqualified stock options to purchase shares of Common Stock at purchase
prices established by the Board of Directors on the date the options
are
granted,
subject to such terms and conditions set forth in an option agreement as may
be
established by the Board of Directors in its sole discretion. The purchase
price
may be paid (i) by check, (ii) in the discretion of the Board of
Directors, by the delivery of shares of Common Stock of the Company owned by
the
participant for at least six (6) months or (iii) in the discretion of the Board
of Directors, by a combination of any of the foregoing, in the manner provided
in the option agreement.
(b)
Stock
Units.
A
Stock
Unit represents the right to receive a share of Common Stock from the Company
at
a designated time in the future, subject to such terms and conditions set forth
in a Stock Unit agreement as may be established by the Board of Directors in
its
sole discretion. The participant generally does not have the rights of a
stockholder until receipt of the Common Stock. The Board of Directors may in
its
discretion provide for payments in cash, or adjustment in the number of Stock
Units, equivalent to the dividends the participant would have received if the
participant had been the owner of shares of Common Stock instead of the Stock
Units.
7.
Adjustment
Provisions
.
If the
Company shall at any time change the number of issued shares of Common Stock
without new consideration to the Company (such as by stock dividends or stock
splits), the total number of shares of Common Stock reserved for issuance under
the Plan shall be appropriately adjusted, and the number of shares of Common
Stock covered by each outstanding option or Stock Unit shall be appropriately
adjusted so that the aggregate consideration payable to the Company and the
aggregate value of each such option or Stock Unit shall not be changed. Written
option agreements or Stock Unit agreements may also contain provisions for
their
continuation or for other equitable adjustments after changes in the Common
Stock resulting from the Company’s reorganization, recapitalization, sale,
merger, consolidation, issuance of stock rights or warrants, or similar
occurrence.
8.
No
Right to Continue as a Director; No Stockholder Rights
.
Neither
the Plan, nor the granting of an option or Stock Unit, nor any other action
taken pursuant to the Plan, shall constitute or be evidence of any agreement
or
understanding, express or implied, that the Eligible Director has a right to
continue as an Eligible Director for any period of time, or at any particular
rate of compensation. No Eligible Director shall have rights as a stockholder
with respect to shares of Common Stock covered by options or Stock Units granted
hereunder until the date of the issuance of a stock certificate
therefor.
9.
Amendment;
Governing Law
.
The
Board may revise or amend the Plan in any respect whatsoever; provided, that,
without approval of the stockholders of the Company, no revision or amendment
shall (i) change the selection or eligibility requirements under the Plan,
(ii) increase the number of shares of Common Stock that may be issued under
the Plan or (iii) increase the amount or type of benefits that may be
granted under the Plan. No action authorized by this paragraph shall reduce
the
amount of any existing option or Stock Unit or change the terms and conditions
thereof without the holder’s consent. The validity, construction and effect of
the Plan shall be determined in accordance with the laws of the State of
Missouri.
10.
Effective
Date, Duration, Suspension and Termination of the Plan
.
The
Plan will be effective immediately following approval by the stockholders of
the
Company at the 2006 Annual Meeting of Stockholders. The period during which
option and Stock Unit grants shall be made under the Plan shall terminate on
the
day following the tenth anniversary of the 2006 Annual Meeting of Stockholders
(unless the Plan is extended or terminated at an earlier date by stockholders);
provided, (i) such termination shall not affect the terms of any then
outstanding option or Stock Unit and (ii) the terms and conditions
applicable to any option or Stock Unit granted within such period may thereafter
be amended or modified by mutual agreement between the Company and the holder.
The Board may suspend or terminate the Plan at any time and for any
reason.
Appendix
C
1.
Purpose
and Nature of Plan
.
The
purpose of this 2006 Employee Equity Incentive Plan (the “Plan”) of Insituform
Technologies, Inc. (the “Company”) is to encourage key employees of the Company
and such subsidiaries of the Company as the Administrator may designate, to
acquire shares of Class A $0.01 par value common stock of the Company (“Common
Stock”) or to receive monetary payments based on the value of such stock or
based upon achieving certain goals on a basis mutually advantageous to such
employees and the Company and thus provide an incentive for employees to
contribute to the success of the Company and align the interests of key
employees with the interests of the shareholders of the Company.
2.
Administration
.
The
Plan shall be administered by the Board of Directors of the Company or the
Compensation Committee of the Board of Directors (the “Administrator”).
The
authority to select persons eligible to participate in the Plan, to grant
benefits in accordance with the Plan, and to establish the timing, pricing,
amount and other terms and conditions of such grants (which need not be uniform
with respect to the various participants or with respect to different grants
to
the same participant), may be exercised by the Administrator in its sole
discretion.
Subject
to the provisions of the Plan, the Administrator shall have exclusive authority
to interpret and administer the Plan, to establish appropriate rules relating
to
the Plan, to delegate some or all of its authority under the Plan and to take
all such steps and make all such determinations in connection with the Plan
and
the benefits granted pursuant to the Plan as it may deem necessary or advisable.
The validity, construction, and effect of the Plan shall be determined in
accordance with the laws of the State of Missouri.
The
Board
of Directors in its discretion may delegate and assign specified duties and
authority of the Administrator to any other committee and retain the other
duties and authority of the Administrator to itself. Also, the Board of
Directors in its discretion may appoint a separate committee of outside
directors to make awards that satisfy the requirements of Section 162(m) of
the
Internal Revenue Code.
3.
Shares
Reserved Under the Plan
.
Subject
to the provisions of Section 12 (relating to adjustment for changes in capital
stock) an aggregate of two million (2,000,000) shares of Common Stock of the
Company shall be available for issuance under the Plan. The shares of Common
Stock issued under the Plan may be made available from authorized but unissued
shares or shares re-acquired by the Company, including shares purchased in
the
open market or in private transactions.
As
used
in this Section, the term “Plan Maximum” shall refer to the number of shares of
Common Stock of the Company that are available for grant of awards pursuant
to
the Plan. Stock underlying outstanding options, stock appreciation rights,
stock
units or performance awards will reduce the Plan Maximum while such options,
stock appreciation rights, stock units or performance awards are outstanding.
Shares underlying expired, canceled or forfeited options, stock appreciation
rights, stock units or performance awards shall be added back to the Plan
Maximum. When the exercise price of stock
options
is paid by delivery of shares of Common Stock of the Company, or if the
Administrator approves the withholding of shares from a distribution in payment
of the exercise price, the Plan Maximum shall be reduced by the net (rather
than
the gross) number of shares issued pursuant to such exercise, regardless of
the
number of shares surrendered or withheld in payment. If the Administrator
approves the payment of cash to an optionee equal to the difference between
the
fair market value and the exercise price of stock subject to an option, or
if a
stock appreciation right is exercised for cash or a performance award is paid
in
cash, the Plan Maximum shall be increased by the number of shares with respect
to which such payment is applicable. Restricted stock issued pursuant to the
Plan will reduce the Plan Maximum while outstanding even while subject to
restrictions. Shares of restricted stock shall be added back to the Plan Maximum
if such restricted stock is forfeited or is returned to the Company as part
of a
restructuring of benefits granted pursuant to this Plan.
Notwithstanding
the above, the maximum number of shares subject to stock options that may be
awarded in any calendar year to any individual shall not exceed 200,000 shares
(as adjusted in accordance with Section 12).
4.
Participants.
Participants will consist of such officers and key employees of the Company
or
any designated subsidiary as the Administrator in its sole discretion shall
determine. Designation of a participant in any year shall not require the
Administrator to designate such person to receive a benefit in any other year
or
to receive the same type or amount of benefit as granted to the participant
in
any other year or as granted to any other participant in any year. The
Administrator shall consider such factors as it deems pertinent in selecting
participants and in determining the type and amount of their respective
benefits.
5.
Types
of Benefits
.
The
following benefits may be granted under the Plan: (a) stock appreciation rights
(“SARs”); (b) restricted stock (“Restricted Stock”); (c) performance awards
(“Performance Awards”); (d) incentive stock options (“ISOs”); (e) nonqualified
stock options (“NQSOs”); and (f) Stock Units, all as described
below.
6.
Stock
Appreciation Rights
.
A SAR
is the right to receive all or a portion of the difference between the fair
market value of a share of Common Stock at the time of exercise of the SAR
and
the exercise price of the SAR established by the Administrator, subject to
such
terms and conditions set forth in a SAR agreement as may be established by
the
Administrator in its sole discretion. At the discretion of the Administrator,
SARs may be exercised (a) in lieu of exercise of an option, (b) in conjunction
with the exercise of an option, (c) upon lapse of an option, (d) independent
of
an option or (e) each of the above in connection with a previously awarded
option under the Plan. If the option referred to in (a), (b) or (c) above
qualified as an ISO pursuant to Section 422 of the Internal Revenue Code of
1986
(“Code”), the related SAR shall comply with the applicable provisions of the
Code and the regulations issued thereunder. At the time of grant, the
Administrator may establish, in its sole discretion, a maximum amount per share
which will be payable upon exercise of a SAR, and may impose conditions on
exercise of a SAR. At the discretion of the Administrator, payment for SARs
may
be made in cash or shares of Common Stock of the Company, or in a combination
thereof. SARs will be exercisable not later than ten years after the date they
are granted and will expire in accordance with the terms established by the
Administrator.
7.
Restricted
Stock.
Restricted Stock is Common Stock of the Company issued or transferred under
the
Plan (other than upon exercise of stock options or as Performance Awards) at
any
purchase price less than the fair market value thereof on the date of issuance
or transfer, or as a bonus, subject to such terms and conditions set forth
in a
Restricted Stock agreement as may be established by the Administrator in its
sole discretion. In the case of any Restricted Stock:
(a)
The
purchase price, if any, will be determined by the Administrator.
(b)
The
period of restriction shall be established by the Administrator for any grants
of Restricted Stock;
(c)
Restricted
Stock may be subject to (i) restrictions on the sale or other disposition
thereof; (ii) rights of the Company to reacquire such Restricted Stock at
the purchase price, if any, originally paid therefor upon termination of the
employee’s employment within specified periods; (iii) representation by the
employee that he or she intends to acquire Restricted Stock for investment
and
not for resale; and (iv) such other restrictions, conditions and terms as
the Administrator deems appropriate.
(d)
The
participant shall be entitled to all dividends paid with respect to Restricted
Stock during the period of restriction and shall not be required to return
any
such dividends to the Company in the event of the forfeiture of the Restricted
Stock.
(e)
The
participant shall be entitled to vote the Restricted Stock during the period
of
restriction.
(f)
The
Administrator shall determine whether Restricted Stock is to be delivered to
the
participant with an appropriate legend imprinted on the certificate or if the
shares are to be issued in the name of a nominee or deposited in escrow pending
removal of the restrictions.
Notwithstanding
the above, the maximum number of shares of Restricted Stock that may be awarded
in any calendar year to any individual shall not exceed 50,000 shares (as
adjusted in accordance with Section 12).
8.
Performance
Awards
.
Performance Awards are Common Stock of the Company, monetary units or some
combination thereof, to be issued without any payment therefor, in the event
that certain performance goals established by the Administrator are achieved
over a period of time designated by the Administrator, but not in any event
more
than five years. The goals established by the Administrator may include return
on average total capital employed, earnings per share, increases in share price
or such other goals as may be established by the Administrator. In the event
the
minimum corporate goal is not achieved at the conclusion of the period, no
payment shall be made to the participant. Actual payment of the award earned
shall be in cash or in Common Stock of the Company or in a combination of both,
as the Administrator in its sole discretion determines. If Common Stock of
the
Company is used, the participant shall not have the right to vote and receive
dividends until the goals are achieved and the actual shares are
issued.
9.
Incentive
Stock Options.
ISOs are
stock options to purchase shares of Common Stock at not less than 100% of the
fair market value of the shares on the date the option is granted, subject
to
such terms and conditions set forth in an option agreement as may be established
by the Administrator in its sole discretion that conform to the requirements
of
Section 422 of the Code. Such purchase price may be paid (a) by check or (b),
in
the discretion of the Administrator, by the delivery of shares of Common Stock
owned by the participant for at least six months, or (c), in the discretion
of
the Administrator, by a combination of any of the foregoing, in the manner
provided in the option agreement. The aggregate fair market value (determined
as
of the time an option is granted) of the stock with respect to which ISOs are
exercisable for the first time by an optionee during any calendar year (under
all option plans of the Company and its subsidiaries) shall not exceed
$100,000.
10.
Nonqualified
Stock Options
.
NQSOs
are nonqualified stock options to purchase shares of Common Stock at purchase
prices established by the Administrator on the date the options are granted,
subject to such terms and conditions set forth in an option agreement as may
be
established by the Administrator in its sole discretion;
provided,
however
,
in no
event shall the purchase price per share be less than 100% of the fair market
value of the shares on the date the option is granted. The purchase price may
be
paid (a) by check or (b), in the discretion of the Administrator, by the
delivery of shares of Common Stock owned by the participant for at least six
months, or (c), in the discretion of the Administrator, by a combination of
any
of the foregoing, in the manner provided in the option agreement.
11.
Stock
Units.
A
Stock
Unit represents the right to receive a share of Common Stock from the Company
at
a designated time in the future, subject to such terms and conditions set forth
in a Stock Unit agreement as may be established by the Administrator in its
sole
discretion. The participant generally does not have the rights of a shareholder
until receipt of the Common Stock. The Administrator may in its discretion
provide for payments in cash, or adjustment in the number of Stock Units,
equivalent to the dividends the participant would have received if the
participant had been the owner of shares of Common Stock instead of the Stock
Units.
12.
Adjustment
Provisions
.
(a)
If
the
Company shall at any time change the number of issued shares of Common Stock
without new consideration to the Company (such as by stock dividends or stock
splits), the total number of shares reserved for issuance under this Plan and
the number of shares covered by each outstanding benefit shall be adjusted
so
that the aggregate consideration payable to the Company, if any, and the value
of each such benefit shall not be changed. Benefits may also contain provisions
for their continuation or for other equitable adjustments after changes in
the
Common Stock resulting from reorganization, sale, merger, consolidation,
issuance of stock rights or warrants, or similar occurrence.
(b)
Notwithstanding
any other provision of this Plan, and without affecting the number of shares
reserved or available hereunder, the Board of Directors may authorize the
issuance or assumption of benefits in connection with any merger, consolidation,
acquisition of property or stock, or reorganization upon such terms and
conditions as it may deem appropriate.
13.
Nontransferability.
Each
benefit granted under the Plan to an employee shall not be transferable
otherwise than by will or the laws of descent and distribution; provided,
however, NQSOs granted under the Plan may be transferred, without consideration,
to a Permitted Transferee (as defined below). Benefits granted under the Plan
shall be exercisable, during the participant’s lifetime, only by the participant
or a Permitted Transferee. In the event of the death of a participant, exercise
or payment shall be made only:
(a)
By
or to
the Permitted Transferee, executor or administrator of the estate of the
deceased participant or the person or persons to whom the deceased participant’s
rights under the benefit shall pass by will or the laws of descent and
distribution; and
(b)
To
the
extent that the deceased participant or the Permitted Transferee, as the case
may be, was entitled thereto at the date of his death.
For
purposes of this Section, “Permitted Transferee” shall include (i) one or
more members of the participant’s family, (ii) one or more trusts for the
benefit of the participant and/or one or more members
of
the
participant’s family, or (iii) one or more partnerships (general or
limited), corporations, limited liability companies or other entities in which
the aggregate interests of the participant and members of the participant’s
family exceed 80% of all interests. For this purpose, the participant’s family
shall include only the participant’s spouse, children and
grandchildren.
14.
Taxes
.
The
Company shall be entitled to withhold the amount of any tax attributable to
any
amounts payable or shares deliverable under the Plan after giving the person
entitled to receive such payment or delivery notice as far in advance as
practicable, and the Company may defer making payment or delivery as to any
benefit if any such tax is payable until indemnified to its satisfaction. The
person entitled to any such delivery may, by notice to the Company at the time
the requirement for such delivery is first established, elect to have such
withholding satisfied by a reduction of the number of shares otherwise so
deliverable, such reduction to be calculated based on a closing market price
on
the date of such notice.
15.
Tenure
.
A
participant’s right, if any, to continue to serve the Company and its
subsidiaries as an officer, employee, or otherwise, shall not be enlarged or
otherwise affected by his or her designation as a participant under the
Plan.
16.
Duration,
Interpretation, Amendment and Termination
.
No
benefit shall be granted more than ten years after the date of adoption of
this
Plan; provided, however, that the terms and conditions applicable to any benefit
granted within such period may thereafter be amended or modified by mutual
agreement between the Company and the participant or such other person as may
then have an interest therein. Also, by mutual agreement between the Company
and
a participant hereunder, stock options or other benefits may be granted to
such
participant in substitution and exchange for, and in cancellation of, any
benefits previously granted such participant under this Plan. To the extent
that
any stock options or other benefits which may be granted within the terms of
the
Plan would qualify under present or future laws for tax treatment that is
beneficial to a recipient, then any such beneficial treatment shall be
considered within the intent, purpose and operational purview of the Plan and
the discretion of the Administrator, and to the extent that any such stock
options or other benefits would so qualify within the terms of the Plan, the
Administrator shall have full and complete authority to grant stock options
or
other benefits that so qualify (including the authority to grant, simultaneously
or otherwise, stock options or other benefits which do not so qualify) and
to
prescribe the terms and conditions (which need not be identical as among
recipients) in respect to the grant or exercise of any such stock option or
other benefits under the Plan.
The
Board
of Directors may amend the Plan from time to time or terminate the Plan at
any
time. However, no action authorized by this paragraph shall reduce the amount
of
any existing benefit or change the terms and conditions thereof without the
participant’s consent. No amendment of the Plan shall, without approval of the
stockholders of the Company, (a) increase the total number of shares which
may
be issued under the Plan or increase the amount or type of benefits that may
be
granted under the Plan; or (b) modify the requirements as to eligibility for
benefits under the Plan.
17.
Effective
Date.
The Plan
will be effective immediately following approval by the stockholders of the
Company at the 2006 Annual Meeting of Stockholders.
Appendix
D
1.
Purpose
.
Section
162(m) of the Internal Revenue Code of 1986, as amended, limits to $1,000,000
the amount of an employer’s deduction for a fiscal year relating to compensation
for certain executive officers, with exceptions for specific types of
compensation such as performance-based compensation. The Insituform
Technologies, Inc. 2006 Executive Performance Plan (the “
Plan
”)
is
intended to provide for the payment of qualified performance-based compensation
in the form of incentive compensation that is not subject to the Section 162(m)
deduction limitation. The Plan also is intended to focus the interests of key
employees on the key measures of Insituform Technologies, Inc.’s (the
“
Company
”)
success and to reward such employees for achieving such key measures of the
Company’s success.
2.
Definitions
.
As used
in the Plan, the following terms shall have the meanings set forth
below:
“
Award
”
shall
mean a cash payment (whether paid currently or deferred), or a grant of a
“benefit” (other than a stock option) pursuant to the Equity Plan.
“
Board
”
shall
mean the Board of Directors of the Company.
“
Code
”
shall
mean the Internal Revenue Code of 1986, as amended.
“
Common
Stock
”
shall
mean the Class A common stock, par value $0.01 per share, of the
Company.
“
Compensation
Committee
”
shall
mean the Compensation Committee of the Board (or any successor committee),
which
committee shall consist solely of two or more “outside directors” within the
meaning of Section 162(m) of the Code.
“
Covered
Employee
”
shall
mean a “covered employee” within the meaning of Section 162(m) of the
Code.
“
Equity
Plan
”
shall
mean the Insituform Technologies, Inc. 2001 Employee Equity Incentive Plan,
the
Insituform Technologies, Inc. 2006 Employee Equity Incentive Plan, and any
successor plan or plans of the Company.
“
Participant
”
shall
mean any executive of the Company who is eligible to participate in accordance
with Section 3 of this Plan.
“
Performance
Period
”
shall
mean any period of at least one year designated as a Performance Period by
the
Compensation Committee.
“
Performance
Award
”
shall
mean an Award level that may be paid if certain performance goals are achieved
in the Performance Period.
3.
Eligibility
.
The
Participants in this Plan for any Performance Period shall be comprised of
each
employee of the Company who is a Covered Employee during such Performance
Period, or who may be a Covered Employee as of the end of a tax year for which
the Company would claim a tax deduction in connection with the payment of
compensation to such employee, during such Performance Period and who is
designated individually or by class to be a Participant for such Performance
Period by the Compensation Committee at the time a Performance Award is
established for such employee.
4.
Awards
.
(a)
The
Compensation Committee shall establish objective performance goals in writing
not later than 90 days after the beginning of each Performance Period.
The
performance goals will be based on one or more of the following business
criteria: stock price, sales, return on equity, book value, expense management,
earnings per share, free cash flow, net income, return on assets, individual
performance and business unit performance. The Compensation Committee will
specifically define such terms at the time it establishes the performance
goals.
Such performance goals shall be sufficiently detailed and objective so
that a
third party having knowledge of the relevant performance results could
calculate
the amount to be paid to the Participant pursuant to such Performance Award
formula.
(b)
The
Compensation Committee shall also establish the Performance Award
payable
to a Participant if the performance goals are achieved. The payment of any
Award
shall be subject to achievement of the performance goals. The Compensation
Committee may, in its discretion, reduce the amount of any Award based on
such
criteria as it shall determine. Awards shall be paid as soon as practical
after
the Compensation Committee has certified that the performance goals for the
Performance Period have been achieved.
(c)
Prior
to
the payment of any Award, the Compensation Committee shall certify in
writing that the performance goals applicable to such Award were
met.
(d)
The
Compensation Committee shall have the power to impose such other
restrictions on Awards as it may deem necessary or appropriate to
ensure
that such Awards satisfy all requirements for “performance-based compensation”
within the meaning of Section 162(m) of the Code, the regulations promulgated
thereunder, and any successors thereto.
(e)
The
maximum aggregate amount of compensation that may be paid to a
Participant in any fiscal year of the Company pursuant to one or more
Performance Awards under this Plan shall not exceed the Maximum Amount for
such
fiscal year. If the Maximum Amount (including carryforwards under this sentence)
for a fiscal year exceeds the amount paid to a Participant in that year,
such
excess shall be carried forward and added to the Maximum Amount for the
succeeding fiscal year. For this purpose, the Maximum Amount for a fiscal
year
shall be $3,220,000 for the 2006 fiscal year, and, for each succeeding fiscal
year, 110% of the Maximum Amount for the immediately preceding year (determined
without regard to any carryforward); and compensation shall be treated as
paid
when such compensation would be allowable as a deduction under chapter 1
of the
Internal Revenue Code of 1986, as amended, (without regard to section 162(m)
of
such Code).
5.
Form
Of Payment
.
An
Award
shall be paid in the form of cash, or in the form of a “benefit” in accordance
with an award pursuant to the Equity Plan.
6.
Time
of Payment.
An Award
for a Performance Period normally shall be paid as soon as administratively
feasible after the Compensation Committee certifies
in
writing that the performance goals applicable to such Award were met. However,
a
Participant may elect to defer receipt of such a
payment
in accordance with the terms of the Insituform Technologies, Inc. Senior
Management Voluntary Deferred Compensation Plan.
7.
Other
Conditions
.
(a)
No
person
shall have any claim to an Award under the Plan. There is no obligation
of
uniformity of treatment of Participants under the Plan. Awards under the
Plan
may not be assigned or alienated.
(b)
Neither
the Plan, nor any action taken hereunder, shall be construed as giving to
any Participant the right to be retained in the employ of the Company
or
an affiliate.
(c)
The Company or any affiliate shall have the right to deduct from any
Award to
be paid under the Plan any federal, state or local taxes
required by law to be withheld with respect to such payment.
8.
Plan
Administration
.
(a)
The Compensation Committee shall have full discretionary power to
administer
and interpret the Plan and to establish rules for its
administration. In making any determinations under or referred to in the Plan,
the Compensation Committee shall be entitled to rely on opinions, reports or
statements of employees of the Company and its affiliates and of counsel, public
accountants and other professional or expert persons.
(b)
The Plan shall be governed by the laws of the State of Missouri and
applicable
federal law.
9.
Modification
Or Termination Of Plan
.
The
Board
may modify or terminate the Plan at any time, effective at such date as the
Board may determine.
10.
Stockholder
Approval
.
This
Plan
shall be subject to approval by the affirmative vote of a majority of the shares
of Common Stock cast in a separate vote of the stockholders of the Company
at
the 2006 Annual Meeting of Stockholders, and such stockholder approval shall
be
a condition to the right of a Participant to receive any Award
hereunder.
D-3
INSITUFORM
TECHNOLOGIES, INC.
THIS
PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The
undersigned having received the notice of the annual meeting of stockholders
of
Insituform Technologies, Inc. and the proxy statement, appoints Thomas S.
Rooney, Jr. and David F. Morris, and each of them acting individually, the
undersigned’s proxies with full power of substitution, for and in the name,
place and stead of the undersigned, to vote and act with respect to all of
the
shares of our Class A common stock, $.01 par value, standing in the name of
the
undersigned or with respect to which the undersigned is entitled to vote and
act, at the meeting and at any adjournment or adjournments thereof, and the
undersigned directs that this proxy be voted as specified on the reverse
side.
If
more
than one of the proxies named above shall be present in person or by substitute
at the meeting or any adjournment or adjournments thereof, all of the proxies
so
present and voting, either in person or by substitute, shall exercise all of
the
proxies hereby given.
The
undersigned hereby revokes any proxy or proxies heretofore given to vote upon
or
act with respect to such stock and hereby ratifies and confirms all that the
proxies so present and voting, their substitutes or any of them, may lawfully
do
by virtue hereof.
(Continued
and to be signed on reverse side)
ANNUAL
MEETING OF STOCKHOLDERS OF
INSITUFORM
TECHNOLOGIES, INC.
April 26,
2006
Please
date, sign and mail your proxy
card
in the envelope provided as soon as possible.
-
Please
detach along perforated line and mail in the envelope provided. -
THE
BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE FOLLOWING:
PLEASE
MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
/X/
|
1.
ELECTION
OF DIRECTORS:
o
FOR
ALL
NOMINEES
o
WITHHOLD AUTHORITY
FOR
ALL NOMINEES
o
FOR ALL EXCEPT
(See
instructions below)
|
NOMINEES:
/
/
STEPHEN
P. CORTINOVIS
/
/
STEPHANIE
A. CUSKLEY
/
/
JOHN
P. DUBINSKY
/
/
JUANITA
H. HINSHAW
/
/
ALFRED
T. MCNEILL
/
/
THOMAS
S. ROONEY, JR.
/
/
SHELDON
WEINIG
/
/
ALFRED
L. WOODS
|
| INSTRUCTION : |
To
withhold authority to vote for any individual nominee(s), mark “FOR
ALL
EXCEPT”
and fill in the circle next to each nominee you wish to withhold,
as
shown
here: [GRAPHIC]
|
2.
PROPOSAL
TO APPROVE THE 2006 NON-EMPLOYEE DIRECTOR EQUITY INCENTIVE
PLAN.
o
For
o
Against
o
Abstain
3.
PROPOSAL
TO APPROVE THE 2006 EMPLOYEE EQUITY INCENTIVE PLAN.
o
For
o
Against
o
Abstain
4.
PROPOSAL
TO APPROVE THE 2006 EXECUTIVE PERFORMANCE PLAN.
o
For
o
Against
o
Abstain
5.
PROPOSAL
TO RATIFY THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT
PUBLIC AUDITORS.
o
For
o
Against
o
Abstain
This
proxy also may be voted, in the discretion of the proxies, on any matter that
may properly come before the meeting or any adjournment or adjournments
thereof.
This
proxy will be voted as specified.
IF
NO SPECIFICATION IS MADE, THIS PROXY WILL BE
VOTED
“FOR” ALL THE NAMED NOMINEES FOR DIRECTOR, “FOR” PROPOSAL 2, “FOR” PROPOSAL 3,
“FOR” PROPOSAL 4 and “FOR” PROPOSAL 5.
To
change
the address on your account, please check the box at right and indicate your
new
address in the address space above. Please note that changes to the registered
name(s) on the account may not be submitted via this method.
o
Signature
of Stockholder____________________________
Date:____________________
Signature
of Stockholder____________________________
Date:____________________
|
Note:
|
Please
sign exactly as your name or names appear on this Proxy. When shares
are
held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title
as
such. If the signer is a corporation, please sign full corporate
name by
duly authorized officer, giving full title as such. If signer is
a
partnership, please sign in partnership name by authorized person.
|